"... And while I am not as focused on the poverty ve wealth dynamic. this century has revealed something very disappointing that you address. That the elites have done a very poor job of leading the ship of state, while still remaining in leadership belies such a bold hypocrisy in accountability, it's jarring. The article could actually be titled: "The Myth of the Best and the Brightest." ..."
"... They are teaching the elite how to drain all value from American companies, as the rich plan their move to China, the new land of opportunity. When 1% of the population controls such a huge portion of the wealth, patriotism becomes a loadstone to them. The elite are global. Places like Harvard cater to them, help train them to rule the world .but first they must remake it. ..."
"... In my high school, there were roughly 15 of us who had been advanced two years ahead in math. Of those, 10 were Jewish; only two of them had a 'Jewish' last name. In my graduate school class, half (7) are Jewish. None has a 'Jewish' last name. So I'm pretty dubious of the counting method that you use. ..."
"... Regarding the declining Jewish achievement, it looks like it can be primarily explained through demographics: "Intermarriage rates have risen from roughly 6% in 1950 to approximately 40–50% in the year 2000.[56][57] This, in combination with the comparatively low birthrate in the Jewish community, has led to a 5% decline in the Jewish population of the United States in the 1990s." ..."
"... Jewish surnames don't mean what they used to. And intermarriage rates are lowest among the low-performing and highly prolific Orthodox. ..."
"... A potentially bigger issue completely ignored by your article is how do colleges differentiate between 'foreign' students (overwhelmingly Asian) and American students. Many students being counted as "Asian American" are in reality wealthy and elite foreign "parachute kids" (an Asian term), dropped onto the generous American education system or into boarding schools to study for US entrance exams, qualify for resident tuition rates and scholarships, and to compete for "American" admissions slots, not for the usually limited 'foreign' admission slots. ..."
"... As some who is Jewish from the former Soviet Union, and who was denied even to take an entrance exam to a Moscow college, I am saddened to see that American educational admission process looks more and more "Soviet" nowadays. Kids are denied opportunities because of their ethnic or social background, in a supposedly free and fair country! ..."
"... Actually, Richard Feynman famously rejected genetic explanations of Jewish achievement (whether he was right or wrong to do so is another story), and aggressively resisted any attempts to list him as a "Jewish scientist" or "Jewish Nobel Prize winner." I am sure he would not cared in the slightest bit how many Jews were participating in the Physics Olympiad, as long as the quality of the students' work continued to be excellent. Here is a letter he wrote to a woman seeking to include him in a book about Jewish achievement in the sciences. ..."
"... It would be interesting to know how well "true WASPS" do in admissions. This could perhaps be estimated by counting Slavic and Italian names, or Puritan New England last names. I would expect this group to do almost as well as Jews (not quite as well, because their ability would be in the lower end of the Legacy group). ..."
"... The missing variable in this analysis is income/class. While Unz states that many elite colleges have the resources to fund every student's education, and in fact practice need-blind admissions, the student bodies are skewed towards the very highest percentile of the income and wealth distribution. SAT scores may also scale with parents' income as well. ..."
"... Having worked with folks from all manner of "elite" and not so elite schools in a technical field, the main conclusion I was able to draw was folks who went to "elite" colleges had a greater degree of entitlement. And that's it. ..."
"... My own position has always been strongly in the former camp, supporting meritocracy over diversity in elite admissions. ..."
"... The Reality of American Mediocrity ..."
"... The central test of fairness in any admissions system is to ask this simple question. Was there anyone admitted under that system admitted over someone else who was denied admission and with better grades and SAT scores and poorer ? If the answer is in the affirmative, then that system is unfair , if it is in the negative then the system is fair. ..."
"... Harvard ranks only 8th after Penn State in the production of undergrads who eventually get Doctorates in Science and Engineering. Of course Berkeley has the bragging rights for that kind of attribute. ..."
"... There is an excellent analysis of this article at The Occidental Observer by Kevin MacDonald, "Ron Unz on the Illusory American Meritocracy". The MSM is ignoring Unz's article for obvious reasons. ..."
"... Could it be that the goal of financial, rather than academic, achievement, makes many young people uninterested in competing in the science and math competitions sought out by the Asian students? I ..."
"... America never promised success through merit or equality. That is the American "dream." ..."
"... Anyone famliar with sociology and the research on social stratification knows that meritocracy is a myth; for example, if one's parents are in the bottom decile of the the income scale, the child has only a 3% chance to reach the top decile in his or her lifetime. In fact, in contrast to the Horatio Alger ideology, the U.S. has lower rates of upward mobility than almost any other developed country. Social classses exist and they tend to reproduce themselves. ..."
"... The rigid class structure of the the U.S. is one of the reasons I support progressive taxation; wealth may not always be inherited, but life outcomes are largely determined by the class position of one's parents. In this manner, it is also a myth to believe that wealth is an individual creation;most financially successful individuals have enjoyed the benefits of class privilege: good and safe schools, two-parent families, tutors, and perhaps most important of all, high expecatations and positive peer socialization (Unz never mentions the importants of peeer groups, which data show exert a strong causal unfluence on academic performance). ..."
"... And I would challenge Unz's assertion that many high-performing Asians come from impovershed backgrounds: many of them may undereport their income as small business owners. I believe that Asian success derives not only from their class background but their culture in which the parents have authority and the success of the child is crucual to the honor of the family. As they assimilate to the more individualist American ethos, I predict that their academic success will level off just as it has with Jews. ..."
"... All I can say is see a book: "Ivy League Fools and Felons"' by Mack Roth. Lots of them are kids of corrupt people in all fields. ..."
Just before the Labor Day weekend, a front page New York Times story broke the news of the largest cheating scandal in Harvard University
history, in which nearly half the students taking a Government course on the role of Congress had plagiarized or otherwise illegally
collaborated on their final exam.
[1] Each year, Harvard admits just 1600 freshmen while almost 125 Harvard students now face possible suspension over this single
incident. A Harvard dean described the situation as "unprecedented."
But should we really be so surprised at this behavior among the students at America's most prestigious academic institution? In
the last generation or two, the funnel of opportunity in American society has drastically narrowed, with a greater and greater proportion
of our financial, media, business, and political elites being drawn from a relatively small number of our leading universities, together
with their professional schools. The rise of a Henry Ford, from farm boy mechanic to world business tycoon, seems virtually impossible
today, as even America's most successful college dropouts such as Bill Gates and Mark Zuckerberg often turn out to be extremely well-connected
former Harvard students. Indeed, the early success of Facebook was largely due to the powerful imprimatur it enjoyed from its exclusive
availability first only at Harvard and later restricted to just the Ivy League.
During
this period, we have witnessed a huge national decline in well-paid middle class jobs in the manufacturing sector and other sources
of employment for those lacking college degrees, with median American wages having been stagnant or declining for the last forty
years. Meanwhile, there has been an astonishing concentration of wealth at the top, with America's richest 1 percent now possessing
nearly as much net wealth as the bottom 95 percent.
[2]
This situation, sometimes described as a "winner take all society," leaves families desperate to maximize the chances that their
children will reach the winners' circle, rather than risk failure and poverty or even merely a spot in the rapidly deteriorating
middle class. And the best single means of becoming such an economic winner is to gain admission to a top university, which provides
an easy ticket to the wealth of Wall Street or similar venues, whose leading firms increasingly restrict their hiring to graduates
of the Ivy League or a tiny handful of other top colleges.
[3] On the other side, finance remains the favored employment choice for Harvard, Yale or Princeton students after the diplomas
are handed out. [4]
As a direct consequence, the war over college admissions has become astonishingly fierce, with many middle- or upper-middle class
families investing quantities of time and money that would have seemed unimaginable a generation or more ago, leading to an all-against-all
arms race that immiserates the student and exhausts the parents. The absurd parental efforts of an Amy Chua, as recounted in her
2010 bestseller Battle Hymn of the Tiger Mother , were simply a much more extreme version of widespread behavior among her
peer-group, which is why her story resonated so deeply among our educated elites. Over the last thirty years, America's test-prep
companies have grown from almost nothing into a $5 billion annual industry, allowing the affluent to provide an admissions edge to
their less able children. Similarly, the enormous annual tuition of $35,000 charged by elite private schools such as Dalton or Exeter
is less for a superior high school education than for the hope of a greatly increased chance to enter the Ivy League.
[5]
Many New York City parents even go to enormous efforts to enroll their children in the best possible pre-Kindergarten program,
seeking early placement on the educational conveyer belt which eventually leads to Harvard.
[6] Others cut corners in a more
direct fashion, as revealed in the huge SAT cheating rings recently uncovered in affluent New York suburbs, in which students were
paid thousands of dollars to take SAT exams for their wealthier but dimmer classmates.
[7]
But given such massive social and economic value now concentrated in a Harvard or Yale degree, the tiny handful of elite admissions
gatekeepers enjoy enormous, almost unprecedented power to shape the leadership of our society by allocating their supply of thick
envelopes. Even billionaires, media barons, and U.S. Senators may weigh their words and actions more carefully as their children
approach college age. And if such power is used to select our future elites in a corrupt manner, perhaps the inevitable result is
the selection of corrupt elites, with terrible consequences for America. Thus, the huge Harvard cheating scandal, and perhaps also
the endless series of financial, business, and political scandals which have rocked our country over the last decade or more, even
while our national economy has stagnated.
Just a few years ago Pulitzer Prize-winning former Wall Street Journal reporter Daniel Golden published The Price
of Admission , a devastating account of the corrupt admissions practices at so many of our leading universities, in which every
sort of non-academic or financial factor plays a role in privileging the privileged and thereby squeezing out those high-ability,
hard-working students who lack any special hook.
In one particularly egregious case, a wealthy New Jersey real estate developer, later sent to Federal prison on political corruption
charges, paid Harvard $2.5 million to help ensure admission of his completely under-qualified son.
[8] When we consider that Harvard's
existing endowment was then at $15 billion and earning almost $7 million each day in investment earnings, we see that a culture of
financial corruption has developed an absurd illogic of its own, in which senior Harvard administrators sell their university's honor
for just a few hours worth of its regular annual income, the equivalent of a Harvard instructor raising a grade for a hundred dollars
in cash.
An admissions system based on non-academic factors often amounting to institutionalized venality would seem strange or even unthinkable
among the top universities of most other advanced nations in Europe or Asia, though such practices are widespread in much of the
corrupt Third World. The notion of a wealthy family buying their son his entrance into the Grandes Ecoles of France or the top Japanese
universities would be an absurdity, and the academic rectitude of Europe's Nordic or Germanic nations is even more severe, with those
far more egalitarian societies anyway tending to deemphasize university rankings.
Well, legacy programs are alive and well. According to the read, here's the problem:
"The research certainly supports the widespread perception that non-academic factors play a major role in the process,
including athletic ability and "legacy" status. But as we saw earlier, even more significant are racial factors, with black
ancestry being worth the equivalent of 310 points, Hispanics gaining 130 points, and Asian students being penalized by 140
points, all relative to white applicants on the 1600 point Math and Reading SAT scale."
These arbitrary point systems while well intended are not a reflection of AA design. School lawyers in a race not be penalized
for past practices, implemented their own versions of AA programs. The numbers are easy to challenge because they aren't based
on tangible or narrow principles. It's weakneses are almost laughable. Because there redal goal was to thwart any real challenge
that institutions were idle in addressing past acts of discrimination. To boost their diversity issues, asians were heavily recruited.
Since AA has been in place a lot of faulty measures were egaged in: Quotas for quotas sake. Good for PR, lousy for AA and issues
it was designed to address.
I think the statistical data hides a very important factor and practice. Most jews in this country are white as such , and
as such only needed to change their names and hide behaviors as a strategy of surviving the entrance gauntlet. That segregation
created a black collegiate system with it's own set of elite qualifiers demonstrates that this model isn't limited to the Ivy
league.
That an elite system is devised and practiced in members of a certain club networks so as to maintain their elite status, networks
and control, this is a human practice. And it once served as something to achieve. It was thought that the avenues of becoming
an elite were there if one wanted to strive for it. Hard work, honesty, persistence, results . . . should yield X.
And while I am not as focused on the poverty ve wealth dynamic. this century has revealed something very disappointing
that you address. That the elites have done a very poor job of leading the ship of state, while still remaining in leadership
belies such a bold hypocrisy in accountability, it's jarring. The article could actually be titled: "The Myth of the Best and
the Brightest."
I don't think it's just some vindictive intent. and while Americans have always known and to an extent accepted that for upper
income citizens, normal was not the same as normal on the street. Fairness, was not the same jn practice nor sentiment. What may
becoming increasing intolerant has been the obvious lack of accountability among elites. TARP looked like the elites looking out
for each other as opposed the ship of state. I have read three books on the financials and they do not paint a pretty portrait
of Ivy League leadership as to ethics, cheating, lying, covering up, and shamelessly passing the buck. I will be reading this
again I am sure.
It's sad to think that we may be seeing te passing of an era. in which one aspired to be an elite not soley for their wealth,
but the model they provided od leadership real or imagined. Perhaps, it passed long ago, and we are all not just noticing.
I appreciated you conclusions, not sure that I am comfortable with some of the solutions.
Since I still hanker to be an elite in some manner, It is interesting to note my rather subdued response to the cheating. Sadly,
this too may be an open secret of standard fair - and that is very very sad. And disappointing. Angering even.
The shifting social demography of deans, house masters and admissions committees may be a more important metric than the composition
of the student body, as it determines the shape of the curriculum, and the underlying culture of the university as a legacy in
itself.
If Ron harrows the literary journals of the Jackson era with equal diligence. he may well turn up an essay or two expressing
deep shock at Unitarians admitting too many of the Lord's preterite sheep to Harvard, or lamenting the rise of Methodism at Yale
and the College of New Jersey.
Harvard is a university, much like Princeton and Yale, that continues based on its reputation, something that was earned in
the past. When the present catches up to them people will regard them as nepotistic cauldrons of corruption.
Look at the financial disaster that befell the USA and much of the globe back in 2008. Its genesis can be found in the clever
minds of those coming out of their business schools (and, oddly enough, their Physics programs as well).
They are teaching the elite how to drain all value from American companies, as the rich plan their move to China, the new
land of opportunity. When 1% of the population controls such a huge portion of the wealth, patriotism becomes a loadstone to them.
The elite are global. Places like Harvard cater to them, help train them to rule the world .but first they must remake it.
• Replies: @Part White, Part
Native I agree, common people would never think of derivatives , nor make loans based on speculation
First, I appreciated the length and depth of your article.
Having said that, to boil it down to its essence:
Subconcious bias/groupthink + affirmative action/diversity focus + corruption + innumeracy = student bodies at elite institutions
that are wildly skewed vis-a-vis both: 1) the ethnic makeup of the general population; and 2) the makeup of our top-performing
students.
Since these institutions are pipelines to power, this matters.
I rather doubt that wage stagnation (which appears to have begun in ~1970) can be pinned on this – that part stuck out, because
there are far more plausible causes. To the extent you're merely arguing that our elite failed to counter the trend, ok, but I'm
not sure a "better" elite would have either. The trend, after all, favored the elite.
Anyway, I find your case is plausible.
Your inner/outer circle hybrid option is interesting. One (perhaps minor) thing jumps out at me: kids talk. The innies are
going to figure out who they are and who the outies are. The outies might have their arrogance tempered, but the innies? I suspect
they'd be even *more* arrogant than such folks are now (all the more so because they'd have better justification for their arrogance),
but I could be wrong.
Perhaps more significantly, this:
But if it were explicitly known that the vast majority of Harvard students had merely been winners in the application
lottery, top businesses would begin to cast a much wider net in their employment outreach, and while the average Harvard student
would probably be academically stronger than the average graduate of a state college, the gap would no longer be seen as so
enormous, with individuals being judged more on their own merits and actual achievements
Is a very good reason for Harvard, et al. to resist the idea. I think you're right that this would be a good thing for the
country, but it would be bad for Harvard. I think the odds of convincing Harvard to do it out of the goodness of their administrators
hearts is unlikely. You are basically asking them to purposefully damage their brand.
All in all, I think you're on to something here. I have my quibbles (the wage stagnation thing, and the graph with Chinese
vs USA per capita growth come on, apples and oranges there!), but overall I think I agree that your proposal is likely superior
to the status quo.
Don't forget the mess one finds after they ARE admitted to these schools. I dropped out of Columbia University in 2010.
You can "make it" on an Ivy-league campus if you are a conservative-Republican-type with all the rich country-club connections
that liberals use to stereotype.
Or you can succeed if you are a poor or working-class type who is willing to toe the Affirmative Action party line and be a
good "progressive" Democrat (Obama stickers, "Gay Pride" celebrations, etc.)
If you come from a poor or working-class background and are religious, or culturally conservative or libertarian in any way,
you might as well save your time and money. You're not welcome, period. And if you're a military veteran you WILL be actively
persecuted, no matter what the news reports claim.
It sucks. Getting accepted to Columbia was a dream come true for me. The reality broke my heart.
Regarding the overrepresentation of Jewish students compared to their actual academic merit, I think the author overstates
the role bias (subjective, or otherwise) plays in this:
1) , a likely explanation is that Jewish applicants are a step ahead in knowing how to "play the admissions game." They therefore
constitute a good percentage of applicants that admission committees view as "the total package." (at least a higher percentage
than scores alone would yield). Obviously money and connections plays a role in them knowing to say precisely what adcoms want
to hear, but in any case, at the end of the day, if adcoms are looking for applicants with >1400 SATs, "meaningful" life experiences/accomplishments,
and a personal statement that can weave it all together into a compelling narrative, the middle-upper-class east coast Jewish
applicant probably constitutes a good percentage of such "total package" applicants. I will concede however that this explanation
only works in explaining the prevalence of jews vs. whites in general. With respect to Asians, however, since they are likely
being actively and purposefully discriminated against by adcoms, having the "complete package" would be less helpful to them.
2) Another factor is that, regardless of ethnicity, alumni children get a boost and since in the previous generation Jewish
applicants were the highest achieving academic group, many of these lesser qualified jews admitted are children of alumni.
3) That ivy colleges care more about strong verbal scores than mathematics (i.e., they prefer 800V 700M over 700V 800M), and
Jewish applicants make up a higher proportion of the high verbal score breakdowns.
4) Last, and perhaps more importantly we do not really know the extent of Jewish representation compared to their academic
merit. Unlike admitted Asian applicants, who we know, on average, score higher than white applicants, we have no similar numbers
of Jewish applicants. The PSAT numbers are helpful, but hardly dispositive considering those aren't the scores colleges use in
making their decision information.
@Bryan– Getting accepted to Columbia was a dream come true for me. The reality broke my heart.
I'm touched by this. I've spent tons of time at Columbia, a generation ago -- and my background fit fine -- the kind of WASP
background Jews found exotic and interesting. But I can see your point, sad to say. There are other great schools -- Fordham,
where my wife went to law school at night, has incredible esprit de corps - and probably, person for person, has as many lawyers
doing good and interesting work as Columbia.
"There are other great schools–Fordham, where my wife went to law school at night, has incredible esprit de corps - and
probably, person for person, has as many lawyers doing good and interesting work as Columbia."
"Tiffany was also rejected by all her other prestigious college choices, including Yale, Penn, Duke, and Wellsley, an outcome
which greatly surprised and disappointed her immigrant father.88″
In the fall of 1990, my parents had me apply to 10 colleges. I had the profile of many Indian kids at the time – ranked in
the top 10 of the class, editor of school paper, Boy Scouts. SAT scores could have been better, but still strong. Over 700 in
all achievement tests save Bio, which was 670.
Rejected by 5 schools, waitlisted by 3, accepted into 2 – one of them the state univ.
One of my classmates, whose family was from Thailand, wound up in the same predicament as me. His response, "Basketball was
designed to keep the Asian man down."
The one black kid in our group – got into MIT, dropped out after one year because he could not hack it. The kid from our school
who should have gone, from an Italian-American family, and among the few who did not embrace the guido culture, went to Rennsealer
instead, and had professional success after.
As a University of Chicago alum, I infer that by avoiding the label "elite" on such a nifty chart we can be accurately categorized
as "meritocratic" by The American Conservative.
Then again, this article doesn't even purport to ask why elite universities might be in the business of EDUCATING a wider population
of students, or how that education takes place.
Perhaps, by ensuring that "the best" students are not concentrated in only 8 universities is why the depth and quality of America's
education system remains the envy of the world.
In my high school, there were roughly 15 of us who had been advanced two years ahead in math. Of those, 10 were Jewish;
only two of them had a 'Jewish' last name. In my graduate school class, half (7) are Jewish. None has a 'Jewish' last name.
So I'm pretty dubious of the counting method that you use.
Also, it's clear that there are Asian quotas at these schools, but it's not clear that Intel Science Fairs, etc, are the best
way to estimate what level of talent Asians have relative to other groups.
I was curious so I google High School Poetry Competition, High School Constitution Competition, High School Debating Competition.
None of the winners here seem to have an especially high Asian quotient. So maybe a non-technical (liberal arts) university would
settle on ~25-30% instead of ~40% asian? And perhaps a (small) part of the problem is a preponderance of Asian applicants excelling
in technical fields, leading to competition against each other rather than the general population? Just wonderin'
Regarding the declining Jewish achievement, it looks like it can be primarily explained through demographics: "Intermarriage
rates have risen from roughly 6% in 1950 to approximately 40–50% in the year 2000.[56][57] This, in combination with the comparatively
low birthrate in the Jewish community, has led to a 5% decline in the Jewish population of the United States in the 1990s."
Jewish surnames don't mean what they used to. And intermarriage rates are lowest among the low-performing and highly prolific
Orthodox.
Jewish birth rates have been falling faster than the white population, especially for the non-Orthodox:
"In contrast to the ongoing trends of assimilation, some communities within American Jewry, such as Orthodox Jews, have significantly
higher birth rates and lower intermarriage rates, and are growing rapidly. The proportion of Jewish synagogue members who were
Orthodox rose from 11% in 1971 to 21% in 2000, while the overall Jewish community declined in number. [60] In 2000, there were
360,000 so-called "ultra-orthodox" (Haredi) Jews in USA (7.2%).[61] The figure for 2006 is estimated at 468,000 (9.4%).[61]"
"As against the overall average of 1.86 children per Jewish woman, an informed estimate gives figures ranging upward from 3.3
children in "modern Orthodox" families to 6.6 in Haredi or "ultra-Orthodox" families to a whopping 7.9 in families of Hasidim."
These statistics would suggest that half or more of Jewish children are being born into these lower-performing groups. Given
their very low intermarriage rates, a huge portion of the secular, Reform, and Conservative Jews must be intermarrying (more than
half if the aggregate 43% intermarriage figure is right). And the high-performing groups may now be around 1 child per woman or
lower, and worse for the youngest generation.
So a collapse in Jewish representation in youth science prizes can be mostly explained by the collapse of the distinct non-Orthodox
Jewish youth.
Incidentally, intermarriage also produces people with Jewish ancestry who get classified as gentiles using last names or self-identification,
reducing Jewish-gentile gaps by bringing up nominal gentile scores at the same time as nominal-Jewish scores are lowered.
The center of power in this country being located in the Northeast is nothing new. Whether it be in it's Ivy League schools
or the ownership of natural resources located in other regions, particularly the South, the Northeast has always had a disproportionate
share of influence in the power structures, particularly political and financial, of this nation. This is one of the reasons the
definition of "white" when reviewing ethnicity is so laughably inaccurate. There is a huge difference in opportunity between WASP
or Jewish in the Northeast, for instance, and those of Scots Irish ancestory in the mountain south. Hopefully statistical analysis
such as this can break open that stranglehold, especially as it is directly impacting a minority group in a negative fashion.
Doing this exercise using say, white Baptists compared to other white subgroups, while maybe equally valid in the results, would
be seen as racist by the very Ivy League system that is essentially practicing a form of racism.
Yeah, my ultimate goal was to attend law school, and a big part of the heartbreak for me–or heartburn, the more cynical would
call it–was seeing how skewed and absurd the admissions process to law school is.
I have no doubt that I could have eventually entered into a "top tier" law school, and that was a dream of mine also. I met
with admissions officers from Duke, Harvard, Stanford, Fordham, etc. I was encouraged. I had the grades and background for it.
But–and I'm really not trying to sound corny 0r self-important here–what does it profit a man to gain the world and lose his
soul? I really don't feel that I'm exaggerating when I say that that's exactly how it felt to me.
The best experience I had while In New York was working as an after-school programs administrator for P.S. 136, but that was
only because of the kids. They'll be old and bitter and cynical soon enough.
At one point it occurred to me that I should have just started claiming "Black" as my ethnicity when I first started attending
college as an adult. I never attended high-school so it couldn't have been disproved. I'm part Sicilian so I could pass for 1/4
African-American. Then I would have received the preference toward admission that, say, Michael Jordan's kids or Barack Obama's
kids will receive when they claim their Ivy-league diplomas. I should have hid the "white privilege" I've enjoyed as the son of
a fisherman and a waitress from one of the most economically-depressed states in America.
The bottom line is that those colleges are political brainwashing centers for a country I no longer believe in. I arrived on
campus in 2009 and I'm not joking at all when I say I was actively persecuted for being a veteran and a conservative who was not
drinking the Obama Kool-aid. Some big fat African-American lady, a back-room "administrator" for Columbia, straight-up threw my
VA benefits certification in the garbage, so my money got delayed by almost two months. I had no idea what was going on. I had
a wife and children to support.
The fact that technology has enabled us to sit here in real-time and correspond back-and-forth about the state of things doesn't
really change the state of things. They are irredeemable. This country is broke and broken.
If Abraham Lincoln were born today in America he would wind up like "Uncle Teardrop" from Winter's Bone. Back then, in order
to be an attorney, you simply studied law and starting trying cases. If you were good at it then you were accepted and became
a lawyer. Today, something has been lost. There is no fixing it. I don't want to waste my time trying to help by being "productive"
to the new tower of Babel or pretending to contribute.
Perhaps only one thing you left out, which is especially important with regard to Jewish enrollment and applications at Ivy
leagues, and other schools as well.
Jewish high school graduates actively look out for campuses with large Jewish populations, where they feel more comfortable.
I don't know the figures, but I believe Dartmouth, for example, has a much smaller Jewish population than Columbia, and it will
stay that way because of a positive feedback loop. (i.e. Jews would rather be at Columbia than Dartmouth, or sometimes even rather
be at NYU than Dartmouth). This explains some of the difference among different schools (and not solely better admission standards).
This is also especially relevant to your random lottery idea, which will inevitably lead to certain schools being overwhelmingly
Asian, others being overwhelmingly Jewish, etc., because the percentage of applicants from every ethnicity is different in every
school. This will necessarily eliminate any diversity which may or may not have existed until now.
I like the lottery admissions idea a lot but the real remedy for the US education system would be to abandon the absurd elite
cult altogether. There is not a shred of evidence that graduates of so-called elite institutions make good leaders. Many of them
are responsible for the economic crash and some of them have brought us the disaster of the Bush presidency.
Many better functioning countries – Germany, the Scandinavians – do not have elite higher education systems. When I enrolled
to University in Germany, I showed up at the enrollment office the summer before the academic year started, filled out a form
(1), and provided a certified copy of my Abitur certificate proving that I was academically competent to attend University. I
never wasted a minute on any of the admissions games that American middle class teenagers and their parents are subjected to.
It would surely have hurt my sense of dignity to be forced to jump through all these absurd and arbitrary hoops.
Americans, due to their ignorance of everything happening outside their borders, have no clue that a system in which a person
is judged by what "school" they attended is everything but normal. It is part of the reason for American dysfunction.
Since they are the pool from which tomorrow's governing elites will be chosen, I'd much rather see Ivy League student bodies
which reflected the full ethnic and geographic diversity of the US. Right now rural and small town Americans and those of Catholic
and Protestant descent who live in the South and Mid-West - roughly half the population - are woefully under-represented, which
explains why their economic interests have been neglected over the last forty years. We live in a multi-cultural, multi-ethnic
representative democracy and our policy-making elites must reflect that diversity. Else the country will come apart.
Thus I recommend 'affirmative action for all' in our elite liberal arts colleges and universities (though not our technical
schools). Student bodies should be represent 'the best and the brightest' of every ethnic group and geographical area of the country.
Then the old school ties will truly knit our society together in a way that is simply not happening today.
A side benefit - and I mean this seriously - is that our second and third tier colleges and universities would be improved
by an influx of Asian and Ashkenazi students (even though the very best would still go to Harvard).
I believe that this article raises – and then inappropriately immediately dismisses – the simplest and most likely reason for
the over-representation of Jewish students at Ivy League Schools in the face of their declining bulk academic performance:
They apply to those schools in vastly disproportionate numbers.
Without actual data on the ethnicity of the applicants to these and other schools, we simply cannot rule out this simple and
likely explanation.
It is quite clear that a large current of Jewish American culture places a great emphasis on elite college attendance, and
among elite colleges, specifically values the Ivy League and its particular cache as opposed to other elite institutions such
as MIT. Also, elite Jewish American culture, moreso than elite Asian American culture, encourages children to go far away from
home for college, considering such a thing almost a right of passage, while other ethnic groups tend to encourage children to
remain closer. A high performing Asian student from, say, California, is much more likely to face familial pressure to stay close
to home for undergrad (Berkeley, UCLA, etc) than a high performing Jewish student from the same high school, who will likely be
encouraged by his or her family to apply to many universities "back east".
Without being able to systematically compare – with real data – the ethnicities of the applicants to those offered admission,
these conclusions simply cannot be accepted.
Different expectations for different races should worry traditional Americans.
If we become comfortable with different academic standards for Asians will we soon be expected to apply different laws to them
also? Will we apply different laws or at least different interpretations of the same laws to blacks?
The association of East Asians with CalTech is now as strong as the association of blacks with violent crime. Can not race
conscious jurisprudence be far behind?
Around a millenium ago in England it mattered to the court if you were a commoner or a noble. Nobles could exercise 'high justice'
with impunity. They were held to different standards. Their testimony counted for more in court. The law was class concious.
Then we had centuries of reform. We had 'Common Law'. By the time of our revolution the idea that all were equal before the
law was a very American kind of idea. We were proud that unlike England we did not have a class system.
Today we seem to be on the threshold of a similar sytem of privileges and rights based on race. Let me give an example. If
there were a domestic riot of somekind and a breakdown of public order, the authorities might very well impose a cufew. That makes
good sense for black male teens but makes little or no sense for elderly Chinese women. I can envision a time when we have race
specific policies for curfews and similar measures.
It seems to be starting in schools. It could be that the idea of equality before the law was an idea that only flourished between
the fifteenth century and the twenty first.
"But filling out a few very simple forms and having their test scores and grades scores automatically forwarded to a list of
possible universities would give them at least the same chance in the lottery as any other applicant whose academic skills were
adequate."
They get a lot of applications. I am guessing they chuck about 1/2 or more due to the application being incomplete, the applicant
did not follow instructions, the application was sloppy, or just obviously poor grades/test scores. The interview and perhaps
the essay and recommendations are necessary to chuck weirdos and psychopaths you do not want sitting next to King Fahd Jr. So
the "byzantine" application process is actually necessary to reduce the number of applicants to be evaluated.
I have a friend who went to Stanford with me in the early 80s. She has two sons who recently applied to Stanford. The older
son had slightly better grades and test scores. The younger son is gay. Guess which one got in?
If you were in Columbia's GS school, (or even if you were CC/SEAS/Barnard) you ought to reach out to some of on-campus and
alumni veteran's groups. They can help you maneuver through the school. (I know there's one that meets at a cafe on 122 and Broadway)
CU can be a lonely and forbidding place for anyone and that goes double for GSers and quadruple for veterans.
You ought to give it another go. Especially if you aren't going somewhere else that's better. Reach out to your deans and make
a fuss. No one in the bureaucracy wants to help but you can force them to their job.
Mr. Unz, the issues of jewish/gentile intermarriage and the significance of jewish-looking names do indeed merit more consideration
than they were given in this otherwise very enlightening article.
What would the percentage of jews in Ivy-League universities look like if the methodology used to determine the percentage
of jewish NMS semifinalists were applied to the list of Ivy League students (or some available approximation of it)?
For background: I'm an Asian-American who worked briefly in legacy admissions at an Ivy and another non-Ivy top-tier, both
while in school (work-study) and as an alum on related committees.
Mendy Finkel's observations are spot on. Re: her 1st point, personal "presentation" or "branding" is often overlooked by Asian
applicants. An admission officer at another Ivy joked they drew straws to assign "Night of a 1000 Lee's", so accomplished-but-indistinguishable
was that group.
A few points on the Asian analysis:
1. I think this analysis would benefit from expanding beyond HYP/Ivies when considering the broader meritocracy issue. Many
Asians esteem technical-leaning schools over academically-comparable liberal arts ones, even if the student isn't a science major.
When I was in college in the 90′s, most Asian parents would favor a Carnegie Mellon or Hopkins over Brown, Columbia or Dartmouth
(though HYP, of course, had its magnetic appeal). The enrollment percentages reflect this, and while some of this is changing,
this is a fairly persistent pattern.
2. Fundraising is crucial. The Harvard Class of '77 example isn't the most telling kind of number. In my experience, Jewish
alumni provide a critical mass in both the day-to-day fundraising and the resultant dollars. And they play a key role, both as
givers and getters, in the signature capital campaign commitments (univ hospitals, research centers, etc.). This isn't unique
to Jewish Ivy alumni; Catholic alumni of ND or Georgetown provide similar support. But it isn't clear what the future overall
Asian commitment to the Ivy "culture of fundraising" will be, which will continue to be a net negative in admissions.
Sidenote: While Asians greatly value the particular civic good, they are uneasy with it being so hinged to an opaque private
sector, in this case, philanthropy. That distinction, blown out a bit, speaks to some of the Republican "Asian gap".
3. I would not place too much weight on NMS comparisons between Asians and Jews. In my experience, most Asians treat the PSAT
seriously, but many established Jews do not – the potential scholarship money isn't a factor, "NMS semifinalist" isn't an admissions
distinction, and as Mendy highlighted, colleges don't see the scores.
On a different note, while the "weight" of an Ivy degree is significant, it's prestige is largely concentrated in the Northeast
and among some overseas. In terms of facilitating access and mobility, a USC degree might serve you better in SoCal, as would
an SMU one in TX.
And like J Harlan, I also hope the recent monopoly of Harvard and Yale grads in the presidency will end. No doubt, places like
Whittier College, Southwest Texas State Teachers' College, and Eureka College gave earlier presidents valuable perspectives and
experience that informed their governing.
But thank you, Ron, for a great provocative piece. Very well worth the read.
Hey Ron, your next article should be on the military academies, and all those legacies that go back to the Revolutionary War.
How do you get into the French military academy, and do the cadets trace their family history back to the soldiers of Napoleon
or Charles Martel or whatever?
"Thus, there appears to be no evidence for racial bias against Asians, even excluding the race-neutral impact of athletic recruitment,
legacy admissions, and geographical diversity."
Yes, at UCLA, at least up to 2004, Asian and white admits had nearly identical SATs and GPAs.
Further, it just isn't the case that Asians are so spectacular as people seem to think. Their average on the SAT Verbal is
slightly less than whites, their average on SAT Writing is slightly more. Only in math do they have a significant advantage, 59
points or .59 standard deviation. Total advantage is about .2 over the three tests. Assuming that Harvard or Yale admit students
at +3 standard deviations overall, and plugging the relative group quantiles +(3, 2.8) into a normal distribution, we get that
.14% of white kids would get admitted, versus .26% of Asian kids. Or, 1.85 Asian kids for every one white kid.
But, last year 4.25 times as many whites as Asians took the SAT, so there still should be about 2.28 times as many white kids
being admitted as Asians (4.25/1.85).
On GPA, whites and Asians are also pretty similar on average, 3.52 for Asians who took the SAT, 3.45 for whites who took the
SAT. So that shouldn't be much of a factor.
I am a Cadet at the US Military Academy at West Point and generally pretty familiar with trans-national Academy admissions
processes. There's an excellent comparative study of worldwide military academy admissions that was done in the late '90′s you
might find interesting (IIRC it was done by a group in the NATO Defence College) and I think you will find that although soldiers
are often proud of their family histories to a fault, it is not what controls entrance to the officer corps in most countries.
"Legacy" is definitely meaningless in US Military Academy admissions, although can be very helpful in the separate process
of securing a political appointment to attend the Academy once accepted for admission and in an Army career. West Point is not
comparable to the Ivy League schools in the country, because (ironically) the admissions department that makes those comparisons
lets in an inordinate number of unqualified candidates and ensures our student body includes a wide range of candidates, from
people who are unquestionably "Ivy League material" to those who don't have the intellect to hack it at any "elite" institution.
Prior the changes in admissions policies and JFK ordering an doubling of the size of the Corps of Cadets in the '60′s, we didn't
have this problem. But, I digress. My point is, the Academy admissions system is very meritocratic.
I am a Jewish alum of UPenn, and graduated in the late 90s. That puts me almost a generation ago, which may be before the supposed
Jewish decline you write about. I was in an 80%+ Jewish fraternity, and at least 2/3 of my overall network of friends at Penn
was also Jewish. As was mentioned earlier, I have serious qualms with your methods for counting Jews based upon last name.
Based upon my admittedly non-scientific sample, the percentage of us who had traditionally Jewish last names was well under
half and closer to 25%. My own last name is German, and you would never know I am Jewish based solely upon my name (nor would
you based upon the surname of 3/4 of my grandparents, despite my family being 100% Jewish with no intermarriages until my sister).
By contrast, Asians are much easier to identify based upon name. You may overcount certain names like Lee that are also Caucasian,
but it is highly unlikely that you will miss any Asian students when your criterion is last name.
Admittedly I skimmed parts of the article, but were other criterion used to more accurately identify the groups?
The Jewish presence is definitely understated by just looking at surnames. As is the American Indian.
My maternal grandfather was Ashkenazi and his wife was 1/2 Ashkenazi and 1/4 Apache. He changed his name to a Scots surname
that matched his red hair so as to get ahead as a business man in 20s due to KKK and anti-German feelings at the time. Their kids
had two PHDs and a Masters between them despite their parents running a very blue collar firm.
My surname comes from my dad and its a Scottish surname although he was 1/4 Cherokee. On that side we are members of the FF
of Virignia. Altogether I am more Jewish and American Indian than anything else yet would be classified as white. I could easily
claim to be
Jewish or Indian on admissions forms. I always selected white. I was NMSF.
Both my sister and I have kids. Her husband is a full blood Indian with a common English surname. One of my nieces made NMSF
and another might. My sisters kids do not think of themselves as any race and check other.
My wife is 1/4 Indian and 3/4 English. My kids are young yet one has tested to an IQ in the 150s.
Once you get West of the Appalachians, there are a lot of mutts in the non-gentile whites. A lot of Jews and American Indians
Anglicized themselves a generation or two ago and they are lumped into that group – as well as occupy the top percentile academically.
Interesting article with parts I would agree with but also tinged with bias and conclusions that I would argue are not fully
supported by the data.
I think more analysis is needed to confirm your conclusions. As others have mentioned there may be problems with your analysis
of NMS scores. I think graduate admissions and achievements especially in the math and sciences would be a better measure of intellectual
performance.
Now, I didn't attend an Ivy League school, instead a public university, mainly because I couldn't afford it or so I thought.
I was also a NMS finalist.
But I always was of the opinion that except for the most exceptional students admission to the Ivies was based on the wealth
of your family and as you mentioned there are quite a few affluent Jews so I imagine they do have a leg up. Harvard's endowment
isn't as large as it is by accident.
It is interesting that you didn't discuss the stats for Stanford.
Lastly, I think your solution is wrong. The pure meritocracy is the only fair solution. Admissions should be based upon the
entrance exams like in Asia and Europe.
There are plenty of options for those who don't want to compete and if the Asians dominate admissions at the top schools so
be it.
Hopefully, all of this will be mute point n a few years as online education options become more popular with Universities specializing
in graduate education and research.
Ron Unz on Asians (ie Asian Americans): "many of them impoverished immigrant families"
Why do you twice repeat this assertion. Asians are the wealthiest race and most of the wealthiest ethnic groups tracked by
the Census Bureau, which includes immigrants.
A potentially bigger issue completely ignored by your article is how do colleges differentiate between 'foreign' students
(overwhelmingly Asian) and American students. Many students being counted as "Asian American" are in reality wealthy and elite
foreign "parachute kids" (an Asian term), dropped onto the generous American education system or into boarding schools to study
for US entrance exams, qualify for resident tuition rates and scholarships, and to compete for "American" admissions slots, not
for the usually limited 'foreign' admission slots.
Probably people from non-Asian countries are pulling the same stunt, but it seems likely dominated by Asians. And expect many
more with the passage of the various "Dream Acts"
So American kids must compete with the offspring of all the worlds corrupt elite for what should be opportunities for US Americans.
Am I the only one that finds the comparison of Asians (a race) to Jews (a religion) as basis for a case of discrimination completely
flawed? I got in at Harvard and don't remember them even asking me what my religion was.
The value of diversity is absolutely key. I have a bunch of very good Asian friends and I love them dearly, but I don't believe
a place like CalTech with its 40% demographics cannot truly claim to be a diverse place any more.
Regarding the SAT, we do know more than just differences of averages between whites and Asians. We have some years of
score distributions . As recently
as 1992, 1.2% of whites and 5.1% of Asians scored between 750 and 800 on the math subtest. As recently as 1985, 0.20% of whites
and 0.26% of Asians scored in that range on the verbal/critical reading subtest.
On a different form of the writing subtest than is currently used, 5.0% of whites and 3.0% of Asians scored greater than 60
in 1985. We also know that, as the white-Asian average verbal/critical reading gap shrank to almost nothing and the average math
gap grew in Asians' favor, the standard deviations on both for Asians have been much higher than every other group but have stayed
relatively unchanged and have become, in fact, slightly lower than in 1985.
Therefore, Asians probably greatly increased their share of top performers.
@Milton F.: "Perhaps, by ensuring that "the best" students are not concentrated in only 8 universities is why the depth and
quality of America's education system remains the envy of the world."
Hardly. America's education system is "the envy" because of the ability for minorities to get placement into better schools,
not solely for the education they receive. Only a very select few institutions are envied for their education primarily, 90% of
the colleges and universities across the country are sub-standard education providers, same with high schools.
I would imagine you're an educator at some level, more than likely, at one of the sub-standard colleges or even perhaps a high
school teacher. You're attempting to be defensive of the American education system, when in reality, you're looking at the world
through rose colored glasses. Working from within the system, rather than from the private sector looking back, gives you extreme
tunnel vision. That, coupled with the average "closed mindedness" of educators in America is a dangerous approach to advancing
the structure of the American education system. You and those like you ARE the problem and should be taken out of the equation
as quickly as possible. Please retire ASAP or find another career.
Aside from the complete lack of actual ivy league admission data on jewish applicants, a big problem with unz's "jewish affirmative
action" claim is how difficult such a policy would be to carry out in complete secrecy.
Now, it would be one thing if Unz was claiming that jews are being admitted with similar numbers to non-jewish whites, but
in close cases, admissions staff tend to favor jewish applicants. But he goes much further than that. Unz is claiming that jews,
as a group, are being admitted with lower SAT scores than non-jewish whites. Not only that, but this policy is being carried out
by virtually every single ivy league college and it has been going on for years. Moreover, this preference is so pervasive, that
it allows jews to gain admissions at many times the rate that merit alone would yield, ultimately resulting in entering classes
that are over 20% Jewish.
If a preference this deep, consistent and widespread indeed exists, there is no way it could be the result of subjective bias
or intentional tribal favoritism on the part of individual decision makers. It would have to be an official, yet unstated, admissions
policy in every ivy league school. Over the years, dozens (if not hundreds) of admission staff across the various ivy league colleges
would be engaging in this policy, without a single peep ever leaking through about Jewish applicants getting in with subpar SAT
scores. We hear insider reports all the time about one group is favored or discriminated against (we even have such an insider
account in this comment thread), but we hear nothing about the largest admission preference of them all.
Remember, admissions staffs usually include other ethnic minorities. I couldn't imagine them not wondering why jews need to
be given such a big boost so that they make up almost a quarter of the entering class. Even if every member of every admissions
committee were Jewish liberals, it would still be almost impossible to keep this under wraps.
Obviously, I have never seen actual admission numbers for Jewish applicants, so I could be wrong, and there could in fact be
an unbreakable wall of secrecy regarding the largest and most pervasive affirmative action practice in the country. Or, perhaps,
the ivy league application pool contains a disproportionate amount of high scoring jewish applicants.
As some who is Jewish from the former Soviet Union, and who was denied even to take an entrance exam to a Moscow college,
I am saddened to see that American educational admission process looks more and more "Soviet" nowadays. Kids are denied opportunities
because of their ethnic or social background, in a supposedly free and fair country!
But this is just a tip of the iceberg. The American groupthink of political correctness, lowest common denominator, and political
posturing toward various political/ethnic/religious/sexual orientation groups is rotting this country inside out.
"Similarly, Jews were over one-quarter of the top students in the Physics Olympiad from 1986 to 1997, but have fallen to just
5 percent over the last decade, a result which must surely send Richard Feynman spinning in his grave."
Actually, Richard Feynman famously rejected genetic explanations of Jewish achievement (whether he was right or wrong to
do so is another story), and aggressively resisted any attempts to list him as a "Jewish scientist" or "Jewish Nobel Prize winner."
I am sure he would not cared in the slightest bit how many Jews were participating in the Physics Olympiad, as long as the quality
of the students' work continued to be excellent. Here is a letter he wrote to a woman seeking to include him in a book about Jewish
achievement in the sciences.
Dear Miss Levitan:
In your letter you express the theory that people of Jewish origin have inherited their valuable hereditary elements from their
people. It is quite certain that many things are inherited but it is evil and dangerous to maintain, in these days of little knowledge
of these matters, that there is a true Jewish race or specific Jewish hereditary character. Many races as well as cultural influences
of men of all kinds have mixed into any man. To select, for approbation the peculiar elements that come from some supposedly Jewish
heredity is to open the door to all kinds of nonsense on racial theory.
Such theoretical views were used by Hitler. Surely you cannot maintain on the one hand that certain valuable elements can be
inherited from the "Jewish people," and deny that other elements which other people may find annoying or worse are not inherited
by these same "people." Nor could you then deny that elements that others would consider valuable could be the main virtue of
an "Aryan" inheritance.
It is the lesson of the last war not to think of people as having special inherited attributes simply because they are born
from particular parents, but to try to teach these "valuable" elements to all men because all men can learn, no matter what their
race.
It is the combination of characteristics of the culture of any father and his father plus the learning and ideas and influences
of people of all races and backgrounds which make me what I am, good or bad. I appreciate the valuable (and the negative) elements
of my background but I feel it to be bad taste and an insult to other peoples to call attention in any direct way to that one
element in my composition.
At almost thirteen I dropped out of Sunday school just before confirmation because of differences in religious views but mainly
because I suddenly saw that the picture of Jewish history that we were learning, of a marvelous and talented people surrounded
by dull and evil strangers was far from the truth. The error of anti-Semitism is not that the Jews are not really bad after all,
but that evil, stupidity and grossness is not a monopoly of the Jewish people but a universal characteristic of mankind in general.
Most non-Jewish people in America today have understood that. The error of pro-Semitism is not that the Jewish people or Jewish
heritage is not really good, but rather the error is that intelligence, good will, and kindness is not, thank God, a monopoly
of the Jewish people but a universal characteristic of mankind in general.
Therefore you see at thirteen I was not only converted to other religious views but I also stopped believing that the Jewish
people are in any way "the chosen people." This is my other reason for requesting not to be included in your work.
@Rob Schacter – your last point is basically spot-on. The Ivies are fairly unique in the high proportion of Jewish applicants.
History, geographical bias, and self-selection all play a role. I think the overall preference distortion is probably not as wide
as Unz claims, but you will see similar tilts at Stanford, Northwestern, etc. that reflect different preference distortions.
@Leon, two quick points.
1st – the census tracks by household, which generally overestimates Asian wealth. Many families have three generations and
extended members living in one household (this reflects that many of them work together in a small family business).
2nd – most of the time, it's clear in the application (the HS, personal info, other residency info, etc.) which Asian applicants
are Asian-American and which are "Parachute Kids". But the numbers are much smaller than one might think, and the implication
depends on the school.
At Ivies, parachute kids (both Asian and not) tend to compete with each other in the application pool, and aren't substantially
informing the broader admissions thesis in this article. I'm not saying that's right, just saying it's less material than we might
think.
They more likely skew the admissions equation in great-but-not-rich liberal arts colleges (like Grinnell) and top public universities
(like UCLA), which are both having budget crises and need full fare students, parachute or not. And for the publics, this includes
adding more higher-tuition, out-of-state students, which further complicates assertions of just whose opportunities are being
lost.
I will bring this back to fundraising and finances again, because the broader point is about who is stewarding and creating
access: so long as top universities are essentially run as self-invested feedback loops, and position and resource themselves
accordingly (and other universities have to compete with them), we will continue to see large, persistent discrepancies in who
can participate.
When I applied to Harvard College back in 1976, I was proud of my application essay. In it, I proposed that the US used the
Israeli army as a proxy, just as the Russians were using the Cuban army at the time.
Alas, I wasn't admitted (I did get into Yale, which didn't require free-form essay like that).
This, of course, illustrates the point that coming from an Application Hell instead of from central Illinois helps a student
know how to write applications. It also illustrates what might help explain the mystery of high Jewish admissions: political bias.
Jews are savvier about knowing what admissions officers like to hear (including the black and Latino ones, who as a previous commentor
said aren't likely to be pro-semite). They are also politically more liberal, and so don't have to fake it. And their families
are more likely to read the New York Times and thus have the right "social graces" as we might call them, of this age.
It would be interesting to know how well "true WASPS" do in admissions. This could perhaps be estimated by counting Slavic
and Italian names, or Puritan New England last names. I would expect this group to do almost as well as Jews (not quite as well,
because their ability would be in the lower end of the Legacy group).
The missing variable in this analysis is income/class. While Unz states that many elite colleges have the resources to
fund every student's education, and in fact practice need-blind admissions, the student bodies are skewed towards the very highest
percentile of the income and wealth distribution. SAT scores may also scale with parents' income as well.
Tuition and fees at these schools have nearly doubled relative to inflation in the last 25-30 years, and with home prices in
desirable neighborhoods showing their own hyper-inflationary behavior over the past couple of decades (~15 yrs, especially), the
income necessary to pay for these schools without burdening either the student or parents with a lot of debt has been pushed towards
the top decile of earners. A big chunk of the upper middle class has been priced out. This could hit Asian professionals who may
be self made harder than other groups like Jews who may be the second or third generation of relative affluence, and would thus
have advantages in having less debt when starting their families and careers and be less burdened in financing their homes. Would
be curious to see the same analysis if $$ could be controlled.
I would also like to add that I am a late '80′s graduate of Wesleyan who ceased his modest but annual financial contribution to
the school after reading The Gatekeepers.
If I had a penny for every Jewish American I met (including myself) whose first and last name gave no indication of his religion
or ethnicity, I'd be rich. Oh–and my brother and I have four Ivy League degrees between us.
I almost clicked on a different link the instance I came across the word "elite" , but curiosity forced my hand.
Just yesterday my mom was remarking how my cousin had gotten into MIT with an SAT score far below what I scored, and she finished
by adding that I should have applied to an ivy-league college after high school. I as always, reminded her, I'm too "black for
ivy games".
I always worked hard in school, participated in olympiads and symposiums, and was a star athlete. When it came to applying
for college I found myself startled when forced to "quantify" my achievements in an "application package". I did not do or engage
in these activities solely to boost my chances of gaining admission into some elite college over similarly-hardworking Henry Wang
or Jess Steinberg. I did these things because I loved doing them.
Sports after class was almost a relaxation activity for me. Participating in math olympiads was a way for me to get a scoop
on advanced mathematics. Participating in science symposiums was a chance for me to start applying my theoretical education to
solve practical problems.
The moment I realized I would have to kneel down before some admissions officer and "present my case", outlining my "blackness",
athleticism, hard work, curiosity, and academic ability, in that specific order I should point, in order to have a fighting chance
at getting admitted; is the moment all my "black rage" came out in an internal explosion of rebellion and disapproval of "elite
colleges".
I instead applied to a college that was blind to all of the above factors. I am a firm believer that hard work and demonstrated
ability always win out in the end. I've come across, come up against is a better way to put it, Ivy-league competition in college
competitions and applications for co-ops and internships, and despite my lack of "eliteness" I am confident that my sheer ability
and track record will put me in the "interview candidate" pool.
Finally, my opinion is: let elite schools keep doing what they are doing. It isn't a problem at all, the "elite" tag has long
lost its meaning.
The difficulty with using Jewish sounding last names to identify Jewish students works poorly in two ways today. Not only,
as others have pointed out, do many Jews not have Jewish sounding last names, but there are those, my grandson for example, who
have identifiably Jewish last names and not much in the way of Jewish background.
Interesting reading. The article opens a deceptively simple statistical window into a poorly understood process - a window
which I would guess even the key participants have never looked through. I especially appreciated the insights provided by the
author's examination of Asian surname-frequencies and their over-representation in NMS databases.
Though this is a long and meticulously argued piece, it would have benefited from a more thorough discussion of the statistical
share of legacies and athletic scholarships in elite admissions.
Perhaps, though, it would be better to focus on increasing meritocracy in the broader society, which would inevitably lead
to some discounting of the value of educational credentials issued by these less than meritocratic private institutions.
It is precisely because the broader society is also in many key respects non-meritocratic that the non-meritocratic admissions
practices of elite institutions are sustainable.
Despite the very long and detailed argument, the writer's interpretation of a pro-Jewish admissions bias at Ivy-league schools
is worryingly flawed.
First, he uses two very different methods of counting Jews: name recognition for counting various "objective" measures such
as NMS semifinalists and Hillel stats for those admitted to Harvard. The first is most likely an underestimate while the latter
very possibly inflated (in both cases especially due to the very large numbers of partially-Jewish students, in the many interpretations
that has). I wonder how much of his argument would just go away if he simply counted the number of Jews in Harvard using the same
method he used to count their numbers in the other cases. Would that really be hard to do?
Second, he overlooks the obvious two sources that can lead to such Asian/Jewish relative gaps in admissions. The first is the
different groups' different focus on Science/Math vs. on Writing/Culture. It is very possible that in recent years most Asians
emphasize the former while Jews the latter, which would be the natural explanation to the Caltech vs Harvard racial composition
(as well as to the other stats). The second is related but different and it is the different group's bias in applications: the
same cultural anecdotes would explain why Asians would favor applying to Caltech and Jews to Harvard. A natural interpretation
of the data would be that Jews have learned to optimize for whatever criteria the Ivy leagues are using and the Asians are doing
so for the Caltech criteria.
Most strange is the author's interpretation of how a pro-Jewish bias in admissions is actually put into effect: the application
packets do not have the data of whether the applicant is Jewish or not, and I doubt that most admission officers figure it out
in most cases. While it could be possible for admissions officers to have a bias for or against various types of characteristics
that they see in the data in front of them (say Asian/Black/White or political activity), a systematic bias on unobserved data
is a much more difficult proposition to make. Indeed the author becomes rather confused here combining the low education level
of admissions officers, that they are "liberal arts or ethnic-studies majors" (really?), that they are "progressive", and that
there sometimes is corruption, all together presumably leading to a bias in favor of Jews?
Finally, the author's suggestion for changing admittance criteria is down-right bizarre for a conservative: The proposal is
a centralized solution that he aims to force upon the various private universities, each who can only loose from implementing
it.
Despite the long detailed (but extremely flawed) article, I am afraid that it is more a reflection of the author's biases than
of admissions biases.
Both the article and the comments are illuminating. My takeaways:
1) Affirmative action in favor of blacks and Hispanics is acknowledged.
2) Admissions officers in the Ivy League appear to limit Asian admissions somewhat relative to the numbers of qualified applicants.
3) They may also admit somewhat more Jewish applicants than would be warranted relative to their comparative academic qualifications.
The degree to which this is true is muddled by the difficulty of identifying Jews by surnames, by extensive intermarriage, by
changing demographics within the Jewish population, by geographic factors, and by the propensity to apply in the first place.
4) (My major takeaway.) White Protestants and Catholics are almost certainly the sole groups that are greatly under-represented
relative to their qualifications as well as to raw population percentages.
5) This is due partly to subtle or open discrimination.
6) I would hypothesize that a great many of the white Protestants and Catholics who are admitted are legacies, star athletes,
and the progeny of celebrities in entertainment, media, politics, and high finance. White Protestant or Catholic applicants, especially
from the hinterlands, who don't fit one of these special categories–though they must be a very large component of Mr Unz's pool
of top talent–are out of luck.
7) And everyone seems to think this is just fine.
The inner and outer ring idea seems to me an excellent one, though the likelihood of it happening is next to nil, both because
some groups would lose disproportionate access and because the schools' imprimatur would be diminished in
value.
The larger point, made by several respondents, is that far too many institutions place far too much weight on the credentials
conferred by a small group of screening institutions. The great advantage of the American system is not that it is meritocratic,
either objectively or subjectively. It is that it is–or was–Protean in its flexibility. One could rise through luck or effort
or brains, with credentials or without them, early in life or after false starts and setbacks. And there were regional elites
or local elites rather than, as we increasingly see, a single, homogenized national elite. Success or its equivalent wasn't something
institutionally conferred.
The result of the meritocratic process is that we are making a race of arrogant, entitled overlords, extremely skilled at the
aggressive and assertive arts required to gain admission to, and to succeed in, a few similar and ideologically skewed universities
and colleges; and who spend the remainder of their lives congratulating each other, bestowing themselves on the populace, and
destroying the country.
This article is the product of careful and thoughtful research, and it identifies a problem hiding in plain sight. As a society,
we have invested great trust in higher education as a transformative institution. It is clear that we have been too trusting.
That the admissions policies of elite universities are meritocratic is hardly the only wrong idea that Americans have about
higher education. Blind faith in higher education has left too many people with largely worthless degrees and crushing student-loan
debt.
Of course, the problems don't end with undergraduate education. The "100 reasons NOT to go to grad school" blog offers some
depressing reading:
The higher education establishment has failed to address so many longstanding internal structural problems that it's hard to
imagine that much will change anytime soon.
"I believe that this article raises – and then inappropriately immediately dismisses – the simplest and most likely reason
for the over-representation of Jewish students at Ivy League Schools in the face of their declining bulk academic performance:
They apply to those schools in vastly disproportionate numbers."
Here's the problem with that point. What Ron Unz demonstrates, quite effectively, is that today's Jews simply don't measure
up to either their Asian or their White Gentile counterparts in terms of actual performance when they get into, say, Harvard.
The quite massive difference in the proportions of those groups who get into Phi Beta Kappa renders this quite undeniable. What
is almost certain is that policies that favored Asians and White Gentiles over the current crop of Jewish students would create
a class of higher caliber in terms of academic performance.
If indeed it's true that Jews apply to Harvard in greater numbers, then, if the desire is to produce a class with the greatest
academic potential, some appropriate way of correcting for the consequent distortion should be introduced. Certainly when it comes
to Asians, college admissions committees have found their ways of reducing the numbers of Asians admitted, despite their intense
interest in the Ivies.
One way of understanding Unz's results here might be not so much that today's Jewish student is far less inclined to hard academic
work than those of yesteryear, but rather that others - White Gentiles and Asians - have simply caught up in terms of motivation
to get into elite schools and perform to the best of their abilities.
Certainly among members of the upper middle class, there has been great, and likely increasing, emphasis in recent years on
the importance of an elite education and strong academic performance for ultimate success. This might well produce a much stronger
class of students at the upper end applying to the Ivies.
It may be that not only the Asians, but upper middle class White Gentiles, are "The New Jews".
I don't always agree with, Mr. Unz, but his expositions are always provocative and informative. As far as the criticisms of
his data set go, he openly admits that they are less than ideal. However, the variances are so large that the margin of error
can be excused. Jews are 40 TIMES more likely to be admitted to Harvard than Gentile whites. Asians are 10 times more likely.
Of course, it could be possible that Jews, because of higher average IQs, actually produce 40 times as many members in the upper
reaches of the cognitive elite.
Given Richard Lynn's various IQ studies of Jews and the relative preponderance of non-Jewish and Jewish whites in the population,
however, whites ought to have a 7 to 1 representation vis-a-vis Jews in Ivy League institutions, assuming the IQ cutoff is 130.
Their numbers are roughly equivalent instead.
Because Ivy League admissions have been a hotbed of ethnic nepotism in the past, it seems that special care should be taken
to avoid these improprieties (or the appearance thereof) in the future. But no such safeguards have been put in place. David Brooks
has also struck the alarm about the tendency of elites to shut down meritocratic institutions once they have gained a foothold:
http://www.nytimes.com/2012/07/13/opinion/brooks-why-our-elites-stink.html?_r=1&ref=global-home
Clannish as the WASPs may have been, they were dedicated enough to ideals of fairness and equality that they opened the doors
for their own dispossession. I predict that a new Asian elite will eventually eclipse our Jewish elite. Discrimination and repression
can restrain a vigorously ascendant people but for so long. When they do, it will be interesting to see if this Asian cohort clings
to its longstanding Confucian meritocratic traditions, embodied in the Chinese gaokao or if it too will succumb to the temptation,
ever present in a multiethnic polity, of preferring ethnic kinsmen over others.
Does anyone know how a minority such as the Uighurs fares in terms of elite Chinese university admissions?
This may sound like special-pleading, but it's not clear that full-scale IQ measures are meaningful when assessing and predicting
Jewish performance. Jewish deficits on g-loaded spatial reasoning task may reflect specific visuo-spatial deficits and not deficits
in g. As far as I know, no one doubts that the average Jewish VIQ is at least 112 (and possibly over 120). This score may explain
jewish representation which seems to exceed what would be projected by their full-scale iq scores. Despite PIQ's correllation
to mathematical ability in most populations, we ought also remember that, at least on the WAIS, it is the VIQ scale that includes
the only directly mathematical subtest. We should also note that Jewish mathematicians seem to use little visualization in their
reasoning (cf. Seligman
That said, I basically agree that Jews are, by and large, coasting. American Jews want their children to play hockey and join
'greek life' and stuff, not sit in libraries . It's sad for those of us who value the ivory tower, but understandable given their
stigmatiziation as a nerdish people.
I wonder if it would be at all possible to assess the political biases of admissions counselors at these schools by assessing
the rates at which applicants from red states are admitted to the elite universities. I suppose you would have to know how many
applied, and those data aren't likely to exist in the public domain.
One major flaw with this article's method of determining Jewish representation: distinctive Jewish surnames in no way make
up all Jewish surnames. Distinctive Jewish surnames happen to be held by only 10-12% of all American Jews. In fact, the third
most common American Jewish surname after Cohen and Levy is Miller. Mr. Unz' methodology does not speak well for itself, given
that he's comparing a limited set of last names against a far more carefully scrutinized estimate.
I'm not suggesting his estimate of national merit scholars and the like is off by a full 90%, but he's still ending up with
a significant undercount, possibly close to half. That would still mean Jews may be "wrongfully" over-represented are many top
colleges and universities, but the disproportion is nowhere near as nefarious as he would suggest.
@Nick – the "red state" application and admission rates isn't useful data.
Short answer: There are many reasons for this, but basically, historical momentum and comfort play a much bigger role in where
kids apply than we think. I assure you, far more top Nebraska HS seniors want to be a Cornhusker than a Crimson, even though many
would find a very receptive consideration and financial aid package.
Long answer: 1st, although this article and discussion have been framed in broad racial/cultural terms, the mechanics of college
admissions are mostly local and a bit like athletic recruiting – coverage (and cultivation) of specific regions and districts,
"X" high school historically deliver "X" kinds of candidates, etc. So to the degree we may see broader trends noted in the article
and discussion, some of that is rooted at the HS level and lower.
2nd, in "red states", most Ivy applicants come from the few blue or neutral districts. E.g.: the only 2 Utah HS's that consistently
have applicants to my Ivy alma mater are in areas that largely mirror other high-income, Dem-leaning areas nationwide rather than
the rest of Utah.
3rd, but, with some variation among the schools, the Ivy student body is more politically balanced than usually assumed. Remember,
most students are upper-income, Northeastern suburban and those counties' Dem/Rep ratio is often closer to 55/45 than 80/20.
But to wrap up, ideology plays a negligible role in admissions generally (there's always an exception); they have other fish
to fry (see below).
"Quota against Asians" is not entirely wrong, but it's too strong because it implies the forward intent is about limiting their
numbers.
Put another way, Unz believes the Ivies are failing their meritocractic mission by over-admitting a group that is neither disadvantaged
nor has highest technical credentials; and this comes at the expense of a group that is more often disadvantaged and with higher
technical credentials. The Ivies would likely reply, "well, we define 'meritocractic mission' differently".
That may be a legitimate counter, but it's also what needs more expansion and sunlight.
But Unz' analysis has a broader causation vs correlation gap. Just because admissions is essentially zero-sum doesn't mean
every large discrepancy in it is, even after allowing for soft biases. I've mentioned these earlier in passing, but here are just
a couple other factors of note:
Admissions is accountable for selection AND marketing and matriculation – these are not always complementary forces. Essentially,
you want to maximize both the number and distribution (racial, geographic, types of accomplishment, etc.) of qualified applicants,
but also the number you can safely turn down but without discouraging future applications, upsetting certain stakeholders (specific
schools, admissions counselors/consultants, etc.) or "harming" any data in the US News rankings. And you have a very finite time
to do this, and – not just your competition, but the entire sector – is essentially doing this at the same time. You can see how
an admissions process would develop certain biases over time to limit risks in an unpredictable, high volume market, even if rarely
intended to target a specific group. Ivy fixation (but especially around HYP) is particularly concentrated in the Northeast –
a sample from several top HS' across America (public and private) would show much larger application and matriculation variations
among their top students than would be assumed from Unz's thesis. Different Ivies have different competitors/peers, which influences
their diversity breakdowns – to some degree, they all co-compete, but just as often don't. E.g.: Princeton often overlaps with
Georgetown and Duke, Columbia with NYU and Cooper Union, Cornell with SUNY honors programs because it has some "in state" public
colleges, etc.
There's much more, of course, but returning to Unz's ethnographic thesis, I have this anecdote: we have two friends in finance,
whose families think much of their success. The 1st is Asian, went to Carnegie Mellon, and is a big bank's trading CTO; the 2nd
is Jewish, went to Wharton, and is in private equity.
Put another way, while both families shared a pretty specific vision of success, they differed a lot in the execution. The
upper echelon of universities, and the kinds of elite-level mobility they offer, are much more varied than even 25 years ago.
While the relative role of HYP in our country, and their soft biases in admission, are "true enough" to merit discussion, it's
probably not the discussion that was in this article.
While you may have a point as to the difficulty in some cases of identifying a Jewish surname, the most important thing methodologically
is that the criteria be performed uniformly if one is comparing Jewish representation today vs. that of other periods. I can't
think, for example, of any reason that Cohens or Levys or Golds should be any less well represented today as opposed to many years
ago if indeed there has not been an underlying shift in numbers of Jews in the relevant categories. (Nor, for that matter, should
issues like intermarriage affect the numbers much here - for every mother whose maiden name is Cohen who marries a non-Jew with
a non-Jewish surname, and whose half Jewish child will be counted as non-Jewish, there is, on average, going to be a man named
Cohen who will marry a non-Jew, and whose half Jewish child will be counted as Jewish.)
One might suppose that all this "inequity" and "discrimination" matters if we're keeping score. However, seems to me that too
much emphasis is typically placed on equality whereas real criteria in productive and satisfying lives are neglected. Kind'a like
some people wanting bragging rights as much, if not more, than wanting positive reality.
I guess I just went about my way and lived a pretty god life (so far). Who knows?; maybe those "bragging rights" are meaningful.
Ditto to many comments about the "last name problem", even if its correction weakens but doesn't invalidate the argument. (One
imagines, chillingly, a new sub-field: "Jewish last name theory", seeking to determine proportionalities of classic names validated
against member/donor lists of synagogues and other Jewish organizations.)
Regarding the 20% inner ring suggestion, it suffers from its harsh transition. Consider a randomized derating scheme: a random
number between some lower bound (say 0.90) and 1.00 is applied to each score on the ranked applicant list.
The added noise provides warmth to a cold test scores list. Such an approach nicely captures the directive: "study hard, but
it's not all about the grades".
By adjusting the lower bound, you can get whatever degree of representativeness relative to the application base you want.
That it's a "just a number" (rather than a complex subjectivity-laden labyrinth incessantly hacked at by consultants) could
allow interesting conversations about how it could relate to the "top 1% / bottom 50%" wealth ratio. The feedback loop wants closure.
You missed my point, candid. A relatively small proportion of Jews, intermarried or otherwise, have distinctive Jewish names.
I didn't make that 10-12% figure up. It's been cited in numerous local Jewish population studies and is used in part (but certainly
far from whole) to help estimate those populations. It's also been significantly dragged down over the years as the Jewish population
(and hence the surname pool) has diversified, not just from intermarriage, but in-migration from groups who often lack "distinctive
Jewish surnames" such as Jews from the former Soviet Union. Consider also that for obvious reasons, Hillel, which maintains Jewish
centers on most campus, has an incentive to over-report by a bit. Jewish populations on college campuses in the distant past were
easier to gather, given that it was far less un-PC to simply point blank inquire what religious background applicants came from.
Again, I'm not saying there isn't a downward trend in Jewish representation among high achievers (which, even if one were to
accept Unz's figures, Jews would still be triple relative to were they "should" be). But Unz has made a pretty significant oversight
in doing his calculations. That may happen to further suit his personal agenda, but it's not reality.
This is interesting, but I suspect mostly bogus, based on your not having a decent algorithm for discovering if someone's Jewish.
I'm not sure what exact mechanism you're using to decide if a name is Jewish, but I'm certain it wouldn't have caught anyone,
including myself, in my father's side of the family (Sephardic Jews from Turkey with Turkish surnames), nor my wife's family,
an Ellis Island Anglo name. Or probably most of the people in her family. And certainly watching for "Levi, Cohen and Gold*" isn't
going to do anything.
Isn't the point about Jewish over representation in the Ivy League about absolute numbers?
Yes the Jewish demographic has a higher IQ at 115 to the Goyishe Kop 100 but Jewish people are only 2% of the population so
you have 6 million Jewish people vying with 200 million white Goys for admission to the Ivy League and future control of the levers
of power. That is a 33 times larger Bell curve so the right tail of the Goys' Bell curve is still much larger than the Jewish
Bell curve at IQ levels of 130 and 145, supposedly there are seven times more Goys with IQs of 130 and over 4 times more Goys
with IQs of 145. So why the equality of representation, one to one, Jewish to white Goy in the Ivy Leagues?
Russell K. Nieli on study by Thomas Espenshade and Alexandria Radford (mentioned by Unz):
"When lower-class whites are matched with lower-class blacks and other non-whites the degree of the non-white advantage becomes
astronomical: lower-class Asian applicants are seven times as likely to be accepted to the competitive private institutions as
similarly qualified whites, lower-class Hispanic applicants eight times as likely, and lower-class blacks ten times as likely.
These are enormous differences and reflect the fact that lower-class whites were rarely accepted to the private institutions Espenshade
and Radford surveyed. Their diversity-enhancement value was obviously rated very low."
Having worked with folks from all manner of "elite" and not so elite schools in a technical field, the main conclusion I was
able to draw was folks who went to "elite" colleges had a greater degree of entitlement. And that's it.
If all of the author's suspicions are correct, the most noteworthy takeaway would be that Jewish applicants have absolutely
no idea that they are being given preferential treatment when applying to Ivys.
Not that they think they are being discriminated against or anything, but no Jewish high school student or their parents think
they have any kind of advantage, let alone such a huge one. Someone should tell all these Jews that they don't need to be so anxious!
Also, I know this is purely anecdotal but having gone to an ivy and knowing the numbers of dozens of other Jews who have also
gone, I don't think I have ever witnessed a "surprise" acceptance, where someone got in with a score under the median.
I don't doubt for a minute that it's increasingly difficult for Asian students to get into so-called "elite" universities.
Having grown up in that community, I know a lot of people who were pressured into applying at Harvard and Yale but ended up *gasp*
going to a very good local school. My sarcasm aside, we can't really deny that having Harvard on your CV can virtually guarantee
a ticket to success, regardless of whether or not you were just a C student. It happens.
But what worries me about that is the fact that I know very well how hard Asian families tend to push their children. They
do, after all, have one of the highest suicide rates and that's here in the US. If by some means the Asian population at elite
universities is being controlled, as I suspect it is, that's only going to make tiger mothers push their children even harder.
That's not necessarily a good thing for the child's psyche, so instead of writing a novel here, I'll simply give you this link.
Since the author brought up the subject of Amy Chua and her book, I think it's a pretty fitting explanation of the fears I have
for my friends and their children if this trend is allowed to continue.
As a former admissions staff person at Princeton, I always sigh when I read articles on elite college admissions processes
which build cases on data analysis but which fail to consult with admissions experts on the interpretation of that data.
I am neither an expert in sociology, nor am I a statistician, but I have sat in that chair, reading thousands of essays, and
I have a few observations:
The most selective part of any college's admissions process is the part where students themselves decides whether or not to apply.
Without data on the actual applicant sets, it is, at the least, misleading to attribute incongruities between the overall population's
racial/ethnic/income/what-have-you characteristics and the student bodies' make-ups entirely to the admission decisions. The reality
is that there is always a struggle in the admission offices to compensate for the inequities that the applicant pool itself delivers
to their doorsteps. An experienced admission officer can tell you that applicants from cultures where academics and education
are highly valued, and where the emphasis on a single test is quite high, will generally present with very high SAT scores. Race
does not seem to be correlated, but immigrant status from such a culture is highly correlated. (This may partially explain Unz's
observation of a "decline" in Jewish scores, although I also do not believe that the surname tool for determining which scores
are "Jewish" holds much water.) One of the reasons that such students often fare less well in holistic application processes is
that the same culture that produces the work ethic and study skills which benefit SAT performance and GPA can also suppress activities
and achievement outside of the academic arena. Therefore, to say that these students are being discriminated against because of
race is a huge assumption. The true questions is whether the students with higher test scores are presenting activity, leadership
and community contributions comparable to other parts of the applicant pool which are "overrepresented". All of these articles
seem to miss the point that a freshman class is a fixed size pie chart. Any piece that shrinks or grows will impact the other
slices. My first thought upon reading Unz' argument that the Asian slice shrank was, "What other pieces were forced to grow?"
Forced growth in another slice of the class is the more likely culprit for this effect, much more likely than the idea that all
of the Ivies are systematically discriminating against the latest victim. I could go on and on, but will spare you! My last note
is to educate Mr. Unz on what an "Assistant Director" is in college admissions. Generally that position is equivalent to a Senior
Admission Officer (one step up from entry level Admission Officer), while the head of the office might be the Dean and the next
step down from that would be Associate Deans (not Assistant Directors). So while Michelle Hernandez was an Assistant Director,
she was not the second in charge of Admissions, as your article implies. A minor distinction, but one which is important to point
out so that her expertise and experience, as well as my own, as AN Assistant Director of Admission at Princeton, are not overstated.
A last personal note: During Princeton's four month reading season, I worked 7 days a week, usually for about 14 hours a day,
in order to give the fullest, most human and considerate reading of each and every applicant that I could give. I am sure that
the admission profession has its share of incompetents, corruptible people and just plain jerks, and apparently some of us are
not intelligent enough to judge the superior applicants . . . . But most of us did it for love of the kids at that age (they are
all superstars!), for love of our alma maters and what they did for us, and because we believed in the fairness of our process
and the dignity with which we tried to do it.
The sheer numbers of applicants and the fatigue of the long winters lend themselves to making poor jokes such as the "Night
of 1000 Lee's", but a good dean of admission will police such disrespect, and encourage the staff, as mine did, to read the last
applicant of the day with the same effort, energy and attention paid to the first. We admission folk have our honor, despite being
underpaid and playing in a no-win game with regard to media coverage of our activities. I am happy to be able to speak up for
the integrity of my former colleagues and the rest of the profession.
My own position has always been strongly in the former camp, supporting meritocracy over diversity in elite admissions.
When these Ivy League institutions were first begun in the colonial period, they were not strictly speaking meritocratic. The
prevailing idea was that Christocentric education is the right way to go, both from an eschatological and a temporal perspective,
and the central focus was on building and strengthening family ties. The Catholic institutions of higher learning took on the
vital role of preserving Church tradition from apostolic times and were thus more egalitarian and universalist. The results went
far beyond all expectations.
Nothing lasts forever. Your premise misses the essential point that the economy is for man and not vice-versa.
Many of the statements in this article relating to Jews are rather misleading: for while the Hillel data regarding percentage
of students who self-identify as Jews may be fairly accurate, the numbers the author cites based upon "likely Jewish names" are
a gross under-count of the real numbers, leading to the appearance of a large disparity between the two which, in reality, does
not exist. The reason for the under-count is that a large percentage of American Jews have either Anglicized their family name
or intermarried, resulting in their being mistaken for non-Hispanic whites. Thus, one ends up with incorrect statements such as
"since 2000, the percentage (of Jewish Putnam Fellows) has dropped to under 10 percent, without a single likely Jewish name in
the last seven years". The reality is that Jews, by Hillel's definition of self-identified students, have continued to be prominent
among the Putnam Fellows, US IMO team members, and high scorers in the USA Mathematical Olympiad. I have published a careful analysis
of the true ethnic/racial composition of the very top-performing students in these math competitions from recent years (see, Andreescu
et al. Notices of the AMS 2008; http://www.ams.org/notices/200810/fea-gallian.pdf
). For example, Daniel Kane, a Putnam Fellow in 2002-2006, is 100% of Jewish ancestry; his family name had been Cohen before
it was changed. Brian Lawrence was a Putnam Fellow in 2007, 2008, 2010, and 2011; his mother is Jewish. Furthermore, many of the
non-Jewish Putnam Fellows in recent years are Eastern European or East-Asian foreigners who matriculated to college in the US;
they were not US citizen non-Jewish whites or Asian-Americans, respectively. Rather, my data indicate that in recent years both
Jews and Asians have been 10- to 20-over-represented in proportion to their percentage of the US population among the students
who excel at the highest level in these math competitions. The authors conclusions based upon data from other types of competitions
is likely similarly flawed.
The title of this piece captured me to read what it was all about. What was discussed was admissions into elite colleges as
the only focus on "meritocracy" in America. That leaves the tail of the distribution of high IQ people in America, minus those
that make it into elite colleges, to be ignored, especially those that managed to be admitted to Cal Tech, or MIT, or a number
of other universities where significant intellectual power is admitted and fostered. this seems to further the meme that only
the elite graduates run the nation. They may have an early advantage through connections, but I believe that the Fortune 400 CEO's
are fairly evenly spread across the university world.
(1) Jews are better at verbal IQ, Asians at math. Your measures are all math. That woudl be OK if all else were equal across
time, but especially because Jews care a lot about admissions to Ivies, what we'd expect is that with growing Asian competition
in math/science, Jews would give up and focus their energy on drama/writing/service. I wonder if Jewish kids are doing worse in
music competitions too? Or rather- not even entering any more.
(2) For college numbers, adjustment for US/foreign is essential. How many Asians at Yale are foreign? It could well be that
Asian-Americans are far more under-represented than it seems, because they face quota competition from a billion Chinese and a
billion Indians. Cal Tech might show the same result as the Ivies.
(3) A separate but interesting study would be of humanities and science PhD programs. Different things are going on there,
and the contrast with undergrads and with each other might be interseting.
I also learned that Jews are no longer as prominent in math and science achievement, and that's not surprising to me at
all, because everyone in the elite knows that STEM is for Asians and middle-class kids. Jewish parents have learned that colleges
value sports and "leadership" activities more than raw academic achievement and nerdy activities like math olympiads, and that
the most prestigious careers are value transference activities which don't require science or high-level math.
The higher representation of Jews in the Ivies compared to Asians who have better average academic records compared to Jews
(applicants that is ) in the Ivies is due to the greater eligibility of Jews for preferences of every kind in the Ivies. In a
typical Ivy school like Harvard, at least 60% of the freshman class will disappear because of the vast system of preferences that
exists. There is no doubt that there is racial animus involved despite the denials of the Ivies and other private universities
despite the constant denials involved like that of Rosovsky who happens to be a historian by training. Jews are classified as
white in this country, hence there would presumably greater affinity for them among the white Board of Trustees and the adcom
staff. This is in contrast to Asians who do not share the same culture or body physiogonomy as whites do.
I had read the Unz article and the Andrew Goldman response to it. I just do not agree with Unz with his solutions to this problem.
First of all private schools are not going to give legacy preferences and other kinds of preferences for the simple reason that
it provides a revenue stream. Harvard is nothing but a business just like your Starbucks or Mcdonald's on the corner.
Around the world private universities regarded as nothing but the dumping ground of the children of the wealthy, the famous
and those with connections who cannot compete with others with regards to their talent and ability regardless of what anyone will
say from abroad about the private universities in their own country. Bottomline is in other countries , the privates simply do
not get the top students in the country, the top public school does. People in other countries will simply look askance at the
nonsensical admissions process of the Ivies and other private schools, the system that the Ivies use for admission does not produce
more creative people contrary to its claims.
The Goldman response has more to do with the humanities versus math . My simple response to Andrew Goldman would be this :
a grade of A in Korean history is different from a grade of A in Jewish history, it is like comparing kiwis and bananas. The fast
and decisive way of dealing with this problem is simply to deprive private schools of every single cent of tax money that practices
legacy preferences and other kinds repugnant preferences be it for student aid or for research and I had been saying that for
a long time. I would like to comment on the many points that had been raised here but I have no time.
The solution to a lot of problems would be transparency. I'd love to see the admissions and grade data of even one major university.
Public universities should be required to post publicly the names, SAT scores, and transcripts of every student. Allowing such
posting should be a requirement for admission.
The public could then investigate further if, for example, it turned out that children of state senators had lower SAT scores.
Scholars could then analyze the effect of diversity on student performance.
Of course, already many public universities (including my own, Indiana), post the salaries of their professors on the web,
and I haven't seen much analysis or muckraking come out of that.
One factor hinted at in the article, but really needing to be addressed is the "school" that is being attended.
By this, I mean, you need philosophy students to keep the philosophy department going. When I was in college 20 years ago,
I was a humanities major. I took 1 class in 4 years with an Asian American student. 1 class. When I walked through the business
building, it was about 50% Asian.
Could Asian-American students only wanting to go to Harvard to go into business, science, or math be skewing those numbers?
I don't know, but it's just a thought to put out there.
You are preaching to the choir! I blog on this extensively on my Asian Blog: JadeLuckClub. This has been going on for the last
30 years or more! All my posts are here under Don't ID as Asian When Applying to College:
All private schools basically practice legacy prefrences and other kinds of preferences and this practice has been going on
in the Ivies since time immemorial. The income revenue from these gallery of preferences will certainly not encourage the Ivies
to give them up.
In many countries around the world, private universiites are basically the dumping ground for the children of the wealthy ,
the famous and the well connected who could not get into the top public university of their choice in their own country. This
no different from the Ivies in this country where these Ivies and other private universities are just a corral or holding pen
for the children of the wealthy, the famous and the well connected and the famous who could not compete with others based on their
won talent or ability.
Abroad you have basically 3 choices if you could not get into the top public university of that country , they are:
Go to a less competetive public university
Go to a private university
or go abroad to schools like the Ivies or in other countries where the entrance requirements to a public or private university
are less competetive compared to the top public universities in your own home country.
You can easily tell a top student from another country, he is the guy who is studying in this country under a government scholarship
( unless of course it was wrangled through corruption ). the one who is studying here through his own funds or through private
means is likely to be the one who is a reject from the top public university in his own country. That is how life works.
I am generally satisfied with the data that Ron provided about Jews compared to Asians where Jews are lagging behind Asians
at least in grades and SAT scores in the high school level, from the data I had seen posted by specialized schools in NY like
Stuy , Bronx Sci, Brook Tech, Lowell (Frisco ) etc.
Ron is correct in asserting that the Ivies little represents the top students in this country. Compare UCLA and for example.
For the fall 2011 entering freshman class at UCLA , there were 2391 domestic students at UCLA compared to 1148 at Harvard who
scored above 700 in the Math portion of the SAT and there were 439 domestic students who scored a perfect 800 in the Math portion
of the SAT at UCLA, more than Harvard or MIT certainly. For the fall 2012 freshman classs at UCLA the figure was 2409 and 447
respectively.
We can devise a freshman class that will use only income, SATS,grades as a basis of admissions that will have many top students
like UCLA has using only algorithms.
The central test of fairness in any admissions system is to ask this simple question. Was there anyone admitted under that
system admitted over someone else who was denied admission and with better grades and SAT scores and poorer ? If the answer is
in the affirmative, then that system is unfair , if it is in the negative then the system is fair.
I like the comments from Chales Hale. (Nov. 30, 2012) He says: "Welcome to China". It said all in three words. All of these
have been experienced in China. They said there is no new things under the sun. History are nothing but repeated, China with its
5000 years experienced them all.
I meant that there were 439 domestic students in the fall 2011 freshman class at UCLA and 447 domestic students in the fall
2012 freshman class at UCLA who scored a perfect score of 800 in the Math portion of the SAT. In either case it is bigger than
what Harvard or MIT has got.
In fact for the fall 2011 of the entire UC system there were more students in the the freshman class of the entire UC system
who scored above 700 in the Math portion of the SAT than the entire fall 2011 freshman of the Ivy League (Cornell not included
since it is both a public and a private school )'
As I mentioned earlier there were 2409 domestic students in the fall 2012 UCLA freshman class who scored above 700 in the Math
portion of the SAT. We know that Harvard had only 1148 domestic students in its fall 2011 freshman class who scored above 700
in the Math portion of the SAT, why would Harvard ever want to have that many top students like Berkeley or UCLA have ? The answer
to that is simple , it has to do with money. For every additional student that Harvard will enroll it would mean money being taken
out of the endowment .
Since the endowment needs constant replenishment. Where would these replenishment funds come from ? From legacies,from the
children of the wealthy and the famous etc. of course . It would mean more legacy admits, more children of the wealthy admitted
etc.
That would mean that the admission rate at Harvard will rise, the mean SAT score of the entering class will be no different from
the mean SAT scores of the entering freshman classes of Boston University and Boston College
down the road. With rising admission rates and lower mean SAT scores for the entering freshman class that prospect will not prove
appetizing or appealing to the applicant pool.
Harvard ranks only 8th after Penn State in the production of undergrads who eventually get Doctorates in Science and Engineering.
Of course Berkeley has the bragging rights for that kind of attribute.
In the scenario I had outlined above, it would mean that the mean SAT score of the Harvard freshman class will actually go
down if it tried to increase the size of its freshman class and that kind of prospect ia unpalatable to Harvard and that is the
reason as to why it wants to maintain its current " air of exclusivity ".
There is another way of looking at the quality of the Harvard student body. The ACM ICPC computer programming competition is
regarded as the best known college competition among students around the world , it is a grueling programming marathon for 2 or
3 days presumably. Teams from universities around the world vie to win the contest that is dubbed the "Battle of the Brains "
What is arguably sad is that Ivy schools, Stanford and other private schools teams fielded in the finals of the competition are
basically composed of foreign students or foreign born students and foreign born coaches.
The University of Southern California team in this competition in its finals section was made up of nothing but foreign Chinese
students and a Chinese coach. The USC team won the Southern California competition to win a slot in the finals. Apparently they
could not find a domestic student who could fill the bill. However the USC team was roundly beaten by teams from China and Asia,Russia
and Eastern Europe. The last time a US team won this competition was in 1999 by Harvey Mudd, ever since the US had gone downhill
in the competition with the competition being dominated by China and Asia and by countries from Eastern Europe and Russia. Well
I guess USC's strategy was trying to fight fire with fire (Chinese students studying in the US versus Chinese students from the
Mainland ), and it failed.
Thank you Mr. Unz for scratching the surface of the various forms of corruption surrounding elite college admissions. I hope
that your next article further discusses the Harvard Price (and Yale Price and Brown Price etc). The recent press surrounding
the Hong Kong couple suing the person they had retained to pave their children's way into Harvard indicates the extent of the
problem. This Hong Kong couple just were not savvy enough to lay their money down where it would produce results.
Additionally, a discussion of how at least some North Eastern private schools facilitate the corrupt process would be illuminating.
Finally, a more thorough discussion of whether the Asian students being admitted are US residents or nationals or whether they
are foreign citizens would also be worth while and reveal. I suspect, an even lower admit percentage for US resident citizens
of Asian ethnicity.
For these schools to state that their acceptances are need blind is patently untrue and further complicates the admissions process
for students who are naive enough to believe that. These schools should come clean and just say that after the development admits
and the wealthy legacy admits spots are purchased, the remaining few admits are handed out in a need blind fashion remembering
that many of admit pools will already be filled by the development and wealthy legacy admits resulting in extraordinarily low
rates for certain non-URM type candidates (I estimate in the 1% range).
"By contrast, a similarly overwhelming domination by a tiny segment of America's current population, one which is completely
misaligned in all these respects, seems far less inherently stable, especially when the institutional roots of such domination
have continually increased despite the collapse of the supposedly meritocratic justification. This does not seem like a recipe
for a healthy and successful society, nor one which will even long survive in anything like its current form."
I completely agree that it is not healthy for one tiny segment of our population to basically hold all the key positions in
every major industry in this country. If Asians or Blacks (who look foreign) all of a sudden ran education, media, government,
and finance in this country, there would be uproar and resistance. But because Jewish people look like the majority (whites),
they've risen to the top without the masses noticing.
But Jewish people consider themselves a minority just like blacks and Asians. They have a tribal mentality that causes stronger
ethnic nepotism than most other minority groups. And they can get away with it because no one can say anything to them lest they
be branded "jew-hunters" or "anti-semists."
The question is, "where do we go from here?" True race-blind meritocracy will never be instituted on a grand scale in this
country both in education and in the work force. One group currently controls most industries and the only way this country will
see more balance is if other groups take more control. But if one group already controls them all and controls succession plans,
how will there ever be more balance?
If Jews become presidents or regents of universities, that's a credit to their ability. Nothing sinister there.
But when Jews (or anyone) buy into an institution to create the 'Goldman School of Business', or when they give large donations,
that is not a credit to anyone's ability and there may well be something sinister there.
It is no secret that corporations and individuals look for influence, if not control, in return for cash. The same thinking
can easily affect admissions policy.
It's always the same. In spite of all the jingoism about "democracy" and "freedoms" and the "free market capitalist system",
the trail of money obfuscates and corrupts. It is still very true that whoever pays the piper, calls the tune. And naive to believe
otherwise.
How recent was it that Princeton cancelled its anti-Semitism classes for lack of participation, and at least one Jewish organisation
was screaming that Princeton would never get another penny from any Jew, ever.
That is close to absolute control of a curriculum. I give you money, and you teach what I want you to teach.
How far is that from I give you money and you admit whom I want you to admit? Or from I give you money and you hire whom I
want?
A university that is properly funded by the government – "the people" – doesn't have these issues because there is nothing
you can buy.
Operating educational institutions as a business, just like charities and health care, will always produce this kind of corruption.
Two other points:
1. It occurred to me that the lowly-paid underachiever admissions officers might well have been mostly Jewish, and hired for
that reason, and that in itself could skew the results in a desired manner.
2. I think this is a serious criticism of the othewise excellent article:
At the end, Ron Unz wants us to believe that a $30-billion institution, the finest of its kind in the world, the envy of the
known universe and beyond, the prime educator of the world's most prime elites, completely abandons its entire admissions procedures,
without oversight or supervision, to a bunch of dim-witted losers of "poor human quality" who will now choose the entire next
generation of the nation's elites. And may even take cash payments to do so.
Come on. Who are you kidding? Even McDonald's is smarter than this.
Some of the comments suggest major problems with estimating who is Jewish. But the authors information is underpinned by data
collected by Jewish pressure groups for the purpose of ensuring the gravy train keeps flowing. It's either their numbers, or the
numbers are consistent with their numbers.
This article, to me, is shocking and groundbreaking. I don't think anyone has gone this in-depth into this biased and un-meritocratic
system. This is real analysis based on real numbers.
Why is this not getting more coverage in the media? Why are people so afraid to talk about this?
There is an excellent analysis of this article at The Occidental Observer by Kevin MacDonald, "Ron Unz on the Illusory
American Meritocracy". The MSM is ignoring Unz's article for obvious reasons.
I don't know if there's any truth behind the idea that Japanese Americans have become lazy relative to their Korean and Chinese
counterparts. I've grew up in Southern California, a part of the country with a relatively high percentage of Japanese Americans,
yet I've know very few other Japanese Americans in my life. I can recall one Japanese American classmate in jr. high, and one
Japanese classmate in my high school (who returned to Japan upon graduating). Even at the UC school I attended for undergrad,
I was always the only Japanese person in the every class, and the Japanese Student Association, already meager in numbers, was
almost entirely made up of Japanese International students who were only here for school.
If, in fact, 1% of California is made up of Japanese Americans, I suspect they are an aging population. I also think many 2nd
and 3rd generation Japanese Americans are only partially Japanese, since, out of necessity, Japanese Americans have a very high
rate of out marriage.
The carefully researched article makes a strong case that there is some discrimination against Asian-Americans at the Ivy League
schools.
On the other hand, I don't see how a percentage of 40-60% Asian-Americans at the selective UC schools, even given the higher
percentage of Asian-Americans in California, does not perhaps reflect reverse discrimation, or at least affirmative action on
their behalf. To be sure one way or the other, we would have to see their test scores AND GPA, apparently the criteria that the
UC schools use for admission, considered as well in the normalization of this statistical data.
The replies to date make some good points but also reflect precisely the biases pointed out in the article as likely causing
the discussed distortions.
1) use of name data in achievement vs use of Hillel data for Ivy admits: definitely an issue but is this only one of the measures
used in this study. Focusing only on this obscures the fact that Jewish enrollment as measured over time by Hillel numbers (apples
to apples) increased significantly over the past decade while the percent of Jewish high school age students relative to other
groups declined. One explanation for this surge could be that Jewish students became even more academically successful than they
have been in the past. The achievement data using Jewish surnames is used to assess this thesis in the absence of other better
data. Rejecting the surname achievement data still leaves a huge enrollment surge over time in Jewish attendance at the Ivies
relative to their percentage of the population.
2) many comments accept that the numbers show disproportionate acceptance and enrollment growth but simply then go on to assert
that Jewish students really are smarter (absolutely or in gaming the system) relying on anecdotal evidence that is not at all
compelling. All definitions of "smarter" contain value judgments". Back in the '20s the argument was that the Ivies should rely
more on objective testing to remove bias against the then high testing Jewish students; now the writers argue conveniently wthat
the new subjective tests that are applied to disproportionately admit Jewish students over higher scoring Asians and non-Jewish
Caucasians are better measures. In both cases, there is still an issue of using a set of factors that disproportionately favors
one group. In all such cases of significant disproportionate admits, the choice of the factors used to definemmerit and their
application should be carefully evaluated for bias. The burden of proof should shift to those defending the status quo in this
situation. In any event, it is clear that given the large applicant pool, there is no shortage of non-Jewish caucasians and Asians
who are fully qualified, so if the desire was there for a balanced entering class, the students are available to make it happen
3) the numbers don't break down admissions between men and women. When my child was an athletic recruit to Harvard, we received
an ethnic breakdown of the prior year's entering class. I was surprised to discover that the Caucasian population skewed heavily
male and the non-white/Asian population skewed heavily female. It seemed that Harvard achieved most of its ethnic diversity that
year by admitting female URMs, which made being a Caucasian female the single most underrepresented group relative to its percentage
in the school age population. I'm curious if this was an anomaly or another element of bias in the admissions process.
I will note that there is one flaw in this whole argument, and that flaw is thus:
Harvard and Yale aren't the best universities in the country. As someone who went to Vanderbilt, I knew people who had been
to those universities, and their evaluation was that they were no better – and perhaps actually worse – than Vanderbilt, which
is "merely" a top 25 university.
While there is a great deal of, shall we say, "insider trading" amongst graduates of those universities, in actuality they
aren't actually the best universities in the country today. That honor probably goes to MIT and Caltech, which you note are far
more meritocratic. But most of the other best universities are probably very close in overall level, and some of them might have
a lot of advantages over those top flight universities.
Or to put it simply, the Ivy League ain't what it used to be. Yeah, it includes some of the best universities in the country,
but there are numerous non-Ivy League universities that are probably on par with them. This may indeed be in part a consequence
of some of what you have described in the article, as well as a sense of complacency.
I suspect that in twenty or thirty years a lot of Ivy League graduates are going to feel a lot less entitled simply because
there has been an expansion of the top while they weren't paying attention.
I'm against the Ivies going up to 30-50% Asian but I'm also against the over-representation of a tiny minority group. This
country is going to go downhill if we continue to let one group skirt a fair application process just because they possess money
and influence. Who will stand up for fairness and equality?
Many of those commenting above don't seem to be picking up on Unz's evidence of bias against white Gentiles, which by meritocratic
measures is far worse than the bias against Asian Americans.
A drop of 70 PERCENT??? What's going on? Why is so much of the discussion that this article has spawned focused only on Asian
Americans and (secondarily) Jews?
National Merit Scholarship semifinalists are chosen based on per-state percentiles.
What this means is that NMS semifinalist numbers would be skewed _against_ a high-performing demographic group to the extent
that group's demographics concentrate geographically. Mr. Unz acknowledges that geographical skewing of Jewish populations is
huge. However, he ignores its effect on the NMS semifinalist numbers he uses as a proxy for academic performance on a _national_
level to predict equitable distributions at _national_ universities.
Please somebody explain to me how this oversight isn't fatal to his arguments
Surely the author must be aware that approximately half the children with "Jewish" names are not fully Jewish. Over half of
the marriages west of the Mississippi are reportedly mixed. Many non-Jews have last names that start with "Gold". Just these two
facts make the entire analysis ridiculous. Hillel does not keep statistics on how Jewish a student is, while many of Levys and
Cohens are not actually Jewish. What would we call Amy Chua's daughters? Jewish or Asian? It is therefore impossible to tease
out in a multi-racial society who is who.
I am an elementary school teacher at a Title One school in northern California. I supported your "English for the Children"
initiative when it was introduced.
However, the law of unintended consequences has kicked in, and what exists now is not at all what you (or anyone else, for that
matter) had intended.
The school day was not lengthened to create a time slot for English language instruction. Instead, history and science classes
were elbowed aside to make way for mediocre English language instruction. These usually worthless classes have crowded out valuable
core academic instruction for English language learners.
To make matters worse, while English language learners are in ESL classes, no academic instruction in science or history can
be given to "regular" students because that would lead to issues of "academic inequity." In other words, if the Hispanic kids
are missing out on history, the black kids have to miss out on it, too.
As a teacher, I hope you will once again consider bringing your considerable talents to focus on the education of low-income
minority children in California.
Could it be that the goal of financial, rather than academic, achievement, makes many young people uninterested in
competing in the science and math competitions sought out by the Asian students? I wonder about the different percentages
of applicants to medical school versus law or business.
I must also add that I am surprised that the author used the word "data" as singular, rather than plural. Shouldn't he be stating
that the data ARE, not IS; or SHOW, not SHOWS.
The author perhaps pays an incredible amount of attention to those with strengths in STEM fields (Science, technology, engineering,
and math), even though the proportion of all native-born white students majoring in these fields has plummetted in recent decades.
That means that he overlooks a shift in what kinds of training is considered "prestigious," and that this might be reflected in
the pursuits of students in high school. Perhaps there is a movement away from Jewish students' focus on Math Olympiad because
they are in no way interested in majoring in math or engineering fields, instead preferring economics or business. Is that the
fault of the students, or of the rewards system that corporate America has set up?
Jobs in STEM fields pay considerably less than do jobs in numerous professions - investment banking and law. So that is why
~ 40% of the Harvard graduating class - including many of its Jewish students - pursue that route. But to rely on various assessments
of math/science/computing as the measure of intelligence fails to incorporate how the rewards structure in our society has changed
over time.
I teach at an Ivy League university, and believe that many of the authors' arguments have merit, but there are also many weaknesses
in his argument. He sneers at Steinberg and the other sociologists he cites for not quite getting how society has changed - but
he clearly doesn' tunderstand how other aspects of our society have changed. Many of our most talented undergrads have no desire
to pursue careers in STEM fields. Entrance into STEM jobs even among those who majored in those fields is low, and there is very
high attrition from those fields, among both men and women. Young adults and young professionals are voting with their feet. While
our society might be better off with more Caltech grads and students interested in creating our way to a better future rather
than pursuing riches on wall street, one cannot fault students for seeking to maximize their returns on their expensive education.
That's the system we have presented them with, at considerable cost to the students and their families.
Personally, what I found profoundly disturbing is not the overrepresentation of Jewish students or the large presence of Asians
who feel they are discriminated against, but the fact that Ivy League schools have not managed to increase their representation
of Blacks for the last 3 decades. We all compete for the same talent pool. And until the K-12 system is improved, Black representation
won't increase without others screaming favoritism. The other groups - high performing Asians, middle class Jews - will do fine,
even if they don't get into Ivy League schools but have to "settle" for elite private schools. But if the Ivy Leagues are the
pathway to prestige and power, than we're not broadening our power base enough to adequately reprewsent the demographic shifts
reshaping our nation. more focus on that, please.
I've been an SAT tutor for a long time in West Los Angeles (a heavily Asian city), and I feel that at least some of Asians'
over-representation in SAT scores and NMS finalists is due to Asian parents putting massive time and money into driving their
children's success in those very statistics.
In my experience, Asian parents are more likely than other parents to attempt to ramrod their kids through test prep in order
to increase their scores. For example, the few students I've ever had preparing for the PSAT - most students prepare only for
the SAT - were all Asian.
Naturally, because it's so strange to be preparing for what is supposed to be a practice test, I asked these parents why their
9th or 10th grade child was in this class, and the answer was that they wanted to do well on the PSAT because of its use in the
NMS! Similarly, many Asian immigrants send their children to "cram school" every day after regular school lets out (and I myself
have taught SAT at one of these institutions), essentially having their students tutored in every academic subject year-round
from early in elementary school.
Because whites are unlikely to do this, it would seem to me that the resulting Asian academic achievement is analogous to baseball
players who use steroids having better stats than baseball players who do not.
It seems reasonable that the "merit" in "meritocracy" need not be based solely on test scores and grades, and that therefore
a race-based quota system is not the only conclusion that one can draw from a decrease in the attendance rate of hard-driving
test-preppers. Maybe the university didn't want to fill its dorms with grade-grubbers who are never seen because they're holed
up in the library 20 hours a day, and grade-grubbers just happen to be over-represented in the Asian population?
Unz's piece analyzes only the data that lead up to college - when the Asian parents' academic influence over their children
is absolute - whereas the Ivy League schools he criticizes are most concerned with what their students do during and after college.
Is the kid who went to cram school his entire life as likely to join student organizations? To continue practicing his four instruments
once his mom isn't forcing him to take lessons 4 days a week? To start companies and give money to his university? Or did he just
peak early because his parents were working him so hard in order to get him into that college?
However, the remedies considered are not. It is silly to believe that all abilities can be distilled into a small set of numbers,
and anyway, no one knows what abilities will succeed in marketplaces. The source of the problem is the lack of competition in
education, including higher education, a situation written in stone by current accreditation procedures. The solution to the problem
is entry. Remember Brandeis U? With sufficient competition, colleges could take whomever they pleased, on whatever grounds, and
everyone would get a chance.
Concerning the drop in non-Jewish white enrollment:
I am a recent graduate of a top public high school, where I was a NMS, individual state champion in Academic Decathlon, perfect
ACT score, National AP Scholar, etc. etc. Many of my friends – almost exclusively white and Asian – had similar backgrounds and
were eminently qualified for Ivy. None of us even applied Ivy, let alone considered going there. Why? At $60,000/yr, the cost
is simply not worth it, since none of us would have been offered anything close to substantial financial aid and our parents were
unable/unwilling to fully fund our educations. Meanwhile, my Asian friends applied to as many Ivies as they could because it was
understood that (a) their parents would foot the bill if they got in or (b) they would take on a large debt load in order to do
it.
This article discounts financial self-selection, which (at least based on my own, anecdotal evidence) is more prevalent than
we tend to think.
The author ignores the role that class plays in setting kids up for success. At one point he notes, "Given that Asians
accounted for just 1.5 percent of the population in 1980 and often lived in relatively impoverished immigrant families. . ."
When I was at Harvard in the mid-1980s, there were two distinct groups of Asian students: children of doctors, academics, scientists
and businesspeople who came from educated families in China, Korea and Vietnam, and therefore grew up with both strong educational
values and parental resources to push them; and a much smaller group of kids from Chinatown and Southeast Asian communities,
whose parents were usually working class and uneducated. The second group were at a severe disadvantage to the first, who were
able to claim "diversity" without really having to suffer for it.
I would expect you'd see the same difference among higher-caste educated South Asian Brahmins and Indians from middle and
lower castes or from places like Guyana. It is ridiculous to put South Asians and East Asians in the same category as "Asian."
They have different cultural traditions and immigration histories. Ask any Indian parent what race they are and they'll answer
"Caucasian." Grouping them without any kind of assessment of how they might be different undermines the credibility of the
author.
The takeaway is not that affirmative action is damaging opportunities for whites, but that whites are losing against Asians.
The percentage of Hispanic and Black students at leading schools is still tiny. Hence, if invisible quotas for Asians are lifted,
there will be far fewer white students at these schools. This isn't because of any conspiracy, but because white students are
scoring lower than the competition on the relevant entry requirements. I would love to see an article in this publication titled,
"Why White Students Are Deficient." How about some more writing about "The White Student Achievement Gap?"
As parents of 2 HYP grads, We can tell you from experience that Asian students are not under-represented in the Ivies today.
(In fact, I think they are slightly over represented, for the same reasons and stats the author cited).
True, if one looks at stats, such as SAT, scientific competition awards etc, it seems to imply that a +35% enrollment of Asian
students is warranted. However, these indicators are just a small part of a "holistc" approach in predicting the success of a
candidate not only in the next 4 years, but the individual's success in life and be able to impact and contribute to society later.
I have seen candidates of Asian background, who score almost full mark in SAT but was less than satisfactory in all other aspects
of being a potential achiever in life.
Granted, if one wants to be an achiever in science and technology, by all means go with Caltech and MIT. But if one wants an
real "education" and be a leader later on in life, one has to have other qualities as well (skin color is NOT one of them). Of
course, history, and current cultural and political climate may influence the assessment of such qualities because it is highly
subjective. (Is is unfair to pick a pleasant looking candidate over a lesser one, if the rest are the same?)
That is why an interview with the candidates is a good way to assess a potential applicant. I always encourage my children
to conduct interviews locally for their alma mater.
I just hope that the Ivies do not use this holistic approach to practice quota policies.
Here's a quote from a friend just today about this related topic: "Just like the Catholic church in the middle ages recruited
the smartest peasants in order to forestall revolutionary potential, and to learn mind bending religious dogma to befuddle the
remaining peasants, current practice is much the same. To twist Billy Clinton's mantra, "its the economy stupid", No ,"its the
co opted brains"! "
We can substitute economics dogma to the befuddlement mix. The bottom line is every ruling elite has co-opted the top 1%-5%
of high wage earners, to make the pyramid work. Sociology writing is all over this. Veblen, Weber, etc. We can see this little
group created everywhere minerals or natural resources are coveted by private empires.
The universities are doing exactly what they are supposed to do to protect the interests of the Trustees and Donors who run
them for a reason. They are a tool of, not a cause of, the inequality and over-concentration. It is interesting how the story
goes into hairsplitting and comparing Asians to others, etc. But, the real story is a well understood sociology story. This article
explains why Napoleon established free public education after the French Revolution.
This is a fascinating article. So much data. So many inferences. It's hardly surprising to any parent of high school students
that college admissions are only marginally meritocratic. Whether that's a good a thing or a bad thing is an open question. I
think meritocracy has a place in college admissions. But not the only place. Consider athletics, which are themselves almost exclusively
meritocratic. Only the best among the best are offered Division I scholarships. The same, I think, applies to engineering schools,
the physical sciences, and (to a lesser degree), elite law schools. It also applies to auto-mechanics, plumbers, and electricians.
Regarding the humanities (a field in which I hold a PhD), not so much. I think Unz's beef is less with admissions policies per
se (which I agree are mind-bogglingly opaque) than with the status of elite institutions. I also think, and I may be wrong, that
Unz appears heading down the Bobby Fisher highway, intimating that those pesky Jews are
America never promised success through merit or equality. That is the American "dream." America promises freedom of
religious belief and the right to carry a gun.
This is a fascinating and extremely important article which I am very eager to discuss privately with the author, having spent
my whole life in higher education, albeit with a unique perspective. I was flabbergasted the findings about Jewish and non-Jewish
white representation, and intrigued, all the more so since my own ancestry is evenly divided between those two groups. I do want
to make one criticism, however of something the author said about the 1950s which I do not think is correct.
At one point in the article the author makes the claim that the breakdown of Ivy League Jewish quotas in the 1950s reflected
the power of Jews in the media and Hollywood. The statistics he gives about their representation there may be correct, but the
inference, I believe, is unsustainable. The Proquest historical database includes the Washington Post, New York Times, and many
other major newspapers. I did a search for "Harvard AND Jewish AND quota" for the whole period 1945-65 and it turned up only 20
articles, not one of which specifically addressed the issue of Jewish quotas at Harvard and other Ivy League schools. The powerful
Jews of that era had reached their positions by downplaying their origins–often including changes in their last names–and they
were not about to use their positions overtly on behalf of their ethnic group. (This could be, incidentally, another parallel
with today's Asians.) Those quotas were broken down, in my opinion, because of a general emphasis on real equality among Americans
in those decades, which also produced the civil rights movement. The Second World War had been fought on those principles.
I could not agree more that the admissions policies of the last 30 years have produced a pathetic and self-centered elite that
has done little if any good for the country as a whole.
It is really refreshing to see in print what we all know by experience, but I have to wonder out loud, what is our higher purpose?
Surely, you have a largely goal than merely exposing corruption in the academy. Lastly, I have to wonder out loud, how would the
predicament of the working class fit into your analysis? I thank you for this scathing indictment of higher ed that has the potential
to offer us a chillingly sobering assessment.
This is why we need to reinstate a robust estate tax or "death tax" as conservatives derisively call it. To break the aristocracy
described in this article. No less than Alexis de Tocqueville said that the estate tax is what made America great and created
a meritocracy (which now is weaker and riddled with loopholes, thus the decline of America). Aristocracies dominated Europe for
centuries because they did not tax the inheritance.
The day when I learned so many Chinese ruling class' offspring are either alumni or current students of Harvard (the latest
example being Bo GuaGua), it was clear to me Harvard's admission process is corrupt. How would any ivy college determine "leadership"
quality? Does growing up in a leader's family give you more innate leadership skills? Harvard obviously thinks so.
Therefore, it's not surprising that Ron said the following on this subject. " so many sons and daughters of top Chinese leaders
attend college in the West ..while our own corrupt admissions practices get them an easy spot at Harvard or Stanford, sitting
side by side with the children of Bill Clinton, Al Gore, and George W. Bush." I hope world peace will be obtained within reach
in this approach.
The chilling factor is a hardworking Chinese immigrant's child in the U.S. would have less chance of getting into ivies than
these children of privileged.
It was also very disappointing to see another Asian parent whose children are HYP alumni saying too many Asians in ivies, despite
the overwhelming evidence showing otherwise.
Perhaps it's to be expected given the length of the article (over 22,000 words), but so many of the objections and "oversights"
raised in the comments are in fact dealt with – in detail and with a great deal of respect – by Unz in the article itself.
For example, this:
National Merit Scholarship semifinalists are chosen based on per-state percentiles.
What this means is that NMS semifinalist numbers would be skewed _against_ a high-performing demographic group to the extent
that group's demographics concentrate geographically. Mr. Unz acknowledges that geographical skewing of Jewish populations
is huge. However, he ignores its effect on the NMS semifinalist numbers he uses as a proxy for academic performance on a _national_
level to predict equitable distributions at _national_ universities.
Please somebody explain to me how this oversight isn't fatal to his argument
because geographical skewing of Asian populations is also huge, yet we don't witness the same patterning in admissions data
pertaining to Asian students. As the article states: "Geographical diversity would certainly hurt Asian chances since nearly half
their population lives in just the three states of California, New York, and Texas."
Unz goes on to note: "Both groups [Jews and Asians] are highly urbanized, generally affluent, and geographically concentrated
within a few states, so the 'diversity' factors considered above would hardly seem to apply; yet Jews seem to fare much better
at the admissions office."
So there's your answer.
And aside from the fact that your "basic question" has a very simple answer, it's just ludicrous in any case to suggest that
the validity of the entire article rests on a single data point.
There is no doubt this is more of a political issue than the academic one. If only merit is considered then asian american
would constitute as much as 50% of the student population in elite universities. Politically and socially this is not a desired
outcome. Rationale for affirmative action for the african americans and hispanics is same – leaving a large population is in elite
institution is not desired, it smacks of segregation.
But the core issue remains unsolved. Affirmative action resulted in higher representation but not the competitiveness of the
blacks. I am afraid whites are going the similar path.
Anyone famliar with sociology and the research on social stratification knows that meritocracy is a myth; for example,
if one's parents are in the bottom decile of the the income scale, the child has only a 3% chance to reach the top decile in his
or her lifetime. In fact, in contrast to the Horatio Alger ideology, the U.S. has lower rates of upward mobility than almost any
other developed country. Social classses exist and they tend to reproduce themselves.
The rigid class structure of the the U.S. is one of the reasons I support progressive taxation; wealth may not always be
inherited, but life outcomes are largely determined by the class position of one's parents. In this manner, it is also a myth
to believe that wealth is an individual creation;most financially successful individuals have enjoyed the benefits of class privilege:
good and safe schools, two-parent families, tutors, and perhaps most important of all, high expecatations and positive peer socialization
(Unz never mentions the importants of peeer groups, which data show exert a strong causal unfluence on academic performance).
And I would challenge Unz's assertion that many high-performing Asians come from impovershed backgrounds: many of them
may undereport their income as small business owners. I believe that Asian success derives not only from their class background
but their culture in which the parents have authority and the success of the child is crucual to the honor of the family. As they
assimilate to the more individualist American ethos, I predict that their academic success will level off just as it has with
Jews.
1. HYP are private universities: the success of their alumni verifies the astuteness of their admissions policies.
2. Mr. Unz equates "merit" with "academic". I wonder how many CalTech undergrads would be, or were, admitted, to HYP (and vice-versa).
3. I would like ethnic or racial stats on, for several examples, class officers, first chair musicians*, job holders, actors^,
team captains, and other equally valuable (in the sense of contributing to an entering freshman class) high-school pursuits.*By
17, I had been a union trombonist for three years; at Princeton, I played in the concert band, the marching band, the concert
orchestra, several jazz ensembles, and the Triangle Club orchestra.^A high school classmate was John Lithgow, the superb Hollywood
character actor. Harvard gave him a full scholarship – and they should have.
What if we were one homogeneous ethnic group? What dynamic would we set up then?
I suggest taking the top 20% on straight merit, based on SAT scores, whether they crammed for them or not, and take the next
50% from the economically poorest of the qualified applicants (1500 – 1600 on the SAT?) by straight ethnicity percentages to directly
reflect population diversity, and 30% at random to promote some humility, and try that for 20 years and see what effects are produced
in the quality of our economic and political leadership. And of course, keep them all in the dark as to how they actually got
admitted.
Maybe one effect is that more non-ivy league schools will be tapped by the top recruiters.
"Surely the author must be aware that approximately half the children with "Jewish" names are not fully Jewish. Over
half of the marriages west of the Mississippi are reportedly mixed. Many non-Jews have last names that start with "Gold". Just
these two facts make the entire analysis ridiculous. Hillel does not keep statistics on how Jewish a student is, while many
of Levys and Cohens are not actually Jewish. What would we call Amy Chua's daughters? Jewish or Asian? It is therefore impossible
to tease out in a multi-racial society who is who."
Well, there are several arguments to be made. First, unless you are advocating that there has been a mass adoption of words
like "Gold" in non-Jewish last names these past 10, 15 years, that argument sinks like a stone. Second, by selecting for specifically
Jewish last names, intermarriage can be minimized but not eliminated. How many kids with the lastname "Goldstein" was a non-Jew
in the last NMS? Not likely a lot of them.
Intermarriage can account for some fog, but not all, not by a longshot. Your entire argument reeks of bitter defensiveness.
You have to come to grips that Jews have become like the old WASPs, rich, not too clever anymore, and blocking the path forward
for brighter, underrepresented groups.
With all due respect, I was worried that I would get an answer that lazily points to the part of the essay that glosses over
this point (which mind you I had combed through carefully before posting my question). However, I was hoping that in response
someone might respond who had thought a little more carefully about the statistical fallacy in Unz's essay: that far-reaching
statements about nation-wide academic performance can be drawn directly from per-state-percentiles.
Yes, Asian Americans, like Jews, have concentrations. But their geographical distributions differ. Yes, it might be possible
that upon careful analysis of relative distributions of populations and NMS semifinalists in each state Unz might be able to draw
a robust comparison: he might even come up with the same answer. The point that I made is that he doesn't even try.
Given the lengths Unz goes to calculate and re-calculate figures _based_on_ the assumption of _equal_ geographic distributions
among Asians and Jews, it is - and I stand by this - a disservice to the reader that no effort (beyond hand-waving) is made to
quantitatively show the assumption is at all justified.
The statistical analysis used in this article is flawed. The author uses last names to identify the religion (or birth heritage)
of NMS semifinalists? Are you serious? My son was a (recent) National Merit Finalist and graduated from an ivy league university.
His mother is Jewish; his father is not, thus he has a decidedly WASP surname and according to the author's methods he would have
been classified as WASP. With the growing numbers of interfaith and mixed-race children how can anyone draw conclusions about
race and religion in the meritocracy or even "IQ" argument? Anecdotally, my son reported that nearly half his classmates at his
ivy league were at least one-quarter Jewish (one or more parents or one grandparent). To use last names (in lieu of actual demographic
data) to make the conclusion that Jews are being admitted to ivies at higher rates than similarly qualified Asians is irresponsible.
Essentially, the leftist forces in this country are trying to put the squeeze on white gentiles from both directions.
Affirmative action for underachieving minorities to take the place of white applicants.
Meritocracy for highly achieving Asians to push down white applicants, while never mentioning that full meritocracy would push
out other minorities as well (that's not politically correct).
The whole thing has become more about political narrative than actual concern for justice. I want you to know that as an Asian
man who graduated from Brown, I sympathize with you.
Very interesting article. The case that East Asian students are significantly underrepresented and Jewish students overrepresented
at Ivy League schools is persuasive, although not dispositive. The most glaring flaw in the analysis is the heavy reliance on
performance on the PSAT (the discussion of the winners of the various Olympiad and Putnam contests has little informational value
relevant to admissions, since those winners are the outliers on the tail of the distribution), which is a test that can be prepped
for quite easily. Another flaw is the reliance on last names to determine ethnicity, which I doubt works well for Jews, although
it probably works reasonably well for East Asians.
Unfortunately, the article is also peppered with (very) thinly supported (and implausible) claims like Asians are better at
visuospatial skills, worse at verbal skills, and that the situation is reversed for Jews. This kind of claim strikes me as racial
gobbledygook, and at least anecdotally belied if one considers the overrepresentation of Jews among elite chess players, both
in the US and worldwide.
In any event, the fundamental point is that the PSAT (as is the case with all standardized tests) is a fixed target that can
be studied for. Whether one chooses to put in 100s of hours studying for the PSAT is not, and should not be, the only criterion
used for admissions.
I find the relative percentage of East Asians and Jews at schools like MIT (and also Caltech and Berkeley, although obviously
those are in part distorted by the heavy concentration of East Asians in California) as compared to HYP as strong evidence that
the admissions process at HYP advantages Jews and disadvantages East Asians.
I suspect, though, that the advantages Jews enjoy in the admissions process are unconscious and unintentional, whereas the
disadvantages suffered by East Asians are quite conscious and intentional.
The graph entitled "Asians Age 18-21 and Elite College Enrollment Trends, 1990-2011″ is misleading. It contrasts percentage
of enrolled Asian students vs. the total number of the eligible Asian applicants. Therefore, it led to a flawed argument
when comfusing number vs. percentage . For proof, if a similar graph of Hispanic student percentage vs. eligible applicants
were drawn, it would appear that they were discriminated against as well. So would be the Black!
well, even a fair and objective admission criteria can have devastating consequences. here at IIT, we admit about 1 in 100.
this has the same effect on student ethics, career options and so on. in fact, even worse, since IIT is an engineering college,
the very definition of engineering in India has now distorted as serving international finance or distant masters in a globalized
world. our own development problems remain unattended.
also, the above is a part of the current trend of knowledge concentration, i.e., a belief that only a few universities can
impart us "true" knowledge or conduct "true" research.
see http://www.cse.iitb.ac.in/~sohoni/kpidc.pdf
This is a very valuable article. It deals with a subject that has received too little attention. I believe that cultural bias
in many cases outweighs the racial bias in the selection program. Time and again, I have seen young people with great potential
being selected against because they are culturally different from what the selectors are looking for (often people who are like
them culturally). The article's mentioning that students who participated in R.O.T.C., F.F.A. and/or 4H are often passed over
is a good illustration.
It was interesting to note that the girl who wrote an essay on how she dealt with being caught in a drug violation found acceptance.
I suspect that a student with similar academic qualifications who wrote an essay on the negative aspects of drug use would not
be so lucky.
comes news that Yale President Levin's successor will be Peter Salovey, tending to confirm Unz's observations regarding the
grossly disproportionate number of Jewish presidents at Ivy League schools.
All very interesting but I am among the National Merit Scholars from California who has a not obviously Jewish name despite
having two Jewish parents. It was changed in the 1950s due to anti-Semitism and an urge to assimilate. A lot of other names can
be German or Jewish for example. I suspect in light of that and intermarriage cases where the mom is Jewish and the dad is not,
not to mention a lot of Russian names, you may be undercounting Jews among other things. Although to be fair, you are probably
also undercounting some half-Asians given most of those marriages have a white husband and Asian wife.
I'm an Asian HYP grad. I applaud this article for being so extremely well researched and insightful. It's an excellent indictment
of the arbitrariness and cultural favoritism concentrated in the hands of a very small group of unqualified and ideologically
driven admissions officers. And I hasten to add that I am a liberal Democratic, an avid Obama supporter, and a strong proponent
of correcting income inequality and combating discrimination in the workplace.
To me, the most compelling exhibit was the one towards the end which showed the % relative representation of enrolled students
to highly-qualified students (I wish the article labeled the exhibits). This chart shows that in the Ivies, which administer highly
subjective admission criteria, Jews are overrepresented by 3-4x, but in the California schools and MIT, which administer more
objective criteria, Jews are overrepresented by only 0-50%, a range that can easily be explained by methodology or randomness.
This single exhibit is unequivocal evidence to me of systematic bias in the Ivy League selection process, with Jews as the
primary beneficiary. I tend to agree with the author this this bias is unlikely to be explicit, but likely the result of cultural
favoritism, with a decision-making body that is heavily Jewish tending to favor the activities, accomplishments, personalities,
etc. of Jewish applicants.
The author has effectively endorsed one of the core tenets of modern liberalism – that human beings tend to favor people who
look and act like themselves. It's why institutions dominated by white males tend to have pro-white male biases. The only twist
here is that the decision-making body in this instance (Ivy League admissions committees) is white-Jewish, not white-Gentile.
So if you're a liberal like me, let's acknowledge that everyone is racist and sexist toward their own group, and what we have
here is Jews favoring Jews. We can say that without being anti-semitic, just like we can say that men favor men without being
anti-male, or whites favor whites without being anti-white.
Just some puzzling statistics: In p. 32, second paragraph, it is mentioned "The Asian ratio is 63% slightly above the white
ratio of 61 percent", then in the third paragraph "However, if we separate out the Jewish students, their
ratio turns out to be 435 percent, while the residual ratio for non-Jewish whites drops to just 28 percent, less than half of
even the Asian figure", leading to the conclusion that "As a consequence, Asians appear under-represented relative to Jews by
a factor of seven, while non-Jewish whites are by far the most under-represented group of all". Not very clear on the analysis!
Let me try to make a guess on the calculation of this statistics ratio: Assume that all groups in NMS will apply, with mA=Asians,
mJ=Jews, mW=Whites be the respective numbers in NMS. Suppose that nA, nJ, and nW are those Asians, Jews, and Whites finally admitted.
Then if the statistics ratio for G means ((nG)/(mG))/(mG/mNMS), where mNMS is the total number in the NMS, then the ratio will
amplify the admission rate (nG/mG) by (mNMS/mG) times and becomes very large or very small for small group size. For example,
for a single person group, being admitted will give a ratio as large as mNMS, and a zero for not being admitted. Why can this
ratio be used for comparing under-representation between different groups?
Very well. Loved the fact that the author put a lot into reseaching this piece. But i would like to know how many asians who
manage to attend this ivy schools end up as nobel leaurets and professors?? This demonstrates the driving force behind the testscore
prowess of the asians-financial motivation. The author talks about asians being under-represented in the ivies but even though
they manage to attend then what?? do they eventually become eintiens and great nobel leurets or great cheese players. Also what
is the stats like for asian poets, novelist, actors.etc Pls focus should be given on improving other non-ivy schools since we
have a lots of high SAT test scores than high running universities.
Look at Nobel prizes, field medals and all kind of prizes and awards that recognize lifetime original academic contributions.
Not many asians there yet. Perfect grades or SAT scores does not guarantee creativity, original thinking, intelectual curiosity
or leadership. The problem is that those things are hard to measure and very easy to fake in an application.
Loved all the research in the article and I am on board with the idea that moving in the tiger mother direction will kill creativity
in young people. And I agree with the observation that our country's top leadership since 1970 or so has been underwhelming and
dishonest especially in the financial services industry which draws almost entirely from the Ivies.
However, I am not so convinced that the over representation of Jewish students in the Ivy league is created by intentional
bias on the part of Jewish professors or administrators at these institutions. Is it possible that admissions officers select
Jewish applicants at such a high rate because they are more likely to actually attend? Once a family of four's income exceeds
$160k the net price calculation for a year at Harvard jumps up pretty quickly. By the time you hit annual income of $200k you
are looking at $43k/yr or $172k for 4 years. And at the lower income levels, even if a family has to pay just $15k a year, how
will they do that if they are struggling to make it as it is? Do they want/does their student want to graduate with $60k worth
of debt? Why not choose a great scholarship offer from a state university to pay nothing at all or go to community college for
2 years and then on to the state public institution?
There are many options for top students who can compete at the Ivy level. If I am an admissions officer looking to fill slots
left over after minority admissions (ones poor enough to get the education for free and thus to say yes), legacies, athletic recruits,
and the few super special candidates, wouldn't I choose those most likely to take me up on the admissions offer and protect my
yield number? Might an easy way to get this done be to consult a demographic tool showing net worth by zip code? And to stack
the yield odds a little more in my favor might I also choose families with Jewish appearing last names knowing they would be extremely
likely to accept my offer since I obviously have recent history to show me that these families say yes to our prices? I think
this is a much more plausible explanation then assuming some secret quota in force at these schools.
I am a conservative but I cannot believe Jewish liberals would go that far just to ensure more Jewish liberals attend their
institutions or to keep conservative white non Jewish middle income students out. Dollars and cents and the perception a yield
number conveys about the desirability of a school are what is at work here in my humble opinion.
There is a very simple solution. There is no legal definition of race. Simply check the "Negro" (or "African-American" or whatever
it is called today) box on the application form. You don't look it? Neither do many others, because your ancestry is really mixed.
This may get you in. It won't hurt your chances, which are essentially zero before you check that box. At the very least, it will
make it harder for the bigots in the admissions office to exercise their bigotry.
"Look at Nobel prizes, field medals and all kind of prizes and awards that recognize lifetime original academic contributions.
Not many asians there yet. Perfect grades or SAT scores does not guarantee creativity, original thinking, intelectual curiosity
or leadership. The problem is that those things are hard to measure and very easy to fake in an application."
Last year, 75% of Ph.D candidates where foreign born, most of which were either Indian or Chinese. You should rely on statistics
that are more current and relevant.
Wow, another article on how corrupt higher eduation is.
Folks, open your eyes a bit. Online education is growing massively; sharing this growth are websites that write academic papers
(even Ph.D. theses) on demands .these websites in toto have nearly as many customers as there are online students.
Harvard is unusual in that they actually banned students for cheating. Every investigation of cheating on campus shows it exists
on a massive scale, and reports of half or more of a class cheating are quite common in the news.
The reason for this is simple: administrators care about retention, nothing else. Faculty have long since gotten the message.
I've taught in higher education for nearly 25 years now, and I've seen many faculty punished for catching cheaters; not once has
there been any reward.
Over 90% of remedial students fail to get a 2-year degree in three years, yet administration sees no issue with talking them
into loans that will keep them in debt forever. Admin sees no issue with exploiting the vulnerable for personal gain, of course.
Here's what higher education is today: desperate people take out loans to go to college. They use the money to pay the tuition,
and they use the money to buy academic papers because they really aren't there for college, they're there for the checks. Their
courses are graded by poorly paid faculty (mostly adjuncts), again paid by those checks. The facutly are watched over by administrators
to make sure there is no integrity to the system and again, admin is paid by those checks (in fact, most of the tuition money
goes to administrators).
Hmm, what part of this could be changed that would put integrity back into the system?
I think your sources who claim to be familiar with China are very wrong concerning entrance into Chinese universities, especially
those so-called upper tier unis. It is well known amongst most Chinese students who take the gaokao, the all-or-nothing university
entrance examination, bribes, guanxi (connections) and just being local, are often better indicators of who will be accepted.
• Replies: @KA Same and
some more in India.
In India it is politics of the gutter. Someone can get to medical school and engineering school even if he or she did not qualify,if
scored say 3 points out of 1000 points as long as he or she belonged to lower caste of Hindu. The minimum requirements they have
to fulfill is to pass the school leaving examinations with science subjects .A passing level is all that matters . The process
then continues (in further education -master , training, post doctoral, and in job and in promotion)
While upper caste Hindu or Christian or Muslim may not be allowed despite scoring 999 out of 1000. It is possible and has happened.
Unfortunately the lower caste has not progressed much. Upper caste Hindus have misused this on many occasions and continue to
do do by selling themselves as lower caste with legal loopholes .Muslim or Christians can't do that for they can't claim to be
Hindu
Ron Unz is a brilliant man. He created software that made him rich, and has written articles on all kinds of subjects. But
apparently, Ron shares a problem with a very tiny number of humanity. Ron is one of those oddball characters, that, no matter
where the truth leads him, he simply has to express it, regardless of political correctness. He did this in California with the
debate on English,etc.
Compared to the administrators of these Ivy League Institutions, Ron is a mental giant, not even near being in the same class
as these supposedly important but in reality, worthless beurocrats.
If ten million Gentile whites and Asians changed their surname to Kaplan, Levy, Golden, Goldstein, Goldman, it obviously would
throw a monkey wrench into the process of ethnic favoritism.
To paraphrase Unz - the "shared group biases" of Ivy League college admission officers that have "extreme flexibility and subjectivity",
does harm white Gentiles and Asians, but only because the process lacks objective, meritocratic decision making, and in its place
is a vile form of corrupt cronyism and favoritism.
An Asian speaking here, I agree that America isn't a meritocracy, but has it ever been? It seems like this article's falling
for the oldest trick in the book - looking back at the "good old days". I'd argue that now more than ever, the barrier to entry
is lower than ever, and that every individual can rise to the occasion and innovate for the better. Places like Exeter (my alma
mater) aren't just playgrounds for the rich - I'm not extremely wealthy, and neither were my classmates. Most of us were even
on financial aid. Don't just point fingers at institutions to account for shortcomings - if you had the stroke of fortune to be
born in a nation with such opportunity, with hard work and CREATIVITY and INNOVATION, anything is possible.
Has anyone thought about why the test-prep business has expanded so much? It's to feed into the very same system that you're
complaining about. Be the change you wish to see in the world, not a victim of it. To many of the Asians out there, I'd say get
over your 4.0 GPA and 2400 SAT score and be unique for once.
To put Unz's findings in social and historical perspective, it is important to understand where Jewish academics come from.
The Eastern European Jews who immigrated to Northeast US in the Twentieth Century ran into an immigrant world dominated by Catholics
and particularly Irish Catholics. The Irish, who were as "hungry" as the Jews got control over government and its ancillary economic
benefits. I wasn't there at the time, but I imagine we Irish did not do much to help Jewish immigrants compared with Catholic
immigrants.
One area abandoned by the Catholic Church was public and secular education. The Church formed its own educational Catholic
ghetto. Jewish immigrants adopted the public-secular educational world as their own and became strong adherents of education as
the key to Americanization. Education became their small piece of turf. The only memorable political conflict between Jews and
AfricanAmericans in New York City was over control of the public schools.
Just as the Irish react against affirmative action for non-Irish in government jobs, the descendants of these Jewish immigrants
react to the plagiarism of their assimilation plan by the Chinese/Koreans. When you have de facto Irish affirmative action you
don't want de jure African American affirmative action. When you have Jewish "meritocracy" you don't want Asian meritocracy.
The result is what you see today. The Irish still have a stranglehold on government related jobs in the Northeast with a smattering
of minorities ("New Irish") and the Jews try to protect their secular education turf from the "New Jews". It's just business.
Don't take it personally.
All I can say is see a book: "Ivy League Fools and Felons"' by Mack Roth. Lots of them are kids of corrupt people in all
fields.
But I disagree that opportunity is being closed off to most Americans. Here in North Dakota I work for a high school graduate,
self made trucking millionaire. Five years ago she was a secretary in Iowa. But she got off her butt and went to where the money
is circulating. Just my 2 cents
Sorry, but quick correction regarding rankings (and I only have to say this because I go to MIT). Technically, MIT and Caltech
are *both* ranked the same. The only reason why Caltech appears on the list before MIT is because it come before it alphabetically
to suggest otherwise would be untrue. When you look at individual departments, you'll find that MIT consistently ranks higher
than that of Caltech in all engineering disciplines and most scientific disciplines. Also, personally speaking, MIT has a far
better humanities program that Caltech (especially in the fields of economics, political science, philosophy, and linguisitics).
We do have a number of Pulitizer Prize winners who teach here.
Also generally, in academic circle, MIT is usually viewed with higher regard than Caltech, although that isn't to say Caltech
isn't a fantastic school (it really and truly is–I loved it there and I wish more people knew more about it)
One observation about methodology that struck me while reading this:
The Jewish population of universities is being evaluated based on Hillel statistics, with the "Non-Jewish white" population
being based on the white population minus the Jewish population.
This can be problematic when you consider that these population are merging at a pretty high rate. (I don't have much information
here, but this is from the header of the wikipedia article: "The 1990 National Jewish Population Survey reported an intermarriage
rate of 52 percent among American Jews.")
What percentage of partially Jewish students identify as "Jewish" or does Hillel identify as Jewish? If you're taking a population
that would have once identified as "white" and now identifying them as Jewish, obviously you'll see some Jewish inflation, and
white deflation. And when a large percentage of this population bears the names "Smith", "Jones", "Roberts" etc., you're obviously
not going to see a corresponding increase in NMS scores evaluated on the basis of last names.
Of course, I have no idea what methodology Hillel is using, but I wouldn't be surprised to learn that it's an inflated one.
Thank you Mr. Unz for this provocative article. It isn't the author's first one on Jewish & Asian enrollment at Ivy League
colleges. I remember another one, in the 1990s I believe.
According to what I read, less and less American Jews apply for medical school nationwide, and Jewish women are very educated,
but it comes also with a low birthrate and high median age. It makes the recent spike in Jewish admissions at Harvard College
all the more curious, intriguing.
This month, the NY Times published a list of the highest earners in the hedge fund industry in 2012, and 8 out of 10 were Jewish.
Are certain universities aggressively seeking donations from this super rich demographic since the 2000s?
The young American Jew is not like his grandparents. They are just as fun loving and lazy as any other. This is the result
of a lack of perceived persecution that use to keep the group together. In the major cities, half of the young people leave the
tribe through intermarriage. This is human nature. The Rabbis changed the rules some time ago to define a Jew as coming from the
mother, so the Jewish man would marry a Jewish woman, instead of a woman outside of the tribe. Read the Bible. In David's time,
the men had an eye for good looking women outside of the tribe(like all men). Now days, the young people just laugh at the Rabbi's
words.
Instead of the old folks liberal ideas of race and ethnic divisions, let us change it to go by economic class. According to
liberal thought, intelligence is equally distributed throughout all economic classes, so higher education admissions should be
by economic class, and not the old divisive ideas of race and ethnic background. After all, affirmative action programs are institutionalized
racism and racial profiling.
• Replies: @KA Yes . You
have points . This is one of the fears that drove the Zionist to plan of Israel in 1880 . It was the fear of secular life free
from religious persecution and freedom to enjoy life to its fullest in the post industrial non religious Europe guided by enlightenment
that drove them embrace the religious ethnic mix concept of statehood.
These and many other ills would be alleviated if government would stop: (a) banning aptitude tests or even outright discrimination
as determinants of employment; (b) subsidizing private institutions such as Harvard; and (c) close down all government schools,
starting with state institutions of "higher learning."
I know, pie in the sky. But the author's suggestions by comparison are mere Band-Aids.
Great analysis, but pie-in-the-sky prescription, which was presumably just intended to be thought provoking. If you want to
know why Harvard would never adopt the author's recommendation, just read what he wrote:
"But if it were explicitly known that the vast majority of Harvard students had merely been winners in the application lottery,
top businesses would begin to cast a much wider net in their employment outreach, and while the average Harvard student would
probably be academically stronger than the average graduate of a state college, the gap would no longer be seen as so enormous,
with individuals being judged more on their own merits and actual achievements. A Harvard student who graduated magna cum laude
would surely have many doors open before him, but not one who graduated in the bottom half of his class."
I wonder why Harvard officials would desire this outcome?
So a lot of ivy league presidents with Jewish-sounding names somehow influence admissions staff who may not have Jewish-sounding
names to favor undeserving applicants because they also have Jewish-sounding names? And this is because of some secret ethnic
pride thing going on? And nobody's leaked this conspiracy to the outside world until our whistle blowing author? The guy's a nut
job.
All of your statistics are highly suspect due to the enormous, and rapid annual increase in Jewish intermarriage. I do not
have the statistics, but over many years, it certainly appears that Jewish men are far more likely to intermarry than Jewish women
(the lure of the antithesis to their Jewish mother??) and to complicate matters further, Jewish men seem to have a predilection
for Asian women, at least in the greater NY Metro Area. But that still does not represent the majority of Jewish men marrying
Christians. QED. More Jewish last names, for children who are DNA wise only half Jewish than non Jewish names for the intermarried.
And if one wanted to get really specific, the rapidly rising intermarriage is diluting the "Jewish" genetic pool's previously
demonstrable intelligence superiority., strengthened by the fact that most couples use the Jewish fathers last name.
These observations are in no way associated with how the various Jewish denominations define 'Jewish"
In short: Unz substantially overestimated the percentage of Jews at Harvard while grossly underestimating the percentage of
Jews among high academic achievers, when, in fact, there is no discrepancy.
In addition, Unz's arguments have proven to be untenable in light of a recent survey of incoming Harvard freshmen conducted
by The Harvard Crimson, which found that students who identified as Jewish reported a mean SAT score of 2289, 56 points higher
than the average SAT score of white respondents.
First. I was thrilled to see your advocacy of admissions by lottery. I have advocated such a plan on various websites that
I participate in, but you have written the first major article advocating it that I have seen. Congratulations.
Just a small quibble with your plan, I would not allow the schools any running room for any alternatives to the lottery. They
have not demonstrated any willingness to administer such a system fairly. After a few years of pure lottery it would be time to
evaluate it and see if they should be allowed any leeway, but I wouldn't allow any variation before that.
I would hypothesize that one effect of a lottery admissions plan would be a return to more stringent grading in the class rooms.
It would be useful to the faculty to weed out the poor performers more quickly, and the students might have less of an attitude
of entitlement.
Second, I am glad that you raised the issue of corruption of the admissions staffs. It would be a new chapter in human history
if there was no straight out bribe taking of by functionaries in their positions. My guess is that the bag men are the "high priced
consultants". Pay them a years worth of tuition money and a sufficient amount will flow to the right places to get your kid in
to wherever you want him to go.
Third, three observations about Jewish Students.
First, Jews are subject to mean reversion just like everybody else.
Second, the kids in the millennial generation were, for the most part, born into comfortable middle class and upper class homes.
The simply do not have the drive that their immigrant grandparents and great-grandparents had. I see this in my own family. My
wife and I had immigrant parents, and we were pretty driven academically (6 degrees between us). Our kids, who are just as bright
as we were, did not show that same edge, and it was quite frustrating to us. None of them have gone to a graduate or professional
school. They are all working and are happy, but driven they aren't.
Third, Hillel's numbers of Jewish students on their website should be taken cum grano salis. All three of our kids went to
Northwestern U. (Evanston, IL) which Hillel claimed was 20% Jewish. Based on our personal observations of kids in their dorms
and among their friends, I think the number is probably 10% or less.
Finally, the side bar on Paying Tuition to a Hedge Fund. I too am frustrated with the current situation among the wealthy institutions.
I think that it deserves a lot more attention from policy makers than it has received. The Universities have received massive
benefits from the government (Federal and state) - not just tax exemptions, but grants for research and to students, subsidized
loans, tax deductions for contributions, and on, and on. They have responded to this largess by raising salaries, hiring more
administrators, spending billions on construction, and continually raising tuitions far faster than the rate of inflation. I really
do not think the tax payers should be carrying this much of a burden at a time when deficits are mounting without limit.
Henry VIII solved a similar problem by confiscating assets. We have constitutional limits on that sort of activity, but I think
there a lot of constitutional steps that should be considered. Here a few:
1. There is ample reason to tax the the investment gains of the endowments as "unrelated business taxable income" (UBTI, see
IRS Pub 598 and IRC §§ 511-515) defined as income from a business conducted by an exempt organization that is not substantially
related to the performance of its exempt purpose. If they do not want to pay tax on their investments, they should purchase treasuries
and municipals, and hold them to maturity.
2. The definition of an exempt organization could be narrowed to exclude schools that charge tuition. Charging $50,000/yr and
sitting on 30G$ of assets looks a lot more like a business than a charity.
3. Donations to overly rich institutions should be non deductible to the donors. Overly rich should be defined in terms of
working capital needs and reserves for depreciation of physical assets.
Is the proposed mechanism that Jewish university presidents create a bias in the admissions department?
That could be tested by comparing Jewish student percentages between schools with Christian and Jewish presidents. If Christian
presidents produce student bodies with a high proportion of Jews, then Jewish ethnocentrism is not the cause. (We'd have to find
a way to control for presidents' politics.)
If admissions departments are discriminating in favor of liberals, that will boost the proportion of all liberals, including
many Jews, but it will be political discrimination, not ethnic discrimination. (Both are bad, but we should be accurate.)
Liberals see a discrepancy in ethnic outcomes and consider it proof of ethnic discrimination. Are we doing the same thing?
After Russian emancipation, the Jews from Pale settlement spread out and took up jobs in government services, secured admissions
in technical and medical schools, and established positions in trade in just two decades. Then they started interconnecting and
networking more aggressively to eliminate competition and deny the non-Jews the opportunities that the non Jews rightfully claimed.
This pattern was also evident in Germany after 1880 and in Poland between interwars .
The anti-Jewish sentiment seen in pre revolutionary Russia was the product of this ethnic exclusivisity and of the tremendous
in-group behaviors .
@Ira The young American
Jew is not like his grandparents. They are just as fun loving and lazy as any other. This is the result of a lack of perceived
persecution that use to keep the group together. In the major cities, half of the young people leave the tribe through intermarriage.
This is human nature. The Rabbis changed the rules some time ago to define a Jew as coming from the mother, so the Jewish man
would marry a Jewish woman, instead of a woman outside of the tribe. Read the Bible. In David's time, the men had an eye for good
looking women outside of the tribe(like all men). Now days, the young people just laugh at the Rabbi's words.
Instead of the old folks liberal ideas of race and ethnic divisions, let us change it to go by economic class. According to
liberal thought, intelligence is equally distributed throughout all economic classes, so higher education admissions should be
by economic class, and not the old divisive ideas of race and ethnic background. After all, affirmative action programs are institutionalized
racism and racial profiling.
Yes . You have points . This is one of the fears that drove the Zionist to plan of Israel in 1880 . It was the fear of secular
life free from religious persecution and freedom to enjoy life to its fullest in the post industrial non religious Europe guided
by enlightenment that drove them embrace the religious ethnic mix concept of statehood.
@Anonymous I think your
sources who claim to be familiar with China are very wrong concerning entrance into Chinese universities, especially those so-called
upper tier unis. It is well known amongst most Chinese students who take the gaokao, the all-or-nothing university entrance examination,
bribes, guanxi (connections) and just being local, are often better indicators of who will be accepted.
Same and some more in India. In India it is politics of the gutter. Someone can get to medical school and engineering school
even if he or she did not qualify, if scored say 3 points out of 1000 points as long as he or she belonged to lower caste of Hindu.
The minimum requirements they have to fulfill is to pass the school leaving examinations with science subjects .A passing level
is all that matters . The process then continues (in further education -master , training, post doctoral, and in job and in promotion)
While upper caste Hindu or Christian or Muslim may not be allowed despite scoring 999 out of 1000. It is possible and has happened.
Unfortunately the lower caste has not progressed much. Upper caste Hindus have misused this on many occasions and continue to
do do by selling themselves as lower caste with legal loopholes .Muslim or Christians can't do that for they can't claim to be
Hindu
Takeaways:
Jews are really good at networking and in-group activity. They have centuries of practice, and lived a meritocratic existence
of self-sorting in the Pale and elsewhere.
That is evident to all who look.
Other groups have different approaches, and different organizational or affiliation bonds, based on their history, culture
and other factors.
NE Asians share some traits, and both value education as a way to improve themselves and to some extent their groups.
S Asians will demonstrate their own approach, focusing heavily on STEM.
Expect demographics to win out, given 2.5B Asians versus a smaller NAM or NE European-base populace.
Thanks for the informative article. Your proposal sounds reasonable. Another option would be to attempt to vastly decrease
the significance of these elite private schools. Why should we allow undemocratic little fiefdoms to largely control entry into
our country's ruling class? It would probably be considerably more fair, more transparent and more efficient to pour a lot of
resources into our public universities. If Berkeley, Michigan, UVA, UMass, etc. were completely free, for instance–or if they
provided students with living expenses as well as free tuition, the quality of their students would conceivably surpass that of
the Ivy League's, and over time the importance and prestige of Harvard, Stanford, etc. would diminish. Instead, we are subsidizing
students at elite private colleges more than those at public colleges–an absurd state of affairs (see this article, whose author
is a bit of an ideologue but who is right on this issue:
http://www.csmonitor.com/Business/Robert-Reich/2014/1014/How-the-government-spends-more-per-student-at-elite-private-universities-than-public
).
Mr. Unz; thank you for the long, informational and scholarly article. I read the whole thing, and from Sailer I am familiar
with your reputation as a certified genius. I must admit however, after the 5-10,000 words you had written, I was a bit shocked
that your answer to how to improve elite University enrollment, was to FLIP A FIGURATIVE COIN.
I expected some chart with differential equations that I would have to consult my much more intelligent brother, the electrical
engineer to explain to me. Not that it does not make a lot of sense.
The issue with your solution is that you go from a three class university:
1) Legacy Admits
2) Non athletic, black admits
3) everyone else
to a much-more rigid, two class university:
1) academic admits
2) coin-flip admits
One tier being one of the smartest 15-18 year olds in the world, the other being "somewhat better than good student at Kansas
State."
My brother works at a little ivy league school. Well endowed because the parents Dun and Bradstreet reports are at the top
of the selection sheets with parents jobs also. Extra points for finance and government jobs at executive levels.
This article was excellent and reinforced everything he has told me over the years. One thing he did mention i would like to
add. Asians, which for years were their choice for filling minority quotas, are horrible when it comes to supporting the alma
mater financially during the fund drives. This information was confirmed by several other schools in the area when they tried
a multi-school drive in the far east and south east asia to canvas funds and returned with a pitiful sum.
Diversity is a scheme that is the opposite of a meritocracy. Diversity is a national victim cult that generally demonizes gentiles,
and more specifically demonizes people that conform to a jewish concocted profile of a nazi.
Why would anyone use the word diversity in the same sentence as the word meritocracy?
"Are elite university admissions based on meritocracy and diversity as claimed?" Why would anybody claiming to be intelligent
include meritocracy and diversity in the same sentence?
@Sean Gillhoolley Harvard
is a university, much like Princeton and Yale, that continues based on its reputation, something that was earned in the past.
When the present catches up to them people will regard them as nepotistic cauldrons of corruption.
Look at the financial disaster that befell the USA and much of the globe back in 2008. Its genesis can be found in the clever
minds of those coming out of their business schools (and, oddly enough, their Physics programs as well). They are teaching the
elite how to drain all value from American companies, as the rich plan their move to China, the new land of opportunity. When
1% of the population controls such a huge portion of the wealth, patriotism becomes a loadstone to them. The elite are global.
Places like Harvard cater to them, help train them to rule the world....but first they must remake it.
I agree, common people would never think of derivatives , nor make loans based on speculation .
"Tiffany Wang['s] SAT scores were over 100 points above the Wesleyan average, and she ranked as a National Merit Scholarship
semifinalist "
"Julianna Bentes her SAT scores were somewhat higher than Tiffany's "
Did Ms. Wang underperform on her SATs? NMS semifinalist status depends purely on the score on a very SAT-like test being at
a 99.5 percentile level, as I understand it (and I was one, albeit a very long time ago) and I gather from the above that her
SAT scores did not correspond to the PSAT one. That is, merely " 100 points above the Wesleyan average" doesn't seem all that
exceptional. Or am I wrong?
Mr. Unz several times conflates NMS semifinalist status with being a top student. Which I most definitely was not. It's rather
an IQ test. As was the SAT.
An interesting article on John McCain. I disagree with the contention that McCain hid knowledge that many American POWs were left
behind (undoubtedly some voluntarily choose to remain behind but not hundreds ). However, the article touched on some ideas that
rang true:
Today when we consider the major countries of the world we see that in many cases the official leaders are also the leaders
in actuality: Vladimir Putin calls the shots in Russia, Xi Jinping and his top Politburo colleagues do the same in China, and
so forth. However, in America and in some other Western countries, this seems to be less and less the case, with top national
figures merely being attractive front-men selected for their popular appeal and their political malleability, a development that
may eventually have dire consequences for the nations they lead. As an extreme example, a drunken Boris Yeltsin freely allowed
the looting of Russia's entire national wealth by the handful of oligarchs who pulled his strings, and the result was the total
impoverishment of the Russian people and a demographic collapse almost unprecedented in modern peacetime history.
An obvious problem with installing puppet rulers is the risk that they will attempt to cut their strings, much like Putin
soon outmaneuvered and exiled his oligarch patron Boris Berezovsky.
One means of minimizing such risk is to select puppets who
are so deeply compromised that they can never break free, knowing that the political self-destruct charges buried deep within
their pasts could easily be triggered if they sought independence. I have sometimes joked with my friends that perhaps the best
career move for an ambitious young politician would be to secretly commit some monstrous crime and then make sure that the hard
evidence of his guilt ended up in the hands of certain powerful people, thereby assuring his rapid political rise.
The gist is that elite need a kill switch on their front men (and women).
Seems to be a series of pieces dealing with Vietnam POWs: the following linked item was interesting and provided a plausible explanation:
that the US failed to pay up agreed on reparations…
Remarkable and shocking. Wheels within wheels – this is the first time I have ever seen McCain's father connected with the infamous
Board of Inquiry which cleared Israel in that state's attack on USS LIBERTY during Israel's seizure of the Golan Heights.
Another stunning article in which the author makes reference to his recent acquisition of what he considers to be a reliably authentic
audio file of POW McCain's broadcasts from captivity. Dynamite stuff. The conclusion regarding aspiring untenured historians is
quite downbeat:
Also remarkable; fantastic. It's hard to believe, and a testament to the boldness of Washington dog-and-pony shows, because this
must have been well-known in insider circles in Washington – anything so damning which was not ruthlessly and professionally suppressed
and simply never allowed to become part of a national discussion would surely have been stumbled upon before now. Land of the
Cover-Up.
"... So, if the period when he was a good econometrician exists it is limited to pre-war and war years. As he was born in 1912, he was just 33 in 1945. His "A Theory of the Consumption Function" was published in 1957. And "A Monetary History of the United States, 1867–1960" in 1963, when he was already completely crooked. ..."
"... Mont Pelerin Society was founded in 1947 with the explicit political goal of being hatching place for neoliberal ideology as alternative to communist ideology. He served as a President of this Society from 1970 to 1972. ..."
"... So what Krugnam is saying is a myth. And he is not an impartial observer. He is a neoliberal himself. I still remember Krugman despicable attacks on John Kenneth Galbraith and his unhealthy fascination with the usage of differential equations in economic modeling, the epitome of mathiness. ..."
Ironic isn't it? "Why didn't ... exhibit the same restraint in his role as a public intellectual?
The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could
and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not
give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm
of his early career hardened into a rigid defense of what had become the new orthodoxy."
Krugman should have stuck to economics...
likbez -> JohnH...
Yes, this is pretty nasty verdict for Krugman too.
But, in reality, Milton Friedman was an intellectual prostitute of financial oligarchy most of his long life, starting from
his days in Mont Pelerin Society ( https://en.wikipedia.org/wiki/Mont_Pelerin_Society)
, where he was one of the founders.
So, if the period when he was a good econometrician exists it is limited to pre-war and war years. As he was born in 1912,
he was just 33 in 1945. His "A Theory of the Consumption Function" was published in 1957. And "A Monetary History of the United
States, 1867–1960" in 1963, when he was already completely crooked.
Mont Pelerin Society was founded in 1947 with the explicit political goal of being hatching place for neoliberal ideology
as alternative to communist ideology. He served as a President of this Society from 1970 to 1972.
Capitalism and Freedom that many consider to be neoliberal manifesto similar to Marx and Engels "Manifesto of the Communist
Party" was published in 1962.
So what Krugnam is saying is a myth. And he is not an impartial observer. He is a neoliberal himself. I still remember
Krugman despicable attacks on John Kenneth Galbraith and his unhealthy fascination with the usage of differential equations in
economic modeling, the epitome of mathiness.
Ironic isn't it? "Why didn't ... exhibit the same restraint in his role as a public intellectual?
The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could
and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not
give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm
of his early career hardened into a rigid defense of what had become the new orthodoxy."
Krugman should have stuck to economics...
likbez -> JohnH...
Yes, this is pretty nasty verdict for Krugman too.
But, in reality, Milton Friedman was an intellectual prostitute of financial oligarchy most of his long life, starting from
his days in Mont Pelerin Society ( https://en.wikipedia.org/wiki/Mont_Pelerin_Society)
, where he was one of the founders.
So, if the period when he was a good econometrician exists it is limited to pre-war and war years. As he was born in 1912,
he was just 33 in 1945. His "A Theory of the Consumption Function" was published in 1957. And "A Monetary History of the United
States, 1867–1960" in 1963, when he was already completely crooked.
Mont Pelerin Society was founded in 1947 with the explicit political goal of being hatching place for neoliberal ideology
as alternative to communist ideology. He served as a President of this Society from 1970 to 1972.
Capitalism and Freedom that many consider to be neoliberal manifesto similar to Marx and Engels "Manifesto of the Communist
Party" was published in 1962.
So what Krugnam is saying is a myth. And he is not an impartial observer. He is a neoliberal himself. I still remember
Krugman despicable attacks on John Kenneth Galbraith and his unhealthy fascination with the usage of differential equations in
economic modeling, the epitome of mathiness.
"... My criticism of Krugman is far more fundamental. I do not believe the profit motive is superior to the mutual benefit motive
when it comes to organizing economies. ..."
1. His refusal to acknowledge the central role of consumption in our economy. As Keynes said, ""Consumption - to repeat
the obvious - is the sole end and object of all economic activity." The General Theory, p. 104.
And Adam Smith agreed: "Consumption is the sole end and purpose of all production." The Wealth of Nations, Book IV Chapter
VIII, v. ii, p. 660, para. 49.
2. Krugman's refusal to endorse fiscal stimulus unless the economy is at ZLB. That is not only anti-Keynesian, it plays
directly into the hands of the debt fear mongers. (Krugman is also worried about the debt.)
"Krugman's refusal to endorse fiscal stimulus unless the economy is at ZLB."
That is a strawman, and a bad one.
PS: My criticism of Krugman is far more fundamental. I do not believe the profit motive is superior to the mutual benefit
motive when it comes to organizing economies.
An Inquiry into the Nature and Causes of The Wealth of Nations
By Adam Smith
On Systems of Political Economy
Conclusion of the Mercantile System
Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so
far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self evident that it would be absurd
to attempt to prove it. But in the mercantile system the interest of the consumer is almost constantly sacrificed to that of the
producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.
The General Theory of Employment, Interest and Money
By John Maynard Keynes
The Propensity to Consume: The Objective Factors
Consumption - to repeat the obvious - is the sole end and object of all economic activity. Opportunities for employment are
necessarily limited by the extent of aggregate demand. Aggregate demand can be derived only from present consumption or from present
provision for future consumption. The consumption for which we can profitably provide in advance cannot be pushed indefinitely
into the future. We cannot, as a community, provide for future consumption by financial expedients but only by current physical
output. In so far as our social and business organisation separates financial provision for the future from physical provision
for the future so that efforts to secure the former do not necessarily carry the latter with them, financial prudence will be
liable to diminish aggregate demand and thus impair well-being, as there are many examples to testify. The greater, moreover,
the consumption for which we have provided in advance, the more difficult it is to find something further to provide for in advance,
and the greater our dependence on present consumption as a source of demand. Yet the larger our incomes, the greater, unfortunately,
is the margin between our incomes and our consumption. So, failing some novel expedient, there is, as we shall see, no answer
to the riddle, except that there must be sufficient unemployment to keep us so poor that our consumption falls short of our income
by no more than the equivalent of the physical provision for future consumption which it pays to produce to-day.
anne -> Paul Mathis... , -1
Krugman's refusal to endorse fiscal stimulus unless the economy is at zero lower bound. That is not only anti-Keynesian, it plays
directly into the hands of the debt fear mongers. (Krugman is also worried about the debt.)
[ Only correct to a degree, economic weakness is recognized. ]
"What's odd about Friedman's absolutism on the virtues of markets and the vices of government is that in his work as an economist's
economist he was actually a model of restraint. As I pointed out earlier, he made great contributions to economic theory by emphasizing
the role of individual rationality-but unlike some of his colleagues, he knew where to stop. Why didn't he exhibit the same restraint
in his role as a public intellectual?
The answer, I suspect, is that he got caught up in an essentially political role. Milton Friedman the great economist could
and did acknowledge ambiguity. But Milton Friedman the great champion of free markets was expected to preach the true faith, not
give voice to doubts. And he ended up playing the role his followers expected. As a result, over time the refreshing iconoclasm
of his early career hardened into a rigid defense of what had become the new orthodoxy.
In the long run, great men are remembered for their strengths, not their weaknesses, and Milton Friedman was a very great man
indeed-a man of intellectual courage who was one of the most important economic thinkers of all time, and possibly the most brilliant
communicator of economic ideas to the general public that ever lived. But there's a good case for arguing that Friedmanism, in
the end, went too far, both as a doctrine and in its practical applications. When Friedman was beginning his career as a public
intellectual, the times were ripe for a counterreformation against Keynesianism and all that went with it. But what the world
needs now, I'd argue, is a counter-counterreformation."
In an interview with Public Broadcasting System on Oct. 1, 2000, Dr. Milton Friedman said, "Let me emphasize [that] I think
Keynes was a great economist. I think his particular theory in The General Theory of Employment, Interest, and Money is a fascinating
theory. It's a right kind of a theory. It's one which says a lot by using only a little. So it's a theory that has great potentiality."
Brilliant economist? Not exactly. For monetarists who believe as Dr. Friedman did that "inflation is always and everywhere
a monetary phenomenon," the nearly $4 trillion added to the money supply by the Fed since 2008 should have produced raging hyper-inflation.
For Friedman, the answer was not debatable: "A steady rate of monetary growth at a moderate level can provide a framework under
which a country can have little inflation and much growth." The Counter-Revolution in Monetary Theory (1970).
this graph, which should have been labelled but was not, depicts the monetary base from October 2012 to December 2015 for reasons
that are a mystery to me.
So Friedman has vanished from the policy scene - so much so that I suspect that a few decades from now, historians of economic
thought will regard him as little more than an extended footnote.
Who Was Milton Friedman?
By Paul Krugman - New York Review of Books
1.
The history of economic thought in the twentieth century is a bit like the history of Christianity in the sixteenth century.
Until John Maynard Keynes published The General Theory of Employment, Interest, and Money in 1936, economics-at least in the English-speaking
world-was completely dominated by free-market orthodoxy. Heresies would occasionally pop up, but they were always suppressed.
Classical economics, wrote Keynes in 1936, "conquered England as completely as the Holy Inquisition conquered Spain." And classical
economics said that the answer to almost all problems was to let the forces of supply and demand do their job.
But classical economics offered neither explanations nor solutions for the Great Depression. By the middle of the 1930s, the
challenges to orthodoxy could no longer be contained. Keynes played the role of Martin Luther, providing the intellectual rigor
needed to make heresy respectable. Although Keynes was by no means a leftist-he came to save capitalism, not to bury it-his theory
said that free markets could not be counted on to provide full employment, creating a new rationale for large-scale government
intervention in the economy.
Keynesianism was a great reformation of economic thought. It was followed, inevitably, by a counter-reformation. A number of
economists played important roles in the great revival of classical economics between 1950 and 2000, but none was as influential
as Milton Friedman. If Keynes was Luther, Friedman was Ignatius of Loyola, founder of the Jesuits. And like the Jesuits, Friedman's
followers have acted as a sort of disciplined army of the faithful, spearheading a broad, but incomplete, rollback of Keynesian
heresy. By the century's end, classical economics had regained much though by no means all of its former dominion, and Friedman
deserves much of the credit.
I don't want to push the religious analogy too far. Economic theory at least aspires to be science, not theology; it is concerned
with earth, not heaven. Keynesian theory initially prevailed because it did a far better job than classical orthodoxy of making
sense of the world around us, and Friedman's critique of Keynes became so influential largely because he correctly identified
Keynesianism's weak points. And just to be clear: although this essay argues that Friedman was wrong on some issues, and sometimes
seemed less than honest with his readers, I regard him as a great economist and a great man....
It's one of Ben Bernanke's most memorable quotes: at a conference honoring Milton Friedman on his 90th birthday, he said: *
"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say
to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do
it again."
He was referring to the Friedman-Schwartz argument that the Fed could have prevented the Great Depression if only it has been
more aggressive in countering the fall in the money supply. This argument later mutated into the claim that the Fed caused the
Depression, but its original version still packed a strong punch. Basically, it implied that no fundamental reforms of the economy
were necessary; all it takes to avoid depressions is for central banks to do their job.
But can we say that recent events appear to disprove that claim? (So did Japan's experience in the 1990s, but that lesson failed
to sink in.) What we have now is a Fed that is determined not to "do it again." It has been very aggressive about monetary expansion.
Here's one measure of that aggressiveness, banks' excess reserves:
[Bank excess reserves, 1990-2009]
And yet the world economy is still falling off a cliff.
Preventing depressions, it turns out, is a lot harder than we were taught.
"... You can't go all Ayn Rand/Gordon Gekko on the importance of greed as a motivator while claiming that wealth insulates ... from
temptation. ... ..."
"... And this is telling us something significant: namely, that supply-side economic theory is and always was a sham. It was never
about the incentives; it was just another excuse to make the rich richer. ..."
"... "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." ..."
"... choosing a cabinet of billionaires, because rich men are incorruptible"...kind of like showering ZIRP on the Wall Street banking
cartel and letting them how to ration credit to the rest of economy...mostly their wealthy clientele, who use it for stock buy-backs
and asset speculation. ..."
"... Of course, 'liberal' economists see nothing wrong with trickle down, supply side economics, as long as it's the Wall Street
banking cartel who's in charge of it... ..."
"... Stiglitz: "I've always said that current monetary policy is not going to work because quantitative easing is based on a variant
of trickle-down economics. The lower interest rates have led to a stock-market bubble – to increases in stock-market prices and huge
increases in wealth. But relatively little of that's been translated into increased and broad consumer spending." ..."
"... But pgl and many other '[neo[liberal' economists just can't get enough of the trickle down monetary policy...all the while
they vehemently condemn trickle down tax policy. ..."
"... You all think Trump can do worse than the sitting cabal adding $660B from Sep 2015 to the federal debt quietly keeping the
economy going for the incumbent party? ..."
"... The losers think the winners are as crooked as they! ..."
To belabor what should be obvious: either the wealthy care about having more money or they don't. If lower marginal tax rates
are an incentive to produce more, the prospect of personal gain is an incentive to engage in corrupt practices. You can't go
all Ayn Rand/Gordon Gekko on the importance of greed as a motivator while claiming that wealth insulates ... from temptation. ...
And this is telling us something significant: namely, that supply-side economic theory is and always was a sham. It was never
about the incentives; it was just another excuse to make the rich richer.
In one sentence, you still can't beat John Kenneth Galbraith's assessment: "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."
Nothing is more admirable than the fortitude with which millionaires tolerate the disadvantages of their wealth. -- Nero
Wolfe
You need to know nothing else to understand the entirety of the conservative edifice.
JohnH :
"choosing a cabinet of billionaires, because rich men are incorruptible"...kind of like showering ZIRP on the Wall Street
banking cartel and letting them how to ration credit to the rest of economy...mostly their wealthy clientele, who use it for stock
buy-backs and asset speculation.
Of course, 'liberal' economists see nothing wrong with trickle down, supply side economics, as long as it's the Wall Street
banking cartel who's in charge of it...
But pgl and many other '[neo[liberal' economists just can't get enough of the trickle down monetary policy...all the while
they vehemently condemn trickle down tax policy.
yuan -> JohnH...
and few liberal economists have been more skeptical of QE's economic impact than Krugman.
You all think Trump can do worse than the sitting cabal adding $660B from Sep 2015 to the federal debt quietly keeping the
economy going for the incumbent party?
The losers think the winners are as crooked as they!
yuan -> ilsm...
when we can borrow over the long-term at 3% and have truly massive infrastructure and clean energy needs we should be borrowing
like military Keynesian republicans...
"... And this is telling us something significant: namely, that supply-side economic theory is and always was a sham. ..."
"... That it is and always a sham is irrelevant. It is THE NARRATIVE that matters! They had a compelling story and they stuck to
it. That's how you sell politics in this country. ..."
And this is telling us something significant: namely, that supply-side economic theory is and always was a sham.
Urgh. That it is and always a sham is irrelevant. It is THE NARRATIVE that matters! They had a compelling story and they
stuck to it. That's how you sell politics in this country.
Trump told a significant fraction of the population that he understood their problems and that he would fix them. He told
enough people what they wanted to hear - and did so with a convincing tone - that he got himself elected. That's how you win.
You sell people on your vision. If you tell a good story most people aren't going to reality-check it. Sad but true.
Krugman was clearly a neoliberal propagandist on payroll. He
should not be even discussed in this context because his
columns were so clearly partisan.
As for "Centrist Democrats" (aka Clinton wing of the
party) their power is that you have nowhere to go: they rule
the Democratic Party and the two party system guarantees that
any third party will be either squashed or assimilated.
In no way they need that you believe them: being nowhere
to go is enough.
Remember what happened with Sanders supporters during the
convention? They were silenced. And then eliminated. That's
how this system works.
Cal -> likbez...
, -1
Krugman is a polarizing agent here in RiverCity...to our
collective loss IMHO...as you know I don't have the Nobel.
But you might be giving him some hope with that "was"?
Clearly he does not need $.
He is writing for our....yes, American, maybe even Global
citizenship, which he thinks is in peril.
It is. Otherwise I'd be out fishing.
And you?
What's in it for you? Are you familiar with the history of
political party systems that transition in and out of 2
parties?
Is this little forum an example of the 2 party system:
pro/con Krugman?
Americans believe crazy things, yet they are outdone by
economists
Comment on Catherine Rampell on 'Americans - especially but
not exclusively Trump voters - believe crazy, wrong things'#1
Americans are NOT special. Since more than 5000 years people
believe things JUST BECAUSE they are absurd - in accordance
with Tertullian's famous dictum "credo quia absurdum".#2
As a matter of principle, almost everybody has the right
to his own opinion no matter how stupid, crazy, wrong, or
absurd; the only exception are scientists. The ancient Greeks
started science with the distinction between doxa (= opinion)
and episteme (= knowledge). Scientific knowledge is
well-defined by material and formal consistency. Knowledge is
established by proof, belief or opinion counts for nothing.
Opinion is the currency in the political sphere, knowledge
is the currency is the scientific sphere. It is extremely
important to keep both spheres separate. Since the founding
fathers, though, economists have not emancipated themselves
from politics. They claim to do science but they have never
risen above the level of opinion, belief, wish-wash,
storytelling, soap box propaganda, and sitcom gossip.
The orthodox majority still believes in these Walrasian
hard core absurdities: "HC1 economic agents have preferences
over outcomes; HC2 agents individually optimize subject to
constraints; HC3 agent choice is manifest in interrelated
markets; HC4 agents have full relevant knowledge; HC5
observable outcomes are coordinated, and must be discussed
with reference to equilibrium states." (Weintraub)
To be clear: HC2, HC4, HC5 are NONENTITIES like angels,
Spiderman, or the Easter Bunny.
The heterodox minority still believes in these ill-defined
Keynesian relationships: "Income = value of output =
consumption + investment. Saving = income - consumption.
Therefore saving = investment."
Until this day, Walrasians, Keynesians, Marxians,
Austrians hold to their provable false beliefs and claim to
do science. This is absurdity on stilts but it is swallowed
hook, line and sinker by every new generation of economics
students. Compared to the representative economist the
average political sucker is a genius.
Did not William Casey (CIA
Director) say, "We'll know
our disinformation program is
complete when everything the
American public believes is
false."?
Notable quotes:
"... The media should certainly shoulder some blame for parroting militarist propaganda but ordinary USAnians who continue to reward these scoundrels with their votes. And with Trump ordinary USAnians appear to have elected someone even more willing to shamelessly lie and loot than his predecessors. ..."
Americans are also led to believe a lot of crazy, wrong
things, such as Saddam had WMDs, or Iran had a nuclear
weapons program, to cite only the most outrageous lies
dutifully propagated by the mainstream media.
Before
Catherine Rampell criticizes ordinary Americans, she should
have the Washington Post engage in a little serious
introspection and self-criticism...
The media should certainly shoulder some blame for
parroting militarist propaganda but ordinary USAnians who
continue to reward these scoundrels with their votes. And
with Trump ordinary USAnians appear to have elected someone
even more willing to shamelessly lie and loot than his
predecessors.
It is time for ordinary USAnians to
engage in a lot of serious introspection and self-criticism.
I doubt this will happen until it's too late. (Very thankful
that I am not tied to this nation!)
>It is time for ordinary USAnians to engage in a lot of
serious introspection and self-criticism.
Don't hold your breath. Introspection and self-criticism
aren't our strong suits. They run counter to that whole
"American exceptionalism" thing.
> I doubt this will happen until it's too late.
I doubt that it will ever happen but, if it does, I have
no doubt that it will happen until after its too late to
salvage what currently passes for civilization in these
parts.
"There's a big difference between the task of trying to
sustain "civilisation" in its current form... and the task of
holding open a space for the things which make life worth
living. I'd suggest that it's this second task, in its many
forms, which remains, after we've given up on false hopes." (
http://dark-mountain.net/blog/what-do-you-do-after-you-stop-pretending/)
"... But there are other flavors too. For example Trump introduced another flavor which I called "bastard neoliberalism". Which is the neoliberalism without neoliberal globalization and without "Permanent revolution" mantra -- efforts for enlargement of the US led global neoliberal empire. Somewhat similar to Eduard Bernstein "revisionism" in Marxism. Or Putinism - which is also a flavor of neoliberalism with added "strong state" part and "resource nationalism" bent, which upset so much the US neoliberal establishment, as it complicates looting of the country by transnational corporations. ..."
"... Neoliberalism also can be viewed as a modern mutation of corporatism, favoring multinationals (under disguise of "free trade"), privatization of state assets, minimal government intervention in business (with financial oligarchy being like Soviet nomenklatura above the law), reduced public expenditures on social services, and decimation of New Deal, strong anti trade unionism stance and attempt to atomize work force (perma temps as preferred mode of employment giving employers "maximum flexibility") , neocolonialism and militarism in foreign relations (might makes right). ..."
"... The word "elite" in the context of neoliberalism has the same meaning as the Russian word nomenklatura. https://en.wikipedia.org/wiki/Nomenklatura, -- the political establishment holding or controlling both public and private power centers such as media, finance, academia, culture, trade, industry, state and international institutions. ..."
At this point, when I hear people use the words "neoliberal," "elites" and "the media" in unspecified
or highly generalized terms to make broad characterizations ... I know I'm dealing with an
unserious person.
It's a lot like when someone says "structural reform" without specification in an economic
discussion: An almost perfect indicator of vacuity.
likbez -> sanjait... , -1
Let's define the terms.
Neoliberals are those who adhere to the doctrine of Neoliberalism (the "prohibited" word
you should not ever see in the US MSM ;-)
In this sense the term is very similar to Marxists (with the replacement of the slogan of
"proletarians of all nations unite" with the "financial oligarchy of all countries unite").
Or more correctly they are the "latter day Trotskyites".
Neoliberalism consists of several eclectic parts such as neoclassic economics, mixture of
Nietzscheanism (often in the form of Ann Rand philosophy; with the replacement of concept of
Ubermench with "creative class" concept)) with corporatism. Like with Marxism there are different
flavors of neoliberalism and different factions like "soft neoliberalism" (Clinton third way)
which is the modern Democratic Party doctrine, and hard neoliberalism (Republican party version),
often hostile to each other.
But there are other flavors too. For example Trump introduced another flavor which I called
"bastard neoliberalism". Which is the neoliberalism without neoliberal globalization and without
"Permanent revolution" mantra -- efforts for enlargement of the US led global neoliberal empire.
Somewhat similar to Eduard Bernstein "revisionism" in Marxism. Or Putinism - which is also
a flavor of neoliberalism with added "strong state" part and "resource nationalism" bent, which
upset so much the US neoliberal establishment, as it complicates looting of the country by
transnational corporations.
Neoliberalism also can be viewed as a modern mutation of corporatism, favoring multinationals
(under disguise of "free trade"), privatization of state assets, minimal government intervention
in business (with financial oligarchy being like Soviet nomenklatura above the law), reduced
public expenditures on social services, and decimation of New Deal, strong anti trade unionism
stance and attempt to atomize work force (perma temps as preferred mode of employment giving
employers "maximum flexibility") , neocolonialism and militarism in foreign relations (might
makes right).
Like for any corporatist thinkers the real goals are often hidden under thick smoke screen
of propaganda.
The word "elite" in the context of neoliberalism has the same meaning as the Russian word
nomenklatura. https://en.wikipedia.org/wiki/Nomenklatura,
-- the political establishment holding or controlling both public and private power centers
such as media, finance, academia, culture, trade, industry, state and international institutions.
[As if] protectionist Japan is now backward and poverty stricken; free trade Africa is soaring
on the wings of giant trade deficits :
Economists lead the way in silly beliefs that defy empirical reality and common sense. The most glaring
example of this is the view that free trade is beneficial. All evidence points in the opposite direction,
but no matter - our fake economists are happy to say/believe whatever so long as their foreign government
paymasters and banks write the ten thousand dollar checks for "consulting" and "academic reports".
You are probably wrong. Free trade is a delicate instrument, much like tennis racket. If you hold
it too tightly you can't play well. If you hold it too loose you can't play well either.
Neoliberals promote "free trade" (note "free" not "fair") as the universal cure for all nations
problems in all circumstances. This is a typical neoliberal Three-card Monte.
The real effect in many cases is opening market for transnationals who dictate nations the
rules of the game and loot the country.
But isolationism has its own perils. So some middle ground should be fought against excessive
demands of neoliberal institutions like IMF and World Bank. For example, any country that take
loans from them (usually on pretty harsh conditions; with string attached), has a great danger
that money will be looted via local fifth column. And will return in no time back into Western Banks
leaving the country in the role of the debt slave.
The latter is the preferred role neoliberals want to see each and every third world country
(and not only third world countries -- see Greece and Cyprus). Essentially in their "secret" book
this is the role those counties should be driven into.
Recent looting of Ukraine is the textbook example of this process. The majority of population
now will live on less then $2 a day for many, many years.
At the same time, balancing free trade and isolationism is tricky process also. Because at some
point, the subversion starts and three letter agencies come into the play. You risk getting color
revolution as a free present for your refusal to play the game.
Neoliberals usually do not take NO for the answer.
That's when the word "neoliberal" becomes yet another dirty word.
Did William Casey (CIA
Director) really say, "We'll know
our disinformation program is
complete when everything the
American public believes is
false."?
Americans are also led to believe a lot of crazy, wrong
things, such as Saddam had WMDs, or Iran had a nuclear
weapons program, to cite only the most outrageous lies
dutifully propagated by the mainstream media.
Before
Catherine Rampell criticizes ordinary Americans, she should
have the Washington Post engage in a little serious
introspection and self-criticism...
The media should certainly shoulder some blame for parroting
militarist propaganda but ordinary USAnians who continue to
reward these scoundrels with their votes. And with Trump
ordinary USAnians appear to have elected someone even more
willing to shamelessly lie and loot than his predecessors.
It is time for ordinary USAnians to engage in a lot of
serious introspection and self-criticism. I doubt this will
happen until it's too late. (Very thankful that I am not tied
to this nation!)
(Does this have something to do
with Jon Stewart's retirement &
Stephen Colbert 'going legit'?)
Wielding Claims of 'Fake News,' Conservatives
Take Aim at Mainstream Media http://nyti.ms/2iuFxRx
NYT - JEREMY W. PETERS - December 25, 2016
WASHINGTON - The CIA, the F.B.I. and the White House may all agree that Russia was behind
the hacking that interfered with the election. But that was of no import to the website Breitbart
News, which dismissed reports on the intelligence assessment as "left-wing fake news."
Rush Limbaugh has diagnosed a more fundamental problem. "The fake news is the everyday news"
in the mainstream media, he said on his radio show recently. "They just make it up."
Some supporters of President-elect Donald J. Trump have also taken up the call. As reporters
were walking out of a Trump rally this month in Orlando, Fla., a man heckled them with shouts
of "Fake news!"
Until now, that term had been widely understood to refer to fabricated news accounts that are
meant to spread virally online. But conservative cable and radio personalities, top Republicans
and even Mr. Trump himself, incredulous about suggestions that fake stories may have helped swing
the election, have appropriated the term and turned it against any news they see as hostile to
their agenda.
In defining "fake news" so broadly and seeking to dilute its meaning, they are capitalizing
on the declining credibility of all purveyors of information, one product of the country's increasing
political polarization. And conservatives, seeing an opening to undermine the mainstream media,
a longtime foe, are more than happy to dig the hole deeper.
"Over the years, we've effectively brainwashed the core of our audience to distrust anything
that they disagree with. And now it's gone too far," said John Ziegler, a conservative radio host,
who has been critical of what he sees as excessive partisanship by pundits. "Because the gatekeepers
have lost all credibility in the minds of consumers, I don't see how you reverse it."
Journalists who work to separate fact from fiction see a dangerous conflation of stories that
turn out to be wrong because of a legitimate misunderstanding with those whose clear intention
is to deceive. A report, shared more than a million times on social media, that the pope had endorsed
Mr. Trump was undeniably false. But was it "fake news" to report on data models that showed Hillary
Clinton with overwhelming odds of winning the presidency? Are opinion articles fake if they cherry-pick
facts to draw disputable conclusions?
"Fake news was a term specifically about people who purposely fabricated stories for clicks
and revenue," said David Mikkelson, the founder of Snopes, the myth-busting website. "Now it includes
bad reporting, slanted journalism and outright propaganda. And I think we're doing a disservice
to lump all those things together."
The right's labeling of "fake news" evokes one of the most successful efforts by conservatives
to reorient how Americans think about news media objectivity: the move by Fox News to brand its
conservative-slanted coverage as "fair and balanced." Traditionally, mainstream media outlets
had thought of their own approach in those terms, viewing their coverage as strictly down the
middle. Republicans often found that laughable.
As with Fox's ubiquitous promotion of its slogan, conservatives' appropriation of the "fake
news" label is an effort to further erode the mainstream media's claim to be a reliable and accurate
source. ...
"... Rich individuals (who are willing to be interviewed) also express concern about inequality but generally oppose using higher taxes on the rich to fight it. Scheiber is very willing to bluntly state his guess (and everyone's) that candidates are eager to please the rich, because they spend much of their time begging the rich for contributions. ..."
"... Of course another way to reduce inequality is to raise wages. Buried way down around paragraph 9 I found this gem: "Forty percent of the wealthy, versus 78 percent of the public, said the government should make the minimum wage "high enough so that no family with a full-time worker falls below the official poverty line." ..."
"... The current foundational rules embedded in tax law, intellectual property law, corporate construction law, and other elements of our legal and regulatory system result in distributions that favor those with capital or in a position to seek rents. This isn't a situation that calls for a Robin Hood who takes from the rich and gives to the poor. It is more a question of how elites have rigged the system to work primarily for them. ..."
"... the problem is incomes and demand, and the first and best answer for creating demand for workers and higher wages to compete for those workers is full employment. ..."
"... if you are proposing raising taxes on the rich SO THAT you can cut taxes on the non rich you are simply proposing theft. ..."
"... what we are looking at here is simple old fashioned greed just as stupid and ugly among the "non rich" as it is among the rich. ..."
"... you play into the hands of the Petersons who want to "cut taxes" and leave the poor elderly to die on the streets, and the poor non-elderly to spend their lives in anxiety and fear-driven greed trying to provide against desperate poverty in old age absent any reliable security for their savings.) ..."
"... made by the ayn rand faithful. it is wearisome. ..."
"... The only cure for organized greed is organized labor. ..."
"... A typical voice of American politics is the avoidance of saying anything real on real issues" ..."
The content should be familiar to AngryBear
readers. A majority of Americans are alarmed by high and increasing inequality and support government
action to reduce inequality. However, none of the important 2016 candidates has expressed any willingness
to raise taxes on the rich. The Republicans want to cut them and Clinton (and a spokesperson) dodge
the question.
Rich individuals (who are willing to be interviewed) also express concern about inequality but
generally oppose using higher taxes on the rich to fight it. Scheiber is very willing to bluntly
state his guess (and everyone's) that candidates are eager to please the rich, because they spend
much of their time begging the rich for contributions.
No suprise to anyone who has been paying attention except for the fact that it is on the front
page of www.nytimes.com and the article is printed in the business section not the opinion section.
Do click the link - it is brief, to the point, solid, alarming and a must read.
I clicked one of the links and found weaker evidence than I expected for Scheiber's view (which
of course I share
"By contrast, more than half of Americans and three-quarters of Democrats believe the "government
should redistribute wealth by heavy taxes on the rich," according to a
Gallup poll of about 1,000 adults in April 2013."
It is a small majority 52% favor and 47% oppose. This 52 % is noticeably smaller than the solid
majorities who have been telling Gallup that high income individuals pay less than their fair share
of taxes (click and search
for Gallup on the page).
I guess this isn't really surprising - the word "heavy" is heavy maaaan and "redistribute" evokes
the dreaded welfare (and conservatives have devoted gigantic effort to giving it pejorative connotations).
The 52% majority is remarkable given the phrasing of the question. But it isn't enough to win elections,
since it is 52% of adults which corresponds to well under 52% of actual voters.
My reading is that it is important for egalitarians to stress the tax cuts for the non rich and
that higher taxes on the rich are, unfortunately, necessary if we are to have lower taxes on the
non rich without huge budget deficits. This is exactly Obama's approach.
Comments (87)
Jerry Critter
March 29, 2015 10:40 pm
Get rid of tax breaks that only the wealthy can take advantage of and perhaps everyone will
pay their fair share. The same goes for corporations.
amateur socialist
March 30, 2015 11:42 am
Of course another way to reduce inequality is to raise wages. Buried way down around paragraph
9 I found this gem: "Forty percent of the wealthy, versus 78 percent of the public, said the government
should make the minimum wage "high enough so that no family with a full-time worker falls below
the official poverty line."
I'm fine with raising people's taxes by increasing their wages. A story I heard on NPR recently
indicated that a single person needs to make about $17-19 an hour to cover most basic necessities
nowadays (the story went on to say that most people in that situation are working 2 or more jobs
to get enough income, a "solution" that creates more problems with health/stress etc.). A full
time worker supporting kids needs more than $20.
You double the minimum wage and strengthen people's rights to organize union representation.
Tax revenues go up (including SS contributions btw) and we add significant growth to the economy
with the increased purchasing power of workers. People can go back to working 40-50 hours a week
and cut back on moonlighting which creates new job opportunities for the younger folks decimated
by this so called recovery.
Win Win Win Win. And the poor overburdened millionaires don't have to have their poor tax fee
fees hurt.
Mark Jamison, March 30, 2015 8:09 pm
How about if we get rid of the "re" and call it what it is "distribution". The current
foundational rules embedded in tax law, intellectual property law, corporate construction law,
and other elements of our legal and regulatory system result in distributions that favor those
with capital or in a position to seek rents.
This isn't a situation that calls for a Robin Hood who takes from the rich and gives to the
poor. It is more a question of how elites have rigged the system to work primarily for them.
Democrats cede the rhetoric to the Right when they allow the discussion to be about redistribution.
Even talk of inequality without reference to the basic legal constructs that are rigged to create
slanted outcomes tend to accepted premises that are in and of themselves false.
The issue shouldn't be rejiggering things after the the initial distribution but creating a
system with basic rules that level the opportunity playing field.
coberly, March 30, 2015 11:03 pm
Thank You Mark Jamison!
An elegant, informed writer who says it better than I can.
But here is how I would say it:
Addressing "inequality" by "tax the rich" is the wrong answer and a political loser.
Address inequality by re-criminalizing the criminal practices of the criminal rich. Address
inequality by creating well paying jobs with government jobs if necessary (and there is necessary
work to be done by the government), with government protection for unions, with government policies
that make it less profitable to off shore
etc. the direction to take is to make the economy more fair . actually more "free" though you'll
never get the free enterprise fundamentalists to admit that's what it is. You WILL get the honest
rich on your side. They don't like being robbed any more than you do.
But you will not, in America, get even poor people to vote to "take from the rich to give to
the poor." It has something to do with the "story" Americans have been telling themselves since
1776. A story heard round the world.
That said, there is nothing wrong with raising taxes on the rich to pay for the government
THEY need as well as you. But don't raise taxes to give the money to the poor. They won't do it,
and even the poor don't want it except as a last resort, which we hope we are not at yet.
urban legend, March 31, 2015 2:07 am
Coberly, you are dead-on. Right now, taxation is the least issue. Listen to Jared Bernstein
and Dean Baker: the problem is incomes and demand, and the first and best answer for creating
demand for workers and higher wages to compete for those workers is full employment. Minimum
wage will help at the margins to push incomes up, and it's the easiest initial legislative sell,
but the public will support policies - mainly big-big infrastructure modernization in a country
that has neglected its infrastructure for a generation - that signal a firm commitment to full
employment.
It's laying right there for the Democrats to pick it up. Will they? Having policies that are
traditional Democratic policies will not do the job. For believability - for convincing voters
they actually have a handle on what has been wrong and how to fix it - they need to have a story
for why we have seem unable to generate enough jobs for over a decade. The neglect of infrastructure
- the unfilled millions of jobs that should have gone to keeping it up to date and up to major-country
standards - should be a big part of that story. Trade and manufacturing, to be sure, is the other
big element that will connect with voters. Many Democrats (including you know who) are severely
compromised on trade, but they need to find a way to come own on the right side with the voters.
coberly, March 31, 2015 10:52 am
Robert
i wish you'd give some thought to the other comments on this post.
if you are proposing raising taxes on the rich SO THAT you can cut taxes on the non
rich you are simply proposing theft. if you were proposing raising taxes on the rich to provide
reasonable welfare to those who need it you would be asking the rich to contribute to the strength
of their own country and ultimately their own wealth.
i hope you can see the difference.
it is especially irritating to me because many of the "non rich" who want their taxes cut make
more than twice as much as i do. what we are looking at here is simple old fashioned greed
just as stupid and ugly among the "non rich" as it is among the rich.
"the poor" in this country do not pay a significant amount of taxes (Social Security and Medicare
are not "taxes," merely an efficient way for us to pay for our own direct needs . as long as you
call them taxes you play into the hands of the Petersons who want to "cut taxes" and leave
the poor elderly to die on the streets, and the poor non-elderly to spend their lives in anxiety
and fear-driven greed trying to provide against desperate poverty in old age absent any reliable
security for their savings.)
Kai-HK, April 4, 2015 12:23 am
coberly,
Thanks for your well-reasoned response.
You state, 'i personally am not much interested in the "poor capitalist will flee the country
if you tax him too much." in fact i'd say good riddance, and by the way watch out for that tarriff
when you try to sell your stuff here.'
(a) What happens after thy leave? Sure you can get one-time 'exit tax' but you lose all the
intellectual capital (think of Bill Gates, Warren Buffet, or Steve Jobs leaving and taking their
intellectual property and human capital with them). These guys are great jobs creators it will
not only be the 'bad capitalists' that leave but also many of the 'job creating' good ones.
(b) I am less worried about existing job creating capitalists in America; what about the future
ones? The ones that either flee overseas and make their wealth there or are already overseas and
then have a plethora of places they can invest but why bother investing in the US if all they
are going to do is call me a predator and then seize my assets and or penalise me for investing
there? Right? It is the future investment that gets impacted not current wealth per se.
You also make a great point, 'the poor are in the worst position with respect to shifting their
tax burden on to others. the rich do it as a matter of course. it would be simpler just to tax
the rich there are fewer of them, and they know what is at stake, and they can afford accountants.
the rest of us would pay our "taxes" in the form of higher prices for what we buy.'
Investment capital will go where it is best treated and to attract investment capital a market
must provide a competitive return (profit margin or return on investment). Those companies and
investment that stay will do so because they are able to maintain that margin .and they will do
so by either reducing wages or increasing prices. Where they can do neither, their will exit the
market.
That is why, according to research, a bulk of the corporate taxation falls on workers and consumers
as a pass-on effect. The optimum corporate tax is 0. This will be the case as taxation increases
on the owners of businesses and capital .workers, the middle class, and the poor pay it. The margins
stay competitive for the owners of capital since capital is highly mobile and fungible.Workers
and the poor less so.
But thanks again for the tone and content of your response. I often get attacked personally
for my views instead of people focusing on the issue. I appreciate the respite.
K
coberly, April 4, 2015 12:34 pm
kai
yes, but you missed the point.
i am sick of the whining about taxes. it takes so much money to run the country (including
the kind of pernicious poverty that will turn the US into sub-saharan africa. and then who will
buy their products.
i can't do much about the poor whining about taxes. they are just people with limited understanding,
except for their own pressing needs. the rich know what the taxes are needed for, they are just
stupid about paying them. of course they would pass the taxes through to their customers. the
customers would still buy what they need/want at the new price. leaving everyone pretty much where
they are today financially. but the rich would be forced to be grownup about "paying" the taxes,
and maybe the politics of "don't tax me tax the other guy" would go away.
as for the sainted bill gates. there are plenty of other people in this country as smart as
he is and would be happy to sell us computer operating systems and pay the taxes on their billion
dollars a year profits.
nothing breaks my heart more than a whining millionaire.
Kai-HK
April 4, 2015 11:32 pm
Sure I got YOUR point, it just didn't address MY points as put forth in MY original post. And
it still doesn't.
More importantly, you have failed to defend YOUR point against even a rudimentary challenge.
K
coberly, April 5, 2015 12:45 pm
kai,
rudimentary is right.
i have read your "points" about sixteen hundred times in the last year alone. made by the
ayn rand faithful. it is wearisome.
and i have learned there is no point in trying to talk to true believers.
William Ryan, May 13, 2015 4:43 pm
Thanks again Coberly for your and K's very thoughtful insight. You guys really made me think
hard today and I do see your points about perverted capitalism being a big problem in US. I still
do like the progressive tax structure and balanced trade agenda better.
I realize as you say that we cannot compare US to Hong Kong just on size and scale alone. Without
all the obfuscation going Lean by building cultures that makes people want to take ownership and
sharing learning and growing together is a big part of the solution Ford once said "you cannot
learn in school what the world is going to do next".
Also never argue with an idiot. They will bring you down to their level then beat you with
experience. The only cure for organized greed is organized labor. It's because no matter
what they do nothing get done about it. With all this manure around there must be a pony somewhere!
"
A typical voice of American politics is the avoidance of saying anything real on real
issues". FDR.
Rich people pay rich people to tell middle class people to blame poor people
Earth doesn't matter, people don't matter, even economy doesn't matter . The only thing
that matters is R.W. nut bar total ownership of everything.
I'm sorry I put profits ahead of people, greed above need and the rule of gold above God's
golden rules.
I try to stay away from negative people who have a problem for every solution
We need capitalism that is based on justice and greater corporate responsibility. I do
not speak nor do I comprehend assholian.
"If you don't change direction , you may end up where you are headed". Lao-Tzu.
"The true strength of our nation comes not from our arm or wealth but from our ideas".
Obama..
Last one.
"If the soul is left to darkness, sins will be committed. The guilty one is not the one
who commits the sins, but the one who caused the darkness". Victor Hugo.
coberly , May 16, 2015 9:57 pm
kai
as a matter of fact i disagree with the current "equality" fad at least insofar as it implies
taking from the rich and giving to the poor directly.
i don't believe people are "equal" in terms of their economic potential. i do beleive they
are equal in terms of being due the respect of human beings.
i also believe your simple view of "equality" is a closet way of guarantee that the rich can
prey upon the poor without interruption.
humans made their first big step in evolution when they learned to cooperate with each other
against the big predators.
Jerry Critter, May 17, 2015 12:10 am
it is mildly progressive up to about $75,000 per year where the rate hits 30%. But from there
up to $1.542 million the rate only increases to 33.3%.
I call that very flat!
Jerry Critter, May 17, 2015 11:20 am
"i assume there are people in this country who are truly poor. as far as i know they
don't pay taxes."
Read my reference and you will see that the "poor" indeed pay taxes, just not much income tax
because they don't have much income. You are fixated on income when we should be considering all
forms of taxation.
Jerry Critter, May 17, 2015 9:25 pm
Oh Kai, cut the crap. Paying taxes Is nothing like slavery. My oh my, how did we ever survive
with a top tax rate of around 90%, nearly 3 times the current rate? Some people would even say
that the economy then was pretty great and the middle class was doing terrific. So stop the deflection
and redirection. I think you just like to see how many words you can write. Sorry, but history
is not on your side.
Bottom line: Trump's Santa Rally could turn into a stock market bloodbath
unless he's able to deliver on his promises, which doesn't look very likely.
Check this out from Bloomberg:
"President-elect Donald Trump's race to enact the biggest tax cuts since
the 1980s went under a caution flag Monday as Senate Majority Leader Mitch
McConnell warned he considers current levels of U.S. debt "dangerous" and
said he wants any tax overhaul to avoid adding to the deficit.
"I think this level of national debt is dangerous and unacceptable,"
McConnell said, adding he hopes Congress doesn't lose sight of that when it
acts next year. "My preference on tax reform is that it be revenue neutral,"
he said
The Committee for a Responsible Federal Budget, a nonpartisan think tank,
has projected that Trump's plans would increase the debt by $5.3 trillion
over a decade, with deficits already over $600 billion a year and rising on
autopilot
What I hope we will clearly avoid, and I'm confident we will, is a
trillion-dollar stimulus," he said. "Take you back to 2009. We borrowed $1
trillion and nobody could find that it did much of anything. So we need to
do this carefully and correctly and the issue of how to pay for it needs to
be dealt with responsibly." (
McConnell,
Warning of 'Dangerous' Debt, Wants Tax Cut Offsets
, Bloomberg)
It doesn't sound like McConnell is a big fan of Trump's economic plan, does
it? So why has the Dow risen to within 26 points of the 20,000-mark if that's
the case?? Do investors think that Trump can simply issue an executive order
and force Congress to do what he wants?
Good luck with that. The deficit-crazed Republicans are just as committed to
austerity as ever, mainly because slashing government spending coupled with low
interest rates is a tried-and-true method of transferring obscene amounts of
money to the 1 percenters. Why would they tinker with a mechanism that works
perfectly already?
They won't, at least not to the extent that it'll have any meaningful impact
on the living standards of millions of working people across America. Congress
is going to prevent that at all cost. And so will the Fed. Just listen to what
Yellen had to say to a journalist from the Washington Post last week following
the FOMC meeting. She was asked point-blank whether she thought the economy
needed more fiscal stimulus or not. Her answer:
"Well I called for fiscal stimulus when the unemployment rate was
substantially higher than it is now. So with a 4.6 percent unemployment, and
a solid labor market, there may be some additional slack in labor markets,
but I would judge that the degree of slack has diminished, So I would say
at this point that fiscal policy is not obviously needed to help us get back
to full employment
But nevertheless, let me be careful that I am not
trying to provide advice to the new administration or to Congress as to what
is the appropriate stance of policy."
Nice, eh? Yellen threatens Trump with three more rate hikes in 2017,
torpedoes his $1 trillion infrastructure plan with a wave of the hand, and then
has the audacity to deny that she's dictating policy.
Of course she's dictating policy. What else would you call it?
Yellen is saying as clearly as possible, that if Trump launches his fiscal
spending plan, the Fed's going to slap him down by raising rates. If that's not
a threat, then what is??
Distributional National Accounts: Methods and Estimates for the United States
By Thomas Piketty, Emmanuel Saez, and Gabriel Zucman
Abstract
This paper combines tax, survey, and national accounts data to estimate the distribution of national
income in the United States since 1913. Our distributional national accounts capture 100% of national
income, allowing us to compute growth rates for each quantile of the income distribution consistent
with macroeconomic growth. We estimate the distribution of both pre-tax and post-tax income, making
it possible to provide a comprehensive view of how government redistribution affects inequality.
Average pre-tax national income per adult has increased 60% since 1980, but we find that it
has stagnated for the bottom 50% of the distribution at about $16,000 a year.
The pre-tax income of the middle class-adults between the median and the 90th percentile-has
grown 40% since 1980, faster than what tax and survey data suggest, due in particular to the rise
of tax-exempt fringe benefits.
Income has boomed at the top: in 1980, top 1% adults earned on average 27 times more than
bottom 50% adults, while they earn 81 times more today.
The upsurge of top incomes was first a labor income phenomenon but has mostly been a capital
income phenomenon since 2000.
The government has offset only a small fraction of the increase in inequality. The reduction of
the gender gap in earnings has mitigated the increase in inequality among adults. The share of women,
however, falls steeply as one moves up the labor income distribution, and is only 11% in the top
0.1% today.
Distributional National Accounts: Methods and Estimates for the United States
By Thomas Piketty, Emmanuel Saez, and Gabriel Zucman
Introduction Income inequality has increased in many developed countries over the last
several decades. This trend has attracted considerable interest among academics, policy-makers,
and the general public. In recent years, following up on Kuznets' (1953) pioneering attempt,
a number of authors have used administrative tax records to construct long-run series of
top income shares (Alvaredo et al., 2011-2016). Yet despite this endeavor, we still face
three important limitations when measuring income inequality. First and most important,
there is a large gap between national accounts-which focus on macro totals and growth-and
inequality studies-which focus on distributions using survey and tax data, usually without
trying to be fully consistent with macro totals. This gap makes it hard to address questions
such as: What fraction of economic growth accrues to the bottom 50%, the middle 40%, and
the top 10% of the distribution? How much of the rise in income inequality owes to changes
in the share of labor and capital in national income, and how much to changes in the dispersion
of labor earnings, capital ownership, and returns to capital? Second, about a third of U.S.
national income is redistributed through taxes, transfers, and public good spending. Yet
we do not have a good measure of how the distribution of pre-tax income differs from the
distribution of post-tax income, making it hard to assess how government redistribution
affects inequality. Third, existing income inequality statistics use the tax unit or the
household as unit of observation, adding up the income of men and women. As a result, we
do not have a clear view of how long-run trends in income concentration are shaped by the
major changes in women labor force participation-and gender inequality generally-that have
occurred over the last century.
This paper attempts to compute inequality statistics for the United States that overcome
the limits of existing series by creating distributional national accounts. We combine tax,
survey, and national accounts data to build new series on the distribution of national income
since 1913. In contrast to previous attempts that capture less than 60% of US national income-
such as Census bureau estimates (US Census Bureau 2016) and top income shares (Piketty and
Saez, 2003)-our estimates capture 100% of the national income recorded in the national accounts.
This enables us to provide decompositions of growth by income groups consistent with macroeconomic
growth. We compute the distribution of both pre-tax and post-tax income. Post-tax series
deduct all taxes and add back all transfers and public spending, so that both pre-tax and
post-tax incomes add up to national income. This allows us to provide the first comprehensive
view of how government redistribution affects inequality. Our benchmark series uses the
adult individual as the unit of observation and splits income equally among spouses. We
also report series in which each spouse is assigned her or his own labor income, enabling
us to study how long-run changes in gender inequality shape the distribution of income.
Distributional national accounts provide information on the dynamic of income across
the entire spectrum-from the bottom decile to the top 0.001%-that, we believe, is more accurate
than existing inequality data. Our estimates capture employee fringe benefits, a growing
source of income for the middle-class that is overlooked by both Census bureau estimates
and tax data. They capture all capital income, which is large-about 30% of total national
income- and concentrated, yet is very imperfectly covered by surveys-due to small sample
and top coding issues-and by tax data-as a large fraction of capital income goes to pension
funds and is retained in corporations. They make it possible to produce long-run inequality
statistics that control for socio-demographic changes-such as the rise in the fraction of
retired individuals and the decline in household size-contrary to the currently available
tax-based series.
Methodologically, our contribution is to construct micro-files of pre-tax and post-tax
income consistent with macro aggregates. These micro-files contain all the variables of
the national accounts and synthetic individual observations that we obtain by statistically
matching tax and survey data and making explicit assumptions about the distribution of income
categories for which there is no directly available source of information. By construction,
the totals in these micro-files add up to the national accounts totals, while the distributions
are consistent with those seen in tax and survey data. These files can be used to compute
a wide array of distributional statistics-labor and capital income earned, taxes paid, transfers
received, wealth owned, etc.-by age groups, gender, and marital status. Our objective, in
the years ahead, is to construct similar micro-files in as many countries as possible in
order to better compare inequality across countries. Just like we use GDP or national income
to compare the macroeconomic performances of countries today, so could distributional national
accounts be used to compare inequality across countries tomorrow.
We stress at the outset that there are numerous data issues involved in distributing
national income, discussed in the text and the online appendix. First, we take the national
accounts as a given starting point, although we are well aware that the national accounts
themselves are imperfect (e.g., Zucman 2013). They are, however, the most reasonable starting
point, because they aggregate all the available information from surveys, tax data, corporate
income statements, and balance sheets, etc., in an standardized, internationally-agreed-upon
and regularly improved upon accounting framework. Second, imputing all national income,
taxes, transfers, and public goods spending requires making assumptions on a number of complex
issues, such as the economic incidence of taxes and who benefits from government spending.
Our goal is not to provide definitive answers to these questions, but rather to be comprehensive,
consistent, and explicit about what assumptions we are making and why. We view our paper
as attempting to construct prototype distributional national accounts, a prototype that
could be improved upon as more data become available, new knowledge emerges on who pays
taxes and benefits from government spending, and refined estimation techniques are developed-just
as today's national accounts are regularly improved....
Low oil prices and an increasingly
costly war in Yemen have torn a yawning hole in the Saudi budget and created a crisis that has led
to cuts in public spending, reductions in take-home pay and benefits for government workers and a
host of new fees and fines. Huge subsidies for fuel, water and electricity that encourage
overconsumption are being curtailed. ...
I wonder what facts you have to label Trump's team "globalist shills".
Robert W. Merry in his National Interest article disagrees with you
http://nationalinterest.org/feature/trump-vs-hillary-nationalism-vs-globalism-2016-16041
=== start of the quote ===
Globalists captured much of American society long ago by capturing the bulk of the nation's elite
institutions -- the media, academia, big corporations, big finance, Hollywood, think tanks, NGOs,
charitable foundations. So powerful are these institutions -- in themselves and, even more so,
collectively -- that the elites running them thought that their political victories were complete
and final. That's why we have witnessed in recent years a quantum expansion of social and political
arrogance on the part of these high-flyers.
Then along comes Donald Trump and upends the whole thing. Just about every major issue that this
super-rich political neophyte has thrown at the elites turns out to be anti-globalist and pro-nationalist.
And that is the single most significant factor in his unprecedented and totally unanticipated
rise. Consider some examples:
Immigration: Nationalists believe that any true nation must have clearly delineated and protected
borders, otherwise it isn't really a nation. They also believe that their nation's cultural heritage
is sacred and needs to be protected, whereas mass immigration from far-flung lands could undermine
the national commitment to that heritage.
Globalists don't care about borders. They believe the nation-state is obsolete, a relic of
the 1648 Peace of Westphalia, which codified the recognition of co-existing nation states.
Globalists reject Westphalia in favor of an integrated world with information, money, goods
and people traversing the globe at accelerating speeds without much regard to traditional concepts
of nationhood or borders.
=== end of the quote ===
I wonder how "globalist shills" mantra correlates with the following Trump's statements:
=== start of quote ===
"Globalization has made the financial elite who donate to politicians very, very wealthy ... but
it has left millions of our workers with nothing but poverty and heartache," Trump told supporters
during a prepared speech targeting free trade in a nearly-shuttered former steel town in Pennsylvania.
In a speech devoted to what he called "How To Make America Wealthy Again," Trump offered a
series of familiar plans designed to deal with what he called [Obama] "failed trade policies"
- including rejection of the proposed Trans-Pacific Partnership (TPP) with Pacific Rim nations
and re-negotiation of the North American Free Trade Agreement (NAFTA) with Canada and Mexico,
withdrawing from it if necessary.
The presumptive Republican presidential nominee also said he would pursue bilateral trade agreements
rather than multi-national deals like TPP and NAFTA.
In addition to appointing better trade negotiators and stepping up punishment of countries
that violate trade rules, Trump's plans would also target one specific economic competitor: China.
He vowed to label China a currency manipulator, bring it before the World Trade Organization and
consider slapping tariffs on Chinese imports coming into the U.S.
"... In Bristol County, which includes Fall River, New Bedford, and Taunton, manufacturing employed nearly a quarter of the workforce in 2000; now it provides jobs for only one in 10 workers. ..."
"... Most of the manufacturing jobs lost since 2000 are unlikely to return, economists said. Automation has made manufacturing much more specialized, requiring more education and fewer workers, leaving parts of the country struggling to figure out how to reinvent their economies. ..."
"... "We will probably never have as many manufacturing jobs as we had in 1960," Dunn said. "The question is how do we train workers and provide them opportunities to feel productive. What's clear from the election is an increasing number of people don't have those opportunities or don't feel that those opportunities will be available." ..."
"... Characteristics of people dying by suicide after job loss, financial difficulties and other economic stressors during a period of recession (2010–2011): A review of coroners׳ records ..."
FALL RIVER - In this struggling industrial city, changes in trade policy are being measured
not only in jobs lost, but also in lives lost - to suicide.
The jobs went first, the result of trade deals that sent them overseas. Once-humming factories
that dressed office workers and soldiers, and made goods to furnish their homes, stand abandoned,
overtaken by weeds and graffiti.
And now there is research on how the US job exodus parallels an increase in suicides. A one percentage
point increase in unemployment correlated with an 11 percent increase in suicides, according to
Peter Schott, a Yale University economist who coauthored the report with Justin Pierce, a researcher
at the Federal Reserve Board.
The research doesn't prove a definitive link between lost jobs and suicide; it simply notes
that as jobs left, suicides rose. Workers who lost their jobs may have been pushed over the edge
and turned to suicide or drug addiction, lacking financial resources or community connections
to get help, the authors suggest.
The research contributes to a growing body of work that shows the dark side of global trade:
the dislocation, anger, and despair in some parts of the country that came with the United States'
easing of trade with China in 2000. The impact of job losses was greatest in places such as Fall
River and other cities in Bristol County, along with rural manufacturing counties in New Hampshire
and Maine, vast stretches of the South, and portions of the Rust Belt.
"There are winners and losers in trade," Schott said. "If you go to these communities, you can
see the disruptions."
The unemployment rate in Fall River remains persistently high and at 5.5 percent in September
was a good two points above the Massachusetts average. Nearly one in three households gets some
sort of public assistance.
Opposition to global trade policies became a rallying cry in Donald Trump's campaign, propelling
him into the White House with strategic wins in the industrial Midwest and the South. Trump has
threatened to impose tariffs on Chinese goods and has bashed recent US trade pacts. ...
... Previous trade deals, including the 1994 North American Free Trade Agreement with Canada and
Mexico, chipped away at US manufacturing towns. But economists say the decision to normalize relations
with China was far more disruptive. Some economists have estimated the United States may have
lost at least 1 million manufacturing jobs from 2000 to 2007 due to freer trade with China.
In Bristol County, which includes Fall River, New Bedford, and Taunton, manufacturing employed
nearly a quarter of the workforce in 2000; now it provides jobs for only one in 10 workers.
Most of the manufacturing jobs lost since 2000 are unlikely to return, economists said.
Automation has made manufacturing much more specialized, requiring more education and fewer workers,
leaving parts of the country struggling to figure out how to reinvent their economies.
"We will probably never have as many manufacturing jobs as we had in 1960," Dunn said.
"The question is how do we train workers and provide them opportunities to feel productive. What's
clear from the election is an increasing number of people don't have those opportunities or don't
feel that those opportunities will be available."
Officials in Fall River and Bristol County said they are trying to provide appropriate training,
including computer programming, a prerequisite for many manufacturing jobs.
They also point out there have been recent victories.
Amazon.com opened a distribution warehouse in Fall River and has been hiring in recent
months to fill 500 jobs.
Companies are eyeing Taunton for its cheaper land, access to highways, and state tax breaks.
Norwood-based Martignetti Cos., among the state's largest wine and spirits distributors,
last year agreed to move its headquarters to a Taunton industrial park.
Mayor Tom Hoye said Taunton has also been more active in recent years, holding community meetings
and expanding social services for residents facing distress and drug addiction.
Despite the hits the city and its residents have taken, there is reason to be optimistic about
the future, he said.
Jobs are returning, and the county's suicide rate dropped from 13 per 100,000 people in 2014
to 12 per 100,000 in 2015.
"We're reinventing ourselves," Hoye said on a recent morning as he sat in an old elementary
school classroom that has served as the temporary mayor's office for several years.
"It's tough to lift yourself out of the hole sometimes. But we're much better off than we were
10 years ago."
'The research doesn't prove a definitive
link between lost jobs and suicide; it
simply notes that as jobs left,
suicides rose.'
Pierce, Justin R., and Peter K. Schott (2016). "Trade Liberalization and Mortality:
Evidence from U.S. Counties," Finance and Economics Discussion Series
2016-094. Washington: Board of Governors of the Federal Reserve System
Characteristics of people dying by suicide after job loss, financial difficulties and other
economic stressors during a period of recession (2010–2011): A review of coroners׳ records
Caroline Coope, et al
Journal of Affective Disorders
Volume 183, 1 - September 2015
"... I would say both parties are for the rich and both do their best to distract their respective base with talk of abortion or race, while neither would like these red meat distractions disappear by being in any solved. ..."
"... Why do they like these particular distractions? Because the rich don't care about either. ..."
"... Trump broke the mold by talking about jobs in a meaningful way immigration and exporting factories both boost unemployment, suppressing wages while boosting profits; these topics have been forbidden since Ross Perot spoke of millions of jobs going south on account of Nafta, exactly what happened. ..."
"... 8mm official unemployment. 16mm reduced participation since 2005 in 25-54 age group. ..."
"... 24mm total, not counting part timers that want full time and 10mm fewer voted for dems in 2016 than 2008. ..."
"... Exactly the same number that voted for Romney voted for trump, so Hillary lost obamas third term not because of a wave of trump racists but because there was somehow dissatisfaction among former dem voters regarding the great jobs program, low cost healthcare, and prosecution of bankers and other elites that drove the economy off the cliff. Granted, nominating the second most unpopular person in America might not guarantee success ..."
Really? When did they do something that benefitted the poor?
I would say both parties are for the rich and both do their best to distract their respective
base with talk of abortion or race, while neither would like these red meat distractions disappear
by being in any solved.
Why do they like these particular distractions? Because the rich don't care about either.
Trump broke the mold by talking about jobs in a meaningful way immigration and exporting factories
both boost unemployment, suppressing wages while boosting profits; these topics have been forbidden
since Ross Perot spoke of millions of jobs going south on account of Nafta, exactly what happened.
8mm official unemployment. 16mm reduced participation since 2005 in 25-54 age group.
24mm total, not counting part timers that want full time and 10mm fewer voted for dems in 2016
than 2008.
Exactly the same number that voted for Romney voted for trump, so Hillary lost obamas
third term not because of a wave of trump racists but because there was somehow dissatisfaction
among former dem voters regarding the great jobs program, low cost healthcare, and prosecution
of bankers and other elites that drove the economy off the cliff. Granted, nominating the second
most unpopular person in America might not guarantee success
I mis spoke.
Nominating her had risks, but it assured Bernie would not be president, and Bernie was a far greater
risk to bankers and the other dem paymasters than trump. Remember, for them it was existential,
bernie would have jailed bankers. Trump is one of the oligarchs.
With her nom bankers let out a sigh of relief and could thankfully murmur, 'mission accomplished!'
If Sanders had won the Democratic nomination, and he had been "Bobby Kennedy'd", people besides
the conspiracy enthusiasts would have started to notice a pattern. Instead, there are millions
of people who actually believe that Sanders lost the primaries to Clinton fair and square. Some
of us know better. . . .
As for patterns, Trump's nominations for cabinet level offices are showing a pattern: billionaires,
hecto-millionaires, overt vassals of the ultra-rich, and at least one (alleged) criminal: Ryan
Zinke.
True. Because of estate recovery, I am doing without medical "insurance" of any kind. As I
tell Phyllis, if I get anything serious, just put me in my ragged old canvas chair in the back
yard and keep the beer coming until I stop complaining.
This entire Medicade story is curious. I had thought that any self respecting oligarchy would
want reasonably powerful clients to buttress the oligarch's power and influence. Instead, the
Medicade Oligarchy buys into a "power base" of the poor and disenfranchised. The funds for this
complex relationship are supplied, as best as I can discern, by the central government. What will
the Medicade Oligarchs do when the "X" Oligarchs cut off or even just restrict the flow of funds
from the central government?
Not just estate recovery. Loading Medicaid with more claimants, particularly poor, ethnic minority
claimants, was a great way to stress it's gonig to need a neo-liberal cure, if the neo-cons don't
use the opportunity Obama gave them to out right kill it. Medicaid isn't Medicare, and the retired
folks know it. They, the retires, would kill it in a second if they could get an extra $100 per
annum in free drugs.
I'm not too sure about the "Retired" "Poor" divide anymore. The two groups are converging and
merging. Any animus experienced here would be the result of restriction of total benefits available.
In other words, an artificially engineered conflict.
Once the "old folks" realize that they, as a class, are the poor, all bets will be off.
Nor is Medicare Medicare, in the sense of being a fully public program. Medicare Advantage,
Medicare supplemental insurance, and prescription drug insurance are all privatized.
Yes, I had a problem with that phrase, as well; especially as older people (read "retired")
are known to have the highest percentage of actual voters. Assuming that the 90% is an overstatement,
I don't believe it negates the point that all ages and all races can find common ground on certain
issues–Medicare for All being one of those issues. Seniors would definitely get behind an improved
Medicare, just as students, unemployed, working poor, and others would support such a sensible
universal health care program.
They old though – retired folks love them some voting. Work or have worked for wages, or had
vital domestic labor supported by a wage earning family member would surely get us over 90 IMO.
(sorry for quibbling Lambert. I think we all get the point. Thanks for the lovely essay)
In my opinion, probably not. The government's 20th century
"growth as a factory" underestimates service sector growth
and our continued share shrink in 20th century industrial
production means our "potential" growth is by this factory
methiod, in decline. If we grow 3% it is a gaudy number by
the government's own statistical backwardness.
To regenerate American factory growth is not possible
right now under a market system. I mean, it simply isn't.
If we tried, we would crater industrial growth as well
with consumption cuts.
likbez -> AngloSaxon...
, -1
Growth of the service sector is also under attack due to
increasing "robotization", replacing salaried workers with
"perma-temps" and underpaid contractors (Uber) as well as
offshoring of help desk and such.
Economist was always adamantly anti-Russian and, especially, anti-Putin. The use of people like
Sergey Guriev (recent emigrant to Paris, who excape to avoid the danger of criminal procecution for skolkovao machinations) is just an icing on the cake.
Notable quotes:
"... During the 2015-16 recession, GDP. fell by more than 4 percent and real incomes declined by 10 percent. That is significant, but much less serious than, say, the 40 percent drop in GDP that Russia experienced during the first half of the 1990s. Despite a dramatic decline in oil prices and the burden of sanctions imposed by Western governments after the Crimea crisis, the Putin administration has managed to avert economic disaster by pursuing competent macroeconomic policies. ..."
"... As the sanctions cut off Russia's access to global financial markets, the government set out to cover the budget deficit by undertaking major austerity measures and tapping its substantial sovereign funds. In early 2014, the Reserve Fund (created to mitigate fiscal shocks caused by drops in oil prices) and the National Welfare Fund (set up to address shortfalls in the pension system) together held the equivalent of 8 percent of GDP. ..."
LONDON - The Russian economy is in trouble - "in tatters," President Obama has said - so why
aren't Russians more upset with their leaders? The country underwent a major recession recently.
The ruble lost half of its value. And yet, according to a leading independent pollster in Russia,
President Vladimir V. Putin's approval ratings have consistently exceeded 80 percent during the
past couple of years.
One reason is that while the Russian economy is struggling, it is not falling apart, and many
Russians remember times when it was in a much worse state. Another, perhaps more important, explanation
is that Mr. Putin has convinced them that it's not the economy, stupid, anymore.
Thanks largely to the government's extensive control over information, Mr. Putin has rewritten
the social contract in Russia. Long based on economic performance, it is now about geopolitical
status. If economic pain is the price Russians have to pay so that Russia can stand up to the
West, so be it.
It wasn't like this in the 1990s and 2000s. Back then the approval ratings of Russian leaders
were closely correlated with economic performance, as the political scientist Daniel Treisman
has demonstrated. When the economy began to recover from the 1998 financial crisis, Mr. Putin's
popularity increased. It dipped when growth stalled. It climbed again in 2005, after the global
price of oil - Russia' main export commodity - rose, foreign investment flowed in and domestic
consumption boomed. And it fell substantially after growth rates slowed in 2012-13.
Russia's intervention in Crimea in early 2014 changed everything. Within two months, Mr. Putin's
popularity jumped back to more than 80 percent, where it has stayed until now, despite the recession.
One might argue that these figures are misleading: Given the pressures faced by the Kremlin's
political opponents, aren't respondents in polls too afraid to answer questions honestly? Hardly,
according to a recent study co-written by the political scientist Tim Frye, based on an innovative
method known as "list experiments." It found that, even after adjusting for respondents' reluctance
to openly acknowledge any misgivings about specific leaders, Mr. Putin's popularity really is
very high: around 70 percent.
During the 2015-16 recession, GDP. fell by more than 4 percent and real incomes declined
by 10 percent. That is significant, but much less serious than, say, the 40 percent drop in GDP
that Russia experienced during the first half of the 1990s. Despite a dramatic decline in oil
prices and the burden of sanctions imposed by Western governments after the Crimea crisis, the
Putin administration has managed to avert economic disaster by pursuing competent macroeconomic
policies.
As the sanctions cut off Russia's access to global financial markets, the government set
out to cover the budget deficit by undertaking major austerity measures and tapping its substantial
sovereign funds. In early 2014, the Reserve Fund (created to mitigate fiscal shocks caused by
drops in oil prices) and the National Welfare Fund (set up to address shortfalls in the pension
system) together held the equivalent of 8 percent of GDP.
The government also adopted sound monetary policy, including the decision to fully float the
ruble in 2014. Because of the decline in oil prices and large net capital outflows - caused by
the need to repay external corporate debt and limited foreign investment in Russia - the currency
depreciated by 50 percent within a year. Although a weaker ruble hurt the living standards of
ordinary Russians, it boosted the competitiveness of Russia's companies. The Russian economy is
now beginning to grow again, if very modestly - at a projected 1 to 1.5 percent per year over
the next few years.
This performance comes nowhere near meeting Mr. Putin's election-campaign promises of 2012,
when he projected GDP. growth at 6 percent per year for 2011-18. But it isn't catastrophic either,
and the government has managed to explain it away.
Thanks partly to its near-complete control of the press, television and the internet, the government
has developed a grand narrative about Russia's role in the world - essentially promoting the view
that Russians may need to tighten their belts for the good of the nation. The story has several
subplots. Russian speakers in Ukraine need to be defended against neo-Nazis. Russia supports President
Bashar al-Assad of Syria because he is a rampart against the Islamic State, and it has helped
liberate Aleppo from terrorists. Why would the Kremlin hack the Democratic Party in the United
States? And who believes what the CIA says anyway?
The Russian people seem to accept much of this or not to care one way or the other. This should
come as no surprise. In a recent paper based on data for 128 countries over 10 years, Professor
Treisman and I developed an econometric model to assess which factors affect a government's approval
ratings and by how much. We concluded that fully removing internet controls in a country like
Russia today would cause the government's popularity ratings to drop by about 35 percentage points.
...
"... We have a dollar democracy that protects the economic interest of the elite class while more than willing to let working class families lose their homes and jobs on the back end of wide scale mortgage fraud. Then the fraud was perpetuated in the mortgage default process just to add insult to injury. ..."
"... One thing that Trump certainly got wrong that no one ever points out is that there is a lot more murder than rape crossing the Mexican-American border in the drug cartel operations ..."
"... The technocrats lied about how globalization would be great for everyone. People's actual experience in their lives has been different. ..."
"... Centrist Democrat partisans with their increasinly ineffectual defenses of the establishment say it's only about racism and xenophobia, but it's more than that. ..."
Assaults on democracy are working because our current political elites have no idea how to
defend it.
[There are certainly good points to this article, but the basic assumption that our electorally
representative form of republican government is the ideal incarnation of the democratic value
set is obviously incorrect. We have a dollar democracy that protects the economic interest of
the elite class while more than willing to let working class families lose their homes and jobs
on the back end of wide scale mortgage fraud. Then the fraud was perpetuated in the mortgage default
process just to add insult to injury.
One thing that Trump certainly got wrong that no one ever points out is that there is a lot
more murder than rape crossing the Mexican-American border in the drug cartel operations:<) ]
The author fails to mention the Sanders campaign. An elderly socialist Jew from Brooklyn was able
to win 23 primaries and caucuses and approximately 43% of pledged delegates to Clinton's 55%.
This despite a nasty, hostile campaign against him and his supporters by the Clinton campaign
and corporate media.
There's also Jeremy Corbyn in the UK. Podemos, Syriza, etc.
Italy's 5 Star movement demonstrates a hostility to technocrats as well.
The author doesn't really focus on how the technocrats have failed.
The technocrats lied about how globalization would be great for everyone. People's actual experience
in their lives has been different.
Trump scapegoated immigrants and trade, as did Brexit, but what he really did was channel hostility
and hatred at the elites and technocrats running the country.
Centrist Democrat partisans with their increasinly ineffectual defenses of the establishment
say it's only about racism and xenophobia, but it's more than that.
RC AKA Darryl, Ron said in reply to Peter K.... , -1
"Globalization has made the financial elite who donate to politicians very, very wealthy ... but
it has left millions of our workers with nothing but poverty and heartache," Trump told supporters
during a prepared speech targeting free trade in a nearly-shuttered former steel town in Pennsylvania.
In a speech devoted to what he called "How To Make America Wealthy Again," Trump offered a series
of familiar plans designed to deal with what he called "failed trade policies" - including rejection
of the proposed Trans-Pacific Partnership (TPP) with Pacific Rim nations and re-negotiation of the
North American Free Trade Agreement (NAFTA) with Canada and Mexico, withdrawing from it if necessary.
The presumptive Republican presidential nominee also said he would pursue bilateral trade agreements
rather than multi-national deals like TPP and NAFTA.
In addition to appointing better trade negotiators and stepping up punishment of countries that violate
trade rules, Trump's plans would also target one specific economic competitor: China. He vowed to
label China a currency manipulator, bring it before the World Trade Organization and consider slapping
tariffs on Chinese imports coming into the U.S.
"... Excellent critique. Establishment Democrats are tone-deaf right now; the state of denial they live in is stunning. I'd like to think they can learn after the shock of defeat is over, but identity politics for non-white, non-male, non-heterosexual is what the Democratic party is about today and has been the last decade or so. ..."
"... That's the effect of incessant Dem propaganda pitting races and sexes against each other. ..."
"... And Democrats' labeling of every Republican president/candidate as a Nazi - including Trump - is desensitizing the public to the real danger created by discriminatory policies that punish [white] children and young adults, particularly boys. ..."
"... So, to make up for the alleged screw job that women and minorities have supposedly received, the plan will be screwing white/hetro/males for the forseeable future. My former employer is doing this very plan, as we speak. Passed over 100 plus males, who have been turning wrenches on airplanes for years, and installed a female shop manager who doesn't know jack-$##t about fixing airplanes. No experience, no certificate......but she has a management degree. But I guess you don't know how to do the job to manage it. ..."
"... Bernie Sanders was that standard bearer, but Krugman and the Neoliberal establishment Democrats (ie. Super Delegates) decided that they wanted to coronate Clinton. ..."
"... Evolution of political parties happens organically, through evolution (punctuated equilibrium - like species and technology - parties have periods of stability with some sudden jumps in differentiation). ..."
"... If Nancy Pelosi is re-elected (highly likely), it will be the best thing to happen to Republicans since Lincoln. They will lose even more seats. ..."
"... The Coastal Pelosi/Schumer wing is still in power, and it will take decimation at the ballot box to change the party. The same way the "Tea Party" revolution decimated the Republicans and led to Trump. Natural selection at work. ..."
"... The central fact of the election is that Hillary has always been extraordinarily unlikable, and it turned out that she was Nixonianly corrupt ..."
"... I'm from Dallas. Three of my closest friends growing up (and to this day), as well as my brother in law, are hispanic. They, and their families, all vote Republican, even for Trump. Generally speaking, the longer hispanics are in the US, the more likely they tend to vote Republican. ..."
"... The Democratic Establishment and their acolytes are caught in a credibility trap. ..."
"... I also think many Trump voters know they are voting against their own economic interest. The New York Times interviewed a number who acknowledge that they rely on insurance subsidies from Obamacare and that Trump has vowed to repeal it. I know one such person myself. She doesn't know what she will do if Obamacare is repealed but is quite happy with her vote. ..."
"... Krugman won his Nobel for arcane economic theory. So it isn't terribly surprising that he spectacularly fails whenever he applies his brain to anything remotely dealing with mainstream thought. He is the poster boy for condescending, smarter by half, elite liberals. In other words, he is an over educated, political hack who has yet to learn to keep his overtly bias opinions to himself. ..."
"... Funny how there's all this concern for the people whose jobs and security and money have vanished, leaving them at the mercy of faceless banks and turning to drugs and crime. Sad. Well, let's bash some more on those lazy, shiftless urban poors who lack moral strength and good, Protestant work ethic, shall we? ..."
"... Clinton slammed half the Trump supporters as deplorables, not half the public. She was correct; about half of them are various sorts of supremacists. The other half (she said this, too) made common cause with the deplorables for economic reasons even though it was a devil's bargain. ..."
"... I have never commented here but I will now because of the number of absurd statements. I happen to work with black and Hispanic youth and have also worked with undocumented immigrants. To pretend that trump and the Republican Party has their interest in mind is completely absurd. As for the white working class, please tell me what programs either trump or the republican have put forward to benefit them? I have lost a lot of respect for Duy ..."
"... The keys of the election were race, immigration and trade. Trump won on these points. What dems can do is to de-emphasize multiculturalism, racial equality, political correctness etc. Instead, emphasize economic equality and security, for all working class. ..."
"... Krugman more or less blames media, FBI, Russia entirely for Hillary's loss, which I think is wrong. As Tim said, Dems have long ceased to be the party of the working class, at least in public opinion, for legitimate reasons. ..."
"... All Mr. Krugman and the Democratic establishment need to do is to listen, with open ears and mind, to what Thomas Frank has been saying, and they will know where they went wrong and most likely what to do about it, if they can release themselves from their fatal embrace with Big Money covered up by identity politics. ..."
"... Pretty sad commentary by neoliberal left screaming at neoliberal right and vice versa. ..."
"... The neoliberals with their multi-culti/love them all front men have had it good for a while, now there's a reaction. Deal with it. ..."
Excellent critique. Establishment Democrats are tone-deaf right now; the state of denial they
live in is stunning. I'd like to think they can learn after the shock of defeat is over, but identity
politics for non-white, non-male, non-heterosexual is what the Democratic party is about today
and has been the last decade or so.
The only way Dems can make any headway by the midterms is if Trump really screws up,
which is a tall order even for him. He will pick the low-hanging fruit (e.g., tax reform, Obamacare
reform, etc), the economy will continue to recover (which will be attributed to Trump), and Dems
will lose even more seats in Congress. And why? Because they refuse to recognize that whites from
the middle-class and below are just as disadvantaged as minorities from the same social class.
If white privilege exists at all (its about as silly as the "Jews control the banks and media"
conspiracy theories), it exists for the upper classes. Poor whites need help too. And young men
in/out of college today are being displaced by women - not because the women have superior academic
qualification, but because they are women. I've seen it multiple times firsthand in some of the
country's largest companies and universities (as a lawyer, when an investigation or litigation
takes place, I get to see everyone's emails, all the way to CEO/board). There is a concerted effort
to hire only women and minorities, especially for executive/managerial positions. That's not equality.
That's the effect of incessant Dem propaganda pitting races and sexes against each other.
This election exposed the media's role, but its not over. Fortunately, Krugman et al. are
showing the Dems are too dumb to figure out why they lost. Hopefully they keep up their stupidity
so identity politics can fade into history and we can get back to pursuing equality.
"There is a concerted effort to hire only women and minorities, especially for executive/managerial
positions."
Goooooolllllllllllllly, gee. Now why would that be? I hope you're not saying there shouldn't
be such an effort. This is a good thing. It exactly and precisely IS equality. It may be a bit
harsh, but if certain folks continually find ways to crap of women and minorities, then public
policies would seem warranted.
Are you seriously telling us that pursuing public policies to curb racial and sexual discrimination
are a waste of time?
How, exactly, does your vision of "pursuit of equality" ameliorate the historical fact of discrimination?
You don't make up for past discrimination with discrimination. You make up for it by equal application
of the law. Today's young white men are not the cause of discrimination of the 20th century, or
of slavery. If you discriminate against them because of the harm caused by other people, you're
sowing the seeds of a REAL white nationalist movement. And Democrats' labeling of every Republican
president/candidate as a Nazi - including Trump - is desensitizing the public to the real danger
created by discriminatory policies that punish [white] children and young adults, particularly
boys.
Displacement of white men by lesser-qualified women and minorities is NOT equality.
So, to make up for the alleged screw job that women and minorities have supposedly received,
the plan will be screwing white/hetro/males for the forseeable future. My former employer is doing
this very plan, as we speak. Passed over 100 plus males, who have been turning wrenches on airplanes
for years, and installed a female shop manager who doesn't know jack-$##t about fixing airplanes.
No experience, no certificate......but she has a management degree. But I guess you don't know
how to do the job to manage it.
God forbid somebody have to "pay some dues" before setting them loose as suit trash.
Back when cultural conservatives ruled the roost (not that long ago), they didn't pursue equality
either. Rather, they favored (hetero Christian) white men. So hoping for Dem stupidity isn't going
to lead to equality. Most likely it would go back to favoring hetero Christian white men.
"...should they find a new standard bearer that can win the Sunbelt states and bridge the divide
with the white working class? I tend to think the latter strategy has the higher likelihood of
success."
Easy to say. What would that standard bearer or that strategy look like?
Bernie Sanders was that standard bearer, but Krugman and the Neoliberal establishment Democrats
(ie. Super Delegates) decided that they wanted to coronate Clinton. Big mistake that we are
now paying for...
Basic political math - Sanders would have been eaten alive with his tax proposals by the GOP anti-tax
propaganda machine on Trump steroids.
His call to raise the payroll tax to send more White working class hard-earn money to Washington
would have made election night completely different - Trump would have still won, it just wouldn't
have been a surprise but rather a known certainty weeks ahead.
Evolution of political parties happens organically, through evolution (punctuated equilibrium
- like species and technology - parties have periods of stability with some sudden jumps in differentiation).
Old politicians are defeated, new ones take over. The old guard, having been successful in
the past in their own niche rarely change.
If Nancy Pelosi is re-elected (highly likely), it will be the best thing to happen to Republicans
since Lincoln. They will lose even more seats.
The Coastal Pelosi/Schumer wing is still in power, and it will take decimation at the ballot
box to change the party. The same way the "Tea Party" revolution decimated the Republicans and
led to Trump. Natural selection at work.
In 1991, Republicans thought they would always win, Democrats thought the country was relegated
to Republican Presidents forever. Then along came a new genotype- Clinton. In 2012, Democrats
thought that they would always win, and Republicans were thought to be locked out of the electoral
college. Then along came a new genotype, Trump.
A new genotype of Democrat will have to emerge, but it will start with someone who can win
in flyover country and Texas. Hint: They will have to drop their hubris, disdain and lecturing,
some of their anti-growth energy policies, hate for the 2nd amendment, and become more fiscally
conservative. They have to realize that *no one* will vote for an increase in the labor supply
(aka immigration) when wages are stagnant and growth is anemic. And they also have to appreciate
people would rather be free to choose than have decisions made for them. Freedom means nothing
unless you are free to make mistakes.
But it won't happen until coastal elites like Krugman and Pelosi have retired.
My vote for the Democratic Tiktaalik is the extraordinarily Honorable John Bel Edwards, governor
of Louisiana. The central fact of the election is that Hillary has always been extraordinarily
unlikable, and it turned out that she was Nixonianly corrupt (i.e., deleted E-mails on her
illegal private server) as well - and she still only lost by 1% in the tipping point state (i.e.,
according to the current count, which could very well change).
You know what will win Texas? Demographic change. Economic growth. And it is looking pretty inevitable
on both counts.
I'm also pretty damned tired of being dismissed as "elitist", "smug" and condescending. I grew
up in a red state. I know their hate. I know their condescension (they're going to heaven, libruls
are not).
It cuts both ways. The Dems are going into a fetal crouch about this defeat. Did the GOP do
that after 2008? Nope. They dug in deeper.
Ahh yes, all Texas needs is demographic change, because all [Hispanics, Blacks, insert minority
here] will always and forever vote Democrat. Even though the Democrats take their votes for granted
and Chicago/Baltimore etc. are crappy places to live with no school choice, high taxes, fleeing
jobs, and crime. Even though Trump outperformed Romney among minorities.
Clinton was supposed to be swept up in the winds of demographics and the Democrats were supposed
to win the White House until 2083.
Funny things happen when you take votes for granted. Many urban areas are being crushed by
structural deficits and need some Detroit type relief. I predict that some time in the next 30
years, poles reverse, and urban areas are run by Republicans.
If you are tired of being dismissed as "elitist", "smug" and condescending, don't be those
things. Don't assume people will vote for your party because they have always voted that way,
or they are a certain color. Respect the voters and work to earn it.
The notion that hispanic=democrat that liberals like bob have is hopelessly ignorrant.
I'm from Dallas. Three of my closest friends growing up (and to this day), as well as my
brother in law, are hispanic. They, and their families, all vote Republican, even for Trump. Generally
speaking, the longer hispanics are in the US, the more likely they tend to vote Republican.
The Democratic Party's plan to wait out the Republicans and let demographics take over is ignorant,
racist and shortsighted, cooked up by coastal liberals that haven't got a clue, and will ultimately
fail.
In addition to losing hispanics, Democrats will also start losing the African American vote
they've been taking for granted the last several decades. Good riddance to the Democratic party,
they are simply unwilling to listen to what the people want.
This is a really shoddy piece that repeats the medias pulling of Clintons quote out of context.
She also said "that other basket of people are people who feel that the government has let them
down, the economy has let them down, nobody cares about them, nobody worries about what happens
to their lives and their futures, and they're just desperate for change. It doesn't really even
matter where it comes from. They don't buy everything he says, but he seems to hold out some hope
that their lives will be different. They won't wake up and see their jobs disappear, lose a kid
to heroin, feel like they're in a dead-end. Those are people we have to understand and empathize
with as well."
Now maybe it is okay to make gnore this part of the quote because you think calling racism
"deplorable" is patently offensive. But when the ignored context makes the same points that Duy
says she should have been making, that is shoddy.
There are zero electoral college votes in the State of Denial. Hopefully you understand a)the
difference between calling people deplorable and calling *behavior* deplorable; b) Godwin's Law:
when you resort to comparing people to Hitler you've lost the argument. Trump supporters were
not racist, homophobic, xenophobic, or any other phobic. As a moderate, educated, female Trump
supporter counseled: He was an a-hole, but I liked his policies.
Even my uber liberal friends cannot tell me what Clinton's economic plan was. Only that they
are anti-Trump.
Trump flanked Clinton on the most popular policies (the left used to be the anti-trade party
of union Democrats): Lower regulation, lower taxes, pro-2nd amendment, trade deals more weighted
in favor of US workers, and lower foreign labor supply. Turn's out, those policies are sufficiently
popular that people will vote for them, even when packaged into an a-hole. Trump's anti-trade
platform was preached for decades by rust belt unions.
The coastal Democrats have become hostages to pro-big-government municipal unions crushing
cities under structural deficits, high taxes, poorly run schools, and overbearing regulations.
The best thing that can happen for the Democrats is for the Republicans to push for reforms of
public pensions, school choice, and break municipal unions. Many areas see the disaster in Chicago
and Baltimore, run by Democrats for decades, and say no thank you. Freed of the need to cater
to urban municipal unions, Democrats may be able to appeal to people elsewhere.
Tim, I believe you've missed the point: by straightforward measures, Democratic voters in USA
are substantially under-represented. The problem is likely to get much worse, as the party whose
policies abet minority rule now controls all three branches of the federal government and a substantial
majority of state governments.
This is an outstanding takedown on what has been a never-ending series of garbage from Krugman.
I used to hang on every post he'd made for years after the 2008 crisis hit. But once the Clinton
coronation arose this year, the arrogant, condescending screed hit 11 - and has not slowed down
since. Threads of circular and illogical arguments have woven together pathetic - and often non-liberal
- editorials that have driven me away permanently.
Since he's chosen to ride it all on political commentary, Krugman's credibility is right there
with luminaries such as Nial Ferguson and Greg Mankiw.
Seems that everyone who chooses to hitch their wagon to the Clintons ends up covered in bilge.....
funny thing about that persistent coincidence...
"And it is an especially difficult pill given that the decline was forced upon the white working
class.... The tsunami of globalization washed over them....in many ways it was inevitable, just
as was the march of technology that had been eating away at manufacturing jobs for decades. But
the damage was intensified by trade deals.... Then came the housing crash and the ensuing humiliation
of the foreclosure crisis."
All the more amazing then that Trump pulled out such a squeaker of an election beating Clinton
by less than 2% in swing states and losing the popular vote overall. In the shine of Duy's lights
above, I would have imagined a true landslide for Trump... Just amazing.
"I don't know that the white working class voted against their economic interest".
I think you're pushing too hard here. Democrats have been for, and Republicans against many
policies that benefit the white working class: expansionary monetary policy, Obamacare, housing
refinance, higher minimum wage, tighter worker safety regulation, stricter tax collection, and
a host of others.
I also think many Trump voters know they are voting against their own economic interest.
The New York Times interviewed a number who acknowledge that they rely on insurance subsidies
from Obamacare and that Trump has vowed to repeal it. I know one such person myself. She doesn't
know what she will do if Obamacare is repealed but is quite happy with her vote.
There is zero evidence for this theory. It ignores the fact that Trump lied his way to the White
House with the help of a media unwilling to confront and expose his mendacity. And there was the
media's obsession with Clinton's Emails and the WikiLeaks daily release of stolen DNC documents.
And finally the Comey letter which came in the middle of early voting keeping the nation in suspense
for 11 days and which was probably a violation of the hatch act. Comey was advised against his
unjustified action by higher up DOJ officials but did it anyway. All of these factors loomed much
larger than the deplorables comment. Besides, the strong dollar fostered by the FOMC's obsession
with "normalization" helped Trump win because the strong dollar hurts exporters like farmers who
make up much of the rural vote as well as hurting US manufacturing located in the midwest states.
The FOMC was objectively pro Trump.
I was surrounded by Trump voters this past election. Trust me, an awful lot of them are deplorable.
My father is extremely anti semetic and once warned me not to go to Minneapolis because of there
being "too many Muslims." One of our neighbors thinks all Muslims are terrorists and want to do
horrible things to all Christians.
I know, its not a scientific study. But I've had enough one on one conversations with Trump
supporters (not just GOP voters, Trump supporters) to say that yes, as a group they have some
pretty horrible views.
Yep. I've got plenty of stories myself. From the fact that there are snooty liberals it does NOT
follow that the resentment fueling Trump's support is justified.
One should note that the "The racist, sexist, homophobic, xenophobic, Islamaphobic - you name
it ... " voted for Obama last time around.
When the blue collar voter (for lack of a better class) figures out that the Republicans (Trump)
are not going to help them anymore than the Dems did -- it will be time for them to understand
they can only rely on themselves, namely: through rebuilding labor union density, which can be
done AT THE STATE BY PROGRESSIVE STATE LEVEL.
To keep it simple states may add to federal protections like the minimum wage or safety regs
-- just not subtract. At present the NLRB has zero (no) enforcement power to prevent union busting
(see Trump in Vegas) -- so illegal labor market muscling, firing of organizers and union joiners
go completely undeterred and unrecoursed.
Recourse, once we get Congress back might include mandating certification elections on finding
of union busting. Nothing too alien: Wisconsin, for instance, mandates RE-certification of all
public employee unions annually.
Progressive states first step should be making union busting a felony -- taking the power playing
in our most important and politically impacting market as seriously as taking a movie in the movies
(get you a couple of winters). For a more expansive look (including a look at the First Amendment
and the fed cannot preempt something with nothing, click here):
http://ontodayspage.blogspot.com/2016/11/first-100-days-progressive-states-agenda.html
Labor unions -- returned to high density -- can act as the economic cop on every corner --
our everywhere advocates squelching such a variety of unhealthy practices as financialization,
big pharam gouging, for profit college fraud (Trump U. -- that's where we came into this movie).
6% private union density is like 20/10 bp; it starves every other healthy process (listening blue
collar?).
Don't panic if today's Repub Congress passes national right-to-work legislation. Germany, which
has the platinum standard labor institutions, does not have one majority union (mostly freeloaders!),
but is almost universally union or covered by union contracts (centralized bargaining -- look
it up) and that's what counts.
Trump took both sides of every issue. He wants high and low interest rates. He wants a depression
first, (Bannonomics) and inflation first, (Trumponomics), he wants people to make more and make
less. He is nasty and so he projected that his opponent was nasty.
Now he has to act instead of just talk out of both sides of his mouth. That should not be as
easy to do.
Hi Tim, nice post, and I particularly liked your last paragraph. The relevant question today if
you have accepted where we are is effectively: 'What would you prefer - a Trump victory now? Or
a Trump type election victory in a decade or so? (with todays corresponding social/economic/political
trends continuing).
I'm a Brit so I was just an observer to the US election but the same point is relevant here in
the UK - Would I rather leave the EU now with a (half sensible) Tory government? Or would I rather
leave later on with many more years of upheaval and a (probably by then quite nutty) UKIP government?
I know which one I prefer - recognise the protest vote sooner, rather than later.
Sure they're angry, and their plight makes that anger valid.
However, not so much their belief as to who and what caused their plight, and more importantly,
who can and how their plight would be successfully reversed.
Most people have had enough personal experiences to know that it is when we are most angry
that we do the stupidest of things.
Krugman won his Nobel for arcane economic theory. So it isn't terribly surprising that he
spectacularly fails whenever he applies his brain to anything remotely dealing with mainstream
thought. He is the poster boy for condescending, smarter by half, elite liberals. In other words,
he is an over educated, political hack who has yet to learn to keep his overtly bias opinions
to himself.
Tim's narrative felt like a cold shower. I was apprehensive that I found it too agreeable on one
level but were the building blocks stable and accurate?
Somewhat like finding a meal that is satisfying, but wondering later about the ingredients.
But, like Tim's posts on the Fed, they prompt that I move forward to ponder the presentation
and offer it to others for their comment. At this time, five-stars on a 1-5 system for bringing
a fresh approach to the discussion. Thanks, Professor Duy. This to me is Piketty-level pushing
us onto new ground.
Funny how there's all this concern for the people whose jobs and security and money have vanished,
leaving them at the mercy of faceless banks and turning to drugs and crime. Sad. Well, let's bash
some more on those lazy, shiftless urban poors who lack moral strength and good, Protestant work
ethic, shall we?
Clinton slammed half the Trump supporters as deplorables, not half the public. She was correct;
about half of them are various sorts of supremacists. The other half (she said this, too) made
common cause with the deplorables for economic reasons even though it was a devil's bargain.
Now, there's a problem with maternalism here; it's embarrassing to find out that the leader
of your political opponents knows you better than you know yourself, like your mother catching
you out in a lie. It was impolitic for Clinton to have said this But above all remember that when
push came to shove, the other basket made common cause with the Nazis, the Klan, and so on and
voted for a rapey fascist.
"Economic development" isn't (and can't) be the same thing as bringing back lost manufacturing
(or mining) jobs. We have had 30 years of shifting power between labor and capital. Restoring
labor market institutions (both unions and government regulation) and raising the floor through
higher minimum wages, single payer health care, fair wages for women and more support for child
and elder care, trade policies that care about working families, better safe retirement plans
and strengthened Social Security, etc. is key here, along with running a real full employment
economy, with a significant green component. See Bob Polllin's excellent program in
https://mitpress.mit.edu/books/back-full-employment
That program runs up against racism, sexism, division, and fear of government and taxation,
and those are powerful forces. But we don't need all Trump supporters. We do need a real, positive
economic program that can attract those who care about the economics more than the cultural stuff.
How about people of color drop the democrats and their hand wringing about white people when they
do nothing about voter suppression!! White fragility is nauseating and I'm planning to arm myself
and tell all the people of color I know to do the same. I expect nothing from the democrats going
forward.
I have never commented here but I will now because of the number of absurd statements. I happen
to work with black and Hispanic youth and have also worked with undocumented immigrants. To pretend
that trump and the Republican Party has their interest in mind is completely absurd. As for the
white working class, please tell me what programs either trump or the republican have put forward
to benefit them? I have lost a lot of respect for Duy
I think much of appeal of DJT was in his political incorrectness. PC marginalises. Very. Of white
working class specifically. it tells one, one cannot rely on one's ideas any more. In no uncertain
terms. My brother, who voted for Trump, lost his job to PC without offending on purpose, but the
woman in question felt free to accuse him of violating her, with no regard to his fate. He was
never close enough to do that. Is that not some kind of McCarthyism?
Just to be correct. Clinton was saying that half (and that was a terrible error-should have said
"some") were people that were unreachable, but that they had to communicate effectively with the
other part of his support. People who echo the media dumb-ing down of complex statements are part
of the problem.
Still, I believe that if enough younger people and african-americans had come out in the numbers
they did for Obama in some of those states, Clinton would have won. Certainly, the media managed
to paint her in more negative light than she objectively deserved-- even if she deserved some
negatives.
I am in no way a fan of HRC. Still, the nature of the choice was blurred to an egregious degree.
"The tough reality of economic development is that it will always be easier to move people to
jobs than the jobs to people."
This is indisputable, but I have never seen any discussion of the point that moving is not
cost-free. Back in the '90s I had a discussion with a very smart person, a systems analyst, who
insisted that poor people moved to wherever the welfare benefits were highest.
I tried to point out that moving from one town to another costs more than a bus ticket. You
have to pay to have your possessions transported. You have to have enough cash to pay at least
two months' rent and maybe an additional security deposit.
You have to have enough cash to pay for food for at least one month or however long it takes
for your first paycheck or welfare check to come in. There may be other costs like relocating
your kids to a new school system and maybe changing your health insurance provider.
There probably are other costs I'm not aware of, and the emotional cost of leaving your family
and your roots. The fact that some people succeed in moving is a great achievement. I'm amazed
it works at all in Europe where you also have the different languages to cope with.
I'm not sure the Hillary non-voters - which also include poor black neighborhoods - were voting
against their economic interests. Under Obama, they didn't do well. Many of them were foreclosed
on while Obama was giving the money to the banks. Jobs haven't improved, unless you want to work
at an Amazon warehouse or for Uber and still be broke. Obama tried to cut social security. He
made permanent Bush's tax cuts for the rich. Wars and more wars. Health premiums went up - right
before the election. The most Obama could say in campaigning for Hillary was "if you care about
my legacy, vote for Hillary." He's the only one that cares about his legacy. I don't know that
it's about resentment but about just having some hope for economic improvement - which Trump offered
(no matter how shallow and deceptive) and Hillary offered nothing but "Trump's an idiot and I'm
not."
I believe Bernie would have beat Trump's ass if 1) the DNC hadn't put their fingers on the
scale for Hillary and 2) same with the media for Hillary and Trump. The Dems need more than some
better campaign slogans. They really need a plan for serious economic equality. And the unions
need to get their shit together and stop thinking that supporting corrupt corporate Dems is working.
Or perhaps the rank and file need to get their shit together and get rid of union bosses.
The keys of the election were race, immigration and trade. Trump won on these points. What
dems can do is to de-emphasize multiculturalism, racial equality, political correctness etc. Instead,
emphasize economic equality and security, for all working class.
Lincoln billed the civil war as a war to preserve the union, to gain wide support, instead
of war to free slaves. Of course, the slaves were freed when the union won the war. Dems can benefit
from a similar strategy
Krugman more or less blames media, FBI, Russia entirely for Hillary's loss, which I think
is wrong. As Tim said, Dems have long ceased to be the party of the working class, at least in
public opinion, for legitimate reasons.
Besides, a lot voters are tired of stale faces and stale ideas. They yearn something new, especially
the voters in deep economic trouble.
Maybe it's time to try some old fashioned mercantilism, protectionism? America first is an
appealing idea, in this age of mindless globalization.
All Mr. Krugman and the Democratic establishment need to do is to listen, with open ears and
mind, to what Thomas Frank has been saying, and they will know where they went wrong and most
likely what to do about it, if they can release themselves from their fatal embrace with Big Money
covered up by identity politics.
But they cannot bring themselves to admit their error, and to give up their very personally
profitable current arrangement. And so they are caught up in a credibility trap which is painfully
obvious to the objective observer.
Pretty sad commentary by neoliberal left screaming at neoliberal right and vice versa.
It seems quite clear that the vast majority of commenters live as much in the ivory tower/bubble
as is claimed for their ideological opponent.
It is also quite interesting that most of these same commenters don't seem to get that the
voting public gets what the majority of it wants - not what every single group within the overall
population wants.
The neoliberals with their multi-culti/love them all front men have had it good for a while,
now there's a reaction. Deal with it.
This Russian hacking thing is being discussed entirely out of realistic context.
Cyber security
is a serious risk management operation that firms and governments spend outrageous sums of money
on because hacking attempts, especially from sources in China and Russia, occur in vast numbers
against every remotely desirable target corporate or government each and every day. At my former
employer, the State of Virginia, the data center repelled over two million hacking attempts from
sources in China each day. Northrop Grumman, the infrastructure management outsourcer for the
State of Virginia's IT infrastructure, has had no known intrusions into any Commonwealth of Virginia
servers that had been migrated to their standard security infrastructure thus far since the inception
of their contract in July 2006. That is almost the one good thing that I have to say about NG.
Some state servers, notably the Virginia Department of Health Professions, not under protection
of the NG standard network security were hacked and had private information such as client SSNs
stolen. Retail store servers are hacked almost routinely, but large banks and similarly well protected
corporations are not. Security costs and it costs a lot.
Even working in a data center with an excellent intrusion protection program as part of that
program I had to take an annual "securing the human" computer based training class. Despite all
of the technical precautions we were retrained each year to among other things NEVER put anything
in an E-Mail that we did not want to be available for everyone to read; i.e., to never assume
privacy is protected in an E-Mail. Embarrassing E-Mails need a source. We should assume that there
will always be a hacker to take advantage of our mistakes.
The reality is that all the major world powers (and some minor ones), including us, do this routinely
and always have. While it is entirely appropriate to be outraged that it may have materially determined
the election (which I think is impossible to know, though it did have some impact), we should
not be shocked or surprised by this.
"...I would suggest attacks on Putin's personal business holdings all over the world..."
[My guess is that has been being done a long time ago considering the direction of US/Russian
foreign relations over NATO expansion, the Ukraine, and Syria.
Long before TCP/IP the best way to prevent dirty secrets from getting out was not to have dirty
secrets. It still works.
The jabbering heads will not have much effect on the political opinions of ordinary citizens
because 40 million or more US adults had their credit information compromised by the Target hackers
three years ago. Target had been saving credit card numbers instead of deleting them as soon as
they obtained authorizations for transfers, so that the 40 million were certainly exposed while
more than twice that were probably exposed. Establishment politicians having their embarrassing
E-mails hacked is more like good fun family entertainment than something to get all riled up about.]
Voting machines are public and for Federal elections then tampering with them is elevated to a
Federal crime. Political parties are private. The Federal government did not protect Target or
Northrop Grumman's managed infrastructure for the Commonwealth of Virginia although either one
can take forensic information to the FBI that will obtain warrants for prosecution. Foreign criminal
operations go beyond the immediate domestic reach of the FBI. Not even Interpol interdicts foreign
leaders unless they are guilty of genocide, crimes against humanity or war crimes.
The Federal government can do what it will as there are not hard guidelines for such clandestine
operations and responses. Moreover, there are none to realistically enforce against them, which
inevitably leads to war given sufficient cycles of escalation. Certainly our own government has
done worse (political assassinations and supporting coups with money and guns) with impunity merely
because of its size, reach, and power.
BTW, "the burglar that just ransacked your house" can be arrested and prosecuted by a established
regulated legal system with absolutely zero concerns of escalating into a nuclear war, trade war,
or any other global hostility. So, not the same thing at all. Odds are good though that the burglar
will get away without any of that because when he does finally get caught it will be an accident
and probably only after dozen if not hundreds of B&E's.
There is a line. The US has crossed that line, but always in less developed countries that
had no recourse against us. Putin knows where the line is with the US. He will dance around it
and lean over it, but not cross it. We have him outgunned and he knows it. Putin did not tamper
with an election, a government function. Putin tampered with private data exposing incriminating
information against a political party, which is a private entity rather than government entity.
Whatever we do should probably stay within the rule of law as it gets messy fast once outside
those boundaries.
As far as burglars go I live in a particular working class zip code that has very few burglaries.
It is a bad risk/reward deal unless you are just out to steal guns and then you better make sure
that no one is home. Most people with children still living at home also have a gun safe. Most
people have dogs.
There are plenty burglaries in a lower income zip code nearby and lots more in higher income
zip codes further away, the former being targets of opportunity with less security and possible
drug stashes, which has a faster turnover than fencing big screen TV's. High income neighborhoods
are natural targets with jewelry, cash, credit cards, and high end electronics, but far better
security systems. I don't know much about their actual crime stats because they are on the opposite
side of the City of Richmond VA from me, but I used to know a couple of burglars when I lived
in the inner city. They liked the upscale homes near the University of Richmond on River Road.
"They kept telling us the e-mail didn't reveal anything and now they say the e-mail determined
the election"
And those two statement are not in conflict unless you are a brain dead Fox bot. Big nothing-burgers
like Bhengazi or trivial emails can easily be blown up and affect a few hundred thousand voters.
When the heck are you going to grow up and get past your 5 stages of Sanders grief?
I know - and there used to be some signs of a functional brain. Now it is all "they are all the
same" ism and Hillary derangement syndrome on steroids. Someone who cares need to do an intervention
before it becomes he get gobbled up by "ilsm" ism.
ABC video interview by Martha Raddatz of Donna Brazile 2:43
Adding the following FACTS, not opinion, to the Russian Hacking debate at the DNC
Russian hacks of the DNC began at least as early as April, the FBI informed the DNC in May
of the hacks, NO ONE in the FedGovt offered to HELP the DNC at anytime (allowed it to continue),
and Russia's Putin DID NOT stop after President Obama told Putin in September to "Cut it Out",
despite Obama's belief otherwise
"DNC Chair Says Russian Hackers Attacked The Committee Through Election Day"
'That goes against Obama's statement that the attacks ended after he spoke to Putin in September'
by Dave Jamieson Labor Reporter...The Huffington Post...12/18/2016...10:59 am ET
"The chair of the Democratic National Committee said Sunday that the DNC was under constant
cyber attack by Russian hackers right through the election in November. Her claim contradicts
President Barack Obama's statement Friday that the attacks ended in September after he issued
a personal warning to Russian President Vladimir Putin.
"No, they did not stop," Donna Brazile told Martha Raddatz on ABC's "This Week." "They came
after us absolutely every day until the end of the election. They tried to hack into our system
repeatedly. We put up the very best cyber security but they constantly [attacked]."
Brazile said the DNC was outgunned in its efforts to fend off the hacks, and suggested the
committee received insufficient protection from U.S. intelligence agencies. The CIA and FBI have
reportedly concluded that Russians carried out the attacks in an effort to help Donald Trump defeat
Hillary Clinton.
"I think the Obama administration ― the FBI, the various other federal agencies ― they informed
us, they told us what was happening. We knew as of May," Brazile said. "But in terms of helping
us to fight, we were fighting a foreign adversary in the cyberspace. The Democratic National Committee,
we were not a match. And yet we fought constantly."
In a surprising analogy, Brazile compared the FBI's help to the DNC to that of the Geek Squad,
the tech service provided at retailer Best Buy ― which is to say well-meaning, but limited.
"They reached out ― it's like going to Best Buy," Brazile said. "You get the Geek Squad, and
they're great people, by the way. They reached out to our IT vendors. But they reached us, meaning
senior Democratic officials, by then it was, you know, the Russians had been involved for a long
time."..."
This new perspective and set of facts is more than distressing it details a clear pattern of Executive
Branch incompetence, malfeasance, and ineptitude (perhaps worse if you are conspiratorially inclined)
im1dc -> im1dc... , -1
The information above puts in bold relief President Obama's denial of an Electoral College briefing
on the Russian Hacks
There is now no reason not to brief the Electors to the extent and degree of Putin's help for
demagogue Donald
Fred C. Dobbs -> Peter K....
December 26, 2016 at 07:15 AM neopopulism: A cultural and political movement, mainly in Latin
American countries, distinct from twentieth-century populism in radically combining classically opposed
left-wing and right-wing attitudes and using electronic media as a means of dissemination. (Wiktionary)
"... Efforts which led to impoverishment of lower 80% the USA population with a large part of the US population living in a third world country. This "third world country" includes Wal-Mart and other retail employees, those who have McJobs in food sector, contractors, especially such as Uber "contractors", Amazon packers. This is a real third world country within the USA and probably 50% population living in it. ..."
"... While conversion of electricity supply from coal to wind and solar was more or less successful (much less then optimists claim, because it requires building of buffer gas powered plants and East-West high voltage transmission lines), the scarcity of oil is probably within the lifespan of boomers. Let's say within the next 20 years. That spells deep trouble to economic growth as we know it, even with all those machinations and number racket that now is called GDP (gambling now is a part of GDP). And in worst case might spell troubles to capitalism as social system, to say nothing about neoliberalism and neoliberal globalization. The latter (as well as dollar hegemony) is under considerable stress even now. But here "doomers" were wrong so often in the past, that there might be chance that this is not inevitable. ..."
"... Shale gas production in the USA is unsustainable even more then shale oil production. So the question is not if it declines, but when. The future decline (might be even Seneca Cliff decline) is beyond reasonable doubt. ..."
"What is good for wall st. is good for America". The remains of the late 19th century anti
trust/regulation momentum are democrat farmer labor wing in Minnesota, if it still exists. An
example: how farmers organized to keep railroads in their place. Today populists are called deplorable,
before they ever get going.
And US' "libruls" are corporatist war mongers.
Used to be the deplorable would be the libruls!
Division!
likbez -> pgl...
I browsed it and see more of less typical pro-neoliberal sentiments, despite some critique
of neoliberalism at the end.
This guy does not understand history and does not want to understand. He propagates or invents
historic myths. One thing that he really does not understand is how WWI and WWII propelled the
USA at the expense of Europe. He also does not understand why New Deal was adopted and why the
existence of the USSR was the key to "reasonable" (as in "not self-destructive" ) behaviour of
the US elite till late 70th. And how promptly the US elite changed to self-destructive habits
after 1991. In a way he is a preacher not a scientist. So is probably not second rate, but third
rate thinker in this area.
While Trump_vs_deep_state (aka "bastard neoliberalism") might not be an answer to challenges the USA is
facing, it is definitely a sign that "this time is different" and at least part of the US elite
realized that it is too dangerous to kick the can down the road. That's why Bush and Clinton political
clans were sidelined this time.
There are powerful factors that make the US economic position somewhat fragile and while Trump
is a very questionable answer to the challenges the USA society faces, unlike Hillary he might
be more reasonable in his foreign policy abandoning efforts to expand global neoliberal empire
led by the USA.
Efforts which led to impoverishment of lower 80% the USA population with a large part of
the US population living in a third world country. This "third world country" includes Wal-Mart
and other retail employees, those who have McJobs in food sector, contractors, especially such
as Uber "contractors", Amazon packers. This is a real third world country within the USA and probably
50% population living in it.
Add to this the decline of the US infrastructure due to overstretch of imperial building efforts
(which reminds British empire troubles).
I see several factors that IMHO make the current situation dangerous and unsustainable, Trump
or no Trump:
1. Rapid growth of population. The US population doubled in less them 70 years. Currently
at 318 million, the USA is the third most populous country on earth. That spells troubles for
democracy and ecology, to name just two. That might also catalyze separatists movements with two
already present (Alaska and Texas).
2. Plato oil. While conversion of electricity supply from coal to wind and solar
was more or less successful (much less then optimists claim, because it requires building of buffer
gas powered plants and East-West high voltage transmission lines), the scarcity of oil is probably
within the lifespan of boomers. Let's say within the next 20 years. That spells deep trouble to
economic growth as we know it, even with all those machinations and number racket that now is
called GDP (gambling now is a part of GDP). And in worst case might spell troubles to capitalism
as social system, to say nothing about neoliberalism and neoliberal globalization. The latter
(as well as dollar hegemony) is under considerable stress even now. But here "doomers" were wrong
so often in the past, that there might be chance that this is not inevitable.
3. Shale gas production in the USA is unsustainable even more then shale oil production.
So the question is not if it declines, but when. The future decline (might be even Seneca
Cliff decline) is beyond reasonable doubt.
4. Growth of automation endangers the remaining jobs, even jobs in service sector .
Cashiers and waiters are now on the firing line. Wall Mart, Shop Rite, etc, are already using
automatic cashiers machines in some stores. Wall-Mart also uses automatic machines in back office
eliminating staff in "cash office".
Waiters might be more difficult task but orders and checkouts are computerized in many restaurants.
So the function is reduced to bringing food. So much for the last refuge of recent college graduates.
The successes in speech recognition are such that Microsoft now provides on the fly translation
in Skype. There are also instances of successful use of computer in medical diagnostics.
https://en.wikipedia.org/wiki/Computer-aided_diagnosis
IT will continue to be outsourced as profits are way too big for anything to stop this trend.
"... Someone needs to buy Paul Krugman a one way ticket to Camden and have him hang around the devastated post-industrial hell scape his policies helped create. ..."
"... Krugman should be temporarily barred from public discourse until he apologizes for pushing NAFTA and all the rest. Hundreds of millions of people were thrust into dire poverty because of the horrible free trade policies he and 99.9% of US economists pushed. ..."
"... Extremes meet: extreme protectionism is close to extreme neoliberal globalization in the level of devastation, that can occur. ..."
"... But please do not forget that Krugman is a neoliberal stooge and this is much worse then being protectionist. This is close to betrayal of the nation you live it, people you live with, if you ask me. ..."
"... To me academic neoliberals after 2008 are real "deplorables". And should be treated as such, despite his intellect. There not much honor in being an intellectual prostitute of financial oligarchy that rules the country. ..."
Economists are still oblivious to the devastation created by 40 years of free trade.
Someone needs to buy Paul Krugman a one way ticket to Camden and have him hang around the
devastated post-industrial hell scape his policies helped create.
Krugman should be temporarily barred from public discourse until he apologizes for pushing
NAFTA and all the rest. Hundreds of millions of people were thrust into dire poverty because of
the horrible free trade policies he and 99.9% of US economists pushed.
They have learned nothing and they have forgotten much.
Oh yea - bring on the tariffs which will lead to a massive appreciation of the dollar. Which in
turn will lead to massive reductions in US exports. I guess our new troll is short selling Boeing.
likbez -> pgl, -1
I tend to agree with you. Extremes meet: extreme protectionism is close to extreme neoliberal
globalization in the level of devastation, that can occur.
But please do not forget that Krugman is a neoliberal stooge and this is much worse then
being protectionist. This is close to betrayal of the nation you live it, people you live with,
if you ask me.
To me academic neoliberals after 2008 are real "deplorables". And should be treated as
such, despite his intellect. There not much honor in being an intellectual prostitute of financial
oligarchy that rules the country.
"You control the message, and the facts do not matter. "
Notable quotes:
"... That's funny. Neoliberals are closet Trotskyites and they will let you talk only is specially
designated reservations, which are irrelevant (or, more correctly, as long as they are irrelevant) for
swaying the public opinion. ..."
"... If you think they are for freedom of the press, you are simply delusional. They are for freedom
of the press for those who own it. ..."
"... Try to get dissenting views to MSM or academic magazines. Yes, they will not send you to GULAG,
but the problem is that ostracism works no less effectively. That the essence of "inverted totalitarism"
(another nickname for neoliberalism). You can substitute physical repression used in classic totalitarism
with indirect suppression of dissenting opinions with the same, or even better results. Note that even
the term "neoliberalism" is effectively censored and not used by MSM. ..."
"... And the resulting level of suppressing of opposition (which is the essence of censorship) is
on the level that would make the USSR censors blush. And if EconomistView gets too close to anti-neoliberal
platform it will instantly find itself in the lists like PropOrNot ..."
"Then of course, it is easy to attack the neoliberals, they'll actually let you talk."
That's funny. Neoliberals are closet Trotskyites and they will let you talk only is specially
designated reservations, which are irrelevant (or, more correctly, as long as they are irrelevant)
for swaying the public opinion.
They are all adamant neo-McCarthyists, if you wish and will label you Putin stooge in no time
[, if you try to escape the reservation].
If you think they are for freedom of the press, you are simply delusional. They are for
freedom of the press for those who own it.
Try to get dissenting views to MSM or academic magazines. Yes, they will not send you to
GULAG, but the problem is that ostracism works no less effectively. That the essence of "inverted
totalitarism" (another nickname for neoliberalism). You can substitute physical repression used
in classic totalitarism with indirect suppression of dissenting opinions with the same, or even
better results. Note that even the term "neoliberalism" is effectively censored and not used by
MSM.
See Sheldon Wolin writings about this.
And the resulting level of suppressing of opposition (which is the essence of censorship)
is on the level that would make the USSR censors blush. And if EconomistView gets too close to
anti-neoliberal platform it will instantly find itself in the lists like PropOrNot
"... The Democratic Party as a Party (Sanders was an outlier) has nothing to do with "fair and equal
play for all". This is a party of soft neoliberals and it adheres to Washington consensus no less then
Republicans. https://en.wikipedia.org/wiki/Washington_Consensus ..."
"... If you read the key postulates it is clear that that they essentially behaved like an occupier
in this country. In this sense "Occupy Wall street" movement should actually be called "Liberation from
Wall Street occupation" movement. ..."
"... Bill Clinton realized that he can betray working class with impunity as "they have nowhere
to go" and will vote for Democrat anyway. In this sense Bill Clinton is a godfather of the right wing
nationalism in the USA. He sowed the "Teeth's of Dragon" and now we have, what we have. ..."
You guys should wake up and smell what country you live in. Here is a good place to start.
"Campaigning for president in 1980, Ronald Reagan told stories of Cadillac-driving "welfare
queens" and "strapping young bucks" buying T-bone steaks with food stamps. In trumpeting these
tales of welfare run amok, Reagan never needed to mention race, because he was blowing a dog
whistle: sending a message about racial minorities inaudible on one level, but clearly heard
on another. In doing so, he tapped into a long political tradition that started with George
Wallace and Richard Nixon, and is more relevant than ever in the age of the Tea Party and the
first black president.
In Dog Whistle Politics, Ian Haney L?pez offers a sweeping account of how politicians and
plutocrats deploy veiled racial appeals to persuade white voters to support policies that favor
the extremely rich yet threaten their own interests. Dog whistle appeals generate middle-class
enthusiasm for political candidates who promise to crack down on crime, curb undocumented immigration,
and protect the heartland against Islamic infiltration, but ultimately vote to slash taxes
for the rich, give corporations regulatory control over industry and financial markets, and
aggressively curtail social services. White voters, convinced by powerful interests that minorities
are their true enemies, fail to see the connection between the political agendas they support
and the surging wealth inequality that takes an increasing toll on their lives. The tactic
continues at full force, with the Republican Party using racial provocations to drum up enthusiasm
for weakening unions and public pensions, defunding public schools, and opposing health care
reform.
Rejecting any simple story of malevolent and obvious racism, Haney L?pez links as never
before the two central themes that dominate American politics today: the decline of the middle
class and the Republican Party's increasing reliance on white voters. Dog Whistle Politics
will generate a lively and much-needed debate about how racial politics has destabilized the
American middle class -- white and nonwhite members alike."
Reading the above posts I am reminded that in November there was ONE Election with TWO Results:
Electoral Vote for Donald Trump by the margin of 3 formerly Democratic Voting states Michigan,
Ohio, and Pennsylvania
Popular Vote for Hillary Clinton by over 2.8 Million
The Democratic Party and its Candidates OBVIOUSLY need to get more votes in the Electoral States
that they lost in 2016, not change what they stand for, the principles of fair and equal play
for all.
And, in the 3 States that turned the Electoral Vote in Trump's favor and against Hillary, all
that is needed are 125,000 or more votes, probably fewer, and the DEMS win the Electoral vote
big too.
It is not any more complex than that.
So how does the Democratic Party get more votes in those States?
PANDER to their voters by delivering on KISS, not talking about it.
That is create living wage jobs and not taking them away as the Republican Party of 'Free Trade'
and the Clinton Democratic Party 'Free Trade' Elites did.
Understand this: It is not the responsibility of the USA, or in its best interests, to create
jobs in other nations (Mexico, Japan, China, Canada, Israel, etc.) that do not create jobs in
the USA equivalently, especially if the gain is offset by costly overseas confrontations and involvements
that would not otherwise exist.
"The Democratic Party and its Candidates OBVIOUSLY need to get more votes in the Electoral
States that they lost in 2016, not change what they stand for, the principles of fair and equal
play for all. "
The Democratic Party as a Party (Sanders was an outlier) has nothing to do with "fair and
equal play for all". This is a party of soft neoliberals and it adheres to Washington consensus
no less then Republicans.
https://en.wikipedia.org/wiki/Washington_Consensus
If you read the key postulates it is clear that that they essentially behaved like an occupier
in this country. In this sense "Occupy Wall street" movement should actually be called "Liberation
from Wall Street occupation" movement.
Bill Clinton realized that he can betray working class with impunity as "they have nowhere
to go" and will vote for Democrat anyway. In this sense Bill Clinton is a godfather of the right
wing nationalism in the USA. He sowed the "Teeth's of Dragon" and now we have, what we have.
Progressives have already homed in on Republican efforts to privatize Medicare as
one of the major domestic political battles of 2017. If Donald J. Trump decides
to gut the basic guarantee of Medicare and revamp its structure so that it hurts
older and sicker people, Democrats must and will
push back hard
. But if Democrats focus too much of their attention on
Medicare, they may inadvertently assist the quieter war on Medicaid - one that
could deny health benefits to millions of children, seniors, working families and
people with disabilities.
Of the two battles, the Republican effort to dismantle Medicaid is more certain.
Neither Mr. Trump nor Senate Republicans may have the stomach to fully own the
political risks of Medicare privatization. But not only have Speaker Paul D. Ryan
and Tom Price, Mr. Trump's choice for secretary of health and human services,
made proposals to deeply cut Medicaid through arbitrary block grants or "per
capita caps," during the campaign, Mr. Trump has also proposed block grants.
If Mr. Trump chooses to oppose his party's Medicare proposals while pushing
unprecedented cuts to older people and working families in other vital safety-net
programs, it would play into what seems to be an emerging strategy of his: to
publicly fight a few select or symbolic populist battles in order to mask an
overall economic and fiscal strategy that showers benefits on the most well-off
at the expense of tens of millions of Americans.
Without an intense focus by progressives on the widespread benefits of Medicaid
and its efficiency, it will be too easy for Mr. Trump to market the false notion
that Medicaid is a bloated, wasteful program and that such financing caps are
means simply to give states more flexibility while "slowing growth." Medicaid's
actual spending per beneficiary has, on average, grown about 3 percentage points
less each year than it has for those with private health insurance,
according to the Center on Budget and Policy Priorities
- a long-term trend
that is projected to continue. The arbitrary spending caps proposed by Mr. Price
and Mr. Ryan would cut Medicaid to the bone, leaving no alternative for states
but to impose harsh cuts in benefits and coverage.
Mr. Price's own proposal, which he presented as the chairman of the House budget
committee, would cut Medicaid by about $1 trillion over the next decade. This is on
top of the reduction that would result from the repeal of the Affordable Care Act,
which both Mr. Trump and Republican leaders have championed. Together, full repeal
and block granting would cut Medicaid and the Children's Health Insurance Program
funding by about $2.1 trillion over the next 10 years - a 40 percent cut.
Photo
Tom Price, President-elect Trump's choice for secretary of
health and human services, has made proposals to deeply cut Medicaid.
Credit
Joshua Roberts/Reuters
Even without counting the repeal of the A.C.A. coverage expansion, the Price plan
would cut remaining federal Medicaid spending by $169 billion - or one-third - by the
10th year of his proposal, with the reductions growing more severe thereafter. The
Henry J. Kaiser Family Foundation
estimated
that a similar Medicaid block grant proposed by Mr. Ryan in 2012 would
lead to 14 million to 21 million Americans' losing their Medicaid coverage by the
10th year, and that is on top of the 13 million who would lose Medicaid or children's
insurance program coverage under an A.C.A. repeal.
The emerging Republican plan to "repeal, delay and replace" the A.C.A. seeks to
further camouflage these harmful cuts. Current Republican plans to eliminate the
marketplace subsidies and A.C.A. Medicaid expansion in 2019 would create a health
care cliff where all of the Medicaid funds and subsidies for the A.C.A. expansion
would simply disappear and 30 million people would lose their health care.
In the face of such a manufactured crisis, the Trump administration could cynically
claim to be increasing Medicaid funding by offering governors a small fraction of the
existing A.C.A. expansion back as part of a block grant. No one should be deceived.
Maintaining a small fraction of the current Medicaid expansion within a tightly
constrained block grant is not an increase.
Some might whisper that these cuts would be harder to beat back because their impact
would fall on those with the least political power. Sweeping cuts to Medicaid would
hurt tens of millions of low-income and middle-income families who had a family
member with a disability or were in need of nursing home care. About 60 percent of
the costs of traditional Medicaid come from providing nursing home care and other
types of care for the elderly and those with disabilities.
While Republicans resist characterizations of their block grant or cap proposals as
tearing away health benefits from children, older people in nursing homes or
middle-class families heroically coping with children with serious disabilities, the
tyranny of the math does not allow for any other conclusion. If one tried to cut off
all 30 million poor kids now enrolled in Medicaid, it would save 19 percent of the
program's spending. Among the Medicaid programs at greatest risk would be those
optional state programs that seek to help middle-income families who become
"medically needy" because of the costs of having a child with a serious disability
like autism or Down syndrome.
Democrats at all levels of government must aggressively communicate the degree to
which these anodyne-sounding proposals would lead to an assault on health care for
those in nursing homes and for working families straining to deal with a serious
disability, as well as for the poorest Americans. With many Republican governors and
local hospitals also likely to be victimized by the proposals of Mr. Ryan and Mr.
Price, this fight can be both morally right and
politically powerful
. Republicans hold only a slight majority in the Senate. It
would take only three Republican senators thinking twice about the wisdom of block
grants and per capita caps to put a halt to the coming war on Medicaid.
Gene B. Sperling was director of the National Economic Council from 1996 to
2001 and from 2011 until 2014.
"... By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Originally published at Wolf Street ..."
"... should head down ..."
"... not ..."
"... A population of less than 100 million in 1945 became more than 200 million in 1976 and over 320 million in 2016! Tripling your population in 70 years is a really bad idea. At this rate over a billion US citizens will exist in 2086. ..."
"... 'Merika is the third most populous nation in the world followed by Indonesia, Brazil, Pakistan and Nigeria. ..."
By Wolf Richter, a San Francisco
based executive, entrepreneur, start up specialist, and author, with extensive
international work experience. Originally published at
Wolf Street
Hardly any improvement for individuals since the Great Recession.
When Donald Trump campaigned on how "terrible" the jobs situation was, while
the Obama Administration touted the jobs growth since the employment bottom of
the Great Recession in 2010, it sounded like they were talking about two
entirely different economies at different ends of the world. But they weren't.
Statistically speaking, they were both right.
Since 2011, the US economy created 14.6 million "nonfarm payrolls" as
defined by the Bureau of Labor Statistics – whether or not they're low-wage or
less than full-time jobs. But for individuals, this job market, statistically
speaking, looks almost as tough as it was during the Great Recession.
Obviously, a lot of people have found jobs, and some of them have found good
jobs since then, and there are a ton of "job openings." But the Census Bureau
just told us why the job market is still, to use Trump's term, "terrible" when
it released its
population estimates
for 2016, just before clocking out for the holidays.
According to this report: From the beginning of 2010 – in terms of jobs, the
darkest days of the Great Recession – through December 2016, the US "resident
population" (not counting overseas-stationed military personnel) grew by 16
million people.
But since the beginning of 2010 through November 2016, nonfarm payrolls grew
by only 13.8 million.
Note that in 2010, nonfarm payrolls declined by 900,000, after having
plunged by over 5 million in 2009. The first year with growth in nonfarm
payrolls was 2011.
The chart below shows this peculiar relationship between the "resident
population" of the US (top green line) and nonfarm payrolls (bottom blue line).
Both rose. But the bottom line (nonfarm payrolls) didn't rise nearly enough.
The difference between the two is the number of people that are
not
on nonfarm payrolls. They might be students, unemployed, retirees, or working
in a job that the "nonfarm payrolls" do not capture (more on that in a moment).
This is reflected by the red line, whose slope
should head down
in an
economy where jobs grow faster than the population:
For the first five years of this seven-year period, the number of people
not
occupying a job as captured by nonfarm payroll data, kept growing (red
numbers), even as the touted jobs growth was kicking in. Why? Because
population growth outpaced jobs growth over the five years from 2010 through
2014.
Only in 2015 and 2016 has growth in "nonfarm payrolls" edged past population
growth. Those were the only two years since the Great Recession when people on
an individual basis actually had improving chances of getting a job.
The nonfarm payrolls data is not a complete measure of the US jobs
situation. According to the
Bureau of Labor Statistics
, it excludes "proprietors, the unincorporated
self-employed, unpaid volunteer or family employees, farm employees, and
domestic employees. It also excludes military personnel, and employees of a big
part of the intelligence community, including the CIA, the NSA, the National
Imagery and Mapping Agency, and the Defense Intelligence Agency.
There are many folks who'd contend that this population growth is mostly
young people who are not yet in the work force and old people who refuse to
die, and that for working age people (say, 18 to 65), the jobs growth has been
phenomenal.
But that's not the case. According to the Census report, in 2016, the
percentage of people 18 and over grew to 249.5 million, making up 77.2% of the
total US population, up from 76.8% in 2015 (247.3 million), and up from 76.2%
in 2010! The millennials have moved into adulthood, elbowing each other while
scrambling for jobs.
And boomers are not retiring from the working life. Why should they. Many of
them are fit and don't want to sit around bored, and many of them
have to
work because they can't afford to quit working, even if they would like to. So
the number of workers 65+ has soared 45% since the end of 2009, from 6.2
million to 9.0 million. So now there are nearly 3 million more of them on
nonfarm payrolls than there had been in 2010:
The natural growth rate of the population (births minus deaths) has been
declining for years. In 2016, it dropped to 0.38%, a new low. The growth rate
from immigration, which fluctuates somewhat with the economy, edged down to
0.31%. So total population growth dropped to a new low of 0.69%. Of note: the
natural growth rate via births won't impact the labor force until the babies
are young adults. But the vast majority of new immigrants are of working age,
and they add to the labor force immediately.
So the number of jobs since 2010 has risen by 13.8 million – which the
economists are endlessly touting, along with the even better sounding 14.8
million since 2011. But the population has increased by 16 million since 2010.
Most of them are people of working age, jostling for position to grab one of
these jobs that would put them on the nonfarm payrolls. And this is why the job
market for many individuals is "terrible," as Trump said.
Lambert Strether has been blogging, managing online communities, and
doing system administration 24/7 since 2003, in Drupal and WordPress.
Besides political economy and the political scene, he blogs about rhetoric,
software engineering, permaculture, history, literature, local politics,
international travel, food, and fixing stuff around the house. The nom de
plume "Lambert Strether" comes from Henry James's The Ambassadors: "Live all
you can. It's a mistake not to." You can follow him on Twitter at @lambertstrether.
http://www.correntewire.com
KK
,
December 26, 2016 at 5:55 am
A population of less than 100 million in 1945 became more than 200
million in 1976 and over 320 million in 2016! Tripling your population in 70
years is a really bad idea. At this rate over a billion US citizens will exist
in 2086.
There are resource limits to growth. And a car, house, vacation,
pension, healthcare,and large family will cease to be possible for all or even
the majority. Study how the average Indian or Chinese family live and that
albeit with a few bits of technology is the future.
A lot of "pro-natalists" are religious fundamentalists who do actually
see the population/resource crunch coming for which they are trying to
stack the numbers on their team.
But I think most of the "pro-natalists" are rich people who, more
than anything else, want cheap labor. And there is no better way to
get cheap labor than to force population growth ever higher.
We are not importing foreign workers because the natives refuse to
breed 'enough' children. The natives (of all races) are limiting their
family sizes because they are worried about having more children than
they can support, just like they did in the great depression. Left to
themselves, that would start to tighten up the labor market and
produce powerful forces raising wages. But not if we keep forcing ever
more foreign workers into the labor pool. Which is of course the whole
idea.
'Merika is the third most populous nation in the
world followed by Indonesia, Brazil, Pakistan and Nigeria.
Seems to be a mind-jarring fat to most when I bring it up .
Alot of poorer countries in the "developing world" ensured they stayed
poorer by letting their population growth get out of control. A big, if not
the main, reason for China's economic success since 1975 was in getting its
population growth under control, that is a big reason for the contrast
between China and India.
Unlike, for example, Japan, the rulers of the United States decided to
emulate the developing countries that let their populations expand too much,
importing people from the developing world to get the job done.
The planet can take care of itself. I think you mean "the key to saving
ourselves." Also I think
consumption patterns
of the
"global North" are more of a problem than simply population.
That resident population number appears to include under-16-year-olds who
are in most cases not looking for employment. I have no idea how that number
has changed. Ditto, it includes the voluntarily retired.
This article appears to be another argument for immigration. I am very much
a progressive liberal, excepting the standard progressive immigration stance
that more is better and that illegal immigration is o.k.
What would our job market look like without immigrants, even just legal
immigrants?
Between 1970 and 2014, the percentage of foreign-born workers in the
civilian labor force more than tripled, from 5 percent to 17 percent. In 2014
immigrants accounted for 17% of the work force; 27.6 million out of 159.5
million. What is that number was cut in half?
The number of US unemployed peaked in 2009 at 15,352,000. Today its
7,400,000 (if you believe the official numbers).
That means if we had cut immigration by just 30% there would be 0
unemployment. Of course this is a simplistic analysis but it is interesting to
compare the two. And of course with near 0 unemployment wages would be pushed
up.
No wonder the powers that be keep yammering about immigration but never do
anything about it. More people in the country willing to work for less money
means increased profits for the rich.
Did you not read the article or simply fail to grasp it? Richter points
out that the population has grown faster than the number of jobs and also
that immigration is the largest part of that pop. growth (especially the
adult population). He nowhere makes an argument for more illegal (or legal)
immigration.
On immigration, how about we ask ourselves why it is that so many people
are immigrating here and what we might do to discourage them? For instance,
a kind of Marshall Plan for Central and South America would probably go a
long way, as most people prefer to stay where they are from, if they can
make a reasonable life there.
Call me crazy, but considering that the Clinton campaign had access to a
certain portion of this information, their inability to understand the appeal
of Sanders and Trump is clearly delusional.
Certainly the latest data just came out, but some of this about the period
until 2014 and even a little after had to be out there. They had to know that
until recently there really were not enough jobs to go around, and that there
was a good chance that any gains in the last year or so were not enough to
remotely cover the deficit up to that point. I get they might not have had the
information that beyond not being enough most of the jobs created were part
time and benefit free. That doesn't explain not seeing and getting that most
Americans have seen little or no recovery.
It appears the DLC Democratic Party must be similar to that narrative
driven NY Times environment, you only survive if you embrace the narrative even
as the success of the enterprise you are apart loses more and more.
"It is difficult to get a man to understand something, when his salary
depends on his not understanding it."
― Upton Sinclair
All career elected politicians on both sides of the aisle are paid to not
understand the jobs problem by donors with very large wallets who do not
want the jobs problem solved. Follow the money. Who wants cheap labor and
what's the best way to get it if you can't offshore operations?
We cannot rebuild the DLC or any leftist party until we figure out how to
fund campaigns without donor money that is interested in maintaining the
status quo.
I will comment elsewhere, but I keep on hearing arguments on the lines
that if only Hillary Clinton had understood the problems of the white
working class she would have won or something along these lines.
The Trump and Sanders campaigns were protest vehicles -- and there were
precursors in previous elections -- over how the country has been run for
the past several decades. Since 1981 either the Clintons or the Bushes have
either lived in the White House or held really high ranking positions in the
US government.
Members of neither family can credibly run against globalization (or
"invade the world/ invite the world" as Steve Sailer puts it) or really
other major policies pursued by the US government since the 1980s. They own
it.
They have to run on a globalization platform. Hillary Clinton in fact did
surprisingly well at the polls, considering this.
There can be types of verbal Marshall Plans, too. Some percentage of the US
transient population has self-deported already, although likely not enough to
upset the temporary Obama Rush of 1,500+ per day streaming in to claim amnesty
prior to January 20th. Announce that undocumented entrants will be turned back,
instead of throwing benefits at them, and that will help stem the human tide.
Supplement that with specific policies to aid and abet Mexico and Central
American governments in their internal and border control efforts to stop the
human tide further south. Publicize those efforts and stick to them.
Both policies would change the dynamic and would allow some degree of US
control over its own population growth. Then put in place specific, actionable
steps to identify and facilitate thoughtful population growth to meet US needs
and to allow for legitimate humanitarian relief instead of bleeding heart
efforts that externalized ill-considered policies.
(reuters.com)
241
Posted by
BeauHD
on Tuesday December 13, 2016 @10:30PM
from the
lick-and-a-promise
dept.
IBM Chief Executive Ginni Rometty has
pledged to
"hire about 25,000 professionals in the next four years in the United States
"
as she and other technology executives prepared to meet with President-elect
Donald Trump on Wednesday. Reuters reports:
IBM had nearly 378,000 employees
at the end of 2015, according to the company's annual report. While the firm
does not break out staff numbers by country, a review of government filings
suggests IBM's U.S. workforce declined in each of the five years through 2015.
When asked why IBM planned to increase its U.S. workforce after those job cuts,
company spokesman Ian Colley said in an email that Rometty had laid out the
reasons in her USA Today piece. Her article did not acknowledge that IBM had
cut its U.S. workforce, although it called on Congress to quickly update the
Perkins Career and Technical Education Act that governs federal support for
vocational education. "We are hiring because the nature of work is evolving,"
she said. "As industries from manufacturing to agriculture are reshaped by data
science and cloud computing, jobs are being created that demand new skills --
which in turn requires new approaches to education, training and recruiting."
She said IBM intended to invest $1 billion in the training and development of
U.S. employees over the next four years. Pratt declined to say if that
represented an increase over spending in the prior four years.
Economists might also wince just a bit... Dickens writes: "I know that the unreasonable
disciples of a reasonable school, demented disciples who push arithmetic and political economy
beyond all bounds of sense (not to speak of such a weakness as humanity), and hold them to be
all-sufficient for every case, can easily prove that such things ought to be, and that no man has
any business to mind them. Without disparaging those indispensable sciences in their sanity, I
utterly renounce and abominate them in their insanity ..." Here's Dickens:
Economists might also wince just a bit... Dickens writes:
"I know that the unreasonable disciples of a reasonable
school, demented disciples who push arithmetic and
political economy beyond all bounds of sense (not to speak
of such a weakness as humanity), and hold them to be
all-sufficient for every case, can easily prove that such
things ought to be, and that no man has any business to
mind them. Without disparaging those indispensable
sciences in their sanity, I utterly renounce and abominate
them in their insanity ..."
This is not about insanity,
this is about greed.
Reading this I am thinking that Hyman Minsky was a
scientist, while Milton Friedman especially just before
and after "Capitalism and Freedom" was a well-paid
intellectual prostitute of financial oligarchy.
"... Popular pre-financial crisis versions of the model excluded banking and finance, taking as given that finance and asset prices were merely a by-product of the real economy. ..."
"... The centre-piece of Paul Romer's scathing attack on these models is on the 'pretence of knowledge' ..."
"... he is critical of the incredible identifying assumptions and 'pretence of knowledge' in both Bayesian estimation and the calibration of parameters in DSGE models. ..."
"... A further symptom of the 'pretence of knowledge' is the assumed 'knowledge' that these parameters are constant over time. A milder critique by Olivier Blanchard (2016) points to a number of failings of DSGE models and recommends greater openness to more eclectic approaches. ..."
"... The equation is based on the assumption of inter-temporal optimising by consumers and that every consumer faces the same linear period-to-period budget constraint, linking income, wealth, and consumption. ..."
"... In the basic form, consumption every period equals permanent non-property income plus permanent property income defined as the real interest rate times the stock of wealth held by consumers at the beginning of each period. Permanent non-property income converts the variable flow of labour and transfer incomes a consumer expects over a lifetime into an amount equally distributed over time. ..."
"... However, consumers actually face idiosyncratic (household-specific) and uninsurable income uncertainty, and uncertainty interacts with credit or liquidity constraints. ..."
"... The 2000 Commodity Futures Modernization Act (CFMA) made derivatives enforceable throughout the US with priority ahead of claims by others (e.g. workers) in bankruptcy. ..."
"... 2004 SEC decision to ease capital requirements on investment banks increased gearing to what turned out to be dangerous levels ..."
"... Similar measures to lower required capital on investment grade PMBS increased leverage at commercial banks. These changes occurred in the political context of pressure to extend credit to poor. ..."
"... The importance of debt was highlighted in the debt-deflation theory of the Great Depression of Fisher (1933). 5 Briefly summarised, his story is that when credit availability expands, it raises spending, debt, and asset prices; irrational exuberance raises prices to vulnerable levels, given leverage; negative shocks can then cause falls in asset prices, increased bad debt, a credit crunch, and a rise in unemployment. ..."
"... In the financial accelerator feedback loops that operated in the US sub-prime crisis, falls in house prices increased bad loans and impaired the ability of banks to extend credit. As a result, household spending and residential investment fell, increasing unemployment and reducing incomes, feeding back further into lower asset prices and credit supply. ..."
"... The transmission mechanism that operated via consumption was poorly represented by the Federal Reserve's FRB-US model and similar models elsewhere. ..."
"... Reminds me of a young poseur at engineering school, who exclaimed during a group study session, "I've got it all jocked out. Now I just need the equations!" ..."
"... I have been aware of that for a few years now, but I doubt that one person in a hundred (or a thousand) knows when they listen to some economist on a news program or a business channel that the person speaking thinks that how much debt people have does not substantively affect their spending. ..."
"... If I used or invented an econ model that left out the "consumer", and modeled it with a "consumption agent object" having a single independent input variable being the Fed zero term, zero risk interest rate, I'd be too embarrassed to admit it. I would probably just very quietly make a career change into one of the softer sciences. Maybe writing fictional romance novels, or some such thing. ..."
"... The worst thing about these types of mea culpas from the mainstream is the cited criticisms from other mainstream economists only. It can only be a valid criticism if it was published in a mainstream journal ..."
"... That 'political pressure' turned out to be the bait and switch for a system that shifted power via debt creation. ..."
"... What we have not yet come to terms with are the implications of David Graeber's anthropological insights: how does debt affect social relationships, alter social norms, and affect relationships among individuals? ..."
"... Debt is a form of power, but by failing to factor this into their equations, the Central Bankers are missing the social, political, and cultural consequences of the profound shifts in 'credit market architecture'. In many respects, this is not about 'money'; it's about power. ..."
"... The Central Bankers' models can include all the parameters they can dream up, but until someone starts thinking more clearly about the role and function of money, and the way that 'different kinds of money' create 'different kinds of social relationships', we are all in a world of hurt. ..."
"... Now, maybe it is just a coincidence, but it is hard for me not to notice that the explosion in consumer credit matches up nicely with the rise in inequality. ..."
"... " .. debt does not make society as a whole poorer: one person's debt is another person's asset. So total wealth is unaffected by the amount of debt out there. This is, strictly speaking true only for the world economy as a whole .. " Paul Krugman "End this Depression Now". ..."
By John Muellbauer, Professor of Economics, Oxford University. Originally published at
VoxEU
The failure of the New Keynesian dynamic stochastic general equilibrium models to capture interactions
of finance and the real economy has been widely recognised since the Global Crisis. This column argues
that the flaws in these models stem from unrealistic micro-foundations for household behaviour and
from wrongly assuming that aggregate behaviour mimics a fully informed 'representative agent'. Rather
than 'one-size-fits-all' monetary and macroprudential policy, institutional differences between countries
imply major differences for monetary policy transmission and policy.
The New Keynesian DSGE models that dominated the macroeconomic profession and central bank thinking
for the last two decades were based on several principles.
The first was formal derivation from micro-foundations, assuming optimising behaviour of consumers
and firms with rational or 'model-consistent' expectations of future conditions. For such derivation
to result in a tractable model, it was assumed that the behaviour of firms and of consumers corresponded
to that of a 'representative' firm and a 'representative' consumer. In turn, this entailed the
absence of necessarily heterogeneous credit or liquidity constraints. Another important assumption
to obtain tractable solutions was that of a stable long-run equilibrium trend path for the economy.
If the economy was never far from such a path, the role of uncertainty would necessarily be limited.
Popular pre-financial crisis versions of the model excluded banking and finance, taking as
given that finance and asset prices were merely a by-product of the real economy.
Second, a competitive economy was assumed but with a number of distortions, including nominal
rigidities – sluggish price adjustment – and monopolistic competition. This is what distinguished
New Keynesian DSGE models from the general equilibrium real business cycle (RBC) models that preceded
them. It extended the range of stochastic shocks that could disturb the economy from the productivity
or taste shocks of the RBC model. Finally, while some models calibrated (assumed) values of the
parameters, where the parameters were estimated, Bayesian system-wide estimation was used, imposing
substantial amounts of prior constraints on parameter values deemed 'reasonable'.
The 'Pretence of Knowledge'
The centre-piece of Paul Romer's scathing attack on these models is on the 'pretence of knowledge'
(Romer 2016); echoing Caballero (2010), he is critical of the incredible identifying assumptions
and 'pretence of knowledge' in both Bayesian estimation and the calibration of parameters in DSGE
models. 1
A further symptom of the 'pretence of knowledge' is the assumed 'knowledge' that these parameters
are constant over time. A milder critique by Olivier Blanchard (2016) points to a number of failings
of DSGE models and recommends greater openness to more eclectic approaches.
Unrealistic Micro-Foundations
As explained in Muellbauer (2016), an even deeper problem, not seriously addressed by Romer or
Blanchard, lies in the unrealistic micro-foundations for the behaviour of households embodied in
the 'rational expectations permanent income' model of consumption, an integral component of these
DSGE models. Consumption is fundamental to macroeconomics both in DSGE models and in the consumption
functions of general equilibrium macro-econometric models such as the Federal Reserve's FRB-US. At
the core of representative agent DSGE models is the Euler equation for consumption, popularised in
the highly influential paper by Hall (1978). It connects the present with the future, and is essential
to the iterative forward solutions of these models. The equation is based on the assumption of
inter-temporal optimising by consumers and that every consumer faces the same linear period-to-period
budget constraint, linking income, wealth, and consumption. Maximising expected life-time utility
subject to the constraint results in the optimality condition that links expected marginal utility
in the different periods. Under approximate 'certainty equivalence', this translates into a simple
relationship between consumption at time t and planned consumption at t +1 and in periods
further into the future.
Under these simplifying assumptions, the rational expectations permanent income consumption function
can be derived. In the basic form, consumption every period equals permanent non-property income
plus permanent property income defined as the real interest rate times the stock of wealth held by
consumers at the beginning of each period. Permanent non-property income converts the variable flow
of labour and transfer incomes a consumer expects over a lifetime into an amount equally distributed
over time.
However, consumers actually face idiosyncratic (household-specific) and uninsurable income
uncertainty, and uncertainty interacts with credit or liquidity constraints. The asymmetric
information revolution in economics in the 1970s for which Akerlof, Spence and Stiglitz shared the
Nobel prize explains this economic environment. Research by Deaton (1991,1992), 2 several
papers by Carroll (1992, 2000, 2001, 2014), Ayigari (1994), and a new generation of heterogeneous
agent models (e.g. Kaplan et al. 2016) imply that household horizons then tend to be both heterogeneous
and shorter – with 'hand-to-mouth' behaviour even by quite wealthy households, contradicting the
textbook permanent income model, and hence DSGE models. A second reason for the failure of these
DSGE models is that aggregate behaviour does not follow that of a 'representative agent'. Kaplan
et al. (2016) show that, with these better micro-foundations, quite different implications follow
for monetary policy than in the New Keynesian DSGE models. A third reason is that structural breaks,
as shown by Hendry and Mizon (2014), and radical uncertainty further invalidate DSGE models, illustrated
by the failure of the Bank of England's DSGE model both during and after the 2008-9 crisis (Fawcett
et al. 2015). The failure of the representative agent Euler equation to fit aggregate data 3
is further empirical evidence against the assumptions underlying the DSGE models, while evidence
on financial illiteracy (Lusardi 2016) is a problem for the assumption that all consumers optimise.
The Evolving Credit Market Architecture
Of the structural changes, the evolution and revolution of credit market architecture was the
single most important. In the US, credit card ownership and instalment credit spread between the
1960s and the 2000s; the government-sponsored enterprises – Fannie Mae and Freddie Mac – were recast
in the 1970s to underwrite mortgages; interest rate ceilings were lifted in the early 1980s; and
falling IT costs transformed payment and credit screening systems in the 1980s and 1990s. More revolutionary
was the expansion of sub-prime mortgages in the 2000s, driven by rise of private label securitisation
backed by credit default obligations (CDOs) and swaps.
The 2000 Commodity Futures Modernization Act (CFMA) made derivatives enforceable throughout
the US with priority ahead of claims by others (e.g. workers) in bankruptcy. This permitted
derivative enhancements for private label mortgage-backed securities (PMBS) so that they could be
sold on as highly rated investment grade securities. A second regulatory change was the deregulation
of banks and investment banks. In particular, the 2004 SEC decision to ease capital requirements
on investment banks increased gearing to what turned out to be dangerous levels and further
boosted PMBS, Duca et al (2016). Similar measures to lower required capital on investment grade
PMBS increased leverage at commercial banks. These changes occurred in the political context of pressure
to extend credit to poor.
The Importance of Debt
A fourth reason for the failure of the New Keynesian DSGE models, linking closely with the previous,
is the omission of debt and household balance sheets more generally, which are crucial for understanding
consumption and macroeconomic fluctuations. Some central banks did not abandon their large non-DSGE
econometric policy models, but these were also defective in that they too relied on the representative
agent permanent income hypothesis which ignored shifts in credit constraints and mistakenly lumped
all elements of household balance sheets, debt, liquid assets, illiquid financial assets (including
pension assets) and housing wealth into a single net worth measure of wealth. 4 Because
housing is a consumption good as well as an asset, consumption responds differently to a rise in
housing wealth than to an increase in financial wealth (see Aron et al. 2012). Second, different
assets have different degrees of 'spendability'. It is indisputable that cash is more spendable than
pension or stock market wealth, the latter being subject to asset price uncertainty and access restrictions
or trading costs. This suggests estimating separate marginal propensities to spend out of liquid
and illiquid financial assets. Third, the marginal effect of debt on spending is unlikely just to
be minus that of either illiquid financial or housing wealth. The reason is that debt is not subject
to price uncertainty and it has long-term servicing and default risk implications, with typically
highly adverse consequences.
The importance of debt was highlighted in the debt-deflation theory of the Great Depression
of Fisher (1933). 5 Briefly summarised, his story is that when credit availability expands,
it raises spending, debt, and asset prices; irrational exuberance raises prices to vulnerable levels,
given leverage; negative shocks can then cause falls in asset prices, increased bad debt, a credit
crunch, and a rise in unemployment.
In the 1980s and early 1990s, boom-busts in Norway, Finland, Sweden, and the UK followed this
pattern. In the financial accelerator feedback loops that operated in the US sub-prime crisis,
falls in house prices increased bad loans and impaired the ability of banks to extend credit. As
a result, household spending and residential investment fell, increasing unemployment and reducing
incomes, feeding back further into lower asset prices and credit supply.
The transmission mechanism that operated via consumption was poorly represented by the Federal
Reserve's FRB-US model and similar models elsewhere. A more relevant consumption function for
modelling the financial accelerator is needed, modifying the permanent income model with shorter
time horizons, 6 incorporating important shifts in credit lending conditions, and disaggregating
household balance sheets into liquid and illiquid elements, debt and housing wealth.
Implications for Macroeconomic Policy Models
To take into account all the feedbacks, a macroeconomic policy model needs to explain asset prices
and the main components of household balance sheets, including debt and liquid assets. This is best
done in a system of equations including consumption, in which shifts in credit conditions – which
have system-wide consequences, sometimes interacting with other variables such as housing wealth
– are extracted as a latent variable. 7 The availability of home equity loans, which varies
over time and between countries – hardly available in the US of the 1970s or in contemporary Germany,
France or Japan – and the also the variable size of down-payments needed to obtain a mortgage, determine
whether increases in house prices increase (US and UK) or reduce (Germany and Japan) aggregate consumer
spending. This is one of the findings of research I review in Muellbauer (2016). Another important
finding is that a rise in interest rates has different effects on aggregate consumer spending depending
on the nature of household balance sheets. Japan and Germany differ radically from the US and the
UK, with far higher bank and saving deposits and lower household debt levels so that lower interest
rates reduce consumer spending. A crucial implication of these two findings is that monetary policy
transmission via the household sector differs radically between countries – it is far more effective
in the US and UK, and even counterproductive in Japan (see Muellbauer and Murata 2011).
Such models, building in disaggregated balance sheets and the shifting, interactive role of credit
conditions, have many benefits: better interpretations of data on credit growth and asset prices
helpful for developing early warning indicators of financial crises; better understandings of long-run
trends in saving rates and asset prices; and insights into transmission for monetary and macro-prudential
policy. Approximate consistency with good theory following the information economics revolution of
the 1970s is better than the exact consistency of the New Keynesian DSGE model with bad theory that
makes incredible assumptions about agents' behaviour and the economy. Repairing central bank policy
models to make them more relevant and more consistent with the qualitative conclusions of the better
micro-foundations outlined above is now an urgent task.
Endnotes
[1] Part of the problem of identification is that the DSGE models throw away long-run information.
They do this by removing long-run trends with the Hodrick-Prescott filter, or linear time trends
specific to each variable. Identification, which rests on available information, then becomes more
difficult, and necessitates 'incredible assumptions'. Often, impulse response functions tracing out
the dynamic response of the modelled economy to shocks are highly sensitive to the way the data have
been pre-filtered.
[3] See Campbell and Mankiw (1989, 1990) and for even more powerful evidence from the UK, US and
Japan; Muellbauer (2010); and micro-evidence from Shea (1995).
[4] Net worth is defined as liquid assets minus mortgage and non-mortgage debt plus illiquid financial
assets plus housing assets, and this assumes that the coefficients are all the same.
[5] In recent years, several empirical contributions have recognised the importance of the mechanisms
described by Fisher (1933). Mian and Sufi (2014) have provided extensive micro-economic evidence
for the role of credit shifts in the US sub-prime crisis and the constraining effect of high household
debt levels. Focusing on macro-data, Turner (2015) has analysed the role of debt internationally
with more general mechanisms, as well as in explaining the poor recovery from the global financial
crisis. Jorda et al. (2016) have drawn attention to the increasing role of real estate collateral
in bank lending in most advanced countries and in financial crises.
[6] The FRB-US model does build in shorter average horizons than text-book permanent income. It
also has a commendable flexible treatment of expectations, Brayton et al (1997).
[7] The use of latent variables in macroeconomic modelling has a long vintage. Potential output,
and the "natural rate" of unemployment or of interest are often treated as latent variables, for
example in the FRB-US model and in Laubach and Williams (2003), and latent variables are often modelled
using state space methods. Flexible spline functions can achieve similar estimates. Interaction effects
of latent with other variables seem not to have been considered, however. We use the term 'latent
interactive variable equation system' (LIVES) to describe the resulting format.
'the omission of debt and household balance sheets more generally'
putting these eclownometric [sic] models at about the same level of technical sophistication
as the Newcomen steam engine of 1712, which achieved about one (1) percent thermodynamic efficiency.
'a macroeconomic policy model needs to explain asset prices and household balance sheets.
This is best done in a system of equations.'
Yes indeedy. Reminds me of a young poseur at engineering school, who exclaimed during a
group study session, "I've got it all jocked out. Now I just need the equations!"
' the omission of debt and household balance sheets more generally '
You beat me to it. I have been aware of that for a few years now, but I doubt that one
person in a hundred (or a thousand) knows when they listen to some economist on a news program
or a business channel that the person speaking thinks that how much debt people have does not
substantively affect their spending.
Really, 5 year olds describing how they get toys from Santa have a better grasp of economics
than most "economists"
If I used or invented an econ model that left out the "consumer", and modeled it with a
"consumption agent object" having a single independent input variable being the Fed zero term,
zero risk interest rate, I'd be too embarrassed to admit it. I would probably just very quietly
make a career change into one of the softer sciences. Maybe writing fictional romance novels,
or some such thing.
The worst thing about these types of mea culpas from the mainstream is the cited criticisms
from other mainstream economists only. It can only be a valid criticism if it was published in
a mainstream journal
Of the structural changes, the evolution and revolution of credit market architecture was
the single most important . In the US, credit card ownership and instalment credit spread between
the 1960s and the 2000s; the government-sponsored enterprises – Fannie Mae and Freddie Mac
– were recast in the 1970s to underwrite mortgages; interest rate ceilings were lifted in the
early 1980s; and falling IT costs transformed payment and credit screening systems in the 1980s
and 1990s. More revolutionary was the expansion of sub-prime mortgages in the 2000s, driven
by rise of private label securitisation backed by credit default obligations (CDOs) and swaps.
The 2000 Commodity Futures Modernization Act (CFMA) made derivatives enforceable throughout
the US with priority ahead of claims by others (e.g. workers) in bankruptcy. This permitted
derivative enhancements for private label mortgage-backed securities (PMBS) so that they could
be sold on as highly rated investment grade securities. A second regulatory change was the
deregulation of banks and investment banks . Similar measures to lower required capital on
investment grade PMBS increased leverage at commercial banks. These changes occurred in the
political context of pressure to extend credit to poor.
That 'political pressure' turned out to be the bait and switch for a system that shifted
power via debt creation.
What we have not yet come to terms with are the implications of David Graeber's anthropological
insights: how does debt affect social relationships, alter social norms, and affect relationships
among individuals?
Debt is a form of power, but by failing to factor this into their equations, the Central
Bankers are missing the social, political, and cultural consequences of the profound shifts in
'credit market architecture'. In many respects, this is not about 'money'; it's about power.
After Brexit, Trump, and the emerging upheaval in the EU, it's no longer enough to just 'build
better economic models'.
The Central Bankers' models can include all the parameters they can dream up, but until
someone starts thinking more clearly about the role and function of money, and the way that 'different
kinds of money' create 'different kinds of social relationships', we are all in a world of hurt.
At this point, Central Bankers should also ask themselves what happens - socially, personally
- when 'debt' (i.e., financialization) shifts from productivity to predation. That shift accelerated
from the 1970s, through the 1990s, into the 2000s.
Allowing anyone to charge interest that is usurious is the modern equivalent of turning a blind
eye to slavery.
By enabling outrageous interest, any government hands their hard working taxpayers over to
what is essentially unending servitude.
This destroys the political power of any government that engages in such blind stupidity.
Frankly, I'm astonished that it has taken so long for taxpayers to show signs of outrage and
revolt.
I think you have come up with a good insight – I very much agree its about power and not money.
Now, maybe it is just a coincidence, but it is hard for me not to notice that the explosion
in consumer credit matches up nicely with the rise in inequality.
And one other thing I would point out – it doesn't take usurious interest rates. If squillionaires
have access to unlimited, essentially cost free money in which the distributors of money are guaranteed
a profit, NO MATTER HOW MUCH THEY HAVE LOST, while the debts on non-squillionaires are collected
with fees, penalties, and to the last dime, than it doesn't matter if interest rates are essentially
zero.
Who gets bailed out is not due to logic or accounting that says that the banks' losses have
to be made whole, but not home owners – that is an ideology called economics .
I wouldn't downplay how cool the money part is, however. It's no fun making questionable, dodgy
loans unless you can charge fees up front and then sell the risk off to a large crowd of suckers.
Hence the importance of securitization and other "insurance" type derivatives. Then, if you run
out of willing suckers, you need a place to stuff it all, say pension plans and maybe even privatized
social security.
But if they allow this to happen in the real world, shouldn't the models have a piece reflecting
this behavior as well? Full circle of course, where the "consumer balance sheet" contains his
bad debt investment and savings assets* offsetting his liabilities. Then everyone would be more
like a bank?
* we still need to model bubble assets – like real estate and stocks. This sounds like it's
starting to get tricky!
"Another important finding is that a rise in interest rates has different effects on aggregate
consumer spending depending on the nature of household balance sheets".
This is a point that Warren Mosler and other MMTers have been making since the 1990s: depending
on circumstances, lower interest rates may well have contractionary effects and higher interest
rates may stimulate the economy.
The tool of choice to fight recessions and control inflation should thus be fiscal instead
of monetary policy.
Again, MMT had the analysis right long before mainstream theory started to admit there might
be serious problems with its favorite approaches (without ever giving appropriate credit to MMT,
of course!).
I think the Samarians knew that 5000 years ago. The Templars certainly knew it 1300 years ago.
And most definitely, "modern" European banking knew it 300 years ago.
of note to me is just how simplistic Keynesian statistics were/are, based on almost fantasy-assumptions.
And that was followed by Stiglitz et al's theory of asymmetric information models. And this above
does give us a dose of all the different variables involved in accurately analyzing an economy
– an economy that exploded with financialization, but nobody could keep up. As was proven in 2008.
It shouldn't be this confusing. "Repairing CB policies to make them more relevant is now an urgent
task." I think it is urgent enough to nationalize the banks and start over using a sovereign money
model.
Let's take an infinitely complex system (the economy) that is widely affected by human emotion,
then we'll leave out the mechanism by which money itself is created and distributed and then let's
"model" it.
We'll have two fans of Stalin's communist "command and control" economy (Keynes and Harry Dexter
White) pretend they could create a stable system based on Ph.Ds divining future economic and trade
flows and then "managing" them by price fixing the price of money. We'll set policy based on the
national conditions of the country with the global reserve currency despite the fact that 2/3
of that currency is outside that country. And with a system where trade never settles so massive
imbalances can persist indefinitely. Then let's put self-interested private institutions in charge
of all money creation and distribution .and we'll be sure their system operates in secret and
is never audited. When the system blows up we'll have these central overlords step in as uneconomic
buyers of assets with no consideration for asset quality or price, with no economic need to ever
sell, and with "unlimited" funds with which to buy more such assets. At the end we'll continue
to call the system "capitalism" and we'll continue to call the scrip "money" and hope nobody notices.
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 a credit bubble
on your hands (money = debt).
The mainstream are all trained in neoclassical economics which is spectacularly dismal.
Steve Keen sits outside the mainstream and saw the credit bubble forming in 2005, you can see
it in the
US money supply (money = debt).
In 2007, Ben Bernanke could see no problems ahead (dismal).
Irving Fisher looked at the debt inflated asset bubble after the 1929 crash when ideas that
markets reached stable equilibriums were beyond a joke.
Fisher developed a theory of economic crises called debt-deflation, which attributed the crises
to the bursting of a credit bubble.
Hyman Minsky came up with "financial instability hypothesis" in 1974 and Steve Keen carries
on with this work today. The theory is there outside the mainstream.
To understand the theory you have to understand money:
" .. debt does not make society as a whole poorer: one person's debt is another person's
asset. So total wealth is unaffected by the amount of debt out there. This is, strictly speaking
true only for the world economy as a whole .. " Paul Krugman "End this Depression Now".
This is the neoclassical economic view of money and it's totally wrong and will always leave
you blind to events like 2008, e.g.
1929 – US (margin lending into US stocks)
1989 – Japan (real estate)
2008 – US (real estate bubble leveraged up with derivatives for global contagion)
2010 – Ireland (real estate)
2012 – Spain (real estate)
2015 – China (margin lending into Chinese stocks)
Norway, Sweden, Canada and Australia have been letting their real estate bubbles inflate because
their mainstream economists and Central Bankers don't know what's coming.
Money and debt are opposite sides of the same coin.
If there is no debt there is no money.
Money is created by loans and destroyed by repayments of those loans.
Advanced:
"Where does money come from" available from Amazon
You need to understand how money works to understand why austerity doesn't work in balance
sheet recessions, the cause of the dire prediction from the IMF that I started with.
You can look at the money supply/debt levels (the same thing) to see how well the economy is
doing.
The money supply is contracting – the economy will be doing badly and the risk of this turning
into debt deflation is high, there is positive feedback tending to make the situation worse. Debt
repayments are larger than the new debt being taken out, the overall level of debt is decreasing.
The money supply is stable – this is stagnation, in the ideal world the money supply should
be growing at a steady pace.
The money supply is growing steadily – the ideal.
The money supply is growing very rapidly – you've got a credit bubble on your hands and the
"black swan" is near. The FED didn't understand money and debt before 2008 so they missed it.
Mario is still doing austerity now, no wonder those Italian banks are full of NPLs.
It's too late for Norway, Sweden, Canada and Australia's mainstream economists and Central
Bankers, but we need to get this dismal neoclassical economics updated before the whole world
descends into debt deflation.
It's almost here, there isn't much time.
Chuck another trillion in to keep this sinking ship afloat Central Bankers, we need to get
our technocrat elite up to speed.
Just look at the rate of change of the money supply/debt.
When it's rising rapidly you're in trouble as a credit bubble is forming.
A negative gradient is also a bad sign as it means your money supply is contracting, your economy
is in trouble and debt deflation could be on its way.
I am shocked, shocked I tell you, that a model with 'Equilibrium' right in the name fails to
predict crises. They could probably do better just aggregating results from a big multi-player
version of The Sims.
Better models should start from scratch, assuming non-linearity. They could take the Limits-to-Growth
system of nonlinear pde's as a starting point, for example, to get a good handle on long range
dynamics. Then add detailed submodels for money and debt, for different countries, for trade,
for different economic sectors, etc. Use realistic agent based models where standard models are
inadequate.
To do all, start by sending all those economics Ph.D.s back to school in other fields where
they know how to do modern applied mathematics.
"... Another thing: it will be clear how serious they take the allegations of Russian hacking, by how they address the problem of auditing electronic voting machines. ..."
"... If the 2018 elections aren't all with voter verified paper ballots, accompanied by random auditing and auditing all close elections, we know the accusations of Russian hacking were blatant lies. ..."
Another thing: it will be clear how serious they take the allegations of Russian hacking,
by how they address the problem of auditing electronic voting machines.
If the 2018 elections aren't all with voter verified paper ballots, accompanied by random auditing
and auditing all close elections, we know the accusations of Russian hacking were blatant lies.
"... Democratic party under Bill Clinton became yet another neoliberal party (soft neoliberals) and betrayed both organized labour and middle class in favour of financial oligarchy. ..."
"... The cynical calculation was that "they have nowhere to go" and will vote for Democrats anyway. And that was true up to and including election of "change we can believe in" guy. After this attempt of yet another Clinton-style "bait and switch" trick failed. ..."
"... Now it is clear that far right picked up large part of those votes. So in a way Bill Clinton is the godfather of the US far right renaissances. The same is true for Hillary: her "kick the can down the road" stance made victory of Trump possible (although it surprised me; I expected that neoliberals were still strong enough to push their candidate down the US people throat) ..."
"... Under "democrat" Obama the USA pursued imperial policy of creating global neoliberal empire. The foreign policy remained essentially unchanged. Neocons were partially replaced with "liberal interventionists" which is the same staff in a different bottle. This policy costs the US tremendous amount of money and it is probable that the US is going the way British empire went -- overextending itself. ..."
"... Regional currency blocks are now a reality and arrangements bypass the usage of US dollar if international trade are common. They are now in place between several large countries such as Russia and China and absolutely nothing can reverse this trend. So dollar became virtualized -- a kind of "conversion gauge" but without profits for real conversion national currency to dollars for major TBTF banks. ..."
This Washington Post article on Poland - where a right-wing, anti-intellectual, nativist party
now rules, and has garnered a lot of public support - is chilling for those of us who worry that
Trump_vs_deep_state may really be the end of the road for US democracy. The supporters of Law and Justice
clearly looked a lot like Trump's white working class enthusiasts; so are we headed down the same
path?
(In Poland, a window on what happens when
populists come to power http://wpo.st/aHJO2
Washington Post - Anthony Faiola - December 18)
Well, there's an important difference - a bit of American exceptionalism, if you like. Europe's
populist parties are actually populist; they pursue policies that really do help workers, as long
as those workers are the right color and ethnicity. As someone put it, they're selling a herrenvolk
welfare state. Law and Justice has raised minimum wages and reduced the retirement age; France's
National Front advocates the same things.
Trump, however, is different. He said lots of things on the campaign trail, but his personnel
choices indicate that in practice he's going to be a standard hard-line economic-right Republican.
His Congressional allies are revving up to dismantle Obamacare, privatize Medicare, and raise
the retirement age. His pick for Labor Secretary is a fast-food tycoon
who loathes minimum wage hikes. And his pick for top economic advisor is the king of trickle-down.
So in what sense is Trump a populist? Basically, he plays one on TV - he claims to stand for
the common man, disparages elites, trashes political correctness; but it's all for show. When
it comes to substance, he's pro-elite all the way.
It's infuriating and dismaying that he managed to get away with this in the election. But that
was all big talk. What happens when reality begins to hit? Repealing Obamacare will inflict huge
harm on precisely the people who were most enthusiastic Trump supporters - people who somehow
believed that their benefits would be left intact. What happens when they realize their mistake?
I wish I were confident in a coming moment of truth. I'm not. Given history, what we can count
on is a massive effort to spin the coming working-class devastation as somehow being the fault
of liberals, and for all I know it might work. (Think of how Britain's Tories managed to shift
blame for austerity onto Labour's mythical fiscal irresponsibility.) But there is certainly an
opportunity for Democrats coming.
And the indicated political strategy is clear: make Trump and company own all the hardship
they're about to inflict. No cooperation in devising an Obamacare replacement; no votes for Medicare
privatization and increasing the retirement age. No bipartisan cover for the end of the TV illusion
and the coming of plain old, ugly reality.
Democratic party under Bill Clinton became yet another neoliberal party (soft neoliberals)
and betrayed both organized labour and middle class in favour of financial oligarchy.
The cynical calculation was that "they have nowhere to go" and will vote for Democrats
anyway. And that was true up to and including election of "change we can believe in" guy. After
this attempt of yet another Clinton-style "bait and switch" trick failed.
Now it is clear that far right picked up large part of those votes. So in a way Bill Clinton
is the godfather of the US far right renaissances. The same is true for Hillary: her "kick the
can down the road" stance made victory of Trump possible (although it surprised me; I expected
that neoliberals were still strong enough to push their candidate down the US people throat)
Point 2:
Under "democrat" Obama the USA pursued imperial policy of creating global neoliberal empire.
The foreign policy remained essentially unchanged. Neocons were partially replaced with "liberal
interventionists" which is the same staff in a different bottle. This policy costs the US tremendous
amount of money and it is probable that the US is going the way British empire went -- overextending
itself.
Regional currency blocks are now a reality and arrangements bypass the usage of US dollar
if international trade are common. They are now in place between several large countries such
as Russia and China and absolutely nothing can reverse this trend. So dollar became virtualized
-- a kind of "conversion gauge" but without profits for real conversion national currency to dollars
for major TBTF banks.
So if we think about Iraq war as the way to prevent to use euro as alternative to dollar in
oil sales that goal was not achieved and all blood and treasure were wasted.
In this sense it would be difficult to Trump to continue with "bastard neoliberalism" both
in foreign policy and domestically and betray his election promises because they reflected real
problems facing the USA and are the cornerstone of his political support.
Also in this case neocons establishment will simply get rid of him one way or the other. I
hope that he understand this danger and will avoid trimming Social Security.
Returning to Democratic Party betrayal of interests of labour, Krugman hissy fit signifies
that he does not understand the current political situation. Neoliberal wing of Democratic Party
is now bankrupt both morally and politically. Trump election was the last nail into Bill Clinton
political legacy coffin.
Now we returned to essentially the same political process that took place after the Great Depression,
with much weaker political leaders, this time. So this is the time for stronger, more interventionist
in internal policy state and the suppression of financial oligarchy. If Trump does not understand
this he is probably doomed and will not last long.
That's why I think Trump inspired far right renaissance will continue and the political role
of military might dramatically increase. And politically Trump is the hostage of this renaissance.
Flint appointment in this sense is just the first swallow of increased role of military leaders
in government.
"... The fact remains, however, that every single developed country got there by using protectionist policies to nurture the develop local industries. Protectionism in developed countries does have strongly negative consequences, but it is beneficial for developing economies. ..."
"... You are exactly right about Japan and I lived through that period. Please name one advanced economy which did not rely on protectionist laws to support domestic industries. All of the European industrial countries did it. The US did it. Japan and Korea did it. China is currently doing it and India has done it. ..."
"... Nobody cared about US labor or about hollowing out the US economy. Krugman frequently noted that the benefits to investors and 'strategic' considerations for free trade were more important that job losses. ..."
"... This extra demand for dollars as a commodity is what drives the price of the dollar higher, leading to the strategic benefits and economic hollowing out that I noted above. ..."
"... There really is no "post-industrialization era", no matter what fantasies the FIRE sector wants to sell. To the extent there is, the existing global trade agreements (including the WTO, World Bank, IMF, and related organization) accomplish that as well by privileging the position of first world capital. ..."
"... "Over the long haul, clearly automation's been much more important - it's not even close," said Lawrence Katz, an economics professor at Harvard who studies labor and technological change. No candidate talked much about automation on the campaign trail. Technology is not as convenient a villain as China or Mexico, there is no clear way to stop it, and many of the technology companies are in the United States and benefit the country in many ways. ..."
"... Globalization is clearly responsible for some of the job losses, particularly trade with China during the 2000s, which led to the rapid loss of 2 million to 2.4 million net jobs, according to research by economists including Daron Acemoglu and David Autor of M.I.T. ..."
"... People who work in parts of the country most affected by imports generally have greater unemployment and reduced income for the rest of their lives, Mr. Autor found in a paper published in January. Still, over time, automation has had a far bigger effect than globalization, and would have eventually eliminated those jobs anyway, he said in an interview. "Some of it is globalization, but a lot of it is we require many fewer workers to do the same amount of work," he said. "Workers are basically supervisors of machines." ..."
"... Clarification of 3: that is, infant industry protection as traditionally done, i.e. "picking winners", won't help. What would help is structural changes that make things relatively easier for small enterprises and relatively harder for large ones. ..."
"... Making direct lobbying of state and federal politicians by industry groups and companies a crime punishable by 110% taxation of net income on all the participants would be a start. ..."
"... "Over time, automation has generally had a happy ending: As it has displaced jobs, it has created new ones. But some experts are beginning to worry that this time could be different. Even as the economy has improved, jobs and wages for a large segment of workers - particularly men without college degrees doing manual labor - have not recovered." ..."
"... So why have manufacturing jobs plummeted since 2000? One answer is that the current account deficit is the wrong figure, since it also includes our surplus in trade in services. If you just look at goods, the deficit is closer to 4.2% of GDP. ..."
"... trade interacts with automation. Not only do we lose jobs in manufacturing to automation, but trade leads us to re-orient our production toward goods that use relatively less labor (tech, aircraft, chemicals, farm produces, etc.), while we import goods like clothing, furniture and autos. ..."
"... There are industries that are closely connected with the sovereignty of the country. That's what neoliberals tend to ignore as they, being closet Trotskyites ("Financial oligarchy of all countries unite!" instead of "Proletarian of all countries unite!" ;-) do not value sovereignty and are hell bent on the Permanent Neoliberal Revolution to bring other countries into neoliberal fold (in the form of color revolutions, or for smaller countries, direct invasions like in Iraq and Libya ). ..."
"... Neoliberal commenters here demonstrate complete detachment from the fact that like war is an extension of politics, while politics is an extension of economics. For example, denying imports can and is often used for political pressure. ..."
"... Now Trump want to play this game selectively designating China as "evil empire" and providing a carrot for Russia. Will it works, or Russia can be wiser then donkeys, I do not know. ..."
"... The US propagandists usually call counties on which they impose sanction authoritarian dictatorships to make such actions more politically correct, but the fact remains: The USA as a global hegemon enjoys using economic pressure to crush dissidents and put vassals in line. ..."
"... Neoliberalism as a social system is past it pinnacle and that creates some problems for the USA as the central player in the neoliberal world. The triumphal march of neoliberalism over the globe ended almost a decade ago. ..."
The Case for Protecting Infant Industries : I must say, it's been almost breathtaking to see
how fast the acceptable terms of debate have shifted on the subject of trade. Thanks partly to
President-elect Donald Trump's populism and partly to academic
research
showing that the costs of free trade could be higher than anyone predicted, economics commentators
are now happy to lambast
the entire idea of trade. I don't want to do that -- I think a nuanced middle ground is best.
But I do think it's worth reevaluating one idea that the era of economic dogmatism had seemingly
consigned to the junk pile -- the notion of infant-industry protectionism. ...
DrDick -> pgl...
The fact remains, however, that every single developed country got there by using protectionist
policies to nurture the develop local industries. Protectionism in developed countries does have
strongly negative consequences, but it is beneficial for developing economies.
You are exactly right about Japan and I lived through that period. Please name one advanced
economy which did not rely on protectionist laws to support domestic industries. All of the European
industrial countries did it. The US did it. Japan and Korea did it. China is currently doing it
and India has done it.
JohnH -> pgl... , -1
Japan and other developed countries took advantage of the strong dollar/reserve currency, which
provided their industries de facto protection from US exports along with a price umbrella that
allowed them export by undercutting prices on US domestic products. The strong dollar was viewed
as a strategic benefit to the US, since it allowed former rivals to develop their economies while
making them dependent on the US consumer market, the largest in the world. The strong dollar also
allowed the US to establish bases and fight foreign wars on the cheap, while allowing Wall Street
to buy foreign economies' crown jewels on the cheap.
Nobody cared about US labor or about hollowing out the US economy. Krugman frequently noted
that the benefits to investors and 'strategic' considerations for free trade were more important
that job losses.
Even pgl's guy, Milton Friedman, recognized that "overseas demand for dollars allows the United
States to maintain persistent trade deficits without causing the value of the currency to depreciate
or the flow of trade to re-adjust." https://en.wikipedia.org/wiki/International_use_of_the_U.S._dollar
This extra demand for dollars as a commodity is what drives the price of the dollar higher,
leading to the strategic benefits and economic hollowing out that I noted above.
John San Vant -> JohnH... , -1
That is because you get a persistent trade surplus in services, which offsets the "Goods" trade
deficit. The currency depreciated in the 2000's because said surplus in services began to decline
creating a real trade deficit.
There really is no "post-industrialization era", no matter what fantasies the FIRE sector
wants to sell. To the extent there is, the existing global trade agreements (including the WTO,
World Bank, IMF, and related organization) accomplish that as well by privileging the position
of first world capital.
anne -> DrDick... , -1
There really is no "post-industrialization era", no matter what fantasies the Finance, Insurance,
and Real Estate sectors want to sell....
[ Interesting assertion. Do develop this further. ]
The Long-Term Jobs Killer Is Not China. It's Automation.
By Claire Cain Miller
The first job that Sherry Johnson, 56, lost to automation was at the local newspaper in Marietta,
Ga., where she fed paper into the printing machines and laid out pages. Later, she watched machines
learn to do her jobs on a factory floor making breathing machines, and in inventory and filing.
"It actually kind of ticked me off because it's like, How are we supposed to make a living?"
she said. She took a computer class at Goodwill, but it was too little too late. "The 20- and
30-year-olds are more up to date on that stuff than we are because we didn't have that when we
were growing up," said Ms. Johnson, who is now on disability and lives in a housing project in
Jefferson City, Tenn.
Donald J. Trump told workers like Ms. Johnson that he would bring back their jobs by clamping
down on trade, offshoring and immigration. But economists say the bigger threat to their jobs
has been something else: automation.
"Over the long haul, clearly automation's been much more important - it's not even close,"
said Lawrence Katz, an economics professor at Harvard who studies labor and technological change.
No candidate talked much about automation on the campaign trail. Technology is not as convenient
a villain as China or Mexico, there is no clear way to stop it, and many of the technology companies
are in the United States and benefit the country in many ways.
Mr. Trump told a group of tech company leaders last Wednesday: "We want you to keep going with
the incredible innovation. Anything we can do to help this go along, we're going to be there for
you."
Andrew F. Puzder, Mr. Trump's pick for labor secretary and chief executive of CKE Restaurants,
extolled the virtues of robot employees over the human kind in an interview with Business Insider
in March. "They're always polite, they always upsell, they never take a vacation, they never show
up late, there's never a slip-and-fall, or an age, sex or race discrimination case," he said.
Globalization is clearly responsible for some of the job losses, particularly trade with
China during the 2000s, which led to the rapid loss of 2 million to 2.4 million net jobs, according
to research by economists including Daron Acemoglu and David Autor of M.I.T.
People who work in parts of the country most affected by imports generally have greater
unemployment and reduced income for the rest of their lives, Mr. Autor found in a paper published
in January. Still, over time, automation has had a far bigger effect than globalization, and would
have eventually eliminated those jobs anyway, he said in an interview. "Some of it is globalization,
but a lot of it is we require many fewer workers to do the same amount of work," he said. "Workers
are basically supervisors of machines."
When Greg Hayes, the chief executive of United Technologies, agreed to invest $16 million in
one of its Carrier factories as part of a Trump deal to keep some jobs in Indiana instead of moving
them to Mexico, he said the money would go toward automation.
"What that ultimately means is there will be fewer jobs," he said on CNBC....
Clarification of 3: that is, infant industry protection as traditionally done, i.e. "picking winners",
won't help. What would help is structural changes that make things relatively easier for small
enterprises and relatively harder for large ones.
Making direct lobbying of state and federal politicians by industry groups and companies a
crime punishable by 110% taxation of net income on all the participants would be a start.
What's Different About Stagnating Wages for Workers Without College Degrees
There seems to be a great effort to convince people that the displacement due to the trade
deficit over the last fifteen years didn't really happen. The New York Times contributed to this
effort with a piece * telling readers that over the long-run job loss has been primarily due to
automation not trade.
While the impact of automation over a long enough period of time certainly swamps the impact
of trade, over the last 20 years there is little doubt that the impact of the exploding trade
deficit has had more of an impact on employment. To make this one as simple as possible, we currently
have a trade deficit of roughly $460 billion (@ 2.6 percent of GDP). Suppose we had balanced trade
instead, making up this gap with increased manufacturing output.
Does the NYT want to tell us that we could increase our output of manufactured goods by $460
billion, or just under 30 percent, without employing more workers in manufacturing? That would
be pretty impressive. We currently employ more than 12 million workers in manufacturing, if moving
to balanced trade increase employment by just 15 percent we would be talking about 1.8 million
jobs. That is not trivial.
But this is not the only part of the story that is strange. We are getting hyped up fears over
automation even at a time when productivity growth (i.e. automation) has slowed to a crawl, averaging
just 1.0 percent annually over the last decade. The NYT tells readers:
"Over time, automation has generally had a happy ending: As it has displaced jobs, it has
created new ones. But some experts are beginning to worry that this time could be different. Even
as the economy has improved, jobs and wages for a large segment of workers - particularly men
without college degrees doing manual labor - have not recovered."
Hmmm, this time could be different? How so? The average hourly wage of men with just a high
school degree was 13 percent less in 2000 than in 1973. ** For workers with some college it was
down by more than 2.0 percent. In fact, stagnating wages for men without college degrees is not
something new and different, it has been going on for more than forty years. Hasn't this news
gotten to the NYT yet?
Inequality, technology, globalization, and the false assumptions that sustain current inequities
by Jared Bernstein
December 22nd, 2016 at 3:24 pm
Here's a great interview* with inequality scholar Branko Milanovic wherein he brings a much-needed
historical and international perspective to the debate (h/t: C. Marr). Many of Branko's points
are familiar to my readers: yes, increased trade has upsides, for both advanced and emerging economies.
But it's not hard to find significant swaths hurt by globalization, particularly workers in rich
economies who've been placed into competition with those in poorer countries. The fact that little
has been done to help them is one reason for president-elect Trump.
As Milanovic puts it:
"The problems with globalization arise from the fact that gains from it are not (and can never
be) evenly distributed. There would be always those who gain less than some others, or those who
lose even in absolute terms. But to whom can they "appeal" for redress? Only to their national
governments because this is how the world is politically organized. Thus national governments
have to engage in "mop up" operations to fix the negative effects of globalization. And this they
have not done well, led as they were by the belief that the trickle-down economics will take care
of it. We know it did not."
But I'd like to focus on a related point from Branko's interview, one that gets less attention:
the question of whether it was really exposure to global trade or to labor-saving technology that
is most responsible for displacing workers. What's the real problem here: is it the trade deficit
or the robots?
Branko cogently argues that "both technological change and economic polices responded to globalization.
The nature of recent technological progress would have been different if you could not employ
labor 10,000 miles away from your home base." Their interaction makes their relative contributions
hard to pull apart.
I'd argue that the rise of trade with China, from the 1990s to the 2007 crash, played a significant
role in moving US manufacturing employment from its steady average of around 17 million factory
jobs from around 1970 to 2000, to an average today that's about 5 million less (see figure below;
of course, manufacturing employment was falling as a share of total jobs over this entire period).
Over at Econlog I have a post that suggests the answer is no, CA deficits do not cost jobs.
But suppose I'm wrong, and suppose they do cost jobs. In that case, trade has been a major
net contributor to American jobs during the 21st century, as our deficit was about 4% of GDP during
the 2000 tech boom, and as large as 6% of GDP during the 2006 housing boom. Today it is only 2.6%
of GDP. So if you really believe that rising trade deficits cost jobs, you'd be forced to believe
that the shrinking deficits since 2000 have created jobs.
So why have manufacturing jobs plummeted since 2000? One answer is that the current account
deficit is the wrong figure, since it also includes our surplus in trade in services. If you just
look at goods, the deficit is closer to 4.2% of GDP.
But even that doesn't really explain very much, because it's slightly lower than the 4.35%
of GDP trade deficit in goods back in 2000. So again, the big loss of manufacturing jobs is something
of a mystery. Yes, we import more goods than we used to, but exports of goods have risen at about
the same rate since 2000. So why does it seem like trade has devastated our manufacturing sector?
Perhaps because trade interacts with automation. Not only do we lose jobs in manufacturing
to automation, but trade leads us to re-orient our production toward goods that use relatively
less labor (tech, aircraft, chemicals, farm produces, etc.), while we import goods like clothing,
furniture and autos.
So trade and automation are both parts of a bigger trend, Schumpeterian creative destruction,
which is transforming big areas of our economy. It's especially painful as during the earlier
period of automation (say 1950-2000) the physical output of goods was still rising fast. So the
blow of automation was partly cushioned by a rise in output. (Although not in the coal and steel
industries!) Since 2000, however, we've seen slower growth in physical output for a number of
reasons, including slower workforce growth, a shift to a service economy, and a home building
recession (which normally absorbs manufactured goods like home appliances, carpet, etc.) We are
producing more goods than ever, but with dramatically fewer workers.
Update: Steve Cicala sent me a very interesting piece on coal that he had published in Forbes.
Ironically, environmental regulations actually helped West Virginia miners, by forcing utilities
to install scrubbers that cleaned up emissions from the dirtier West Virginia coal. (Wyoming coal
has less sulfur.) He also discusses the issue of competition from natural gas.
The historical record is totally unambiguous. Protectionism always leads to wealth and industrial
development. Free trade leads you to the third world. This was true four hundred years ago with
mercantilist England and the navigation acts; it was true with Lincoln's tariffs in the 1860's,
it was true of East Asia post 1945.
Economists better abandon silly free trade if they want to have any credibility and not be
seen as quacks.
Washington (CNN)President-elect Donald Trump's transition team is discussing a proposal to
impose tariffs as high as 10% on imports, according to multiple sources.
A senior Trump transition official said Thursday the team is mulling up to a 10% tariff aimed
at spurring US manufacturing, which could be implemented via executive action or as part of a
sweeping tax reform package they would push through Congress.
Incoming White House Chief of Staff Reince Priebus floated a 5% tariff on imports in meetings
with key Washington players last week, according to two sources who represent business interests
in Washington. But the senior transition official who spoke to CNN Thursday on the condition of
anonymity said the higher figure is now in play.
Such a move would deliver on Trump's "America First" campaign theme, but risks drawing the
US into a trade war with other countries and driving up the cost of consumer goods in the US.
And it's causing alarm among business interests and the pro-trade Republican establishment.
The senior transition official said the transition team is beginning to find "common ground"
with House Speaker Paul Ryan and Ways and Means Committee Chairman Kevin Brady, pointing in particular
to the border adjustment tax measure included in House Republicans' "Better Way" tax reform proposal,
which would disincentivize imports through tax policy.
Aides to Ryan and Brady declined to say they had "common ground" with Trump, but acknowledged
they are in deep discussions with transition staffers on the issue.
Curbing free trade was a central element of Trump's campaign. He promised to rip up the North
American Free Trade Agreement with Mexico and Canada. He also vowed to take a tougher line against
other international trading partners, almost always speaking harshly of China but often including
traditional US allies such as Japan in his complaint that American workers get the short end of
the stick under current trade practices.
Gulf with GOP establishment
It is an area where there is a huge gulf between Trump's stated positions and traditional GOP
orthodoxy. Business groups and GOP establishment figures -- including Ryan and Senate Majority
Leader Mitch McConnell -- have been hoping the transition from the campaign to governing would
bring a different approach.
Ryan did signal in a CNBC interview earlier this month that Trump's goals of spurring US manufacturing
could be accomplished through "comprehensive tax reform."
"I'll tell him what I've been saying all along, which is we can get at what he's trying to
get at better through comprehensive tax reform," Ryan said.
The pro-business GOP establishment says the new Trump administration could make clear it would
withdraw from NAFTA unless Canada and Mexico entered new talks to modernize the agreement to reflect
today's economy. That would allow Trump to say he kept a promise to make the agreement fairer
to American workers without starting a trade war and exacerbating tensions with America's neighbors
and vital economic partners.
But there remain establishment jitters that Trump, who views his tough trade message as critical
to his election victory, will look for ways to make an early statement that he is serious about
reshaping the trade playing field.
And when Priebus told key Washington players that the transition is mulling a 5% tariff on
imports, the reaction was one of fierce opposition, according to two sources who represent business
interests in Washington and spoke on condition of anonymity because the conversations with the
Trump team were confidential.
Priebus, the sources said, was warned such a move could start trade wars, anger allies, and
also hurt the new administration's effort to boost the rate of economic growth right out of the
gate.
Role of Wilbur Ross
One of the sources said he viewed the idea as a trial balloon when first raised, and considered
it dead on arrival given the strong reaction in the business community -- and the known opposition
to such protectionist ideas among the GOP congressional leadership.
But this source voiced new alarm Tuesday after being told by allies within the Trump transition
that defending new tariffs was part of the confirmation "murder board" practice of Wilbur Ross,
the President-elect's choice for commerce secretary.
At least one business community organization is worried enough about the prospect of the tariff
it already has prepared talking points, obtained by CNN Wednesday night.
"This $100 billion tax on American consumers and industry would impose heavy costs on the
US economy, particularly for the manufacturing sector and American workers, with highly negative
political repercussions," according to the talking points. "Rather than using a trade policy
sledgehammer that would inflict serious collateral damage, the Trump administration should
use the scalpel of US trade remedy law to achieve its goals."
The talking points also claim the tariffs would lead to American job loss and result in a tax
to consumers, both of which would harm the US economy.
Trump aides have signaled that Ross is likely to be a more influential player in trade negotiations
than recent Commerce secretaries. Given that, the aides know his confirmation hearings are likely
to include tough questioning -- from both Democrats and Republicans -- about Trump's trade-related
campaign promises.
"The way it was cast to me was that (Trump) and Ross are all over it," said one source. "It
is serious."
The second source was less certain about whether the tariff idea was serious or just part of
a vigorous debate about policy options. But this source said the unpredictability of Trump and
his team had the business interests nervous.
The business lobbying community is confident the GOP leadership would push back on any legislative
effort to impose tariffs, which organizations like the Chamber of Commerce, the Business Roundtable,
the National Association of Manufactures and others, including groups representing farmers, believe
would lead to retaliation against US industries heavily dependent on exports.
But the sources aligned with those interests told CNN the conversation within the Trump transition
includes using executive authority allowed under existing trade laws. Different trade laws enacted
over the course of the past century allow the president to impose tariffs if he issues a determination
the United States is being subjected to unfair trade practices or faces an economic or national
security threat because of trade practices.
There are industries that are closely connected with the sovereignty of the country. That's
what neoliberals tend to ignore as they, being closet Trotskyites ("Financial oligarchy of all
countries unite!" instead of "Proletarian of all countries unite!" ;-) do not value sovereignty
and are hell bent on the Permanent Neoliberal Revolution to bring other countries into neoliberal
fold (in the form of color revolutions, or for smaller countries, direct invasions like in Iraq
and Libya ).
For example, if you depends of chips produced outside the country for your military or space
exploration, then sabotage is possible (or just pure fraud -- selling regular ships instead of
special tolerant to cosmic radiation or harsh conditions variant; actually can be done with the
support of internal neoliberal fifth column).
The same is probably true for cars and auto engines. If you do not produce domestically a variety
at least some domestic brans of cars and trucks, your military trucks and engines will be foreign
and that will cost you tremendous amount of money and you might depend for spare parts on you
future adversary. Also such goods are overprices to the heaven. KAS is a clear example of this
as they burn their money in the war with Yemen as there is no tomorrow making the US MIC really
happy.
So large countries with say over 100 million people probably need to think twice before jumping
into neoliberal globalization bandwagon and relying in imports for strategically important industries.
Neoliberal commenters here demonstrate complete detachment from the fact that like war
is an extension of politics, while politics is an extension of economics. For example, denying
imports can and is often used for political pressure.
That was one of factors that doomed the USSR. Not that the system has any chance -- it was
doomed after 1945 as did not provide for higher productivity then advanced capitalist economies.
But this just demonstrates the power of the US sanctions mechanism. Economic sanctions works
and works really well. The target country is essentially put against the ropes and if you unprepared
you can be knocked down.
For example now there are sanctions against Russia that deny them advanced oil exploration
equipment. And oil is an important source of Russia export revenue. So the effect of those narrow
prohibitions multiples by factor of ten by denying Russia export revenue.
That's how an alliance between Russia and China was forged by Obama administration. because
China does produce some of this equipment now. And Russia paid dearly for that signing huge multi-year
deals with China on favorable for China terms.
Now Trump want to play this game selectively designating China as "evil empire" and providing
a carrot for Russia. Will it works, or Russia can be wiser then donkeys, I do not know.
And look what countries are on the USA economic sanctions list: many entries are countries
that are somewhat less excited about the creation of the global neoliberal empire led by the USA.
KAS and Gulf monarchies are not on the list. So much about "spreading democracy".
The US propagandists usually call counties on which they impose sanction authoritarian
dictatorships to make such actions more politically correct, but the fact remains: The USA as
a global hegemon enjoys using economic pressure to crush dissidents and put vassals in line.
The problem with tariffs on China is an interesting reversion of the trend: manufacturing is
already in China and to reverse this process now is an expensive proposition. So alienating Chinese
theoretically means that some of USA imports might became endangered, despite huge geopolitical
weight of the USA. They denied export of rare metals to Japan in the past. They can do this for
Apple and without batteries Apple can just fold.
Also it is very easy to prohibit Apple sales in China of national security grounds (any US
manufacturer by definition needs to cooperate with NSA and other agencies). I think some countries
already prohibit the use of the USA companies produced cell phones for government officials.
So if Trump administration does something really damaging, for Chinese there are multiple ways
to skin the cat. Neoliberalism as a social system is past it pinnacle and that creates some problems
for the USA as the central player in the neoliberal world. The triumphal march of neoliberalism
over the globe ended almost a decade ago.
From "One neat trick to stop Social Security 'Reform'" http://angrybearblog.com/2016/12/one-neat-trick-to-stop-social-security-reform.html
=== quote === Republicans constantly try to bring Social Security into ongoing debates about 'Balanced Budgets'.
But they face a fundamental problem with their math. For a variety of reasons, some quite reasonable
and others nakedly political (seniors vote) nearly every 'Reform' proposal out there promises to
hold 55 and older harmless. Meaning you can't have any more than miniscule effects on Cost projections
until today's 54′s and younger start retiring. Except for a handful of early retirees that event
happens 11+ years in the future, which is to say outside the 10 year Budget Scoring window.
You can't have a fix to a problem scored over 10 years with a solution starting Year 11. Sure
the 'Reformers' will blather about "Infinite Future Horizons". But any proposal that spares current
seniors from cuts will score close to zero by CBO and JCT. You just have to count years on your fingers.
... ... ...
GOP plans to "reform" Social Security often take this form
1. Américas $20 trillion public debt is unsustainable
2. Current Budget Deficits add to that debt
So far so good
3. Social Security must be part of that discussion
4. 55 and orders must be shielded from changes that allow them no time to adjust
5. (The Bush/Krasting argument) Payrolll tax increases across the board are neither politically possible
nor econimically wise
All three of these are doubtful. This post points out that 2 and 3 +4 (2nd edit) are incompatible
within a structure that assumes 10 year budget scoring. Argue or acknowledge that specific point
and we can move on. ... ... .. GOP point one is interesting on several fronts. One it is debatable on its own terms. It it is not
clear that current Public Debt is unsustainable on a percentage of GDP basis, especially when you
take that in the form of Debt Service at current and projected 10 year rates. A $10 trillion debt
at 8% (roughly Bush era) is twice as expensive as a $20 trillion debt at 2% in debt service terms
and assuming principal rollover. Simply put Obama years have seen a massive refi of Public Debt.
Much credit for which belongs to the Feds QE1 and QE 2.
... ... ..
Jim A, December 15, 2016 11:31 am
Of course that 22% benefit cut is an illusion created by thinking that the SS trust fund is something
more substantial than your left pocket borrowing from your right pocket and giving it IOUs.
Assuming
that we were to simply run out the clock and make no changes to SS until the trust fund ran out.
On the day before the trust fund ran out we would have combined general revenues and government borrowing
sufficient to redeem the special, non-negotiable bonds held in the trust fund. On the day afterwards,
the general revenue and the ability to the US treasury to borrow money wouldn't have changed. Under
current law we would at that point be forced to cut benefits to all retirees by 22%.
Presumably that
22% of revenue that was NOT being spent to repay the trust fund would be applied as deficit reduction.
Or used for tax cuts or new discretionary spending. Of course those are all political impossibilities,
and would never happen.
It is important to the Republicans that want to reform SS that people never
realize that we can afford to pay the shortfall in SS revenues from the treasury. Because once people
realize that, they will be more comfortable with that than they will be with the alternatives.
Growing inequality. We are already at Gini coefficients normally only found in banana republics.
Notable quotes:
"... from 2005 to 2015, the proportion of Americans workers engaged in what they refer to as "alternative work" soared during the Obama era, from 10.7% in 2005 to 15.8% in 2015. Alternative, or "gig" work is defined as "temporary help agency workers, on-call workers, contract company workers, independent contractors or freelancers", and is generally unsteady, without a fixed paycheck and with virtually no benefits. ..."
"... The two economists also found that each of the common types of alternative work increased from 2005 to 2015-with the largest changes in the number of independent contractors and workers provided by contract firms, such as janitors that work full-time at a particular office, but are paid by a janitorial services firm. ..."
Just over six years ago, in December of 2010, we wrote "
Charting America's Transformation To A Part-Time Worker Society ", in which we predicted - and
showed - that in light of the underlying changes resulting from the second great depression, whose
full impacts remain masked by trillions in monetary stimulus and soon, perhaps fiscal, America is
shifting from a traditional work force, one where the majority of new employment is retained on a
full-time basis, to a "gig" economy, where workers are severely disenfranchised, and enjoy far less
employment leverage, job stability and perks than their pre-crash peers. It also explains why despite
the 4.5% unemployment rate, which the Fed has erroneously assumed is indicative of job market at
"capacity", wage growth not only refuses to materialize, but as we showed yesterday, the growth in
real disposable personal income was
the lowest since 2014 .
When we first penned our article, it was dubbed "fringe" tinfoil hattery, or in the latest vernacular,
"fake news."
Fast forward 6 years, when a
report by Harvard and Princeton economists Lawrence Katz and Alan Krueger , confirms exactly
what we warned. In their study, the duo show that from 2005 to 2015, the proportion of Americans
workers engaged in what they refer to as "alternative work" soared during the Obama era, from 10.7%
in 2005 to 15.8% in 2015. Alternative, or "gig" work is defined as "temporary help agency workers,
on-call workers, contract company workers, independent contractors or freelancers", and is generally
unsteady, without a fixed paycheck and with virtually no benefits.
The two economists also found that each of the common types of alternative work increased
from 2005 to 2015-with the largest changes in the number of independent contractors and workers provided
by contract firms, such as janitors that work full-time at a particular office, but are paid by a
janitorial services firm.
Krueger, who until 2013 was also the top White House economist serving as chairman of the Council
of Economic Advisers under Obama, was "surprised" by the finding.
Quoted by
quartz , he said " We find that 94% of net job growth in the past decade was in the alternative
work category ," said Krueger. "And over 60% was due to the [the rise] of independent contractors,
freelancers and contract company workers." In other words, nearly all of the 10 million jobs created
between 2005 and 2015 were not traditional nine-to-five employment.
While the finding is good news for some, such as graphic designers and lawyers who hate going
to an office, for whom new technology and Obamacare has made it more appealing to become an independent
contractor. But for those seeking a steady administrative assistant office job, the market is grim.
It also explains why despite an apparent recovery in the labor market, wage growth has been non-existant,
due to the lack of career advancement and salary increase options for this vast cohort which was
hired over the past decade.
The decline of conventional full-time work has impacted every demographic. Whether this change
is good or bad depends on what kinds of jobs people want. " Workers seeking full-time, steady work
have lost," said Krueger. He then added, perhaps sarcastically, that "while many of those who value
flexibility and have a spouse with a steady job have probably gained."
Yes, well, spousal support aside, it also confirms another troubling finding this website reported
first earlier this month, namely that the
number of multiple jobholders has recently hit the highest number this century.
It appears not everyone is convinced that "the 30 year bond bull is dead." A quick glance
across US equity options today shows TLT (the long-end Treasury Bond ETF) is the most active with
call volumes (bullish bonds, lower rates) more than double their average
, with
over $1.3 billion notional in February $126 Calls (which will
payoff if rates drop to
around 2.00% by then
).
"... [Afterall, I don't think she really believes that the national debt really matters; she knows better than that and if she doesn't she doesn't deserve to be in the Fed Reserve.] ..."
"... [The above said, I'm still not sure that the Fed Reserve controls the Fed Funds rate. For the last so many decades the Fed Funds rate has followed the 13 week treasury market. Even the rate hike this last week was consistent with this. Which begs the question. Is the 13 week treasury anticipating the Fed rate hike? If so, the 13 week treasury seems to know when the Fed will blink. The easier explanation is that the Fed Reserve is simply tacking on their profit margin on top of the 13 week treasury. In which case, Trump's enemy isn't the Fed Reserve. Rather it's bond vigilantes on the short-end of the curve. Still if bond vigilantes really are the controlling influence, they were certainly slow to respond during the last two bubbles.] ..."
Companies in the S&P 500 spent about $3 trillion since 2011 to buy back
their own shares, often with borrowed money. It's part of a noble magic
called financial engineering, the simplest way to goose the all-important
metric of earnings per share (by lowering the number of shares outstanding).
And it creates buying pressure in the stock market that drives up share
prices.
With buybacks, you don't need to sell one extra iPhone to boost
your earnings per share. So the amounts have grown and grown. With
ultra-cheap money available to borrow endlessly, companies take on debt and
hollow out shareholder equity. It has worked like a charm. Stock prices have
soared. Declining revenues and earnings, no problem. But something is
happening that hasn't happened since the Financial Crisis.
Share buybacks in the third quarter plunged 28% year-over-year, to $115.6
billion, the biggest year-over-year dive since Q3 2009, according to
FactSet
. It was the second quarter in a row of declines, from the
glorious Q1 this year, when buybacks had reached $168 billion, behind only
Q3 2007 before it all came apart.
From that great Q1 2016 to Q3, buybacks plunged 31%, or by $52 billion.
"Only" 362 of the S&P 500 companies bought back shares in Q3, the second
lowest number in three years, with Q2 having been the lowest number (blue
line in the chart below).
Steve
,
December 21, 2016 at 8:05 am
One of the advantages of reading Naked Capitalism: I finally understood
what stock buybacks are about. So when proxy seasons arrives, and I get to
vote my 12.5 shares in the old SEP and IRA, I vote against the proposals.
Not that I expect to have much influence.
I suspect Q4 2016 will show a resurgence in corporate share buybacks.
Having the corporations they control borrow money and expend the cash to buy
their shares back at high prices maximizes personal financial gains for CEOs
from their stock option grants, and many corporate board members who are in
a position to approve these buybacks also benefit. Very few of these
individuals founded the companies they lead or have significantly
contributed to the organic growth of their organizations. In fact, in many
cases the reverse is true.
This practice merely appears to be another form of control looting to me.
I find it particularly troublesome when the corporations engaged in this
practice enjoy large government contracts, large numbers of employees are
subsequently laid off during economic downturns as an inevitable result of
the decline in corporations' financial resilience, and corporations seek
various forms of government assistance, including tax forbearances at the
state and local level.
There are ways to address this damaging practice. One way is to
aggressively raise taxes on executive stock option income. Another way is to
simply outlaw the practice.
If rates on long term bonds go up, then all this corporate debt will
eventually have to be rolled into something that causes pain.
And that's what is beginning to happen. Presumably because of Trump being
in office and the fiscal spigots being turned on.
I'm beginning to wonder if this is why Yellen is jawboning against fiscal
stimulus by Trump. It's not that her target is fiscal spending per se.
[Afterall, I don't think she really believes that the national debt really
matters; she knows better than that and if she doesn't she doesn't deserve
to be in the Fed Reserve.]
Rather, I'm thinking her real target is long
term bonds and trying to keep the rates down. To protect the debt load taken
on by the corporations.
Which would make Yellen even more evil of course. Because when it comes
down to cash flow to people vs asset inflation to corporations and the
wealthy, it would mean she's landing squarely on the latter.
Anyways, in theory the only weapon she's got really is the Fed Funds
rate which drives the short end of the curve. However, she could invert
the yield curve, which is the normal tell to market participants to get
out of the market in anticipation of a significant down-turn. So her
weapon vis-a-vis Trump is that she can tank the market. My advice to
Trump would be to call her on this and to use his bully pulpit to let his
constituency know the lengths that the Fed Reserve is willing to go to
(tank the market) to fight him on infrastructure spending.
If Trump really wants to go Full Monty and amp it up a notch, declare
that the Fed Reserve's primary interest is to protect the "wealth
effect". Such that the common bloke must be thrown under the bus. "becuz
inflation don't you know". Man how I would love to see Trump play this
hand.
[The above said, I'm still not sure that the Fed Reserve controls
the Fed Funds rate. For the last so many decades the Fed Funds rate has
followed the 13 week treasury market. Even the rate hike this last week
was consistent with this. Which begs the question. Is the 13 week
treasury anticipating the Fed rate hike? If so, the 13 week treasury
seems to know when the Fed will blink. The easier explanation is that the
Fed Reserve is simply tacking on their profit margin on top of the 13
week treasury. In which case, Trump's enemy isn't the Fed Reserve. Rather
it's bond vigilantes on the short-end of the curve. Still if bond
vigilantes really are the controlling influence, they were certainly slow
to respond during the last two bubbles.]
"And much of it is funded with debt" – and that has been getting more
expensive. The Trump rally is likely due to an expectation of plus laissez
faire, whether it be intent or negligence, it matters not.
I'd like to see share buybacks on the same graph as relevant interest
rates, to get an idea of you much potential causation is there between
interest rates and share buybacks
Trump is not a fan of the stock market and will to nothing to protect it.
He has said repeatedly that the market is in a bubble. When it crashes,
he'll say he was right. This Trump rally is not his idea and investors will
be shocked when they finally realize stock prices mean absolutely nothing to
him. This is not the metric he will use to measure his success, unlike every
President before him for the last 20 years.
It's not regulation per se is deficient, it is regulation under neoliberal regime, were government
is captured by financial oligarchy ;-). But that understanding is foreign to WSJ with its neoliberal
agenda :-(.
Notable quotes:
"... Impressionable journalists finally meet George Stigler. ..."
"... The secret recordings were made by Carmen Segarra, who went to work as an examiner at the New York Fed in 2011 but was fired less than seven months later in 2012. She has filed a wrongful termination lawsuit against the regulator and says Fed officials sought to bury her claim that Goldman had no firm-wide policy on conflicts-of-interest. Goldman says it has had such policies for years, though on the same day Ms. Segarra's revelations were broadcast, the firm added new restrictions on employees trading for their own accounts. ..."
"... On the recordings, regulators can be heard doing what regulators do-revealing the limits of their knowledge and demonstrating their reluctance to challenge the firms they regulate. At one point Fed officials suspect a Goldman deal with Banco Santander may have been "legal but shady" in the words of one regulator, and should have required Fed approval. But the regulators basically accept Goldman's explanations without a fight. ..."
"... The journalists have also found evidence in Ms. Segarra's recordings that even after the financial crisis and the supposed reforms of the Dodd-Frank law, the New York Fed remained a bureaucratic agency resistant to new ideas and hostile to strong-willed, independent-minded employees. In government? ..."
"... "as a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit." ..."
"... Once one understands the inevitability of regulatory capture, the logical policy response is to enact simple laws that can't be gamed by the biggest firms and their captive bureaucrats. ..."
"... And it means considering economist Charles Calomiris's plan to automatically convert a portion of a bank's debt into equity if the bank's market value falls below a healthy level. ..."
Impressionable journalists finally meet George Stigler.
The financial scandal du jour involves leaked audio recordings that purport to show that
regulators at the Federal Reserve Bank of New York were soft on
Goldman Sachs . Say it ain't so.
... ... ...
The secret recordings were made by Carmen Segarra, who went to work as an examiner at the
New York Fed in 2011 but was fired less than seven months later in 2012. She has filed a wrongful
termination lawsuit against the regulator and says Fed officials sought to bury her claim that Goldman
had no firm-wide policy on conflicts-of-interest. Goldman says it has had such policies for years,
though on the same day Ms. Segarra's revelations were broadcast, the firm added new restrictions
on employees trading for their own accounts.
The New York Fed won against Ms. Segarra in district court, though the case is on appeal. The
regulator also notes that Ms. Segarra "demanded $7 million to settle her complaint." And last week
New York Fed President
William Dudley said,
"We are going to keep striving to improve, but I don't think anyone should question our motives or
what we are trying to accomplish."
On the recordings, regulators can be heard doing what regulators do-revealing the limits of
their knowledge and demonstrating their reluctance to challenge the firms they regulate. At one point
Fed officials suspect a Goldman deal with Banco Santander may have been "legal but shady" in the
words of one regulator, and should have required Fed approval. But the regulators basically accept
Goldman's explanations without a fight.
The sleuths at the ProPublica website, working with a crack team of investigators from public
radio, also seem to think they have another smoking gun in one of Ms. Segarra's conversations that
was not recorded but was confirmed by another regulator. Ms. Seest means. For example, a company
offering securities is exempt from some registration requirements if it is only selling to accredited
investors, such as people with more than $1 million in net worth, excluding the value of primary
residences.
The journalists have also found evidence in Ms. Segarra's recordings that even after the financial
crisis and the supposed reforms of the Dodd-Frank law, the New York Fed remained a bureaucratic agency
resistant to new ideas and hostile to strong-willed, independent-minded employees. In government?
***
Enter George Stigler, who published his famous essay "The Theory of Economic Regulation" in the
spring 1971 issue of the Bell Journal of Economics and Management Science. The University of Chicago
economist reported empirical data from various markets and concluded that "as a rule, regulation
is acquired by the industry and is designed and operated primarily for its benefit."
Stigler knew he was fighting an uphill battle trying to persuade his fellow academics. "The idealistic
view of public regulation is deeply imbedded in professional economic thought," he wrote. But thanks
to Stigler, who would go on to win a Nobel prize, many economists have studied the operation and
effects of regulation and found similar results.
A classic example was the New York Fed's decision to let Citigroup stash $1.2 trillion
of assets-including more than $600 billion of mortgage-related securities-in off-balance-sheet vehicles
before the financial crisis. That's when Tim Geithner ran the New York Fed and Jack Lew was at Citigroup.
Once one understands the inevitability of regulatory capture, the logical policy response
is to enact simple laws that can't be gamed by the biggest firms and their captive bureaucrats.
This means repealing most of Dodd-Frank and the so-called Basel rules and replacing them with a simple
requirement for more bank capital-an equity-to-asset ratio of perhaps 15%. It means bringing back
bankruptcy for giant firms instead of resolution at the discretion of political appointees. And
it means considering economist Charles Calomiris's plan to automatically convert a portion of a bank's
debt into equity if the bank's market value falls below a healthy level.
Krugman is a neoliberal stooge. Since when Social Security is an entitlement program. If you start
contributing at 25 and retire at 67 (40 years of monthly contributions), you actually get less then
you contribute, unless you live more then 80 years. It just protects you from "free market casino".
Notable quotes:
"... A "contribution" theory of what a proper distribution of income might be can only be made coherent if there are constant returns to scale in the scarce, priced, owned factors of production. Only then can you divide the pile of resources by giving to each the marginal societal product of their work and of the resources that they own. ..."
"... n a world--like the one we live in--of mammoth increasing returns to unowned knowledge and to networks, no individual and no community is especially valuable. Those who receive good livings are those who are lucky -- as Carrier's workers in Indiana have been lucky in living near Carrier's initial location. It's not that their contribution to society is large or that their luck is replicable: if it were, they would not care (much) about the departure of Carrier because there would be another productive network that they could fit into a slot in. ..."
"... If not about people, what is an economy about? ..."
"... I hadn't realized that Democrats now view Social Security and Medicare as "government handouts". ..."
"... Some Democrats like Krugman are Social Darwinists. ..."
"... PK is an ignorant vicious SOB. Many of those "dependent hillbillies" PK despises paid SS and Medicare taxes for many decades, most I know have never been on foos stamps, and if they are on disability it is because they did honest hard work, something PK knows nothing about. What an ignorant jerk. ..."
"... What is a very highly subsidized industry that benefits Delong and Krugman? Higher education. Damn welfare queens! :) ..."
"... No Krugman is echoing the tribalism of Johnny Bakho. These people won't move or educate themselves or "skill up" so they deserve what they get. Social darwinism. ..."
"... People like Bakho are probably anti-union as well. They're seen as relics of an earlier age and economically "uncompetitve." See Fred Dobbs below. That's the dog whistle about the "rust belt." ..."
"... Paul Krugman's reputation, formerly that of a a noted economic, succumbed after a brief struggle to Trump Derangement Syndrome. Friends said Mr Krugman's condition had been further aggravated by cognitive dissonance from a severely challenged worldview. ..."
"... He is survived by the New York Times, also said to be in failing health. ..."
"... For a long time DeLong was mocking the notion of "economic anxiety" amongst the voters. Does this blog post mean he's rethinking that idea? ..."
"... The GOP has a long history of benefitting from the disconnect where a lot of their voters are convinced that when government money goes to others (sometimes even within their own white congregations), then it is not deserved. ..."
Brad DeLong has an interesting meditation * on markets and political demands - inspired by
a note from Noah Smith ** - that offers food for thought. I wonder, however, if Brad's discussion
is too abstract; and I also wonder whether it fully recognizes the disconnect between what Trump
voters think they want and reality. So, an entry of my own.
What Brad is getting at is the widespread belief by, well, almost everyone that they are entitled
to - have earned - whatever good hand they have been dealt by the market economy. This is reflected
in the more or less universal belief of the affluent that they deserve what they have; you could
see this in the rage of rentiers at low interest rates, because it's the Federal Reserve's job
to reward savers, right? In this terrible political year, the story was in part one of people
in Appalachia angrily demanding a return of the good jobs they used to have mining coal - even
though the world doesn't want more coal given fracking, and it can get the coal it still wants
from strip mines and mountaintop removal, which don't employ many people.
And what Brad is saying, I think, is that what those longing for the return to coal want is
those jobs they deserve, where they earn their money - not government handouts, no sir.
A fact-constrained candidate wouldn't have been able to promise such people what they want;
Trump, of course, had no problem.
But is that really all there is? Working-class Trump voters do, in fact, receive a lot of government
handouts - they're almost totally dependent on Social Security for retirement, Medicare for health
care when old, are quite dependent on food stamps, and many have recently received coverage from
Obamacare. Quite a few receive disability payments too. They don't want those benefits to go away.
But they managed to convince themselves (with a lot of help from Fox News etc) that they aren't
really beneficiaries of government programs, or that they're not getting the "good welfare", which
only goes to Those People.
And you can really see this in the regional patterns. California is an affluent state, a heavy
net contributor to the federal budget; it went 2-1 Clinton. West Virginia is poor and a huge net
recipient of federal aid; it went 2 1/2-1 Trump.
I don't think any kind of economic analysis can explain this. It has to be about culture and,
as always, race.
Regional Policy and Distributional Policy in a World Where People Want to Ignore the Value
and Contribution of Knowledge- and Network-Based Increasing Returns
Pascal Lamy: "When the wise man points at the moon, the fool looks at the finger..."
Perhaps in the end the problem is that people want to pretend that they are filling a valuable
role in the societal division of labor, and are receiving no more than they earn--than they contribute.
But that is not the case. The value--the societal dividend--is in the accumulated knowledge
of humanity and in the painfully constructed networks that make up our value chains.
A "contribution" theory of what a proper distribution of income might be can only be made
coherent if there are constant returns to scale in the scarce, priced, owned factors of production.
Only then can you divide the pile of resources by giving to each the marginal societal product
of their work and of the resources that they own.
That, however, is not the world we live in.
In a world--like the one we live in--of mammoth increasing returns to unowned knowledge
and to networks, no individual and no community is especially valuable. Those who receive good
livings are those who are lucky -- as Carrier's workers in Indiana have been lucky in living near
Carrier's initial location. It's not that their contribution to society is large or that their
luck is replicable: if it were, they would not care (much) about the departure of Carrier because
there would be another productive network that they could fit into a slot in.
All of this "what you deserve" language is tied up with some vague idea that you deserve what
you contribute--that what your work adds to the pool of society's resources is what you deserve.
This illusion is punctured by any recognition that there is a large societal dividend to be
distributed, and that the government can distribute it by supplementing (inadequate) market wages
determined by your (low) societal marginal product, or by explicitly providing income support
or services unconnected with work via social insurance. Instead, the government is supposed to,
somehow, via clever redistribution, rearrange the pattern of market power in the economy so that
the increasing-returns knowledge- and network-based societal dividend is predistributed in a relatively
egalitarian way so that everybody can pretend that their income is just "to each according to
his work", and that they are not heirs and heiresses coupon clipping off of the societal capital
of our predecessors' accumulated knowledge and networks.
On top of this we add: Polanyian disruption of patterns of life--local communities, income
levels, industrial specialization--that you believed you had a right to obtain or maintain, and
a right to believe that you deserve. But in a market capitalist society, nobody has a right to
the preservation of their local communities, to their income levels, or to an occupation in their
industrial specialization. In a market capitalist society, those survive only if they pass a market
profitability test. And so the only rights that matter are those property rights that at the moment
carry with them market power--the combination of the (almost inevitably low) marginal societal
products of your skills and the resources you own, plus the (sometimes high) market power that
those resources grant to you.
This wish to believe that you are not a moocher is what keeps people from seeing issues of
distribution and allocation clearly--and generates hostility to social insurance and to wage supplement
policies, for they rip the veil off of the idea that you deserve to be highly paid because you
are worth it. You aren't.
And this ties itself up with regional issues: regional decline can come very quickly whenever
a region finds that its key industries have, for whatever reason, lost the market power that diverted
its previously substantial share of the knowledge- and network-based societal dividend into the
coffers of its firms. The resources cannot be simply redeployed in other industries unless those
two have market power to control the direction of a share of the knowledge- and network-based
societal dividend. And so communities decline and die. And the social contract--which was supposed
to have given you a right to a healthy community--is broken.
As I have said before, humans are, at a very deep and basic level, gift-exchange animals. We
create and reinforce our social bonds by establishing patterns of "owing" other people and by
"being owed". We want to enter into reciprocal gift-exchange relationships. We create and reinforce
social bonds by giving each other presents. We like to give. We like to receive. We like neither
to feel like cheaters nor to feel cheated. We like, instead, to feel embedded in networks of mutual
reciprocal obligation. We don't like being too much on the downside of the gift exchange: to have
received much more than we have given in return makes us feel very small. We don't like being
too much on the upside of the gift exchange either: to give and give and give and never receive
makes us feel like suckers.
PK is an ignorant vicious SOB. Many of those "dependent hillbillies" PK despises paid SS and
Medicare taxes for many decades, most I know have never been on foos stamps, and if they are on
disability it is because they did honest hard work, something PK knows nothing about. What an
ignorant jerk.
Exactly the same could be said about many of those inner city minorities that the "dependent hillbillies"
look down on as "welfare queens". That may be one of the reasons they take special issues with
"food stamps", because in contrast to the hillbillies, inner city poor people cannot grow their
own food. What Krugman is pointing out is the hypocrisy of their tribalism - and also the idiocy,
because the dismantling of society would ultimately hurt the morons that voted GOP into power
this round.
"What Krugman is pointing out is the hypocrisy of their tribalism "
No Krugman is echoing the tribalism of Johnny Bakho. These people won't move or educate
themselves or "skill up" so they deserve what they get. Social darwinism.
People like Bakho are probably anti-union as well. They're seen as relics of an earlier age
and economically "uncompetitve." See Fred Dobbs below. That's the dog whistle about the "rust
belt."
His tone is supercilious and offensive. But your argument is that they are not "dependent" because
they earned every benefit they get from the government. I think his point is that "dependent"
is not offensive -- the term jus reflects how we all depend on government services. DeLong makes
the point much better in the article quoted by anne above.
Paul Krugman's reputation, formerly that of a a noted economic, succumbed after a brief
struggle to Trump Derangement Syndrome. Friends said Mr Krugman's condition had been further aggravated
by cognitive dissonance from a severely challenged worldview.
He is survived by the New York Times, also said to be in failing health.
The New York Times is easily the finest newspaper in the world, is broadly recognized as such
and is of course flourishing. Such an institution will always have sections or editors and writers
of relative strength but these relative strengths change over time as the newspaper continually
changes.
NYT Co. to revamp HQ, vacate eight floors in consolidation
"In an SEC filing, New York Times Co. discloses a staff communication it provided today to
employees about a revamp of its headquarters -- including consolidating floors.
The company will vacate at least eight floors, consolidating workspaces and allowing for "significant"
rental income, the memo says."
The GOP has a long history of benefitting from the disconnect where a lot of their voters
are convinced that when government money goes to others (sometimes even within their own white
congregations), then it is not deserved. But if that same government money goes to themselves
(or their real close relatives), then it is a hard earned and well-deserved payback for their
sacrifices and tax payments. So the GOP leadership has always called it "saving social security"
and "cracking down on fraud" rather than admitting to their attempts to dismantle those programs.
The Dems better be on the ball and call it what it is. If you want to save those programs you
just have to prevent rich people from wiggling out of paying for them (don't repeal the Obamacare
medicare taxes on the rich).
On the Pk piece. I think it is really about human dignity, and the need for it. There were a lot
of factors in this horrific election, but just as urban blacks need to be spared police brutality,
rural whites need a dignified path in their lives. Everyone, united, deserves such a path.
This is a real challenge for economists; how do we rebuild the rust belt (which applies to
areas beyond the literal rust belt).
If we do not, we risk Trump 2.0, which could be very scary indeed.
I agree to a point, but what the piece is about is that in search of a solution to the problems
of the rustbelt (whatever the definition is),people voted for Trump who had absolutely no plan
to solve such a problem, other than going back to the future and redoing Nafta and getting rid
of regulations.
Meanwhile, that vote also meant that the safety net that helps all Americans in trouble was
being placed in severe risk.
Those voters were fixed on his rhetoric and right arm extended while his left hand was grabbing
them by the (in deference to Anne I will not say the words, but Trump himself has said one of
them and the other is the male version).
Really? You didn't seem to before. You'd say what Duy or Noah Smith or DeLong were mulling about was
off-limits. You'd ban them from the comment section if you could. "This is a real challenge for economists; how do we rebuild the rust belt (which applies to
areas beyond the literal rust belt).
If we do not, we risk Trump 2.0, which could be very scary indeed." I don't see why this is such a controversial point for centrist like Krugman. How do we appeal to the white working class without contradicting our principles?
By promoting policies that raise living standards. By delivering, which mean left-wing policies
not centrist tinkering. It's the Clinton vs. Sanders primary. Hillary could have nominated Elizabeth Warren as her VP candidate but her corporate masters
wouldn't let her.
"Meanwhile, that vote also meant that the safety net that helps all Americans in trouble was being
placed in severe risk."
That safety net is an improvement over 1930. But it's been fraying so badly over the last 20-30
years that it's almost lost all meaning. It's something people turn to before total destitution,
but for rebuilding a life? A sick joke, filled with petty hassles and frustrations.
And the fraying has been a solidly bipartisan project. Who can forget welfare "reform"?
So maybe the yokels you're blaming for the 10,000-th time might not buy your logic or your
intentions.
... At the height of their influence in the 1950s, labor unions could claim to represent about
1 of every 3 American workers. Today, it's 1 in 9 - and falling.
Some have seen the shrinking size and waning influence of labor unions as a sign that the US
economy is growing more flexible and dynamic, but there's mounting evidence that it is also contributing
to slow wage growth and the rise in inequality. ...
(Union membership) NY 24.7%, MA 12.4%, SC 2.1%
... Are unions faring any better here in Massachusetts?
While Massachusetts's unions are stronger than average, it's not among the most heavily unionized
states. That honor goes to New York, where 1 in every 4 workers belongs to a union. After New
York, there are 11 other states with higher union membership rates then Massachusetts.
Here too, though, the decline in union membership over time has been steep.
... In 2015, 30 states and the District of Columbia had union membership rates below
that of the U.S. average, 11.1 percent, and 20 states had rates above it. All states
in the East South Central and West South Central divisions had union membership rates
below the national average, and all states in the Middle Atlantic and Pacific divisions
had rates above it. Union membership rates increased over the year in 24 states and
the District of Columbia, declined in 23 states, and were unchanged in 3 states.
(See table 5.)
Five states had union membership rates below 5.0 percent in 2015: South Carolina
(2.1 percent), North Carolina (3.0 percent), Utah (3.9 percent), Georgia (4.0 percent),
and Texas (4.5 percent).
Two states had union membership rates over 20.0 percent in
2015: New York (24.7 percent) and Hawaii (20.4 percent).
State union membership levels depend on both the employment level and the union
membership rate. The largest numbers of union members lived in California (2.5 million)
and New York (2.0 million).
Roughly half of the 14.8 million union members in the
U.S. lived in just seven states (California, 2.5 million; New York, 2.0 million;
Illinois, 0.8 million; Pennsylvania, 0.7 million; and Michigan, Ohio, and New Jersey,
0.6 million each), though these states accounted for only about one-third of wage and
salary employment nationally.
(It appears that New England union participation
lags in the northeast, and also in the rest of
the US not in the Red Zone.)
I have noted before that New England
is doing better 'than average' (IMO)
because of high-tech industry & education.
Not necessarily because of a lack of
unionization, which is prevalent here
in public education & among service
workers. Note that in higher ed,
much here is private.
Private industry here traditionally
is not heavily unionized, although
that is probably not the case
among defense corps.
As to causation, I think the
implication is that 'Dems dealing
with unions' has not been working
all that well, recovery-wise,
particularly in the rust belt.
That must have as much to do with
industrial management as it does
with labor, and the ubiquitous
on-going industrial revolution.
Everybody needs, and desperately crave, self-confidence and dignity. In white rural culture that
has always been connected to the old settler mentality and values of personal "freedom" and "independence".
It is unfortunate that this freedom/independence mythology has been what attracted all the immigrants
from Europe over here. So it is as strongly engrained (both in culture and individual values)
as it is outdated and counterproductive in the world of the future. I am not sure that society
can help a community where people find themselves humiliated by being helped (especially by bad
government). Maybe somehow try to get them to think of the government help as an earned benefit?
"... The essence of voting the lesser of two evils: "To comfortable centrists like pgl, the Democrats should be graded on a curve. As long as they're better than the awful Republicans, then they're good enough and beyond criticism." ..."
"... These Wall Street Democrats can rest assured that Democrats will surely get their turn in power in 4-8 years...after Trump thoroughly screws things up. And then Democrats will proceed to screw things up themselves...as we learned from Obama and Hillary's love of austerity and total disinterest in the economic welfare of the vast majority. ..."
"... In case you didn't notice, Democrats did nothing about the minimum wage 2009-2010. ..."
"... Many Democratic candidates won't even endorse minimum wage increase in states where increases win via initiative. They preferred to lose elections to standing up for minimum wage increases. ..."
Peter K.... The essence of voting the lesser of two evils: "To comfortable centrists like pgl,
the Democrats should be graded on a curve. As long as they're better than the awful Republicans,
then they're good enough and beyond criticism."
These Wall Street Democrats can rest assured that Democrats will surely get their turn in power
in 4-8 years...after Trump thoroughly screws things up. And then Democrats will proceed to screw
things up themselves...as we learned from Obama and Hillary's love of austerity and total disinterest
in the economic welfare of the vast majority.
To pgl and his ilk, Obama was great as long as he said the right things...regardless of what
he actually did. Hillary didn't even have to say the right things...she only had to be a Wall
Street Democrat for pgl to be enthusiastic about her.
In case you didn't notice, Democrats did nothing about the minimum wage 2009-2010.
At a minimum,
they could have taken their dominance then to enact increases for 2010-2016 or to index increases
to inflation. Instead, Pelosi, Reid and Obama preferred to do nothing.
Many Democratic candidates won't even endorse minimum wage increase in states where increases
win via initiative. They preferred to lose elections to standing up for minimum wage increases.
"... At some point the GOP has to decide how much of Trump's populist agenda they can stuff in the toilet without inducing an uncontrollable backlash. ..."
"... The reason Trump won the GOP nomination was exactly because he claimed to reject traditional GOP policies and approaches. ..."
"... If the GOP just go ahead with a traditional "rule for the rich" policy (because they won) there could be serious fireworks ahead - provided the Dems can pull out a populist alternative policy by the the next election. ..."
"... I have no idea what's going to happen, but my guess is that Trump and the Republicans are going to completely sell out the "Trump voters." ..."
"... But they still tried to push through Social Security privatization even though everyone is against it. ..."
"... If recent history is any guide, incumbents get a second term regardless of how bad the economy is. Clinton, Bush, and Obama were all reelected despite a lousy economy. The only exception in recent memory was Bush 41. ..."
"... Upper class tax cuts were central to his policies. Anybody who believed he was anything other than an standard issue Republican would buy shares in Arizona swampland. ..."
"... trump did indeed state that he would give bigger tax cuts to the rich, repeatedly. the genius of trump's performance is that by never having a clear position his gullible followers were able to fill in the gaps using their own hopes and desires. ..."
"... That is correct, but also the weakness in his support. They will almost certainly be disappointed as the exact interpretations and choices between incompatible promises turns out to be different from the individuals hopes and desires. ..."
"... And consider how dysfunction from laissez faire healthcare policy readoption leads to rising prices/costs above current trend to limit disposable income even more, it will be amazing if we do not have stagnation and worse for the bulk of society. ..."
"... Bush implemented and expanded a community health clinic system, that reallnwoukd be a nice infrastructure play for the US, but this Congress is more likely to disinvest here. They certainly don't want these do-gooder nonprofits competing against the doctor establishment. ..."
"... The question is first of all whether Trump can bully the Fed away from their current and traditional course (which would not allow much of a stimulus, before they cancelled it out with rate hikes). ..."
"... Second whether the Fed itself having been traditionally prone to support GOP presidents (see inconsistencies in Greenspan's policies during Clinton vs. Bush) will change its policies and allow higher inflation and wage growth than they have under any Dem president. ..."
"... The little people go to the credit channels to help finance the purchase of durables and higher education too. The Fed's actions themselves will see these credit prices ratchet, so nit good fir basic demand. Veblen goods will see more price rises as the buyers will have lots of rentier/lobbying gathered money to burn. ..."
At some point the GOP has to decide how much of Trump's populist agenda they can stuff in
the toilet without inducing an uncontrollable backlash.
The reason Trump won the GOP nomination was exactly because he claimed to reject traditional
GOP policies and approaches. It was the old tea-partiers insisting that their anti-rich/Anti-Wall
street sentiments be inserted into the GOP.
If the GOP just go ahead with a traditional "rule for the rich" policy (because they won)
there could be serious fireworks ahead - provided the Dems can pull out a populist alternative
policy by the the next election.
I have no idea what's going to happen, but my guess is that Trump and the Republicans are
going to completely sell out the "Trump voters."
George W. Bush wasn't completely horrible (besides Iraq, John Roberts, tax cuts for the rich,
the Patriot act and the surveillance state, Katrina, etc. etc. etc.). He was good on immigration,
world AIDS prevention, expensive Medicare drug expansion, etc.
But they still tried to push through Social Security privatization even though everyone
is against it.
To some extent Bush demoralized the Republican base and they didn't turn out in 2008.
If recent history is any guide, incumbents get a second term regardless of how bad the economy
is. Clinton, Bush, and Obama were all reelected despite a lousy economy. The only exception in
recent memory was Bush 41.
About the only thing that can derail Trump is a big recession in 2019.
"The reason Trump won the GOP nomination was exactly because he claimed to reject traditional
GOP policies and approaches."
While generally enthusiastically embracing them. Upper class tax cuts were central to his
policies. Anybody who believed he was anything other than an standard issue Republican would buy
shares in Arizona swampland.
He never came out directly saying or tweeting that he would give bigger tax cuts to the rich than
anybody else - he said he would give bigger tax cuts. It is true that people with a college education
had an easy time figuring him out even before the election. But the populist messages he campaigned
on were anti-establishment including suggesting that the "hedge-fund guys" were making a killing
by being taxed at a lower rate.
trump did indeed state that he would give bigger tax cuts to the rich, repeatedly. the genius
of trump's performance is that by never having a clear position his gullible followers were able
to fill in the gaps using their own hopes and desires.
"his gullible followers were able to fill in the gaps using their own hopes and desires"
That is correct, but also the weakness in his support. They will almost certainly be disappointed
as the exact interpretations and choices between incompatible promises turns out to be different
from the individuals hopes and desires. The reason Trump was able to beat even a Tea party
darling, was the backlash against big money having taken over the Tea party. The backlash against
Trump_vs_deep_state being "taken over by big money" interest will be interesting to observe, especially if
the Dems find the right way to play it.
Following up on Johnny Bakho's comment below, let's assume that average wage growth YoY for nonsupervisory
workers never reaches 3% before the next recession hits. Wage growth rates always decline in recessions,
usually by over 2%.
If in the next recession, we see actual slight nominal wage decreases, is a debt-deflationary
wage-price spiral inevitable? Or could there be a small decline of less than -1% without triggering
such a spiral.
"is a debt-deflationary wage-price spiral inevitable?"
Good question. It all depends on the response of policy makers. If we continue with the stupid
fiscal austerity that began in 2011, it may be inevitable. Which is why doing public infrastructure
investment is a very good idea.
And consider how dysfunction from laissez faire healthcare policy readoption leads to rising
prices/costs above current trend to limit disposable income even more, it will be amazing if we
do not have stagnation and worse for the bulk of society.
Bush implemented and expanded a community health clinic system, that reallnwoukd be a nice
infrastructure play for the US, but this Congress is more likely to disinvest here. They certainly
don't want these do-gooder nonprofits competing against the doctor establishment.
For Clinton dems, the ones the wiki revealed are con artists, doing for the peeps [like Bernie
stood for] is too far ideologically for the faux centrists.
They are neoliberals market monetarists who keep the bankers green and everyone else takes
the back seats.
At this point in time pretty much anything the policy makers do will be countered by the Fed.
The question is first of all whether Trump can bully the Fed away from their current and traditional
course (which would not allow much of a stimulus, before they cancelled it out with rate hikes).
Second whether the Fed itself having been traditionally prone to support GOP presidents
(see inconsistencies in Greenspan's policies during Clinton vs. Bush) will change its policies
and allow higher inflation and wage growth than they have under any Dem president.
As long as the FED thinks the natural rate of the employment to population ratio is only 60% -
you'd be right. But then the FED is not thinking clearly.
like many of my fellow socialists, i fulminated about bernanke's coddling of banks and asset holders.
i was somewhat wrong. bernanke was a evidently a strong voice for banking regulation and an end
to the moral hazard of TBTF. it is a pity that obama did not listen to him.
The little people go to the credit channels to help finance the purchase of durables and higher
education too. The Fed's actions themselves will see these credit prices ratchet, so nit good
fir basic demand. Veblen goods will see more price rises as the buyers will have lots of rentier/lobbying
gathered money to burn.
Will the Fed use rulemaking to control bubbling in the financial asset marketplaces as they
wont want to rause rates too much. I hope they are paying attention
"... I always laugh when Newt Gingrich says we need "rational regulation". His crew has as its prime agenda getting rid of any regulation that is actually rational. ..."
"... the greater the information asymmetry, the easier it is to loot. ..."
"... Gramm pushed the next round of stupid deregulation which led to the latest crisis. And it seems Team Trump is about to relive the same mistake. Studying overly simplified models that have historically failed us over and over is the height of stupidity. ..."
Jeb Hensarling and the Allure of Economism : The
Wall Street Journal has a profile up on Mike Crapo and Jeb Hensarling, the key committee
chairs (likely in Crapo's case) who will repeal or rewrite the Dodd-Frank Wall Street Reform and
Consumer Protection Act. It's clear that both are planning to roll back or dilute many of the
provisions of Dodd-Frank, particularly those that protect consumers from toxic financial products
and those that impose restrictions on banks (which, together, make up most of the act).
Hensarling is about as clear a proponent of
economism -the belief that the world operates exactly as described in Economics 101 models-as
you're likely to find. He majored in economics at Texas A&M, where one of his professors was none
other than Phil Gramm. Hensarling described his college exposure to economics
this way :
"Even though I had grown up as a Republican, I didn't know why I was a Republican until
I studied economics. I suddenly saw how free-market economics provided the maximum good to
the maximum number, and I became convinced that if I had an opportunity, I'd like to serve
in public office and further the cause of the free market."
This is not a unique story...
Introductory economics, and particularly the competitive market model, can be seductive that
way. The models are so simple, logical, and compelling that they seem to unlock a whole new way
of seeing the world. And, arguably, they do: there are real insights you can gain from a working
understanding of supply and demand curves.
The problem, however, is that the people ... forget that the power of a theory in the abstract
bears no relationship to its accuracy in practice. ...
Hensarling, who likes to quote market principles in the abstract, doesn't appear to have moved
on much from Economics 101. ... This ritual invocation of markets ignores the fact that there
is no way to design a contemporary financial system that even remotely resembles the textbook
competitive market: perfect information, no barriers to entry, a large number of suppliers such
that no supplier can affect the market price, etc. ...
Regulatory policy that presumes well-functioning markets that don't exist is unlikely to work
well in the real world. Actually, Bill Clinton and George W. Bush tried that already, and we got
the financial crisis. But to people who believe in economism, theory can never be disproved by
experience. Hensarling is "always willing to compromise policies to advance principles," he actually
said to the Journal . That's a useful trait in an ideologue. It's frightening in the man
who will write the rules for our financial system.
I always laugh when Newt Gingrich says we need "rational regulation". His crew has as its prime
agenda getting rid of any regulation that is actually rational.
That is required to cover all the common law complexities from civil suits on labor issues being
legislated from the Federal bench.
Businesses have resorted to getting judges to legislate their way once their lobbying failed
to get Congress to legalize slavery by other names.
Labor is a part of econ 101 that businesses do not understand.
Businesses see labor as black holes sucking all the money it can out of the economy. Consumers,
on the other hand, are infinite sources of spending as long as government does not require consumers
repay debts. But government does need to put more money in consumer pockets with more and bigger
tax cuts.
When I learned econ 1 in secondary school social studies, the money spent at businesses came
100% from wages businesses paid.
A more advanced concept was economic profits were bad because that meant monopoly power restricting
supply to consumers to take too much of their money and also pay them less than in an efficient
economy.
"Hensarling is about as clear a proponent of economism -- the belief that the world operates exactly
as described in Economics 101 models-as you're likely to find. He majored in economics at Texas
A&M, where one of his professors was none other than Phil Gramm."
Gramm never really got the economics of financial institutions. Milton Friedman did as he studies
their failures during the Great Depression. We sort of relived this during the 1980's S&L crisis
but on a smaller scale. That crisis was driven by ill advised financial deregulation.
Gramm pushed
the next round of stupid deregulation which led to the latest crisis. And it seems Team Trump
is about to relive the same mistake. Studying overly simplified models that have historically
failed us over and over is the height of stupidity.
"The Gramm–Leach–Bliley Act (GLBA), also known as the Financial Services Modernization Act of
1999, (Pub.L. 106–102, 113 Stat. 1338, enacted November 12, 1999) is an act of the 106th United
States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers
in the market among banking companies, securities companies and insurance companies that prohibited
any one institution from acting as any combination of an investment bank, a commercial bank, and
an insurance company. With the bipartisan passage of the Gramm–Leach–Bliley Act, commercial banks,
investment banks, securities firms, and insurance companies were allowed to consolidate. Furthermore,
it failed to give to the SEC or any other financial regulatory agency the authority to regulate
large investment bank holding companies.[1] The legislation was signed into law by President Bill
Clinton.[2]"
a good read but i disagree with their suggested approach:
"Consideration needs to be given to approaches such as those suggested by Bulow and Klemperer
(2015) and
King (2016) that give more weight to market prices as indicators of asset values and that bring
automaticity to the restoration of bank capital when it starts to decline."
imo, small enough to fail institutions pose less system risk and are less likely to speculate.
I suspect over time we will disagree slightly here and there on specifics but it is a joy to have
someone here that gets down to real analysis.
In my view Sarin-Summers took too tiny a step into something fundamental but often overlooked.
The return to equity is a mix of the equity/asset ratio (which needs to go up) aka leverage risk
and the issue of operational risk which you are hinting at.
I bet Anne will demand more on what I'm saying here. Tiem to think about how best to present
this over at Econospeak as this is a really big deal. Even if it is something Trump's new CEA
(Lawrence Kudlow) does not get. Neither does PeterK so maybe he can work for Kudlow - the stupidest
man alive (almost).
Small enough to fail institutions like ... Bear and Lehman?
Theory aside, in the real life crisis we had risk built up across the entire system, not just
big banks, and when a few midsized firms went under it broke the buck and everything went to hell.
Perhaps more importantly though, it was *consumers'* overleveraging that caused the prolonged
depression. The big banks participated in that but didn't have central roles.
"Milton Friedman did as he studies their failures during the Great Depression."
So, how is it that he promised money market funds would ever be at risk of insolvency and need
Fed bailout of credit, and that money market funds would never face bank runs because no one would
ever question their safety and solvency?
How is it that he failed to predict Primary Reserve breaking the buck and triggering bank runs
on the shadow banks?
I remember the debate over Regulation Q and retail money market funds. I agreed with the big
government liberals that it was going to end badly. That it took 37 years is not a surprise to
me, but October 2008 was no surprise at all to me. It was forecast by my kind of economists in
1970 based on what happened multiple times before 1935 when sane bankers and economists developed
the bank regulation that produced half a century of no bank crisis.
Friedman, on the other hand, argued for deregulation that delivered bank crisis in the late
80s, the 90s multiple times deftly handled by bailouts by both government and by forcing Wall
Street banks to do Morgan bailouts, eg LTCM, and the IMF, and then yet again, the bank crisis
of the 00s.
Three decades of bank crisis in four decades is hardly evidence Friedman understood banking.
For Free Market Ideologues the Great Depression Never Happened
Simple question for Jeb H: Why was there a Great Depression when we had budget surpluses every
year during the 1920s?
How could the Free Market have failed so completely from 1929 to 1933? We had gold money and
regulations were minimal. It was the ideal context for the Free Market and yet the Dow lost 90%
of its value. Why has the Dow nearly tripled in value now with Dodd-Frank in force?
I'm with yuan on this one. But this is a long story. For today - let me applaud you and yuan for
bringing something new and needed here. Debates over actual economic analysis.
We got a lot more than the financial crisis from r lying on markets more than government. Yes,
regs are necessary (externalities, monopolies, etc) but "the more the merrrier" is not the underlying
principle. Read that D/F has > 20k "rules" with >300 "major" rules yet to be written after 6 years
of work. The world changes way faster than government can. Regulators need to find much simpler,
more general approaches ("less leverage") if they're going to continue to add value.
This is a problem of the teaching of contemporary economics, not of Jed Hensarling. Economists
tout simplified classical models as fundamentally correct, teach them in freshman Economics 101,
and only admit that they don't approximate reality in Econ 401, for seniors. But most students
never take another econ course after 101. The damage is done. Not surprisingly, most young Republicans
discover that economic reality is...Free Market and Republican!
Think maybe it's time to show them that the classical model doesn't really work when they are
freshmen, and not complain after they're already in Congress.
Agency's '04 Rule Let Banks Pile Up New Debt
It was unanimous. The decision, changing what was known as the net capital rule, was completed
and published in The Federal Register a few months later.
With that, the five big independent investment firms were unleashed.
In loosening the capital rules, which are supposed to provide a buffer in turbulent times,
the agency also decided to rely on the firms' own computer models for determining the riskiness
of investments, essentially outsourcing the job of monitoring risk to the banks themselves.
At Bear Stearns, the leverage ratio - a measurement of how much the firm was borrowing compared
to its total assets - rose sharply, to 33 to 1.
Ah, Texas the home of fundamentalism. Texas basically lives by sticking a big straw in the ground
and selling what comes out. That is great until it (as it will) stops working. Texas is a caricature
of all that is wrong with mankind.
Another way to look at Texas is as the Saudi Arabia of North America. All that is missing is a
King. The rest of the USA should get together and give it back to Mexico. Both countries would
be better off.
"... Democracy is inevitably going to clash with the demands of Globalization as they are opposite. Globalization requires entrepreneurs to search cheaper means of production worldwide. ..."
"... In practice, this means moving capital out of the USA. ..."
"... To put it in Marxist terms the interests of American society to survive and prosper came into contradiction with the interests of capitalism as a system of production and with the capitalists as a class who has no homeland, and for whom homeland is where it is easier to make money. ..."
"... American capitalism from its very beginning was based on the assumption that what was good for business was good for America. Until 1929 it more or less worked. The robber barons were robbing other entrepreneurs and workers but at least they reinvested their ill gained profits in America. The crash of 1929 showed that the interests of Big Banks clashed with the interest of American society with devastating results. ..."
"... The decades after WWII have seen a slow and steady erosion of American superiority in technology and productivity and slow and steady flight of capital from the USA. Globalization has been undermining America. From the point of view of Global prosperity if it is cheaper to produce in China, production should relocate to China. From the point of view of American worker, this is treason, a policy destroying the United States as an industrial power, as a nation, and as a community of citizens. Donald Trump is the first top ranking politician who has realized this simple fact. The vote for Donald Trump has been a protest against Globalization, immigration, open borders, capital flight, multiculturalism, liberalism and all the values American Liberal establishment has been preaching for 60 years that are killing the USA. ..."
"... Donald Trump wants to arrest the assault of Globalization on America. He promised to reduce taxes, and to attract business back to the USA. However, reduced taxes are only one ingredient in incentives. For businesses to stay or come back to the US, companies must have educated labor force, steady supply of talented, well-educated young people, excellent schools, and safe neighborhoods, among other things. As of now most of these preconditions are missing. ..."
"... Dr. Brovkin is a historian, formerly a Harvard Professor of History. He has published several books and numerous articles on Russian History and Politics. Currently, Dr. Brovkin works and lives in Marrakech, Morocco. ..."
"... This is an interesting question: is it possible to contain neoliberal globalization by building walls, rejecting 'trade' agreement, and so on. I get the feeling that a direct attack may not work. Water will find a way, as they say. With a direct attack against globalization, what you're likely to face is major capital flight. ..."
In his election campaign Donald Trump has identified several key themes that defined American malaise.
He pointed to capital flight, bad trade deals, illegal immigration, and corruption of the government
and of the press. What is missing in Trump's diagnosis though is an explanation of this crisis. What
are the causes of American decline or as Ross Pero used to say: Let's look under the hood.
Most of the challenges America faces today have to do with two processes we call Globalization
and Sovietization. By Globalization we mean a process of externalizing American business thanks to
the doctrine of Free trade which has been up to now the Gospel of the establishment. By Sovietization
we mean a process of slow expansion of the role of the government in economy, education, business,
military, press, virtually any and every aspect of politics and society.
Let us start with Globalization.
Dani Rodrick (
The Globalization Paradox: Democracy and the Future of the World Economy) has argued that
it is impossible to have democracy and globalization at the same time. Democracy is inevitably
going to clash with the demands of Globalization as they are opposite. Globalization requires entrepreneurs
to search cheaper means of production worldwide.
In practice, this means moving capital out of the USA. For fifty years economists have
been preaching Free trade, meaning that free unimpeded, no tariffs trade is good for America. And
it was in the 1950s, 60s and 1970s that American products were cheaper or better than those overseas.
Beginning with the 1970s, the process reversed. Globalization enriched the capitalists and impoverished
the rest of Americans. To put it in Marxist terms the interests of American society to survive
and prosper came into contradiction with the interests of capitalism as a system of production and
with the capitalists as a class who has no homeland, and for whom homeland is where it is easier
to make money.
American capitalism from its very beginning was based on the assumption that what was good
for business was good for America. Until 1929 it more or less worked. The robber barons were robbing
other entrepreneurs and workers but at least they reinvested their ill gained profits in America.
The crash of 1929 showed that the interests of Big Banks clashed with the interest of American society
with devastating results.
The decades after WWII have seen a slow and steady erosion of American superiority in technology
and productivity and slow and steady flight of capital from the USA. Globalization has been undermining
America. From the point of view of Global prosperity if it is cheaper to produce in China, production
should relocate to China. From the point of view of American worker, this is treason, a policy destroying
the United States as an industrial power, as a nation, and as a community of citizens. Donald Trump
is the first top ranking politician who has realized this simple fact. The vote for Donald Trump
has been a protest against Globalization, immigration, open borders, capital flight, multiculturalism,
liberalism and all the values American Liberal establishment has been preaching for 60 years that
are killing the USA.
Donald Trump wants to arrest the assault of Globalization on America. He promised to reduce
taxes, and to attract business back to the USA. However, reduced taxes are only one ingredient in
incentives. For businesses to stay or come back to the US, companies must have educated labor force,
steady supply of talented, well-educated young people, excellent schools, and safe neighborhoods,
among other things. As of now most of these preconditions are missing.
To fight Globalization Donald Trump announced in his agenda to drop or renegotiate NAFTA and TPP.
That is a step in the right direction. However, this will not be easy. There are powerful vested
interests in making money overseas that will put up great resistance to America first policy. They
have powerful lobbies and votes in the Congress and it is by far not certain if Trump will succeed
in overcoming their opposition.
Another step along these lines of fighting Globalization is the proposed building of the Wall
on Mexican border. That too may or may not work. Powerful agricultural interests in California have
a vested interest in easy and cheap labor force made up of illegal migrants. If their supply is cut
off they are going to hike up the prices on agricultural goods that may lead to inflation or higher
consumer prices for the American workers.
... ... ...
The Military: Americans are told they have a best military in the world. In fact, it is not the
best but the most expensive one in the world. According to the National priorities Project, in fiscal
2015 the military spending amounted to 54% of the discretionary spending in the
amount of 598.5 billion dollars . Of those almost 200 billion dollars goes for operations and
maintenance, 135 billion for military personnel and 90 billion for procurement (see
Here is How the US Military Spends its Billions )
American military industrial complex spends more that the next seven runners up combined. It is
a Sovietized, bureaucratic structure that exists and thrives on internal deals behind closed doors,
procurement process closed to public scrutiny, wasted funds on consultants, kickbacks, and outrageous
prices for military hardware. Specific investigations of fraud do not surface too often. Yet for
example, DoD Inspector General reported:
Why is it that an F35 fighter jet should cost 135 million apiece and the Russian SU 35 that can
do similar things is sold for 35 million dollars and produced for 15 million? The answer is that
the Congress operates on a principle that any price the military asks is good enough. The entire
system of military procurement has to be scrapped. It is a source of billions of stolen and wasted
dollars. The Pentagon budget of half a trillion a year is a drain on the economy that is unsustainable,
and what you get is not worth the money. The military industrial complex in America does not deliver
the best equipment or security it is supposed to.(on this see:
http://nationalinterest.org/blog/the-skeptics/cutting-waste-isnt-enough-curb-pentagon-spending-18640
)
Donald Trump was the first to his credit who raised the issue: Do we need all these bases overseas?
Do they really enhance American security? Or are they a waste of money for the benefit of other countries
who take America for a free ride. Why indeed should the US pay for the defense of Japan? Is Japan
a poor country that cannot afford to defend itself? Defense commitments like those expose America
to unnecessary confrontations and risk of war over issues that have nothing to do with America's
interests. Is it worth it to fight China over some uninhabitable islands that Japan claims? (See
discussion:
http://nationalinterest.org/blog/the-skeptics/should-the-us-continue-guarantee-the-security-wealthy-states-17720
)
Similarly, Trump is the first one to raise the question: What is the purpose of NATO? ( see discussion
of NATO utility:
http://nationalinterest.org/blog/the-buzz/will-president-trump-renegotiate-the-nato-treaty-18647
) Yes the Liberal pro-Clinton media answer is: to defend Europe from Russian aggression. But
really what aggression? If the Russians wanted to they could have taken Kiev in a day two years ago.
Instead, they put up with the most virulently hostile regime in Kiev. Let us ask ourselves would
we have put up with a virulently anti-American regime in Mexico, a regime that would have announced
its intention to conclude a military alliance with China or Russia? Were we not ready to go to nuclear
war over Soviet missiles in Cuba? If we would not have accepted such a regime in Mexico, why do we
complain that the Russians took action against the new regime in Ukraine. Oh yes, they took Crimea.
But the population there is Russian, and until 1954 it was Russian territory and after Ukrainian
independence the Russians did not raise the issue of Crimea as Ukrainian territory and paid rent
for their naval base there The Russians took it over only when a hostile regime clamoring for NATO
membership settled in Kiev. Does that constitute Russian aggression or actually Russian limited response
to a hostile act? (see on this Steven Cohen:
http://eastwestaccord.com/podcast-stephen-f-cohen-talks-russia-israel-middle-east-diplomacy-steele-unger/
) As I have argued elsewhere Putin has been under tremendous pressure to act more decisively
against the neo-Nazis in Kiev. (see Vlad Brovkin: On Russian Assertiveness in Foreign Policy. (
http://eastwestaccord.com/?s=brovkin&submit=Search
)
With a little bit of patience and good will a compromise is possible on Ukraine through Minsk
accords. Moreover, Ukraine is not in NATO and as long as it is not admitted to NATO, a deal with
the Russians on Ukraine is feasible. Just like so many other pro-American governments, Ukraine wants
to milk Uncle Sam for what it is worth. They expect to be paid for being anti/Russian. (See discussion
on need of enemy:
http://nationalinterest.org/feature/does-america-need-enemy-18106
) Would it not be a better policy to let Ukraine know that they are on their own: no more subsidies,
no more payments? Mend your relations with Russia yourselves. Then peace would immediately prevail.
If we admit that there is no Russian aggression and that this myth was propagated by the Neo/Cons
with the specific purpose to return to the paradigm of the cold war, i.e. more money for the military
industrial complex, if we start thinking boldly as Trump has begun, we should say to the Europeans:
go ahead, build your own European army to allay your fears of the Russians. Europe is strong enough,
rich enough and united enough to take care of its defense without American assistance. (See discussion
of Trumps agenda:
http://nationalinterest.org/feature/course-correction-18062
)
So, if Trump restructures procurement mess, reduces the number of military bases overseas, and
invests in high tech research and development for the military on the basis of real competition,
hundreds of billions of dollars could be saved and the defense capability of the country would increase.
... ... ...
Dr. Brovkin is a historian, formerly a Harvard Professor of History. He has published several
books and numerous articles on Russian History and Politics. Currently, Dr. Brovkin works and lives
in Marrakech, Morocco.
This is a bit too much, Volodya. Maybe you should've taken one subject – globalization, for
example – and stop there.
This is an interesting question: is it possible to contain neoliberal globalization by
building walls, rejecting 'trade' agreement, and so on. I get the feeling that a direct attack
may not work. Water will find a way, as they say. With a direct attack against globalization,
what you're likely to face is major capital flight.
You might be able to make neoliberal globalization work for you (for your population, that
is), like Germany and the Scandinavians do, but that's a struggle, constant struggle. And it's
a competition; it will have to be done at the expense of other nations (see Greece, Portugal,
Central (eastern) Europe). And having an anti-neoliberal president is not enough; this would require
a major change, almost a U turn, in the whole governing philosophy. Forget the sanctity of 'free
market', start worshiping the new god: national interest
What an INTERESTING article -- So much that is right, so much that is wrong. An article you
can get your teeth into.
On globalisation: pretty spot-on (although I believe he exaggerates the US weakness in what he
calls "preconditions": there are still many well educated Americans, still good neighborhoods
(yes, sure it could be a lot better). He's against NAFTA & other neoliberal Trade self indulgences.
But then we come to his concept of "Sovietization" of the US. Perhaps it's mere semantics, but
I find the concept incoherent & suspiciously adapted to deliberately agitate US conservatives.
Example: "huge sectors of American economy are not private at all, that in fact they have been
slowly taken over by an ever growing state ownership and control"
This is nonsense on its face: the government spews out trillions to private actors to provide
goods & services. It does so, in part, because it has systematically privatized every government
function capable of returning a profit. The author can't see the actor behind the mask: how much
legislation is now written by & for the benefit of private interests ? (Obama care, Bush pharmaceutical
laws ?)
Of course, the author is correct on the US military-industrial complex: it is a sump of crime
& corruption. Yet he seems not to grasp that the problem is regulative capture. How is the Fiasco
of the F35 & MacDonald Douglas merely an issue for the Legislature alone & how does this circus
resemble the Soviet Union, beyond the fact that BOTH systems (like most systems) are capable of
gross negligence & corruption ?
I like what the author says about NATO, Japan, bases etc. Although he's a little naive if he
thinks NATO for instance is about "protecting" Europe. Yes, that's a part of it: but primarily
NATO etc exist as a tool/mask behind which the US can exert it's imperial ambitions against friend
& for alike.
The author does go off against welfare well that's to be expected: sadly I don't think he quite
gets the connection between globalisation & welfare .He also legitimately goes after tertiary
education, but seems to be (again) confused as to cause & effect.
The author is completely spot on with his sovietization analogy when he comes to the US security
state. Only difference between the Soviets & the US on security totalitarianism ? The US is much
better at it (of course the US has technological advantages unimaginable to the Soviets)
• Replies:
@Randal I agree with you that it's a fascinating piece, and I also agree with many of the points
you agree with.
But then we come to his concept of "Sovietization" of the US. Perhaps it's mere semantics, but
I find the concept incoherent & suspiciously adapted to deliberately agitate US conservatives.
Example: "huge sectors of American economy are not private at all, that in fact they
have been slowly taken over by an ever growing state ownership and control"
This is nonsense on its face: the government spews out trillions to private actors to provide
goods & services. It does so, in part, because it has systematically privatized every government
function capable of returning a profit. The author can't see the actor behind the mask: how much
legislation is now written by & for the benefit of private interests ? (Obama care, Bush pharmaceutical
laws ?)
I think part of the problem here might be a mistaken focus on "the government" as an independent
actor, when in reality it is just a mechanism whereby the rulers (whether they are a dictator,
a political party or an oligarchy or whatever), and those with sufficient clout to influence them,
get things done the way they want to see them done.
As such there is really not much difference between the government directly employing the people
who do things (state socialism), and the government paying money to companies to get the same
things done. Either way, those who use the government to get things done, get to say what gets
done and how. There are differences of nuance, in terms of organizational strengths and weaknesses,
degrees of corruption and of efficiency, but fundamentally it's all big government.
A more interesting question might be - how really different are these big government variants
from the small government systems, in which the rulers pay people directly to get things done
the way they want them to be done?
An excellent article. The points that resonated the most were:
For businesses to stay or come back to the US, companies must have educated labor force,
steady supply of talented, well-educated young people, excellent schools, and safe neighborhoods,
among other things. As of now most of these preconditions are missing.
This is an enormously difficult problem that will take years to resolve, and it will need a
rethink of education from the ground up + the political will to fight the heart of Cultural Bolshevism
and the inevitable 24/7 Media assault.
Drain the swamp in Washington: ban the lobbyists, make it a crime to lobby for private interest
in a public place, restructure procurement, introduce real competition, restore capitalism,
phase out any government subsidies to Universities, force them to compete for students, force
hospitals to compete for patients. Cut cut cut expenditure everywhere possible, including welfare.
Banning lobbyists should be possible but draining the rest of the swamp looks really complicated.
Each area would need to be examined from the ground up from a value for money – efficiency viewpoint.
It doesn't matter which philosophy each one is run on – good value healthcare is desirable whichever
system produces it.
Could we have ever imagined in our worst dreams that a system of mass surveillance would
be created and perfected in the USA. (see discussion on this in: Surveillance State, in
http://www.americamagazine.org/issue/surveillance-state
This one should be easy. The Constitution guarantees a right to privacy so just shut down the
NSA. Also shut down the vast CIA mafia (it didn't exist prior to 1947) and the expensive and useless
FED (controlling the money supply isn't the business of a group of private banks – an office in
the Treasury could easily match the money supply to economic activity).
This one should be easy. The Constitution guarantees a right to privacy so just shut down the
NSA. Also shut down the vast CIA mafia (it didn't exist prior to 1947) and the expensive and useless
FED (controlling the money supply isn't the business of a group of private banks – an office in
the Treasury could easily match the money supply to economic activity).
From Unz, I have learned that the US actually has a four-part government: the "Deep State"
part which has no clear oversight from any of the other three branches.
To put it in Marxist terms the interests of American society to survive and prosper came
into contradiction with the interests of capitalism as a system of production and with the
capitalists as a class who has no homeland, and for whom homeland is where it is easier to
make money.
Another add-on contradiction, comrade, is that the selfsame capitalist class expect their host
nation to defend their interests whenever threatened abroad. This entails using the resources
derived from the masses to enforce this protection including using the little people as cannon
fodder when deemed useful.
Donald Trump is the first top ranking politician who has realized this simple fact.
Come now, do you really believe that all these politicians who have gone to these world-class
schools don't know this? They simply don't care. They're working on behalf of the .1% who are
their benefactors and who will make them rich. They did not go into politics to take vows of poverty.
They just realize the need to placate the masses with speeches written by professional speechwriters,
that's all.
Insofar as Social Security/Medicare/Medicaid goes, those are the most democratic institutions
of all. It's money spent on ourselves, internally, with money being cycled in and out at the grassroots
level. Doctors, nurses, home-care providers, etc etc, all local people get a piece of the action
unlike military spending which siphons money upwards to the upper classes.
I'd rather be employed in a government job than unemployed in the private sector. That's not
the kind of "freedom" I'm searching for comrade.
@animalogic What an INTERESTING article -- So much that is right, so much that is wrong. An
article you can get your teeth into.
On globalisation: pretty spot-on (although I believe he exaggerates the US weakness in what
he calls "preconditions": there are still many well educated Americans, still good neighborhoods
(yes, sure it could be a lot better). He's against NAFTA & other neoliberal Trade self indulgences.
But then we come to his concept of "Sovietization" of the US. Perhaps it's mere semantics, but
I find the concept... incoherent...& suspiciously adapted to deliberately agitate US conservatives.
Example: "huge sectors of American economy are not private at all, that in fact they
have been slowly taken over by an ever growing state ownership and control"
This is nonsense on its face: the government spews out trillions to private actors to provide
goods & services. It does so, in part, because it has systematically privatized every government
function capable of returning a profit. The author can't see the actor behind the mask: how much
legislation is now written by & for the benefit of private interests ? (Obama care, Bush pharmaceutical
laws ?)
Of course, the author is correct on the US military-industrial complex: it is a sump of crime
& corruption. Yet he seems not to grasp that the problem is regulative capture. How is the Fiasco
of the F35 & MacDonald Douglas merely an issue for the Legislature alone...& how does this circus
resemble the Soviet Union, beyond the fact that BOTH systems (like most systems) are capable of
gross negligence & corruption ?
I like what the author says about NATO, Japan, bases etc. Although he's a little naive if he
thinks NATO for instance is about "protecting" Europe. Yes, that's a part of it: but primarily
NATO etc exist as a tool/mask behind which the US can exert it's imperial ambitions ...against
friend & for alike.
The author does go off against welfare...well that's to be expected: sadly I don't think he quite
gets the connection between globalisation & welfare....He also legitimately goes after tertiary
education, but seems to be (again) confused as to cause & effect.
The author is completely spot on with his sovietization analogy when he comes to the US security
state. Only difference between the Soviets & the US on security totalitarianism ? The US is much
better at it (of course the US has technological advantages unimaginable to the Soviets)
I agree with you that it's a fascinating piece, and I also agree with many of the points you
agree with.
But then we come to his concept of "Sovietization" of the US. Perhaps it's mere semantics,
but I find the concept incoherent & suspiciously adapted to deliberately agitate US conservatives.
Example: "huge sectors of American economy are not private at all, that in fact they have been
slowly taken over by an ever growing state ownership and control"
This is nonsense on its face: the government spews out trillions to private actors to provide
goods & services. It does so, in part, because it has systematically privatized every government
function capable of returning a profit. The author can't see the actor behind the mask: how
much legislation is now written by & for the benefit of private interests ? (Obama care, Bush
pharmaceutical laws ?)
I think part of the problem here might be a mistaken focus on "the government" as an independent
actor, when in reality it is just a mechanism whereby the rulers (whether they are a dictator,
a political party or an oligarchy or whatever), and those with sufficient clout to influence them,
get things done the way they want to see them done.
As such there is really not much difference between the government directly employing the people
who do things (state socialism), and the government paying money to companies to get the same
things done. Either way, those who use the government to get things done, get to say what gets
done and how. There are differences of nuance, in terms of organisational strengths and weaknesses,
degrees of corruption and of efficiency, but fundamentally it's all big government.
A more interesting question might be – how really different are these big government variants
from the small government systems, in which the rulers pay people directly to get things done
the way they want them to be done?
The Shiller 10-year price-earnings ratio is currently 28.08, so the inverse or the earnings rate
is 3.56%. The dividend yield is 1.98%. So an expected yearly return over the coming 10 years would
be 3.56 + 1.98 or 5.54% provided the price-earnings ratio stays the same and before investment costs.
Against the 5.54% yearly expected return on stock over the coming 10 years, the current 10-year
Treasury bond yield is 2.56%.
"Jack Bogle tells you the secret to becoming a winning investor"
By Chuck Jaffe, Columnist...Dec 20, 2016...11:40 a.m. ET
..."On smart beta investing in general:
Bogle: Smart beta is stupid.
So not one of these new index products is intriguing?
Bogle: No, no, no, no, no. Academics can find anything with these masses of data they
have on their computers. They can find something that works in the past, it's as easy as rolling
off a log. But it almost never works in the future – and not for very long - because they all
forget the most important single thing that happens in our markets reversion to the mean.
As the Good Book says, 'And the first shall be last and the last shall be first.'...
On what to expect from the market:
Bogle: The key to stock market investment returns is today's dividend yield [around 2%]
plus future earnings growth. Nobody knows what that earnings growth will be, but I am guessing
it will be maybe in the range of 4% to 5%. That seems like an informed reasonable expectation.
You compare that with history and we are looking at something very different. An average
dividend yield not of 2% but of maybe 4.5%, and earnings growth has averaged over 6% over the
last 50 years.
So we have lower earnings forecast and a much lower dividend yield built in. No one is going
to change that. It's like buying a bond, what is the interest rate when you buy in. So we're
talking about lower returns from investment side, from what corporations do.
The other side of total return on stocks is what we call speculative return, and that's
how bullish or bearish investors are, which is measured by the price/earnings multiple -- how
many times earnings your companies sell at or the total stock market sells at. Over the long-term
past, that number has been about 15 times earnings. Today, depending on who you are listening
to, it could be as high as 25 times earnings. ...I look backward at reported earnings after
all the bad stuff and I'm looking at a p/e of 25. So the market is at least fully valued and
I think it is reasonable to expect possibly negative returns but certainly no positive speculative
return.
So we're looking at future market returns, if we are lucky, of 4-5% before the costs of
investing are deducted."
Bad News for America's Workers
By JOSEPH E. STIGLITZ
NEW YORK – As US President-elect Donald Trump fills his
cabinet, what have we learned about the likely direction
and impact of his administration's economic policy?
To be sure, enormous uncertainties remain. As in many
other areas, Trump's promises and statements on economic
policy have been inconsistent. While he routinely accuses
others of lying, many of his economic assertions and
promises – indeed, his entire view of governance – seem
worthy of Nazi Germany's "big lie" propagandists.
Trump will take charge of an economy on a strongly
upward trend, with third-quarter GDP growing at an
impressive annual rate of 3.2% and unemployment at 4.6% in
November. By contrast, when President Barack Obama took
over in 2009, he inherited from George W. Bush an economy
sinking into a deep recession. And, like Bush, Trump is
yet another Republican president who will assume office
despite losing the popular vote, only to pretend that he
has a mandate to undertake extremist policies.
The only way Trump will square his promises of higher
infrastructure and defense spending with large tax cuts
and deficit reduction is a heavy dose of what used to be
called voodoo economics. Decades of "cutting the fat" in
government has left little to cut: federal government
employment as a percentage of the population is lower
today than it was in the era of small government under
President Ronald Reagan some 30 years ago.
With so many former military officers serving in
Trump's cabinet or as advisers, even as Trump cozies up to
Russian President Vladimir Putin and anchors an informal
alliance of dictators and authoritarians around the world,
it is likely that the US will spend more money on weapons
that don't work to use against enemies that don't exist.
If Trump's health secretary succeeds in undoing the
careful balancing act that underlies Obamacare, either
costs will rise or services will deteriorate – most likely
both.
During the campaign, Trump promised to get tough on
executives who outsource American jobs. He is now holding
up the news that the home heating and air conditioning
manufacturer Carrier will keep some 800 jobs in my home
state of Indiana as proof that his approach works. Yet the
deal will cost taxpayers $7 million, and still allow
Carrier to outsource 1,300 jobs to Mexico. This is not a
sound industrial or economic policy, and it will do
nothing to help raise wages or create good jobs across the
country. It is an open invitation for a shakedown of the
government by corporate executives seeking handouts.
Similarly, the increase in infrastructure spending is
likely to be accomplished through tax credits, which will
help hedge funds, but not America's balance sheet: such
programs' long track record shows that they deliver little
value for money. The cost to the public will be especially
high in an era when the government can borrow at near-zero
interest rates. If these private-public partnerships are
like those elsewhere, the government will assume the
risks, and the hedge funds will assume the profits.
The debate just eight years ago about "shovel-ready"
infrastructure seems to be a distant memory. If Trump
chooses shovel-ready projects, the long-term impact on
productivity will be minimal; if he chooses real
infrastructure, the short-term impact on economic growth
will be minimal. And back-loaded stimulus has its own
problems, unless it is managed extremely carefully.
If Trump's pick for US Treasury Secretary, the Goldman
Sachs and hedge-fund veteran Steven Mnuchin, is like
others from his industry, the expertise he will bring to
the job will be in tax avoidance, not constructing a
well-designed tax system. The "good" news is that tax
reform was inevitable, and was likely to be undertaken by
Speaker of the House Paul Ryan and his staff – giving the
rich the less progressive, more capital-friendly tax
system that Republicans have long sought. With the
abolition of the estate tax, the Republicans would finally
realize their long-held ambition of creating a dynastic
plutocracy – a far cry from the "equality of opportunity"
maxim the party once trumpeted....
What the US economy doesn't need from Donald Trump
The only way he can square higher infrastructure and
defence spending with tax cuts is voodoo economics
By Joseph Stiglitz - Guardian
As Donald Trump fills his cabinet, what have we learned
about the likely direction and impact of his
administration's economic policy?
To be sure, enormous uncertainties remain. As in many
other areas, Trump's promises and statements on economic
policy have been inconsistent. While he routinely accuses
others of lying, many of his economic assertions and
promises – indeed, his entire view of governance – seem
worthy of Nazi Germany's "big lie" propagandists.
Trump will take charge of an economy on a strongly
upward trend, with third-quarter GDP growing at an
impressive annual rate of 3.2% and unemployment at 4.6% in
November. By contrast, when Barack Obama took over in
2009, he inherited from George W Bush an economy sinking
into a deep recession. And, like Bush, Trump is yet
another Republican president who will assume office
despite losing the popular vote, only to pretend that he
has a mandate to undertake extremist policies.
The only way Trump will square his promises of higher
infrastructure and defence spending with large tax cuts
and deficit reduction is a heavy dose of what used to be
called voodoo economics. Decades of "cutting the fat" in
government has left little to cut: federal government
employment as a percentage of the population is lower
today than it was in the era of small government under
Ronald Reagan about 30 years ago.
With so many former military officers serving in
Trump's cabinet or as advisers, even as Trump cozies up to
the Russian president, Vladimir Putin, and anchors an
informal alliance of dictators and authoritarians around
the world, it is likely that the US will spend more money
on weapons that don't work to use against enemies that
don't exist. If Trump's health secretary succeeds in
undoing the careful balancing act that underlies
Obamacare, either costs will rise or services will
deteriorate – most likely both.
During the campaign, Trump promised to get tough on
executives who outsource American jobs. He is now holding
up the news that the home heating and air-conditioning
manufacturer Carrier will keep around 800 jobs in my home
state of Indiana as proof that his approach works. Yet the
deal will cost taxpayers $7m, and still allow Carrier to
outsource 1,300 jobs to Mexico. This is not a sound
industrial or economic policy, and it will do nothing to
help raise wages or create good jobs across the country.
It is an open invitation for a shakedown of the government
by corporate executives seeking handouts.
Similarly, the increase in infrastructure spending is
likely to be accomplished through tax credits, which will
help hedge funds, but not America's balance sheet: such
programmes' long track record shows that they deliver
little value for money. The cost to the public will be
especially high in an era when the government can borrow
at near-zero interest rates. If these private-public
partnerships are like those elsewhere, the government will
assume the risks, and the hedge funds will assume the
profits....
As soon as he awakes, Brian Porrell checks his e-mail,
sometimes firing off a message before he gets out of bed.
He makes calls during his commute to the Waltham staffing
firm WinterWyman, spends 10 to 12 hours at the office and
out visiting clients, and keeps his phone by his side at
night, checking work e-mails while he watches sports on
TV.
Like many workers today, Porrell, 30, is on the job
wherever he is - and he doesn't count out-of-office
exchanges in his 50-plus hour week.
The millennial generation, the first to grow up with
smartphones in their hands, is often stereotyped as lazy
and entitled. But workplace experts say workaholics are
common among 19-to-35-year-olds, perhaps more so than
among older members of Generation X and baby boomers.
In one online study, more than 4 in 10 millennials
consider themselves "work martyrs" - dedicated,
indispensable, and racked with guilt if they take time
off.
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What's more, nearly half of millennials want to be seen
that way, according to the survey of 5,600 workers by
Project: Time Off, a Washington, D.C., coalition that
promotes vacation time.
So why are millennials bent on being workaholics? Even
though the economy has improved markedly in recent years,
young people in the workforce today have record levels of
student loan debt. They are also less likely than previous
generations to earn more than their parents, according to
a Stanford University report. The percentage of children
who are better off than their parents has dropped
dramatically - 50 percent of those born in the 1980s have
a higher standard of living than their parents, compared
with 90 percent of those born in the 1940s.
(December 8, 2016 - Today's children face tough
prospects of being better off than their parents,
Stanford researchers find
http://stanford.io/2ghwtmj
via @Stanford)
The way millennials were raised may play into their
always-on mindset, too, said Bob Kelleher, a Boston-based
employee engagement consultant and author. Many of them
were highly scheduled, he said, going to soccer camps,
enrolling in SAT prep courses, and competing on the debate
team in order to get into a good college.
And some have delayed several of the responsibilities of
adulthood, he noted, living with their parents and putting
off marriage and kids. That frees them up to work even
more.
"This is a driven generation," he said.
Jane Alexander, 26, a staffing manager at WinterWyman,
said she is often one of the first to arrive and the last
to leave the office but acknowledged she will probably
work less when she has kids. "That is part of why I want
to crank it now while I do have time," she said.
The concept of 24/7 work has become so prevalent that
workplace analysts are starting to talk about "work-life
blending" instead of "work-life balance."
The ability to work anytime, anywhere, helps propel
this blending of work and life, in part because answering
a work text at a coffee shop doesn't feel as much like
work as sitting in a cubicle. Indeed, nearly one in five
people said they don't consider after-hours texts from
clients or customers to be work, according to Workforce
Institute at Kronos Inc., a think tank set up by the
Chelmsford human resources software provider.
"If a friend texted me at the gym I would answer their
text. Answering a work e-mail is just a natural extension
of that," said Jessica Molson, a 24-year-old integration
manager at Beacon Communities, the Boston real estate
developer and property management firm. "I don't think of
it as working; it's just communicating."
Molson finds herself answering e-mails and jumping on
conference calls even when she's on vacation, once
distracting other participants with the sound of seagulls
in the background while she was in Florida with her
family. But going on a real vacation is a rarity for
Molson, who tends to take long weekends because she's
afraid of missing something at work - and also because she
loves what she does.
Like many millennials, Molson came of age when the
economy was reeling, and the uncertain job market had a
profound effect on her.
"I'm very anxious to rack up as much experience as
possible," she said.
Millennials are also more likely to forfeit paid days
off than older generations of workers, with a quarter of
18-to-25-year-olds reporting they weren't using any of
their paid vacation days this year, according to the
personal finance website Bankrate.com. The rise of
companies offering unlimited vacation time may contribute
to that, workplace consultants say, noting that when there
is no set bank of "use it or lose it" vacation time,
people are less likely to take days off than they
otherwise would be.
But not being able to truly get away from work can have
serious downsides. Employees who don't disconnect
experience more stress and anxiety, which leads to reduced
productivity and a higher rate of burnout, said Dan
Schawbel, research director at Future Workplace, an
executive development firm in New York.
"If all you're doing is trying to be the perfect
employee, it's actually not going to work out in your
favor because it's going to make you less happy," said
Schawbel, who describes working too much as "a weakness
disguised as a strength."
Seeing co-workers hunched over their desks late at
night can cause others to feel they should be doing the
same and increase guilt, or resentment, among employees
who strive to keep their work and home lives separate.
It can also lead people working around the clock to
hold it against their employer - "even if it's your own
fault," Schawbel noted. Indeed, people who see being a
"work martyr" as a good thing are more likely to be
unhappy with their jobs, and less likely to receive
bonuses, according to the Project: Time Off study.
That can lead to retention problems, particularly among
millennials, who aren't afraid to quit. Two out of three
young workers expect to leave their current job by 2020,
according to a recent study by Deloitte.
Still, workaholics aren't necessarily unhappy - many
are ambitious or simply enjoy their work. At Beacon
Communities, several employees work 60 to 70 hours a week
no matter what adjustments supervisors make. Adding more
people to an overachiever's team doesn't help, said chief
administrative officer Darlene Perrone: "They just find
another project." ...
I have enormous problems with generationism. Anything that
starts with {generation} is/are(n't) I know what is coming
is mostly nonsense. It is exactly the same as if you
replaced {generation} with {race} {gender} {nationality}
it is sure to be wrong for a significant (perhaps even a
majority) of the addressed category.
There does seem to be a fruitful direction to take in
"generational" analysis, though.
It may be that the mechanism by which increasing
inequality works is by reducing the prospects of new young
workers while generally maintaining the income of older
ones. Thus by age cohort, lifetime incomes follow a lower
and lower track as the young age compared to older
workers.
If that is what is happening, and someone with
sufficiently fine data may be able to show it, then it
would be trivial to forecast future inequality by
re-composing forecasts of lifetime income profiles for the
various cohorts and the inflow of new young cohorts.
The possibility is that there is a much more severe
inequality on the way that is embedded in the current age
cohorts, if we could display them.
I agree with this. I don't believe all the bullshit
categories come up with like Generation X, Millenials etc.
However, the ruling classes like to use age divisions to
divide and conquer so we will keep on hearing about how
unengaged, bored, lazy, vapid, greedy and irresponsible
young people are. And we have heard it going back at least
to Plato and Socrates!
Today's children face tough prospects
of being better off than their parents
http://stanford.io/2ghwtmj
via @Stanford - Dec 8
Parents often expect that their
kids will have a good shot at making more money than they
ever did.
But young people entering the workforce today are far
less likely to earn more than their parents when compared
to children born two generations before them, according to
a new study by Stanford researchers.
In a new study, Stanford economist Raj Chetty found
that the link between income and life expectancy varies
from one area to another within the United States.
The findings show that the fraction of kids earning
more than their parents has fallen dramatically – from 90
percent for kids born in the 1940s to 50 percent for kids
born in the 1980s.
"It's basically a coin flip as to whether you'll do
better than your parents," said economics Professor Raj
Chetty, a senior fellow at the Stanford Institute for
Economic Policy Research and one of the study's authors.
One of the most comprehensive studies of
intergenerational income mobility to date, the study used
a combination of Census data and anonymized Internal
Revenue Service records to measure the rate of "absolute
income mobility" – or the percentage of children who
earned more than their parents – for people born between
1940 and 1984.
What emerged from the empirical analysis was an
economic portrait of the fading American Dream, and
growing inequality appeared to be the main cause for the
steady decline.
"One of the defining features of the American Dream is
the ideal that children have a higher standard of living
than their parents," Chetty said. "We assessed whether the
U.S. is living up to this ideal, and found a steep decline
in absolute mobility that likely has a lot to do with the
anxiety and frustration many people are feeling, as
reflected in the election." ...
The paper was co-authored by David Grusky, a SIEPR
senior fellow, sociology professor and director of the
Stanford Center on Poverty and Inequality; Maximilian
Hell, a sociology doctoral student at Stanford; Professor
Nathaniel Hendren and doctoral student Robert Manduca,
both of Harvard; and Jimmy Narang, a former SIEPR
predoctoral fellow who is currently a doctoral student at
the University of California, Berkeley.
The study – and more information about the team's
research – can be found on The Equality of Opportunity
Project website run by Chetty and Hendren.
One of the basic themes
of Donald J. Trump's election campaign was that the United
States was being ripped off by foreign countries and that
his administration would reduce our trade deficit.
Yet the budget policies he is now proposing would be
sharply at odds with that goal. By advocating an expansive
budget through tax cuts and infrastructure spending, Mr.
Trump's plan would most likely lower national savings and
propel the United States dollar ever higher, creating the
very conditions to widen rather than to narrow the trade
deficit.
Mr. Trump seems to be overlooking a matter of basic
arithmetic. While a country's trade balance is the
difference between a country's exports and imports, it is
also the difference between the amount it saves and
invests, as can be derived from rearranging the components
of a country's aggregate demand equation. If a country
saves more than it invests, it will run a trade surplus.
Conversely, a country that saves less than it invests will
run a trade deficit.
Seemingly oblivious to this basic math, Mr. Trump is
proposing far-reaching and seemingly unfunded cuts in both
corporate and household tax rates. Worse yet, he is
simultaneously proposing large increases in both public
infrastructure and military spending.
He is doing so in the unrealistic hope that these
policies will cause the economy to accelerate from its
present 2 percent growth rate to between 3 and 4 percent.
And he is counting on such faster economic growth to
generate additional tax revenue.
Should a significant pickup in economic growth not
materialize, the net effect of these tax cuts and public
spending policies will almost certainly lead to a
significant widening of the budget deficit and to a
corresponding decline in public savings. That, in turn,
would in all probability lead to a significant widening of
the trade deficit as the country's overall savings rate
would decline.
A further basic weakness of Mr. Trump's budget proposal
is that it would add stimulus to the economy at the very
time that the economy is at or very close to full
employment. That policy is bound to raise concerns about
inflation and to push the Federal Reserve to raise
interest rates more than it is currently contemplating in
order to meet its inflation target.
One of the distinguishing characteristics of the global
economy right now is the divergence of monetary policy
stances among the world's major central banks. The United
States Federal Reserve is now embarked on a path of
raising interest rates at a time when the European Central
Bank and the Bank of Japan are still engaged in aggressive
rounds of quantitative easing in an effort to kick-start
their moribund economies.
Forcing the Federal Reserve to raise interest rates at
a faster pace than it is presently contemplating will only
serve to widen the difference between it and the other
major central banks. This would more than likely put
further upward pressure on the dollar.
Since the November election, the United States dollar
has already appreciated significantly, to its strongest
level in the past 14 years. The last thing that the
country needs if it is to reduce its trade deficit is a
further dollar appreciation. Such an appreciation would
make our exports across the board more expensive in
foreign markets and make our imports cheaper in United
States dollar terms. That would hardly seem to be the way
to reduce the country's trade deficit. ...
Much of President-elect Donald J. Trump's pledge to
be a job creator rests on his call for a $1 trillion in
infrastructure spending over 10 years. While few question
the need for such investment, many have questioned how he
would finance it and what it would fund. Can Trump's plan
effectively repair the nation's infrastructure?
"A further basic weakness of Mr. Trump's budget proposal
is that it would add stimulus to the economy at the very
time that the economy is at or very close to full
employment. That policy is bound to raise concerns about
inflation and to push the Federal Reserve to raise
interest rates more than it is currently contemplating in
order to meet its inflation target."
Centrist fail.
Krugman might be right that Trump's policies don't add
much actual stimulus.
(He's better on economics than on politics.)
And so Obama's Fed might actually raise rates too
quickly.
Combined with a strong dollar and weakening exports
this could bring on a recession.
(EMichael is horrified at the fact that Obama's Fed
might be considered anti-worker.)
Mohammed El-Erian talks about the international aspect
in today's links.
He says the same thing as Krugman and pgl (except adds
the Republican BS about tax cuts and deregulation being
pro-growth.)
"Mr. Trump seems to be overlooking a matter of basic
arithmetic. While a country's trade balance is the
difference between a country's exports and imports, it is
also the difference between the amount it saves and
invests,"
Exactly, his understanding of economics is at
the 5'th grade level. Furthermore, just as he thinks he
known "more than the generals", he also thinks he knows
more than the economists. We have elected a narcissistic
moron like Turkey's Ergodan and the Philippine's Duterte.
We will se the same erratic and destructive policies they
have seen, because he is equally incapable of leading a
nation. The hope is that our institutions checks and
balances will prevent us from slipping into the same type
of semi-democracy.
"If a country
saves more than it invests, it will run a trade surplus.
Conversely, a country that saves less than it invests will
run a trade deficit."
But:
GDP (Gross Domestic Product) is the value of all goods
and services sold within a country during one year. GDP
measures flows rather than stocks (example: the public
deficit is a flow, the government debt is a stock). Flows
are derived from the National Accounting relationship
between aggregate spending and income. Ergo:
(1) Y = C + I + G + (X – M)
where Y is GDP (expenditure), C is consumption spending, I
is private investment spending, G is government spending,
X is exports and M is imports (so X – M = net exports).
Another perspective on the national income accounting
is to note that households can use total income (Y) for
the following uses:
(2) Y = C + S + T
where S is total saving and T is total taxation (the other
variables are as previously defined).
You can then bring the two perspectives together
(because they are both just "views" of Y) to write:
(3) C + S + T = Y = C + I + G + (X – M)
You can then drop the C (common on both sides) and you
get:
(4) S + T = I + G + (X – M)
Then you can convert this into the following sectoral
balances accounting relations, which allow us to
understand the influence of fiscal policy over private
sector indebtedness. Hence, equation (4) can be rearranged
to get the accounting identity for the three sectoral
balances – private domestic, government budget and
external:
(S – I) = (G – T) + (X – M)
The sectoral balances equation says that total private
savings (S) minus private investment (I) has to equal the
public deficit (spending, G minus taxes, T) plus net
exports (exports (X) minus imports (M)), where net exports
represent the net savings of non-residents.
Thus, (S-I) can be positive if (G-T) ( the federal
deficit) is greater than (X-M) ( an assumed trade
deficit).
Also:
"Should a significant pickup in economic growth not
materialize, the net effect of these tax cuts and public
spending policies will almost certainly lead to a
significant widening of the budget deficit and to a
corresponding decline in public savings."
But (S – I) = (G – T) + (X – M), i.e., a federal
deficit increase that exceeds a trade deficit increase
means greater public savings.
"a federal deficit increase that exceeds a trade deficit
increase means greater public savings."
Or "export" of
treasuries, dollars and other pieces of paper that allow
the private sector and government to run deficits at the
same time. Nobody in the US need to save as long as we
either print more money or sell more paper assets to
savers in the non-US part of the world.
The New York Times had an interesting piece *
discussing the National Institutes of Health collaboration
with private companies in the development of new cancer
drugs. As the piece points out, this collaboration has
proven very profitable for the drug companies, but leads
to drugs that are very expensive because the drug
companies are allowed to have patent monopolies, with no
restriction on the price they charge.
It also suggests an alternative path. It shows,
contrary to conventional wisdom in right-wing circles,
everything the government funds is not worthless garbage.
If the tables were turned, and all the funding came from
the government (rather than relying on government imposed
patent monopolies), then the new drugs could be sold at
generic prices since everyone already would have been paid
for their research.
In many cases, the generic price would be less than one
percent of the patent protected price. New cancer drugs
that might sell for $100,000 for a year's treatment, might
sell for hundreds of dollars. ** Policy types who don't
work for the pharmaceutical industry should be looking
into more efficient alternatives for financing drug
research.
Harnessing the U.S. Taxpayer to Fight Cancer and Make
Profits
By MATT RICHTEL and ANDREW POLLACK
Enthusiasm for cancer immunotherapy is soaring, and so
is Arie Belldegrun's fortune.
Dr. Belldegrun, a physician, co-founded Kite Pharma, a
company that could be the first to market next year with a
highly anticipated new immunotherapy treatment. But even
without a product, Dr. Belldegrun has struck gold.
His stock in Kite is worth about $170 million.
Investors have profited along with him, as the company's
share price has soared to about $50 from an initial price
of $17 in 2014.
The results reflect widespread excitement over
immunotherapy, which harnesses the body's immune system to
attack cancer and has rescued some patients from
near-certain death. But they also speak volumes about the
value of Kite's main scientific partner: the United States
government.
Kite's treatment, a form of immunotherapy called CAR-T,
was initially developed by a team of researchers at the
National Cancer Institute, led by a longtime friend and
mentor of Dr. Belldegrun. Now Kite pays several million a
year to the government to support continuing research
dedicated to the company's efforts.
The relationship puts American taxpayers squarely in
the middle of one of the hottest new drug markets. It also
raises a question: Are taxpayers getting a good deal?
Defenders say that the partnership will likely bring a
lifesaving treatment to patients, something the government
cannot really do by itself, and that that is what matters
most.
Critics say that taxpayers will end up paying twice for
the same drug - once to support its development and a
second time to buy it - while the company reaps the
financial benefit.
"If this was not a government-funded cancer treatment -
if it was for a new solar technology, for example - it
would be scandalous to think that some private investors
are reaping massive profits off a taxpayer-funded
invention," said James Love, director of Knowledge Ecology
International, an advocacy group concerned with access to
medicines.
The debate goes squarely to one of the nation's most
vexing challenges: rising health care and drug prices.
Kite is one of a growing number of drug and biotech
companies relying on federal laboratories. Analysts expect
the company to charge at least $200,000 for the new
treatment, which is intended as a one-time therapy for
patients.
While the law allows the government to demand
drug-price concessions from its private-sector partners,
the government has declined to do so with Kite and
generally disdains the practice.
Insisting on lower prices, federal researchers say,
would drive away innovative partners that speed the
drug-development process and benefit patients. But with
the government doing so much pivotal research, others say
that the private sector cannot afford to walk away.
"The market is so reliant on the knowledge and know-how
that comes out of the government and academic labs," said
Dr. Aaron Kesselheim, director of the Program on
Regulation, Therapeutics and Law at Brigham & Women's
Hospital in Boston....
President-elect Donald Trump's transition team is close
to picking economic commentator Larry Kudlow to be
chairman of the White House Council of Economic Advisers,
according to a report in the Detroit News.
Kudlow, 69, has served as an informal adviser to the Trump
campaign, primarily focused on tax policy and teaming
primarily with Stephen Moore, a visiting fellow at the
Heritage Foundation and fellow alumnus of President Ronald
Reagan's economic team. Moore was cited by the newspaper
as saying Thursday the selection of Kudlow would be
announced in the next 48 hours.
Kudlow's appointment, which would require Senate
confirmation, marks another non-traditional pick by the
incoming administration. Kudlow doesn't hold a Ph.D. in
economics, unlike former heads of the CEA. For five years,
he hosted a show on CNBC on business and politics, and
he's worked at the Federal Reserve Bank of New York.
During Reagan's first term, Kudlow was associate director
for economics and planning in the White House's Office of
Management and Budget. ...
Kudlow & Cramer (was) a CNBC American business
and politics television program hosted by
conservatives Lawrence Kudlow and Jim Cramer, which aired
weekdays from 2002 to 2005. (Wikipedia)
Misrepresenting 24/7 we see. No - Krugman got this right.
And yes Jared was nicer to Kudlow than I could ever be.
But soft? A day without a PeterK lie is like a day without
sunshine.
You
candidate was to weak to win the semifinals, and he would
have been crushed in the finals. He didn't have what it
takes to win in little league, and he wouldn't have had
what it takes to win in the big league either. Maybe the
democrats could have found someone who would have won
against Trump; but it sure as hell wasn't any of the
losers of their primary contest.
Someone Has to Tell John Williams Inflation Is Not
Accelerating
The Federal Reserve Board raising interest rates last
and seem poised to do so again in the not distant future.
The rationale is that the economy is now near or at full
employment and that if job growth continues at its recent
pace it will lead to a harmful acceleration in the
inflation rate.
We have numerous pieces raising serious questions about
whether the labor market is really at full employment,
noting for example the sharp drop * in employment rates
(for all groups) from pre-recession levels and the high
rate of involuntary part-time ** employment. But the story
of accelerating inflation is also not right.
This is particularly important, since John Williams,
the president of the San Francisco Federal Reserve Bank,
cited accelerating inflation as a reason to support last
week's rate hike, and possibly future rate hikes, in an
interview in the New York Times this morning. Williams has
been a moderate on inflation, so there are many members of
the Fed's Open Market Committee who are more anxious to
raise rates than him.
A close look at the data does not provide much evidence
of accelerating inflation. The core personal consumption
expenditure deflator, the Fed's main measure of inflation,
has risen 1.7 percent over the last year, which is still
under the 2.0 percent target. This target is an average,
which means that the Fed should be prepared to allow the
inflation rate to rise somewhat above 2.0 percent, with
the idea that inflation will drop in the next recession.
Anyhow, the 1.7 percent rate is slightly higher than a
low of 1.3 percent reached in the third quarter of 2015,
but it is exactly the same as the rate we saw in the third
quarter of 2014. In other words, there has been zero
acceleration in the rate of inflation over the last two
years.
Furthermore, even this modest acceleration has been
entirely due to the more rapid increase in rent over the
last two years. The inflation rate in the core consumer
price index, stripped of its shelter component, actually
has been falling slightly over the last year. It now
stands at 1.1 percent over the last year.
[Consumer Price Index Minus Food, Energy and Shelter,
2006-2016]
It is reasonable to pull shelter out of the CPI because
rents do not follow the same dynamic as most goods and
services. In fact, higher interest rates, by reducing
construction, are likely to increase the pace of increase
in rents rather than reduce them.
This issue is hugely important, since if the Fed
prevents the labor market from tightening further it will
be preventing millions of people from getting jobs. These
people are disproportionately African American and
Hispanic and also less-educated workers. The decision to
tighten will also lessen the bargaining power of a much
larger group of workers, making it more difficult for them
to get pay increases.
The weak labor market of the Great Recession resulted
in a large redistribution from wages to profits. The
tightening of the labor market in the last two years has
reversed part of this shift. If the Fed raises interest
rates enough to prevent further tightening, then it will
be locking in place this redistribution to profits. That
would be bad news for tens of millions of workers,
especially if the decision was based on a misreading of
inflation data.
President-elect Donald Trump boasted about his wealth
during his campaign. Now he's surrounding himself with
people who have similarly unimaginable riches.
Collectively, the wealth of his Cabinet choices so far
is about five times greater than President Obama's Cabinet
and about 34 times greater than the one George W. Bush led
at the end of his presidency.
And Trump still has four more key advisory spots left
to fill.
The net worth of the Cabinet Trump had selected as of
Monday was at least $13.1 billion, based on available
estimates, or more than the annual gross domestic product
of about 70 small countries.
That included the $3.7 billion Trump is estimated to be
worth, according to Forbes. (Trump has claimed to be worth
much more - around $10 billion.)
It also included the $5.1 billion in net worth that
Forbes estimated belongs to the family of Betsy DeVos, the
former Michigan Republican Party chair and education
activist selected to be education secretary.
Investor Wilbur Ross, picked to become commerce
secretary, is estimated to be worth $2.5 billion,
according to Forbes.
Linda McMahon, a former WWE executive and U.S. Senate
candidate, has been picked to serve as small business
administrator. She and her husband Vincent McMahon are
worth at least an estimated $1.35 billion, according to
Bloomberg.
Exxon Mobile CEO Rex Tillerson, nominated to become
secretary of state, is estimated to be worth $365 million,
according to Bloomberg.
Steven Mnuchin, the former Goldman Sachs executive in
line to become Treasury secretary, is worth at least $46
million, according to Politico.
Retired neurosurgeon and former presidential candidate
Ben Carson, who is in line to become the housing and urban
development secretary, was worth $26 million, according to
a Forbes estimate from 2015.
The pick for transportation secretary, Elaine Chao, the
former labor secretary, was worth an estimated $16.9
million as of 2008, when she last held public office,
according to the Center for Responsive Politics, a
Washington-based nonprofit that tracks campaign finance
data.
Two other Cabinet picks - Alabama Senator Jeff Sessions
for attorney general and Georgia Representative Tom Price
for health and human services secretary - were estimated
to be worth about $7.5 million and $13.6 million,
respectively, as of 2014, according to the center.
Former Texas governor and presidential candidate Rick
Perry, selected to be energy secretary, is estimated to be
worth about $3 million, according to the Associated Press.
U.S. Representative from South Carolina Mick Mulvaney,
picked to become director of the Office of Management and
Budget, was worth an estimated $2.6 million as of 2014,
according to the center.
Fast-food executive Andrew Puzder, picked to fill the
role of labor secretary, is also a multi-millionaire,
according to Politico.
U.S. Representative from Montana Ryan Zinke, picked to
become interior secretary, was worth an estimated $675,000
as of 2014, according to the center. ...
(Andrew Mellon tops the
list. Treasury
secretary under Harding, Coolidge and
Hoover, worth $50 billion in current
dollars. No one else is even close.)
Mellon was the third-richest American of his time -
behind only John D. Rockefeller and Henry Ford - and has
been ranked the 14th richest American of all time, in
inflation-adjusted dollars.
'Collectively, the wealth of his Cabinet choices so far is
about five times greater than President Obama's Cabinet
and about 34 times greater than the one George W. Bush led
at the end of his presidency.'
So, the Obama cabinet is
worth $2.6B apparently.
That would largely be due to Penny Pritzker,
#3 on the MarketWatch list above,
who is said to be worth $1.85B.
And, believe it or not, the Bush Jr
cabinet was apparently only worth
$382M, a pittance.
When Yellen says there's no need for fiscal stimulus -
which should be blasphemous to all "real" progressives* -
what she's saying is that the Fed can just use
uncoventional monetary policy again the next time there is
a downturn.
They gave us the recovery they wanted this past time
after all.
* of course pgl refuses to discuss this episode. His
lies of omission are the biggest of all. Krugman too
refuses to address Yellen's blasphemy. Only DeLong was
brave enough and honest enough to disagree.
"Prostate cancer laser treatment 'truly
transformative'"
By James Gallagher, HEalth and science reporter...BBC
News...12-20-2016...7 hours ago
"The approach, tested across Europe, uses lasers and a
drug made from deep sea bacteria to eliminate tumours, but
without causing severe side effects.
Trials on 413 men - published in The Lancet Oncology -
showed nearly half of them had no remaining trace of
cancer.
Lifelong impotence and incontinence are often the price
of treating prostate cancer with surgery or radiotherapy.
Up to nine-in-10 patients develop erectile problems and
up to a fifth struggle to control their bladders.
That is why many men with an early stage tumour choose
to "wait and see" and have treatment only when it starts
growing aggressively.
"This changes everything," said Prof Mark Emberton, who
tested the technique at University College London.
Triggered to kill
The new treatment uses a drug, made from bacteria that
live in the almost total darkness of the seafloor and
which become toxic only when exposed to light.
Ten fibre optic lasers are inserted through the
perineum - the gap between the anus and the testes - and
into the cancerous prostate gland.
When the red laser is switched on, it activates the
drug to kill the cancer and leaves the healthy prostate
behind..."
"But I'm also hearing from Berniebros, insisting that
anything I say must be wrong, because I criticized their
hero. And this suggests to me that we may need a
clarification of the doctrine that facts have a well-known
liberal bias. More specifically, they seem to have a
center-left bias: conservatives are big on empirical
denial, but so is some of the U.S. left."
I'd say the center-left is big on empirical denial,
especially when it comes to the rise of populism and
globalization.
They'd rather focus on Putin's hackers.
But some are coming around or at least asking
questions. See Tim Duy, DeLong, and Noah Smith.
"he search has gained an extraordinary sense of urgency
as a wave of reactionary populism sweeps the globe,
casting the elite establishment as the main beneficiary of
economic forces that have hurt the working masses.
Americans' election of Donald J. Trump, who has vowed to
radically constrain trade, and the stunning vote in
Britain to abandon the European Union, have resounded as
emergency sirens for global leaders. They must either
update capitalism to share the spoils more equitably, or
risk watching angry mobs dismantle the institutions that
have underpinned economic policy since the end of World
War II."
The center-left, like Krugman, EMichael, pgl, Bakho,
etc. argue that's just racism. That's it.
There's been an upsurge in racism and tribalism
worldwide for some inexplicable reason. Fox News.
Or Obama.
Even the U.S you had Father Coughlin, the populist Huey
Long, and Charles Lindbergh's America First movement which
was isolationist just like Trump.
"Europe as a whole was
badly hit, in both rural and industrial areas. Democracy
was discredited and the left often tried a coalition
arrangement between Communists and Socialists, who
previously had been harsh enemies. Right wing movements
sprang up, often following Italy's fascist mode."
By Brian Wheeler...BBC News, Washington
DC...12-20-2016...6 hours ago
"Gun ownership has traditionally been associated with
the right wing in America but the election of Donald Trump
has prompted some left-wingers to join gun clubs - and
even start preparing for the collapse of society.
"I really didn't expect to be thinking about purchasing
a gun. It was something that my father did and I rolled my
eyes at him."
Clara, a 28-year-old nursing student, grew up in the
Mid-West, where "the folks that had guns were seen as
hicks" or were just "culturally different", she says.
But since the election of Donald Trump in November she
has started going to a gun range for the first time and is
shopping around for a semi-automatic pistol.
"It's been seeing the way that Trump's election has
mobilised a lot of the far right and given them hope," she
says, citing a rise in reports of hate crimes and neo-Nazi
activity.
As a transgender woman, she does not fear for her
personal safety in the Californian city where she now
lives but she says she knows people in rural areas "who
woke up and found a bunch of swastikas and words like
'faggot' and 'trannie' scrawled all over their building".
She foresees a wide-ranging struggle between the Trump
administration and the left over issues such as
immigration and racial politics.
But won't buying a gun just increase tensions?
"Things are already escalating and they will continue
to do so and me not engaging or being prepared to defend
my friends by force... isn't going to stop people from
being attacked or harassed," Clara says.
Gun sales in America hit record levels in October amid
fears a Hillary Clinton election victory would lead to
increased controls.
Many expected the election of Donald Trump, whose
candidacy was backed by the National Rifle Association, to
bring an end to the panic buying. Shares in gun
manufacturers dropped by as much as 18% following his
victory.
But instead FBI background checks for gun transactions
soared to a new record for a single day - 185,713 - during
the Black Friday sales on 25 November, according to gun
control news site The Trace.
Some of this has been put down to gun retailers selling
off stock at reduced prices, but there have also been
reports of more "non-traditional" buyers, such as African
Americans and other minorities, turning up at gun shops
and shooting ranges..."
"The Single Greatest Force in American Politics?
Partisanship"
by Chuck Todd, Mark Murray and Carrie Dann...Dec 20
2016...8:56 am ET
"Why partisanship is the single greatest force in
American politics"
Want to know why partisanship -- or party
identification -- is the single greatest force in American
politics today? Just check out these shifting attitudes
about the economy and nation's direction in the latest
NBC/WSJ poll:
... 68% of Republicans believe the economy will get
better in the next 12 months (versus just 14% of GOPers
who said this a year ago in the Dec. 2015 NBC/WSJ poll).
... By contrast, only 19% of Democrats said the economy
will improve next year (compared with 37% of them who said
this last December).
... Right now, 52% of Republicans say the country is
headed in the right direction (versus just 5% who said
this in December 2015).
... Conversely, only 18% of Democrats say the country
is headed in the right direction (compared with 37% of
them who said this a year ago).
Folks, the underlying dynamics of the U.S. economy have
remained pretty much the same over the past year. The only
thing that has changed is the party that will be in the
White House next year. It's all confirmation that so much
public opinion is shaped through Americans' partisan
lenses, and little else. Want another example of this from
our NBC/WSJ poll? A combined 86% of Democrats say they are
bothered a great deal/quite a bit by Russia's interference
in the 2016 presidential election, versus just 29% of
Republican respondents who say this..."
"Asymmetrical warfare: Democrats have knives,
Republicans have guns"
"But if partisanship is the greatest force in American
politics, there's maybe a more important dynamic at play
-- the asymmetrical warfare between the two parties. As
the New York Times' David Leonhardt writes in comparing
how Barack Obama is leaving the White House versus how
Republican Pat McCory is leaving power in North Carolina,
Democrats are wielding knives while Republicans have guns.
Think of the 2011 debt-ceiling standoff. Mitch McConnell
denying Obama's Supreme Court pick to even get a hearing.
And now what's playing out in North Carolina. Republicans
are playing a different game than Democrats are playing."
"Trump's popularity improves -- but he's still the most
unpopular president-elect in the history of our poll"
"Also from our NBC/WSJ poll: 40% of Americans now have
a positive view of Donald Trump, versus 46% who have a
negative view. That's up considerably from his 29%-62%
rating in the October NBC/WSJ poll. Still, Trump's 40%-46%
fav/unfav score is the WORST in the history of our poll
for a president-elect and the first time it's a
net-negative. Bill Clinton's was 60%-19% in Dec. 1992,
George W. Bush's was 48%-35% in Dec. 2000, and Barack
Obama's was 67%-16% in Dec. 2008.
My prescription and takeaway is for the next four years
for the Democratic Party especially those in D.C. is for
Hyper Partisanship, no holds barred bare knuckle
deliberate faithless drug out deliberations and
negotiations with the GOP, and the ceaseless cacaphonic
BLAME, BLAME, BLAME media game of imagined, fake, and real
failures of every Republican especially Donald Trump and
his family.
There you have it, your assignment for the
next next Presidential Election.
This is, of course, the opposite of the Democratic Party
Obama-way and the Clinton-way that reasonably expected the
American Electorate to see through and reject those same
tactics used on President Obama and Hillary Clinton when
they relied upon logic not lies, facts not falsehoods, and
intellectual and scientific critical thinking instead of
rants, ravings, and unhinged screeds to win the argument
and sway the Electorate.
IOW, time to stick it to Middle
America Fly Over country and make them see how wrong they
were to vote for Trump while aiding the BiCoastal States,
and the majority of voters in the last Election, survive
the next 4 years.
First and foremost start by insisting on cutting off or
at least severely reducing any and all AG support welfare
and corporate welfare for noncompetitive manufacturers
before any support for cutting Obamacare, SS, and
Medicare, which are the highest items on Ryan's and the
GOP's agenda.
Trump and his assembled Cabinet picks and Team are a full
month away from taking the Oath of Office and have loaded
the DEMS up with issues at the heart of every American
Worker, Blue and Middle Class: Class Warfare and Pay
Inequality
"Why Donald Trump Could Spell Doom for CEO Pay
Transparency"
by Martha C. White...Dec 20 2016...7:49 am ET
"Outsized CEO pay is an issue coming under increasing
scrutiny, and Donald Trump has already promised to do away
with legislation that would require companies to be more
transparent.
However, compensation experts say an executive branch
filled with corporate titans could benefit the relative
few atop the corporate ladder at the expense of everyone
else.
The implicit assumption is that these CEOs will look
out for their own.
Furthermore, because Trump is one of those CEOs
himself, it might very well "put a halo effect around the
whole issue [of executive pay] for a while," said John
Challenger, CEO of executive outplacement firm Challenger,
Gray & Christmas.
Repeal of Dodd-Frank?
"I think the first year will be a true measure of who
he is as a policy person," said Lawrence Mishel, president
of the Economic Policy Institute, a left-leaning think
tank...
...Starting next year, the Securities and Exchange
Commission planned to require companies to disclose how
much their CEO makes as a ratio of median employee pay,
giving shareholders - and ordinary Americans - a window
into how companies treat their CEO compared to the
rank-and-file workers, but the future of that rule is in
limbo.
Donald Trump, although he railed against fat CEO pay
packages during his campaign, calling them "disgraceful,"
also vowed to "dismantle" the Dodd-Frank Act, which
provided the mandate for the new SEC rule...
...For the future, many expect the SEC's push for
increased transparency to be scuttled, in keeping with
Donald Trump's promise to roll back regulations of all
types...
..."they believe now that it's likely to be pulled out
is when you look at the cabinet Trump is putting together,
there are a lot of billionaires, a lot of CEOs," Kropp
said.
"It seems to me that the pressure is going to abate.
There's going to be less scrutiny," Challenger
predicted..."
This doubling of the sub fleet was outlined in a defense
White Paper earlier this year. Basically, its due to
concerns about China. The article doesn't say, but I
assume these are AIP powered.
Australia, France sign submarine deal
"Australia and France on Tuesday signed the final
agreement for French naval contractor DCNS to build 12
submarines in what Prime Minister Malcolm Turnbull called
a "critically important step in the development of our
security."
The 34.9 billion euro ($36.3 billion) deal, including
separate agreements with US and Australian contractors, is
one of the world's largest defense contracts.
Turnbull described the deal as the "last foundation
stone needed to ensure Australia is able to develop a
cutting-edge sovereign submarine capability."
The submarines will be a conventionally-powered version
of France's 4,700-tonne nuclear-fuelled Barracuda complete
with stealth technology. France and Australia agreed in
April to the deal, for which Germany and Japan were also
contending.
Most of the submarine production will be in the
southern city of Adelaide and create 2,800 high-skilled
jobs, Turnbull said.
US defense giant Lockheed Martin will produce the
combat systems for the Barracudas."
A war of words has erupted between a group of prominent
Australian businessmen and seemingly the entire southern
state over the Federal Government's controversial French
submarines deal.
(Adelaide, South Australia, is to be
a recipient of much employment related
to this deal.)
The group, which includes entrepreneur Dick Smith, Gary
Johnston of Jaycar Electronics and adman John Singleton,
took out a full-page advertisement in
The Australian on Tuesday slamming the move to go with
French producer DCNS, suggesting buying off-the-shelf
nuclear subs would be a better option.
They warned the current deal, announced on April 28
this year, will "condemn our sailors to their graves". The
group says it can't understand the Federal Government's
decision to award a multi-billion deal to French supplier
DCNS, which will be required to deliver 12 diesel-powered
submarines for which there are no drawings and no plans.
They said under the deal, the navy's next fleet of
conventionally-powered subs would come into service at a
time when the rest of the world would be operating nuclear
fleets, which would be "like putting a propeller plane up
against a modern jet".
"We will be condemning our sailors to their graves,"
the advertisement said. It also questioned the economics
of the decision, saying it would be cheaper to subsidise
car industry jobs, if creating jobs was the desired
outcome. Mr Johnston said DCNS was being asked to build a
diesel-powered version of what is essentially a
nuclear-powered sub.
"It's a bit like trying to turn a cat into a dog. It's
crazy. Why would you do it?" he told Sky News. "They
haven't got a drawing, they haven't got a plan. Their
current nuclear submarine, the Barracuda, is sitting on a
slipway. It won't even be tested until next year."
DCNS declined to comment on the row, but the Federal
Government said the decision to award the contract to the
company came after a competitive evaluation process, which
involved the best experts available. It said the new subs
would be regionally superior and would allow Australia to
pursue its national and international interests. ...
The government estimates building the submarines in
Adelaide will create 2800 jobs.
That would be the equivalent of giving every single one
of those 2800 workers a cheque for $5.4 million - or
handing every single man, woman and child in South
Australia a cheque for nearly $9000.
Speaking on 2GB, Mr Johnston said "if we were smart" we
would simply buy the French or British nuclear sub, or
even the "ultimate" US Virginia class nuclear submarine,
which has 33 years of fuel.
"You don't have to have a nuclear industry in Australia
- you just simply buy the thing and 33 years later you
trade it in on a new one," he said.
"It's unbelievable how these things are just such an
order of magnitude better than a diesel sub. Every one of
the enemy we would hopefully not ever encounter, but if we
do, would have nuclear submarines which will blow diesel
submarines out of the water."
But the group was dismissed as "sad old men" by South
Australian Premier Jay Weatherill, who rubbished their
proposal to go nuclear. "[It] looked like it was scribbled
on the back of a serviette after a long lunch," Mr
Weatherill tweeted on Tuesday.
Defence Industry Minister Christopher Pyne, who holds
the South Australian seat of Sturt, described the
criticism as "misinformed, misguided" and "entirely
wrong". "We don't have nuclear energy in Australia and
therefore we can't have nuclear submarines," Mr Pyne told
ABC radio on Wednesday.
"The advice from defence was entirely clear and that
was that the French DCNS design was the best for what we
needed.
"Quite clearly we are not getting a Short Fin Barracuda
submarine, we are getting a unique design for Australian
conditions. We've chosen DCNS because we believe that they
have the best record and the best designs in terms of
large submarines both nuclear and non nuclear." ...
#- Richard Harold "Dick" Smith, AC (*) is an Australian
entrepreneur, businessman, aviator, philanthropist, and
political activist. He is the founder of Dick Smith
Electronics, Dick Smith Foods and Australian Geographic,
and was selected as the 1986 Australian of the Year. In
2010 he founded the media production company Smith&Nasht
with the intention of producing films about global issues.
In 2015 he was awarded the Companion of the Order of
Australia (*), and is a fellow of the Committee for
Skeptical Inquiry. (Wikipedia)
This should serve as a warning to those here that put
their faith in some Republican senators such as S. Lindsey
Graham and S. John McCain, they can not trusted, they are
straw men, sent out to make their Party look less extreme
than it is in fact.
Roman politics involved fierce competition among
ambitious men. But for centuries that competition was
constrained by some seemingly unbreakable rules. Here's
what Adrian Goldsworthy's "In the Name of Rome" says: *
"However important it was for an individual to win fame
and add to his own and his family's reputation, this
should always be subordinated to the good of the Republic.
The same belief in the superiority of Rome that made
senators by the second century BC hold themselves the
equals of any king ensured that no disappointed Roman
politician sought the aid of a foreign power."
In the Name of Rome: The Men Who Won the Roman Empire
By Adrian Goldsworthy
General in exile: Sertorius and the Civil War
Quintus Sertorius (c. 125–72 BC)
The Roman political élite was not unique in its
competitiveness and desire to excel. The aristocracies of
most Greek cities – and indeed of the overwhelming
majority of other communities in the Mediterranean world –
were just as eager to win personal dominance and often
unscrupulous in their methods of achieving this. Roman
senators were highly unusual in channelling their
ambitions within fairly narrow, and universally
recognized, boundaries. The internal disorder and
revolution which plagued the public lives of most city
states were absent from Rome until the last century of the
Republic. Even then, during civil wars of extreme savagery
when the severed heads of fellow citizens were displayed
in the Forum, the Roman aristocracy continued to place
some limits on what means were acceptable to overcome
their rivals. A common figure in the history of the
ancient world is the aristocratic exile – the deposed king
or tyrant, or the general forced out when he was perceived
to be becoming too powerful – at the court of a foreign
power, usually a king. Such men readily accepted foreign
troops to go back and seize power by force in their
homeland – as the tyrant Pisistratus had done at Athens –
or actively fought against their own city on their new
protector's behalf, like Alcibiades.
Rome's entire history contains only a tiny handful of
individuals whose careers in any way followed this
pattern. The fifth-century BC, and semi-mythical, Caius
Marcius Coriolanus probably comes closest, for when
banished from Rome he took service with the hostile
Volscians and led their army with great success. In the
story he came close to capturing Rome itself, and was only
stopped from completing his victory by the intervention of
his mother. The moral of the tale was quintessentially
Roman. However important it was for an individual to win
fame and add to his own and his family's reputation, this
should always be subordinated to the good of the Republic.
The same belief in the superiority of Rome that made
senators by the second century BC hold themselves the
equals of any king ensured that no disappointed Roman
politician sought the aid of a foreign power. Senators
wanted success, but that success only counted if it was
achieved at Rome. No senator defected to Pyrrhus or
Hannibal even when their final victory seemed imminent,
nor did Scipio Africanus' bitterness at the ingratitude of
the State cause him to take service with a foreign king.
The outbreak of civil war did not significantly change
this attitude, since both sides invariably claimed that
they were fighting to restore the true Republic. Use was
often made of non-Roman troops, but these were always
presented as auxiliaries or allies serving from their
obligations to Rome and never as independent powers
intervening for their own benefit. Yet the circumstances
of Roman fighting Roman did create many highly unorthodox
careers, none more so than that of Quintus Sertorius, who
demonstrated a talent for leading irregular forces and
waging a type of guerrilla warfare against conventional
Roman armies. Exiled from Sulla's Rome, he won his most
famous victories and lived out the last years of his life
in Spain, but never deviated from the attitudes of his
class or thought of himself as anything other than a Roman
senator and general....
Paul Krugman has drawn on the writing of Adrian
Goldsworthy to make sense of and point out what he
obviously considers to be a possible undermining of the
American republic. The complete Goldsworthy passage
strikes me as critical in understanding Krugman.
Though
Krugman has mentioned Goldsworthy before, I only began to
read "In the Name of Rome" yesterday.
"F-35 program is not 'out of control', JSF chief fires
back at Trump"
By Ryan Maass ... Dec. 20, 2016 ... 1:01 PM
"WASHINGTON, Dec. 20 (UPI) -- The F-35 program is not
"out of control" as President-elect Donald Trump suggests,
the head of the F-35 program office asserted.
F-35 executive director Lt. Gen. Christopher Bogdan
maintained the program was going as planned in response to
the incoming president's controversial tweet, which
appeared to threaten the plane's funding.
"The F-35 program and cost is out of control. Billions
of dollars can and will be saved on military (and other)
purchases after January 20th," Trump tweeted on Dec. 12.
The Lockheed Martin-led effort has been characterized
by numerous delays since its inception. Despite the
setbacks, however, Bogdan contends the program's leaders
have reined in the finances for the production of the
5th-generation fighter.
"I have no doubt, that given the controversy on the
F-35 program over the years, that there's a perception
that this program is out of control," Bogdan told
reporters. "That's in the past."
The program director went on to say industry partners
have made necessary adjustments and cut excessive
expenditures. However, he also conceded the development
phase of the program could face additional delays..."
A Reason writer returns to Appalachia to ask: Why
don't people who live in places with no opportunity just
leave?
...............
So why don't people just leave? That question is actually
surprisingly easy to answer: They did. After all, 80
percent of McDowell's population, including my
grandparents, cleared out of the county to seek
opportunities elsewhere during the last half-century.
......................
So why don't people just leave? That question is actually
surprisingly easy to answer: They did. After all, 80
percent of McDowell's population, including my
grandparents, cleared out of the county to seek
opportunities elsewhere during the last half-century.
[
This is critically important to understand. What has been
and is necessary in economically depressed areas where
development over several years time would be unlikely is
to assist migration. This is precisely what was done in
East Germany to pronounced benefit through Germany but is
little recognized or accepted by American analysts. ]
Simon Wren-Lewis: Understanding Free Trade: * "There
you have, in one calm and measured paragraph, the
contradiction at the heart of the argument...
...put forward by Liam Fox and others that leaving the
European Union will allow the UK to become a 'champion of
free trade'. You cannot be a champion of free trade, and
have sovereignty in the form of taking back control. It is
not a contradiction, of course, if you are happy to accept
the regulatory standards of the US, China or India. That
appears to be the position of Leave leaders like MP Jacob
Rees Mogg. Ellie Mae O'Hagan spells out what this may mean
in practice. Lead in toys--bring them in so we can sign a
trade agreement with China. And you can be sure that this
will be the nature of the discussion every time a trade
deal is signed. In each case we will be told that we have
to accept this drop in regulatory standards, because
British export jobs are on the line.
This is the point of Dani Rodrik's famous impossible
trilemma: ** you cannot have all three of the nation
state, democratic politics and deep economic integration
(aka free trade). His trilemma replaces sovereignty, by
which is meant in this context the nation state being able
to do what it likes, by democracy. In the past I have
always found this problematic. Surely a democracy can
decide to give away a bit of its sovereignty in return for
the benefits of international cooperation (in the form of
trade deals, or indeed any other kind of international
cooperation). After all, every adult in a relationship
knows that this relationship means certain restrictions on
doing just what they would like...
Having carefully read the essay by Simon Wren-Lewis, along
with this passage from Brad DeLong, the argument here
against leaving the European Union makes no sense. Though
I think the UK would fare better in the EU, the bitter
argument by Wren-Lewis leaves me indifferent. The idea
that the UK apart from the EU would suddenly be exploited
by the likes of India or China has no logic that I can
find.
I have not understood the bitterness of Wren-Lewis
to the Labour Party of Jeremy Corbyn since the Brexit
vote, especially so since Corbyn wanted the UK to remain
part of the EU.
"Trump meets with Carlos Slim as Mexican leaders seek
better relations"
By Philip Rucker, Robert Costa and Joshua
Partlow...December 19 at 7:29 PM
"In the closing days of his campaign, Donald Trump
vilified one of the world's richest men - Mexican
billionaire Carlos Slim - as part of a globalist cabal
conspiring to extinguish his populist candidacy.
Yet over the weekend, Slim journeyed to Mar-a-Lago,
Trump's estate in Palm Beach, Fla., for what the
president-elect described as "a lovely dinner with a
wonderful man."
The peacemaking gesture - the culmination of weeks of
back-channel negotiations that included a secret visit to
Mexico City by a Trump envoy - signals a possible thawing
between Trump and Mexico's business and political elite,
which he had used relentlessly as a foil throughout his
campaign.
The communications raised hopes in Mexico's business
community that Trump might reconsider his vow to tear up
the North American Free Trade Agreement and be persuaded
to adopt less hard-line immigration and economic policies,
which were cornerstones of his campaign..."
"Do not worry. We are going to build the wall,"
Trump said, reiterating his promise to erect a
wall along the U.S.-Mexico border to keep out
undocumented immigrants and to make Mexico pay for it.
Obama Administration Intends to Transfer 17 or 18
Guantánamo Detainees
http://nyti.ms/2i9aL0z
NYT - CHARLIE SAVAGE - December 19, 2016
WASHINGTON - When Prime Minister Matteo Renzi of Italy
visited the White House in October for a state dinner, he
made a commitment to President Obama: Italy, which
resettled a Yemeni detainee from Guantánamo Bay last
summer, would take one more person on the transfer list.
But before the deal was completed, Mr. Renzi resigned.
So a day after his successor, Paolo Gentiloni, formed a
government on Dec. 14, Secretary of State John Kerry
called to congratulate Mr. Gentiloni - and to urge him to
follow through on the commitment, according to an official
familiar with the negotiations. Mr. Gentiloni agreed,
leading a rush to finalize the details and paperwork.
The effort was part of a burst of urgent, high-level
diplomatic talks aimed at moving as many as possible of
Guantánamo's 22 prisoners who are recommended for
transfer. By law, the Pentagon must notify Congress 30
days before a transfer, so the deadline to set in motion
deals before the end of the Obama administration was
Monday.
By late in the day, officials said, the administration
had agreed to tell Congress that it intended to transfer
17 or 18 of the 59 remaining detainees at the prison; they
would go to Italy, Oman, Saudi Arabia and the United Arab
Emirates. If all goes as planned, that will leave 41 or 42
prisoners in Guantánamo for Donald J. Trump's
administration. Mr. Trump has vowed to keep the prison
operating and "load it up with some bad dudes." ...
The Shiller 10-year price-earnings ratio is currently
28.08, so the inverse or the earnings rate is 3.56%. The
dividend yield is 1.98%. So an expected yearly return over
the coming 10 years would be 3.56 + 1.98 or 5.54% provided
the price-earnings ratio stays the same and before
investment costs.
Against the 5.54% yearly expected return on stock over
the coming 10 years, the current 10-year Treasury bond
yield is 2.56%.
"The Subpoena That Rocked The Election Is Legal
Garbage, Experts Say"
'The warrant assumes that the mere existence of emails
from or to Hillary Clinton is probable cause that a crime
occurred'
by Matt Ferner, National Reporter, Ryan Grim,
Washington bureau chief & Nick Baumann, Senior Enterprise
Editor all of The Huffington Post...12/20/2016... 02:25 pm
ET...Updated 16 minutes ago
"The warrant connected to the FBI search that Hillary
Clinton says cost her the election shouldn't have been
granted, legal experts who reviewed the document released
on Tuesday told The Huffington Post.
FBI Director James Comey shook up the presidential race
11 days before the election by telling Congress the agency
had discovered new evidence in its previously closed
investigation into the email habits of Clinton, who was
significantly ahead in the polls at the time.
When Comey made the announcement, the bureau did not
have a warrant to search a laptop that agents believed
might contain evidence of criminal activity. The FBI set
out to rectify that two days later, on Oct. 30, when
agents applied for a warrant to search the laptop, which
was already in the FBI's possession. The FBI had seized
the computer as part of an investigation into former Rep.
Anthony Weiner, the estranged husband of Clinton aide Huma
Abedin.
The unsealed warrant "reveals Comey's intrusion on the
election was as utterly unjustified as we suspected at
time," Brian Fallon, a Clinton campaign spokesman, said on
Twitter Tuesday.
Clinton's lead in the polls shrank in the wake of
Comey's announcement. Then, just days ahead of election,
the FBI announced its search was complete, and it had
found no evidence of criminal activity. Clinton officials
believe that second announcement damaged her as much as,
or more than, the first, by enraging Trump supporters who
believed the fix was in.
The legal experts' argument against the validity of the
subpoena boils down to this: The FBI had already publicly
announced that it could not prove Clinton intended to
disclose classified information. Without that intent, and
without evidence of gross negligence, there was no case.
The warrant offers no suggestion that proving those
elements of the crime would be made easier by searching
new emails.
The essence of the warrant application is merely that
the FBI has discovered new emails sent between Clinton and
Abedin.
That's not enough. The idea that the mere existence of
emails involving Clinton may be evidence of a crime is
startling, said Ken Katkin, a professor at Salmon P. Chase
College of Law.
"The warrant application seems to reflect a belief that
any email sent by Hillary Clinton from a private email
server is probably evidence of a crime," Katkin said. "If
so, then it must be seen as a partisan political act,
rather than a legitimate law enforcement action."
The warrant never should have been granted, attorney
Randol Schoenberg argued. "I see nothing at all in the
search warrant application that would give rise to
probable cause, nothing that would make anyone suspect
that there was anything on the laptop beyond what the FBI
had already searched and determined not to be evidence of
a crime, nothing to suggest that there would be anything
other than routine correspondence between Secretary
Clinton and her longtime aide Huma Abedin," Schoenberg
wrote in an email.
"I am appalled," he added, noting that the name of the
agent in charge had been redacted in the copy of the
document publicly released.
Katkin agreed. "This search warrant application appears
to have been meritless. The FBI should not have sought it,
and the magistrate judge should not have granted it," he
:
...Federal Magistrate Judge Kevin Fox, who approved the
search warrant, didn't immediately respond to a request
for comment.
"The Fourth Amendment requires you to pretty much know
that what you're looking for is there ― not speculation.
This is just speculation," Cunningham said."
"Jack Bogle tells you the secret to becoming a winning
investor"
By Chuck Jaffe, Columnist...Dec 20, 2016...11:40 a.m.
ET
..."On smart beta investing in general:
Bogle: Smart beta is stupid.
So not one of these new index products is intriguing?
Bogle: No, no, no, no, no. Academics can find
anything with these masses of data they have on their
computers. They can find something that works in the past,
it's as easy as rolling off a log. But it almost never
works in the future – and not for very long - because they
all forget the most important single thing that happens in
our markets reversion to the mean. As the Good Book
says, 'And the first shall be last and the last shall be
first.'...
On what to expect from the market:
Bogle: The key to stock market investment returns is
today's dividend yield [around 2%] plus future earnings
growth. Nobody knows what that earnings growth will be,
but I am guessing it will be maybe in the range of 4% to
5%. That seems like an informed reasonable expectation.
You compare that with history and we are looking at
something very different. An average dividend yield not of
2% but of maybe 4.5%, and earnings growth has averaged
over 6% over the last 50 years.
So we have lower earnings forecast and a much lower
dividend yield built in. No one is going to change that.
It's like buying a bond, what is the interest rate when
you buy in. So we're talking about lower returns from
investment side, from what corporations do.
The other side of total return on stocks is what we
call speculative return, and that's how bullish or bearish
investors are, which is measured by the price/earnings
multiple -- how many times earnings your companies sell at
or the total stock market sells at. Over the long-term
past, that number has been about 15 times earnings. Today,
depending on who you are listening to, it could be as high
as 25 times earnings. ...I look backward at reported
earnings after all the bad stuff and I'm looking at a p/e
of 25. So the market is at least fully valued and I think
it is reasonable to expect possibly negative returns but
certainly no positive speculative return.
So we're looking at future market returns, if we are
lucky, of 4-5% before the costs of investing are
deducted."
I mean that I am suffering, physically, about the
ramifications of Donald Trump being officially elected as
the next President of the United States of America. I feel
despondent, looking through gloomy glass, looking for a
bright shiny object to deflect, even if only for a moment.
I mean if we immediately try to impeach him, we would have
Mike Pence (ak Tung) as president. Maybe we could embroil
him in a four year impeachment process.
As he slashes
his way, destroying Social Security and Medicare.
"U.S. Rig Count Up on Land, Flat Offshore
permian"
By MarEx...2016-12-16
"For the seventh week in a row, the benchmark Baker
Hughes Rig Count trended upwards, bringing the combined
count of active oil and gas rigs in the U.S. to 637.
However, only 22 of these were offshore rigs, essentially
unchanged from the same period last year.
The largest part of the onshore increase was in Texas,
where activity in the Permian Basin and Eagle Ford fields
has brought the state's count by 14 rigs in one week.
Taken together, the Permian and Eagle Ford accound for
nearly half of U.S. drilling activity, with 302 rigs
between them. Compared with offshore projects, onshore
shale drilling campaigns like those in the Eagle Ford are
remarkably inexpensive and brief; a shale well's breakeven
price point is typically in the range of $30-40, depending
on the field, and it is often a matter of weeks between
setting up a rig and pumping first oil.
West Texas Intermediate crude prices were at $52 per
barrel on Friday, well above the price point that would
induce shale producers to begin new drilling, analysts
say. In addition, Goldman Sachs raised its outlook for
crude oil prices for mid-2017, predicting WTI prices at
$57.50 by the second quarter. Goldman cited the recent
OPEC and non-OPEC agreements to cut production by 1.6
million barrels per day, and said that it expects
compliance with the cut agreement in excess of 80 percent.
However, assuming that the OPEC agreement holds and
that competitors do not raise output to offset it, a price
of $57.50 is still below the level at which many offshore
projects become competitive, says Wood Mackenzie. In July,
the firm found that only 20 percent of deep- and
ultra-deepwater projects at the pre-FID stage are
commercially viable at $60 per barrel – suggesting that
offshore activity may remain quiet until prices rise
further."
"...The autonomy technology being developed by ONR is
called Control Architecture for Robotic Agent Command and
Sensing, or CARACaS. The components that make up CARACaS
(some are commercial off-the-shelf) are inexpensive
compared to the costs of maintaining manned vessels..."
The Republican controlled House and Senate has been largely busy passing bills in the few days
left in 2016. This particular one caught my eye.
Michigan had put in place a new Unemployment System (Michigan Data Automated System or MiDAS)
to help in detecting unemployment fraud.
With the passage of Senate Bill 1008 by the Republican led House , $10 million is transferred
from the Unemployment Contingent Fund to the General Fund to be done with in the General Fund as
determined by the Republican held Legislature.
Just a little history;
MiDAS was put in place (2013) by Governor Rick Snyder of Flint, Michigan fame to automate the
system away from the manual process. The system sends out a series of questions, which the Unemployment
Applicant has to answer picking from listed answers. There is no room for explanation. The claimants
chosen answers from the list of answers are then loaded into the MiDAS data base and notification
is sent to the former employer who then confirms the answers the claimant has listed in the system.
If there is any discrepancy, MiDAS assumes the claimant has committed a potential fraud.
Another questionnaire is then sent to the claimant, which is also limited to listed responses.
If you do not respond in 10 days, it is assumed a fraud has been committed as determined by MiDAS.
A notice is "supposedly" sent out and the claimant has 30 days to answer. If no notice is sent out
and the claimant does not answer, MiDAS assumes fraud and the issue goes to collections where just
about anything can take place to collect the unemployment funds already given to the claimant. There
is little or no human interaction throughout the process and little can be done to explain circumstance
during the process.
"
The Michigan Unemployment Insurance Agency , partly at the request of the federal government
and partly on its own, reviewed 22,427 cases in which a computer determined a claimant had committed
civil fraud between October 2013 and October 2015 and found that 20,965 of those cases did not
involve fraud. Unemployment Insurance Agency spokesman Dave Murray said on Wednesday. That's an
error rate of more than 93%."
The $10 million will be transferred from the Unemployment Contingent Fund which had already grown
by 400%
after the MiDAS caused spike in fraud cases of which nearly all of them unfounded.
Senate Bill 1008 is balancing the state budget on the backs of innocent citizens wrongfully accused
of false unemployment claims.
Governor Rick Snyder spent $47 million of taxpayer funds to install MiDAS which has been shown
to be correct in determining fraud < 7% of the time. Rather than give the funds to those who were
unjustly denied Unemployment Compensation by MiDAS, the Republican led Michigan legislature and Republican
governor Rick Snyder are keeping much of it in the Unemployment Contingent (used to train workers
and for rainy days) and will also transfer $10 million of it to the General Fund to help balance
the budget. This is the same as using the additional Medicaid funding received from the expansion
to balance the budget rather than set it aside for later years which would have kept Michigan from
having to add to Medicaid funding till 2027. It too was used to balance the budget. By doing so in
both cases, the Republicans do not have to raise taxes on the rich in income.
Longtooth , December 18, 2016 8:14 pm
What? You mean to tell me that a conservative right wing republican controlled government is
trying to eliminate or grossly reduce a valued safety net feature provided by government (public
funds)?
What is the world coming to?
P.S. Did you perhaps think conservatives favor and support public funds use in safety nets
for labor (as opposed to capital owner's safety nets)? Whatever gave you that idea? Reagan's "welfare
queen" speech perhaps?
run75441 , December 18, 2016 10:24 pm
Actually, it is the failure of Snyder and the Repubs to acknowledge the error of "MiDAS" in
swindling all Michigan citizens in general and have chosen to keep the funds they have swindled
rather than acknowledge the error publically and give the funds to those hurt by "MiDAS." Mistakes
do happen and it would have been easy enough to fix by adding an area for explanation and in doing
two mailings of the questionnaire to the Unemployment applicant. The state is attempting to eliminate
people using a computer system which does not allow for applicant error and inturn is not 100%
fool-proof in mailing out notification.
The state has already acknowledged that 93% of the time it has made an error and yet they have
failed to reconcile it.
beene , December 19, 2016 7:26 am
Run, if you want to correct problems like this; where error is a feature. Make it a criminal
fraud to sell the state or federal government a program that the error rate is more than 4%.
Beverly Mann , December 19, 2016 9:13 am
The problem with that suggestion, Beene, is that fraud-criminal or civil-requires knowledge
of falsity, or intent to steal. The idea of declaring a particular error rate a criminal fraud
is a non sequitur; it's absurd.
But selling a system that so clearly had no ability to accomplish its supposed purpose, and
whose purpose seems to have actually been to simply kill the unemployment compensation program-and
whose method was accusing virtually everyone of fraud who applied for unemployment compensation-does
not appear to be mere incompetence. It does appear to be knowing-i.e., a fraud.
And I would think it is prosecutable. The Justice Dept. apparently hasn't pursued the matter,
and of course under Sessions it won't. But two years from now, there will be a Democrat about
to be inaugurated as governor and, hopefully also, a Dem as AG. Ingram County (Lansing, the state
capitol) is always Dem, I believe, and even now it's prosecutors probably could launch a criminal-fraud
inquiry-and it should. But the statute of limitations probably will not have run by, say, mid-2019,
so it will still be prosecutable then by a Dem AG's office. And presumably, this will be a big
campaign issue statewide in 2018.
Which brings me to this: In virtually every instance (the one exception is Romney during his
first two years as governor after running as a moderate, before starting to run as far-right presidential
primary candidate) of some rightwing successful businessperson winning a state governorship (and
now, president), on the claim that he's been such a success at business, and, well, shouldn't
the government be run like a business, that person has proved utterly incompetent. Snyder and
Illinois governor Bruce Rauner are exhibits A and B; Florida governor Rick Scott is Exhibit C.
As for people who were falsely accused of fraud under what itself was a fraudulent system,
they should file a class action lawsuit in state court against the folks who sold the state that
snake oil.
Warren , December 19, 2016 9:44 am
You seem to be assuming the problem is with the computer system. If the computer system is
simply implementing the law, then there is no fraud by the company that created it. Perhaps the
problem is in the law itself, or with the people who do not return the forms when they are supposed
to.
Bill White , December 19, 2016 1:44 pm
There is a very interesting book, written by the estimable Math Babe (www.mathbabe.org), Cathie
O'Neill about this phenomenon called Weapons of Math Destruction. I can't recommend it enough.
Combining the supposed lack of bias of statistics, conservative's ardent desire to treat the government
as just another tool for personal monetary profit and the right's natural desire to kick people
when they are down and steal their lunch money means these stories will just proliferate.
The headline in last Sunday's San Jose Mercury News was all about AI as the next wave of technological
profit making. The future is not likely to be comforting. Instead of asking where our jetpacks
are, we will be asking where all our stuff went.
"... One bankruptcy attorney told the Detroit Metro Times he had as many as 30 cases in 2015 tied to debt from the UIA; before the automated system was implemented, he said he would typically have at most one per year with such claims. The newspaper also found claimants who were charged with fraud despite never having received a single dollar in unemployment insurance benefits. ..."
"... A pair of lawsuits were filed in 2015 against the UIA over Midas. According to a pending federal case, in which the state revealed it had discontinued using Midas for fraud determinations, the system "resulted in countless unemployment insurance claimants being accused of fraud even though they did nothing wrong". ..."
"... Blanchard told the Guardian in February that many unemployment applicants may not have realized they were even eligible to appeal against the fraud charge, due to the setup of Midas. Attorneys representing claimants have said that many refuse to ever apply for unemployment benefits again. ..."
"... Levin, who represents part of metropolitan Detroit, said in his statement that Michigan officials had to fully account for the money that has flowed into the unemployment agency's contingent fund. ..."
Michigan government
agency wrongly accused individuals in at least 20,000 cases of fraudulently seeking unemployment
payments, according to a review by the state.
The review released this week found that an automated system had erroneously accused claimants
in 93% of cases – a rate that stunned even lawyers suing the state over the computer system and faulty
fraud claims.
"It's literally balancing the books on the backs of Michigan's poorest and jobless," attorney
David Blanchard, who is pursuing a class action in federal court on behalf of several claimants,
told the Guardian on Friday.
The
Michigan unemployment insurance agency (UIA) reviewed 22,427 cases in which an automated computer
system determined a claimant had committed insurance fraud, after federal officials, including the
Michigan congressman Sander Levin, raised concerns with the system.
The review found that the overwhelming majority of claims over a two-year period between October
2013 and August 2015 were in error. In 2015, the state revised its policy and required fraud determinations
to be reviewed and issued by employees. But the new data is the first indication of just how widespread
the improper accusations were during that period .
The people accused lost access to unemployment payments, and reported facing fines as high as
$100,000. Those who appealed against the fines fought the claims in lengthy administrative hearings.
And some had their federal and state taxes garnished. Kevin Grifka, an electrician who lives
in metro Detroit, had his entire federal income tax garnished by the UIA, after it accused him of
fraudulently collecting $12,000 in unemployment benefits.
The notice came just weeks before Christmas in 2014.
"To be honest with you, it was really hard to see your wife in tears around Christmas time, when
all of this went on for me," Grifka said.
The computer system claimed that he had failed to accurately represent his income over a 13-week
period. But the system was wrong: Grifka, 39, had not committed insurance fraud.
In a statement issued on Friday, Levin called on state officials to review the remaining fraud
cases that were generated by the system before the policy revision.
"While I'm pleased that a small subset of the cases has been reviewed, the state has a responsibility
to look at the additional 30,000 fraud determinations made during this same time period," he said.
Figures released by the state show 2,571 individuals have been repaid a total of $5.4m. It's unclear
if multiple cases were filed against the same claimants.
The findings come as Michigan's Republican-led legislature passed a bill this week to use
$10m from the unemployment agency's contingent fund – which is composed mostly of fines generated
by fraud claims – to balance the state's budget. Since 2011, the balance of the contingent fund has
jumped from $3.1m to $155m, according to
a report from a Michigan house agency.
The system, known as the Michigan Integrated Data Automated System (Midas), caused an immediate
spike in claims of fraud when it was implemented in October 2013 under the state's Republican governor,
Rick Snyder, at a cost of $47m.
In the run-up to a scathing report on the system issued last year by Michigan's auditor general,
the UIA began requiring employees to review the fraud determinations before they were issued.
The fraud accusations can carry an emotional burden for claimants.
"These accusations [have] a pretty big burden on people," Grifka said. While he said the new findings
were validating and his own case had been resolved, he called for state accountability.
"There's no recourse from the state on what they're doing to people's lives. That's my biggest
problem with all of this."
Steve Gray, director of the University of Michigan law school's unemployment insurance clinic,
told the Guardian earlier this year that he routinely came across claimants facing a significant
emotional toll. As a result, he said, the clinic added the number for a suicide hotline to a referral
resource page on the program's website.
"We had just a number of clients who were so desperate, saying that they were going to lose their
house they've never been unemployed before, they didn't know," said Gray, who filed a complaint
with the US labor department in 2015 about the Midas system.
The fines can be enormous. Residents interviewed by local news outlets have highlighted fraud
penalties from the UIA
upwards of $100,000 . Bankruptcy petitions filed as a result of unemployment insurance fraud
also increased during the timeframe when Midas was in use.
One bankruptcy attorney
told the Detroit Metro Times he had as many as 30 cases in 2015 tied to debt from the UIA; before
the automated system was implemented, he said he would typically have at most one per year with such
claims. The newspaper also found claimants who were charged with fraud despite never having received
a single dollar in unemployment insurance benefits.
A pair of lawsuits were filed in 2015 against the UIA over Midas. According to a pending federal
case, in which the state revealed it had discontinued using Midas for fraud determinations, the system
"resulted in countless unemployment insurance claimants being accused of fraud even though they did
nothing wrong".
Blanchard told the Guardian in February that many unemployment applicants may not have realized
they were even eligible to appeal against the fraud charge, due to the setup of Midas. Attorneys
representing claimants have said that many refuse to ever apply for unemployment benefits again.
A spokesman for the unemployment insurance agency, Dave Murray, said it appreciated Levin's work
on the issue and said it was continuing "to study fraud determinations".
The agency had already made changes to the fraud determination process, he said, and "we appreciate
that the state legislature this week approved a bill that codifies the reforms we've set in place".
Levin, who represents part of metropolitan Detroit, said in his statement that Michigan officials
had to fully account for the money that has flowed into the unemployment agency's contingent fund.
"While I am pleased that $5m has been repaid, it strikes me as small compared to the amount of
money that was collected at the time," he said. "Only a full audit will ensure the public that the
problem has been fully rectified."
ManuSHeloma 12 Feb 2016 9:02
Another failure of Gov Snyder's administration: first Flint water, now this. What can the people
of Michigan expect next? The recall of Snyder should be automated.
stuinmichigan pepspotbib 12 Feb 2016 10:02
It's not just Snyder and his lackies. You should see the radically gerrymanderd Michigan legislature,
run by rightist extremists, directed by the Koch Brothers, the DeVos family and others, via the
ALEC program that provides them with the radical right legislation they have passed and continue
to pass. Snyder ran saying that sort of stuff was not really on his agenda, but continues to sign
it. He's either a liar, an unprincipled idiot, or both. It's bad here. And it's getting worse.
DarthPutinbot 12 Feb 2016 9:09
What the f*ck is wrong in Michigan? Split it up among the surrounding states and call it good.
Michigan destroyed Detroit and cutoff their water. Michigan deliberately poisoned the residents
of Flint. Too many Michigan lawyers are crooks or basically inept. The court system screws over
parents in divorce cases. And now, Michigan is wrongly trying to collect money from people on
trumped up fraud charges. Stop it. The federal government needs to take over the state or bust
it up.
Non de Plume 12 Feb 2016 9:23
Hell, when the system *works* it's ridiculous. Watching my Dad - who had worked continuously since
14 years old save a few months in the early 90s - sitting on hold for hours... At least once a
week, to 'prove' he still deserved money from a system he paid into. Hours is not an exaggeration.
And now this. Goddammit Lansing! How many other ways can you try to save/take money from the
poor and end up costing us so much more?!?
Bailey Wilkins stuinmichigan 12 Feb 2016 21:56
Nothing against The Guardian's reporting, but if you follow the links, you'll see FOX 17 has been
covering the story locally since last May. It's their investigation that got the attention of
all the other publications (including Detroit Metro Times.) Local papers could have done a better
job though, agreed on that.
talenttruth 12 Feb 2016 12:48
Leering, Entitled Republican bastards like Governor Snyder simply HATE poor people. And THAT is
because all such bullies are cowards, through-and-through, always selecting as their "victims"
those who can't fight back. And, since such Puritan Cretins as Snyder "Believe" that they are
rich because of their superior merit, it stands to reason (doesn't it) that "poor people" (actually,
all us Little Folk) have NO merit, because we didn't inherit a Trust Fund, Daddy's Business or
other anciently stolen wealth. These people deserve stunningly BAD Karma. Unfortunately, Karma
has its own timeline and doesn't do what seems just, on a timely basis (usually).
Jim Uicker 12 Feb 2016 13:29
With today's sophisticated algorithms, computers are used to flag insurance claims all the time.
The hit rate is usually much better than 8%. But how can they even consider automating the adjudication
of fraud? Fraud is a crime; there should be a presumption of innocence and a right to due process.
Without telling people they had a right to appeal, didn't this system violate the constitutional
rights of Michigan's most vulnerable citizens: those with no job and therefore no money to defend
themselves?
And what about the employers who paid unemployment insurance premiums month after month, expecting
the system to protect their employees from business conditions that would necessitate layoffs?
Michigan has defrauded them as well, by collecting premiums and not paying claims.
Jim Uicker 12 Feb 2016 13:51
Even if the problem with Midas can be entirely blamed on the tech workers who built and tested
the software, there is no excuse for the behavior of the Snyder administration when they became
aware of the problem. Just like the cases of legionnaires disease, where the state failed to alert
the public about the outbreak and four more people died, the Snyder administration is again trying
to sweep its mistakes under the rug.
Before taking Midas offline, the UIA refused to comment on the Metro Times investigation, and
Snyder himself artfully avoided reporters' questions after being made aware of the result of an
investigation by a local television station. Now the state only revealed that it shut down Midas
to a pending lawsuit.
The state spent $47 million dollars on a computer system and then took it offline because it
didn't work. The flaws in the system are now costing the state many millions more. This level
of secrecy is evidence of bad government. The state is supposed to be accountable to taxpayers
for that money! Even if the Snyder administration isn't responsible for all of these tragedies,
it is definitely responsible for covering them up.
Jefferson78759 12 Feb 2016 13:55
This is the GOP "governing"; treat the average person like a criminal, "save" money on essential
infrastructure like water treatment, regardless of the consequences.
I get why the 1% votes GOP but if you're an average person you're putting your financial and
physical well being on the line if you do. Crazy.
MaryLee Sutton Henry 12 Feb 2016 22:30
I was forced to plead guilty by a public defender to the UIA fraud charge & thrown in jail for
4 days without my Diabetic meds or diet in Allegan county. As it stands right now the State of
Michigan keeps sending me bills that are almost $1000 more then what the county says I own. I
have done community service, and between witholding tax refunds and payments I have paid over
$1200 on a $4300 total bill. I have literally spend hours on the phone with UIA and faxing judgements
trying to straighten this out, yet still get bills for the higher amount from UIA. Its a nightmare,
I have a misdominer, until its paid and refuse to pay no more then $50 per month until they straighten
this out. Maybe joining the class action law suit would help. Does anyone have any better ideas??
Teri Roy 13 Feb 2016 13:27
My son and I both got hit, I was able to dispute mine but he has autism and they would not dismiss
his, so at 24 yrs old he's paying back 20 grand in pentailies and interest. Just not right
Outragously Flawless 14 Feb 2016 9:42
I also received a letter stating I owe and hadn't file taxes since 2007. I had to find all of
my taxes from 2007 to 2013 my question is why did they wait over 5yrs to contact me, or is that
the set up H&R block does my taxes and they didn't have records that far back.#sneakyass government
"... The New Keynesian agenda is the child of the neoclassical synthesis and, like the IS-LM model before it, New Keynesian economics inherits the mistakes of the bastard Keynesians. It misses two key Keynesian concepts: (1) there are multiple equilibrium unemployment rates and (2) beliefs are fundamental. My work brings these concepts back to center stage and integrates the Keynes of the General Theory with the microeconomics of general equilibrium theory in a new way. " ..."
" To complete the reconciliation of Keynesian economics
with general equilibrium theory, Paul Samuelson introduced
the neoclassical synthesis in 1955...
... In this view of the world, high unemployment is a
temporary phenomenon caused by the slow adjustment of money
wages and money prices. In Samuelson's vision, the economy is
Keynesian in the short run, when some wages and prices are
sticky. It is classical in the long run when all wages and
prices have had time to adjust....
... Although Samuelson's neoclassical synthesis was tidy,
it did not have much to do with the vision of the General
Theory...
... In Keynes' vision, there is no tendency for the
economy to self-correct. Left to itself, a market economy may
never recover from a depression and the unemployment rate may
remain too high forever. In contrast, in Samuelson's
neoclassical synthesis, unemployment causes money wages and
prices to fall. As the money wage and the money price fall,
aggregate demand rises and full employment is restored, even
if government takes no corrective action. By slipping wage
and price adjustment into his theory, Samuelson reintroduced
classical ideas by the back door-a sleight of hand that did
not go unnoticed by Keynes' contemporaries in Cambridge,
England. Famously, Joan Robinson referred to Samuelson's
approach as 'bastard Keynesianism.'
The New Keynesian agenda is the child of the
neoclassical synthesis and, like the IS-LM model before it,
New Keynesian economics inherits the mistakes of the bastard
Keynesians. It misses two key Keynesian concepts: (1) there
are multiple equilibrium unemployment rates and (2) beliefs
are fundamental. My work brings these concepts back to
center stage and integrates the Keynes of the General Theory
with the microeconomics of general equilibrium theory in a
new way. "
You could meanwhile contemplate Farmer's point that Samuelson
and his MIT colleagues "bastardized" Keynes' views when they
introduced them to the US.
" By slipping wage and price
adjustment into his theory, Samuelson reintroduced classical
ideas by the back door-a sleight of hand that did not go
unnoticed by Keynes' contemporaries in Cambridge, England.
Famously, Joan Robinson referred to Samuelson's approach as
'bastard Keynesianism."
And then you might contemplate Samuelson's (and MIT
colleagues) influence on Krugman, Blanchard, Summers and all
the well-publicized mainstream economists.
By slipping wage and price adjustment into his theory,
Samuelson reintroduced classical ideas by the back door-a
sleight of hand that did not go unnoticed by Keynes'
contemporaries in Cambridge, England. Famously, Joan Robinson
referred to Samuelson's approach as 'bastard Keynesianism'.
-- Roger Farmer
[ A fine place to start thinking. I knew this before and
read this again today, but did not think about the argument.
You might also wonder how it could happen that those "bastard
Keynesians", the ones who distorted Keynes' message, came to
be the ones who are well publicized, rather than more
accurate interpreters.
I think that is a good discussion. I also think the major
weakness of both Keynes and Marx is that they underestimated
the power and resilience of finance. They both thought logic
dictated the "euthanasia of the rentier", while we are seeing
the rentier growing ever stronger.
It's always with great diffidence that I write about
macroeconomics. Although I'm in good company in being
sceptical about much of macro (see this roundup from Bruegel
and this view from Noah Smith, for instance), I'm all too
well aware of the limits of my knowledge. So with that
warning, here's what I made of Roger Farmer's very
interesting new book, Prosperity for All: How To Prevent
Financial Crises....
"... Brother Feltner is right. Corporations are moving offshore to cut their wage bills. But they are not using that money to reinvest in their companies to improve the product and train the workforce. Instead, they are offshoring to gain cash flow to finance their fix. They want more stock buybacks which in turn enrich top executives and Wall Street investors. Automation and technology have nothing to do with this perilous addiction. ..."
"... emissions ..."
"... "The Anti-Corn Law League was a successful political movement in Great Britain aimed at the abolition of the unpopular Corn Laws, which protected landowners' interests by levying taxes on imported wheat, thus raising the price of bread at a time when factory-owners were trying to cut wages to be internationally competitive." ..."
"... Our backwards free fall from stable middle class growth and access and attainment to higher education has been precipitated and pushed by a broadcasting system and cyber platforms that have excluded the VOICE OF WORKERS ever since the first newspaper carried a BUSINESS section with no ..."
"... from being forced to compete against cheaper off-shore or south-of-the-border slave labor that formed the same COMPETITIVE ADVANTAGE now taken for granted when a subsidized start-up like NIKE decides to pursue a business model that relentlessly exploits North American running shoe and sports wear market needs by cheaply manufacturing such products off-shore via contracting agents exploiting captive Indonesian (substitute other Latin American, African or Asian ENTERPRISE aka FREE TRADE ZONES) slave laborers. ..."
"... If we aren't worth hiring at a sustainable SOCIALLY CONTRACTED WAGE aimed at developing our national resources, we should reject buying from such nationally suicidal business models and corporate LLC fictions even if they can pay-2-play legislation that removes the PROTECTIONS. We vow to never sacrifice NATIONAL SECURITY, so why have we allowed the PRIVATIZATION of our NATIONAL SECURITY STATE by corporate legal fictions? A revealing if not all-encompassing historical answer to that question is another corporate-captured and regulatory-captured Mass Media Taboo discussed one time to my knowledge on the PEOPLE'S AIRWAVES. Search Bill Moyers panel discussing the LEWIS POWELL MEMO TO THE NATIONAL CHAMBER OF COMMERCE and the Nixon appointment of LEWIS POWELL to the Supreme Court, despite his total lack of judicial experience. ..."
"... {Creative Commons Copyright} Mitch Ritter Paradigm Shifters Lay-Low Studios, Ore-Wa Media Discussion List ..."
American manufacturers have chosen a different path. Their CEOs grow wealthy by financially strip-mining
their own companies, aided and abetted by elite financiers who have only one goal: extracting as
much wealth as possible from the company while putting back as little as possible into production
and workers.
The heroin driving their addiction is stock buybacks-a company using its own profits (or borrowed
money) to buy back the company's own shares. This directly adds more wealth to the super-rich because
stock buybacks inevitably increase the value of the shares owned by top executives and rich investors.
Since top executives receive the vast majority of their income (often up to 95%) through stock incentives,
stock buybacks are pure gold. The stock price goes up and the CEOs get richer. In this they are in
harmony with top Wall Street private equity/hedge fund investors who incessantly clamor for more
stock buybacks, impatient for their next fix.
For the few, this addiction is the path to vast riches. It also is the path to annihilating the
manufacturing sector. (For a definitive yet accessible account see "
Profits without Prosperity
" by William Lazonick in the Harvard Business Review .)
Wait, wait, isn't this stock manipulation? Well, before the Reagan administration deregulated
them in 1982, stock buybacks indeed were considered stock manipulation and one of the causes of the
1929 crash. Now they are so ubiquitous that upwards of 75% of all corporate profits go to stock buybacks.
Over the last year, 37 companies in the S&P 500 actually spent more on buybacks than they generated
in profits, according to
Buyback
Quarterly .
Little wonder that stock buybacks are a major driver of
runaway inequality . In 1980 before the
stock buyback era, the ratio of compensation between the top 100 CEOs and the average worker was
45 to 1. Today it is a whopping 844 to 1. (The German CEO gap is closer to 150 to 1.)
Germany holds down its wage gap, in part, by discouraging stock buybacks. Through its system of
co-determination, workers and their unions have seats on the boards of directors and make sure profits
are used to invest in productive employment. As a result, in Germany stock buybacks account for a
much smaller percentage of corporate profits.
Between 2000 and 2015, 419 U.S. companies (on the S&P 500 index) spent a total of $4.7 trillion
on stock buybacks (annual average of $701 million per firm). During the same period, only 33 German
firms in the S&P350 Europe index conducted buybacks for a total of $111 billion (annual average of
$211 million per firm). (Many thanks to Mustafa Erdem Sakinç from the
Academic-Industry Research Network for
providing this excellent data.)
Let's do the math: U.S. firms as a whole spent 42 times more on stock buybacks than German firms!
Little wonder that our manufacturing sector is a withering appendage of Wall Street, while German
manufacturing leads the global economy.
So why does the media consistently use automation/technology to explain the loss of well-paying
manufacturing jobs?
To be fair, Poppy is not alone. Virtually every elite broadcaster, journalist, pundit and columnist
claims that the loss of good-paying, blue-collar jobs is somehow connected to new technologies. How
can they ignore the fact that in Germany advanced technologies and good-paying jobs go hand in hand?
Part of the answer is that it is reassuring for elites to believe that job loss stems from complex
"forces of production" that are far removed from human control. The inevitability of broad economic
trends makes a pundit sound more sophisticated than the unschooled factory worker who thinks the
company is moving to Mexico just because labor costs one-tenth as much.
Technological inevitability also fits neatly into the idea that runaway inequality in our economy
is akin to an act of God, that globalization and technology move forward and no one can stop the
process from anointing winners and losers. The winners-the richest of the rich-are those who have
the skills needed to succeed in the international technological race. The losers-most of the rest
of us without the new skills-see our jobs vaporized by technology and automation.
Too bad. Nothing to be done about it. Stop whining. Move on.
In other words, rising inequality can't be fundamentally altered.
Sinclair's Law of Human Nature
Or maybe there's another explanation suggested by Upton Sinclair's famous adage: "It is difficult
to get a man to understand something, when his salary depends on his not understanding it."
The newscasters, the pundits, the top columnists and recidivist TV commentators-nearly all of
them are doing very well. They may not be billionaires, but they live in a rarefied world far removed
form the worries felt by Mr. Feltner and his brothers and sisters at Rexnord. From their elite vantage
point, the status quo may have problems, but it is treating them remarkably well. So quite naturally
they are drawn to narratives that justify their elite positions; that altering runaway inequality
and its privileges would be futile at best and even harmful to society as a whole. How convenient.
Then again, American media firms are no strangers to stock buybacks. Time Warner, which owns CNN,
Poppy's employer, instituted a $5 billion stock buyback in 2016. That's $5 billion that, for example,
didn't go to news investigations about the perils of stock buybacks. We don't know if Poppy Harlow
receives stock incentives, but her top bosses certainly do.
What about NBC/MSNBC? Comcast is the parent company which also instituted a $5 billion stock buyback
in 2016.
Brother Feltner is right. Corporations are moving offshore to cut their wage bills. But they
are not using that money to reinvest in their companies to improve the product and train the workforce.
Instead, they are offshoring to gain cash flow to finance their fix. They want more stock buybacks
which in turn enrich top executives and Wall Street investors. Automation and technology have nothing
to do with this perilous addiction.
So, I'll stop yelling at Poppy, once she starts covering stock buybacks.
Lambert Strether has been blogging, managing online communities, and doing system administration
24/7 since 2003, in Drupal and WordPress. Besides political economy and the political scene, he blogs
about rhetoric, software engineering, permaculture, history, literature, local politics, international
travel, food, and fixing stuff around the house. The nom de plume "Lambert Strether" comes from Henry
James's The Ambassadors: "Live all you can. It's a mistake not to." You can follow him on Twitter
at @lambertstrether. http://www.correntewire.com
View all posts by
Lambert Strether → John ,
December 18, 2016 at 6:33 am
Now I understand. Companies off-shore their manufacturing because Mexico, as an example, has
the latest in automation and the highest of high technology. Another example of the "Move alone.
Nothing to see here." mantra.
Yes, does moving to Mexico, or China, somehow enable more automation? If you are going to automate,
why not automate in place and forget unnecessary long supply chains.
There's an endless supply of Mexicans that can work cheap, can be trained and who cost far
less than complicated machinery. They also have another utilitarian value: driving down wages
in America.
I'm glad I'm not the only one yelling at the TV ..
;)
"HARLOW: But you agree it won't save all of them, because of automation, because of technology."
SO .does it occur to this reported to ask how many jobs are moving from the US to Mexico? If
so many jobs are lost to automation at this factory, why is it worthwhile to move to Mexico. HOW
MANY jobs lost in the US and HOW MANY jobs gained in Mexico from this plant??? I wouldn't be surprised
that there is a gain in Mexico beyond the number directly moved from Carrier .(extra maintenance,
etc.)
And its a bizarre thing – 99% of "news" is in fact "analysis" – and they are remarkably wrong
– yet NONE of them are ever fired
What Mexico offers for some segments of the steel industry is the ability to bypass emissions
controls. This, much more than labour, is a primary attraction for process industries like
steel/petrochemical, where the goods are all most never touched by human hand.
While it also offers proximity to market that building a similar, high emissions plant further
south into Central/South America (or further west into Asia) can't compete, even with labour cheaper
than Mexico's. Because NAFTA does not require economic impact equivalents, industries with high
costs of compliance will go where there is nothing to comply too.
Environmental regulations in general are lower in the off-shore areas. Those countries are
where we were 50 years ago with polluted air, water, and land. However, as the citizens have better
and more stable lives. they will insist on improved conditions. We are already seeing some of
that start in China and other countries. We had to invent many of the technologies in the 70s-90s,
so those countries will be able to improve their lot much faster if they want to because they
will be able to buy off the shelf technologies.
Countries like China are moving forward with renewable energy, as much because it means clean
air and water, as it does reduced reliance on the cantankerous Middle East and greenhouse gas
emissions. It will be interesting to see what happens when US voters figure out that the goal
of the current Republican party is to return the US environmental condition to a Third World country.
Keep in mind that nearly all of the major environmental laws were signed by Republican presidents.
Every buyback returns cash to the investor – who then has to re-invest in something else to
continue getting returns, so to some extent equity buybacks of one company result in new investment
in some other company. To the extent that a company's growth prospects are dim, there are many
many situations in which buybacks make complete sense – as that company simply needs less and
less capital for a shrinking industry. So why should they be heavily capitalized with low growth
prospects?
It is still stock manipulation, plain and simple. And the decision to do it is made by the
executives who benefit the most from it. And it was illegal for a good reason, and it was made
legal for another good reason.
If the executives have so much retained earnings that they do not know how to invest them properly
then they are incompetent in their jobs and should be replaced. They should not be allowed to
use corporate funds to manipulate the stock price up to their own benefit.
Even worse, in some cases the company borrows money, at today's low interest rates, to buy back
stock.
When this occurs pervasively, as it has been for some time now in the US, it is a sign of stagnation
of the corporate sector.
@ dwayne, In which class were you "accidentally" born into. Not hard to make a guess is it.
Don't bother with your already anticipated tesponse. Since I know fairwell the answer. The child
of a poor substistance farmer who was made to walk five miles in knee deep snow to learn all that
you now do.
Buy backs are not manipulation any more than increasing the dividend is. In both cases, the
corporation is saying it has more money than it needs, and that that money should be returned
to the company's stockholders, allowing them to choose how that money will be invested instead
of having corporate management do it for them.
The concern over stock buy backs is simply people focusing on part of a larger transaction
instead of seeing the whole thing. It is the difference between micro thinking and macro thinking,
otherwise known as failing to see the bigger picture.
Benedict – you are spot on. Sounds like a lot of the other responders are either bitter shorts
that have been burned by buybacks just generally shallow thinkers. They will be giving their same
economically baseless arguments for the rest of their lives unless they learn to open their minds.
Those who are arguing for a dividend instead of a buyback are making a foolish argument – as
if a significant dividend increase wouldn't see a significant rise in the stock and hence a similar
effect as a buyback. Of course a dividend increase would see a significant rise in the stock price
just like the buyback.
As to those whining about workers at-risk and executives with pay tied to the stock price –
they mention nothing about the fact that workers risked no capital and can head for the door whenever
they like, and that executives risked having part of their pay go to $0 in the event of an industry
or economic downturn, and locked them into staying at that company for a period of time (if they
leave, their options get taken away). The risk profile of a salaried worker and an executive are
far different – and hence their economic outcomes are rightfully different depending on the financial
performance of a company.
. . . Of course a dividend increase would see a significant rise in the stock price just
like the buyback.
Why is that almost never the option taken?
As to those whining about workers at-risk and executives with pay tied to the stock price
– they mention nothing about the fact that workers risked no capital and can head for the door
whenever they like, and that executives risked having part of their pay go to $0 in the event
of an industry or economic downturn . . .
In the event of an industry or economic downturn those workers risk all of their pay going
to $0
Your argument reminds me that a rich person has just as much right to sleep under the bridge
on a freezing night as the poor person.
Executives of publicly traded companies are not the owners, but act with impunity as if they
are, and they risked no capital either.
Do you guys live in the real world? The company hires (from among their friends) a CEO, COO,
whatever. These people are "granted stock options" ok, those stocks don't even exist so basically
they just dilute the holdings of everybody who was working there. After a few years they "cash
out" where money comes from basically the worker's pockets.
How's that for "shallow thinking"?
> that executives risked having part of their pay go to $0 in the event of an industry or economic
downturn, and locked them into staying at that company for a period of time (if they leave, their
options get taken away).
Sigh. How many links can NakCap readers come up with that shows that this is exactly what *doesn't*
happen. Lemme guess, Dwayne, economic major?
Why do share buy backs if growth prospects are dim?
Why not return the money as a special dividend or pay down debt?
I'd like to see share buyback proposal prefaced with a statement such as:
"We scoured the world looking for a suitable investment for our excess cash, there was no additional
business enhancing technology we could justify purchasing, no additional R&D into product development
we could justify, no additional investment in plant or equipment upgrades we could justify, no
additional training for our employees we could justify, no prepayment of debt we could justify,
no funding of university research we could justify."
"We don't see a way to use our excess cash to grow/improve our business".
"Surprisingly, from the global list of corporate securities we could find no financial security
that is at a more attractive price level than our own stock."
"So we are buying back our company's stock."
"Take our word for it, it will be a great investment for the future."
"Note: our senior executives will be exercising options but not holding onto their option purchased
stock."
"Personal financial diversification is important to them."
Excuse me, but isn't one of the main factors driving the buybacks contractual executive bonus
payouts?
As in, if the stock price increases by X%, the CEO gets a maximum bonus Y. The people in the
finance wing of these companies are simply solving for how many stocks they need to buyback in
order to achieve X. Because they can spend other people's money to meet that goal, there is no
technical or legal barrier to them doing this.
So, since we can't mandate more ethical and longer term thinking people become CEO's, can't
we put a rule into place that no one in the organization performing the buyback is allowed to
benefit from a buyback directly? That would make a buyback more like an option of last resort.
Which is what it should be, given how corrosive it is to future development of a company.
" Stock buybacks inevitably increase the value of the shares owned by top executives and
rich investors. "
While this is true as far as it goes, buybacks increase the value of ALL shares - including
the roughly one quarter of outstanding shares owned by pension plans.
Pension plans are an important asset of the middle class. Cut their investment returns, and
real people take a hit.
Jim's argument also applies to 401k and other defined-contribution plans, of course. You do
still have a point, though – a lot of people who are eligible for such plans can't contribute
to them because they don't have any surplus income to stash away – which is, of course, because
wages are too low .
It's called "talking one's book," and working whenever possible to keep the flow of discourse
going in the direction that supports one's wealth and interests
Goosing investment returns in the short term with buybacks to benefit stock-option insiders,
at the expense of underinvestment in productive measures like R&D and training, eventually leads
to corporate decline which does no favors for the few middle class people who still have pensions.
Buybacks increase the price of shares of stock, not the value. If a pension plan owns stock
which has been inflated by buy-backs, the dividends paid to the pension plan won't increase. The
only way that the pension plan can benefit is by selling the stock. Then the pension plan will
need to use the proceeds of the sale to buy something else. But if most companies are inflating
the price of their stocks with buy-backs, how does the pension plan find an appropriate stock
to buy? If they buy another inflated stock, the value of the pension plan is in the same place
as it was before it sold the previous stock.
It seems to me that buy-backs just cause a bubble. Short term "investors" such as executives
can benefit from the bubble, but long term investors such as pension plans aren't able to benefit
in that way.
It's a huge problem of principle agent. The other is that every dollar used to buy back for
the company is then one less available for capital costs, R&D, employee training, etc.
The overwhelming majority of the gains to investors will go to the wealthy as well. Workers
get nothing and often worse than nothing when their job security is under attack.
Things were a lot more straight forward in the 18th and 19th centuries and there was far less
complication to obscure the reality. In 18th and 19th century they had small state, raw capitalism
when there was little Government interference to cloud the issue.
The Corn Laws and Laissez-Faire, the requirements of free trade, a historical lesson:
"The Anti-Corn Law League was a successful political movement in Great Britain aimed at
the abolition of the unpopular Corn Laws, which protected landowners' interests by levying taxes
on imported wheat, thus raising the price of bread at a time when factory-owners were trying to
cut wages to be internationally competitive."
The landowners wanted to maintain their profit, charging a high price for corn, but this posed
a barrier to international free trade in making UK wage labour uncompetitive raising the cost
of living for workers and as a consequence, wages.
The anti-corn law league had to fight the vested interests of the landowners to get the UK
in a position where it could engage in free trade. They had to get the cost of living down to
a point where they could pay their workers internationally competitive wages.
Opposing national interests, productive industry and landowner rentiers.
It's always been that way, we just forgot.
Workers have been priced out of international markets by the high cost of living in the West
and now we try and tell them that is their fault. It is the elite who do not understand the first
thing about free trade unlike their 19th century predecessors.
The US has probably been the most successful in making its labour force internationally uncompetitive
with soaring costs of housing, healthcare and student loan repayments. These all have to be covered
by wages and US businesses are now squealing about the high minimum wage.
US investors and companies have little interest in investing in the US due to its high labour
costs caused by its own national rentier interests. There are opposing national interests within
the US just as there were in the UK in the 19th Century.
Most of the UK now dreams of giving up work and living off the "unearned" income from a BTL
portfolio, extracting the "earned" income of generation rent. The UK dream is to be like the idle
rich, rentier, living off "unearned" income and doing nothing productive.
The UK is itself atrocious and has encouraged rentier interests which oppose the interests
of those who want free trade. The UK is now ramping up student loans to make things worse. High
housing costs and student loan repayments will have to be covered by wages pricing UK labour out
of international markets.
Things were a lot more straight forward in the 18th and 19th centuries and there was far less
complication to obscure the reality. In 18th and 19th century they had small state, raw capitalism
when there was little Government interference to cloud the issue.
The Classical Economists observed the situation which was a lot more clear cut in those days.
The Classical Economists thought the cost of living must be kept low with free or subsidised housing,
education and healthcare funded through taxes on "unearned" income. "Earned" income shouldn't
be taxed as this raises the cost of doing business, real productive business that earns real wealth.
Imaginary wealth can be produced by inflating the value of a nations housing stock until the
bubble bursts and all the imaginary wealth disappears (e.g. US 2008, Japan 1989, Ireland, Spain,
etc ..).
Ditto all other financial assets.
The Classical Economists realised capitalism has two sides, the productive side where "earned"
income is generated the unproductive, parasitic side where "unearned" income is generated. The
vested interests of the two sides are opposed to each other.
If you forget you can made fundamental mistakes, like today's ideas on free trade.
Real wealth comes from the real economy where real products and services are traded. This involves
hard work which is something the financial sector is not interested in.
The financial sector is interested in imaginary wealth – the wealth effect.
They look for some existing asset they can inflate the price of, like the national housing
stock. They then pour money into this asset to create imaginary wealth, the bubble bursts and
all the imaginary wealth disappears.
1929 – US (margin lending into US stocks)
1989 – Japan (real estate)
2008 – US (real estate bubble leveraged up with derivatives for global contagion)
2010 – Ireland (real estate)
2012 – Spain (real estate)
2015 – China (margin lending into Chinese stocks)
Central Banks have now got in on the act with QE and have gone for an "inflate all financial
asset prices" strategy to generate a wealth effect (imaginary wealth). The bubble bursts and all
the imaginary wealth disappears.
The wealth effect – it's like real wealth but it's only temporary.
The markets are high but there is a lot of imaginary wealth there after all that QE. Get ready
for when the imaginary wealth starts to evaporate, its only temporary. Refer to the "fundamentals"
to gauge the imaginary wealth in the markets; it's what "fundamentals" are for.
Canadian, Australian, Swedish and Norwegian housing markets are full of imaginary wealth. Get
ready for when the imaginary wealth starts to evaporate, its only temporary. Refer to the "fundamentals"
to gauge the imaginary wealth in these housing markets; it's what "fundamentals" are for.
Remember when we were panicking about the Chinese stock markets falling last year?
Have a look at it on any web-site with the scale set to max. you can see the ridiculous bubble
as clear as day.
The Chinese stock markets were artificially inflated creating imaginary wealth in Chinese stocks,
it was only temporary and it evaporated.
Did the Chinese who used the "money" they got from inflation of stock prices to buy real estate
and other tangible assets, with that "money," continue to have legal ownership of said assets
after the market collapsed?
If they did, it's amazing how "wealth" gets created
I gave up TV 6 years ago and I am old. TV is awful for so many reasons. One of them is the
fact that it dictates lifestyle and values. I hate it for children.
Harlow is just using what I call the 3-legged stool approach which is to blunt any argument
by introducing rotating facets. You see it in arguments about the West Bank. If you mention Zionist,
they rebut with Israeli. If you say Israeli, they introduce Jewish. Round and round you go until
the point is lost.
Aside: I'd pay money to see Lambert yelling at a TV. The way he carves some people up on this
site makes my toes curl. No matter how much they deserve it, I feel really sorry for them.
Silver lining time. Without TV to emote to, my blood pressure is lower overall. This trade
off is very beneficial to me.
Also germane is that a hundred years ago, the cheap labour was pouring into America from offshore.
Now that population has stabilized, the labour is no longer as cheap, (it is still too cheap,
but,) in America. Companies are generally about the "bottom line." Socially conscious corporate
management is feted and lionized for a reason; it's rare.
Regulation and enforcement is the key. Buy local, shop local, govern local.
Yup. Unfortunately that can't be applied to the environment, where everybody is downstream
and downwind of everybody else. I don't believe in God, but if you do then you can claim that's
why he made planets spherical. :)
While I do have a tv I don't get CNN. Thank gawd. In fact the indignity of paying for CNN with
its inane announcers and endless commercial interruptions was a big motivator for "cutting the
cord."
Count me as another who doesn't have tv. The Jimmy Dore Show and various online videos make
up our viewing. In fact, it's difficult to read NC and other sites and then see the drivel that
passes for tv news. But just keep it up, guys (MSM); you're one of the main reasons we have a
huge alienated population of have-nots, and the unwashed masses are becoming restive.
The automation=job loss meme has been picked up in other places.
On the Saturday before the election, I visited the local Democratic headquarters in my Northern
California town to get a Clinton-Kaine bumper sticker for my collection.
As they wanted $1, I wanted to get some entertainment value from the purchase, so I asked one
of the elderly women "What has Hillary ever done?".
She responded with "Financial reform", apparently confusing HRC with Elizabeth Warren.
I mentioned that Hillary supported the TPP, until well into her campaign, and that trade bills
had cost jobs.
Her immediate response was "More jobs have been lost to automation than trade bills".
I was surprised she had this explanation at the ready, perhaps it was given to HRC campaign
workers as a talking point in case someone questioned HRC's commitment to stopping the TPP.
There is a meme being told from the people at the top, to the peasants.
Part of the answer is that it is reassuring for elites to believe that job loss stems from
complex "forces of production" that are far removed from human control. The inevitability of broad
economic trends makes a pundit sound more sophisticated than the unschooled factory worker who
thinks the company is moving to Mexico just because labor costs one-tenth as much.
The other day someone left a link to an article by an economist named Scott Sumner, where at
the end of his article the same meme is put forth, with a twist.
So what's all this really about? Perhaps the "feminization" of America. When farm work was
wiped out by automation, uneducated farmers generally found factory jobs in the city. Now factory
workers are being asked to transition to service sector jobs that have been traditionally seen
as "women's work". Even worse, the culture is pushing back against a lot of traditionally masculine
character traits (especially on campuses). The alt-right is overtly anti-feminist, and Trump ran
a consciously macho themed campaign. This all may seem to be about trade , but it's actually about
automation and low-skilled men who feel emasculated .
Unschooled and low skilled are code words for stupid, and the meme is, men that make stuff
are stupid.
Within his article is an interview of the CEO of United Technologies by Jim Cramer in Business
Insider that he quotes as confirming his reasoning that automation is solely responsible for all
the job loss and that offshoring and globalization caused zero manufacturing jobs to be lost in
the US.
The result of keeping the plant in Indiana open is a $16 million investment to drive down
the cost of production, so as to reduce the cost gap with operating in Mexico.
What does that mean? Automation. What does that mean? Fewer jobs, Hayes acknowledged.
From the transcript (emphasis added):
GREG HAYES: Right. Well, and again, if you think about what we talked about last week, we're
going to make a $16 million investment in that factory in Indianapolis to automate to drive the
cost down so that we can continue to be competitive. Now is it as cheap as moving to Mexico with
lower cost of labor? No. But we will make that plant competitive just because we'll make the capital
investments there.
JIM CRAMER: Right.
GREG HAYES: But what that ultimately means is there will be fewer jobs .
The general theme here is something we've been writing about a lot at Business Insider. Yes,
low-skilled jobs are being lost to other countries, but they're also being lost to technology.
Everyone from liberal, Nobel-winning economist Paul Krugman to Republican Sen. Ben Sasse
has noted that technological developments are a bigger threat to American workers than trade.
Viktor Shvets, a strategist at Macquarie, has called it the "third industrial revolution."
Economists can't add. $16 million in investment, of real goods to improve productivity to the
point where air conditioner production in Indianapolis can compete with Mexican production cost
using existing technologies that are ripped off the shop floor and trucked to Mexico, itself creates
jobs, and the improved more highly automated plant still retains jobs here, along with the technology.
That $16 million investment happened only because Donald Trump either threatened or promised
something for United Technologies, but the number of jobs lost now are not solely due to moving
all production to Mexico, which would have been what happened had he not used his power of persuasion
to pry some money for investment out of the United Technologies bank account.
I wonder what Scott Sumner and the rest of the economists think of the women that work in manufacturing?
Are they stupid too?
In 1980 before the stock buyback era, the ratio of compensation between the top 100 CEOs
and the average worker was 45 to 1. Today it is a whopping 844 to 1. (The German CEO gap is
closer to 150 to 1.)
45 to 1, 150 to 1, 844 to 1 .it's all ridiculous. Just because you wear a suit and have your
own office to work in does not somehow entitle you to make as much in a year (or a month or a
week) as much as someone else does in a lifetime.
Stock buybacks are a problem of such proportions, that it is a subject all by itself. To connect
it to Germany's Industrial policy is a perfect example of ahistorical, faulty, unempirical analysis
at its worst leading to the politics of simpletons. The stock buybacks reference here are recent,
21st Century. The de-industrialization of the US goes back to the immediate post WWII policies
of corporate America as well as the US Government.
Germany's industrial policy has complex contributing factors which has a more important contributing
factor in its military expenditures. This of course is directly related to Germany's history.
It lost WWII and was an occupied territory, eventually split into an East And West Germany. For
many years, even as a NATO member, West Germany spent almost ZERO on military expenditures. This
comes with being an occupied nation that lost a war. Even today, the US Marine Corps alone has
a budget that exceeds all of the re-united Germany's military budget. Germany, for obvious historical
reasons has been deliberately suppressed as a military power, even in meager self defense, back
when a Soviet doppleganger was on its border. Of course, when the US Government stations on your
soil, almost 100,000 or more military personnel, armored tank divisions and US Air Force bases
for decades, you can avoid the cost of national defense.
----------
"German Chancellor Angela Merkel said on Saturday that Europe's largest economy would significantly
boost defense spending in the coming years to move towards the NATO target for member states to
spend 2 percent of their economic output on defense.
But Merkel, addressing a conference of the youth wing of her conservatives, did not specify
by how much defense spending would rise.
Merkel said U.S. President Barack Obama had told her it could no longer be the case that the
U.S. spends 3.4 percent of its gross domestic product (GDP) on security while Germany – its close
NATO ally – only spends 1.2 percent of GDP on that.
"To get from 1.2 percent to 2 percent, we need to increase it by a huge amount," Merkel said.
In 2016 Germany's budget for defense spending stands at 34.3 billion euros so it would need
to be increased by more than 20 billion euros to reach the 2 percent target."
And for decades, avoid the burden of military expenses it did, to the direct contribution to
its industrial manufacturing center. Chalmers Johnson reviews this critical aspect of America's
Hegemony since WWII in the course of several books. He was a CIA analyst as well academic economist
expert on Japan and China. The US economy suffered disinvestment in its tool and die and metal
working sector to the tune of over $7Trillion while building up the Pentagon into the Global Military
Hegemon that it is today. The platform of the manufacturing center dependent on tool and die to
make the parts of the machinery of factories and weapons of wars was in decline and overtaken
by the Japanese and the Germans. We outspent the Soviet Union and now the rest of the world by
staggering margins. But, to make and maintain the machinery of war, the Great American Killing
Machine, global bases and global industrial skills and equipment replaced the domestic. The US
Naval bases from Boston, Brooklyn, Philadelphia-founding locale of the US Navy and US Marine Corps,
Baltimore, and on and on, all gone. Replacing the base closures, Guam, Okinawa, Rota, Spain, Naples,
Italy Ramstein, Germany, and on and on. And Germany and Japan, played their roles to keep up American
military might in exchange for our nuclear umbrella and military protection. This to the detriment
of jobs in the US.
--------------------------
"After World War II, the US reduced defense spending to 7.2 percent of GDP by 1948, boosting it
to nearly 15 percent during the Korean War. During the height of the Cold War with the Soviet
Union US defense spending fluctuated at around 10 percent of GDP.
At the height of the Vietnam War in 1968 defense spending was 10 percent of GDP. But then it began
a rapid decline to 6 percent of GDP in the mid 1970s and hit a low of 5.5 percent of GDP in 1979
before beginning a large increase to 6.8 percent in 1986.
Starting in 1986 defense spending resumed its decline, bottoming out at 3.5 percent of GDP in
2001. After 2001, the US increased defense spending to a peak of 5.7 percent of GDP in 2010. It
is expected to reduce to 4.5 percent of GDP in 2015 and 3.8 percent by 2020."
For 20 years from the end of WWII, military expenses soaked up about 10% of the annual GNP.
Those amounts dwarf stock buy backs. As you can see from the excerpt above, the military bill
to the US is enormous and as a global military, much of this money is spent outside of the US,
employing people outside of the US, many who are not US citizens. As bad and as large as financialized
capitalism is, the jobs are lost more to wasteful military "Keynesianism". The 10s of $Trillions$
for most of the 2nd half of the 20th Century explains more than stock buybacks, which of course
are more than statistically significant, just not in the same league as Imperial America.
Automation, deindustrialization and run away factories together formed the basis for weakening
organized labor and reducing the amount of good paying working class jobs with their good benefits
and security. Job security comes in the form of unemployment benefits due to the boom/bust business
cycle that has factories operating on 2 or more shifts and then cut back due to saturation and
or slack demand. Mexicans thrown out of work are easier to deal with than unemployed Americans,
not only due to costs but also political fallout. Unemployed Americans can still vote congressmen
out of office every 24 months if they are that unhappy with the economy. You don't need a job
to vote. But alas, that is also another large scale problem, all by itself that deserves focused
analysis and comments.
Soooo it's back to blame the gub'ment and give Capital a pass, eh? I see what you did there
nice work. I particularly enjoyed your fantasy that unhappy workers can vote their congressperson
out every two years ' cause that's empirically true of the US political system.
All this stuff about 'automation' killing jobs is just a distraction. It's not happening, not
overall. That's why productivity figures are going down – they should be skyrocketing if automation
was to blame. The number of janitors and maids that have lost their jobs to a Roomba robotic vacuum
cleaner is zero. The number of truck drivers that have lost their jobs to robotic trucks is zero.
Shrimp are still flown to Malaysia, peeled by hand using slave labor, and then flown back, because
it's cheaper than developing and building and maintaining automated shrimp peeling machines. And
so on.
Why are the elites still so set on moving jobs to low wage countries? Why are they still so
set on an open-borders immigration policy? Because they know what they aren't telling us: right
now general robotics is still in its infancy, it's all about cheap labor.
So many otherwise rational and skeptical people have been distracted by the false 'robots are
now making human workers obsolete' meme. Congrats again on such a clearly reasoned piece.
The difference between German and US industrial manufacturing is social, not technological.
It only demonstrates that in the face of the displacement of labor with machines, social measures
are required to address the fact that a smaller percentage of total available labor is required
to produce the necessities of life. One way Germany has addressed this is by targeting high value-added
manufactures. In addition, historically manufacturing exports have always played a more important
part for Germany than for the US, never a big manufacturing exporter unlike (in the 19th C) Britain,
Germany, Japan and now China. US manufacturing was always primarily oriented towards the home
market, beginning with the Midwestern farmers and their McCormick reapers and Montgomery Wards
catalogs in the 19th C. The US has always been a primary products (oil, agri, timber, minerals)
exporter. Plus weapons. Kinda like Russia. Its two biggest trading partners are its continental
neighbors, Mexico and Canada.
The debate over whether job loss is due to automation or offshoring tends to be short on facts.
One almost never see a statistical breakdown that might tell us how much job losses are due to
one factor or another. That includes John Smith's "Imperialism in the Twenty-First Century: Globalization,
Super-exploitation and Capitalism's Final Crisis" (2016), quite big on off-shoring, but never
giving a concrete measure of the relative importance of one or the other.
However I put up a BLS-based chart that shows the decline in manufacturing jobs in the US in
a pretty diagonal straight line down beginning well before off-shoring became a thing, well before
NAFTA. Basically the manufacturing workforce peaked in the 50's. So there is always some pressure
through competition to displace labor with automation. Offshoring is merely a dependent alternative
to automation – reduce the labor bill with cheaper labor, not displacement. It's not "one or the
other".
Technological determinism aside, a fetish is made of automation in the media because they know
there is no answer that doesn't conclude with the elimination of capitalism, and that answer is
out of bounds. Hence it is deployed literally as a deus ex machina that ends social debate. But
clearly the question of a living income has become separated from that of productive labor.
One might say that manufacturing employment started declining, when we allowed non-reciprocal
"free-trade"; access to our markets, in order to enable some other geopolitical goal.
Going something like : "Sure, go ahead and let the Japanese and Germans export their cars to
our market. It will help their economies, and we'll never notice the difference. Besides, even
if they didn't have various ways of restricting our exports, the size of their markets aren't
worth exporting to "
Then in the 70-80s, it was "Sure, lets help all of our Allies develop an aerospace industry,
and build their own F-16s. "Offsets"? No problem. No sacrifice by US workers is too much in order
to fight the "Red Menace", and promote "Free Markets" "Democracy", and improve the standard of
living over there.."
Millions of jobs go to Mexico and millions of Mexicans come to usa and send their millions
in wages home to support their families. Meanwhile Politicians continue with Rectal Crainial Inversion
while drawing huge salaries. When will the revolution begin?
Class-hatred has been simmering in the U.S. throughout its entire history, and it manifests
itself today in the anti-Americanism of our greedy elites, who would prefer to profit from the
exploitation of foreign labor over living in a just and equitable society. Germany and Japan benefitted
from losing the War, from Cold War trade policies that allowed them to rebuild on exports to the
U.S. (subsidized in many cases, such as by container ships returning from Vietnam via Yokohama),
and the creation of a manufacturing culture that continued to value workers even as their wages
rose. Americans in the credentialed classes became obsessed with rock-star lifestyles, epitomized
by Slick Willie bragging that his first date with Hill in 1971 involved crossing a union picket
line to scab at the Yale Art Museum in order to gaze at a bunch of vacuous Rothkos. But watch
out - class-hatred is a two-way street
Chicken and egg, Lambert. Stock manipulation increases the power of the 1%. I also yell at
the TV "news" - probably because I didn't have one either between the critical developmental ages
of 18 and 23 - so "news" broadcasts are not allowed in my house.
It's not all roses and unicorns either in Germany. There is outsourcing going on as well –
for example both BMW and VW manufacture cars for the US market in the Southeastern US (IIRC both
in Spartanburg, SC).
Yes, Germany does have a better education system for apprentices etc plus it is still socially
acceptable to become an apprentice in a trade and not go to college. BMW is trying to establish
something similar around Spartanburg, but apparently with mixed success. Dan Rather did a segment
on this effort a few years back and interviewed a bunch of parents who said something along the
lines of "nice idea, but it's for other people's kids – ours have to go to college".
Another thing to keep in mind is that large German manufacturing companies still tend to have
pretty strong union representation, which of course is sorely missing in the US.
Two words missing from Union Reps and Wage Slaves ourselves as we flail away while falling
backwards, "SOCIAL CONTRACT." Our backwards free fall from stable middle class growth and
access and attainment to higher education has been precipitated and pushed by a broadcasting system
and cyber platforms that have excluded the VOICE OF WORKERS ever since the first newspaper carried
a BUSINESS section with no LABOR section.
Through the various historical attempts to insulate some small sliver of broadcast spectrum
from advertiser pressures and market forces. Those various historical attempts now the strictest
taboo on content, even stricter than sexual predation and violent aberration which comprise much
of the broadcast content. Yet when or where can we find a broadcaster in the U.S. addressing issues
of structural media reform to insulate some national resources from the POLITICAL E-CON-o-my that
grants them to the the highest bidder.
As media scholars Robert McChesney and John Nichols have pointed out in a number of their book-length
studies on this taboo U.S. history of mass media: One of the first national radio networks was
designated for LABOR, there were multiple EDUCATIONAL networks and this has nothing to do with
IDENTITY LABELS used to divide U.S. like Conservative or Liberal, however these shifty terms are
defined. A well-rounded human has both aspects and more within them depending on circumstance,
context and situation being addressed.
Another designated non-commercial broadcaster was the CATHOLIC CHURCH whose leaders were actively
concerned with the use of public airwaves by Advertising Agencies using sales tactics to habituate
dangerous past-times (like alcohol and tobacco) and were driven by seasonal fashions rather than
values and verities such as the bible and catechism's preponderant calls to address the needs
of society's most disadvantaged. Or to beat weapons into plowshares and sit under a fig tree and
reason together (Isaiah) rather than to use fear to keep subsidizing the worlds largest distributor
of weapons and its stealthy and steely profiteers.
Sad day when the few token representatives of U.S. Wage Slaves cannot even be counted on to
voice a DEMAND much less to insert the concept of SOCIAL CONTRACT that extended humane and practical
DEMAND-DRIVEN\SUPPLY LINE insights into our materialistic society's wealthiest distributors of
hate and divisiveness such as Henry Ford, who while stoking anti-Semitism and disparaging independently
organized labor for his MASS PRODUCTION facilities, eventually realized that if his impoverished
work-force was ever to constitute the potential internal markets that became the Post WW II envy
of the world, those workers would have to be paid more than slave wages, be granted access to
long-term capital to purchase big-ticket items and our growing internal markets within the lower
48 states would require careful regulation and controls like tariffs and capital-flight restrictions
that would protect our enviable internal markets. Nowadays whenever PROTECTIONISM is demonized
by both Fair & Balanced Journalists and their Golden Rolodex of E-CON and Bid-Net experts there
is nobody to note how our own late-developing working middle classes grew from the Age of the
Robber Barons in which the U.S. was as feudal a society as Europe's with simple substitution of
the Captains of Industry for the monopolistic and conservative royal Anglo and Euro monarchs whose
crown-chartered legal anti-trust fictions dba EAST INDIA TRADING COMPANY or HUDSON BAY TRADING
CORPORATION.
Our founders rebelled against these Conservative Royal Feudal Monarchs and their Royally Chartered
monopolistic Corporate Legal Fictions by dumping such product into every available cartel-controlled
mercantile harbor. PROTECTIONISM was what allowed our states to form that most enviable of internal
national markets and prevented our SOCIALLY CONTRACTED WORK FORCE from being forced to compete
against cheaper off-shore or south-of-the-border slave labor that formed the same COMPETITIVE
ADVANTAGE now taken for granted when a subsidized start-up like NIKE decides to pursue a business
model that relentlessly exploits North American running shoe and sports wear market needs by cheaply
manufacturing such products off-shore via contracting agents exploiting captive Indonesian (substitute
other Latin American, African or Asian ENTERPRISE aka FREE TRADE ZONES) slave laborers.
If we aren't worth hiring at a sustainable SOCIALLY CONTRACTED WAGE aimed at developing our
national resources, we should reject buying from such nationally suicidal business models and
corporate LLC fictions even if they can pay-2-play legislation that removes the PROTECTIONS. We
vow to never sacrifice NATIONAL SECURITY, so why have we allowed the PRIVATIZATION of our NATIONAL
SECURITY STATE by corporate legal fictions? A revealing if not all-encompassing historical answer
to that question is another corporate-captured and regulatory-captured Mass Media Taboo discussed
one time to my knowledge on the PEOPLE'S AIRWAVES. Search Bill Moyers panel discussing the LEWIS
POWELL MEMO TO THE NATIONAL CHAMBER OF COMMERCE and the Nixon appointment of LEWIS POWELL to the
Supreme Court, despite his total lack of judicial experience.
{Creative Commons Copyright}
Mitch Ritter Paradigm Shifters
Lay-Low Studios, Ore-Wa
Media Discussion List
FELTNER: These companies are leaving to exploit cheap labor. That's plain and simple. If
he can change those trade policies to keep those jobs here in America, that's what we need.
We need American jobs, not just union jobs.
And thus we circle back to finding a way to keep manufacturing jobs in the USA. The comment
by Feltner is correct, but the solution of keep jobs in the USA using more expensive labor simply
means more expensive products. That is fine if you are in the top 10% and can pay anything for
your purchases, but I am on a fixed income and cannot afford to pay more for anything without
a 1:1 drop in my living standards.
The real macroeconomic problem is all, I repeat – ALL – new income after inflation generated
by the macro economy since Bush II took office has gone to the top 10% of households by wealth.
Why does NOBODY else seem to understand that you cannot run an economy without money? And the
Main Street economy is strapped with 10's of millions having fallen out of the middle class even
as their paper assets like home equity were stolen by the financialization of the USA and the
stockholders that own the Wall Street economy.
The data coming out of the government/fed is a work of total fiction, inflation has been galloping
(at least here in Oregon) at double digits since Jan 2014, rents alone are up 75% since then.
Food at least 40%, both auto and healthcare insurance at least 40%, just to name three items,
even a sandwich at a fast food join is nearly 100% higher than start of 2014 here. Del Taco raised
it's menu prices in July by over 100%. Companies do not do that in disinflationary eras such as
we are assured have existed since 2010. My veteran's disability/SS had it's first COLA increase
in a while for 2017, social security disability went up $3, that is not a typo, my rent has gone
up from 725 in December 2013 to $1,250 in Jan 2017 while my benefit has risen for next year by
THREE dollars.
I considered myself middle class, just barely but above working class/poor, as recently as
2014. Now I am leaving for Australia on a one way ticket in 3 weeks, if I had not been invited
there by a friend I would have had to give notice at this place anyway in order to live in my
vehicle. Inflation is so wildly out of control that anyone taking home less than 40k a year here
now needs a roommate. Is this metro Portland? No, it is far southern semi rural Jackson county
hundreds of miles from the nearest major hub.
So any analysis of economic conditions in the USA have got to start with recognition that the
cost of living has risen OVERALL by as much as 40-50% just in the last very few years.
WHY DO YOU THINK POPULISM RAISED IT'S VIRULENT HEAD THIS ELECTION CYCLE?
People are angry, they are broke, living paycheck to paycheck, using payday loans to feed their
kids, and the entire media and government refuse to recognize price increases because those increases
do not fit the Feds or government's economic models that allowed for negative real interest rates
and the historic borrowing by the congress. Inflation is as bad as it ever was in the 1970's but
we are told there is no inflation and so if we are not making ends meet it simply has to be a
personal failing, bad habits, or profligate spending when I know for my part I have cut back on
absolutely every thing I can including heat. It is not a personal failing, it is being lied to
by the powers that be.
Seriously, until the contributors at Naked Capitalism finally recognize the house on fire inflation
for every item you must purchase (except gasoline and flat screens) there really is nothing here
worth reading.
The answer is that the very rich are waging class warfare and are looking for anything to absolve
them of responsibility.
If automation were responsible for unemployment, then productivity figures would be soaring.
Dean Baker notes that productivity has been rising at half the rate over the past decade at just
1.5% per year, compared to 3% between 1947 and 1973.
http://cepr.net/publications/op-eds-columns/the-job-killing-robot-myth
People need a restitution for the outright looting of society from the rich. That's about it.
You missed some. German companies, but also those of other European countries, generally have
a seat on the board for unions. The adversarial model of management versus unions is not so common.
China has stolen a great deal of technology from Germany because it has (had?) the most advanced
industrial technology in the world. Read the below articles from Der Spiegel and you will understand.
Essentially, Germany is what the U.S. was in the 1980s before the various presidents, both left
and right, starting with Nixon, sold us down the river.
– "Product Piracy Goes High-Tech: Nabbing Know-How in China"
– "Harmony and Ambition: China's Cut-Throat Railway Revolution"
– "Beijing's High-Tech Ambitions: The Dangers of Germany's Dependence on China"
And the following is from CNN/Money, "How to save U.S. manufacturing jobs": "High wages can't
be the culprit, because wages in U.S. manufacturing are not especially high by international standards.
As of 2009, 12 European countries plus Australia had higher average manufacturing wages than the
United States. Norway topped the list with an average manufacturing wage of $53.89 per hour, 60
percent above the U.S. average of $33.53 Moreover, the United States lost manufacturing jobs
at a faster rate since 2000 than several countries that paid manufacturing workers even more.
Among the 10 countries for which the Bureau of Labor Statistics tracks manufacturing employment,
Australia, France, Germany, Italy, the Netherlands and Sweden both had higher manufacturing wages
and lost smaller shares of their manufacturing employment than the United States between 2000
and 2010."
Not to mention Germany's apprentice system, which works really well.
"... Cahal Moran is a member of Rethinking Economics, the worldwide student movement to reform the teaching of economics. He is the co-author, with Joe Earle and Zach Ward-Perkins of the book ..."
"... The Econocracy: The Perils of Leaving Economics to the Experts ..."
"... the authors can be followed on their Twitter account ..."
"... @TheEconocracy ..."
"... . Interview conducted by Philip Pilkington, a macroeconomist working in asset management and author of the new book ..."
"... The Reformation in Economics: A Deconstruction and Reconstruction of Economic Theory ..."
"... . The views expressed in this interview are not those of his employer. ..."
"... In the book we give a formal definition of econocracy as "a society in which political goals are defined in terms of their effect on the economy, which is believed to be a distinct system with its own logic that requires experts to manage it. " ..."
"... Economists are wheeled out to comment on all sorts of public policy issues: in the news, on the TV, online and so forth. The deference to economic expertise is something that permeates our politics and, through the use of jargon, maths and statistics, serves to exclude non-expert citizens from conversations about issues that often have a direct impact on their lives. As you imply, it is something like an ancient priesthood. In fact, in an earlier draft of the book we made a comparison to ancient medical texts, which were only written in Latin and so created a huge asymmetry between experts and non-experts, which could have awful consequences for the latter. In some senses economics in modern times goes even further than this, because it affects policy on everything from incomes and jobs to healthcare and the environment. ..."
"... I suppose that leads us pretty tidily to the title of the second chapter of your book: 'Economics as Indoctrination'. Given that you have this view of economic language – one which I concur with in that I have concluded that maybe 60-80% of formal economic language is ideology – it pretty naturally follows that there will be some attempt to indoctrinate those who wish to speak the language. I guess the natural place to start is to ask you for a flavour of what this indoctrination looks like and then maybe we will move on to what its purposes are and what ends it serves. ..."
"... We call economics education indoctrination in the book not just because students are presented with only one set of ideas – neoclassical economics – but because they are taught to accept it in an uncritical manner, as if it is all there is to economics. ..."
"... Keynes said that the real challenge lies in escaping old ways of thinking, and this is something we've all noticed in ourselves after studying economics. ..."
"... This process is indeed the main way that the econocracy reproduces itself: as the economic experts of the present train the economic experts of the future, this shapes the way the latter approach economic problems when they go on to work at powerful institutions. Broadly speaking, this education shapes the perception of economic experts in two ways. Firstly, they tend to have mechanical view of the world, thinking of economic and social problems as clearly defined technical questions. This allows them to produce clear predictions when addressing even complex political issues. Secondly, they see economics as a separate, value-free sphere which does not require ethical and political debate. Their answers to policy questions have the air of objectivity about them. ..."
"... Economists predict disaster where none occurs. They deny the possibility of events that then happen. They oppose the most basic, decent, and sensible reforms, while offering placebos instead. They are always surprised when something untoward (like a recession) actually occurs. And when finally they sense that some position cannot be sustained, they do not re-examine their ideas. Instead, they simply change the subject. ..."
"... Making central banks independent from the political process, staffing them with economists and tasking them with using interest rates to manage inflation and growth, along with a fairly hands-off approach to the financial sector (which itself used economic models such as Black-Scholes) seemed to be working. That was, until the theoretical blind spots economists had in the housing market and financial sector was revealed by the near-collapse of both of them. ..."
"... I suppose this is a variant on the classic 'who governs the governors': who teaches the teachers. ..."
"... substantive ..."
"... If economics is to function as the medium of power than its students must be made to follow blindly. Critical thinking would allow them to undermine it or manipulate it to their own ends. ..."
"... The students must be made into strict adherents before being granted access to the highest levels of information. By erecting barriers at each level (be it specialized language that must be mastered or learning contigent on prior learning) we can separate the weak from the true adherents. ..."
"... Following Adler, economics is not a science, it's a philosophy. At least economics doesn't burn its heretics, it just ignores them. Science is neither immune. Gerald Pollack has written that he was advised to avoid water as a subject of inquiry, or it could kill his career. ..."
"... File under "the creative class" writers à la Toynbee ..."
"... When you think about it economics doesn't really exist. Society does. And when economics is talked about like society doesn't exist it gets pointless. Just like some stupid software language that does basically nothing. What we need is the courage of our human convictions. I think it was Blyth in an early clip who said more or less, "Just do it." Deficit spend as necessary and the solutions will appear. That's very Zen and I love it. I mean, here's the question, What is the worst that can happen? If there is sufficient money. Great interviewer and interviewee. Thanks NC for this post. ..."
"... "Economics doesn't really exist, society does": a super obvious statement that stands in starkest distinction to NeoLib ideology that insists we are all atomistic, isolated individuals. Math and language are epiphenomena to human being that have perverted our self perception nearly to oblivion. ..."
"... Interesting thing I heard the other day, Professor Richard Wolff says he studied economics at three elite universities (Yale, Harvard, and another notable I cannot remember) and never had a course in Karl Marx. Tunnel vision for sure in the field. ..."
"... Answer to question no 2: The jargon that is being used these days by presidents, economists, talk show hosts is beyond my understanding. I have a masters degree. ..."
"... An argot (English pronunciation: /ˈɑːrɡoʊ/; from French argot [aʁˈɡo] 'slang') is a secret language used by various groups-e.g., schoolmates, outlaws, colleagues, among many others-to prevent outsiders from understanding their conversations. The term argot is also used to refer to the informal specialized vocabulary from a particular field of study, occupation, or hobby, in which sense it overlaps with jargon. ..."
"... Is the economics profession simply following the "He who has the gold, makes the rules"? Many other professions service retail customers, such as attorneys and doctors. But how many ordinary citizens ever deal with an economist on any level? ..."
"... If paycheck dependent economists know that powerful politicians, wealthy corporate leaders and wealthy donors in academia are looking over their shoulders, one could expect economists' message to be justify what their "employers" want to do. ..."
"... "Keen was formerly an associate professor of economics at University of Western Sydney, until he applied for voluntary redundancy in 2013, due to the closure of the economics program at the university. ..."
"... You will eat, by and by, when you learn how to bake and how to fry. Chop some wood, It'll do ya good. And you'll eat in that sweet by and by. ..."
"... This interview articulates an extremely important insight when it states that the economy " is believed to be a distinct system with its own logic that requires experts to manage it." ..."
"... This seeming independence of the economic and political systems has largely deceived most of modern social science. This seeming independence is not real, and in fact these spheres are deeply intertwined. ..."
"... As people llike Karl Polyani and Philip Mirowski have maintained, markets are always organized through politics and institutions and one key to understanding this reality is to keep a focus on the promulgation of the rules and regulations of a powerful state that helps to create movements for both regulation and deregulation. ..."
"... It was notable that Cathal failed to mention Marx. I don't think he realizes yet quite how fully indoctrinated he's been – as that humdinger of an analogy (gay marriage – actually a redefinition to normalize surrogacy, a eugenics-by-stealth agenda, hence it's enormous funding by the plutocracy) indicates. The economic can never be separated from the socio-political. ..."
"... Mirowski describes how the "Neoliberal Economic thought collective" captured and now dominates economic doctrine by controlling what and who can publish in the major economic journals. As a result those aspects of Neoclassical Economics remaining are being re-shaped into a Neoliberal mold. I noticed the word "neoliberal" doesn't show up anywhere in this post yet Neoliberal economic policies and rationales dominate policy in the real world. ..."
"... Mirowski points out that Neoliberal economics designs policy to apply market models to every problem based on the doctrine that markets are the most powerful information processing system available to man - a strong form of the Efficient Markets Hypothesis. The Market is the ultimate epistemological device. If the market solution doesn't satisfy the needs of the common man then satisfying those needs is simply contrary to the wisdom of the market. For other problems like externalities they just need to be properly incorporated into the market model to obtain an optimal solution to whatever problem they present. ..."
"... . Putting fins and flashy hubcaps on Neoclassical economics as it morphs into Neoliberal economics is not the answer. ..."
"... The role of Economics is simple: it should inform people of the consequences of certain decisions we make about who gets what. ..."
"... You are right, that is what it should be, unfortunately neoclassical has failed horribly in that regard. It is based on assumptions that are demonstrably false and they are never revisited to see the effect of relaxing them. You might as well be counting angels on a pin. See Roamer's take down of it for starters. ..."
PP: Your book starts with a quote from Albert Camus that is, in some ways, rather pessimistic.
In it he says that most generations seek to reform the world but that his generation only sought
to ensure that the world does not destroy itself. You and I are both of the same generation broadly
speaking and I do not think it unfair that our generation is subject to some abuse and often portrayed
as narcissistic, video-game obsessed, layabouts. I have always felt that the 'problem generation'
are, in fact, the Baby Boomers who tag us with these clichés. It is this generation that rules the
world today and this generation that gave birth to The Econocracy. Before we get too much into what
The Econocracy is and how it operates, maybe you could briefly talk about this generational issue.
Is it something that you have given much thought to and do you identify more so with Camus' generation?
CM: We do not focus on the generational issue too much, but it is really at the heart of the book
and of the student movement more generally. Unlike the boomers, we have grown up in a world of economic
and political uncertainty, with the financial crisis being the most extreme example of this (yet).
The disconnect between this uncertainty and at times chaos and what we saw in the classroom really
sowed the seeds for societies like Post-Crash Economics. If the boom had simply continued, perhaps
we would have just shrugged our shoulders and got on with it. But we could not ignore what was going
on outside the lecture theatre. In this sense, Camus' feeling of a call of duty resonated with us
and that's why we chose that quote. However, we try to use this initial pessimism to build a positive
vision later on.
PP: Yeah, I know the feeling. It was very hard for me to not think that something was really,
really wrong with economics as I took undergraduate classes against the backdrop of the 2007-08 crisis.
For me there was a lot of cognitive dissonance. I found it really weird because it seemed to me pretty
obvious that economics was the language of power – the language through which our leaders communicated
their plans and goals to the rest of us. But what I was learning in class did not seem up to this
in any way, shape or form. I think that this is a theme in your book too. Could you explain what
you mean by 'The Econocracy' and how it functions?
CM: In the book we give a formal definition of econocracy as "a society in which political goals
are defined in terms of their effect on the economy, which is believed to be a distinct system with
its own logic that requires experts to manage it. " In other words, the idea of 'the
economy' as a separate sphere of life is dominant in politics, and this separate sphere has technical
properties which can only be understood through economic expertise. The results are twofold. First,
public debates about the economy are conducted in a language that most people simply do not speak
– we've tried to look at this this through undertaking polling with Yougov and one of the things
we found is that only 12% of respondents said they thought politicians and the media talk about economics
in an accessible language.
Second, many key areas of decision making – central banks, international institutions like the
IMF & World Bank, competition authorities – are delegated to people with economic expertise on the
grounds that they can find what is in some sense a technically 'right' answer to economic problems
in their respective domains. The rise of this idea of the economy is reflected in the increase in
mentions of 'the economy' in the winning UK political party's manifestos: it was only mentioned once,
for the first time, by the Conservatives in 1950, but 5 years later this rose to 10 and in the most
recent Conservative party manifesto 'the economy' was mentioned 59 times.
PP: I'm getting the sense that this goes beyond a simple criticism of technocracy and bureaucracy,
right? I mean a lot of aspects of society are run based on expertise of some sort or another. But
you seem to be getting at something else. Is this related to the fact that, like the Scholastics
of the Middle Ages, they have concocted an elite language?
CM: That's absolutely right. One could probably write a book critiquing the technocratic and bureaucratic
tendencies of say, lawyers or accountants, but where economics goes one step further is the place
it has in public debate. Economists are wheeled out to comment on all sorts of public policy issues:
in the news, on the TV, online and so forth. The deference to economic expertise is something that
permeates our politics and, through the use of jargon, maths and statistics, serves to exclude non-expert
citizens from conversations about issues that often have a direct impact on their lives. As you imply,
it is something like an ancient priesthood. In fact, in an earlier draft of the book we made a comparison
to ancient medical texts, which were only written in Latin and so created a huge asymmetry between
experts and non-experts, which could have awful consequences for the latter. In some senses economics
in modern times goes even further than this, because it affects policy on everything from incomes
and jobs to healthcare and the environment.
PP: Yes. I've also long thought this. My book is actually about trying to figure out what is pure
ideology and mysticism and what is not within the jargon. I suppose that leads us pretty tidily to
the title of the second chapter of your book: 'Economics as Indoctrination'. Given that you have
this view of economic language – one which I concur with in that I have concluded that maybe 60-80%
of formal economic language is ideology – it pretty naturally follows that there will be some attempt
to indoctrinate those who wish to speak the language. I guess the natural place to start is to ask
you for a flavour of what this indoctrination looks like and then maybe we will move on to what its
purposes are and what ends it serves.
CM: It sounds like there's some crossover between our books, and this is something I've noticed
with people across the movement. It's great that so many people are independently coming to similar
ideas and, I think, a sign that we may just have a point.
We call economics education indoctrination in the book not just because students are presented
with only one set of ideas – neoclassical economics – but because they are taught to accept it in
an uncritical manner, as if it is all there is to economics. The idea that there might be criticisms
of neoclassical economics, other schools of thought, and even the real world are evicted to such
an extent that after a while students may find it difficult to think any other way. Keynes
said that the real challenge lies in escaping old ways of thinking, and this is something we've all
noticed in ourselves after studying economics.
PP: I'd tend to agree. But what I found very interesting about the book was that you looked at
how economics education is structured. You paint the picture of a very odd discipline that does not
appear to be taught like other disciplines, whether natural or social science. Do you think that
there is something distinctly different in this regard and could you describe it briefly?
CM: Economics is definitely a law unto itself. In natural sciences, the culture is very much focused
on the empirics: theory has empirical motivations, and you always come back to falsifiable predictions
before too long. In other social sciences, the culture is instead focused on debate and the contested
nature of knowledge. You learn not to take any of your beliefs for granted. But entering an economics
degree feels a bit like being transported to another universe. Students are introduced to a fixed
body of knowledge that is presented as if – in the words of one student – it "fell from heaven in
an ever-true form". The focus is very much on learning this body of knowledge by rote, building up
the neoclassical world from abstract axioms and solving mathematical problems with at best vague
and stylised references to the real world they are supposed to represent. The commonly used phrase
'thinking like an economist' really captures the effort to indoctrinate students into this framework.
We did a curriculum review of the final exams and course outlines of 174 modules at 7 Russell
Group universities (considered the 'elite' of the UK) to look systematically into how economics students
are educated. Our main aim was to look for evidence of critical thinking, pluralism and real world
application, all of which we would consider vital to educating the experts of the future. The results
were deeply worrying: 76% of final exam questions showed no evidence of critical thinking – that
is, formulating an independent, reasoned argument. When only compulsory modules (namely micro and
macroeconomics) were included, this figure increased to a staggering 92%. Instead, the majority of
marks are given for what we call 'operate a model' questions: working through a model mathematically
without asking questions about its applicability. Of those questions which ask students to operate
a model, only 3% even attempted a link to the real world. The remainder of the marks were given for
simple description questions ('what is the Friedman k% rule?') or multiple choice questions, again
neither of which require any critical thinking. All of this is very worrying when you consider the
place economic expertise has in society.
PP: It is really very concerning. Although I would imagine that anyone who has actually taken
an economics class – as many of the educated public have at some time or other – will not be surprised
at what you have found. If you are correct then it seems to logically follow that the experts of
the future are being trained to think in a highly abstract manner but that these abstractions need
no link to the real world as it exists. What is more, if they are only being given one perspective
and are told that this perspective is as true and infallible as the most rigorous of the sciences
you are going to get a very high level of confidence in these abstractions by these experts. Have
you thought about what this means when these people flow into the elite institutions that control
important aspects of our societies? How do you think that it informs and shapes their judgements
and what implications do you think this has for the rest of us?
CM: This process is indeed the main way that the econocracy reproduces itself: as the economic
experts of the present train the economic experts of the future, this shapes the way the latter approach
economic problems when they go on to work at powerful institutions. Broadly speaking, this education
shapes the perception of economic experts in two ways. Firstly, they tend to have mechanical view
of the world, thinking of economic and social problems as clearly defined technical questions. This
allows them to produce clear predictions when addressing even complex political issues. Secondly,
they see economics as a separate, value-free sphere which does not require ethical and political
debate. Their answers to policy questions have the air of objectivity about them.
To make things more concrete consider cost-benefit analysis, an idea with its roots in economics
that's used extensively by major institutions like the Government Economic Service in the UK. This
calculates the 'costs' and 'benefits' of different policies by assigning a monetary value to each
of them, then provides a clear decision rule: if the benefits outweigh the costs, the policy is a
good one. Cost-benefit analysis is used even when the effects of a policy are not obviously monetary,
such as the number of trees in an area, or mortality rates, transforming what was a multifaceted
problem into a simple, seemingly objective mathematical problem. The result of this is that decisions
which could concern a large range of stakeholders are made in a centralised manner behind closed
doors, often without the consultation of these stakeholders (except in order to retrieve money values
from them, which raises problems in itself).
PP: Right. I see what you mean. So this goes far beyond, say, the blindnesses in the theories
that led to, say, economists largely missing the crisis and thinking, to quote Blanchard, that
the "state of macro was good" even in the face of such problems. Have you given any consideration
to these facts in the book? James Galbraith has a great quote where he says that:
Economists predict disaster where none occurs. They deny the possibility of events that then
happen. They oppose the most basic, decent, and sensible reforms, while offering placebos instead.
They are always surprised when something untoward (like a recession) actually occurs. And when
finally they sense that some position cannot be sustained, they do not re-examine their ideas.
Instead, they simply change the subject.
That seems to be another angle by which you might criticise the profession: namely, that they're
not actually very good at what they claim to be specialists in. Do you and your co-authors have anything
to say about that?
CM: Exactly – economics permeates our political process, from seemingly small examples like cost-benefit
analysis to catastrophic events such as the financial crisis. We open the book with the former but
later on we move on to several case studies of the latter, including the financial crisis but also
broadening our argument to other areas where we think neoclassical economics falls short, like the
environment and inequality. The kind of hubris illustrated by economists like Blanchard – as well
as Robert Lucas when he claimed "the central problem of depression prevention had been solved" in
2003 – seems quite remarkable to us now, but economists really had convinced themselves that they'd
found a simple, technical solution to the business cycle. Making central banks independent from the
political process, staffing them with economists and tasking them with using interest rates to manage
inflation and growth, along with a fairly hands-off approach to the financial sector (which itself
used economic models such as Black-Scholes) seemed to be working. That was, until the theoretical
blind spots economists had in the housing market and financial sector was revealed by the near-collapse
of both of them.
Quite clearly, the profession has yet to find definitive answers to major economic questions like
'what causes financial crises?' This is completely understandable in itself, as these are difficult
questions. But the fact that the profession also has the capacity to convince not only itself but
policymakers and politicians that it has solved these problems, and therefore
that its ideas should guide public policy, is extremely worrying when it can have such terrible consequences
for so many people. And it is worth mentioning those non-neoclassical economists – like Hyman Minsky,
Wynne Godley, and Steve Keen – who put the financial sector front and centre of their analysis and
made sometimes prescient warnings about crises like the one we've just experienced. Given these examples,
it actually puzzles and saddens me that the profession is not willing to accept more intellectual
diversity. Galbraith's quote touches on this intellectual inertia, and one of the things we discuss
in the book is macroeconomists' attempts to reassert themselves since the financial crisis, some
of which have involved some impressive mental gymnastics. One example is Tom Sargent denying altogether
that macroeconomists failed to foresee the crisis, which is ironic because he wrote a paper just
before the crisis arguing that investors weren't taking enough risk due to their memories of the
Great Depression. This kind of retrospective rewriting of history has to be fought if economics is
not to slip back into old habits.
PP: The mental contortions are absolutely fascinating. I've noticed three key trends in the profession
since the crisis. The first is to talk more about a phenomenon that mainstream economists call 'rational
bubbles'. I mean RATIONAL bubbles. That is manifestly a doublethink word, not unlike Orwell's blackwhite.
The second is to add Bayesian agents into economics models and saying that this will ensure that
these models are robust in future (an absurd claim given the backward-looking nature of Bayesian
agents). Bayesian agents, of course, update their beliefs in line with past events - not a bad allegory
for the how the modellers see themselves! The final, and most pronounced, is to try to sweep under
the carpet the fact that the Efficient Markets Hypothesis makes falsifiable (and falsified!) claims
that markets integrate all relevant information and instead try to draw attention to the fact that
it also states that no one can beat the markets. The idea seems to be to maintain the theory by saying
that it doesn't say what it in fact says and drawing attention to a secondary prediction that it
makes. What do you make of this sorry, but I have to say it dishonesty? And do you think that the
next generation are by and large swallowing it?
CM: I think the issue is that many economists are stuck in their ways. It's clear these economists
have been doing economics a certain way, using a certain framework, for their entire lives, so it's
perhaps unsurprising that they can't think any other way. Max Planck said that science advances one
funeral at a time, but the especially worrying thing given the research we've done for the book is
that the next generation of economic experts are being trained to think in the exact same way. In
fact, evidence we present suggests that economics education has actually become more, not less narrow
over the past few decades, so if things don't change the situation could get even worse in the future.
And as I mentioned earlier, that's nothing against economics students themselves – they have exams
to pass, and aren't really given much opportunity to read around and question what they're taught.
The positive thing is that we are seeing these student groups spring up across the world who are
all recognising the limitations of their education: the lack of pluralism, critical thinking and
empiricism come up again and again in students' complaints. What's more is that we have support from
big institutions like the Bank of England, Trade Union Congress and Government Economic Service,
who have voiced similar concerns. If you look at things like the movement for gay marriage in the
United States, it's clear the politicians were the last to change – when every other sector of civil
society had been convinced and they had no choice. Perhaps if change comes to economics, academia
will be the last to change – when everyone else demands it.
PP: But surely this is somewhat different from a political issue like gay marriage. Political
issues have to do with changing peoples' opinions on some matter or other. That just means putting
forward a persuasive argument and then waiting for it to get accepted. What we are dealing with seems
like something rather different. Sure, you could convince many that some change needs to come about
in the way economics is taught. But that does not produce the means by which to teach it. I think
that we saw what happens there with Wendy Carlin's CORE program (an INET-funded attempt at curriculum
reform). This was the economists' response to demands for a more integrated and pluralistic course
but I saw it - and I think the student movement saw it - as more of the same. Yet I have no doubt
that Carlin really did her best to put together something that she thought would address the concerns
being raised. The problem is that Carlin et al cannot actually put together something that meets
the concerns. I suppose this is a variant on the classic 'who governs the governors': who teaches
the teachers.
CM: You are absolutely right about that and the example of CORE is a good one, as it demonstrates
perfectly the type of limited reform which can serve as a safety valve against more radical opposition.
Carlin and CORE's other proponents view the problem as one with economics education, but not economics
itself – she has previously stated that "economics explains our world, economics degrees don't".
Interestingly, this rhetoric is similar to the response to calls for reform in economics graduate
programs in the US in the 1980s, where the need for more real world application was accepted but
it was argued that programs should retain the "core [which] should be regarded as the basic unit
in which those things common to all economists should be taught". We repeatedly see this disconnect
between the critic's idea of reform and the mainstream's, cemented by the fact that many neoclassical
economists simply do not know enough about non-neoclassical ideas to teach them. It is a vicious
circle which is inevitably going to reproduce a fundamentally similar education, even if some internal
attempts at reform are made along the way.
Thus in CORE the calls for history, real world applications and interdisciplinarity are all, to
some degree accepted (even if they are not pursued adequately), while the calls for pluralism and
critical thinking are not. The resulting education is perhaps an improvement, but the outcome is
similar: instead of saying 'here is neoclassical economics, learn and then (maybe) apply it', the
message of CORE is 'here is the real world, here is how neoclassical economics applies to it'. Once
more, the idea that the theory and even the history itself might be contested is thrown out of the
window and the result is still a narrow education. In fact, we reviewed the University College London
exams for the CORE course and found that they showed a slight increase in critical thinking, but
were still primarily about regurgitating models and theories. The need for pluralism is made especially
apparent here, as learning about alternative ideas immediately makes students re-evaluate what they
have already been taught. Students need to know more than one set of ideas if they are to judge which
ideas are best suited to explaining a particular situation.
PP: My impression from the book – and please, correct me if I'm wrong – is that you want to bypass
this structural constraint by making economics more democratically accessible. Personally, I think
that there is a lot of merit to this idea. In my book, as I said, I try to present an ideology-neutral
economics – which I think can be done to some limited extent – and what you find with such an economics
is that many different worlds are possible. Economics in this regard can be a helpful guide but it
cannot tell you much about where you want to go. For this reason I would much prefer to see more
democratic input on economic decision-making and much less pontifications from an over-heavy technocracy.
That said, however, economics is still a relatively difficult subject. It cannot be picked up without
some commitment to study it. How do you square this circle – by which I mean, how do you try to increase
the accessibility of economics without watering it down so much that it becomes analytically dysfunctional?
And a cheeky, but related question: in the book you rightly draw attention to the fact that economics
jargon is over represented in political discourse – how do you ensure that you are not increasing
the volume and weight of this jargon through attempts at popularisation?
CM: We definitely view the democratisation of economics as a necessary part of the renewal of
the discipline and indeed of politics, but your conception of it as a strategic way to bypass the
inertia of the discipline is an interesting idea and something I hadn't thought of explicitly. I
suppose this goes back to what I was saying about bottom-up approaches to reform and the value of
demanding change from different angles. Unfortunately and as we've seen, one of the main response
to Brexit and Trump by elites has simply been to view those who vote for it as ignorant or bigoted.
The simple fact is that many peoples' lived experience of 'the economy' is completely different to
the top-down, statistical and theoretical views of economists and pundits. Many have experienced
huge shifts and declines in their circumstances for decades, neither of which are obvious if you
only look at GDP and inflation statistics, or (worse) if you are completely lost in theory.
In the book we introduce the idea of the public interest economist, who has socially aware research
topics, a commitment to public engagement and education, and who looks to hold powerful public and
private institutions to account. Reconnecting economic experts with the public in this way would
be a great way to temper the former's technocratic, top-down tendencies and encourage the experts
to understand that people may have different, valid views to them – and this is a gateway to appreciating
other approaches more generally. Of course, this doesn't eliminate the need for expertise altogether:
our intuition can only go so far, and some things can only be revealed by systematic and empirical
study. Economics is difficult, as you point out. But a world in which economic experts are in touch
with and can be questioned by the public is one where economic expertise will naturally be more responsive
to the needs of said public. We sum it up by saying that we want experts to inform our decisions,
but not necessarily to make them for us.
Illustrating the magnitude of the challenge you raise about teaching economics without jargon,
I'm going to have to introduce some jargon. In the book we distinguish between formal
literacy, where people are taught a fixed body of knowledge; and substantive
literacy, where people are encouraged to question the subject matter and form their own independent
views. This is the basis for the other pillar of our proposals: citizen economists, non-experts who
nevertheless have some baseline level of substantive literacy and are able to engage in economic
debates. The starting point for citizen economics is to make connections between peoples' own lives
and broader economic problems, encouraging their own input from the start. And an important part
of being a citizen economist is not to accept the seeming authority bestowed by the use of jargon
and to ask experts to say what they mean in plain language. As a student movement we have already
started to put this into practice with citizens' crash courses (evening classes for adults), schools
workshops, the public education website ecnmy.org and by supporting the RSA's
Citizens' Economic Council, which is seeking to establish more democratic input into economic policy.
PP: Yeah, I think I see what you're saying. Anyway, I suppose we should wrap this up as it's pretty
long already. Where do you see this whole thing going from here? Are you optimistic about the future,
both in terms of opening up the discipline and in terms of fixing the incredibly serious economic
problems that have emerged in the past 30 years?
CM: I am cautiously optimistic about the future, as I think in many ways the debate has been won
over whether economics should change – the question is now what form this change should take. On
top of changes we have already discussed such as CORE and the position of the Bank of England, we
have seen the ESRC put aside a large pot of money for research in new ideas in macroeconomics (the
question is whether this money will be used to support CORE type research or more diverse and radical
ideas); Manchester council involving citizens more in the decision-making process; the director of
the IFS, Paul Johnson, admitting economists' failure to communicate during Brexit; and many more
emerging examples that the message is getting across to various sections of civil society. More must
certainly be done and it is up to everyone to make sure that the changes are fundamental rather than
incremental, but in my eyes it is starting to look possible that economics will evolve from an insular
and esoteric discipline into a vibrant, pluralistic public dialogue – and we think that can only
be a good thing
"In other social sciences, the culture is instead focused on debate and the contested nature
of knowledge. You learn not to take any of your beliefs for granted. But entering an economics
degree feels a bit like being transported to another universe. Students are introduced to a
fixed body of knowledge that is presented as if – in the words of one student – it "fell from
heaven in an ever-true form"."
How on earth did this happen?? Was the teaching of economics always this way? Or did something
happen at some point along the way (say, the influence of a particular school of thought, etc.)
to create a static curriculum where critical thinking is so undervalued?
"The deference to economic expertise is something that permeates our politics and, through
the use of jargon, maths and statistics, serves to exclude non-expert citizens from conversations
about issues that often have a direct impact on their lives."
Doesn't this sound exactly like the Clinton campaign? Technocrats all, who say to people like
me, "Trust us. We're the EXPERTS. Don't even try to stretch your silly little brains. We know
what's best."
If economics is to function as the medium of power than its students must be made to follow
blindly. Critical thinking would allow them to undermine it or manipulate it to their own ends.
The students must be made into strict adherents before being granted access to the highest
levels of information. By erecting barriers at each level (be it specialized language that must
be mastered or learning contigent on prior learning) we can separate the weak from the true adherents.
Following Adler, economics is not a science, it's a philosophy. At least economics doesn't burn its heretics, it just ignores them. Science is neither immune.
Gerald Pollack has written that he was advised to avoid water as a subject of inquiry, or it could
kill his career.
This article highlights why I take what positions Naked Capitalism assert seriously. For instance
getting input from Clive about the difficulty of the mechanics of Greece leaving the Euro. Or
Yves, having knowledge from her father's work about solving problems in the real world. This problem
is not just limited to economics. To get a Phd one must basically agree to what you have been
taught. To get published one must undergo peer review by people who almost always believe the
current mainstream ideas in that field. Remember how the nutrition experts told you margarine
was good for you – butter and eggs were bad. Climate science is a good example. Reliance on models
that can never be complete. In almost every conversation I have had as a climate skeptic, the
strongest believers in the alarmist position rely not on their own understanding but that of experts.
And those experts who are alarmist rely almost entirely on computer modeling results to buttress
their position. In fact, as a skeptic I could almost rewrite the above article using climate science.
In your own mind, try that. As a generalist (non climate scientist) I can read and understand
most climate papers if I take the time to learn and understand the jargon as every subfield has
its own. it does take a good while with considerable effort. Climate science proclaims to know
with certainty what the climate future holds so they should be the experts on public policy that
will affect the lives of everyone in the world. "The totally convinced and the totally stupid
have too much in common for the resemblance to be accidental." Robert Anton Wilson
Economists writing about climate change purport to define the optimal reduction in greenhouse
gases by tallying up the avoided damage, or the benefit in the cost-benefit analysis, then saying
that costs of emission reduction should go no higher than this benefit. Not sure if they are still
doing this, but in the past they used the ethically questionable and benefit-lessening assumption
that lives in poor countries, where most people would die, should be valued much less than lives
in rich countries. Worse, the entire exercise is absurd because the result of the calculation
is an emissions reduction that could have no effect on the climate, because emissions don't have
a simple effect as with traditional air pollutants for which the analysis was initially developed.
As a generalist who works for and with a climate scientist who is at the forefront of his field
I am not able to understand essential details of most of his papers because he and his co-authors
are in fact physicists and their analyses involve substantially more than modest calculus. Furthermore
neither he nor any other of his colleagues whose work I am exposed to have proclaimed that they
"know" what the future holds.
At the UI and when I was at Michigan, they simply don't. Anything remotely like that would
be taught in the History department, and then mostly for History grad students.
At Cambridge University it was a compulsory course representing 25% of the first year curriculum
(this was 1991-92). No idea if it has been downsized since then but given the "new blood" I remember
entering the faculty I am pessimistic.
I have to agree that when I studied economics, it was theory and barely any practical exercises.
Lots of maximization and other But I never took this as gospel. I understood that all these economic models were a product
of their time. A framework that would be adapted by those in power to fit their needs.
When my son was born with a disability, I had to turn many 15 minute errands into 2 hour adventures.
It became even more evident that efficiency is relative What are we really maximizing anyway?
THAT is the key question.
I guess many graduate without any critical thinking. But I tend to think that many graduates
of economics like the way the world is set and feel no compulsion to change it.
yes, absolutely. If it is good public policy do it. When you think about it economics doesn't
really exist. Society does. And when economics is talked about like society doesn't exist it gets
pointless. Just like some stupid software language that does basically nothing. What we need is
the courage of our human convictions. I think it was Blyth in an early clip who said more or less,
"Just do it." Deficit spend as necessary and the solutions will appear. That's very Zen and I
love it. I mean, here's the question, What is the worst that can happen? If there is sufficient
money. Great interviewer and interviewee. Thanks NC for this post.
"Economics doesn't really exist, society does": a super obvious statement that stands in starkest
distinction to NeoLib ideology that insists we are all atomistic, isolated individuals. Math and
language are epiphenomena to human being that have perverted our self perception nearly to oblivion.
Bayes allows an entry to qualifying bias and uncertainty in conditional probabilities (tree
diagrams). It allows an indication that the source is b.s., which is currently relevant.
It's unnecessary in terms of fudging models, we've been quite capable of that without Bayesian
modifiers.
The most important bias his theorem clarifies concerns false positives, for example if a drug
test is 95% accurate it can still be wrong more than half the time on a positive response.
Economics wil never progress until it has a clearer grasp on the phenomenon of money. Until
they do it's the same old GIGO using Newtonian metaphors prettied up with math (or let us say
"arithmetic", since it's just basic calculus, linear algebra or probability/statistics).
Not to be demeaning toward Eigenvectors and matrix theory. It's amazing how recent that was
in the history of math - I mean all the way back to the Greeks, Pythagoras, Archimedes, etc. It's
like it's still brand new!
However, you could say a drawing by Rembrandt is just "basic pen and ink". Indeed on one level
it is. On another level it's an entire self-consistent and revelatory conceptualization of infinite
physical reality. That's the kind of holistic and syntheticistic ideation that economics sorely
lacks.
Not only does it lack this, but the economists don't even know it's there!
whoa you guys rock! that was faster than a New Yoarke minite. Whoa Yves would be proud. I hope
you get a bonus! maybe a few million dollars.
They're not this fast in Denver. That's for sure. All those TV people and all that money they
have and they fkk something up so bad they have to apologize. Wow. that really is screwing up.
Not only that, They're stilll pointing a camera straight at a scene and failing to use cinematic
story telling techniques invented , oh, 80 or 90 years ago!
There should be awards for excellence in fake news. The best fake news is news that's true
in the most profound and highest sense of reality. it's news that captures a truth reality only
approximates. It's hard to avoid Plato even when you try. I didn't mention him, OK? he's just
there. He's usually there, but if you mention him every time it gets boring.
The WaPo is an example of largely fake news written and published by individuals who don't
realize what's true and what's fake. You'd like to think they qualify for a fake news award, given
the fakeiness of what they write (except Redskins coverage which is very good, they have some
good spowtswriters for sure), but they don't because they think they're writing real news. That
should be embarrasing.
Well then, how would somebody advise them to better distinguish fake news from real news? Well,
how does a hawk know what to do to hunt rodents? There's no hawk scientist or hawk school or hawk
instruction manual. they can't even read! But they know exactly what to do. It's like that. Everybody
knows but they pretend to themselves they don't know. That's when the faking starts,
[T]he irony is that for many upper-middle-class white gay men, the argument became that
legal and economic (yes, economic) privileges of marriage were being denied. Fortunately, many
people were able to keep the focus on equality and equal protection of the law, which is political
argument.
On the one hand, yes, absolutely, and it remains a point of contention to this day in the gay
community that the one major victory in recent memory was perfectly amenable to a patriarchal,
capitalist order. People like David Brock and what have you, who saw gay liberation not as a means
to transform society, which is the purpose for which the GLF was created, but rather as a means
to help people like themselves become elites like anyone else.
On the other hand, and perhaps it's just the vulgar Marxist in me, but I recoil at the notion
of separating economics from politics. This is why the phrase political economy even exists, to
represent the notion that all decisions regarding distribution of resources are inherently political.
I find it symptomatic of how entirely defanged class rhetoric is in the US (though the interviewee
is British, I presume) that even the well meaning and critical thinking among us can get away
with pretending that "economics" can somehow be sequestered from political decisions.
I realize that's not the point you're making, but there are moments in the interview when the
subject moves in that direction. As for statistics, Mark Twain reminds us there are three kinds
of lies: lies, damned lies, and statistics–or, as my spouse is fond of saying, "70% of all statistics
are made up."
One place where social needs interfere with monetary policy, aka economics, is deficit spending
wherein the underlying economy is not keeping up (because of economic malpractice usually). So
that's a conflict against the oligarchy because they prevented the necessary jobs and so makes
their money worth less. So, depending which side you are on, politics should have a say (force
the government not to devalue the currency by inflation/deficit spending without a proper economy)
or politics should serve the chronically neglected needs of the general public regardless of preliminary
"inflation" – the inflation here is the most dreaded form of inflation for the rich, of course,
wage inflation. I think the term 'wage inflation' qualifies as an oxymoron, but that's just me.
probably an apocryphal story;
so a guy is playing regularly in a rigged poker game. a friend asked him, "why do you play, you
know they're cheating you"? the guy shrugs, and replies "i don't have a choice, it's the only
game in town".
Interesting thing I heard the other day, Professor Richard Wolff says he studied economics
at three elite universities (Yale, Harvard, and another notable I cannot remember) and never had
a course in Karl Marx. Tunnel vision for sure in the field.
Yikes. I remember being taught Marx in the early 90s . But that was Cambridge ;-) and it was
clearly a dying course as they were struggling to find faculty members.
As one who is well past university age, I am excited to hear that those in the Millenial generation
are organizing this movement. The (intentional?) failure of K-12 education to develop critical
thinking skills and focus solely on standardized testing of fact knowledge has been deeply upsetting
to me as a parent. To see that others have made it through our education system with a well developed
BS detector and are not afraid to use it is welcome news.
I look forward to reading your books!
Answer to question no 2: The jargon that is being used these days by presidents, economists,
talk show hosts is beyond my understanding. I have a masters degree.
I believe Trump gained some
supporters who were angry about the disconnect with the way they talk and the way they needed
to be talked to. Simple language has its own good. That is what Trump did. Trump is just not a
person. There is more to Trump that what it is. He proved so many of these experts wrong and bought
back the simple language and easy straight talk to the forefront. Saying wrong things is attractive
to me. More people relate to Trump in ways that he can say bad things. I relate to him because
we say bad things in our every day life. We go about having a conversation after to correct them.
Its that simple.
After all we are all human beings with little better instincts and rational than animals. Just
because few people can speak politically correct, few can dress like they are supposed to doesn't
mean that every one has to conform. I am excited to read this book.
An argot
(English pronunciation: /ˈɑːrɡoʊ/; from French argot [aʁˈɡo] 'slang') is a secret language used
by various groups-e.g., schoolmates, outlaws, colleagues, among many others-to prevent outsiders
from understanding their conversations. The term argot is also used to refer to the informal specialized
vocabulary from a particular field of study, occupation, or hobby, in which sense it overlaps
with jargon.
Is the economics profession simply following the "He who has the gold, makes the rules"?
Many other professions service retail customers, such as attorneys and doctors. But how many ordinary citizens ever deal with an economist on any level?
While there may be some economists attached to labor unions, for the most part economists are
employed by government, the financial industry, academia or the media.
If paycheck dependent economists know that powerful politicians, wealthy corporate leaders
and wealthy donors in academia are looking over their shoulders, one could expect economists'
message to be justify what their "employers" want to do.
"Keen was formerly an associate professor of economics at University of Western Sydney, until
he applied for voluntary redundancy in 2013, due to the closure of the economics program at the
university.
But he did find another job. "In autumn 2014 he became a professor and Head of the School of Economics, History and Politics
at Kingston University in London." Is there a large job market for skeptical economists?
Nothing's changed in 100 + years. American Yale Professor Irving Fisher "financial transactions
aren't random": Yale Professor Irving Fisher – 1920 2nd edition: "The Purchasing Power of Money"
"If the principles here advocated are correct, the purchasing power of money - or its reciprocal,
the level of prices - depends exclusively on five definite factors:
(1)the volume of money in circulation;
(2) its velocity of circulation;
(3) the volume of bank deposits subject to check;
(4) its velocity; and
(5) the volume of trade.
"Each of these five magnitudes is extremely definite, and their relation to the purchasing
power of money is definitely expressed by an "equation of exchange."
"In my opinion, the branch of economics which treats of these five regulators of purchasing
power ought to be recognized and ultimately will be recognized as an EXACT SCIENCE, capable of
precise formulation, demonstration, and statistical verification."
And the Fed already validated the Fisherian theory: In 1931 a commission was established on
member bank reserve requirements. The commission completed their recommendations after a 7 year
inquiry on Feb. 5, 1938. The study was entitled "Member Bank Reserve Requirements - Analysis of
Committee Proposal"
It's 2nd proposal: "Requirements against debits to deposits"
After a 45 year hiatus, this research paper was "declassified" on March 23, 1983. By the time
this paper was "declassified", required reserves had become a "tax" [sic].
Monetary flows, our means-of-payment money times its transactions velocity of circulation:
Here's my suggestion for educating economists about the fallacy of their assumption that it
is in any way acceptable or even meaningful to put a monetary price on a human life.
Step 1: we ask the economist to place a monetary value on his or her own life in the same way
that they feel so comfortable doing for people who are not them.
Step 2: crowdfund that amount of money.
Step 3: give said money to their next of kin and ask them to kindly follow us out to the woodshed
Ok, so let's call it a thought experiment .but I think that should make clear one
of the many, many things wrong with monetizing the value of everything in existence, as is the
common practice.
Step 1: we ask the economist to place a monetary value on his or her own life . . .
Priceless, or in economist's terms, infinity.
Step 2: crowdfund that amount of money.
Borrow from the Fed. It's fantasy money.
Step 3: give said money to their next of kin and ask them to kindly follow us out to the
woodshed
That would be cruel. They always claim they are the smartest guys in the room, while also claiming
men in manufacturing are low skill or put bluntly, stupid. Can we put them all on an uninhabited
island with a few shovels so they can live the civilized life and dig their own latrine, after
which they can bootstrap themselves to imagined wealth by inventing their own can opener? They
can get there by recycling the shovels, but they would need fire for that.
This interview articulates an extremely important insight when it states that the economy " is
believed to be a distinct system with its own logic that requires experts to manage it."
This seeming independence of the economic and political systems has largely deceived most of
modern social science. This seeming independence is not real, and in fact these spheres are deeply
intertwined.
As people llike Karl Polyani and Philip Mirowski have maintained, markets are always organized
through politics and institutions and one key to understanding this reality is to keep a focus
on the promulgation of the rules and regulations of a powerful state that helps to create movements
for both regulation and deregulation.
It is now imperative that an alternative political movement finally take the time to carefully
examine the nature and role of the State in political and economic life.
As a pre-med student of the mid 1970s, I never took an economics course. Professionally, I
tried to fight the same kind of jargon that baffles the lay public in medicine. And I watched
in horror how my profession became captured.
I struggle to read NC when reading jargon-filled posts. For example, I read about economic
cycles and wonder why that is an acceptable concept.
But I do so because I know that ignorance is not bliss. I know the economy is rigged. Orwellian
economics-speak allows the elite to configure human and social capital in their favor.
Is it time to throw this baby out with the bath water? If so, how do we conceive a baby that
doesn't eventually suckle at the wrong teat?
It was notable that Cathal failed to mention Marx. I don't think he realizes yet quite how fully indoctrinated he's been – as that humdinger of
an analogy (gay marriage – actually a redefinition to normalize surrogacy, a eugenics-by-stealth
agenda, hence it's enormous funding by the plutocracy) indicates. The economic can never be separated from the socio-political.
I think its more general than that. Those that have been airbrushed out of the history of economic
thought are those who never thought of economics as a separate, largely technocratic, discipline
but always as political economy. Marx was just one of these following the tradition of Smith,
Ricardo, Mill etc. Veblen and, to a large extent, Keynes were also following this tradition.
So sad that they lost and Walrasian physics envy ended up splitting economics from its political
context.
."how do you try to increase the accessibility of economics without watering it down so much
that it becomes analytically dysfunctional?"
This question makes no sense in the context of this discussion around the fact that modern
"economics" (theory, courses and practice) is an ideological construct. The suggestion being the
discipline as currently manifested would only become "analytically dysfunctional" if it were "watered
down" ??????
This simplistic, patently failed dogma has become an almost totalitarian "pensee unique" simply
because in coincided perfectly with the interests of the rich and powerful (and therefore those
of their lackeys)
It`s politics stupid!!!!!
Sorry, I realise the (exceptional!) core NC community knows all this as well as anyone
Another quibble. ?technocrats? At the height of the crisis, Italy, for example, had a govt
of "technocrats" foisted on the it. Monti, connections with Goldman?. Technocratic indeed!!!
The last couple of days I've been listening to a series of lectures by Philip Mirowski available
on youtube. When I place Mirowski's ideas in opposition to the ideas expressed in this interview
- the result is very different from the trend I see in the other comments here.
Mirowski describes how the "Neoliberal Economic thought collective" captured and now dominates
economic doctrine by controlling what and who can publish in the major economic journals. As a
result those aspects of Neoclassical Economics remaining are being re-shaped into a Neoliberal
mold. I noticed the word "neoliberal" doesn't show up anywhere in this post yet Neoliberal economic
policies and rationales dominate policy in the real world.
The discussion in the post makes several statements about how economics fails to make predictions
about the real world and fails in designing economic policies to help the common man. Mirowski
points out that Neoliberal economics designs policy to apply market models to every problem based
on the doctrine that markets are the most powerful information processing system available to
man - a strong form of the Efficient Markets Hypothesis. The Market is the ultimate epistemological
device. If the market solution doesn't satisfy the needs of the common man then satisfying those
needs is simply contrary to the wisdom of the market. For other problems like externalities they
just need to be properly incorporated into the market model to obtain an optimal solution to whatever
problem they present.
I don't see how "democratization" of economics teaching or eliminating jargon or deprecating
experts or more emphasis on critical thinking or pointing out the abject failure of economics
in solving economic problems will do much to counter the Neoliberal attack on the economics discipline.
Putting fins and flashy hubcaps on Neoclassical economics as it morphs into Neoliberal economics
is not the answer.
Its a hair ball that needs untangling and not a blowtorch thingy . If you are familiar with Philips past contributions to NC, his blog, social democracy blog
and other media portals you would have a better understanding of the perspective forwarded.
Disheveled . Mirowski does do service here wrt the fundamental methodology and how that frames
the topic, wrt base assumptions [human descriptors] and the extension of them.
The role of Economics is simple: it should inform people of the consequences of certain decisions
we make about who gets what. So if you have a problem with classical economics, you really have
a more fundamental problem. Economics provides many good answers; but don't expect it to also
provide the right questions. A comment above asked 'maximising what?'. Good question, but not
an economics question.
You are right, that is what it should be, unfortunately neoclassical has failed horribly in
that regard. It is based on assumptions that are demonstrably false and they are never revisited
to see the effect of relaxing them. You might as well be counting angels on a pin. See Roamer's
take down of it for starters. https://paulromer.net/wp-content/uploads/2016/09/WP-Trouble.pdf
First Bush II bankrupted the country by cutting taxes for rich and unleashing Iraq war. Then
Republicans want to cut Social Securty to pay for it
Notable quotes:
"... His nominee to run the Department of Health and Human Services, Tom Price, a Republican congressman from Georgia, has been a champion of cuts to all three of the nation's large social programs - Medicare, Medicaid and Social Security. When discussing reforms to Social Security, he has ignored ways to bring new revenue into the system while emphasizing possible benefit cuts through means-testing, private accounts and raising the retirement age. ..."
"... But Mr. Price, who currently heads the House Budget Committee, has found a way to cut Social Security deeply without Congress and the president ever having to enact specific benefit cuts, like raising the retirement age. ..."
"... Mr. Trump's hands-off approach to Social Security during the campaign was partly a strategic gesture to separate him from other Republican contenders who stuck to the party line on cutting Social Security. But he also noted the basic fairness of a system in which people who dutifully contribute while they are working receive promised benefits when they retire. Unfortunately, he has not surrounded himself with people who will help him follow those instincts. ..."
Donald Trump campaigned on a promise not to cut Social Security, which puts him at odds with the
Republican Party's historical antipathy to the program and the aims of today's Republican leadership.
So it should come as no surprise that congressional Republicans are already testing Mr. Trump's hands-off
pledge.
... ... ...
As Congress drew to a close this month, Sam Johnson, the chairman of the House Social Security
subcommittee, introduced a bill that would slash Social Security benefits for all but the very poorest
beneficiaries. To name just two of the bill's benefit cuts, it would raise the retirement age to
69 and reduce the annual cost-of-living adjustment, while asking nothing in the way of higher taxes
to bolster the program; on the contrary, it would cut taxes that high earners now pay on a portion
of their benefits. Last week, Mark Meadows, the Republican chairman of the conservative House Freedom
Caucus, said the group would push for an overhaul of Social Security and Medicare in the early days
of the next Congress.
... ... ...
Another sensible reform would be to bring more tax revenue into the system by raising the level
of wages subject to Social Security taxes, currently $118,500. In recent decades, the wage cap has
not kept pace with the income gains of high earners; if it had, it would be about $250,000 today.
The next move on Social Security is Mr. Trump's. He can remind Republicans in Congress that his
pledge would lead him to veto benefit cuts to Social Security if such legislation ever reached his
desk. When he nominates the next commissioner of Social Security, he can choose a competent manager,
rather than someone who has taken sides in political and ideological debates over the program.
What Mr. Trump actually will do is unknown, but his actions so far don't inspire confidence. By law,
the secretaries of labor, the Treasury and health and human services are trustees of Social Security.
Mr. Trump's nominees to head two of these departments, Labor and Treasury - Andrew Puzder, a fast-food
executive, and Steve Mnuchin, a Wall Street trader and hedge fund manager turned Hollywood producer
- have no government experience and no known expertise on Social Security.
His nominee to run the Department of Health and Human Services, Tom Price, a Republican congressman
from Georgia, has been a champion of cuts to all three of the nation's large social programs - Medicare,
Medicaid and Social Security. When discussing reforms to Social Security, he has ignored ways to
bring new revenue into the system while emphasizing possible benefit cuts through means-testing,
private accounts and raising the retirement age.
There is no way to mesh those ideas with Mr. Trump's pledge. But Mr. Price, who currently
heads the House Budget Committee, has found a way to cut Social Security deeply without Congress
and the president ever having to enact specific benefit cuts, like raising the retirement age.
Recently, he put forth a proposal to reform the budget process by imposing automatic spending
cuts on most federal programs if the national debt exceeds specified levels in a given year. If Congress
passed Mr. Trump's proposed tax cut, for example, the ensuing rise in debt would trigger automatic
spending cuts that would slash Social Security by $1.7 trillion over 10 years, according to an analysis
by the Center for American Progress, a liberal think tank. This works out to a cut of $168 a month
on the average monthly benefit of $1,240. If other Trump priorities were enacted, including tax credits
for private real estate development and increases in military spending, the program cuts would be
even deeper.
Mr. Trump's hands-off approach to Social Security during the campaign was partly a strategic
gesture to separate him from other Republican contenders who stuck to the party line on cutting Social
Security. But he also noted the basic fairness of a system in which people who dutifully contribute
while they are working receive promised benefits when they retire. Unfortunately, he has not surrounded
himself with people who will help him follow those instincts.
Susan Anderson is a trusted commenter Boston 1 hour ago
There is a simple solution to Social Security.
Remove the cap, so it is not a regressive tax. After all, Republicans appear to be all for
a "flat" tax. Then lower the rate for everyone.
There is no reason why it should only be charged on the part of income that is needed to pay
for necessary expenses should as housing, food, medical care, transportation, school, communications,
and such. Anyone making more than the current "cap" is actually able to afford all this.
There is no reason the costs should be born only by those at the bottom of the income pyramid.
As for Republican looting, that's just despicable, and we'll hope they are wise enough to realize
that they shouldn't let government mess with people's Social Security!
Thomas Zaslavsky is a trusted commenter Binghamton, N.Y. 1 hour ago
The idea hinted in the editorial that Trump has any principle or instinct that would lead him
to protect benefits for people who are not himself or his ultra-wealthy class is not worthy of
consideration. No, Trump has none such and he will act accordingly. (Test my prediction at the
end of 2017 or even sooner; it seems the Republicans are champing at the bit to loot the government
and the country fro their backers.)
Christine McM is a trusted commenter Massachusetts 2 hours ago
I wouldn't hold Trump to any of his campaign promises, given how often he changes positions, backtracks,
changes subjects, or whatever. His biggest promise of all was to "drain the swamp" and we know
how that turned out.
He might have a cabinet of outsiders, but they are still creatures from outside swamps. That
said, if there is even the barest of hints that this is on the agenda, I can pretty much bet that
in two years, Congress will completely change parties.
Imagine: cutting benefits for people who worked all their lives and depend on that money in
older age, all in order to give the wealthiest Americans another huge tax cut. For a fake populist
like Trump, that might sound like a great idea (he has no fixed beliefs or principles) but to
his most ardent supporters, that might be the moment they finally get it: they fell for one of
the biggest cons in the universe.
Rita is a trusted commenter California 2 hours ago
Given the Republican desire to shut down Medicare and Social Security, it is not hard to predict
that they will do so a little at a time so that people will not notice until its too late.
But since the Republicans have been very upfront with hostility towards the social safety net,
one can conclude that their supporters want to eliminate social safety net.
Mary Ann Donahue is a trusted commenter NYS 2 hours ago
RE: "To name just two of the bill's benefit cuts, it would raise the retirement age to 69 and
reduce the annual cost-of-living adjustment..."
The COLA for 2017 is .03% a paltry average increase of $5 per month. There was no increase in
2016.
The formula for how the COLA is calculated needs to be changed to allow for fair increases
not reductions.
Mary Scott is a trusted commenter NY 4 hours ago
Republicans have been promising to "fix" Social Security for years and now we are seeing exactly
what they mean. We can see how low they're willing to stoop by their plan to cut the taxes that
high earners now pay on a portion of their benefits and decimate the program for everybody else.
I wouldn't be surprised if they raised SS taxes on low and middle income earners.
There has been an easy fix for Social Security for years. Simply raise the tax on income to
$250,000 thousand and retirees both present and future would be on much firmer footing. Many future
retirees will be moving on to Social Security without the benefit of defined pension plans and
will need a more robust SS benefit in the future, not a weaker one.
Don't count on Donald Trump to come to the rescue. He seems to hate any tax more than even
the most fervent anti-tax freak like Paul Ryan. Mr. Trump admitted throughout the campaign that
he avoids paying any tax at all.
The Times seems to want to give Mr. Trump limitless chances to do the right thing. "Will Donald
Trump Cave on Social Security" it asks. Of course he will. One has only to look at his cabinet
choices and his embrace of the Ryan budget to know the answer to that question. Better to ask,
"How Long Will It Take Trump To Destroy Social Security?"
At least it would be an honest question and one that would put Mr. Trump in the center of a
question that will affect the economic security of millions of Americans.
serban is a trusted commenter Miller Place 4 hours ago
Cutting benefits for upper income solves nothing since by definition upper incomes are a small
percentage of the population. The obvious way to solve any problem with SS is to raise taxes on
upper incomes, the present cap is preposterous. People so wealthy that SS is a pittance can show
their concern by simply donating the money they get from SS to charities.
david is a trusted commenter ny 4 hours ago
We can get some perspective on what Social Security privatization schemes would mean to the
average SSS recipient from Roger Lowenstein' analysis of Bush's privatization scheme.
Roger Lowenstein's Times article discusses the CBO's analysis of how the Bush privatization
scheme for Social Security would reduce benefits.
"The C.B.O. assumes that the typical worker would invest half of his allocation in stocks
and the rest in bonds. The C.B.O. projects the average return, after inflation and expenses,
at 4.9 percent. This compares with the 6 percent rate (about 3.5 percent after inflation) that
the trust fund is earning now.
The second feature of the plan would link future benefit increases
to inflation rather than to wages. Because wages typically grow faster, this would mean a rather
substantial benefit cut. In other words, absent a sustained roaring bull market, the private
accounts would not fully make up for the benefit cuts. According to the C.B.O.'s analysis,
which, like all projections of this sort should be regarded as a best guess, a low-income retiree
in 2035 would receive annual benefits (including the annuity from his private account) of $9,100,
down from the $9,500 forecast under the present program. A median retiree would be cut severely,
from $17,700 to $13,600. "
"... Shorter Paul Krugman: nobody acted more irresponsibly in the last election than the New York Times. ..."
"... Looks like Putin recruited the NYT, the FBI and the DNC. ..."
"... Dr. Krugman is feeding this "shoot first, ask questions later" mentality. He comes across as increasingly shrill and even unhinged - it's a slide he's been taking for years IMO, which is a big shame. ..."
"... It is downright irresponsible and dangerous for a major public intellectual with so little information to cast the shadow of legitimacy on a president ("And it means not acting as if this was a normal election whose result gives the winner any kind of a mandate, or indeed any legitimacy beyond the bare legal requirements.") This kind of behavior is EXACTLY what TRUMP and other authoritarians exhibit - using pieces of information to discredit institutions and individuals. Since foreign governments have and will continue to try to influence U.S. policy through increasingly sophisticated means, this opens the door for anyone to declare our elections and policies as illegitimate in the future. ..."
"... Any influence Russian hacking had was entirely a consequence of U.S. media obsession with celebrity, gotcha and horse race trivia and two-party red state/blue state tribalism. ..."
"... Without the preceding, neither Trump nor Clinton would have been contenders in the first place. Putin didn't invent super delegates, Citizens United, Fox News, talk radio, Goldman-Sachs, etc. etc. etc. If Putin exploited vulnerabilities, it is because preserving those vulnerabilities was more important to the elites than fostering a democratic political culture. ..."
"... It's not a "coup". It's an election result that didn't go the way a lot of people want. That's it. It's probably not optimal, but I'm pretty sure that democracy isn't supposed to produce optimal results. ..."
"... All this talk about "coups" and "illegitimacy" is nuts, and -- true to Dem practice -- incredibly short-sighted. For many, voting for Trump was an available way to say to those people, "We don't believe you any more. At all." Seen in that light, it is a profoundly democratic (small 'd') response to elites that have most consistently served only themselves. ..."
"... Post Truth is Pre-Fascism. The party that thinks your loyalty is suspect unless you wear a flag pin fuels itself on Post Truth. Isnt't this absurdity the gist of Obama's Russia comments today!?! ..."
"... Unless the Russians or someone else hacked the ballot box machines, it is our own damn fault. ..."
"... The ship of neo-liberal trade sailed in the mid-2000's. That you don't get that is sad. You can only milk that so far the cow had been milked. ..."
"... The people of the United States did not have much to choose between: Either a servant of the Plutocrats or a member of the Plutocratic class. The Dems brought this on us when they refused to play fair with Bernie. (Hillary would almost certainly have won the nomination anyway.) ..."
"... The Repubs brought this on, by refusing to govern. The media brought this on: I seem to remember Hillary's misfeasances, once nominated, festering in the media, while Trump's were mentioned, and then disappeared. (Correct me if I'm wrong in this.) Also, the media downplayed Bernie until he had no real chance. ..."
"... The government brought this on, by failing to pursue justice against the bankers, and failing to represent the people, especially the majority who have been screwed by trade and the plutocratic elite and their apologists. ..."
"... The educational system brought this on, by failing to educate the people to critical thought. For instance: 1) The wealthy run the country. 2) The wealthy have been doing very well. 3) Everybody else has not. It seems most people cannot draw the obvious conclusion. ..."
"... Krugman is himself one of those most useful idiots. I do not recall his clarion call to Democrats last spring that "FBI investigation" and "party Presidential nominee" was bound to be an ugly combination. Some did; right here as I recall. Or his part in the official "don't vote for third party" week in the Clinton media machine....thanks, hundreds of thousands of Trump votes got the message. ..."
"... It's too rich to complain about Russia and Wikileaks as if those elements in anyway justified Clinton becoming President. Leaks mess with our democracy? Then for darn sure do not vote for a former Sec. of State willing to use a home server for her official business. Russia is menacing? Just who has been managing US-Russia relations the past 8 years? I voted for her anyway, but the heck if I think some tragic fate has befell the nation here. Republicans picked a better candidate to win this thing than we Democrats did. ..."
"... The truth of the matter is that Clinton was a very weak candidate with nothing to offer but narcissism ("I'm with her"). It's notable that Clinton has still not accepted responsibility for her campaign, preferring to throw the blame for the loss anywhere but herself. Sociopathy much? ..."
[ I find it terrifying, simply terrifying, to refer to people as "useful idiots" after all
the personal destruction that has followed when the expression was specifically used in the past.
To me, using such an expression is an honored economist intent on becoming Joseph McCarthy.
]
To demean a person as though the person were a communist or a fool of communists or the like,
with all the personal harm that has historically brought in this country, is cruel beyond my understanding
or imagining.
Well, not really. For example he referred to "the close relationship between Wikileaks and Russian
intelligence." But Wikileaks is a channel. They don't seek out material. They rely on people to
bring material to them. They supposedly make an effort to verify that the material is not a forgery,
but aside from that what they release is what people bring to them. Incidentally, like so many
people you seem to not care whether the material is accurate or not -- Podesta and the DNC have
not claimed that any of the emails are different from what they sent.
ZURICH - If Putin the Thug gets away with crushing Ukraine's new democratic experiment and
unilaterally redrawing the borders of Europe, every pro-Western country around Russia will be
in danger....
Yup, like the other elections, the bases stayed solvent and current events factored into the turnout
and voting patterns which spurred the independent vote.
When people were claiming Clinton was going to win big, I thought no Republican and Democratic
voters are going to pull the lever like a trained monkey as usual. Only difference in this election
was Hillary's huge negatives due entirely by her and Bill Clinton's support for moving manufacturing
jobs to Mexico and China in the 90s.
To Understand Trump, Learn Russian http://nyti.ms/2hLcrB1
NYT - Andrew Rosenthal - December 15
The Russian language has two words for truth - a linguistic quirk that seems relevant to our
current political climate, especially because of all the disturbing ties between the newly elected
president and the Kremlin.
The word for truth in Russian that most Americans know is "pravda" - the truth that seems evident
on the surface. It's subjective and infinitely malleable, which is why the Soviet Communists called
their party newspaper "Pravda." Despots, autocrats and other cynical politicians are adept at
manipulating pravda to their own ends.
But the real truth, the underlying, cosmic, unshakable truth of things is called "istina" in
Russian. You can fiddle with the pravda all you want, but you can't change the istina.
For the Trump team, the pravda of the 2016 election is that not all Trump voters are explicitly
racist. But the istina of the 2016 campaign is that Trump's base was heavily dependent on racists
and xenophobes, Trump basked in and stoked their anger and hatred, and all those who voted for
him cast a ballot for a man they knew to be a racist, sexist xenophobe. That was an act of racism.
Trump's team took to Twitter with lightning speed recently to sneer at the conclusion by all
17 intelligence agencies that the Kremlin hacked Democratic Party emails for the specific purpose
of helping Trump and hurting Hillary Clinton. Trump said the intelligence agencies got it wrong
about Iraq, and that someone else could have been responsible for the hack and that the Democrats
were just finding another excuse for losing.
The istina of this mess is that powerful evidence suggests that the Russians set out to interfere
in American politics, and that Trump, with his rejection of Western European alliances and embrace
of Russia's invasion of Ukraine, was their chosen candidate.
The pravda of Trump's selection of Rex Tillerson, head of Exxon Mobil, as secretary of state
is that by choosing an oil baron who has made billions for his company by collaborating with Russia,
Trump will make American foreign policy beholden to American corporate interests.
That's bad enough, but the istina is far worse. For one thing, American foreign policy has
been in thrall to American corporate interests since, well, since there were American corporations.
Just look at the mess this country created in Latin America, the Caribbean, Southeast Asia and
the Middle East to serve American companies.
Yes, Tillerson has ignored American interests repeatedly, including in Russia and Iraq, and
has been trying to remove sanctions imposed after Russia's seizure of Crimea because they interfered
with one of his many business deals. But take him out of the equation in the Trump cabinet and
nothing changes. Trump has made it plain, with every action he takes, that he is going to put
every facet of policy, domestic and foreign, at the service of corporate America. The istina here
is that Tillerson is just a symptom of a much bigger problem.
The pravda is that Trump was right in saying that the intelligence agencies got it wrong about
Saddam Hussein and weapons of mass destruction.
But the istina is that Trump's contempt for the intelligence services is profound and dangerous.
He's not getting daily intelligence briefings anymore, apparently because they are just too dull
to hold his attention.
And now we know that Condoleezza Rice was instrumental in bringing Tillerson to Trump's attention.
As national security adviser and then secretary of state for president George W. Bush, Rice was
not just wrong about Iraq, she helped fabricate the story that Hussein had nuclear weapons.
Trump and Tillerson clearly think they are a match for the wily and infinitely dangerous Putin,
but as they move foward with their plan to collaborate with Russia instead of opposing its imperialist
tendencies, they might keep in mind another Russian saying, this one from Lenin.
"There are no morals in politics; there is only expedience," he wrote. "A scoundrel may be
of use to us just because he is a scoundrel."
Putin has that philosophy hard-wired into his political soul. When it comes to using scoundrels
to get what he wants, he is a professional, and Trump is only an amateur. That is the istina of
the matter.
If nothing else, Russia - with a notably un-free press - has shrewdly used our own 'free press'
against US.
RUSSIA'S UNFREE PRESS
The Boston Globe - Marshall Goldman - January 29, 2001
AS THE BUSH ADMINISTRATION DEBATES ITS POLICY TOWARD RUSSIA, FREEDOM OF THE PRESS SHOULD BE
ONE OF ITS MAJOR CONCERNS. UNDER PRESIDENT VLADIMIR PUTIN THE PRESS IS FREE ONLY AS LONG AS IT
DOES NOT CRITICIZE PUTIN OR HIS POLICIES. WHEN NTV, THE TELEVISION NETWORK OF THE MEDIA GIANT
MEDIA MOST, REFUSED TO PULL ITS PUNCHES, MEDIA MOST'S OWNER, VLADIMIR GUSINSKY, FOUND HIMSELF
IN JAIL, AND GAZPROM, A COMPANY DOMINATED BY THE STATE, BEGAN TO CALL IN LOANS TO MEDIA MOST.
Unfortunately, Putin's actions are applauded by more than 70 percent of the Russian people. They
crave a strong and forceful leader; his KGB past and conditioned KGB responses are just what they
seem to want after what many regard as the social, political, and economic chaos of the last decade.
But what to the Russians is law and order (the "dictatorship of the law," as Putin has so accurately
put it) looks more and more like an old Soviet clampdown to many Western observers.
There is no complaint about Putin's promises. He tells everyone he wants freedom of the press.
But in the context of his KGB heritage, his notion of freedom of the press is something very different.
In an interview with the Toronto Globe and Mail, he said that that press freedom excludes the
"hooliganism" or "uncivilized" reporting he has to deal with in Moscow. By that he means criticism,
especially of his conduct of the war in Chechnya, his belated response to the sinking of the Kursk,
and the heavy-handed way in which he has pushed aside candidates for governor in regional elections
if they are not to Putin's liking.
He does not take well to criticism. When asked by the relatives of those lost in the Kursk
why he seemed so unresponsive, Putin tried to shift the blame for the disaster onto the media
barons, or at least those who had criticized him. They were the ones, he insisted, who had pressed
for reduced funding for the Navy while they were building villas in Spain and France. As for their
criticism of his behavior, They lie! They lie! They lie!
Our Western press has provided good coverage of the dogged way Putin and his aides have tried
to muscle Gusinsky out of the Media Most press conglomerate he created. But those on the Putin
enemies list now include even Boris Berezovsky, originally one of Putin's most enthusiastic promoters
who after the sinking of the Kursk also became a critic and thus an opponent.
Gusinsky would have a hard time winning a merit badge for trustworthiness (Berezovsky shouldn't
even apply), but in the late Yeltsin and Putin years, Gusinsky has earned enormous credit for
his consistently objective news coverage, including a spotlight on malfeasance at the very top.
More than that, he has supported his programmers when they have subjected Yeltsin and now Putin
to bitter satire on Kukly, his Sunday evening prime-time puppet show.
What we hear less of, though, is what is happening to individual reporters, especially those
engaged in investigative work. Almost monthly now there are cases of violence and intimidation.
Among those brutalized since Putin assumed power are a reporter for Radio Liberty who dared to
write negative reports about the Russian Army's role in Chechnia and four reporters for Novaya
Gazeta. Two of them were investigating misdeeds by the FSB (today's equivalent of the KGB), including
the possibility that it rather than Chechins had blown up a series of apartment buildings. Another
was pursuing reports of money-laundering by Yeltsin family members and senior staff in Switzerland.
Although these journalists were very much in the public eye, they were all physically assaulted.
Those working for provincial papers labor under even more pressure with less visibility. There
are numerous instances where regional bosses such as the governor of Vladivostok operate as little
dictators, and as a growing number of journalists have discovered, challenges are met with threats,
physical intimidation, and, if need be, murder.
True, freedom of the press in Russia is still less than 15 years old, and not all the country's
journalists or their bosses have always used that freedom responsibly. During the 1996 election
campaign, for example, the media owners, including Gusinsky conspired to denigrate or ignore every
viable candidate other than Yeltsin. But attempts to muffle if not silence criticism have multiplied
since Putin and his fellow KGB veterans have come to power. Criticism from any source, be it an
individual journalist or a corporate entity, invites retaliation.
When Media Most persisted in its criticism, Putin sat by approvingly as his subordinates sent
in masked and armed tax police and prosecutors. When that didn't work, they jailed Gusinsky on
charges that were later dropped, although they are seeking to extradite and jail him again. along
with his treasurer, on a new set of charges. Yesterday the prosecutor general summoned Tatyana
Mitkova, the anchor of NTV's evening news program, for questioning. Putin's aides are also doing
all they can to prevent Gusinsky from refinancing his debt-ridden operation with Ted Turner or
anyone else in or outside of the country.
According to one report, Putin told one official, You deal with the shares, debts, and management
and I will deal with the journalists. His goal simply is to end to independent TV coverage in
Russia. ...
"Unfortunately, Putin's actions are applauded by more than 70 percent of the Russian people"
Exactly; the majority of people are so stupid and/or lazy that they cannot be bothered understanding
what is going on; and how their hard won democracy is being subjugated. But thank God that is
in Russia not here in the US - right?
"Pravda" is etymologically derived from "prav-" which means "right" (as opposed to "left", other
connotations are "proper", "correct", "rightful", also legal right). It designates the social-construct
aspect of "righteousness/truthfulness/correctness" as opposed to "objective reality" (conceptually
independent of social standards, in reality anything but). In formal logic, "istina" is used to
designate truth. Logical falsity is designated a "lie".
It is a feature common to most European languages that rightfulness, righteousness, correctness,
and legal rights are identified with the designation for the right side. "Sinister" is Latin for
"left".
If you believe 911 was a Zionist conspiracy, so where the Paris attacks of November 2015, when
Trump was failing in the polls as the race was moving toward as you would expect, toward other
candidates. After the Paris attacks, his numbers reaccelerated.
If "ZOG" created the "false flag" of the Paris attacks to start a anti-Muslim fervor, they
succeeded, much like 911. Bastille day attacks were likewise, a false flag. This is not new, this
goes back to when the aristocracy merged with the merchant caste, creating the "bourgeois". They
have been running a parallel government in the shadows to effect what is seen.
There used to be something called Usenet News, where at the protocol level reader software could
fetch meta data (headers containing author, (stated) origin, title, etc.) independently from comment
bodies. This was largely owed to limited download bandwidth. Basically all readers had "kill files"
i.e. filters where one could configure that comments with certain header parameters should not
be downloaded, or even hidden.
The main application was that the reader would download comments in the background when headers
were already shown, or on demand when you open a comment.
Now you get the whole thing (or in units of 100) by the megabyte.
A major problem is signal extraction out of the massive amounts of noise generated by the media,
social media, parties, and pundits.
It's easy enough to highlight this thread of information here, but in real time people are
being bombarded by so many other stories.
In particular, the Clinton Foundation was also regularly being highlighted for its questionable
ties to foreign influence. And HRC's extravagant ties to Wall St. And so much more.
The media's job was to sell Trump and denounce Clinton. The mistake a lot of people make is thinking
the global elite are the "status quo". They are not. They are generally the ones that break the
status quo more often than not.
The bulk of them wanted Trump/Republican President and made damn sure it was President. Buffering
the campaign against criticism while overly focusing on Clinton's "crap". It took away from the
issues which of course would have low key'd the election.
Not much bullying has to be applied when there are "economic incentives". The media attention
economy and ratings system thrive on controversy and emotional engagement. This was known a century
ago as "only bad news is good news". As long as I have lived, the non-commercial media not subject
(or not as much) to these dynamics have always been perceived as dry and boring.
I heard from a number of people that they followed the campaign "coverage" (in particular Trump)
as gossip/entertainment, and those were people who had no sympathies for him. And even media coverage
by outlets generally critical of Trump's unbelievable scandals and outrageous performances catered
to this sentiment.
First, let me disclose that I detest TRUMP and that the Russian meddling has me deeply concerned.
Yet...
We only have assertions that the Russian hacking had some influence. We do not know whether
it likely had *material* influence that could have reasonably led to a swing state(s) going to
TRUMP that otherwise would have gone to HRC.
Dr. Krugman is feeding this "shoot first, ask questions later" mentality. He comes across
as increasingly shrill and even unhinged - it's a slide he's been taking for years IMO, which
is a big shame.
It is downright irresponsible and dangerous for a major public intellectual with so little
information to cast the shadow of legitimacy on a president ("And it means not acting as if this
was a normal election whose result gives the winner any kind of a mandate, or indeed any legitimacy
beyond the bare legal requirements.") This kind of behavior is EXACTLY what TRUMP and other authoritarians
exhibit - using pieces of information to discredit institutions and individuals. Since foreign
governments have and will continue to try to influence U.S. policy through increasingly sophisticated
means, this opens the door for anyone to declare our elections and policies as illegitimate in
the future.
It is quite clear that the Russians intervened on Trump's behalf and that this intervention had
an impact. The problem is that we cannot actually quantify that impact.
"We only have assertions that the Russian hacking had some influence."
Any influence Russian hacking had was entirely a consequence of U.S. media obsession with
celebrity, gotcha and horse race trivia and two-party red state/blue state tribalism.
Without the preceding, neither Trump nor Clinton would have been contenders in the first
place. Putin didn't invent super delegates, Citizens United, Fox News, talk radio, Goldman-Sachs,
etc. etc. etc. If Putin exploited vulnerabilities, it is because preserving those vulnerabilities
was more important to the elites than fostering a democratic political culture.
But this is how influence is exerted - by using the dynamics of the adversary's/targets organization
as an amplifier. Hierarchical organizations are approached through their management or oversight
bodies, social networks through key influencers, etc.
I see this so much and it's so right wing cheap: I hate Trump, but assertions that Russia intervened
are unproven.
First, Trump openly invited Russia to hack DNC emails. That is on its face treason and sedition.
It's freaking on video. If HRC did that there would be calls of the right for her execution.
Second, a NYT story showed that the FBI knew about the hacking but did not alert the DNC properly
- they didn't even show up, they sent a note to a help desk.
This was a serious national security breach that was not addressed properly. This is criminal
negligence.
This was a hacked election by collusion of the FBI and the Russian hackers and it totally discredits
the FBI as it throwed out chum and then denied at the last minute. Now the CIA comes in and says
PUTIN, Trump's bff, was directly involved in manipulating the timetable that the hacked emails
were released in drip drip form to cater to the media - creating story after story about emails.
It was a perfect storm for a coup. Putin played us. And he will play Trump. And God knows how
it ends. But it doesn't matter b/c we're all screwed with climate change anyway.
"It was a perfect storm for a coup. Putin played us. And he will play Trump. And God knows how
it ends. But it doesn't matter b/c we're all screwed with climate change anyway."
It's not a "coup". It's an election result that didn't go the way a lot of people want.
That's it. It's probably not optimal, but I'm pretty sure that democracy isn't supposed to produce
optimal results.
All this talk about "coups" and "illegitimacy" is nuts, and -- true to Dem practice --
incredibly short-sighted. For many, voting for Trump was an available way to say to those people,
"We don't believe you any more. At all." Seen in that light, it is a profoundly democratic (small
'd') response to elites that have most consistently served only themselves.
Trump and his gang will be deeply grateful if the left follows Krugman's "wisdom", and clings
to his ever-changing excuses. (I thought it was the evil Greens who deprived Clinton of her due?)
Post Truth is Pre-Fascism. The party that thinks your loyalty is suspect unless you wear a
flag pin fuels itself on Post Truth. Isnt't this absurdity the gist of Obama's Russia comments
today!?!
"On Wednesday an editorial in The Times described Donald Trump as a "useful idiot" serving Russian
interests." I think that is beyond the pale. Yes, I realize that Adolph Hitler was democratically
elected. I agree that Trump seems like a scary monster under the bed. That doesn't mean we have
too pee our pants, Paul. He's a bully, tough guy, maybe, the kind of kid that tortured you before
you kicked the shit out of them with your brilliance. That's not what is needed now.
What really is needed, is a watchdog, like Dean Baker, that alerts we dolts of pending bills and
their ramifications. The ship of neo-liberal trade bullshit has sailed. Hell, you don't believe
it yourself, you've said as much. Be gracious, and tell the truth. We can handle it.
The experience of voting for the Hill was painful, vs Donald Trump.
The Hill seemed like the least likely aristocrat, given two choices, to finish off all government
focus on the folks that actually built this society. Two Titans of Hubris, Hillary vs Donald,
each ridiculous in the concept of representing the interests of the common man.
At the end of the day. the American people decided that the struggle with the unknown monster
Donald was worth deposing the great deplorable, Clinton.
The real argument is whether the correct plan of action is the way of FDR, or the way of the industrialists,
the Waltons, the Kochs, the Trumps, the Bushes and the outright cowards like the Cheneys and the
Clintons, people that never spent a day defending this country in combat. What do they call it,
the Commander in Chief.
My father was awarded a silver and a bronze star for his efforts in battle during WW2. He was
shot in the face while driving a tank destroyer by a German sniper in a place called Schmitten
Germany.
He told me once, that he looked over at the guy next to him on the plane to the hospital in
England, and his intestines were splayed on his chest. It was awful.
What was he fighting for ? Freedom, America. Then the Republicans, Ronald Reagan, who spent the
war stateside began the real war, garnering the wealth of the nation to the entitled like him.
Ronald Reagan was a life guard.
Anthony Weiner
Podesta
Biden (for not running)
Tim Kaine (for accepting the nomination instead of deferring to a latino)
CNN and other TV news media (for giving trump so much coverage- even an empty podium)
Donna Brazile
etc.
The people of the United States did not have much to choose between: Either a servant of the
Plutocrats or a member of the Plutocratic class. The Dems brought this on us when they refused
to play fair with Bernie. (Hillary would almost certainly have won the nomination anyway.)
The Repubs brought this on, by refusing to govern. The media brought this on: I seem to
remember Hillary's misfeasances, once nominated, festering in the media, while Trump's were mentioned,
and then disappeared. (Correct me if I'm wrong in this.) Also, the media downplayed Bernie until
he had no real chance.
The government brought this on, by failing to pursue justice against the bankers, and failing
to represent the people, especially the majority who have been screwed by trade and the plutocratic
elite and their apologists.
The educational system brought this on, by failing to educate the people to critical thought.
For instance: 1) The wealthy run the country. 2) The wealthy have been doing very well. 3) Everybody
else has not. It seems most people cannot draw the obvious conclusion.
The wealthy brought this on. For 230 years they have, essentially run this country. They are
too stupid to be satisfied with enough, but always want more.
The economics profession brought this on, by excusing treasonous behavior as efficient, and
failing to understand the underlying principles of their profession, and the limits of their understanding.
(They don't even know what money is, or how a trade deficit destroys productive capacity, and
thus the very ability of a nation to pay back the debts it incurs.)
The people brought this on, by neglecting their duty to be informed, to be educated, and to
be thoughtful.
Anybody else care for their share of blame? I myself deserve some, but for reasons I cannot
say.
What amazes me now is, the bird having shown its feathers, there is no howl of outrage from
the people who voted for him. Do they imagine that the Plutocrats who will soon monopolize the
White House will take their interests to heart?
As far as I can tell, not one person of 'the people' has been appointed to his cabinet. Not
one. But the oppressed masses who turned to Mr Trump seem to be OK with this.
I can only wonder, how much crap will have to be rubbed in their faces, before they awaken to
the taste of what it is?
Eric377 : , -1
Krugman is himself one of those most useful idiots. I do not recall his clarion call to Democrats
last spring that "FBI investigation" and "party Presidential nominee" was bound to be an ugly
combination. Some did; right here as I recall. Or his part in the official "don't vote for third
party" week in the Clinton media machine....thanks, hundreds of thousands of Trump votes got the
message.
It's too rich to complain about Russia and Wikileaks as if those elements in anyway justified
Clinton becoming President. Leaks mess with our democracy? Then for darn sure do not vote for
a former Sec. of State willing to use a home server for her official business. Russia is menacing?
Just who has been managing US-Russia relations the past 8 years? I voted for her anyway, but the
heck if I think some tragic fate has befell the nation here. Republicans picked a better candidate
to win this thing than we Democrats did.
The truth of the matter is that Clinton was a very weak candidate with nothing to offer
but narcissism ("I'm with her"). It's notable that Clinton has still not accepted responsibility
for her campaign, preferring to throw the blame for the loss anywhere but herself. Sociopathy
much?
This has made me cynical. I used to think that at least *some* members of the US political
elite had the best interests of ordinary households in mind, but now I see that it's just ego
vs. ego, whatever the party.
As for democracy being on the edge: I believe Adam Smith over Krugman: "there is a lot of ruin
in a nation". It takes more than this to overturn an entrenched institution.
I think American democracy will survive a decade of authoritarianism, and if it does not, then
H. L. Mencken said it best: "The American people know what they want, and they deserve to get
it -- good and hard."
Donald Trump won the electoral college at least in part by promising to bring coal jobs
back to Appalachia and manufacturing jobs back to the Rust Belt. Neither promise can be honored
– for the most part we're talking about jobs lost, not to unfair foreign competition, but to
technological change. But a funny thing happens when people like me try to point that out:
we get enraged responses from economists who feel an affinity for the working people of the
afflicted regions – responses that assume that trying to do the numbers must reflect contempt
for regional cultures, or something.
Is this the right narrative? I am no longer comfortable with this line:
for the most part we're talking about jobs lost, not to unfair foreign competition, but
to technological change.
Try to place that line in context with this from
Noah Smith:
Then, in the 1990s and 2000s, the U.S opened its markets to Chinese goods, first with Most
Favored Nation trading status, and then by supporting China's accession to the WTO. The resulting
competition from cheap Chinese goods contributed to vast inequality in the United States, reversing
many of the employment gains of the 1990s and holding down U.S. wages. But this sacrifice on
the part of 90% of the American populace enabled China to lift its enormous population out
of abject poverty and become a middle-income country.
Was this "fair" trade? I think not. Let me suggest this narrative: Sometime during the
Clinton Administration, it was decided that an economically strong China was good for both the
globe and the U.S. Fair enough. To enable that outcome, U.S. policy deliberately sacrificed manufacturing
workers on the theory that a.) the marginal global benefit from the job gain to a Chinese worker
exceeded the marginal global cost from a lost US manufacturing job, b.) the U.S. was shifting
toward a service sector economy anyway and needed to reposition its workforce accordingly and
c.) the transition costs of shifting workers across sectors in the U.S. were minimal.
As a consequence – and through a succession of administrations – the US tolerated implicit
subsidies of Chinese industries, including national industrial policy designed to strip production
from the US.
And then there was the currency manipulation. I am always shocked when international economists
claim "fair trade," pretending that the financial side of the international accounts is irrelevant.
As if that wasn't a big, fat thumb on the scale. Sure, "currency manipulation" is running the
other way these days. After, of course, a portion of manufacturing was absorbed overseas. After
the damage is done.
Yes, technological change is happening. But the impact, and the costs, were certainly accelerated
by U.S. policy.
It was a great plan. On paper, at least. And I would argue that in fact points a and b above
were correct.
But point c. Point c was a bad call. Point c was a disastrous call. Point c helped deliver
Donald Trump to the Oval Office. To be sure, the FBI played its role, as did the Russians. But
even allowing for the poor choice of Hilary Clinton as the Democratic nominee (the lack of contact
with rural and semi-rural voters blinded the Democrats to the deep animosity toward their candidate),
it should never have come to this.
As the opioid epidemic sweeps through rural America, an ever-greater number of drug-dependent
newborns are straining hospital neonatal units and draining precious medical resources.
The problem has grown more quickly than realized and shows no signs of abating, researchers
reported on Monday. Their study, published in JAMA Pediatrics, concludes for the first time
that the increase in drug-dependent newborns has been disproportionately larger in rural areas.
The latest causalities in the opioid epidemic are newborns.
The transition costs were not minimal.
My take is that "fair trade" as practiced since the late 1990s created another disenfranchised
class of citizens. As if we hadn't done enough of that already. Then we weaponized those newly
disenfranchised citizens with the rhetoric of identity politics. That's coming back to bite us.
We didn't really need a white nationalist movement, did we?
Now comes the big challenge: What can we do to make amends? Can we change the narrative? And
here is where I agree with Paul Krugman:
Now, if we want to have a discussion of regional policies – an argument to the effect that
my pessimism is unwarranted – fine. As someone who is generally a supporter of government activism,
I'd actually like to be convinced that a judicious program of subsidies, relocating government
departments, whatever, really can sustain communities whose traditional industry has eroded.
The damage done is largely irreversible. In medium-size regions, lower relative housing
costs may help attract overflow from the east and west coast urban areas. And maybe a program
of guaranteed jobs for small- to medium-size regions combined with relocation subsidies for very
small-size regions could help. But it won't happen overnight, if ever. And even if you could reverse
the patterns of trade – which wouldn't be easy given the intertwining of global supply chains
– the winners wouldn't be the same current losers. Tough nut to crack.
Bottom Line: I don't know how to fix this either. But I don't absolve the policy community
from their role in this disaster. I think you can easily tell a story that this was one big policy
experiment gone terribly wrong.
Basic point is that when interest rates are rising, longer-term bonds
suffer capital losses. Duration (a weighted average of when the coupon
payments and the final principal payment are received) allows comparing
the interest rate sensitivity of different bonds.
An example of "shedding duration" would be selling 10-year Treasuries
and buying 2-year Treasuries. For a graphic example of how much harder
the 10-year has been hit than the 2-year, check the charts for IEF (7-10
year Treasuries) and SHY (1-3 year Treasuries).
IEF has lost about 9 percent since last July, while SHY fell a little
over 1 percent. Both funds pay monthly dividends, which added about 0.7%
to IEF's total return over the period, while SHY's dividends added about
0.35% to its total return.
IEF's capital loss since July represents 4-1/2 years of interest
earnings.
Well, it's a new month. And Treasuries are getting their daily
ritual beating, as the 10-year T-note - at 2.46% - seems pulled
upward toward the 2.50% round number strange attractor. Ten-year
yield chart:
Despite having an instinctive feeling that this bond bashing is
overdone, my bond model says "Take shelter in the short end"
(meaning T-bills and the like).
Well here's the problem, now regulatory issues prevent The Street from
warehousing any large inventories, so how is a poor asset manager going to
shed their duration?
Not a complete story in my professional experience. Most of the really
long stuff is held by institutions (pensions, supranationals, and insurance
companies) with the capability to hedge and interest rate hedges are
generally cheap and efficient. These players don't have hair triggers on
their underlying holdings, particularly corporates that have value if the
economy is expected to pick up. And lots of institutions and retail
investors stayed short because the rise in rates has been telegraphed. Now,
after rates have risen, some of those investors are extending and buying
longer bonds with higher yields; so there is a two way market in that longer
paper. All this said, it is likely that the Street would struggle mightily
to digest real institutional selling, particularly in the event of a genuine
credit event ala World Com. A symptom of indigestion would be some degree of
divergence between ETF trading prices and NAV's.
Staying short compared to duration bogeys is one thing, actually being
short bonds or UST is perhaps a little different.
You allocate benefit of the doubt to retail investors more than i
might. Waitll they get their year end reports, paying on distributions
whilst the fund lost NAV.
"... Social Security has succeeded because Roosevelt insisted it be paid for by the workers who would get the benefits, "so no damn politician can take it away from them." ..."
"... "These who pant after the very dust of the earth on the head of the helpless also turn aside the way of the humble; " ..."
The trouble with Sneed's article is that she does not appear to know what she is talking about.
She just wrote down what some "experts" told her with no idea what the words mean.
For example, she says,
"A 65 year-old at the top of the scale, a $118,500 average earner, would see his benefits cut
by 25% when he retired, compared to the current law, and that reduction would grow to 55 percent
compared to current law by the time the retiree was 85 years old."
Well, which is he, "at the top of the scale" or an "average earner"?
The point is probably trivial but I point it out so you will be on your guard if you read her
article.
Additionally she quotes Paul Van de Water, who is someone who actually knows that Social
Security can be fixed entirely and forever by simply raising the payrolll tax one tenth of one percent
per year until the balance between wage growth and growth in the cost of retirement is restored.
But somehow she doesn't bother to mention this, or maybe Van De Water forgot to mention it
because he favors a "tax the rich" solution without understanding that that will turn Social
Security into welfare as we knew it, and lead to its ultimate destruction by those rich who would
then be paying for it.
Social Security has succeeded because Roosevelt insisted it be paid for by the workers who would
get the benefits, "so no damn politician can take it away from them."
But the damn politicians keep lying and journalists keep repeating the lies without spending ten
minutes thinking about them. The basic "facts" about the Republican proposal, introduced by Texas Congressman Sam Johnson appear
to be :
gradually raise the retirement age from 67 to 69.
This amounts to a benefit cut of about 10%, but that's not the worst of it. Raising
the retirement age is simply a death sentence for people whose health is not up to working another
two years, or won't live to collect benefits for more than a few years after they retire.
change the cost of living adjustment to reduce real benefits as the retiree gets older .
This is called a "technical adjustment." They can pretend that the CPI is too generous and
know that most people won't understand the scam.
the size of initial benefits will be cut for most workers by catastrophic amounts .
This turns Social Security into a straight welfare plan. Most people will be paying for
benefits they will never get. The very poorest are promised a larger benefit for awhile until
the bogus cost of living adjustment, and increased retirement age do their work. Moreover it
is not clear what happens to "the rich" who lose their "side income" as they get older.
And of course there is always the fun of going to the welfare office every month to prove that
you don't have any hidden assets.
Meanwhile, the CRFB (Committee for a Responsible Federal Budget). an organization dedicated
to the destruction of Social Security by misrepresenting the facts, is playing cute games like "use
our calculator to find out how old you will be when SS runs out of funds."
But SS will never run out of funds as long as the workers are allowed to pay in advance for their
own benefits. With no change at all in SS, SS will pay 80% of "scheduled benefits," but this
is 80% of scheduled benefits which meanwhile have grown 25% in real value. So the GOP "plan
to save SS" is out and out theft.
CRFB has another cute game: "use our calculator to design your own plan to save social security."
But when I used their calculator it did not allow "increase the payroll contribution by one
tenth percent (for each the worker and the employer) per year for twenty years.
There are other ways to accomplish the same end, but this seemed to be the simplest way to fit
the CRFB "calculator." Someone with more time and a newer browser might want to try seeing
what they get. But look at small per year increases in payroll contribution. For example,
I think a 0.4% increase (combined), about two dollars per week for each the worker and the employer,
should solve the problem in ten years, but I haven't done the numbers on that myself.
Meanwhile, something that calls itself "the Bipartisan Policy Center, says "Ultimately, we are
going to need something that's a little more balanced between benefits saving and revenue changes
in order to get a proposal that could pass Congress and get approved by the president," said Shai
Akabas, director fiscal policy at the Bipartisan Policy Center."
It's hard to see how much cuts ("benefit savings") make sense to balance a dollar a week increase
in the payroll tax (revenue changes), but that's the kind of thinking that "Bipartisan" gets
you. "Hey folks, we can save you a dollar a week just by gutting Social Security so it
becomes meaningless as insurance so workers can retire at a reasonable age."
I am getting too discouraged. As long as no one is working to tell the people how this will
work for them, we are just going to stand around like sheep and watch them cut our throats.
As someone who grew up with the promise of Social Security as a minimal income support system
for my old age I can attest to the fact that when the "average" retiree, who has almost no individual
savings accrued, steps in the pile of Social Security "reforms," there will be not just a wailing
and gnashing of teeth.
Modern age old people no longer can rely on extended families for support. Those extended families
have been fragmented by the pressures of "modern" socio-economics. This is prime territory for
a demagogue.
The Twentieth Century had World War 1.0 and a subsequent "Lost Generation." It's increasingly
looking like the Twentyfirst Century will have the GFC, Social Support 'Reforms' and a subsequent
"Euthanized Generation."
Remember, this process will not affect just oldsters. It will suck in those closest to said
oldsters as emergency support resources. It won't be only oldesters who will be watching elites
"over iron sights."
Perhaps someone will enlighten me, but this is one thing that really puzzles me about the Republican
determination over many years to gut social security. I can understand their ideological fixation
with it – what I can't understand is why they are so willing to play electoral fire with it. Surely
this directly attacks millions of core Republican voters?
They may be able to fool many of them with deceptive slogans, but surely when the prospect
of finding their pensions slashed faces them, even the most supine and gullible middle American
Republican voter in their middle to late years is going to realise they've been had. The backlash
could be enormous. I find it hard to see how any rational politician would want to go near it.
They will find a way to blame it on the Democrats, and more importantly, on Blacks, Hispanics
and other minorities. They will sell the cuts and privatizations as the only way to save the system
that has been so badly damage by the fore mentioned, and as long as their base gets their beliefs
from Faux News, Bretbart, etc; it's quite probably the Republicans will succeed in getting what
they want while screwing down the ever hapless Democratic party.
I've met more than a few who'd almost be pleased to suffer as long as they thought blacks were
being made to suffer even more. There's no logic when hate gets this strong.
Exactly, the same way they have mortally wounded our once stellar public education system,
(a system once good enough to educate our "Greatest Generation) – is now a shell, death by a thousand
cuts
Also, if you think income disparity is bad now? – hang on to your wallet, because after 4 years
of Trump and his prospective cabinet picks, it will hit the stratosphere.
"There's no logic when hate gets this strong" – so true.
Smart to point at the educational system.
I have not found many youths who can tell me what they want to do. I find this really weird.
It is true that if you know what you want to do the library will do.
Thanks to Ben Franklin, inventors, engineers had a place to hang out and collect information they
could use.
Maybe you had to live in NYC to have a NYCity library card, but it is a big city.
Meantime Charter schools, which sounded great to us when at Kenwood on the Southside, are gaining
ground and collecting tax money regardless of results.
They are said now in Not Conscious to be handing out diplomas same as Public Schools did to get
some bodies out the door.
I was a graduate, but denied attendance at the diploma hand out thing, cause I refused to pay,
for my public school diploma. Public education, supposed to be free to citizens.
People think I didn't graduate.
The Union believed in Trump. I get sick about lots of things. It will be worse than they think.
Education & Defense are what the government is for.
Twelve years ago the Republicans needed the Democrats to actually plunge the knife on the back.
Democrats like Joe Lieberman dearly wanted to lend a bipartisan hand but Pelosi and Reid actually
rallied to prevent it. Talking Points Memo was all over it then. Now they're on top of Paul Ryan's
machinations to privatize Medicare and this Social Security scam. Kind of raised some old feelings
for TPM, but they're also heavily flogging the CIA Russian hacking dembot campaign.
About the only thing I knew about Hillary's agenda is that she wanted to means test Social
Security and Medicare and start new wars. Obama wanted to do many of the cuts in Sam Johnson's
bill but was foiled by Tea Partiers who couldn't take yes for an answer or were smarter than they
seemed.
Both Schumer and Pelosi said the Democrats would oppose any of these current plans. We'll see.
I would hope they would realize that Social Security and Medicare are issues where the only
winning move is to expand them. IOW, they need to realize this is an area where the campaign donors
need to be told to pound sand, shut up and expect to pony up – as in you ARE going to be paying
more into the system.
But these are people who thought there was no way that Clinton could lose, that this Russia nonsense
is a winning strategy and that ACA was going to be good for Democrats once people got to know
it. IOW, their grasp of reality outside their bubble might as well not exist it is so broken.
So while my fingers are crossed they still want their jobs AND aren't completely delusional, I
also know we better put the fear of the voters into every member of Congress about grannies and
wannabe grannies with canes beating them to a pulp any time they leave their house.
And by grannies I mean anyone on SS, and wanna be grannies everyone who someday might be able
to retire or at least only work part time after retirement age because of SS.
IF they cannot win an election they will not have any donors, and they are rapidly getting
to the point where a Democrat getting elected to a national office is the exception. Not to mention
there are a large number of states where that is pretty much the case. There is no reason to try
to bribe people so you can have them in your pocket if they are powerless.
They are terrible at strategy, but eventually they may figure out they need voters. You do
NOT alienate seniors as seniors are the most reliable voters around. Oh, and most of those seniors
have grandchildren they think deserve Social Security and Medicare as well. The only winning strategy
is to protect and expand.
I forgot to mention the consultant class. Absent a hostile takeover the Democrats may not be
fixable. Their disdain for and disconnect from the voters will do them in.
Would love to see this repeated and repeated, because although it's hard, we need to grasp
this fact:
their grasp of reality outside their bubble might as well not exist it is so broken.
their grasp of reality outside their bubble might as well not exist it is so broken.
their grasp of reality outside their bubble might as well not exist it is so broken.
their grasp of reality outside their bubble might as well not exist it is so broken.
their grasp of reality outside their bubble might as well not exist it is so broken.
Sam Johnson the same Sam Johnson who wrote "I spent seven years in the Hanoy Hilton. The Hanoy
Hilton is no Trump hotel." back in July ? Who milks his Vietnam tour of duty like a rabid milkmaid Who
says "I do not feel like a hero, and I do not call myself one" in the tones of one who thinks
the exact opposite? Who is constant cahoots with McCain (who is currently trying to sink a Trump
presidency) why am I not surprised that a neoliberal faction of the senatorial republican party
in seeking to weaken a populist president-elect is reaching for the third rail with both hands
and smearing all republicans with the same brush. I doubt very much Trump will weaken social security
since he knows it is the only thing his rebellious base of Deplorables can depend on call me simple
but Trump won this election against practically everyone and he knows his base is the only sure
recourse he has.
I don't count on that (Trump knowing not to touch Social Security). I wouldn't be surprised
if he went for privatization. HE will never ever need Social Security so why concern himself over
it? He's already throwing his electoral base under the bus with his cabinet picks. Every single
one of them is a direct violation of his pre-election promises.
I think Hillary also wanted to increase the payroll tax by 3% (an enormous amount of money)
and use it to privatize 3% of the SS funds to make up for shortfalls, ostensibly. They better
have a good insurance policy so that'll be another 3%. All this nonsense because we refuse to
admit we need social policies and social funding of the basic things. We are committing suicide
24/7 these days. Why don't we just call it all insurance?
The financial (rentier) crowd want to get their claws on the SS funds. They'll achieve their
goal unless we kick their puppets out of Congress.
They already have their teeth into your IRA funds, student loans, home mortgages and your bank
funds, It won't be too long before a Trojan Horse Prez signs away your SS. Beware!
We'll see if the Dems stand firm and fight back OR go for the old "bipartisanship!" bullcrap
and instead agree to a lessor CUT. They would then promote it as the two sides working together.
Typical neoliberal Dem establishment move.
Or are the progressive forces ascendant and ready to fight absolutely?
We'll see. In any case, the House will pass it, no question. The test is in the senate where
the Dems still have some teeth available (whether they USE those teeth is another thing altogether).
The Democratic Party must be made to defend Social Security as they rallied
against Bush's privatization plan. They will do so for political advantage, but they
too have attacked Social Security. Obama attacked it on three occasions–the Deficit Commission,
the chained CPI added to a budget proposal, and the timing of married couples claiming benefits–and,
were it not for Monica Lewinsky distracting
Bill Clinton, Bill Clinton would have been attempting to privatize Social Security, not Bush.
Now it the time to contact your senators and representatives: NO CUTS.
As things stand, what you recommend is the best action to take as of right now. It is not enough,
but when letters come in to Dems and Repubs stating the senders will NEVER vote for anyone who
votes to mess with Social Security, Medicare, Medicaid, there might be some reactions.
BUT it needs to be many, many, many people writing, calling, and meaning it when stating "Representative/Senator
XXX, you mess with this and you will never, ever get a vote from me."
Humm, if you are depending on Bernie or any one politician to save you, then you've lost the
point of Democracy. It's all of you forcing them to do the right thing.
Bernie Sanders has said it himself, even FDR said to Black Activist asking for an anti-discrimination
executive order to the defense industry: "I agree with you, I want to do it, now make me do it."
They did do it, by threatening a strike during WWII, for which some were sent to jail. That's
what it's going to take, because voting once every 2 or 4 years isn't going to cut it.
They will never attack current beneficiaries. This is a lesson they have learnt over the years.
This is why they changed tack in the 1980s and keep raising the eligibility age which is a very
soft target. One thing the GOPers understand really well is, GOPer Seniors ALWAYS vote and some
Dem Seniors vote sometimes. So they will leave current beneficiaries alone. GOPer Seniors – almost
all of them are driven by the conviction (Tea Party types) that Social Security and Medicare are
under jeopardy because of illegal immigration and because Social Security funds are being raided
and handed over to other beneficiaries like those on Disability etc. They have plenty of traction
on this because if you go ask the average 25 year old or even a 40 year old today whether they
can count on Social Security, most of them being morons and having swallowed the MSM propaganda
will tell you, 'I don't think it will be around when I get to 65'. I am fairly certain there are
polls to back this up. This is what the Greenspan Blue Ribbon Commission cleverly did under Reagan.
The people who are in their 50s today were in their late 20s in the 1980s and clueless about what
exactly Greenspan did to the eligibility age. So telling current beneficiaries that its good to
cut benefits for future beneficiaries makes a lot of sense to current beneficiaries. In any case
SS is toast. I think we will have to wait for the entire cycle of Old Age poverty to take root
again in another 50-60 years and for the tide to turn. It was wide spread old age poverty that
prompted FDR and also Trueman into action for SS and Medicare respectively.
Sewer species like Pete Peterson and the Hedge Funders target SS because it is a very productive
way to create mass unemployment and lower wages. They don't want people removed from the labor
market by SS when they become 65. Their secret longing is to drive down wages to the point where
the per hour rate will equal the human mules you see pulling overloaded hand carts in Mumbai,
India or Shangai, China. This is really the agenda. This is basically the psychology of monopoly
thinking. When you have captured markets up to a 95% level then you start looking like an idiot
because you have closed off growth altogether. Monopolies do not grow because there are no more
markets left. So the next thing to do is increase profits via driving labor costs down – standard
Michael Porter Harvard Business School trick. This is what they have been doing in the last 40
years.
It's how they are selling every sort of deregulation. it destroys the future, but who gives
a damn about their children and grand-kids, the ungrateful snots. Shipping the old folks off to
the retirement home has divorced them from both the care and of caring about their descendants.
Your comment about the old folks home is right on target. The better class of senior housing
establishments are often the most fortified of bubble worlds, and the Seniors there spend hours
ranting to each other about how the younger generation has screwed them over somehow. I've witnessed
it first hand. They've been carefully taught not to give a crap about future generations, including
their own kids and grandkids. It's all about MEEEEEEEEEEE .
Thank you, I think a lot of us have noticed the veracity of this, especially over the last
four decades. Show of hands who else out there is sufficiently paranoid, to consider signing-up
a year early & simply absorbing the hit, with some silly fantasy of being grandfathered-in?
Thanks! I was dizzy from a bad head cold, working in very bagger-ridden environs (a quite literally
Dikensian hell-hole in Pennsyltucky), applying for Medicare and fishing through obfuscatory pleonasm,
picking Plan D & N insurers the 2nd or 3rd page in, they ask you if you're applying for "benefits"
at this time! Jesus Anybody ANYBODY??? I have some meager equity (at least, last time I looked?)
sufficient for a decade or so. But with Republicans dying young?
Increasing the retirement age while the average life expectancy is decreasing seams especially
crewel. Combine that with that piece from the times that showed people like me, born in the 80's
only have a 50% chance of earning more than our parents and that we are already drowning in student
debt and that is a full on assault on the youth of this country. Screw the national debt burdening
future generations, this will actually burden us. This really is the worst country in the world.
Fuck Patriotism.
Anyone who has a chance of affecting the behavior of AARP when it comes to SS and Medicare
needs to step up and apply whatever pressure they can to get that thing to return to its origins
and "work the issue" for their members, present and future. I know, it's mostly just another front
for insurance and other sales pitches and scams and "cruise packages" and other lifestyle crap,
but at least there has to be some skeletal remains of the original bones of the organization in
there somewhere.
Or failing that, is there another entity that might be worth supporting and joining with, to
go on the offensive and fight back? I would hate to think it's all futility and "47%" from here
on out.
AARP's origins? It was founded by an insurance salesman as a slick way to sell, yep you guessed
it, the industry's interests to a powerful bank of less than bright voters.
Some of us question if there won't be mass human extinction before then. Maybe there will be
no old age for many people alive today including yours truly. But nonetheless, if by some miracle
the worst doesn't happen then Social Security is important.
Prez Hope and Change's support for chained-CPI will certainly complicate the fight against
this. If Obama and his Rubinite stable of bean-counting butt-boys were for it then it must be
okay?
They're banking on getting some Democratic support, to make it bipartisan. With weasels like
Mark Warner in the Senate, they might get some Democrats to sign on to this.
Eh? Democrats will line up with their Republican BFFs to screw over the proles. Given how Democrats
are now a very Rump party in this nation, what have they got to lose? Why take of their alleged
"constituents" in the 99% What a laugh. The constituents of the Dem pols are, have always been,
and will continue to be the .01%. So the Dems will happily oblige their real constituents by screwing
over the proles. Anyone who expects a different outcome is not living in reality.
Perhaps it's because "the banks own this place." Also the Republicans, like the Dems, are running
on the fumes of past ideological obsessions and Social Security was always seen as a prime Dem
vote getter and flagship of the hated New Deal. Remember Karl Rove wanted to take the country
back to the McKinley administration. But mostly it's probably because people like Paul Ryan are
creatures of their funders.
Plenty are stupid, but the Democrats are in complete disarray. The GOP will face push back
from their voters, but the Democrats as they are now are not a threat to win any time soon. AARP
recognizing the interests of its members can shake Washington, but right now, the GOP sees no
threat to its rule.
Many of the not so weathy Repubs are 'rich wannabes'. So they'll gladly toe the line on cut
social security cuts and free market memes. They think that they have noting to worry about because
they'll be wealthy before they retire and they won't need SS. Boy, do I have a few bridges and
lots of swamp land to sell them!
One can note the Social Security "reform" is usually pushed by wealthy individuals who feign
concern about saving a system for the future of less well off Americans.
Also, Social Security is a system that is of little import to the wealthy as they will not
be depending on it for basic living expenses.
The wealthy's real fears are of a raising of the income cap that will hit them directly or
of an effort to support higher wages for the citizens currently paying into Social Security, hitting
their business profits.
While it may seem unexpected they can get help from Democrats in this effort (Obama, Bill Clinton )
but I suspect this is so because wealthy donors support the effort and the Democrats can pitch
the "saving" aspect while collecting campaign cash.
If a politician is not re-elected as a result, they might have a more lucrative career at a
think tank or as a lobbyist.
Of course, if the wealthy are so concerned about the alleged Social Security problem that is
looming in the future, where were far sighted wealthy Americans when it came to questioning the
Iraq War, the drug war, the lack of financial reform, and all the USA military/covert actions
that have done great harm to public finances?
Strangely, Social Security "reform" is a big concern of theirs, and the other USA efforts that
have caused much harm, are not.
Then there is climate change, again, wealthy individuals are more concerned about "saving social
security" than saving the planet.
Also the "reform minded" politicians do not appear to allow that current social security benefits
probably are used by many entire low income families. So cutting grandma's benefits also could
immediately hit her kids/grandkids financially.
A secondary effect is that lowering SS benefits means the wages of current workers can be lowered
in concert as their SS payments, which flow to current recipients, can be lowered, perhaps even
allowing another Social Security reform effort to be promoted.
The ability of TPTB to sell this to the American public should not be underestimated as the
advertising/public relations/MSM has been successful in promoting/maintaining many bad ideas.
The wealthy are not concerned about saving anything unless they can make money off it. They
are already getting richer from the endless wars on terror and drugs, and taking planetary resources
for themselves. The only reason they talk about "reforming" Social Security and Medicare is to
get their hands on that money as well. And please do not expect the corporate media to explain
any of this to the dumbed-down masses.
The Republicans can afford to play with potential policial backlash for two reasons: First,
they relentlessly beat out false narratives about the demise of SS and its inadequacies so that
their flase story becomes a part of the consciousness of citizens. (This is the same thing done
to attack teachers, unions, the post office, government, etc. You put out the lie long enough,
it becomes the truth.) Second, they have been engaged in not one knife to the heart of the program
but an attempt to promote its demise by a thousand cuts, little by little, until the program is
no longer viable. I know for a fact that young people have bought into the lies put forth by them
and do not think the program will be there for them because they too have bought the lie. Those
pushing to kill the most effective program in US history, one that has kept the elderly from complete
poverty, are nothing more than evil. They want no public programs, and all revenue funnelled into
corporate models that enrich the 1%.
Conservatives love destruction for its own sake. Smashing the Alaska Wildlife Refuge, smashing
the ancient city of Baghdad, spilling oil all over North Dakota, wrecking Social Security, all
these things have a political component, but it is the destruction itself that makes them absolutely
adorable to Conservatives. Bear in mind this pervasive love of destruction, and many Conservative
initiatives will become more clear.
And the "base" goes along with it, because many of them have been inculcated with the theory
that it is more pleasurable to do someone else harm than to do one's self good. Given a choice
to make, they will always pick the former. Hope this helps.
Me, I find NC's alarm and amazement at the Republican plans to wreck Social Security ingenuous.
What did you think would happen? God knows you were warned.
Who warned us? Not the media. Not Obama. Who? I'm thinking naked capitalism.com, best Paul
Revere substitute I can come up with at the moment.
Nobody here needed warning. Nobody is alarmed or amazed. And nobody stuck their heads in the
sand and figured everything is going to be peachy. What we did need was a well written reminder.
People drunk a whole lot of Koolaid like "it takes a Democrat to cut social security". Koolaid
was spilled all over in drunken Koolaid orgies at one point toward the end of election silly season.
But the party is over and all that is left is the wreckage. Of course Hillary may have done the
same thing as we weren't exactly getting any encouragement from her that she wouldn't and rather
in fact got hints that she might (support for Peterson committee, her retirement plans for private
investment etc. – to supplement Social Security of course). None of which were absolute certainty
that she would cut it of course, but they aren't always honest about that are they, so not encouraging
either.
It's best seen as an all out effort to wreck any good that the government does for common people
so that they can beat the war drum of government failure. This then serves as the smoke screen
to hide just how much ultra rich directly benefit from government support through bailouts, privatization,
tax cuts, subsidies, and out right theft and fraud. And just how much more they will get when
Social Security and Medicare are privatized and benefits are shrunk. Those are large streams of
government controlled funds, and they want it.
Social Security and Medicare work extremely well, and should be expanded. But don't delude
yourself into thinking this is obvious to most people. Both political parties are dedicated to
killing Social Security and Medicare and are extremely adept at spouting the " we must kill it
to save it" BS.
Ds movement to the right and their continuation of R policies, no matter how vile, actually
redeems the R party for the next election. If they take turns governing only on behalf of the
.9, .09 and .01% they take turns redeeming the other branch of the money party. The colluding
media will propagandize every bit of corruption and sleazebaggery as 'no other option' trot out
imaginary deficits.
The voted out politicians will enthusiastically do it because they enter office looking for
the big sellout as they will receive the only objective they ever had in achieving elected office .
lucrative appointments and sinecures at parasitizing corporations, think tanks, scam foundations
and presidential libraries.
Exactly. But not everyone has a reflex sight or scope. And a lot of people who do have such
a very wrong notion of who the targets ought to be, the ones that actually pose the greater=st
immediate threat
Though 4,000 veterans appearing at Cannon Ball with the #NoDAPL presence probably have or are
developing a correct "sight picture" and target designation
Oh H-! Where is my 3-9X40 when I need it?
The late lamented science fiction writer Mack Reynolds penned a screed along these line a ways
back about a pissed off ageing Lord Greystoke and the fate of the old in America called "Relic."
The plan will be structured to only hurt future retirees. The solution to this political problem
is to have anyone who will be affected demand that they be allowed to opt out from now on and
to receive a refund, with interest, of all of their previous contributions to the system because
the "earned benefits" have been taken away. Ownership in America is a sure winner politically.
I don't expect Democrats to have the balls to actually propose this, but it would leave the
plans in tatters because without the tax stream and the already contributed taxes it won't be
able to pay current retirees. Now that would get the current retirees attention!
Not only can old people no longer depend on their extended families for support I'm afraid
many young people in that extended family have had to rely on the older people for support. My
young adult children are not doing terribly well in the new economy and I don't see things improving
for them any time soon - if at all. I've had to step in and help a little here and little there
more and more as the costs for those unplanned surprise expenses keep blindsiding my children.
And maybe that is what the author thought, but it doesn't work. Wages above the SS max don't
get taxed and don't add to the final benefit, so people who have an average salary equal to the
max have a benefit that is below the max. The difference would depend on how much the salary fluctuates,
year by year.
Perhaps a serious attack on welfare for the rich would persuade the enemies of Social Security
that those who live in glass houses should not throw stones?
To make such an attack, one needs must take over the "reins of power." In short, your suggestion
is revolutionary. (I'm not averse to such, just observing.)
I mean an ideological attack since much welfare for the rich is not yet recognized as such
(e.g. government provided deposit insurance instead of a Postal Checking Service or equivalent,
e.g. interest on reserves, e.g. other positive yeilding sovereign debt).
Yes it is. It is part of the means by which the poor, the least so-called creditworthy, are
forced to loan to depository institutions to lower the borrowing costs of the rich, the most so-called
credit worthy.
The ethical alternative is an inherently risk-free Postal Checking Service or equivalent for
all citizens, their businesses, etc. Then the poor need no longer lend (a deposit is legally a
loan) to banks, credit unions, etc or else be limited to unsafe, inconvenient physical fiat, aka
"cash."
Interesting that maybe 4,000 veterans showed up and formed up at Cannonball/DAPL, to stand
against the thugs and "government" and with the Native Americans who seem to have found a set
of honest and attractive memes to present to the rest of us. The Bonus Marchers got the MacArthur
Fist way back when, but I'm wondering how all those troops trained in maneuver-and-fire would
take to further (planned) assaults on their livelihoods and families, while they are ever more
being "deployed" to protect the as-s-ets and post-national "interests" of the Few
Not to worry. Organization is taking place. In New York State the Bernie delegates have kept
in touch since the convention. They have organized into 25 affiliates state wide. We have had
a conference already. The Lower Hudson Valley affiliate may be able to defeat the Trump agenda
all by itself. We tuned into the Our Revolution call and decided to do our own thing.
https://twitter.com/NYPANetwork
Any similar initiative in Massachusetts? The last time the Republicans tried to gut SS under
Bush, the Democrats came out in force and held meetings on weekends around Rhode Island (where
I was living at the time) to fire up opposition to the plan. I'm anticipating Elizabeth Warren
and other MA democrats will oppose this, but want to be ahead of that by looking for other avenues
of opposition like Bernie's coalition, such that it is.
I seriously doubt anyone would be enthused by a Democrat party still headed by that Super Frisco
Water Carrier Pelosi. I know I would not for one. The bell tolls for Bernie but the man has been
struck dumb.
If you already have an OR local or state group and you want to be affiliated with national,
or at least talk to national DM me on twitter and I can get you in touch, I have a friend who
works for them. https://twitter.com/UserFrIENDlyyy
Social security has already been cut over the last several years without a peep out of anyone.
No cost of living adjustments in 3 of the last 8 years. Actual inflation is at least 2 points
higher than the reported figures. Social security has been cut 15-20% since the financial crisis.
Yep. And I have elderly friends who are suffering bc of it. But everyone is very passive having
bought into the propaganda that this is "just the way it is," and "there's just not enough money"
to provide anymore via SS. So we have a very passive population, who've mostly all bought the
propaganda about how "broke" Soc Sec is we proles, yet again, have to suck it up bc the wealthy
certainly cannot be expected to have the income cap raised heave forfend.
Just got my Soc Security statement. My net gain, for 2017, after an increased deduction for
MediCare, is .nothing. See, there's no inflation (except my car insurance, home insurance, health
insurance, food, etc have all gone up). And to add insult to injury, our benefits (derived from
involuntary deductions from our paychecks) are called "entitlements."
As our elected "representatives" are so adamantly opposed to these programs, and would like to
reduce them to table scraps, I am eagerly awaiting the announcement that Congressional pensions
and healthcare benefits are going to be discontinued.
Same here. Any small gain was offset by increase in deduction for Medicare. In addition to
the rising costs you cite, I find I am paying increased local taxes, among other things. So, like
most people, we must contend with stagnant income to pay rising cost of living (and I mean the
necessities).
I started paying into the system in 1965. Medicare used to be no cost and cover all medical expenses,
so that is a cut in itself. I knew that I could not rely on SS in my old age, and I live modestly.
I agree with your last comment. I have never seen why our representatives in Congress should receive
any different coverage than the citizens they are elected to represent. As individuals, they can
supplement it, just as we have to.
I was notified yesterday via letter that my SS benefits will increase 4.00 / mo next year.
This will be a great help because my rent went up 7.00 / mo to 1600.00 for my studio apt.
Current law says that in approximately 13 years all benefits will be cut – across the board
– by 20-25%.
That is an unacceptable outcome.
What to do with this reality? The answer is "Something" must get done. The wrong answer is,
"Don't do anything, wait 13 years, and then fall off a cliff".
The proposal that in the author's words "Guts" SS actually increases benefits by 9% for the
bottom 20% of beneficiaries. The cost of the proposal falls on those who have high incomes before
AND after reaching age 65. The proposal stabilizes SS for the next 75 years, and there are no
new taxes required. Exactly what is wrong with that?
In the post pension plan age, I think the 20%-90% bracket needs it. Maybe up to the 99% bracket
once our current 401K bubble bursts and Housing Bubble II bursts.
So the only option are things that actually punish today's working class and weaken the system
by eliminating the all in/all the same position? No, it isn't. The problem is that the answer
is to slowly raise the payroll tax AND eliminate the cap – something that should have been done
decades ago once it became clear that the people who lived the longest on SS were largely those
who stopped paying payroll taxes at some point throughout the year. But we cannot consider those.
Nope we have to talk about raising the retirement age when life expectancy for most is dropping
and we have to go with things that mean that you need to start living like you have to choose
between drugs and eating cat food from day one because your benefit will never increase regardless
of how much more your food, housing or medicare premium increase, or there even if they allow
cost of living they write off things because you can give up steak for chicken over and over.
Instead of a expanding to a more universal program, you support turning SS farther into a program
that categorizes individuals, assigns a hierarchy and then ranks them according to some random
definition of human and who is most deserving.
There's nothing wrong at all with having nothing but contempt for others and hiding behind
some made up term of 'cost'. It's perfectly reasonable to deny the means to the dignity of housing
and food to others.
The fact the last two Dim-o-crat presidents (Clinton and Obama) and not a few Dim-o-crat Senators
and Congressmen are in agreement about "saving" Social Security doesn't help either. Clinton's
plan was derailed by the Lewinski thing and Obama's because the Republicans wouldn't take yes
for an answer (didn't want him to get credit for it but don't mind doing it themselves)
In case anyone has not noticed, they are already cutting SS benefits by stealth means. There
have been no cost of living increases in 3 of the last 5 years, and for my personal SS benefits,
the measly .3% increase next year goes away entirely with the increase in medicare payments. I
suspect many folks, like my sister who is 78 and still working full time, do not realize that
the increases they are receiving are due entirely to their still being in the work force. In addition,
with the cutbacks that have been forced on the administrative side of SS, more mistakes are being
made. A friend of mine was declared "dead" by SS (something that also happened to me with my tiny
pension plan). When she attempted to correct the error, the SS employee discovered that "thousands"
of people had been similarly affected. This happened last summer and my friend is finally receiving
her benefits, but a month late and for some reason the agency cannot issue that catch-up check.
She is still working and so not completely bereft, but what in the world are the folks doing who
have no other income??? I suppose our overlords will be most pleased that the constant annoyances
they are causing us will result in our passing away from sheer anger and frustration.
That's interesting. I have a friend, who is still in her 50s, who was working on her will,
etc, and discovered that she was no longer "alive" as far as Soc Sec was concerned. She got it
rectified, and it didn't have a negative impact on her (she's still comparatively young and working).
But it's decidedly odd about how all these citizens are suddenly dead as far as Soc Sec is concerned.
And yes, it takes some effort to get back on the database of the living. For those who are really
elderly, this could be a very difficult thing to do.
It boggles my mind why any one would ever want to gut social security. Companies already push
people out at 55 and then you have a good 8 to 12 years of somehow managing until social security
comes to your rescue. Younger people do think social security will not be in place when they are
in their 60s which makes them angry. And who can ultimately rely on the stock market etc. to give
them the money they will need when older – shivers. Is the economy that sound? Plus many people
cannot manage to work so long due to health reasons which do start creeping up on people in their
late 50s or the work they do is too labor intensive for them to imagine keeping at it until 69
or even 67. Bodies give out at some point. That is reality. Everyone wants to work until 70 but
the companies don't want older workers – they want young, fresh, vital. If anything, social security
should start at 60.
Two reasons come to my mind, a desire to reduce or eliminate the employer half of payroll taxes
AND the pool of money that the financial industry thinks should be theirs to rape and pillage.
But I'm sure there are others.
Recent posts and comments have noted both more billionaires and a rapid concentration of wealth
amongst them. But it's mo' po', too, what Turchin calls 'popular immiseration'. To decrease the
effects of 'interelite competition' the wealthiest cannot just bestow unto their favorites, they
must tend to the rich on the downslope. Those are the ones with resources to engage in attrition.
So there is a long history of shoving the costs onto those who can't fight back, and the unlanded
are easier to slap down.
A personal case: Pearl was a delightful very elderly lady a few doors down. Her house was in
trust until she died, and she had a daughter and a grandaughter living with her. When she died,
one of her (all over-55) children had medical debt needing paid and so he vetoed keeping the house.
It sold, the land was lost to the family, and daughter and grandaughter were homeless.
That interelite competition was apparent in the election. Our choice of two New York billionaires
was a choice over which aspect of the FIRE sector would dominate, Finance or Real Estate. But
those differences seem to get averaged out below a scale of 10^8 or so dollars.
Re Companies that push people out at 55 and don't want older workers and prefer younger ones,
this leaves a lot of people in that 55-70 age bracket in a difficult (and in some cases, a terrible)
situation if they're not in the minority of those who have a secure gig until they retire (usually
people that I know that have government gigs w/ pensions.) The Presidency nor the Congress have
no solution for older workers who get pushed out and face discrimination due to their age when
they seek employment. They would prefer to not hear about it and if they're sleeping in cars or
in tents under bridges, that's their problem.
continuing what's been going on for the past 8 years, ever heard of quantitative easing, the
ACA, or chained CPI? Foam the runway with HAMP, maybe, or endless war as the only jobs guarantee
available. Sorry, but trump is just more of the same, only a little more forthright. You should
be used to it by now.
No argument here. Put the Dems in control and they will find all kinds of excuses for doing
the same thing, all bight more subtlety. Clinton was going to privatize Social Security and Obama
proposed chained CPI. Not to mention the effects of TPP.
Another columnist whose "answers" are predicated on the assumption that taxes provision government
programs. Just one question: Where do tax payers get the dollars to pay taxes with if government
doesn't spend them out into the economy first?
If that's too much thinking: Where was all this "we're out of money" talk when the Fed, according
to its own audit, pushed $16 – $29 trillion out the door to save the financial sector from its
own frauds? Yet government routinely denies it makes the money when the orders-of-magnitude demands
of safety net programs appear. Taxes make the money valuable; they do not, and obviously cannot,
provision government.
As long as this isn't common knowledge, we're all condemned to austerity. Even public policy
makers sympathetic to workers (e.g. Dilma Rousseff) are in peril if they adopt the "inevitable
austerity" routine.
Unfortunate that I had to scroll this far down to find the first person with a correct understanding
of government finance. I've explained MMT point blank to people multiple times and they still
cannot grasp it. Until people start caring and get a general understanding of how this thing works
we are in a lot of trouble. I am hoping that Trump will be godawful enough to bring about such
a conviction for revolution to the average American
As the Henry Ford saying goes (oft-quoted by Ellen Brown):
"It is well enough that people of the nation do not understand our banking and monetary system,
for if they did, I believe there would be a revolution before tomorrow morning."
Exactly right and if the powers that be were really concerned about funding SS from those who
will receive it all they have to do is raise the income cap to cover total income for everyone
- not just middle income workers. Problem solved and no need to worry about the fact that the
government can't run out of dollars.
I see the Trust Fund as having been accumulated over the decades by my generation - by paying
higher FICA tax to purchase fed bonds with. TF running out now supposed to be the big to do? Wasn't
it supposed to run out? Aren't we supposed to use what we saved?
I like to say: have an SS retirement shortfall today? Do it all over again: hike FICA, lower
income tax and accumulate bonds. Mmm.
But, just yesterday I had a brainstorm. If Repubs want to cut benefits so FICA shortfall doesn't
have to made up by income tax cashing bonds (covering about 25% of outgo just before our bonds
run out, then, Repubs want to steal our savings that we forgave immediate gratification to accumulate
all those long years.
Always suspected income tax payers who are hit for as much as 39% would balk at cashing the
bonds when the time came - but on the basis of the usual world run for the haves idea. Never thought
of it in terms of outright theft - before yesterday.
PS. Really shouldn't use up all bonds. Right now there are about four years of full replacement
in the TF. Legal solvency is defined as one year - needed to cover temporary shortfall while Congress
moves to fill in - happened couple of times.
No. Defined benefit plans are supposed to be funded so that the assets earn enough to pay promised
benefits. If the assets run out, the plan is not only mismanaged, it's bankrupt.
Seriously, if your checking account were emptied by a hacker, would you ask "Wasn't it supposed
to run out?" You are a crime victim.
Educate, Agitate, Organize, yup, expanding on cry shop's comment above, it's more than breitbart
and Fox these days. The mainstream media may be (usually) more polite and more subtle, but they
will not report the basic info accurately like Yves and Lambert do here. Our Revolution is a good
start. There need to be alternative sources of information such that education can happen. That
is why the "fake news" attacks on alternative media are such a big deal. The founders of the US
understood the importance of information too, one reason the postal service was established with
low rates for all periodicals. "Knowledge will forever govern ignorance; and a people who mean
to be their own governors must arm themselves with the power which knowledge gives", wrote Madison.
We really are sheep without knowledge. Some like it that way .
Donald Trump, at his rallies, consistently lied to his fervent fans that he was going to save
Soc Sec & Medicare. What a laugh.
I've been blogging and telling people throughout the election process that Trump made a very
public DEAL with Paul Ryan that he, Trump, was totally behind cutting and gutting SS & Medicare.
That is the main (possibly only) reason why Ryan gave Trump his very tepid "endorsement." But
this was very public knowledge and not hidden.
But of course, Trump lies constantly, so his fans were mainly enthralled with what a bully
he is and believed what they wanted to believe. Made up fantasies. Some of his fans are waking
up to the fact that they've been screwed over royally. Of course the M$M will happily oblige by
somehow finding a way to blame it all on Obama, Clinton, the Democrats, whatever (not that the
Dems aren't equally happy to cut and gut SS & Medicare, as well) and the proles will buy it.
Although various states have now passed laws to legalize what's called "assisted suicide,"
there's still a lot of resistance to it, esp from those of various religious persuasions. Also
assisted death in these cases is only available for those already in the latter stages of terminal
illnesses, and generally extreme poverty doesn't fall under that definition. So sucks to be you.
I guess dying from hunger and exposure, due to extreme poverty, is our just deserts. No rest
for the wicked. When you die, you have to die as painfully and slowly as possible just to impress
upon you how worthless and awful you truly are. The punishments will continue until morale improves.
This was posted hours ago. How many readers have taken the time to email their congressmen?
Please do! You don't have to be lengthy or learned. You can simply state a couple of talking points
you all know and intimate that tampering with benefits is not going to be accepted. This is definitely
one of those "if you're not with us you're against us" issues, and the sooner your elected representatives
understand you mean that the better.
"I think a 0.4% increase (combined), about two dollars per week for each the worker and
the employer, should solve the problem in ten years, but I haven't done the numbers on that
myself. "
WHUT? Why are space cadets like this even allowed on the internet?
Trying to patch Soc Sec's $10 trillion hole with an 0.4% FICA tax hike is like trying to empty
the Atlantic Ocean with a teaspoon.
Net present value, Dale - I'm afraid you cut class that day. Now it's too late.
The attempt by the right to "fix" Social Security is nothing more than an attempt to make the
trust fund disappear, and to mark all the obligations that fund was supposed to have met null
and void.
If this sounds like they are trying to steal the trust fund, that is not the case. They have
already stolen it. Now they just have to fix the accounting to say they didn't, which they will
do by setting the system to never need to cash a bond from the trust fund.
Tin foil hat, you say? Fine, but do me a favor. Whenever a bill is introduced to "fix" Social
Security, do the accounting for how it will play out. The trust fund will no longer be needed?
Something about this strikes me as a hilarious farce of unintended consequences. People worried
about "government debt" and demanding its reduction are getting exactly what they wished
for.
I'm not quite sure of your meaning here. It sounds like you are mocking people for not being
able to get out from under a propagandist educational/media system and a corrupt government. Then
again, it also seems to be gloating and that people deserve to be immiserated.
This is called a "technical adjustment." They can pretend that the CPI is too generous and
know that most people won't understand the scam.
I am a 100% disabled veteran and several years back they tied our COLA to the SS COLA.
The result is that since mid 2013 in this region we have lost about 40% of our purchasing power.
Our standards of living have dropped by that much.
Of course there is NO INFLATION, the letters I have been getting actually claimed that because
of this DISINFALTIONARY economic environment . That is no inflation so no raise this year.
Now, I am going to be 59 this spring, I worked at a lot of things between 1973 and 2005 when
a judge ruled in my favor regarding my disability and awarded me SSD. But, because I spent so
many years fighting SS and did not have the quarters of income recent enough my SSD amounts to
$1,013 per month.
Now for all the republicans out there who think SS is too generous, I would ask you to stick
your filthy little brains, or rather pull them out of your exhaust holes. You can claim it is
too generous when you have spent a lifetime paying in and then someone tells you that 12 grand
a year is too generous.
MY RENT IS MORE THAN THAT and this place s a hovel in the sticks. The only way I can have a
roof over my head for less is to live in my vehicle.
Fortunately I also have a bit in VA disability and between the two I thought of myself as middle
class if just barely only 36 months ago, now I would consider myself in dire poverty at 20k a
year, anything less and we are talking eating at the mission and sleeping in shelters. Vehicle?
Right. The fact that they refuse to acknowledge inflation and use quite literally half a dozen
tricks to disappear it from the headlines does NOT mean it does not exist. If you can eat gasoline
and flat screen TV's you are certainly doing great, otherwise you are experiencing something never
known in the USA, structural downward mobility for 90% of us.
And it is these facts that drove the angry and the stupid to vote for Trump, they were not
the majority of voters, but between them and antiquated laws giving voters in small states far
more power than in urban areas (where people actually live) that Orange Hitler dude got in, and
so did the GOP majority of fascists who have as a holy mission class warfare and getting rid of
diversity of any kind, racial, sexual, or gender.
They are going to gut every bit of progress since Teddy Roosevelt. They are going to bring
back segregation, this time though via school vouchers. They are not going to FORCE non white
non middle class kids into slum condition schools, so they will plausibly claim HEY it is NOT
segregation and those parents have an equal right to move their kids to private schools also.
No, instead these kids will be abandoned in schools that the government will slash funding to
as white upper and middle class people are partially paid the tuition to send their kids to private
schools which are exempt from federal discrimination laws. I am NOT holding my breath for this,
I have a one way ticket to Australia for the first week of January.
THAT is going to be the story of all government for a while, social security is just one of
MANY functions of government they are going to kill off. If you think people were angry in 2016
just you wait till 2020.
It is already so bad that unless the GOP grows a conscience and a heart in the next 2-4 years
the USA will break up the way the Soviet Union did. The nation now has what so many married couples
cite in divorce proceedings, IRRECONCILABLE differences.
And the worst of it is that no matter if you like it or hate it the USA is the rock of stability
that has keep civilization working since the end of WWII. You break up the USA and bingo there
is no uni in the unipolar geopolitical world. What we will have is chaos and war and humanity
will fail. USA FAIL=Humanity FAIL.
Thank you. Thank you. Thank you. For your plainspoken honesty. This should be copied and posted
everywhere, starting with senators and representatives.
They should have an option for an opt out of social security, medicare/Medicaid, Affordable
Health Care. Not having that kind of freedom to me is not worth it. I am not buying any other
excuses such as I am not shrewd to invest my money. Taking money is the easy part. Getting back
is always laborious if you are lucky to get.
right. many people opt out of "mandantory" auto insurance by just not
getting it. it's been estimated that in FL at different times as many as
one third of the drivers on the road are not insured. and really, if they
get injured, they get treated in an emergency room until they are stabilized
(the law) and if they were sued for damages, what could be recovered?
but, let's remember, while they are on their "ride" they are "free." Yep.
a lot of people think like that.
Social Security, let's lay it to rest once and for all Social security has nothing to do
with the deficit. Social Security is totally funded by the payroll tax leviedon employer and
employee. If you reduce the outgo of Social Security, that money would not go into the general
fund or reduce the deficit. It would go into to the Social Security Trust Fund. So Social Security
has nothing to do with balancing a budget or lowering the deficit.
would someone explain why the greenspan changes , which were supposed to keep social security
solvent, did not, I've googled the history and the only answers seem to be that the trust had
trillions in surplus that were used to pay off other obligations, , which I do know that the funds
were used to lower the deficits in previous years, but wouldn't the surplus still be there? Explanation
please by someone knowledgeable about the history and why the problems now
"Well, which is he, "at the top of the scale" or an "average earner"?"
Oops. Even I understand that one. It means he earned an AVERAGE of $118,500, the maximum that
SS taxes.
Next question: what kind of idiot actually introduces a bill to cut Social Security? One who
plans on a lucrative retirement from politics, that's what kind.
Protesting the proposed policies of President who owns real properties of value in media-drenched
major cities that require the labor of lower income workers on a daily basis might be more effective
than protesting a President whose wealth is almost entirely stored in secret, offshore bank accounts.
"The trouble with Sneed's article is that she does not appear to know what she is talking about.
She just wrote down what some "experts" told her with no idea what the words mean."
You missed the question, is it the writer or the policy of the site?
Vladimir Putin's Valdai Speech at the XIII Meeting (Final Plenary Session) of the Valdai International
Discussion Club (Sochi, 27 October 2016)
As is his usual custom, Russian President Vladimir Putin delivered a speech at the final session
of the annual Valdai International Discussion Club's 13th meeting, held this year in Sochi, before
an audience that included the President of Finland Tarja Halonen and former President of South Africa
Thabo Mbeki. The theme for the 2016 meeting and its discussion forums was "The Future in Progress:
Shaping the World of Tomorrow" which as Putin noted was very topical and relevant to current developments
and trends in global politics, economic and social affairs.
Putin noted that the previous year's Valdai Club discussions centred on global problems and crises,
in particular the ongoing wars in the Middle East; this fact gave him the opportunity to summarise
global political developments over the past half-century, beginning with the United States' presumption
of having won the Cold War and subsequently reshaping the international political, economic and social
order to conform to its expectations based on neoliberal capitalist assumptions. To that end, the
US and its allies across western Europe, North America and the western Pacific have co-operated in
pressing economic and political restructuring including regime change in many parts of the world:
in eastern Europe and the Balkans, in western Asia (particularly Afghanistan and Iraq) and in northern
Africa (Libya). In achieving these goals, the West has either ignored at best or at worst exploited
international political, military and economic structures, agencies and alliances to the detriment
of these institutions' reputations and credibility around the world. The West also has not hesitated
to dredge and drum up imaginary threats to the security of the world, most notably the threat of
Russian aggression and desire to recreate the Soviet Union on former Soviet territories and beyond,
the supposed Russian meddling in the US Presidential elections, and apparent Russian hacking and
leaking of emails related to failed US Presidential candidate Hillary Rodham Clinton's conduct as
US Secretary of State from 2008 to 2012.
After his observation of current world trends as they have developed since 1991, Putin queries
what kind of future we face if political elites in Washington and elsewhere focus on non-existent
problems and threats, or on problems of their own making, and ignore the very real issues and problems
affecting ordinary people everywhere: issues of stability, security and sustainable economic development.
The US alone has problems of police violence against minority groups, high levels of public and private
debt measured in trillions of dollars, failing transport infrastructure across most states, massive
unemployment that either goes undocumented or is deliberately under-reported, high prison incarceration
rates and other problems and issues indicative of a highly dysfunctional society. In societies that
are ostensibly liberal democracies where the public enjoys political freedoms, there is an ever-growing
and vast gap between what people perceive as major problems needing solutions and the political establishment's
perceptions of what the problems are, and all too often the public view and the elite view are at
polar opposites. The result is that when referenda and elections are held, predictions and assurances
of victory one way or another are smashed by actual results showing public preference for the other
way, and polling organisations, corporate media with their self-styled "pundits" and "analysts" and
governments are caught scrambling to make sense of what just happened.
Putin points out that the only way forward is for all countries to acknowledge and work together
on the problems that challenge all humans today, the resolution of which should make the world more
stable, more secure and more sustaining of human existence. Globalisation should not just benefit
a small plutocratic elite but should be demonstrated in concrete ways to benefit all. Only by adhering
to international law and legal arrangements, through the charter of the United Nations and its agencies,
can all countries hope to achieve security and stability and achieve a better future for their peoples.
To this end, the sovereignty of Middle Eastern countries like Iraq, Syria and Yemen should be
respected and the wars in those countries should be brought to an end, replaced by long-term plans
and programs of economic and social reconstruction and development. Global economic development and
progress that will reduce disparities between First World and Third World countries, eliminate notions
of "winning" and "losing", and end grinding poverty and the problems that go with it should be a
major priority. Economic co-operation should be mutually beneficial for all parties that engage in
it.
Putin also briefly mentioned in passing the development of human potential and creativity, environmental
protection and climate change, and global healthcare as important goals that all countries should
strive for.
While there's not much in Putin's speech that he hasn't said before, what he says is typical of
his worldview, the breadth and depth of his understanding of current world events (which very, very
few Western politicians can match), and his preferred approach of nations working together on common
problems and coming to solutions that benefit all and which don't advantage one party's interests
to the detriment of others and their needs. Putin's approach is a typically pragmatic and cautious
one, neutral with regards to political or economic ideology, but one focused on goals and results,
and the best way and methods to achieve those goals.
One interesting aspect of Putin's speech comes near the end where he says that only a world with
opportunities for everyone, with access to knowledge to all and many ways to realise creative potential,
can be considered truly free. Putin's understanding of freedom would appear to be very different
from what the West (and Americans in particular) understand to be "freedom", that is, being free
of restraints on one's behaviour. Putin's understanding of freedom would be closer to what 20th-century
Russian-born British philosopher Isaiah Berlin would consider to be "positive freedom", the freedom
that comes with self-mastery, being able to think and behave freely and being able to choose the
government of the society in which one lives.
The most outstanding point in Putin's speech, which unfortunately he does not elaborate on further,
given the context of the venue, is the disconnect between the political establishment and the public
in most developed countries, the role of the mass media industry in reducing or widening it, and
the dangers that this disconnect poses to societies if it continues. If elites continue to pursue
their own fantasies and lies, and neglect the needs of the public on whom they rely for support (yet
abuse by diminishing their security through offshoring jobs, weakening and eliminating worker protection,
privatising education, health and energy, and encouraging housing and other debt bubbles), the invisible
bonds of society – what might collectively be called "the social contract" between the ruler and
the ruled – will disintegrate and people may turn to violence or other extreme activities to get
what they want.
An English-language transcript of the speech can be found at
this link .
"... I had always thought Hayek made some good critical points about the illusions of socialists/utopians and then chose to ignore the fact that his criticism also applied to his ..."
"... So maybe Hayek didn't overlook the fact that his critique also applied to his utopia. Maybe he knew full well he was misrepresenting what he was selling, engaging in exactly the same propaganda techniques that he attributed to others. ..."
"... A Rovian strategy - conceal your weakness by attacking others on precisely that issue. ..."
"... The Road to Serfdom put out in the US after WWII, which was full of this inflammatory sort of thing that doing anything to ameliorate the harder edges of capitalism put one inexorably on the road to serfdom. ..."
"... In the actual RtS one finds Hayek himself supporting quite a few such amiliorations, most notably social insurance, especially national health insurance well beyond what we even have in the US now with ACA. ..."
"... The problem for lovers of Hayek, and arguably Hayek himself, is that he simply never repudiated this comic book version of his work, even as he and many of his followers got all worked up when people, such as Samuelson, would criticize Hayek for this comic book version of the RtS, pointing out his support for these ameliorations in the original non-comic book version. ..."
"... However, Samuelson in his last remarks on Hayek, which I published in JEBO some years ago, effectively said that Hayek had only himself to blame for this confusion. ..."
"... I have been thinking that maybe both "sides" in our mostly brainwashed America today could agree with the meme of "DRAIN-THE-SWAMP" and hope to see it carried proudly on protest signs by the non-zombies of both sides in the ongoing social upheaval. ..."
"... I agree that "accuse the other side of doing what you are doing" is a familiar ploy of the right. ..."
Sandwichman | December 10, 2016 12:51 am
In his neo-Confederate "Mein Kampf," Whither Solid South ,
Charles Wallace Collins quoted a full paragraph from Hayek's The Road to Serfdom
regarding the emptying out of the meaning of words. My instinct would be not to condemn Hayek
for the politics of those who quote him. Even the Devil quotes Shakespeare.
But after taking another look at the Look magazine
comic book edition of Hayek's tome, I realized that Collins's depiction of full employment
as a sinister Stalinist plot was, after all, remarkably faithful to the
comic-book version of Hayek's argument. With only a little digging, one can readily
infer that what the comic book refers to as "The Plan" is a policy also known as full employment
(or, if you want to get specific, William Beveridge's Full Employment in a Free Society
). "Planners" translates as cartoon Hayek's alias for Keynesian economists and their political
acolytes.
To be sure, Hayek's sole reference to full employment in the book is unobjectionable
- even estimable almost:
That no single purpose must be allowed in peace to have absolute preference over all others
applies even to the one aim which everybody now agrees comes in the front rank: the conquest of
unemployment. There can be no doubt that this must be the goal of our greatest endeavour; even
so, it does not mean that such an aim should be allowed to dominate us to the exclusion of everything
else, that, as the glib phrase runs, it must be accomplished "at any price". It is, in fact, in
this field that the fascination of vague but popular phrases like "full employment" may well lead
to extremely short-sighted measures, and where the categorical and irresponsible "it must be done
at all cost" of the single-minded idealist is likely to do the greatest harm.
Yes, single-minded pursuit at all costs of any
nebulous objective will no doubt be short-sighted and possibly harmful. But is that really
what "the planners" were advocating?
Hayek elaborated his views on full employment policy in a 1945 review of Beveridge's
Full Employment in a Free Society, in which he glibly characterized Keynes's theory of
employment as "all that was needed to maintain employment permanently at a maximum was to secure
an adequate volume of spending of some kind."
Beveridge, Hayek confided, was "an out-and-out planner" who proposed to deal with the difficulty
of fluctuating private investment "by abolishing private investment as we knew it." You see, single-minded
pursuit of any nebulous objective will likely be short-sighted and even harmful unless that
objective is the preservation of the accustomed liberties of the owners of private property, in
which case it must be done at all cost!
Further insight into Hayek's objection to Keynesian full-employment policy can be found in
The Constitution of Liberty . The problem with full employment is those damn unions. On this
matter, he quoted Jacob Viner with approval:
The sixty-four dollar question with respect to the relations between unemployment and full
employment policy is what to do if a policy to guarantee full employment leads to chronic upward
pressure on money wages through the operation of collective bargaining .
and
it is a matter of serious concern whether under modern conditions, even in a socialist country
if it adheres to democratic political procedures, employment can always be maintained at a high
level without recourse to inflation, overt or disguised, or if maintained whether it will not
itself induce an inflationary wage spiral through the operation of collective bargaining
Sharing Viner's anxiety about those damn unions inducing an inflationary wage spiral "through
the operation of collective bargaining" was Professor W, H, Hutt, author of the Theory of
Collective Bargaining, who "[s]hortly after the General Theory appeared
argued that it was a specific for inflation."
Hutt, whose earlier book on collective bargaining "analysed [and heralded] the position of the
Classical economists on the relation between unions and wage determination," had his own
plan for full employment . It appeared in The South African Journal
of Economics in September, 1945 under the title "Full Employment and the Future of Industry."
I am posting a large excerpt from Hutt's eccentric full employment "plan"
here because it makes explicit principles that are tacit in the neo-liberal pursuit of
"non-inflationary growth":
Full employment and a prosperous industry might yet be achieved if what I propose
to call the three "basic principles of employment" determine our planning .
The first basic principle is as follows. Productive resources of all kinds, including
labour, can be fully employed when the prices of the services they render are sufficiently
low to enable the people's existing purchasing power to absorb the full flow of the
product.
To this must be added the second basic principle of employment. When the prices of
productive service have been thus adjusted to permit full employment, the flow of purchasing power,
in the form of wages and the return to property is maximised .
The assertion that unemployment is "voluntary" and can be cured by reducing wages is the classical
assumption that Keynes challenged in the theory of unemployment. Hutt's second principle, that full
employment, achieved by wage cuts, will maximize the total of wages, profit and rent thus would be
not be likely to command "more or less universal assent," as Hutt claimed. But even if it did, Hutt's
stress on maximizing a total , regardless of distribution of that total between wages
and profits, is peculiar. Why would workers be eager to work more hours for
less pay just to generate higher profits? Hutt's principles could only gain "more or
less universal assent" if they were sufficiently opaque that no one could figure out what he was
getting at, which Hutt's subsequent exposition makes highly unlikely.
Hutt's proposed full employment plan consisted of extending the hours of work, postponing retirement
and encouraging married women to stay in the work force. He advertised his idea as a reverse lump-of-labor
strategy. Instead of insisting - as contemporary economists do - that immigrants (older workers,
automation or imports) don't take jobs, Hutt boasted they create jobs, specifically because they
keep wages sufficiently low and thus maximize total returns to property and wages
combined. He may have been wrong but he was consistent. Nor did he conceal his antagonism toward
trade unions and collective bargaining behind hollow platitudes about
inclusive growth .
The U.S. has been following Hutt-like policies for decades now and the
results are in :
For the 117 million U.S. adults in the bottom half of the income distribution, growth has been
non-existent for a generation while at the top of the ladder it has been extraordinarily strong.
Or perhaps Hutt was right and what has held back those at the bottom of the income distribution
is that wages have not been sufficiently low to insure full employment and thus
to maximize total returns to labor and capital. The incontestable thing about Hutt's theory is that
no matter how low wages go, it will always be possible to claim that they didn't go sufficiently
low enough to enable people's purchasing power to absorb the full flow of their services.
coberly , December 10, 2016 11:52 am
I can't claim to know all of what Hayek meant. but I did read one of his books and it was clear
he did not mean what the right has taken him to not only mean, but to have proved.
In any case it is dangerous (and a bit stupid) to base policy on what someone said or is alleged
to have said. Especially economists who claim to have "proved" some "law" of economics.
That said, i wonder if some of what is said here is the result of over-reading what someone
(else) as said: to be concerned with policies "to the exclusion of all else" is not the same as
rejecting the policies while keeping other things in mind. and to recognize the potential of labor
unions to force inflationary levels of wages is not the same as opposing labor unions.
neither the advocates in favor of or those opposed to the extreme understanding of these cautions
–including the authors of them if that is the case - are contributing much to the development
of sane and humane policy.
I had always thought Hayek made some good critical points about the illusions of socialists/utopians
and then chose to ignore the fact that his criticism also applied to his neo-liberal
utopia. But I followed up the passage quoted by Collins and it turns out that Hayek was discussing
a statement made by Karl Mannheim, which he quoted out of context and egregiously misrepresented
-- a classic right-wing propaganda slander technique. So here is Hayek talking about emptying out
the meaning from words and filling them with new content and he is doing just that to the words
of another author.
So maybe Hayek didn't overlook the fact that his critique also applied to his utopia. Maybe
he knew full well he was misrepresenting what he was selling, engaging in exactly the same propaganda
techniques that he attributed to others. By accusing others first of doing what he was doing,
it made it awkward for anyone to point out that he was doing it, too. A Rovian strategy - conceal
your weakness by attacking others on precisely that issue.
One of the problems with Hayek is that there was always this conflict between the "comic book
Hayek" and the more scholarly and careful Hayek. In fact, there really was a comic book version
of The Road to Serfdom put out in the US after WWII, which was full of this inflammatory sort
of thing that doing anything to ameliorate the harder edges of capitalism put one inexorably on
the road to serfdom.
In the actual RtS one finds Hayek himself supporting quite a few such amiliorations,
most notably social insurance, especially national health insurance well beyond what we even have
in the US now with ACA.
The problem for lovers of Hayek, and arguably Hayek himself, is that he simply never repudiated
this comic book version of his work, even as he and many of his followers got all worked up when
people, such as Samuelson, would criticize Hayek for this comic book version of the RtS, pointing
out his support for these ameliorations in the original non-comic book version.
However, Samuelson
in his last remarks on Hayek, which I published in JEBO some years ago, effectively said that
Hayek had only himself to blame for this confusion.
To me it comes down to whether government is structured to serve all or some obfuscated minority
of all. With that as the divider it is easy to decipher Hayek's work and others.
I have been thinking that maybe both "sides" in our mostly brainwashed America today could
agree with the meme of "DRAIN-THE-SWAMP" and hope to see it carried proudly on protest signs by
the non-zombies of both sides in the ongoing social upheaval.
coberly , December 10, 2016 6:41 pm
Sammich
I agree that "accuse the other side of doing what you are doing" is a familiar ploy of the
right.
I don't know what Hayek was really saying, or if he let the comic book version stand because
he was so flattered to have his child receive such adulation, or just because he was in his dotage
and didn't really understand how he was being misrepresented if he was.
but the fun thing to do with Hayek is to point out what he "really" said to those who have
only heard the comic book version
if anyone is still talking about him at all. seems there was a big rush of talk about Hyak
a few years ago and now it has faded.
Sandwichman
:
December 07, 2016 at 12:06 PM
Terence Hutchison concluded his appendix on "Some postulates
of economic liberalism" in Significance and Basic Postulates
of Economic Theory with the admonition, "It is high time to
put these theories [laissez faire and equilibrium doctrines]
firmly back in their place as Utopian constructions." He
cited S. Bauer's 1931 article, "Origine utopique et
métaphorique de la théorie du "laissez faire" et de
l'équilibre naturel."
Prominent in Bauer's discussion is
the role of Baltasar Gracian's Oráculo Manual, which was
translated into French by Amelot de la Houssaie in 1684, in
popularizing both the notion and the term, laissez faire.
Pierre le Pesant Boisguilbert is credited with introducing
the term into political economic thought in a book published
in 1707. It is conceivable that Keynes knew of the Gracian
maxim because he used the image Gracian had used of
tempestuous seas in his famous rejoinder about "the long run"
being "a misleading guide to current affairs."
In his book Hutchinson noted that "several writers have
argued that some such postulate as 'perfect expectations' is
necessary for equilibrium theory." This observation lends a
special note of irony to Gracian's coinage of laissez faire.
In his discussion of Gracian's Oráculo, Jeremy Robbins
highlighted the observation that:
"Gracián's prudence rests firmly on a belief that human
nature is constant... In Gracián's case, human nature is
viewed as a constant in so far as he believes it to act
consistently contrary to reason."
In fact, Robbin's chapter on Gracian is titled "The
Exploitation of Ignorance." Gracian's maxims establish "a
sharp distinction between the elite and the necios [that is,
fools]." Assuming that most people are fools who act contrary
to reason is obviously something quite different from
assuming perfect expectations. For that matter, the prudence
of a courtier seeking to gain power over others is something
quite distinct the foresight required of a policy
professional acting ostensively on behalf of the public
welfare.
That metaphorical and Utopian notions of laissez faire and
natural equilibrium have managed to persist and even prevail
in economics -- impervious to Hutchinson's warning (or
Keynes's) -- is testimony to the perceptiveness of Gracian's
estimate of human nature.
"Let's stop pretending unemployment is voluntary" is the
title for chapter four of Roger Farmer's book,"Prosperity for
All: How to Prevent Financial Crises."
That is not good
enough.
No. Let's stop pretending that the "pretending" is
innocent. Let's stop pretending that it isn't a deliberate
fraud that has been aided and abetted by most of the
economics profession.
If you want to access the dynamical systems literature you
should know the terminology that self-equilibrating systems
have at least one stable equilibrium point with a non-empty
domain of attraction (think downward pointing pendulum). Any
state (set of variables describing the system configuration)
that starts in this domain will end up at the stable
equilibrium point. Non-linear systems can have several
equilibria and some may be unstable as well, in that starting
any small distance from those equilibria results in movement
away from that equilibrium (e.g. an upside down pendulum). It
is not enough to determine if a point is an equilibrium
point, you must also check its stability.
The trouble with this approach is that economics is
describing a system that is not an equilibrium system in the
first place. Economics is describing a system that is
1. Evolutionary
2. Dynamic. (In fact all the measurements are not
measurements of a static state but of movements. Even
apparently static things like asset values or the discounting
sum of flow over time.)
Just in case you don't see the relevance, just think about
what happens if it is not the position that is moving but the
equilibrium point (and worse the equilibrium point is not
known, and perhaps unknowable).
" If the expectations of agents are incompatible or
inconsistent with the equilibrium of the model, then, since
the actions taken or plans made by agents are based on those
expectations, the model cannot have an equilibrium solution.
..."
There is clearly one very important word missing in
this sentence.
Let me try again:
"" If the expectations of ANY agents are incompatible or
inconsistent with the equilibrium of the model, then, since
the actions taken or plans made by agents are based on those
expectations, the model cannot have an equilibrium solution.
..."
Now what at first look seems merely far fetched, just
became laughable.
I'm sorry, but this is very, very important. General
equilibrium is the original sin of economics (especially
Macro-economics). It is where it all went wrong. They should
just drop it, and try to model the dynamic response of agents
and the system to disequilibrium, which inevitably arises
faster than equilibrating forces can possibly work. A more
fundamental way of thinking about this is to realize that
economics deals with transactions and all transactions are
the result of a disequilibrium (at equilibrium all the trades
are already made).
Where did the disequilibrium come from? When you
understand the answer to that, you can understand what drives
the economy. Not before.
Barron's investment weekly has published a "Get Ready for Dow 20,000" cover today. Is
that a problem for stocks, from a contrarian point of view?
Not necessarily. Paul Macrae Montgomery, who first articulated the concept of fading the always-wrong
MSM, stipulated that it's widely-circulated, general-interest publications that are the best mirrors
of popular sentiment.
So far, they are largely silent on the twin asset bubbles - stocks and house prices - rising
ominously beneath our feet. Looks like it's gonna be awhile before we reach the supreme silliness
of Time magazine's fatuous June 2005 cover "Home $weet Home: Why We're Going Gaga Over
Real Estate."
That one actually scored double points, for the MSM's presumptuous habit of invoking the cozy
"we" formulation to tell readers what they think. (That's why "we" hate the MSM.)
With Time reportedly on the block, maybe a sensational "Dow 36,000" cover could goose
the sale price up to five dollars instead of one. It's worth a try, lads!
Jim, odd snippet from something I heard last night struck me as being right up your alley.
The guy who founded Princeton Review is now some kind of investment guru. He was talking about
last years announced rate hikes, and that he told his clients they weren't going up but might
reach record lows. He based that on metals traders (gold, silver etc). He says they have never
been wrong about the direction of rates. (I got interrupted so if he explained the signals he
was seeing from them I missed it). It should be part of a pod cast from Tim Ferriss if you want
to check it out, but I really did think it was one of those things you would have in your arsenal
for market prediction.
His other big advice was treat investing like a poker game, don't bet on the cards bet on the
players – look for their tells. And he hasn't figured out that Uber has some real issues to deal
with before its 'profits' are real, so take everything with a grain of salt.
TIPS didn't exist before 1997. But real Treasury yields (proxied by subtracting the trailing
12-month CPI change from nominal Treasury yields) went negative in 1974 and 1979 too, during the
epic gold spikes of that era.
So this seems to be an enduring anticorrelation. However, I use the yield curve in my bond
model rather than gold. The pronounced serial correlation in Fed-controlled short rates is highly
non-random, signaling what the cockeyed commissars are up to.
"... existing official models do not sufficiently explain the Minsky period, the runup, how things got so fragile that they could collapse so badly. ..."
"... in effect Minsky provided a model and discussion of all three stages, although his model of the Keynes stage is not really all that distinctive and is really just Keynes. ..."
"... he probably did a better job of discussing the Bagehot stage than did Bagehot, and more detailed, if less formal, than Diamond and Dybvig. ..."
"... But the essentials of what go on in a panic and crash were well understood and discussed prior to 1873, with Minsky, and Kindlegerger drawing on Minsky in his 1978 Manias, Panics, and Crashes, quoting in particular a completely modern discussion from 1848 by John Stuart Mill ..."
"... Keep in mind, there are an infinite number of models that fit the data. Science requires more that a fit. It requires that the model correspond with reality in a way that it can fill in observable data before it is observed. ..."
"... Here's a theory (not a model): the true and revolutionary insights of Veblen, Keynes, and Minsky have all failed to significantly alter the trajectory of economic thought because the discipline expects "the truth" to do the impossible. ..."
Yes, we miss the late Hy Minsky, especially those of us who knew him, although I cannot claim
to be one who knew him very well. But I knew him well enough to have experienced his wry wit and
unique perspective. Quite aside from that, it would have been great to have had him around these
last few years to comment on what has gone on, with so many invoking his name, even as they have
in the end largely ended up studiously ignoring him and relegating him back into an intellectual
dustbin of history, or tried to.
So, Paul Krugman has a post entitled "The Case of the Missing Minsky," which in turn comments
on comments by Mark Thoma on comments by Gavyn Davis on discussions at a recent IMF conference on
macroeconomic policy in light of the events of recent years, with Mark link
http://economistsview.typepad.com/economistsview/2015/06/the-case-of-the-missing-minsky.htmling
to Krugman's post.
He notes that there seem to be three periods of note:
a Minsky period of increasing vulnerability of the financial system to crash before the crash,
a Bagehot period during the crash,
a Keynes period after the crash.
Krugman argues that, despite a lot of floundering by the IMF economists, we supposedly understand
the second two, with his preferred neo-ISLM approach properly explaining the final Keynes period
of insufficiently strong recovery due to insufficiently strong aggregate demand stimulus, especially
relying on fiscal policy (and while I do not fully buy his neo-ISLM approach, I think he is mostly
right about the policy bottom line on this, as would the missing Minsky, I think).
He also says that looking at 1960s Diamond-Dybvig models of bank panics sufficiently explain the
Bagehot period, and they probably do, given the application to the shadow banking system. However,
he grants that existing official models do not sufficiently explain the Minsky period, the runup,
how things got so fragile that they could collapse so badly.
Now I do not strongly disagree with most of this, but I shall make a few further points. The first
is that in effect Minsky provided a model and discussion of all three stages, although his model
of the Keynes stage is not really all that distinctive and is really just Keynes.
But he probably did a better job of discussing the Bagehot stage than did Bagehot, and more
detailed, if less formal, than Diamond and Dybvig. I suspect that Bagehot got dragged in by
the IMF people because he is so respectable and influential regarding central bank policymaking,
given his important 1873 Lombard Street, and I am certainly not going to dismiss the importance
of that work.
But the essentials of what go on in a panic and crash were well understood and discussed prior
to 1873, with Minsky, and Kindlegerger drawing on Minsky in his 1978 Manias, Panics, and Crashes,
quoting in particular a completely modern discussion from 1848 by John Stuart Mill (I am tempted
to produce the quotation here, but it is rather long; I do so on p. 59 of my 1991 From Catastrophe
to Chaos: A General Theory of Economic Discontinuities), which clearly delineates the mechanics
and patterns of the crash, using the colorful language of "panic" and "revulsion" along the way.
Others preceding Bagehot include the inimitable MacKay in 1852 in his Madness of Crowds book
and Marx in Vol. III of Capital, although admittedly that was not published until well after
Bagehot's book.
One can even find such discussions in Cantillon early in the 1700s discussing what went on in
the Mississippi and South Sea bubbles, from which he made a lot of money, and then, good old Adam
Smith in 1776 in WoN (pp. 703-704), who in regard to the South Sea bubble and the managers of the
South Sea company declared, "They had an immense capital dividend among an immense number of proprietors.
It was naturally to be expected, therefore, that folly, negligence, and profusion should prevail
in the whole management of their affairs. The knavery and extravagance of their stock-jobbing operations
are sufficiently known [as are] the negligence, profusion and malversation of the servants of the
company."
It must be admitted that this quote from Smith does not have the sort of detailed analysis of
the crash itself that one finds in Mill or Bagehot, much less Minsky or Diamond and Dybvig. But there
is another reason of interest now to note these inflammatory remarks by Smith. David Warsh in his
Economic Principals has posted in the last few days on "Just before the lights went up," also linked
to by the
inimitable
Mark Thoma. Warsh discusses recent work on Smith's role in the bailout of the Ayr Bank of Scotland,
whose crash in 1772 created macroeconomic instability and layoffs, with Smith apparently playing
a role in getting the British parliament to bail out the bank, with its main owners, Lord Buccleuch
and the Duke of Queensbury, paying Smith off with a job as Commissioner of Customs afterwards. I
had always thought that it was ironic that free trader Smith ended his career in this position, but
had not previously known how he got it. As it is, Warsh points out that the debate over bubbles and
what the role of government should be in dealing with them was a difference between Smith and his
fellow Scottish rival, Sir James Steuart, whose earlier book provided an alternative overview of
political economy, now largely forgotten by most (An Inquiry into the Principles of Political
Oeconomy, 1767).
I conclude this by noting that part of the problem for Krugman and also the IMF crowd with Minsky
is that it is indeed hard to fit his view into a nice formal model, with various folks (including
Mark Thoma) wishing it were to be done and noting that it probably involves invoking the dread behavioral
economics that does not provide nice neat models. I also suspect that some of these folks, including
Krugman, do not like some of the purveyors of formal models based on Minsky, notably Steve Keen,
who has been very noisy in his criticism of these folks, leading even such observers as Noah Smith,
who might be open to such things, to denounce Keen for his general naughtiness and to dismiss his
work while slapping his hands. But, aside from what Keen has done, I note that there are other ways
to model the missing Minsky more formally, including using agent-based models, if one really wants
to, these do not involve putting financial frictions into DSGE models, which indeed do not successfully
model the missing Minsky.
Barkley Rosser
Update: Correction from comments is that the Ayr Bank was not bailed out. It failed. However,
the two dukes who were its main owners were effectively bailed out, see comments or the original
Warsh piece for details. It remains the case that Adam Smith helped out with that and was rewarded
with the post of Commissioner of Customs in Scotland.
What, exactly, is the value added of formal (or even informal) "models" in all this? That is to
say, if a historian were to describe the events and responses outlined above, what would he leave
out that an economist would put in?
Keep in mind, there are an infinite number of models
that fit the data. Science requires more that a fit. It requires that the model correspond with
reality in a way that it can fill in observable data before it is observed.
Meanwhile, Simon Wren-Lewis dismisses the policy-maker who listens to the historian as using
mere "intelligent guess work", strongly suggesting that economists clearly do better. But if trying
to figure out whether the current moments is Minsky, Keynes or even Keen, isn't "guesswork" then
I don't know what is. Put "intelligent guess work" policy next to model guided policy in your
history above. Where's the value added from modeling? It has to be useful AND the policy maker
must have a scientific reason for knowing it will be useful IN REAL TIME.
Krugman frequently defends "textbook" modeling with a "nobody else has come up with anything
better" response. But that's a classic "when did you stop beating your wife".
What if the economy can't be modeled? Claiming to do the impossible is deluded, even if you
can correctly say: "no one has ever improved upon my method of doing the impossible."
"But we have learned so much!" People say that, but what, exactly, are they talking about?
Here's a theory (not a model): the true and revolutionary insights of Veblen, Keynes, and
Minsky have all failed to significantly alter the trajectory of economic thought because the discipline
expects "the truth" to do the impossible.
Newton faced this when his theory of universal
Gravity was criticized for failing to explain the distance of the planets from the sun. The Aristotelian
tradition said that a proper theory of the heavens would do this.
And so Keynes has his Aristotelian interpreter Hicks and Minsky has his Keen. Requiring the
revolution to succeed in doing the impossible means that the truth gets misinterpreted or ignored.
Either way, no revolution despite every generation producing a revolutionary that sees the truth.
What is the value of this theory? If true, it explains how economics can be filled with smart
people seeking the truth and yet make zero progress in more than a century.
I get the impression that mainstream economists are generally resistant to any kind of boom-and-bust
models (at least while getting a BA in econ I was never taught any). Is this the case? It's too
bad, because models like Lotka–Volterra are not that hard. Just from messing around with agent-based
models it seems like anything with a lag or learning generates cycles. Is it because economists
are fixated on optimization and equilibrium? Are they worried about models that are too sensitive
to initial conditions?
Maybe they should not be, but the discussion among IMF economists, Davis, Thoma, and
Krugman has involved models, and in particular, conventional models. So, Krugman declares that
there are conventional models as noted above to cover two of the stages, the latter two, but not
the first one identified with Minsky. I think there are better models for all this, but they are
not the conventional ones.
chrismealy,
The DSGE and other conventional models are able to model booms and busts, although they generally
do not use the Lotka-Volterra models that such people as the late Richard Goodwin (and even Paul
Samuelson) have used for modeling business cycle dynamics. The big difference is that the conventional
models involve exogenous shocks to set off their busts, with cyclical reverberations that decay
then following the exogenous shock, with some of the lag mechanisms operating for that.
It is not really surprising that this sort of thing does not model Minsky or the Minsky moment,
which involve endogenous dynamics, the very success of the boom as during the Great Moderation
itself undermining the stability and even resilience of the system as essentially endogenous psychological
(and hence behavioral) factors operate to loosen requirements for lending and to use Minksy language,
lending and borrowing increasingly involves highly leveraged Ponzi schemes (and I note that some
more conventional economists have emphasized leverage cycles, notably John Geanakoplis, although
avoiding Minsky per se in doing so).
This is a good post and discussion so far. So here's my $.02:
1. Maybe the behaviorists like
Thaler have already explored this, but it seems to me that economists still need to learn learning
theory from psychologists. Most importantly, "bservational learning," { http://psychology.about.com/od/oindex/fl/What-Is-Observational-Learning.htm
), or more simply "monkey see, monkey do." We constantly learn by observing behavior in others:
our parents, our older siblings, the cool kids at school, our favorite pop icons, our professors,
our business mentors, and so on. As to which,
2. Some people are better at learning than others (duh!). Some learn right away, some more
slowly, some never at all. And further,
3. Some people are more persceptive than others, recognizing the importance of something earlier
or later. If you recognized how important the trend change was when Volcker broke the back of
inflation in the early 1980s, and simply bought 30 year treasuries and held them to maturity,
you made a killing. If you discovered that in the early 1990s, you made less. And so on.
All we need, to pick up on chrismealy's comment, are time periods and learning. Incorporate
variations in skill and persceptiveness into the population, and you can get a nice boom and bust
model. As more and more people, with various levels of skill, learn an economic behavior (flipping
houses, using leverage), they will "push the edge of the envelope" more and more -- does 2x leverage
work? Yes, then how about 4x? Yes, then how about 20x? -- until the system is overwhelmed.
4. But if you don't want to incorporate imitative learning models from psychology, how about
just using appraisals of short term vs. long term risk and reward. Suppose it is the 1980s, and
I think treasury yields are on a securlar downtrend. But this book called "Bankruptcy 1995" just
came out, based on a blue ribbon panel Reagan created to look at budget deficits. That best selling
book forecasts a "hockey stick" of exploding interest rates by the mid-1990s due to ever increasing
US debt. So let's say I am 50% sure of my belief that treasury yields will continue to decline
for another 20 years, and I can make 10% a year if I am right. But if I am wrong .....
Meanwhile, I calculate that there is an 80% chance I can make 10% a year for the next few years
by investing in this new publicly traded company named "Microsoft."
Even leaving aside behavioral finance theories about loss aversion, it's pretty clear that
most investors will plump for Microsoft over treasuries, given their relative confidence in short
term outcomes.
Historically, once interest rates went close to zero at the outset of the Great Depression,
they stayed there for 20 years, and then gradually rose for another 30. How confident are investors
that the same scenario will play out this time?
Either or both of the learning theory or the short term-long term risk reward scenario are
good explanations for why backwards induction ad absurdum isn't an accurate description of behavior.
----
BTW, a nice example of a failed "backwards induction" is the "taper tantrum" of 2013. Since
investors knew that the Fed was going to be raising interest rates sooner or later, they piled
on and raised interest rates immediately -- and made a nice intermediate term top at 3%.
I think New Deal Democrat has it here. This surely, can be covered with a simple model
of asynchronous adaptive expectations with stochastic (Taleb type - big tail) risks. I wouldn't
think you would even need a sophisticated agent based model. There must be plenty of ratchet type
models out there to chose from.
"...the true and revolutionary insights of Veblen, Keynes, and Minsky have all failed to significantly
alter the trajectory of economic thought because the discipline..." sacrifices to the God, Equilibrium.
New Deal Democrat,
WRT "monkey see, monkey do" see Andred Orlean's The Empire of Value which articulates
his mimetic theory of value.
Sorry, I am not on board with this at all. Sure, I am all for incorporating
learning and lags. No problem. This is good old adaptive expectations, which I have no problem
with.
The problem is back to what I said earlier, that Minsky's apparatus operates endogenously without
any need for exogenous shocks, although it can certainly operate within those, as his quoting
of Mill shows, although I did not provide that quote, but Mill starts his story of how bubbles
happen with some exogenous initial supply/demand shock in a market.
Why is what you guys talk about an exogenous shock model? Look at the example: Volcker does
something and then different people figure it out at different rates. But Volcker is the exogenous
shocker. If he does nothing, nothing happens.
In Minsky world, there does not need to be an exogenous shock. The system may be in a total
anf full equilibrium,, but that equilibrium will disequilibrate itself as psychological attitudes
and expectations endogenously change due to it. This is what the standard modelers have sush a
problem with and do not like. They have no problem wiht adaptive expectations models. This is
all old hat stuff for them, with only the fact that one does not know for sure what all those
lags are being the problem, and what opened the door to the victory of ratex because it said there
are no lags and thus no problem. Agents now what will be on average.
Warsh's history of the Ayr Bank has errors. The Bank of England offered it a "bailout" in 1772
but required the personal guarantees of the two Dukes which were not forthcoming. The Ayr Bank
struggled on without lender of last resort support until August 1773, when it closed for good.
(This is all in Clapham's history of the Bank of England.)
What Warsh is calling a "bailout" was not a bailout of the bank, but of its proprietors who
had unlimited liability and were facing the possibility of putting their estates on the market
(which would have affected land prices in Scotland).
As I understand Warsh's description, Parliament granted the two Dukes a charter for a limited
liability company that would sell annuities. It is entirely possible that contemporary sources
would describe such an action as "indemnifying" the promoters of the company. But what is meant
by this use of the term is only that Parliament authorized the formation of corporation. The actual
indemnity is provided in the event the corporation fails by the members of the public who are
creditors of the corporation.
In short, it is an error to claim that there was a "bailout" of the Ayr Bank.
I still don't understand what information is added by "models". Krugman has a job he has created
for himself where everything he does is with an eye toward policy.
So I'm a policy maker. Explain why I need a model. in the 1930s austerity caused recessions
and WWII ended the Depression. A little history of Japan's lost decade and some thinking about
the implications of fiat currency, and, voilia, Krugman's policy suggestions, with no models and
therefore no need to listen to economists like Mankiw or the Germans currently destroying Europe
(third times a charm).
By the by, I have thought this thru. The head of Duke's Philosophy Department agrees: Krugman's
method for using models is empty hand-waving. However he comes to his conclusions, it is not logically
possible that ISLM, or any other model, has anything to do with it.
http://thorntonhalldesign.com/philosophy/2014/7/1/credentialed-person-repeats-my-critique-of-krugman
Since Adam Smith economists have told rather enthralling stories about speculations, manias,
follies, frauds, and breakdowns. The audience likes this kind of stuff. However, when it comes
to how all this fits into economic theory things become a bit awkward. Of course, we have some
modls -- Minsky, Diamond-Dybvig, Keynes come to mind -- but we could also think of other modls
-- more agent-based or equilibrium with friction perhaps. On closer inspection, though, economists
have no clue at all.
Keynes messed up the basics of macro with this faulty syllogism: "Income = value of output
= consumption + investment. Saving = income - consumption. Therefore saving = investment." (1973,
p. 63)
From I=S all variants of IS-LM models are derived including Krugman's neo-ISLM which allegedly
explains the post-crash Keynes period. Let there be no ambiguity, all these models have always
been conceptually and formally defective (2011).
Minsky built upon Keynes but not on I=S.
"The simple equation 'profit equals investment' is the fundamental relation for a macroeconomics
that aims to determine the behavior through time of a capitalist economy with a sophisticated,
complex financial structure." (Minsky, 2008, p. 161)
Here profit comes in but neither Minsky, nor Keynes, nor Krugmann, nor Keen, nor the rest of
the profession can tell the fundamental difference between income and profit (2014).
The fact of the matter is that the representative economist fails to capture the essence of
the market economy. This does not matter much as long as he has models and stories about crashing
Ponzi schemes and bank panics. Yes, eventually we will miss them all -- these inimitable proto-scientific
storytellers.
To have any number of incoherent models is not such a good thing as most economists tend to
think. What is needed is the true theory.
"In order to tell the politicians and practitioners something about causes and best means,
the economist needs the true theory or else he has not much more to offer than educated common
sense or his personal opinion." (Stigum, 1991, p. 30)
The true theory of financial crises presupposes the correct profit theory which is missing
since Adam Smith. After this disqualifying performance nobody should expect that some Walrasian
or Keynesian bearer of hope will come up with the correct modl any time soon.
Egmont Kakarot-Handtke
References
Kakarot-Handtke, E. (2011). Why Post Keynesianism is Not Yet a Science. SSRN Working Paper
Series, 1966438: 1–20. URL http://ssrn.com/abstract=1966438.
Keynes, J. M. (1973). The General Theory of Employment Interest and Money. The Collected
Writings of John Maynard Keynes Vol. VII. London, Basingstoke: Macmillan.
Minsky, H. P. (2008). Stabilizing an Unstable Economy. New York, NY, Chicago, IL, San Francisco,
CA: McGraw Hill, 2nd edition.
Stigum, B. P. (1991). Toward a Formal Science of Economics: The Axiomatic Method in Economics
and Econometrics. Cambridge, MA: MIT Press.
In addition to my hypo re Volcker and interest rates, I also mention flipping
houses and leverage.
Person A flips a house, makes $100k. Person B learns of it, figures s/he can do just as well,
and flips a house. Eventually enough people are doing it that news stories are written about it.
By now 1000s of people are figuring, "if they can do it, I can do it.":
So long as the trend continues, the person using financial leverage to flip houses makes even
more profit. Person B uses more leverage, and so on. And since 2x leverage worked, why not 4x
leverage. And if that works, why not 10x leverage?
Both the number of people engaging in the behavior, and the financial leveraging of the behavior,
are endogenous, unless you are going to hang your hat on existing trend (note, not necessarily
a shock - of rising house prices0.
All you need is more and more people of various skill sets at various entry points of time
engaging in the behavior, and testing increasing leverage the more the behavior works.
Secondly, as to stability breeding instability, stability itself is the existing trend. Increasingly
over time, more and more leverage will be used to profit off the existing trend. All it takes
is learning + risk-takers successfully testing the existing limits. The more stable the system,
the more risk-takers can apply leverage without rupturing it -- for a while.
Let me try to express my position as a series of axioms:
1. Assume that no system, no matter how stable, can withstand infinite leverage.
2. Assume that there is a certain non-zero percentage of risk-taking individuals.
3. Assume that risk-takers will use some amount of leverage to attempt to profit within a stable
system.
4. Assume that risk-takers will use increasing leverage once any given lesser percentage of leverage
succeeds in rendering a profit, in order to increase profits.
5. Assume that others will learn, over various time periods, at varying levels of skill, to imitate
the successful behavior of risk-takers.
Under those circumstances, it is certain that any system,
no matter how stable, will ultimately succumb to leverage. And the more stable, the more leverage
will have been applied to reach that breaking point. I.e., stability breeds instability.
Even using history as an analogy is implicitly introducing a model. You're saying, here's my model
of this history and I crank my little model to show the behavior of the model simulates the historical
record, then I adapt the model to present circumstances, and crank again arguing, again by analogy.
What I would object to is the reliance on "analytic models" as opposed to operational
models of the actual institutions. Economists love their analytic models, particularly axiomatic
deductive "nomological machines", DSGE being the current orthodox approach. Not that there is
anything wrong about analysis. My objection would be to basing policy advice on a study of analytic
models to the exclusion of all else -- Krugman's approach -- rather than an empirical study of
institutions in operation (which would still involve models, because that's how people think,
but they might be, for example, simulation models calibrated to observed operational mechanisms).
There are reasons why economists prefer analytic models, but few of those reasons are sound.
In the end, it is a matter of bad judgment fostered by a defective education and corruption or
weakmindedness. Among other things, reliance on analytic models give economics an esoteric quality
that privileges its elite practitioners. Ordinary people can barely understand what Krugman is
talking about in the referenced piece, and that's by design. He does his bit to protect the reputations
of folks like Bernanke and Blanchard, obscuring their viewpoints and the consequences of their
policies.
I am not sure what can be done about it. Economists like Krugman are as arrogant as they are
ignorant -- there's not enough intellectual integrity to even acknowledge fundamental errors,
and that lack of integrity keeps the "orthodoxy" going in the face of manifest failures. For the
conservatives on some payroll, the problem is even worse.
I am not confident that shooing economists from the policy room and encouraging politicians
to discuss these matters among themselves improves the situation. In doubt, people fall back on
a moral fundamentalism of the kind that gets us to "austerity" and "sacrifice" and blames the
victims -- pretty much what we have now.
Re-doing Minsky as an analytic model is an impossible task almost by definition. Minsky's approach
was fundamentally about abstracting from careful observation of what financial firms did, operationally.
It made him a hero with many financial sector denizens, who recognized themselves in his narratives,
even when he cast them in the role of bad guys. (No one is ever going to recognize himself as
a representative agent in a DSGE model.)
Perhaps the hardest thing to digest from Minsky is the insight that business cycles can not
be entirely mastered. The economy is fundamentally a set of disequilibrium phenomena, the instability
built-in (endogenous, as they say). The New Keynesian idea is that the economy is fundamentally
an equilibrium phenomenon, that occasionally needs a helping hand to recover from exogenous disturbance.
These are antagonistic world views, which cannot be reconciled with each other, and the New Keynesian
view can be reconciled only minimally with the observable facts of the world, by a lot of ad hoc
fuzzy thinking ("frictions").
Bruce, I disagree with your view of politicians. The current GOP crop are essentially following
the moral philosophy that, in the end, is the only content generated by economics. But it was
not always thus.
I once watched Senator Kit Bond of Missouri (very-R) try to round up a quorum in the Small
Business Committee. It was quite clear that the man enjoyed people. He liked the company of just
about everybody. Without the strong interference from economists, that's who ends up in politics.
People like that are pragmatic. They try things. They aren't there for the purpose (contra Ted
Cruz) of breaking things.
You're right, my problem really is with analytic "models" which aren't really models but rather
metaphors or analogies. But I don't think that's the only way reasoning from history can work.
There are lots of areas of policy, some of which continue to resist conversion to economic
religion. In education policy we try interventions and see what happens. It's inductive and mostly
correlation, but thru trial and error we do progress toward better policy (although schools of
education are only slowly moving away from their notoriously anti-scientific past).
Politicians don't have to think about the budget like a household and tighten belts. They know
that business borrow money all the time. It's actually the language of the academy that leads
to "tightening belts" instead of investing in the future. Economics is the science of claiming
that if you need something, and you can afford that something, you still must consider "multipliers"
or "the philosophers stone" or some other nonsense before you can decide to buy what you need.
What I mean to say about history: don't confuse theories with models. I have a theory about what
caused what in the Great Depression. But I don't model the economy.
I think I should clarify, I think endogenous and exogenous are a little bit besides the point
here. I think the exact trigger that starts a "state change" in the system has a stochastic component.
But the increasing vulnerability of the system is endogenous, in a very Minsky sense. What I am
saying is that increasing vulnerability could be modelled without using agent based modelling
(a bit like modelling landslides or earthquakes if you like). I'm not saying that the model is
just being driven by exogenous shocks.
Bruce,
I think there is a bit of tendency to mischaracterise what Paul Krugman is saying. He is the last
person you should be accusing of mistaking the map for the territory. He is saying that EVEN relatively
simple models can make sensible suggestions about policy in some circumstances.
Yes, though I tend to agree with you that general equilibrium is the original sin in macro-economic
modelling and that the system is in fact a disequilibrium system. But that doesn't imply to me
at all that you can't use analytical approaches.
Why Trade Deficits Matter, The Atlantic
: However one feels about
Donald Trump, it's fair to say he has usefully elevated a
long-simmering issue in American political economy: the hardship faced
by the families and communities who have lost out as jobs have shifted
overseas. For decades, many politicians from both parties ignored the
plight of these workers, offering them bromides about the benefits of
free trade and yet another trade deal, this time with some "adjustment
assistance."
One of Trump's economic goals is to lower the U.S.'s trade
deficit-which is to say, shrink the discrepancy between the value of
the country's imports and the value of its exports. Right now, the
U.S. currently imports $460 billion more than it exports, meaning it
has a trade deficit that works out to about 2.5 percent of GDP. Given
that the job market is still not back to full strength and the U.S.
has been losing manufacturing jobs-there are 60,000 fewer now than at
the beginning of this year,
according to the Bureau
of Labor Statistics
-economists would be wise to question their
assumption that such a deficit is harmless. ...
Is the U.S. trade deficit a problem whose solution would help American
workers? ...
Looks to me like "global power" comes from a lot more than
military spending, and if its jobs we want, then military
spending is a decent short run stimulus but long run waste in
terms of productive expenditure.
The
Great Illusion is a book by Norman Angell, first published in
the United Kingdom in 1909 under the title Europe's Optical
Illusion and republished in 1910 and subsequently in various
enlarged and revised editions under the title The Great
Illusion.
Angell argued that war between industrial countries was
futile because conquest did not pay. J.D.B. Miller writes:
"The 'Great Illusion' was that nations gained by armed
confrontation, militarism, war, or conquest." The economic
interdependence between industrial countries meant that war
would be economically harmful to all the countries involved.
Moreover, if a conquering power confiscated property in the
territory it seized, "the incentive to produce [of the local
population] would be sapped and the conquered area be
rendered worthless. Thus, the conquering power had to leave
property in the hands of the local population while incurring
the costs of conquest and occupation."
Angell said that arms build-up, for example the naval race
that was happening as he wrote the book in the early 1910s,
was not going to secure peace. Instead, it would lead to
increased insecurity and thus increase the likelihood of war.
Only respect for international law, a world court, in which
issues would be dealt with logically and peaceably would be
the route for peace.
A new edition of The Great Illusion was published in 1933;
it added "the theme of collective defence." Angell was
awarded the Nobel Peace Prize in 1933. He added his belief
that if France, Britain, Poland, Czechoslovakia, etc. had
bound themselves together to oppose all military aggression,
including that of Hitler's, and to appeal to world justice
for solution to countries' grievances, then the great mass of
reasonable Germans would have stepped up and stopped Hitler
from leading their country into an unwinnable war, and World
War II would have been avoided.
In 1909 a book was published
saying that free trade would make the world prosperous
forever. In the U.S. It was called "the Grand Illusion."
Unfortunately Kaiser Wilhelm appeared not to get the message.
If China didn't have those $$$$trillions, they wouldn't
feel empowered to change boundary lines by force. We wouldn't
be worried about a new arms race.
As for solutions, a trade weighted tariff that kicked in
after a certain period/percentage would work just fine,
probably similar to the wage equalization tariff I suggested
the other day. A VAT might accomplish a similar result.
But seriously, you and everyone who thinks like you can go
screw yourselves. Your myopic elitism has gotten us here. I
wish you nothing but pain.
"then military spending is a decent short run stimulus"
No
it is not. It is very ineffective and wasteful. You would get
much better return on your investment by spending on
repairing and upgrading civic infrastructure.
Bull. What we need is enforceable labor and environmental
standards and protections so that the corporate greed heads
will have less incentive to outsource their production to
places lacking any of those things. This is all about
maximizing rents by ruthlessly exploiting vulnerable labor in
the developing world and by being able to poison and
devastate their countries at will.
U.S. currently imports $460 billion more than it exports,
meaning
"
~J B & D B~~
... meaning that We the People print up
t-bonds valued at $460 then trade these bonds for Federal
Reserve Notes printed up by FG-s worth $460 then use same
notes to buy same amount of running shoes, shot glasses, etc.
We print up genuine t-bonds for their counterfeit products
that look like the real thing. Huh! The question is :
How can we do more of this without those foreigner suckers
catching on, getting wise to the scam?
For one, we can make sure that we don't print up more of
our genuine paper than their demand for it. Get it? So long
as their demand continues to be great enough to raise the
price of our tiny slips of paper, we are cool.
When we are printing too much, the price of our paper
falls, buys less, has less buying power. Less buying power is
what we call inflation. More buying power is what we call
deflation. Got it?
Print less thus keep popularity of our printed numbers up.
Tell me something!
What happens when our workers lose jobs to foreigner
suckers who dig our printed numbers?
Job loss to foreigners slows down the domestic development
of robotics, artificial intelligence, and the singularity
that will inevitably detonate all jobs globally. What will
that detonation do to our life style of excessive
overpopulation.
Don't ask, but don't
tell --
Donald A. Coffin :
, -1
The usual response to a trade deficit is that the country
running the deficit sees its currency decline in value. This
lowers the effective price of its exports and raises the
effective price of its imports. Assuming nothing peculiar
about the price elasticities of demand for exports and
import, this should lead to a shrinking trade deficit. From
1973 to 1998, the dollar appreciated steadily, and the
(nominal) trade deficit expanded only slightly. From 1998 to
2005, the dollar continued to appreciate--but the (nominal)
trade deficit exploded, increasing by a factor of (roughly)
10 by 2006. Then, as the dollar began depreciating (in 2002),
the trade deficit began to shrink. Since about 2008, the
dollar has been appreciating again.
What needs most to be
explained is the explosion of the trade deficit between 1998
and 2006; about half of the increase in the trade deficit was
between 1998 and 2002; the other half between 2002 and 2006.
I have spent the better
part of the last 10 years working diligently to investigate and relate information on
economics and geopolitical discourse for the liberty movement. However, long before I
delved into these subjects my primary interests of study were the human mind and the
human "soul" (yes, I'm using a spiritual term).
My fascination with economics and sociopolitical events has always been rooted in the
human element.
That is to say, while economics is often treated as a
mathematical and statistical field, it is also driven by psychology.
To know
the behavior of man is to know the future of all his endeavors, good or evil.
Evil is what we are specifically here to discuss.
I have touched on
the issue in various articles in the past including
Are Globalists Evil Or Just Misunderstood
, but with extreme tensions taking shape
this year in light of the U.S. election as well as the exploding online community
investigation of "Pizzagate," I am compelled to examine it once again.
I will not be grappling with this issue from a particularly religious perspective.
Evil applies to everyone regardless of their belief system, or even their lack of
belief. Evil is secular in its influence.
The first and most important thing to understand is this - evil is NOT simply
a social or religious construct, it is an inherent element of the human psyche.
Carl Gustav Jung was one of the few psychologists in history to dare write extensively
on the issue of evil from a scientific perspective as well as a metaphysical
perspective. I highly recommend a book of his collected works on this subject titled
'Jung On Evil', edited by Murray Stein, for those who are interested in a deeper view.
To summarize, Jung found that much of the foundations of human behavior are rooted in
inborn psychological contents or "archetypes." Contrary to the position of Sigmund
Freud, Jung argued that while our environment may affect our behavior to a certain
extent, it does not make us who we are. Rather, we are born with our own individual
personality and grow into our inherent characteristics over time. Jung also found that
there are universally present elements of human psychology. That is to say, almost every
human being on the planet shares certain truths and certain natural predilections.
The concepts of good and evil, moral and immoral, are present in us from birth and
are mostly the same regardless of where we are born, what time in history we are born
and to what culture we are born. Good and evil are shared subjective experiences. It is
this observable psychological fact (among others) that leads me to believe in the idea
of a creative design - a god. Again, though, elaborating on god is beyond the scope of
this article.
To me, this should be rather comforting to people, even atheists. For if there is
observable evidence of creative design, then it would follow that there may every well
be a reason for all the trials and horrors that we experience as a species. Our lives,
our failures and our accomplishments are not random and meaningless. We are striving
toward something, whether we recognize it or not. It may be beyond our comprehension at
this time, but it is there.
Evil does not exist in a vacuum; with evil there is always good, if one looks
for it in the right places.
Most people are readily equipped to recognize evil when they see it
directly. What they are not equipped for and must learn from environment is how to
recognize evil disguised as righteousness.
The most heinous acts in
history are almost always presented as a moral obligation - a path towards some "greater
good." Inherent conscience, though, IS the greater good, and any ideology that steps
away from the boundaries of conscience will inevitably lead to disaster.
The concept of globalism is one of these ideologies that crosses the line of
conscience and pontificates to us about a "superior method" of living.
It
relies on taboo, rather than moral compass, and there is a big difference between the
two.
When we pursue a "greater good" as individuals or as a society, the means are just as
vital as the ends. The ends NEVER
justify the means. Never. For if we
abandon our core principles and commit atrocities in the name of "peace," safety or
survival, then we have forsaken the very things which make us worthy of peace and safety
and survival. A monster that devours in the name of peace is still a monster.
Globalism tells us that the collective is more important than the individual,
that the individual owes society a debt and that fealty to society in every respect is
the payment for that debt.
But inherent archetypes and conscience tell us
differently. They tell us that society is only ever as healthy as the individuals
within it, that society is only as free and vibrant as the participants. As the
individual is demeaned and enslaved, the collective crumbles into mediocrity.
Globalism also tells us that humanity's greatest potential cannot be reached without
collectivism and centralization. The assertion is that the more single-minded a society
is in its pursuits the more likely it is to effectively achieve its goals. To this end,
globalism seeks to erase all sovereignty. For now its proponents claim they only wish to
remove nations and borders from the social equation, but such collectivism never stops
there. Eventually, they will tell us that individualism represents another nefarious
"border" that prevents the group from becoming fully realized.
At the heart of collectivism is the idea that human beings are "blank
slates;" that we are born empty and are completely dependent on our environment in order
to learn what is right and wrong and how to be good people or good citizens. The
environment becomes the arbiter of decency, rather than conscience, and whoever controls
the environment, by extension, becomes god.
If the masses are convinced of this narrative then moral relativity is only a short
step away. It is the abandonment of inborn conscience that ultimately results in evil.
In my view, this is exactly why the so called "elites" are pressing for globalism in the
first place. Their end game is not just centralization of all power into a one world
edifice, but the suppression and eradication of conscience, and thus, all that is good.
To see where this leads we must look at the behaviors of the elites
themselves, which brings us to "Pizzagate."
The exposure by Wikileaks during the election cycle of what appear to be coded emails
sent between John Podesta and friends has created a burning undercurrent in the
alternative media. The emails consistently use odd and out of context "pizza"
references, and independent investigations have discovered a wide array connections
between political elites like Hillary Clinton and John Podesta to James Alefantis, the
owner of a pizza parlor in Washington D.C. called Comet Ping Pong. Alefantis, for
reasons that make little sense to me, is listed as number 49 on GQ's
Most Powerful People In Washington list
.
The assertion according to circumstantial evidence including the disturbing child and
cannibalism artwork collections of the Podestas has been that Comet Ping Pong is somehow
at the center of a child pedophilia network serving the politically connected. Both
Comet Ping Pong and a pizza establishment two doors down called Besta Pizza use symbols
in their logos and menus that are listed on the
FBI's
unclassified documentation on pedophilia symbolism
, which does not help matters.
Some of the best documentation of the Pizzagate scandal that I have seen so far has
been done by David Seaman, a former mainstream journalist gone rogue.
Here is his
YouTube page
.
I do recommend everyone at least look at the evidence he and others present. I went
into the issue rather skeptical, but was surprised by the sheer amount of weirdness and
evidence regarding Comet Pizza. There is a problem with Pizzagate that is difficult to
overcome, however; namely the fact that to my knowledge no victims have come forward.
This is not to say there has been no crime, but anyone hoping to convince the general
public of wrong-doing in this kind of scenario is going to have a very hard time without
a victim to reference.
The problem is doubly difficult now that an armed man was arrested on the premises of
Comet Ping Pong while "researching" the claims of child trafficking. Undoubtedly, the
mainstream media will declare the very investigation "dangerous conspiracy theory."
Whether this will persuade the public to ignore it, or compel them to look into it,
remains to be seen.
I fully realize the amount of confusion surrounding Pizzagate and the assertions by
some that it is a "pysop" designed to undermine the alternative media. This is a
foolish notion, in my view. The mainstream media is dying, this is unavoidable. The
alternative media is a network of sources based on the power of choice and cemented in
the concept of investigative research. The reader participates in the alternative media
by learning all available information and positions and deciding for himself what is the
most valid conclusion, if there is any conclusion to be had. The mainstream media
simply tells its readers what to think and feel based on cherry picked data.
The elites will never be able to deconstruct that kind of movement with something
like a faked "pizzagate"; rather, they would be more inclined to try to co-opt and
direct the alternative media as they do most institutions. And, if elitists are using
Pizzagate as fodder to trick the alternative media into looking ridiculous, then why
allow elitist run social media outlets like Facebook and Reddit to shut down discussion
on the issue?
The reason I am more convinced than skeptical at this stage is because this has
happened before; and in past scandals of pedophilia in Washington and other political
hotbeds, some victims DID come forward.
I would first reference the events of the Franklin Scandal between 1988 and 1991. The
Discovery Channel even produced a documentary on it complete with interviews of alleged
child victims peddled to Washington elites for the purpose of favors and blackmail.
Meant to air in 1994, the documentary was quashed before it was ever shown to the
public. The only reason it can now be found is because an original copy was released
without permission by parties unknown.
I would also reference the highly evidenced
Westminster Pedophile Ring in the U.K.
, in which the U.K. government lost or
destroyed at least 114 related files related to the investigation.
Finally, it is disconcerting to me that the criminal enterprises of former Bear
Sterns financier and convicted pedophile Jeffrey Epstein and his "Lolita Express" are
mainstream knowledge, yet the public remains largely oblivious. Bill Clinton is
shown on flight logs
to have flown on Epstein's private jet at least a 26 times; the
same jet that he used to procure child victims as young as 12 to entertain celebrities
and billionaires on his 72 acre island called "Little Saint James". The fact that
Donald Trump was also close friends with Epstein should raise some eyebrows - funny how
the mainstream media attacked Trump on every cosmetic issue under the sun but for some
reason backed away from pursuing the Epstein angle.
Where is the vast federal investigation into the people who frequented Epstein's
wretched parties? There is none, and Epstein, though convicted of molesting a 14 year
old girl and selling her into prostitution, was only slapped on the wrist with a 13
month sentence.
Accusations of pedophilia seem to follow the globalists and elitist politicians
wherever they go. This does not surprise me. They often exhibit characteristics of
narcissism and psychopathy, but their ideology of moral relativity is what would lead to
such horrible crimes.
Evil often stems from people who are empty.
When one abandons
conscience, one also in many respects abandons empathy and love. Without these elements
of our psyche there is no happiness. Without them, there is nothing left but desire and
gluttony.
Narcissists in particular are prone to use other people as forms of
entertainment and fulfillment without concern for their humanity. They can be vicious
in nature, and when taken to the level of psychopathy, they are prone to target and
abuse the most helpless of victims in order to generate a feeling of personal power.
Add in sexual addiction and aggression and narcissists become predatory in the
extreme. Nothing ever truly satisfies them. When they grow tired of the normal, they
quickly turn to the abnormal and eventually the criminal. I would say that pedophilia
is a natural progression of the elitist mindset; for children are the easiest and most
innocent victim source, not to mention the most aberrant and forbidden, and thus the
most desirable for a psychopathic deviant embracing evil impulses.
Beyond this is the even more disturbing prospect of cultism.
It is
not that the globalists are simply evil as individuals; if that were the case then they
would present far less of a threat. The greater terror is that they are also organized.
When one confronts the problem of evil head on, one quickly realizes that evil is within
us all. There will always be an internal battle in every individual. Organized evil,
though, is in fact the ultimate danger, and it is organized evil that must be
eradicated.
For organized evil to be defeated, there must be organized good.
I believe the liberty movement in particular is that good; existing in early stages,
not yet complete, but good none the less. Our championing of the non-aggression
principle and individual liberty is conducive to respect for privacy, property and
life. Conscience is a core tenet of the liberty ideal, and the exact counter to
organized elitism based on moral relativity.
Recognize and take solace that though we live in dark times, and evil men
roam free, we are also here. We are the proper response to evil, and we have been placed
here at this time for a reason. Call it fate, call it destiny, call it coincidence, call
it god, call it whatever you want, but the answer to evil is us.
"Out of the temporary evil we are now compelled to commit will emerge the
good of an unshakable rule, which will restore the regular course of the
machinery of the national life, brought to naught by liberalism. The result
justifies the means. Let us, however, in our plans, direct our attention not
so much to what is good and moral as to what is necessary and useful."
I should also point out those alledgedly behind The Protocols
are not the people the article is referring ie: those people are
typically found in any liberal establishment.
A good article, but it fails to deliver on these key aspects of
the matter:
Everyone knows from the Godfather and its genre
that there is a connection between loyalty, criminality and
power: Once you witness someone engaging in a criminal act, you
have leverage over them and that ensures their loyalty. But what
follows from that - which healthy sane minds have trouble
contemplating - is that the greater the criminality the greater
the leverage, and that because murderous paedophilia places a
person utterly beyond any prospect of redemption in decent
society, there in NO GREATER LOYALTY than those desperate to
avoid being outed. These must be the three corners of the
triangle - Power:Loyalty:Depravity through which the evil eys
views the world.
I always beleived in an Illuminati of sorts, however they
care to self identify. Until Pizzagate, I never understood that
murderous paedophilia, luciferian in style to accentuate their
own depravity, is THE KEY TO RULING THE EARTH
And another thing. If pizzagate is 'fake news' then it it
inconceivably elaborate - they'd have had to fake Epstein 2008,
Silsby 2010, Breitbart 2011, the 2013 portugese release of
podestaesque mccann suspects, as well as the current run of
wikileaks and Alefantis' instagram account - which had an avatar
photo of the 13 yr old lover of a roman emperor.
Is that much fake news a possibility? Or has this smoke been
blowing for years and we've all been too distracted to stop and
look for fire?
What floors me about the whole pizzagate thing is the evil staring us
right in the face. And then to realize that the libtards don't even
believe in evil at all, only "mental illness"!
Lesson #1: Do not waste your time figuring some things out. Things like evil
people are probably beyond a decent persons ability to understand and let's be
honest I don't want to feel any sympathy for them anyway.
Read a book years ago by Dr. Karl Menninger, a psychiatrist, titled
'Whatever happened to Sin?'
In it he talks of murder and that it is not a natural thing for man to
do,. However, when the burden of guilt is spread over many shoulders and
government condones the action, it becomes easier to bear.
When observing the results, such as soldiers returning from war, unstable
mentally, it is evident that evil has occured. It has been decades since I
read the book, so the words I wrote may not be verbatim.
Lurked ZH for years, just started reading the comments. This is worse than
Reddit's echo chamber. Bible quotes? 3 guys 1 hammer on liveleak has more
productive comments. Why not mention methods you've used to help people reach
their own conclusion about Pizzagate?
I had two slices of pizza for dinner. I had to try not to think of the poor
children walking innocently about the store who may at any moment fall victim
to a pedo. My gf said pizza places all over now need to keep a keen eye out for
the Posdesta Brothers and their Gang after all the stuff that has come out from
WikiLeaks and other sources about them.
The bible says God created evil and loosed it on us. The correct reading of
Genesis 4;1 is from the dead sea scrolls stating :
"And Adam knew his
wife Eve,
who was pregnant by Sammael [Satan]
, and she conceived and
bare Cain,
and he was like the heavenly beings, and not like earthly
beings,
and
she
said, I have gotten a man from
the angel of
the Lord."
So in Isaiah 45:7 we have this:
I form the light, and create darkness: I make peace, and create evil: I the
LORD do all these
things
.
So my research shows evil was "grafted" into humans through
the unholy alliance and 2 seedline of people resulted.
Good article but an exception: evil doesn't reside in all of us, sin does.
Evil is the expression of wanton and intentional deception, injury,
degradation, and destruction and rarely self-recognizes or admits to God as
supreme. It may be DNA encoded. Sociopathy certainly is.
But you're so
right about the organized nature of it all, and for thousands of years. The
newly formed EU didn't advertise itself as the New Babylonia for nothing on
publicty posters, heralding the coming age of one tongue out of many and
fashioning its parliament building after the Tower of Bablyon:
Secret societies are cannibalizing us, and themselves, but members won't
know till it's too late that they'll also be eaten fairly early on. Of all
"people", they should know those in the pyramid capstone won't have enough
elbow room if they let in every Tom, Dick and Harry Mason.
I am sympatico with Brandon. I have always had similar interests, about the
soul, about ethics, about human behavior.
The reality is that evil is extant
in other human beings. The thought that your property manager is going to piss
in your OJ or fuck their BFF in your bed is abhorrent to most people, but not
all. There was an article this week about a married couple that had concerns
about their rental unit manager. And what did they find? He was fucking his BFF
(yes, of course it was another dude) in their bed. The good news is they got it
on video and moved. The bad news? This kind of attitude is rampant. People
don't give a shit about other people. They think the rules don't apply to them.
That they are special. The result is renting from some asshat that fucks in
your bed or pisses in your OJ. Or parents that wonder why little Johnny or
little Janie never move out of the house and are stoned and play video games
all day.
Evil exists, in varying forms. Sadly too many people continue to make
excuses for not only bad behavior but evil behavior. I don't think that way and
I don't live my life that way but I am fully aware of all the morons stumbling
through the world that do.
I think people are misunderstanding the setup theory. Nobody believes, at
least I hope not, that all of this art and bizarre behavior on the part of
these freaks was staged for the purposes of taking down the last of our free
media, but rather, they just took advantage of a situation where they knew
people were making accusations that couldn't be sufficiently backed up or even
prosecuted, and yet caused proven or contrived damages to people. If this is
the case, their intention,
with the help of intelligence agencies
, is
to frame alt-media for starting vigilante violence and the destruction of
innocent people's lives through promoting defamation against others.
I have
no doubt that our entire system is riddled with pedophilia and likely much
worse. They have also been getting away with this forever, so when we go for
the takedown we better have our ducks in a row. To do otherwise will just give
these sickos complete immunity and more decades will pass with them continuing
to prey on our children. Not only is this at stake but the fate of all the
children of this nation is at stake if we lose our media. We are in very
dangerous and treacherous times. When you go toe to toe with the professional
trade crafters you have to play smart or they will have you every time.
Once people have had enough exposure to NPDs or psychopaths you will vibe
them after a while. I imagine this is likely the case for anyone who has
worked as a trader, finance, politics, big commodity booms are bad, etc. We
have all encountered them somewhere. People should pay attention to how they
feel (yeah I know, people hate that word) when they are around people. I have
to pretend that I don't notice them because it is so apparent to me and
immediately.
The last time I picked one out at work, a few months later the creepy
bastard walked past me at night during a -20 blizzard, with next to no
visibility, knowing that I had an hour drive, and told me in super spooky
whisper.. "Don't hit a deer on your way home now." I found out later that a
bunch of horses had mysteriously died in his care and a bunch of other things
that confirmed my suspicions. I had a long battle with him so I eventually got
to understand him pretty well. I didn't have to hear the guy state a single
sentence or watch any body language, I just knew immediately because I could
feel his malevolence and threat in my stomach where we have a large nerve
cluster. Pay attention and you will know. Also their eye contact is all wrong
and too intense.
Globalism, is designed to make you poorer slowly over decades by allowing wages
and conditions to be for ever slowly reduced under the guise of free market
competition to funnel wealth ever upwards to the 1%.
""The trouble is not so much that macroeconomists say things that are inconsistent with the facts."
-- that's a clear sign of a cult.
Notable quotes:
"... "The trouble is not so much that macroeconomists say things that are inconsistent with the facts. The real trouble is that other economists do not care that the macroeconomists do not care about the facts. An indifferent tolerance of obvious error is even more corrosive to science than committed advocacy of error." ..."
"... The obvious explanation is ideological. While Simon Wren Lewis cannot prove it was ideological, it is difficult to understand why one would choose to develop theories that ignore some of the existing evidence, in an area that lacks data. There is a reluctance among the majority of economists to admit that some among them may not be following the scientific method but may instead be making choices on ideological grounds. This is the essence of Romer's critique. ..."
"... ...it is all but indistinguishable from Milton Friedman's ideologically-driven description of the macroeconomy. In particular, Milton Friedman's prohibition of fiscal policy is retained with a caveat about the zero-lower bound in recent years. To argue otherwise is to deny Keynes' dictum that 'the ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood.' ..."
"... What I find most egregous in Neo-classicism, is it's failure to accept that people invented government to perform tasks they individually could not. ..."
"... Economics is a foul and pestilent ghetto, an intellectual dead-end akin to Ptolemaic astronomy. The priests will continue adding epicycles to epicycles until they are dragged screaming to the asylum. ..."
"... There is always some revered academic economist readily available to support virtually any political narrative imaginable, even if it's total rubbish. It is truly a "science" for all seasons fostered by reverend figures with authority earned by many years diligent practice in translating gibberish into runes of mathematical formulae. That's more dainty than poking about in sheep guts with a sharp stick, but of little more use in the real world which lies outside the ivied towers. ..."
"... Diligence blesses them with tenure followed by offers to serve private or public patrons perpetually engaged in rent-seeking. These made men (and women) are essentially set for life, regardless of whatever nonsense they may forever promote thereafter. A few are blessed by the good luck of a Nobel which guarantees a prosperous sinecure and unlimited opportunity to promote their own vacuous political narratives masqueraded as "science". ..."
"... This cult enjoys perpetual protection within public and private safe spaces created by their well-heeled paymasters. It is one of a number of deeply attached parasites which cannot be safely excised from the corrupt body of the host without killing it. ..."
"... I should add that neoclassical economics has damaged economics by excluding explicitly the government sector in their models. As a result, the impact of government on the macroeconomy has not been properly understood ..."
"... Do the economists he names really not understand the computer stat model they are using? Are they admitting to making up the fudge factors to make their 'data' fit their (wrong headed) totem pole, supply and demand? I mean, there it is in black and white, by the economists' own words, that their math is just flat out wrong. ..."
"... The economics I learned in the early 1960's seems to work as well now as it did back then. I was lucky enough to be so busy at work in the decades that followed, that I did not have a chance to keep up on the mis-education of the time. When I had the time to start paying more attention to the subject again, I couldn't understand what had happened to the knowledge that I had learned that seemed to explain all that was happening in the economy. ..."
"... The Neolib-Globalist Ministry Of Truth erased it. You must not have got the memo. ..."
"... It's 2016 and some Dismal Scientists are still debating whether "involuntary unemployment" exists. ..."
"... If anything, Philip Mirowski has persuasively argued that neoliberalism requires a powerful State. ..."
"... He has shown that the neoliberal thought collective theorized an elaborate political mobilization, and recognized early on that the creation of a new market is a political process requiring the intervention of organized power. The political will to impose a market required a strong state and elaborate regulation and also that the State would need to expand its economic and political power over time. ..."
"... The neoliberal market had to be imposed it did not just happen. A key issue for the future is defining the nature of the state–whether under neoliberalism or MMT or under Trump or Sanders, or left populist or right populist. ..."
"... Mankiw belongs in the non-ideological camp? I don't see how anybody with a brain could read any of his work past the first page and still hold that view. ..."
"... agreed, Mankiw is an intellectual clown and he has been mis-educating students for decades now. ..."
Romer
kicked off the debate in an essay, stating that for more than three decades, macroeconomics has
gone backwards. He finds that the treatment of identification now is no more credible than in the
early 1970s, but escapes challenge because it is so much more opaque. Macroeconomic theorists dismiss
mere facts by feigning an obtuse ignorance about such simple assertions as "tight monetary policy
can cause a recession." For Romer, the Nobel Prize-winning crop of macroeconomic theorists who transformed
the field in the late 1970s and 1980s - Robert Lucas, Edward Prescott and Thomas Sargent –
are the main people to be held responsible for this this development. Their models attribute fluctuations
in aggregate variables to imaginary causal forces that are not influenced by actions that any
person takes. Especially when it comes to monetary policy, the belief that it has no or little effect
on the economy is disturbing, or as Romer puts it:
"The trouble is not so much that macroeconomists say things that are inconsistent with the
facts. The real trouble is that other economists do not care that the macroeconomists do not care
about the facts. An indifferent tolerance of obvious error is even more corrosive to science than
committed advocacy of error."
... ... ...
Simon Wren-Lewis identifies yet another factor which lies at the heart of macroeconomic criticism:
ideology. As an example he quotes Real Business Cycle (RBC) research from a few decades ago. That
was only made possible because economists chose to ignore evidence about the nature of unemployment
in recessions. There is overwhelming evidence that employment declines in a recession because workers
are fired rather than choosing not to work, and that the resulting increase in unemployment is involuntary
(those fired would have rather retained their job at their previous wage). Both facts are incompatible
with the RBC model. Why would researchers try to build models of business cycles where these cycles
require no policy intervention, and ignore key evidence in doing so? The obvious explanation
is ideological. While Simon Wren Lewis cannot prove it was ideological, it is difficult to understand
why one would choose to develop theories that ignore some of the existing evidence, in an area that
lacks data. There is a reluctance among the majority of economists to admit that some among them
may not be following the scientific method but may instead be making choices on ideological grounds.
This is the essence of Romer's critique.
...it is all but indistinguishable from Milton Friedman's ideologically-driven description
of the macroeconomy. In particular, Milton Friedman's prohibition of fiscal policy is retained with
a caveat about the zero-lower bound in recent years. To argue otherwise is to deny Keynes' dictum
that 'the ideas of economists and political philosophers, both when they are right and when they
are wrong are more powerful than is commonly understood.'
PlutoniumKun, December 6, 2016 at 4:18 am
I can recall my very first lecture in Macroeconomics back in the mid 1980's when the Prof.
freely admitted that macro had very little real world validity as the models simply didn't match
the real world data. He advised us to focus on economic history if we wanted to understand how
the real world worked. That was the only useful thing I learned from three years studying the
subject.
Dr. George W. Oprisko, December 6, 2016 at 7:21 am
I cut y teeth on computer models of rainfall – streamflow relationships. We always started
with constants derived from experimental or theoretical bases
Recently I was asked to critique a paper written by a colleague which reported results of a
numeric model of plankton distribution in the Arabian Sea. In this paper his original constants
based on known relationships gave results which did not agree with reality, so instead of looking
for mistakes in his fundamentals, he massaged the constants until he got agreement. When I pointed
out that he neglected the Somali Current, he was livid. That is, instead of thanking me for pointing
out a glaring deficiency in his methodology, he chose to obfuscate.
I see the same thing prevalent in macro-economics, with the sole exception of Modern Monetary
Theory. I find MMT to be the only variant which concretely explains the real economy.
What I find most egregous in Neo-classicism, is it's failure to accept that people invented
government to perform tasks they individually could not.
iNDY
Jake, December 6, 2016 at 5:24 am
..and none of the economists were held responsible, refused tenure, tried in court or had
their nobel prizes taken away. They continued serving their pay masters or their ideologies and
nothing changed. Life went on, gradually becoming shittier, full of anxiety and ultimately meaningless.
But hey atleast the great information processor is satisfying your utility!
PlutoniumKun,
December 6, 2016 at 6:23 am
One Irish macro professor did quite well after the Irish economic crash (2008) informing everyone
about the correct policy approaches on various public media. His university department had one
of his peer reviewed papers online dating from 2005 which advocated the adoption of US style sub-prime
mortgages as a 'solution' to rising housing costs. Around 2010 the paper was quietly removed from
all servers. I regret not saving a copy so it could be linked to every time he popped up in public.
look for the doi and plug that in here (site does not work in Chrome) http://gen.lib.rus.ec/scimag/index.php
or here http://sci-hub.cc/
The 1st has an author search too, but it isn't as good, but it might work.
I Have Strange Dreams, December 6, 2016 at 5:43 am
Kill it with fire!
Economics is a foul and pestilent ghetto, an intellectual dead-end akin to Ptolemaic astronomy.
The priests will continue adding epicycles to epicycles until they are dragged screaming to the
asylum.
Burn the whole subject to the ground and sow the razed economics departments with salt. Require
economists to ring a bell when approaching the uninfected and cry "unclean! unclean!"
actually belly-laughed – 1st ever belly-laugh from an interweb comment – Bravisimmo!
H/e, can't agree with you re: economics. As a historical and social area of study, it is valid
in my book – even a necessity. Still, my eyes cross lately when I read the latest in economic
"theory" on any scale. Such a dreary and detached subject these days. Rootless and toothless.
Too bad.
Every time a bell rings, an angel gets his wings. That is a called a positive externality in
macroeconomics, and can therefore be defined in an equation. Which makes it thus so.
There is no chance of killing off this mystery cult as long as politicians rely on its ruminations
and incantations to help perpetuate them in office.
There is always some revered academic economist readily available to support virtually
any political narrative imaginable, even if it's total rubbish. It is truly a "science" for all
seasons fostered by reverend figures with authority earned by many years diligent practice in
translating gibberish into runes of mathematical formulae. That's more dainty than poking about
in sheep guts with a sharp stick, but of little more use in the real world which lies outside
the ivied towers.
Economists, like carny balloon sellers, are paid based on volume, not weight. Diligence
blesses them with tenure followed by offers to serve private or public patrons perpetually engaged
in rent-seeking. These made men (and women) are essentially set for life, regardless of whatever
nonsense they may forever promote thereafter. A few are blessed by the good luck of a Nobel which
guarantees a prosperous sinecure and unlimited opportunity to promote their own vacuous political
narratives masqueraded as "science".
This cult enjoys perpetual protection within public and private safe spaces created by
their well-heeled paymasters. It is one of a number of deeply attached parasites which cannot
be safely excised from the corrupt body of the host without killing it.
We live in a post-truth or post-fact world, where truth and fact do not matter.
But the fact is: Keynes has never gone away in the sense that governments have always been
trying to manage the economy with fiscal and monetary policies – which (to me) is the essence
of Keynes and macroeconomics. Most governments run budget deficits to stimulate demand. It is
merely cognitive dissonance of academics to think neoclassical economics only is mainstream and
solely responsible for the GFC, just because to them there is an apparent bias in research funding
at universities.
First, government is such a huge portion of the economy that its actions have huge influence
and therefore the impact has to be managed. Pretending you can have some type of neutral autopilot
is a false idea, but that is the bedrock of economic thinking, that economies have a natural propensity
to equilibrium and that equilibrium is full employment.
Second, it's not done much these days, but the best forms of intervention are ones that are
naturally countercyclical so you don't have politicians wrangling and have pork and election timing
and results and inertia get in the way.
I'm not defending neoclassical economics. In economics, the alternative to a wrong is another
wrong. Governments are politically compelled to intervene. But with the Keynesian economic fallacy,
their interventions make things worse in the long-run. Please visit my blog:
"The Battle of Bretton Woods" is very instructive. Start with two intellectuals (Keynes and
Harry Dexter White) who were big fans of Stalinist Russia's command economy ("I've seen the future and
it works!"). Last time I checked this kind of tomfoolery ("we will raise X number of cows because
we think we'll need leather for Y number of shoes") has been utterly discredited. Implement for
the global currency and trade systems. Fast forward to today where there are massive imbalances,
global currency wars, and a race to zero and beyond that has sucked all demand from the future
to the present and now the past. And the shining answer, the clarion rallying cry, is "we just
need more debt, and we need some new rugs to sweep all the bad debt under".
All while "macro-economists" propagate models that completely misunderstand how money is actually
created and distributed. All I can say is "Forward Soviet!".
Indeed. Gov't is the biggest business in town in every economy, everything else, even giant
corporations, are minuscule players in comparison. This is a large source of dynamical behavior,
the swings and re-balancing as the State throw its weight around in the marketplace.
I should add that neoclassical economics has damaged economics by excluding explicitly
the government sector in their models. As a result, the impact of government on the macroeconomy
has not been properly understood. The empirical facts, without theories or equilibrium assumptions
etc., show the failure of government policy of demand stimulation:
http://www.asepp.com/fiscal-stimulus-of-consumption/
It seems to me that for something to be called "keynesian", it should also mean that the aim
of those policies was to help create robust private demand (though I doubt Keynes was as emotionally
handicapped as today's mainstream bean-counting theorists are, if only because gdp figures didn't
yet dominate macro thinking in the manner they do today, thanks to everyone having received "economics
education" in school); if not, it wolud more fairly be called Marxist, because he was the one
from whom Keynes (indirectly, as he refused to read Marx personally) pilfered his insights. What
matters is whether we've got 'socialism for the rich / incumbents / industrial complexes', or
"socialism" (well, social-democrat, liberal new-dealerism) for the "masses".
Well, I have to say this article reminds me too much of the DNC sole searching over why Hillary
didn't win. Just another room full of wantonly clueless people.
Does start out on a high note where Romer states the problem is economists don't care if they
are winging and slinging BS from their arses same as chimpanzees.
I guess the article coulda ended there. But no.
Noah Smith laments a shortage of macro data – so the who knows how many gigs at FRED are found
wanting and I guess the BLS, etc aren't up to snuff either. Or maybe Noah means they are fabricating
phoney data? Then Noah doubles down on the efficacy of interest rate policy – after 9 years in
the liquidity trap.
[Caution: The following is allegory – we are speaking of the high priestess here.]
We then are treated to JYell and her discovery of the buggy whip. She states there is current
research being done on buggy whips, and more research is necessary. She is able to use big words
to speak of these buggy whips. Some of these words are borrowed from real science – making this
more scientific. Like hysteresis – and even an example for lay-off people. It's possible you may
never work again and add to the long term employment rate! Yikes. Worse yet, their definition
of "long term" is longer than 6 months. After that, 7 months or retire at 30 is all the same to
them. "Heterogeneity" is another good one. For use in polite company. Has an Evil Twin named inequality
and a macro version called crony capitalism. JYell can keep the hits coming!
I'm tired of typing someone else can take up the rest of it.
The complaint about not enough data struck me too; actually economist have vasts amounts of
data to gain insights from and test hypothesis against because economies are well recorded human
endeavours, recorded in actual painful detail thanks to the inexhaustible efforts of statemen
and statewomen to know everything about the populations they control and harvest. Probably more
data-oriented lines of research would lead to progress in macro-economy as a scholarly discipline?
@Ruben – They want more data because the data that exists cannot be explained by their eloquent
mathematical theories, which are based on assumptions that are ridiculous on their face e.g.,
rational expectations and utility maximization. The hope is that additional data will fit the
theories better allowing them to remain comfortably ensconced in their fantasy world of regressions
and p values.
Which is how we get adjustments to CPI based on the premise that CPI is overstating inflation.
Now the hip thing is that productivity is undermeasured because economists don't like what the
numbers are saying, so we can expect an upwards adjustment there as well.
Read Romer's article, twice. Will need a third try to fully get it, but as someone with a modest
background in engineering and engineering mathematics, I still can't quite believe what Romer
is saying. Do the economists he names really not understand the computer stat model they are
using? Are they admitting to making up the fudge factors to make their 'data' fit their (wrong
headed) totem pole, supply and demand? I mean, there it is in black and white, by the economists'
own words, that their math is just flat out wrong.
Now Romer is writing for the inside crowd, as an long time, connected insider himself, so don't
expect an easy read. But he writes quite clearly what is the problem with economics so the main
idea, that macro economics, in rejecting an early model of macro economics (Keynesian) because
said model was based on a few openly stated fudge factors, have spent the last 40 years building
models that are 1. full with even more fudge factors, 2. these fudge factors are never openly
stated, and 3. the new models have given truly disastrous results in the real world (also known
as the US economy, amoung others). Along the way, he names names and steps on some toes. Then
he finishes up with a full charge of how the 'dismal science' is a lying religion, nothing at
all like truth seeking science.
Okay, I'll quit here before I hurt myself. Let someone else slam the keys. (haha)
The economics I learned in the early 1960's seems to work as well now as it did back then.
I was lucky enough to be so busy at work in the decades that followed, that I did not have a chance
to keep up on the mis-education of the time. When I had the time to start paying more attention
to the subject again, I couldn't understand what had happened to the knowledge that I had learned
that seemed to explain all that was happening in the economy.
I was surprised to learn that Yellen had expressed any interest in the people permanently out
of the labor market. I thought all the discussions of interest rates focused almost exclusively
on what in my mind is the unemployment pseudo-rate, which completely ignores those people.
Regardless of which rate is considered, I have never been able to comprehend the mind that
can talk about acceptable levels of unemployment. Acceptable to whom? The people who lose their
homes, and sometimes their neighborhood networks when they have to move, and may with just a little
bad luck slide into still worse conditions? The communities that see more people becoming burglars,
muggers, bank robbers, drug dealers, and prostitutes because only the illegal economy has any
place for them? I have never seen a sustained or general effort to look at the economic consequences
of those events, much less an admission of the immorality of causing so much trouble. It seems
to me that a macroeconomics that divorces itself from those possibly micro concerns will be forever
irrelevant to good policy.
Way back prior to the great Permian-Triassic Extinction, I was fortunate enough to wander around
an Economics Department where I could encounter intellectual dead-ends like Keynes, Marx, Polanyi,
Kalecki, Veblen – all of whom prepared me to pump-gas at the local filling station oh wait!
Having somehow successfully survived the subsequent big-brain epoch, I settled comfortably into
making a modest annual donation to a scholarship fund for budding economists at the olde U. Then
it came to my attention that not only could one still obtain a BA in Economics, but the olde school
was also awarding two different Bachelor on Science degrees in Economics. Breathtaking! Economics,
an actual science! Like for example physics!
I am now in the reduced circumstance of donating only to my old high school in the doubtless vain
hope that the youngsters will study enough science to be able to shoot these aspiring BS cone-heads
to the moon.
It's 2016 and some Dismal Scientists are still debating whether "involuntary unemployment"
exists.
#FacePalm
Perhaps we should deploy them to that Carrier plant to investigate. So thankful for heterodox
voices:
Abba Lerner – Functional Finance
Hyman Minsky – Financial Instability
Wynne Godley – Sectoral Balances
Entire MMT School – Mosler, Wray, Kelton, Tcherneva et al
#ThereIsHope
Gee, why attack the one healthy sector of the economy, the Wealth Defence Industry?
(Why did so much of 'the social-democratic left' go along all this? I think John Rawls gave
them the excuse. He said inequality is great if the worse off are better off under this economic
system than they would be under a more equal one. The poor can therefore protest if they can show
that if we did things more equally they would be better off. The task of the economist today is
to ward this possibility off by ensuring that economic thought is utterly subservient to oligarchic
extraction. It does this by lying – Trickle Down! Rising Tide Lifts all Boats! This has worn out.
So next it does There Is No Alternative! – 'Those Jobs are Never Coming Back', 'Robots!' And finally,
to make really certain, it turns the whole discipline into toadying intellectual fantasy. Romer
homed in on the last.)
"Too much market and too little state invites a backlash."
If anything, Philip Mirowski has persuasively argued that neoliberalism requires a powerful
State.
He has shown that the neoliberal thought collective theorized an elaborate political mobilization,
and recognized early on that the creation of a new market is a political process requiring the
intervention of organized power. The political will to impose a market required a strong state
and elaborate regulation and also that the State would need to expand its economic and political
power over time.
The neoliberal market had to be imposed it did not just happen. A key issue for the future
is defining the nature of the state–whether under neoliberalism or MMT or under Trump or Sanders,
or left populist or right populist.
Mankiw belongs in the non-ideological camp? I don't see how anybody with a brain could
read any of his work past the first page and still hold that view.
I'm imagining them all as engineers on the deck of a half-submerged Titanic, debating about
whether the hull integrity model might perhaps not have been 100% accurate.
Ann Pettifor. give me ann pettifor always. she never puts the cart before the horse, only the
ideological neoliberals try to do that while keeping a straight face – they are quintessential
con artists if there ever were.
Excellent article, except it failed to point out that there are realistic and successful modeling
techniques, in addition to historical studies. These techniques are based on the nonlinear nature
of real world economies. Just use complexity and evolutionary techniques like agent based models
and nonlinear dynamical systems. Nothing new here – I still think that the limits-to-growth models
("system dynamics" = nonlinear dynamical systems) of the early 1970s represent the best mathematical
economics ever done. And the economists' agent based models are just a variation on cellular automata,
which have been used with notable success in other fields for many decades.
The problem is that economists either maintained a deliberate ignorance of such methods, or
have outright rejected them, like Nordhaus with system dynamics. In part this is because these
techniques involve a different mind set: they trade off simplistic models that are easy to understand,
but whose assumptions are demonstrably false, with complexity results that give much better real
world results but have more nuanced narratives.
Ann Pettifor is right about Brexit imo. The belief and the fact is that government is trying
a fast one on the people without being straightforward in its motives or intentions and a major
cause of the discontent and disillusionment seems to stem from the macro-economic error she highlights.
People don't want this mumbo-jumbo any more. The old professions – medicine, accountancy, law
– created jargons of specialist words and phrases (usually Latin) to make their speech and writings
incomprehensible to the hoi polloi. Then in recent decades all sorts of trades have adopted the
same jargon approach to mystifying their work. Enough already! Say what you mean, mean what you
say.
"Nick Bunker points out that in a recent speech, the Federal Reserve Chair Janet Yellen raised
important questions about macroeconomic research in the wake of the Great Recession."
Hint: Citing an ivory-tower twit like J-Yel as "raising important questions" is a huge bullshit
tell. While she was at it, did Janet raise any important questions as to why virtually every highly
credentialed macroeconomist on planet earth completely fail to foresee the global financial crisis
and the massive distortions, in very large part caused by the machinations of the high priests
of those "believers in the power of monetary policy", which portended its coming? But, on to the
bullshit:
"The first area of interest is the influence of aggregate demand on aggregate supply. Yellen
points to research that increasingly finds so-called hysteresis effects in the macroeconomy.
Hysteresis, a term borrowed from physics, is the idea that short-run shocks to the economy
can alter its long-term trend. One example of hysteresis is workers who lose jobs in recessions
and then are not drawn back into the labuor [sic] market but rather permanently locked out,
therefore increasing the long-term unemployment rate."
That's irreversibility, not hysteresis. The latter is a special case of the former, which the
chosen example does not illustrate. An example of hysteresis from my shower's temperature control:
I find the temp is a tad too high, and turn the control a bit toward the cold setting. But I overshoot
my target, and now it's too cold. Nudge back toward hot, but the somewhat-sticky mechanism again
overshoots and lands more or less on the starting "too hot" position. But the water is still too
cold, and I find I have to nudge even further toward hot to fix that. That's hysteresis. In the
context of the recession example, hysteresis would be e.g. if once the E/P ratio had recovered
to its pre-recession level but growth and its correlates remained weaker than expected, say due
to the "recovery jobs" being on average of poorer quality than those which were lost. Kinda like
the current 8-year-long "recovery", come to think of it! But I will admit that glossing over such
messy real-world details like "widespread worker immiseration" with hifalutin terminology-borrowed-form-actual-science
like "hysteresis:" is a great way to make oneself sound important, cloistered there in one's ivory
tower.
"Another open research question that Yellen raises is the influence of "heterogeneity" on aggregate
demand. Ignoring this heterogeneity in the housing market and its effects on economic inequality
seems like something modern macroeconomics needs to resolve."
Ah yes, "needs to resolve" - that implies lots of high-powered academic conferences and PhD
theses. And it's so wonderfully wishy-washy compared to "is something only a joke pretend-scientific
discipline would even need to consider stopping doing, because no self-respecting discipline would
have abandoned assumptions of homogeneity in roughly Year 2 of said discipline's evolutionary
history."
"Yellen raises other areas of inquiry in her speech, including better understanding how the
financial system is linked to the real economy and how the dynamics of inflation are determined.
Hey, when y'all finally "better understand" how this whole "financial system" thingy is linked
to the real economy, by all means do let us know, because it seems like such a linkage might have,
like, "important ramifications", or something. As to inflation, you mean actual inflation, or
the fake measures thereof the folks at the world's central banks make their stock in trade? You
know, for example, "in determining house price inflation we studiously ignore actual house prices
and instead use an artificial metric called Owner's Equivalent Rent, which itself studiously ignores
actual prices renters pay. Ain't it cool?"
Sorry if I sound grumpy, but this article is rather reminiscent of reading US Dem-party insiders
pretending to "soul search" in re. Election 2016. Let's see:
"Another open research question that Team HRC raises is the influence of "heterogeneity" on
voting preference. Ignoring this heterogeneity in the electoral trends and its effects on election
outcomes seems like something modern macroelectorodynamics needs to resolve."
...Well, solving the "Orange Is Not Free" dilemma may take time just as the solution to a global debt
crisis (now seven years running) may take even longer. It helps though to understand what the plan
is in order to invest accordingly.
While I and others have been critical of its destructive,
as opposed to constructive elements, it is the current global establishment's (including Trump's)
overall plan, and the establishment's emphatic "whatever it takes" monetary policies are the law
of our financial markets
.
It pays to not fight the tiger until it becomes obvious
that another plan will by necessity replace it.
That time is not now, but growing populism
and the increasing ineffectiveness of monetary policy suggest an eventual transition. But back to
the beginning which was sometime around 2009/2010:
How policymakers plan to solve a long-term global debt crisis
:
As in Japan, the Eurozone, the U.S., and the UK,
central banks bought/buy increasing
amounts of government debt (QE), then rebate all interest to their Treasuries and eventually extend
bond maturities
. Someday they might even "forgive" the debt.
Poof! It's gone.
Keep interest rates artificially low to
raise asset prices and bail out over-indebted
zombie corporations and individuals
. Extend and pretend.
Talk about "normalization" to maintain as steep a yield curve as possible to help
financial institutions with long-term liabilities
, but normalize very, very slowly using
financial repression.
Liberalize accounting rules to
make some potentially "bankrupt" insurance companies
and pension funds appear solvent
. Puerto Rico, anyone?
Downgrade or never mention the low interest rate burden on household savers.
Suggest
it is a problem that eventually will be resolved by the "market".
Begin to emphasize "fiscal" as opposed to "monetary" policy,
but never mention Keynes
or significant increases in government deficit spending.
Use the buzzwords of "infrastructure"
spending and "lower taxes".
Everyone wants those potholes fixed, don't they? Everyone
wants lower taxes too!
Promote capitalism – even though government controlled, near zero percent interest rates distort
markets and ultimately corrupt capitalism as we once understood it. Reintroduce Laffer Curve logic
to significantly lower corporate taxes. Foster hope.
Discourage acknowledgement of abysmal
productivity trends which are a critical test of an economic system's effectiveness.
If you are a policymaker or politician,
plan to eventually retire from the Fed/Congress/
Executive Wing and claim it'll be up to the Millennials now.
If you are an active as
opposed to passive investment manager, fight the developing trend of low fee ETFs and index funds.
But expect to retire with a nest egg.
That's the plan dear reader, and President-elect Trump's policies fit neatly into numbers
6, 7 and 8.
There's no doubt that many aspects of Trump's agenda are good for stocks and
bad for bonds near term – tax cuts, deregulation, fiscal stimulus, etc. But longer term, investors
must consider the negatives of Trump's anti-globalization ideas which may restrict trade and negatively
affect corporate profits.
In addition, the strong dollar weighs heavily on globalized corporations, especially tech stocks.
Unconstrained strategies should increase cash and cash alternatives (such as high probability equity
buy-out proposals). Bond durations and risk assets should be below benchmark targets.
On TV, "Orange Is the New Black" yet, in the markets, "
Red" (in some cases) may be the
new "Green" when applied to future investment returns. Be careful – stay out of jail.
Bill of Rights •Dec 6, 2016 9:50 AM
As in Japan, the Eurozone, the U.S., and the UK, central banks bought/buy increasing amounts of
government debt (QE), then rebate all interest to their Treasuries and eventually extend bond
maturities. Someday they might even "forgive" the debt. Poof! It's gone.
Load up folks its not gonna be paid back anyway...
One major problem is the disconnect between macroeconomics and the study of economic inequality.
Macroeconomics relies on national accounts data to study the growth of national income while the
study of inequality relies on individual or household income, survey and tax data. Ideally all
three sets of data should be consistent, but they are not. The total flow of income reported by
households in survey or tax data adds up to barely 60 percent of the national income recorded
in the national accounts, with this gap increasing over the past several decades. 1
This disconnect between the different data sets makes it hard to address important economic
and policy questions...
A second major issue is that economists and policymakers do not have a comprehensive view of
how government programs designed to ameliorate the worst effects of economic inequality actually
affect inequality. Americans share almost one-third of the fruits of economic output (via taxes
that help pay for an array of social services) through their federal, state, and local governments.
... Yet we do not have a clear measure of how the distribution of pre-tax income differs from
the distribution of income after taxes are levied and after government spending is taken into
account. This makes it hard to assess the extent to which governments make income growth more
equal. 2
In a recent paper , the three
authors of this issue brief attempt to create inequality statistics for the United States that
overcome the limitations of existing data by creating distributional national accounts. 3
We combine tax, survey, and national accounts data to build a new series on the distribution
of national income. ... Our distributional national accounts enable us to provide decompositions
of growth by income groups consistent with macroeconomic growth.
In our paper, we calculate the distribution of both pre-tax and post-tax income. The post-tax
series deducts all taxes and then adds back all transfers and public spending so that both pre-tax
and post-tax incomes add up to national income. This allows us to provide the first comprehensive
view of how government redistribution in the United States affects inequality. Our benchmark series
use the adult individual as the unit of observation and split income equally among spouses in
married couples. But we also produce series where each spouse is assigned their own labor income,
allowing us to study gender inequality and its impact on overall income inequality. In this short
summary, we would like to highlight three striking findings.
Our first finding-a surge in income inequality
First, our data show that the bottom half of the income distribution in the United States has
been completely shut off from economic growth since the 1970s. ...
It's a tale of two countries. For the 117 million U.S. adults in the bottom half of the income
distribution, growth has been non-existent for a generation while at the top of the ladder it
has been extraordinarily strong. And this stagnation of national income accruing at the bottom
is not due to population aging. ...
Our second finding-policies to ameliorate income inequality fall woefully short
Our second main finding is that government redistribution has offset only a small fraction
of the increase in pre-tax inequality. ...
Our third finding-comparing income inequality among countries is enlightening
Third, an advantage of our new series is that it allows us to directly compare income across
countries. Our long-term goal is to create distributional national accounts for as many countries
as possible; all the results will be made available online on the
World Wealth and Income Database . One example
of the value of these efforts is to compare the average bottom 50 percent pre-tax incomes in the
United States and France. 8 In sharp contrast with the United States, in France the
bottom 50 percent of real (inflation-adjusted) pre-tax incomes grew by 32 percent from 1980 to
2014, at approximately the same rate as national income per adult. While the bottom 50 percent
of incomes were 11 percent lower in France than in the United States in 1980, they are now
16 percent higher. (See Figure 3.) ... Since the welfare state is more generous in France, the
gap between the bottom 50 percent of income earners in France and the United States would be even
greater after taxes and transfers.
The diverging trends in the distribution of pre-tax income across France and the United States-two
advanced economies subject to the same forces of technological progress and globalization-show
that working-class incomes are not bound to stagnate in Western countries. In the United States,
the stagnation of bottom 50 percent of incomes and the upsurge in the top 1 percent coincided
with drastically reduced progressive taxation, widespread deregulation of industries and services,
particularly the financial services industry, weakened unions, and an eroding minimum wage.
Conclusion
Given the generation-long stagnation of the pre-tax incomes among the bottom 50 percent of
wage earners in the United States, we feel that the policy discussion at the federal, state, and
local levels should focus on how to equalize the distribution of human capital, financial capital,
and bargaining power rather than merely the redistribution of national income after taxes. Policies
that could raise the pre-tax incomes of the bottom 50 percent of income earners could include:
Improved education and access to skills, which may require major changes in the system
of education finance and admission
Reforms of labor market institutions to boost workers' bargaining power and including a
higher minimum wage
Corporate governance reforms and worker co-determination of the distribution of profits
Steeply progressive taxation that affects the determination of pay and salaries and the
pre-tax distribution of income, particularly at the top end
The different levels of government in the United States today obviously have the power to make
income distribution more unequal, but they also have the power to make economic growth in America
more equitable again. Potentially pro-growth economic policies should always be discussed alongside
their consequences for the distribution of national income and concrete ways to mitigate their
unequalizing effects. We hope that the distributional national accounts we present today can prove
to be useful for such policy evaluations. ...
Progressive states can push it on their own -- re-constituting union density locally. Just need
to add some dimension of enforcement to what the NLRB helplessly considers illegal -- actually
protect employees right to organize commercially.
"Alas, I do not trust Trump to push for this agenda. I hope my distrust is misplaced."
I would hold out no hope for this. Trumputin is not going to empower the people vs the oligarchs.
You can with high confidence expect he will do the opposite.
Are the folks in the bottom half who are getting screwed over. They blame the Mexicans and
Chinese for their fates. They made their choice, let them live with it.
Economic Pie Grows, but Half of U.S. Gets Smaller Slice
By PATRICIA COHEN
In 35 years, the U.S. economy has more than doubled, but new research shows close to zero growth
for working-age adults in the bottom 50 percent of income.
A Bigger Economic Pie, but a Smaller Slice
for Half of the U.S. http://nyti.ms/2hdlnuU
NYT - PATRICIA COHEN - December 6
Even with all the setbacks from recessions, burst bubbles and vanishing industries, the United
States has still pumped out breathtaking riches over the last three and half decades.
The real economy more than doubled in size; the government now uses a substantial share of
that bounty to hand over as much as $5 trillion to help working families, older people, disabled
and unemployed people pay for a home, visit a doctor and put their children through school.
Yet for half of all Americans, their share of the total economic pie has shrunk significantly,
new research has found.
This group - the approximately 117 million adults stuck on the lower half of the income ladder
- "has been completely shut off from economic growth since the 1970s," the team of economists
found. "Even after taxes and transfers, there has been close to zero growth for working-age adults
in the bottom 50 percent."
The new findings, by the economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman, provide
the most thoroughgoing analysis to date of how the income kitty - like paychecks, profit-sharing,
fringe benefits and food stamps - is divided among the American population.
Inequality has been a defining national issue for nearly a decade, thanks in part to groundbreaking
research done by Mr. Piketty at the Paris School of Economics and Mr. Saez at the University of
California, Berkeley.
But now a new administration in Washington is promising to reshape the government's role in
curbing the intense concentration of wealth at the top and improving the fortunes of those left
behind.
During his tenure in the White House, President Obama pushed to address income stagnation by
shifting more of the tax burden from the middle class to the rich and expanding public programs
like universal health insurance.
Both strategies are now targeted by President-elect Donald J. Trump and Republicans in Congress,
led by House Speaker Paul Ryan. Like many conservatives, Mr. Ryan argues that aid to the poor
is ultimately counterproductive because it undermines the incentive to work. Proposals put forward
by Republican leaders, though short on details, make clear that they want to roll back benefits
like Medicaid and the Affordable Care Act, which primarily help the poor, and direct the largest
tax cuts to the wealthiest Americans.
About 30 percent of the country's income is channeled to federal, state and local taxes. Apart
from military spending and performing basic public services, much of that is distributed back
to individuals through various programs and tax benefits in the form of Social Security checks,
Medicare benefits and veterans' benefits. But until now, no one has truly measured the full impact
that tax payments, government spending, noncash benefits and nontaxable income together have on
inequality.
Abundant documentation of income inequality already exists, but it has been challenged as incomplete.
Studies have excluded the impact of taxes and value of public benefits, skeptics complained, or
failed to account for the smaller size of households over time.
This latest project tries to address those earlier criticisms. What the trio of economists
found is that the spectacular growth in incomes at the peak has so outpaced the small increase
at the bottom from public programs intended to ameliorate poverty and inequality that the gap
between the wealthiest and everyone else has continued to widen.
Stagnant wages have sliced the share of income collected by the bottom half of the population
to 12.5 percent in 2014, from 20 percent of the total in 1980. Where did that money go? Essentially,
to the top 1 percent, whose share of the nation's income nearly doubled to more than 20 percent
during that same 34-year period.
Average incomes grew by 61 percent. But nearly $7 out of every additional $10 went to those
in the top tenth of the income scale.
Inequality has soared over that period. In 1980, the researchers found, someone in the top
1 percent earned on average $428,200 a year - about 27 times more than the typical person in the
bottom half, whose annual income equaled $16,000.
Today, half of American adults are still pretty much earning that same $16,000 on average -
in 1980 dollars, adjusted for inflation - while members of the top 1 percent now bring home $1,304,800
- 81 times as much.
That ratio, the authors point out, "is similar to the gap between the average income in the
United States and the average income in the world's poorest countries, the war-torn Democratic
Republic of Congo, Central African Republic and Burundi."
The growth of incomes has probably increased a bit since 2014, the latest year for which full
data exists, said Mr. Zucman, who, like Mr. Saez, also teaches at the University of California,
Berkeley. But it is "not enough to make any significant difference to our long-run finding, and
in particular, to affect the long-run stagnation of bottom-50-percent incomes." ...
NYT: Is there nothing to be done about galloping inequality?
Last year the typical American family experienced the fastest income gains since the government
started measuring them in the 1960s. But the top 1 percent did even better, raising their share
of income higher than it was when President Obama took office.
Mr. Obama has led the most progressive administration since Lyndon B. Johnson's half a century
ago, raising taxes on the rich to expand the safety net for the less fortunate. Still, by the
White House's own account, eight years of trench warfare in Washington trimmed the top 1-percenters'
share, after taxes and transfers, to only 15.4 percent, from 16.6 percent of the nation's income.
It increased the slice going to the poorest fifth of families by 0.6 percentage point, to a grand
total of 4 percent.
The policies also helped push the Republican Party even further to the right, leading to the
Tea Party - whose rabid opposition to government redistribution still shakes American politics.
They did nothing to salve - and perhaps even added to - the stewing resentment of white working-class
Americans who feel left out of the nation's advancements, producing the electoral victory for
Donald J. Trump, who has proposed a tax plan that amounts to a lavish giveaway to the rich.
The point is not that President Obama should have done better. He probably did the best he
could under the circumstances. The point is that delivering deep and lasting reductions in inequality
may be impossible absent catastrophic events beyond anything any of us would wish for.
History - from Ancient Rome through the Gilded Age; from the Russian Revolution to the Great
Compression of incomes across the West in the middle of the 20th century - suggests that reversing
the trend toward greater concentrations of income, in the United States and across the world,
might be, in fact, nearly impossible.
That's the bleak argument of Walter Scheidel, a professor of history at Stanford, whose new
book, "The Great Leveler" (Princeton University Press), is due out next month. He goes so far
as to state that "only all-out thermonuclear war might fundamentally reset the existing distribution
of resources." If history is anything to go by, he writes, "peaceful policy reform may well prove
unequal to the growing challenges ahead."
Professor Scheidel does not offer a grand unified theory of inequality. But scouring through
the historical record, he detects a pattern: From the Stone Age to the present, ever since humankind
produced a surplus to hoard, economic development has almost always led to greater inequality.
There is one big thing with the power to stop this dynamic, but it's not pretty: violence. ...
Hmmm. At some point, the powers that
be may want to organize a gigantic
apocalyptical world-wide conflict
that does NOT go nuclear because
that would be Really Excessive.
After his success in the Red- White civil war, Lenin began the destruction of the hereditary rich
and the educated professional classes in the Soviet Union. Executions were common as were slower
deaths in work camps ridden with lice and typhus. He had to cut back on the pace of destruction
after a few years because he found he could not run the country without technical experts and
so some of the engineers, doctors, professors, etc were allowed to live out their days and care
for some of their impoverished relatives. A book on the subject, "Former People" gives details
of the methods used for selecting and liquidating the pre-revolutionary Elite. Not for the squeamish.
Distributional National Accounts: Methods and Estimates for the United States
By Thomas Piketty, Emmanuel Saez, and Gabriel Zucman
Abstract
This paper combines tax, survey, and national accounts data to estimate the distribution of
national income in the United States since 1913. Our distributional national accounts capture
100% of national income, allowing us to compute growth rates for each quantile of the income distribution
consistent with macroeconomic growth. We estimate the distribution of both pre-tax and post-tax
income, making it possible to provide a comprehensive view of how government redistribution affects
inequality. Average pre-tax national income per adult has increased 60% since 1980, but we find
that it has stagnated for the bottom 50% of the distribution at about $16,000 a year. The pre-tax
income of the middle class- adults between the median and the 90th percentile-has grown 40% since
1980, faster than what tax and survey data suggest, due in particular to the rise of tax-exempt
fringe benefits. Income has boomed at the top: in 1980, top 1% adults earned on average 27 times
more than bottom 50% adults, while they earn 81 times more today. The upsurge of top incomes was
first a labor income phenomenon but has mostly been a capital income phenomenon since 2000. The
government has offset only a small fraction of the increase in inequality. The reduction of the
gender gap in earnings has mitigated the increase in inequality among adults. The share of women,
however, falls steeply as one moves up the labor income distribution, and is only 11% in the top
0.1% today.
Distributional National Accounts: Methods and Estimates for the United States
By Thomas Piketty, Emmanuel Saez, and Gabriel Zucman
Conclusion
This paper has combined tax, survey, and national accounts data to build series on the distribution
of total National Income in the United States since 1913. Our "Distributional National Accounts"
estimates capture 100% of National Income and hence provide decompositions of growth by income
groups consistent with macroeconomic economic growth. We compute both pre-tax and post-tax series.
Post-tax series deduct all taxes and add back all transfers and public spending so that they also
aggregate to total National Income. We find an overall U-shape for pre-tax and post-tax income
concentration over the century. The surge in income concentration since the 1970s was first a
labor income phenomenon but has been mostly a capital income phenomenon since 2000. Since 1980,
growth in real incomes for the bottom 90% adults has been only about half of the national average
on pre-tax basis and about two-thirds on a post-tax basis. Median pre-tax incomes have hardly
grown since 1980. The reduction of the gender gap in earnings has played an important role in
mitigating the increase in inequality among adults since the late 1960s but the gender gap is
far from being closed especially at the upper earnings end. Tax progressivity at the top has declined
since the 1960s but the generosity of transfers at the bottom has increased hereby mitigating
the dramatic worsening in inequality.
Our objective is to extend the methods developed in this paper to as many countries as possible
in the coming years. The ultimate goal is to be able to compare inequality across countries and
over time rigorously. Just like we use GDP or national income to compare the macroeconomic performance
of countries today, so could distributional national accounts be used to compare inequality tomorrow.
We also hope that our work can contribute to foster international collaborations between academics
and statistical institutes in order to produce more and more consistent and systematic "Distributional
national accounts." The same methodology is currently being applied and extended to more countries.
"Given the generation-long stagnation of the pre-tax incomes among the bottom 50 percent of wage
earners in the United States, we feel that the policy discussion at the federal, state, and local
levels should focus on how to equalize the distribution of human capital, financial capital, and
bargaining power rather than merely the redistribution of national income after taxes."
Krugman:
"So what would a political manifesto aimed at winning over these voters look like? You could
promise to make their lives better in ways that don't involve bringing back the old plants and
mines - which, you know, Obama did with health reform and Hillary would have done with family
policies and more. But that apparently isn't an acceptable answer."
Chris Dillow:
"I have a slightly different beef. It's that this form of centrism offers too etiolated a vision
of equality. Inequality isn't simply a matter of pay packets but of power too. Centrism fails
to tackle the latter. This is a big failing not least because policies to increase productivity
might require greater equality of power in the workplace – something which technocratic centrism
has long ignored."
It's really easy to say we should "equalize" before tax outcomes, but notably, the authors don't
even attempt to say with specificity how to do that.
Not that it isn't a worthwhile endeavor, but when everyone saying we should do it fails to
say how to do it, it shows there are neither obvious answers nor long hanging fruit.
It should be noted though that in addition to after tax stuff like Obamacare and family support
policies, mainstream Dems like Obama and Clinton also support education at all levels and ages
and working bargaining through a friendly NLRB, which fall right into the categories the paper
authors specified.
One idea is to counter monopsony power in the labor market by increasing wage floors. But when
I suggest this - baby poor PeterK gets confused (he has no idea what we are talking about as usual)
so he gets all MAD.
"You could promise to make their lives better in ways ... which, you know, Obama did with health
reform and Hillary would have done with family policies and more."
Gotta love that "and more."
Boosting the safety net a tiny little bit does help with bargaining power but not much.
Democrats have to be much more bold and explicit - like Bernie Sanders was - or Trump is just
going to win again in 2020.
It's not enough for Democrats to just be better than Republicans (even as Obama pushes the
TPP). That's a very low bar.
ACA and Hillary's family support policies were huge.
Calling those "a little bit" shows you're one of those faux progressives who wants a "revolution"
but really doesn't appreciate how actual government policies affect actual working peoples' lives.
"Given the generation-long stagnation of the pre-tax incomes among the bottom 50 percent of wage
earners in the United States, we feel that the policy discussion at the federal, state, and local
levels should focus on how to equalize the distribution of human capital, financial capital, and
bargaining power rather than merely the redistribution of national income after taxes."
People have no right complain! They're just being racist and nostalgic for old days of white
male hetero Christian privilege.
EMichael wants to purge all of the Bernie Sanders voters who voted for Hillary in the general.
He equates them with Susan Sarandon and Jill Stein, since they didn't like Hillary.
When EMichael would defend centrist Bill Clinton and Obama's etiolated record of progressivism,
he'd argue that FDR and LBJ had large marjorities of Democrats.
Yeah but back then FDR and LBJ had to work with and compromise with racist Democrats from the
South in Congress.
That's why they New Deal and War on Poverty was imperfect but it was a lot better than what
Bill Clinton or Obama left behind.
" coincided with drastically reduced progressive taxation, widespread deregulation of industries
and services, particularly the financial services industry, weakened unions, and an eroding minimum
wage "
"weakened unions?"
Read disappeared unions. 6% union density in private industry is analogous to 20/10 blood pressure
-- it starves every other healthy economic and political process.
Re-constitute union density and unions will be your social cop on every corner -- goodbye "reduced
progressive tax, dereged industries and services espec' financial and the eroded minimum wage."
****************************
Just happened to post this somewhere else today -- talk about eroded!!!!!!!!!!!!
dbl-indexed is for inflation and per capita income growth -- 2013 dollars:
If we could have foretold to Americans of 1968 that by early 2007 the minimum wage would have
dropped almost in half in real terms (instead of almost tripling in real terms to keep up with
national productivity gains) -- what could they have possibly guessed: a comet strike, a limited
nuclear exchange, multiple world plagues?
Decomposed data is tremendously valuable, and making it publicly available for many countries
is a huge service.
I will again note that this piece falls into the category of diagnosing-but-not-proposing-anything-specific-to-address-the-problem,
from which we are seeing many pieces of commentary these days, but I think it's a useful part
of the process to collectively go through this realization phase.
But these authors take a good half-step forward in proposing a useful framework for the *types*
of policies that would be helpful. And it's a very good framework (I say with bias, because it's
the same one i've long had). That's also worth something, in addition to the invaluable contribution
of data.
Having real world data that would illuminate progressive issues is indeed a useful contribution.
But those faux progressives would just call our praise for this hard yet important work centrist
neoliberal elitism. Yes - they love their pointless labels as it makes actual analysis so obsolete.
How about "CAPS" on all top federal positions- presidents, vice-presidents,cabinet members, senators,
representatives. There needs to be Federal and STATE "CAPS" established across the US. "CAPS"
on University president wages, University coaches wages, etc. etc. THEN, minimize all the pensions
that the present 5 ex-Presidents are still getting, security guards, upkeep and expense on homes
etc. etc. The US citizens are really being forced to support a closed ARISTOCRACY. Just start
a list of all the extra-perks that the ARISTOCRACY are receiving. Some are receiving benefits
to sons, daughter, cousins, close relatives etc. etc. Just how much $$$ is given to 20 year-olds
that haven't worked except through patronage positions, because of "cronies" giving them a job
because of immediate family connections. The mess of political patronage on the Federal and State
levels need to be discussed and dissected. If Us taxpayers had to bail out private investors,
insurance companies and hedge-funds because of the TBTF fiasco, then let these companies that
were bailed out come to the focus on just how much churning, and bad investment advise occurred
that enabled the rape WORKERS in civil-service jobs across the US. Come on MSM and MSE start revealing
the behind-the-scenes patronage that has sucked the $$ from the general public. The $$$ was sucked
into the DC swamp by the Left, the Right, and the In-Betweeners that hide beyond the snow-job
propaganda messages to the GP.
llisa2u2 : , -1
One sentence should include the words:.... the rape of WORKERS PENSIONS.......
Just side note, the old European guilds, and unions KNEW what they were doing in their organizational
structures and why. The majority of US workers today don't have a clue. Too many blue collar and
white collar workers have been suckered by the New Boss, who's exactly the same as the Old Boss,
if not worse!
This is a very weak article from a prominent paleoconservative, but it is instructive what a mess he has in his head as for the
nature of Trump phenomenon. We should probably consider the tern "New Class" that neocons invented as synonym for "neoliberals". If
so, why the author is afraid to use the term? Does he really so poorly educated not to understand the nature of this neoliberal revolution
and its implications? Looks like he never read "Quite coup"
That probably reflects the crisis of pealeoconservatism itself.
Notable quotes:
"... What do these insurgents have in common? All have called into question the interventionist consensus in foreign policy. All have opposed large-scale free-trade agreements. ..."
"... the establishment in both parties almost uniformly favors one approach to war, trade, and immigration, while outsider candidates as dissimilar as Buchanan, Nader, Paul, and Trump, and to a lesser extent Sanders, depart from the consensus. ..."
"... The insurgents clearly do not represent a single class: they appeal to eclectic interests and groups. The foe they have all faced down, however-the bipartisan establishment-does resemble a class in its striking unity of outlook and interest. So what is this class, effectively the ruling class of the country? ..."
"... The archetypal model of class conflict, the one associated with Karl Marx, pits capitalists against workers-or, at an earlier stage, capitalists against the landed nobility. The capitalists' victory over the nobility was inevitable, and so too, Marx believed, was the coming triumph of the workers over the capitalists. ..."
"... The Soviet Union had never been a workers' state at all, they argued, but was run by a class of apparatchiks such as Marx had never imagined. ..."
"... Burnham recognized affinities between the Soviet mode of organization-in which much real power lay in the hands of the commissars who controlled industry and the bureaucratic organs of the state-and the corporatism that characterized fascist states. Even the U.S., under the New Deal and with ongoing changes to the balance between ownership and management in the private sector, seemed to be moving in the same direction. ..."
"... concept popularized by neoconservatives in the following decade: the "New Class." ..."
"... It consists of a goodly proportion of those college-educated people whose skills and vocations proliferate in a 'post-industrial society' (to use Daniel Bell's convenient term). We are talking about scientists, teachers, and educational administrators, journalists and others in the communication industries, psychologists, social workers, those lawyers and doctors who make their careers in the expanding public sector, city planners, the staffs of the larger foundations, the upper levels of the government bureaucracy, and so on. ..."
"... I have felt that this 'new class' is, so far, rather thin gruel. Intellectuals, verbalists, media types, etc. are conspicuous actors these days, certainly; they make a lot of noise, get a lot of attention, and some of them make a lot of money. But, after all, they are a harum-scarum crowd, and deflate even more quickly than they puff up. On TV they can out-talk any of the managers of ITT, GM, or IBM, or the administration-managers of the great government bureaus and agencies, but, honestly, you're not going to take that as a power test. Who hires and fires whom? ..."
"... Burnham had observed that the New Class did not have the means-either money or manpower-to wield power the way the managers or the capitalists of old did. It had to borrow power from other classes. Discovering where the New Class gets it is as easy as following the money, which leads straight to the finance sector-practically to the doorstep of Goldman Sachs. Jerry Rubin's journey from Yippie to yuppie was the paradigm of a generation. ..."
"... Yet the New Class as a whole is less like Carl Oglesby or Karl Hess than like Hillary Clinton, who arguably embodies it as perfectly as McNamara did the managerial class. ..."
"... Even the New Class's support for deregulation-to the advantage of its allies on Wall Street-was no sign of consistent commitment to free-market principles ..."
"... The individual-mandate feature of Obamacare and Romneycare is a prime example of New Class cronyism: government compels individuals to buy a supposedly private product or service. ..."
"... America's class war, like many others, is not in the end a contest between up and down. It's a fight between rival elites: in this case, between the declining managerial elite and the triumphant (for now) New Class and financial elites. ..."
"... Donald Trump is not of the managerial class himself. But by embracing managerial interests-industrial protection and, yes, "big government"-and combining them with nationalistic identity politics, he has built a force that has potential to threaten the bipartisan establishment, even if he goes down to defeat in November. ..."
"... The New Class, after all, lacks a popular base as well as money of its own, and just as it relies on Wall Street to underwrite its power, it depends on its competing brands of identity politics to co-opt popular support. ..."
"... Marx taught that you identify classes by their structural role in the system of production. I'm at a loss to see how either of the 'classes' you mention here relate to the system of production. ..."
"... [New] Class better describes the Never Trumpers. Mostly I have found them to be those involved in knowledge occupations (conservative think tanks, hedge fund managers, etc.) who have a pecuniary interest in maintaining the Global Economy as opposed to the Virtuous Intergenerational Economy that preceded. Many are dependent on funding sources for their livelihoods that are connected to the Globalized Economy and financial markets. ..."
"... "mobilize working-class voters against the establishment in both parties. " = workers of the world unite. ..."
"... Where the class conflict between the Working and Knowledge Classes begins is where the Knowledge Class almost unilaterally decided to shift to a global economy, at the expense of the Working Class, and to the self-benefit of the Knowledge Class. Those who designed the Global Economy like Larry Summers of Harvard did not invite private or public labor to help design the new Globalist Economy. The Working Class lost out big time in job losses and getting stuck with subprime home loans that busted their marriages and created bankruptcies and foreclosures. The Knowledge Class was mostly unscathed by this class-based economic divide. ..."
"... Trump's distinguishing ideology, which separates him from the current elite, is something he has summed up many times – nationalism vs. Globalism. ..."
"... The financial industry, the new tech giants, the health insurance industry are now almost indistinguishable from the government ruling elite. The old left–represented by Sanders–rails against this as big money coopting government, even while conservatives are exasperated by the unholy cabal of big business and big government in cohoots in the "progressive" remake of America. Both are right in a sense. ..."
"... The hyperconcentration of power in Washington and a few tributary locations like Wall Street and Silicon Valley, elite academia and the media–call that the New Class if you like–means that most of America–Main Street, the flyover country has been left behind. Trump instinctively – brilliantly in some ways – tapped into the resentment that this hyperconcentration of wealth and government power has led to. That is why it cuts across right and left. The elites want to characterize this resentment as backwards and "racist," but there is also something very American from Jefferson to Jackson to Teddy Roosevelt that revolts against being lectured to and controlled by their would-be "betters." ..."
"... The alienation of those left out is real and based on real erosion of the middle class and American dream under both parties' elites. The potentially revolutionary capabilities of a political movement that could unite right and left in restoring some equilibrium and opportunities to those left out is tremendous, but yet to be realized by either major party. The party that can harness these folks – who are after all the majority of Americans – will have a ruling coalition for decades. If neither party can productively harness this budding movement, we are headed for disarray, civil unrest, and potentially the dissolution of the USA. ..."
"... . And blacks who cleave to the democrats despite being sold down the tubes on issues, well, for whatever reason, they just have thinner skin and the mistaken idea that the democrats deliver – thanks to Pres. Johnson. But what Pres. Johnson delivered democrats made a mockery of immediately as they stripped it of its intent and used for their own liberal ends. ..."
"... Let's see if I can help Dreher clear up some confusion in his article. James Burnham's "Managerial Class" and the "New Class" are overlapping and not exclusive. By the Managerial Class Burnham meant both the executive and managers in the private sector and the Bureaucrats and functionaries in the public sector. ..."
"... The rise of managers was a "revolution" because of the rise of modernization which meant the increasing mechanization, industrialization, formalization and rationalization (efficiency) of society. Burnham's concern about the rise of the managerial revolution was misplaced; what he should have focused on was modernization. ..."
"... The old left–represented by Sanders–rails against this as big money coopting government, even while conservatives are exasperated by the unholy cabal of big business and big government in cohoots in the "progressive" remake of America ..."
"... . Some 3 – 5% of the population facing no real opposition has decided that that their private lives needed public endorsement and have proceeded to upend the entire social order - the game has shifted in ways I am not sure most of the public fully grasps or desires ..."
"... There has always been and will always be class conflict, even if it falls short of a war. Simply examining recent past circumstances, the wealthy class has been whooping up on all other classes. This is not to suggest any sort of remedy, but simply to observe that income disparity over the past 30 years has substantially benefitted on sector of class and political power remains in their hands today. To think that there will never be class conflict is to side with a Marxian fantasy of egalitarianism, which will never come to pass. Winners and losers may change positions, but the underlying conflict will always remain. ..."
"... State governments have been kowtowing to big business interests for a good long while. Nothing new under the sun there. Back in the 80s when GM was deciding where to site their factory for the new Saturn car line, they issued an edict stating they would only consider states that had mandatory seat belt use laws, and the states in the running fell all over each to enact those. ..."
"... People don't really care for the actions of the elite but they care for the consequences of these actions. During the 1960's, per capita GDP growth was around 3.5%. Today it stands at 0,49%. If you take into account inflation, it's negative. Add to this the skewed repartition of said growth and it's intuitive that many people feel the pain; whom doesn't move forward, goes backwards. ..."
"... People couldn't care for mass immigration, nation building or the emergence of China if their personal situation was not impacted. But now, they begin to feel the results of these actions. ..."
"... I have a simple philosophy regarding American politics that shows who is made of what, and we don't have to go through all the philosophizing in this article: Anyone who believes in same sex marriage has been brainwashed and is un-American and unreliable. Anyone who puts Israeli interests above America's is un-American. ..."
"... Re: Anyone who believes in same sex marriage has been brainwashed and is un-American and unreliable. Anyone who puts Israeli interests above America's is un-American. ..."
"... The first has nothing whatsoever to do with American citizenship. It's just a political issue– on which, yes, reasonable people can differ. However no American citizen should put the interests of any other country ahead of our own, except in a situation where the US was itself up to no good and deserved its comeuppance. And then the interest is not that of any particular nation, but of justice being done period. ..."
"... A lot of this "New Class" stuff is just confusing mis-mash of this and that theory. Basically, America changed when the US dollar replace gold as the medium of exchange in the world economy. Remember when we called it the PETRO-DOLLAR. As long as the Saudis only accepted the US dollar as the medium of exchange for oil, then the American government could export it's inflation and deficit spending. Budget deficits and trade deficits are intrinsically related. It allowed America to become a nation of consumers instead of a nation of producers. ..."
"... It's really a form of classic IMPERIALISM. To maintain this system, we've got the US military and we prop up the corrupt dictatorships in Saudi Arabia, Iraq, Libya ..."
"... Yeah, you can talk about the "new class", the corruption of the banking system by the idiotic "libertarian" or "free market utopianism" of the Gingrich Congress, the transformation of American corporations to international corporations, and on and on. But it's the US dollar as reserve currency that has allowed it all to happen. God help us, if it ends, we'll be crippled. ..."
"... The Clinton Class mocks The Country Class: Bill Clinton, "We all know how her opponent's done real well down in West Virginia and eastern Kentucky. Because the coal people don't like any of us anymore." "They blame the president when the sun doesn't come up in the morning now," ..."
"... That doesn't mean they actually support Hillary's policies and position. What do they really know about either? These demographics simply vote overwhelmingly Democrat no matter who is on the ticket. If Alfred E. Newman were the candidate, this particular data point would look just the same. ..."
"... "On the contrary, the New Class favors new kinds of crony finance capitalism, even as it opposes the protectionism that would benefit hard industry and managerial interests." This doesn't ring true. Hard industry, and the managers that run it had no problem with moving jobs and factories overseas in pursuit of cheaper labor. Plus, it solved their Union issues. I feel like the divide is between large corporations, with dilute ownership and professional managers who nominally serve the interests of stock fund managers, while greatly enriching themselves versus a multitude of smaller, locally owned businesses whose owners were also concerned with the health of the local communities in which they lived. ..."
"... The financial elites are a consequence of consolidation in the banking and finance industry, where we now have 4 or 5 large institutions versus a multitude of local and regional banks that were locally focused. ..."
Since the Cold War ended, U.S. politics has seen a series of insurgent candidacies. Pat Buchanan prefigured Trump in the Republican
contests of 1992 and 1996. Ralph Nader challenged the Clinton wing of the Democratic Party from the outside in 2000. Ron Paul vexed
establishment Republicans John McCain and Mitt Romney in 2008 and 2012. And this year, Trump was not the only candidate to confound
his party's elite: Bernie Sanders harried Hillary Clinton right up to the Democratic convention.
What do these insurgents have in common? All have called into question the interventionist consensus in foreign policy. All
have opposed large-scale free-trade agreements. (The libertarian Paul favors unilateral free trade: by his lights, treaties
like NAFTA and the Trans-Pacific Partnership are not free trade at all but international regulatory pacts.) And while no one would
mistake Ralph Nader's or Ron Paul's views on immigration for Pat Buchanan's or Donald Trump's, Nader and Paul have registered their
own dissents from the approach to immigration that prevails in Washington.
Sanders has been more in line with his party's orthodoxy on that issue. But that didn't save him from being attacked by Clinton
backers for having an insufficiently nonwhite base of support. Once again, what might have appeared to be a class conflict-in this
case between a democratic socialist and an elite liberal with ties to high finance-could be explained away as really about race.
Race, like religion, is a real factor in how people vote. Its relevance to elite politics, however, is less clear. Something else
has to account for why the establishment in both parties almost uniformly favors one approach to war, trade, and immigration,
while outsider candidates as dissimilar as Buchanan, Nader, Paul, and Trump, and to a lesser extent Sanders, depart from the consensus.
The insurgents clearly do not represent a single class: they appeal to eclectic interests and groups. The foe they have all
faced down, however-the bipartisan establishment-does resemble a class in its striking unity of outlook and interest. So what is
this class, effectively the ruling class of the country?
Some critics on the right have identified it with the "managerial" class described by James Burnham in his 1941 book The Managerial
Revolution . But it bears a stronger resemblance to what what others have called "the New Class." In fact, the interests of this
New Class of college-educated "verbalists" are antithetical to those of the industrial managers that Burnham described. Understanding
the relationship between these two often conflated concepts provides insight into politics today, which can be seen as a clash between
managerial and New Class elites.
♦♦♦
The archetypal model of class conflict, the one associated with Karl Marx, pits capitalists against workers-or, at an earlier
stage, capitalists against the landed nobility. The capitalists' victory over the nobility was inevitable, and so too, Marx believed,
was the coming triumph of the workers over the capitalists.
Over the next century, however, history did not follow the script. By 1992, the Soviet Union was gone, Communist China had embarked
on market reforms, and Western Europe was turning away from democratic socialism. There was no need to predict the future; mankind
had achieved its destiny, a universal order of [neo]liberal democracy. Marx had it backwards: capitalism was the end of history.
But was the truth as simple as that? Long before the collapse of the USSR, many former communists -- some of whom remained socialists,
while others joined the right-thought not. The Soviet Union had never been a workers' state at all, they argued, but was run
by a class of apparatchiks such as Marx had never imagined.
Among the first to advance this argument was James Burnham, a professor of philosophy at New York University who became a leading
Trotskyist thinker. As he broke with Trotsky and began moving toward the right, Burnham recognized affinities between the Soviet
mode of organization-in which much real power lay in the hands of the commissars who controlled industry and the bureaucratic organs
of the state-and the corporatism that characterized fascist states. Even the U.S., under the New Deal and with ongoing changes to
the balance between ownership and management in the private sector, seemed to be moving in the same direction.
Burnham called this the "managerial revolution." The managers of industry and technically trained government officials did not
own the means of production, like the capitalists of old. But they did control the means of production, thanks to their expertise
and administrative prowess.
The rise of this managerial class would have far-reaching consequences, he predicted. Burnham wrote in his 1943 book, The Machiavellians
: "that the managers may function, the economic and political structure must be modified, as it is now being modified, so as
to rest no longer on private ownership and small-scale nationalist sovereignty, but primarily upon state control of the economy,
and continental or vast regional world political organization." Burnham pointed to Nazi Germany, imperial Japan-which became a "continental"
power by annexing Korea and Manchuria-and the Soviet Union as examples.
The defeat of the Axis powers did not halt the progress of the managerial revolution. Far from it: not only did the Soviets retain
their form of managerialism, but the West increasingly adopted a managerial corporatism of its own, marked by cooperation between
big business and big government: high-tech industrial crony capitalism, of the sort that characterizes the military-industrial complex
to this day. (Not for nothing was Burnham a great advocate of America's developing a supersonic transport of its own to compete with
the French-British Concorde.)
America's managerial class was personified by Robert S. McNamara, the former Ford Motor Company executive who was secretary of
defense under John F. Kennedy and Lyndon Johnson. In a 1966 story for National Review , "Why Do They Hate Robert Strange McNamara?"
Burnham answered the question in class terms: "McNamara is attacked by the Left because the Left has a blanket hatred of the system
of business enterprise; he is criticized by the Right because the Right harks back, in nostalgia if not in practice, to outmoded
forms of business enterprise."
McNamara the managerial technocrat was too business-oriented for a left that still dreamed of bringing the workers to power. But
the modern form of industrial organization he represented was not traditionally capitalist enough for conservatives who were at heart
19th-century classical liberals.
National Review readers responded to Burnham's paean to McNamara with a mixture of incomprehension and indignation. It
was a sign that even readers familiar with Burnham-he appeared in every issue of the magazine-did not always follow what he was saying.
The popular right wanted concepts that were helpful in labeling enemies, and Burnham was confusing matters by talking about changes
in the organization of government and industry that did not line up with anyone's value judgements.
More polemically useful was a different concept popularized by neoconservatives in the following decade: the "New Class."
"This 'new class' is not easily defined but may be vaguely described," Irving Kristol wrote in a 1975 essay for the Wall
Street Journal :
It consists of a goodly proportion of those college-educated people whose skills and vocations proliferate in a 'post-industrial
society' (to use Daniel Bell's convenient term). We are talking about scientists, teachers, and educational administrators, journalists
and others in the communication industries, psychologists, social workers, those lawyers and doctors who make their careers in
the expanding public sector, city planners, the staffs of the larger foundations, the upper levels of the government bureaucracy,
and so on.
"Members of the new class do not 'control' the media," he continued, "they are the media-just as they are our educational
system, our public health and welfare system, and much else."
Burnham, writing in National Review in 1978, drew a sharp contrast between this concept and his own ideas:
I have felt that this 'new class' is, so far, rather thin gruel. Intellectuals, verbalists, media types, etc. are conspicuous
actors these days, certainly; they make a lot of noise, get a lot of attention, and some of them make a lot of money. But, after
all, they are a harum-scarum crowd, and deflate even more quickly than they puff up. On TV they can out-talk any of the managers
of ITT, GM, or IBM, or the administration-managers of the great government bureaus and agencies, but, honestly, you're not going
to take that as a power test. Who hires and fires whom?
Burnham suffered a stroke later that year. Although he lived until 1987, his career as a writer was over. His last years coincided
with another great transformation of business and government. It began in the Carter administration, with moves to deregulate transportation
and telecommunications. This partial unwinding of the managerial revolution accelerated under Ronald Reagan. Regulatory and welfare-state
reforms, even privatization of formerly nationalized industries, also took off in the UK and Western Europe. All this did not, however,
amount to a restoration of the old capitalism or anything resembling laissez-faire.
The "[neo]liberal democracy" that triumphed at "the end of history"-to use Francis Fukuyama's words-was not the managerial capitalism
of the mid-20th century, either. It was instead the New Class's form of capitalism, one that could be embraced by Bill Clinton and
Tony Blair as readily as by any Republican or Thatcherite.
Irving Kristol had already noted in the 1970s that "this new class is not merely liberal but truly 'libertarian' in its approach
to all areas of life-except economics. It celebrates individual liberty of speech and expression and action to an unprecedented degree,
so that at times it seems almost anarchistic in its conception of the good life."
He was right about the New Class's "anything goes" mentality, but he was only partly correct about its attitude toward economics.
The young elite tended to scorn the bourgeois character of the old capitalism, and to them managerial figures like McNamara were
evil incarnate. But they had to get by-and they aspired to rule.
Burnham had observed that the New Class did not have the means-either money or manpower-to wield power the way the managers
or the capitalists of old did. It had to borrow power from other classes. Discovering where the New Class gets it is as easy as following
the money, which leads straight to the finance sector-practically to the doorstep of Goldman Sachs. Jerry Rubin's journey from Yippie
to yuppie was the paradigm of a generation.
Part of the tale can be told in a favorable light. New Left activists like Carl Oglesby fought the spiritual aridity and murderous
militarism of what they called "corporate liberalism"-Burnham's managerialism-while sincere young libertarians attacked the regulatory
state and seeded technological entrepreneurship. Yet the New Class as a whole is less like Carl Oglesby or Karl Hess than like
Hillary Clinton, who arguably embodies it as perfectly as McNamara did the managerial class.
Even the New Class's support for deregulation-to the advantage of its allies on Wall Street-was no sign of consistent commitment
to free-market principles. On the contrary, the New Class favors new kinds of crony finance capitalism, even as it opposes the
protectionism that would benefit hard industry and managerial interests. The individual-mandate feature of Obamacare and Romneycare
is a prime example of New Class cronyism: government compels individuals to buy a supposedly private product or service.
The alliance between finance and the New Class accounts for the disposition of power in America today. The New Class has also
enlisted another invaluable ally: the managerial classes of East Asia. Trade with China-the modern managerial state par excellence-helps
keep American industry weak relative to finance and the service economy's verbalist-dominated sectors. America's class war, like
many others, is not in the end a contest between up and down. It's a fight between rival elites: in this case, between the declining
managerial elite and the triumphant (for now) New Class and financial elites.
The New Class plays a priestly role in its alliance with finance, absolving Wall Street for the sin of making money in exchange
for plenty of that money to keep the New Class in power. In command of foreign policy, the New Class gets to pursue humanitarian
ideological projects-to experiment on the world. It gets to evangelize by the sword. And with trade policy, it gets to suppress its
class rival, the managerial elite, at home. Through trade pacts and mass immigration the financial elite, meanwhile, gets to maximize
its returns without regard for borders or citizenship. The erosion of other nations' sovereignty that accompanies American hegemony
helps toward that end too-though our wars are more ideological than interest-driven.
♦♦♦
So we come to an historic moment. Instead of an election pitting another Bush against another Clinton, we have a race that poses
stark alternatives: a choice not only between candidates but between classes-not only between administrations but between regimes.
Donald Trump is not of the managerial class himself. But by embracing managerial interests-industrial protection and, yes,
"big government"-and combining them with nationalistic identity politics, he has built a force that has potential to threaten the
bipartisan establishment, even if he goes down to defeat in November.
The New Class, after all, lacks a popular base as well as money of its own, and just as it relies on Wall Street to underwrite
its power, it depends on its competing brands of identity politics to co-opt popular support. For the center-left establishment,
minority voters supply the electoral muscle. Religion and the culture war have served the same purpose for the establishment's center-right
faction. Trump showed that at least one of these sides could be beaten on its own turf-and it seems conceivable that if Bernie Sanders
had been black, he might have similarly beaten Clinton, without having to make concessions to New Class tastes.
The New Class establishment of both parties may be seriously misjudging what is happening here. Far from being the last gasp of
the demographically doomed-old, racially isolated white people, as Gallup's analysis says-Trump's insurgency may be the prototype
of an aggressive new politics, of either left or right, that could restore the managerial elite to power.
This is not something that conservatives-or libertarians who admire the old capitalism rather than New Class's simulacrum-might
welcome. But the only way that some entrenched policies may change is with a change of the class in power.
Daniel McCarthy is the editor of The American Conservative .
Excellent analysis. What is important about the Trump phenomenon is not every individual issue, it's the potentially revolutionary
nature of the phenomenon. The opposition gets this. That's why they are hysterical about Trump. The conservative box checkers
do not.
"Donald Trump is not of the managerial class himself. But by embracing managerial interests-industrial protection and, yes, "big
government"-and combining them with nationalistic identity politics, he has built a force that has potential to threaten the bipartisan
establishment, even if he goes down to defeat in November."
My question is, if Trump is not himself of the managerial class, in fact, could be considered one of the original new class
members, how would he govern? What explains his conversion from the new class to the managerial class; is he merely taking advantage
of an opportunity or is there some other explanation?
I'm genuinely confused by the role you ascribe to the 'managerial class' here. Going back to Berle and Means ('The Modern Corporation
and Private Property') the managerial class emerged when management was split from ownership in mid C20th capitalism. Managers
focused on growth, not profits for shareholders. The Shareholder revolution of the 1980s destroyed the managerial class, and destroyed
their unwieldy corporations.
You seem to be identifying the managerial class with a kind of cultural opposition to the values of [neo]liberal capitalism. And
instead of identifying the 'new class' with the new owner-managers of shareholder-driven firms, you identify them by their superficial
cultural effects.
This raises a deeper problem in how you talk about class in this piece. Marx taught that you identify classes by their
structural role in the system of production. I'm at a loss to see how either of the 'classes' you mention here relate to the system
of production. Does the 'new class' of journalists, academics, etc. actually own anything? If not, what is the point of ascribing
to them immense economic power?
I would agree that there is a new class of capitalists in America. But they are well known people like Sheldon Adelson, the Kochs,
Linda McMahon, the Waltons, Rick Scott the pharmaceutical entrepreneur, Mitt Romney, Mark Zuckerberg, and many many hedge fund
gazillionaires. These people represent the resurgence of a family-based, dynastic capitalism that is utterly different from the
managerial variety that prevailed in mid-century.
If there is a current competitor to international corporate capitalism, it is old-fashioned dynastic family capitalism. Not
Managerialism.
There is no "new class". That's simply a derogatory trope of the Right. The [neo]liberal elite– educated, cosmopolitan and possessed
of sufficient wealth to be influential in political affairs and claims to power grounded in moral stances– have a long pedigree
in both Western and non-Western lands. They were the Scribal Class in the ancient world, the Mandarins of China, and the Clergy
in the Middle Ages. This class for a time was eclipsed in the early modern period as first royal authority became dominant, followed
by the power of the Capitalist class (the latter has never really faded of course). But their reemergence in the late 20th century
is not a new or unique phenomenon.
In a year in which "trash Trump" and "trash Trump's supporters" are tricks-to-be-turned for more than 90% of mainstream journalists
and other media hacks, it's good to see Daniel McCarthy buck the "trash trend" and write a serious, honest analysis of the class
forces that are colliding during this election cycle.
Two thumbs way up for McCarthy, although his fine effort cannot save the reputation of those establishment whores who call
themselves journalists. Nothing can save them. They have earned the universality with which Americans hold them in contempt.
In 1976 when Gallup began asking about "the honesty and ethical standards" of various professions only 33% of Americans rated
journalists "very high or high."
By last December that "high or very high" rating for journalists had fallen to just 27%.
It is certain that by Election Day 2016 the American public's opinion of journalists will have fallen even further.
Most of your argument is confusing. The change I see is from a production economy to a finance economy. Wall Street rules, really.
Basically the stock market used to be a place where working folk invested their money for retirement, mostly through pensions
from unions and corporations. Now it's become a gambling casino, with the "house"-or the big banks-putting it's finger on the
roulette wheel. They changed the compensation package of CEO's, so they can rake in huge executive compensation–mostly through
stock options-to basically close down everything from manufacturing to customer service, and ship it off to contract manufacturers
and outside services in oligarchical countries like mainland China and India.
I don't know what exactly you mean about the "new class", basically its the finance industry against everyone else.
One thing you right-wingers always get wrong, is on Karl Marx he was really attacking the money-changers, the finance speculators,
the banks. Back in the day, so-called "capitalists" like Henry Ford or George Eastman or Thomas Edison always complained about
the access to financing through the big money finance capitalists.
Don't overlook the economic value of intellectual property rights (patents, in particular) in the economic equation.
A big chunk of the 21st century economy is generated due to the intellectual property developed and owned by the New Class
and its business enterprises.
The economic value of ideas and intellectual property rights is somewhat implied in McCarthy's explanation of the New Class,
but I didn't see an explicit mention (perhaps I overlooked it).
I think the consideration of intellectual property rights and the value generated by IP might help to clarify the economic
power of the New Class for those who feel the analysis isn't quite complete or on target.
I'm not saying that IP only provides value to the New Class. We can find examples of IP throughout the economy, at all levels.
It's just that the tech and financial sectors seem to focus more on (and benefit from) IP ownership, licensing, and the information
captured through use of digital technology.
"What do these insurgents have in common? All have called into question the interventionist consensus in foreign policy."
But today we have this: Trump pledges big US military
expansion . Trump doesn't appear to have any coherent policy, he just says whatever seems to be useful at that particular
moment.
[New] Class better describes the Never Trumpers. Mostly I have found them to be those involved in knowledge occupations (conservative
think tanks, hedge fund managers, etc.) who have a pecuniary interest in maintaining the Global Economy as opposed to the Virtuous
Intergenerational Economy that preceded. Many are dependent on funding sources for their livelihoods that are connected to the
Globalized Economy and financial markets.
Being white is not the defining characteristic of Trumpers because it if was then how come there are many white working class
voters for Hillary? The divide in the working class comes from being a member of a union or a member of the private non-unionized
working class.
Where the real class divide shows up is in those who are members of the Knowledge Class that made their living based on the
old Virtuous Economy where the elderly saved money in banks and the banks, in turn, lent that money out to young families to buy
houses, cars, and start businesses. The Virtuous Economy has been replaced by the Global Economy based on diverting money to the
stock market to fund global enterprises and prop up government pension funds.
The local bankers, realtors, private contractors, small savers and small business persons and others that depended on the Virtuous
Economy lost out to the global bankers, stock investors, pension fund managers, union contractors and intellectuals that propounded
rationales for the global economy as superior to the Virtuous Economy.
Where the class conflict between the Working and Knowledge Classes begins is where the Knowledge Class almost unilaterally
decided to shift to a global economy, at the expense of the Working Class, and to the self-benefit of the Knowledge Class. Those
who designed the Global Economy like Larry Summers of Harvard did not invite private or public labor to help design the new Globalist
Economy. The Working Class lost out big time in job losses and getting stuck with subprime home loans that busted their marriages
and created bankruptcies and foreclosures. The Knowledge Class was mostly unscathed by this class-based economic divide.
Beginning in the 50's and 60's, baby boomers were warned in school and cultural media that "a college diploma would become what
a high school diploma is today." An extraordinary cohort of Americans took this advice seriously, creating the smartest and most
successful generation in history. But millions did not heed that advice, cynically buoyed by Republicans who – knowing that college
educated people vote largely Democrat – launched a financial and cultural war on college education. The result is what you see
now: millions of people unprepared for modern employment; meanwhile we have to import millions of college-educated Asians and
Indians to do the work there aren't enough Americans to do.
Have to say, this seems like an attempt to put things into boxes that don't quite fit.
Trump's distinguishing ideology, which separates him from the current elite, is something he has summed up many times –
nationalism vs. Globalism.
The core of it is that the government no longer serves the people. In the United States, that is kind of a bad thing, you know?
Like the EU in the UK, the people, who fought very hard for self-government, are seeing it undermined by the erosion of the nation
state in favor of international beaurocracy run by elites and the well connected.
Both this article and many comments on it show considerable confusion, and ideological opinion all over the map. What is happening
I think is that the world is changing –due to globalism, technology, and the sheer huge numbers of people on the planet. As a
result some of the rigid trenches of thought as well as class alignments are breaking down.
In America we no longer have capitalism, of either the 19th century industrial or 20th century managerial varieties. Money
and big money is still important of course, but it is increasingly both aligned with and in turn controlled by the government.
The financial industry, the new tech giants, the health insurance industry are now almost indistinguishable from the government
ruling elite. The old left–represented by Sanders–rails against this as big money coopting government, even while conservatives
are exasperated by the unholy cabal of big business and big government in cohoots in the "progressive" remake of America. Both
are right in a sense.
The hyperconcentration of power in Washington and a few tributary locations like Wall Street and Silicon Valley, elite
academia and the media–call that the New Class if you like–means that most of America–Main Street, the flyover country has been
left behind. Trump instinctively – brilliantly in some ways – tapped into the resentment that this hyperconcentration of wealth
and government power has led to. That is why it cuts across right and left. The elites want to characterize this resentment as
backwards and "racist," but there is also something very American from Jefferson to Jackson to Teddy Roosevelt that revolts against
being lectured to and controlled by their would-be "betters."
The alienation of those left out is real and based on real erosion of the middle class and American dream under both parties'
elites. The potentially revolutionary capabilities of a political movement that could unite right and left in restoring some equilibrium
and opportunities to those left out is tremendous, but yet to be realized by either major party. The party that can harness these
folks – who are after all the majority of Americans – will have a ruling coalition for decades. If neither party can productively
harness this budding movement, we are headed for disarray, civil unrest, and potentially the dissolution of the USA.
I have one condition about which, Mr. Trump would lose my support - if he flinches on immigration, I will have to bow out.
I just don't buy the contentions about color here. He has made definitive moves to ensure that he intends to fight for US citizens
regardless of color. This nonsense about white racism, more bigotry in reality, doesn't pan out. The Republican party has been
comprised of mostly whites since forever and nearly all white sine the late 1960's. Anyone attempting to make hay out of what
has been the reality for than 40 years is really making the reverse pander. Of course most of those who have issues with blacks
and tend to be more expressive about it, are in the Republican party. But so what. Black Republicans would look at you askance,
should you attempt this FYI.
It's a so what. The reason you joining a party is not because the people in it like you, that is really beside the point. Both
Sec Rice and General Powell, are keenly aware of who's what it and that is the supposed educated elite. They are not members of
the party because it is composed of some pure untainted membership. But because they and many blacks align themselves with the
ideas of the party, or what the party used to believe, anyway.
It's the issues not their skin color that matters. And blacks who cleave to the democrats despite being sold down the tubes
on issues, well, for whatever reason, they just have thinner skin and the mistaken idea that the democrats deliver – thanks to
Pres. Johnson. But what Pres. Johnson delivered democrats made a mockery of immediately as they stripped it of its intent and
used for their own liberal ends.
I remain convinced that if blacks wanted progress all they need do is swamp the Republican party as constituents and confront
whatever they thought was nonsense as constituents as they move on policy issues. Goodness democrats have embraced the lighter
tones despite having most black support. That is why the democrats are importing so many from other state run countries. They
could ignore blacks altogether. Sen Barbara Jordan and her deep voiced rebuke would do them all some good.
Let's face it - we are not going to remove the deeply rooted impact of skin color, once part of the legal frame of the country
for a quarter of the nations populous. What Republicans should stop doing is pretending, that everything concerning skin color
is the figment of black imagination. I am not budging an inch on the Daughters of the American Revolution, a perfect example of
the kind of peculiar treatment of the majority, even to those who fought for Independence and their descendants.
________________
I think that there are thousands and thousands of educated (degreed)people who now realize what a mess the educational and
social services system has become because of our immigration policy. The impact on social services here in Ca is no joke. In the
face of mounting deficits, the laxity of Ca has now come back to haunt them. The pressure to increase taxes weighed against the
loss of manual or hard labor to immigrants legal and otherwise is unmistakable here. There's debate about rsstroom etiquette in
the midst of serious financial issues - that's a joke. So this idea of dismissing people with degrees as being opposed to Mr.
Trump is deeply overplayed and misunderstood. If there is a class war, it's not because of Mr. Trump, those decks were stacked
in his favor long before the election cycle.
--------
"But millions did not heed that advice, cynically buoyed by Republicans who–knowing that college educated people vote largely
Democrat–launched a financial and cultural war on college education. The result is what . . . employment; meanwhile we have to
import millions of college-educated Asians and Indians to do the work there aren't enough Americans to do."
Hmmmm,
Nope. Republicans are notorious for pushing education on everything and everybody. It's a signature of hard work, self reliance,
self motivation and responsibility. The shift that has been tragic is that conservatives and Republicans either by a shove or
by choice abandoned the fields by which we turn out most future generations - elementary, HS and college education. Especially
in HS, millions of students are fed a daily diet of liberal though unchecked by any opposing ideas. And that is become the staple
for college education - as it cannot be stated just how tragic this has become for the nation. There are lots of issues to moan
about concerning the Us, but there is far more to embrace or at the very least keep the moaning in its proper context. No, conservatives
and Republicans did engage in discouraging an education.
And there will always be a need for more people without degrees than with them. even people with degrees are now getting hit
even in the elite walls of WS finance. I think I posted an article by John Maulden about the growing tensions resulting fro the
shift in the way trading is conducting. I can build a computer from scratch, that's a technical skill, but the days of building
computers by hand went as fast it came. The accusation that the population should all be trained accountants, book keepers, managers,
data processors, programmers etc. Is nice, but hardly very realistic (despite my taking liberties with your exact phrasing). A
degree is not going to stop a company from selling and moving its production to China, Mexico or Vietnam - would that were true.
In fact, even high end degree positions are being outsourced, medicine, law, data processing, programming . . .
How about the changes in economy that have forced businesses to completely disappear. We will never know how many businesses
were lost in the 2007/2008 financial mess. Recovery doesn't exist until the country's growth is robust enough to put people back
to work full time in a manner that enables them to sustain themselves and family.
That income gap is real and its telling.
___________________
even if I bought the Karl Marx assessment. His solutions were anything but a limited assault on financial sector oligarchs
and wizards. And in practice it has been an unmitigated disaster with virtually not a single long term national benefit. It's
very nature has been destructive, not only to infrastructure, but literally the lifeblood of the people it was intended to rescue.
Let's see if I can help Dreher clear up some confusion in his article. James Burnham's "Managerial Class" and the "New Class"
are overlapping and not exclusive. By the Managerial Class Burnham meant both the executive and managers in the private sector
and the Bureaucrats and functionaries in the public sector.
There are two middle classes in the US: the old Business Class and the New Knowledge Class. A manager would be in the Business
Class and a Bureaucrat in the New Class.
The rise of managers was a "revolution" because of the rise of modernization which meant the increasing mechanization,
industrialization, formalization and rationalization (efficiency) of society. Burnham's concern about the rise of the managerial
revolution was misplaced; what he should have focused on was modernization.
The New Class were those in the mostly government and nonprofit sectors that depended on knowledge for their livelihood without
it being coupled to any physical labor: teachers, intellectuals, social workers and psychiatrists, lawyers, media types, hedge
fund managers, real estate appraisers, financial advisors, architects, engineers, etc. The New Knowledge Class has only risen
since the New Deal created a permanent white collar, non-business class.
The Working Class are those who are employed for wages in manual work in an industry producing something tangible (houses,
cars, computers, etc.). The Working Class can also have managers, sometimes called supervisors. And the Working Class is comprised
mainly of two groups: unionized workers and private sector non-unionized workers. When we talk about the Working Class we typically
are referring to the latter.
The Trumpsters should not be distinguished as being a racial group or class (white) because there are many white people who
support Clinton. About 95% of Blacks vote Democratic in the US. Nowhere near that ratio of Whites are supporting Trump. So Trumps'
support should not be stereotyped as White.
The number one concern to Trumpsters is that they reflect the previous intergenerational economy where the elderly lent money
to the young to buy homes, cars and start small businesses. The Global bankers have shifted money into the stock market because
0.25% per year interest rates in a bank isn't making any money at all when money inflation runs at 1% to 2% (theft). This has
been replaced by a Global Economy that depends on financial bubbles and arbitraging of funds.
"The old left–represented by Sanders–rails against this as big money coopting government, even while conservatives are exasperated
by the unholy cabal of big business and big government in cohoots in the "progressive" remake of America. Both are right
in a sense."
Why other couching this. Ten years ago if some Hollywood exec had said, no same sex marriage, no production company in your
town, the town would have shrugged. Today before shrugging, the city clerk is checking the account balance. When the governors
of Michigan, and Arizona bent down in me culpa's on related issue, because business interests piped in, it was an indication that
the game had seriously changed. Some 3 – 5% of the population facing no real opposition has decided that that their private
lives needed public endorsement and have proceeded to upend the entire social order - the game has shifted in ways I am not sure
most of the public fully grasps or desires.
Same sex weddings in US military chapels - the concept still turns my stomach. Advocates control the megaphones, I don't think
they control the minds of the public, despite having convinced a good many people that those who have chosen this expression are
under some manner of assault – that demands a legal change - intelligent well educated, supposedly astute minded people actually
believe it. Even the Republican nominee believes it.
I love Barbara Streisand, but if the election means she moves to Canada, well, so be it. Take your "drag queens" impersonators
wit you. I enjoy Mr. and Mrs Pitt, I think have a social moral core but really? with millions of kids future at stake, endorsing
a terminal dynamic as if it will save society's ills - Hollywood doesn't even pretend to behave royally much less embody the sensitivities
of the same.
There is a lot to challenge about supporting Mr. Trump. He did support killing children in the womb and that is tragic. Unless
he has stood before his maker and made this right, he will have to answer for that. But no more than a trove of Republicans who
supported killing children in the womb and then came to their senses. I guess of there is one thing he and I agree on, it's not
drinking.
As for big budget military, it seems a waste, but if we are going to waste money, better it be for our own citizens. His Achilles
heel here is his intentions as to ISIS/ISIL. I think it's the big drain getting ready to suck him into the abyss of intervention
creep.
Missile defense just doesn't work. The tests are rigged and as Israel discovered, it's a hit and miss game with low probability
of success, but it makes for great propaganda.
I am supposed to be outraged by a football player stance on abusive government. While the democratic nominee is turning over
every deck chair she find, leaving hundreds of thousands of children homeless - let me guess, on the bright side, George Clooney
cheers the prospect of more democratic voters.
If Mr. Trumps only achievements are building a wall, over hauling immigration policy and expanding the size of the military.
He will be well on his way to getting ranked one of the US most successful presidents.
I never understood why an analysis needs to lard in every conceivable historical reference and simply assume its relevance, when
there are so many non constant facts and circumstances. There has always been and will always be class conflict, even if it
falls short of a war. Simply examining recent past circumstances, the wealthy class has been whooping up on all other classes.
This is not to suggest any sort of remedy, but simply to observe that income disparity over the past 30 years has substantially
benefitted on sector of class and political power remains in their hands today. To think that there will never be class conflict
is to side with a Marxian fantasy of egalitarianism, which will never come to pass. Winners and losers may change positions, but
the underlying conflict will always remain.
State governments have been kowtowing to big business interests for a good long while. Nothing new under the sun there.
Back in the 80s when GM was deciding where to site their factory for the new Saturn car line, they issued an edict stating they
would only consider states that had mandatory seat belt use laws, and the states in the running fell all over each to enact those.
The split on Trump is first by race (obviously), then be gender (also somewhat obviously), and then by education. Even among
self-declared conservatives it's the college educated who tend to oppose him. This is a lot broader than simply losing some "new"
Knowledge Class, unless all college educated people are put in that grouping. In fact he is on track to lose among college educated
whites, something no GOP candidate has suffered since the days of FDR and WWII.
People don't really care for the actions of the elite but they care for the consequences of these actions. During the 1960's,
per capita GDP growth was around 3.5%. Today it stands at 0,49%. If you take into account inflation, it's negative. Add to this
the skewed repartition of said growth and it's intuitive that many people feel the pain; whom doesn't move forward, goes backwards.
People couldn't care for mass immigration, nation building or the emergence of China if their personal situation was not
impacted. But now, they begin to feel the results of these actions.
I have a simple philosophy regarding American politics that shows who is made of what, and we don't have to go through all
the philosophizing in this article: Anyone who believes in same sex marriage has been brainwashed and is un-American and unreliable.
Anyone who puts Israeli interests above America's is un-American.
EliteComic beat me to the punch. I was disappointed that Ross Perot, who won over 20% of the popular vote twice, and was briefly
in the lead in early 1992, wasn't mentioned in this article.
Re: Anyone who believes in same sex marriage has been brainwashed and is un-American and unreliable. Anyone who puts Israeli
interests above America's is un-American.
The first has nothing whatsoever to do with American citizenship. It's just a political issue– on which, yes, reasonable
people can differ. However no American citizen should put the interests of any other country ahead of our own, except in a situation
where the US was itself up to no good and deserved its comeuppance. And then the interest is not that of any particular nation,
but of justice being done period.
A lot of this "New Class" stuff is just confusing mis-mash of this and that theory. Basically, America changed when the US
dollar replace gold as the medium of exchange in the world economy. Remember when we called it the PETRO-DOLLAR. As long as the
Saudis only accepted the US dollar as the medium of exchange for oil, then the American government could export it's inflation
and deficit spending. Budget deficits and trade deficits are intrinsically related. It allowed America to become a nation of consumers
instead of a nation of producers.
Who really cares about the federal debt. REally? We can print dollars, exchange these worthless dollars with China for hard
goods, and then China lends the dollars back to us, to pay for our government. Get it?
It's really a form of classic IMPERIALISM. To maintain this system, we've got the US military and we prop up the corrupt
dictatorships in Saudi Arabia, Iraq, Libya
Yeah, you can talk about the "new class", the corruption of the banking system by the idiotic "libertarian" or "free market
utopianism" of the Gingrich Congress, the transformation of American corporations to international corporations, and on and on.
But it's the US dollar as reserve currency that has allowed it all to happen. God help us, if it ends, we'll be crippled.
And damn the utopianism of you "libertarians" you're worse then Marxists when it comes to ideology over reality.
"State governments have been kowtowing to big business interests for a good long while. Nothing new under the sun there. Back
in the 80s when GM was deciding where to site their factory for the new Saturn car line, they issued an edict stating they would
only consider states that had mandatory seat belt use laws, and the states in the running fell all over each to enact those."
Ah, not it's policy on some measure able effect. The seatbelt law was debate across the country. The data indicated that it
did in fact save lives. And it's impact was universal applicable to every man women or child that got into a vehicle.
That was not a private bedroom issue. Of course businesses have advocated policy. K street is not a K-street minus that reality.
But GM did not demand having relations in parked cars be legalized or else.
You are taking my apples and and calling them seatbelts - false comparison on multiple levels, all to get me to acknowledge
that businesses have influence. It what they have chosen to have influence on -
I do not think the issue of class is relevant here – whether it be new classes or old classes. There are essentially two classes
– those who win given whatever the current economic arrangements are or those who lose given those same arrangements. People who
think they are losing support Trump versus people who think they are winning support Clinton. The polls demonstrates this – Trump
supporters feel a great deal more anxiety about the future and are more inclined to think everything is falling apart whereas
Clinton supporters tend to see things as being okay and are optimistic about the future. The Vox work also shows this pervasive
sense that life will not be good for their children and grandchildren as a characteristic of Trump supporters.
The real shift I think is in the actual coalitions that are political parties. Both the GOP and the Dems have been coalitions
– political parties usually are. Primary areas of agreement with secondary areas of disagreement. Those coalitions no longer work.
The Dems can be seen as a coalition of the liberal knowledge types – who are winners in this economy and the worker types who
are often losers now in this economy. The GOP also is a coalition of globalist corporatist business types (winners) with workers
(losers) who they attracted in part because of culture wars and the Dixiecrats becoming GOPers. The needs of these two groups
in both parties no longer overlap. The crisis is more apparent in the GOP because well – Trump. If Sanders had won the nomination
for the Dems (and he got close) then their same crisis would be more apparent. The Dems can hold their creaky coalition together
because Trump went into the fevered swamps of the alt. right.
I think this is even more obvious in the UK where you have a Labor Party that allegedly represents the interests of working
people but includes the cosmopolitan knowledge types. The cosmopolitans are big on the usual identity politics, unlimited immigration
and staying in the EU. They benefit from the current economic arrangement. But the workers in the Labor party have been hammered
by the current economic arrangements and voted in droves to get out of the EU and limit immigration. It seems pretty obvious that
there is no longer a coalition to sustain the Labor Party. Same with Tories – some in the party love the EU,immigration, globalization
while others voted out of the EU, want immigration restricted and support localism. The crisis is about the inability of either
party to sustain its coalitions. Those in the Tory party who are leavers should be in a political party with the old Labor working
class while the Tory cosmopolitans should be in a party with the Labor cosmopolitans. The current coalitions not being in synch
is the political problem – not new classes etc.
Here in the US the southern Dixiecrats who went to the GOP and are losers in this economy might find a better coalition with
the black, Latino and white workers who are still in the Dem party. But as in the UK ideological culture wars have become more
prominent and hence the coalitions are no longer economically based. If people recognized that politics can only address the economic
issues and they aligned themselves accordingly – the membership of the parties would radically change.
The Clinton Class mocks The Country Class: Bill Clinton, "We all know how her opponent's done real well down in West Virginia
and eastern Kentucky. Because the coal people don't like any of us anymore." "They blame the president when the sun doesn't come
up in the morning now,"
"Trump's voters were most strongly characterized by their "racial isolation": they live in places with little ethnic diversity.
"
During the primaries whites in more diverse areas voted Trump. The only real exception was West Virginia. Utah, Wyoming, Iowa?
All voted for Cruz and "muh values".
In white enclaves like Paul Ryans district, which is 91%, whites are able to signal against white identity without having to
face the consequences.
"All three major African, Hispanic, & Asian-American overwhelming support HRC in the election."
That doesn't mean they actually support Hillary's policies and position. What do they really know about either? These demographics
simply vote overwhelmingly Democrat no matter who is on the ticket. If Alfred E. Newman were the candidate, this particular data
point would look just the same.
"On the contrary, the New Class favors new kinds of crony finance capitalism, even as it opposes the protectionism that would
benefit hard industry and managerial interests."
This doesn't ring true. Hard industry, and the managers that run it had no problem with moving jobs and factories overseas
in pursuit of cheaper labor. Plus, it solved their Union issues. I feel like the divide is between large corporations, with dilute
ownership and professional managers who nominally serve the interests of stock fund managers, while greatly enriching themselves
versus a multitude of smaller, locally owned businesses whose owners were also concerned with the health of the local communities
in which they lived.
The financial elites are a consequence of consolidation in the banking and finance industry, where we now have 4 or 5 large
institutions versus a multitude of local and regional banks that were locally focused.
"... Speaking to a local radio station before the joint rally, Farage urged Americans to "go out and fight" against Hillary Clinton. ..."
"... "I am going to say to people in this country that the circumstances, the similarities, the parallels between the people who voted Brexit and the people who could beat Clinton in a few weeks time here in America are uncanny," Farage told Super Talk Mississippi. "If they want things to change they have get up out of their chairs and go out and fight for it. It can happen. We've just proved it." ..."
"... It's not for me as a foreign politician to say who you should vote for ... All I will say is that if you vote for Hillary Clinton, then nothing will change. She represents the very politics that we've just broken through the Brexit vote in the United Kingdom. ..."
...the British politician, who was invited by Mississippi governor Phil Bryant, will draw parallels
between what he sees as the inspirational story of Brexit and Trump's campaign. Farage will describe
the Republican's campaign as a similar crusade by grassroots activists against "big banks and global
political insiders" and how those who feel disaffected and disenfranchised can become involved in
populist, rightwing politics. With Trump lagging in the polls, just as Brexit did prior to the vote
on the referendum, Farage will also hearten supporters by insisting that they can prove pundits and
oddsmakers wrong as well.
This message resonates with the Trump campaign's efforts to reach out to blue collar voters who
have become disillusioned with American politics, while also adding a unique flair to Trump's never
staid campaign rallies.
The event will mark the first meeting between Farage and Trump.
Arron Banks, the businessman who backed Leave.EU, the Brexit campaign group associated with the
UK Independence party (Ukip), tweeted that he would be meeting Trump over dinner and was looking
forward to Farage's speech.
The appointment last week of Stephen Bannon, former chairman of the Breitbart website, as
"CEO" of Trump's campaign has seen the example of the Brexit vote, which Breitbart enthusiastically
advocated, rise to the fore in Trump's campaign narrative.
Speaking to a local radio station before the joint rally, Farage urged Americans to "go out
and fight" against Hillary Clinton.
"I am going to say to people in this country that the circumstances, the similarities, the
parallels between the people who voted Brexit and the people who could beat Clinton in a few weeks
time here in America are uncanny," Farage told Super Talk Mississippi. "If they want things to change
they have get up out of their chairs and go out and fight for it. It can happen. We've just proved
it."
"I am being careful," he added when asked if he supported the controversial Republican nominee.
"It's not for me as a foreign politician to say who you should vote for ... All I will say is
that if you vote for Hillary Clinton, then nothing will change. She represents the very politics
that we've just broken through the Brexit vote in the United Kingdom."
"... As Mr. Buffet so keenly said it, There is a war going on, and we are winning. ..."
"... Just type `TPP editorial' into news.google.com and watch a toxic sludge of straw men, misdirection, and historical revisionism flow across your screen. And the `objective' straight news reporting is no better. ..."
"... "Why is it afraid of us?" Because we the people are perceived to be the enemy of America the Corporation. Whistleblowers have already stated that the NSA info is used to blackmail politicians and military leaders, provide corporate espionage to the highest payers and more devious machinations than the mind can grasp from behind a single computer. 9/11 was a coup – I say that because looking around the results tell me that. ..."
"... The fourth estate (the media) has been purchased outright by the second estate (the nobility). I guess you could call this an 'estate sale'. All power to the markets! ..."
Free Trade," the banner of Globalization, has not only wrecked the world's economy, it has left Western
Democracy in shambles. Europe edges ever closer to deflation. The Fed dare not increase interest
rates, now poised at barely above zero. As China's stock market threatened collapse, China poured
billions to prop it up. It's export machine is collapsing. Not once, but twice, it recently manipulated
its currency to makes its goods cheaper on the world market. What is happening?
The following two
graphs tell most of the story. First, an overview of Free Trade.
Capital fled from developed countries to undeveloped countries with slave-cheap labor, countries
with no environmental standards, countries with no support for collective bargaining. Corporations,
like Apple, set up shop in China and other undeveloped countries. Some, like China, manipulated its
currency to make exported goods to the West even cheaper. Some, like China, gave preferential tax
treatment to Western firm over indigenous firms. Economists cheered as corporate efficiency unsurprisingly
rose. U.S. citizens became mere consumers.
Thanks to Bill Clinton and the Financial Modernization Act, banks, now unconstrained, could peddle
rigged financial services, offer insurance on its own investment products–in short, banks were free
to play with everyone's money–and simply too big to fail. Credit was easy and breezy. If nasty Arabs
bombed the Trade Center, why the solution was simple: Go to the shopping mall–and buy. That remarkable
piece of advice is just what freedom has been all about.
Next: China's export machine sputters.
China's problem is that there are not enough orders to keep the export machine going. There comes
a time when industrialized nations simply run out of cash–I mean the little people run out of cash.
CEOs and those just below them–along with slick Wall Street gauchos–made bundles on Free Trade, corporate
capital that could set up shop in any impoverished nation in the world.. No worries about labor–dirt
cheap–or environmental regulations–just bring your gas masks. At some point the Western consumer
well was bound to run dry. Credit was exhausted; the little guy could not buy anymore. Free trade
was on its last legs.
So what did China do then? As its markets crashed, it tried to revive its export model, a model
based on foreign firms exporting cheap goods to the West. China lowered its exchange rates, not once
but twice. Then China tried to rescue the markets with cash infusion of billions. Still its market
continued to crash. Manufacturing plants had closed–thousands of them. Free Trade and Globalization
had run its course.
And what has the Fed been doing? Why quantitative easy–increase the money supply and lower short
term interest rates. Like China's latest currency manipulation, both were merely stop-gap measures.
No one, least of all Obama and his corporate advisors, was ready to address corporate outsourcing
that has cost millions of jobs. Prime the pump a little, but never address the real problem.
The WTO sets the groundwork for trade among its member states. That groundwork is deeply flawed.
Trade between impoverished third world countries and sophisticated first world economies is not merely
a matter of regulating "dumping"-not allowing one country to flood the market with cheap goods-nor
is it a matter of insuring that the each country does not favor its indigenous firms over foreign
firms. Comparable labor and environmental standards are necessary. Does anyone think that a first
world worker can compete with virtual slave labor? Does anyone think that a first world nation with
excellent environmental regulations can compete with a third world nation that refuses to protect
its environment?
Only lately has Apple even mentioned that it might clean up its mess in China. The Apple miracle
has been on the backs of the Chinese poor and abysmal environmental wreckage that is China.
The WTO allows three forms of inequities-all of which encourage outsourcing: labor arbitrage,
tax arbitrage, and environmental arbitrage. For a fuller explanation of these inequities and the
"race to the bottom," see
here.
Of course now we have the mother of all Free Trade deals –the Trans-Pacific Partnership (TPP)–
carefully wrapped in a black box so that none of us can see what finally is in store for us. Nothing
is ever "Free"–even trade. I suspect that China is becoming a bit too noxious and poisonous. It simply
has to deal with its massive environmental problems. Time to move the game to less despoiled and
maybe more impoverished countries. Meanwhile, newscasters are always careful to tout TPP.
Fast Tracking is a con man's game. Do it so fast that the marks never have a chance to watch their
wallets. In hiding negotiations from prying, public eyes, Obama, has given the con men a bigger edge:
A screen to hide the corporations making deals. Their interest is in profits, not in public good.
Consider the media. Our only defense is a strong independent media. At one time,
newsrooms were not required to be profitable. Reporting the news was considered a community service.
Corporate ownership provided the necessary funding for its newsrooms–and did not interfere.
But the 70′s and 80′s corporate ownership required its newsrooms to be profitable. Slowly but
surely, newsrooms focused on personality, entertainment, and wedge issues–always careful not to rock
the corporate boat, always careful not to tread on governmental policy. Whoever thought that one
major news service–Fox–would become a breeding ground for one particular party.
But consider CNN: It organizes endless GOP debates; then spends hours dissecting them. Create
the news; then sell it–and be sure to spin it in the direction you want.
Are matters of substance ever discussed? When has a serious foreign policy debate ever been allowed
occurred–without editorial interference from the media itself. When has trade and outsourcing been
seriously discussed–other than by peripheral news media?
Meanwhile, news media becomes more and more centralized. Murdoch now owns National Geographic!
Now, thanks to Bush and Obama, we have the chilling effect of the NSA. Just whom does the NSA
serve when it collects all of our digital information? Is it being used to ferret out the plans of
those exercising their right of dissent? Is it being used to increase the profits of favored corporations?
Why does it need all of your and my personal information–from bank accounts, to credit cards, to
travel plans, to friends with whom we chat .Why is it afraid of us?
jefemt, October 23, 2015 at 9:43 am
As Mr. Buffet so keenly said it, There is a war going on, and we are winning.
If 'they' are failing, I'd hate to see success!
Isn't it the un-collective WE who are failing?
failing to organize,
failing to come up with plausible, 90 degrees off present Lemming-to-Brink path alternative plans
and policies,
failing to agree on any of many plausible alternatives that might work
Divided- for now- hopefully not conquered ..
I gotta scoot and get back to Dancing with the Master Chefs
allan, October 23, 2015 at 10:03 am
Just type `TPP editorial' into news.google.com and watch a toxic sludge of straw men, misdirection,
and historical revisionism flow across your screen. And the `objective' straight news reporting
is no better.
Vatch, October 23, 2015 at 10:36 am
Don't just watch the toxic sludge; respond to it with a letter to the editor (LTE) of the offending
publication! For some of those toxic editorials, and contact information for LTEs, see:
A few of the editorials may now be obscured by paywalls or registration requirements, but most
should still be visible. Let them know that we see through their nonsense!
TedWa, October 23, 2015 at 10:38 am
"Why is it afraid of us?" Because we the people are perceived to be the enemy of America
the Corporation. Whistleblowers have already stated that the NSA info is used to blackmail politicians
and military leaders, provide corporate espionage to the highest payers and more devious machinations
than the mind can grasp from behind a single computer. 9/11 was a coup – I say that because looking
around the results tell me that.
TG, October 23, 2015 at 3:27 pm
The fourth estate (the media) has been purchased outright by the second estate (the nobility).
I guess you could call this an 'estate sale'. All power to the markets!
Pelham, October 23, 2015 at 8:32 pm
Even when newsrooms were more independent they probably would not, in general, have reported
on free trade with any degree of skepticism. The recent disappearance of the old firewall between
the news and corporate sides has made things worse, but at least since the "professionalization"
of newsrooms that began to really take hold in the '60s, journalists have tended to identify far
more with their sources in power than with their readers.
There have, of course, been notable exceptions. But even these sometimes serve more to obscure
the real day-to-day nature of journalism's fealty to the corporate world than to bring about any
significant change.
CHRIS HEDGES: We're going to be discussing a great Ponzi scheme that not only defines not only
the U.S. but the global economy, how we got there and where we're going. And with me to discuss this
issue is the economist Michael Hudson, author of
Killing
the Host: How Financial Parasites and Debt Destroy the Global Economy. A professor of economics
who worked for many years on Wall Street, where you don't succeed if you don't grasp Marx's dictum
that capitalism is about exploitation. And he is also, I should mention, the godson of Leon Trotsky.
I want to open this discussion by reading a passage from your book, which I admire very much,
which I think gets to the core of what you discuss. You write,
"Adam Smith long ago remarked that profits often are highest in nations going fastest to
ruin. There are many ways to create economic suicide on a national level. The major way through
history has been through indebting the economy. Debt always expands to reach a point where it
cannot be paid by a large swathe of the economy. This is the point where austerity is imposed
and ownership of wealth polarizes between the One Percent and the 99 Percent. Today is not the
first time this has occurred in history. But it is the first time that running into debt has occurred
deliberately." Applauded. "As if most debtors can get rich by borrowing, not reduced to a condition
of debt peonage."
So let's start with the classical economists, who certainly understood this. They were reacting
of course to feudalism. And what happened to the study of economics so that it became gamed by ideologues?
HUDSON: The essence of classical economics was to reform industrial capitalism, to streamline
it, and to free the European economies from the legacy of feudalism. The legacy of feudalism was
landlords extracting land-rent, and living as a class that took income without producing anything.
Also, banks that were not funding industry. The leading industrialists from James Watt, with his
steam engine, to the railroads
HEDGES: From your book you make the point that banks almost never funded industry.
HUDSON: That's the point: They never have. By the time you got to Marx later in the 19th century,
you had a discussion, largely in Germany, over how to make banks do something they did not do under
feudalism. Right now we're having the economic surplus being drained not by the landlords
but also by banks and bondholders.
Adam Smith was very much against colonialism because that lead to wars, and wars led to public
debt. He said the solution to prevent this financial class of bondholders burdening the economy by
imposing more and more taxes on consumer goods every time they went to war was to finance wars on
a pay-as-you-go basis. Instead of borrowing, you'd tax the people. Then, he thought, if everybody
felt the burden of war in the form of paying taxes, they'd be against it. Well, it took all of the
19th century to fight for democracy and to extend the vote so that instead of landlords controlling
Parliament and its law-making and tax system through the House of Lords, you'd extend the vote to
labor, to women and everybody. The theory was that society as a whole would vote in its self-interest.
It would vote for the 99 Percent, not for the One Percent.
By the time Marx wrote in the 1870s, he could see what was happening in Germany. German banks
were trying to make money in conjunction with the government, by lending to heavy industry, largely
to the military-industrial complex.
HEDGES: This was Bismarck's kind of social – I don't know what we'd call it. It was a form
of capitalist socialism
HUDSON: They called it State Capitalism. There was a long discussion by Engels, saying, wait a
minute. We're for Socialism. State Capitalism isn't what we mean by socialism. There are two kinds
of state-oriented–.
HEDGES: I'm going to interject that there was a kind of brilliance behind Bismarck's policy
because he created state pensions, he provided health benefits, and he directed banking toward industry,
toward the industrialization of Germany which, as you point out, was very different in Britain and
the United States.
HUDSON: German banking was so successful that by the time World War I broke out, there were discussions
in English economic journals worrying that Germany and the Axis powers were going to win because
their banks were more suited to fund industry. Without industry you can't have really a military.
But British banks only lent for foreign trade and for speculation. Their stock market was a hit-and-run
operation. They wanted quick in-and-out profits, while German banks didn't insist that their clients
pay as much in dividends. German banks owned stocks as well as bonds, and there was much more of
a mutual partnership.
That's what most of the 19th century imagined was going to happen – that the world
was on the way to socializing banking. And toward moving capitalism beyond the feudal level, getting
rid of the landlord class, getting rid of the rent, getting rid of interest. It was going to be labor
and capital, profits and wages, with profits being reinvested in more capital. You'd have an expansion
of technology. By the early twentieth century most futurists imagined that we'd be living in a leisure
economy by now.
HEDGES: Including Karl Marx.
HUDSON: That's right. A ten-hour workweek. To Marx, socialism was to be an outgrowth of the reformed
state of capitalism, as seemed likely at the time – if labor organized in its self-interest.
HEDGES: Isn't what happened in large part because of the defeat of Germany in World War I?
But also, because we took the understanding of economists like Adam Smith and maybe Keynes. I don't
know who you would blame for this, whether Ricardo or others, but we created a fictitious economic
theory to praise a rentier or rent-derived, interest-derived capitalism that countered productive
forces within the economy. Perhaps you can address that.
HUDSON: Here's what happened. Marx traumatized classical economics by taking the concepts of Adam
Smith and John Stuart Mill and others, and pushing them to their logical conclusion.
Progressive
capitalist advocates – Ricardian socialists such as John Stuart Mill – wanted to tax away the land
or nationalize it. Marx wanted governments to take over heavy industry and build infrastructure to
provide low-cost and ultimately free basic services. This was traumatizing the landlord class and
the One Percent. And they fought back. They wanted to make everything part of "the market," which
functioned on credit supplied by them and paid rent to them.
None of the classical economists imagined how the feudal interests – these great vested interests
that had all the land and money – actually would fight back and succeed. They thought that the future
was going to belong to capital and labor. But by the late 19th century, certainly in America,
people like John Bates Clark came out with a completely different theory, rejecting the classical
economics of Adam Smith, the Physiocrats and John Stuart Mill.
HEDGES: Physiocrats are, you've tried to explain, the enlightened French economists.
HUDSON: The common denominator among all these classical economists was the distinction between
earned income and unearned income. Unearned income was rent and interest. Earned incomes were wages
and profits. But John Bates Clark came and said that there's no such thing as unearned income. He
said that the landlord actually earns his rent by taking the effort to provide a house and
land to renters, while banks provide credit to earn their interest. Every kind of income is thus
"earned," and everybody earns their income. So everybody who accumulates wealth, by definition, according
to his formulas, get rich by adding to what is now called Gross Domestic Product (GDP).
HEDGES: One of the points you make in
Killing
the Host which I liked was that in almost all cases, those who had the capacity to make money
parasitically off interest and rent had either – if you go back to the origins – looted and seized
the land by force, or inherited it.
HUDSON: That's correct. In other words, their income is unearned. The result of this anti-classical
revolution you had just before World War I was that today, almost all the economic growth in the
last decade has gone to the One Percent. It's gone to Wall Street, to real estate
HEDGES: But you blame this on what you call Junk Economics.
HUDSON: Junk Economics is the anti-classical reaction.
HEDGES: Explain a little bit how, in essence, it's a fictitious form of measuring the economy.
HUDSON: Well, some time ago I went to a bank, a block away from here – a Chase Manhattan bank
– and I took out money from the teller. As I turned around and took a few steps, there were two pickpockets.
One pushed me over and the other grabbed the money and ran out. The guard stood there and saw it.
So I asked for the money back. I said, look, I was robbed in your bank, right inside. And they said,
"Well, we don't arm our guards because if they shot someone, the thief could sue us and we don't
want that." They gave me an equivalent amount of money back.
Well, imagine if you count all this crime, all the money that's taken, as an addition to GDP.
Because now the crook has provided the service of not stabbing me. Or suppose somebody's held up
at an ATM machine and the robber says, "Your money or your life." You say, "Okay, here's my money."
The crook has given you the choice of your life. In a way that's how the Gross National Product accounts
are put up. It's not so different from how Wall Street extracts money from the economy. Then also
you have landlords extracting
HEDGES: Let's go back. They're extracting money from the economy by debt peonage. By raising
HUDSON: By not playing a productive role, basically.
HEDGES: Right. So it's credit card interest, mortgage interest, car loans, student loans. That's
how they make their funds.
HUDSON: That's right. Money is not a factor of production. But in order to have access to credit,
in order to get money, in order to get an education, you have to pay the banks. At New York University
here, for instance, they have Citibank. I think Citibank people were on the board of directors at
NYU. You get the students, when they come here, to start at the local bank. And once you are in a
bank and have monthly funds taken out of your account for electric utilities, or whatever, it's very
cumbersome to change.
So basically you have what the classical economists called the rentier class. The class
that lives on economic rents. Landlords, monopolists charging more, and the banks. If you have a
pharmaceutical company that raises the price of a drug from $12 a shot to $200 all of a sudden, their
profits go up. Their increased price for the drug is counted in the national income accounts as if
the economy is producing more. So all this presumed economic growth that has all been taken by the
One Percent in the last ten years, and people say the economy is growing. But the economy isn't growing
HEDGES: Because it's not reinvested.
HUDSON: That's right. It's not production, it's not consumption. The wealth of the One Percent
is obtained essentially by lending money to the 99 Percent and then charging interest on it, and
recycling this interest at an exponentially growing rate.
HEDGES: And why is it important, as I think you point out in your book, that economic theory
counts this rentier income as productive income? Explain why that's important.
HUDSON: If you're a rentier, you want to say that you earned your income by
HEDGES: We're talking about Goldman Sachs, by the way.
HUDSON: Yes, Goldman Sachs. The head of Goldman Sachs came out and said that Goldman Sachs workers
are the most productive in the world. That's why they're paid what they are. The concept of productivity
in America is income divided by labor. So if you're Goldman Sachs and you pay yourself $20 million
a year in salary and bonuses, you're considered to have added $20 million to GDP, and that's enormously
productive. So we're talking in a tautology. We're talking with circular reasoning here.
So the issue is whether Goldman Sachs, Wall Street and predatory pharmaceutical firms, actually
add "product" or whether they're just exploiting other people. That's why I used the word parasitism
in my book's title. People think of a parasite as simply taking money, taking blood out of a host
or taking money out of the economy. But in nature it's much more complicated. The parasite can't
simply come in and take something. First of all, it needs to numb the host. It has an enzyme so that
the host doesn't realize the parasite's there. And then the parasites have another enzyme that takes
over the host's brain. It makes the host imagine that the parasite is part of its own body, actually
part of itself and hence to be protected.
That's basically what Wall Street has done. It depicts itself as part of the economy. Not as a
wrapping around it, not as external to it, but actually the part that's helping the body grow, and
that actually is responsible for most of the growth. But in fact it's the parasite that is taking
over the growth.
The result is an inversion of classical economics. It turns Adam Smith upside down. It says what
the classical economists said was unproductive – parasitism – actually is the real economy. And that
the parasites are labor and industry that get in the way of what the parasite wants – which is to
reproduce itself, not help the host, that is, labor and capital.
HEDGES: And then the classical economists like Adam Smith were quite clear that unless that
rentier income, you know, the money made by things like hedge funds, was heavily taxed and put back
into the economy, the economy would ultimately go into a kind of tailspin. And I think the example
of that, which you point out in your book, is what's happened in terms of large corporations with
stock dividends and buybacks. And maybe you can explain that.
HUDSON: There's an idea in superficial textbooks and the public media that if companies make a
large profit, they make it by being productive. And with
HEDGES: Which is still in textbooks, isn't it?
HUDSON: Yes. And also that if a stock price goes up, you're just capitalizing the profits – and
the stock price reflects the productive role of the company. But that's not what's been happening
in the last ten years. Just in the last two years, 92 percent of corporate profits in America have
been spent either on buying back their own stock, or paid out as dividends to raise the price of
the stock.
HEDGES: Explain why they do this.
HUDSON: About 15 years ago at Harvard, Professor Jensen said that the way to ensure that corporations
are run most efficiently is to make the managers increase the price of the stock. So if you give
the managers stock options, and you pay them not according to how much they're producing or making
the company bigger, or expanding production, but the price of the stock, then you'll have the corporation
run efficiently, financial style.
So the corporate managers find there are two ways that they can increase the price of the stock.
The first thing is to cut back long-term investment, and use the money instead to buy back their
own stock. But when you buy your own stock, that means you're not putting the money into capital
formation. You're not building new factories. You're not hiring more labor. You can actually increase
the stock price by firing labor.
HEDGES: That strategy only works temporarily.
HUDSON: Temporarily. By using the income from past investments just to buy back stock, fire the
labor force if you can, and work it more intensively. Pay it out as dividends. That basically is
the corporate raider's model. You use the money to pay off the junk bond holders at high interest.
And of course, this gets the company in trouble after a while, because there is no new investment.
So markets shrink. You then go to the labor unions and say, gee, this company's near bankruptcy,
and we don't want to have to fire you. The way that you can keep your job is if we downgrade your
pensions. Instead of giving you what we promised, the defined benefit pension, we'll turn it into
a defined contribution plan. You know what you pay every month, but you don't know what's going to
come out. Or, you wipe out the pension fund, push it on to the government's Pension Benefit Guarantee
Corporation, and use the money that you were going to pay for pensions to pay stock dividends. By
then the whole economy is turning down. It's hollowed out. It shrinks and collapses. But by that
time the managers will have left the company. They will have taken their bonuses and salaries and
run.
HEDGES: I want to read this quote from your book, written by David Harvey, in
A Brief
History of Neoliberalism, and have you comment on it.
"The main substantive achievement of neoliberalism has been to redistribute rather than
to generate wealth and income. [By] 'accumulation by dispossession' I mean the commodification
and privatization of land, and the forceful expulsion of peasant populations; conversion of various
forms of property rights (common collective state, etc.) into exclusive private property rights;
suppression of rights to the commons; colonial, neocolonial, and the imperial processes of appropriation
of assets (including natural resources); and usury, the national debt and, most devastating
at all, the use of the credit system as a radical means of accumulation by dispossession. To
this list of mechanisms, we may now add a raft of techniques such as the extraction of rents from
patents, and intellectual property rights (such as the diminution or erasure of various forms
of common property rights, such as state pensions, paid vacations, and access to education, health
care) one through a generation or more of class struggle. The proposal to privatize all state
pension rights, pioneered in Chile under the dictatorship is, for example, one of the cherished
objectives of the Republicans in the US."
This explains the denouement. The final end result you speak about in your book is, in essence,
allowing what you call the rentier or the speculative class to cannibalize the entire society until
it collapses.
HUDSON: A property right is not a factor of production. Look at what happened in Chicago, the
city where I grew up. Chicago didn't want to raise taxes on real estate, especially on its expensive
commercial real estate. So its budget ran a deficit. They needed money to pay the bondholders, so
they sold off the parking rights to have meters – you know, along the curbs. The result is that they
sold to Goldman Sachs 75 years of the right to put up parking meters. So now the cost of living and
doing business in Chicago is raised by having to pay the parking meters. If Chicago is going to have
a parade and block off traffic, it has to pay Goldman Sachs what the firm would have made
if the streets wouldn't have been closed off for a parade. All of a sudden it's much more expensive
to live in Chicago because of this.
But this added expense of having to pay parking rights to Goldman Sachs – to pay out interest
to its bondholders – is counted as an increase in GDP, because you've created more product simply
by charging more. If you sell off a road, a government or local road, and you put up a toll booth
and make it into a toll road, all of a sudden GDP goes up.
If you go to war abroad, and you spend more money on the military-industrial complex, all this
is counted as increased production. None of this is really part of the production system of the capital
and labor building more factories and producing more things that people need to live and do business.
All of this is overhead. But there's no distinction between wealth and overhead.
Failing to draw that distinction means that the host doesn't realize that there is a parasite
there. The host economy, the industrial economy, doesn't realize what the industrialists realized
in the 19th century: If you want to be an efficient economy and be low-priced and under-sell
competitors, you have to cut your prices by having the public sector provide roads freely. Medical
care freely. Education freely.
If you charge for all of these, you get to the point that the U.S. economy is in today. What if
American factory workers were to get all of their consumer goods for nothing. All their food,
transportation, clothing, furniture, everything for nothing. They still couldn't compete with
Asians or other producers, because they have to pay up to 43% of their income for rent or mortgage
interest, 10% or more of their income for student loans, credit card debt. 15% of their paycheck
is automatic withholding to pay Social Security, to cut taxes on the rich or to pay for medical care.
So Americans built into the economy all this overhead. There's no distinction between growth and
overhead. It's all made America so high-priced that we're priced out of the market, regardless of
what trade policy we have.
HEDGES: We should add that under this predatory form of economics, you game the system. So
you privatize pension funds, you force them into the stock market, an overinflated stock market.
But because of the way companies go public, it's the hedge fund managers who profit. And it's those
citizens whose retirement savings are tied to the stock market who lose. Maybe we can just conclude
by talking about how the system is fixed, not only in terms of burdening the citizen with debt peonage,
but by forcing them into the market to fleece them again.
HUDSON: Well, we talk about an innovation economy as if that makes money. Suppose you have an
innovation and a company goes public. They go to Goldman Sachs and other Wall Street investment banks
to underwrite the stock to issue it at $40 a share. What's considered a successful float is when,
immediately, Goldman and the others will go to their insiders and tell them to buy this stock and
make a quick killing. A "successful" flotation doubles the price in one day, so that at the end of
the day the stock's selling for $80.
HEDGES: They have the option to buy it before anyone else, knowing that by the end of the day
it'll be inflated, and then they sell it off.
HUDSON: That's exactly right.
HEDGES: So the pension funds come in and buy it at an inflated price, and then it goes back
down.
HUDSON: It may go back down, or it may be that the company just was shortchanged from the very
beginning. The important thing is that the Wall Street underwriting firm, and the speculators it
rounds up, get more in a single day than all the years it took to put the company together. The company
gets $40. And the banks and their crony speculators also get $40.
So basically you have the financial sector ending up with much more of the gains. The name of
the game if you're on Wall Street isn't profits. It's capital gains. And that's something that wasn't
even part of classical economics. They didn't anticipate that the price of assets would go up for
any other reason than earning more money and capitalizing on income. But what you have had in the
last 50 years – really since World War II – has been asset-price inflation. Most middle-class families
have gotten the wealth that they've got since 1945 not really by saving what they've earned by working,
but by the price of their house going up. They've benefited by the price of the house. And they think
that that's made them rich and the whole economy rich.
The reason the price of housing has gone up is that a house is worth whatever a bank is going
to lend against it. If banks made easier and easier credit, lower down payments, then you're going
to have a financial bubble. And now, you have real estate having gone up as high as it can. I don't
think it can take more than 43% of somebody's income to buy it. But now, imagine if you're joining
the labor force. You're not going to be able to buy a house at today's prices, putting down a little
bit of your money, and then somehow end up getting rich just on the house investment. All of this
money you pay the bank is now going to be subtracted from the amount of money that you have available
to spend on goods and services.
So we've turned the post-war economy that made America prosperous and rich inside out. Somehow
most people believed they could get rich by going into debt to borrow assets that were going to rise
in price. But you can't get rich, ultimately, by going into debt. In the end the creditors always
win. That's why every society since Sumer and Babylonia have had to either cancel the debts, or you
come to a society like Rome that didn't cancel the debts, and then you have a dark age. Everything
collapses.
"... Furthermore, as Mark Kleiman sagely observes , the conventional case for trade liberalization relies on the assertion that the government could redistribute income to ensure that everyone wins - but we now have an ideology utterly opposed to such redistribution in full control of one party, and with blocking power against anything but a minor move in that direction by the other. ..."
A Protectionist Moment? : ... if Sanders were to make it to the White House, he would find
it very hard to do anything much about globalization - not because it's technically or economically
impossible, but because the moment he looked into actually tearing up existing trade agreements
the diplomatic, foreign-policy costs would be overwhelmingly obvious. ...
But it's also true
that much of the elite defense of globalization is basically dishonest: false claims of inevitability,
scare tactics (
protectionism causes depressions !), vastly exaggerated claims for the benefits of trade liberalization
and the costs of protection, hand-waving away the large distributional effects that are what standard
models actually predict. I hope, by the way, that I haven't done any of that...
Furthermore, as Mark Kleiman
sagely observes , the conventional case for trade liberalization relies on the assertion that
the government could redistribute income to ensure that everyone wins - but we now have an ideology
utterly opposed to such redistribution in full control of one party, and with blocking power against
anything but a minor move in that direction by the other.
So the elite case for ever-freer trade is largely a scam, which voters probably sense even
if they don't know exactly what form it's taking.
Ripping up the trade agreements we already have would, again, be a mess, and I would say that
Sanders is engaged in a bit of a scam himself in even hinting that he could do such a thing. Trump
might actually do it, but only as part of a reign of destruction on many fronts.
But it is fair to say that the case for more trade agreements - including TPP, which hasn't
happened yet - is very, very weak. And if a progressive makes it to the White House, she should
devote no political capital whatsoever to such things.
Again, just because automation has been a major factor in job loss doesn't mean "off shoring"
(using the term broadly and perhaps somewhat inaccurately) is not a factor.
The "free" trade deals suck. They are correctly diagnosed as part of the problem.
What would you propose to fix the problems caused by automation?
Automation frees labor to do more productive and less onerous tasks. We should expand our solar
production and our mass transit. We need to start re-engineering our urban areas. This will not
bring back the number of jobs it would take to make cities like Flint thrive once again.
Flint and Detroit have severe economic problems because they were mismanaged by road building
and suburbanization in the 1950s and 1960s. Money that should have been spent on maintaining and
improving urban infrastructure was instead plowed into suburban development that is not dense
enough to sustain the infrastructure required to support it. People moved to the suburbs, abandoned
the built infrastructure of the cities and kissed them goodbye.
Big roads polluted the cities with lead, noise, diesel particles and ozone and smog. Stroads
created pedestrian kill zones making urban areas, unwalkable, unpleasant- an urban blights to
drive through rather than destinations to drive to.
Government subsidized the white flight to the suburbs that has left both the suburbs and the
urban cores with too low revenue to infrastructure ratio. The inner suburbs have aged into net
losers, their infrastructure must be subsidized. Big Roads were built on the Big Idea that people
would drive to the city to work and play and then drive home. That Big idea has a big problem.
Urban areas are only sustainable when they have a high resident density. The future of cities
like Flint and Detroit will be tearing out the roads and replacing them with streets and houses
and renewing the housing stock that has been abandoned. It needs to be done by infill, revitalizing
inner neighborhoods and working outward. Cities like Portland have managed to protect much of
their core, but even they are challenged by demands for suburban sprawl.
Slash and burn development, creating new suburbs and abandoning the old is not a sustainable
model. Not only should we put people to work replacing the Flint lead pipes, but much of the city
should be rebuilt from the inside out. Flint is the leading edge of this problem that requires
fundamental changes in our built environment to fix. I recommend studying Flint as an object lesson
of what bad development policy could do to all of our cities.
An Interview with Frank Popper about Shrinking Cities, Buffalo Commons, and the Future of Flint
How does America's approach shrinking cities compare to the rest of the world?
I think the American way is to do nothing until it's too late, then throw everything at it
and improvise and hope everything works. And somehow, insofar as the country's still here, it
has worked. But the European or the Japanese way would involve much more thought, much more foresight,
much more central planning, and much less improvising. They would implement a more, shall we say,
sustained effort. The American way is different. Europeans have wondered for years and years why
cities like Detroit or Cleveland are left to rot on the vine. There's a lot of this French hauteur
when they ask "How'd you let this happen?"
Do shrinking cities have any advantages over agricultural regions as they face declining populations?
The urban areas have this huge advantage over all these larger American regions that are going
through this. They have actual governments with real jurisdiction. Corrupt as Detroit or Philadelphia
or Camden may be, they have actual governments that are supposed to be in charge of them. Who's
in charge of western Kansas? Who's in charge of the Great Plains? Who is in charge of the lower
Mississippi Delta or central Appalachia? All they've got are these distant federal agencies whose
past performance is not exactly encouraging.
Why wasn't there a greater outcry as the agricultural economy and the industrial economy collapsed?
One reason for the rest of the country not to care is that there's no shortage of the consumer
goods that these places once produced. All this decline of agriculture doesn't mean we're running
out of food. We've got food coming out of our ears. Likewise, Flint has suffered through all this,
but it's not like it's hard to buy a car in this country. It's not as if Flint can behave like
a child and say "I'm going to hold my nose and stop you from getting cars until you do the right
thing." Flint died and you can get zero A.P.R. financing. Western Kansas is on its last legs and,
gee, cereal is cheaper than ever.
In some sense that's the genius of capitalism - it's heartless. But if you look at the local
results and the cultural results and the environmental results you shake your head. But I don't
see America getting away from what I would call a little sarcastically the "wisdom" of the market.
I don't think it's going to change.
So is there any large-scale economic fallout from these monumental changes?
Probably not, and it hurts to say so. And the only way I can feel good about saying that is
to immediately point to the non-economic losses, the cultural losses. The losses of ways of life.
The notion of the factory worker working for his or her children. The notion of the farmer working
to build up the country and supply the rest of the world with food. We're losing distinctive ways
of life. When we lose that we lose something important, but it's not like The Wall Street Journal
cares. And I feel uncomfortable saying that. From a purely economic point of view, it's just the
price of getting more efficient. It's a classic example of Schumpeter's theory of creative destruction,
which is no fun if you're on the destruction end.
Does the decline of cities like Flint mirror the death of the middle class in the United States?
I think it's more the decline of the lower-middle class in the United States. Even when those
jobs in the auto factories paid very high wages they were still for socially lower-middle-class
people. I think there was always the notion in immigrant families and working-class families who
worked in those situations that the current generation would work hard so that the children could
go off and not have to do those kind of jobs. And when those jobs paid well that was a perfectly
reasonable ambition. It's the cutting off of that ambition that really hurts now. The same thing
has been true on farms and ranches in rural parts of the united states.
It is a much different thing to be small minded about trade than it is to be large minded about
everything else. The short story that it is all about automation and not trade will always get
a bad reception because it is small minded. When you add in the large minded story about everything
else then it becomes something entirely different from the short story. We all agree with you
about everything else. You are wrong about globalization though. Both financialization and globalization
suck and even if we paper over them with tax and transfer then they will still suck. One must
forget what it is to be a created equal human to miss that. Have you never felt the job of accomplishment?
Does not pride and self-confidence matter in your life?
While automation is part of the story, offshoring is just as important. Even when there is not
net loss in the numbers of jobs in aggregate, there is significant loss in better paying jobs
in manufacturing. It is important to look at the distributional effects within countries, as well
as between them
It would probably be cheaper and easier to just fix them. We don't need to withdraw from trade.
We just need to fix the terms of trade that cause large trade deficits and cross border capital
flows and also fix the FOREX system rigging.
What would it take to ignore trade agreements? They shouldn't be any more difficult to ignore
than the Geneva Conventions, which the US routinely flaunts.
In order to import we must export and in order to export we must import. The two are tied together.
Suppressing imports means we export less.
What free trade does is lower the price level relative to wages. It doesn't uniformly lower
the price level but rather lowers the cost of goods that are capable of being traded internationally.
It lowers the price on those goods that are disproportionately purchased by those with low incomes.
Free trade causes a progressive decline in the price level while protectionism causes a regressive
increase in the price level.
Funny rebuttal! Bhagwati probably has a model that says the opposite! But then he grew up in India
and should one day get a Nobel Prize for his contributions to international economics.
Our media needs to copy France 24, ... and have real debates about real issues. What we get is
along the lines of ignoring the problem then attacking any effort to correct. for example, the
media stayed away from the healthcare crisis, too complicated, but damn they are good at criticizing.
A seriously shameful article. Krugman has been a booster of trade & globalization for 30 years:
marginally more nuanced than the establishment, but still a booster.
Now, the establishment has what it wanted and the effects have been disastrous for those not
in the top 20 percent of the income distribution.
At this stage, comes insult to injury. Establishment economists (like Mr. Krugman) can reinvent
themselves with "brilliant new studies" showing the costs and damage of globalization. They pay
no professional costs for the grievous injuries inflicted; there is no mention of the fact that
critical outsider economists have been predicting and writing about these injuries and were right;
and they blithely say we must stay the course because we are locked-in and have few options.
Krugman is not Greg Mankiw. Most people who actually get international economics (Mankiw does
not) are not of the free trade benefits all types. Paul Samuelson certainly does not buy into
Mankiw's spin. Funny thing - Mankiw recently cited an excellent piece from Samuelson only to dishonestly
suggest Samuelson did not believe in what he wrote.
Why are you mischaracterizing what Krugman has written? That's my point. Oh wait - you misrepresent
what people write so you can "win" a "debate". Never mind. Please proceed with the serial dishonesty.
"The truth is that if Sanders were to make it to the White House, he would find it very hard to
do anything much about globalization - not because it's technically or economically impossible,
but because the moment he looked into actually tearing up existing trade agreements the diplomatic,
foreign-policy costs would be overwhelmingly obvious. In this, as in many other things, Sanders
currently benefits from the luxury of irresponsibility: he's never been anywhere close to the
levers of power, so he could take principled-sounding but arguably feckless stances in a way that
Clinton couldn't and can't."
As Dean Baker says, we need to confront Walmart and Goldman Sachs at home, who like these policies,
more than the Chinese.
The Chinese want access to our consumer market. They'd also like if we did't invade countries
like Iraq.
"so he could take principled-sounding but arguably feckless stances in a way that Clinton couldn't"
And what is that? Tear up trade deals? It is Krugman who is engaging in straw man arguments.
Krugman does indeed misrepresent Sanders' positions on trade. Sander is not against trade, he
merely insists on *Fair Trade*, which incorporates human rights and environmental protections.
His opposition is to the kinds of deals, like NAFTA and TPP, which effectively gut those (a central
element in Kruman's own critique of the latter).
Krugman has definitely backed off his (much) earlier boosterism and publicly said so. This is
an excellent piece by him, though it does rather downplay his earlier stances a bit. This is one
of the things I especially like about him.
I can get the idea that some people win, some people lose from liberalized trade. But what really
bugs me about the neoliberal trade agenda is that it has been part of a larger set of economically
conservative, laissez faire policies that have exacerbated the damages from trade rather than
offsetting them.
At the same time they were exposing US workers to greater competition from abroad and destroying
and offshoring working class jobs via both trade and liberalized capital flows, the neoliberals
were also doing things like "reinventing government" - that is, shrinking structural government
spending and public investment - and ending welfare. They have done nothing serious about steering
capital and job development efforts toward the communities devastated by the liberalization.
The neoliberal position has seem to come down to "We can't make bourgeois progress without
breaking a few working class eggs."
Agreed! "Krugman has been a booster of trade & globalization for 30 years: marginally more nuanced
than the establishment, but still a booster.'
Now he claims that he saw the light all along! "much of the elite defense of globalization
is basically dishonest: false claims of inevitability, scare tactics (protectionism causes depressions!),
vastly exaggerated claims for the benefits of trade liberalization and the costs of protection,
hand-waving away the large distributional effects that are what standard models actually predict.
I hope, by the way, that I haven't done any of that..."
You would be hard pressed to find any Krugman clips that cited any of those problems in the
past. Far from being an impartial economist, he was always an avid booster of free trade, overlooking
those very downsides that he suddenly decides to confess.
As far as I know, Sanders has not proposed ripping up the existing trade deals. His information
page on trade emphasizes (i) his opposition to these deals when they were first negotiated and
enacted, and (ii) the principles he will apply to the consideration of future trade deals. Much
of his argumentation concerning past deals is put forward to motivate his present opposition to
TPP.
Note also that Sanders connects his discussion of the harms of past trade policy to the Rebuild
America Act. That is, his approach is forward facing. We can't undo most of the past damage by
recreating the old working class economy we wrecked, but we can be aggressive about using government-directed
national investment programs to create new, high-paying jobs in the US.
You could have said the same about the 1920s
We can't undo most of the past damage by recreating the old agrarian class economy we wrecked,
but we can be aggressive about using government-directed national investment programs to create
new, high-paying jobs in the US.
The march of progress:
Mechanization of agriculture with displacement of large numbers of Ag workers.
The rise of factory work and large numbers employed in manufacturing.
Automation of Manufacturing with large displacement of workers engaged in manufacturing.
What do we want our workers to do? This question must be answered at the highest level of society
and requires much government facilitation. The absence of government facilitation is THE problem.
Memo to Paul Krugman - lead with the economics and stay with the economics. His need to get into
the dirty business of politics dilutes what he ends up sensibly writes later on.
""The truth is that if Sanders were to make it to the White House, he would find it very hard
to do anything much about globalization - not because it's technically or economically impossible,
but because the moment he looked into actually tearing up existing trade agreements the diplomatic,
foreign-policy costs would be overwhelmingly obvious. In this, as in many other things, Sanders
currently benefits from the luxury of irresponsibility: he's never been anywhere close to the
levers of power, so he could take principled-sounding but arguably feckless stances in a way that
Clinton couldn't and can't."
Yeah, it's pretty dishonest for Krugman to pretend that Sanders' position is "ripping up the trade
agreements we already have" and then say Sanders is "engaged in a bit of a scam" because he can't
do that. Sanders actual position (trying to stop new trade deals like the TPP) is something the
president has a lot of influence over (they can veto the deal). Hard to tell what Krugman is doing
here other than deliberately spreading misinformation.
Also worth noting that he decides to compare Sanders' opposition to trade deals with Trump,
and ignore the fact that Clinton has come out against the TPP as well .
Busy with real life, but yes, I know what happened in the primaries yesterday. Triumph for
Trump, and big upset for Sanders - although it's still very hard to see how he can catch Clinton.
Anyway, a few thoughts, not about the horserace but about some deeper currents.
The Sanders win defied all the polls, and nobody really knows why. But a widespread guess is
that his attacks on trade agreements resonated with a broader audience than his attacks on Wall
Street; and this message was especially powerful in Michigan, the former auto superpower. And
while I hate attempts to claim symmetry between the parties - Trump is trying to become America's
Mussolini, Sanders at worst America's Michael Foot * - Trump has been tilling some of the same
ground. So here's the question: is the backlash against globalization finally getting real political
traction?
You do want to be careful about announcing a political moment, given how many such proclamations
turn out to be ludicrous. Remember the libertarian moment? The reformocon moment? Still, a protectionist
backlash, like an immigration backlash, is one of those things where the puzzle has been how long
it was in coming. And maybe the time is now.
The truth is that if Sanders were to make it to the White House, he would find it very hard
to do anything much about globalization - not because it's technically or economically impossible,
but because the moment he looked into actually tearing up existing trade agreements the diplomatic,
foreign-policy costs would be overwhelmingly obvious. In this, as in many other things, Sanders
currently benefits from the luxury of irresponsibility: he's never been anywhere close to the
levers of power, so he could take principled-sounding but arguably feckless stances in a way that
Clinton couldn't and can't.
But it's also true that much of the elite defense of globalization is basically dishonest:
false claims of inevitability, scare tactics (protectionism causes depressions! ** ), vastly exaggerated
claims for the benefits of trade liberalization and the costs of protection, hand-waving away
the large distributional effects that are what standard models actually predict. I hope, by the
way, that I haven't done any of that; I think I've always been clear that the gains from globalization
aren't all that (here's a back-of-the-envelope on the gains from hyperglobalization *** - only
part of which can be attributed to policy - that is less than 5 percent of world GDP over a generation);
and I think I've never assumed away the income distribution effects.
Furthermore, as Mark Kleiman sagely observes, **** the conventional case for trade liberalization
relies on the assertion that the government could redistribute income to ensure that everyone
wins - but we now have an ideology utterly opposed to such redistribution in full control of one
party, and with blocking power against anything but a minor move in that direction by the other.
So the elite case for ever-freer trade is largely a scam, which voters probably sense even
if they don't know exactly what form it's taking.
Ripping up the trade agreements we already have would, again, be a mess, and I would say that
Sanders is engaged in a bit of a scam himself in even hinting that he could do such a thing. Trump
might actually do it, but only as part of a reign of destruction on many fronts.
But it is fair to say that the case for more trade agreements - including Trans-Pacific Partnership,
which hasn't happened yet - is very, very weak. And if a progressive makes it to the White House,
she should devote no political capital whatsoever to such things.
Michael Mackintosh Foot (1913 – 2010) was a British Labour Party politician and man of letters
who was a Member of Parliament (MP) from 1945 to 1955 and from 1960 until 1992. He was Deputy
Leader of the Labour Party from 1976 to 1980, and later the Leader of the Labour Party and Leader
of the Opposition from 1980 to 1983.
Associated with the left of the Labour Party for most of his career, Foot was an ardent supporter
of the Campaign for Nuclear Disarmament and British withdrawal from the European Economic Community.
He was appointed to the Cabinet as Secretary of State for Employment under Harold Wilson in 1974,
and he later served as Leader of the House of Commons under James Callaghan. A passionate orator,
he led Labour through the 1983 general election, when the party obtained its lowest share of the
vote at a general election since 1918 and the fewest parliamentary seats it had had at any time
since before 1945.
There was so much wrong with Mitt Romney's Trump-is-a-disaster-whom-I-will-support-in-the-general
* speech that it may seem odd to call him out for bad international macroeconomics. But this is
a pet peeve of mine, in an area where I really, truly know what I'm talking about. So here goes.
In warning about Trumponomics, Romney declared:
"If Donald Trump's plans were ever implemented, the country would sink into prolonged recession.
A few examples. His proposed 35 percent tariff-like penalties would instigate a trade war and
that would raise prices for consumers, kill our export jobs and lead entrepreneurs and businesses
of all stripes to flee America."
After all, doesn't everyone know that protectionism causes recessions? Actually, no. There
are reasons to be against protectionism, but that's not one of them.
Think about the arithmetic (which has a well-known liberal bias). Total final spending on domestically
produced goods and services is
Total domestic spending + Exports – Imports = GDP
Now suppose we have a trade war. This will cut exports, which other things equal depresses
the economy. But it will also cut imports, which other things equal is expansionary. For the world
as a whole, the cuts in exports and imports will by definition be equal, so as far as world demand
is concerned, trade wars are a wash.
OK, I'm sure some people will start shouting "Krugman says protectionism does no harm." But
no: protectionism in general should reduce efficiency, and hence the economy's potential output.
But that's not at all the same as saying that it causes recessions.
But didn't the Smoot-Hawley tariff cause the Great Depression? No. There's no evidence at all
that it did. Yes, trade fell a lot between 1929 and 1933, but that was almost entirely a consequence
of the Depression, not a cause. (Trade actually fell faster ** during the early stages of the
2008 Great Recession than it did after 1929.) And while trade barriers were higher in the 1930s
than before, this was partly a response to the Depression, partly a consequence of deflation,
which made specific tariffs (i.e. tariffs that are stated in dollars per unit, not as a percentage
of value) loom larger.
Again, not the thing most people will remember about Romney's speech. But, you know, protectionism
was the only reason he gave for believing that Trump would cause a recession, which I think is
kind of telling: the GOP's supposedly well-informed, responsible adult, trying to save the party,
can't get basic economics right at the one place where economics is central to his argument.
The Gains From Hyperglobalization (Wonkish)
By Paul Krugman
Still taking kind of an emotional vacation from current political madness. Following up on
my skeptical post on worries about slowing trade growth, * I wondered what a state-of-the-art
model would say.
The natural model to use, at least for me, is Eaton-Kortum, ** which is a very ingenious approach
to thinking about multilateral trade flows. The basic model is Ricardian - wine and cloth and
labor productivity and all that - except that there are many goods and many countries, transportation
costs, and countries are assumed to gain productivity in any particular industry through a random
process. They make some funny assumptions about distributions - hey, that's kind of the price
of entry for this kind of work - and in return get a tractable model that yields gravity-type
equations for international trade flows. This is a good thing, because gravity models *** of trade
- purely empirical exercises, with no real theory behind them - are known to work pretty well.
Their model also yields a simple expression for the welfare gains from trade:
Real income = A*(1-import share)^(-1/theta)
where A is national productivity and theta is a parameter of their assumed random process (don't
ask); they suggest that theta=4 provides the best match to available data.
Now, what I wanted to do was apply this to the rapid growth of trade that has taken place since
around 1990, what Subramanian **** calls "hyperglobalization". According to Subramanian's estimates,
overall trade in goods and services has risen from about 19 percent of world GDP in the early
1990s to 33 percent now, bringing us to a level of integration that really is historically unprecedented.
There are some conceptual difficulties with using this rise directly in the Eaton-Kortum framework,
because much of it has taken the form of trade in intermediate goods, and the framework isn't
designed to handle that. Still, let me ignore that, and plug Subramanian's numbers into the equation
above; I get a 4.9 percent rise in real incomes due to increased globalization.
That's by no means small change, but it's only a fairly small fraction of global growth. The
Maddison database ***** gives us a 45 percent rise in global GDP per capita over the same period,
so this calculation suggests that rising trade was responsible for around 10 percent of overall
global growth. My guess is that most people who imagine themselves well-informed would give a
bigger number.
By the way, for those critical of globalization, let me hasten to concede that by its nature
the Eaton-Kortum model doesn't let us talk about income distribution, and it also makes no room
for the possible role of globalization in causing secular stagnation. ******
Still, I thought this was an interesting calculation to make - which may show more about my
warped sense of what's interesting than it does about anything else.
General Equilibrium Analysis of the Eaton-Kortum Model of International Trade
By Fernando Alvarez and Robert E. Lucas
We study a variation of the Eaton-Kortum model, a competitive, constant-returns-to-scale multicountry
Ricardian model of trade. We establish existence and uniqueness of an equilibrium with balanced
trade where each country imposes an import tariff. We analyze the determinants of the cross-country
distribution of trade volumes, such as size, tariffs and distance, and compare a calibrated version
of the model with data for the largest 60 economies. We use the calibrated model to estimate the
gains of a world-wide trade elimination of tariffs, using the theory to explain the magnitude
of the gains as well as the differential effect arising from cross-country differences in pre-liberalization
of tariffs levels and country size.
The gravity model of international trade in international economics, similar to other gravity
models in social science, predicts bilateral trade flows based on the economic sizes (often using
GDP measurements) and distance between two units. The model was first used by Jan Tinbergen in
1962.
The Hyperglobalization of Trade and Its Future
By Arvind Subramanian and Martin Kessler
Abstract
The open, rules-based trading system has delivered immense benefits-for the world, for individual
countries, and for average citizens in these countries. It can continue to do so, helping today's
low-income countries make the transition to middle-income status. Three challenges must be met
to preserve this system. Rich countries must sustain the social consensus in favor of open markets
and globalization at a time of considerable economic uncertainty and weakness; China and other
middle-income countries must remain open; and mega-regionalism must be prevented from leading
to discrimination and trade conflicts. Collective action should help strengthen the institutional
underpinnings of globalization. The world should move beyond the Doha Round dead to more meaningful
multilateral negotiations to address emerging challenges, including possible threats from new
mega-regional agreements. The rising powers, especially China, will have a key role to play in
resuscitating multilateralism.
"Furthermore, as Mark Kleiman sagely observes, the conventional case for trade liberalization
relies on the assertion that the government could redistribute income to ensure that everyone
wins"
That was never the conventional case for trade. Plus it's kind of odd that you have to add
"plus have the government redistribute" to the case your making.
Tom Pally above is correct. Krugman has been on the wrong side of this issue. He's gotten better,
but the timing is he's gotten better as the Democratic Party has moved to the left and pushed
back against corporate trade deals. Even Hillary came out late against Obama's TPP.
Sanders has nothing about ripping up trade deals. He has said he won't do any more.
As cawley predicted, once Sanders won Michigan, Krugman started hitting him again at his blog.
With cheap shots I might add. He's ruining his brand.
Tell Morning Edition: It's Not "Free Trade" Folks
by Dean Baker
Published: 10 March 2016
Hey, can an experienced doctor from Germany show up and start practicing in New York next week?
Since the answer is no, we can say that we don't have free trade. It's not an immigration issue,
if the doctor wants to work in a restaurant kitchen, she would probably get away with it. We have
protectionist measures that limit the number of foreign doctors in order to keep their pay high.
These protectionist measures have actually been strengthened in the last two decades.
We also have strengthened patent and copyright protections, making drugs and other affected
items far more expensive. These protections are also forms of protectionism.
This is why Morning Edition seriously misled its listeners in an interview with ice cream barons
Ben Cohen and Jerry Greenfield over their support of Senator Bernie Sanders. The interviewer repeatedly
referred to "free trade" agreements and Sanders' opposition to them. While these deals are all
called "free trade" deals to make them sound more palatable ("selective protectionism to redistribute
income upward" doesn't sound very appealing), that doesn't mean they are actually about free trade.
Morning Edition should not have used the term employed by promoters to push their trade agenda.
This has been Dean Baker's excellent theme for a very long time. And if you actually paid attention
to what Krugman said about TPP - he agreed with Dean's excellent points. But do continue to set
up straw man arguments so you can dishonestly attack Krugman.
No. That is not a sign of a faulty memory, quite the contrary.
Krugman writes column after column praising trade pacts and criticizing (rightly, I might add)
the yahoos who object for the wrong reasons.
But he omits a few salient facts like
- the gains are small,
- the government MUST intervene with redistribution for this to work socially,
- there are no (or minimal) provisions for that requirement in the pacts.
I would say his omissions speak volumes and are worth remembering.
Krugman initially wrote a confused column about the TPP, treating it as a simple free trade deal
which he said would have little impact because tariffs were already so low. But he did eventually
look into the matter further and wound up agreeing with Baker's take.
"That was never the conventional case for trade". Actually it was. Of course Greg Mankiw never
got the memo so his free trade benefits all BS confuses a lot of people. Mankiw sucks at international
trade.
David Glasner attacks Krugman from the right, but he doesn't whitewash the past as you do.
He remembers Gore versus Perot:
"Indeed, Romney didn't even mention the Smoot-Hawley tariff, but Krugman evidently forgot the
classic exchange between Al Gore and the previous incarnation of protectionist populist outrage
in an anti-establishment billionaire candidate for President:
GORE I've heard Mr. Perot say in the past that, as the carpenters says, measure twice and cut
once. We've measured twice on this. We have had a test of our theory and we've had a test of his
theory. Over the last five years, Mexico's tariffs have begun to come down because they've made
a unilateral decision to bring them down some, and as a result there has been a surge of exports
from the United States into Mexico, creating an additional 400,000 jobs, and we can create hundreds
of thousands of more if we continue this trend. We know this works. If it doesn't work, you know,
we give six months notice and we're out of it. But we've also had a test of his theory.
PEROT When?
GORE In 1930, when the proposal by Mr. Smoot and Mr. Hawley was to raise tariffs across the
board to protect our workers. And I brought some pictures, too.
[Larry] KING You're saying Ross is a protectionist?
GORE This is, this is a picture of Mr. Smoot and Mr. Hawley. They look like pretty good fellows.
They sounded reasonable at the time; a lot of people believed them. The Congress passed the Smoot-Hawley
Protection Bill. He wants to raise tariffs on Mexico. They raised tariffs, and it was one of the
principal causes, many economists say the principal cause, of the Great Depression in this country
and around the world. Now, I framed this so you can put it on your wall if you want to.
You obviously have not read Krugman. Here is from his 1997 Slate piece:
But putting Greenspan (or his successor) into the picture restores much of the classical vision
of the macroeconomy. Instead of an invisible hand pushing the economy toward full employment in
some unspecified long run, we have the visible hand of the Fed pushing us toward its estimate
of the noninflationary unemployment rate over the course of two or three years. To accomplish
this, the board must raise or lower interest rates to bring savings and investment at that target
unemployment rate in line with each other.
And so all the paradoxes of thrift, widow's cruses, and so on become irrelevant. In particular,
an increase in the savings rate will translate into higher investment after all, because the Fed
will make sure that it does.
To me, at least, the idea that changes in demand will normally be offset by Fed policy--so
that they will, on average, have no effect on employment--seems both simple and entirely reasonable.
Yet it is clear that very few people outside the world of academic economics think about things
that way. For example, the debate over the North American Free Trade Agreement was conducted almost
entirely in terms of supposed job creation or destruction. The obvious (to me) point that the
average unemployment rate over the next 10 years will be what the Fed wants it to be, regardless
of the U.S.-Mexico trade balance, never made it into the public consciousness. (In fact, when
I made that argument at one panel discussion in 1993, a fellow panelist--a NAFTA advocate, as
it happens--exploded in rage: "It's remarks like that that make people hate economists!")
Yes. But please do not interrupt PeterK with reality. He has important work do with his bash all
things Krugman agenda. BTW - it is a riot that he cites Ross Perot on NAFTA. Perot has a self
centered agenda there which Gore exposed. Never trust a corrupt business person whether it is
Perot or Trump.
Yes the model PeterK is using is unclear. He doesn't seem to have a grasp on the economics of
the issues. He seems to think that Sanders is a font of economic wisdom who is not to be questioned.
I would hate to see the left try to make a flawed candidate into the larger than life icon that
the GOP has made out of Reagan.
"Yes the model PeterK is using is unclear. He doesn't seem to have a grasp on the economics of
the issues."
Dean Baker and Jared Bernstein. Like you I want full employment and rising wages. And like
Krugman I am very much an internationalist. I want us to deal fairly with the rest of the world.
We need to cooperate especially in the face of global warming.
1. My first, best solution would be fiscal action. Like everyone else. I prefer Sanders's unicorn
plan of $1 trillion over five years rather than Hillary's plan which is one quarter of the size.
Her plan puts more pressure on the Fed and monetary policy.
a. My preference would be to pay for it with Pigouvian taxes on the rich, corporations, and
the financial sector.
b. if not a, then deficit spending like Trudeau in Canada
C. if the deficit hawks block that, then monetary-financing would be the way around them.
2. close the trade deficit. Dean Baker and Bernstein have written about this a lot. Write currency
agreements into trade deals. If we close the trade deficit and are at full employment, then we
can import more from the rest of the world.
3. If powerful interests block 1. and 2. then lean on monetary policy. Reduce the price of
credit to boost demand. It works as a last resort.
"I would hate to see the left try to make a flawed candidate into the larger than life icon
that the GOP has made out of Reagan.'
I haven't seen any evidence of this. It would be funny if the left made an old Jewish codger
from Brooklyn into an icon. Feel the Bern!!!
Sanders regularly points out it's not about him as President fixing everything, it's about
creating a movement. It's about getting people involved. He can't do it by himself. Obama would
say this too. Elizabeth Warren become popular by saying the same things Sanders is saying.
However to say that the conventional case for trade liberalization relies on the Compensation
Principle isn't quite accurate. The conventional case has traditionally relied on the assertion
that "we" are better off with trade since we could *theoretically* distribute the gains. However,
free trade boosters never seem to get around to worrying about distributing the gains *in practice*.
In practice, free trade is typically justified simply by the net aggregate gain, regardless of
how these gains are distributed or who is hurt in the process.
To my mind, before considering some trade liberalization deal we should FIRST agree to and
implement the redistribution mechanisms and only then reduce barriers. Implementing trade deals
in a backward, half-assed way as has typically been the case often makes "us" worse off than autarky.
"Krugman has at times advocated free markets in contexts where they are often viewed as controversial.
He has ... likened the opposition against free trade and globalization to the opposition against
evolution via natural selection (1996),[167]
(In fact, when I made that argument at one panel discussion in 1993, a fellow panelist--a NAFTA
advocate, as it happens--exploded in rage: "It's remarks like that that make people hate economists!")
[Thanks to electoral politics, we're all fellow panelists now.]
"To me, at least, the idea that changes in demand will normally be offset by Fed policy--so that
they will, on average, have no effect on employment--seems both simple and entirely reasonable.
Yet it is clear that very few people outside the world of academic economics think about things
that way."
As we've seen the Fed is overly fearful of inflation, so the Fed doesn't offset the trade deficit
as quickly as it should. Instead we suffer hysteresis and reduction of potential output.
"The truth is that if Sanders were to make it to the White House, he would find it very hard to
do anything much about globalization - not because it's technically or economically impossible,
but because the moment he looked into actually tearing up existing trade agreements the diplomatic,
foreign-policy costs would be overwhelmingly obvious."
Here Krugman is more honest. We're basically buying off the Chinese, etc. The cost for stopping
this would be less cooperation from the Chinese, etc.
This is new. He never used to say this kind of thing. Instead he'd go after "protectionists"
as luddites.
"This is new. He never used to say this kind of thing. Instead he'd go after "protectionists"
as luddites."
You have Krugman confused with Greg Mankiw. Most real international economics (Mankiw is not
one) recognize the distributional consequences of free trade v. protectionism. Then again - putting
forth the Mankiw uninformed spin is a prerequisite for being on Team Republican. Of course Republicans
will go protectionist whenever it is politically expedient as in that temporary set of steel tariffs.
Helped Bush-Cheney in 2004 and right after that - no tariffs. Funny how that worked.
Where is the "redistribution from government" in the TPP. There isn't any.
Even the NAFTA side agreements on labor and the environment are toothless. The point of these
corporate trade deals is to profit from the lower labor and environmental standards of poorer
countries.
The fact that you resort to calling me a professional Krugman hater means you're not interested
in an actual debate about actual ideas. You've lost the debate and I'm not participating.
One is not allowed to criticize Krugman lest one be labeled a professional Krugman hater?
Your resort to name calling just weakens the case you're making.
You of late have wasted so much space misrepresenting what Krugman has said. Maybe you don't hate
him - maybe you just want to get his attention. For a date maybe. Lord - the troll in you is truly
out of control.
Sandwichman may think Krugman changed his views but if one actually read what he has written over
the years (as opposed to your cherry picking quotes), you might have noticed otherwise. But of
course you want Krugman to look bad. It is what you do.
Sizeable numbers of Americans have seen wages decline in real terms for nearly 20 years. Many/most
parents in many communities do not see a better future before them, or for their children.
Notable quotes:
"... Democracy demands that ballot access rules be selected by referendum, not by the very legacy parties that maintain legislative control by effectively denying ballot access to parties that will pose a challenge to their continued rule. ..."
"... I think the U.S. Party system, in the political science sense, shifted to a new state during George W Bush's administration as, in Kevin Phillip's terms the Republican Party was taken over by Theocrats and Bad Money. ..."
"... My understanding is trumps support disproportionately comes from the small business owning classes, Ie a demographic similar to the petite bourgeoisie who have often been heavily involved in reactionary movements. This gets oversold as "working class" when class is defined by education level rather than income. ..."
"... Racism serves as an organizing principle. Politically, in an oppressive and stultifying hierarchy like the plantation South, racism not incidentally buys the loyalty of subalterns with ersatz status. ..."
"... For a time, the balkanization of American political communities by race, religion and ethnicity was an effective means to the dominance of an tiny elite with ties to an hegemonic community, but it backfired. Dismantling that balkanization has left the country with a very low level of social affiliation and thus a low capacity to organize resistance to elite depredations. ..."
"... Watching Clinton scoop up bankster money, welcome Republicans neocons to the ranks of her supporters does not fill me with hope. ..."
Legislators affiliated with the duopoly parties should not write the rules governing the ballot
access of third parties. This exclusionary rule making amounts to preserving a self-dealing duopoly.
Elections are the interest of the people who vote and those elected should not be able to subvert
the democratic process by acting as a cartel.
Democracy demands that ballot access rules be selected by referendum, not by the very legacy
parties that maintain legislative control by effectively denying ballot access to parties that
will pose a challenge to their continued rule.
Of course any meaningful change would require a voluntary diminishment of power of the duopoly
that now has dictatorial control over ballot access, and who will prevent any Constitutional Amendment
that would enhance the democratic nature of the process.
bruce wilder 08.02.16 at 8:02 pm
I think the U.S. Party system, in the political science sense, shifted to a new state during
George W Bush's administration as, in Kevin Phillip's terms the Republican Party was taken over
by Theocrats and Bad Money.
Ronan(rf) 08.04.16 at 10:35 pm
"I generally don't give a shit about polls so I have no "data" to evidence this claim,
but my guess is the majority of Trump's support comes from this broad middle"
My understanding is trumps support disproportionately comes from the small business owning
classes, Ie a demographic similar to the petite bourgeoisie who have often been heavily involved
in reactionary movements. This gets oversold as "working class" when class is defined by education
level rather than income.
This would make some sense as they are generally in economically unstable jobs, they tend to
be hostile to both big govt (regulations, freeloaders) and big business (unfair competition),
and while they (rhetorically at least) tend to value personal autonomy and self sufficiency ,
they generally sell into smaller, local markets, and so are particularly affected by local demographic
and cultural change , and decline. That's my speculation anyway.
bruce wilder 08.06.16 at 4:28 pm
I am somewhat suspicious of leaving dominating elites out of these stories of racism as an
organizing principle for political economy or (cultural) community.
Racism served the purposes of a slaveholding elite that organized political communities to
serve their own interests. (Or, vis a vis the Indians a land-grab or genocide.)
Racism serves as an organizing principle. Politically, in an oppressive and stultifying
hierarchy like the plantation South, racism not incidentally buys the loyalty of subalterns with
ersatz status. The ugly prejudices and resentful arrogance of working class whites is thus
a component of how racism works to organize a political community to serve a hegemonic master
class. The business end of racism, though, is the autarkic poverty imposed on the working communities:
slaves, sharecroppers, poor blacks, poor whites - bad schools, bad roads, politically disabled
communities, predatory institutions and authoritarian governments.
For a time, the balkanization of American political communities by race, religion and ethnicity
was an effective means to the dominance of an tiny elite with ties to an hegemonic community,
but it backfired. Dismantling that balkanization has left the country with a very low level of
social affiliation and thus a low capacity to organize resistance to elite depredations.
bruce wilder 08.06.16 at 4:31 pm
Watching Clinton scoop up bankster money, welcome Republicans neocons to the ranks of her
supporters does not fill me with hope.
Trump and the other illiberal populists have been benefiting from three overlapping backlashes.
The first is cultural. Movements for civil liberties have been remarkably successful over the
last 40 years. Women, ethnic and religious minorities, and the LGBTQ community have secured important
gains at a legal and cultural level. It is remarkable, for instance, how quickly same-sex marriage
has become legal in more than 20 countries when no country recognized it before 2001.
Resistance has always existed to these movements to expand the realm of civil liberties. But this
backlash increasingly has a political face. Thus the rise of parties that challenge multiculturalism
and immigration in Europe, the movements throughout Africa and Asia that support the majority over
the minorities, and the Trump/Tea Party takeover of the Republican Party with their appeals to primarily
white men.
The second backlash is economic. The globalization of the economy has created a class of enormously
wealthy individuals (in the financial, technology, and communications sectors). But globalization
has left behind huge numbers of low-wage workers and those who have watched their jobs relocate to
other countries.
Illiberal populists have directed all that anger on the part of people left behind by the world
economy at a series of targets: bankers who make billions, corporations that are constantly looking
for even lower-wage workers, immigrants who "take away our jobs," and sometimes ethnic minorities
who function as convenient scapegoats. The targets, in other words, include both the very powerful
and the very weak.
The third backlash, and perhaps the most consequential, is political. It's not just that people
living in democracies are disgusted with their leaders and the parties they represent. Rather, as
political scientists Roberto Stefan Foa and Yascha Mounk
write in the Journal of Democracy , "they have also become more cynical about the value
of democracy as a political system, less hopeful that anything they do might influence public policy,
and more willing to express support for authoritarian alternatives."
Foa and Mounk are using 20 years of data collected from surveys of citizens in Western Europe
and North America – the democracies with the greatest longevity. And they have found that support
for illiberal alternatives is greater among the younger generation than the older one. In other countries
outside Europe and North America, the disillusionment with democratic institutions often takes the
form of a preference for a powerful leader who can break the rules if necessary to preserve order
and stability – like Putin in Russia or Abdel Fattah el-Sisi in Egypt or Prayuth Chan-ocha in Thailand.
These three backlashes – cultural, economic, political – are also anti-internationalist because
international institutions have become associated with the promotion of civil liberties and human
rights, the greater globalization of the economy, and the constraint of the sovereignty of nations
(for instance, through the European Union or the UN's "responsibility to protect" doctrine).
... ... ....
The current political order is coming apart. If we don't come up with a fair, Green, and internationalist
alternative, the illiberal populists will keep winning. John Feffer is the director of Foreign
Policy In Focus.
"... if neo-liberalism is partly defined by the free flow of goods, labor and capital - and that has been the Republican agenda since at least Reagan - how is Trump a continuation of the same tradition?" ..."
"... Trump is a conservative (or right populist, or whatever), and draws on that tradition. He's not a neoliberal. ..."
"... Trump is too incoherent to really represent the populist view. He's consistent w/the trade and immigration views but (assuming you can actually figure him out) wrong on banks, taxes, etc. ..."
"... But the next populists we see might be more full bore. When that happens, you'll see much more overlap w/Sanders economic plans for the middle class. ..."
"... There's always tension along the lead running between the politician and his constituents. The thing that seems most salient to me at the present moment is the sense of betrayal pervading our politics. At least since the GFC of 2008, it has been hard to deny that the two Parties worked together to set up an economic betrayal. And, the long-running saga of the wars in Iraq and Afghanistan also speak to elite failure, as well as betrayal. ..."
"... Trump is a novelty act. He represents a chance for people who feel resentful without knowing much of anything about anything to cast a middle-finger vote. They wouldn't be willing to do that, if times were really bad, instead of just disappointing and distressing. ..."
"... There's also the fact Reagan tapped a fair number of Nixon people, as did W years later. Reagan went after Nixon in the sense of running against him, and taking the party in a much more hard-right direction, sure. But he was repudiated largely because he got caught doing dirty tricks with his pants down. ..."
"... From what I can tell - the 1972 election gave the centrists in the democratic party power to discredit and marginalize the anti-war left, and with it, the left in general. ..."
"... Ready even now to whine that she's a victim and that the whole community is at fault and that people are picking on her because she's a woman, rather than because she has a habit of making accusations like this every time she comments. ..."
"... That is a perfect example of predatory "solidarity". Val is looking for dupes to support her ..."
"Once again, if neo-liberalism is partly defined by the free flow of goods, labor and capital
- and that has been the Republican agenda since at least Reagan - how is Trump a continuation
of the same tradition?"
You have to be willing to see neoliberalism as something different
from conservatism to have the answer make any sense. John Quiggin has written a good deal here
about a model of U.S. politics as being divided into left, neoliberal, and conservative. Trump
is a conservative (or right populist, or whatever), and draws on that tradition. He's not a neoliberal.
... ... ...
T 08.12.16 at 5:52 pm
RP @683
That's a bit of my point. I think Corey has defined the Republican tradition solely
in response to the Southern Strategy that sees a line from Nixon (or Goldwater) to Trump. But
that gets the economics wrong and the foreign policy too - the repub foreign policy view has not
been consistent across administrations and Trump's economic pans (to the extent he has a plan)
are antithetical to the Nixon – W tradition. I have viewed post-80 Dem administrations as neoliberals
w/transfers and Repub as neoliberals w/o transfers.
Trump is too incoherent to really represent the populist view. He's consistent w/the trade
and immigration views but (assuming you can actually figure him out) wrong on banks, taxes, etc.
But the next populists we see might be more full bore. When that happens, you'll see much
more overlap w/Sanders economic plans for the middle class. Populists have nothing against
gov't programs like SS and Medicare and were always for things like the TVA and infrastructure
spending. Policies aimed at the poor and minorities not so much.
T @ 685: Trump is too incoherent to really represent the populist view.
There's always tension along the lead running between the politician and his constituents.
The thing that seems most salient to me at the present moment is the sense of betrayal pervading
our politics. At least since the GFC of 2008, it has been hard to deny that the two Parties worked
together to set up an economic betrayal. And, the long-running saga of the wars in Iraq and Afghanistan
also speak to elite failure, as well as betrayal.
These are the two most unpopular candidates in living memory. That is different.
I am not a believer in "the fire next time". Trump is a novelty act. He represents a chance
for people who feel resentful without knowing much of anything about anything to cast a middle-finger
vote. They wouldn't be willing to do that, if times were really bad, instead of just disappointing
and distressing.
Nor will Sanders be back. His was a last New Deal coda. There may be second acts in American
life, but there aren't 7th acts.
If there's a populist politics in our future, it will have to have a much sharper edge. It
can talk about growth, but it has to mean smashing the rich and taking their stuff. There's very
rapidly going to come a point where there's no other option, other than just accepting cramdown
by the authoritarian surveillance state built by the neoliberals. that's a much taller order than
Sanders or Trump have been offering.<
Corey, you write: "It's not just that the Dems went after Nixon, it's also that Nixon had so few
allies. People on the right were furious with him because they felt after this huge ratification
that the country had moved to the right, Nixon was still governing as if the New Deal were the
consensus. So when the time came, he had very few defenders, except for loyalists like Leonard
Garment and G. Gordon Liddy. And Al Haig, God bless him."
You've studied this more than I have,
but this is at least somewhat at odds with my memory. I recall some prominent attackers of Nixon
from the Republican party that were moderates, at least one of whom was essentially kicked out
of the party for being too liberal in later years. There's also the fact Reagan tapped a fair
number of Nixon people, as did W years later. Reagan went after Nixon in the sense of running
against him, and taking the party in a much more hard-right direction, sure. But he was repudiated
largely because he got caught doing dirty tricks with his pants down.
To think that something similar would happen to Clinton (watergate like scandal) that would
actually have a large portion of the left in support of impeachment, she would have to be as dirty
as Nixon was, *and* the evidence to really put the screws to her would have to be out, as it was
against Nixon during watergate.
OTOH, my actual *hope* would be that a similar left-liberal sea change comparable to 1980 from
the right would be plausible. I don't think a 1976-like interlude is plausible though, that would
require the existence of a moderate republican with enough support within their own party to win
the nomination. I suppose its possible that such a beast could come to exist if Trump loses a
landslide, but most of the plausible candidates have already left or been kicked out of the party.
From what I can tell - the 1972 election gave the centrists in the democratic party power
to discredit and marginalize the anti-war left, and with it, the left in general. A comparable
election from the other side would give republican centrists/moderates the ability to discredit
and marginalize the right wing base. But unlike Democrats in 1972, there aren't any moderates
left in the Republican party by my lights. I'm much more concerned that this will simply re-empower
the hard-core conservatives with plausbly-deniable dog-whistle racism who are now the "moderates",
and enable them to whitewash their history.
Unfortunately, unlike you, I'm not convinced that a landslide is possible without an appeal
to Reagan/Bush republicans. I don't think we're going to see a meaningful turn toward a real left
until Democrats can win a majority of statehouses and clean up the ridiculous gerrymandering.
Val: "Similarly with your comments on "identity politics" where you could almost be seen
by MRAs and white supremacists as an ally, from the tone of your rhetoric."
That is 100% perfect Val. Insinuates that BW is a sort-of-ally of white supremacists - an infuriating
insinuation. Does this insinuation based on a misreading of what he wrote. Completely resistant
to any sort of suggestion that what she dishes out so expansively to others had better be something
she should be willing to accept herself, or that she shouldn't do it. Ready even now to whine
that she's a victim and that the whole community is at fault and that people are picking on her
because she's a woman, rather than because she has a habit of making accusations like this every
time she comments.
That is a perfect example of predatory "solidarity". Val is looking for dupes to support
her - for people to jump in saying "Why are you being hostile to women?" in response to people's
response to her comment.
"... More than a dozen Republican rivals, described as the strongest GOP field since 1980, were sent packing. This was the year Americans rose up to pull down the establishment in a peaceful storming of the American Bastille. ..."
"... If 2016 taught us anything, it is that if the establishment's hegemony is imperiled, it will come together in ferocious solidarity - for the preservation of their perks, privileges and power. All the elements of that establishment - corporate, cultural, political, media - are today issuing an ultimatum to Middle America: Trump is unacceptable. Instructions are going out to Republican leaders that either they dump Trump, or they will cease to be seen as morally fit partners in power. ..."
"... Our CIA, NGOs and National Endowment for Democracy all beaver away for "regime change" in faraway lands whose rulers displease us. How do we effect "regime change" here at home? ..."
"... Donald Trump's success, despite the near-universal hostility of the media, even much of the conservative media, was due in large part to the public's response to the issues he raised. ..."
"I'm afraid the election is going to be rigged," Donald Trump told voters
in Ohio and Sean Hannity on Fox News. And that hit a nerve.
"Dangerous," "toxic," came the recoil from the media.
Trump is threatening to "delegitimize" the election results of 2016.
Well, if that is what Trump is trying to do, he has no small point. For consider
what 2016 promised and what it appears about to deliver.
This longest of election cycles has rightly been called the Year of the Outsider.
It was a year that saw a mighty surge of economic populism and patriotism, a
year when a 74-year-old Socialist senator set primaries ablaze with mammoth
crowds that dwarfed those of Hillary Clinton.
It was the year that a non-politician, Donald Trump, swept Republican primaries
in an historic turnout, with his nearest rival an ostracized maverick in his
own Republican caucus, Senator Ted Cruz.
More than a dozen Republican rivals, described as the strongest GOP field
since 1980, were sent packing. This was the year Americans rose up to pull down
the establishment in a peaceful storming of the American Bastille.
But if it ends with a Clintonite restoration and a ratification of the same
old Beltway policies, would that not suggest there is something fraudulent about
American democracy, something rotten in the state?
If 2016 taught us anything, it is that if the establishment's hegemony
is imperiled, it will come together in ferocious solidarity - for the preservation
of their perks, privileges and power. All the elements of that establishment
- corporate, cultural, political, media - are today issuing an ultimatum to
Middle America: Trump is unacceptable. Instructions are going out to Republican
leaders that either they dump Trump, or they will cease to be seen as morally
fit partners in power.
It testifies to the character of Republican elites that some are seeking
ways to carry out these instructions, though this would mean invalidating and
aborting the democratic process that produced Trump.
But what is a repudiated establishment doing issuing orders to anyone?
Why is it not Middle America issuing the demands, rather than the other way
around?
Specifically, the Republican electorate should tell its discredited and rejected
ruling class: If we cannot get rid of you at the ballot box, then tell us how,
peacefully and democratically, we can be rid of you?
You want Trump out? How do we get you out? The Czechs had their Prague Spring.
The Tunisians and Egyptians their Arab Spring. When do we have our American
Spring? The Brits had their "Brexit," and declared independence of an arrogant
superstate in Brussels. How do we liberate ourselves from a Beltway superstate
that is more powerful and resistant to democratic change?
Our CIA, NGOs and National Endowment for Democracy all beaver away for
"regime change" in faraway lands whose rulers displease us. How do we effect
"regime change" here at home?
Donald Trump's success, despite the near-universal hostility of the media,
even much of the conservative media, was due in large part to the public's response
to the issues he raised.
He called for sending illegal immigrants back home, for securing America's
borders, for no amnesty. He called for an America First foreign policy to
keep us out of wars that have done little but bleed and bankrupt us.
He called for an economic policy where the Americanism of the people
replaces the globalism of the transnational elites and their K Street lobbyists
and congressional water carriers.
He denounced NAFTA, and the trade deals and trade deficits with China,
and called for rejection of the Trans-Pacific Partnership.
By campaign's end, he had won the argument on trade, as Hillary Clinton was
agreeing on TPP and confessing to second thoughts on NAFTA.
But if TPP is revived at the insistence of the oligarchs of Wall Street,
the Business Roundtable, the U.S. Chamber of Commerce - backed by conscript
editorial writers for newspapers that rely on ad dollars - what do elections
really mean anymore?
And if, as the polls show we might, we get Clinton - and TPP, and amnesty,
and endless migrations of Third World peoples who consume more tax dollars than
they generate, and who will soon swamp the Republicans' coalition - what was
2016 all about?
Would this really be what a majority of Americans voted for in this most
exciting of presidential races?
"Those who make peaceful revolution impossible will make violent revolution
inevitable," said John F. Kennedy.
The 1960s and early 1970s were a time of social revolution in America, and
President Nixon, by ending the draft and ending the Vietnam war, presided over
what one columnist called the "cooling of America."
But if Hillary Clinton takes power, and continues America on her present
course, which a majority of Americans rejected in the primaries, there is going
to be a bad moon rising.
And the new protesters in the streets will not be overprivileged children
from Ivy League campuses.
"... the capitalist economy is more and more an asset driven one. This article does not even begin to address the issue of asset valuations, the explicit CB support for asset inflation and the effect on inequality, and especially generational plunder. ..."
"... the problem of living standards is obviously a Malthusian one. despite all the progress of social media tricks, we cannot fool nature. the rate of ecological degradation is alarming, and now irreversible. "the market" is now moving rapidly to real assets. This will eventually lead to war as all war is eventually for resources. ..."
No matter what central banks do, their actions will not be able to create the same level of
economic growth that we have become used to over the past seven decades.
Economic growth does not come from the central banks; if government sought to provide the basics
for all its citizens, including health care, education, a home, and proper food and all the infrastructure
needed to give people the basics, then you could have something akin to "growth" while at the
same time making life more pleasant for the less fortunate. There seems to be no definition of
economic growth that includes everyone.
This seems a very elaborate way of stating a simple problem, that can be summarised in three
points.
The living standards of most people have fallen over the last thirty years or so because of
the impact of neoliberal economic policies. Conventional politicians are promising only more
of the same. Therefore people are increasingly voting for non-conventional politicians.
Neoliberalism has only exacerbated falling living standards. Living standards would be falling
even without it, albeit more gradually.
Neoliberalism itself may even be nothing more than a standard type response of species that
have expanded beyond the capacity of their environment to support them. What we see as an evil
ideology is only the expression of a mechanism that apportions declining resources to the elites,
like shutting shutting down the periphery so the core can survive as in hypothermia.
I really don't have problem with this. Let the financial sector run the world into the ground
and get it over with.
In defference to a great many knowledgable commentors here that work in the FIRE sector, I
don't want to create a damning screed on the cost of servicing money, but at some point even the
most considered opinions have to acknowledge that that finance is flooded with *talent* which
creates a number of problems; one being a waste of intellect and education in a field that doesn't
offer much of a return when viewed in an egalitarian sense, secondly; as the field grows due to,
the technical advances, the rise in globilization, and the security a financial occuptaion offers
in an advanced first world country nowadays, it requires substantially more income to be devoted
to it's function.
This income has to be derived somewhere, and the required sacrifices on every facet of a global
economy to bolster positions and maintain asset prices has precipitated this decline in the well
being of peoples not plugged-in to the consumer capitalist regime and dogma.
Something has to give here, and I honestly couldn't care about your 401k or home resale value,
you did this to yourself as much as those day-traders who got clobbered in the dot-com crash.
the capitalist economy is more and more an asset driven one. This article does not even
begin to address the issue of asset valuations, the explicit CB support for asset inflation and
the effect on inequality, and especially generational plunder.
the problem of living standards is obviously a Malthusian one. despite all the progress
of social media tricks, we cannot fool nature. the rate of ecological degradation is alarming,
and now irreversible. "the market" is now moving rapidly to real assets. This will eventually
lead to war as all war is eventually for resources.
"... RBC Capital Markets' Global Head of Commodity Strategy Helima Croft outlined three potential scenarios for WTI crude on CNBC's "Fast Money" for the new year. The most bullish situation would be seeing more than a million barrels of oil pulled off the market and prices averaging in the $60 dollar range. ..."
"... "If you are thinking about sort of about a mid-$30s average for WTI, low-$40s, I think that's a bearish scenario," said Croft, who's also a CNBC contributor. ..."
"... "Our base case is this sort of middle range... $52 is our WTI call for next year," she said, implying that U.S. crude would be nearly one-third higher than its current trading levels. The fourth quarter "is really where you want to be looking for WTI to sort of take-off," she added. ..."
RBC Capital Markets' Global Head of Commodity Strategy Helima Croft outlined three potential
scenarios for WTI crude on CNBC's "Fast Money" for the new year. The most bullish situation would
be seeing more than a million barrels of oil pulled off the market and prices averaging in the
$60 dollar range.
The worst case scenario involves a tsunami of new production from OPEC, Saudi Arabia, Iran and
Libya hitting the market -- all but certain to drive prices even lower. On Thursday, the final day
of trading before the Christmas holiday, Brent and U.S. crude closed up by more than a percent,
but still well under $40 per barrel.
"If you are thinking about sort of about a mid-$30s average for WTI, low-$40s, I think that's
a bearish scenario," said Croft, who's also a CNBC contributor.
... ... ....
"Our base case is this sort of middle range... $52 is our WTI call for next year," she
said, implying that U.S. crude would be nearly one-third higher than its current trading levels.
The fourth quarter "is really where you want to be looking for WTI to sort of take-off," she
added.
But those politicians lucky enough to win discover -- if they did not know already -- that their
capacity to affect even their own domestic environment is constrained by forces beyond their control.
Notable quotes:
"... But those politicians lucky enough to win discover -- if they did not know already -- that their capacity to affect even their own domestic environment is constrained by forces beyond their control. ..."
"... In the case of Britain, the once-powerful centralized governments of that country are now multiply constrained. As the power of Britain in international affairs has declined, so has the British government's power within its own domain. Membership of the European Union constrains British governments' ability to determine everything from the quantities of fish British fishermen can legally catch to the amount in fees that British universities can charge students from other EU countries. ..."
"... Not least, the EU's insistence on the free movement of labor caused the Conservative-dominated coalition that came to power in 2010 to renege on the Tories' spectacularly ill-judged pledge to reduce to "tens of thousands a year" the number of migrants coming to Britain. The number admitted in 2014 alone was nearer 300,000. ..."
"... On top of all that, British governments -- even more than those of some other predominantly capitalist economies -- are open to being buffeted by market forces, whose winds can acquire gale force. In a world of substantially free trade, imports and exports of goods and services are largely beyond any government's control, and the Bank of England's influence over the external value of sterling is negligible. During the present election campaign, HSBC, one of the world's largest banks, indicated that it was contemplating shifting its headquarters from the City of London to Hong Kong. For good or ill, Britain's government was, and is, effectively helpless to intervene. ..."
"... That's why we need a federal Europe. Local governments for local issues and elected by the local people and a European government for European issues elected by all Europeans. ..."
Once upon a time, national elections were -- or seemed to be -- overwhelmingly domestic affairs,
affecting only the peoples of the countries taking part in them. If that was ever true, it is so
no longer. Angela Merkel negotiates with Greece's government with Germany's voters looming in the
background. David Cameron currently fights an election campaign in the UK holding fast to the belief
that a false move on his part regarding Britain's relationship with the EU could cost his Conservative
Party seats, votes and possibly the entire election.
Britain provides a good illustration of a general proposition. It used to be claimed, plausibly,
that "all politics is local." In 2015, electoral politics may still be mostly local, but the post-electoral
business of government is anything but local. There is a misfit between the two. Voters are mainly
swayed by domestic issues. Vote-seeking politicians campaign accordingly. But those politicians
lucky enough to win discover -- if they did not know already -- that their capacity to affect even
their own domestic environment is constrained by forces beyond their control.
Anyone viewing the UK election campaign from afar could be forgiven for thinking that British
voters and politicians alike imagined they were living on some kind of self-sufficient sea-girt island.
The opinion polls indicate that a large majority of voters are preoccupied -- politically as well
as in other ways -- with their own financial situation, tax rates, welfare spending and the future
of the National Health Service. Immigration is an issue for many voters, but mostly in domestic terms
(and often as a surrogate for generalized discontent with Britain's political class). The fact that
migrants from Eastern Europe and elsewhere make a positive net contribution to both the UK's economy
and its social services scarcely features in the campaign.
... ... ...
After polling day, all that will change -- probably to millions of voters' dismay. One American
presidential candidate famously said that politicians campaign in poetry, but govern in prose. Politicians
in democracies, not just in Britain, campaign as though they can move mountains, then find that most
mountains are hard or impossible to move.
In the case of Britain, the once-powerful centralized governments of that country are now
multiply constrained. As the power of Britain in international affairs has declined, so has the British
government's power within its own domain. Membership of the European Union constrains British governments'
ability to determine everything from the quantities of fish British fishermen can legally catch to
the amount in fees that British universities can charge students from other EU countries.
Not least, the EU's insistence on the free movement of labor caused the Conservative-dominated
coalition that came to power in 2010 to renege on the Tories' spectacularly ill-judged pledge to
reduce to "tens of thousands a year" the number of migrants coming to Britain. The number admitted
in 2014 alone was nearer 300,000.
The UK's courts are also far more active than they were. The British parliament in 1998 incorporated
the European Convention on Human Rights into British domestic law, and British judges have determinedly
enforced those rights. During the 1970s, they had already been handed responsibility for enforcing
the full range of EU law within the UK.
Also, Britain's judges have, on their own initiative, exercised increasingly frequently their
long-standing power of "judicial review," invalidating ministerial decisions that violated due process
or seemed to them to be wholly unreasonable. Devolution of substantial powers to semi-independent
governments in Scotland, Wales and Northern Ireland has also meant that the jurisdiction of many
so-called UK government ministers is effectively confined to the purely English component part.
On top of all that, British governments -- even more than those of some other predominantly
capitalist economies -- are open to being buffeted by market forces, whose winds can acquire gale
force. In a world of substantially free trade, imports and exports of goods and services are largely
beyond any government's control, and the Bank of England's influence over the external value of sterling
is negligible. During the present election campaign, HSBC, one of the world's largest banks, indicated
that it was contemplating shifting its headquarters from the City of London to Hong Kong. For good
or ill, Britain's government was, and is, effectively helpless to intervene.
The heirs of Gladstone, Disraeli, Lloyd George and Winston Churchill, Britain's political leaders
are understandably still tempted to talk big. But their effective real-world influence is small.
No wonder a lot of voters in Britain feel they are being conned.
ItsJustTim
That's globalization. And it won't go away, even if you vote nationalist. The issues are increasingly
international, while the voters still have a mostly local perspective. That's why we need
a federal Europe. Local governments for local issues and elected by the local people and a European
government for European issues elected by all Europeans.
"... it seems fair to say: Globalism isn't quite the Wave of the Future that most observers thought it was, even just a year ago. And so before we attempt to divide the true intentions of Clinton and Trump, we might first step back and consider how we got to this point. ..."
"... An Inquiry into the Nature and Causes of the Wealth of Nations . ..."
"... Clinton will say anything then she'll sell you out. I hope we never get a chance to see how she will sell us out on TPP ..."
"... What we would be headed for under Hillary Clinton is fascism--Mussolini's shorthand definition of fascism was the marriage of industry and commerce with the power of the State. That is what the plutocrats who run the big banks (to whom she owes her soul) aim to do. President, Thomas Jefferson knew the dangers of large European-style central banks. ..."
On the surface, it appears that Hillary Clinton and Donald Trump, for all their mutual antipathy,
are united on one big issue: opposition to new trade deals. Here's a recent headline in
The Guardian: "Trump and Clinton's free trade retreat: a pivotal moment for the world's
economic future."
And the subhead continues in that vein:
Never before have both main presidential candidates broken so completely with Washington orthodoxy
on globalization, even as the White House refuses to give up. The problem, however, goes much
deeper than trade deals.
In the above quote, we can note the deliberate use of the loaded word, "problem." As in, it's
a problem that free trade is unpopular-a problem, perhaps, that the MSM can fix. Yet in the
meantime, the newspaper sighed, the two biggest trade deals on the horizon, the well-known
Trans Pacific Partnership (TPP), and the lesser-known
Trans Atlantic Trade Investment
Partnership (TTIP), aimed at further linking the U.S. and European Union (EU), are both in jeopardy.
So now we must ask broader questions: What does this mean for trade treaties overall? And what
are the implications for globalism?
More specifically, we can ask: Are we sure that the two main White House hopefuls, Clinton and
Trump, are truly sincere in their opposition to those deals? After all, as has been
widely reported, President Obama still has plans to push TPP through to enactment in the "lame
duck" session of Congress after the November elections. Of course, Obama wouldn't seek to do that
if the president-elect opposed it-or would he?
Yet on August 30, Politico reminded its Beltway readership, "How
Trump or Clinton could kill Pacific trade deal." In other words, even if Obama were to move TPP
forward in his last two months in office, the 45th president could still block its implementation
in 2017 and beyond. If, that is, she or he really wanted to.
Indeed, as we think about Clinton and Trump, we realize that there's "opposition" that's for show
and there's opposition that's for real.
Still, given what's been said on the presidential campaign trail this year, it seems fair
to say: Globalism isn't quite the Wave of the Future that most observers thought it was, even just
a year ago. And so before we attempt to divide the true intentions of Clinton and Trump, we might
first step back and consider how we got to this point.
2. The Free Trade Orthodoxy
It's poignant that the headline, "Trump and Clinton's free trade retreat", lamenting the decay
of free trade, appeared in The Guardian. Until recently, the newspaper was known as The
Manchester Guardian, as in Manchester, England. And Manchester is not only a big city, population
2.5 million, it is also a city with a fabled past: You see, Manchester was the cradle of the Industrial
Revolution, which transformed England and the world. It was that city that helped create the free
trade orthodoxy that is now crumbling.
Yes, in the 18th and 19th centuries, Manchester was the leading manufacturing city in the world,
especially for textiles. It was known as "Cottonopolis."
Indeed, back then, Manchester was so much more efficient and effective at mass production that
it led the world in exports. That is, it could produce its goods at such low cost that it could send
them across vast oceans and still undercut local producers on price and quality.
Over time, this economic reality congealed into a school of thought: As Manchester grew rich from
exports, its business leaders easily found economists, journalists, and propagandists who would help
advance their cause in the press and among the intelligentsia.
The resulting school of thought became known, in the 19th century, as "Manchester
Liberalism." And so, to this day, long after Manchester has lost its economic preeminence to
rivals elsewhere in the world, the phrase "Manchester Liberalism" is a well-known in the history
of economics, bespeaking ardent support for free markets and free trade.
More recently, the hub for free-trade enthusiasm has been the United States. In particular, the
University of Chicago, home to the Nobel Prize-winning economist Milton Friedman, became free trade's
academic citadel; hence the "Chicago
School" has displaced Manchesterism.
And just as it made sense for Manchester Liberalism to exalt free trade and exports when Manchester
and England were on top, so, too, did the Chicago School exalt free trade when the U.S. was unquestionably
the top dog.
So back in the 40s and 50s, when the rest of the world was either bombed flat or still under the
yoke of colonialism, it made perfect sense that the U.S., as the only intact industrial power, would
celebrate industrial exports: We were Number One, and it was perfectly rational to make the most
of that first-place status. And if scribblers and scholars could help make the case for this new
status quo, well, bring 'em aboard. Thus the Chicago School gained ascendancy in the late 20th century.
And of course, the Chicagoans drew inspiration from a period even earlier than Manchesterism,
3. On the Origins of the Orthodoxy: Adam Smith and David Ricardo
One passage in that volume considers how individuals might optimize their own production and consumption:
It is the maxim of every prudent master of a family never to attempt to make at home what it
will cost him more to make than to buy.
Smith is right, of course; everyone should always be calculating, however informally, whether
or not it's cheaper to make it at home or buy it from someone else.
We can quickly see: If each family must make its own clothes and grow its own food, it's likely
to be worse off than if it can buy its necessities from a large-scale producer. Why? Because, to
be blunt about it, most of us don't really know how to make clothes and grow food, and it's expensive
and difficult-if not downright impossible-to learn how. So we can conclude that self-sufficiency,
however rustic and charming, is almost always a recipe for poverty.
Smith had a better idea: specialization. That is, people would specialize in one line of
work, gain skills, earn more money, and then use that money in the marketplace, buying what they
needed from other kinds of specialists.
Moreover, the even better news, in Smith's mind, was that this kind of specialization came naturally
to people-that is, if they were free to scheme out their own advancement. As Smith argued, the ideal
system would allow "every man to pursue his own interest his own way, upon the liberal plan of equality,
liberty and justice."
That is, men (and women) would do that which they did best, and then they would all come together
in the free marketplace-each person being inspired to do better, thanks to, as Smith so memorably
put it, the "invisible hand." Thus Smith articulated a key insight that undergirds the whole of modern
economics-and, of course, modern-day prosperity.
A few decades later, in the early 19th century, Smith's pioneering work was expanded upon by another
remarkable British economist, David Ricardo.
Ricardo's big idea built on Smithian specialization; Ricardo called it "comparative advantage."
That is, just as each individual should do what he or she does best, so should each country.
In Ricardo's well-known illustration, he explained that the warm and sunny climate of Portugal
made that country ideal for growing the grapes needed for wine, while the factories of England made
that country ideal for spinning the fibers needed for apparel and other finished fabrics.
Thus, in Ricardo's view, we could see the makings of a beautiful economic friendship: The Portuguese
would utilize their comparative advantage (climate) and export their surplus wine to England, while
the English would utilize their comparative advantage (manufacturing) and export apparel to Portugal.
Thus each would benefit from the exchange of efficiently-produced products, as each export paid for
the other.
Furthermore, in Ricardo's telling, if tariffs and other barriers were eliminated, then both countries,
Portugal and England, would enjoy the maximum free-trading win-win.
Actually, in point of fact-and Ricardo knew this-the relationship was much more of a win for England,
because manufacture is more lucrative than agriculture. That is, a factory in Manchester could crank
out garments a lot faster than a vineyard in Portugal could ferment wine.
And as we all know, the richer, stronger countries are industrial, not agricultural. Food is essential-and
alcohol is pleasurable-but the real money is made in making things. After all, crops can be grown
easily enough in many places, and so prices stay low. By contrast, manufacturing requires a lot of
know-how and a huge upfront investment. Yet with enough powerful manufacturing, a nation is always
guaranteed to be able to afford to import food. And also, it can make military weapons, and so, if
necessary, take foreign food and croplands by force.
We can also observe that Ricardo, smart fellow that he was, nevertheless was describing the economy
at a certain point in time-the era of horse-drawn carriages and sailing ships. Ricardo realized that
transportation was, in fact, a key business variable. He wrote that it was possible for a company
to seek economic advantage by moving a factory from one part of England to another. And yet in his
view, writing from the perspective of the year 1817, it was impossible to imagine
moving a factory from England to another country:
It would not follow that capital and population would necessarily move from England to Holland,
or Spain, or Russia.
Why this presumed immobility of capital and people? Because, from Ricardo's early 19th-century
perspective, transportation was inevitably slow and creaky; he didn't foresee steamships and airplanes.
In his day, relying on the technology of the time, it wasn't realistic to think that factories, and
their workers, could relocate from one country to another.
Moreover, in Ricardo's era, many countries were actively hostile to industrialization, because
change would upset the aristocratic rhythms of the old order. That is, industrialization could turn
docile or fatalistic peasants, spread out thinly across the countryside, into angry and self-aware
proletarians, concentrated in the big cities-and that was a formula for unrest, even revolution.
Indeed, it was not until the 20th century that every country-including China, a great civilization,
long asleep under decadent imperial misrule-figured out that it had no choice other than to industrialize.
So we can see that the ideas of Smith and Ricardo, enduringly powerful as they have been, were
nonetheless products of their time-that is, a time when England mostly had the advantages of industrialism
to itself. In particular, Ricardo's celebration of comparative advantage can be seen as an artifact
of his own era, when England enjoyed a massive first-mover advantage in the industrial-export game.
Smith died in 1790, and Ricardo died in 1823; a lot has changed since then. And yet the two economists
were so lucid in their writings that their work is studied and admired to this day.
Unfortunately, we can also observe that their ideas have been frozen in a kind of intellectual
amber; even in the 21st century, free trade and old-fashioned comparative advantage are unquestioningly
regarded as the keys to the wealth of nations-at least in the U.S.-even if they are so no longer.
4. Nationalist Alternatives to Free Trade Orthodoxy
As we have seen, Smith and Ricardo were pushing an idea, free trade, that was advantageous to
Britain.
So perhaps not surprisingly, rival countries-notably the United States and Germany-soon developed
different ideas. Leaders in Washington, D.C., and Berlin didn't want their respective nations to
be mere dependent receptacles for English goods; they wanted real independence. And so they wanted
factories of their own.
In the late 18th century, Alexander Hamilton, the visionary American patriot, could see that both
economic wealth and military power flowed from domestic industry. As the nation's first Treasury
Secretary, he persuaded President George Washington and the Congress to support a system of protective
tariffs and "internal improvements" (what today we would call infrastructure) to foster US manufacturing
and exporting.
And in the 19th century, Germany, under the much heavier-handed leadership of Otto von Bismarck,
had the same idea: Make a concerted effort to make the nation stronger.
In both countries, this industrial policymaking succeeded. So whereas at the beginning of the
19th century, England had led the world in steel production, by the beginning of the 20th century
century, the U.S. and Germany had moved well ahead. Yes, the "invisible hand" of individual self-interest
is always a powerful economic force, but sometimes, the "visible hand" of national purpose, animated
by patriotism, is even more powerful.
Thus by 1914, at the onset of World War One, we could see the results of the Smith/Ricardo model,
on the one hand, and the Hamilton/Bismarck model, on the other. All three countries-Britain, the
US, and Germany, were rich-but only the latter two had genuine industrial mojo. Indeed, during World
War One, English weakness became glaringly apparent in the 1915
shell crisis-as
in, artillery shells. It was only the massive importing of made-in-USA ammunition that saved Britain
from looming defeat.
Yet as always, times change, as do economic circumstances, as do prevailing ideas.
As we have seen, at the end of World War II, the U.S. was the only industrial power left standing.
And so it made sense for America to shift from a policy of Hamiltonian protection to a policy of
Smith-Ricardian export-minded free trade. Indeed, beginning in around 1945, both major political
parties, Democrats and Republicans, solidly embraced the new line: The U.S. would be the factory
for the world.
Yet if times, circumstances, and ideas change, they can always change again.
5. The Contemporary Crack-Up
As we have seen, in the 19th century, not every country wanted to be on the passive receiving
end of England's exports. And this was true, too, in the 20th century; Japan, notably, had its own
ideas.
If Japan had followed the Ricardian doctrine of comparative advantage, it would have focused on
exporting rice and tuna. Instead, by dint of hard work, ingenuity, and more than a little national
strategizing, Japan grew itself into a great and prosperous industrial power. Its exports, we might
note, were such high-value-adds as automobiles and electronics, not mere crops and fish.
Moreover, according to the same theory of comparative advantage, South Korea should have been
exporting parasols and kimchi, and China should have settled for exporting fortune cookies and pandas.
Yet as the South Korean economist
Ha-Joon Chang has chronicled,
these Asian nations resolved, in their no-nonsense neo-Confucian way, to launch state-guided private
industries-and the theory of comparative advantage be damned.
Yes, their efforts violated Western economic orthodoxy, but as the philosopher Kant once observed,
the actual proves the possible. Indeed, today, as we all know, the Asian tigers are among the richest
and fastest-growing economies in the world.
China is not only the world's largest economy in terms of purchasing power parity (PPP), but
also the world's largest manufacturing nation-producing 52 percent of color televisions, 75 percent
of mobile phones and 87 percent of the world's personal computers. The Chinese automobile industry
is the world's largest, twice the size of America's. China leads the world in foreign exchange
reserves. The United States is the main trading partner for seventy-six countries. China is the
main trading partner for 124.
In particular, we might pause over one item in that impressive litany: China makes 87 percent
of the world's personal computers.
Indeed, if it's true, as ZDNet reports, that
the Chinese have built "backdoors" into almost all the electronic equipment that they sell-that
is to say, the equipment that we buy-then we can assume that we face a serious military challenge,
as well as a serious economic challenge.
Yes, it's a safe bet that the People's Liberation Army has a good handle on our defense establishment,
especially now that the Pentagon has fully equipped itself with
Chinese-made iPhones and iPads.
Of course, we can safely predict that Defense Department bureaucrats will always say that there's
nothing to worry about, that they have the potential hacking/sabotage matter under control (although
just to be sure, the Pentagon might say, give us more money).
Yet we might note that this is the same defense establishment that couldn't keep track of lone
internal rogues such as Bradley Manning and Edward Snowden. Therefore, should we really believe that
this same DOD knows how to stop the determined efforts of a nation of 1.3 billion people, seeking
to hack machines-machines that they made in the first place?
Yes, the single strongest argument against the blind application of free- trade dogma is the doctrine
of self defense. That is, all the wealth in the world doesn't matter if you're conquered. Even Adam
Smith understood that; as he wrote, "Defense
. . . is of much more importance than opulence."
Yet today we can readily see: If we are grossly dependent on China for vital wares, then we can't
be truly independent of China. In fact, we should be downright fearful.
Still, despite these deep strategic threats, directly the result of careless importing, the Smith-Ricardo
orthodoxy remains powerful, even hegemonistic-at least in the English-speaking world.
Why is this so? Yes, economists are typically seen as cold and nerdy, even bloodless, and yet,
in fact, they are actual human beings. And as such, they are susceptible to the giddy-happy feeling
that comes from the hope of building a new utopia, the dream of ushering in an era of world harmony,
based on untrammeled international trade. Indeed, this woozy idealism among economists goes way back;
it was the British free trader Richard Cobden who declared in 1857,
Free trade is God's diplomacy. There is no other certain way of uniting people in the bonds
of peace.
And lo, so many wars later, many economists still believe that.
Indeed, economists today are still monolithically pro-fee trade; a
recent survey of economists found that 83 percent supported eliminating all tariffs and other
barriers; just 10 percent disagreed.
We might further note that others, too, in the financial and intellectual elite are fully on board
the free-trade train, including most corporate officers and their lobbyists, journalists, academics,
and, of course, the mostly for-hire think-tankers.
To be sure, there are always exceptions: As that Guardian article, the one lamenting the
sharp decrease in support for free trade as a "problem," noted, not all of corporate America is on
board, particularly those companies in the manufacturing sector:
Ford openly opposes TPP because it fears the deal does nothing to stop Japan manipulating its
currency at the expense of US rivals.
Indeed, we might note that the same Guardian story included an even more cautionary note,
asserting that support for free trade, overall, is remarkably rickety:
Some suggest a "bicycle theory" of trade deals: that the international bandwagon has to keep
rolling forward or else it all wobbles and falls down.
So what has happened? How could virtually the entire elite be united in enthusiasm for free trade,
and yet, even so, the free trade juggernaut is no steadier than a mere two-wheeled bike? Moreover,
free traders will ask: Why aren't the leaders leading? More to the point, why aren't the followers
following?
To answer those questions, we might start by noting the four-decade phenomenon of
wage stagnation-that's
taken a toll on support for free trade. But of course, it's in the heartland that wages have been
stagnating; by contrast,
incomes for
the bicoastal elites have been soaring.
We might also note that some expert predictions have been way off, thus undermining confidence
in their expertise. Remember, this spring, when all the experts were saying that the United Kingdom
would fall into recession, or worse, if it voted to leave the EU? Well, just the other day came this
New York Post headline: "Brexit
actually boosting the UK economy."
Thus from the Wall Street-ish perspective of the urban chattering classes, things are going well-so
what's the problem?
Yet the folks on Main Street have known a different story. They have seen, with their own eyes,
what has happened to them, and no fusillade of op-eds or think-tank monographs will persuade them
to change their mind.
However, because the two parties have been so united on the issues of trade and globalization-the
"Uniparty," it's sometimes called-the folks in the boonies have had no political alternative. And
as they say, the only power you have in this world is the power of an alternative. And so, lacking
an alternative, the working/middle class has just had to accept its fate.
Indeed, it has been a bitter fate, particularly bitter in the former industrial heartland. In
a 2013 paper, the
Economic Policy Institute (EPI) came to some startling conclusions:
Growing trade with less-developed countries lowered wages in 2011 by 5.5 percent-or by roughly
$1,800-for a full-time, full-year worker earning the average wage for workers without a four-year
college degree.
The paper added, "One-third of this total effect is due to growing trade with just China."
Continuing, EPI found that even as trade with low-wage countries caused a decrease in the incomes
for lower-end workers, it had caused an increase in the incomes of high-end workers-so no
wonder the high-end thinks globalism in great.
To be sure, some in the elite are bothered by what's been happening.
Peggy Noonan, writing earlier this year in The Wall Street Journal-a piece that must have
raised the hackles of her doctrinaire colleagues-put the matter succinctly: There's a wide, and widening,
gap between the "protected" and the "unprotected":
The protected make public policy. The unprotected live in it. The unprotected are starting
to push back, powerfully.
Of course, Noonan was alluding to the Trump candidacy-and also to the candidacy of Sen. Bernie
Sanders. Those two insurgents, in different parties, have been propelled by the pushing from all
the unprotected folks across America.
We might pause to note that free traders have arguments which undoubtedly deserve a fuller airing.
Okay. However, we can still see the limits. For example, the familiar gambit of outsourcing jobs
to China, or Mexico-or 50 other countries-and calling that "free trade" is now socially unacceptable,
and politically unsustainable.
Still, the broader vision of planetary freedom, including the free flow of peoples and their ideas,
is always enormously appealing. The United States, as well as the world, undoubtedly benefits from
competition, from social and economic mobility-and yes, from new blood.
As
Stuart Anderson, executive director of the National Foundation for American Policy, notes, "77
percent of the full-time graduate students in electrical engineering and 71 percent in computer science
at U.S. universities are international students." That's a statistic that should give every American
pause to ask: Why aren't we producing more engineers here at home?
We can say, with admiration, that Silicon Valley is the latest Manchester; as such, it's a powerful
magnet for the best and the brightest from overseas, and from a purely dollars-and-cents point of
view, there's a lot to be said for welcoming them.
So yes, it would be nice if we could retain this international mobility that benefits the U.S.-but
only if the economic benefits can be broadly shared, and patriotic assimilation of immigrants can
be truly achieved, such that all Americans can feel good about welcoming newcomers.
The further enrichment of Silicon Valley won't do much good for the country unless those riches
are somehow widely shared. In fact, amidst the ongoing outsourcing of mass-production jobs,
total employment in such boomtowns as San Francisco and San Jose has barely budged. That is,
new software billionaires are being minted every day, but their workforces tend to be tiny-or located
overseas. If that past pattern is the future pattern, well, something will have to give.
We can say: If America is to be
one nation-something Mitt "47 percent" Romney never worried about, although it cost him in the
end-then we will have to figure out a way to turn the genius of the few into good jobs for the many.
The goal isn't socialism, or anything like that; instead, the goal is the widespread distribution
of private property, facilitated, by conscious national economic development, as
I argued at the tail end of this piece.
If we can't, or won't, find a way to expand private ownership nationwide, then the populist upsurges
of the Trump and Sanders campaigns will be remembered as mere overtures to a starkly divergent future.
6. Clinton and Trump Say They Are Trade Hawks: But Are They Sincere?
So now we come to a mega-question for 2016: How should we judge the sincerity of the two major-party
candidates, Clinton or Trump, when they affirm their opposition to TPP? And how do we assess their
attitude toward globalization, including immigration, overall?
The future is, of course, unknown, but we can make a couple of points.
First, it is true that
many have questioned the sincerity of Hillary's new anti-TPP stance, especially given the presence
of such prominent free-traders as vice presidential nominee Tim Kaine and presidential transition-planning
chief Ken Salazar. Moreover, there's also Hillary's own decades-long association with open-borders
immigration policies, as well as past support for such trade bills as NAFTA, PNTR, and, of course,
TPP. And oh yes, there's the Clinton Foundation, that global laundromat for every overseas fortune;
most of those billionaires are globalists par excellence-would a President Hillary really
cross them?
Second, since there's still no way to see inside another person's mind, the best we can
do is look for external clues-by which we mean, external pressures. And so we might ask a basic question:
Would the 45th president, whoever she or he is, feel compelled by those external pressures to keep
their stated commitment to the voters? Or would they feel that they owe more to their elite friends,
allies, and benefactors?
As we have seen, Clinton has long chosen to surround herself with free traders and globalists.
Moreover, she has raised money from virtually every bicoastal billionaire in America.
So we must wonder: Will a new President Clinton really betray her own class-all those
Davos Men and Davos Women-for the sake of middle-class folks she has never met, except maybe
on a rope line? Would Clinton 45, who has spent her life courting the powerful, really stick her
neck out for unnamed strangers-who never gave a dime to the Clinton Foundation?
Okay, so what to make of Trump? He, too, is a fat-cat-even more of fat-cat, in fact, than Clinton.
And yet for more than a year now, he has based his campaign on opposition to globalism in all its
forms; it's been the basis of his campaign-indeed, the basis of his base. And his campaign policy
advisers are emphatic. According to Politico, as recently as August 30, Trump trade adviser
Peter Navarro reiterated Trump's opposition to TPP, declaring,
Any deal must increase the GDP growth rate, reduce the trade deficit, and strengthen the manufacturing
base.
So, were Trump to win the White House, he would come in with a much more solid anti-globalist
mandate.
Thus we can ask: Would a President Trump really cross his own populist-nationalist base by going
over to the other side-to the globalists who voted, and donated, against him? If he did-if he repudiated
his central platform plank-he would implode his presidency, the way that Bush 41 imploded his presidency
in 1990 when he went back on his "read my lips, no new taxes" pledge.
Surely Trump remembers that moment of political calamity well, and so surely, whatever mistakes
he might make, he won't make that one.
To be sure, the future is unknowable. However, as we have seen, the past, both recent and historical,
is rich with valuable clues.
Clinton will say anything then she'll sell you out. I hope we never get a chance to see
how she will sell us out on TPP
Ellen Bell -> HoosierMilitia
You really do not understand the primitive form of capitalism that the moneyed elites are trying
to impose on us. That system is mercantilism and two of its major tenets are to only give the
workers subsistence level wages (what they are doing to poor people abroad and attempting to do
here) and monopolistic control of everything that is possible to monopolize. The large multi-nationals
have already done that. What we would be headed for under Hillary Clinton is fascism--Mussolini's
shorthand definition of fascism was the marriage of industry and commerce with the power of the
State. That is what the plutocrats who run the big banks (to whom she owes her soul) aim to do.
President, Thomas Jefferson knew the dangers of large European-style central banks. He said:
"...The central bank is an institution of the most deadly hostility existing against the
Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes
for anything but Coin. If the American People allow private banks to control the issuance of
their currency, first by inflation and then by deflation, the banks and corporations that will
grow up around them will deprive the People of all their Property until their Children will
wake up homeless on the continent their Fathers conquered..."
The power to create money was given to the private banking system of the Federal Reserve in
1913. Nearly every bit of our enormous debt has been incurred since then. The American people
have become debt-slaves. In the Constitution, only Congress has the right to issue currency. That's
why the plutocrats want to do away with it--among other reasons.
"... Donald Trump is challenging the very fabric of the institutional elites in this country on both sides that have, quite frankly, just straight up screwed this country up and made the world a mess. ..."
Tom Coyne, a lifelong Democrat and the mayor of Brook Park, Ohio, spoke
about his endorsement of Republican presidential nominee Donald Trump with Breitbart
News Daily SiriusXM host Matt Boyle.
Coyne said:
The parties are blurred. What's the difference? They say the same things
in different tones. At the end of the day, they accomplish nothing.
Donald Trump is challenging the very fabric of the institutional elites
in this country on both sides that have, quite frankly, just straight up
screwed this country up and made the world a mess.
Regarding the GOP establishment's so-called Never Trumpers, Coyne stated,
"If it's their expertise that people are relying upon as to advice to vote,
people should go the opposite."
In an interview last week, Coyne said that Democrats and Republicans
have failed the city through inaction and bad trade policies, key themes
Trump often trumpets.
"He understands us," Coyne said of Trump. "He is saying what we feel,
and therefore, let him shake the bedevils out of everyone in the canyons
of Washington D.C. The American people are responding to him."
Breitbart News Daily airs on SiriusXM Patriot 125 weekdays from 6:00
a.m. to 9:00 a.m. Eastern.
"... Donald Trump isn't a politician -- he's a one-man wrecking ball against our dysfunctional and corrupt establishment. We're about to see the deluxe version of the left's favorite theme: Vote for us or we'll call you stupid. It's the working class against the smirking class. ..."
"... He understands that if we're ever going to get our economy back on its feet the wage-earning middle class will have to prosper along with investors ..."
"... Trump that really "gets" the idea that the economy is suffering because the middle class can't find employment at livable wages ..."
"... Ms. Coulter says it more eloquently: "The Republican establishment has no idea how much ordinary voters hate both parties." Like me, she's especially annoyed with Republicans, because we think of the Republican Party as being our political "family" that has turned against us: ..."
"... The RNC has been forcing Republican candidates to take suicidal positions forever They were happy to get 100 percent of the Business Roundtable vote and 20 percent of the regular vote. ..."
"... American companies used free trade with low-wage countries as an opportunity to close their American factories and relocate the jobs to lower-paying foreign workers. Instead of creating product and exporting it to other countries, our American companies EXPORTED American JOBS to other countries and IMPORTED foreign-made PRODUCTS into America! Our exports have actually DECLINED during the last five years with most of the 20 countries we signed free trade with. Even our exports to Canada, our oldest free trade partner, are less than what they were five years ago. ..."
"... Trade with Japan, China, and South Korea is even more imbalanced, because those countries actively restrict imports of American-made products. We run a 4x trade imbalance with China, which cost us $367 billion last year. We lost $69 billion to Japan and $28 billion to South Korea. Our exports to these countries are actually DECLINING, even while our imports soar! ..."
"... Why do Establishment Republicans join with Democrats in wanting to diminish the future with the WRONG kind of "free trade" that removes jobs and wealth from the USA? As Ms. Coulter reminds us, it is because Republican Establishment, like the Democrat establishment, is PAID by the money and jobs they receive from big corporations to believe it. ..."
"... The donor class doesn't care. The rich are like locusts: once they've picked America dry, they'll move on to the next country. A hedge fund executive quoted in The Atlantic a few years ago said, "If the transformation of the world economy lifts four people in China and India out of poverty and into the middle class, and meanwhile [that] means one American drops out of the middle class, that's not such a bad trade." ..."
"... The corporate 1% who believe that the global labor market should be tapped in order to beat American workers out of their jobs; and that corporations and the 1% who own them should be come tax-exempt organizations that profit by using cheap overseas labor to product product that is sold in the USA, and without paying taxes on the profit. Ms. Coulter calls this group of Republican Estblishmentarians "locusts: once they've picked America dry, they'll move on to the next country." ..."
"... Pretending to care about the interests of minorities. Of course, the Republican Establishment has even less appeal to minorities than to the White Middle Class (WMC) they abandoned. Minorities are no more interested in losing their jobs to foreigners or to suffer economic stagnation while the rich have their increasing wealth (most of which is earned at the expense of the middle class) tax-sheltered, than do the WMC. ..."
"... Trump has given Republicans a new lease on life. The Establishment doesn't like having to take a back seat to him, but perhaps they should understand that having a back seat in a popular production is so much better than standing outside alone in the cold. ..."
Donald Trump isn't a politician -- he's a one-man wrecking ball against our dysfunctional
and corrupt establishment. We're about to see the deluxe version of the left's favorite theme: Vote
for us or we'll call you stupid. It's the working class against the smirking class.
No pandering! The essence of Trump in personality and issues , August 23, 2016
Ms. Coulter explains the journey of myself and so many other voters into Trump's camp. It captures
the essence of Trump as a personality and Trump on the issues. If I had to sum Ms. Coulter's view
of the reason for Trump's success in two words, I'd say "No Pandering!" I've heard many people,
including a Liberal tell me, "Trump says what needs to be said."
I've voted Republican in every election going back to Reagan in 1980, except for 2012 when
I supported President Obama's re-election. I've either voted for, or financially supported many
"Establishment Republicans" like Mitt Romney and John McCain in 2008. I've also supported some
Conservative ones like Newt Gingrich and Rudy Giuliani. In this election I'd been planning to
vote for Jeb Bush, a superb governor when I lived in Florida.
Then Trump announced his candidacy. I had seen hints of that happening as far back as 2012.
In my Amazon reviews in 2012 I said that many voters weren't pleased with Obama or the Republican
Establishment. So the question became: "Who do you vote for if you don't favor the agendas of
either party's legacy candidates?" In November 2013 I commented on the book DOUBLE DOWN: GAME
CHANGE 2012 by Mark Halperin and John Heileman:
=====
Mr. Trump occupies an important place in the political spectrum --- that of being a Republican
Populist.
He understands that if we're ever going to get our economy back on its feet the wage-earning
middle class will have to prosper along with investors, who are recovering our fortunes in
the stock market.
IMO whichever party nominates a candidate like Trump that really "gets" the idea that the
economy is suffering because the middle class can't find employment at livable wages, will
be the party that rises to dominance.
Mr. Trump, despite his flakiness, at least understood that essential fact of American economic
life.
November 7, 2013
=====
Ms. Coulter says it more eloquently: "The Republican establishment has no idea how much
ordinary voters hate both parties." Like me, she's especially annoyed with Republicans, because
we think of the Republican Party as being our political "family" that has turned against us:
===== The RNC has been forcing Republican candidates to take suicidal positions forever They were
happy to get 100 percent of the Business Roundtable vote and 20 percent of the regular vote.
when the GOP wins an election, there is no corresponding "win" for the unemployed blue-collar
voter in North Carolina. He still loses his job to a foreign worker or a closed manufacturing
plant, his kids are still boxed out of college by affirmative action for immigrants, his community
is still plagued with high taxes and high crime brought in with all that cheap foreign labor.
There's no question but that the country is heading toward being Brazil. One doesn't have to
agree with the reason to see that the very rich have gotten much richer, placing them well beyond
the concerns of ordinary people, and the middle class is disappearing. America doesn't make anything
anymore, except Hollywood movies and Facebook. At the same time, we're importing a huge peasant
class, which is impoverishing what remains of the middle class, whose taxes support cheap labor
for the rich.
With Trump, Americans finally have the opportunity to vote for something that's popular.
=====
That explains how Trump won my vote --- and held on to it through a myriad of early blunders
and controversies that almost made me switch my support to other candidates.
I'm no "xenophobe isolationist" stereotype. My first employer was an immigrant from Eastern
Europe. What I learned working for him launched me on my successful career. I've developed and
sold computer systems to subsidiaries of American companies in Europe and Asia. My business partners
have been English and Canadian immigrants. My family are all foreign-born Hispanics. Three of
my college roommates were from Ecuador, Germany, and Syria.
BECAUSE of this international experience I agree with the issues of trade and immigration that
Ms. Coulter talks about that have prompted Trump's rising popularity.
First, there is the false promise that free trade with low-wage countries would "create millions
of high-paying jobs for American workers, who will be busy making high-value products for export."
NAFTA was signed in 1994. GATT with China was signed in 2001. Since then we've signed free trade
with 20 countries. It was said that besides creating jobs for Americans, that free trade would
prosper the global economy. In truth the opposite happened:
American companies used free trade with low-wage countries as an opportunity to close their
American factories and relocate the jobs to lower-paying foreign workers. Instead of creating
product and exporting it to other countries, our American companies EXPORTED American JOBS to
other countries and IMPORTED foreign-made PRODUCTS into America! Our exports have actually DECLINED
during the last five years with most of the 20 countries we signed free trade with. Even our exports
to Canada, our oldest free trade partner, are less than what they were five years ago.
We ran trade SURPLUSES with Mexico until 1994, when NAFTA was signed. The very next year the
surplus turned to deficit, now $60 billion a year. Given that each American worker produces an
average of $64,000 in value per year, that is a loss of 937,000 American jobs to Mexico alone.
The problem is A) that Mexicans are not wealthy enough to be able to afford much in the way of
American-made product and B) there isn't much in the way of American-made product left to buy,
since so much of former American-made product is now made in Mexico or China.
Trade with Japan, China, and South Korea is even more imbalanced, because those countries
actively restrict imports of American-made products. We run a 4x trade imbalance with China, which
cost us $367 billion last year. We lost $69 billion to Japan and $28 billion to South Korea. Our
exports to these countries are actually DECLINING, even while our imports soar!
Thus, free trade, except with a few fair-trading countries like Canada, Australia, and possibly
Britain, has been a losing proposition. Is it coincidence that our economy has weakened with each
trade deal we have signed? Our peak year of labor force participation was 1999. Then we had the
Y2K collapse and the Great Recession, followed by the weakest "recovery" since WWII? As Trump
would say, free trade has been a "disaster."
Why do Establishment Republicans join with Democrats in wanting to diminish the future
with the WRONG kind of "free trade" that removes jobs and wealth from the USA? As Ms. Coulter
reminds us, it is because Republican Establishment, like the Democrat establishment, is PAID by
the money and jobs they receive from big corporations to believe it. Ms. Coulter says:
===== The donor class doesn't care. The rich are like locusts: once they've picked America dry,
they'll move on to the next country. A hedge fund executive quoted in The Atlantic a few years
ago said, "If the transformation of the world economy lifts four people in China and India
out of poverty and into the middle class, and meanwhile [that] means one American drops out
of the middle class, that's not such a bad trade."
=====
Then there is immigration. My wife, son, and extended family legally immigrated to the USA
from Latin America. The first family members were recruited by our government during the labor
shortage of the Korean War. Some fought for the United States in Korea. Some of their children
fought for us in Vietnam, and some grandchildren are fighting in the Middle East. Most have
become successful professionals and business owners. They came here LEGALLY, some waiting in
queue for up to 12 years. They were supported by the family already in America until they were
on their feet.
Illegal immigration has been less happy. Illegals are here because the Democrats want new voters
and the Republicans want cheap labor. Contrary to business propaganda, illegals cost Americans
their jobs. A colleague just old me, "My son returned home from California after five years, because
he couldn't get construction work any longer. All those jobs are now done off the books by illegals."
It's the same in technology. Even while our high-tech companies are laying off 260,000 American
employees in 2016 alone, they are banging the drums to expand the importation of FOREIGN tech
workers from 85,000 to 195,000 to replace the Americans they let go. Although the H1-B program
is billed as bringing in only the most exceptional, high-value foreign engineers, in truth most
visas are issued to replace American workers with young foreigners of mediocre ability who'll
work for much less money than the American family bread-winners they replaced.
Both parties express their "reverse racism" against the White Middle Class. Democrats don't
like them because they tend to vote Republican. The Republican Establishment doesn't like them
because they cost more to employ than overseas workers and illegal aliens. According to them the
WMC is too technologically out of date and overpaid to allow our benighted business leaders to
"compete internationally."
Ms. Coulter says "Americans are homesick" for our country that is being lost to illegal immigration
and the removal of our livelihoods overseas. We are sick of Republican and Democrat Party hidden
agendas, reverse-racism, and economic genocide against the American people. That's why the Establishment
candidates who started out so theoretically strong, like Jeb Bush, collapsed like waterlogged
houses of cards when they met Donald Trump. As Ms. Coulter explains, Trump knows their hidden
agendas, and knows they are working against the best interests of the American Middle Class.
Coulter keeps coming back to Mr. Trump's "Alpha Male" personality that speaks to Americans
as nation without pandering to specific voter identity groups. She contrasts his style to the
self-serving "Republican (Establishment) Brain Trust that is mostly composed of comfortable, well-paid
mediocrities who, by getting a gig in politics, earn salaries higher than a capitalist system
would ever value their talents." She explains what she sees as the idiocy of those Republican
Establishment political consultants who wrecked the campaigns of Jeb Bush and Ted Cruz by micromanaging
with pandering.
She says the Republican Establishment lost because it served itself --- becoming wealthy by
serving the moneyed interests of Wall Street. Trump won because he is speaking to the disfranchised
American Middle Class who loves our country, is proud of our traditions, and believes that Americans
have as much right to feed our families through gainful employment as do overseas workers and
illegal aliens.
"I am YOUR voice," says Trump to the Middle Class that until now has been ignored and even
sneered at by both parties' establishments.
I've given an overview of the book here. The real delight is in the details, told as only Anne
Coulter can tell them. I've quoted a few snippets of her words, that relate most specifically
to my views on Trump and the issues. I wish there were space to quote many more. Alas, you'll
need to read the book to glean them all!
Bruce, I would also add that the Republican Establishment chose not to represent the interests
of the White Middle Class on trade, immigration, and other issues that matter to us. They chose
to represent the narrow interests of:
1. The corporate 1% who believe that the global labor market should be tapped in order
to beat American workers out of their jobs; and that corporations and the 1% who own them should
be come tax-exempt organizations that profit by using cheap overseas labor to product product
that is sold in the USA, and without paying taxes on the profit. Ms. Coulter calls this group
of Republican Estblishmentarians "locusts: once they've picked America dry, they'll move on to
the next country."
2. Pretending to care about the interests of minorities. Of course, the Republican Establishment
has even less appeal to minorities than to the White Middle Class (WMC) they abandoned. Minorities
are no more interested in losing their jobs to foreigners or to suffer economic stagnation while
the rich have their increasing wealth (most of which is earned at the expense of the middle class)
tax-sheltered, than do the WMC.
The Republican Establishment is in a snit because Trump beat them by picking up the WMC votes
that the Establishment abandoned. What would have happened if Trump had not come on the scene?
The probable result is that the Establishment would have nominated a ticket of Jeb Bush and John
Kasich. These candidates had much to recommend them as popular governors of key swing states.
But they would have gone into the election fighting the campaign with Republican Establishment
issues that only matter to the 1%. They would have lost much of the WMC vote that ultimately rallied
around Trump, while gaining no more than the usual 6% of minorities who vote Republican. It would
have resulted in a severe loss for the Republican Party, perhaps making it the minority party
for the rest of the century.
Trump has given Republicans a new lease on life. The Establishment doesn't like having
to take a back seat to him, but perhaps they should understand that having a back seat in a popular
production is so much better than standing outside alone in the cold.
It's funny how White Men are supposed to be angry. But I've never seen any White men:
1. Running amok, looting and burning down their neighborhood, shooting police and other "angry
White men." There were 50 people shot in Chicago last weekend alone. How many of those do you
think were "angry white men?" Hint: they were every color EXCEPT white.
2. Running around complaining that they aren't allowed into the other gender's bathroom, then
when they barge their way in there complain about being sexually assaulted. No, it's only "angry
females" (of any ethnicity) who barge their way into the men's room and then complain that somebody
in there offended them.
Those "angry white men" are as legendary as "Bigfoot." They are alleged to exist everywhere,
but are never seen. Maybe that's because they mostly hang out in the quiet neighborhoods of cookie-cutter
homes in suburbia, go to the lake or bar-be-que on weekends, and take their allotment of Viagra
in hopes of occassionally "getting lucky" with their wives. If they're "angry" then at least they
don't take their angry frustrations out on others, as so many other militant, "in-your-face" activist
groups do!
"... I've tuned out Warren-she has become the "red meat" surrogate for Clinton. Just because Taibbi was excellent on exposing Wall St. doesn't mean he really knows s**t about politics. I find the depiction of Trump as some kind of monster-buffoon to be simply boring and not very helpful. ..."
"... (might be the Trump Chaos bc Hillary will strategically turn our war machine on us can't believe this is as good as it gets, sighed out) ..."
"... Having the establishment, the military-industrial complex and Wall Street against him helps Trump a lot. ..."
"... You can fool part of the people all the time, and all people part of the time, but Brexit won, so will Trump, politician extraordinaire ..."
"... Given his family, a Trump presidency may look more like JFK's, where Bobby had more power than LBJ. Also, given Trump's negotiating expertise, I would certainly not believe any assertion of support he proclaims for the VP. I expect he had little choice in the matter, and that he also plans to send the VP to the hinterlands at the first opportunity. I'm unclear why so many appear to believe the VP has any influence whatsoever; I believe GWB was the only post-WW2 president who let the VP have any power. ..."
"... What is a populist? Somebody that tries to do what the majority want. Current examples: Less wars and military spending. More infrastructure spending. Less support for banks and corps (imagine how many votes trump would gain if he said 'as pres I will jail bankers that break the law' And how that repudiates Obama and both parties.) Gun control (but not possible from within the rep party) ..."
"... What is a fascist? Somebody that supports corporations, military, and military adventures. ..."
"... Actually, it sounds a whole lot like a different candidate from a different party, doesn't it? ..."
"... Neoliberal "Goodthink" flag. What this means when neoliberals say it is not let's build a better global society for all it means Corporations and our military should be able to run roughshod over the world and the people's of other countries. Exploit their citizens for cheap Labor, destroy their environment and move on. These are the exact policies of Hillary Clinton (see TPP, increase foreign wars etc.). Hillary globalism is not about global Brotherhood it's about global economic and military exploitation. Trump is nationalist non – interventionist, which leads to less global military destruction than hillary and less global exploitation. So who is a better for those outside the US, hillary the interventionist OR trump the non-interventionist? ..."
"... Look, the Clintons are criminals, and their affiliate entities, including the DNC, could be considered criminal enterprises or co-conspirators at this point. ..."
"... The very fact that Establishment, Wall St and Koch bros are behind HRC is evidence that the current 'status quo' will be continued! I cannot stand another 4 years of Hilabama. ..."
"... The striving for American empire has so totally confused the political order of the country that up is down and down is up. The idea of government for and by the people is a distant memory. Covering for lies and contradictions of beliefs has blurred any notion of principles informing public action. ..."
"... If there is any principle that matters today, it is the pursuit of money and profit reigns supreme. Trump is populist in the sense he is talking about bringing money and wealth back to the working classes. Not by giving it directly, but by forcing businesses to turn their sights back to the US proper and return to making their profits at home. In the end, it is all nostalgia and probably impossible, but working class people remember those days so it rings true. That is hope and change in action. People also could care less if he cheats on his taxes or is found out lying about how much he is worth. Once again, fudging your net worth is something working people care little about. Having their share of the pie is all that matters and Trump is tapping into that. ..."
"... The only crime Trump has committed so far is his language. Liberals like Clinton, Blair and Obama drip blood. ..."
"... The 2016 election cannot be looked at in isolation. The wars for profit are spreading from Nigeria through Syria to Ukraine. Turkey was just lost to the Islamists and is on the road to being a failed state. The EU is in an existential crisis due to Brexit, the refugee crisis and austerity. Western leadership is utterly incompetent and failing to protect its citizens. Globalization is failing. Its Losers are tipping over the apple cart. Humans are returning to their tribal roots for safety. The drums for war with Russia are beating. Clinton / Kaine are 100% Status Quo Globalists. Trump / Pence are candidates of change to who knows what. Currently I am planning on voting for the Green Party in the hope it becomes viable and praying that the chaos avoids Maryland. ..."
I've tuned out Warren-she has become the "red meat" surrogate for Clinton. Just because
Taibbi was excellent on exposing Wall St. doesn't mean he really knows s**t about politics. I
find the depiction of Trump as some kind of monster-buffoon to be simply boring and not very helpful.
for all the run around Hillary, Trump's chosen circle of allies are Wall Street and Austerity
enablers. actually, Trump chaos could boost the enablers as easily as Hillary's direct mongering.
War is Money low hanging fruit in this cash strapped era and either directly or indirectly neither
candidate will disappoint.
So I Ask Myself which candidate will the majority manage sustainability while assembling to create
different outcomes? (might be the Trump Chaos bc Hillary will strategically turn our war machine
on us can't believe this is as good as it gets, sighed out)
War is only good for the profiteers when it can be undertaken in another territory. Bringing
the chaos home cannot be good for business. Endless calls for confidence and stability in markets
must reflect the fact that disorder effects more business that the few corporations that benefit
directly from spreading chaos. A split in the business community seems to be underway or at least
a possible leverage point to bring about positive change.
Even the splits in the political class reflect this. Those that benefit from spreading chaos are
loosing strength because they have lost control of where that chaos takes place and who is directly
effected from its implementation. Blowback and collateral damage are finally registering.
Trump may be a disaster. Clinton will be a disaster. One of these two will win. I won't vote
for either, but if you put a gun to my head and forced me to choose, I'd take Trump. He's certainly
not a fascist (I think it was either Vice or Vox that had an article where they asked a bunch
of historians of fascism if he was, the answer was a resounding no), he's a populist in the Andrew
Jackson style. If nothing else Trump will (probably) not start WW3 with Russia.
And war with Russia doesn't depend just on Hillary, it depends on us in Western Europe agreeing
with it.
A laughable proposition. The official US policy, as you may recall, is
fuck the EU .
Where was Europe when we toppled the Ukrainian govt? Get back to me when you can actually spend
2% GDP on your military. At the moment you can't even control your illegal immigrants.
The political parties that survive display adaptability, and ideological consistency isn't
a requirement for that. Look at the party of Lincoln. Or look at the party of FDR.
If the Democrats decapitate the Republican party by bringing in the Kagans of this world and
Republican suburbanites in swing states, then the Republicans will go where the votes are; the
Iron Law of Institutions will drive them to do it, and the purge of the party after Trump will
open the positions in the party for people with that goal.
In a way, what we're seeing now is what should have happened to the Republicans in
2008. The Democrats had the Republicans down on the ground with Obama's boot on their neck. The
Republicans had organized and lost a disastrous war, they had lost the legislative and executive
branches, they were completely discredited ideologically, and they were thoroughly discredited
in the political class and in the press.
Instead, Obama, with his strategy of bipartisanship - good faith or not - gave them a hand
up, dusted them off, and let them right back in the game, by treating them as a legitimate opposition
party. So the Republican day of reckoning was postponed. We got various bids for power by factions
- the Tea Party, now the Liberty Caucus - but none of them came anywhere near taking real power,
despite (click-driven money-raising) Democrat hysteria.
And now the day of reckoning has arrived. Trump went through the hollow institutional shell
of the Republican Party like the German panzers through the French in 1939. And here we are!
(Needless to say, anybody - ***cough*** Ted Cruz ***cough*** - yammering about "conservative
principles" is part of the problem, dead weight, part of the dead past.) I don't know if the Republicans
can remake themselves after Trump; what he's doing is necessary for that, but may not be sufficient.
Republicans won Congress and the states because the Democrats handed them to them on a silver
platter. To Obama and his fan club meaningful power is a hot potato, to be discarded as soon as
plausible.
Having the establishment, the military-industrial complex and Wall Street against him helps
Trump a lot.
Pro-Sanders folks, blacks, and hispanics will mostly vote for Trump.
Having Gov. Pence on the ticket, core Republicans and the silent majority will vote for Trump.
Women deep inside know Trump will help their true interests better than the Clinton-Obama rinse
repeat
Young people, sick and tired of the current obviously rigged system, will vote for change.
You can fool part of the people all the time, and all people part of the time, but Brexit
won, so will Trump, politician extraordinaire
Even Michael Moore gets it
Trump has intimated that he is not going to deal with the nuts and bolts of government,
that will be Pence's job.
Given his family, a Trump presidency may look more like JFK's, where Bobby had more power
than LBJ.
Also, given Trump's negotiating expertise, I would certainly not believe any assertion of support
he proclaims for the VP. I expect he had little choice in the matter, and that he also plans to
send the VP to the hinterlands at the first opportunity. I'm unclear why so many appear to believe
the VP has any influence whatsoever; I believe GWB was the only post-WW2 president who let the
VP have any power.
Minorities will benefit at least as much as whites with infrastructure spending, which trump
says he wants to do It would make him popular, which he likes, why not believe him? And if pres
he would be able to get enough rep votes to get it passed. No chance with Hillary, who anyway
would rather spend on wars, which are mostly fought by minorities.
What is a populist? Somebody that tries to do what the majority want. Current examples:
Less wars and military spending. More infrastructure spending. Less support for banks and corps
(imagine how many votes trump would gain if he said 'as pres I will jail bankers that break the
law' And how that repudiates Obama and both parties.) Gun control (but not possible from within
the rep party)
What is a fascist? Somebody that supports corporations, military, and military adventures.
I'm saying you have a much better chance to pressure Clinton
Sorry, but this argues from facts not in evidence and closely resembles the Correct the Record
troll line (now substantiated through the Wikileaks dump) that Clinton "has to be elected" because
she is at least responsive to progressive concerns.
Except she isn't, and the degree to which the DNC clearly has been trying to pander to disillusioned
Republicans and the amount of bile they spew every time they lament how HRC has had to "veer left"
shows quite conclusively to my mind that, in fact, the opposite of what you say is true.
Also, when NAFTA was being debated in the '90s, the Clintons showed themselves to be remarkably
unresponsive both to the concerns of organized labor (who opposed it) as well as the majority
of the members of their own party, who voted against it. NAFTA was passed only with a majority
of Republican votes.
I have no way of knowing whether you're a troll or sincerely believe this, but either way,
it needs to be pointed out that the historical record actually contradicts your premise. If you
do really believe this, try not to be so easily taken in by crafty rhetoric.
BTW, I'll take Trump's record as a husband over HRC's record as a wife. He loves a woman, then
they break up, and he finds another one. This is not unusual in the US. Hillary, OTOH, "stood
by her man" through multiple publicly humiliating infidelities, including having to settle out
of court for more than $800,000, and rape charges. No problem with her if her husband was flying
many times on the "Lolita Express" with a child molester. Could be she had no idea where her "loved
one" was at the time. Do they in fact sleep in the same bed, or even live in the same house? I
don't know.
RE: calling Donald Trump a "sociopath"-this is another one of those words that is thrown around
carelessly, like "nazi" and "fascist". In the Psychology Today article "How to Spot a Sociopath",
they list 16 key behavioral characteristics. I can't see them in Trump-you could make a case for
a few of them, but not all. For example: "failure to follow any life plan", "sex life impersonal,
trivial, and poorly integrated", "poor judgment and failure to learn by experience", "incapacity
for love"-–you can't reasonably attach these characteristics to The Donald, who, indeed, has a
more impressive and loving progeny than any other prez candidate I can think of.
"I have a sense of international identity as well: we are all brothers and sisters."
Neoliberal "Goodthink" flag. What this means when neoliberals say it is not let's build
a better global society for all it means Corporations and our military should be able to run roughshod
over the world and the people's of other countries. Exploit their citizens for cheap Labor, destroy
their environment and move on. These are the exact policies of Hillary Clinton (see TPP, increase
foreign wars etc.). Hillary globalism is not about global Brotherhood it's about global economic
and military exploitation. Trump is nationalist non – interventionist, which leads to less global
military destruction than hillary and less global exploitation. So who is a better for those outside
the US, hillary the interventionist OR trump the non-interventionist?
"And not everyone feels the same way, but for most voters there is either a strong tribal loyalty
(Dem or Repub) or a weaker sense of "us" guiding the voter on that day.
Mad as I am about the Blue Dogs, I strongly identify with the Dems."
So you recognize you are a tribalist, and assume all the baggage and irrationality that tribalism
often fosters, but instead of addressing your tribalism you embrace it. What you seem to be saying
(to me)is that we should leave critical thinking at the door and become dem tribalists like you.
"But the Repubs and Dems see Wall Street issues through different cultural prisms. Republican
are more reflexively pro-business. It matters."
Hillary Clinton's biggest donors are Wallstreet and her dem. Husband destroyed glass-steagall.
Trump wants to reinstate glass-steagall, so who is more business friendly again?
"He is racist, and so he knows how to push ugly buttons."
This identity politics trope is getting so old. Both are racist just in different ways, Trump
says in your face racist things, which ensure the injustice cannot be ignored, where hillary has
and does support racist policies, that use stealth racism to incrementaly increase the misery
of minorities, while allowing the majority to pretend it's not happening.
"First, he will govern with the Republicans. Republican judges, TPP, military spending, environmental
rollbacks, etc. Trump will not overrule Repubs in Congress."
These are literally hillarys policies not trumps.
Trump: anti TPP, stop foreign interventions, close bases use money for infrastructure.
Hillary :Pro TPP, more interventions and military spending
"And no, no great Left populist party will ride to the rescue. The populist tradition (identity)
is mostly rightwing and racist in our society.
People do not change political identity like their clothes. The left tradition in the US, such
as it is, is in the Dem party."
So what you are saying is quit being stupid, populism is bad and you should vote for hillarys
neoliberalism. The democrats were once left so even if they are no longer left, we must continue
to support them if another party or candidate that is to the left isn't a democrat? Your logic
hurts my head.
Look, the Clintons are criminals, and their affiliate entities, including the DNC, could
be considered criminal enterprises or co-conspirators at this point. Those who haven't realized
that, or worse, who shill for them are willfully ignorant, amoral, or unethical. The fact that
that includes a large chunk of the population doesn't change that. I don't vote for criminals.
The very fact that Establishment, Wall St and Koch bros are behind HRC is evidence that
the current 'status quo' will be continued! I cannot stand another 4 years of Hilabama.
I hate Hillary more than Trump. I want to protest at the Establishment, which at this represented
by Hillary.
Populism (support for popular issues) is, well, popular.
Fascism (support for corps and military adventures) is, at least after our ME adventures, unpopular.
Commenters are expressing support for the person expressing popular views, such as infrastructure
spending, and expressing little support for the candidate they believe is most fascist.
Btw, Most on this site are liberals, few are reps, so to support him they have had to buck
some of their long held antipathy regarding reps.
Right, what is changing with Trump is the Republicans are going back to, say, the Eisenhower
era, when Ike started the interstate highway system, a socialist program if there ever was one.
It's a good article; this is a general observation. Sorry!
"Hate" seems to be a continuing Democrat meme, and heck, who can be for hate? So it makes sense
rhetorically, but in policy terms it's about as sensible as being against @ssh0les (since as the
good book says, ye have the @ssh0les always with you). So we're really looking at virtue signaling
as a mode of reinforcing tribalism, and to be taken seriously only for that reason. If you look
at the political class writing about the working class - modulo writers like Chris Arnade - the
hate is plain as day, though it's covered up with the rhetoric of meritocracy, taking care of
losers, etc.
Strategic hate management is a great concept. It's like hate can never be created or destroyed,
and is there as a resource to be mined or extracted. The Clinton campaign is doing a great job
of strategic hate management right now, by linking Putin and Trump, capitalizing on all the good
work done in the press over the last year or so.
For years we have been told that government should be run like a business. In truth that statement
was used as a cudgel to avoid having the government provide any kind of a safety net to its citizenry
because there was little or no profit in it for the people who think that government largess should
only be for them.
Here's the thing, if government had been run like a business, we the people would own huge
portions of Citigroup, Goldman Sachs and Chase today. We wouldn't have bailed them out without
an equity stake in them. Most cities would have a share of the gate for every stadium that was
built. And rather than paying nothing to the community Walmart would have been paying a share
of their profits (much as those have dropped over the years).
I do not like Trump's business, but he truly does approach his brand and his relationships
as a business. When he says he doesn't like the trade deals because they are bad business and
bad deals he is correct. IF the well being of the United states and his populace are what you
are interested in regarding trade deals, ours are failures. Now most of us here know that was
not the point of the trade deals. They have been a spectacular success for many of our largest
businesses and richest people, but for America as a whole they have increased our trade deficit
and devastated our job base. When he says he won't go there, this is one I believe him on.
I also believe him on NATO and on the whole Russian thing. Why, because of the same reasons
I believe him on Trade. They are not winners for America as a whole. They are bad deals. Europe
is NOT living up to their contractual agreement regarding NATO. For someone who is a believer
in getting the better of the deal that is downright disgusting. And he sees no benefit in getting
into a war with Russia. The whole reserve currency thing vs. nukes is not going to work for him
as a cost benefit analysis of doing it. He is not going to front this because it is a business
loser.
We truly have the worst choices from the main parties in my lifetime. There are many reasons
Trump is a bad candidate. But on these two, he is far more credible and on the better side of
things than the Democratic nominee. And on the few where she might reasonably considered to have
a better position, unfortunately I do not for a moment believe her to be doing more than giving
lip service based on both her record and her character.
Is it your opinion that to have globalisation we must marginalize russia to the extent that
they realize they can't have utopia and make the practical choice of allowing finance capitalism
to guide them to realistic incrementally achieved debt bondage?
The Democratic Party has been inching further and further to the right. Bernie tried to arrest
this drift, but his internal populist rebellion was successfully thwarted by party elite corruption.
The Democratic position is now so far to the right that the Republicans will marginalize themselves
if they try to keep to the right of the Democrats.
But, despite party loyalty or PC slogans, the Democrat's rightward position is now so obvious
that it can be longer disguised by spin. The Trump campaign has demonstrated, the best electoral
strategy for the Republican Party is to leapfrog leftward and campaign from a less corporate position.
This has given space for the re-evaluation of party positions that Trump is enunciating, and the
result is that the Trump is running to the
left of Hillary. How weird is this?
I meant to use right and left to refer generally to elite vs popular. The issue is too big
to discuss without some simplification, and I'm sorry it has distracted from the main issue. On
the face of it, judging from the primaries, the Republican candidates who represented continued
rightward drift were rejected. (Indications are that the same thing happened in the Democratic
Party, but party control was stronger there, and democratic primary numbers will never be known).
The main point I was trying to make is that the Democratic party has been stretching credulity
to the breaking point in claiming to be democratic in any sense, and finally the contradiction
between their statements and actions has outpaced the capabilities of their propaganda. Their
Orwellian program overextended itself. Popular recognition of the disparity has caused a kind
of political "snap" that's initiated a radical reorganization of what used to be the party of
the right (or corporations, or elites, or finance, or "your description here".)
Besides confusion between which issues are right or left for Republicans or Democrats on the
national level, internationally, the breakdown of popular trust in the elites, and the failure
of their propaganda on that scale, is leading to a related worldwide distrust and rejection of
elite policies. This distrust has been percolating in pockets for some time, but it seems it's
now become so widespread that it's practically become a movement.
I suspect, however, there's a Plan B for this situation to restore the proper order. Will be
interesting to see how this plays out.
The striving for American empire has so totally confused the political order of the country
that up is down and down is up. The idea of government for and by the people is a distant memory.
Covering for lies and contradictions of beliefs has blurred any notion of principles informing
public action.
If there is any principle that matters today, it is the pursuit of money and profit reigns
supreme. Trump is populist in the sense he is talking about bringing money and wealth back to
the working classes. Not by giving it directly, but by forcing businesses to turn their sights
back to the US proper and return to making their profits at home. In the end, it is all nostalgia
and probably impossible, but working class people remember those days so it rings true. That is
hope and change in action. People also could care less if he cheats on his taxes or is found out
lying about how much he is worth. Once again, fudging your net worth is something working people
care little about. Having their share of the pie is all that matters and Trump is tapping into
that.
Clintons arrogance is worse because the transcripts probably clearly show her secretly conspiring
with bankers to screw the working people of this country. Trumps misdeeds effect his relationship
to other elites while Clintons directly effect working people.
Such a sorry state of affairs. When all that matters is the pursuit of money and profit, moving
forward will be difficult and full of moral contradictions. Populism needs a new goal. The political
machinery that gives us two pro-business hacks and an ineffectual third party has fundamentally
failed.
The business of America must be redefined, not somehow brought back to a mythical past greatness.
Talk about insanity.
"Bill Clinton has been a disaster for the Democratic Party. Send him packing."
"There's not much the Democrats can do about Mrs. Clinton. She's got a Senate seat for six
years. But there is no need for the party to look to her for leadership. The Democrats need to
regroup, re-establish their strong links to middle-class and working-class Americans, and move
on."
"You can't lead a nation if you are ashamed of the leadership of your party. The Clintons are
a terminally unethical and vulgar couple, and they've betrayed everyone who has ever believed
in them."
"As neither Clinton has the grace to retire from the scene, the Democrats have no choice but
to turn their backs on them. It won't be easy, but the Democrats need to try. If they succeed
they'll deserve the compliment Bill Clinton offered Gennifer Flowers after she lied under oath:
"Good for you." "
Amazing how the New York Times has "evolved" from Herbert's editorial stance of 15 years ago
to their unified editorial/news support for HRC's candacy,
In my view, it is not as if HRC has done anything to redeem herself in the intervening years.
It takes liberals to create a refugee crisis.
What country are we going to bomb back into the stone age this week?
We are very squeamish about offensive language.
We don't mind dropping bombs and ripping people apart with red hot shrapnel.
We are liberals.
Liberal sensibilities were on display in the film "Apocalypse Now".
No writing four letter words on the side of aircraft.
Napalm, white phosphorous and agent orange – no problem.
Liberals are like the English upper class – outward sophistication hiding the psychopath underneath.
They were renowned for their brutality towards slaves, the colonies and the English working class
(men, women and children) but terribly sophisticated when with their own.
Are you a bad language sort of person – Trump
Or a liberal, psychopath, empire builder – Clinton
The only crime Trump has committed so far is his language. Liberals like Clinton, Blair
and Obama drip blood.
Lambert strether said: my view is that the democrat party cannot be saved, but it can be seized.
Absolutely correct.
That is why Trump must be elected. Only then through the broken remains of both Parties can the
frangible Democrat Party be seized and restored.
The 2016 election cannot be looked at in isolation. The wars for profit are spreading from
Nigeria through Syria to Ukraine. Turkey was just lost to the Islamists and is on the road to
being a failed state. The EU is in an existential crisis due to Brexit, the refugee crisis and
austerity. Western leadership is utterly incompetent and failing to protect its citizens. Globalization
is failing. Its Losers are tipping over the apple cart. Humans are returning to their tribal roots
for safety. The drums for war with Russia are beating. Clinton / Kaine are 100% Status Quo Globalists.
Trump / Pence are candidates of change to who knows what. Currently I am planning on voting for
the Green Party in the hope it becomes viable and praying that the chaos avoids Maryland.
"... Because we interpreted the end of the Cold War as the ultimate vindication of America's economic system, we intensified our push toward the next level of capitalism, called globalization. It was presented as a project that would benefit everyone. Instead it has turned out to be a nightmare for many working people. Thanks to "disruption" and the "global supply chain," many American workers who could once support families with secure, decent-paying jobs must now hope they can be hired as greeters at Walmart. Meanwhile, a handful of super-rich financiers manipulate our political system to cement their hold on the nation's wealth. ..."
"... Rather than shifting to a less assertive and more cooperative foreign policy, we continued to insist that America must reign supreme. When we declared that we would not tolerate the emergence of another "peer power," we expected that other countries would blithely obey. Instead they ignore us. We interpret this as defiance and seek to punish the offenders. That has greatly intensified tensions between the United States and the countries we are told to consider our chief adversaries, Russia and China. ..."
Because we interpreted the end of the Cold War as the ultimate vindication
of America's economic system, we intensified our push toward the next level
of capitalism, called globalization. It was presented as a project that
would benefit everyone. Instead it has turned out to be a nightmare for
many working people. Thanks to "disruption" and the "global supply chain,"
many American workers who could once support families with secure, decent-paying
jobs must now hope they can be hired as greeters at Walmart. Meanwhile,
a handful of super-rich financiers manipulate our political system to cement
their hold on the nation's wealth.
Enrique Ferro's insight:
Moments of change require adaptation, but the United States is not good
at adapting. We are used to being in charge. This blinded us to the reality
that as other countries began rising, our relative power would inevitably
decline. Rather than shifting to a less assertive and more cooperative
foreign policy, we continued to insist that America must reign supreme.
When we declared that we would not tolerate the emergence of another "peer
power," we expected that other countries would blithely obey. Instead they
ignore us. We interpret this as defiance and seek to punish the offenders.
That has greatly intensified tensions between the United States and the
countries we are told to consider our chief adversaries, Russia and China.
This is downright sickening and the people who are voting for Hillary will not even care what will
happen with the USA iif she is elected.
By attacking Trump using "Khan gambit" she risks a violent backlash (And not only via Wikileaks,
which already promised to release information about her before the elections)
People also start to understand that she is like Trump. He destroyed several hundred American lifes
by robbing them, exploiting their vanity (standard practice in the USA those days) via Trump University
scam. She destroyed the whole country -- Libya and is complicit in killing Khaddafi (who, while not
a nice guy, was keeping the country together and providing be highest standard of living in Africa for
his people).
In other words she is a monster and sociopath. He probably is a narcissist too. So there is no much
phychological difference between them. And we need tight proportions to judge this situation if we are
talking about Hillary vs Trump.
As for people voting for Trump -- yes they will. I think if Hillary goes aganst Trump, the female
neoliberal monster will be trumped. She has little chances even taking into account the level of brainwashing
in the USA (which actually is close to those that existed in the USSR).
Notable quotes:
"... The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their job security, income security, retirement security all go up in smoke. Neoliberals are trying to snip and cut labor protections, healthcare, environmental regulations all for corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources and protecting their markets, cause massive refugee flows which strain social structures in Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist. ..."
"... U.S. Government Tried to Tackle Gun Violence in 1960s ..."
"... Another key feature of fascism is territorial expansionism. As far as I am aware, none of the nationalist parties advocate invading other countries or retaking former colonies. Once again, contemporary neoliberalism is far closer to fascism. But you are correct about both Israel and Turkey – our allies. They are much closer to the genuine article. But you won't hear those complaining about the rise of fascism in Europe complaining too much about them. ..."
"... The only way they have avoided complete revolt has been endless borrowing to fund entitlements, once that one-time fix plays out the consequences will be apparent. The funding mechanism itself (The Fed) has even morphed into a neo-liberal tool designed to enrich Capital while enslaving Labor with the consequences. ..."
"... "Every society chooses how resources are allocated between capital and labor." More specifically, isn't it a struggle between various political/economic/cultural movements within a society which chooses how resources are allocated between capital and labor. ..."
"... My objection to imprecise language here isn't merely pedantic. The leftist dismissal of right wing populists like Trump (or increasingly influential European movements like Ukip, AfD, and the Front national) as "fascist" is a reductionist rhetorical device intended to marginalize them by implying their politics are so far outside of the mainstream that they do not need to be taken seriously. ..."
"... " the gutters and cutters of neoliberalism" ..."
"... The neoliberals are all too aware that the clock is ticking. In this morning's NYT, yet more talk of ramming TPP through in the lame duck. ..."
"... The roads here are deteriorating FAST. In Price County, the road commissioner said last night that their budget allows for resurfacing all the roads on a 200 year basis. ..."
"... This Trump support seems like a form of political vandalism with Trump as the spray paint. People generally feel frustrated with government, utterly powerless and totally left out as the ranks of the precariat continue to grow. Trump appeals to the nihilistic tendencies of some people who, like frustrated teens, have decided to just smashed things up for the hell of it. They think a presidency mix of Caligula with Earl Scheib would be a funny hoot. ..."
"... Someone at American Conservative, when trying to get at why it's pointless to tell people Trump will wreck the place, described him as a "hand grenade" lobbed into the heart of government. You can't scare people with his crass-ness and destructive tendencies, because that's precisely what his voters are counting on when/if he gets into government. ..."
"... In other words, the MSM's fear is the clearest sign to these voters that their ..."
"... Your phrase "Trump is political vandalism" is great. I don't think I've seen a better description. NPR this morning was discussing Trump and his relationship with the press and the issues some GOP leaders have with him. When his followers were discussed, the speakers closely circled your vandalism point. Basically they said that his voters are angry with the power brokers and leaders in DC and regardless of whether they think Trump's statements are heartfelt or just rhetoric, they DO know he will stick it to those power brokers so that's good. Vandalism by a longer phrase. ..."
"... Meritocracy was ALWAYS a delusional fraud. What you invariably get, after a couple of generations, is a clique of elitists who define merit as themselves and reproduce it ad nauseam. Who still believes in such laughable kiddie stories? ..."
"... Campaign Finance Reform: If you can't walk into a voting booth you cannot contribute, or make all elections financed solely by government funds and make private contributions of any kind to any politician illegal. ..."
"... Re-institute Glass-Steagall but even more so. Limit the number of states a bank can operate in. Make the Fed publicly owned, not privately owned by banks. Completely revise corporate law, doing away with the legal person hood of corporations and limit of liability for corporate officers and shareholders. ..."
"... Single payer health care for everyone. Allow private health plans but do away with health insurance as a deductible for business. Remove the AMA's hold on licensing of medical schools which restricts the number of doctors. ..."
"... Do away with the cap on Social Security wages and make all income, wages, capital gains, interest, and dividends subject to taxation. Impose tariffs to compensate for lower labor costs overseas and revise industry. ..."
"... Cut the Defense budget by 50% and use that money for intensive infrastructure development. ..."
"... Raise the national minimum wage to $15 and hour. ..."
"... Severely curtail the revolving door from government to private industry with a 10 year restriction on working for an industry you dealt with in any way as a government official. ..."
"... Free public education including college (4 year degree). ..."
"... Obama and Holder, allowing the banks to be above the law have them demi-gods, many of whom are psychopaths and kleptocrats, and with their newly granted status, they are now re-shaping the world in their own image. Prosecute these demi-gods and restore sanity. Don't and their greed for our things will never end until nothings left. ..."
"... This is why Hillary is so much more dangerous than trump, because she and the demi gods are all on the same page. The TPP is their holy grail so I expect heaven and earth to be moved, especially if it looks like some trade traitors are going to get knocked off in the election, scoundrels like patty murray (dino, WA) will push to get it through then line up at the feed trough to gorge on k street dough. I plan to vote stein if it's not Bernie, but am reserving commitment until I see what kind of betrayals the dems have for me, if it's bad enough I'll go with the trump hand grenade. ..."
"... Totally agree tegnost, no more democratic neoliberals -- ..."
"... "they are now re-shaping the world in their own image" Isn't this intrinsic to bourgeois liberalism? ..."
"... Two things are driving our troubles: over-population and globalization. The plutocrats and kleptocrats have all the leverage over the rest of us laborers when the population of human beings has increased seven-fold in the last 70 years, from a little over a billion to seven billions (and growing) today. They are happy to let us freeze to death behind gas stations in order for them to compete with other oligarchs in excess consumption. ..."
"... Thank you for mentioning the third rail of overpopulation. Too often, this giant category of problems is ignored, because it makes people uncomfortable. The planet is finite, resources on the planet are finite, yet the number of people keeps growing. We need to strive for a higher quality of life, not a higher quantity of people. ..."
"... The issue goes beyond "current neoliberals up for election", it is most of our political establishment that has been corrupted by a system that provides for the best politicians money can buy. ..."
"... America has always been a country where a majority of the population has been poor. With the exception of a fifty five year(1950-2005) year period where access to large quantities of consumer debt by households was deployed to first to provide a wealth illusion to keep socialism at bay, followed by a mortgage debt boom to both keep the system afloat and strip the accumulated capital of the working class, i.e. home equity, the history of the US has been one of poverty for the masses. ..."
"... Further debt was foisted on the working class in the form of military Keynesianism, generating massive fiscal deficits which are to be paid for via austerity in a neo-feudal economy. ..."
The first comment gives a window into the hidden desperation in America that is showing up in statistics
like increasing opioid addiction and suicides, rather than in accounts of how and why so many people
are suffering. I hope readers will add their own observations in comments.
We recently took three months to travel the southern US from coast to coast. As an expat for
the past twenty years, beyond the eye opening experience it left us in a state of shock. From
a homeless man convulsing in the last throes of hypothermia (been there) behind a fuel station
in Houston (the couldn't care less attendant's only preoccupation getting our RV off his premises),
to the general squalor of near-homelessness such as the emergence of "American favelas" a block
away from gated communities or affluent ran areas, to transformation of RV parks into permanent
residencies for the foreclosed who have but their trailer or RV left, to social study one can
engage while queuing at the cash registers of a Walmart before beneficiaries of SNAP.
Stopping to take the time to talk and attempt to understand their predicament and their beliefs
as to the cause of their plight is a dizzying experience in and of itself. For a moment I felt
transposed to the times of the Cold War, when the Iron Curtain dialectics fuzzed the perception
of that other world to the west with a structured set of beliefs designed to blacken that horizon
as well as establish a righteous belief in their own existential paradigm.
What does that have to do with education? Everything if one considers the elitist trend that
is slowly setting the framework of tomorrow's society. For years I have felt there is a silent
"un-avowed conspiracy", why the seeming redundancy, because it is empirically driven as a by-product
of capitalism's surge and like a self-redeeming discount on a store shelf crystalizes a group
identity of think-alike know-little or nothing frustrated citizens easily corralled by a Fox or
Trump piper. We have re-rcreated the conditions or rather the reality of "Poverty In America"
barely half a century after its first diagnostic with one major difference : we are now feeding
the growth of the "underclass" by lifting ever higher and out of reach the upward mobility ladder,
once the banner of opportunity now fallen behind the supposedly sclerotic welfare states of Europe.
So Richard Cohen now fears American voters because of Trump. Well, on Diane Reem today (NPR)
was a discussion on why fascist parties are growing in Europe. Both Cohen and the clowns on NPR
missed the forest for the trees. The reason Trump and Sanders are doing well in the US while
fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process
of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their
job security, income security, retirement security all go up in smoke. Neoliberals are trying
to snip and cut labor protections, healthcare, environmental regulations all for corporate profit.
In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism
(neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US
and NATO destabilize countries with the intent of stealing their resources and protecting their
markets, cause massive refugee flows which strain social structures in Europe (which falls right
into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist.
In the US we don't have the refugees, but the neoliberalism is further along and more damaging.
There's no mystery here or in Europe, just the natural effects of governments failing to represent
real people in favor of useless eater rich.
Make the people into commodities, endanger their washes and job security, impose austerity,
and tale in floods of refugees. Of COURSE Europeans stay leaning fascist.
According to NPR's experts, many or most of those parties are "fascist". The fascist label
is getting tossed around a LOT right now. It is slung at Trump, at UKIP, or any others. Fascist
is what you call the opposition party to the right that you oppose. Now I don't call Trump a fascist.
A buffoon, yes, even a charlatan (I still rather doubt he really originally thought he would become
the GOP nominee. Perhaps I'm wrong but, like me, many seemed to think that he was pushing his
"brand" – a term usage of which I HATE because it IS like we are all commodities or businesses
rather than PEOPLE – and that he would drop by the wayside and profit from his publicity).
Be that as it may, NPR and Co were discussing the rise of fascist/neofascist parties and wondering
why there were doing so well. Easy answer: neoliberalism + refugee hoards = what you see in Europe.
I've also blamed a large part of today's gun violence in the USA on the fruits of neoliberalism.
Why? Same reason that ugly right-wing groups (fascist or not) are gaining ground around the Western
world. Neoliberalism destroys societies. It destroys the connections within societies (the USA
in this case). Because we have guns handy, the result is mass shootings and flashes of murder-suicides.
This didn't happen BEFORE neoliberalism got its hooks into American society. The guns were there,
always have been (when I was a teen I recall seeing gun mags advertising various "assault weapons"
for sale this was BEFORE Reagan and this was BEFORE mass shootings, etc). Machine guns were much
easier to come by BEFORE the 1980s yet we didn't have mass killings with machine guns, handguns,
or shotguns. ALL that stuff is a NEW disease. A disease rooted in neoliberalism. Neoliberalism
steals your job security, your healthcare security, your home, your retirement security, your
ability to provide for your family, your ability to send your kids to college, your ability to
BUY FOOD. Neoliberalism means you don't get to work for a company for 20 years and then see the
company pay you back for that long, good service with a pension. You'll be lucky to hold a job
at any company from month-to-month now and FORGET about benefits! Healthcare? Going by the wayside
too. Workers in the past felt a bond with each other, especially within a company. Neoliberalism
has turned all workers against each other because they have to fight to gain any of the scraps
being tossed out by the rich overlords. You can't work TOGETHER to gain mutual benefit, you need
to fight each other in a zero sum game. For ME to win you have to lose. You are a commodity. A
disposable and irrelevant widget. THAT combines with guns (that have always been available!) and
you get desperate acting out: mass shootings, murder suicides, etc.
There are actual fascist parties in Europe. To name a few in one country I've followed, Ukraine,
there's Right Sector, Svoboda, and others, and that's just one country. I don't think anyone calls
UKIP fascist.
@Praedor – Your comment that Yves posted and this one are excellent. One of the most succinct
statements of neoliberalism and its worst effects that I have seen.
As to the cause of recent mass gun violence, I think you have truly nailed it. If one thinks
at all about the ways in which the middle class and lower have been squeezed and abused, it's
no wonder that a few of them would turn to violence. It's the same despair and frustration that
leads to higher suicide rates, higher rates of opiate addiction and even decreased life expectancy.
"Machine guns were much easier to come by BEFORE the 1980s yet we didn't have mass killings
with machine guns, handguns, or shotguns. ALL that stuff is a NEW disease. A disease rooted in
neoliberalism."
Easy availability of guns was seen as a serious problem long before the advent of neoliberalism.
For one example of articles about this, see U.S. Government Tried to Tackle Gun Violence in
1960s . Other examples include 1920s and 1930s gangster and mob violence that were a consequence
of Prohibition (of alcohol). While gun violence per-capita might be increasing, the population
is far larger today, and the news media select incidents of violence to make them seem like they're
happening everywhere and that everyone needs to be afraid. That, of course, instills a sense of
insecurity and fear into the public mind; thus, a fearful public want a strong leader and are
willing to accept the inconvenience and dangers of a police state for protection.
America has plenty of refugees, from Latin America
Neo-liberal goes back to the Monroe Doctrine. We used to tame our native workers with immigrants,
and we still do, but we also tame them by globalism in trade. So many rationalizations for this,
based on political and economic propaganda. All problems caused by the same cause American predatory
behavior. And our great political choice iron fist with our without velvet glove.
Germany, Belgium, France, Poland, Hungary, Romania, Turkey, Israel, Australia come to mind
(if one is allowed to participate in a European song contest, one is supposed to be part of Europe
:) They all have more or less fascist governments.
Once you realize that the ECB creates something like 60 billion euros a month, and gives nothing
to its citizens nor its nation-states, that means the money goes to corporations, which means
that the ECB, and by extension the whole EU, is a fascist construct (fascism being defined as
a government running on behalf of the corporations).
That's a fallacy. Corporatism is a feature of fascism, not the other way around.
None of the governments you mention, with the possible exception of Israel and Turkey, can
be called fascist in any meaningful sense.
Even the anti-immigration parties in the Western European countries you mention – AfD, Front
National, Vlaams Belang – only share their nationalism with fascist movements. And they are decidedly
anti-corporatist.
The problem here is one of semantics, really. You're using "fascist" interchangeably with "authoritarian",
which is a misnomer for these groups. The EU is absolutely anti-democratic, authoritarian, and
technocratic in a lot of respects, but it's not fascist. Both have corporatist tendencies, but
fascist corporatism was much more radical, much more anti-capitalist (in the sense that the capitalist
class was expected to subordinate itself to the State as the embodiment of the will of the Nation
or People, as were the other classes/corporate units). EU technocratic corporatism has none of
the militarism, the active fiscal policy, the drive for government supported social cohesion,
the ethno-nationalism, or millenarianism of Fascism.
The emergent Right parties like UKIP, FNP, etc. share far more with the Fascists, thought I'd
say they generally aren't yet what Fascists would have recognized as other Fascists in the way
that the NSDAP and Italian Fascists recognized each other -perhaps they're more like fellow travelers.
True, I posted a few minutes ago saying roughly the same thing – but it seems to have gone
to moderation.
Another key feature of fascism is territorial expansionism. As far as I am aware, none
of the nationalist parties advocate invading other countries or retaking former colonies. Once
again, contemporary neoliberalism is far closer to fascism. But you are correct about both Israel
and Turkey – our allies. They are much closer to the genuine article. But you won't hear those
complaining about the rise of fascism in Europe complaining too much about them.
When I was young, there were 4 divisions:
* who owned the means of production (public or private entities)
* who decided what those means were used for.
If it is a 'public entity' (aka government or regime) that decides what is built, we have a totalitarian
state, which can be 'communist' (if the means also belong the public entities like the government
or regional fractions of it) or 'fascist' (if the factories are still in private hands).
If it is the private owner of the production capacity who decides what is built, you get capitalism.
I don't recall any examples of private entities deciding what to do with public means of production
(mafia perhaps).
Sheldon Wolin
introduced
us to inverted totalitarism. While it is no longer the government that decides what must be
done, the private 'owners' just buy the government, the judiciary, the press, or whatever is needed
to achieve their means.
When I cite Germany, it is not so much AfD, but the 2€/hour jobs I am worried about. When I cite
Belgium, it is not the fools of Vlaams Belang, but rather the un-taxing of corporations and the
tear-down of social justice that worries me.
But Jeff, is Wolin accurate in using the term "inverted totalitarianism" to try to capture
the nature of our modern extractive bureaucratic monolith that apparently functions in an environment
where "it is no longer the government that decides what must be done..simply.."private owners
just buy the government, the judiciary, the press, or whatever is needed to achieve their means."
Mirowski argues quite persuasively that the neoliberal ascendency does not represent the retreat
of the State but its remaking to strongly support a particular conception of a market society
that is imposed with the help of the State on our society.
For Mirowski, neoliberalism is definitely not politically libertarian or opposed to strong
state intervention in the economy and society.
Inverted totalitarianism is the mirror image of fascism, which is why so many are confused.
Fascism is just a easier term to use and more understandable by all. There is not a strict adherence
to fascism going on, but it's still totalitarian just the same.
Hi
I live in Europe as well, and what to think of Germany's AfD, Greece's Golden Dawn, the Wilder's
party in the Netherlands etc. Most of them subscribe to the freeloading, sorry free trading economic
policies of neoliberalism.
There's LePen in France and the far-right, fascist leaning party nearly won in Austria. The
far right in Greece as well. There's clearly a move to the far right in Europe. And then there's
the totalitarian mess that is Turkey. How much further this turn to a fascist leaning right goes
and how widespread remains to be seen, but it's clearly underway.
Searched 'current fascist movements europe' and got these active groups from wiki.
National Bolshevik Party-Belarus
Parti Communautaire National-Européen Belgium
Bulgarian National Alliance Bulgaria
Nova Hrvatska Desnica Croatia
Ustaše Croatia
National Socialist Movement of Denmark
La Cagoule France
National Democratic Party of Germany
Fascism and Freedom Movement – Italy
Fiamma Tricolore Italy
Forza Nuova Italy
Fronte Sociale Nazionale Italy
Movimento Fascismo e Libertà Italy
Pērkonkrusts Latvia
Norges Nasjonalsosialistiske Bevegelse Norway
National Radical Camp (ONR) Poland
National Revival of Poland (NOP)
Polish National Community-Polish National Party (PWN-PSN)
Noua Dreaptă Romania
Russian National Socialist Party(formerly Russian National Union)
Barkashov's Guards Russia
National Socialist Society Russia
Nacionalni stroj Serbia
Otačastveni pokret Obraz Serbia
Slovenska Pospolitost Slovakia
España 2000 Spain
Falange Española Spain
Nordic Realm Party Sweden
National Alliance Sweden
Swedish Resistance Movement Sweden
National Youth Sweden
Legion Wasa Sweden
SPAS Ukraine
Blood and Honour UK
British National Front UK
Combat 18 UK
League of St. George UK
National Socialist Movement UK
Nationalist Alliance UK
November 9th Society UK
Racial Volunteer Force UK
"Fascism" has become the prefered term of abuse applied indiscriminately by the right thinking
to any person or movement which they want to tar as inherently objectionable, and which can therefore
be dismissed without the tedium of actually engaging with them at the level of ideas.
Most of the people who like to throw this word around couldn't give you a coherant definition
of what exactly they understand it to signify, beyond "yuck!!"
In fairness even students of political ideology have trouble teasing out a cosistent system
of beliefs, to the point where some doubt fascism is even a coherent ideology. That hardly excuses
the intellectual vacuity of those who use it as a term of abuse, however.
Precisely 3,248 angels can fit on the head of a pin. Parsing the true definition of "fascism"
is a waste of time, broadly, fascism is an alliance of the state, the corporation, and the military,
anyone who doesn't see that today needs to go back to their textbooks.
As far as the definition "neo-liberalism" goes, yes it's a useful label. But let's keep it
simple: every society chooses how resources are allocated between Capital and Labor. The needle
has been pegged over on the Capital side for quite some time, my "start date" is when Reagan busted
the air traffic union. The hideous Republicans managed to sell their base that policies that were
designed to let companies be "competitive" were somehow good for them, not just for the owners
of the means of production.
The only way they have avoided complete revolt has been endless borrowing to fund entitlements,
once that one-time fix plays out the consequences will be apparent. The funding mechanism itself
(The Fed) has even morphed into a neo-liberal tool designed to enrich Capital while enslaving
Labor with the consequences.
"Every society chooses how resources are allocated between capital and labor." More specifically,
isn't it a struggle between various political/economic/cultural movements within a society which
chooses how resources are allocated between capital and labor.
Take, for example, the late 1880s-1890s in the U.S. During that time-frame there were powerful
agrarian populists movements and the beginnings of some labor/socialist movements from below,
while from above the property-production system was modified by a powerful political movement
advocating for more corporate administered markets over the competitive small-firm capitalism
of an earlier age.
It was this movement for corporate administered markets which won the battle and defeated/absorbed
the agrarian populists.
What are the array of such forces in 2016? What type of movement doe Trump represent? Sanders?
Clinton?
fascism is an alliance of the state, the corporation, and the military, anyone who doesn't
see that today needs to go back to their textbooks
Which textbooks specifically?
The article I cited above in Vox canvasses the opinion of five serious students of fascism,
and none of them believe Trump is a fascist. I'd be most interested in knowing what you
have been reading.
As for your definition of "fascism", it's obviously so vague and broad that it really doesn't
explain anything. To the extent it contains any insight it is that public institutions (the state),
private businesses (the corporation) and the armed forces all exert significant influence on public
policy. That and a buck and and a half will get you a cup of coffee. If anything it is merely
a very crude descriptive model of the political process. It doesn't define fascism as a particular
set of beliefs that make it a distinct political ideology that can be differentiated from other
ideologies (again, see the Vox article for a discussion of some of the beliefs that are arguably
characteristic of fascist movements). Indeed by your standard virtually every state that has ever
existed has to a greater or lesser extent been "fascist".
My objection to imprecise language here isn't merely pedantic. The leftist dismissal of
right wing populists like Trump (or increasingly influential European movements like Ukip, AfD,
and the Front national) as "fascist" is a reductionist rhetorical device intended to marginalize
them by implying their politics are so far outside of the mainstream that they do not need to
be taken seriously. Given that these movements are only growing in strength as faith in traditional
political movements and elites evaporate this is likely to produce exactly the opposite result.
Right wing populism isn't going to disappear just because the left keeps trying to wish it away.
Refusing to accept this basic political fact risks condemning the left rather than "the fascists"
to political irrelevance.
I moved to a small city/town in Iowa almost 20 years ago. Then, it still had something of a
Norman Rockwell quality to it, particularly in a sense of egalitarianism, and also some small
factory jobs which still paid something beyond a bare existence.
Since 2000, many of those jobs have left, and the population of the county has declined by
about 10%. Kmart, Penney's, and Sears have left as payday/title loan outfits, pawnshops, smoke
shops, and used car dealers have all proliferated.
Parts of the town now resemble a combination of Appalachia and Detroit. Sanders easily won
the caucuses here and, no, his supporters were hardly the latte sippers of someone's imagination,
but blue collar folks of all ages.
My tale is similar to yours. About 2 years ago, I accepted a transfer from Chicagoland to north
central Wisconsin. JC Penney left a year and a half ago, and Sears is leaving in about 3-4 months.
Kmart is long gone.
I was back at the old homestead over Memorial Day, and it's as if time has stood still. Home
prices still going up; people out for dinner like crazy; new & expensive automobiles everywhere.
But driving out of Chicagoland, and back through rural Wisconsin it is unmistakeable.
2 things that are new: The roads here are deteriorating FAST. In Price County, the road
commissioner said last night that their budget allows for resurfacing all the roads on a 200 year
basis. (Yes, that means there is only enough money to resurface all the county roads if spread
out over 200 years.) 2nd, there are dead deer everywhere on the side of the road. In years past,
they were promptly cleaned up by the highway department. Not any more. Gross, but somebody has
to do the dead animal clean up. (Or not. Don't tell Snotty Walker though.)
Anyway, not everything is gloom and doom. People seem outwardly happy. But if you're paying
attention, signs of stress and deterioration are certainly out there.
This Trump support seems like a form of political vandalism with Trump as the spray paint.
People generally feel frustrated with government, utterly powerless and totally left out as the
ranks of the precariat continue to grow. Trump appeals to the nihilistic tendencies of some people
who, like frustrated teens, have decided to just smashed things up for the hell of it. They think
a presidency mix of Caligula with Earl Scheib would be a funny hoot.
You also have the more gullible fundis who have actually deluded themselves into thinking the
man who is ultimate symbol of hedonism will deliver them from secularism because he says he will.
Authoritarians who seek solutions through strong leaders are usually the easiest to con because
they desperately want to believe in their eminent deliverance by a human deus ex machina. Plus
he is ostentatiously rich in a comfortably tacky way and a TV celebrity beats a Harvard law degree.
And why not the thinking goes the highly vaunted elite college Acela crowd has pretty much made
a pig's breakfast out of things. So much for meritocracy. Professor Harold Hill is going to give
River City a boys band.
Someone at American Conservative, when trying to get at why it's pointless to tell people
Trump will wreck the place, described him as a "hand grenade" lobbed into the heart of government.
You can't scare people with his crass-ness and destructive tendencies, because that's precisely
what his voters are counting on when/if he gets into government.
In other words, the MSM's fear is the clearest sign to these voters that their
political revolution is working. Since TPTB decided peaceful change (i.e. Sanders) was a non-starter,
then they get to reap the whirlwind.
Your phrase "Trump is political vandalism" is great. I don't think I've seen a better description.
NPR this morning was discussing Trump and his relationship with the press and the issues some
GOP leaders have with him. When his followers were discussed, the speakers closely circled your
vandalism point. Basically they said that his voters are angry with the power brokers and leaders
in DC and regardless of whether they think Trump's statements are heartfelt or just rhetoric,
they DO know he will stick it to those power brokers so that's good. Vandalism by a longer phrase.
Meritocracy was ALWAYS a delusional fraud. What you invariably get, after a couple of generations,
is a clique of elitists who define merit as themselves and reproduce it ad nauseam. Who still
believes in such laughable kiddie stories?
Besides, consumers need to learn to play the long game and suck up the "scurrilous attacks"
on their personal consumption habits for the next four years. The end of abortion for four years
is not important - lern2hand and lern2agency, and lern2cutyourrapist if it comes to that. What
is important is that the Democratic Party's bourgeois yuppie constituents are forced to defend
against GOP attacks on their personal and cultural interests with wherewithal that would have
been ordinarily spent to attend to their sister act with their captive constituencies.
If bourgeois Democrats hadn't herded us into a situation where individuals mean nothing outside
of their assigned identity groups and their corporate coalition duopoly, they wouldn't be reaping
the whirlwind today. Why, exactly, should I be sympathetic to exploitative parasites such as the
middle class?
There are all good ideas. However, population growth undermines almost all of them. Population
growth in America is immigrant based. Reverse immigration influxes and you are at least doing
something to reduce population growth.
How to "reverse immigration influxes"?
Stop accepting refugees. It's outrageous that refugees from for example, Somalia,
get small business loans, housing assistance, food stamps and lifetime SSI benefits while some
of our veterans are living on the street.
No more immigration amnesties of any kind.
Deport all illegal alien criminals.
Practice "immigrant family unification" in the country of origin. Even if you have
to pay them to leave. It's less expensive in the end.
Eliminate tax subsidies to American corn growers who then undercut Mexican farmers'
incomes through NAFTA, driving them into poverty and immigration north. Throw Hillary Clinton
out on her ass and practice political and economic justice to Central America.
I too am a lifetime registered Democrat and I will vote for Trump if Clinton gets the crown.
If the Democrats want my vote, my continuing party registration and my until recently sizeable
donations in local, state and national races, they will nominate Bernie. If not, then I'm an Independent
forevermore. They will just become the Demowhig Party.
Campaign Finance Reform: If you can't walk into a voting booth you cannot contribute,
or make all elections financed solely by government funds and make private contributions of
any kind to any politician illegal.
Re-institute Glass-Steagall but even more so. Limit the number of states a bank can
operate in. Make the Fed publicly owned, not privately owned by banks.
Completely revise corporate law, doing away with the legal person hood of corporations
and limit of liability for corporate officers and shareholders.
Single payer health care for everyone. Allow private health plans but do away with
health insurance as a deductible for business. Remove the AMA's hold on licensing of medical
schools which restricts the number of doctors.
Do away with the cap on Social Security wages and make all income, wages, capital gains,
interest, and dividends subject to taxation.
Impose tariffs to compensate for lower labor costs overseas and revise industry.
Cut the Defense budget by 50% and use that money for intensive infrastructure development.
Raise the national minimum wage to $15 and hour.
Severely curtail the revolving door from government to private industry with a 10 year
restriction on working for an industry you dealt with in any way as a government official.
Free public education including college (4 year degree).
Obama and Holder, allowing the banks to be above the law have them demi-gods, many of whom
are psychopaths and kleptocrats, and with their newly granted status, they are now re-shaping
the world in their own image. Prosecute these demi-gods and restore sanity. Don't and their greed
for our things will never end until nothings left.
This is why Hillary is so much more dangerous than trump, because she and the demi gods
are all on the same page. The TPP is their holy grail so I expect heaven and earth to be moved,
especially if it looks like some trade traitors are going to get knocked off in the election,
scoundrels like patty murray (dino, WA) will push to get it through then line up at the feed trough
to gorge on k street dough. I plan to vote stein if it's not Bernie, but am reserving commitment
until I see what kind of betrayals the dems have for me, if it's bad enough I'll go with the trump
hand grenade.
Totally agree tegnost, no more democratic neoliberals -- Patty Murray (up for re-election)
and Cantwell are both trade traitors and got fast track passed.
Two things are driving our troubles: over-population and globalization. The plutocrats
and kleptocrats have all the leverage over the rest of us laborers when the population of human
beings has increased seven-fold in the last 70 years, from a little over a billion to seven billions
(and growing) today. They are happy to let us freeze to death behind gas stations in order for
them to compete with other oligarchs in excess consumption.
This deserves a longer and more thoughtful comment, but I don't have the time this morning.
I have to fight commute traffic, because the population of my home state of California has doubled
from 19M in 1970 to an estimated 43M today (if you count the Latin American refugees and H1B's).
Thank you for mentioning the third rail of overpopulation. Too often, this giant category
of problems is ignored, because it makes people uncomfortable. The planet is finite, resources
on the planet are finite, yet the number of people keeps growing. We need to strive for a higher
quality of life, not a higher quantity of people.
The issue goes beyond "current neoliberals up for election", it is most of our political
establishment that has been corrupted by a system that provides for the best politicians money
can buy.
In the 1980's I worked inside the beltway witnessing the new cadre of apparatchiks that drove
into town on the Reagan coattails full of moral a righteousness that became deviant, parochial,
absolutist and for whom bi-partisan approaches to policy were scorned prodded on by new power
brokers promoting their gospels in early morning downtown power breakfasts. Sadly our politicians
no longer serve but seek a career path in our growing meritocratic plutocracy.
America has always been a country where a majority of the population has been poor. With
the exception of a fifty five year(1950-2005) year period where access to large quantities of
consumer debt by households was deployed to first to provide a wealth illusion to keep socialism
at bay, followed by a mortgage debt boom to both keep the system afloat and strip the accumulated
capital of the working class, i.e. home equity, the history of the US has been one of poverty
for the masses.
Further debt was foisted on the working class in the form of military Keynesianism, generating
massive fiscal deficits which are to be paid for via austerity in a neo-feudal economy.
"... Money, it seems to him, has somehow changed its role. It has "increased" (is that possible, he asks?) while at the same time it has become concentrated in fewer and fewer hands. It appears to seek to become an autonomous and dominating sector of economic life, functionally separated from production of real things, almost all of which seem to come from faraway places. "Real" actually begins to change its meaning, another topic more interesting still. This devotion to the world of money-making-money seems to have obsessed the lives of many of the most "important" Americans. Entire TV networks are devoted to it. They talk about esoteric financial instruments that to the ordinary citizen look more like exotically placed bets-on-credit in the casino than genuine ways to grow real-world business, jobs, wages, and family income. The few who are in position to master the game live material lives that were beyond what almost any formerly "wealthy" man or woman in Rip's prior life could even imagine ..."
"... children gone away and lost to either the relentless rootlessness of the trans-national economy or the virtual hell-world of meth and opioids and heroin and unending underemployed hopelessness. ..."
"... "If public life can suffer a metaphysical blow, the death of the labor question was that blow. For millions of working people, it amputated the will to resist." ..."
"... It's a Wonderful Life ..."
"... as educators ..."
"... OK, so I hear some of you saying, corporate America will never let this Civic Media get off the ground. My short answer to this is that corporations do what makes money for them, and in today's despairing political climate there's money to be made in sponsoring something truly positive, patriotic and constructive. ..."
"... I am paying an exorbitant subscription for the UK Financial Times at the moment. Anyway, the good news is that very regular articles are appearing where you can almost feel the panic at the populist uprisings. ..."
"... The kernel of Neoliberal Ideology: "There is no such a thing as society." (Margaret Thatcher). ..."
"... "In this postindustrial world not only is the labor question no longer asked, not only is proletarian revolution passé, but the proletariat itself seems passé. And the invisibles who nonetheless do indeed live there have internalized their nonexistence, grown demoralized, resentful, and hopeless; if they are noticed at all, it is as objects of public disdain. What were once called "blue-collar aristocrats"-skilled workers in the construction trades, for example-have long felt the contempt of the whole white-collar world. ..."
"... Or, we could replace Western liberal culture, with its tradition to consume and expand by force an unbroken chain from the Garden of Eden to Friedrich von Hayek, with the notion of maintenance and "enough". Bourgeois make-work holds no interest to me. ..."
"... My understanding of the data is that living standards increased around the world during the so-called golden age, not just in the U.S. (and Western Europe and Japan and Australia ). It could be that it was still imperialism at work, but the link between imperialism and the creation of the middle class is not straightforward. ..."
"... I thought neoliberalism was just the pogrom to make everyone – rational agents – as subscribed by our genetic / heraldic betters .. putting this orbs humans and resources in the correct "natural" order . ..."
"... Disheveled Marsupial for those thinking neoliberalism is not associated with libertarianism one only has to observe the decades of think tanks and their mouth organs roaming the planet . especially in the late 80s and 90s . bringing the might and wonders of the – market – to the great unwashed globally here libertarian priests rang in the good news to the great unwashed ..."
"... I would argue that neoliberalism is a program to define markets as primarily engaged in information processing and to make everyone into non-agents ( as not important at all to the proper functioning of markets). ..."
"... It also appears that neoliberals want to restrict democracy to the greatest extent possible and to view markets as the only foundation for truth without any need for input from the average individual. ..."
I am almost 70 years old, born and raised in New York City, still living in a near suburb.
Somehow, somewhere along the road to my 70th year I feel as if I have been gradually transported
to an almost entirely different country than the land of my younger years. I live painfully now
in an alien land, a place whose habits and sensibilities I sometimes hardly recognize, while unable
to escape from memories of a place that no longer exists. There are days I feel as I imagine a
Russian pensioner must feel, lost in an unrecognizable alien land of unimagined wealth, power,
privilege, and hyper-glitz in the middle of a country slipping further and further into hopelessness,
alienation, and despair.
I am not particularly nostalgic. Nor am I confusing recollection with sentimental yearnings
for a youth that is no more. But if I were a contemporary Rip Van Winkle, having just awakened
after, say, 30-40 years, I would not recognize my beloved New York City. It would be not just
the disappearance of the old buildings, Penn Station, of course, Madison Square Garden and its
incandescent bulb marquee on 50th and 8th announcing NYU vs. St. John's, and the WTC, although
I always thought of the latter as "new" until it went down. Nor would it be the disappearance
of all the factories, foundries, and manufacturing plants, the iconic Domino Sugar on the East
River, the Wonder Bread factory with its huge neon sign, the Swingline Staples building in Long
Island City that marked passage to and from the East River tunnel on the railroad, and my beloved
Schaeffer Beer plant in Williamsburg, that along with Rheingold, Knickerbocker, and a score of
others, made beer from New York taste a little bit different.
It wouldn't be the ubiquitous new buildings either, the Third Avenue ghostly glass erected
in the 70's and 80's replacing what once was the most concentrated collection of Irish gin mills
anywhere. Or the fortress-like castles built more recently, with elaborate high-ceilinged lobbies
decorated like a kind of gross, filthy-wealthy Versailles, an aesthetically repulsive style that
shrieks "power" in a way the neo-classical edifices of our Roman-loving founders never did. Nor
would it even be the 100-story residential sticks, those narrow ground-to-clouds skyscraper condominiums
proclaiming the triumph of globalized capitalism with prices as high as their penthouses, driven
ever upward by the foreign billionaires and their obsession with burying their wealth in Manhattan
real estate.
It is not just the presence of new buildings and the absence of the old ones that have this
contemporary Van Winkle feeling dyslexic and light-headed. The old neighborhoods have disintegrated
along with the factories, replaced by income segregated swatches of homogenous "real estate" that
have consumed space, air, and sunlight while sucking the distinctiveness out of the City. What
once was the multi-generational home turf for Jewish, Afro-American, Puerto Rican, Italian, Polak
and Bohunk families is now treated as simply another kind of investment, stocks and bonds in steel
and concrete. Mom's Sunday dinners, clothes lines hanging with newly bleached sheets after Monday
morning wash, stickball games played among parked cars, and evenings of sitting on the stoop with
friends and a transistor radio listening to Mel Allen call Mantle's home runs or Alan Freed and
Murray the K on WINS 1010 playing Elvis, Buddy Holly, and The Drifters, all gone like last night's
dreams.
Do you desire to see the new New York? Look no further than gentrifying Harlem for an almost
perfect microcosm of the city's metamorphosis, full of multi-million condos, luxury apartment
renovations, and Maclaren strollers pushed by white yuppie wife stay-at-homes in Marcus Garvey
Park. Or consider the "new" Lower East Side, once the refuge of those with little material means,
artists, musicians, bums, drug addicts, losers and the physically and spiritually broken - my
kind of people. Now its tenements are "retrofitted" and remodeled into $4000 a month apartments
and the new residents are Sunday brunching where we used to score some Mary Jane.
There is the "Brooklyn brand", synonymous with "hip", and old Brooklyn neighborhoods like Red
Hook and South Brooklyn (now absorbed into so desirable Park Slope), and Bushwick, another former
outpost of the poor and the last place I ever imagined would be gentrified, full of artists and
hipsters driving up the price of everything. Even large sections of my own Queens and the Bronx
are affected (infected?). Check out Astoria, for example, neighborhood of my father's family,
with more of the old ways than most but with rents beginning to skyrocket and starting to drive
out the remaining working class to who knows where.
Gone is almost every mom and pop store, candy stores with their egg creams and bubble gum cards
and the Woolworth's and McCrory's with their wooden floors and aisles containing ordinary blue
collar urgencies like thread and yarn, ironing boards and liquid bleach, stainless steel utensils
of every size and shape. Where are the locally owned toy and hobby stores like Jason's in Woodhaven
under the el, with Santa's surprises available for lay-away beginning in October? No more luncheonettes,
cheap eats like Nedicks with hot dogs and paper cones of orange drink, real Kosher delis with
vats of warm pastrami and corned beef cut by hand, and the sacred neighborhood "bar and grill",
that alas has been replaced by what the kids who don't know better call "dive bars", the detestable
simulacra of the real thing, slick rooms of long slick polished mahogany, a half-dozen wide screen
TV's blaring mindless sports contests from all over the world, over-priced micro-brews, and not
a single old rummy in sight?
Old Rip searches for these and many more remembered haunts, what Ray Oldenburg called the "great
good places" of his sleepy past, only to find store windows full of branded, high-priced, got-to-have
luxury-necessities (necessary if he/she is to be certified cool, hip, and successful), ridiculously
overpriced "food emporia", high and higher-end restaurants, and apparel boutiques featuring hardened
smiles and obsequious service reserved for those recognized by celebrity or status.
Rip notices too that the visible demographic has shifted, and walking the streets of Manhattan
and large parts of Brooklyn, he feels like what walking in Boston Back Bay always felt like, a
journey among an undifferentiated mass of privilege, preppy or 'metro-sexed' 20 and 30-somethings
jogging or riding bicycles like lean, buff gods and goddesses on expense accounts supplemented
by investments enriched by yearly holiday bonuses worth more than Rip earned in a lifetime.
Sitting alone on a park bench by the river, Rip reflects that more than all of these individual
things, however, he despairs of a city that seems to have been reimagined as a disneyfied playground
of the privileged, offering endless ways to self-gratify and philistinize in a clean, safe (safest
big city in U.S., he heard someone say), slick, smiley, center-of-the-world urban paradise, protected
by the new centurions (is it just his paranoia or do battle-ready police seem to be everywhere?).
Old ethnic neighborhoods are filled with apartment buildings that seem more like post-college
"dorms", tiny studios and junior twos packed with three or four "singles" roommates pooling their
entry level resources in order to pay for the right to live in "The City". Meanwhile the newer
immigrants find what place they can in Kingsbridge, Corona, Jamaica, and Cambria Heights, far
from the city center, even there paying far too much to the landlord for what they receive.
New York has become an unrecognizable place to Rip, who can't understand why the accent-less
youngsters keep asking him to repeat something in order to hear his quaint "Brooklyn" accent,
something like the King's English still spoken on remote Smith Island in the Chesapeake, he guesses
.
Rip suspects that this "great transformation" (apologies to Polanyi) has coincided, and is somehow
causally related, to the transformation of New York from a real living city into, as the former
Mayor proclaimed, the "World Capital" of financialized commerce and all that goes with it.
"Financialization", he thinks, is not the expression of an old man's disapproval but a way
of naming a transformed economic and social world. Rip is not an economist. He reads voraciously
but, as an erstwhile philosopher trained to think about the meaning of things, he often can't
get his head around the mathematical model-making explanations of the economists that seem to
dominate the more erudite political and social analyses these days. He has learned, however, that
the phenomenon of "capitalism" has changed along with his city and his life.
Money, it seems to him, has somehow changed its role. It has "increased" (is that possible,
he asks?) while at the same time it has become concentrated in fewer and fewer hands. It appears
to seek to become an autonomous and dominating sector of economic life, functionally separated
from production of real things, almost all of which seem to come from faraway places. "Real" actually
begins to change its meaning, another topic more interesting still. This devotion to the world
of money-making-money seems to have obsessed the lives of many of the most "important" Americans.
Entire TV networks are devoted to it. They talk about esoteric financial instruments that to the
ordinary citizen look more like exotically placed bets-on-credit in the casino than genuine ways
to grow real-world business, jobs, wages, and family income. The few who are in position to master
the game live material lives that were beyond what almost any formerly "wealthy" man or woman
in Rip's prior life could even imagine
.
Above all else is the astronomical rise in wealth and income inequality. Rip recalls that growing
up in the 1950's, the kids on his block included, along with firemen, cops, and insurance men
dads (these were virtually all one-parent income households), someone had a dad who worked as
a stock broker. Yea, living on the same block was a "Wall Streeter". Amazingly democratic, no?
Imagine, people of today, a finance guy drinking at the same corner bar with the sanitation guy.
Rip recalls that Aristotle had some wise and cautionary words in his Politics concerning the stability
of oligarchic regimes.
Last year I drove across America on blue highways mostly. I stayed in small towns and cities,
Zanesville, St. Charles, Wichita, Pratt, Dalhart, Clayton, El Paso, Abilene, Clarksdale, and many
more. I dined for the most part in local taverns, sitting at the bar so as to talk with the local
bartender and patrons who are almost always friendly and talkative in these spaces. Always and
everywhere I heard similar stories as my story of my home town. Not so much the specifics (there
are no "disneyfied" Lubbocks or Galaxes out there, although Oxford, MS comes close) but in the
sadness of men and women roughly my age as they recounted a place and time – a way of life – taken
out from under them, so that now their years are filled with decayed and dead downtowns, children
gone away and lost to either the relentless rootlessness of the trans-national economy or the
virtual hell-world of meth and opioids and heroin and unending underemployed hopelessness.
I am not a trained economist. My graduate degrees were in philosophy. My old friends call me
an "Eric Hoffer", who back in the day was known as the "longshoreman philosopher". I have been
trying for a long time now to understand the silent revolution that has been pulled off right
under my nose, the replacement of a world that certainly had its flaws (how could I forget the
civil rights struggle and the crime of Viet Nam; I was a part of these things) but was, let us
say, different. Among you or your informed readers, is there anyone who can suggest a book or
books or author(s) who can help me understand how all of this came about, with no public debate,
no argument, no protest, no nothing? I would be very much appreciative.
I'll just highlight this line for emphasis
"there are no "disneyfied" Lubbocks or Galaxes out there, although Oxford, MS comes close) but
in the sadness of men and women roughly my age as they recounted a place and time – a way of life
– taken out from under them, so that now their years are filled with decayed and dead downtowns,
children gone away and lost to either the relentless rootlessness of the trans-national economy
or the virtual hell-world of meth and opioids and heroin and unending underemployed hopelessness."
my best friend pretty much weeps every day.
I don't have a book to recommend. I do think you identify a really underemphasized central
fact of recent times: the joint processes by which real places have been converted into "real
estate" and real, messy lives replaced by safe, manufactured "experiences." This affects wealthy
and poor neighborhoods alike, in different ways but in neither case for the better.
I live in a very desirable neighborhood in one of those places that makes a lot of "Best of"
lists. I met a new neighbor last night who told me how he and his wife had plotted for years to
get out of the Chicago burbs, not only to our city but to this specific neighborhood, which they
had decided is "the one." (This sentiment is not atypical.) Unsurprisingly, property values in
the neighborhood have gone through the roof. Which, as far as I can tell, most everyone here sees
as an unmitigated good thing.
At the same time, several families I got to know because they moved into the neighborhood about
the same time we did 15-20 years ago, are cashing out and moving away, kids off to or out of college,
parents ready (and financed) to get on to the next phase and the next place. Of course, even though
our children are all Lake Woebegoners, there are no next generations staying in the neighborhood,
except of course the ones still living, or back, at "home." (Those families won't be going anywhere
for awhile!)
I can't argue that new money in the hood hasn't improved some things. Our formerly struggling
food co-op just finished a major expansion and upgrade. Good coffee is 5 minutes closer than it
used to be. But to my wife and me, the overwhelming feeling is that we are now outsiders here
in this neighborhood where we know all the houses and the old trees but not what motivates our
new neighbors. So I made up a word for it: unsettling (adj., verb, noun).
"If public life can suffer a metaphysical blow, the death of the labor question was that
blow. For millions of working people, it amputated the will to resist."
Christopher Lash in "Revolt of the Elites and the Betrayal of Democracy" mentions Ray Oldenburg's
"The Great Good Places: Cafes, Coffee Shops, Community Centers, Beauty Parlors, General Stores,
Bars, Hangouts and How they Got You through the Day."
He argued that the decline of democracy is directly related to the disappearance of what he
called third places:,
"As neighborhood hangouts give way to suburban shopping malls, or, on the other hand private
cocktail parties, the essentially political art of conversation is replaced by shoptalk or personal
gossip.
Increasingly, conversation literally has no place in American society. In its absence how–or
better, where–can political habits be acquired and polished?
Lasch finished he essay by noting that Oldenburg's book helps to identify what is missing from
our then newly emerging world (which you have concisely updated):
"urban amenities, conviviality, conversation, politics–almost everything in part that makes
life worth living."
The best explainer of our modern situation that I have read is Wendell Berry. I suggest that
you start with "The Unsettling of America," quoted below.
"Let me outline briefly as I can what seem to me the characteristics of these opposite kinds
of mind. I conceive a strip-miner to be a model exploiter, and as a model nurturer I take the
old-fashioned idea or ideal of a farmer. The exploiter is a specialist, an expert; the nurturer
is not. The standard of the exploiter is efficiency; the standard of the nurturer is care. The
exploiter's goal is money, profit; the nurturer's goal is health - his land's health, his own,
his family's, his community's, his country's. Whereas the exploiter asks of a piece of land only
how much and how quickly it can be made to produce, the nurturer asks a question that is much
more complex and difficult: What is its carrying capacity? (That is: How much can be taken from
it without diminishing it? What can it produce dependably for an indefinite time?) The exploiter
wishes to earn as much as possible by as little work as possible; the nurturer expects, certainly,
to have a decent living from his work, but his characteristic wish is to work as well as possible.
The competence of the exploiter is in organization; that of the nurturer is in order - a human
order, that is, that accommodates itself both to other order and to mystery. The exploiter typically
serves an institution or organization; the nurturer serves land, household, community, place.
The exploiter thinks in terms of numbers, quantities, "hard facts"; the nurturer in terms of character,
condition, quality, kind."
I also think Prof. Patrick Deneen works to explain the roots (and progression) of decline.
I'll quote him at length here describing the modern college student.
"[T]he one overarching lesson that students receive is the true end of education: the only
essential knowledge is that know ourselves to be radically autonomous selves within a comprehensive
global system with a common commitment to mutual indifference. Our commitment to mutual indifference
is what binds us together as a global people. Any remnant of a common culture would interfere
with this prime directive: a common culture would imply that we share something thicker, an inheritance
that we did not create, and a set of commitments that imply limits and particular devotions.
Ancient philosophy and practice praised as an excellent form of government a res publica –
a devotion to public things, things we share together. We have instead created the world's first
Res Idiotica – from the Greek word idiotes, meaning "private individual." Our education system
produces solipsistic, self-contained selves whose only public commitment is an absence of commitment
to a public, a common culture, a shared history. They are perfectly hollowed vessels, receptive
and obedient, without any real obligations or devotions.
They won't fight against anyone, because that's not seemly, but they won't fight for anyone
or anything either. They are living in a perpetual Truman Show, a world constructed yesterday
that is nothing more than a set for their solipsism, without any history or trajectory."
Wow. Did this hit a nerve. You have eloquently described what was the city of hope for several
generations of outsiders, for young gay men and women, and for real artists, not just from other
places in America, but from all over the world. In New York, once upon a time, bumping up against
the more than 50% of the population who were immigrants from other countries, you could learn
a thing or two about the world. You could, for a while, make a living there at a job that was
all about helping other people. You could find other folks, lots of them, who were honest, well-meaning,
curious about the world. Then something changed. As you said, you started to see it in those hideous
80's buildings. But New York always seemed somehow as close or closer to Europe than to the U.S.,
and thus out of the reach of mediocrity and dumbing down. New York would mold you into somebody
tough and smart, if you weren't already – if it didn't, you wouldn't make it there.
Now, it seems, this dream is dreamt. Poseurs are not artists, and the greedy and smug drive
out creativity, kindness, real humor, hope.
It ain't fair. I don't know where in this world an aspiring creative person should go now,
but it probably is not there.
Americans cannot begin to reasonably demand a living wage, benefits and job security when there
is an unending human ant-line of illegals and legal immigrants willing to under bid them.
Only when there is a parity or shortage of workers can wage demands succeed, along with other
factors.
From 1925 to 1965 this country accepted hardly any immigrants, legal or illegal. We had the
bracero program where Mexican males were brought in to pick crops and were then sent home to collect
paychecks in Mexico. American blacks were hired from the deep south to work defense plants in
the north and west.
Is it any coincidence that the 1965 Great Society program, initiated by Ted Kennedy to primarily
benefit the Irish immigrants, then co-opted by LBJ to include practically everyone, started this
process of Middle Class destruction?
1973 was the peak year of American Society as measured by energy use per capita, expansion
of jobs and unionization and other factors, such as an environment not yet destroyed, nicely measured
by the The Real Progress Indicator.
Solution? Stop importing uneducated people. That's real "immigration reform".
Now explain to me why voters shouldn't favor Trump's radical immigration stands?
Maybe, but OTOH, who is it, exactly, who is recruiting, importing, hiring and training undocumented
workers to downgrade pay scales??
Do some homework, please. If businesses didn't actively go to Central and South America to
recruit, pay to bring here, hire and employ undocumented workers, then the things you discuss
would be great.
When ICE comes a-knocking at some meat processing plant or mega-chicken farm, what happens?
The undocumented workers get shipped back to wherever, but the big business owner doesn't even
get a tap on the wrist. The undocumented worker – hired to work in unregulated unsafe unhealthy
conditions – often goes without their last paycheck.
It's the business owners who manage and support this system of undocumented workers because
it's CHEAP, and they don't get busted for it.
Come back when the USA actually enforces the laws that are on the books today and goes after
big and small business owners who knowingly recruit, import, hire, train and employee undocumented
workers you know, like Donald Trump has all across his career.
This is the mechanism by which the gov't has assisted biz in destroying the worker, competition
for thee, but none for me. For instance I can't go work in canada or mexico, they don't allow
it. Policy made it, policy can change it, go bernie. While I favor immigration, in it's current
form it is primarily conducted on these lines of destroying workers (H1b etc and illegals combined)
Lucky for the mexicans they can see the american dream is bs and can go home. I wonder who the
latinos that have gained citizenship will vote for. Unlikely it'll be trump, but they can be pretty
conservative, and the people they work for are pretty conservative so no guarantee there, hillary
is in san diego at the tony balboa park where her supporters will feel comfortable, not a huge
venue I think they must be hoping for a crowd, and if she can't get one in san diego while giving
a "if we don't rule the world someone else will" speech, she can't get one anywhere. Defense contractors
and military advisors and globalist biotech (who needs free money more than biotech? they are
desperate for hillary) are thick in san diego.
I live part-time in San Diego. It is very conservative. The military, who are constantly screwed
by the GOP, always vote Republican. They make up a big cohort of San Diego county.
Hillary may not get a big crowd at the speech, but that, in itself, doesn't mean that much
to me. There is a segment of San Diego that is somewhat more progressive-ish, but it's a pretty
conservative county with parts of eastern SD county having had active John Birch Society members
until recently or maybe even ongoing.
There's a big push in the Latino community to GOTV, and it's mostly not for Trump. It's possible
this cohort, esp the younger Latino/as, will vote for Sanders in the primary, but if Clinton gets
the nomination, they'll likely vote for her (v. Trump).
I was unlucky enough to be stuck for an hour in a commuter train last Friday after Trump's
rally there. Hate to sound rude, but Trump's fans were everything we've seen. Loud, rude, discourteous
and an incessant litany of rightwing talking points (same old, same old). All pretty ignorant.
Saying how Trump will "make us great again." I don't bother asking how. A lot of ugly comments
about Obama and how Obama has been "so racially divisive and polarizing." Well, No. No, Obama
has not been or done that, but the rightwing noise machine has sure ginned up your hatreds, angers
and fears. It was most unpleasant. The only instructive thing about it was confirming my worst
fears about this group. Sorry to say but pretty loutish and very uninformed. Sigh.
part timer in sd as well, family for hillary except for nephew and niece .I keep telling my
mom she should vote bernie for their sake but it never goes over very well
Re Methland, we live in rural US and we got a not-very-well hidden population of homeless children.
I don't mean homeless families with children, I mean homeless children. Sleeping in parks in good
weather, couch-surfing with friends, etc. I think related.
Fascism is a system of political and social order intended to reinforce the unity, energy and
purity of communities in which liberal democracy stand(s) accused of producing division and decline.
. . . George Orwell reminded us, clad in the mainstream patriotic dress of their own place and
time, . . . an authentically popular fascism in the United States would be pious and anti-Black;
in Western Europe, secular and antisemitic, or more probably, these days anti-Islamic; in Russia
and Eastern Europe, religious, antisemitic, and slavophile.
Robert O. Paxton
In The Five Stages of Faschism
" that eternal enemy: the conservative manipulators of privilege who damn as 'dangerous agitators'
any man who menaces their fortunes" (maybe 'power and celebrity' should be added to fortunes)
Sinclair Lewis
It Can't Happen Here page 141
On the Boots To Ribs Front: Anyone hereabouts notice that Captain America has just been revealed
to be a Nazi? Maybe this is what R. Cohen was alluding to but I doubt it.
The four horse men are, political , social, economic and environmental collapse . Any one remember
the original Mad Max movie. A book I recommend is the Crash Of 2016 By Thom Hartmann.
From the comment, I agree with the problems, not the cause. We've increased the size and scope
of the safety net over the last decade. We've increased government spending versus GDP. I'm not
blaming government but its not neoliberal/capitalist policy either.
1. Globalization clearly helps the poor in other countries at the expense of workers in the
U.S. But at the same time it brings down the cost of goods domestically. So jobs are not great
but Walmart/Amazon can sell cheap needs.
2. Inequality started rising the day after Bretton Woods – the rich got richer everyday after
"Nixon Shock"
Hi rfam : To point 1 : Why is there a need to bring down the cost of goods? Is it because of
past outsourcing and trade agreements and FR policies? I think there's a chicken and egg thing
going on, ie.. which came first. Globalization is a way to bring down wages while supplying Americans
with less and less quality goods supplied at the hand of global corporations like Walmart that
need welfare in the form of food stamps and the ACA for their workers for them to stay viable
(?). Viable in this case means ridiculously wealthy CEO's and the conglomerate growing bigger
constantly. Now they have to get rid of COOL's because the WTO says it violates trade agreements
so we can't trace where our food comes from in case of an epidemic. It's all downhill. Wages should
have risen with costs so we could afford high quality American goods, but haven't for a long,
long time.
Globalization helps the rich here way more than the poor there. The elites get more money for
nothing (see QE before you respond, if you do, that's where the money for globalization came from)
the workers get the husk. Also the elite gets to say "you made your choices" and other moralistic
crap. The funny(?) thing is they generally claim to be atheists, which I translate into "I am
God, there doesn't need to be any other" Amazon sells cheap stuff by cheating on taxes, and barely
makes money, mostly just driving people out of business. WalMart has cheap stuff because they
subsidise their workers with food stamps and medicaid. Bringing up bretton woods means you don't
know much about money creation, so google "randy wray/bananas/naked capitalism" and you'll find
a quick primer.
The Walmart loathsome spawn and Jeff Bezos are the biggest welfare drains in our nation – or
among the biggest. They woefully underpay their workers, all while training them on how to apply
for various welfare benefits. Just so that their slaves, uh, workers can manage to eat enough
to enable them to work.
It slays me when US citizens – and it happens across the voting spectrum these days; I hear
just as often from Democratic voters as I do from GOP voters – bitch, vetch, whine & cry about
welfare abuse. And if I start to point out the insane ABUSE of welfare by the Waltons and Jeff
Bezos, I'm immediately greeted with random TRUE stories about someone who knew someone who somehow
made out like a bandit on welfare.
Hey, I'm totally sure and in agreement that there are likely a small percentage of real welfare
cheats who manage to do well enough somehow. But seriously? That's like a drop in the bucket.
Get the eff over it!!!
Those cheats are not worth discussing. It's the big fraud cheats like Bezos & the Waltons and
their ilk, who don't need to underpay their workers, but they DO because the CAN and they get
away with it because those of us the rapidly dwindling middle/working classes are footing the
bill for it.
Citizens who INSIST on focusing on a teeny tiny minority of real welfare cheats, whilst studiously
ignoring the Waltons and the Bezos' of the corporate world, are enabling this behavior. It's one
of my bugabears bc it's so damn frustrating when citizens refuse to see how they are really being
ripped off by the 1%. Get a clue.
That doesn't even touch on all the other tax breaks, tax loopholes, tax incentives and just
general all-around tax cheating and off-shore money hiding that the Waltons and Bezos get/do.
Sheesh.
"I'm immediately greeted with random TRUE stories about someone who knew someone who somehow
made out like a bandit on welfare."
is the key and a v. long term result of the application of Bernays' to political life. Its
local and hits at the gut interpersonal level 'cos the "someones" form a kind of chain of trust
esp. if the the first one on the list is a friend or a credentialed media pundit. Utterly spurious
I know but countering this with a *merely* rational analysis of how Walmart, Amazon abuse the
welfare system to gouge profits from the rest of us just won't ever, for the large majority, get
through this kind emotional wall.
I don't know what any kind of solution might look like but, somehow, we need to find a way
of seriously demonising the corporate parasites that resonates at the same emotional level as
the "welfare cheat" meme that Bill Clinton and the rest of the DLC sanctified back in the '90s.
Something like "Walmart's stealing your taxes" might work but how to get it out there in a
viral way ??
What a comment from seanseamour. And the "hoisting" of it to high visibility at the site is
a testament to the worth of Naked Capitalism.
seanseamour asks "What does that have to do with education?" and answers "Everything if one
considers the elitist trend " This question & answer all but brings tears to my eyes. It is so
utterly on point. My own experience of it, if I may say so, comes from inside the belly of the
beast. As a child and a product of America's elite universities (I have degrees from Harvard and
Yale, and my dad, Richard B. Sewall, was a beloved English prof at Yale for 42 years), I could
spend all morning detailing the shameful roles played by America's torchbearing universities –
Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators
to maintaining the health of the nation's public school system.*
And as I suspect seanseymour would agree, when a nation loses public education, it loses everything.
But I don't want to spend all morning doing that because I'm convinced that it's not too late
for America to rescue itself from maelstrom in which it finds itself today. (Poe's "Maelstrom"
story, cherished by Marshall McLuhan, is supremely relevant today.)
To turn America around, I don't look to education – that system is too far gone to save itself,
let alone the rest of the country – but rather to the nation's media: to the all-powerful public
communication system that certainly has the interactive technical capabilities to put citizens
and governments in touch with each other on the government decisions that shape the futures of
communities large and small.
For this to happen, however, people like the us – readers of Naked Capitalism – need to stop
moaning and groaning about the damage done by the neoliberals and start building an issue-centered,
citizen-participatory, non-partisan, prime-time Civic Media strong enough to give all Americans
an informed voice in the government decisions that affect their lives. This Civic media would
exist to make citizens and governments responsive and accountable to each other in shaping futures
of all three communities – local, state and national – of which every one of us is a member.
Pie in the sky? Not when you think hard about it. A huge majority of Americans would welcome
this Civic Media. Many yearn for it. This means that a market exists for it: a Market of the Whole
of all members of any community, local, state and national. This audience is large enough to rival
those generated by media coverage of pro sports teams, and believe it or not much of the growth
of this Civic media could be productively modeled on the growth of media coverage of pro sports
teams. This Civic Media would attract the interest of major advertisers, especially those who
see value in non-partisan programming dedicated to getting America moving forward again. Dynamic,
issue-centered, problem-solving public forums, some modeled on voter-driven reality TV contests
like The Voice or Dancing with the Stars, could be underwritten by a "rainbow" spectrum of funders,
commericial, public, personal and even government sources.
So people take hope! Be positive! Love is all we need, etc. The need for for a saving alternative
to the money-driven personality contests into which our politics has descended this election year
is literally staring us all in the face from our TV, cellphone and computer screens. This is no
time to sit back and complain, it's a time to start working to build a new way of connecting ourselves
so we can reverse America's rapid decline.
OK, so I hear some of you saying, corporate America will never let this Civic Media get
off the ground. My short answer to this is that corporations do what makes money for them, and
in today's despairing political climate there's money to be made in sponsoring something truly
positive, patriotic and constructive. And I hear a few others saying that Americans are too
dumbed down, too busy, too polarized or too just plain stupid to make intelligent, constructive
use of a non-partisan, problem-solving Civic Media. But I would not underestimate the intelligence
of Americans when they can give their considered input – by vote, by comment or by active participation
– in public forums that are as exciting and well managed as an NFL game or a Word Series final.
I am paying an exorbitant subscription for the UK Financial Times at the moment. Anyway,
the good news is that very regular articles are appearing where you can almost feel the panic
at the populist uprisings.
Whatever system is put in place the human race will find a way to undermine it. I believe in
capitalism because fair competition means the best and most efficient succeed.
I send my children to private schools and universities because I want my own children at the
top and not the best. Crony capitalism is inevitable, self-interest undermines any larger system
that we try and impose.
Can we design a system that can beat human self-interest? It's going to be tricky.
"If that's the system, how can I take advantage of it?" human nature at work. "If that's the
system, is it working for me or not?" those at the top.
If not, it's time to change the system.
If so, how can I tweak it to get more out of it?
Neo-Liberalism
Academics, who are not known for being street-wise, probably thought they had come up with
the ultimate system using markets and numeric performance measures to create a system free from
human self-interest.
They had already missed that markets don't just work for price discovery, but are frequently
used for capital gains by riding bubbles and hoping there is a "bigger fool" out there than you,
so you can cash out with a handsome profit.
(I am not sure if the Chinese realise markets are supposed to be for price discovery at all).
Hence, numerous bubbles during this time, with housing bubbles being the global favourite for
those looking for capital gains.
If we are being governed by the markets, how do we rig the markets?
A question successfully solved by the bankers.
Inflation figures, that were supposed to ensure the cost of living didn't rise too quickly,
were somehow manipulated to produce low inflation figures with roaring house price inflation raising
the cost of living.
What unemployment measure will best suit the story I am trying to tell?
U3 – everything great
U6 – it's not so good
Labour participation rate – it hasn't been this bad since the 1970s
Anything missing from the theory has been ruthlessly exploited, e.g. market bubbles ridden
for capital gains, money creation by private banks, the difference between "earned" and "unearned"
income and the fact that Capitalism trickles up through the following mechanism:
1) Those with excess capital collect rent and interest.
2) Those with insufficient capital pay rent and interest.
I just went on a rant last week. (Not only because the judge actually LIED in court)
I left the courthouse in downtown Seattle, to cross the street to find the vultures selling
more foreclosures on the steps of the King County Administration Building, while above them, there
were tents pitched on the building's perimeter. And people were walking by just like this scene
was normal.
Because the people at the entrance of the courthouse could view this, I went over there and
began to rant. I asked (loudly) "Do you guys see that over there? Vultures selling homes rendering
more people homeless and then the homeless encampment with tents pitched on the perimeter above
them? In what world is this normal?" One guy replied, "Ironic, isn't it?" After that comment,
the Marshall protecting the judicial crooks in the building came over and tried to calm me down.
He insisted that the scene across the street was "normal" and that none of his friends or neighbors
have been foreclosed on. I soon found out that that lying Marshall was from Pierce County, the
epicenter of Washington foreclosures.
"In this postindustrial world not only is the labor question no longer asked, not only
is proletarian revolution passé, but the proletariat itself seems passé. And the invisibles who
nonetheless do indeed live there have internalized their nonexistence, grown demoralized, resentful,
and hopeless; if they are noticed at all, it is as objects of public disdain. What were once called
"blue-collar aristocrats"-skilled workers in the construction trades, for example-have long felt
the contempt of the whole white-collar world.
For these people, already skeptical about who runs things and to what end, and who are now
undergoing their own eviction from the middle class, skepticism sours into a passive cynicism.
Or it rears up in a kind of vengeful chauvinism directed at alien others at home and abroad, emotional
compensation for the wounds that come with social decline If public life can suffer a metaphysical
blow, the death of the labor question was that blow. For millions of working people, it amputated
the will to resist."
One thing I don't think I have seen addressed on this site (apologies if I have missed it!)
in all the commentary about the destruction of the middle class is the role of US imperialism
in creating that middle class in the first place and what it is that we want to save from destruction
by neo-liberalism. The US is rich because we rob the rest of the world's resources and have been
doing so in a huge way since 1945, same as Britain before us. I don't think it's a coincidence
that the US post-war domination of the world economy and the middle class golden age happened
at the same time. Obviously there was enormous value created by US manufacturers, inventors, government
scientists, etc but imperialism is the basic starting point for all of this. The US sets the world
terms of trade to its own advantage. How do we save the middle class without this level of control?
Within the US elites are robbing everyone else but they are taking what we use our military power
to appropriate from the rest of the world.
Second, if Bernie or whoever saves the middle class, is that so that everyone can have a tract
house and two cars and continue with a massively wasteful and unsustainable lifestyle based on
consumption? Or are we talking about basic security like shelter, real health care, quality education
for all, etc? Most of the stories I see seem to be nostalgic for a time when lots of people could
afford to buy lots of stuff and don't 1) reflect on origin of that stuff (imperialism) and 2)
consider whether that lifestyle should be the goal in the first place.
I went to the electronics recycling facility in Seattle yesterday. The guy at customer service
told me that they receive 20 million pounds per month. PER MONTH. Just from Seattle. I went home
and threw up.
It doesn't have to be that way. You can replace military conquest (overt and covert) with space
exploration and science expansion. Also, instead of pushing consumerism, push contentment. Don't
setup and goose a system of "gotta keep up with the Joneses!"
In the 50s(!!!) there was a plan, proven in tests and studies, that would have had humans on
the mars by 1965, out to Saturn by 72. Project Orion. Later, the British Project Daedalus was
envisioned which WOULD have put space probes at the next star system within 20 years of launch.
It was born of the atomic age and, as originally envisioned, would have been an ecological disaster
BUT it was reworked to avoid this and would have worked. Spacecraft capable of comfortably holding
100 personnel, no need to build with paper-thin aluminum skin or skimp on amenities. A huge ship
built like a large sea vessel (heavy iron/steel) accelerated at 1g (or more or slightly less as
desired) so no prolonged weightlessness and concomitant loss of bone and muscle mass. It was all
in out hands but the Cold War got in the way, as did the many agreements and treaties of the Cold
War to avoid annihilation. It didn't need to be that way. Check it out:
https://en.wikipedia.org/wiki/Project_Orion_(nuclear_propulsion)
All that with 1950s and 60s era technology. It could be done better today and for less than
your wars in the Middle East. Encourage science, math, exploration instead of consumption, getting
mine before you can get yours, etc.
Or, we could replace Western liberal culture, with its tradition to consume and expand
by force an unbroken chain from the Garden of Eden to Friedrich von Hayek, with the notion of
maintenance and "enough". Bourgeois make-work holds no interest to me.
My understanding of the data is that living standards increased around the world during
the so-called golden age, not just in the U.S. (and Western Europe and Japan and Australia ).
It could be that it was still imperialism at work, but the link between imperialism and the creation
of the middle class is not straightforward.
Likewise, US elites are clearly NOT robbing the manufacturing firms that have set up in China
and other low-wage locations, so it is an oversimplification to say they are "robbing everyone
else."
Nostalgia is overrated but I don't sense the current malaise as a desire for more stuff. (I
grew up in the 60s and 70s and I don't remember it as a time where people had, or craved, a lot
of stuff. That period would be now, and I find it infects Sanders' supporters less than most.)
If anything, it is nostalgia for more (free) time and more community, for a time when (many but
not all) people had time to socialize and enjoy civic life.
those things would be nice as would just a tiny bit of hope for the future, our own and the
planet's and not an expectation of things getting more and more difficult and sometimes for entirely
unnecessary reasons like imposed austerity. But being we can't have "nice things" like free time,
community and hope for the future, we just "buy stuff".
I live on the south side, in the formerly affluent south shore neighborhood. A teenager was
killed, shot in the head in a drive by shooting, at 5 pm yesterday right around the corner from
my residence. A white coworker of mine who lives in a rich northwest side neighborhood once commented
to me how black people always say goodbye by saying "be safe". More easily said than done.
I thought neoliberalism was just the pogrom to make everyone – rational agents – as subscribed
by our genetic / heraldic betters .. putting this orbs humans and resources in the correct "natural"
order .
Disheveled Marsupial for those thinking neoliberalism is not associated with libertarianism
one only has to observe the decades of think tanks and their mouth organs roaming the planet .
especially in the late 80s and 90s . bringing the might and wonders of the – market – to the great
unwashed globally here libertarian priests rang in the good news to the great unwashed
I would argue that neoliberalism is a program to define markets as primarily engaged in
information processing and to make everyone into non-agents ( as not important at all to the proper
functioning of markets).
It also appears that neoliberals want to restrict democracy to the greatest extent possible
and to view markets as the only foundation for truth without any need for input from the average
individual.
But as Mirowski argues–carrying their analysis this far begins to undermine their own neoliberal
assumptions about markets always promoting social welfare.
When I mean – agents – I'm not referring to agency, like you say the market gawd/computer does
that. I was referencing the – rational agent – that 'ascribes' the markets the right at defining
facts or truth as neoliberalism defines rational thought/behavior.
Disheveled Marsupial yes democracy is a direct threat to Hayekian et al [MPS and Friends]
paranoia due to claims of irrationality vs rationally
I have trouble understanding the focus on an emergence of fascism in Europe, focus that seems
to dominate this entire thread when, put in perspective such splinter groups bear little weight
on the European political spectrum.
As an expat living in France, in my perception the Front National is a threat to the political
establishments that occupy the center left and right and whose historically broad constituencies
have been brutalized by the financial crisis borne of unbridled anglo-saxon runaway capitalism,
coined neoliberalism. The resulting disaffection has allowed the growth of the FN but it is also
fueled by a transfer of reactionary constituencies that have historically found identity in far
left parties (communist, anti-capitalist, anarchist ), political expressions the institutions
of the Republic allow and enable in the name of plurality, a healthy exultury in a democratic
society.
To consider that the FN in France, UKIP in the UK and others are a threat to democratic values
any more that the far left is non-sensical, and I dare say insignificant compared to the "anchluss"
our conservative right seeks to impose upon the executive, legislative and judicial branches of
government.
The reality in Europe as in America is economic. The post WWII era of reconstruction, investment
and growth is behind us, the French call these years the "Trente Glorieuses" (30 glorious years)
when prosperity was felt through all societal strats, consumerism for all became the panacea for
a just society, where injustice prevailed welfare formulas provided a new panacea.
As the perspective of an unravelling of this golden era began to emerge elites sought and conspired
to consolidate power and wealth, under the aegis of greed is good culture by further corrupting
government to serve the few, ensuring impunity for the ruling class, attempting societal cohesiveness
with brash hubristic dialectics (America, the greatest this or that) and adventurism (Irak, mission
accomplished), conspiring to co-opt and control institutions and the media (to understand the
depth of this deception a must read is Jane Mayer in The Dark Side and in Dark Money).
The difference between America and Europe is that latter bears of brunt of our excess.
The 2008 Wall St / City meltdown eviscerated much of America' middle class and de-facto stalled,
perhaps definitively, the vehicle of upward mobility in an increasingly wealth-ranked class structured
society – the Trump phenomena feeds off the fatalistic resilience and "good book" mythologies
remnant of the "go west" culture.
In Europe where to varying degrees managed capitalism prevails the welfare state(s) provided the
shock absorbers to offset the brunt of the crisis, but those who locked-in on neoliberal fiscal
conservatism have cut off their nose in spite leaving scant resources to spur growth. If social
mobility survives, more vibrantly than the US, unemployment and the cost thereof remains steadfast
and crippling.
The second crisis borne of American hubris is the human tidal wave resulting from the Irak adventure;
it has unleashed mayhem upon the Middle East, Sub Saharan Africa and beyond. The current migrational
wave Europe can not absorb is but the beginning of much deeper problem – as ISIS, Boko Haram and
so many others terrorist groups destabilize the nation-states of a continent whose population
is on the path to explode in the next half century.
The icing on the cake provided by a Trump election will be a world wave of climate change refugees
as the neoliberal establishment seeks to optimize wealth and power through continued climate change
denial.
Fascism is not the issue, nationalism resulting from a self serving bully culture will decimate
the multilateral infrastructure responsible nation-states need to address today's problems.
Broadly, Trump Presidency capping the neoliberal experience will likely signal the end of the
US' dominant role on the world scene (and of course the immense benefits derived for the US).
As he has articulated his intent to discard the art of diplomacy, from soft to institutional,
in favor of an agressive approach in which the President seeks to "rattle" allies (NATO, Japan
and S. Korea for example) as well as his opponents (in other words anyone who does not profess
blind allegiance), expect that such modus operandi will create a deep schism accompanied by a
loss of trust, already felt vis-a-vis our legislature' behavior over the last seven years.
The US's newfound respect among friends and foes generated by President Obama' presidency, has
already been undermined by the GOP primaries, if Trump is elected it will dissipate for good as
other nations and groups thereof focus upon new, no-longer necessarily aligned strategic relationships,
some will form as part as a means of taking distance, or protection from the US, others more opportunist
with the risk of opponents such as Putin filling the void – in Europe for example.
Neoliberalism isn't helping, but it's a population/resource ratio thing. Impacts on social
orders occur well before raw supply factors kick in (and there is more than food supply to basic
rations). The world population has more than doubled in the last 50 years, one doesn't get that
kind of accelerated growth without profound impacts to every aspect of societies. Some of the
most significant impacts are consequent to the acceleration of technological changes (skill expirations,
automations) that are driven in no small part by the needs of a vast + growing population.
I don't suggest population as a pat simplistic answer. And neoliberalism accelerates the declining
performance of institutions (as in the CUNY article and that's been going on for decades already,
neoliberalism just picked up where neoconservatism petered out), but we would be facing issues
like homelessness, service degradation, population displacements, etc regardless of poor policies.
One could argue (I do) that neoliberalism has undertaken to accelerate existing entropies for
profit.
Thanks for soliciting reader comments on socioeconomic desperation. It's encouraging to know
that I'm not the only failure to launch in this country.
I'm a seasonal farm worker with a liberal arts degree in geology and history. I barely held
on for six months as a junior environmental consultant at a dysfunctional firm that tacitly encouraged
unethical and incompetent behavior at all levels. From what I could gather, it was one of the
better-run firms in the industry. Even so, I was watching mid-level and senior staff wander into
extended mid-life crises while our entire service line was terrorized by a badly out-of-shape,
morbidly obese, erratic, vicious PG who had alienated almost the entire office but was untouchable
no matter how many firing offenses she committed. Meanwhile I was watching peers in other industries
(especially marketing and FIRE) sell their souls in real time. I'm still watching them do so a
decade later.
It's hard to exaggerate how atrociously I've been treated by bougie conformists for having
failed/dropped out of the rat race. A family friend who got into trouble with the state of Hawaii
for misclassifying direct employees of his timeshare boiler room as 1099's gave me a panic attack
after getting stoned and berating me for hours about how I'd wake up someday and wonder what the
fuck I'd done with my life. At the time, I had successfully completed a summer job as the de facto
lead on a vineyard maintenance crew and was about to get called back for the harvest, again as
the de facto lead picker.
Much of my social life is basically my humiliation at the hands of amoral sleazeballs who presume
themselves my superiors. No matter how strong an objective case I have for these people being
morally bankrupt, it's impossible to really dismiss their insults. Another big component is concern-trolling
from bourgeois supremacists who will do awfully little for me when I ask them for specific help.
I don't know what they're trying to accomplish, and they probably don't, either. A lot of it is
cognitive dissonance and incoherence.
Some of the worst aggression has come from a Type A social climber friend who sells life insurance.
He's a top producer in a company that's about a third normal, a third Willy Loman, and a third
Glengarry Glen Ross. This dude is clearly troubled, but in ways that neither of us can really
figure out, and a number of those around him are, too. He once admitted, unbidden, to having hazed
me for years.
The bigger problem is that he's surrounded by an entire social infrastructure that enables
and rewards noxious, predatory behavior. When college men feel like treating the struggling like
garbage, they have backup and social proof from their peers. It's disgusting. Many of these people
have no idea of how to relate appropriately to the poor or the unemployed and no interest in learning.
They want to lecture and humiliate us, not listen to us.
Dude recently told me that our alma mater, Dickinson College, is a "grad school preparatory
institution." I was floored that anyone would ever think to talk like that. In point of fact,
we're constantly lectured about how versatile our degrees are, with or without additional education.
I've apparently annoyed a number of Dickinsonians by bitterly complaining that Dickinson's nonacademic
operations are a sleazy racket and that President Emeritus Bill Durden is a shyster who brainwashed
my classmates with crude propaganda. If anything, I'm probably measured in my criticism, because
I don't think I know the full extent of the fraud and sleaze. What I have seen and heard is damning.
I believe that Dickinson is run by people with totalitarian impulses that are restrained only
by a handful of nonconformists who came for the academics and are fed up with the propaganda.
Meanwhile, I've been warm homeless for most of the past four years. It's absurd to get pledge
drive pitches from a well-endowed school on the premise that my degree is golden when I'm regularly
sleeping in my car and financially dependent on my parents. It's absurd to hear stories about
how Dickinson's alumni job placement network is top-notch when I've never gotten a viable lead
from anyone I know from school. It's absurd to explain my circumstances in detail to people who,
afterwards, still can't understand why I'm cynical.
While my classmates preen about their degrees, I'm dealing with stuff that would make them
vomit. A relative whose farm I've been tending has dozens of rats infesting his winery building,
causing such a stench that I'm just about the only person willing to set foot inside it. This
relative is a deadbeat presiding over a feudal slumlord manor, circumstances that he usually justifies
by saying that he's broke and just trying to make ends meet. He has rent-paying tenants living
on the property with nothing but a pit outhouse and a filthy, disused shower room for facilities.
He doesn't care that it's illegal. One of his tenants left behind a twenty-gallon trash can full
to the brim with his own feces. Another was seen throwing newspaper-wrapped turds out of her trailer
into the weeds. They probably found more dignity in this than in using the outhouse.
When I was staying in Rancho Cordova, a rough suburb of Sacramento, I saw my next-door neighbor
nearly come to blows with a man at the light rail station before apologizing profusely to me,
calling me "sir," "man," "boss," and "dog." He told me that he was angry at the other guy for
selling meth to his kid sister. Eureka is even worse: its west side is swarming with tweakers,
its low-end apartment stock is terrible, no one brings the slumlords to heel, and it has a string
of truly filthy residential motels along Broadway that should have been demolished years ago.
A colleague who lives in Sweet Home, Oregon, told me that his hometown is swarming with druggies
who try to extract opiates from local poppies and live for the next arriving shipment of garbage
drugs. The berry farm where we worked had ten- and twelve-year-olds working under the table to
supplement their families' incomes. A Canadian friend told me that he worked for a crackhead in
Lillooet who made his own supply at home using freebase that he bought from a meathead dealer
with ties to the Boston mob. Apparently all the failing mill towns in rural BC have a crack problem
because there's not much to do other than go on welfare and cocaine. An RCMP sergeant in Kamloops
was recently indicted for selling coke on the side.
Uahsenaa's comment about the invisible homeless is spot on. I think I blend in pretty well.
I've often stunned people by mentioning that I'm homeless. Some of them have been assholes about
it, but not all. There are several cars that I recognize as regular overnighters at my usual rest
area. Thank God we don't get hassled much. Oregon is about as safe a place as there is to be homeless.
Some of the rest areas in California, including the ones at Kingsburg and the Sacramento Airport,
end up at or beyond capacity overnight due to the homeless. CalTrans has signs reminding drivers
that it's rude to hog a space that someone else will need. This austerity does not, of course,
apply to stadium construction for the Kings.
Another thing that almost slipped my mind (and is relevant to Trump's popularity): I've encountered
entrenched, systemic discrimination against Americans when I've tried to find and hold menial
jobs, and I've talked to other Americans who have also encountered it. There is an extreme bias
in favor of Mexican peasants and against Americans in the fields and increasingly in off-farm
jobs. The top quintile will be lucky not to reap the whirlwind on account of this prejudice.
"... The number one issue fueling the leave vote was immigration – a lot like Trump's wall against Mexico. The number two issue was lack of accountability of government: Leavers believe that the EU government in Brussels is unaccountable to voters. For Trump supporters, resentment towards a distant and unaccountable Washington government ranks high as well. The Brexit constituency and the Trump constituency are both motivated by the same sense of loss and vulnerability. ..."
"... In both the U.S. and the U.K., a large and growing segment of voters has not prospered in today's complex, technology-driven global economy. Their wages have stagnated and in many cases fallen. Too few good-paying jobs exist for people lacking a college degree, or even people with a college degree, if the degree is not in the right field. These people are angry, frustrated, and afraid -- and with very good reason. Both countries' governments have done little to help them adapt, and little to soothe the sting of globalization. The voter's concerns in both places are mostly the same even though these concerns have coalesced around a policy issue ("leave") in the U.K. whereas here in the U.S. they have coalesced around a candidate (Trump). ..."
"... Similarly, the elite insiders of the Republican Party and their business allies badly underestimated Trump. Establishment candidates like former Florida Gov. Jeb Bush failed terribly. Now the Republican political insiders are trying to make sense of a presumptive nominee who trashes free trade, one of the fundamental principles of the party, and openly taunts one of most important emerging voting blocks. ..."
"... Perhaps the biggest reason for the impotence of today's political elites is that elites have trashed the very idea of competent and effective government for 35 years now, and the public has taken the message to heart. Ever since Reagan identified government as the problem, conservative elites have attacked the idea of government itself – rather than respecting the idea of government itself while criticizing the particular policies of a particular government. This is a crucial (and dangerous) distinction. In 1986, Reagan went on to say "the nine most terrifying words in the English language are 'I'm from the government and I'm here to help.'" ..."
In addition, the issues are similar between the two campaigns: The number
one issue fueling the leave vote was immigration – a lot like Trump's wall against
Mexico. The number two issue was lack of accountability of government: Leavers
believe that the EU government in Brussels is unaccountable to voters. For Trump
supporters, resentment towards a distant and unaccountable Washington government
ranks high as well. The Brexit constituency and the Trump constituency are both
motivated by the same sense of loss and vulnerability.
In both the U.S. and the U.K., a large and growing segment of voters
has not prospered in today's complex, technology-driven global economy. Their
wages have stagnated and in many cases fallen. Too few good-paying jobs exist
for people lacking a college degree, or even people with a college degree, if
the degree is not in the right field. These people are angry, frustrated, and
afraid -- and with very good reason. Both countries' governments have done little
to help them adapt, and little to soothe the sting of globalization. The voter's
concerns in both places are mostly the same even though these concerns have
coalesced around a policy issue ("leave") in the U.K. whereas here in the U.S.
they have coalesced around a candidate (Trump).
In both countries, political elites were caught flat-footed. Elites lost
control over the narrative and lost credibility and persuasiveness with angry,
frustrated and fearful voters. The British elites badly underestimated the intensity
of public frustration with immigration and with the EU. Most expected the vote
would end on the side of "remain," up to the very last moment. Now they are
trying to plot their way out of something they never expected would actually
happen, and never prepared for.
Similarly, the elite insiders of the Republican Party and their business
allies badly underestimated Trump. Establishment candidates like former Florida
Gov. Jeb Bush failed terribly. Now the Republican political insiders are trying
to make sense of a presumptive nominee who trashes free trade, one of the fundamental
principles of the party, and openly taunts one of most important emerging voting
blocks.
How did the elites lose control? There are many reasons: With social media
so pervasive, advertising dollars no longer controls what the public sees and
hears. With unrestricted campaign spending, the party can no longer "pinch the
air hose" of a candidate who strays from party orthodoxy.
Perhaps the biggest reason for the impotence of today's political elites
is that elites have trashed the very idea of competent and effective government
for 35 years now, and the public has taken the message to heart. Ever since
Reagan identified government as the problem, conservative elites have attacked
the idea of government itself – rather than respecting the idea
of government itself while criticizing the particular policies of a particular
government. This is a crucial (and dangerous) distinction. In 1986, Reagan went
on to say "the nine most terrifying words in the English language are 'I'm from
the government and I'm here to help.'"
Reagan booster Grover Norquist is known for saying, "I don't want to abolish
government. I simply want to reduce it to the size where I can drag it into
the bathroom and drown it in the bathtub." Countless candidates and elected
officials slam "Washington bureaucrats" even though these "bureaucrats" were
none other than themselves. It's not a great way to build respect. Then the
attack escalated, with the aim of destroying parts of government that were actually
mostly working. This was done to advance the narrative that government itself
is the problem, and pave the way for privatization. Take the Transportation
Security Administration for example. TSA has actually done its job. No terrorist
attacks have succeeded on U.S. airplanes since it was established. But by
systematically underfunding it , Congress has made the lines painfully long,
so people hate it. Take the Post Office. Here Congress manufactured a crisis
to force service cuts, making the public believe the institution is incompetent.
But the so-called "problem" is
due almost entirely to a requirement, imposed by Congress, forcing the Postal
Service to prepay retiree's health care to an absurd level, far beyond what
a similar private sector business would have to do. A similar dynamic now threatens
Social Security. Thirty-five years have passed since Reagan first mocked the
potential for competent and effective government. Years of unrelenting attack
have sunk in. Many Americans now distrust government leaders and think it's
pointless to demand or expect wisdom and statesmanship. Today's American voters
(and their British counterparts), well-schooled in skepticism, disdain and dismiss
leaders of all parties and they are ready to burn things down out of sheer frustration.
The moment of blowback has arrived.
PK has nearly lost all of his ability to see things objectively. Ambition got him, I suppose,
or maybe he has always longed to be popular. He was probably teased and ridiculed too much in
his youth. He is something of a whinny sniveler after-all.
Then too, I doubt if PK has ever used a public restroom in the Southwest, or taken his kids
to a public park in one of the thousands of small towns where non-English speaking throngs take
over all of the facilities and parking.Or had his children bullied at school by a gang of dark-skinned
kids whose parents believe that whites took their land, or abused or enslaved their distant ansestors.
It might be germane here too... to point out that some of this anti-white sentiment gets support
and validation from the very rhetoric that Democrats have made integral to their campaigns.
As for not knowing why crime rates have been falling, the incarceration rates rose in step,
so duh, if you lock up those with propensities for crime, well, how could crime rates not fall?
And while I'm on the subject of crime, the statistical analysis that is commonly used focuses
too much on violent crime and convictions. Thus, crimes of a less serious nature, that being the
type of crimes committed by poor folks, is routinely ignored. Then too, those who are here illegally
are often transient and using assumed names, and so they are, presumably, more difficult to catch.
So, statistics are all too often not as telling as claimed.
And, though I'm not a Trump supporter, I fully understand his appeal. As would PK if he were
more travelled and in touch with those who have seen their schools, parks, towns, and everything
else turn tawdry and dysfunctional. But of course the nation that most of us live in is much different
than the one that PK knows.
> And, though I'm not a Trump supporter, I fully understand his appeal
I wonder why everybody is thinking about this problem only in terms of identity politics.
This is a wrong, self-defeating framework to approach the problem. which is pushed by neoliberal
MSM and which we should resist in this forum as this translates the problems that the nation faces
into term of pure war-style propaganda ("us vs. them" mentality). To which many posters here already
succumbed
IMHO the November elections will be more of the referendum on neoliberal globalization (with
two key issues on the ballot -- jobs and immigration) than anything else.
If so, then the key question is whether the anger of population at neoliberal elite that stole
their jobs and well-being reached the boiling point or not. The level of this anger might decide
the result of elections, not all those petty slurs that neoliberal MSM so diligently use as a
smoke screen.
All those valiant efforts in outsourcing and replacing permanent jobs with temporary to increase
profit margin at the end have the propensity to produce some externalities. And not only in the
form "over 50 and unemployed" but also by a much more dangerous "globalization of indifference"
to human beings in general.
JK Galbraith once gave the following definition of neoliberal economics: "trickle down economics
is the idea that if you feed the horse enough oats eventually some will pass through to the road
for the sparrows." This is what neoliberalism is about. Lower 80% even in so-called rich countries
are forced to live in "fear and desperation", forced to work "with precious little dignity".
Human beings are now considered consumer goods in "job market" to be used and then discarded.
As a consequence, a lot of people find themselves excluded and marginalized: "without work, without
possibilities, without any means of escape" (pope Francis).
And that inevitably produces a reaction. Which in extreme forms we saw during French and Bolsheviks
revolutions. And in less extremist forms (not involving lampposts as the placeholders for the
"Masters of the Universe" (aka financial oligarchy) and the most obnoxious part of the "creative
class" aka intelligentsia
https://en.wikipedia.org/wiki/Intelligentsia
) in Brexit vote.
Hillary and Trump are just symbols here. The issue matters, not personalities.
"... he changed American politics forever by demonstrating that style was more important than substance. In fact, he showed that style was everything and substance utterly unimportant. ..."
"... Conservatives used "bracket creep" to convince the middle class that reducing marginal rates on the top tax brackets along with their own would be a good idea, then with the assistance of Democrats replaced the revenue with a huge increase in FICA so that the Social Security Trust Fund could finance the deficit in the rest of the budget. The result was a huge boon to the richest, little difference for the middle class, and a far greater burden for the working poor. ..."
"... Any conversation about who the fantasy-projection "Reagan" was, misses an important reality: He was a hologram, fabricated by a kaleidoscope of various sorts of so-called "conservative" handlers and puppeteers. It was those "puppeteers" who ranged from heartlessly, stunningly "conservative" (destroya-tive), all the way further right to the kind of militaristic, macho, crackpots who have finally emerged from under their rocks at this year's "candidates." ..."
Do not contradict the memories of all the old teabaggers who desperately need the myth of Saint
Ronnie to justify their Greed is Good declining mentality and years.
When Reagan cut-and-ran on Lebanon he showed rare discretion. A lot of the puffery stuff was
B-Movie grade, but there was a lot of cross-the-aisle ventures, too.
He was a politician. The current GOP is just a bunch of white Fundie bullies, actually and
metaphorically (e.g., Carson).
Zepp -> thedono 19 Sep 2015 11:37
Well, compared to Cruz, or Santorum, or Huckabee, he's a moderate. Of course, compared to the
right people, you can describe Mussolini or Khruschev as moderates...
mastermisanthrope 19 Sep 2015 11:37
Lifelong shill
LostintheUS -> William J Rood 19 Sep 2015 11:36
Reagan underwent a political conversion when Nancy broke up his marriage with Jane Wyman and
married him.
The cold war ended while Reagan was president, but he did not win the cold war. His rhetoric
and strategy was wishful thinking - there's no way he could have had the definitive intelligence
about the entire military-political-economic that would have justified the confidence he projected.
He merely lucked out, significantly damaging the US economy by trying (and luckily succeeding)
to out-militarize the soviets.
pretzelattack -> kattw 19 Sep 2015 11:31
both clinton and obama have showed a willingness to "reform social security". try naked capitalism,
there are probably a number of articles in the archives.
LostintheUS -> piethein 19 Sep 2015 11:29
And that the emergency room federally funded program that saved his life was soon after defunded...by
him.
LostintheUS -> pretzelattack 19 Sep 2015 11:28
Many of us saw through him...I noted the senility during his speeches during his first campaign...as
did many people I knew.
Dementia masquerading as politics.
But you can't say anything negative about Saint Ronald!
Peter Davis -> Peter Davis 19 Sep 2015 11:22
I believe Reagan also is responsible for creating the Hollywood notion in American politics
and political thinking that life works just like a movie--with good guys and bad guys. And all
one needs is a gun and you can save the world. That sort of delusional thinking has been at the
heart of the modern GOP ever since.
loljahlol -> ID3732233 19 Sep 2015 11:21
Reagan did not end the Cold War. Brezhnev rule solidified the Soviet death. Their corrupt,
inefficient form of capitalism could not compete with the globalization of Western capitalism.
John78745 19 Sep 2015 11:21
There's not much nuance to Reagan. He was a coward, a bully and a loser. He got hundreds of
U.S. Marines killed then he ran from the terrorists in Beirut and on the Archille Lauro personally
creating the seeds of the morass of terrorists we now live with. He fostered the republican traditions
of sending U.S. jobs overseas at the expense of U.S. taxpayers and of invading helpless, hapless
nations, a tradition so adeptly followed by Bush I & II. He also promised that there would never
be a need for another amnesty.
I guess it's true that he talked mean to the Russians, broke unions, and helped make the military
industrial complex into the insatiable war machine that it is today. Remember murderous Iran-Contra
(a real) scandal where he and his minions worked in secret without congressional authorization
to overthrow a democratically elected government while conspiring to supply arms to the dastardly
Iranians!
We could also say that he bravely fought to save the U.S. from socialized medicine and to expunge
the tradition of free tuition for California students. Whatta hero!
thankgodimanatheist 19 Sep 2015 11:19
Reagan, the acting President, was the worst President since WWII until the Cheney/Bush debacle.
Most of the problems we face today can be directly traced to his voodoo economics, huge deficit
spending, deregulation, and in retrospect disastrous foreign policies.
LostintheUS 19 Sep 2015 11:17
"these days everyone seems to love Ronald."
Absolutely, not true. The farther along we go in time, the more Americans realize the damage
this man and his backers did to America and the world. The inversion of the tax tables, the undoing
of union laws, the polarization of Americans against each other so the plutocrats had no real
opposition and on and on. His camp stole the election in 1980 through making a back door deal
with the Iranian government to hold onto the American hostages until the election when Jimmy Carter
had negotiated an end to the hostage crisis, which was the undoing of Jimmy Carter's administration.
"Behind Carter's back, the Reagan campaign worked out a deal with the leader of Iran's radical
faction - Supreme Leader Ayatollah Khomeini - to keep the hostages in captivity until after the
1980 Presidential election." This is, unquestionably, treason. http://www.truth-out.org/opinion/item/20287-without-reagans-treason-iran-would-not-be-a-problem
No, Reagan marks the downward turn for our country and has resulted in the economic and social
mess we still have not clawed our way back out of. No, Reagan is no hero, he is an American nemesis
and a traitor. Reagan raised taxes three times while slashing the tax rate of the super rich...starting
the downward spiral of the middle-class and the funneling of money toward the 1%. Thus his reputation
as a "tax cutter", yeah, if you were a multi-millionaire.
Never thought of Reagan as the first Shrub but it fits. I wonder if future pundits will sing
the Dub's praises as well. I think I'm gonna be sick for a bit.
kattw -> namora 19 Sep 2015 11:10
Pretzel is maybe talking about the 'strengthen SS' bandwagon? Perhaps? Not entirely sure myself,
but yeah - one of the major democrat platform planks is that SS should NOT be privatized, and
that if people want to invest in stocks, they can do that on their own. The whole point of SS
is to be a mattress full of cash that is NOT vulnerable to the vagaries of the market, and will
always have some cash in it to be used as needed.
SS would be totally secure, too, if congress would stop robbing it for other projects, or pay
back all they've borrowed. As it is, I wish *I* was as broke as republicans claim SS is - I wouldn't
mind having a few billion in the bank.
William J Rood 19 Sep 2015 11:08
Reagan was former president of the Screen Actors' Guild. Obviously, he thought unions for highly
educated workers were great. Meatpackers? Not so much.
RealSoothsayer 19 Sep 2015 11:04
This article does not mention the fact that in his last couple of years as President at least,
his mental state had seriously deteriorated. He could not remember his own policies, names, etc.
CBS' Leslie Stahl should be prosecuted for not being honest with her everyone when she found out.
Peter Davis 19 Sep 2015 11:04
Reagan was a failed president who nonetheless managed to convince people that he was great.
He was a professional actor, after all. And he acted his way into the White House. Most importantly,
he changed American politics forever by demonstrating that style was more important than substance.
In fact, he showed that style was everything and substance utterly unimportant. He was the
figurehead while his handlers did the dirty work of Iran-Contra, ballooning deficits, and tanking
unemployment.
nishville 19 Sep 2015 11:03
For me, he was a pioneer. He was the first sock-puppet president, starting a noble tradition
that reached its climax with W.
mbidding -> hackerkat 19 Sep 2015 11:03
In addition to:
Treasonous traitor when, as a presidential candidate, he negotiated with Khomeini to hold the
hostages till after the election.
Subverter of the Constitution via the Iran-Contra scandal.
Destroyer of social cohesion by turning JFK's famous admonishment of "ask not what your country
can do for you, ask what you can do for your country" on its head with his meme that all evil
emanates from the government and taxation represents stealing rather than a social obligation
for any civilized society that wishes to continue to develop in a sound fashion that lifts all
boats.
Incarcerator in Chief through his tough on crime and war on drugs policies, not to mention
defunding mental health care.
Pisser in Chief through his successful efforts to imbed trickle down economics as the economic
thought du jour which even its original architects, notably Stockman, now confirm is a failed
theory that we nonetheless cling to to this day.
Ignoramus in Chief by gutting real federal financial aid for higher education leading to the
obscene amounts of student debt our college students now incur.
Terrorist creator extraordinaire not only with the creation of the Latin American death squads
you note, but the creation, support, trading, and funding of the mujahedin and Bin Laden himself,
now known as the Taliban, Al Qa'ida, and ISIS, only the most notable among others.
namora -> trholland1 19 Sep 2015 10:59
That is not taking into account his greatest role for which he was ignored for a much deserved
Oscar, Golden Globe or any of the other awards passed out by the entertainment industry, President
of The United States of America. He absolutely nailed that one.
William J Rood 19 Sep 2015 10:58
Conservatives used "bracket creep" to convince the middle class that reducing marginal
rates on the top tax brackets along with their own would be a good idea, then with the assistance
of Democrats replaced the revenue with a huge increase in FICA so that the Social Security Trust
Fund could finance the deficit in the rest of the budget. The result was a huge boon to the richest,
little difference for the middle class, and a far greater burden for the working poor.
Tax brackets could have been indexed to inflation, but that wouldn't have been so great for
Reagans real supporters.
Doueman 19 Sep 2015 10:55
What sad comments by these armchair experts.
They don't gel with my experiences in North America during this period at all. When Reagan
ran for the presidency he was generally ridiculed by much of the press in the US and just about
all of the press in the UK for being a right wing fanatic, a lightweight, too old, uninformed
and even worse an actor. I found this rather curious and watched him specifically on TV in unscripted
scenarios to form my own impression as to how such a person, with supposedly limited abilities,
could possibly run for President of the US. I get a bit suspicious when organisations and individuals
protest and ridicule too much.
My reaction was that he handled himself well and gradually concluded that the mainly Eastern
liberal press in the US couldn't really stomach a California actor since they themselves were
meant to know everything. He actually was pretty well read ( visitors were later astonished to
read his multiple annotations in heavy weight books in his library). He was a clever and astute
union negotiator dealing with some of the toughest Hollywood moguls who would eat most negotiators
for dinner. He had become Governor of California and had done a fine job. I thought it was unlikely
he was the simpleton many portrayed. He couldn't be easily categorised as he embraced many good
aspects of the Democrats and the Republicans. Life wasn't so polarised then.
The US had left leaning Republicans and right wing Democrats. A political party as Churchill
noted was simply a charger to ride into action.
In my view, his presidential record was pretty remarkable. A charming, fair minded charismatic
man without the advantage of a wealthy background or influential family. The world was lucky to
have him.
raffine -> particle 19 Sep 2015 10:50
Reagan's second term was a disaster. But as someone below mentioned, conservative pundits and
their financers engaged in a campaign to make Reagan into a right-wing FDR. The most effective,
albeit bogus, claim on Reagan's behalf was that he had ended the Cold War.
jpsartreny 19 Sep 2015 14:22
Reagan is the shadow governments greatest triumph. After the adolescent Kennedy, egomaniacs
Johnson and Nixon , they needed front guys who followed orders instead .
The experiment with the peanut farmer from Georgia provided disastrous to Zebrew Brzezinski
and the liberals. The conservatives had better luck with a B- movie actor with an great talent
to read of the teleprompter.
RealSoothsayer -> semper12 19 Sep 2015 14:19
How? By talking? Gobachev brought down the USSR with his 'Glasnost' and 'Perestroika' policies.
His vision was what communist China later on achieved: mixed economy that flies a red flag. Reagan
was just an observer, absolutely nothing more. Tito of Yugoslavia was even more instrumental.
Marc Herlands 19 Sep 2015 14:17
IMHO Reagan was the second most successful president, behind FDR and ahead of LBJ. Not that
I liked anything about him, but he moved this country to the right and set the play book. He lowered
taxes on the wealthy, the corporations, capital gains, and estate taxes. He reduced growth in
programs for the poor, and made it impossible to increase their funding after his presidency because
of he left huge federal deficits caused by lowering taxes and increasing outlays on the military.
This Republican playbook still is their way of making sure that the Democrats can't give the poor
more money after they lose power. Also, he enlarged the program for deregulating industries, doing
away with antitrust laws, hindering labor laws, encouraged anti-union behavior, and did nothing
for AIDS research. He was a scoundrel who did a deal with Iran to prevent Carter from being re-elected.
He directly disobeyed Congressional laws not to intervene in Nicaragua. He set the tone for US
interventions after him.
bloggod 19 Sep 2015 14:17
Obama, Clinton, and the Bushes all hope to be forgiven for their unpardonable crimes.
Popularity is created. It is not populism, or informed consent of the pubic as approval for
more of the same collusion.
It is a One Party hoe down.
bloggod -> SigmetSue 19 Sep 2015 14:12
"they"
the indicted Sec of Defense Weinberger; the indicted head of the CIA Casey who "died" as he
was due to testify: Mcfarlane, Abrams, Clair George, Oilyver North, Richard Secord, Albert Hakim
Reagan had no genius, he had Bush-CIA and the Jerry Falwell, Billy Graham, and the "immoral
majority" of anti-abortion war profiteers.
Marios Antoniou Lattimore 19 Sep 2015 13:52
I agree with everything you mentioned, and I intensely dislike Reagan YET the point of the
article wasn't that Reagan was good, it rather points to the fact that Republicans have shifted
so far to the right that Reagan would appear moderate compared to the current batch.
Rainer Jansohn pretzelattack 19 Sep 2015 13:52
Interesting had been his speeches during the Cold War.Scientists have subsumed it under "Social
Religion",a special form of political theology.Simple dialectical:UDSSR the incarnation of the
evil/hell on the other side USA :the country of God himself.A tradition in USA working until now.There
is no separation between government and church as in good old centuries sincetwo centuries resulting
from enlightening per Philosophie/Voltaire/Kant/Hume/Descartes and so on.Look at Obamas speeches/God
is always mixed in!
talenttruth 19 Sep 2015 13:49
Any conversation about who the fantasy-projection "Reagan" was, misses an important reality:
He was a hologram, fabricated by a kaleidoscope of various sorts of so-called "conservative" handlers
and puppeteers. It was those "puppeteers" who ranged from heartlessly, stunningly "conservative"
(destroya-tive), all the way further right to the kind of militaristic, macho, crackpots who have
finally emerged from under their rocks at this year's "candidates."
The fact that Reagan was going ga-ga – definitely in his second term, and likely for part of
the first – was entirely convenient for his Non-Human-Based-Crackpot-Right-Holographers, since
he had was not actually "driven" to vacuousness by a tragic mental condition (dementia) – THAT
change was merely a "short putt" – from his entire previous life.
Regarding his Great Achievement, the collapse of the Soviet Union? After decades of monstrous
over-spending by the USA's Military-Industrial-Complex, the bogus and equally insane USSR finally
bankrupted itself trying to "compete" and fell. Reagan (and his puppeteer handlers), always excellent
at Taking Credit for anything, showed up with exquisite cynical timing, and indeed Took Credit.
Lest anyone forget, Reagan got elected in 1980, via a totally illegal and stunningly immoral
"side deal" with the Iranians, in which they agreed to not release our hostages to make Carter
look like a feeble old man. Then we got Reagan who WAS a "feeble old man" (ESPECIALLY intellectually
and morally). Reagan "won," the hostages were "released" and he of course took credit for that
too.
So all these so-called "candidates" ARE the heirs of all the very worst of Ronald Reagan: they
are all simpleminded, they are totally beholden to Hidden Sociopathic Billionaires hiding behind
various curtains, and they all have NO CLUE what the word "ethics" means. Vacuous, anti-intellectual,
scheming, appealing only to morons, and puppets all. Perfect "Reaganites."
Bill Ehrhorn -> semper12 19 Sep 2015 13:32
It seems that the teabaggers and their ilk give only Reagan credit.
SigmetSue 19 Sep 2015 13:16
They called him the Teflon President because nothing ever stuck. It still doesn't. That was
his genius -- and I'm no fan.
Lattimore 19 Sep 2015 13:13
The article seems to present Reagan as an theatrical figure. I disagree. Reagan, President
of the United States, was a criminal; as such, he was among the most corrupt and anti democratic
person to hold the office POTUS. The fact that he tripled the national debt, raised taxes and
skewed the tax schedules to benifit the wealthy, are comparitively minor.
,,,
Reagan's crimes and anti democratic acts:
1. POTUS: CIA smuggling cocaine into the U.S., passing the drug to wholesalers, who then processed
the drug and distributed crack to Black communities. At the same time Reagan's "War on Crime"
insured that the Black youth who bought "Central Intelligenc Agencie's" cocaine were criminalized
and handed lengthy prison sentences.
2. POTUS supported SOUTH AMERICAN terrorist, and the genocidal atrocities commited by terrorist
in Chili, Guatamala, El Mazote, etc.
3. POTUS supported SOUTH AFRICAN apartheid, and the imprisonment of Nelson Mandela as well. Vetoing
a bill that would express condemnation of South Africa.
4. POTUS sold Arms to Iran.
5. POTUS used taxpayer dollars to influence election outcomes.
6. POTUS rigged government grants to enrich his cronies.
7. POTUS thew mental patients onto the streets.
8. POTUS supported McCarthyism, witch hunts, etc.
9. POTUS created and supported Islamic terrorist--fore runners of al Queada, ISIS, etc.
Niko2 LostintheUS 19 Sep 2015 13:12
I don't have much love for Nancy, but she did not break up this marriage, to be fair. And she
actually got rid off the extreme right wingers in Reagan's administration, like Haig and Regan,
whom she called "extra chromosome republicans". Surely she was a vain and greedy flotus with no
empathy whatsoever for people not in her Bel Air circles (I can easily imagine her, "Do I really
have to go and see these Aids-Babies, I'd rather shop at Rodeo Drive, lose the scheduler") but
she realized at an early stage that hubbies shtick-it-to-the-commies policies would do him no
favour. Maybe she's the unsung heroine of his presidency.
tommydog -> MtnClimber 19 Sep 2015 13:04
The principle subsidies to big oil are probably the strategic oil reserve and subsidies to
low income people for winter heating oil. You can choose which of those you'd like to cut. After
that you're arguing about whether exploration costs should be expensed in the year incurred or
capitalized and amortized over time.
WilliamK 19 Sep 2015 13:03
He was one of J Edgar Hoover's red baiting fascist admiring boys along with Richard Nixon and
Walt Disney used to destroy the labor unions, control the propaganda machine of Hollywood and
used to knuckle under the television networks and undermine as much as possible the New Deal polices
of Franklin Roosevelt. An actor groomed by the General Electric Corporation and their fellow travelers.
"Living better through electricity" was his mantra and he played the role of President to push
forward their right wing agenda. Now we are in new stage in our "political development" in America.
The era of the "reality television star" with Hollywood in bed with the military industrial complex,
selling guns, violence and sex to the fool hardy and their children and prime time television
ads push pharmaceutical drugs, children hear warnings of four hour erections, pop-stars flash
their tits and asses and a billionaire takes center stage as the media cashes in and goes along
for the ride. Yeah Ronnie was a second tier film star and with his little starlet Nancy by his
side become one of America's greatest salesman.
Backbutton 19 Sep 2015 12:57
LOL! Reagan was a walking script renderer, with lines written by others, and a phony because
he was just acting the part of POTUS. His speeches were all crafted, and he had good writers.
He was no Abraham Lincoln.
And now these morons running for office all want to rub off his "great communicator" fix.
Good help America!
Milwaukee Broad 19 Sep 2015 12:49
Ronald Reagan was an actor whom the depressingly overwhelming majority of American voters thought
was a messiah. They so believed in him that they re-elected him to a second term. Nothing positive
whatsoever became of his administration, yet he is still worshiped by millions of lost souls (conservatives).
Have a nice day.
Michael Williams 19 Sep 2015 12:48
The US was the world's leading creditor when Reagan took office. The US was the world's leading
debtor by the time Bush 1 was tossed out of office.
This is what Republicans cannot seem to remember.
All of the other scandals pale in comparison, even as we deal with the blowback from most of
these original, idiotic policies.
Reagan was an actor, mouthing words he barely understood, especially as his dementia progressed.
This is the exact reason the history is so poorly taught in the US.
People might make connections....
Jessica Roth 19 Sep 2015 12:46
Oh, he had holes in his brain long before the dementia. "Facts are stupid things", trees cause
pollution, and so on.
A pathetic turncoat who sold out his original party (the one that kept his dad in work throughout
the Great Depression via a series of WPA jobs) because Nancy allegedly "gave the best head in
Hollywood" and who believed that only 144,000 people were going to Heaven, presumably accounting
for his uncaring treatment of the less-well-off.
His administration was full of corruption, from Richard Allen's $1000 in an envelope (and three
wristwatches) that he claimed was an inappropriate gift for Mrs. Reagan he had "intercepted" and
then "forgotten" to report to William Casey trading over $3,000,000 worth of stocks while CIA
director. (Knowing about changes in the oil market ahead of time sure came in handy.) You had
an attorney general who took a $50,000 "severance payment" (never done before) from the board
of a corporation he resigned from to avoid conflict of interest charges and this was William French
Smith; his successor, Edwin Meese, was the one with real scandals (about the sale of his home).
Hell, Reagan himself put his ranch hand (Dennis LeBlanc) on the federal payroll as an "advisor"
to the Commerce Department. I didn't know the Commerce Dept needed "advice" on clearing wood from
St. Ronnie's ranch, but LeBlanc got a $58,500 salary out of the deal. (Roughly £98,000 at today's
prices.) Nice work if you can get it.
Meanwhile, RR "talked tough" at the Soviets (resulting in the world nearly ending in 1983 due
to a false alarm about a US nuclear attack) while propping up any rightwing dictator they could
find, from the South African racists to Ferdinand and Imelda Marcos (after they had Aquino assassinated
at the airport) to Roberto "Death Squad" D'Aubuisson in El Salvador (the man who masterminded
the assassination of Archbishop Romero while he was performing Mass).
Oh, and while Carter did a nice job of shooting himself in the foot, Reagan benefited in the
election not only from his treasonous dealings with the Iranian hostage-takers (shades of Nixon
making a deal with North Viet Nam to stall the peace talks until after the 1968 elections, promising
them better terms) but through more pedestrian means such as his campaign's stealing of Carter's
briefing book for the campaign's only debate, Reagan being coached for the debate by a supposedly
neutral journalist (George Will, of ABC and The Washington Post), who then went on television
afterwards (in the days when there were only three commercial channels) and "analysed" how successful
Reagan had been in executing his "game plan" and seeming "Presidential" without either Will or
ABC bothering to mention that Will had coached Reagan and designed the "game plan" in question.
The "liberal bias" in the media, no doubt.
Always a joke, only looking slightly better by the dross that has followed him. (Including
Bill "Third Way" Clinton and his over-£50,000,000 in post-Presidential "speaking fees" graft,
and Barack Obama, drone-murderer of children in over a dozen countries and serial-summary-executioner
of U.S. citizens. When Gordon-effing-Brown is the best that's held office on either side of the
Atlantic since 1979, you can see how this planet is in the state it's in.)
pretzelattack DukeofMelbourne 19 Sep 2015 12:45
his stand on russia was inconsistent, and he didn't cause it to collapse. his economic programs
were a failure. his foreign policy generally a disaster. he set the blueprint for the current
mess.
pretzelattack semper12 19 Sep 2015 12:38
a total crock. reagan let murdering thugs run rampant as long as they paid lip service to democracy,
the world over from africa to central america. the ussr watched this coward put 240 marines to
die in lebanon, and then cut and run, exactly the pattern he was so ready to condemn as treason
in others, and was so ready to portray as showing weakness, and you think the ussr was terrified
of him. he was a hollywood actor playing a role, and you bought it.
Tycho1961 19 Sep 2015 12:13
No President exists in a political vacuum. While he was in office, Reagan had a large Democrat
majority in the House of Representatives and a small Republican majority in the Senate. The Supreme
Court was firmly liberal. Whatever his political agenda Reagan knew he had to constructively engage
with people of both parties that were in opposition to him. If he didn't he would suffer the same
fate as Carter, marginalized by even his own party. His greatest strength was as a negotiator.
Reagan's greatest failures were when he tried to be clever and he and his advisors were found
to be rather ham handed about it.
RichardNYC 19 Sep 2015 11:57
The principal legacy of Ronald Reagan is the still prevalent view that corporate interests
supersede individual interests.
Harry Haff 19 Sep 2015 11:45
Reagan did many horrible things while in office, committed felonies and supported murderous
regimes in Central America that murdered tens of thousands of people with the blessing of the
US chief executive. he sold arms to Iran and despoiled the natural environment whenever possible.
But given those horrendous accomplishments, he could not now get a seat at the table with the
current GOP. He would be considered a RINO, that most stupid and inaccurate term, at best, and
a closet liberal somewhere down the line. The current GOP is more to the right than the politicians
in the South after the Civil War.
"... the great schism inside the American labor force get wider. We are referring to the unprecedented divergence between the total number of high-paying manufacturing jobs, and minimum-wage food service and drinking places jobs, also known as waiters and bartenders. In October, according to the BLS, while the number of people employed by "food services and drinking places" rose by another 18,900, the US workforce lost another 4,000 manufacturing workers. ..."
"... National Restaurant Association's Restaurant performance activity index showed in October, overall industry sentiment is the worst since the financial crisis, due to declines in both same-store sales and customer traffic, suggesting that restaurant workers should now be in the line of fire for mass layoffs. ..."
"... Putting this divergence in a long context, since the official start of the last recession in December 2007, the US has gained 1.8 million waiters and bartenders, and lost 1.5 million manufacturing workers. Worse, while the latter series had been growing, if at a slower pace than historically, it has now clearly rolled over, and in 2016, some 60,000 manufacturing jobs have been lost. ..."
As another month passes, the great schism inside the American labor force get wider. We are
referring to the unprecedented divergence between the total number of high-paying manufacturing jobs,
and minimum-wage food service and drinking places jobs, also known as waiters and bartenders. In
October, according to the BLS, while the number of people employed by "food services and drinking
places" rose by another 18,900, the US workforce lost another 4,000 manufacturing workers.
This is the fourth consecutive month of declining manufacturing workers, and the 7th decline in
the past 10 months.
The chart below puts this in context: since 2014, the US had added 571,000 waiters and bartenders,
and has lost 34,000 manufacturing workers.
While we would be the first to congratulate the new American waiter and bartender class, something
does not smell quite right. On one hand, there has been a spike in recent restaurant bankruptcies
or mass closures (Logan's, Fox and Hound, Bob Evans), which has failed to reflect in the government
report. On the other hand, as the National Restaurant Association's Restaurant performance activity
index showed in October, overall industry sentiment is the worst since the financial crisis, due
to declines in both same-store sales and customer traffic, suggesting that restaurant workers should
now be in the line of fire for mass layoffs.
However, what we find more suspect, is that according to the BLS' seasonally adjusted "data",
starting in March of 2010 and continuing through September of 2016, there has been just one month
in which restaurant workers lost jobs, and alternatively, jobs for waiters and bartenders have increased
in 80 out of the past 81 months, with just one month of job losses, something unprecedented in this
series history.
Putting this divergence in a long context, since the official start of the last recession
in December 2007, the US has gained 1.8 million waiters and bartenders, and lost 1.5 million manufacturing
workers. Worse, while the latter series had been growing, if at a slower pace than historically,
it has now clearly rolled over, and in 2016, some 60,000 manufacturing jobs have been lost.
Like last month, we remain curious what this "data" series will look like after it is revised
by the BLS shortly after the NBER declares the official start of the next recession.
"... The incomes of the financial sector are mostly pure rents so there are fewer gains from trade possible here than there are for more productive sectors. Trade negotiations on this are therefore more 'win-lose' rather than potentially 'win-win'. ..."
T's right – the economic impact of Brexit on the UK will overwhelmingly depend on how the EU "passport"
entitlements for the banks are negotiated. And of course the Germans (with Frankfurt) and the
French (with Paris) have a strong incentive to make sure that a good slab of the City's business
goes to them.
The incomes of the financial sector are mostly pure rents so there are fewer gains from trade
possible here than there are for more productive sectors. Trade negotiations on this are therefore
more 'win-lose' rather than potentially 'win-win'.
I think the result will certainly be lower aggregate GDP for the UK but it might well be better
distributed (eg London property prices may be less absurd). The City has long made the rest of
the UK economy suffer from a form of Dutch disease through an overvalued pound sterling. So those
Sunderland Brexit voters might prove ultimately correct in their assessment of their economic
interests – just not in the way they think.
The number of subprime auto loans sinking into delinquency hit their highest level since
2010 in the third quarter, with roughly 6 million individuals at least 90 days late on their
payments.
It's behavior much like that seen in the months heading into the 2007-2009 recession,
according to data from Federal Reserve Bank of New York researchers.
"The worsening in the delinquency rate of subprime auto loans is pronounced, with a
notable increase during the past few years," the researchers, led by Andrew Haughwout, said
Wednesday in a
blog on their Liberty Street Economics site
.
There is no economics, only political economy. That means that financial oligarchy under liberalism
puts the political pressure and takes measures to have the final say as for who occupy top academic
positions.
Indirect negative selection under neoliberalism (much like in the USSR) occurs on multiple
fronts, but especially via academic schools and indoctrination of students. The proper term for
political pressure of science and creating an academic school that suppressed other is Lysenkoism.
So far this term was not mentioned even once here. But this what we have in the USA. Of course
there are some dissidents, some of them quite vocal, but in no way they can get to the level of
even a department chair.
In best traditions of Lysenkoism such people as Greg Mankiw, Krugman, DeLong and Summers after
getting to their lucrative positions can do tremendous, lasting decades damage. The same is true
for all other prominent neoliberal economists. It's not even about answers given, it is about
questions asked and framework and terminology used.
Fish rots from the head. It is important to understand that essentially the same game (with
minor variations, and far worse remuneration for sycophantism ) was played in the USSR -- the
Communist Party essentially dictated all top academic position assignments, so mostly despicable
sycophants had managed to raise to the top in this environment. Some people who can well mask
their views under the disguise of formal obedience also happened, but were extremely rare. Situation
in the past in the USA was better and such people as Hyman Minsky (who died in 1996) while not
promoted were not actively suppressed either. But He spend only the last decade of his career
under neoliberal regime.
What was really funny, is how quickly in late 80th prominent USSR economists switched to neoliberalism
when the wind (and money) start flowing in this direction.
I would suggest that there are non are trivial links between Soviet political and economic
science and neoclassical economics in the USA -- both are flavors of Lysenkoism.
The reasons for the election of Donald Trump as President of the U.S. will be analyzed and argued
about for many years to come. Undoubtedly there are U.S.-specific factors that are relevant, such
as racial divisions in voting patterns. But the election took place after the British vote to withdraw
from the European Union and the rise to power of conservative politicians in continental Europe,
so it is reasonable to ask whether globalization bears any responsibility.
Have foreign workers taken the jobs of U.S. workers? Increased trade does lead to a reallocation
of resources, as a country increases its output in those sectors where it has an advantage while
cutting back production in other sectors. Resources should flow from the latter to the former, but
in reality it can be difficult to switch employment across sectors.
Daron Acemoglu and David Autor of MIT,
David Dorn of the University of Zurich, Gordon Hanson of UC-San Diego and Brendan Price of MIT
have found that import competition from China after 2000 contributed to reductions in U.S. manufacturing
employment and weak U.S. job growth. They estimated manufacturing job losses due to Chinese competition
of 2.0 – 2.4 million.
Other studies
find similar results for workers who do not have high school degrees.
Moreover, multinational firms do shift production across borders in response to lower wages, among
other factors.
Ann E. Harrison of UC-Berkeley and Margaret S. McMillan of Tufts University looked at the hiring
practices of the foreign affiliates of U.S. firms during the period of 1977 to 1999. They found that
lower wages in affiliate countries where the employees were substitutes for U.S. workers led to more
employment in those countries but reductions in employment in the U.S. However, when employment across
geographical locations is complementary for firms that do significantly different work at home and
abroad, domestic and foreign employment rise and fall together.
Imports and foreign production, therefore, have had an impact on manufacturing employment in the
U.S. But several caveats should be raised. First, as
Erik Brynjolfsson and Andrew McAfee of MIT and others have pointed out, technology has had a
much larger effect on jobs. The U.S. is the second largest global producer of manufactured goods,
but these products are being made in plants that employ fewer workers than they did in the past.
Many of the lost jobs simply do not exist any more. Second, the U.S. exports goods and services as
well as purchases them. Among the manufactured goods that account for significant shares of U.S.
exports are
machines
and engines, electronic equipment and aircraft . Third, there is inward FDI as well as outward,
and the foreign-based firms hire U.S. workers. A 2013
Congressional Research Service
study by James V. Jackson reported that by year-end 2011 foreign firms employed 6.1 million Americans,
and 37% of this employment-2.3 million jobs-was in the manufacturing sector.
More recent data
shows that employment by the U.S. affiliates of multinational companies rose to 6.4 million in
2014. Mr. Trump will find himself in a difficult position if he threatens to shut down trade and
investment with countries that both import from the U.S. and invest here.
The other form of globalization that drew Trump's derision was immigration. Most of his ire focused
on those who had entered the U.S. illegally. However, in a speech in Arizona he said that he would
set up a commission that would
roll back the number of legal migrants to "historic norms."
The
current number of immigrants (42 million) represents around 13% of the U.S. population, and 16%
of the labor force. An increase in the number of foreign-born workers depresses the wages of some
native-born workers, principally high-school dropouts, as well as other migrants who arrived earlier.
But there are other, more significant reasons for the
stagnation in
working-class wages . In addition, a reduction in the number of migrant laborers would raise
the ratio of young and retired people to workers-the dependency ratio-and endanger the financing
of Social Security and Medicare. And by increasing the size of the U.S. economy,
these workers induce expansions in investment expenditures and hiring in areas that are complementary.
The one form of globalization that Trump has not criticized, with the exception of outward FDI,
is financial. This is a curious omission, as the crisis of 2008-09 arose from the financial implosion
that followed the collapse of the housing bubble in the U.S. International financial flows exacerbated
the magnitude of the crisis. But
Trump has pledged
to dismantle the Dodd-Frank legislation, which was enacted to implement financial regulatory
reform and lower the probability of another crisis. While
Trump has criticized China for undervaluing its currency in order to increase its exports to
the U.S., most economists believe that the
Chinese currency is no longer undervalued vis-à-vis the U.S. dollar.
Did globalization produce Trump, or lead to the circumstances that resulted in
46.7% of the electorate voting
for him? A score sheet of the impact of globalization within the U.S. would record pluses and minuses.
Among those who have benefitted are consumers who purchase items made abroad at cheaper prices, workers
who produce export goods, and firms that hire migrants. Those who have been adversely affected include
workers who no longer have manufacturing jobs and domestic workers who compete with migrants for
low-paying jobs. Overall, most studies find evidence of
positive net benefits from trade . Similarly,
studies of the cost and benefits of immigration indicate that overall foreign workers make a
positive contribution to the U.S. economy.
Other trends have exerted equal or greater consequences for our economic welfare. First, as pointed
out above, advances in automation have had an enormous impact on the number and nature of jobs, and
advances in artificial intelligence wii further change the nature of work. The launch of driverless
cars and trucks, for example, will affect the economy in unforeseen ways, and more workers will lose
their livelihoods. Second, income inequality has been on the increase in the U.S. and elsewhere for
several decades. While those in the upper-income classes have benefitted most from increased trade
and finance, inequality reflects many factors besides globalization.
Why, then, is globalization the focus of so much discontent? Trump had the insight that demonizing
foreigners and U.S.-based multinationals would allow him to offer simple solutions-ripping up trade
deals, strong-arming CEOs to relocate facilities-to complex problems. Moreover, it allows him to
draw a line between his supporters and everyone else, with Trump as the one who will protect workers
against the crafty foreigners and corrupt elite who conspire to steal American jobs. Blaming the
foreign "other" is a well-trod route for those who aspire to power in times of economic and social
upheaval.
Globalization, therefore, should not be held responsible for the election of Donald Trump and
those in other countries who offer similar simplistic solutions to challenging trends. But globalization's
advocates did indirectly lead to his rise when they oversold the benefits of globalization and neglected
the downside. Lower prices at Wal-Mart are scarce consolation to those who have lost their jobs.
Moreover, the proponents of globalization failed to strengthen the safety networks and redistributive
mechanisms that allow those who had to compete with foreign goods and workers to share in the broader
benefits.
Dani Rodrik of Harvard's Kennedy School has described how the policy priorities were changed:
"The new model of globalization stood priorities on their head, effectively putting democracy to
work for the global economy, instead of the other way around. The elimination of barriers to trade
and finance became an end in itself, rather than a means toward more fundamental economic and social
goals."
The battle over globalization is not finished, and there will be future opportunities to adapt
it to benefit a wider section of society. The goal should be to place it within in a framework that
allows a more egalitarian distribution of the benefits and payment of the costs. This is not a new
task. After World War II, the Allied planners sought to revive international trade while allowing
national governments to use their policy tools to foster full employment. Political scientist
John
Ruggie of the Kennedy School called the hybrid system based on fixed exchange rates, regulated
capital accounts and government programs "
embedded liberalism
," and it prevailed until it was swept aside by the wave of neoliberal policies in the 1980s
and 1990s.
What would today's version of "embedded liberalism" look like? In the financial sector, the pendulum
has already swung back from unregulated capital flows and towards the use of capital control measures
as part of macroprudential policies designed to address systemic risk in the financial sector. In
addition,
Thomas Piketty of the École des hautes etudes en sciences (EHESS) and associate chair at the Paris
School of Economics , and author of Capital in the Twenty-first Century, has called
for a new focus in discussions over the next stage of globalization: " trade is a good thing, but
fair and sustainable development also demands public services, infrastructure, health and education
systems. In turn, these themselves demand fair taxation systems."
The current political environment is not conducive toward the expansion of public goods. But it
is unlikely that our new President's policies will deliver on their promise to return to a past when
U.S. workers could operate without concern for foreign competition or automation. We will certainly
revisit these issues, and we need to redefine what a successful globalization looks like. And if
we don't? Thomas Piketty warns of the consequences of not enacting the necessary domestic policies
and institutions: "If we fail to deliver these, Trump_vs_deep_state will prevail."
Since 1980, US manufacturing output has approximately doubled while manufacturing employment
fell by about a third.
Yes, globalization impacts the composition of output and it is a contributing factor in the
weaker growth of manufacturing output. but overall it has accounted for a very minor share of
the weakness in manufacturing employment since 1980. Productivity has been the dominant factor
driving manufacturing employment down.
JimH November 29, 2016 11:11 am
"Overall, most studies find evidence of positive net benefits from trade."
Of course they do! And in your world, studies always Trump real world experience.
Studies on trade can ignore the unemployed workers with a high school education or less. How
were they supposed to get an equivalent paying job? EDUCATION they say! A local public university
has a five year freshman graduation rate of 25%. Are those older students to eat dirt while attempting
to accumulate that education!
Studies on trade can ignore that illegal immigration increases competition for the those under
educated employees. Since 1990 there has been a rising demand that education must be improved!
That potential high school drop outs should be discouraged by draconian means if necessary. YET
we allow immigrants to enter this country and STAY with less than the equivalent of an American
high school education! Why are we spending so much on secondary education if it is not necessary!
"In Mexico, 34% of adults aged 25-64 have completed upper secondary education, much lower than
the OECD average of 76% the lowest rate amongst OECD countries."
See: http://www.oecdbetterlifeindex.org/countries/mexico/
Trade studies can ignore the fate of a small town when its major employer shuts down and leaves.
Trade studies can assume that we are one contiguous job market. They can assume that an unemployed
worker in Pennsylvania will learn of a good paying job in Washington state, submit an application,
and move within 2 weeks. Or assume that the Washington state employer will hold a factory job
open for a month! And they can assume that moving expenses are trivial for an unemployed person.
Our trade partners have not attempted anything remotely resembling balanced trade with us.
Here are the trade deficits since 1992.
Year__________US Trade Balance with the world
1992__________-39,212
1993__________-70,311
1994__________-98,493
1995__________-96,384
1996__________-104,065
1997__________-108,273
1998__________-166,140
1999__________-258,617
2000__________-372,517
2001__________-361,511
2002__________-418,955
2003__________-493,890
2004__________-609,883
2005__________-714,245
2006__________-761,716
2007__________-705,375
2008__________-708,726
2009__________-383,774
2010__________-494,658
2011__________-548,625
2012__________-536,773
2013__________-461,876
2014__________-490,176
2015__________-500,361
From:
https://www.census.gov/foreign-trade/statistics/historical/gands.pdf
AND there is the loss of the income from tariffs which had been going to the federal government!
How has that effected our national debt?
"However, when employment across geographical locations is complementary for firms that do
significantly different work at home and abroad, domestic and foreign employment rise and fall
together."
And exactly how do you think that the US government could guarantee that complementary work
at home and abroad. Corporations are profit seeking, amoral entities, which will seek profit any
way they can. (Legal or illegal)
The logical conclusion of your argument is that we could produce nothing and still have a thriving
economy. How would American consumers earn an income?
Indiana, Michigan, Ohio, Pennsylvania, and Wisconsin are RUST BELT states. Were the voters
there merely ignorant or demented? You should never ever run for elected office.
Beverly Mann November 29, 2016 12:30 pm
Meanwhile, Trump today chose non-swampy Elaine Chao, Mitch McConnell's current wife and GWBush's
former Labor Secretary, as Transportation Secretary, to privatize roads, bridges, etc.
JimH November 29, 2016 12:36 pm
The trade balances are in millions of dollars in the table in my last comment.
Global trade had a chance of success beginning in 1992. But that required a mechanism which
was very difficult to game. A mechanism like the one that the Obama administration advocated in
October 2010.
"At the meeting in South Korea's southern city of Gyeongju, U.S. officials sought to set a
cap for each country's deficit or surplus at 4% of its economic output by 2015.
The idea drew support from Britain, Australia, Canada and France, all of which are running trade
deficits, as well as South Korea, which is hosting the G-20 meetings and hoping for a compromise
among the parties.
But the proposal got a cool reception from export powerhouses such as China, which has a current
account surplus of 4.7% of its gross domestic product; Germany, with a surplus of 6.1%; and Russia,
with a surplus of 4.7%, according to IMF statistics."
See:
http://articles.latimes.com/2010/oct/24/business/la-fi-g20-summit-20101024
That cap was probably too high. But at least the Obama administration showed some realization
that global trade was exhibiting serious unpredicted problems. Too bad that Hillary Clinton could
not have internalized that realization enough to campaign on revamping problematic trade treaties.
(And persuaded a few more of the voters in the RUST BELT to vote for her.) Elections have consequences
and voters understand that, but what choice did they have?
In your world, while American corporations act out in ways that would be diagnosed as antisocial
personality disorder in a human being, American human beings are expected to wait patiently for
decades while global trade is slowly adjusted into some practical system. (As one shortcoming
after another is addressed.)
The article states almost exactly what you 'add' in your comment:
"Imports and foreign production, therefore, have had an impact on manufacturing employment
in the U.S. But several caveats should be raised. First, as Erik Brynjolfsson and Andrew McAfee
of MIT and others have pointed out, technology has had a much larger effect on jobs".
So, what gives? Is there an award today for who ever gets the biggest DUH??? If there is anything
worth adding, it would be a mention of the Ball St study that supports the author's claim but
is somehow overlooked. But your comment, well, DUH!!
=================================================
JimH,
Some good stuff there, your assessment of Economics and its penchant for ignoring variables,
and your insight which states that "studies can assume that we are one contiguous job market",
is all very true, and especially when it comes to immigration issues. I've lived most of my life
near the Southern border and when economists claim that undocumented workers are good for our
economy I can only chuckle and shake my head. I suppose I could also list all of the variables
which those economists ignore, and there are many to choose from, but, there is that quote by
Upton Sinclair: "You can't get a man to understand what his salary depends on his not understanding".
In all fairness though, The Dept. of Labor does of course have its JOLTS data, and so not all
such studies are based on broad assumptions, but Economics does have its blind spots, generally
speaking. And of course economists apply far too much effort and energy serving their political
and financial masters.
As for your comment in regards to the the trade deficit, you might want to read up a little
on the Triffin Dilemma. The essence of globalization has a lot to do with the US leadership choosing
to maintain the reserve-currency status and Triffin showed that an increasing amount of dollars
must supply the world's demand for dollars, or, global growth would falter. So, the trade deficit
since 1975 has been intentional, for that reason, and others. Of course the cost of labor in the
US was a factor too, and shipping and standards and so on. But, it is wise also, to remember that
these choices were made at time, during and just after the Viet Nam war, when military recruitment
was a very troubling issue for the leadership. And the option of good paying jobs for the working-class
was very probably seen as in conflict with military recruitment. Accordingly, the working-class
has been left with fewer options. This being accomplished in part with the historical anomaly
of high immigration quotas, (and by the tolerance for illegal immigration), during periods with
high unemployment, a falling participation-rate, inadequate infrastructure, and etc.
Ray LaPan-Love November 29, 2016 2:18 pm
JimH,
After posting my earlier comment it occurred to me that I should have recommended an article
by Tim Taylor that has some good info on the Triffin dilemma.
Also, it might be worth mentioning that you are making the common mistake of assigning blame
to an international undertaking that would be more accurately assigned to national shortcomings.
I'm referring here to what you quoted and said:
""Overall, most studies find evidence of positive net benefits from trade.""
"Of course they do! And in your world, studies always Trump real world experience".
My point being that "positive net benefits from trade" are based on just another half-baked
measurement as you suggest, but the problems which result from trade-related displacements are
not necessarily the fault of trade itself. There are in fact political options, for example, immigration
could have been curtailed about 40 years ago and we would now have about 40 million fewer citizens,
and thus there would almost certainly be more jobs available. Or, the laws pertaining to illegal
immigration could have been enforced, or the 'Employee Free Choice Act could have been passed,
or whatever, and then trade issues may have had much different impact.
Ray LaPan-Love November 29, 2016 3:12 pm
It seems worth mentioning here, that there are other more important goals that make globalization
valuable than just matters of money or employment or who is getting what. Let us not forget the
famous words of Immanuel Kant:
"the spirit of commerce . . . sooner or later takes hold of every nation, and is incompatible
with war."
coberly November 29, 2016 6:33 pm
Ray
the spirit of commerce did not prevent WW1 or WW2.
otherwise, thank you, and Jim H and Joseph Joyce for the first Post and Comments for grownups
we've had around here in some time.
Ray LaPan-Love November 29, 2016 7:03 pm
Hey Coberly, long time no see.
And yes, you are right, 'the spirit of commerce' theory has had some ups and downs. But, one
could easily and accurately argue that the effort which began with the League of Nations, and
loosely connects back to Kant's claim, has gained some ground since WW2. There has not, after-all,
been a major war since.
So, when discussing the pros and cons of globalization, that factor, as I said, is worthy of
mention. And it was a key consideration in the formation of the Bretton Woods institutions, and
in the globalization effort in general. This suggesting then that there are larger concerns than
the unemployment-rate, or the wage levels, of the working-class folks who may, or may not, have
been at the losing end of 'free-trade'.
I've been a 'labor-lefty' since the 1970s, but I am still capable of understanding that things
could have been much worse for the American working-class. Plus, if anyone must give up a job,
who better than those with a fairly well-constructed safety-net. History always has its winners
and losers, and progress rarely, if ever, comes in an even flow.
Meanwhile, those living in extreme poverty, worldwide, have dropped from 40% in 1981, to about
10% in 2015 (World Bank), so, progress is occurring. But of course much of that is now being ignored
by the din which has drowned out so many considerations that really do matter, and a great deal.
coberly November 29, 2016 8:25 pm
Ray
I am inclined to agree with you, but sometimes it's hard to see the forest for the trees. Especially
if one of those trees has fallen on you.
In general I am more interested in stopping predatory business models that really hurt people
than in creating cosmic justice.
as for the relative lack of big wars since WW2, I always thought that was because of mutual
assured destruction. I am sure Vietnam looked like a big enough war to the Vietnamese.
"... Labor market monopsony is the idea that when there isn't enough competition among businesses, it is bad news for workers. When an industry includes only a few big companies, they don't have to compete with one another as hard to attract employees - and so end up paying their workers less than they would if there were true competition. It's the flip side of how monopoly power lets companies charge higher prices to consumers. ..."
... it's also worth examining a 21-page briefing paper issued on Oct. 25 by Obama White House
economists about an important concept with a forbidding name: labor market monopsony. The paper
is a prime example of the direction left-of-center economic policy is going, evident not just in
the Obama administration's second-term priorities but in a range of work at liberal think tanks
and in Mrs. Clinton's own economic proposals.
Labor market monopsony is the idea that when there isn't enough competition among businesses,
it is bad news for workers. When an industry includes only a few big companies, they don't have
to compete with one another as hard to attract employees - and so end up paying their workers
less than they would if there were true competition. It's the flip side of how monopoly power
lets companies charge higher prices to consumers.
It's an idea that has a long lineage in economic thought but has been barely discussed in
mainstream policy-making circles until recently. Every year since 1947, White House economists
have issued the "Economic Report of the President," describing in great detail the United States'
strengths and challenges. The phrase "labor market monopsony" appears not once in tens of
thousands of pages.
The talk of monopsony is part of a shift in the policy tools that many left-of-center economic
thinkers see as most promising for addressing the economic challenges of poor and middle-class
Americans. Rather than focusing on policies that amount to redistribution - tax rates, the social
welfare system - they are looking at how the rules of the economic game shape people's outcomes.
Some use a term for this set of policies coined by the Yale political scientist Jacob Hacker:
predistribution policy. This is policy that shapes how the market works in the first place, as
opposed to redistribution policy, which assumes a free market will generate growth and then uses
taxes and spending to give a lift to the economy's losers.
To understand the dueling approaches, think of a professional sports league that finds that
richer, big-market teams are consistently at an advantage, making games less entertaining. One
approach would be to tack on a few extra points to the small-market team's score when it plays a
larger rival. That's the equivalent of redistribution.
I am a Marxist economist (Professor of Economics, Mount Holyoke College) and I appreciate Branko
Milanovic's open-mindedness and his efforts in a recent post on his blog to educate economists who
often have a crude and superficial misunderstanding of Marx's labor theory of value.
For context for my comments on Milanovic, I will first say a few words about my interpretation
of Marx's labor theory of value (LTV). In my view, Marx's LTV is primarily a macro theory and
the main question addressed in Marx's macro LTV is the determination of the total profit (or surplus-value)
produced in the capitalist economy as a whole. Profit is the main goal of capitalist economies
and should be a key variable in any theory of capitalism. Marx's theory of the total profit
is that profit is the difference between the value produced by workers and the wages they are paid,
i.e. that profit is produced by the "surplus labor" of workers.
I argue that Marx's "surplus labor" theory of profit has very significant and wide-ranging explanatory
power. Marx's theory provides straight-forward and robust explanations of the following important
phenomena of capitalist economies: conflicts between capitalists and workers over wages, and
over the length of the working day, and over the intensity of labor (i.e. how hard workers work,
which determines in part how much value they produce); endogenous technological change (in order
to reduce necessary labor and increase surplus labor and surplus-value); increasing concentration
of capital and income(i.e. increasing inequality); the trend and fluctuations in the rate of profit
over time; and endogenous cycles due to fluctuations in the rate of profit rate of profit.
(A more complete discussion of the explanatory power of Marx's theory of profit is provided in my
" Marx's Economic Theory: True or False? A Marxian Response to Blaug's Appraisal, " in Moseley (ed.),
Heterodox Economic Theories: True or False?, Edward Elgar, 1995).
This wide-ranging explanatory power of Marx's surplus labor theory of profit is especially impressive
when compared to mainstream economics. In mainstream macroeconomics, there is no theory of
profit at all; profit (or the rate of profit) is not even a variable in the theory! I was shocked
when I realized in graduate school this absence of profit in mainstream macro, and am still shocked
that there is no effort to include profit. Indeed, DSGE models go in the opposite direction
and many models do not even have firms!
Mainsteam micro does have a theory of profit (or interest) – the marginal productivity theory
of distribution – but it is a weak and largely discredited theory. Marginal productivity theory
has been shown by the capital controversy and other criticisms to have insoluble logical problems
(the aggregation problem, reswitching, cannot integrate intermediate goods, etc.). And marginal
productivity theory has very meager explanatory power and explains none of the important phenomena
listed above that are explained by Marx's theory.
Milanovic agrees that Marx's LTV is primarily a macro theory, but he interprets it in this post
as only the assumption that "sum of values will be equal to sum of production prices". And
he continues: "The former is an unobservable quantity so Marx's contention is not falsifiable.
It is therefore an extra-scientific statement that we have to take on faith.
I argue, to the contrary, that Marx's macro LTV is primarily a theory of profit and my conclusion
that Marx's theory is the best theory of profit we have is not based on faith but is instead based
on the standard scientific criterion of empirical explanatory power. It is much more accurate
to say that marginal productivity theory is accepted by mainstream economists on faith, as Charles
Ferguson famously said in his conclusion to the capital controversy.
Now to my comments on Milanovic's three main points:
1. Milanovic's main point is that the LTV is often misinterpreted as a simple micro theory
that assumes that the prices of individual commodities are proportional to the labor-times required
to produce them. Milanovic argues that is not true in a capitalist economy because of the equalization
of the profit rate across industries with unequal ratios of capital to labor, so that according to
Marx's theory, long-run equilibrium prices are determined by the equation: w + d + rK, where
w is wages, d is depreciation and r is the economy-wide rate of profit (missing in this equation
is the cost of intermediate goods, but I will ignore this).
Milanovic emphasizes that Walras and Marshall had essentially the same equation for long-run equilibrium
prices. I agree that all three theories of long-run equilibrium prices have this same form,
but there is an important difference. Marx's theory provides a logically rigorous theory of
the rate of profit in this equation (based on his theory of the total profit discussed above) and
Walras and Marshall just take the rate of profit as given , disguised as an "opportunity cost", and
thus provides no theory of profit at all . Therefore, I think Marx's theory of long-run equilibrium
prices is superior to Walras' and Marshall's in this important sense.
2. Milanovic's second main point is that Marx's theory of long-run equilibrium prices are
"clearly very, very far from derisive statements that the labor theory of value means that people
are just paid for their labor input regardless of what is the 'socially necessary labor' required
to produce a good." I presume that this derisive statement means that workers produce more
value than they are paid and thus are exploited in capitalism. But Branko is mistaken about
this. Marx's theory of long-run equilibrium prices is based on his macro theory of profit according
to which the source of profit is the surplus labor of workers. This conclusion is indeed derisive
and that is the main (non-scientific) reason that Marx's theory of profit is rejected by mainstream
economists in spite of its superior explanatory power.
I know from previous correspondence that Milanovic understands well Marx's "exploitation" theory
of profit, but he seems to overlook the connection between Marx's micro theory of prices of production
and his macro theory of profit.
3. Milanovic's third point is that Marx's labor theory of value is most helpful in understanding
pre-capitalist economies and the relation between capitalism and non-capitalist economies today.
I argue, to the contrary, that Marx's labor theory of value and profit is the best theory we have
to understand the most important phenomena of capitalist economies, including 21 st century capitalism.
It would be one thing if mainstream economics had a robust theory of profit with significant explanation
power. But it has almost no theory of profit. Therefore it would seem to be appropriate
from a scientific point of view that Marx's surplus labor theory of profit should be given more serious
consideration.
Thanks again to Milanovic and I look forward to further discussion.
I used to respect Krugman during Bush II presidency. His columns at this time looked like on target
for me. No more.
Now I view him as yet another despicable neoliberal shill. I stopped reading his
columns long ago and kind of always suspect his views as insincere and unscientific.
In this particular
case the key question is about maintaining the standard of living which can be done only if manufacturing
even in robotic variant is onshored and profits from it re-distributed in New Deal fashion. Technology
is just a tool. There can be exception for it but generally attempts to produce everything outside
the US and then sell it in the USA lead to proliferation of McJobs and lower standard of living.
Creating robotic factories in the USA might not completely reverse the damage, but might be a step
in the right direction. The nations can't exist by just flipping hamburgers for each other.
Actually there is a term that explains well behavior of people like Krugman and it has certain
predictive value as for the set of behaviors we observe from them. It is called Lysenkoism and it
is about political control of science.
Yves in her book also touched this theme of political control of science. It might be a good time
to reread it. The key ideas of "ECONned: How Unenlightened Self Interest Undermined Democracy and
Corrupted Capitalism " are still current.
ZeroHedge is usually deceiving about oil production issues, being on a short side all the time,
and this exaggerating OPEC differences (Which proved to be substantial due to obstuctionalist
KAS and later Iran positions)... So you need to take everything they write with a grain of salt.
Notable quotes:
"... Finally, adding to the complexity, there are two more wildcards: one is Iran oil production and whether Trump will seek to undo the Iranian nuclear deal . Should that happen, and if sanctions are reintroduced, some 1 million barrels in daily oil exports from Iran may go offline, further pressuring the market. ..."
...Reuters countered that according to an OPEC source the group had yet to decide on the
final figures to be discussed on Nov. 28, when OPEC and non-OPEC experts meet in Vienna.
As previously reported, OPEC is expected to discuss production cuts of 4.0-4.5% among
its members at the Vienna meeting to comply with the roughly 1.2mmbpd reduction as set
forth in the Algiers meeting which expects total OPEC output of 32.5-33.0mmbpd, but Iran
and Iraq still have reservations about how much they want to contribute.
A cut of
880,000 bpd would represent less than 2% of current total non-OPEC output.
Shortly after the report came out, Russian energy minister Alexander Novak said
Russia was working with Kazakhstan and Mexico, though not the United States, on joint
output curbs, but reiterated Moscow preferred to freeze output over cuts.
...Novak also said that Russia's position "has remained unchanged and consistent"
(even if the algos may have misinterpreted it), and added that "as our president
said earlier, we are ready to freeze production at the current levels."
President Vladimir Putin on Monday reaffirmed the country is willing to freeze, adding
he sees no obstacles to an OPEC agreement this month after the group made major progress
in overcoming differences.
...Putting even a cut of 880,000 bpd in context, this would represent less than 2
percent of current total non-OPEC output.
... ... ...
* * *
Finally, adding to the complexity, there are two more wildcards: one is Iran oil
production and whether
Trump will seek to undo the Iranian nuclear deal. Should that happen, and if
sanctions are reintroduced, some 1 million barrels in daily oil exports from Iran may go
offline, further pressuring the market. The other is suddenly waning Chinese
demand, on what some analysts have speculated is the result of the Chinese Strategic
Petroleum Reserve approaching full status,
which could eliminate as much as 1.1 million bpd in demand from the market once
China stop filling up its extensive SPR.
"... CNN is Paul's biggest alleged culprit, with nine entries, followed by the NY Times and MSNBC, with six each. The NY Times has recently come under fire from President-elect Donald Trump, who accuses them of being "totally wrong" on news regarding his transition team, while describing them as "failing." ..."
"... CNN's Wolf Blitzer is also amongst those named on the list. In an email from the Democratic National Committee (DNC) released by WikiLeaks, the DNC staff discusses sending questions to CNN for an interview with Donald Trump. ..."
"... So-called 'fake news' has been recently attacked by US President Barack Obama, who claimed that false news shared online may have played a role in Donald Trump's victory in the US presidential election. ..."
"This list contains the culprits who told us that Iraq had weapons of mass destruction and
lied us into multiple bogus wars,"according to a report on his website, Ron Paul Liberty Report.
Paul claims the list is sourced and "holds a lot more water" than a list previously released by
Melissa Zimdars, who is described on Paul's website as "a leftist feminist professor."
"These are the news sources that told us 'if you like your doctor, you can keep your doctor,'"
he said. "They told us that Hillary Clinton had a 98% of winning the election. They tell us in
a never-ending loop that 'The economy is in great shape!'"
Paul's list includes the full names of the "fake news" journalists as well as the publications
they write for, with what appears to be hyperlinks to where the allegations are sourced from.
In most cases, this is WikiLeaks, but none of the hyperlinks are working at present, leaving the
exact sources of the list unknown.
CNN is Paul's biggest alleged culprit, with nine entries, followed by the NY Times and MSNBC,
with six each. The NY Times has recently come under fire from President-elect Donald Trump, who
accuses them of being "totally wrong" on news regarding his transition team, while describing
them as "failing."
The publication hit back, however, saying their business has increased since his election,
with a surge in new subscriptions.
CNN's Wolf Blitzer is also amongst those named on the list. In an email from the Democratic
National Committee (DNC) released by WikiLeaks, the DNC staff discusses sending questions to CNN
for an interview with Donald Trump.
Also listed is NY Times journalist Maggie Haberman, whom leaked emails showed working closely
with Clinton's campaign to present the Democratic candidate in a favorable light.
So-called 'fake news' has been recently attacked by US President Barack Obama, who claimed
that false news shared online may have played a role in Donald Trump's victory in the US presidential
election.
Facebook head Mark Zuckerberg has now said that the social media site may begin entrusting
third parties with filtering the news.
"... For more than three decades, macroeconomics has gone backwards," the paper began. Romer closed out his argument, some 20 pages later, by accusing a cohort of economists of drifting away from science, more interested in preserving reputations than testing their theories against reality, "more committed to friends than facts." In between, he offers a wicked parody of a modern macro argument: "Assume A, assume B, blah blah blah and so we have proven that P is true ..."
"... The idea that consumers and businesses always make rational choices pervades mainstream economics. Romer thinks that's not only wrong, but may lead to the misleading conclusion that government action can't fix big problems. ..."
"... There is no better place to be writing this than from (nearly) Minneapolis, for the University of Minnesota's economics department is the most devoted coven worshipping the most extreme form of "rational expectations." The most famous cultists have now relocated, but the U. Minnesota economics department remains fanatical in its devotion to rational expectations theory. ..."
"... All of this means that Romer's denunciations were sure to hit home far harder with mainstream and theoclassical economists than anything a heterodox economist could write. ..."
"... What this paragraph reveals is the classic tactic of theoclassical economists – they simply ignore real criticism. Lucas, Prescott, and Sargent all care desperately about Romer's criticism – but they all refuse to engage substantively with his critique. One has to love the arrogance of Sargent in "responding" – without reading – to Romer's critique. Sargent cannot, of course, respond to a critique he has never read so he instead makes a crude attempt to insult Romer, asserting that Romer has not done any scientific work in three decades. ..."
"... The rational expectations purists have been unable to come up with a response to their predictive failures and their false model of human behavior for thirty years. The Bloomberg article does not understand a subtle point about their non-defense defense, as shown in these key passages. ..."
"... What the rational expectations devotees are actually saying is their standard line, which is a radical departure from the scientific method. Their mantra is "it takes a model to beat a model." That mantra violates the scientific method. Their models are designed to embody their rational expectations theory. Those models' predictive ability is pathetic, which means that their theory and models are both falsified and should be rejected. The academic proponents of modern macro models, however, assert that their models are incapable of falsification by testing and predictive failure. This is not science, but theology. ..."
"... V.V. Chari's criticism of Romer is revealing. He complains that Romer does not want to "build on [rational expectation theory's] foundations." Why would Romer want to commit such a pointless act? Romer's point is that rational expectations is a failed theory that needs to be rejected so macroeconomics can move on to useful endeavors. ..."
"... Rational expectations theory has no such empirical foundations. ..."
"... Further, the dynamic stochastic general equilibrium (DSGE) models routinely fail the predictive test and, as Romer details, fail despite the use of dozens of ways in which the models are "gamed" with arbitrary inputs and restrictions that have no theoretical or empirical basis. Chari is right to describe the modern macro model as an "edifice." I would add that it is a baroque edifice top heavy with ornamental features designed to hide its lack of a foundation. Modern macro collapsed as soon as its devotees tried to build without an empirical foundation. ..."
"... The rational expectation devotees respond that predictive failures – no matter how extreme or frequent – cannot falsify their models or their theories. The proponents claim that only a better model, with superior predictive ability can beat their model. ..."
"... Kocherlakota's summary description is appropriately terse. He later explains the dogmatic gloss that devotees place on each of these five points. The "budget constraint," for example, means that nations with sovereign currencies such as the U.S. cannot run deficits, even to fight severe recessions or depressions. Why? Because theoclassical economists are enormous believers in austerity. As Kocherlakota archly phrased the matter, "freshwater" DSGE models were so attractive to theoclassical macro types because their model perfectly tracked their ideology. ..."
"... Specifying household preferences and firm objectives is equally erroneous, as Akerlof and Romer's 1993 article on "Looting" demonstrated. "Firms" do not have "objectives." Employees have "objectives," and the controlling officers' "objectives" are the most powerful drivers of employee behavior. ..."
"... Kocherlakota unintentionally highlighted modern macros' inability to incorporate even massive frauds driving national scandals and banking crises, despite the efforts of Akerlof (1970) (a market for "lemons") and Akerlof and Romer 1993: ("looting") in this passage. ..."
"... If macroeconomics, outside the cult of modern macro, were a car, it would not be "broken." It would be episodically broken when the rational expectations devotees got hold of monetary or fiscal policy. The rational expectations model fails the most fundamental test of a financial model – people trying to make money by anticipating the macroeconomics consequences of changes in monetary and fiscal policy overwhelmingly do not use their models because they are known to have pathetic predictive ability. The alternative models that embrace Keynesian analysis and are not dependent on the fiction of rational expectations function pretty well. The real world macro car, when driven by real world drivers, works OK. Essentially, the rational expectations devotees say that we can never drive the macro "car" because the public will defeat any effort to drive the economy in any direction. Instead, the economy will lurch about n response to random technological "shocks" that cannot be predicted because they occur without any relationship to any public policy choices. ..."
"... I am completely confused about the prediction of "rational choices". Do they include going bankrupt on purpose and letting your investors take the hit, burning your building down for the insurance money, hostile takeover behavior where businesses are run into the ground on purpose, tax strategies, people going on unemployment when they want a vacation from work, and on and on? These are decisions that have a rationale for the people who make them, and they have not been uncommon. Perhaps "economists" are best off observing not predicting "human behavior". ..."
"... I majored in economics. as you go up higher up into the dismal science, the more deranged it gets. The reason they are vague is because they don't know what they are talking about. They don't consider the real world, and as Bill Black's so brilliantly points out, they are in no hurry to out themselves as frauds. ..."
"... thanks, Simon. there must be something in those mental masturbation models for some people. justification for something the 99 % are all paying for most likely ..."
"... In some natural sciences, abandoning equilibrium models and replacing them with dynamic models have led to great progress, and looking at the actual time evolution of economies, there is a great deal of dynamics, such as growth, recessions, demography, natural catastrophes, immigration/emigration, resource discovery and depletion, technological progress. ..."
"... Since our economy has been gradually going casino for so many years, it makes sense that the folks who hold the reigns would make every effort to assure that all their key players adhere to their singular perspectives. ..."
"... The Nobel Memorial Prize in economics promotes the illusion that economics is a science. It is better conceptualized as a literary genre, and economists should be forced to compete with other writers for the prize in literature. ..."
"... Bill Black has a fascinating opinion on unnecessary complexity and I agree with him 200 percent. ..."
"... interesting about Kocherlakota formerly being a rational expectations devotee just the phrase 'rational expectations' is mind boggling as if there were no reaction to any action anywhere. Jack Bogle was on the news this morning laughing about stock picking and saying that every stock picker that makes money is balanced out by another one who loses money and so the only thing that makes money net-net is the long term progress of the market, (or society I would say – and that requires planning). ..."
"... Not one mention of Chaos or Catastrophe Theory, which are theories of systems with non linear feedback (aka: Fear and Greed), which appear to me to be fundamental aspects of Economics, especially the humans who are the Economy. ..."
"... Two slogans I read somewhere recently seem appropriate for theoclassical economics: Ideology is easy, thinking is hard. Belief is belonging. ..."
"... One doesn't have to have read any Reformation theology, but only to have observed more or less casually that human being are scarcely rational even about their own self-interest, and then only self-deceptively. Thomas Frank has commented effectively on that point in the political arena in What's the Matter with Kansas. To wit: Republicans have, he points out, diverted voters attention to social/cultural issues while picking their pockets. Perhaps one might sense an intersection of politics and economics on the latter point. ..."
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor
of economics and law at the University of Missouri-Kansas City. Jointly published at
New Economic Perspectives
Bloomberg has written an article about the origins of Paul Romer's increasingly famous
critique of modern macroeconomics.
His intention actually had been to write a paper that would celebrate advances in the understanding
of what drives economic growth. But when he sat down to write it in the months before taking over
as the World Bank's chief economist, Romer quickly found his heart wasn't in it. The world economy
wasn't growing much anyway; and the math that many colleagues were using to model it seemed unrealistic.
He watched a documentary about the Church of Scientology, and was struck by how groupthink can
operate.
So, Romer said in an interview at the Bank's Washington headquarters, "I just thought, OK,
I'm going to say what I think. I don't know if I'm the right person, but no one else is going
to say it. So I said it."
The upshot was "The Trouble With Macroeconomics," a scathing critique that landed among Romer's
peers like a grenade.
A bit of background makes the first paragraph more understandable. Romer's specialty is developmental
economics.
There are many economists who have said for years that modern macroeconomics is an abject failure.
But all economists are not equal, and Romer is both an extremely distinguished economist and the
World Bank's chief economist. When he writes that macroeconomics is absurd his position gets vastly
more attention from the field.
The Bloomberg article humorously summarizes Romer's article.
"For more than three decades, macroeconomics has gone backwards," the paper began. Romer
closed out his argument, some 20 pages later, by accusing a cohort of economists of drifting away
from science, more interested in preserving reputations than testing their theories against reality,
"more committed to friends than facts." In between, he offers a wicked parody of a modern macro
argument: "Assume A, assume B, blah blah blah and so we have proven that P is true."
The idea that consumers and businesses always make rational choices pervades mainstream
economics. Romer thinks that's not only wrong, but may lead to the misleading conclusion that
government action can't fix big problems.
There is no better place to be writing this than from (nearly) Minneapolis, for the University
of Minnesota's economics department is the most devoted coven worshipping the most extreme form of
"rational expectations." The most famous cultists have now relocated, but the U. Minnesota economics
department remains fanatical in its devotion to rational expectations theory.
A belief that consumers and businesses always make rational choices does not "pervade mainstream
economics." Mainstream economics is increasingly influenced by reality, particularly in the form
of behavioral economics. Behavioral economics, which has led to multiple Nobel awards, has many currents,
but each of them agrees that consumers and business people typically do not make rational decisions
even in simpler tasks, much less demonstrate the ability to predict the future required by rational
expectations theory. Similarly, even the proponents of modern macroeconomics admit that its predictive
ability – and predictive ability is supposed to be their holy grail of legitimacy – is beyond pathetic.
What is true is that mainstream economics' most egregious errors have come from assuming contrary
to reality in a wide range of contexts that corporate officers, consumers, and investors make optimal
decisions that maximize the firm or the household's utility.
In any real scientific field modern macro would, decades ago, have been abandoned as an abject
failure. Romer, therefore, is not storming some impregnable bulwark of economics. He is calling an
obvious, abject failure an obvious, abject failure. Private sector finance participants typically
believe the academic proponents of rational expectations theory are delusional. Romer is calling
out elites in his profession who have ignored these failures and doubled and tripled-down on their
failed dogmas for decades. This makes the Bloomberg article's title deeply misleading: "The
Rebel Economist Who Blew Up Macroeconomics."
Romer is not a rebel. He did not blow up academic, mainstream macroeconomics – the academic proponents
of modern macroeconomics blew it up decades ago. Romer is mainstream, and he is sympathetic on personal
and ideological grounds to the theoclasscial economist most famous for developing rational expectations
theory. Romer has strongly libertarian views and did his doctoral work under Robert Lucas. Romer
has long been appreciative of Lucas. All of this means that Romer's denunciations were sure to
hit home far harder with mainstream and theoclassical economists than anything a heterodox economist
could write.
The same Bloomberg article made a key factual claim that is literally true but misleading.
What's at stake far exceeds hurt feelings in the ivory tower. Central banks and other policy
makers use the models that Romer says are flawed.
Central banks and private economic forecasters rarely use modern macro models, though they have
begun to use New Keynesian models that are hybrids. They do not do use "freshwater" models because
they are known to have terrible predictive ability and because alternative models not based on rational
expectations have far superior predictive ability. The private financial sector typically does not
rely on modern macro models, even the New Keynesian hybrids. Romer is not saying that the models
are "flawed" – he is explaining that they are inherently failed models. Worse, he is saying that
the designers of the models know they are failed and respond by gimmicking the models by littering
them with myriad assumptions that have no empirical or theoretical basis and are designed to try
to make the models produce less absurd results.
I explained that Romer was far from the first to call out modern academic macroeconomics as a
failure but that he is a prominent mainstream economist. The Bloomberg article's most interesting
reveal was the response by the troika of economists must associated with rational expectations theory
to Romer's article decrying their dogmas.
Lucas and Prescott didn't respond to requests for comments on Romer's paper. Sargent did. He
said he hadn't read it, but suggested that Romer may be out of touch with the ways that rational-expectations
economists have adapted their models to reflect how people and firms actually behave. Sargent
said in an e-mail that Romer himself drew heavily on the school's insights, back when he was "still
doing scientific work in economics 25 or 30 years ago."
What this paragraph reveals is the classic tactic of theoclassical economists – they simply
ignore real criticism. Lucas, Prescott, and Sargent all care desperately about Romer's criticism
– but they all refuse to engage substantively with his critique. One has to love the arrogance of
Sargent in "responding" – without reading – to Romer's critique. Sargent cannot, of course, respond
to a critique he has never read so he instead makes a crude attempt to insult Romer, asserting that
Romer has not done any scientific work in three decades.
The rational expectations purists have been unable to come up with a response to their predictive
failures and their false model of human behavior for thirty years. The Bloomberg article does
not understand a subtle point about their non-defense defense, as shown in these key passages.
Allies of the three Nobelists have been more outspoken, and many of them point out that Romer
- unlike Keynes in the 1930s - doesn't offer a new framework to replace the one he says has failed.
"Burning down the edifice, and saying we'll figure out what we'll build on its foundations
later, just does not seem like a constructive way to proceed," said V. V. Chari, an economics
professor at the University of Minnesota.
Romer's heard that line often, and bristles at it: "I'm saying, 'the car is broken.' And everyone's
saying, 'Romer's a terrible guy, because he couldn't fix the car'."
What the rational expectations devotees are actually saying is their standard line, which
is a radical departure from the scientific method. Their mantra is "it takes a model to beat a model."
That mantra violates the scientific method. Their models are designed to embody their rational expectations
theory. Those models' predictive ability is pathetic, which means that their theory and models are
both falsified and should be rejected. The academic proponents of modern macro models, however, assert
that their models are incapable of falsification by testing and predictive failure. This is not science,
but theology.
V.V. Chari's criticism of Romer is revealing. He complains that Romer does not want to "build
on [rational expectation theory's] foundations." Why would Romer want to commit such a pointless
act? Romer's point is that rational expectations is a failed theory that needs to be rejected so
macroeconomics can move on to useful endeavors.
A "foundation" in such a building metaphor is the deep, well-grounded stone or reinforced concrete
beneath the visible building that is attached to solid bedrock. Rational expectations theory
has no such empirical foundations. It was not based on testing that found that people behaved
in accordance with the theory. Behavioral economics and finance, by contrast, is based on a growing
empirical base – virtually all of which refutes the first three assumptions of the models. Similarly,
the work of Akerlof (1970), Akerlof & Romer (1993), and the work of white-collar criminologists has
falsified each of the first three assumptions of the models.
Further, the dynamic stochastic general equilibrium (DSGE) models routinely fail the predictive
test and, as Romer details, fail despite the use of dozens of ways in which the models are "gamed"
with arbitrary inputs and restrictions that have no theoretical or empirical basis. Chari is right
to describe the modern macro model as an "edifice." I would add that it is a baroque edifice top
heavy with ornamental features designed to hide its lack of a foundation. Modern macro collapsed
as soon as its devotees tried to build without an empirical foundation.
The rational expectation devotees respond that predictive failures – no matter how extreme
or frequent – cannot falsify their models or their theories. The proponents claim that only a better
model, with superior predictive ability can beat their model. That might sound acceptable to
some, but there is a critical unstated twist. The many rival models actually used by the private
sector and central banks that produce far superior predictive ability can never be treated as "better
models" to these devotees because the models with far superior predictive powers reject rational
expectations theory, rational decision-making, and the "budget constraint." To the devotees, only
DSGE models that accept this trio of market fictions are eligible to be acceptable "models." Dr.
Kocherlakota states that acceptable models "share five key features." These five characteristics
define DSGE models.
They specify budget constraints for households, technologies for firms, and resource constraints
for the overall economy. They specify household preferences and firm objectives. They assume forward-looking
behavior for firms and households. They include the shocks that firms and households face. They are
models of the entire macroeconomy.
Kocherlakota's summary description is appropriately terse. He later explains the dogmatic
gloss that devotees place on each of these five points. The "budget constraint," for example, means
that nations with sovereign currencies such as the U.S. cannot run deficits, even to fight severe
recessions or depressions. Why? Because theoclassical economists are enormous believers in austerity.
As Kocherlakota archly phrased the matter, "freshwater" DSGE models were so attractive to theoclassical
macro types because their model perfectly tracked their ideology.
[A]lmost coincidentally-in these models, all government interventions (including all forms
of stabilization policy) are undesirable.
Yes, "almost coincidentally."
Specifying household preferences and firm objectives is equally erroneous, as Akerlof and
Romer's 1993 article on "Looting" demonstrated. "Firms" do not have "objectives." Employees have
"objectives," and the controlling officers' "objectives" are the most powerful drivers of employee
behavior.
As Akerlof and Romer (and every modern crisis) demonstrated, this frequently leads to firm practices
that harm the firm, the consumer, and the shareholders. Such behavior, however, is impossible under
the second assumption, so any model (such as control fraud or "looting") that violates the assumption
is not eligible to be a rival model because it these superior models do not produce "general equilibrium."
The "GE" in a "DSGE" model is general equilibrium, so rival models from economics and criminology
that note that the economy is not a self-correcting apparatus that produces general equilibrium are
ruled out as superior models even though they are superior in that they have an empirical and theoretical
basis and demonstrate far superior predictive results.
Kocherlakota unintentionally highlighted modern macros' inability to incorporate even massive
frauds driving national scandals and banking crises, despite the efforts of Akerlof (1970) (a market
for "lemons") and Akerlof and Romer 1993: ("looting") in this passage.
In the macro models of the 1980s, all mutually beneficial trades occur without delay. This
assumption of frictionless exchange made solving these models easy. However, it also made
the models less compelling.
He then goes on to a delighted description of macro economists now sometimes building in (arbitrary)
lags ("frictions") in the time required to accomplish "all mutually beneficial trades." But what
of the three great fraud epidemics that produced the U.S. financial crisis and the Great Recession?
Sorry, that's not allowed into the "friction" canon. The market model is still one of perfection
(albeit slightly delayed). It does not matter how many massive financial scandals occur in which
the largest UK banks and Wells Fargo deliberately abuse their customers by encouraging them to engage
in transactions that will harm them and make the bankers rich. It doesn't not matter that over ten
million Americans were induced by bankers and their agents to pay excessive interest rates in return
for yield spread premiums (YSP) to the bankers and brokers. None of these things are allowed to happen
in these models. Your better model, which includes such frauds and abuses, is not allowed precisely
because it (a) is better and (b) falsifies the theoclassical ideology underlying "rational expectations"
theory.
The assumption of "forward looking behavior" produces "expectations," which are assumed to be
accurate and rational. Theoclassical proponents claim that we all have the ability to predict vast
aspects of the financial future. While we are not perfect, we are optimal in our forecasts given
the state of knowledge. If your rival model lacks rational expectations, it isn't a real model. Romer
rejects the rational expectations myth, so he is incapable of presenting a superior model to the
devotees of rational expectations.
If macroeconomics, outside the cult of modern macro, were a car, it would not be "broken."
It would be episodically broken when the rational expectations devotees got hold of monetary or fiscal
policy. The rational expectations model fails the most fundamental test of a financial model – people
trying to make money by anticipating the macroeconomics consequences of changes in monetary and fiscal
policy overwhelmingly do not use their models because they are known to have pathetic predictive
ability. The alternative models that embrace Keynesian analysis and are not dependent on the fiction
of rational expectations function pretty well. The real world macro car, when driven by real world
drivers, works OK. Essentially, the rational expectations devotees say that we can never drive the
macro "car" because the public will defeat any effort to drive the economy in any direction. Instead,
the economy will lurch about n response to random technological "shocks" that cannot be predicted
because they occur without any relationship to any public policy choices.
Romer takes particular delight in shredding the pretension to "science" in the model's abuse of
shocks. Again, however, the Bloomberg article seriously misleads in making it appear that
his critique of shocks is novel. Then Minneapolis Fed Chair Dr.
Kocherlakota (formerly chair of the U. Minnesota economics department, where he was a "rational
expectations" devotee) forcefully owned up to the egregious predictive failures of the models. He
acknowledged that "macro models are driven by patently unrealistic shocks."
It is unfortunate that Bloomberg article about Romer's article is weak. It is useful, however,
because its journalistic inquiry allows us to know how deep in their bunker Sargent, Lucas, and Prescott
remain. They still refuse to engage substantively with Romer's critique of not only their failures
but their intellectual dishonesty and cowardice. It is astonishing that multiple economists were
awarded Nobel prizes for creating the increasingly baroque failure of modern macro. In any other
field it would be a scandal that would shake the discipline to the core and cause it to reexamine
how it conducted research and trained faculty. In economics, however, a huge proportion of Nobel
awards have gone to theoclassical economists whose predictions have been routinely falsified and
whose policy recommendations have proven disastrous. Theoclassical economists, with only a handful
of exceptions, express no concern about these failures.
I am completely confused about the prediction of "rational choices". Do they include going
bankrupt on purpose and letting your investors take the hit, burning your building down for the
insurance money, hostile takeover behavior where businesses are run into the ground on purpose,
tax strategies, people going on unemployment when they want a vacation from work, and on and on?
These are decisions that have a rationale for the people who make them, and they have not been
uncommon. Perhaps "economists" are best off observing not predicting "human behavior".
I was fortunate enough to have an econ. prof. (mid 70's) who was also my student counselor
tell me that unless I intended to work for the gov't or teach the subject, a degree in econ. was
pointless. What's taught in class has very little to do with the real world.
Anyone who contends that econ is a "science" rather than philosophy is deluded or just trying
to protect their place in the hierarchy. Seems that "physics envy" is never going away.
I'll see your DSGE model & raise with with the IBGYBG* model; in theory, you should win that
hand but I'll be walking away with the actual money.
*(by the time this blows up) I'll Be Gone & You'll Be Gone
I majored in economics. as you go up higher up into the dismal science, the more deranged
it gets. The reason they are vague is because they don't know what they are talking about. They
don't consider the real world, and as Bill Black's so brilliantly points out, they are in no hurry
to out themselves as frauds.
thanks, Simon. there must be something in those mental masturbation models for some people.
justification for something the 99 % are all paying for most likely
I am not sure which is the greatest shortcoming of the macro-economy theory described by Black:
rational expectations or global equilibrium?
In some natural sciences, abandoning equilibrium models and replacing them with dynamic
models have led to great progress, and looking at the actual time evolution of economies, there
is a great deal of dynamics, such as growth, recessions, demography, natural catastrophes, immigration/emigration,
resource discovery and depletion, technological progress.
I sometimes like to use the analogy of the famous failure of the Tacoma Narrows bridge failure.
The engineers calculated the maximum force that the wind would have on the bridge, but didn't
calculate the dynamic aerodynamic effect as the bridge deck swayed in the wind. The result was
a spectacular failure.
Since our economy has been gradually going casino for so many years, it makes sense that
the folks who hold the reigns would make every effort to assure that all their key players adhere
to their singular perspectives.
The most important of these perspectives is that there is no higher human purpose than to make
a lot of money, in essence, that greed is good.
Thus the problem facing economists worshiping at the altar of "rational expectations" is that
the only rational expectation that is accepted as 'truly rational', is first and foremost, the
love of money.
This leads to problems for businesses, as truly selfish, and money-motivated people are actually
rare, as most people have a wide range of possible motivations working in their lives.
This is why business 'leaders' give prospective employees tests to find the people they can
'trust', which is to say find those who are motivated by money, which is the only motivating factor
our masters find useful.
Of course those who are motivated exclusively by the love of money are also those who believe
that austerity is the proper medicine for the rest of us.
There's one more thing about people who are motivated only by the need to accumulate money,
they also tend to steal anything that isn't tied down.
This doesn't bother FIRE sector employers since they are only concerned to ferret-out those
whose motivations might be polluted by inclinations other than greed.
Anyway, it seems to me that the importance of 'rational expectations' is in predicting the
behavior of FIRE sector employees, not the economy as a whole.
As far as the bulk of humanity goes, the only true 'rational expectation' is that people have
many and varied motivations that make it hard to predict their behavior.
Hey Econ. Prof. – I'll see your DSGE model & raise with my IBGYBG** model. In theory, you'll
win the hand but we'll see who actually walks away the money.
**(by the time this thing blows up) I'll Be Gone, You'll Be Gone
The Nobel Memorial Prize in economics promotes the illusion that economics is a science.
It is better conceptualized as a literary genre, and economists should be forced to compete with
other writers for the prize in literature.
We need to get back to basics, to the real economy of people and necessary supplies to support
people. Model a simple city, with a simple agricultural hinterland. You can know how many bushels
of grain equivalent are necessary for subsistence economy. You can know how many people you have
in the countryside and in the city. You can know how many bushels of grain equivalent are in storage.
You can estimate how much of the economy is barter and how much is cash purchase. You can know
how much money is in circulation, and from those determine what velocity the money needs to have,
to pay for all that bushels of grain equivalent. You don't need calculus, just arithmetic. End
the sophistry and obscurity thru unnecessary complexity.
interesting about Kocherlakota formerly being a rational expectations devotee just the
phrase 'rational expectations' is mind boggling as if there were no reaction to any action anywhere.
Jack Bogle was on the news this morning laughing about stock picking and saying that every stock
picker that makes money is balanced out by another one who loses money and so the only thing that
makes money net-net is the long term progress of the market, (or society I would say – and that
requires planning).
Not one mention of Chaos or Catastrophe Theory, which are theories of systems with non
linear feedback (aka: Fear and Greed), which appear to me to be fundamental aspects of Economics,
especially the humans who are the Economy.
Perhaps an approach to a solution for economists who are rightly disgusted with the continuing
failures of macroeconomics is to confess that economics is theology/philosophy and not science.
Economics lands on the "mammon" side of serving God or mammon.
One doesn't have to have read any Reformation theology, but only to have observed more
or less casually that human being are scarcely rational even about their own self-interest, and
then only self-deceptively. Thomas Frank has commented effectively on that point in the political
arena in What's the Matter with Kansas. To wit: Republicans have, he points out, diverted voters
attention to social/cultural issues while picking their pockets. Perhaps one might sense an intersection
of politics and economics on the latter point.
There is less need to moralize about "sin" than to see it as an heuristic. That is, one might
begin by assuming that businesses and individuals are not only guided by rationality, but to the
contrary are aided by economists, say, of the U of Minnesota ilk, to rely upon the myth of rationality
to cloak fundamental selfishness, which economists have neutered by casting it as "self-interest."
Selfishness is the root of continuing, destructive "irrationality," because it is part of what
defines a root of sin, i.e., missing the mark.
An economics of gratitude for shared abundance would be closer to the mark.
Strong, credible allegations of high-level criminal activity can bring down a government. When the
government lacks an effective, fact-based defense, other techniques must be employed. The success
of these techniques depends heavily upon a cooperative, controlled press and a mere token opposition
party.
1. Dummy up . If it's not reported, if it's not news, it didn't happen.
2. Wax indignant . This is also known as the "how dare you" gambit.
3. Characterize the charges as "rumors" or, better yet, "wild rumors." If, in spite of the news
blackout, the public is still able to learn about the suspicious facts, it can only be through "rumors."
4. Knock down straw men . Deal only with the weakest aspect of the weakest charges. Even better,
create your own straw men. Make up wild rumors and give them lead play when you appear to debunk
all the charges, real and fanciful alike.
5. Call the skeptics names like "conspiracy theorist," "nut," "ranter," "kook," "crackpot" and,
of course, "rumor monger." You must then carefully avoid fair and open debate with any of the people
you have thus maligned.
6. Impugn motives . Attempt to marginalize the critics by suggesting strongly that they are not
really interested in the truth but are simply pursuing a partisan political agenda or are out to
make money.
7. Invoke authority . Here the controlled press and the sham opposition can be very useful.
8. Dismiss the charges as "old news."
9. Come half-clean . This is also known as "confession and avoidance" or "taking the limited hang-out
route." This way, you create the impression of candor and honesty while you admit only to relatively
harmless, less-than-criminal "mistakes." This stratagem often requires the embrace of a fall-back
position quite different from the one originally taken.
10. Characterize the crimes as impossibly complex and the truth as ultimately unknowable.
11. Reason backward , using the deductive method with a vengeance. With thoroughly rigorous deduction,
troublesome evidence is irrelevant. For example: We have a completely free press. If they know of
evidence that the Bureau of Alcohol, Tobacco, and Firearms (BATF) had prior knowledge of the Oklahoma
City bombing they would have reported it. They haven't reported it, so there was no prior knowledge
by the BATF. Another variation on this theme involves the likelihood of a conspiracy leaker and a
press that would report it.
12. Require the skeptics to solve the crime completely.
13. Change the subject . This technique includes creating and/or reporting a distraction.
At least with Trump I expect him to talk crap but
Obama talks crap as well when he should know better:
The values that we talked about -- the values of democracy, and free speech, and international
norms, and rule of law, respecting the ability of other countries to determine their own destiny
and preserve their sovereignty and territorial integrity -- those things are not something
that we can set aside.
"... J is for Junk Economics: A Survivor's Guide to Economic Vocabulary in an Age of Deception. ..."
"... The stock market has gone up since 2008 in America, in Europe, all over the world because the central banks have flooded the economy with creating new money. They didn't create the money to hire workers. They didn't create the money to build infrastructure, they didn't create the money to invest in the economy. They didn't create the money to pay off the mortgages of people who had junk mortgages and were exploitive. They didn't create the money to write of student loans. All the money that was created, every penny, was created to give to the banks. To the Wall Street banks at 0.1% interests to create reserves at the Federal Reserve so that the banks could then lend out money and what did they do to ' who did they lend it to? ..."
"... Well they lent to corporate [raiders]. So, part of the reason the stock market has gone up is that corporate [raiders] have borrowed very inexpensively 1%, say from a bank, and bought companies whose dividend rates are 3% or 4 or 5% and they get what's called the arbitrage, the difference ..."
"... As a result of paying interest to the banks and this borrowed money, you don't have to pay income tax on it because this is counted as a cost of doing business, not as a cost of takeover. ..."
"... The first thing they do is tighten working condition. They work the labor harder. They let the labor force go. When people retire, they don't hire new workers. They just work the remaining workers all the more. So, what's happened isn't a new investment. It's just the opposite. It's disinvestment. It's asset stripping. What creates the stock market going up is not capital formation. It's asset stripping. When Donald Trump calls that wealth creation, it means his wealth- meaning the money he's been able to make. But that money has been made by making the economy poorer. ..."
"... Well they don't explain why it's not you. The reason they're living better is what used to be called a transfer payment. Something that is not really earned but it's just a transfer of income like from a rent when a landlord will raise the rent, all of a sudden, same house, nobody's invested more. Nobody's saying oh your rent's going up about $50 a month this month. No that's a transfer payment. You just have to pay more. The landlord didn't do anything to earn that more money. He just found that he's able to squeeze more money out of you. ..."
"... So today when people talk about widows and orphans, they mean millionaires [widows and orphans,]. When they talk about the low interest rates that capitalists aren't making to get rich enough, that's really hurting the pension funds. ..."
"... So, you have the economic vocabulary turning into vocabulary of deception. So, I go over what this vocabulary is and what the concepts are and I also talk about what the original concepts were in classical economics. Everyone from Adam Smith, John Stewart Mill, they were all reforms. What they wanted to reform was getting rid of this parasitic landlord class that had conquered England in 1066 and it's the heirs of the military of the warlords ended up taking the land and just making everybody pay them and all of their descendants for not doing anything. Just for being conquered. ..."
Economist Michael Hudson explains how economic terms like capital gains are deployed to mislead
the public about who is benefiting from economic policy and where wealth is going Michael Hudson
is a Distinguished Research Professor of Economics at the University of Missouri, Kansas City.
He is the author of The Bubble and Beyond and Finance Capitalism and its Discontents
. His most recent book is titled Killing the Host: How Financial Parasites and Debt Bondage
Destroy the Global Economy .
SHARMINI PERIES, TRNN: Welcome back to the Real News Network. I'm Sharmini Peries coming to
you from Baltimore.
Today I'm being joined in our Baltimore studio by economist Michael Hudson. Michael has a new
book out J is for Junk Economics: A Survivor's Guide to Economic Vocabulary in an Age of Deception.
Michael is a distinguished Research Professor of Economics at the University of Missouri,
Kansas City. Thanks so much for joining us Michael.
MICHAEL HUDSON: Good to be here in your Baltimore studio.
PERIES: Thank you. So Michael, in the first segment we spoke more generally in terms of how people
are misled through our policy makers in Washington in particular. But give us some specific examples
of some of the terms used to mislead us.
HUDSON: Well take the word capital gains. People originally think capital gaisn, you have the
image of industry growing and innovation taking place. There's an indication as if somehow when real
estate and housing prices go up, everybody's getting richer. When the stock prices go up, the economies
got richer. So Hillary Clinton was able ot say, look at how the stock market soared in the last 8
years thanks to Mr. Obama.
Well the stock market has soared but now the employees working conditions for the stock market.
Most of these capital gains don't simply reflect what the textbooks say. The textbooks say, well
a company's worth whatever it's expected future earnings are. So the reason stocks are going up and
bonds are going up and real estate is rents are going to go up and profits are going up and the economy
is expanding and everybody's getting richer. But that's not why the stock market goes up at all.
The stock market has gone up since 2008 in America, in Europe, all over the world because
the central banks have flooded the economy with creating new money. They didn't create the money
to hire workers. They didn't create the money to build infrastructure, they didn't create the money
to invest in the economy. They didn't create the money to pay off the mortgages of people who had
junk mortgages and were exploitive. They didn't create the money to write of student loans. All the
money that was created, every penny, was created to give to the banks. To the Wall Street banks at
0.1% interests to create reserves at the Federal Reserve so that the banks could then lend out money
and what did they do to ' who did they lend it to?
Well they lent to corporate [raiders]. So, part of the reason the stock market has gone up
is that corporate [raiders] have borrowed very inexpensively 1%, say from a bank, and bought companies
whose dividend rates are 3% or 4 or 5% and they get what's called the arbitrage, the difference.
So all of a sudden you have the take over a company with borrowed money. As a result of paying
interest to the banks and this borrowed money, you don't have to pay income tax on it because this
is counted as a cost of doing business, not as a cost of takeover.
The first thing they do is tighten working condition. They work the labor harder. They let
the labor force go. When people retire, they don't hire new workers. They just work the remaining
workers all the more. So, what's happened isn't a new investment. It's just the opposite. It's disinvestment.
It's asset stripping. What creates the stock market going up is not capital formation. It's asset
stripping. When Donald Trump calls that wealth creation, it means his wealth- meaning the money he's
been able to make. But that money has been made by making the economy poorer.
So, when people talk about the economy, they have to realize that it's actually money layers.
Not everybody is a millionaire working on Wall Street. Some people actually have to work for paychecks
and out of their paychecks they have to pay rising healthcare costs, rising money to the banks, rising
debt service. They have to borrow more money just to break even. Their rents are going way up to
larger portions of their income.
So, what people are actually left with to spend is maybe 25 to 30% of their income on goods and
services after paying taxes and after paying the FIRE sector (Finance, Insurance, Real Estate). Whether
it's housing insurance or mortgage insurance. So there's an idea of distracting people. Don't think
of your condition. Think of how the overall economy is doing. But don't think of the economy as an
overall unit. Think of the stock market as the economy. Think of the rich people as the economy.
Look at the yachts that are made. Somebody's living a lot better. Couldn't it be you?
Well they don't explain why it's not you. The reason they're living better is what used to
be called a transfer payment. Something that is not really earned but it's just a transfer of income
like from a rent when a landlord will raise the rent, all of a sudden, same house, nobody's invested
more. Nobody's saying oh your rent's going up about $50 a month this month. No that's a transfer
payment. You just have to pay more. The landlord didn't do anything to earn that more money. He just
found that he's able to squeeze more money out of you.
So squeezing money out of you to make money for a [inaud.] class and that was a word that used
to be used 100 years ago, the [inaud.] were people who lived on rents. They were coupon clippers,
they were landlords, they were the idle rich who inherited money and somehow you have like even the
words widows and orphans. People say you have to provide large capital gains, meaning debt financed
asset price inflation so that the widows and orphans can survive. The widows and orphans are all
living on trust funds. Or they're living on alimony. Or they're living on inherited wealth. People
forget that before 1900, widows and orphans used to be poor people. We're talking Charles Dickens
type novels. Widows and orphans were the people who needed welfare. They weren't the millionaires.
So today when people talk about widows and orphans, they mean millionaires [widows and orphans,].
When they talk about the low interest rates that capitalists aren't making to get rich enough, that's
really hurting the pension funds. Our hearts bleed for the workers. Their hearts aren't bleeding
for the workers. They're trotting out pension funds in front of their factotums to say, make the
pension funds richer and behind them, the fact is that 75% of all the stocks and bonds are really
owned by just a small percentage of the American population they're really talking about themselves.
So, you have the economic vocabulary turning into vocabulary of deception. So, I go over what
this vocabulary is and what the concepts are and I also talk about what the original concepts were
in classical economics. Everyone from Adam Smith, John Stewart Mill, they were all reforms. What
they wanted to reform was getting rid of this parasitic landlord class that had conquered England
in 1066 and it's the heirs of the military of the warlords ended up taking the land and just making
everybody pay them and all of their descendants for not doing anything. Just for being conquered.
You could say that the carry over of this today. The rent that people have to pay, the money they
have to pay the banks instead of having a public option. That's the price they still have to pay
for being conquered. The group that I'm working with is trying to promote public options. We're trying
to promote public banking that would provide credit cards, banking services, [vanilla] services at
a fraction of the price that Chase Manhattan or Citi Bank or Bank of America charges.
Yea all these charges that people pay are economically unnecessary. There's no real cost behind
them. There's no value behind them. So, they're what the classical economist called empty pricing.
Prices with no real cost value. What they called fictitious capital. Capital that clings on junk
mortgage borrowers that actually ' the pretense that all these debts can be paid but it's all fictitious
because everybody knows at least on Wall Street everybody knows that debts can't be paid. That somebody
has to default and Wall Street's plan is well make the government reimburse us like the bailouts
that happened in 2008 so that we don't lose, let's pass all of the loss onto the tax payers without
changing the banks, without throwing our guys in jail even though these were fraudulent mortgages.
PERIES: And the government itself doesn't pay its debt.
HUDSON: That's right. The whole idea is that it doesn't. At least if it does pay the debt, it
only pays ' there are two kinds of debts that the governments have. They have a debt to the bond
holders and they do pay that. They have a debt to the social security recipients. Hillary promised
she was going to cut back social security. She was going to cut back social spending and social security
and medical care so that the government would have enough money to pay her backers on Wall Street.
So she was Obama's legacy. A standing for Wall Street.
A stand in is a politician who can deliver her constituency to her Wall Street backers and that's
what a politician does in America. You get a constituency; you make them believe your promises and
then you turn them over to your financial campaign backers. That's what politics has become and that's
as much an art of deception as economics is.
PERIES: Now Donald Trump is proposing to spend trillions of dollars in terms of infrastructure
development in this country. That sounds very good. Of course, in the immediate future that means
jobs for people. But what is the problem with that kind of infrastructure development in the long
term and what kind of plan is he thinking of when he's thinking infrastructure development?
HUDSON: There are many ways of building infrastructure. The way Donald Trump would like, he's
like to spend like aa hundred million dollars building a new bridge in the highway. Then he would
like to sell it, privatize it to a private buy like himself for 10 million dollars. So, the government
would spend a huge amount of money that could've been used for a free bridge or a free road. He'll
then sell it for 10 million dollars to a private owner and then the private owner will put a toll
booth up and charge money for coming across and make a mint.
This is what happened in England under Margaret Thatcher. This is called Thatcherism and it's
what destroyed the English economy. It's what's destroying the European economy and turning Europe
into a dead zone. So, you could do infrastructure in the way of a giveaway. A real infrastructure
would be the government would indeed pay for rebuilding this. But the whole idea of what mad America
rich in the 19th century was the government will develop this infrastructure and it will provide
these services freely to the population. Because if you begin to charge people for bridges and for
roads and for parking meters as is in Chicago and for everything else that's being privatized, you're
going to have even higher costs of living and the wages are going to go up and it will be even harder
to compete with foreign countries and to make exports because nobody can afford to pay the prices
that the American workers have to pay just to live and export in competition with Asia or even Europe
or Germany.
Germany doesn't have all of these costs. Germany has very low rental charges. Maybe 10-15% of
your income. Not 40% as here. Low priced public health, free autobahn to drive on. Not at all like
this. So, Donald Trump wants essentially to double the cost of living for everybody and give the
capital away to his republican backers and essentially leave the whole country unemployed but the
1% is going to be very, very rich.
PERIES: Right. Now let's go back to some specific examples in terms of the kind of infrastructure
that Donald Trump wants to build. So, he wants to build new airports. He says our airports are outdated.
He wants to build new roads and new bridges and build a wall over the US-Mexico border. All of these
are considered infrastructure. In the past we've been told that public-private partnerships are actually
a good thing. It even sounds good, public-private partnerships for the betterment of society. But
it really isn't and in terms of myth making, where does this take us?
HUDSON: The word public partnership it's really a one way partnership. The private, tells the
government what to do. All of the costs are born by the government. All of the risks and the profits
go to the private sector. It really means we're creating an opportunity for banks to make a killing
on making loans for all of this will be financed by bank credit. That banks or bond holders are going
to be paid very high interest rates on.
The government could create all this money the same way banks do. The government has computer
keyboards which is how a bank creates money. They could create their own money without having to
pay interests to anyone. They could either charge the airlines for it or they could provide the airports
more freely but public partnerships are designed to quadruple or quintuple the actual costs of doing
business and pretend that this is in the public interests instead of just in the interests of the
banks and the corporate insiders that the banks are willing to leave money to.
If you look at investigative journalists looked at just one horror story after another of private
public partnerships. Look at London's railroads. Look at what England did with the railroads. Water.
Public Private partnership for water. People now have to pay huge amounts just to get water in England,
that used to be free. The transportation quality goes down. The price goes way up. So the partnership
is a very exploited. We're not talking about equal partnership. We're talking about a dominate submissive
sadomasochistic partnership.
PERIES: Then this point you were making about the government can print all the money they want
if they want to invest it in infrastructure and own that infrastructure, they can make money to then
pay back the treasury if they need to. But instead they're going to borrow the money from these banks
and then be indebted. So is this kind of debt a bad thing?
HUDSON: Well the debt is bad when you have to repay it. All new money is a kind of debt. All money
is created on a computer. You can look at it in terms of a balance sheet. When you create, when you
go into a bank and you want a loan, the bank will give you a bank deposit and you'll sign a promissory
note. The bank has an asset and you have a debt to the bank and you can spend your deposit anyway.
But the bank charges money for all of this. The government can do the same thing. The Federal Reserve
and the Treasury. The Treasury can just print, issue a 1 trillion dollar coin for instance. Give
it to the Federal Reserve and the Fed can issue notes about it. You could call to claim whatever
you want. It's all constitutional because you can assign any level price you want to a coin. All
money is just created artificially.
So, it's a monopoly it's a legal privilege and for thousands of years from Mesopotamia through
Greece and Rome, all the money was created by the temples to make sure that it was honest money.
But it was all privatized after over thousands of years of history and now banks charge for something
that the government can do for free.
PERIES: Michael, for Donald Trump and the Republicans, they are against creating debt aren't they?
HUDSON: No. They know that most people are afraid of going into debt. Because if you go into debt
you actually have to repay it. Government debt doesn't have to be repaid. If you repaid government
debt, there wouldn't be anymore money. What they're really looking for is - the way to cut debt is
by cutting the deficit and what we want to cut is social security. We want to a sort of downsize
it. Hillary wanted to put it into the stock market. We want to pay less social spending. We want
less medical care. We want to spend less money on the 95% of the population so all the money gets
spent on the top 5%.
So, they're really against what debt is spent for. They're against democratic debt. They're against
democracy. What they really want is oligarchic debt which used to be state socialism. Government
will only give money to the banks. They're all for the kind of debt that is the bank bailout in 2008.
They're all for giving money to Wall Street. They're all for giving subsidies to Donald Trump for
building his buildings in New York and enabling him to make a killing. They're just against giving
debt to the workers or to the middle class or to the cities or to anyone who's not one of the 5%.
PERIES: Alright so this is the kind of austerity plan that Paul Ryan '
HUDSON: Austerity is the word.
PERIES: - is trying to promote that he wants Donald Trump to sign onto.
HUDSON: Right.
PERIES: Alright Michael I thank you so much for joining us today. And thank you for joining us
on the Real News Network.
End
DISCLAIMER: Please note that transcripts for The Real News Network are typed from a
recording of the program. TRNN cannot guarantee their complete accuracy.
Take one sentence from your cited passage: "When they (Who are 'they'? The nearest plural noun
is 'millionaires'. The next nearest is 'widows and orphans'. The next is 'people'. I think Prof
Hudson means 'people' as the antecedent, because they are talking about widows and orphans at
the start of the previous sentence. Let's go with that assumption.) talk about the low interest
rates that capitalists arent (sic) making to get rich enough, thats (sic) really hurting the pension
funds."
Who are the "people" talking about the low interest rates? What is meant by "low interest rates
that capitalists aren't making to get rich enough"? If the widows and orphans are now the millionaires
for whom large capital gains are needed for their survival, my guess Hudson means that the millionaires
cannot rely on interest income, because that has been suppressed in order to allow the banks to
make low interest mortgage loans. That is for the debt financed housing industry's asset price
inflation.
That sector is supposed to be the engine of recovery, a questionable recovery to be sure. The
pension funds that used to be able to rely on interest income to finance its future obligations
do not have that any longer. The funds have been investing in the equity market and some in the
derivative market through hedge funds. The funds are an excuse for the asset price inflation of
the stock market brought on by Fed policy.
The Fed is saying that in order for the pension funds to meet their obligations, asset prices
must be inflated to make the equity positions profitable.
It's a Ponzi scheme, a house of cards. When the next card is put in place, it may topple the
entire flimsy structure. Omitted from the discussion is the global position of the US dollar,
whose value is inflated by the damage that neoliberal policies have done to Europe's economy and
the euro.
I sympathize with the Professor's effort to explain a conspiratorial web of policies by the
Fed, the banks, the real estate industry, and the MIC (mostly implied) to support an economic
system based on the economic viability of an economy that is not productive of consumer goods
and services, an economy based on the imports, an economy dedicated to global hegemony based on
huge military expenditures.
This non-productive, US economy depletes the savings of those who still have them and places
at great risk the economic security of what used to be called the middle-class.
Oh, well, goedelite, your contribution clears up whatever confusion I had about MH's passage.
I'm being sarcastic, of course. But your valiant effort is much appreciated. ;=)
The good folks at TRNN should remind MH that the Real News is, I presume, for the general public
-- real people not egghead economists. He must find a way to connect with us in a clear, concise,
and coherent way. In listening to Michael, his spoken words don't seem able to keep pace with
his racing, out-of-control brain.
Go easy on us mere mortals, Professor Hudson.
As I understood him he spoke correctly: If the cost of living goes up, employers, in having to
at least maintain a workforce, will have to pay their employers more. But this makes it harder
for companies to export their goods, which leads to attrition of the workforce which he spoke
of earlier.
What I think you recognized is that 'real wages' go down.
Anyway, it's clear that this is unsustainable. Murray Rothbard called this economic system
a Ponzi Scheme.
I'm pretty sure that he meant to say wages go down. So, I agree with you. One other thing is that
countries like Brazil seemed not to understand that putting up toll booths (literally) on their
roads was not the best most cost effective way to go about this. Here in California we do have
toll bridges, but toll roads. We pay for our road maintenance through excise taxes on gas and
tires. And it's a state function.
The big lie from Trump and others is referring to a corporate tax rate of 35%. Corporations are
now paying far less in income taxes than at any time in the past 80 years. Companies including
Apple and GE and Chevron and Verizon are paying no income taxes. Income taxes and fees (which
includes payroll taxes and social security payments) are a way to have the government extract
income and wealth from workers and their families and pass it along to those in the unreal economy
who derive their income and wealth as rentiers or in the finance industry that turns equity into
debt for millions of Americans. 40% of what is counted as part of the GDP in the United States
is debt servicing which provides no real goods or real services and is only a transfer of wealth
from the working classes to the one percent. That is why when government economists talk about
the economy growing they are not talking about the true economic situation of workers and their
families who are in no better shape today than they were in 2008 when the economy collapsed thanks
to the massive fraud perpetrated by people in the banking and finance and insurance and mortgage
companies, none of who were tried for their criminal actions and none went to jail (unlike many
of the participants in the Savings & Loan industry collapse under Reagan).
Trillions of dollars were stolen by the same people that are serving in the Treasury Department
and in the Federal Reserve and the government (executive, supreme court, congress) is run by Wall
Street for Wall Street. Millenials would be wise to emigrate to a country with a less corrupt
government and people approaching retirement would do well to emigrate as well to a country where
the cost of living is lower and the odds of a climate change disaster is less than in much of
the Unites States.
This development of infrastructure as a public private partnership is the dark flip side of a
new deal economy. What it means as Hudson points out is essentially public money used to fund
the building programs, then passing the profit making over to a private company.
The strong ties of Wall Street to the Democratic party seems to have reached the end of its
credibility with the public. The money now has flipped to a more authoritarian control. This is
a familiar shift throughout history when the strings of control begin to show, when the veil begins
to be lifted and the liberal establishment loses its credibility, wham! their is a shift to fascism.
Worryingly this shift is usually followed by war. Which forces a kind of 'reset' both economically
and politically.
This whole sequence, the rise of a faux liberal elite,(who really just serve moneyed masters)
then a slow discrediting of that elite as their real motives are slowly revealed, then an angered
public backlash, which importantly (this is important to understand) is still controlled by the
moneyed classes. Resulting in a rise of authoritarianism and an insular tribal outlook often characterized
by racism...in other words fascism.
That's certainly an integral part of it. Michael Hudson just focused his analysis on what one
aspect* of what "capital gains" really means: it's the gains made by corporate raiders after money
is printing for their sake, who then go on to essentially partake in asset stripping.
The authoritarian part you bring up is the flip side of the coin: given the resulting damage
to the general economy, for the corporate raiders to continue their raiding they'll have to keep
the people in tight control.
* That aspect is what's "traditionally" called the "economic" side, as opposed the social side.
That's the tradition, anyway, that the capitalist pigs have been trying so hard to indoctrinate
us with. If I recall correctly, Amartya Sen is the first (only?) "Nobel Prize" winning
economist who defined "economics" to include the impact on the people's quality of life.
We've seen the make-shift "fake news" list created by a
leftist feminist professor. Well, another fake news list has been revealed
and this one holds a lot more water.
This list contains the culprits who told us that Iraq had weapons of mass destruction and lied
us into multiple bogus wars. These are the news sources that told us "if you like your doctor, you
can keep your doctor." They told us that Hillary Clinton had a 98% of winning the election. They
tell us in a never-ending loop that "The economy is in great shape!"
"... With Trump, exactly the same thing has happened as with my Five Star Movement, which was born of the Internet: the media were taken aback and asked us where we were before. We gathered millions of people in public squares and they marvelled. We became the biggest movement in Italy and journalists and philosophers continued to say that we were benefitting from people's dissatisfaction. ..."
"... the amateurs are the ones conquering the world and I'm rejoicing in it because the professionals are the ones who have reduced the world to this state. Hillary Clinton, Obama and all the rest have destroyed democracy and their international policies. ..."
"... If that's the case, it signifies that the experts, economists and intellectuals have completely misunderstood everything, especially if the situation is the way it is ..."
"... Brexit and Trump are signs of a huge change. If we manage to understand that, we'll also get to face it." ..."
"... Until now, these anti-establishment movements have come face-to-face with their own limits: as soon as they come to power they seem to lose their capabilities and reason for being. Alexis Tsipras, in Greece, for example ..."
"... President Juncker suggested modifying the code of ethics and lengthening the period of abstinence from any private work for former Commission members to three years. Is that enough? ..."
"... I have serious doubts about a potential change in the code of ethics being made by a former minister of a tax haven. ..."
"... We've always maintained this idea of total autonomy in decision-making, but we united over the common idea of a different Europe, a mosaic of autonomies and sovereignties. ..."
"... If he wants to hold a referendum on the euro, he'll have our support. If he wants to leave the Fiscal Stability Treaty – the so-called Fiscal Compact – which was one of our battles, we'll be there ..."
"... Renzi's negotiating power will also depend on the outcome of the constitutional referendum in December. We'll see whether he sinks or swims. ..."
"... Neoliberal Trojan Horse Obama has quite a global legacy. ..."
"... Maybe it's time for the Europeans to stop sucking American cock. Note that we barely follow your elections. It's time to spread your wings and fly. ..."
"... "The Experts* Destroyed The World" - Beppe Grillo. Never a truer word spoken, Beppe! YOU DA MAN!!! And these "Experts" - these self-described "ELITE" - did so - and are STILL doing so WITH MALICIOUS INTENT - and lining their pockets every fking step of the way! ..."
"... As the Jason Statham character says in that great Guy Richie movie "Revolver": "If there's ONE thing I've learnt about "Experts", it's that they're expert in FUCK ALL!" ..."
"... Apart from asset-stripping the economy & robbing the populace blind that is - and giving their countries away to the invader so indigenous populations cant fight back... or PURPOSELY angling for WW3 to hide their criminality behind the ULTIMATE & FINAL smokescreen. ..."
"... It NATO collapses so will the Euro project. The project was always American from the start. In recent years it has become a mechanism by which the Poles (and other assorted Eastern Europeans) can extract war guarantees out of the USA, UK and France. It is a total mess and people like Grillo add to the confusion by their flawed analysis. ..."
Whatever the reason, we agree with the next point he makes, namely the overthrow of "experts" by
amateurs.
euronews: "Do you think appealing to people's emotions is enough to get elected?
Is that a political project?"
Beppe Grillo: "This information never ceases to make the rounds: you don't
have a political project, you're not capable, you're imbeciles, amateurs And yet, the
amateurs are the ones conquering the world and I'm rejoicing in it because the professionals are
the ones who have reduced the world to this state. Hillary Clinton, Obama and all the rest have
destroyed democracy and their international policies. If that's the case, it signifies
that the experts, economists and intellectuals have completely misunderstood everything, especially
if the situation is the way it is. If the EU is what we have today, it means the European
dream has evaporated. Brexit and Trump are signs of a huge change. If we manage to understand
that, we'll also get to face it."
Bingo, or as Nassim Taleb put its, the "Intellectual-Yet-Idiot"
class. It is the elimination of these so-called "experts", most of whom have PhDs or other letters
next to their name to cover their insecurity, and who drown every possible medium with their endless,
hollow, and constantly wrong chatter, desperate to create a self-congratulatory echo
chamber in which their errors are diluted with the errors of their "expert" peers,
that will be the biggest challenge for the world as it seeks to break away from the legacy of a fake
"expert class" which has brought the entire world to its knees, and has unleashed the biggest political
tsunami in modern history.
One thing is certain: the "experts" won't go quietly as the "amateurs" try to retake what is rightfully
theirs.
... ... ...
Beppe Grillo, Leader of the Five Star Movement
"It's an extraordinary turning point. This corn cob – we can also call Trump that in a nice way –
doesn't have particularly outstanding qualities. He was such a target for the media, with such terrifying
accusations of sexism and racism, as well as being harassed by the establishment – such as the New
York Times – but, in the end, he won.
"That is a symbol of the tragedy and the apocalypse of traditional information. The television
and newspapers are always late and they relay old information. They no longer anticipate anything
and they're only just understanding that idiots, the disadvantaged, those who are marginalised –
and there are millions of them – use alternative media, such as the Internet, which passes under
the radar of television, a medium people no longer use.
"With Trump, exactly the same thing has happened as with my Five Star Movement, which was
born of the Internet: the media were taken aback and asked us where we were before. We gathered millions
of people in public squares and they marvelled. We became the biggest movement in Italy and journalists
and philosophers continued to say that we were benefitting from people's dissatisfaction. We'll
get into government and they'll ask themselves how we did it."
euronews
"There is a gap between giving populist speeches and governing a nation."
Beppe Grillo
"We want to govern, but we don't want to simply change the power by replacing it with our own. We
want a change within civilisation, a change of world vision.
"We're talking about dematerialised industry, an end to working for money, the start of working
for other payment, a universal citizens revenue. If our society is founded on work, what will happen
if work disappears? What will we do with millions of people in flux? We have to organise and manage
all that."
euronews
"Do you think appealing to people's emotions is enough to get elected? Is that a political project?"
Beppe Grillo
"This information never ceases to make the rounds: you don't have a political project, you're
not capable, you're imbeciles, amateurs
"And yet, the amateurs are the ones conquering the world and I'm rejoicing in it because the
professionals are the ones who have reduced the world to this state. Hillary Clinton, Obama and all
the rest have destroyed democracy and their international policies.
"If that's the case, it signifies that the experts, economists and intellectuals have completely
misunderstood everything, especially if the situation is the way it is. If the EU is what we
have today, it means the European dream has evaporated. Brexit and Trump are signs of a huge
change. If we manage to understand that, we'll also get to face it."
euronews
"Until now, these anti-establishment movements have come face-to-face with their own limits:
as soon as they come to power they seem to lose their capabilities and reason for being. Alexis Tsipras,
in Greece, for example "
Beppe Grillo
"Yes, I agree."
euronews
"Let's take the example of Podemos in Spain. They came within reach of power, then had to backtrack.
Why?"
Beppe Grillo
"Because there's an outdated way of thinking. Because they think power is managed by forming coalitions
or by making agreements with others.
"From our side, we want to give the tools to the citizens. We have an information system called
Rousseau, to which every Italian citizen can subscribe for free. There they can vote in regional
and local elections and check what their local MPs are proposing. Absolutely any citizen can even
suggest laws in their own name.
"This is something never before directly seen in democracy and neither Tsipras nor Podemos have
done it."
euronews
"You said that you're not interested in breaking up the European Union, but rather in profoundly
changing it. What can a small group of MEPs do to put into motion such great change?"
Beppe Grillo
"The little group of MEPs is making its voice heard, but there are complications In parliament,
there are lobby groups and commissions. Parliament decides, but at the same time doesn't decide.
"We do what we can, in line with our vision of a world based on a circular economy. We put forward
the idea of a circular economy as the energy of the future and the proposal has been adopted by the
European parliament."
euronews
"One hot topic at the Commission at the moment is the problem of the conflicts of interest concerning
certain politicians.
"President Juncker suggested modifying the code of ethics and lengthening the period of abstinence
from any private work for former Commission members to three years. Is that enough?"
Beppe Grillo
"I have serious doubts about a potential change in the code of ethics being made by a former
minister of a tax haven."
euronews
"You don't think the Commission is legitimate?"
Beppe Grillo
"Absolutely not. Particularly because it's a Commission that no one has actually elected. That's
what brought us closer to Nigel Farage: a democracy coming from the people."
euronews "You don't regret being allied with Farage?"
Beppe Grillo
"It was an alliance of convenience, made to give us enough support to enter parliament. We've
always maintained this idea of total autonomy in decision-making, but we united over the common idea
of a different Europe, a mosaic of autonomies and sovereignties.
"I'm not against Europe, but I am against the single currency. Conversely, I am for the idea of
a common currency. The words are important: 'common' and 'single' are two different concepts.
"In any case, the UK has demonstrated something that we in Italy couldn't even dream of: organising
a clear 'yes-no' referendum."
euronews
"That is 'clear' in terms of the result and not its consequences. In reality, the population is torn.
Many people's views have done u-turns."
Beppe Grillo
"Whatever happens, the responsibility returns entirely to the British. They made the decision."
euronews
"Doesn't it bother you that Italy's Prime Minister Matteo Renzi is playing the spoilsport in Europe?
Criticising European institutions was your battle horse and now he is flexing his muscles in Brussels."
Beppe Grillo
"Renzi has to do that. But he's just copying me and in doing so, strengthens the original."
euronews
"Whatever it may be, his position at the head of the government can get him results."
Beppe Grillo
"Very well. If he wants to hold a referendum on the euro, he'll have our support. If he wants
to leave the Fiscal Stability Treaty – the so-called Fiscal Compact – which was one of our battles,
we'll be there."
euronews
"In the quarrel over the flexibility of public accounts due to the earthquake and immigration, who
are you supporting?"
Beppe Grillo "On that, I share Renzi's position. I have nothing against projects and ideas. I have preconceptions
about him. For me, he is completely undeserving of confidence."
euronews
"Renzi's negotiating power will also depend on the outcome of the constitutional referendum in
December. We'll see whether he sinks or swims."
Beppe Grillo
"It's already lost for him."
euronews
"If he doesn't win, will you ask for early elections?"
Beppe Grillo
"Whatever happens, we want elections because the government as it stands is not legitimate and, as
a consequence, neither are we.
"From this point onwards, the government moves forward simply by approving laws based on how urgent
they are. And 90 percent of laws are approved using this method. So what good will it do to reform
the Senate to make the process quicker?"
euronews
"Can you see yourself at the head of the Italian government?"
Beppe Grillo
"No, no. I was never in the race. Never."
euronews
"So, Beppe Grillo is not even a candidate to become prime minister or to take on another official
role, if one day the Five Star Movement was to win the elections?"
Beppe Grillo
"The time is fast approaching."
euronews
"Really? A projection?"
Beppe Grillo
"People just need to go and vote. We're sure to win."
BabaLooey -> Nemontel •Nov 21, 2016 6:27 AM
euronews: "You don't think the Commission is legitimate?"
Beppe Grillo: "Absolutely not. Particularly because it's a Commission that no one has
actually elected. That's what brought us closer to Nigel Farage: a democracy coming from the people."
BOILED DOWN - THAT IS ALL THAT NEEDS TO BE SAID.
Blackhawks •Nov 21, 2016 3:15 AM
Neoliberal Trojan Horse Obama has quite a global legacy. People all over the world
are voting for conmen and clowns instead of his endorsed candidates and chosen successor. Having
previously exposed the "intellectual-yet-idiot" class, Nassim Taleb unleashes his acerbic
tone in 3 painfully "real news" tweets on President Obama's legacy...
Obama:
Protected banksters (largest bonus pool in 2010)
"Helped" Libya
Served AlQaeda/SaudiBarbaria(Syria & Yemen) https://t.co/bcNMhDgmuo
Maybe it's time for the Europeans to stop sucking American cock. Note that we barely follow
your elections. It's time to spread your wings and fly.
Yen Cross -> LetThemEatRand •Nov 21, 2016 3:27 AM
Amen~ The" European Toadies" should also institute " term limits" so those Jean Paul & Draghi][JUNKERS[]-
technocratic A-Holes can be done away with!
NuYawkFrankie •Nov 21, 2016 5:07 AM
"The Experts* Destroyed The World" - Beppe Grillo. Never a truer word spoken, Beppe! YOU
DA MAN!!! And these "Experts" - these self-described "ELITE" - did so - and are STILL doing so
WITH MALICIOUS INTENT - and lining their pockets every fking step of the way!
As the Jason Statham character says in that great Guy Richie movie "Revolver": "If there's
ONE thing I've learnt about "Experts", it's that they're expert in FUCK ALL!"
Apart from asset-stripping the economy & robbing the populace blind that is - and giving
their countries away to the invader so indigenous populations cant fight back... or PURPOSELY
angling for WW3 to hide their criminality behind the ULTIMATE & FINAL smokescreen.
Yep -THAT is how F'KING sick they are. These, my friends, are your "Experts", your self-decribed
"Elite" - and Soros is at the head of the parade.
lakecity55 -> NuYawkFrankie •Nov 21, 2016 6:18 AM
You know the old saying, "an expert's a guy from more than 20 miles outside of town."
tuetenueggel •Nov 21, 2016 5:17 AM
Which experts do you mean Beppe ?
All I Kow is that those "experts" are too stupid to piss a hole in the snow.
Oettinger ( not even speaking his mother tongue halfways correct )
Jean clown Juncker ( always drunk too is a kind of well structured day )
Schulz capo (who was too stupid as mayor of a german village so they fucked him out)
Hollande ( lefts are always of lower IQ then right wing people )
Blair ( war criminal )
and thousands more not to be named her ( due to little space availlable )
caesium •Nov 21, 2016 6:35 AM
It NATO collapses so will the Euro project. The project was always American from the start.
In recent years it has become a mechanism by which the Poles (and other assorted Eastern Europeans)
can extract war guarantees out of the USA, UK and France. It is a total mess and people like Grillo
add to the confusion by their flawed analysis.
The bedrock of Italy was always the Catholic faith which the country has abandoned. "The Faith
is Europe and Europe is the Faith" said Hilaire Belloc. A reality that Grillo is unable to grasp.
"... For one thing, many vested interests don't want the Democratic party to change. Most of the money it raises ends up in the pockets of political consultants, pollsters, strategists, lawyers, advertising consultants and advertisers themselves, many of whom have become rich off the current arrangement. They naturally want to keep it. ..."
"... For another, the Democratic party apparatus is ingrown and entrenched. Like any old bureaucracy, it only knows how to do what it has done for years. Its state and quadrennial national conventions are opportunities for insiders to meet old friends and for aspiring politicians to make contacts among the rich and powerful. Insiders and the rich aren't going to happily relinquish their power and perquisites, and hand them to outsiders and the non-rich. ..."
"... I have been a Democrat for 50 years – I have even served in two Democratic administrations in Washington, including a stint in the cabinet and have run for the Democratic nomination for governor in one state – yet I have never voted for the chair or vice-chair of my state Democratic party. That means I, too, have had absolutely no say over who the chair of the Democratic National Committee will be. To tell you the truth, I haven't cared. And that's part of the problem. ..."
"... Finally, the party chairmanship has become a part-time sinecure for politicians on their way up or down, not a full-time position for a professional organizer. In 2011, Tim Kaine (who subsequently became Hillary Clinton's running mate in the 2016 election) left the chairmanship to run, successfully, for the Senate from Virginia. ..."
"... The chair then went to Debbie Wasserman-Schultz, a Florida congresswoman who had co-chaired Clinton's bid for the Democratic nomination for president in 2008. This generated allegations in the 2016 race that the Democratic National Committee was siding with Clinton against Bernie Sanders – allegations substantiated by leaks of emails from the DNC. ..."
"... So what we now have is a Democratic party that has been repudiated at the polls, headed by a Democratic National Committee that has become irrelevant at best, run part-time by a series of insider politicians. It has no deep or broad-based grass-roots, no capacity for mobilizing vast numbers of people to take any action other than donate money, no visibility between elections, no ongoing activism. ..."
For one thing, many vested interests don't want the Democratic party to change. Most of the
money it raises ends up in the pockets of political consultants, pollsters, strategists, lawyers,
advertising consultants and advertisers themselves, many of whom have become rich off the current
arrangement. They naturally want to keep it.
For another, the Democratic party apparatus is ingrown and entrenched. Like any old bureaucracy,
it only knows how to do what it has done for years. Its state and quadrennial national conventions
are opportunities for insiders to meet old friends and for aspiring politicians to make contacts
among the rich and powerful. Insiders and the rich aren't going to happily relinquish their power
and perquisites, and hand them to outsiders and the non-rich.
Most Americans who call themselves Democrats never hear from the Democratic party except when
it asks for money, typically through mass mailings and recorded telephone calls in the months leading
up to an election. The vast majority of Democrats don't know the name of the chair of the Democratic
National Committee or of their state committee. Almost no registered
Democrats have any idea
how to go about electing their state Democratic chair or vice-chair, and, hence, almost none have
any influence over whom the next chair of the Democratic National Committee may be.
I have been a Democrat for 50 years – I have even served in two Democratic administrations
in Washington, including a stint in the cabinet and have run for the Democratic nomination for governor
in one state – yet I have never voted for the chair or vice-chair of my state Democratic party. That
means I, too, have had absolutely no say over who the chair of the Democratic National Committee
will be. To tell you the truth, I haven't cared. And that's part of the problem.
Nor, for that matter, has Barack Obama cared. He basically ignored the Democratic National Committee
during his presidency, starting his own organization called Organizing for America. It was originally
intended to marshal grass-roots support for the major initiatives he sought to achieve during his
presidency, but morphed into a fund-raising machine of its own.
Finally, the party chairmanship has become a part-time sinecure for politicians on their way
up or down, not a full-time position for a professional organizer. In 2011, Tim Kaine (who subsequently
became Hillary Clinton's running mate in the 2016 election) left the chairmanship to run, successfully,
for the Senate from Virginia.
The chair then went to Debbie Wasserman-Schultz, a Florida congresswoman who had co-chaired
Clinton's bid for the Democratic nomination for president in 2008. This generated allegations in
the 2016 race that the Democratic National Committee was siding with Clinton against Bernie Sanders
– allegations substantiated by leaks of emails from the DNC.
So what we now have is a Democratic party that has been repudiated at the polls, headed by
a Democratic National Committee that has become irrelevant at best, run part-time by a series of
insider politicians. It has no deep or broad-based grass-roots, no capacity for mobilizing vast numbers
of people to take any action other than donate money, no visibility between elections, no ongoing
activism.
The Republican brass degenerated into a bunch to neocon racketeers who want to impoverish regular Americans. That's why Trump won.
Notable quotes:
"... Indeed, in an October 1991 letter to Patrick J. Buchanan, Regnery claimed that Americans had been hornswoggled into supporting
the war by "the President and those who form public opinion." ..."
"... Everywhere he looked, the media-newspapers, network radio and television news, magazines, and journals-all seemed locked in
a [neo]liberal consensus. . . . If conservatives were going to claw their way back in from the outside, they were going to need to first
find a way to impair and offset liberals in the media. ..."
IN DECEMBER 1953, Henry Regnery convened a meeting in Room 2233 in New York City's Lincoln Building. Regnery, a former Democrat
and head of Regnery Publishing, had moved sharply to the Right after he became disillusioned with the New Deal. His guests included
William F. Buckley Jr.; Frank Hanighen, a cofounder of Human Events ; Raymond Moley, a former FDR adviser who wrote a book
called After Seven Years that denounced the New Deal; and John Chamberlain, a lapsed liberal and an editorial writer for the
Wall Street Journal . Regnery had not called these men together merely to discuss current events. He wanted to reshape them.
"The side we represent controls most of the wealth in this country," he said. "The ideas and traditions we believe in are those which
most Americans instinctively believe in also." So why was liberalism in the ascendant? Regnery explained that media bias was the
problem. Anywhere you looked, the Left controlled the commanding heights-television, newspapers and universities. It was imperative,
Regnery said, to establish a "counterintelligence unit" that could fight back.
In her superb Messengers of the Right , Nicole Hemmer examines the origins of conservative media. Hemmer, who is an assistant
professor at the University of Virginia, has performed extensive archival research to illuminate the furthest recesses of the Right,
complementing earlier works like Geoffrey Kabaservice's Rule and Ruin . She provides much new information and penetrating
observations about figures such as Clarence Manion, William Rusher and Henry Regnery. Above all, she shows that there has been a
remarkable consistency to the grievances and positions, which were often one and the same, of the conservative movement over the
decades.
According to Hemmer, the modern Right first took shape in the form of the America First Committee. A number of leading conservatives
saw little difference between Adolf Hitler and Franklin D. Roosevelt. Regnery recollected that "both Hitler and Roosevelt-each in
his own way -- were masters of the art of manipulating the masses."
Indeed, in an October 1991 letter to Patrick J. Buchanan, Regnery claimed that Americans had been hornswoggled into supporting
the war by "the President and those who form public opinion." Others such as the gifted orator Clarence Manion, a former FDR
acolyte, joined the America First Committee in 1941. After the war, Manion became the dean of the Notre Dame Law School and wrote
a book called The Key to Peace , which argued that limited government was the key to American greatness, not a quest to "take
off for the Mountains of the Moon in search of ways and means to pacify and unify mankind."
While serving in the Eisenhower administration, he also became a proponent of the Bricker Amendment, which would have subjected
treaties signed by the president to ratification by the states. Eisenhower demanded his resignation. An embittered Manion, Hemmer
writes, concluded that columnists such as James Reston, Marquis Childs, and Joseph and Stewart Alsop had effectively operated as
a united front to ruin him.
Everywhere he looked, the media-newspapers, network radio and television news, magazines, and journals-all seemed locked in
a [neo]liberal consensus. . . . If conservatives were going to claw their way back in from the outside, they were going to need to first
find a way to impair and offset liberals in the media.
In 1954, the Manion Forum of Opinion , which aired on several dozen radio stations, was born. It soon became a popular
venue that allowed Manion, who was cochair of a political party called For America, to inveigh against the depredations of liberalism
and preach the conservative gospel.
... ... ...
With the election of Ronald Reagan in 1980, the conservative media seemed to have arrived. But as Hemmer notes, a New Right generation
of activists that included figures such Terry Dolan of the National Conservative Political Action Committee and Jerry Falwell of
the Moral Majority had arrived that did not have much in common with the older conservative generation. She points out that leaders
of the New Right backed Republican congressman Phil Crane, then former Texas governor John Connally, only supporting Reagan during
the general election. Buckley and his cohort, Hemmer writes, saw the New Right paladins as "Johnnies-come-lately to the movement,
demanding rigorous fealty to social issues that had only recently become the drivers of politics." Hemmer might have noted that,
although Reagan has since become a conservative icon, George F. Will and Norman Podhoretz, among others, lamented what they viewed
as Reagan's concessive posture towards Mikhail Gorbachev.
Jacob Heilbrunn is editor of the National Interest.
It is the end of neoliberalism and the start of the era of authoritarian nationalism, and we all
need to come together to stamp out the authoritarian part.
Notable quotes:
"... Neoliberalism has been disastrous for the Rust Belt, and I think we need to envision a new future for what was once the country's industrial heartland, now little more than its wasteland ..."
"... The question of what the many millions of often-unionized factory workers, SMEs which supplied them, family farmers (now fully industrialized and owned by corporations), and all those in secondary production and services who once supported them are to actually do in future to earn a decent living is what I believe should really be the subject of debate. ..."
"... two factors (or three, I guess) have contributed to this state of despair: offshoring and outsourcing, and technology. ..."
"... Medicaid, the CHIP program, the SNAP program and others (including NGOs and private charitable giving) may alleviate some of the suffering, but there is currently no substitute for jobs that would enable men and women to live lives of dignity – a decent place to live, good educations for their children, and a reasonable, secure pension in old age. Near-, at-, and below-minimum wage jobs devoid of any benefits don't allow any of these – at most, they make possible a subsistence life, one which requires continued reliance on public assistance throughout one's lifetime. ..."
"... In the U.S. (a neoliberal pioneer), poverty is closely linked with inequality and thus, a high GINI coefficient (near that of Turkey); where there is both poverty and a very unequal distribution of resources, this inevitably affects women (and children) and racial (and ethnic) minorities disproportionately. The economic system, racism, sexism, and xenophobia are not separate, stand-alone issues; they are profoundly intertwined. ..."
"... But really, if you think about it, slavery was defined as ownership, ownership of human capital (which was convertible into cash), and women in many societies throughout history were acquired as part of a financial transaction (either through purchase or through sale), and control of their capital (land, property [farmland, herds], valuables and later, money) often entrusted to a spouse or male guardian. All of these practices were economically-driven, even if the driver wasn't 21st-century capitalism. ..."
"... Let it be said at once: Trump's victory is primarily due to the explosion in economic and geographic inequality in the United States over several decades and the inability of successive governments to deal with this. ..."
"... Both the Clinton and the Obama administrations frequently went along with the market liberalization launched under Reagan and both Bush presidencies. At times they even outdid them: the financial and commercial deregulation carried out under Clinton is an example. What sealed the deal, though, was the suspicion that the Democrats were too close to Wall Street – and the inability of the Democratic media elite to learn the lessons from the Sanders vote. ..."
"... Regional inequality and globalization are the principal drivers in Japanese politics, too, along with a number of social drivers. ..."
"... The tsunami/nuclear meltdown combined with the Japanese government's uneven response is an apt metaphor for the impact of neo-liberalism/globalization on Japan; and on the US. I then explained that the income inequality in the US was far more severe than that of Japan and that many Americans did not support the export of jobs to China/Mexico. ..."
"... I contend that in some hypothetical universe the DNC and corrupt Clinton machine could have been torn out, root and branch, within months. As I noted, however, the decision to run HRC effectively unopposed was made several years, at least, before the stark evidence of the consequences of such a decision appeared in sharp relief with Brexit. ..."
"... Just as the decline of Virginia coal is due to global forces and corporate stupidity, so the decline of the rust belt is due to long (30 year plus) global forces and corporate decisions that predate the emergence of identity politics. ..."
"... It's interesting that the clear headed thinkers of the Marxist left, who pride themselves on not being distracted by identity, don't want to talk about these factors when discussing the plight of their cherished white working class. ..."
"... The construction 'white working class' is a useful governing tool that splits poor people and possible coalitions against the violence of capital. Now, discussion focuses on how some of the least powerful, most vulnerable people in the United States are the perpetrators of a great injustice against racialised and minoritised groups. Such commentary colludes in the pathologisation of the working class, of poor people. Victims are inculpated as the vectors of noxious, atavistic vices while the perpetrators get off with impunity, showing off their multihued, cosmopolitan C-suites and even proposing that their free trade agreements are a form of anti-racist solidarity. Most crucially, such analysis ignores the continuities between a Trumpian dystopia and our satisfactory present. ..."
"... Race-thinking forecloses the possibility of the coalitions that you imagine, and reproduces ideas of difference in ways that always, always privilege 'whiteness'. ..."
"... Historical examples of ethnic groups becoming 'white', how it was legal and political decision-making that defined the present racial taxonomy, suggest that groups can also lose or have their 'whiteness' threatened. CB has written here about how, in the UK at least, Eastern and Southern Europeans are racialised, and so refused 'whiteness'. JQ has written about southern white minoritisation. Many commentators have pointed that the 'white working class' vote this year looked a lot like a minority vote. ..."
"... Given the subordination of groups presently defined as 'white working class', I wonder if we could think beyond ethnic and epidermal definition to consider that the impossibility of the American Dream refuses these groups whiteness; i.e the hoped for privileges of racial superiority, much in the same way that African Americans, Latin Americans and other racialised minorities are denied whiteness. Can a poor West Virginian living in a toxified drugged out impoverished landscape really be defined as a carrier of 'white privilege'? ..."
"... I was first pointed at this by the juxtapositions of racialised working class and immigrants in Imogen Tyler's Revolting Subjects – Social Abjection and Resistance in Neoliberal Britain but this below is a useful short article that takes a historical perspective. ..."
"... In a 1990 essay, the late Yale political scientist Juan Linz observed that "aside from the United States, only Chile has managed a century and a half of relatively undisturbed constitutional continuity under presidential government - but Chilean democracy broke down in the 1970s." ..."
"... Linz offered several reasons why presidential systems are so prone to crisis. One particularly important one is the nature of the checks and balances system. Since both the president and the Congress are directly elected by the people, they can both claim to speak for the people. When they have a serious disagreement, according to Linz, "there is no democratic principle on the basis of which it can be resolved." The constitution offers no help in these cases, he wrote: "the mechanisms the constitution might provide are likely to prove too complicated and aridly legalistic to be of much force in the eyes of the electorate." ..."
"... In a parliamentary system, deadlocks get resolved. A prime minister who lacks the backing of a parliamentary majority is replaced by a new one who has it. If no such majority can be found, a new election is held and the new parliament picks a leader. It can get a little messy for a period of weeks, but there's simply no possibility of a years-long spell in which the legislative and executive branches glare at each other unproductively.' ..."
"... In any case, as I pointed out before, given that the US is increasingly an urbanised country, and the Electoral College was created to protect rural (slave) states, the grotesque electoral result we have just seen is likely to recur, which means more and more Presidents with dubious democratic legitimacy. Thanks to Bush (and Obama) these Presidents will have, at the same time, more and more power. ..."
"... To return to my original question and answer it myself: I'm forced to conclude that the Democrats did not specifically address the revitalization – rebirth of the Rust Belt in their 2016 platform. Its failure to do so carried a heavy cost that (nearly) all of us will be forced to pay. ..."
"... This sub seems to have largely fallen into the psychologically comfortable trap of declaring that everyone who voted against their preferred candidate is racist. It's a view pushed by the neoliberals, who want to maintain he stranglehold of identity politics over the DNC, and it makes upper-class 'intellectuals' feel better about themselves and their betrayal of the filthy, subhuman white underclass (or so they see it). ..."
"... You can scream 'those jobs are never coming back!' all you want, but people are never going to accept it. So either you come up with a genuine solution (instead of simply complaining that your opponents solutions won't work; you're partisan and biased, most voters won't believe you), you may as well resign yourself to fascism. Because whining that you don't know what to do won't stop people from lining up behind someone who says that they do have one, whether it'll work or not. Nobody trusts the elite enough to believe them when they say that jobs are never coming back. Nobody trusts the elite at all. ..."
"... You sound just like the Wiemar elite. No will to solve the problem, but filled with terror at the inevitable result of failing to solve the problem. ..."
"... One brutal fact tells us everything we need to know about the Democratic party in 2016: the American Nazi party is running on a platform of free health care to working class people. This means that the American Nazi Party is now running to the left of the Democratic party. ..."
"... Back in the 1930s, when the economy collapsed, fascists appeared and took power. Racists also came out of the woodwork, ditto misogynists. Fast forward 80 years, and the same thing has happened all over again. The global economy melted down in 2008 and fascists appeared promising to fix the problems that the pols in power wouldn't because they were too closely tied to the existing (failed) system. Along with the fascists, racists gained power because they were able to scapegoat minorities as the alleged cause of everyone's misery. ..."
"... None of this is surprising. We have seen it before. Whenever you get a depression in a modern industrial economy, you get scapegoating, racism, and fascists. We know what to do. The problem is that the current Democratic party isn't doing it. ..."
"... . It is the end of neoliberalism and the start of the era of authoritarian nationalism, and we all need to come together to stamp out the authoritarian part. ..."
"... This hammered people on the bottom, disproportionately African Americans and especially single AA mothers in America. It crushed the blue collar workers. It is wiping out the savings and careers of college-educated white collar workers now, at least, the ones who didn't go to the Ivy League, which is 90% of them. ..."
"... Calling Hillary an "imperfect candidate" is like calling what happened to the Titanic a "boating accident." Trump was an imperfect candidate. Why did he win? ..."
"... "The neoliberal era in the United States ended with a neofascist bang. The political triumph of Donald Trump shattered the establishments in the Democratic and Republican parties – both wedded to the rule of Big Money and to the reign of meretricious politicians." ..."
"... "It is not an exaggeration to say that the Democratic Party is in shambles as a political force. Not only did it just lose the White House to a wildly unpopular farce of a candidate despite a virtually unified establishment behind it, and not only is it the minority party in both the Senate and the House, but it is getting crushed at historical record rates on the state and local levels as well. Surveying this wreckage last week, party stalwart Matthew Yglesias of Vox minced no words: `the Obama years have created a Democratic Party that's essentially a smoking pile of rubble.' ..."
"... "One would assume that the operatives and loyalists of such a weak, defeated and wrecked political party would be eager to engage in some introspection and self-critique, and to produce a frank accounting of what they did wrong so as to alter their plight. In the case of 2016 Democrats, one would be quite mistaken." ..."
"... Foreign Affairs ..."
"... "At the end of World War II, the United States and its allies decided that sustained mass unemployment was an existential threat to capitalism and had to be avoided at all costs. In response, governments everywhere targeted full employment as the master policy variable-trying to get to, and sustain, an unemployment rate of roughly four percent. The problem with doing so, over time, is that targeting any variable long enough undermines the value of the variable itself-a phenomenon known as Goodhart's law. (..) ..."
"... " what we see [today] is a reversal of power between creditors and debtors as the anti-inflationary regime of the past 30 years undermines itself-what we might call "Goodhart's revenge." In this world, yields compress and creditors fret about their earnings, demanding repayment of debt at all costs. Macro-economically, this makes the situation worse: the debtors can't pay-but politically, and this is crucial-it empowers debtors since they can't pay, won't pay, and still have the right to vote. ..."
"... "The traditional parties of the center-left and center-right, the builders of this anti-inflationary order, get clobbered in such a world, since they are correctly identified by these debtors as the political backers of those demanding repayment in an already unequal system, and all from those with the least assets. This produces anti-creditor, pro-debtor coalitions-in-waiting that are ripe for the picking by insurgents of the left and the right, which is exactly what has happened. ..."
"... "The global revolt against elites is not just driven by revulsion and loss and racism. It's also driven by the global economy itself. This is a global phenomenon that marks one thing above all. The era of neoliberalism is over. The era of neonationalism has just begun." ..."
"... They want what their families have had which is secure, paid, benefits rich, blue collar work. ..."
"... trump's campaign empathized with that feeling just by focusing on the factory jobs as jobs and not as anachronisms that are slowly fading away for whatever reason. Clinton might have been "correct", but these voters didn't want to hear "the truth". And as much as you can complain about how stupid they are for wanting to be lied to, that is the unfortunate reality you, and the Democratic party, have to accept. ..."
"... trump was offering a "bailout" writ large. Clinton had no (good) counteroffer. It was like the tables were turned. Romney was the one talking about "change" and "restructuring" while Obama was defending keeping what was already there. ..."
"... "Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course - the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check." http://www.nytimes.com/2008/11/19/opinion/19romney.html ..."
"... Clinton toward the end offered tariffs. But the trump campaign hit back with what turned out to be a pretty strong counter attack – ""How's she going to get tough on China?" said Trump economic advisor Peter Navarro on CNN's Quest Means Business. He notes that some of Clinton's economic advisors have supported TPP or even worked on it. "" ..."
The question is no longer her neoliberalism, but yours. Keep it or throw it away?
I wish this issue was being seriously discussed. Neoliberalism has been disastrous for
the Rust Belt, and I think we need to envision a new future for what was once the country's industrial
heartland, now little more than its wasteland (cf. "flyover zone" – a pejorative term which
inhabitants of the zone are not too stupid to understand perfectly, btw).
The question of what the many millions of often-unionized factory workers, SMEs which supplied
them, family farmers (now fully industrialized and owned by corporations), and all those in secondary
production and services who once supported them are to actually do in future to earn a decent
living is what I believe should really be the subject of debate.
As noted upthread, two factors (or three, I guess) have contributed to this state of despair:
offshoring and outsourcing, and technology. The jobs that have been lost will not return,
and indeed will be lost in ever greater numbers – just consider what will happen to the trucking
sector when self-driving trucks hit the roads sometime in the next 10-20 years (3.5 million truckers;
8.7 in allied jobs).
Medicaid, the CHIP program, the SNAP program and others (including NGOs and private charitable
giving) may alleviate some of the suffering, but there is currently no substitute for jobs that
would enable men and women to live lives of dignity – a decent place to live, good educations
for their children, and a reasonable, secure pension in old age. Near-, at-, and below-minimum
wage jobs devoid of any benefits don't allow any of these – at most, they make possible a subsistence
life, one which requires continued reliance on public assistance throughout one's lifetime.
In the U.S. (a neoliberal pioneer), poverty is closely linked with inequality and thus,
a high GINI coefficient (near that of Turkey); where there is both poverty and a very unequal
distribution of resources, this inevitably affects women (and children) and racial (and ethnic)
minorities disproportionately. The economic system, racism, sexism, and xenophobia are not separate,
stand-alone issues; they are profoundly intertwined.
I appreciate and espouse the goals of identity politics in all their multiplicity, and also
understand that the institutions of slavery and sexism predated modern capitalist economies.
But really, if you think about it, slavery was defined as ownership, ownership of human capital
(which was convertible into cash), and women in many societies throughout history were acquired
as part of a financial transaction (either through purchase or through sale), and control of their
capital (land, property [farmland, herds], valuables and later, money) often entrusted to a spouse
or male guardian. All of these practices were economically-driven, even if the driver wasn't 21st-century
capitalism.
Also: Faustusnotes@100
For example Indiana took the ACA Medicaid expansion but did so with additional conditions that
make it worse than in neighboring states run by democratic governors.
And what states would those be? IL, IA, MI, OH, WI, KY, and TN have Republican governors. Were
you thinking pre-2014? pre-2012?
To conclude and return to my original point: what's to become of the Rust Belt in future? Did
the Democratic platform include a New New Deal for PA, OH, MI, WI, and IA (to name only the five
Rust Belt states Trump flipped)?
" Let it be said at once: Trump's victory is primarily due to the explosion in economic
and geographic inequality in the United States over several decades and the inability of successive
governments to deal with this.
Both the Clinton and the Obama administrations frequently went along with the market liberalization
launched under Reagan and both Bush presidencies. At times they even outdid them: the financial
and commercial deregulation carried out under Clinton is an example. What sealed the deal, though,
was the suspicion that the Democrats were too close to Wall Street – and the inability of the
Democratic media elite to learn the lessons from the Sanders vote. "
What should have been one comment came out as 4, so apologies on that front.
I spent the last week explaining the US election to my students in Japan in pretty much the
terms outlined by Lilla and PIketty, so I was delighted to discover these two articles.
Regional inequality and globalization are the principal drivers in Japanese politics, too,
along with a number of social drivers. It was therefore very easy to call for a show of hands
to identify students studying here in Tokyo who are trying to decide whether or not to return
to areas such as Tohoku to build their lives; or remain in Kanto/Tokyo – the NY/Washington/LA
of Japan put crudely.
I asked students from regions close to Tohoku how they might feel if the Japanese prime minister
decided not to visit the region following Fukushima after the disaster, or preceding an election.
The tsunami/nuclear meltdown combined with the Japanese government's uneven response is an
apt metaphor for the impact of neo-liberalism/globalization on Japan; and on the US. I then explained
that the income inequality in the US was far more severe than that of Japan and that many Americans
did not support the export of jobs to China/Mexico.
I then asked the students, particularly those from outlying regions whether they believe Japan
needed a leader who would 'bring back Japanese jobs' from Viet Nam and China, etc. Many/most agreed
wholeheartedly. I then asked whether they believed Tokyo people treated those outside Kanto as
'inferiors.' Many do.
Piketty may be right regarding Trump's long-term effects on income inequality. He is wrong,
I suggest, to argue that Democrats failed to respond to Sanders' support. I contend that in
some hypothetical universe the DNC and corrupt Clinton machine could have been torn out, root
and branch, within months. As I noted, however, the decision to run HRC effectively unopposed
was made several years, at least, before the stark evidence of the consequences of such a decision
appeared in sharp relief with Brexit.
Also worth noting is that the rust belts problems are as old as Reagan – even the term dates
from the 80s, the issue is so uncool that there is a dire straits song about it. Some portion
of the decline of manufacturing there is due to manufacturers shifting to the south, where the
anti Union states have an advantage. Also there has been new investment – there were no Japanese
car companies in the us in the 1980s, so they are new job creators, yet insufficient to make up
the losses. Just as the decline of Virginia coal is due to global forces and corporate stupidity,
so the decline of the rust belt is due to long (30 year plus) global forces and corporate decisions
that predate the emergence of identity politics.
It's interesting that the clear headed thinkers of the Marxist left, who pride themselves
on not being distracted by identity, don't want to talk about these factors when discussing the
plight of their cherished white working class. Suddenly it's not the forces of capital and
the objective facts of history, but a bunch of whiny black trannies demanding safe spaces and
protesting police violence, that drove those towns to ruin.
And what solutions do they think the dems should have proposed? It can't be welfare, since
we got the ACA (watered down by representatives of the rust belt states). Is it, seriously, tariffs?
Short of going to an election promising w revolution, what should the dems have done? Give us
a clear answer so we can see what the alternative to identity politics is.
basil 11.19.16 at 5:11 am
Did this go through?
Thinking with WLGR @15, Yan @81, engels variously above,
The construction 'white working class' is a useful governing tool that splits poor people
and possible coalitions against the violence of capital. Now, discussion focuses on how some of
the least powerful, most vulnerable people in the United States are the perpetrators of a great
injustice against racialised and minoritised groups. Such commentary colludes in the pathologisation
of the working class, of poor people. Victims are inculpated as the vectors of noxious, atavistic
vices while the perpetrators get off with impunity, showing off their multihued, cosmopolitan
C-suites and even proposing that their free trade agreements are a form of anti-racist solidarity.
Most crucially, such analysis ignores the continuities between a Trumpian dystopia and our satisfactory
present.
I get that the tropes around race are easy, and super-available. Privilege confessing is very
in vogue as a prophylactic against charges of racism. But does it threaten the structures that
produce this abjection – either as embittered, immiserated 'white working class' or as threatened
minority group? It is always *those* 'white' people, the South, the Working Class, and never the
accusers some of whom are themselves happy to vote for a party that drowns out anti-war protesters
with chants of USA! USA!
Race-thinking forecloses the possibility of the coalitions that you imagine, and reproduces
ideas of difference in ways that always, always privilege 'whiteness'.
--
Historical examples of ethnic groups becoming 'white', how it was legal and political decision-making
that defined the present racial taxonomy, suggest that groups can also lose or have their 'whiteness'
threatened. CB has written here about how, in the UK at least, Eastern and Southern Europeans
are racialised, and so refused 'whiteness'. JQ has written about southern white minoritisation.
Many commentators have pointed that the 'white working class' vote this year looked a lot like
a minority vote.
Given the subordination of groups presently defined as 'white working class', I wonder
if we could think beyond ethnic and epidermal definition to consider that the impossibility of
the American Dream refuses these groups whiteness; i.e the hoped for privileges of racial superiority,
much in the same way that African Americans, Latin Americans and other racialised minorities are
denied whiteness. Can a poor West Virginian living in a toxified drugged out impoverished landscape
really be defined as a carrier of 'white privilege'?
I was first pointed at this by the juxtapositions of racialised working class and immigrants
in Imogen Tyler's Revolting Subjects – Social Abjection and Resistance in Neoliberal Britain but
this below is a useful short article that takes a historical perspective.
The 'racialisation' of class in Britain has been a consequence of the weakening of 'class'
as a political idea since the 1970s – it is a new construction, not an historic one.
.
This is not to deny the existence of working-class racism, or to suggest that racism is
somehow acceptable if rooted in perceived socio-economic grievances. But it is to suggest that
the concept of a 'white working class' needs problematizing, as does the claim that the British
working-class was strongly committed to a post-war vision of 'White Britain' analogous to the
politics which sustained the idea of a 'White Australia' until the 1960s.
Yes, old, settled neighbourhoods could be profoundly distrustful of outsiders – all outsiders,
including the researchers seeking to study them – but, when it came to race, they were internally
divided. We certainly hear working-class racist voices – often echoing stock racist complaints
about over-crowding, welfare dependency or exploitative landlords and small businessmen, but
we don't hear the deep pathological racial fears laid bare in the letters sent to Enoch Powell
after his so-called 'Rivers of Blood' speech in 1968 (Whipple, 2009).
But more importantly, we also hear strong anti-racist voices loudly and clearly. At Wallsend
on Tyneside, where the researchers were gathering their data just as Powell shot to notoriety,
we find workers expressing casual racism, but we also find eloquent expressions of an internationalist,
solidaristic perspective in which, crucially, black and white are seen as sharing the same
working-class interests.
Racism is denounced as a deliberate capitalist strategy to divide workers against themselves,
weakening their ability to challenge those with power over their lives (shipbuilding had long
been a very fractious industry and its workers had plenty of experience of the dangers of internal
sectarian battles).
To be able to mobilize across across racialised divisions, to have race wither away entirely
would, for me, be the beginning of a politics that allowed humanity to deal with the inescapable
violence of climate change and corporate power.
*To add to the bibliography – David R. Roediger, Elizabeth D. Esch – The Production of Difference
– Race and the Management of Labour, and Denise Ferreira da Silva – Toward a Global Idea of Race.
And I have just been pointed at Ian Haney-López, White By Law – The Legal Construction of Race.
FWIW 'merica's constitutional democracy is going to collapse.
Some day - not tomorrow, not next year, but probably sometime before runaway climate change
forces us to seek a new life in outer-space colonies - there is going to be a collapse of the
legal and political order and its replacement by something else. If we're lucky, it won't be violent.
If we're very lucky, it will lead us to tackle the underlying problems and result in a better,
more robust, political system. If we're less lucky, well, then, something worse will happen .
In a 1990 essay, the late Yale political scientist Juan Linz observed that "aside from
the United States, only Chile has managed a century and a half of relatively undisturbed constitutional
continuity under presidential government - but Chilean democracy broke down in the 1970s."
Linz offered several reasons why presidential systems are so prone to crisis. One particularly
important one is the nature of the checks and balances system. Since both the president and the
Congress are directly elected by the people, they can both claim to speak for the people. When
they have a serious disagreement, according to Linz, "there is no democratic principle on the
basis of which it can be resolved." The constitution offers no help in these cases, he wrote:
"the mechanisms the constitution might provide are likely to prove too complicated and aridly
legalistic to be of much force in the eyes of the electorate."
In a parliamentary system, deadlocks get resolved. A prime minister who lacks the backing
of a parliamentary majority is replaced by a new one who has it. If no such majority can be found,
a new election is held and the new parliament picks a leader. It can get a little messy for a
period of weeks, but there's simply no possibility of a years-long spell in which the legislative
and executive branches glare at each other unproductively.'
Given that the basic point is polarisation (i.e. that both the President and Congress have
equally strong arguments to be the the 'voice of the people') and that under the US appalling
constitutional set up, there is no way to decide between them, one can easily imagine the so to
speak 'hyperpolarisation' of a Trump Presidency as being the straw (or anvil) that breaks the
camel's back.
In any case, as I pointed out before, given that the US is increasingly an urbanised country,
and the Electoral College was created to protect rural (slave) states, the grotesque electoral
result we have just seen is likely to recur, which means more and more Presidents with dubious
democratic legitimacy. Thanks to Bush (and Obama) these Presidents will have, at the same time,
more and more power.
nastywoman @ 150
Just study the program of the 'Sozialdemokratische Partei Deutschland' or the Program of 'Die
Grünen' in Germany (take it through google translate) and you get all the answers you are looking
for.
No need to run it through google translate, it's available in English on their site. [Or one
could refer to the Green Party of the U.S. site/platform, which is very similar in scope and overall
philosophy. (www.gp.org).]
I looked at several of their topic areas (Agricultural, Global, Health, Rural) and yes, these
are general theses I would support. But they're hardly policy/project proposals for specific regions
or communities – the Greens espouse "think global, act local", so programs and projects must be
tailored to individual communities and regions.
To return to my original question and answer it myself: I'm forced to conclude that the
Democrats did not specifically address the revitalization – rebirth of the Rust Belt in their
2016 platform. Its failure to do so carried a heavy cost that (nearly) all of us will be forced
to pay.
This sub seems to have largely fallen into the psychologically comfortable trap of declaring
that everyone who voted against their preferred candidate is racist. It's a view pushed by the
neoliberals, who want to maintain he stranglehold of identity politics over the DNC, and it makes
upper-class 'intellectuals' feel better about themselves and their betrayal of the filthy, subhuman
white underclass (or so they see it).
I expect at this point that Trump will be reelected comfortably. If not only the party itself,
but also most of its activists, refuse to actually change, it's more or less inevitable.
You can scream 'those jobs are never coming back!' all you want, but people are never going
to accept it. So either you come up with a genuine solution (instead of simply complaining that
your opponents solutions won't work; you're partisan and biased, most voters won't believe you),
you may as well resign yourself to fascism. Because whining that you don't know what to do won't
stop people from lining up behind someone who says that they do have one, whether it'll work or
not. Nobody trusts the elite enough to believe them when they say that jobs are never coming back.
Nobody trusts the elite at all.
You sound just like the Wiemar elite. No will to solve the problem, but filled with terror
at the inevitable result of failing to solve the problem.
One brutal fact tells us everything we need to know about the Democratic party in 2016:
the American Nazi party is running on a platform of free health care to working class people.
This means that the American Nazi Party is now running to the left of the Democratic party.
Folks, we have seen this before. Let's not descend in backbiting and recriminations, okay?
We've got some commenters charging that other commenters are "mansplaining," meanwhile we've got
other commenters claiming that it's economics and not racism/misogyny. It's all of the above.
Back in the 1930s, when the economy collapsed, fascists appeared and took power. Racists
also came out of the woodwork, ditto misogynists. Fast forward 80 years, and the same thing has
happened all over again. The global economy melted down in 2008 and fascists appeared promising
to fix the problems that the pols in power wouldn't because they were too closely tied to the
existing (failed) system. Along with the fascists, racists gained power because they were able
to scapegoat minorities as the alleged cause of everyone's misery.
None of this is surprising. We have seen it before. Whenever you get a depression in a
modern industrial economy, you get scapegoating, racism, and fascists. We know what to do. The
problem is that the current Democratic party isn't doing it.
Instead, what we're seeing is a whirlwind of finger-pointing from the Democratic leadership
that lost this election and probably let the entire New Deal get rolled back and wiped out. Putin
is to blame! Julian Assange is to blame! The biased media are to blame! Voter suppression is to
blame! Bernie Sanders is to blame! Jill Stein is to blame! Everyone and anyone except the current
out-of-touch influence-peddling elites who currently have run the Democratic party into the ground.
We need the feminists and the black lives matter groups and we also need the green party people
and the Bernie Sanders activists. But everyone has to understand that this is not an isolated
event. Trump did not just happen by accident. First there was Greece, then there was Brexit, then
there was Trump, next it'll be Renzi losing the referendum in Italy and a constitutional crisis
there, and after that, Marine Le Pen in France is going to win the first round of elections. (Probably
not the presidency, since all the other French parties will band together to stop her, but the
National Front is currently polling at 40% of all registered French voters.) And Marine LePen
is the real deal, a genuine full-on out-and-out fascist. Not a closet fascist like Steve Bannon,
LePen is the full monty with everything but a Hugo Boss suit and the death's heads on the cap.
Does anyone notice a pattern here?
This is an international movement. It is sweeping the world . It is the end of neoliberalism
and the start of the era of authoritarian nationalism, and we all need to come together to stamp
out the authoritarian part.
Feminists, BLM, black bloc anarchiest anti-globalists, Sandernistas, and, yes, the former Hillary
supporters. Because it not just a coincidence that all these things are happening in all these
countries at the same time. The bottom 90% of the population in the developed world has been ripped
off by a managerial and financial and political class for the last 30 years and they have all
noticed that while the world GDP was skyrocketing and international trade agreements were getting
signed with zero input from the average citizen, a few people were getting very very rich but
nobody else was getting anything.
This hammered people on the bottom, disproportionately African Americans and especially
single AA mothers in America. It crushed the blue collar workers. It is wiping out the savings
and careers of college-educated white collar workers now, at least, the ones who didn't go to
the Ivy League, which is 90% of them.
And the Democratic party is so helpless and so hopeless that it is letting the American Nazi
Party run to the left of them on health care, fer cripes sake! We are now in a situation
where the American Nazi Party is advocating single-payer nationalized health care, while the former
Democratic presidential nominee who just got defeated assured everyone that single-payer "will
never, ever happen."
C'mon! Is anyone surprised that Hillary lost? Let's cut the crap with the "Hillary
was a flawed candidate" arguments. The plain fact of the matter is that Hillary was running mainly
on getting rid of the problems she and her husband created 25 years ago. Hillary promised criminal
justice reform and Black Lives Matter-friendly policing policies - and guess who started the mass
incarceration trend and gave speeches calling black kids "superpredators" 20 years ago? Hillary
promised to fix the problems with the wretched mandate law forcing everyone to buy unaffordable
for-profit private insurance with no cost controls - and guess who originally ran for president
in 2008 on a policy of health care mandates with no cost controls? Yes, Hillary (ironically, Obama's
big surge in popularity as a candidate came when he ran against Hillary from the left, ridiculing
helath care mandates). Hillary promises to reform an out-of-control deregulated financial system
run amok - and guess who signed all those laws revoking Glass-Steagal and setting up the Securities
Trading Modernization Act? Yes, Bill Clinton, and Hillary was right there with him cheering the
whole process on.
So pardon me and lots of other folks for being less than impressed by Hillary's trustworthiness
and honesty. Run for president by promising to undo the damage you did to the country 25 years
ago is (let say) a suboptimal campaign strategy, and a distinctly suboptimal choice of presidential
candidate for a party in the same sense that the Hiroshima air defense was suboptimal in 1945.
Calling Hillary an "imperfect candidate" is like calling what happened to the Titanic a
"boating accident." Trump was an imperfect candidate. Why did he win?
Because we're back in the 1930s again, the economy has crashed hard and still hasn't recovered
(maybe because we still haven't convened a Pecora Commission and jailed a bunch of the thieves,
and we also haven't set up any alphabet government job programs like the CCC) so fascists and
racists and all kinds of other bottom-feeders are crawling out of the political woodwork to promise
to fix the problems that the Democratic party establishment won't.
Rule of thumb: any social or political or economic writer virulently hated by the current Democratic
party establishment is someone we should listen to closely right now.
Cornel West is at the top of the current Democratic establishment's hate list, and he has got
a great article in The Guardian that I think is spot-on:
"The neoliberal era in the United States ended with a neofascist bang. The political triumph
of Donald Trump shattered the establishments in the Democratic and Republican parties – both wedded
to the rule of Big Money and to the reign of meretricious politicians."
Glenn Greenwald is another writer who has been showered with more hate by the Democratic establishment
recently than even Trump or Steve Bannon, so you know Greenwald is saying something important.
He has a great piece in The Intercept on the head-in-the-ground attitude of Democratic
elites toward their recent loss:
"It is not an exaggeration to say that the Democratic Party is in shambles as a political
force. Not only did it just lose the White House to a wildly unpopular farce of a candidate despite
a virtually unified establishment behind it, and not only is it the minority party in both the
Senate and the House, but it is getting crushed at historical record rates on the state and local
levels as well. Surveying this wreckage last week, party stalwart Matthew Yglesias of Vox minced
no words: `the Obama years have created a Democratic Party that's essentially a smoking pile of
rubble.'
"One would assume that the operatives and loyalists of such a weak, defeated and wrecked
political party would be eager to engage in some introspection and self-critique, and to produce
a frank accounting of what they did wrong so as to alter their plight. In the case of 2016 Democrats,
one would be quite mistaken."
Last but far from least, Scottish economist Mark Blyth has what looks to me like the single
best analysis of the entire global Trump_vs_deep_state tidal wave in Foreign Affairs magazine:
"At the end of World War II, the United States and its allies decided that sustained mass
unemployment was an existential threat to capitalism and had to be avoided at all costs. In response,
governments everywhere targeted full employment as the master policy variable-trying to get to,
and sustain, an unemployment rate of roughly four percent. The problem with doing so, over time,
is that targeting any variable long enough undermines the value of the variable itself-a phenomenon
known as Goodhart's law. (..)
" what we see [today] is a reversal of power between creditors and debtors as the anti-inflationary
regime of the past 30 years undermines itself-what we might call "Goodhart's revenge." In this
world, yields compress and creditors fret about their earnings, demanding repayment of debt at
all costs. Macro-economically, this makes the situation worse: the debtors can't pay-but politically,
and this is crucial-it empowers debtors since they can't pay, won't pay, and still have the right
to vote.
"The traditional parties of the center-left and center-right, the builders of this anti-inflationary
order, get clobbered in such a world, since they are correctly identified by these debtors as
the political backers of those demanding repayment in an already unequal system, and all from
those with the least assets. This produces anti-creditor, pro-debtor coalitions-in-waiting that
are ripe for the picking by insurgents of the left and the right, which is exactly what has happened.
"In short, to understand the election of Donald Trump we need to listen to the trumpets blowing
everywhere in the highly indebted developed countries and the people who vote for them.
"The global revolt against elites is not just driven by revulsion and loss and racism.
It's also driven by the global economy itself. This is a global phenomenon that marks one thing
above all. The era of neoliberalism is over. The era of neonationalism has just begun."
You don't live here, do you? I'm really asking a genuine question because the way you are framing
the question ("SPECIFICS!!!!!!) suggests you don't. (Just to show my background, born and raised
in Australia (In the electoral division of Kooyong, home of Menzies) but I've lived in the US
since 2000 in the midwest (MO, OH) and currently in the south (GA))
If this election has taught us anything it's no one cared about "specifics". It was a mood,
a feeling which brought trump over the top (and I'm not talking about the "average" trump voter
because that is meaningless. The average trunp voter was a republican voter in the south who the
Dems will never get so examining their motivations is immaterial to future strategy. I'm talking
about the voters in the Upper Midwest from places which voted for Obama twice then switched to
trump this year to give him his margin of victory).
trump voters have been pretty clear they don't actually care about the way trump does (or even
doesn't) do what he said he would do during the campaign. It was important to them he showed he
was "with" people like them. They way he did that was partially racialized (law and order, islamophobia)
but also a particular emphasis on blue collar work that focused on the work. Unfortunately these
voters, however much you tell them they should suck it up and accept their generations of familial
experience as relatively highly paid industrial workers (even if it is something only their fathers
and grandfathers experienced because the factories were closing when the voters came of age in
the 80s and 90s) is never coming back and they should be happy to retrain as something else, don't
want it. They want what their families have had which is secure, paid, benefits rich, blue
collar work.
trump's campaign empathized with that feeling just by focusing on the factory jobs as jobs
and not as anachronisms that are slowly fading away for whatever reason. Clinton might have been
"correct", but these voters didn't want to hear "the truth". And as much as you can complain about
how stupid they are for wanting to be lied to, that is the unfortunate reality you, and the Democratic
party, have to accept.
The idea they don't want "government help" is ridiculous. They love the government. They just
want the government to do things for them and not for other people (which unfortunately includes
blah people but also "the coasts", "sillicon valley", etc.). Obama won in 2008 and 2012 in part
due to the auto bailout.
trump was offering a "bailout" writ large. Clinton had no (good) counteroffer. It was like
the tables were turned. Romney was the one talking about "change" and "restructuring" while Obama
was defending keeping what was already there.
"Without that bailout, Detroit will need to drastically restructure itself. With it, the
automakers will stay the course - the suicidal course of declining market shares, insurmountable
labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses.
Detroit needs a turnaround, not a check." http://www.nytimes.com/2008/11/19/opinion/19romney.html
So yes. Clinton needed vague promises. She needed something more than retraining and "jobs
of the future" and "restructuring". She needed to show she was committed to their way of life,
however those voters saw it, and would do something, anything, to keep it alive. trump did that
even though his plan won't work. And maybe he'll be punished for it. In 4 years. But in the interim
the gop will destroy so many things we need and rely on as well as entrench their power for generations
through the Supreme Court.
But really, it was hard for Clinton to be trusted to act like she cared about these peoples'
way of life because she (through her husband fairly or unfairly) was associated with some of the
larger actions and choices which helped usher in the decline.
Clinton toward the end offered tariffs. But the trump campaign hit back with what turned
out to be a pretty strong counter attack – ""How's she going to get tough on China?" said Trump
economic advisor Peter Navarro on CNN's Quest Means Business. He notes that some of Clinton's
economic advisors have supported TPP or even worked on it. ""
In the United States, rising inequality has been a fact of life at least since the 1970s, when
the relatively equitable distribution of economic benefits from the early post-World War II era started
to become skewed. In the late 1990s, when digital technologies began to automate and disintermediate
more routine jobs, the shift toward higher wealth and income inequality became turbocharged.
Globalization played a role. In the 20 years before the 2008 financial crisis, manufacturing employment
in the US rapidly declined in every sector except pharmaceuticals, even as added value in manufacturing
rose. Net jobs loss was kept roughly at zero only because employment in services increased.
In fact, much of the added value in manufacturing actually comes from services such as product
design, research and development, and marketing. So, if we account for this value-chain composition,
the decline in manufacturing – the production of tangible goods – is even more pronounced.
Economists have been tracking these trends for some time. Massachusetts Institute of Technology
economist David Autor and his colleagues have
carefully documented
the impact of globalization and labor-saving digital technologies on routine jobs. More recently,
French economist
Thomas
Piketty 's international bestseller,
Capital in
the Twenty-First Century , dramatically widened our awareness of wealth inequality and described
possible underlying forces driving it. The brilliant, award-winning young economists
Raj Chetty and
Emmanuel Saez have enriched the discussion
with new research. And I have
written about some of the structural economic shifts associated with these problems.
Eventually, journalists picked up on these trends, too, and it would now be hard to find anyone
who has not heard of the "1%" – shorthand for those at the top of the global wealth and income scales.
Many people now worry about a bifurcated society: a thriving global class of elites at the top and
a stressed-out class comprising everyone else. Still, despite these long trends, the political and
policy status quo remained largely unchallenged until 2008.
To understand why it took politics so long to catch up to economic realities, we should look at
incentives and ideology. With respect to incentives, politicians have not been given a good enough
reason to address unequal distribution patterns. The US has relatively weak campaign-finance limits,
so corporations and wealthy individuals – neither of which generally prioritizes income redistribution
– have contributed a disproportionate share to politicians' campaign war chests.
Ideologically, many people are simply suspicious of expansive government. They recognize inequality
as a problem, and in principle they support government policies that provide high-quality education
and health-care services, but they do not trust politicians or bureaucrats. In their eyes, governments
are inefficient and self-interested at best, and dictatorial and oppressive at worst.
All of this began to change with the rise of digital technologies and the Internet, but especially
with the advent of social media. As US President Barack Obama showed in the 2008 election cycle –
followed by Bernie Sanders and Donald Trump in the current cycle – it is now possible to finance
a very expensive campaign without "big money."
As a result, there is a growing disconnect between big money and political incentives; and while
money is still a part of the political process, influence itself no longer belongs exclusively to
corporations and wealthy individuals. Social-media platforms now enable large groups of people to
mobilize in ways reminiscent of mass political movements in earlier eras. Such platforms may have
reduced the cost of political organizing, and thus candidates' overall dependence on money, while
providing an efficient alternative fund-raising channel.
This new reality is here to stay, and, regardless of who wins the US election this year, anyone
who is unhappy with high inequality will have a voice, the ability to finance it, and the power to
affect policymaking. So, too, will other groups that focus on similar issues, such as environmental
sustainability, which has not been a major focus in the current US presidential campaign (the three
debates between the candidates included no discussion of climate change, for example), but surely
will be in the future.
All told, digital technology is shuffling economic structures and rebalancing power relationships
in the world's democracies – even in institutions once thought to be dominated by money and wealth.
A large, newly influential constituency should be welcomed. But it cannot be a substitute for
wise leadership, and its existence does not guarantee prudent policies. As political priorities continue
to rebalance, we will need to devise creative solutions to solve our hardest problems, and to prevent
populist misrule. One hopes that this is the course we are on now.
Michael Spence, a Nobel laureate in economics, is Professor of Economics at NYU's Stern
School of Business, Distinguished Visiting Fellow at the Council on Foreign Relations, Senior Fellow
at the Hoover Institution at Stanford University, Academic Board Chairman of the Asia Global Institute
in Hong Kong, and Chair of the World Economic Forum Global Agenda Council on New Growth Models. He
was the chairman of the independent Commission on Growth and Development, an international body that
from 2006-2010 analyzed opportunities for global economic growth, and is the author of
The Next Convergence – The Future of Economic
Growth in a Multispeed World
"... The economic point is that globalisation has boosted trade and overall wealth, but it has also created a dog eat dog world where western workers compete with, and lose jobs to, people far away who will do the work for much less. ..."
"... But neither Trump nor Farage have shown any evidence of how realistically they can recreate those jobs in the west. And realistically god knows how you keep the wealth free trade and globalisation brings but avoid losing the good jobs? At least the current mess has focused attention on the question and has said that patience has run out. ..."
"... Compared to the real economic problems, the identity politics is minor, but it is still an irritant that explains why this revolution is coming from the right not from the left. ..."
"... And what "age" has that been Roy? The "age" of: climate change, gangster bankers, tax heavens, illegal wars, nuclear proliferation, grotesque inequality, the prison industrial complex to cite just a few. That "age"? ..."
"... the right wing press detest one kind of liberalism, social liberalism, they hate that, but they love economic liberalism, which has done much harm to the working class. ..."
"... Most of the right wing press support austerity measures, slashing of taxes and, smaller and smaller governments. Yet apparently, its being socially liberal that is the problem ..."
A crucial point "WWC men aren't interested in working at McDonald's for $15 per hour instead
of $9.50. What they want is... steady, stable, full-time jobs that deliver a solid middle-class
life."
The economic point is that globalisation has boosted trade and overall wealth, but it has
also created a dog eat dog world where western workers compete with, and lose jobs to, people
far away who will do the work for much less.
But neither Trump nor Farage have shown any evidence of how realistically they can recreate
those jobs in the west. And realistically god knows how you keep the wealth free trade and globalisation
brings but avoid losing the good jobs? At least the current mess has focused attention on the
question and has said that patience has run out.
Compared to the real economic problems, the identity politics is minor, but it is still
an irritant that explains why this revolution is coming from the right not from the left.
If you're white and male it's bad enough losing your hope of economic security, but then to
be repeatedly told by the left that you're misogynist, racist, sexist, Islamophobic, transgenderphobic
etc etc is just the icing on the cake. If the author wants to see just how crazy identity politics
has become go to the Suzanne Moore piece from yesterday accusing American women of being misogynist
for refusing to vote for Hillary. That kind of maniac 'agree with me on everything or you're a
racist, sexist, homophobe' identity politics has to be ditched.
Reply
Funny, I've been a white male my whole life and not once have I been accused of being a misogynist,
racist, sexist, Islamophobic, or transgenderphobic. I didn't think being a white male was so difficult
for some people...
Reply
"Are we turning our backs on the age of enlightenment?".
And what "age" has that been Roy? The "age" of: climate change, gangster bankers, tax heavens,
illegal wars, nuclear proliferation, grotesque inequality, the prison industrial complex to cite
just a few. That "age"?
I agree hardly an age of enlightenment. My opinion... the so called Liberal Elite are responsible
for many of the issues in the list. The poor and the old in this country are not being helped
by the benefits system. Yet the rich get richer beyond the dreams of the ordinary man.
I would
pay more tax if I thought it might be spent more wisely...but can you trust politicians who are
happy to spend 50 billion on a railway line that 98% of the population will never use.
No solutions from me ...an old hippy from the 60s "Love and peace man " ...didn't work did
it :)
I have come under the impression that the right wing press detest one kind of liberalism,
social liberalism, they hate that, but they love economic liberalism, which has done much harm
to the working class.
Most of the right wing press support austerity measures, slashing of taxes and, smaller
and smaller governments. Yet apparently, its being socially liberal that is the problem.
"... "And even though neoliberals and international banks would have you believe otherwise, a fall in these money movements is entirely a good thing. As Ken Rogoff and Carmen Reinhart found in their study of 800 years of financial crises, high levels of international capital flows are correlated with more frequent and severe financial crises. Similarly, a 2010 Bank of International Settlements study by Claudio Borio and Petit Disyatat ascertained that cross border capital flows were over 60 times trade flows, meaning they had almost nothing to do with them. " ..."
"... I think it is apparent that the entire edifice of finance has been jiggered to benefit, Davos man and NO ONE ELSE. ..."
"... hy shouldn't Davos man want it to continue – the aftermath was set right for the 0.1% remarkably fast in the aftermath of the Great Recession – by HUGE infusions of government money, guarantees, credit, forbearance, etcetera – which for some reason can NEVER be made available to the 90% ..."
"... This is probably the most salient reason Hillary lost, but it can never, ever be proffered as a reason for it would reveal that ALL our problems are due to the rich . ..."
"... I've often wondered how "The Multiplier Effect" of money, [not] circulating and recirculating in our local economies, at the consumer level, is affected by money sent out of the country by "immigrants"? ..."
"... Is this such a small amount as not to be considered part of "cross border capital flows"? How does it affect local economies that are more important to us than what happens on Wall Street? ..."
m'kay so kind of like robbing peter (emerging markets with growth potential) to pay paul (goldman
et.al.) until peter goes broke (asset bubble collapse) so paul can't be paid until he "natural"
growth potential of emerging markets recovers (peters growth potential recovers from the asset
bubble/debt overhang with best performance to those with more flexible currency) so that paying
paul (new grifts, oops financial innovations) can be foisted on them again leading to, in hindsight
only of course, and notably after paul has been paid, another collapse? rinse and repeat .is there
any sense to this postulation?
Why do you use the term 'capital' when referring to credit/lending that is not related to economically
real outputs. The rest of the article tells this story but the lead groups it all as 'capital'
flows.
This is an editorial suggestion really one that does not conflate or mislead when treating
credit creation used for financial asset trading as if it were the same general thing as FDI,
that is, direct investment.
We have seen the financial system react to the crisis by recognizing their own unhinged behavior,
and doing much less of it for good reasons. They know their credit creating behavior was nit coverting
Savings into Investment, they know it was not 'capital' – so editors, let us help our writers
to bring more clarity.
I agree. We need a separate word for 'financial capital'. I am thinking 'ante' or 'stake' or
some similar word from the world of gambling and confidence tricks.
"And even though neoliberals and international banks would have you believe otherwise, a fall
in these money movements is entirely a good thing. As Ken Rogoff and Carmen Reinhart found in
their study of 800 years of financial crises, high levels of international capital flows are correlated
with more frequent and severe financial crises. Similarly, a 2010 Bank of International Settlements
study by Claudio Borio and Petit Disyatat ascertained that cross border capital flows were over
60 times trade flows, meaning they had almost nothing to do with them. "
This is probably something that not one in 10,000 people understand (I don't really either) –
but I think it is apparent that the entire edifice of finance has been jiggered to benefit, Davos
man and NO ONE ELSE. And why shouldn't Davos man want it to continue – the aftermath was set right
for the 0.1% remarkably fast in the aftermath of the Great Recession – by HUGE infusions of government
money, guarantees, credit, forbearance, etcetera – which for some reason can NEVER be made available
to the 90%
This is probably the most salient reason Hillary lost, but it can never, ever be proffered
as a reason for it would reveal that ALL our problems are due to the rich .
I've often wondered how "The Multiplier Effect" of money, [not] circulating and recirculating
in our local economies, at the consumer level, is affected by money sent out of the country by
"immigrants"?
Is this such a small amount as not to be considered part of "cross border capital flows"?
How does it affect local economies that are more important to us than what happens on Wall Street?
Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make
the Rich Richer
By Dean Baker
Introduction: Trading in Myths
In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential
nomination, a new line became popular among the nation's policy elite: Bernie Sanders is
the enemy of the world's poor. Their argument was that Sanders, by pushing trade policies
to help U.S. workers, specifically manufacturing workers, risked undermining the well-being
of the world's poor because exporting manufactured goods to the United States and other
wealthy countries is their path out of poverty. The role model was China, which by
exporting has largely eliminated extreme poverty and drastically reduced poverty among its
population. Sanders and his supporters would block the rest of the developing world from
following the same course.
This line, in its Sanders-bashing permutation, appeared early on in Vox, the
millennial-oriented media upstart, and was quickly picked up elsewhere (Beauchamp 2016).
After all, it was pretty irresistible. The ally of the downtrodden and enemy of the rich
was pushing policies that would condemn much of the world to poverty.
The story made a nice contribution to preserving the status quo, but it was less
valuable if you respect honesty in public debate.
The problem in the logic of this argument should be apparent to anyone who has taken an
introductory economics course. It assumes that the basic problem of manufacturing workers
in the developing world is the need for someone who will buy their stuff. If people in the
United States don't buy it, then the workers will be out on the street and growth in the
developing world will grind to a halt. In this story, the problem is that we don't have
enough people in the world to buy stuff. In other words, there is a shortage of demand. But
is it really true that no one else in the world would buy the stuff produced by
manufacturing workers in the developing world if they couldn't sell it to consumers in the
United States? Suppose people in the developing world bought the stuff they produced
raising their living standards by raising their own consumption.
That is how the economics is supposed to work. In the standard theory, general shortages
of demand are not a problem. Economists have traditionally assumed that economies tended
toward full employment. The basic economic constraint was a lack of supply. The problem was
that we couldn't produce enough goods and services, not that we were producing too much and
couldn't find anyone to buy them. In fact, this is why all the standard models used to
analyze trade agreements like the Trans-Pacific Partnership assume trade doesn't affect
total employment. Economies adjust so that shortages of demand are not a problem.
In this standard story (and the Sanders critics are people who care about textbook
economics), capital flows from slow-growing rich countries, where it is relatively
plentiful and so gets a low rate of return, to fast-growing poor countries, where it is
scarce and gets a high rate of return.
[Figure 1-1] Theoretical and actual capital flows.
So the United States, Japan, and the European Union should be running large trade
surpluses, which is what an outflow of capital means. Rich countries like ours should be
lending money to developing countries, providing them with the means to build up their
capital stock and infrastructure while they use their own resources to meet their people's
basic needs.
This wasn't just theory. That story accurately described much of the developing world,
especially Asia, through the 1990s. Countries like Indonesia and Malaysia were experiencing
rapid annual growth of 7.8 percent and 9.6 percent, respectively, even as they ran large
trade deficits, just over 2 percent of GDP each year in Indonesia and almost 5 percent in
Malaysia.
These trade deficits probably were excessive, and a crisis of confidence hit East Asia
and much of the developing world in the summer of 1997. The inflow of capital from rich
countries slowed or reversed, making it impossible for the developing countries to sustain
the fixed exchange rates most had at the time. One after another, they were forced to
abandon their fixed exchange rates and turn to the International Monetary Fund (IMF) for
help.
Rather than promulgating policies that would allow developing countries to continue the
textbook development path of growth driven by importing capital and running trade deficits,
the IMF made debt repayment a top priority. The bailout, under the direction of the Clinton
administration Treasury Department, required developing countries to switch to large trade
surpluses (Radelet and Sachs 2000, O'Neil 1999).
The countries of East Asia would be far richer today had they been allowed to continue
on the growth path of the early and mid-1990s, when they had large trade deficits. Four of
the five would be more than twice as rich, and the fifth, Vietnam, would be almost 50
percent richer. South Korea and Malaysia would have higher per capita incomes today than
the United States.
[Figure 1-2] Per capita income of East Asian countries, actual vs. continuing on 1990s
growth path.
In the wake of the East Asia bailout, countries throughout the developing world decided
they had to build up reserves of foreign exchange, primarily dollars, in order to avoid
ever facing the same harsh bailout terms as the countries of East Asia. Building up
reserves meant running large trade surpluses, and it is no coincidence that the U.S. trade
deficit has exploded, rising from just over 1 percent of GDP in 1996 to almost 6 percent in
2005. The rise has coincided with the loss of more than 3 million manufacturing jobs,
roughly 20 percent of employment in the sector.
There was no reason the textbook growth pattern of the 1990s could not have continued.
It wasn't the laws of economics that forced developing countries to take a different path,
it was the failed bailout and the international financial system. It would seem that the
enemy of the world's poor is not Bernie Sanders but rather the engineers of our current
globalization policies.
There is a further point in this story that is generally missed: it is not only the
volume of trade flows that is determined by policy, but also the content. A major push in
recent trade deals has been to require stronger and longer patent and copyright protection.
Paying the fees imposed by these terms, especially for prescription drugs, is a huge burden
on the developing world. Bill Clinton would have much less need to fly around the world for
the Clinton Foundation had he not inserted the TRIPS (Trade Related Aspects of Intellectual
Property Rights) provisions in the World Trade Organization (WTO) that require developing
countries to adopt U.S.-style patent protections. Generic drugs are almost always cheap -
patent protection makes drugs expensive. The cancer and hepatitis drugs that sell for tens
or hundreds of thousands of dollars a year would sell for a few hundred dollars in a free
market. Cheap drugs would be more widely available had the developed world not forced TRIPS
on the developing world.
Of course, we have to pay for the research to develop new drugs or any innovation. We
also have to compensate creative workers who produce music, movies, and books. But there
are efficient alternatives to patents and copyrights, and the efforts by the elites in the
United States and other wealthy countries to impose these relics on the developing world is
just a mechanism for redistributing income from the world's poor to Pfizer, Microsoft, and
Disney. Stronger and longer patent and copyright protection is not a necessary feature of a
21st century economy.
In textbook trade theory, if a country has a larger trade surplus on payments for
royalties and patent licensing fees, it will have a larger trade deficit in manufactured
goods and other areas. The reason is that, in theory, the trade balance is fixed by
national savings and investment, not by the ability of a country to export in a particular
area. If the trade deficit is effectively fixed by these macroeconomic factors, then more
exports in one area mean fewer exports in other areas. Put another way, income gains for
Pfizer and Disney translate into lost jobs for workers in the steel and auto industries....
It includes this interesting piece on international trade:
"I'll start with my favorite, the complaint that the trade policy advocating by Warren
and Sanders would hurt the poor in the developing world, or to use their words:
"And their ostensible protection of American workers leaves no room to consider the welfare
of poor people elsewhere in the world."
I like this one because it turns standard economic theory on its head to advance the
interests of the rich and powerful. In the economic textbooks, rich countries like the
United States are supposed to be exporting capital to the developing world. This provides
them the means to build up their capital stock and infrastructure, while maintaining the
living standards of their populations. This is the standard economic story where the
problem is scarcity.
But to justify trade policies that have harmed tens of millions of U.S. workers, either
by costing them jobs or depressing their wages, the Post discards standard economics and
tells us the problem facing people in the developing world is that there is too much stuff.
If we didn't buy the goods produced in the developing world then there would just be a
massive glut of unsold products.
In the standard theory the people in the developing world buy their own stuff, with rich
countries like the U.S. providing the financing. It actually did work this way in the
1990s, up until the East Asian financial crisis in 1997. In that period, countries like
Malaysia, Vietnam, and Indonesia were growing very rapidly while running large trade
deficits. This pattern of growth was ended by the terms of the bailout imposed on these
countries by the U.S. Treasury Department through the International Monetary Fund.
The harsh terms of the bailout forced these and other developing countries to reverse
the standard textbook path and start running large trade surpluses. This post-bailout
period was associated with slower growth for these countries. In other words, the poor of
the developing world suffered from the pattern of trade the Post advocates. If they had
continued on the pre-bailout path they would be much richer today. In fact, South Korea and
Malaysia would be richer than the United States if they had maintained their pre-bailout
growth rate over the last two decades. (This is the topic of the introduction to my new
book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make
the Rich Richer, it's free.)"
Not sure that I fully agree with him, but I do agree that trade imbalances and
mercantilism is a large part of the problem.
The Washington Post editorial page decided to lecture readers * on the meaning of
progressivism. Okay, that is nowhere near as bad as a Trump presidency, but really, did we
need this?
The editorial gives us a potpourri of neo-liberal (yes, the term is appropriate here)
platitudes, all of which we have heard many times before and are best half true. For
framing, the villains are Bernie Sanders and Elizabeth Warren who it tells us "are
embracing principles that are not genuinely progressive."
I'll start with my favorite, the complaint that the trade policy advocating by Warren
and Sanders would hurt the poor in the developing world, or to use their words:
"And their ostensible protection of American workers leaves no room to consider the
welfare of poor people elsewhere in the world."
I like this one because it turns standard economic theory on its head to advance the
interests of the rich and powerful. In the economic textbooks, rich countries like the
United States are supposed to be exporting capital to the developing world. This provides
them the means to build up their capital stock and infrastructure, while maintaining the
living standards of their populations. This is the standard economic story where the
problem is scarcity.
But to justify trade policies that have harmed tens of millions of U.S. workers, either
by costing them jobs or depressing their wages, the Post discards standard economics and
tells us the problem facing people in the developing world is that there is too much stuff.
If we didn't buy the goods produced in the developing world then there would just be a
massive glut of unsold products.
In the standard theory the people in the developing world buy their own stuff, with rich
countries like the U.S. providing the financing. It actually did work this way in the
1990s, up until the East Asian financial crisis in 1997. In that period, countries like
Malaysia, Vietnam, and Indonesia were growing very rapidly while running large trade
deficits. This pattern of growth was ended by the terms of the bailout imposed on these
countries by the U.S. Treasury Department through the International Monetary Fund.
The harsh terms of the bailout forced these and other developing countries to reverse
the standard textbook path and start running large trade surpluses. This post-bailout
period was associated with slower growth for these countries. In other words, the poor of
the developing world suffered from the pattern of trade the Post advocates. If they had
continued on the pre-bailout path they would be much richer today. In fact, South Korea and
Malaysia would be richer than the United States if they had maintained their pre-bailout
growth rate over the last two decades. (This is the topic of the introduction to my new
book, "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to
Make the Rich Richer," ** it's free.)
It is also important to note that the Post is only bothered by forms of protection that
might help working class people. The United States prohibits foreign doctors from
practicing in the United States unless they complete a U.S. residency program. (The total
number of slots are tightly restricted with only a small fraction open to foreign trained
doctors.) This is a classic protectionist measure. No serious person can believe that the
only way for a person to be a competent doctor is to complete a U.S. residency program. It
costs the United States around $100 billion a year ($700 per family) in higher medical
expenses. Yet, we never hear a word about this or other barriers that protect the most
highly paid professionals from the same sort of international competition faced by
steelworkers and textile workers.
Moving on, we get yet another Post tirade on Social Security.
"You can expand benefits for everyone, as Ms. Warren favors. Prosperous retirees who
live mostly off their well-padded 401(k)s will appreciate what to them will feel like a
small bonus, if they notice it. But spreading wealth that way will make it harder to find
the resources for the vulnerable elderly who truly depend on Social Security.
"But demographics - the aging of the population - cannot be wished away. In the 1960s,
about five taxpayers were helping to support each Social Security recipient, and the
economy was growing about 6 percent annually. Today there are fewer than three workers for
each pensioner, and the growth rate even following the 2008 recession has averaged about 2
percent . On current trends, 10 years from now the federal government will be spending
almost all its money on Medicare, Social Security and other entitlements and on interest
payments on the debt, leaving less and less for schools, housing and job training. There is
nothing progressive about that."
There are all sorts of misleading or wrong claims here. First, the economy did not grow
"about 6 percent annually" in the 1960s. There were three years in which growth did exceed
6.0 percent, and it was a very prosperous decade, but growth only averaged 4.6 percent from
1960 to 1970.
I suppose we should be happy that the Post is at least getting closer to the mark. A
2007 editorial *** praising The North American Free Trade Agreement told readers that
Mexico's GDP "has more than quadrupled since 1987." The International Monetary Fund data
**** put the gain at 83 percent. So by comparison, they are doing pretty good with the 6
percent growth number for the sixties.
But getting to the demographics, we did go from more than five workers for every retiree
to less than three today, and this number is projected to fall further to around 2.0
workers per retiree in the next fifteen years. This raises the obvious question, so what?
The economy did not collapse even as we saw the fall from 5 workers per retiree to less
than 3, so something really really bad happens when it falls further? We did raise taxes to
cover the additional cost and we will probably have to raise taxes in the future.
We get that the Post doesn't like tax increases (no one does), but this hardly seems
like the end of the world. The Social Security Trustees project ***** that real wages will
rise on average by more than 34 percent over the next two decades. Suppose we took back
5–10 percent of these projected wage gains through tax increases (still leaving workers
with wages that are more than 30 percent higher than they are today), what is the big
problem?
Of course most workers have not seen their wages rise in step with the economy's growth
over the last four decades. This is a huge issue which is the sort of thing that
progressives should be and are focusing on. But the Post would rather distract us with the
possibility that at some point in the future we may be paying a somewhat higher Social
Security tax.
The Post's route for savings is also classic misdirection. It tells how about
high-living seniors who get so much money from their 401(k)s they don't even notice their
Social Security checks. Only a bit more than 4.0 percent of the over 65 population has
non-Social Security income of more than $80,000 a year. If the point is to have substantial
savings from means-testing it would be necessary to hit people with incomes around $40,000
a year or even lower. That is not what most people consider wealthy.
We could have substantial savings on Medicare by pushing down the pay of doctors and
reducing the prices of drugs and medical equipment. The latter could be done by
substituting public financing for research and development for government granted patent
monopolies (also discussed in Rigged). These items would almost invariably be cheap in a
free market. But the Post seems uninterested in ways to save money that could affect the
incomes of the rich.
One can quibble with whether the current benefits for middle income people are right or
should be somewhat higher or lower, but it is ridiculous to argue that raising them $50 a
month, as proposed by Senator Warren, will break the bank.
Then we have the issue of free college. The Post raises the issue, pushed by Senator
Sanders in his presidential campaign, and then tells readers:
"Our answer - we would argue, the progressive answer - is that there are people in
society with far greater needs than that upper-middle-class family in Fairfax County that
would be relieved of its tuition burden at the College of William & Mary if Mr. Sanders got
his wish."
There are two points to be made here. First there is extensive research ****** showing
that many children from low- and moderate-income families hugely over-estimate the cost of
college, failing to realize that they would be eligible for financial aid that would make
it free or nearly free. This means that the current structure is preventing many relatively
disadvantaged children from attending college. Arguably better education on the
opportunities to get aid would solve this problem, but the problem has existed for a long
time and better education has not done much to change the picture thus far.
The second point is that the process of determining eligibility for aid is itself
costly. Many children have divorced parents, with a non-custodial parent often not anxious
to pay for their children's college. Perhaps it is appropriate that they should pay, but
forcing payment is not an easy task and it doesn't make sense to make the children in such
situations suffer.
In many ways, the free college solution is likely to be the easiest, with the tax coming
out of the income of higher earners, the vast majority of whom will be the beneficiaries of
this policy. There are ways to save on paying for college. My favorite is limiting the pay
of anyone at a public school to the salary of the president of the United States ($400,000
a year). We can also deny the privilege of tax exempt status to private universities or
other non-profits that don't accept a similar salary cap. These folks can pay their top
executives whatever they want, but they shouldn't ask the taxpayers to subsidize their
exorbitant pay packages.
There is one final issue in the column worth noting. At one point it makes a pitch for
the virtues of economic growth then tells readers:
"It's not in conflict with the goal of redistribution."
At least some of us progressive types are not particularly focused on "redistribution."
The focus of my book and much of my other writing is on the way that the market has been
structured to redistribute income upward, compared with the structures in place in the
quarter century after World War II. Is understandable that people who are basically very
satisfied with this upward redistribution of market income would not want this rigging of
the market even to be discussed, but serious progressives do.
Although I like much of what
Dean Baker, I don't like his term "loser liberalism", nor do I think his de-emphasis on
redistribution useful. Au contraire, I think talking about redistribution is absolutely
essential if we are to move to sustainable world. We can no longer be certain that per
person GDP growth will be sufficient to be able to ignore distribution or to rely on
"predistribution".
The End of Loser Liberalism: Making Markets Progressive
By Dean Baker
Upward Redistribution of Income: It Didn't Just Happen
Money does not fall up. Yet the United States has experienced a massive upward
redistribution of income over the last three decades, leaving the bulk of the workforce
with little to show from the economic growth since 1980. This upward redistribution was not
the result of the natural workings of the market. Rather, it was the result of deliberate
policy, most of which had the support of the leadership of both the Republican and
Democratic parties.
Unfortunately, the public and even experienced progressive political figures are not
well informed about the key policies responsible for this upward redistribution, even
though they are not exactly secrets. The policies are so well established as conventional
economic policy that we tend to think of them as incontrovertibly virtuous things, but each
has a dark side. An anti-inflation policy by the Federal Reserve Board, which relies on
high interest rates, slows growth and throws people out of work. Major trade deals hurt
manufacturing workers by putting them in direct competition with low-paid workers in the
developing world. A high dollar makes U.S. goods uncompetitive in world markets.
Almost any economist would acknowledge these facts, but few economists have explored
their implications and explained them to the general public. As a result, most of us have
little understanding of the economic policies that have the largest impact on our jobs, our
homes, and our lives. Instead, public debate and the most hotly contested legislation in
Congress tend to be about issues that will have relatively little impact.
This lack of focus on crucial economic issues is a serious problem from the standpoint
of advancing a progressive agenda....
Years of low interest rates and quantitative easing have not restored
growth to developed countries, and many observers lately have been calling on central banks to
inject stimulus into economies directly. But do the rewards of "helicopter money" outweigh the
risks?
ZURICH – The world has been on pins and needles since Donald Trump's upset victory over
Hillary Clinton in the United States' presidential election last week. No one – including,
perhaps, the president-elect himself – quite knows what shape the next US administration will
take, or what its policy priorities will be.
Compounding this uncertainty is the fact that, around the world, geopolitical tensions are
rising, with developed economies continuing to experience tepid growth, even after years of
record-low interest rates. For Trump to stimulate enough activity in the US economy to satisfy
his zealous base, he will have to find the right balance between fiscal measures and
monetary-policy tools.
Whether Trump continues the post-1945 US tradition of international leadership, or instead
chooses an "America first" approach, he will not be alone in his quest for growth: Japan and
eurozone countries are also struggling to bring about sustainable recoveries and meet central
banks' inflation targets. Project Syndicate commentators have been at the forefront of the
ongoing debate about what policymakers can do to achieve these goals. In particular, while Trump
and policymakers elsewhere are embracing fiscal activism, how far they are willing or able to go
remains uncertain, raising the question of what more central banks could do to stimulate demand
and boost growth.
Spinning in Circles
The recent shift toward fiscal expansion reflects widespread agreement that policymakers are
running out of stimulus options. Central banks can no longer rely on "forward guidance," such as
half-promises that interest rates will remain low indefinitely. And quantitative easing (QE) is
quickly losing its potency, perhaps because it is inherently more effective as a crisis-response
mechanism than as a long-term fix.
"... Apparently lax and/or incompetent regulation of systemically important banks by bureaucrats, central bankers, and politicians may not be just a recent American phenomenon. ..."
"... He related how he was not only ignored by his bank, the Irish regulator but also all the major political parties. He then pointed out that the Irish regulator claims that it always – and it is the law after all – informs the regulator of the home country of banks which have subsidiaries in Ireland, about any serious problems. ..."
"... Mr Sugarman suggested Mr Draghi should be asked point-blank of he did or if he did not know . If he did not then the Irish regulator was at least incompetent, and may have lied, misled and perhaps even broken Irish laws. If he was told and did know, then Mr Draghi has serious questions to answer regarding his own dereliction of duty. ..."
Apparently lax and/or incompetent regulation of systemically important banks by bureaucrats, central
bankers, and politicians may not be just a recent American phenomenon.
As we read this, it could imperil the soundness of the financial system in Europe as well, as
is still apparently the case with The Banks in the states, despite assurances to the contrary.
Golem XIV asks some very good questions in the article below, recently posted on his blog
here.
Yesterday a very high-powered panel of international banking whistleblowers met and told their
stories in the European parliament . The questions raised were important. Among them was the Irish
Whistleblower, Jonathan Sugarman, who when UniCredit Ireland was breaking the law in very serious
ways reported it to the Irish regulator.
He related how he was not only ignored by his bank, the Irish regulator but also all the major
political parties. He then pointed out that the Irish regulator claims that it always – and it
is the law after all – informs the regulator of the home country of banks which have subsidiaries
in Ireland, about any serious problems.
In the case of UniCredit that would mean the Italian Central bank would have been told that
Italy's largest Bank was in serious breach of Irish law in ways that could endanger the whole
banking system. The head of the Italian Central Bank at the time was a certain Mr Mario Draghi.
Mr Sugarman suggested Mr Draghi should be asked point-blank of he did or if he did not know
. If he did not then the Irish regulator was at least incompetent, and may have lied, misled
and perhaps even broken Irish laws. If he was told and did know, then Mr Draghi has serious questions to answer regarding his own
dereliction of duty.
Surely not I hear you say. Well perhaps someone might ask him? Or is he above the law?
President Barack Obama said Wednesday that America's election of Donald Trump and the U.K.'s
vote to leave the European Union reflect a political uprising in the West over economic
inequities spawned by leaders' mishandling of globalization.
"... Already, motor-vehicle manufacturers ship an automotive transmission back and forth across the US-Mexican border several times in the course of production. At some point, unpacking that production process still further will reach the point of diminishing returns. ..."
"... The story for cross-border flows of financial capital is even more dramatic. Gross capital flows – the sum of inflows and outflows – are not just growing more slowly; they are down significantly in absolute terms from 2009 levels. ..."
"... ... cross-border bank lending and borrowing that have fallen. Foreign direct investment – financial flows to build foreign factories and acquire foreign companies – remains at pre-crisis levels. ..."
"... This difference reflects regulation. Having concluded, rightly, that cross-border bank lending is especially risky, regulators clamped down on banks' international operations. ..."
Does Donald Trump's election as United States president mean that globalization is dead, or are
reports of the process' demise greatly exaggerated? If globalization is only partly incapacitated,
not terminally ill, should we worry? How much will slower trade growth, now in the offing, matter
for the global economy?
World trade growth would be slowing down, even without Trump in office. Its growth was already
flat in the first quarter of 2016, and it fell
by nearly 1% in the second quarter. This continues a prior trend: since 2010, global trade has
grown at an annual rate of barely 2%. Together with the fact that worldwide production of goods and
services has been rising by more than 3%, this means that the trade-to-GDP ratio has been falling,
in contrast to its steady upward march in earlier years.
... the resurgent protectionism manifest in popular opposition to the Trans-Pacific Partnership
(TPP) and the Transatlantic Trade and Investment Partnership (TTIP),
Causality in economics may be elusive, but in this case it is clear. So far, slower trade growth
has been the result of slower GDP growth, not the other way around.
This is particularly evident in the case of investment spending, which has
fallen sharply since
the global financial crisis. Investment spending is trade-intensive, because countries rely disproportionately
on a relatively small handful of producers, like Germany, for technologically sophisticated capital
goods.
In addition, slower trade growth reflects China's economic deceleration. Until 2011 China was
growing at double-digit rates, and Chinese exports and imports were growing even faster. China's
growth has now slowed by a third, leading to slower growth of Chinese trade.
China's growth miracle, benefiting a fifth of the earth's population, is the most important economic
event of the last quarter-century. But it can happen only once. And now that the phase of catch-up
growth is over for China, this engine of global trade will slow.
The other engine of world trade has been global supply chains. Trade in parts and components has
benefited from falling transport costs, reflecting containerization and related advances in logistics.
But efficiency in shipping is unlikely to continue to improve faster than efficiency in the production
of what is being shipped. Already, motor-vehicle manufacturers ship an automotive transmission
back and forth across the US-Mexican border several times in the course of production. At some point,
unpacking that production process still further will reach the point of diminishing returns.
The story for cross-border flows of financial capital is even more dramatic. Gross capital
flows – the sum of inflows and outflows – are not just growing more slowly; they are down significantly
in absolute terms from 2009 levels.
... cross-border bank lending and borrowing that have fallen. Foreign direct investment –
financial flows to build foreign factories and acquire foreign companies – remains at pre-crisis
levels.
This difference reflects regulation. Having concluded, rightly, that cross-border bank lending
is especially risky, regulators clamped down on banks' international operations.
In response, many banks curtailed their cross-border business. But, rather than alarming anyone,
this should be seen as reassuring, because the riskiest forms of international finance have been
curtailed without disrupting more stable and productive forms of foreign investment.
We now face the prospect of the US government revoking the Dodd-Frank Act and rolling back the
financial reforms of recent years. Less stringent financial regulation may make for the recovery
of international capital flows. But we should be careful what we wish for.
"... "Nearly half of young Americans start their working lives with student debt, and 43 million Americans carry student loans. A new study by the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business found that many borrowers are struggling to make student loan payments and regret their borrowing. ..."
"... GFLEC's newly published policy brief reports that most borrowers did not fully understand what they were taking on when they obtained student loans. Additionally, 54 percent of student loan holders did not try to figure out what their monthly payments would be before taking out loans. And 53 percent said that if they could go back and redo the process of taking out loans, they would do things differently. " ..."
Released earlier this week from George Washington University School of Business: "Study Finds
1 in 3 Student Loan Holders With Payments Due Are Late With Payments and More Than Half Regret
Their Borrowing"
"Nearly half of young Americans start their working lives with student debt, and 43 million
Americans carry student loans. A new study by the Global Financial Literacy Excellence Center
(GFLEC) at the George Washington University School of Business found that many borrowers are struggling
to make student loan payments and regret their borrowing.
GFLEC's newly published policy brief reports that most borrowers did not fully understand what
they were taking on when they obtained student loans. Additionally, 54 percent of student loan
holders did not try to figure out what their monthly payments would be before taking out loans.
And 53 percent said that if they could go back and redo the process of taking out loans, they
would do things differently. "
Odd. I was looking at the comment by Bannon about Spanish young adult unemployment (a serious
problem, as he says) and thinking, well, at least we don't have anything like that here.
No, our young adults aren't unemployed, are they? They are simply working to hand over major
parts of their future to their debt bosses.
And it really is so much better that way. After all, if ours were unemployed, they might take
to the streets like the Spaniards are doing.
"... For over a decade now, Chicago has been the epicenter of the fashionable trend of "privatization"-the transfer of the ownership or operation of resources that belong to all of us, like schools, roads and government services, to companies that use them to turn a profit. Chicago's privatization mania began during Mayor Richard M. Daley's administration, which ran from 1989 to 2011. Under his successor, Rahm Emanuel, the trend has continued apace. For Rahm's investment banker buddies, the trend has been a boon. For citizens? Not so much. ..."
"... the English word "privatization" derives from a coinage, Reprivatisierung, formulated in the 1930s to describe the Third Reich's policy of winning businessmen's loyalty by handing over state property to them. ..."
"... As president, Bill Clinton greatly expanded a privatization program begun under the first President Bush's Department of Housing and Urban Development. "Hope VI" aimed to replace public-housing high-rises with mixed-income houses, duplexes and row houses built and managed by private firms. ..."
"... The fan was Barack Obama, then a young state senator. Four years later, he cosponsored a bipartisan bill to increase subsidies for private developers and financiers to build or revamp low-income housing. ..."
"... However, the rush to outsource responsibility for housing the poor became a textbook example of one peril of privatization: Companies frequently get paid whether they deliver the goods or not (one of the reasons investors like privatization deals). For example, in 2004, city inspectors found more than 1,800 code violations at Lawndale Restoration, the largest privately owned, publicly subsidized apartment project in Chicago. Guaranteed a steady revenue stream whether they did right by the tenants or not-from 1997 to 2003, the project generated $4.4 million in management fees and $14.6 million in salaries and wages-the developers were apparently satisfied to just let the place rot. ..."
PGL on Chicago's parking meters. Yes Democratic Mayor Daley made a bad deal. If Trump does invest in infrastructure is this the kind of thing he'll be doing, selling off public
assets and leasing them back again, aka privatization?
Seems like two different things. Here's an In These Time article from January 2015 by the smart Rick Perlstein.
Welcome to Rahm Emanuel's Chicago, the privatized metropolis of the future.
BY RICK PERLSTEIN
In June of 2013, Chicago Mayor Rahm Emanuel made a new appointment to the city's seven-member
school board to replace billionaire heiress Penny Pritzker, who'd decamped to run President Barack
Obama's Department of Commerce. The appointee, Deborah H. Quazzo, is a founder of an investment firm
called GSV Advisors, a business whose goal-her cofounder has been paraphrased by Reuters as saying-is
to drum up venture capital for "an education revolution in which public schools outsource to private
vendors such critical tasks as teaching math, educating disabled students, even writing report cards."
GSV Advisors has a sister firm, GSV Capital, that holds ownership stakes in education technology
companies like "Knewton," which sells software that replaces the functions of flesh-and-blood teachers.
Since joining the school board, Quazzo has invested her own money in companies that sell curricular
materials to public schools in 11 states on a subscription basis.
In other words, a key decision-maker for Chicago's public schools makes money when school boards
decide to sell off the functions of public schools.
She's not alone. For over a decade now, Chicago has been the epicenter of the fashionable
trend of "privatization"-the transfer of the ownership or operation of resources that belong to all
of us, like schools, roads and government services, to companies that use them to turn a profit.
Chicago's privatization mania began during Mayor Richard M. Daley's administration, which ran from
1989 to 2011. Under his successor, Rahm Emanuel, the trend has continued apace. For Rahm's investment
banker buddies, the trend has been a boon. For citizens? Not so much.
They say that the first person in any political argument who stoops to invoking Nazi Germany automatically
loses. But you can look it up: According to a 2006 article in the Journal of Economic Perspectives,
the English word "privatization" derives from a coinage, Reprivatisierung, formulated in the
1930s to describe the Third Reich's policy of winning businessmen's loyalty by handing over state
property to them.
In the American context, the idea also began on the Right (to be fair, entirely independent of
the Nazis)-and promptly went nowhere for decades. In 1963, when Republican presidential candidate
Barry Goldwater mused "I think we ought to sell the TVA"-referring to the Tennessee Valley Authority,
the giant complex of New Deal dams that delivered electricity for the first time to vast swaths of
the rural Southeast-it helped seal his campaign's doom. Things only really took off after Prime Minister
Margaret Thatcher's sale of U.K. state assets like British Petroleum and Rolls Royce in the 1980s
made the idea fashionable among elites-including a rightward tending Democratic Party.
As president, Bill Clinton greatly expanded a privatization program begun under the first
President Bush's Department of Housing and Urban Development. "Hope VI" aimed to replace public-housing
high-rises with mixed-income houses, duplexes and row houses built and managed by private firms.
Chicago led the way. In 1999, Mayor Richard M. Daley, a Democrat, announced his intention to tear
down the public-housing high-rises his father, Mayor Richard J. Daley, had built in the 1950s and
1960s. For this "Plan for Transformation," Chicago received the largest Hope VI grant of any city
in the nation. There was a ration of idealism and intellectual energy behind it: Blighted neighborhoods
would be renewed and their "culture of poverty" would be broken, all vouchsafed by the honorable
desire of public-spirited entrepreneurs to make a profit. That is the promise of privatization in
a nutshell: that the profit motive can serve not just those making the profits, but society as a
whole, by bypassing inefficient government bureaucracies that thrive whether they deliver services
effectively or not, and empower grubby, corrupt politicians and their pals to dip their hands in
the pie of guaranteed government money.
As one of the movement's fans explained in 1997, his experience with nascent attempts to pay private
real estate developers to replace public housing was an "example of smart policy."
"The developers were thinking in market terms and operating under the rules of the marketplace,"
he said. "But at the same time, we had government supporting and subsidizing those efforts."
The fan was Barack Obama, then a young state senator. Four years later, he cosponsored a bipartisan
bill to increase subsidies for private developers and financiers to build or revamp low-income housing.
However, the rush to outsource responsibility for housing the poor became a textbook example
of one peril of privatization: Companies frequently get paid whether they deliver the goods or not
(one of the reasons investors like privatization deals). For example, in 2004, city inspectors found
more than 1,800 code violations at Lawndale Restoration, the largest privately owned, publicly subsidized
apartment project in Chicago. Guaranteed a steady revenue stream whether they did right by the tenants
or not-from 1997 to 2003, the project generated $4.4 million in management fees and $14.6 million
in salaries and wages-the developers were apparently satisfied to just let the place rot.
Meanwhile, the $1.6 billion Plan for Transformation drags on, six years past deadline and still
2,500 units from completion, while thousands of families languish on the Chicago Housing Authority's
waitlist.
Be that as it may, the Chicago experience looks like a laboratory for a new White House
pilot initiative, the Rental Assistance Demonstration Program (RAD), which is set to turn over some
60,000 units to private management next year. Lack of success never seems to be an impediment where
privatization is concerned.
"... For over a decade now, Chicago has been the epicenter of the fashionable trend of "privatization"-the transfer of the ownership or operation of resources that belong to all of us, like schools, roads and government services, to companies that use them to turn a profit. Chicago's privatization mania began during Mayor Richard M. Daley's administration, which ran from 1989 to 2011. Under his successor, Rahm Emanuel, the trend has continued apace. For Rahm's investment banker buddies, the trend has been a boon. For citizens? Not so much. ..."
"... the English word "privatization" derives from a coinage, Reprivatisierung, formulated in the 1930s to describe the Third Reich's policy of winning businessmen's loyalty by handing over state property to them. ..."
"... As president, Bill Clinton greatly expanded a privatization program begun under the first President Bush's Department of Housing and Urban Development. "Hope VI" aimed to replace public-housing high-rises with mixed-income houses, duplexes and row houses built and managed by private firms. ..."
"... The fan was Barack Obama, then a young state senator. Four years later, he cosponsored a bipartisan bill to increase subsidies for private developers and financiers to build or revamp low-income housing. ..."
"... However, the rush to outsource responsibility for housing the poor became a textbook example of one peril of privatization: Companies frequently get paid whether they deliver the goods or not (one of the reasons investors like privatization deals). For example, in 2004, city inspectors found more than 1,800 code violations at Lawndale Restoration, the largest privately owned, publicly subsidized apartment project in Chicago. Guaranteed a steady revenue stream whether they did right by the tenants or not-from 1997 to 2003, the project generated $4.4 million in management fees and $14.6 million in salaries and wages-the developers were apparently satisfied to just let the place rot. ..."
PGL on Chicago's parking meters. Yes Democratic Mayor Daley made a bad deal. If Trump does invest in infrastructure is this the kind of thing he'll be doing, selling off public
assets and leasing them back again, aka privatization?
Seems like two different things. Here's an In These Time article from January 2015 by the smart Rick Perlstein.
Welcome to Rahm Emanuel's Chicago, the privatized metropolis of the future.
BY RICK PERLSTEIN
In June of 2013, Chicago Mayor Rahm Emanuel made a new appointment to the city's seven-member
school board to replace billionaire heiress Penny Pritzker, who'd decamped to run President Barack
Obama's Department of Commerce. The appointee, Deborah H. Quazzo, is a founder of an investment firm
called GSV Advisors, a business whose goal-her cofounder has been paraphrased by Reuters as saying-is
to drum up venture capital for "an education revolution in which public schools outsource to private
vendors such critical tasks as teaching math, educating disabled students, even writing report cards."
GSV Advisors has a sister firm, GSV Capital, that holds ownership stakes in education technology
companies like "Knewton," which sells software that replaces the functions of flesh-and-blood teachers.
Since joining the school board, Quazzo has invested her own money in companies that sell curricular
materials to public schools in 11 states on a subscription basis.
In other words, a key decision-maker for Chicago's public schools makes money when school boards
decide to sell off the functions of public schools.
She's not alone. For over a decade now, Chicago has been the epicenter of the fashionable
trend of "privatization"-the transfer of the ownership or operation of resources that belong to all
of us, like schools, roads and government services, to companies that use them to turn a profit.
Chicago's privatization mania began during Mayor Richard M. Daley's administration, which ran from
1989 to 2011. Under his successor, Rahm Emanuel, the trend has continued apace. For Rahm's investment
banker buddies, the trend has been a boon. For citizens? Not so much.
They say that the first person in any political argument who stoops to invoking Nazi Germany automatically
loses. But you can look it up: According to a 2006 article in the Journal of Economic Perspectives,
the English word "privatization" derives from a coinage, Reprivatisierung, formulated in the
1930s to describe the Third Reich's policy of winning businessmen's loyalty by handing over state
property to them.
In the American context, the idea also began on the Right (to be fair, entirely independent of
the Nazis)-and promptly went nowhere for decades. In 1963, when Republican presidential candidate
Barry Goldwater mused "I think we ought to sell the TVA"-referring to the Tennessee Valley Authority,
the giant complex of New Deal dams that delivered electricity for the first time to vast swaths of
the rural Southeast-it helped seal his campaign's doom. Things only really took off after Prime Minister
Margaret Thatcher's sale of U.K. state assets like British Petroleum and Rolls Royce in the 1980s
made the idea fashionable among elites-including a rightward tending Democratic Party.
As president, Bill Clinton greatly expanded a privatization program begun under the first
President Bush's Department of Housing and Urban Development. "Hope VI" aimed to replace public-housing
high-rises with mixed-income houses, duplexes and row houses built and managed by private firms.
Chicago led the way. In 1999, Mayor Richard M. Daley, a Democrat, announced his intention to tear
down the public-housing high-rises his father, Mayor Richard J. Daley, had built in the 1950s and
1960s. For this "Plan for Transformation," Chicago received the largest Hope VI grant of any city
in the nation. There was a ration of idealism and intellectual energy behind it: Blighted neighborhoods
would be renewed and their "culture of poverty" would be broken, all vouchsafed by the honorable
desire of public-spirited entrepreneurs to make a profit. That is the promise of privatization in
a nutshell: that the profit motive can serve not just those making the profits, but society as a
whole, by bypassing inefficient government bureaucracies that thrive whether they deliver services
effectively or not, and empower grubby, corrupt politicians and their pals to dip their hands in
the pie of guaranteed government money.
As one of the movement's fans explained in 1997, his experience with nascent attempts to pay private
real estate developers to replace public housing was an "example of smart policy."
"The developers were thinking in market terms and operating under the rules of the marketplace,"
he said. "But at the same time, we had government supporting and subsidizing those efforts."
The fan was Barack Obama, then a young state senator. Four years later, he cosponsored a bipartisan
bill to increase subsidies for private developers and financiers to build or revamp low-income housing.
However, the rush to outsource responsibility for housing the poor became a textbook example
of one peril of privatization: Companies frequently get paid whether they deliver the goods or not
(one of the reasons investors like privatization deals). For example, in 2004, city inspectors found
more than 1,800 code violations at Lawndale Restoration, the largest privately owned, publicly subsidized
apartment project in Chicago. Guaranteed a steady revenue stream whether they did right by the tenants
or not-from 1997 to 2003, the project generated $4.4 million in management fees and $14.6 million
in salaries and wages-the developers were apparently satisfied to just let the place rot.
Meanwhile, the $1.6 billion Plan for Transformation drags on, six years past deadline and still
2,500 units from completion, while thousands of families languish on the Chicago Housing Authority's
waitlist.
Be that as it may, the Chicago experience looks like a laboratory for a new White House
pilot initiative, the Rental Assistance Demonstration Program (RAD), which is set to turn over some
60,000 units to private management next year. Lack of success never seems to be an impediment where
privatization is concerned.
"... The New Deal did not seek to overthrow the plutocracy, but it did seek to side-step and disable
their dominance. ..."
"... It seems to me that while neoliberalism on the right was much the same old same old, the neoliberal
turn on the left was marked by a measured abandonment of this struggle over the distribution of income
between the classes. In the U.S., the Democrats gradually abandoned their populist commitments. In Europe,
the labour and socialist parties gradually abandoned class struggle. ..."
"... When Obama came in, in 2008 amid the unfolding GFC, one of the most remarkable features of
his economic team was the extent to which it conceded control of policy entirely to the leading money
center banks. Geithner and Bernanke continued in power with Geithner moving from the New York Federal
Reserve (where he served as I recall under a Chair from Goldman Sachs) to Treasury in the Obama Administration,
but Geithner's Treasury was staffed from Goldman Sachs, JP Morgan Chase and Citibank. The crisis served
to concentrate banking assets in the hands of the top five banks, but it seemed also to transfer political
power entirely into their hands as well. Simon Johnson called it a coup. ..."
"... Here's the thing: the globalization and financialization of the economy from roughly 1980 drove
both increasingly extreme distribution of income and de-industrialization. ..."
"... It was characteristic of neoliberalism that the policy, policy intention and policy consequences
were hidden behind a rhetoric of markets and technological inevitability. Matt Stoller has identified
this as the statecraft of neoliberalism: the elimination of political agency and responsibility for
economic performance and outcomes. Globalization and financialization were just "forces" that just happened,
in a meteorological economics. ..."
"... This was not your grandfather's Democratic Party and it was a Democratic Party that could aid
the working class and the Rust Belt only within fairly severe and sometimes sharply conflicting constraints.
..."
"... No one in the Democratic Party had much institutional incentive to connect the dots, and draw
attention to the acute conflicts over the distribution of income and wealth involved in financialization
of the economy (including financialization as a driver of health care costs). And, that makes the political
problem that much harder, because there are no resources for rhetorical and informational clarity or
coherence. ..."
"... If Obama could not get a very big stimulus indeed thru a Democratic Congress long out of power,
Obama wasn't really trying. And, well-chosen spending on pork barrel projects is popular and gets Congressional
critters re-elected. So, again, if the stimulus is small and the Democratic Congress doesn't get re-elected,
Obama isn't really trying. ..."
"... Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism, because
it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference. ..."
At the center of Great Depression politics was a political struggle over the distribution of
income, a struggle that was only decisively resolved during the War, by the Great Compression.
It was at center of farm policy where policymakers struggled to find ways to support farm incomes.
It was at the center of industrial relations politics, where rapidly expanding unions were seeking
higher industrial wages. It was at the center of banking policy, where predatory financial practices
were under attack. It was at the center of efforts to regulate electric utility rates and establish
public power projects. And, everywhere, the clear subtext was a struggle between rich and poor,
the economic royalists as FDR once called them and everyone else.
FDR, an unmistakeable patrician in manner and pedigree, was leading a not-quite-revolutionary
politics, which was nevertheless hostile to and suspicious of business elites, as a source of
economic pathology. The New Deal did not seek to overthrow the plutocracy, but it did seek
to side-step and disable their dominance.
It seems to me that while neoliberalism on the right was much the same old same old, the
neoliberal turn on the left was marked by a measured abandonment of this struggle over the distribution
of income between the classes. In the U.S., the Democrats gradually abandoned their populist commitments.
In Europe, the labour and socialist parties gradually abandoned class struggle.
In retrospect, though the New Deal did use direct employment as a means of relief to good effect
economically and politically, it never undertook anything like a Keynesian stimulus on a Keynesian
scale - at least until the War.
Where the New Deal witnessed the institution of an elaborate system of financial repression,
accomplished in large part by imposing on the financial sector an explicitly mandated structure,
with types of firms and effective limits on firm size and scope, a series of regulatory reforms
and financial crises beginning with Carter and Reagan served to wipe this structure away.
When Obama came in, in 2008 amid the unfolding GFC, one of the most remarkable features
of his economic team was the extent to which it conceded control of policy entirely to the leading
money center banks. Geithner and Bernanke continued in power with Geithner moving from the New
York Federal Reserve (where he served as I recall under a Chair from Goldman Sachs) to Treasury
in the Obama Administration, but Geithner's Treasury was staffed from Goldman Sachs, JP Morgan
Chase and Citibank. The crisis served to concentrate banking assets in the hands of the top five
banks, but it seemed also to transfer political power entirely into their hands as well. Simon
Johnson called it a coup.
I don't know what considerations guided Obama in choosing the size of the stimulus or its composition
(as spending and tax cuts). Larry Summers was identified at the time as a voice of caution, not
"gambling", but not much is known about his detailed reasoning in severely trimming Christina
Romer's entirely conventional calculations. (One consideration might well have been worldwide
resource shortages, which had made themselves felt in 2007-8 as an inflationary spike in commodity
prices.) I do not see a case for connecting stimulus size policy to the health care reform. At
the time the stimulus was proposed, the Administration had also been considering whether various
big banks and other financial institutions should be nationalized, forced to insolvency or otherwise
restructured as part of a regulatory reform.
Here's the thing: the globalization and financialization of the economy from roughly 1980
drove both increasingly extreme distribution of income and de-industrialization. Accelerating
the financialization of the economy from 1999 on made New York and Washington rich, but the same
economic policies and process were devastating the Rust Belt as de-industrialization. They were
two aspects of the same complex of economic trends and policies. The rise of China as a manufacturing
center was, in critical respects, a financial operation within the context of globalized trade
that made investment in new manufacturing plant in China, as part of globalized supply chains
and global brand management, (arguably artificially) low-risk and high-profit, while reinvestment
in manufacturing in the American mid-west became unattractive, except as a game of extracting
tax subsidies or ripping off workers.
It was characteristic of neoliberalism that the policy, policy intention and policy consequences
were hidden behind a rhetoric of markets and technological inevitability. Matt Stoller has identified
this as the statecraft of neoliberalism: the elimination of political agency and responsibility
for economic performance and outcomes. Globalization and financialization were just "forces" that
just happened, in a meteorological economics.
It is conceding too many good intentions to the Obama Administration to tie an inadequate stimulus
to a Rube Goldberg health care reform as the origin story for the final debacle of Democratic
neoliberal politics. There was a delicate balancing act going on, but they were not balancing
the recovery of the economy in general so much as they were balancing the recovery from insolvency
of a highly inefficient and arguably predatory financial sector, which was also not incidentally
financing the institutional core of the Democratic Party and staffing many key positions in the
Administration and in the regulatory apparatus.
This was not your grandfather's Democratic Party and it was a Democratic Party that could
aid the working class and the Rust Belt only within fairly severe and sometimes sharply conflicting
constraints.
No one in the Democratic Party had much institutional incentive to connect the dots, and
draw attention to the acute conflicts over the distribution of income and wealth involved in financialization
of the economy (including financialization as a driver of health care costs). And, that makes
the political problem that much harder, because there are no resources for rhetorical and informational
clarity or coherence.
The short version of my thinking on the Obama stimulus is this: Keynesian stimulus spending is
a free lunch; it doesn't really matter what you spend money on up to a very generous point, so
it seems ready-made for legislative log-rolling. If Obama could not get a very big stimulus
indeed thru a Democratic Congress long out of power, Obama wasn't really trying. And, well-chosen
spending on pork barrel projects is popular and gets Congressional critters re-elected. So, again,
if the stimulus is small and the Democratic Congress doesn't get re-elected, Obama isn't really
trying.
Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism,
because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference.
Great comment. Simply great. Hat tip to the author !
Notable quotes:
"… The New Deal did not seek to overthrow the plutocracy, but it did seek to side-step and
disable their dominance. …"
"… It seems to me that while neoliberalism on the right was much the same old same old, the
neoliberal turn on the left was marked by a measured abandonment of this struggle over the distribution
of income between the classes. In the U.S., the Democrats gradually abandoned their populist
commitments. In Europe, the labour and socialist parties gradually abandoned class struggle. …"
"… When Obama came in, in 2008 amid the unfolding GFC, one of the most remarkable features
of his economic team was the extent to which it conceded control of policy entirely to the leading
money center banks. Geithner and Bernanke continued in power with Geithner moving from the
New York Federal Reserve (where he served as I recall under a Chair from Goldman Sachs) to Treasury
in the Obama Administration, but Geithner's Treasury was staffed from Goldman Sachs, JP Morgan
Chase and Citibank. The crisis served to concentrate banking assets in the hands of the top
five banks, but it seemed also to transfer political power entirely into their hands as well.
Simon Johnson called it a coup. … "
"… Here's the thing: the globalization and financialization of the economy from roughly 1980
drove both increasingly extreme distribution of income and de-industrialization. …"
"… It was characteristic of neoliberalism that the policy, policy intention and policy consequences
were hidden behind a rhetoric of markets and technological inevitability. Matt Stoller has identified
this as the statecraft of neoliberalism: the elimination of political agency and responsibility
for economic performance and outcomes. Globalization and financialization were just "forces"
that just happened, in a meteorological economics. …"
"… This was not your grandfather's Democratic Party and it was a Democratic Party that could
aid the working class and the Rust Belt only within fairly severe and sometimes sharply conflicting
constraints. …"
"… No one in the Democratic Party had much institutional incentive to connect the dots, and
draw attention to the acute conflicts over the distribution of income and wealth involved in financialization
of the economy (including financialization as a driver of health care costs). And, that makes
the political problem that much harder, because there are no resources for rhetorical and informational
clarity or coherence. …"
"… If Obama could not get a very big stimulus indeed thru a Democratic Congress long out of
power, Obama wasn't really trying. And, well-chosen spending on pork barrel projects is popular
and gets Congressional critters re-elected. So, again, if the stimulus is small and the Democratic
Congress doesn't get re-elected, Obama isn't really trying. …"
"… Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism,
because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference.
…"
"... "Welcome to the world of strategic analysis," Ivan Selin used to tell his team during the Sixties, "where we program weapons that don't work to meet threats that don't exist." Selin, who would spend the following decades as a powerful behind-the-scenes player in the Washington mandarinate, was then the director of the Strategic Forces Division in the Pentagon's Office of Systems Analysis. "I was a twenty-eight-year-old wiseass when I started saying that," he told me, reminiscing about those days. "I thought the issues we were dealing with were so serious, they could use a little levity." ..."
"Welcome to the world of strategic analysis," Ivan Selin used to tell his team during the
Sixties, "where we program weapons that don't work to meet threats that don't exist." Selin, who
would spend the following decades as a powerful behind-the-scenes player in the Washington mandarinate,
was then the director of the Strategic Forces Division in the Pentagon's Office of Systems Analysis.
"I was a twenty-eight-year-old wiseass when I started saying that," he told me, reminiscing about
those days. "I thought the issues we were dealing with were so serious, they could use a little
levity."
####
While I do have some quibbles with the piece (RuAF pilots are getting much more than 90 hours
a year flight time & equipment is overrated and unaffordable in any decent numbers), it is pretty
solid.
"... I know what it is like to have to juggle creditors to make it through a week. I know what it is like to have to swallow my pride and constantly dun people to pay me so that I can pay others. ..."
"... I know what it is like to dread going to the mailbox, because there will always be new bills to pay but seldom a check with which to pay them. I know what it is like to have to tell my daughter that I didn't know if I would be able to pay for her wedding; it all depended on whether something good happened. And I know what it is like to have to borrow money from my adult daughters because my wife and I ran out of heating oil ..."
"... Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000 emergency, according to an exclusive poll released Thursday, a signal that despite years after the Great Recession, Americans' finances remain precarious as ever. ..."
"... These difficulties span all incomes, according to the poll conducted by The Associated Press-NORC Center for Public Affairs Research. Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill. ..."
"... Even for the country's wealthiest 20 percent - households making more than $100,000 a year - 38 percent say they would have at least some difficulty coming up with $1,000 ..."
"... Chronicle for Higher Education: ..."
"... Meanwhile, 91% of all the profits generated by the U.S. economy from 2009 through 2012 went to the top 1%. As just one example, the annual bonuses (not salaries, just the bonuses) of all Wall Street financial traders last year amounted to 28 billion dollars while the total income of all minimum wage workers in America came to 14 billion dollars. ..."
"... "Between 2009 and 2012, according to updated data from Emmanuel Saez, overall income per family grew 6.9 percent. The gains weren't shared evenly, however. The top 1 percent saw their real income grow by 34.7 percent while the bottom 99 percent only saw a 0.8 percent gain, meaning that the 1 percent captured 91 percent of all real income. ..."
"... Adjusting for inflation and excluding anything made from capital gains investments like stocks, however, shows that even that small gains for all but the richest disappears. According to Justin Wolfers, adjusted average income for the 1 percent without capital gains rose from $871,100 to $968,000 in that time period. For everyone else, average income actually fell from $44,000 to $43,900. Calculated this way, the 1 percent has captured all of the income gains." ..."
"... There actually is a logic at work in the Rust Belt voters for voted for Trump. I don't think it's good logic, but it makes sense in its own warped way. The calculation the Trump voters seem to be making in the Rust Belt is that it's better to have a job and no health insurance and no medicare and no social security, than no job but the ACA (with $7,000 deductibles you can't afford to pay for anyway) plus medicare (since most of these voters are healthy, they figure they'll never get sick) plus social security (most of these voters are not 65 or older, and probably think they'll never age - or perhaps don't believe that social security will be solvent when they do need it). ..."
"... It's the same twisted logic that goes on with protectionism. Rust Belt workers figure that it's better to have a job and not be able to afford a Chinese-made laptop than not to have a job but plenty of cheap foreign-made widgets you could buy if you had any money (which you don't). That logic doesn't parse if you run through the economics (because protectionism will destroy the very jobs they think they're saving), but it can be sold as a tweet in a political campaign. ..."
"... The claim "Trump's coalition is composed of overt racists and people who are indifferent to overt racism" is incomplete. Trump's coalition actually consists of 3 parts and it's highly unstable: [1] racists, [2] plutocrats, [3] working class people slammed hard by globalization for whom Democrats have done little or nothing. ..."
"... The good news is that Trump's coalition is unstable. The plutocrats and Rust Belters are natural enemies. ..."
"... Listen to Steve Bannon, a classic stormfront type - he says he wants to blow up both the Democratic and the Republican party. He calls himself a "Leninist" in a recent interview and vows to wreck all elite U.S. institutions (universities, giant multinationals), not just the Democratic party. ..."
"... Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism, because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference. ..."
Eric places the blame for this loss squarely on economics, which, it seems to me, gets the analysis
exactly right. And the statistics back up his analysis, I believe.
It's disturbing and saddening to watch other left-wing websites ignore those statistics and
charge off the cliff into the abyss, screaming that this election was all about racism/misogyny/homophobia/[fill
in the blank with identity politics demonology of your choice]. First, the "it's all racism" analysis
conveniently lets the current Democratic leadership off the hook. They didn't do anything wrong,
it was those "deplorables" (half the country!) who are to blame. Second, the identity politics
blame-shifting completely overlooks and short-circuits any real action to fix the economy by Democratic
policymakers or Democratic politicians or the Democratic party leadership. That's particularly
convenient for the Democratic leadership because these top-four-percenter professionals "promise
anything and change nothing" while jetting between Davos and Martha's Vineyard, ignoring the peons
who don't make $100,000 or more a year because the peons all live in flyover country.
"Trump supporters were on average affluent, but they are always Republican and aren't numerous
enough to deliver the presidency (538 has changed their view in the wake of the election result).
Some point out that looking at support by income doesn't show much distinctive support for Trump
among the "poor", but that's beside the point too, as it submerges a regional phenomenon in a
national average, just as exit polls do. (..)
"When commentators like Michael Moore and Thomas Frank pointed out that there was possibility
for Trump in the Rust Belt they were mostly ignored or, even more improbably, accused of being
apologists for racism and misogyny. But that is what Trump did, and he won. Moreover, he won with
an amateurish campaign against a well-funded and politically sophisticated opponent simply because
he planted his flag where others wouldn't.
"Because of the obsession with exit polls, post-election analysis has not come to grips with
the regional nature of the Trump phenomenon. Exit polls divide the general electorate based on
individual attributes: race, gender, income, education, and so on, making regional distinctions
invisible. Moreover, America doesn't decide the presidential election that way. It decides it
based on the electoral college, which potentially makes the characteristics of individual states
decisive. We should be looking at maps, not exit polls for the explanation. Low black turnout
in California or high Latino turnout in Texas do not matter in the slightest in determining the
election, but exit polls don't help us see that. Exit polls deliver a bunch of non-explanatory
facts, in this election more than other recent ones." http://blogs.lse.ac.uk/usappblog/2016/11/11/23174/
"Donald Trump performed best on Tuesday in places where the economy is in worse shape, and
especially in places where jobs are most at risk in the future.
"Trump, who in his campaign pledged to be a voice for `forgotten Americans,' beat Hillary Clinton
in counties with slower job growth and lower wages. And he far outperformed her in counties where
more jobs are threatened by automation or offshoring, a sign that he found support not just among
workers who are struggling now but among those concerned for their economic future."
Meanwhile, the neoliberal Democrats made claims about the economy that at best wildly oversold
the non-recovery from the 2009 global financial meltdown, and at worst flat-out misrepresented
the state of the U.S. economy. For example, president Obama in his June 1 2016 speech in Elkhart
Indiana, said:
"Now, one of the reasons we're told this has been an unusual election year is because people
are anxious and uncertain about the economy. And our politics are a natural place to channel
that frustration. So I wanted to come to the heartland, to the Midwest, back to close to my
hometown to talk about that anxiety, that economic anxiety, and what I think it means. (..)
America's economy is not just better than it was eight years ago - it is the strongest, most
durable economy in the world. (..) Unemployment in Elkhart has fallen to around 4 percent.
(Applause.) At the peak of the crisis, nearly one in 10 homeowners in the state of Indiana
were either behind on their mortgages or in foreclosure; today, it's one in 30. Back then,
only 75 percent of your kids graduated from high school; tomorrow, 90 percent of them will.
(Applause.) The auto industry just had its best year ever. (..) So that's progress.(..) We
decided to invest in job training so that folks who lost their jobs could retool. We decided
to invest in things like high-tech manufacturing and clean energy and infrastructure, so that
entrepreneurs wouldn't just bring back the jobs that we had lost, but create new and better
jobs By almost every economic measure, America is better off than when I came here at the
beginning of my presidency. That's the truth. That's true. (Applause.) It's true. (Applause.)
Over the past six years, our businesses have created more than 14 million new jobs - that's
the longest stretch of consecutive private sector job growth in our history. We've seen the
first sustained manufacturing growth since the 1990s."
None of this is true. Not is a substantive sense, not in the sense of being accurate, not in
the sense of reflecting the facts on the ground for real working people who don't fly their private
jets to Davos.
The claim that "America's economy is the strongest and most durable economy in the world" is
just plain false. China has a much higher growth rate, at 6.9% nearly triple the U.S.'s - and
America's GDP growth is trending to historic long-term lows, and still falling. Take a look at
this chart of the Federal Reserve board's projections of U.S. GDP growth since 2009 compared with
the real GDP growth rate:
"[In the survey] [t]he Fed asked respondents how they would pay for a $400 emergency. The answer:
47 percent of respondents said that either they would cover the expense by borrowing or selling
something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who
knew?
"Well, I knew. I knew because I am in that 47 percent.
" I know what it is like to have to juggle creditors to make it through a week. I know
what it is like to have to swallow my pride and constantly dun people to pay me so that I can
pay others. I know what it is like to have liens slapped on me and to have my bank account
levied by creditors. I know what it is like to be down to my last $5-literally-while I wait for
a paycheck to arrive, and I know what it is like to subsist for days on a diet of eggs.
I know what it is like to dread going to the mailbox, because there will always be new
bills to pay but seldom a check with which to pay them. I know what it is like to have to tell
my daughter that I didn't know if I would be able to pay for her wedding; it all depended on whether
something good happened. And I know what it is like to have to borrow money from my adult daughters
because my wife and I ran out of heating oil ."
" Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000
emergency, according to an exclusive poll released Thursday, a signal that despite years after
the Great Recession, Americans' finances remain precarious as ever.
" These difficulties span all incomes, according to the poll conducted by The Associated
Press-NORC Center for Public Affairs Research. Three-quarters of people in households making less
than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty
coming up with $1,000 to cover an unexpected bill.
" Even for the country's wealthiest 20 percent - households making more than $100,000 a
year - 38 percent say they would have at least some difficulty coming up with $1,000 .
"`The more we learn about the balance sheets of Americans, it becomes quite alarming,' said
Caroline Ratcliffe, a senior fellow at the Urban Institute focusing on poverty and emergency savings
issues."
The rest of Obama's statistics are deceptive to the point of being dissimulations - unemployment
has dropped to 4 percent because so many people have stopped looking for work and moved into their
parents' basements that the Bureau of Labor Statistics no longer counts them as unemployed. Meanwhile,
the fraction of working-age adults who are not in the workforce has skyrocketed to an all-time
high. Few homeowners are now being foreclosed in 2016 compared to 2009 because the people in 2009
who were in financial trouble all lost their homes. Only rich people and well-off professionals
were able to keep their homes through the 2009 financial collapse. Since 2009, businesses did
indeed create 14 million new jobs - mostly low-wage junk jobs, part-time minimum-wage jobs that
don't pay a living wage.
"The deep recession wiped out primarily high-wage and middle-wage jobs. Yet the strongest employment
growth during the sluggish recovery has been in low-wage work, at places like strip malls and
fast-food restaurants.
"In essence, the poor economy has replaced good jobs with bad ones."
And the jobs market isn't much better for highly-educated workers:
New research released Monday says nearly half of the nation's recent college graduates work
jobs that don't require a degree.
The report, from the Center for College Affordability and Productivity, concludes that while
college-educated Americans are less likely to collect unemployment, many of the jobs they do have
aren't worth the price of their diplomas.
The data calls into question a national education platform that says higher education is better
in an economy that favors college graduates.
Don't believe it? Then try this article, from the Chronicle for Higher Education:
Approximately 60 percent of the increase in the number of college graduates from 1992 to
2008 worked in jobs that the BLS considers relatively low skilled-occupations where many participants
have only high school diplomas and often even less. Only a minority of the increment in our
nation's stock of college graduates is filling jobs historically considered as requiring a
bachelor's degree or more.
As for manufacturing, U.S. manufacturing lost 35,000 jobs in 2016, and manufacturing employment
remains 2.2% below what it was when Obama took office.
Meanwhile, 91% of all the profits generated by the U.S. economy from 2009 through 2012
went to the top 1%. As just one example, the annual bonuses (not salaries, just the bonuses) of
all Wall Street financial traders last year amounted to 28 billion dollars while the total income
of all minimum wage workers in America came to 14 billion dollars.
"Between 2009 and 2012, according to updated data from Emmanuel Saez, overall income per
family grew 6.9 percent. The gains weren't shared evenly, however. The top 1 percent saw their
real income grow by 34.7 percent while the bottom 99 percent only saw a 0.8 percent gain, meaning
that the 1 percent captured 91 percent of all real income.
Adjusting for inflation and excluding anything made from capital gains investments like
stocks, however, shows that even that small gains for all but the richest disappears. According
to Justin Wolfers, adjusted average income for the 1 percent without capital gains rose from $871,100
to $968,000 in that time period. For everyone else, average income actually fell from $44,000
to $43,900. Calculated this way, the 1 percent has captured all of the income gains."
Does any of this sound like "the strongest, most durable economy in the world"? Does any of
this square with the claims by Hillary Clinton and Barack Obama that "By almost every economic
measure, America is better off "? The U.S. economy is only better off in 2016 by disingenuous
comparison with the stygian depths of the 2009 economic collapse.
Hillary Clinton tied herself to Barack Obama's economic legacy, and the brutal reality for
working class people remains that the economy today has barely improved for most workers to what
it was in 2009, and is in many ways worse. Since 2009, automation + outsourcing/offshoring has
destroyed whole classes of jobs, from taxi drivers (wiped out by Uber and Lyft) to warehoues stock
clerks (getting wiped out by robots) to paralegals and associates at law firms (replaced by databases
and legal search algorithms) to high-end programmers (wiped out by an ever-increasing flood of
H1B via workers from India and China).
Yet vox.com continues to run article after article proclaiming "the 2016 election was all about
racism." And we have a non-stop stream of this stuff from people like Anne Laurie over at balloon-juice.com:
"While the more-Leftist-than-thou "progressives" - including their latest high-profile figurehead
- are high-fiving each other in happy anticipation of potential public-outrage gigs over the next
four years, at least some people are beginning to push back on the BUT WHITE WORKING CLASS HAS
ALL THE SADS!!! meme so beloved of Very Serious Pundits."
That's the ticket, Democrats double down on the identity politics, keep telling the pulverized
middle class how great the economy is. Because that worked so well for you this election.
= = = mclaren@9:52 am: The rest of Obama's statistics are deceptive to the point of being
dissimulations -[ ] Only rich people and well-off professionals were able to keep their homes
through the 2009 financial collapse. = = =
Some food for thought in your post, but you don't help your argument with statements such as
this one. Rich people and well-off professionals make up at most 10% of the population. US homeownership
rate in 2005 was 68.8%, in 2015 is 63.7. That's a big drop and unquestionably represents a lot
of people losing their houses involuntarily. Still, even assuming no "well-off professionals"
lost their houses in the recession that still leaves the vast majority of the houses owned by
the middle class. Which is consistent with foreclosure and sales stats in middle class areas from
2008-2014. Remember that even with 20% unemployment 80% of the population still has a job.
Similarly, I agree that the recession and job situation was qualitatively worse than the quantitative
stats depicted. Once you start adding in hidden factors not captured by the official stats, though,
where do you stop? How do you know the underground economy isn't doing far better than it was
in the boom years of the oughts, thus reducing actual unemployment? Etc.
Finally, you need to address the fundamental question: assuming all you say is true (arguendo),
how does destroying the Affordable Care Act, Social Security, and Medicare help those in the economically
depressed areas? I got hit bad by the recession myself. Know what helped from 2010 forward? Knowing
that I could change jobs, keep my college-age children on my spouse's heath plan, not get hit
with pre-existing condition fraud, and that if worse came to worse in a couple years I would have
the plan exchange to fall back on. Kansas has tried the Ryan/Walker approach, seen it fail, doubled
down, and seen that fail 4x as badly. Now we're going to make it up on unit sales by trying the
Ryan plan nationally? How do you expect that to "work out for you"?
WLGR 11.16.16 at 4:11 pm
mclaren @ 7: "high-end programmers (wiped out by an ever-increasing flood of H1B via workers
from India and China)"
I'm on board with the general thrust of what you're saying, but this is way, way over
the line separating socialism from barbarism. The fact that
it's not even true is beside the point, as is the (quite frankly) fascist metaphor of "flood"
to describe human fucking beings traveling in search of economic security, at least as long as
you show some self-awareness and contrition about your language. Some awareness about the insidious
administrative structure of the H1-B program would also be nice - the way it works is, an individual's
visa status more or less completely depends on remaining in the good graces of their employer,
meaning that by design these employees have no conceivable leverage in any negotiation
over pay or working conditions, and a program of unconditional residency without USCIS as a de
facto strikebreaker would have much less downward pressure on wages - but anti-immigration rhetoric
remaining oblivious to actual immigration law is par for the course.
No, the real point of departure here from what deserves to be called "socialism" is in the
very act of blithely combining effects of automation (i.e. traditional capitalist competition
for productive efficiency at the expense of workers' economic security) and effects of offshoring/outsourcing/immigration
(i.e. racialized fragmentation of the global working class by accident of birth into those who
"deserve" greater economic security and those who don't) into one and the same depiction of developed-world
economic crisis. In so many words, you're walking right down neoliberal capitalism's ideological
garden path: the idea that it's not possible to be anticapitalist without being an economic nationalist,
and that every conceivable alternative to some form of Hillary Clinton is ultimately reducible
to some form of Donald Trump. On the contrary, those of us on the socialism side of "socialism
or barbarism" don't object to capitalism because it's exploiting American workers , we
object because it's exploiting workers , and insisting on this crucial point against all
chauvinist pressure ("workers of all lands , unite!") is what fundamentally separates our
anticapitalism from the pseudo-anticapitalism of fascists.
Maclaren: I'm with you. I well remember Obama and his "pivot to deficit reduction" and "green
shoots" while I was screaming at the TV 'No!! Not Now!"
And then he tried for a "grand bargain" with the Reps over chained CPI adjustment for SS, and
he became my active enemy. I was a Democrat. Where did my party go?
Just chiming in here: The implicit deal between the elites and the hoi polloi was that the economy
would be run with minimal competence. Throughout the west, those elites have broken faith with
the masses on that issue, and are being punished for it.
I'm less inclined to attach responsibility to Obama, Clinton or the Democratic Party than some.
If Democrats had their way, the economy would have been managed considerably more competently.
Always remember that the rejection of the elites wasn't just a rejection of Democrats. The
Republican elite also took it in the neck.
I'll also dissent from the view that race wasn't decisive in this election. Under different
circumstances, we might have had Bernie's revolution rather than Trump's, but Trump's coalition
is composed of overt racists and people who are indifferent to overt racism.
I find the discussions over identity politics so intensely frustrating. A lot of people
on the left have gone all-in on self-righteous anger
Identity politics (and to some extent probably the rhetorical style that goes with it) isn't
a 'left' thing, it's a liberal thing. It's a bête noire for many on the left-see eg. Nancy Fraser's
work.
The Anglo/online genus what you get when you subtract class, socialism and real-world organisation
from politics and add in a lot of bored students and professionals with internet connections in
the context of a political culture (America's) that already valorises individual aggression to
a unique degree.
As polticalfoorball @15 says. The Democrats just didn't have the political muscle to deliver on
those things. There really is a dynamic thats been playing out: Democrats don't get enough governing
capacity because they did poorly in the election, which means their projects to improve the economy
are neutered or allowed through only in a very weakened form. Then the next election cycle the
neuterers use that failure as a weapon to take even more governing capacity away. Its not a failure
of will, its a failure to get on top of the political feedback loop.
@15 politicalfootball 11.16.16 at 5:27 pm
"Throughout the west, those elites have broken faith with the masses on that issue, and are being
punished for it."
Could you specify some "elite" that has been punished?
'the economic theories and programs ascribed to John M. Keynes and his followers; specifically
: the advocacy of monetary and fiscal programs by government to increase employment and spending'
– and if it is done wisely – like in most European countries before 2000 it is one of the least
'braindead' things.
But with the introduction of the Euro – some governmental programs – lead (especially in Spain)
to horrendous self-destructive housing and building bubbles – which lead to the conclusion that
such programs – which allow 'gambling with houses' are pretty much 'braindead'.
Or shorter: The quality of Keynesianism depends on NOT doing it 'braindead'.
Cranky Observer in #11 makes some excellent points. Crucially, he asks: "Finally, you need to
address the fundamental question: assuming all you say is true (arguendo), how does destroying
the Affordable Care Act, Social Security, and Medicare help those in the economically depressed
areas?"
There actually is a logic at work in the Rust Belt voters for voted for Trump. I don't
think it's good logic, but it makes sense in its own warped way. The calculation the Trump voters
seem to be making in the Rust Belt is that it's better to have a job and no health insurance and
no medicare and no social security, than no job but the ACA (with $7,000 deductibles you can't
afford to pay for anyway) plus medicare (since most of these voters are healthy, they figure they'll
never get sick) plus social security (most of these voters are not 65 or older, and probably think
they'll never age - or perhaps don't believe that social security will be solvent when they do
need it).
It's the same twisted logic that goes on with protectionism. Rust Belt workers figure that
it's better to have a job and not be able to afford a Chinese-made laptop than not to have a job
but plenty of cheap foreign-made widgets you could buy if you had any money (which you don't).
That logic doesn't parse if you run through the economics (because protectionism will destroy
the very jobs they think they're saving), but it can be sold as a tweet in a political campaign.
As for 63.7% home ownership stats in 2016, vast numbers of those "owned" homes were snapped
up by giant banks and other financial entities like hedge funds which then rented those homes
out. So the home ownership stats in 2016 are extremely deceptive. Much of the home-buying since
the 2009 crash has been investment purchases. Foreclosure home purchases for rent is now a huge
thriving business, and it's fueling a second housing bubble. Particularly because in many ways
it repeats the financially frothy aspects of the early 2000s housing bubble - banks and investment
firms are issuing junks bonds based on rosy estimates of ever-escalating rents and housing prices,
they use those junk financial instruments (and others like CDOs) to buy houses which then get
rented out at inflated prices, the rental income gets used to fund more tranches of investment
which fuels more buy-to-rent home buying. Rents have already skyrocketed far beyond incomes on
the East and West Coast, so this can't continue. But home prices and rents keep rising. There
is no city in the United States today where a worker making minimum wage can afford to rent a
one-bedroom apartment and have money left over to eat and pay for a car, health insurance, etc.
If home ownership were really so robust, this couldn't possibly be the case. The fact that rents
keep skyrocketing even as undocumented hispanics return to Mexico in record numbers while post-9/11
ICE restrictions have hammered legal immigration numbers way, way down suggests that home ownership
is not nearly as robust as the deceptive numbers indicate.
Political football in #15 remarks: "I'll also dissent from the view that race wasn't decisive
in this election. Under different circumstances, we might have had Bernie's revolution rather
than Trump's, but Trump's coalition is composed of overt racists and people who are indifferent
to overt racism."
Race was important, but not the root cause of the Trump victory. How do we know this? Tump
himself is telling us. Look at Trump's first announced actions - deport 3 million undocumented
immigrants who have committed crimes, ram through vast tax cuts for the rich, and end the inheritance
tax.
If Trump's motivation (and his base's motivation) was pure racism, Trump's first announced
action would be something like passing laws that made it illegal to marry undocumented workers.
His first act would be to roll back the legalization of black/white marriage and re-instate segregation.
Trump isn't promising any of that.
Instead Trump's (bad) policies are based around enriching billionaires and shutting down immigration.
Bear in mind that 43% of all new jobs created since 2009 went to immigrants and you start to realize
that Trump's base is reacting to economic pressure by scapegoating immigrants, not racism by itself.
If it were pure racism we'd have Trump and Ryan proposing a bunch of new Nuremberg laws. Make
it illegal to have sex with muslims, federally fund segregated black schools and pass laws to
force black kids to get bussed to them, create apartheid-style zones where only blacks can live,
that sort of thing. Trump's first announced actions involve enriching the fantastically wealthy
and enacting dumb self-destructive protectionism via punitive immigration control. That's protectionism
+ class war of the rich against everyone else, not racism. The protectionist immigration-control
+ deportation part of Trump's program is sweet sweet music to the working class people in the
Rust Belt. They think the 43% of jobs taken by immigrants will come back. They don't realize that
those are mostly jobs no one wants to do anyway, and that most of those jobs are already in the
process of getting automated out of existence.
The claim "Trump's coalition is composed of overt racists and people who are indifferent
to overt racism" is incomplete. Trump's coalition actually consists of 3 parts and it's highly
unstable: [1] racists, [2] plutocrats, [3] working class people slammed hard by globalization
for whom Democrats have done little or nothing.
Here's an argument that may resonate: the first two groups in Trump's coalition are unreachable.
Liberal Democrats can't sweet-talk racists out of being racist and we certainly have nothing to
offer the plutocrats. So the only part of Trump's coalition that is really reachable by liberal
Democrats is the third group. Shouldn't we be concentrating on that third group, then?
The good news is that Trump's coalition is unstable. The plutocrats and Rust Belters are
natural enemies. Since the plutocrats are perceived as running giant corporations that import
large numbers of non-white immigrants to lower wages, the racists are not big fans of that group
either.
Listen to Steve Bannon, a classic stormfront type - he says he wants to blow up both the
Democratic and the Republican party. He calls himself a "Leninist" in a recent interview and vows
to wreck all elite U.S. institutions (universities, giant multinationals), not just the Democratic
party.
Why? Because the stormfront types consider elite U.S. institutions like CitiBank as equally
culpable with Democrats in supposedly destroying white people in the U.S. According to Bannon's
twisted skinhead logic, Democrats are allegedly race traitors for cultural reasons, but big U.S.
corporations and elite institutions are supposedly equally guilty of economic race treason by
importing vast numbers of non-white immigrants via H1B visas, by offshoring jobs from mostly caucasian-populated
red states to non-white countries like India, Africa, China, and by using elite U.S. universities
to trawl the world for the best (often non-white) students, etc. Bannon's "great day of the rope"
includes the plutocrats as well as people of color.
These natural fractures in the Trump coalition are real, and Democrats can exploit them to
weaken and destroy Republicans. But we have to get away from condemning all Republicans as racists
because if we go down that route, we won't realize how fractured and unstable the Trump coalition
really is.
The short version of my thinking on the Obama stimulus is this: Keynesian stimulus spending is
a free lunch; it doesn't really matter what you spend money on up to a very generous point, so
it seems ready-made for legislative log-rolling. If Obama could not get a very big stimulus indeed
thru a Democratic Congress long out of power, Obama wasn't really trying. And, well-chosen spending
on pork barrel projects is popular and gets Congressional critters re-elected. So, again, if the
stimulus is small and the Democratic Congress doesn't get re-elected, Obama isn't really trying.
Again, it comes down to: by 2008, the Democratic Party is not a fit vehicle for populism,
because it has become a neoliberal vehicle for giant banks. Turns out that makes a policy difference.
Ps. Should prob add that identity politics isn't the same thing as feminism, anti-racism, LGBT
politics, etc. They're all needed now more than ever.
What we don't need more of imo is a particular liberal/middle-class form of those things with
particular assumptions (meritocratic and individualist), epistemology (strongly subjectivist)
and rhetorical style (which often aims humiliating opponents from a position of relative knowledge/status
rather than verbal engagement).
I don't know why I'm even having to say this, as it's so obvious. The "leftists" (for want of
a better word) and feminists who I know are also against neoliberalism. They are against the selloff
of public assets to enterprises for private profit. They want to see a solution to the rapidly
shrinking job market as technology replaces jobs (no, it's not enough for the Heroic Workers to
Seize the Means of Production – the means of production are different now and the solution is
going to have to be more complex than just "bring back manufacturing" or "introduce tariffs".)
They want to roll back the tax cuts for the rich which have whittled down our revenue base this
century. They want corporations and the top 10% to pay their fair share, and concomitantly they
want pensioners, the unemployed and people caring for children to have a proper living wage.
They support a universal "single payer" health care system, which we social democratic squishy
types managed to actually introduce in the 1970s, but now we have to fight against right wing
governments trying to roll it back They support a better system of public education. They support
a science-based approach to climate change where it is taken seriously for the threat it is and
given priority in Government policy. They support spending less on the Military and getting out
of international disputes which we (Western nations) only seem to exacerbate.
This is not an exhaustive list.
Yet just because the same people say that the dominant Western countries (and my own) still
suffer from institutionalised racism and sexism, which is not some kind of cake icing but actually
ruin lives and kill people, we are "all about identity politics" and cannot possibly have enough
brain cells to think about the issues I described in para 1.
The slow recovery was only one factor. Wages have been stagnant since Reagan. And honestly,
if a white Republican president had stabilized the economy, killed Osama Bin Laden and got rid
of pre-existing condition issue with healthcare, the GOP would be BRAGGING all over it. Let's
remember that we have ONE party that has been devoted to racist appeals, lying and putting party
over country for decades.
Obama entered office as the economy crashed over a cliff. Instead of reforming the banks and
punishing the bankers who engaged in fraudulent activities, he waded into healthcare reform. Banks
are bigger today than they were in 2008. And tell me again, which bankers were punished for the
fraud? Not a one All that Repo 105 maneuvering, stuffing the retirement funds with toxic assets
– etc. and so on – all of that was perfectly legal? And if legal, all of that was totally bonusable?
Yes! In America, such failure is gifted with huge bonuses, thanks to the American taxpayer.
Meanwhile, homeowners saw huge drops the value of their homes. Some are still underwater with
the mortgage. It's a shame that politicians and reporters in DC don't get out much.
Concurrently, right before the election, ACA premiums skyrocketed. If you are self-insured,
ACA is NOT affordable. It doesn't matter that prior to ACA, premiums increased astronomically.
Obama promised AFFORDABLE healthcare. In my state, we have essentially a monopoly on health insurance,
and the costs are absurd. But that's in part because the state Republicans refused to expand Medicaid.
Don't underestimate HRC's serious issues. HRC had one speech for the bankers and another for
everyone else. Why didn't she release the GS transcripts? When did the Democrats become the party
of Wall Street?
She also made the same idiotic mistake that Romney did – disparage a large swathe of American
voters (basket of deplorables is this year's 47%.)
And then we had a nation of voters intent on the outsider. Bernie Sanders had an improbable
run at it – the Wikileaks emails showed that the DNC did what they could to get rid of him as
a threat.
Well America has done and gone elected themselves an outsider. Lucky us.
"... Each job offered under a federal employment assurance would be at a wage rate above the poverty threshold, and would include benefits like health insurance. A public sector job guarantee would establish a quality of work and the level of compensation offered for all jobs. The program would be great for the country: It could meet a wide range of the nation's physical and human infrastructure needs, ranging from the building and maintenance of roads, bridges and highways, to school upkeep and the provision of quality child care services"" ..."
""A lot of this has to do with the fact that Americans continue to be subjected to bad jobs
or unstable employment - and those who are employed often face stagnant or even declining wages.
The fragility of Americans' economic well-being is epitomized by the National Coalition for the
Homeless' estimate that 44 percent of homeless persons actually have jobs, albeit poorly paid
jobs.
The expansion of "flex work" arrangements, which make work hours uncertain, contribute significantly
to income volatility for workers in low-pay sectors of the economy. Around 50 percent of Americans
could not meet a $400 emergency expense by drawing upon their personal savings if they had to.
An alternative to these conditions is the adoption of a federal job guarantee, a policy that
would insure the option for anyone to work in a public sector program, similar to what the Works
Progress Administration established in the 1930s.
Each job offered under a federal employment assurance would be at a wage rate above the poverty
threshold, and would include benefits like health insurance. A public sector job guarantee would
establish a quality of work and the level of compensation offered for all jobs. The program would
be great for the country: It could meet a wide range of the nation's physical and human infrastructure
needs, ranging from the building and maintenance of roads, bridges and highways, to school upkeep
and the provision of quality child care services""
"... The "my way" or the highway rhetoric from Clinton supporters on the campaign was sickening. When Bush was called a warmonger for Iraq, that was fine. When Clinton was called a warmonger for Iraq and Libya, the Clintonites went on the offensive, often throwing around crap like "if she was a man, she wouldn't be a warmonger!" ..."
"... On racism: "what I can say, from personal experience, is that the racism of my youth was always one step removed. I never saw a family member, friend, or classmate be mean to the actual black people we had in town. We worked with them, played video games with them, waved to them when they passed. What I did hear was several million comments about how if you ever ventured into the city, winding up in the "wrong neighborhood" meant you'd get dragged from your car, raped, and burned alive. Looking back, I think the idea was that the local minorities were fine as long as they acted exactly like us." ..."
"... I'm telling you, the hopelessness eats you alive. And if you dare complain, some liberal elite will pull out their iPad and type up a rant about your racist white privilege. Already, someone has replied to this with a comment saying, "You should try living in a ghetto as a minority!" Exactly. To them, it seems like the plight of poor minorities is only used as a club to bat away white cries for help. Meanwhile, the rate of rural white suicides and overdoses skyrockets. Shit, at least politicians act like they care about the inner cities." ..."
"... And the rural folk are called a "basket of deplorables" and other names. If you want to fight racism, a battle that is Noble and Honorable, you have to understand the nuances between racism and hopelessness. The wizard-wannabe idiots are a tiny fringe. The "deplorables" are a huge part of rural America. If you alienate them, you're helping the idiots mentioned above. ..."
Erm, atheist groups are known to target smaller Christian groups with lawsuits. A baker was sued
for refusing to bake a cake for a Gay Wedding. She was perfectly willing to serve the couple,
just not at the wedding. In California we had a lawsuit over a cross in a park. Atheists threatened
a lawsuit over a seal. Look, I get that there are people with no life out there, but why are they
bringing the rest of us into their insanity, with constant lawsuits. There's actually a concept
known as "Freedom from Religion" – what the heck? Can you imagine someone arguing about "Freedom
from Speech" in America? But it's ok to do it to religious folk! And yes, that includes Muslims,
who had to fight to build a Mosque in New York. They should've just said it was a Scientology
Center
The "my way" or the highway rhetoric from Clinton supporters on the campaign was sickening.
When Bush was called a warmonger for Iraq, that was fine. When Clinton was called a warmonger
for Iraq and Libya, the Clintonites went on the offensive, often throwing around crap like "if
she was a man, she wouldn't be a warmonger!"
The problem with healthcare in the US deserves its own thread, but Obamacare did not fix it;
Obamacare made it worse, especially in the rural communities. The laws in schools are fundamentally
retarded. A kid was suspended for giving a friend Advil. Another kid suspended for bringing in
a paper gun. I could go on and on. A girl was expelled from college for trying to look gangsta
in a L'Oreal mask. How many examples do you need? Look at all of the new "child safety laws" which
force kids to leave in a bubble. And when they enter the Real World, they're fucked, so they pick
up the drugs. In cities it's crack, in farmvilles it's meth.
Hillary didn't win jack shit. She got a plurality of the popular vote. She didn't win it, since
winning implies getting the majority. How many Johnson votes would've gone to Trump if it was
based on popular vote, in a safe state? Of course the biggest issue is the attack on the way of
life, which is all too real. I encourage you to read this, in order to understand where they're
coming from:
http://www.cracked.com/blog/6-reasons-trumps-rise-that-no-one-talks-about/
"Nothing that happens outside the city matters!" they say at their cocktail parties, blissfully
unaware of where their food is grown. Hey, remember when Hurricane Katrina hit New Orleans? Kind
of weird that a big hurricane hundreds of miles across managed to snipe one specific city and
avoid everything else. To watch the news (or the multiple movies and TV shows about it), you'd
barely hear about how the storm utterly steamrolled rural Mississippi, killing 238 people and
doing an astounding $125 billion in damage. But who cares about those people, right? What's newsworthy
about a bunch of toothless hillbillies crying over a flattened trailer? New Orleans is culturally
important. It matters. To those ignored, suffering people, Donald Trump is a brick chucked through
the window of the elites. "Are you assholes listening now?"
On racism: "what I can say, from personal experience, is that the racism of my youth was always
one step removed. I never saw a family member, friend, or classmate be mean to the actual black
people we had in town. We worked with them, played video games with them, waved to them when they
passed. What I did hear was several million comments about how if you ever ventured into the city,
winding up in the "wrong neighborhood" meant you'd get dragged from your car, raped, and burned
alive. Looking back, I think the idea was that the local minorities were fine as long as they
acted exactly like us."
"They're getting the shit kicked out of them. I know, I was there. Step outside of the city,
and the suicide rate among young people fucking doubles. The recession pounded rural communities,
but all the recovery went to the cities. The rate of new businesses opening in rural areas has
utterly collapsed."
^ That, I'd say, is known as destroying their lives. Also this:
"In a city, you can plausibly aspire to start a band, or become an actor, or get a medical
degree. You can actually have dreams. In a small town, there may be no venues for performing arts
aside from country music bars and churches. There may only be two doctors in town - aspiring to
that job means waiting for one of them to retire or die. You open the classifieds and all of the
job listings will be for fast food or convenience stores. The "downtown" is just the corpses of
mom and pop stores left shattered in Walmart's blast crater, the "suburbs" are trailer parks.
There are parts of these towns that look post-apocalyptic.
I'm telling you, the hopelessness eats you alive. And if you dare complain, some liberal elite
will pull out their iPad and type up a rant about your racist white privilege. Already, someone
has replied to this with a comment saying, "You should try living in a ghetto as a minority!"
Exactly. To them, it seems like the plight of poor minorities is only used as a club to bat away
white cries for help. Meanwhile, the rate of rural white suicides and overdoses skyrockets. Shit,
at least politicians act like they care about the inner cities."
And the rural folk are called a "basket of deplorables" and other names. If you want to fight
racism, a battle that is Noble and Honorable, you have to understand the nuances between racism
and hopelessness. The wizard-wannabe idiots are a tiny fringe. The "deplorables" are a huge part
of rural America. If you alienate them, you're helping the idiots mentioned above.
"... "Class first" amongst men of the left has always signaled "ME first." What else could it mean? ..."
"... So "Black Lives Matter" actually means "Black Lives Matter First". Got it. So damn tired of identity politics. ..."
"... Meanwhile, in the usual way of such things, #BlackLivesMatter hashtag activism became fashionable, as the usual suspects were elevated to celebrity status by elites. Nothing, of course, was changed in policy, and so in a year or so, matters began to bubble on the ground again. ..."
"... I'm not tired of identity politics. I'm just tired of some identity-groups accusing other identity-groups of "identity-politics". I speak in particular of the Identity Left. ..."
"... Identity politics, any identity, is going to automatically split voters into camps and force people to 'pick' a side. ..."
"... The Faux Feminism of Hillary Rodham Clinton, I and many other writers argued that the bourgeois feminism Clinton represents works against the interests of the vast majority of women. This has turned out to be even more true than we anticipated. That branding of feminism has delivered to us the most sexist and racist president in recent history: Donald Trump. ..."
"... Hillary spoke to the million-dollar feminists-of-privilege who identified with her multi-million dollar self and her efforts to break her own Tiffany Glass ceiling. And she worked to get many other women with nothing to gain to identify with Hillary's own breaking of Hillary's own Tiffany Glass ceiling. ..."
"... For me (at least) the essence of the "Left" is justice. When we speak of Class we are putting focus on issues of economic justice. Class is the material expression of economic (and therefore political) stratification. Class is the template for analysing the power dynamics at play in such stratification. ..."
"... in the absence of economic justice, it's very difficult to obtain ANY kind of justice - whether such justice be of race, gender, legal, religious or sexual orientation. ..."
"... I find it indicative that the 1% (now) simply don't care one way or another about race or gender etc, PROVIDED it benefits or, has no negative effects on their economic/political interests. ..."
"... "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." ..."
"... In ship sinking incidents, where a lot of people are dumped in the water, many adopt the strategy of trying to use others as flotation devices, pushing them under while the "rich class" tootle off in the lifeboats. Sounds like a winner, all right. ..."
"... The rich class has enlisted the white indentured servants as their Praetorian Guard. The same play as after Bacon's Rebellion. ..."
"... Is what is actually occurring another Kristallnacht, or the irreducible susurrus of meanness and idiocy that is part of every collection of humans? It would be nice not to get suckered into elevating the painful minima over the importance of getting ordinary people to agree on a real common enemy, and organizing to claim and protect. ..."
"... If even one single banker had gone to jail for the mess (fed by Bush I, Clinton, and Bush II) that blew up in 2008, we would be having a different conversation. We are in a huge legitimacy crisis, in part because justice was never served on those who made tens of millions via fraud. ..."
"... The Malignant Overlords - the King or Queen, the Financial Masters of the Universe,, the tribal witch doctor- live by grazing on the wealth of the natural world and the productivity of their underlings. There are only a few thousand of them but they control finance and the Money system, propaganda organizations (in the USA called the Media) land and agriculture, "educational" institutions and entire armies of Homeland Insecurity police. ..."
"... Under them there are the sycophants– generals and officers, war profiteers and corporate CEO's, the intelligentsia, journalists, fake economists, and entertainment and sports heroes who grow fat feasting on the morsels left over after the .0001% have fed. And far below the Overlords are the millions of professional Bureaucrats whose job security requires unquestioning servitude. ..."
"... Race, gender identity, religion, etc. are the false dichotomies by which the oligarchs divide us. Saudi princes, African American millionaires, gay millionaires etc. are generally treated the same by the oligarchs as wasp millionaires. The true dichotomy is class, that is the dichotomy which dare not speak its name. ..."
"... For Trump it was so easy. He just says something that could be thought of as racist and then his supporters watch as the media morphs his words, removes context, or just ignores any possible non-racist motivations for his words. ..."
"... Just read the actual Mexican- rapists quote. Completely different then reported by the media. Fifteen years ago my native born Mexican friend said almost exactlly the same thing. ..."
"... whilst his GOP colleagues publicly recoiled in horror, there is no question that Trump was merely making explicit what Republicans had been doing for decades – since the days of Nixon in 1968. The dog whistle was merely replaced by a bull horn. ..."
"... Yes, class identity can be a bond that unites. However, in the US the sense of class identity remains underdeveloped. In fact, it is only with the Sanders campaign that large swaths of the American public have had practical and sustained exposure to the concept of class as a political force. For most of the electorate, the language of class is still rather alien, particularly since the "equality of opportunity" narrative even now is not completely overthrown. ..."
"... It seems inevitable that populist sentiment, which both Sanders and Trump have used to electoral advantage, will spill over into a variety of economic nationalism. ..."
"... Obama was a perfect identity candidate, i.e., not only capable of getting the dem nomination, but the presidency and than not jailing banksters NO MATTER WHAT THEY DID, OR WILL DO… ..."
"... One truism about immigration, to pick a topical item, is that uncontrolled immigration leads to overwhelming an area whether city, state or country. Regardless of how one feels about the other aspects of immigration, there are some real, unacknowledged limits to the viability of the various systems that must accommodate arrivals, particularly in the short term. Too much of a perceived ..."
"... There is an entrenched royal court, not unlike Versailles in some respects, where the sinecures, access to the White House tennis court (remember Jimmy Carter and his forest for the trees issues) or to paid "lunches in Georgetown" or similar trappings. Inflow of populist or other foreign ideas behind the veil of media and class secrecy represents a threat to overwhelm, downgrade (Sayeth Yogi Berra: It is so popular that nobody goes there anymore) or remove those perks, and to cause some financial, psychic or other pain to the hangers-on. ..."
"... Pretty soon, word filters out through WikiLeaks, or just on the front page of a newspaper in the case of the real and present corruption (What do you mean nobody went to jail for the frauds?). In those instances, the tendency of a populace to remain aloof with their bread and circuses and reality shows and such gets strained. ..."
"... Some people began noticing and the cognitive dissonance became to great to ignore no matter how many times the messages were delivered from on high. That led to many apparent outbursts of rational behavior ..."
if poor whites were being shot by cops at the rate urban blacks are, they would be screaming
too. blm is not a corporate front to divide us, any more than acorn was a scam to help election
fraud.
It's lazy analysis to suggest Race was a contributing factor. On the fringes, Trump supporters
may have racial overtones, but this election was all about class. I applaud sites like NC in continually
educating me. What you do is a valuable service.
"We won't need a majority of the dying "white working class" in our present and future feminine,
multiracial American working class. Just a minority."
Indeed, this site has featured links to articles elaborating the demographic composition of
today's "working class". And yet we still have people insisting that appeals to the working class,
and policies directed thereof, must "transcend" race and gender.
And, of course this "class first" orientation became a bone of contention between some loud
mouthed "men of the left" during the D-Party primary and "everyone else" and that's why the "Bernie
Bro" label stuck. It didn't help the Sanders campaign either.
"Class first" amongst men of the left has always signaled "ME first." What else could it
mean?
This is, actually, complicated. It's a reasonable position that black lives don't
matter because they keep getting whacked by cops and the cops are never held accountable. Nobody
else did anything, so people on the ground stood up, asserted themselves, and as part
of that created #BlackLivesMatter as an online gathering point; all entirely reasonable. #AllLivesMatter
was created, mostly as deflection/distraction, by people who either didn't like the movement,
or supported cops, and of course if all lives did matter to this crowd, they would have
done something about all the police killings in the first place.
Meanwhile, in the usual way of such things, #BlackLivesMatter hashtag activism became fashionable,
as the usual suspects were elevated to celebrity status by elites. Nothing, of course, was changed
in policy, and so in a year or so, matters began to bubble on the ground again.
Activist time (we might say) is often slower than electoral time. But sometimes it's faster;
see today's Water Cooler on the #AllOfUs people who occupied Schumer's office (and high time,
too). To me, that's a very hopefully sign. Hopefully, not a bundle of groups still siloed by identity
(and if that's to happen, I bet that will happen by working together. Nothing abstract).
I'm not tired of identity politics. I'm just tired of some identity-groups accusing other
identity-groups of "identity-politics". I speak in particular of the Identity Left.
"We won't need a majority of the dying "white working class" in our present and future
feminine, multiracial American working class. Just a minority."
That statement is as myopic a vision as the current political class is today. The statement
offends another minority, or even a possible majority. Identity politics, any identity, is
going to automatically split voters into camps and force people to 'pick' a side.
In False Choices: The Faux Feminism of Hillary Rodham Clinton, I and many other writers
argued that the bourgeois feminism Clinton represents works against the interests of the vast
majority of women. This has turned out to be even more true than we anticipated. That branding
of feminism has delivered to us the most sexist and racist president in recent history: Donald
Trump.
I wonder if there is an even simpler more colorful way to say that. Hillary spoke to the
million-dollar feminists-of-privilege who identified with her multi-million dollar self and her
efforts to break her own Tiffany Glass ceiling. And she worked to get many other women with nothing
to gain to identify with Hillary's own breaking of Hillary's own Tiffany Glass ceiling.
If the phrase "Tiffany Glass ceiling" seems good enough to re-use, feel free to re-use it one
and all.
For me (at least) the essence of the "Left" is justice. When we speak of Class we are putting
focus on issues of economic justice. Class is the material expression of economic (and therefore
political) stratification. Class is the template for analysing the power dynamics at play in such
stratification.
Class is the primary political issue because it not only affects everyone, but in the absence
of economic justice, it's very difficult to obtain ANY kind of justice - whether such justice
be of race, gender, legal, religious or sexual orientation.
I find it indicative that the 1% (now) simply don't care one way or another about race or gender
etc, PROVIDED it benefits or, has no negative effects on their economic/political interests.
"Just how large a spike in hate crime there has been remains uncertain, however. Several reports
have been proven false, and Potok cautioned that most incidents reported to the Southern Poverty
Law Center did not amount to hate crime.
All us ordinary people are insecure. Planet is becoming less habitable, war everywhere, ISDS
whether we want it or not, group sentiments driving mass behaviors with extra weapons from our
masters, soil depletion, water becoming a Nestle subsidiary, all that. But let us focus on maintaining
our favored position as more insecure than others, with a "Yes, but" response to what seems to
me the fundamental strategic scene:
"There's class warfare, all right, but it's my class, the rich class, that's making war,
and we're winning."
Those mostly white guys, but a lot of women too, the "rich classs," are ORGANIZED, they have
a pretty simple organizing principle ("Everything belong us") that leads to straightforward strategies
and tactics to control all the levers and fulcrums of power. The senators in Oregon are "on the
right side" of a couple of social issues, but they both are all in for "trade deals" and other
big pieces of the "rich class's" ground game. In ship sinking incidents, where a lot of people
are dumped in the water, many adopt the strategy of trying to use others as flotation devices,
pushing them under while the "rich class" tootle off in the lifeboats. Sounds like a winner, all
right.
The comparison with 9/11 is instructive. That is not minimizing hate crimes. Within days after
9/11, my Sikh neighbor was assaulted and called a "terrorist". He finally decided to stop wearing
a turban, cut his hair, and dress "American". My neighborhood was not ethnically tense, but it is ethnically diverse, and my neighbor had
never seen his assailant before.
Yes, the rich classes are organized…organized to fleece us with unending wars. But don't minimize
other people's experience of what constitutes a hate crime.
In 1875, the first step toward the assassination of a black, "scalawag", or "carpetbagger"
public official in the South was a friendly visit from prominent people asking him to resign,
the second was night riders with torches, the third was night riders who killed the public official.
Jury nullification (surprise, surprise) made sure that no one was punished at the time. In 1876,
the restoration of "home rule' in Southern states elected in a bargain Rutherford B. Hayes, who
ended Reconstruction and the South entered a period that cleansed "Negroes, carpetbaggers, and
scalawags" from their state governments and put the Confederate generals and former plantation
owners back in charge. That was then called The Restoration. Coincidence that that is the name
of David Horowitz's conference where Donna Brazile was hobnobbing with James O'Keefe?
The rich class has enlisted the white indentured servants as their Praetorian Guard. The
same play as after Bacon's Rebellion.
Not minimizing - my very peaches-and-cream Scots-English daughter is married to a gentleman
from Ghana whose skin tones are about as dark as possible.
the have three beautiful children, and are fortunate to live in an area that is a hotbed of
"tolerance." I have many anecdotes too.
Do anecdotes = reality in all its complexity? Do anecdotes = policy? Is what is
actually occurring another Kristallnacht, or the irreducible susurrus of meanness and idiocy
that is part of every collection of humans? It would be nice not to get suckered into
elevating the painful minima over the importance of getting ordinary people to agree on a real
common enemy, and organizing to claim and protect.
If even one single banker had gone to jail for the mess (fed by Bush I, Clinton, and Bush
II) that blew up in 2008, we would be having a different conversation. We are in a huge legitimacy
crisis, in part because justice was never served on those who made tens of millions via fraud.
When there's no justice, its as if the society's immune system is not functioning.
Expect more strange things to appear, almost all of them aimed at sucking the remaining resources
out of the system with the knowledge that they'll never face consequences for looting. The fact
that they're killing the host does not bother them.
Corruption is both cause & effect of gross wealth inequities. Of course to the 1% it's not
corruption so much as merely what is owed as of a right to the privileged. (Thus, the most fundamental
basis of liberal democracy turns malignant: that ALL, even rulers & law makers are EQUALLY bound
by the Law).
The Malignant Overlords - the King or Queen, the Financial Masters of the Universe,, the
tribal witch doctor- live by grazing on the wealth of the natural world and the productivity of
their underlings. There are only a few thousand of them but they control finance and the Money
system, propaganda organizations (in the USA called the Media) land and agriculture, "educational"
institutions and entire armies of Homeland Insecurity police.
Under them there are the sycophants– generals and officers, war profiteers and corporate
CEO's, the intelligentsia, journalists, fake economists, and entertainment and sports heroes who
grow fat feasting on the morsels left over after the .0001% have fed. And far below the Overlords
are the millions of professional Bureaucrats whose job security requires unquestioning servitude.
Once upon a time there was what was known as the Middle Class who taught school or built things
in factories, made mortgage payments on a home, and bought a new Ford every other year. But they
now are renters, moving from one insecure job in one state to an insecure one across the country.
How else are they to maintain their sense of self-worth except by identifying a tribe that is
under them? If the members of the inferior tribe look just like you they might actually be more
successful and not a proper object of scorn. But if they have a black or brown skin and speak
differently they are the perfect target to make you feel that your life is not a total failure.
It's either that or go home and kick the dog or beat the wife. Or join the Army where you can
go kill a few foreigners and will always know your place in the hierarchy.
Class "trumps" race, but racial prejudice has its roots far back in human social history as
a tribal species where the "other" was always a threat to the tribe's existence.
Anyone who thinks it is only class and not also race is wearing some very strange blinders
No one with any sense is saying that, Katharine, and constantly bringing it up as some kind
of necessary argument (which, you may recall, was done as a way of trying to persuade people of
color Sanders wasn't working for them in the face of his entire history) perpetuates the falsehood
dichotomy that it has to be one or the other.
I can understand the desire to reduce the problems to a single issue that can then be subjected
to our total focus, but that's what's been done for the last fifty years; it doesn't work. Life
is too complex and messy to be fixed using magic pills, and Trump's success because those who've
given up hope of a cure are still enormously vulnerable to snake oil.
Race, gender identity, religion, etc. are the false dichotomies by which the oligarchs divide
us. Saudi princes, African American millionaires, gay millionaires etc. are generally treated
the same by the oligarchs as wasp millionaires. The true dichotomy is class, that is the dichotomy
which dare not speak its name.
yes, racism still exist, but the Democrats want to make it the primary issue of every election
because it is costs them nothing. I've never liked the idea of race based reparations because
they seem like another form of racism.
However, if the neolibs really believe racial disparity
and gender issues are the primary problems, why don't they ever support reparations or a large
tax on rich white people to pay the victims of racism and sexism and all the other isms?
Perhaps
its because that would actually cost them something. I think what bothers most of the Trumpets
out here in rural America is not race but the elevation of race to the top of the political todo
list.
For Trump it was so easy. He just says something that could be thought of as racist and
then his supporters watch as the media morphs his words, removes context, or just ignores any
possible non-racist motivations for his words.
Just read the actual Mexican- rapists quote. Completely
different then reported by the media. Fifteen years ago my native born Mexican friend said almost exactlly the same thing. Its a trap the media walks right into. I think most poor people of whiteness
do see racism as a sin, just not the only or most awful sin. As for Trump being a racist, I think
he would have to be human first.
… whilst his GOP colleagues publicly recoiled in horror, there is no question that Trump
was merely making explicit what Republicans had been doing for decades – since the days of Nixon
in 1968. The dog whistle was merely replaced by a bull horn.
Spot-on statement. Was watching Fareed Zakaria (yeah, I know, but he makes legit points from
time to time) and was pleasantly surprised that he called Bret Stephens, who was strongly opposed
to Trump, out on this. To see Stephens squirm like a worm on a hook was priceless.
"…what divides people rather than what unites people…"
Yes, class identity can be a bond that unites. However, in the US the sense of class identity
remains underdeveloped. In fact, it is only with the Sanders campaign that large swaths of the
American public have had practical and sustained exposure to the concept of class as a political
force. For most of the electorate, the language of class is still rather alien, particularly since
the "equality of opportunity" narrative even now is not completely overthrown.
Sanders and others on an ascendant left in the Democratic Party - and outside the Party - will
continue to do the important work of building a sense of class consciousness. But more is needed,
if the left wants to transform education into political power. Of course, organizing and electing
candidates at the local and state level is enormously important both to leverage control of local
institutions and - even more important - train and create leaders who can effectively use the
tools of political power. But besides this practical requirement, the left also needs to address
- or co-opt, if you will - the language of economic populism, which sounds a lot like economic
nationalism.
It seems inevitable that populist sentiment, which both Sanders and Trump have used to
electoral advantage, will spill over into a variety of economic nationalism. Nationalist
sentiment is the single most powerful unifying principle available, certainly more so than the
concept of class, at least in America. I don't see that changing anytime soon, and I do see the
Alt-Right using nationalism as a lever to try to coax the white working class into their brand
of identity politics. But America's assimilationist, "melting pot" narrative continues to be attractive
to most people, even if it is under assault in some quarters. So I think moving from nationalism
to white identity politics will not so easy for the Alt-Right. On the other hand, picking up the
thread of economic nationalism can provide the left with a powerful tool for bringing together
women, minorities and all who are struggling in this economy. This becomes particularly important
if it is the case that technology already makes the ideal of full (or nearly full) employment
nothing more than a chimera, thus forcing the question of a guaranteed annual income. Establishing
that kind of permanent safety net will only be possible in a polity where there are firm bonds
between citizens and a marked sense of responsibility for the welfare of all.
And if the Democratic Party is honest, it will have to concede that even the popular incumbent
President has played a huge role in contributing to the overall sense of despair that drove people
to seek a radical outlet such as Trump. The Obama Administration rapidly broke with its Hope and
"Change you can believe in" the minute he appointed some of the architects of the 2008 crisis
as his main economic advisors, who in turn and gave us a Wall Street friendly bank bailout that
effectively restored the status quo ante (and refused to jail one single banker, even though many
were engaged in explicitly criminal activity).
====================================================================
For those who think its just Hillary, its not. There is no way there will ever be any acknowledgement
of Obama;s real failures – he will no more be viewed honestly by dems than he could be viewed
honestly by repubs. Obama was a perfect identity candidate, i.e., not only capable of getting
the dem nomination, but the presidency and than not jailing banksters NO MATTER WHAT THEY DID,
OR WILL DO…
I imagine Trump will be one term, and I imagine we return in short order to our nominally different
parties squabbling but in lock step with regard to their wall street masters…
Democrats seem to be the more visible or clumsy in their attempts to govern themselves and
the populace, let alone understand their world. By way of illustration, consider the following.
One truism about immigration, to pick a topical item, is that uncontrolled immigration leads to
overwhelming an area whether city, state or country. Regardless of how one feels about the other
aspects of immigration, there are some real, unacknowledged limits to the viability of the various
systems that must accommodate arrivals, particularly in the short term. Too much of a perceived
good thing may be hazardous to one's health. Too much free stuff exhausts the producers,
infrastructure and support networks.
To extend and torture that concept further, just because, consider the immigration of populist
ideas to Washington. There is an entrenched royal court, not unlike Versailles in some respects,
where the sinecures, access to the White House tennis court (remember Jimmy Carter and his forest
for the trees issues) or to paid "lunches in Georgetown" or similar trappings. Inflow of populist
or other foreign ideas behind the veil of media and class secrecy represents a threat to overwhelm,
downgrade (Sayeth Yogi Berra: It is so popular that nobody goes there anymore) or remove those
perks, and to cause some financial, psychic or other pain to the hangers-on.
Pretty soon, word filters out through WikiLeaks, or just on the front page of a newspaper in
the case of the real and present corruption (What do you mean nobody went to jail for the frauds?).
In those instances, the tendency of a populace to remain aloof with their bread and circuses and
reality shows and such gets strained.
Some people began noticing and the cognitive dissonance
became to great to ignore no matter how many times the messages were delivered from on high. That
led to many apparent outbursts of rational behavior (What, you sold my family and me out and reduced
our prospects, so why should we vote for a party that takes us for granted, at best), which would
be counter-intuitive by some in our media.
"... ""This analysis raises a host of questions: If the unsecured credit lines that make the payments system function smoothly are liquidity, then are these credit lines also money? Should they be money? If these credit lines that are so important to the operation of the payments system are not money, then what is the point of defining money at all? I am still puzzling over these questions so I only ask them and don't pretend to answer them here."" ..."
"... Sissoko acknowledges the role that sovereign governments play in establishing money systems but I think gives too much credit :) to private bank credit creation. ..."
"... If money grew on trees it would be worth very little (Wray 2004) ..."
"... Money is the result of the struggle between debtors' demand for money and creditors' belief that the state can service its debt, which in turn depends on tax revenues. And it is the need to work for a taxable income that gives it value. (Ingham) ..."
"... Taxes don't finance spending but are necessary for money to have state backed value. They are also an important way for the state to transfer resources whether for bank bailouts, wars, social security, health care or whatever the state deems important. ..."
Carolyn Sissoko has an interesting new paper out,
Financial Stability
, in which she takes on the nature of money problem.
I think her concluding paragraph is interesting
""This analysis raises a host of questions: If the unsecured credit lines that make the payments
system function smoothly are liquidity, then are these credit lines also money? Should they be money?
If these credit lines that are so important to the operation of the payments system are not money, then
what is the point of defining money at all? I am still puzzling over these questions so I only ask them
and don't pretend to answer them here.""
As a derivatives expert she takes on the interesting question of how these complex sources of credit
function, they provide credit but are they really money.
I think Ingham makes a great point relevant to this, "all money is credit but not all credit is money"
Sissoko acknowledges the role that sovereign governments play in establishing money systems but I
think gives too much credit :) to private bank credit creation.
If money grew on trees it would be worth very little (Wray 2004)
Money is the result of the struggle between debtors' demand for money and creditors' belief that
the state can service its debt, which in turn depends on tax revenues. And it is the need to work for
a taxable income that gives it value. (Ingham)
Taxes don't finance spending but are necessary for money to have state backed value. They are also
an important way for the state to transfer resources whether for bank bailouts, wars, social security,
health care or whatever the state deems important.
If money grew on trees it would be worth very little (Wray 2004)
That would depend on the rate of growth and, assuming every citizen had an equal number and quality
of such trees, be an ethical means to create fiat apart from normal deficit spending for the general
welfare.
Of course there are no such trees but equal fiat distributions to all adult citizens could have
the same effect.
"... The funny thing is that they've so learned to love the smell of their own farts (or propaganda) that they internalized an image of enlightened progressivism for themselves. This Trump election was probably the first clue that their self image is faulty and not widely shared by others. They are not taking it well. ..."
NYTimes still blames race on Trump's winning over Obama supporters in Iowa:
Trump clearly sensed the fragility of the coalition that Obama put
together - that the president's support in heavily white areas was built not
on racial egalitarianism but on a feeling of self-interest. Many white
Americans were no longer feeling that belonging to this coalition benefited
them.
Racial egalitarianism wasn't the reason for white support for Obama in 2008
and 2012 in Iowa. It reflected racial egalitarianism, but that support had to
do with perceived economic self-interest, just as the switch to Trump in 2016
did.
And what on earth is wrong with self-interest as a reason for voting?
Right. These corporatists use identity politics as a stalking horse to
rob the public blind, and then they spew invectives about racism and
mysogony wherever the public stops buying the bullcrap.
The funny thing is that they've so learned to love the smell of their own
farts (or propaganda) that they internalized an image of enlightened
progressivism for themselves. This Trump election was probably the first
clue that their self image is faulty and not widely shared by others. They
are not taking it well.
"... Judging by the volume of complaints from Clinton sycophants insisting that people did not get behind Clinton or that it was purely her gender, they won't. Why would anyone get behind Clinton save the 1%? Her policies were pro-war, pro-Wall Street, and at odds with what the American people needed. Also, we should judge based on policy, not gender and Clinton comes way short of Sanders in that regard – in many regards, she is the antithesis of Sanders. ..."
"... "Establishment Democrats have nobody but themselves to blame for this one. The only question is whether or not they are willing to take responsibility" I disagree. In my view, it is not a question at all. They have never taken responsibility for anything, and they never will. ..."
"... What would make Democrats focus on the working class? Nothing. They have lost and brought about destruction of the the Unions, which was the Democratic Base, and have become beholden to the money. The have noting in common with the working class, and no sympathy for their situation, either. ..."
"... What does Bill Clinton, who drive much of the policy in the '90s, and spent his early years running away form the rural poor in Arkansas (Law School, Rhodes Scholarship), have in common with working class people anywhere? ..."
"... Iron law of institutions applies. Position in the D apparatus is more important than political power – because with power come blame. ..."
"... I notice Obama worked hard to lose majorities in the house and Senate so he could point to the Republicans and say "it was their fault" except when he actually wanted something, and made it happen (such as TPP). ..."
"... Agreed with the first but not the second. It's typical liberal identity politics guilt tripping. That won't get you too far on the "white side" of Youngstown Ohio. ..."
"... Also suspect that the working-class, Rust-Belt Trump supporters will soon be thrown under the bus by their Standard Bearer, if the Transition Team appointments are any indicator: e.g. Privateers at SSA. ..."
"... My wife teaches primary grades in an inner city school. She has made it clear to me over the years that the challenges her children are facing are related to poverty, not race. She sees a big correlation between the financial status of a family and its family structure (one or more parents not present or on drugs) and the kids' success in school. Race is a minor factor. ..."
"... The problem with running on a class based platform in America is, well, it's America; and in good ol' America, we are taught that anyone can become a successful squillionare – ya know, hard work, nose-to-the-grindstone, blah, blah, blah. ..."
"... The rags to riches American success fable is so ingrained that ideas like taxing the rich a bit more fall flat because everyone thinks "that could be me someday. Just a few house flips, a clever new app, that ten-bagger (or winning lottery ticket) and I'm there" ("there" being part of the 1%). ..."
"... The idea that anyone can be successful (i.e. rich) is constantly promoted. ..."
"... I think this fantasy is beginning to fade a bit but the "wealth = success" idea is so deeply rooted in the American psyche I don't think it will ever fade completely away. ..."
"... If you spend time in hardscrabble, white upstate New York, or eastern Kentucky, or my own native West Texas, and you take an honest look at the welfare dependency, the drug and alcohol addiction, the family anarchy - which is to say, the whelping of human children with all the respect and wisdom of a stray dog - you will come to an awful realization. It wasn't Beijing. It wasn't even Washington, as bad as Washington can be. It wasn't immigrants from Mexico, excessive and problematic as our current immigration levels are. It wasn't any of that. ..."
"... Nothing happened to them. There wasn't some awful disaster. There wasn't a war or a famine or a plague or a foreign occupation. Even the economic changes of the past few decades do very little to explain the dysfunction and negligence - and the incomprehensible malice - of poor white America. So the gypsum business in Garbutt ain't what it used to be. There is more to life in the 21st century than wallboard and cheap sentimentality about how the Man closed the factories down. ..."
"... The truth about these dysfunctional, downscale communities is that they deserve to die. Economically, they are negative assets. Morally, they are indefensible. Forget all your cheap theatrical Bruce Springsteen crap. Forget your sanctimony about struggling Rust Belt factory towns and your conspiracy theories about the wily Orientals stealing our jobs. Forget your goddamned gypsum, and, if he has a problem with that, forget Ed Burke, too. The white American underclass is in thrall to a vicious, selfish culture whose main products are misery and used heroin needles. Donald Trump's speeches make them feel good. So does OxyContin. ..."
"... White Trash: The 400-Year Untold History of Class in America ..."
"... Poor or Poorer whites have been demonised since the founding of the original Colonies, and were continuously pushed west to the frontiers by the ruling elites of New England and the South as a way of ridding themselves of "undesirables", who were then left to their own resources, and clung together for mutual assistance. ..."
"... White trash is a central, if disturbing, thread in our national narrative. The very existence of such people – both in their visibility and invisibility – is proof that American society obsesses over the mutable labels we give to the neighbors we wish not to notice. "They are not who we are". But they are who we are and have been a fundamental part of our history, whether we like it or not". ..."
"... "To be sure, Donald Trump did make a strong appeal to racists, homophobes, and misogynists " ..."
"... working class white women ..."
"... Obama is personally likeable ..."
"... History tells us the party establishment will move further right after election losses. And among the activist class there are identity purity battles going on. ..."
"... Watch as this happens yet again: "In most elections, U.S. politicians of both parties pretend to be concerned about their issues, then conveniently ignore them when they reach power and implement policies from the same Washington Consensus that has dominated the past 40 years." That is why we need a strong third party, a reformed election system with public support of campaigns and no private money, and free and fair media coverage. But it ain't gonna happen. ..."
"... Obviously, if the Democrats nominate yet another Clintonite Obamacrat all over again, I may have to vote for Trump all over again . . . to stop the next Clintonite before it kills again. ..."
Ultimately the Establishment Democrats have nobody but themselves to blame for this one. The
only question is whether or not they are willing to take responsibility for what happened.
Judging by the volume of complaints from Clinton sycophants insisting that people did not
get behind Clinton or that it was purely her gender, they won't. Why would anyone get behind Clinton
save the 1%? Her policies were pro-war, pro-Wall Street, and at odds with what the American people
needed. Also, we should judge based on policy, not gender and Clinton comes way short of Sanders
in that regard – in many regards, she is the antithesis of Sanders.
Class trumps race, to make a pun. If the left doesn't take the Democratic Party back and clean
house, I expect that there is a high probability that 2020's election will look at lot like the
2004 elections.
I'd recommend someone like Sanders to run. Amongst the current crop, maybe Tulsi Gabbard or
Nina Turner seem like the best candidates.
"Establishment Democrats have nobody but themselves to blame for this one. The only question
is whether or not they are willing to take responsibility" I disagree. In my view, it is not a
question at all. They have never taken responsibility for anything, and they never will.
What would make Democrats focus on the working class? Nothing. They have lost and brought
about destruction of the the Unions, which was the Democratic Base, and have become beholden to
the money. The have noting in common with the working class, and no sympathy for their situation,
either.
What does Bill Clinton, who drive much of the policy in the '90s, and spent his early years
running away form the rural poor in Arkansas (Law School, Rhodes Scholarship), have in common
with working class people anywhere?
The same question applies to Hillary, to Trump and the remainder of our "representatives" in
Congress.
Without Unions, how are US Representatives from the working class elected?
What we are seeing is a shift in the US for the Republicans to become the populist party. They
already have the churches, and with Trump they can gain the working class – although I do not
underestimate the contempt help by our elected leaders for the Working Class and poor.
The have forgotten, if they ever believed: "There, but for the grace of God, go I".
Iron law of institutions applies. Position in the D apparatus is more important than political
power – because with power come blame.
I notice Obama worked hard to lose majorities in the house and Senate so he could point
to the Republicans and say "it was their fault" except when he actually wanted something, and
made it happen (such as TPP).
We know that class and economic insecurity drove many white people to vote for Trump. That's
understandable. And now we are seeing a rise in hate incidents inspired by his victory. So obviously
there is a race component in his support as well. So, if you, white person, didn't vote for Trump
out of white supremacy, would you consider making a statement that disavows the acts of extremist
whites? Do you vow to stand up and help if you see people being victimized? Do you vow not to
stay silent when you encounter Trump supporters who ARE obviously in thrall to the white supremacist
siren call?
Agreed with the first but not the second. It's typical liberal identity politics guilt
tripping. That won't get you too far on the "white side" of Youngstown Ohio.
And I wouldn't worry about it. When I worked at the at the USX Fairless works in Levittown
PA in 1988, I was befriended by one steelworker who was a clear raving white supremacist racist.
(Actually rather nonchalant about about it). However he was the only one I encountered who was
like this, and eventually I figured out that he befriended a "newbie" like me because he had no
friends among the other workers, including the whites. He was not popular at all.
I've always thought that Class, not Race, was the Third Rail of American Politics, and that
the US was fast-tracking to a more shiny, happy feudalism.
Also suspect that the working-class, Rust-Belt Trump supporters will soon be thrown under
the bus by their Standard Bearer, if the Transition Team appointments are any indicator: e.g.
Privateers at SSA.
My wife teaches primary grades in an inner city school. She has made it clear to me over
the years that the challenges her children are facing are related to poverty, not race. She sees
a big correlation between the financial status of a family and its family structure (one or more
parents not present or on drugs) and the kids' success in school. Race is a minor factor.
She also makes it clear to me that the Somali/Syrian/Iraqi etc. immigrant kids are going to
do very well even though they come in without a word of English because they are working their
butts off and they have the full support of their parents and community. These people left bad
places and came to their future and they are determined to grab it with both hands. 40% of her
class this year is ENL (English as a non-native language). Since it is an inner city school, they
don't have teacher's aides in the class, so it is just one teacher in a class of 26-28 kids, of
which a dozen struggle to understand English. Surprisingly, the class typically falls short of
the "standards" that the state sets for the standardized exams. Yet many of the immigrant kids
end up going to university after high school through sheer effort.
Bullying and extreme misbehavior (teachers are actually getting injured by violent elementary
kids) is largely done by kids born in the US. The immigrant kids tend to be fairly well-behaved.
On a side note, the CSA at our local farmer's market said they couldn't find people to pick
the last of their fall crops (it is in a rural community so a car is needed to get there). So
the food bank was going out this week to pick produce like squash, onions etc. and we were told
we could come out and pick what we wanted. Full employment?
The problem with running on a class based platform in America is, well, it's America; and
in good ol' America, we are taught that anyone can become a successful squillionare – ya know,
hard work, nose-to-the-grindstone, blah, blah, blah.
The rags to riches American success fable is so ingrained that ideas like taxing the rich
a bit more fall flat because everyone thinks "that could be me someday. Just a few house flips,
a clever new app, that ten-bagger (or winning lottery ticket) and I'm there" ("there" being part
of the 1%).
The idea that anyone can be successful (i.e. rich) is constantly promoted.
I think this fantasy is beginning to fade a bit but the "wealth = success" idea is so deeply
rooted in the American psyche I don't think it will ever fade completely away.
I'm recalling (too lazy to find the link) a poll a couple years ago that showed the number
of American's identifying as "working class" increased, and the number as "middle class" decreased.
It is both. And it is a deliberate mechanism of class division to preserve power. Bill Cecil-Fronsman,
Common Whites: Class and Culture in Antebellum North Carolina identifies nine classes
in the class structure of a state that mixed modern capitalist practice (plantations), agrarian
YOYO independence (the non-slaveowning subsistence farms), town economies, and subsistence (farm
labor). Those classes were typed racially and had certain economic, power, and social relations
associated with them. For both credit and wages, few escaped the plantation economy and being
subservient to the planter capitalists locally.
Moreover, ethnic identity was embedded in the law as a class marker. This system was developed
independently or exported through imitation in various ways to the states outside North Carolina
and the slave-owning states. The abolition of slavery meant free labor in multiple senses and
the capitalist use of ethnic minorities and immigrants as scabs integrated them into an ethnic-class
system, where it was broad ethnicity and not just skin-color that defined classes. Other ethnic
groups, except Latinos and Muslim adherents, now have earned their "whiteness".
One suspects that every settler colonial society develops this combined ethnic-class structure
in which the indigenous ("Indians" in colonial law) occupy one group of classes and imported laborers
or slaves or intermixtures ("Indian", "Cape Colored" in South Africa) occupy another group of
classes available for employment in production. Once employed, the relationship is exactly that
of the slaveowner to the slave no matter how nicely the harsh labor management techniques of 17th
century Barbados and Jamaica have been made kinder and gentler. But outside the workplace (and
often still inside) the broader class structure applies even contrary to the laws trying to restrict
the relationship to boss and worker.
Blacks are not singling themselves out to police; police are shooting unarmed black people
without punishment. The race of the cop does not matter, but the institution of impunity makes
it open season on a certain class of victims.
It is complicated because every legal and often managerial attempt has been made to reduce
the class structure of previous economies to the pure capitalism demanded by current politics.
So when in a post Joe McCarthy, post-Cold War propaganda society, someone wants to protest
the domination of capitalism, attacking who they perceive as de facto scabs to their higher incomes
(true or not) is the chosen mode of political attack. Not standing up for the political rights
of the victims of ethnically-marked violence and discrimination allows the future depression of
wages and salaries by their selective use as a threat in firms. And at the individual firm and
interpersonal level even this gets complicated because in spite of the pressure to just be businesslike,
people do still care for each other.
This is a perennial mistake. In the 1930s Southern Textile Strike, some organizing was of both
black and white workers; the unions outside the South rarely stood in solidarity with those efforts
because they were excluding ethnic minorities from their unions; indeed, some locals were organized
by ethnicity. That attitude also carried over to solidarity with white workers in the textile
mills. And those white workers who went out on a limb to organize a union never forgot that failure
in their labor struggle. It is the former textile areas of the South that are most into Trump's
politics and not so much the now minority-majority plantation areas.
It still is race in the inner ring suburbs of ethnically diverse cities like St. Louis that
hold the political lock on a lot of states. Because Ferguson to them seems like an invasion of
the lower class. Class politics, of cultural status, based on ethnicity. Still called by that
19h century scientific racism terminology that now has been debunked - race - Caucasoid, Mongoloid,
Negroid. Indigenous, at least in the Americas, got stuck under Mongoloid.
You go organize the black, Latino, and white working class to form unions and gain power, and
it will happen. It is why Smithfield Foods in North Carolina had to negotiate a contract. Race
can be transcended in action.
Pretending the ethnic discrimination and even segregation does not exist and have its own problems
is political suicide in the emerging demographics. Might not be a majority, but it is an important
segment of the vote. Which is why the GOP suppressed minority voters through a variety of legal
and shady electoral techniques. Why Trump wants to deport up to 12 million potential US citizens
and some millions of already birthright minor citizens. And why we are likely to see the National
Labor Review Board gutted of what little power it retains from 70 years of attack. Interesting
what the now celebrated white working class was not offered in this election, likely because they
would vote it down quicker because, you know, socialism.
Your comment reminded me of an episode in Seattle's history.
Link . The
unions realized they were getting beat in their strikes, by scabs, who were black. The trick was
for the unions to bring the blacks into the union. This was a breakthrough, and it worked in Seattle,
in 1934. There is a cool mural the union commissioned by,
Pablo O'Higgins , to
celebrate the accomplishment.
Speaking of class, and class contempt , one must recall the infamous screed published
by National Review columnist Kevin Williamson early this year, writing about marginalised white
people here is a choice excerpt:
If you spend time in hardscrabble, white upstate New York, or eastern Kentucky, or my
own native West Texas, and you take an honest look at the welfare dependency, the drug and
alcohol addiction, the family anarchy - which is to say, the whelping of human children with
all the respect and wisdom of a stray dog - you will come to an awful realization. It wasn't
Beijing. It wasn't even Washington, as bad as Washington can be. It wasn't immigrants from
Mexico, excessive and problematic as our current immigration levels are. It wasn't any of that.
Nothing happened to them. There wasn't some awful disaster. There wasn't a war or a famine
or a plague or a foreign occupation. Even the economic changes of the past few decades do very
little to explain the dysfunction and negligence - and the incomprehensible malice - of poor
white America. So the gypsum business in Garbutt ain't what it used to be. There is more to
life in the 21st century than wallboard and cheap sentimentality about how the Man closed the
factories down.
The truth about these dysfunctional, downscale communities is that they deserve to die.
Economically, they are negative assets. Morally, they are indefensible. Forget all your cheap
theatrical Bruce Springsteen crap. Forget your sanctimony about struggling Rust Belt factory
towns and your conspiracy theories about the wily Orientals stealing our jobs. Forget your
goddamned gypsum, and, if he has a problem with that, forget Ed Burke, too. The white American
underclass is in thrall to a vicious, selfish culture whose main products are misery and used
heroin needles. Donald Trump's speeches make them feel good. So does OxyContin.
Now it's not too much of a stretch of the imagination to state that Williamson's animus can
be replicated amongst many of the moneyed elite currently pushing and shoving their way into a
position within the incoming Trump Administration. The Trump campaign has openly and cynically
courted and won the votes of white people similar to those mentioned in Williamson's article,
and who – doubtlessly – will be stiffed by policies vigourously opposed to their welfare that
will be enacted during the Trump years. The truly intriguing aspect of the Trump election is:
what will be the consequences of further degradation of the "lower orders' " quality of life by
such actions? Wholesale retreat from electoral politics? Further embitterment and anger NOT toward
those in Washington responsible for their lot but directed against ethnic and racial minorities
"stealing their jawbs" and "getting welfare while we scrounge for a living"? I sincerely doubt
whether the current or a reconstructed Democratic Party can at all rally this large chunk of white
America by posing as their "champions" the class divide in the US is as profound as the racial
chasm, and neither major party – because of internal contradictions – can offer a credible answer.
[In addition to the growing inequality and concomitant wage stagnation for the middle and working
classes, 9/11 and its aftermath has certainly has contributed to it as well, as, making PEOPLE
LONG FOR the the Golden Age of Managerial Capitalism of the post-WWII era,]
Oh yeah, I noticed a big ol' hankerin' for that from the electorate. What definition could
the author be using for Managerial Capitalism that could make it the opposite of inequality? The
fight for power between administration and shareholders does not lead to equality for workers.
[So this gave force to the idea that the government was nothing but a viper's nest full of
crony capitalist enablers,]
I don't think it's an 'idea' that the govt is crony capitalists and enablers. Ds need to get
away from emotive descriptions. Being under/unemployed, houseless, homeless, unable to pay for
rent, utilities, food . aren't feelings/ideas. When that type of language is used, it comes across
as hand waving. There needs to be a shift of talking to rather than talking about.
If crony capitalism is an idea, it's simply a matter for Ds to identify a group (workers),
create a hierarchy (elite!) and come up with a propaganda campaign (celebrities and musicians
spending time in flyover country-think hanging out in coffee shops in a flannel shirt) to get
votes. Promise to toss them a couple of crumbs with transfer payments (retraining!) or a couple
of regulations (mandatory 3 week severance!) and bring out the obligatory D fall back- it would
be better than the Rs would give them. On the other hand, if it's factual, the cronies need to
be stripped of power and kicked out or the nature of the capitalist structure needs to be changed.
It's laughable to imagine liberals or progressives would be open to changing the power and nature
of the corporate charter (it makes me smile to think of the gasps).
The author admits that politicians lie and continue the march to the right yet uses the ACA,
a march to the right, as a connection to Obama's (bombing, spying, shrinking middle class) likability.
[[But emphasizing class-based policies, rather than gender or race-based solutions, will achieve
more for the broad swathe of voters, who comprehensively rejected the "neo-liberal lite" identity
politics]
Oops. I got a little lost with the neo-liberal lite identity politics. Financialized identity
politics? Privatized identity politics?
I believe women and poc have lost ground (economic and rights) so I would like examples of
successful gender and race-based (liberal identity politics) solutions that would demonstrate
that identity politics targeting is going to work on the working class.
If workers have lost power, to balance that structure, you give workers more power (I predict
that will fail as unions fall under the generic definition of corporatist and the power does not
rest with the members but with the CEOs of the unions – an example is a union that block the members
from voting to endorse a candidate, go against the member preference and endorse the corporatist
candidate), or you remove power from the corporation. Libs/progs can't merely propose something
like vesting more power with shareholders to remove executives as an ameliorating maneuver which
fails to address the power imbalance.
[This is likely only to accelerate the disintegration of the political system and economic
system until the elephant in the room – class – is honestly and comprehensively addressed.]
For a thorough exposition of lower-class white America from the inception of the Republic to
today, a must-read is Nancy Isenberg's White Trash: The 400-Year Untold History of Class in
America . Poor or Poorer whites have been demonised since the founding of the original
Colonies, and were continuously pushed west to the frontiers by the ruling elites of New England
and the South as a way of ridding themselves of "undesirables", who were then left to their own
resources, and clung together for mutual assistance.
Thus became the economic and cultural subset of "crackers", "hillbillies", "rednecks", and
later, "Okies", a source of contempt and scorn by more economically and culturally endowed whites.
The anti-bellum white Southern aristocracy cynically used poor whites as cheap tenant farming,
all the while laying down race-based distinctions between them and black slaves – there is always
someone lower on the totem pole, and that distinction remains in place today. Post-Reconstruction,
the South maintained the cult of white superiority, all the while preserving the status of upper-class
whites, and, by race-based public policies, assured lower-class whites that such "superiority"
would be maintained by denying the black populations access to education, commerce, the vote,
etc. And today, "white trash", or "trailer trash", or poorer whites in general are ubiquitous
and as American as apple pie, in the North, the Midwest, and the West, not just the South. Let
me quote Isenberg's final paragraph of her book:
White trash is a central, if disturbing, thread in our national narrative. The very
existence of such people – both in their visibility and invisibility – is proof that American
society obsesses over the mutable labels we give to the neighbors we wish not to notice. "They
are not who we are". But they are who we are and have been a fundamental part of our history,
whether we like it or not".
Presenting a plan for the future, which has a chance to be supported by the electorate, must
start with scrupulous, unwavering honesty and a willingness to acknowledge inconvenient facts.
The missing topic from the 2016 campaigns was declining energy surpluses and their pervasive,
negative impact on the prosperity to which we feel entitled. Because of the energy cost of producing
oil, a barrel today represents a declining fraction of a barrel in terms of net energy. This is
the major factor in sluggish economic performance. Failing to make this case and, at the same
time, offering glib and vacuous promises of growth and economic revival, are just cynical exercises
in pandering.
Our only option is to mange the coming decline in a way that does not descend into chaos and
anarchy. This can only be done with a clear vision of causes and effects and the wisdom and courage
to accept facts. The alternative is yet more delusions and wishful thinking, whose shelf life
is getting shorter.
To be fair to the article, Marshall did in fact say:
"To be sure, Donald Trump did make a strong appeal to racists, homophobes, and misogynists
"
IMO the point Marshall is making that race was not the primary reason #DJT
won. And I concur.
This is borne out by the vote tallies which show that the number of R voters from 2012 to 2016
was pretty much on the level (final counts pending):
2016 R Vote: 60,925,616
2012 R Vote: 60,934,407
(Source:
US Election Atlas )
Stop and think about this for a minute. Every hard core racist had their guy this
time around; and yet, the R's could barely muster the same amount of votes as Mittens
in 2012. This is huge, and supports the case that other things contributed far more than just
race.
Class played in several ways:
Indifference/apathy/fatigue: Lambert posted some data from Carl Beijer on this yesterday in his
Clinton Myths piece yesterday.
Anger: #HRC could not convince many people who voted for Bernie that she was interested in his
outreach to the working class. More importantly, #HRC could not convince working class white
women that she had anything other than her gender and Trump's boorishness as a counterpoint
to offer.
Outsider v Insider: Working class people skeptical of political insiders rejected #HRC.
If black workers were losing ground and white workers were gaining, one could indeed claim
that racism is a problem. However, both black and white workers are losing ground – racism simply
cannot be the major issue here. It's not racism, it's class war.
The fixation on race, the corporate funding of screaming 'black lives matter' agitators, the
crude attempts to tie Donald Trump to the KKK (really? really?) are just divide and conquer, all
over again.
Whatever his other faults, Donald Trump has been vigorous in trying to reach out to working
class blacks, even though he knew he wouldn't get much of their vote and he knew that the media
mostly would not cover it. Last I heard, he was continuing to try and reach out, despite the black
'leadership' class demanding that he is a racist. Because as was so well pointed out here, the
one thing the super-rich fear is a united working class.
Divide and conquer. It's an old trick, but a powerful one.
Suggestion: if (and it's a big if) Trump really does enact policies that help working class
blacks, and the Republicans peel away a significant fraction of the black vote, that would set
the elites' hair on fire. Because it would mean that the black vote would be in play, and the
Neoliberal Democrats couldn't just take their votes for granted. And wouldn't that be a thing.
that was good for 2016. I will look to see if he has stats for other years. i certainly agree
that poor whites are more likely to be shot; executions of homeless people by police are one example.
the kind of system that was imposed on the people of ferguson has often been imposed on poor whites,
too. i do object to the characterization of black lives matter protestors as "screaming agitators";
that's all too reminiscent of the meme of "outside agitators" riling up the local peaceful black
people to stand up for their rights that was characteristically used to smear the civil rights
movement in the 60's.
I might not have much in common at all with certain minorities, but it's highly likely that
we share class status.
That's why the status quo allows identity politics and suppresses class politics.
Having been around for sometime, I often wonder what The Guardian is going on about in the
UK as it is supposed to be our left wing broadsheet.
It isn't a left I even recognised, what was it?
I do read it to try and find out what nonsense it is these people think.
Having been confused for many a year, I think I have just understood this identity based politics
as it is about to disappear.
I now think it was a cunning ploy to split the electorate in a different way, to leave the
UK working class with no political outlet.
Being more traditional left I often commented on our privately educated elite and private schools
but the Guardian readership were firmly in favour of them.
How is this left?
Thank god this is now failing, get back to the old left, the working class and those lower
down the scale.
It was clever while it lasted in enabling neoliberalism and a neglect of the working class,
but clever in a cunning, nasty and underhand way.
Thinking about it, so many of these recent elections have been nearly 50% / 50% splits, has
there been a careful analysis of who neoliberalism disadvantages and what minorities need to be
bought into the fold to make it work in a democracy.
Women are not a minority, but obviously that is a big chunk if you can get them under your
wing. The black vote is another big group when split away and so on.
Brexit nearly 50/50; Austria nearly 50/50; US election nearly 50/50.
So, 85% of Blacks vote Hillary against Sanders (left) and 92% vote Hillary against Trump (right),
but is no race. It's the class issue that sends them to the Clintons. Kindly explain how.
Funny think about likeability, likeable people can be real sh*ts. So I started looking into
hanging out with less likeable people. I found that they can be considerably more appreciative
of friendship and loyalty, maybe because they don't have such easy access to it.
Entertainment media has cautiously explored some aspect so fthis, but in politics, "nice" is
still disproportionately values, and not appreciated as a possible flag.
Watch out buddy. They are onto you. I have seen some comments on democratic party sites claiming
the use of class to explain Hillary's loss is racist. The democratic party is a goner. History
tells us the party establishment will move further right after election losses. And among the
activist class there are identity purity battles going on.
Watch as this happens yet again: "In most elections, U.S. politicians of both parties pretend
to be concerned about their issues, then conveniently ignore them when they reach power and implement
policies from the same Washington Consensus that has dominated the past 40 years." That is why
we need a strong third party, a reformed election system with public support of campaigns and
no private money, and free and fair media coverage. But it ain't gonna happen.
Well it certainly won't happen by itself. People are going to have to make it happen. Here
in Michigan we have a tiny new party called Working Class Party running 3 people here and there.
I voted for two of them. If the Democrats run somebody no worse than Trump next time, I will be
free to vote Working Class Party to see what happens.
Obviously, if the Democrats nominate yet another Clintonite Obamacrat all over again, I
may have to vote for Trump all over again . . . to stop the next Clintonite before it kills again.
"... when "capitalism" failed to remedy class inequity, in fact worked to cause it, propaganda took over and focused on all sorts of things that float around the edges of class like race, opportunity, civil rights, etc – but not a word about money. ..."
"... "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." ..."
"... "The reason the elites don't like class politics is that the class division that forms against their class, once organized, is large enough to take them on." ..."
"... Class divides the 99% from the small elite who lead both political parties. That makes it an explosive threat. I'm speaking of actual economic class, not the media BS of pork rinds and NASCAR versus brie and art museums. ..."
"... I've always maintained that Class is the real third rail of American politics, and the US is fast tracking to a shiny, prettified version of feudalism. ..."
"... There are two elephants in the room, class and technology. Both are distorted by those in power in order to ensure their continued rule. It seems to me the technology adopted by a society determines its class structure. ..."
"... Add to that HRC's neocon foreign policy instincts ..."
"... This goes beyond corruption. It is one thing to be selling public infrastructure construction contracts to crony capitalist contributors (in the Clintons' case do we call them philanthropists?) – entirely another to be selling guns and bombs used by Middle Eastern despots to grind down (IOW blow up, murder) opposition to their corrupt regimes. ..."
"... In fact, most of Western Civilization (sic?) seems to be happy with the status quo of a 'post-industrial' America as the "exceptional nation" whose only two functions are consuming the world's wealth and employing military Keynesianism to maintain a global social order based on money created ex nihilo by US and international bankers and financiers. ..."
"... What we are witnessing is a political crisis because the system is geared against the citizen. ..."
"... And journalists/media are complicit. Where is the cutting investigative journalism? There is none – the headlines should be screaming it. Thanks God (or whoever) for blogs like these. ..."
"... Sooo, they spent a generation telling the white worker that he was a racist, sexist bigot, mocking his religion, making his kids read "Heather Has Two Mommies" in school, and blaming him for economic woes caused in New York and DC. ..."
"... Tryng lately to get my terminology straight, and I think the policies you itemized should be labeled neoliberal, not liberal/progressive. Neoliberalism seems to be the one that combines the worst features of the private sector with the worst features of the public sector, without the good points of either one. ..."
when "capitalism" failed to remedy class inequity, in fact worked to cause
it, propaganda took over and focused on all sorts of things that float around
the edges of class like race, opportunity, civil rights, etc – but not a
word about money.
That's why Hillary was so irrelevant and boring. If class
itself (money) becomes a topic of discussion, the free-market orgy will be
seen as a last ditch effort to keep the elite in a class by themselves by
"trading" stuff that can just as easily be made domestically, and just not
worth the effort anymore.
Identity politics divides just as well as class politics. It simply divides
into smaller (less powerful) groups. The reason the elites don't like class politics is that the class division that forms against their
class, once organized, is large enough to take them on.
"The reason the elites don't like class politics is that the class
division that forms against their class, once organized, is large enough
to take them on."
I believe there is another aspect to the shift we are seeing, and it
is demographics.
Specifically deplorable demographics.
It should be noted that the deplorable generation, gen x, are very much a mixed racial cohort.
They have not participated in politics much because they have been under attack since they were
children. They have been ignored up to now.
Deplorable means wretched, poor.
This non participation is what has begun to change, and will accelerate for the next 20 years
and beyond.
Demographically speaking, with analysis of the numbers right now are approximately…
GEN GI and Silent Gen – 22,265,021
Baby Boomers 50,854,027
Gen X 90,010,283
Millenials 62,649,947 18 Years to 34
25,630,521 (12-17 Years old)
Total 88,280,468
Artist Gen 48,820,896 and growing…
* Using the Fourth Turning Cultural Demographic Measurement vs. the politically convenient,
MSM supported, propaganda demographics. They would NEVER do such a thing right? Sure.
Class divides the 99% from the small elite who lead both political parties.
That makes it an explosive threat. I'm speaking of actual economic class, not the media BS of pork rinds and NASCAR versus brie and
art museums.
Hi Yves – great post!
I've always maintained that Class is the real third rail
of American politics, and the US is fast tracking to a shiny, prettified version
of feudalism.
I suspect that the working-class Trump voters in the Rust Belt will eventually disappointed in their
standard bearer, Transition Team staffing is any indication: e.g. Privateers back at SSA.
In the post-Reconstruction South poor whites and blacks alike were the victims
of political and legal institutions designed to create a divided and disenfranchised
work force for the benefit of landlords, capitalists and corporations. Poor whites
as well as poor blacks were ensnared in a system of sharecropping and debt peonage.
Poll taxes, literacy tests and other voter restrictions disenfranchised blacks
and almost all poor whites creating an electorate dominated by a white southern
gentry class.
Martin Luther King, Jr. clarified this at the end of his address at the conclusion of the Selma March
on March 25, 1965.
…You see, it was a simple thing to keep the poor white masses working for near-starvation wages in
the years that followed the Civil War. Why, if the poor white plantation or mill worker became dissatisfied
with his low wages, the plantation or mill owner would merely threaten to fire him and hire former Negro
slaves and pay him even less. Thus, the southern wage level was kept almost unbearably low.
Toward the end of the Reconstruction era, something very significant happened. That is what was known
as the Populist Movement. The leaders of this movement began awakening the poor white masses and the
former Negro slaves to the fact that they were being fleeced by the emerging Bourbon interests. Not
only that, but they began uniting the Negro and white masses into a voting bloc that threatened to drive
the Bourbon interests from the command posts of political power in the South.
To meet this threat, the southern aristocracy began immediately to engineer this development of a segregated
society…. If it may be said of the slavery era that the white man took the world and gave the Negro
Jesus, then it may be said of the Reconstruction era that the southern aristocracy took the world and
gave the poor white man Jim Crow. He gave him Jim Crow. And when his wrinkled stomach cried out for
the food that his empty pockets could not provide, he ate Jim Crow, a psychological bird that told him
that no matter how bad off he was, at least he was a white man, better than the black man. And he ate
Jim Crow. And when his undernourished children cried out for the necessities that his low wages could
not provide, he showed them the Jim Crow signs on the buses and in the stores, on the streets and in
the public buildings. And his children, too, learned to feed upon Jim Crow, their last outpost of psychological
oblivion.
Thus, the threat of the free exercise of the ballot by the Negro and the white masses alike resulted
in the establishment of a segregated society. They segregated southern money from the poor whites; they
segregated southern mores from the rich whites; they segregated southern churches from Christianity;
they segregated southern minds from honest thinking; and they segregated the Negro from everything.
That's what happened when the Negro and white masses of the South threatened to unite and build a great
society: a society of justice where none would prey upon the weakness of others; a society of plenty
where greed and poverty would be done away; a society of brotherhood where every man would respect the
dignity and worth of human personality.
There are two elephants in the room, class and technology. Both are distorted
by those in power in order to ensure their continued rule. It seems to me the technology
adopted by a society determines its class structure.
So much of todays discussion revolves around justifying the inappropriate use of
technology, it seems inevitable that only a major breakdown of essential technological
systems will afford the necessary space to address growing social problems.
E.F. Schumacher addressed all this in the 70's with his work on appropriate technologies. Revisiting
the ideas of human scale systems offers a way to actively and effectively deal with todays needs while
simultaneously trying to change larger perspectives and understanding of the citizenry. While Schumacher's
work was directed at developing countries, the impoverishment of the working class makes it relevant
in the US today.
Addressing our technology question honestly will lead to more productive changes in class structure
than taking on the class issue directly. Direct class confrontation is violent. Adopting human scale
technology is peaceful. In the end what stands for a good life will win out. I'm working for human scale.
Thought experiment: If you opposed Clarence Thomas and Sarah Palin does that
make you a racist and a sexist?
Or, is it only when someone votes against a supposed liberal? And when Hillary
supported Cuomo over Teachout for NY Governor, none of her supporters labeled her
a Cuomobros.
Hillary received millions fewer votes than Obama because she was a seriously flawed candidate who
could not muster any excitement. The only reason she received 60 million is because she was running
against Trump. The play on identity politics was pure desperation.
"So this gave force to the idea that
the government was nothing but a viper's nest full
of crony capitalist enablers
, which in turn helped to unleash populism on the right (the
Left being marginalised or co-opted by their Wall Street/Silicon Valley donor class). And this
gave us Trump.
Add to that HRC's neocon foreign policy instincts
, which could have got
us in a war with Russia and maybe the American electorate wasn't so dumb after all."
I voted for Hillary, but it was not easy.
I agree that identity politics of the DNC variety have passed their pull date. Good riddance.
Here's another thought experiment: were voters who chose Obama over Hillary
in the 2008 primary sexists? Were Hillary's voters racists?
I don't think you give the Democratic establishment enough credit for obtuseness by characterizing
their identity politics play as "desperation". I have several sisters who were sucked in by Hillary's
"woman" card, and it made them less than receptive to hearing about her record of pay-for-play, proxy
warmongering, and baseless Russia-bashing.
And it turned people like me – who would choose a woman over a man, other things being equal –
into sexists for not backing Hillary (I voted for Stein).
Yes. If Hillary had been elected I felt like we would have been played by someone
who is corrupt and with no real interest in the working/middle class. We would
have slogged through another 4 years with someone who arrogantly had both a private
and public position and had no real interest in climate change (she was very pro
fracking), financial change (giving hour long $250,000 speeches to banks) or health
care (she laughed at the idea of single payer although that's what most people
want).
Sanders had opposite views on these 3 issues and would have been an advocate of real change which
is why he was so actively opposed by the establishment and very popular with the people as evidenced
by his huge rallies.
Trump was seen by many as the only real hope for some change. As mentioned previously we've already
seen 2 very beneficial outcomes of his being elected by things calming down with Syria and Russia and
with TPP apparently being dead in the water.
Another positive could be a change in the DOJ to go after white collar criminals of which we have
a lot.
Climate change is I think an important blind spot but he has shown the capacity to be flexible and
not as much of an ideologue as some. It's possible that as he sees some of his golf courses go under
water he could change his mind. It can be helpful if someone in power changes his mind on an important
issue as this can relate better to other doubters to come to the same conclusion.
Getting back to class I watched the 2003 movie Seabiscuit a few days ago. This film was set in the
depression period and had clips of FDR putting people back to work. It emphasized the dignity that this
restored to them. It's a tall order but I think that's what much of Trump's base is looking for.
Whilst I agree with the points made, there is a BIG miss for me.
Unless I missed it – where are the comments on corruption? This is not a partisan point of view,
but to make the issue entirely focussed on class misses the point that the game is rigged.
Holder, an Obama pick, unless I am mistaken, looked the other way when it came to investigating and
prosecuting miscreants on Wall Street. The next in line for that job was meeting Bill behind closed
so that Hillary could be kept safe. Outrageous.
The Democratic party's attempts to make this an issue about race is so obviously a crass attempt
at manipulation that only the hard of thinking could swallow it.
The vote for Trump was a vote against corrupt insiders. Maybe he will turn out to be the same.
To your point; dumbfounded that a country that proposes to be waging a "War on Drugs" pardons
home grown banking entities that laundered money for drug dealers.
If you or I attempted such foolishness – we'd be incarcerate in a heartbeat.
Monty Python (big fan), at it's most silly and sophomoric – could not write this stuff…
Yep – para 7. A bit of a passing reference to the embedded corruption
and payola for congress and the writing of laws by lobbyists.
And yes, war on drugs is pretty much a diversionary tactic to give the impression that the
rule of law is still in force. It is for you an me……. for the connected, corrupt, not so much!
This goes beyond corruption. It is one thing to be selling public infrastructure
construction contracts to crony capitalist contributors (in the Clintons' case
do we call them philanthropists?) – entirely another to be selling guns and
bombs used by Middle Eastern despots to grind down (IOW blow up, murder) opposition
to their corrupt regimes.
In fact, most of Western Civilization (sic?) seems
to be happy with the status quo of a 'post-industrial' America as the "exceptional
nation" whose only two functions are consuming the world's wealth and employing
military Keynesianism to maintain a global social order based on money created
ex nihilo by US and international bankers and financiers.
This conspiracy has emerged from the Podesta emails. It was Clinton conspiring with mainstream
media to elevate Trump and then tear him down. We have to now look at all the media who endorsed
Hillary as simply corrupt. Simultaneously, Hillary said that Bernie had to be ground down to the
pulp. Further leaked emails showed how the Democratic National Committee sabotaged Sanders' presidential
campaign. It was Hillary manipulating the entire media for her personal gain. She obviously did
not want a fair election because she was too corrupt.
What is very clear putting all the emails together, the rise of Donald Trump was orchestrated
by Hillary herself conspiring with mainstream media, and they they sought to burn him to the ground.
Their strategy backfired and now this is why she has not come out to to speak against the violence
she has manipulated and inspired.
It seems to be clear the Democratic Party needs to purge itself of the Clinton – Obama influence.
Is Sanders' suggestion for the DNC head a good start or do we need to look elsewhere?
What are are getting now are attempts by the Dems (and let me state here I am not fan of the
Repubs – the distinction is a false one) to point to anything other than the problem that is right
in front of them.
What we are witnessing is a political crisis because the system is geared against the citizen.
And journalists/media are complicit. Where is the cutting investigative journalism? There is
none – the headlines should be screaming it. Thanks God (or whoever) for blogs like these.
There has been a coup I believe. The cooperation and melding of corporate and political power,
and the interchange of power players between the two has left the ordinary person nowhere to go.
This is not a left vs right, Dem vs Repub argument. Those are distinctions are there to keep us
busy and to provide the illusion.
Chris Hedges likend politics to American Pro Wrestling – that is what we are watching!
The idea that a guy who ran casinos in New Jersey, and whose background was
too murky to get a casino license in Nevada, will be the one to clean up corruption
in DC is a level of gullibility beyond my comprehension.
a lot of people out there need 10 baggers. I sure do.
Why work? I mean really. It sucks but what's your choice? The free market solution is to kill yourself
- that's what slaves could have done. If you don't like slavery, then just kill yourself! Why complain?
You're your own boss of "You Incorporated" and you can choose who to work for! Even nobody.
the 10-bagger should be just for billionaires. Even a millionaire has a hard time because there's
only so much you can lose before you're not a millionaire. Then you might have to work!
If most jobs didn't suck work wouldn't be so bad. That's the main thing, make jobs that don't suck
so you don't drown yourself in tattoos and drugs. It's amazing how many people have tattoos. Drugs are
less "deplorable" haha. Some are good - like alcohol, Xanax, Tylenol, red wine, beer, caffeine, sugar,
donuts, cake, cookies, chocolate. Some are bad, like the shlt stringy haired meth freaks take. If they
had good jobs it might give them something better to do,
How do you get good jobs and not shlt jobs? That's not entirely self evident. In the meantime, the
10 bagger at least gets you some breathing room so you can think about it. Even if you think for free,
it's OK since you don't have to work. Working gets in the way of a lot of stuff that you'd rather be
doing. Like nothing,
The amazing thing is this: no matter how much we whinge, whine, bitch moan, complain, rant, rail,
fulminate, gripe, huarrange (that mght be speled wrong), incite, joculate, kriticize, lambaste, malign,
naysay, prevaricate, query, ridicule, syllogize, temporize, ululate (even Baudelaire did that I red
on the internet), yell and (what can "Z" be? I don't want to have to look something up I'm too lazy,
how about "zenophobiasize" hahahahahahahah,
The amazing thing is: million of fkkkers want to come here and - get this! - THEY WON'T COMPLAIN
ABOUT ANY OF THE SHT WE DO!
""By making him aware he has more in common with the black steel workers by
being a worker, than with the boss by being white."
Sooo, they spent a generation telling the white worker that he was a racist, sexist bigot, mocking
his religion, making his kids read "Heather Has Two Mommies" in school, and blaming him for economic
woes caused in New York and DC.
Actually, too many white workers are racist, sexist, and think everyone is
a rabid Christian just like them. I ought to know because I live in red rural
Pennsylvania. I'm not mocking you folks, but I am greatly pissed off that you
just don't mind your own damn business and stop trying to force your beliefs
on others. And I don't want to hear that liberals are forcing their beliefs
on others; we're just asking you follow our laws and our Constitution when it
comes to liberty and justice for all.
And for every school that might have copies of "Heather Has Two Mommies," I can give you a giant
list of schools that want to ban a ton of titles because some parent is offended. One example is
the classic "Brave New World" by Aldus Huxley. "Challenged in an Advanced Placement language composition
class at Cape Henlopen High School in Lewes, Del. (2014). Two school board members contend that while
the book has long been a staple in high school classrooms, students can now grasp the sexual and
drug-related references through a quick Internet search." Source: Newsletter on Intellectual Freedom,
May 2014, p. 80.
Quick internet search, my ass. Too many conservatives won't even use the internet to find real
facts because that would counter the right-wing meme.
And for every school that might have copies of "Heather Has Two Mommies,"
I can give you a giant list of schools that want to ban a ton of titles
because some parent is offended.
And for every liberal/progressive politician, I can give a you basket of shitty policies, such
as charter schools, shipping jobs overseas, cutting social security, austerity, the grand bargain,
Obamacare, drones, etc.
Great. So the library has a copy of "Heather Has Two Mommies." Or not. Who cares? The United
Colors of Benetton worldview doesn't matter a fig when I'm trying to pay for rising health care,
rent, College education, retirement costs, etc.
Tryng lately to get my terminology straight, and I think the policies
you itemized should be labeled neoliberal, not liberal/progressive. Neoliberalism
seems to be the one that combines the worst features of the private sector
with the worst features of the public sector, without the good points
of either one.
It seems to me that you're referencing a certain historical model
of "liberal" that doesn't, nay, cannot exist anymore. A No-True-Scotsman
fallacy, as I see it.
We can only deal with what we have in play, not some pure historical
abstraction.
But for the sake of argument, let's say that a distinction can be made between neoliberal
and "real" liberalism. Both entities, however you want to differentiate/describe them, serve
as managers to capital. In other words, they just want to manage things, to fiddle with
the levers at the margin.
We need a transfer of power, not a new set of smart managers.
The right has spent a generation supporting rabidly bigoted media like Rush
Limbaugh and Fox News making sure the white working class blame all their ills
on immigrants, minorities, feminists and stirring up a Foaming Outrage of the
Week at what some sociology professor said at a tiny college somewhere.
Kiss up, kick down authoritarianism. It's never the fault of the people with all the money and
all the power who control their economic lives.
"... Earning your living in finance or the related co-dependent fields such as economics, business management, certain areas of law and, most especially, information technology, you quickly pick up on the cult mentality that pervades it. ..."
"... When, like so many of us, you're desperate to try to cling onto some semblance of middle class status, you're an easy and, although I'd strongly qualify this statement, understandable, target for buying into the group-think. ..."
"... " Markets " do not " demand " anything. ..."
"... But a "market" can - at the very most, through the use of pricing signals - induce actors to consider entering into a transaction. ..."
"... They provided credit to low income customers because it was insanely profitable. The reason it was insanely profitable was that the loans to the low income customers could be securitised and the commissions the banks earned on the sale of those securities paid for massive bonus pools which directly benefitted bank employees. ..."
"... Yes, I'd always be the first to agree with the proverb "In Heaven you get justice, here on Earth we have the law". The law and our legal systems are not perfect. But they are not that shabby either. ..."
"... If it is regulatory interventions, rather than criminal indictments, that the Streetwise Professor is referring to, the banks can and do leave no political stone unturned in their efforts to water down, delay and neuter regulatory bodies. Look , if you can do so without wincing, at what has happened to the SEC. ..."
"... It wasn't a " pre-crisis political bargain " that caused the Global Financial Crisis. It was financial innovation that was supposed to "free" the financial services industry to allow it to soar to ever greater heights, heights that couldn't be reached with cumbersome "legacy" thinking. If that sounds a lot like Mike Hearn's Blockchain justifications, it's because it is exactly the same thing. ..."
"... Innovation must never be viewed only through separate, disconnected lenses of "technology", "politics", "ethics", "economics", "power relationships" and "morality". Each specific innovation is subject to and either lives or dies by the interplay between these forces." ..."
"... I agree - however, "I don't mind people doing dangerous things" should require a little elucidation. What you likely meant to say was you don't mind people doing dangerous things, WITHIN REASON. ..."
"... Also, there is the rank unwillingness on the part of regulators to, you know, actually do their jobs. I can no longer count the number of times Yellen has sat in front of the Senate banking committee like a deer in headlights ..."
"... Excellent points, I thought that the Bush Wars were initiated to alleviate an oncoming recession as well as ensure W's reelection ..."
"... It did take them a while to get the pieces in place, the Banksters Real Estate Fraud Appraisals were identified as early as 2000, then the Banksters Fraudulent Loans peaked in 2006, and then we had the Banksters Fraudulent Reps and Warranties . ..."
"... Ah, the neo-liberals and the libertarians make their arguments by redefining terms and eliding facts. Once the audience agrees that up is down, why then their arguments are reasonable, dispassionate, and offered in dulcet tones of humble sincerity and objectivity. ..."
"... What a pleasure, then, to read your cold water smack-down of their confidence game. Perhaps they believed their own nonsense. Who knows. ..."
"... A third consequence of modern-day liberals' unquestioning, reflexive respect for expertise is their blindness to predatory behavior if it comes cloaked in the signifiers of professionalism. ..."
"... The difference in interpretation carries enormous consequences: Did Wall Street commit epic fraud, or are they highly advanced professionals who fell victim to epic misfortune? modern day liberals pretty much insist on the later view . Wall Street's veneer of professionalism is further buttressed by its technical jargon, which the financial industry uses to protect itself from the scrutiny of the public ..."
Earning your living in finance or the related co-dependent fields such as economics, business
management, certain areas of law and, most especially, information technology, you quickly pick up
on the cult mentality that pervades it.
When, like so many of us, you're desperate to try to cling onto some semblance of middle class
status, you're an easy and, although I'd strongly qualify this statement, understandable, target
for buying into the group-think. Or at least going along with it on the promise of continued
employment. While I'm letting myself off the hook in the process, I think that's forgivable. I and
others like me need the money. Besides, in our spare time, we might try to atone for our misdeeds
by using whatever means we have available, such as contributing to Naked Capitalism in whatever way
we can, to try to set the record straight.
Not quite so easily forgivable, though, are the members of an altogether different cadre who don't
give the impression of having to live paycheck to paycheck. What is it that motivates them? Why do
they willingly devise clever - and, I have to say it, some are exceptionally adept - ruses to defend
and further the causes of our élites?
... ... ...
As readers with not-so-long memories will recall, in the run-up to the Global Financial Crisis,
the TBTFs did indeed exercise the " FU Option ". As asset prices for the securities they held
fell precipitously, they held more and more of those assets on their balance sheets, refusing to
- or unable to - off-load them into a market that was shunning them. Eventually their capital cushions
were so depleted because of this, they became insolvent. Staring catastrophe in the face, governments
were put into a double-bind by the TBTFs: Rescue us through bail-outs or stand by and see our societies
suffer major collateral damage (bank runs, a collapse of world trade, ruining of perfectly good and
solvent businesses with the likelihood of mass unemployment and civil unrest).
In that situation, who was the " U " who was being " F "'ed? It was governments
and the public.
Faced with an asymmetry of power, in a reverse of the scenario painted by the Streetwise Professor
for OTC trading (where a notional seller tells a theoretical buyer they can go to Hell if they don't
want to pay the price the seller is asking), governments - and us - found themselves on the buy-side
of an " FU Option ". "F the-rest-of-us By Necessity" was a better description as we were
turned into forced buyers of what no other "market participant" would touch.
My dear Professor, allow me to give you , if I may risk the label of being impudent,
a lesson. If I am selling my prized Diana, Princess of Wales tea cups in a yard sale and you make
me a offer for them, that - I'm sure we'd agree on this point - is an OTC transaction. There's no
exchange (mercifully) for Diana, Princess of Wales tea cups. I put a price sticker on them. If you
want them, you pay the price I'm asking. Or else, you make me a different offer. If you don't pay
the price I want, or I don't accept the price you're offering, we do, indeed, have a genuine "
FU Option " scenario. But if instead my mother-in-law threatens to saw your face off with her
cheese grater if you don't buy my Diana, Princess of Wales tea cups at the price shown on the sticker,
then we no longer have an OTC transaction. We have extortion. See the difference?
That's not all. The piece discusses the differences between a proposed smart-contract based settlement
compared with a centralised counterparty which brings up some very valid points. But then it makes
a serious blunder which is introduced with some subtly but is all the more dangerous because of it.
I'll highlight the problem:
So the proposal does some of the same things as a CCP, but not all of them, and in fact omits
the most important bits that make central clearing central clearing. To the extent that these other
CCP services add value–or regulation compels market participants to utilize a CCP that offers these
services–market participants will choose to use a CCP, rather than this service. It is not a perfect
substitute for central clearing, and will not disintermediate central clearing in cases where the
services it does not offer and the functions it does not perform are demanded by market participants
, or by regulators.
Did you catch what is the most troubling thing in that paragraph? The technicalities of it are
fine, but the bigger framing is perilous. "Market participants" is given agency. And put on the same
level as actions taken by regulators. This is at best unintentionally misleading and at worse an
entirely deliberate falsehood.
The fallacious thinking which caused it is due to a traditional economist's mind-set. But this
mind-set is hopelessly wrong and every time we encounter it, we must challenge it. Regardless of
what other progressive goodies it is being bundled up with.
" Markets " do not " demand " anything.
A regulator or central bank can demand that a bank hold more capital and open its books
to check the underlying asset quality. The CFPB can demand that Wells Fargo stops opening fake accounts.
Even I can demand a pony. The power structures, laws, enforcement and levels of trust (to name the
main constraints) governing who is demanding what from whom determine how likely they will be to
have their demands met.
But a "market" can - at the very most, through the use of pricing signals - induce actors
to consider entering into a transaction. The pricing signal cannot make any potential
actor participate in that transaction. Not, probably, that it would have helped her much, but Hillary
Clinton could have created a market for left-wing bloggers to shill for Obamacare by offering Lambert
$1million to start churning out pro-ACA posts on his blog. But that market which Hillary could create
could not "demand" Lambert accept her offer. Lambert would not take that, or any other monetary amount,
and would never enter such a transaction. Markets have limits.
Whether unintentionally or by design, we have a nice example of bait and switch in the Streetwise
Professor's Blockchain article. If you run a critique of Blockchain, you'll likely attract an anti-libertarian
audience. It's a classic example of
nudge theory . If you can
lure readers in with the promise of taking a swipe at disruptive innovation nonsense but then lead
them to being suckered into a reinforcement of failed conventional free-market hogwash, that can
be a powerful propaganda tool.
But perhaps the Blockchain feature was an aberration, just a one-off? No.
Take, for example, this feature
on Deutsche Bank from earlier this month which I'll enter as Exhibit B - It's not the TBTFs Fault,
the Regulators / Governments / Some Guy / Made Us Do It
I'll leave the worst 'til last, but for now let's start with this little treasure:
the pre-crisis political bargain was that banks would facilitate income redistribution
policy by provide credit to low income individuals. This seeded the crisis (though like any complex
event, there were myriad other contributing causal factors), the political aftershocks of which
are being felt to this day. Banking became a pariah industry, as the very large legal settlements
extracted by governments indicate.
No, Streetwise Professor, banks did not provide credit to low income individuals as part of some
"political bargain". They provided credit to low income customers because it was insanely profitable.
The reason it was insanely profitable was that the loans to the low income customers could be securitised
and the commissions the banks earned on the sale of those securities paid for massive bonus pools
which directly benefitted bank employees.
Almost unimaginable wealth could be generated by individuals (the Naked Capitalism archive details
the full sordid story of the likes of Magnetar). The fact that this would all blow up eventually
was certainly predicable and even known by many actors in the prevailing milieu but they didn't care.
They knew they'd have already set themselves up for life financially even after just a few years
in that "game". Politics, for once, had nothing to do with it, save perhaps that regulators, which
are the politicians' responsibility, should have been better able to spot what was going on.
But the Streetwise Professor is only just getting started with the counterfactual misinformation:
It is definitely desirable to have mechanisms to hold financial malfeasors accountable,
but the Deutsche episode illustrates several difficulties. The first is that even the biggest
entities can be judgment proof, and imposing judgments on them can have disastrous economic externalities.
Another is that there is a considerable degree of arbitrariness in the process, and the results
of the process. There is little due process here, and the risks and costs of litigation mean that
the outcome of attempts to hold bankers accountable is the result of a negotiation between the
state and large financial institutions that is carried out in a highly politicized environment
in which emotions and narratives are likely to trump facts. There is room for serious doubt about
the quality of justice that results from this process.
A casual skim could leave the reader with the impression that the Streetwise Professor is lamenting,
rightly, the persistency of the TBTF model. But there's something really dastardly being concocted
here - the notion that in our societies, the rule of law is always and inevitably fallible and not
fit for the purpose of bringing errant TBTFs to justice. And that, if a case is brought against a
TBTF like Deutsche, then it can't help but become a political football.
Yes, I'd always be the first to agree with the proverb "In Heaven you get justice, here on
Earth we have the law". The law and our legal systems are not perfect. But they are not that shabby
either. Any quick parse through the judgments which the U.S. Supreme Court, the U.K. Supreme
Court or the European Court of Justice (to name only a few) hand down on complex cases - often running
to hundreds or even a thousand pages - demonstrates that courts can and do consider fairly and justly
the evidence that prosecutors present and make balanced rulings. And banks can utilize the same legal
safeguards that the law provides - they're not likely to be short of good legal advice options. Trying,
as the Steetwise Professor does, to claim that the TBTFs can't get justice is an insult to our judicial
systems and acceptance of this notion followed by any routine repetition serves to undermine faith
in the rule of law.
If it is regulatory interventions, rather than criminal indictments, that the Streetwise Professor
is referring to, the banks can and do leave no political stone unturned in their efforts to water
down, delay and neuter regulatory bodies.
Look , if you can do so without wincing, at
what has happened to the SEC.
It wasn't a " pre-crisis political bargain " that caused the Global Financial Crisis. It was
financial innovation that was supposed to "free" the financial services industry to allow it to soar
to ever greater heights, heights that couldn't be reached with cumbersome "legacy" thinking. If that
sounds a lot like Mike Hearn's Blockchain justifications, it's because it is exactly the same thing.
In summary, when you throw brickbats at a fellow blogger, it seems to me that you have a moral
obligation to put your cards on the table, to explain your motivations. I don't have to write for
a living ("just as well", I hear forbearing readers shout back). I don't take a penny from Naked
Capitalism's hard-wrung fundraisers, although Yves has generously offered a very modest stipend in
line with other contributors, I cannot conscientiously take anything for what I submit. I write in
the hope that I have some small insights that would help to undo some of the damage which big finance
has done to our cultures, our shared values and our aspirations for what we hope the future will
be for us and others.
That's what motivates me, anyway. After reading his output, I'm really still not at all sure what
is motivating the Streetwise Professor. Certainly there is nothing at all to suggest that he is interested
in rebuking or revising any of the traditional thought-forms which pass for the so-called science
of economics. Conventional economic theory is the ultimate in betrayal of the use of rational methodology
to provide air-cover for élite power grabs. It'll take more than a refutation of Blockchain spin
to convince me that the Streetwise Professor is ready to kick away the more odious ladders - like
being a professional economist - that have given him the leg-ups to the lofty perch he enjoys occupying.
About Clive
Survivor of nearly 30 years in a TBTF bank. Also had the privilege of working in Japan,
which was great, selling real estate, which was an experience bordering on the psychedelic.
View all posts by Clive →
I disagree on the first bit. Even at this blog, Yves mentiones not quite rarely the dangers
of tight coupling. The central exchanges create exactly that. Yes, the FU option of OTC is dangerous.
But then, everything is dangerous, and if I have to choose between tight coupling dangerous option
and loose coupling one, I'll chose the lose coupling one.
The problem is that the regulators refused to recognise that the institutions gamed the regulations
– moving stuff from trading to banking books. It is recognised now, under the new regulation,
although I still have some doubts about its effectivness.
To me all the para says is: markets demand services, and CCP don't offer them – and don't have
to. Regulators demand services (to be offered by CCP), and CCP deliver.
And sorry, I also disagree with your "markets participants demand". The text says "services
[ ] are demanded [by potential clients and by regulators]". I can't honestly see what's the problem
with that. Of course, regulatory demand, and a client demand are two different things – the former
you ignore at your peril, the second you can ignore to your heart's content.
But markets (or, I'd say agents that want to purchase – or sell) _always_ demand something,
and always offer something – otherwise there would not be any market or exchange of services (it
doesn't have to be there even with offer and demand, but in the absence of one it definitely won't
be there).
You could happily change the word to "require" "want" etc. and the meaning of the para would
remain unchanged.
The problem I had with the notion that OTC reduces tight coupling is that it gives the appearance
of reducing tight couple but doesn't actually do this. While "the market" is functioning within
its expected parameters, OTC is less tightly coupled than an Exchange. But as we saw first-hand
in the GFC, those markets function, right up until the point where they don't. By continuing to
function, or certainly giving the appearances of continuing to be functioning, they hide the stresses
which are building up within them but no-one can see. Unless you are deeply plumbed in to the
day-to-day operational activities of the OTC market and can spot signs - and that's all they are,
signs, you don't get to take a view of the whole edifice - you simply don't have a clue. There
were, at most, only a couple of dozen people in the organisation itself and outside it who knew
that my TBTF was a day away from being unable to open for business. That was entirely down to
information asymmetry and that asymmetry was 100% down to OTC prevalence.
And all the while TBTF isn't fixed, then as soon as the OTC market(s) fall off a cliff, the
public provision backstops can be forced to kick in. Yes, everything is dangerous. I don't mind
people doing dangerous things. But I do mind an awful lot being asked to pick up the pieces when
their dangerous things blow up in their faces and they expect me to sort the mess out. If that
is the dynamic, and to me, it most definitely is, then I want the actors who are engaged in the
dangerous things to be highly visible, I want them right where I can see them. Not hiding their
high-risk activities in an OTC venue that I'm not privy to.
And I stick by my objection to the - what I can't see how it isn't being deliberate - fuzziness
or obfuscation about who gets to "demand" and who is merely allowed "invite" parties to a transaction
to either perform or not perform of their own volition. This isn't an incidental semantic about
vocabulary. It goes to the heart of what's wrong with the Streetwise Professor's assessment of
innovation.
Innovation must never be viewed only through separate, disconnected lenses of "technology",
"politics", "ethics", "economics", "power relationships" and "morality". Each specific innovation
is subject to and either lives or dies by the interplay between these forces. My biggest lambaste
of the Streetwise Professor's commentaries is that he examines them only in terms of "technology"
and "economics". In doing so, he reaches partial and inaccurate conclusions.
A 10 year old child might "demand", "require", "ask for", "insist", "claim a right to have"
(use whatever word or phrase you like there) a gun and live ammunition. But they are not, and
should not be, permitted to enter into a transaction to obtain the said gun and ammo based only
on the availability of the technology and the economics that would allow them to satisfy the seller's
market clearing sale price if they saved their pocket money for a sufficient amount of time. The
other forces I listed in my above paragraph are also involved, and just as well.
"Innovation must never be viewed only through separate, disconnected lenses of "technology",
"politics", "ethics", "economics", "power relationships" and "morality". Each specific innovation
is subject to and either lives or dies by the interplay between these forces."
Very well said. I would argue further that "power relationships" structure how all the other
lenses actually operate. In the early sixteenth century the power relationship between the Church,
and Martin Luther, was such that the latter had an opening to redefine "morality"– in such a way
that the Pope's moral opinion was eventually no longer dispositive for Protestants.
In other words, the French invasion of Italy, late in the fifteenth century, weakened the papal
states enough to allow for defiance.
That last sentence, is of course a gross over-simplification! Anyone wishing to know the nitty-gritty
details of how foreign domination over the Italian peninsula was established by the middle of
the sixteenth century should read Machiavelli and Guicciardini.
The latter author's appeal to skepticism, when interpreting the actions and motivations of
powerful people, rings very true five centuries later:
" perché di accidenti tanto memorabili si intendino i consigli e i fondamenti; i quali spesso
sono occulti, e divulgati il più delle volte in modo molto lontano da quell che è vero."
"Yes, everything is dangerous. I don't mind people doing dangerous things. But I do mind an
awful lot being asked to pick up the pieces when their dangerous things blow up in their faces".
I agree - however, "I don't mind people doing dangerous things" should require a little
elucidation. What you likely meant to say was you don't mind people doing dangerous things, WITHIN
REASON.
And let's face it, much of the prior GFC behaviour was unreasonably dangerous. As it turned
out, not that dangerous to its perpetrators .
Danger, like risk, is a cost-benefit calculation. When that calculation ONLY includes benefits
for its originator & suppresses any (real & calculatable) cost for the community it's already
looking suspiciously like an unreasonable danger .
The problem is that the regulators refused to recognise that the institutions gamed the
regulations – moving stuff from trading to banking books. It is recognised now, under the new
regulation, although I still have some doubts about its effectivness.
Also, there is the rank unwillingness on the part of regulators to, you know, actually
do their jobs. I can no longer count the number of times Yellen has sat in front of the Senate
banking committee like a deer in headlights as Warren tries to get her to give anything like
a straight answer as to why, to this day, many if not most TBTFs have no rapid selloff/solvency
plan (which is required by the Dodd-Frank law) or why those banks that fail their stress tests
(again and again) suffer no consequences as a result.
How is any of this supposed to work when so many are clearly acting in bad faith?
Earning your living in finance or the related co-dependent fields such as economics, business
management, certain areas of law and, most especially, information technology, you quickly
pick up on the cult mentality that pervades it.
If you do not subscribe to the "cult mentality," although I'd prefer to call it a dogma, because
it is a unswerving belief in an unproven fact in the face of evidence the fact is not only unproven,
but wrong, one is "not a team player" and then penalized.
If these libertarian want "open markets" and innovation they have to shed the human response
to proof. In their behavior they are no better than the medieval pope, and his court, who did
not want to believe a the earth travels around the sun.
Medieval popes were probably more open to Pythagorean/Copernican cosmologies than early 17th
century Jesuits (i.e. Bellarmine); the opposition of the latter to Galileo had nothing to do with
science and everything to do with Protestantism and Protestant biblical interpretation. Bellarmine
was wrong and what happened to Galileo was shameful. But many of the best astronomers of the time
were in fact Jesuits, and the traditional way the story is told is inaccurate on almost every
level (and a product of late 19th century Italian nationalism).
this was very interesting stuff. Since a lot of things were coming together in the 90s and
2000s that were all connected in a mess too big to understand simply as immoral banking (freeing
up capital like that was crazy but there must have been a reason to try it besides windfall profiteering
and flat-out gambling), I imagine the following: Greenspan and the TBTFs knew returns were diminishing
and set out to do something about it. Because growth and expanding markets were the only thing
that could keep up with a demand by pension funds (and then little Bush's idiotic war) for a minimum
8% return. But growth was slowing down so the situation required clever manipulations and incomprehensible
things like financial derivatives. Makes sense to me. And if this is even partially true then
there was a political mandate all mixed up with the GFC. The banks really did crazy stuff, but
with the blessing of the Fed. Later when Bernanke said about QE and nirp: "now we are in uncharted
territory" he was fibbing – the Fed had been in uncharted territory, trying to make things work,
for almost 20 years. And failing.
Excellent points, I thought that the Bush Wars were initiated to alleviate an oncoming
recession as well as ensure W's reelection
It did take them a while to get the pieces in place, the Banksters Real Estate Fraud Appraisals
were identified as early as 2000, then the Banksters Fraudulent Loans peaked in 2006, and then
we had the Banksters Fraudulent Reps and Warranties .
WORSE then a bunch of Used Car Salesman, but what else would you expect from people who KEEP
the State Income taxes withheld from their employees checks
This bug can manifest itself for arrays whose length (in elements) is 230 or greater (roughly
a billion elements). This was inconceivable back in the '80s, when Programming Pearls was written,
but it is common these days at Google and other places. In Programming Pearls, Bentley says
"While the first binary search was published in 1946, the first binary search that works correctly
for all values of n did not appear until 1962." The truth is, very few correct versions have
ever been published, at least in mainstream programming languages.
Sorting is, or ought to be, basic blocking and tackling. Very smart, not corrupt people worked
on this. And yet, 2006 – 1946 = 60 years later, bugs are still being discovered.
The nice thing about putting your cash in a coffee can in the back yard is that it won't evaporate
because some hacker gets clever about big numbers.
Ah, the neo-liberals and the libertarians make their arguments by redefining terms and
eliding facts. Once the audience agrees that up is down, why then their arguments are reasonable,
dispassionate, and offered in dulcet tones of humble sincerity and objectivity.
What a pleasure, then, to read your cold water smack-down of their confidence game. Perhaps
they believed their own nonsense. Who knows.
What is the Streetwise Professor's (note the word "professor") real view? Has he thought much
about it or simply imbibed his "owners'" views, making him a useful tool. I don't know.
From the book "Listen, Liberal."
" A third consequence of modern-day liberals' unquestioning, reflexive respect for expertise
is their blindness to predatory behavior if it comes cloaked in the signifiers of professionalism.
Take the sort of complexity we saw in the financial instruments that drove the last financial
crisis. For old-school regulators, I am told, undue financial complexity was an indication of
likely fraud. But for the liberal class, it is the opposite: an indicator of sophistication. Complexity
is admirable in its own right. The difference in interpretation carries enormous consequences:
Did Wall Street commit epic fraud, or are they highly advanced professionals who fell victim to
epic misfortune? modern day liberals pretty much insist on the later view . Wall Street's veneer
of professionalism is further buttressed by its technical jargon, which the financial industry
uses to protect itself from the scrutiny of the public. "
-Thomas Frank
"... The angry and disaffected are victims of the neoliberal policies of the past generation, the policies described in congressional testimony by Fed chair Alan Greenspan ..."
"... As Greenspan explained during his glory days, his successes in economic management were based substantially on "growing worker insecurity." Intimidated working people would not ask for higher wages, benefits, and security but would be satisfied with the stagnating wages and reduced benefits that signal a healthy economy by neoliberal standards. ..."
"... in 2007, at the peak of the neoliberal miracle, real wages for non-supervisory workers were lower than they had been years earlier, or that real wages for male workers are about at 1960s levels while spectacular gains have gone to the pockets of a very few at the top, disproportionately a fraction of 1%. Not the result of market forces, achievement, or merit, but rather of definite policy decisions, matters reviewed carefully by economist Dean Baker in recently published work. ..."
According to current information, Trump broke all records in the support he received from white voters,
working class and lower middle class, particularly in the $50,000 to $90,000 income range, rural
and suburban, primarily those without college education. These groups share the anger throughout
the West at the centrist establishment, revealed as well in the unanticipated Brexit vote and the
collapse of centrist parties in continental Europe. The angry and disaffected are victims of the
neoliberal policies of the past generation, the policies described in congressional testimony by
Fed chair Alan Greenspan – St. Alan as he was called reverentially by the economics profession and
other admirers until the miraculous economy he was supervising crashed in 2007-8, threatening to
bring the whole world economy down with it. As Greenspan explained during his glory days, his successes
in economic management were based substantially on "growing worker insecurity." Intimidated working
people would not ask for higher wages, benefits, and security but would be satisfied with the stagnating
wages and reduced benefits that signal a healthy economy by neoliberal standards.
Working people who have been the subjects of these experiments in economic theory are, oddly,
not particularly happy about the outcome. They are not, for example, overjoyed at the fact that
in
2007, at the peak of the neoliberal miracle, real wages for non-supervisory workers were lower than
they had been years earlier, or that real wages for male workers are about at 1960s levels while
spectacular gains have gone to the pockets of a very few at the top, disproportionately a fraction
of 1%. Not the result of market forces, achievement, or merit, but rather of definite policy decisions,
matters reviewed carefully by economist Dean Baker in recently published work.
The fate of the minimum wage illustrates what has been happening. Through the periods of high
and egalitarian growth in the '50s and '60s, the minimum wage – which sets a floor for other wages
– tracked productivity. That ended with the onset of neoliberal doctrine. Since then the minimum
wage has stagnated (in real value). Had it continued as before, it would probably be close to $20
per hour. Today it is considered a political revolution to raise it to $15.
With all the talk of near-full employment today, labor force participation remains below the earlier
norm. And for a working man, there is a great difference between a steady job in manufacturing with
union wages and benefits, as in earlier years, and a temporary job with little security in some service
profession. Apart from wages, benefits, and security, there is a loss of dignity, of hope for the
future, of a sense that this is a world in which I belong and play a worthwhile role.
The impact is captured well in Arlie Hochschild's sensitive and illuminating portrayal of a Trump
stronghold in Louisiana, where she lived and worked for many years. She uses the image of a line
in which these people are standing, expecting to move forward steadily as they work hard and keep
to all the conventional values. But their position in the line has stalled. Ahead of them, they see
people leaping forward, but that does not cause much distress, because it is "the American way" for
(alleged) merit to be rewarded. What does cause real distress is what is happening behind them.
... ... ...
These are just samples of the real lives of Trump supporters, who are deluded to believe that
Trump will do something to remedy their plight, though the merest look at his fiscal and other proposals
demonstrates the opposite – posing a task for activists who hope to fend off the worst and to advance
desperately needed changes.
Exit polls reveal that the passionate support for Trump was inspired primarily by the belief that
he represented change, while Clinton was perceived as the candidate who would perpetuate their distress.
The "change" that Trump is likely to bring will be harmful or worse, but it is understandable that
the consequences are not clear to isolated people in an atomized society lacking the kinds of associations
(like unions) that can educate and organize. That is a crucial difference between today's despair
and the generally hopeful attitudes of many working people under much greater duress during the great
depression of the 1930s.
"... The affluent and rich voted for Clinton by a much broader margin than they had voted for the Democratic candidate in 2012. Among those with incomes between $100,000 and $200,000, Clinton benefited from a 9-point Democratic swing. Voters with family incomes above $250,000 swung toward Clinton by 11 percentage points. The number of Democratic voters amongst the wealthiest voting block increased from 2.16 million in 2012 to 3.46 million in 2016-a jump of 60 percent. ..."
"... Clinton's electoral defeat is bound up with the nature of the Democratic Party, an alliance of Wall Street and the military-intelligence apparatus with privileged sections of the upper-middle class based on the politics of race, gender and sexual orientation ..."
"... Over the course of the last forty years, the Democratic Party has abandoned all pretenses of social reform, a process escalated under Obama. Working with the Republican Party and the trade unions, it is responsible for enacting social policies that have impoverished vast sections of the working class, regardless of race or gender. ..."
The elections saw a massive shift in party support among the poorest and wealthiest voters. The share
of votes for the Republicans amongst the most impoverished section of workers, those with family
incomes under $30,000, increased by 10 percentage points from 2012. In several key Midwestern states,
the swing of the poorest voters toward Trump was even larger: Wisconsin (17-point swing), Iowa (20
points), Indiana (19 points) and Pennsylvania (18 points).
The swing to Republicans among the $30,000 to $50,000 family income range was 6 percentage points.
Those with incomes between $50,000 and $100,000 swung away from the Republicans compared to 2012
by 2 points.
The affluent and rich voted for Clinton by a much broader margin than they had voted for the
Democratic candidate in 2012. Among those with incomes between $100,000 and $200,000, Clinton benefited
from a 9-point Democratic swing. Voters with family incomes above $250,000 swung toward Clinton by
11 percentage points. The number of Democratic voters amongst the wealthiest voting block increased
from 2.16 million in 2012 to 3.46 million in 2016-a jump of 60 percent.
Clinton was unable to make up for the vote decline among women (2.1 million), African Americans
(3.2 million), and youth (1.2 million), who came overwhelmingly from the poor and working class,
with the increase among the rich (1.3 million).
Clinton's electoral defeat is bound up with the nature of the Democratic Party, an alliance
of Wall Street and the military-intelligence apparatus with privileged sections of the upper-middle
class based on the politics of race, gender and sexual orientation.
Over the course of the last forty years, the Democratic Party has abandoned all pretenses
of social reform, a process escalated under Obama. Working with the Republican Party and the trade
unions, it is responsible for enacting social policies that have impoverished vast sections of the
working class, regardless of race or gender.
"... Because the following talking points prevent a (vulgar) identity politics -dominated Democrat Party from owning its loss, debunking them is then important beyond winning your Twitter wars. I'm trying to spike the Blame Cannons! ..."
"... Remember, Trump won Wisconsin by a whisker. So for this talking point to be true, we have to believe that black voters stayed home because they were racist, costing Clinton Wisconsin. ..."
"... These former Obama strongholds sealed the election for Trump. Of the nearly 700 counties that twice sent Obama to the White House, a stunning one-third flipped to support Trump . ..."
"... The Obama-Trump counties were critical in delivering electoral victories for Trump. Many of them fall in states that supported Obama in 2012, but Trump in 2016. In all, these flipped states accounted for 83 electoral votes. (Michigan and New Hampshire could add to this total, but their results were not finalized as of 4 p.m. Wednesday.) ..."
"... And so, for this talking point to be true, we have to believe that counties who voted for the black man in 2012 were racist because they didn't vote for the white women in 2016. Bringing me, I suppose, to sexism. ..."
"... These are resilient women, often working two or three jobs, for whom boorish men are an occasional occupational hazard, not an existential threat. They rolled their eyes over Trump's unmitigated coarseness, but still bought into his spiel that he'd be the greatest job producer who ever lived. Oh, and they wondered why his behaviour was any worse than Bill's. ..."
"... pink slips have hit entire neighbourhoods, and towns. The angry white working class men who voted in such strength for Trump do not live in an emotional vacuum. They are loved by white working class women – their wives, daughters, sisters and mothers, who participate in their remaindered pain. I t is everywhere in the interviews. "My dad lost his business", "My husband hasn't been the same since his job at the factory went away" . ..."
"... So, for this talking point to be true, you have to believe that sexism simultaneously increased the male vote for Trump, yet did not increase the female vote for Clinton. Shouldn't they move in opposite directions? ..."
"... First, even assuming that the author's happy but unconscious conflation of credentials with education is correct, it wasn't the "dunces" who lost two wars, butchered the health care system, caused the financial system to collapse through accounting control fraud, or invented the neoliberal ideology that was kept real wages flat for forty years and turned the industrial heartland into a wasteland. That is solely, solely down to - only some , to be fair - college-educated voters. It is totally and 100% not down to the "dunces"; they didn't have the political or financial power to achieve debacles on the grand scale. ..."
"... Second, the "dunces" were an important part of Obama's victories ..."
"... Not only has polling repeatedly underplayed the importance of white voters without college degrees, it's underplayed their importance to the Obama coalition: They were one-third of Obama votes in 2012. They filled the gap between upper-class whites and working-class nonwhites. Trump gained roughly 15 percentage points with them compared to Romney in 2012. ..."
"... "No, you are ignorant! You threw away the vote and put Trump in charge." Please, it will be important to know what derogatory camp you belong in when the blame game swings into full gear. *snark ..."
"... 'Stupid' was the word I got very tired of in my social net. Two variant targets: ..."
"... 1) Blacks for not voting their interests. The responses included 'we know who our enemies are' and 'don't tell me what to think.' ..."
"... Mostly it was vs rural, non-college educated. iirc, it was the Secretary of Agriculture, pleading for funds, who said the rural areas were where military recruits came from. A young fella I know, elite football player on elite non-urban HS team, said most of his teammates had enlisted. So they are the ones getting shot at, having relatives and friends come back missing pieces of body and self. ..."
"... My guy in the Reserves said the consensus was that if HRC got elected, they were going to war with Russia. Not enthused. Infantry IQ is supposedly average-80, but they know who Yossarian says the enemy is, e'en if they hant read the book. ..."
This post is not an explainer about why and how Clinton lost (and Trump won). I think we're going
to be sorting that out for awhile. Rather, it's a simple debunking of common talking points by Clinton
loyalists and Democrat Establishment operatives; the sort of talking point you might hear on Twitter,
entirely shorn of caveats and context. For each of the three talking points, I'll present an especially
egregious version of the myth, followed by a rebuttals.
How Trump won the presidency with razor-thin margins in swing states
Of the more than 120 million votes cast in the 2016 election, 107,000 votes in three states
[Michigan, Wisconsin and Pennsylvania] effectively decided the election.
Of course, America's first-past-the-post system and the electoral college amplify small margins
into decisive results. And it was the job of the Clinton campaign to find those 107,000 votes and
win them;
the Clinton operation turned out to be weaker than anyone would have imagined when
it counted . However, because Trump has what might be called an institutional mandate - both
the executive and legislative branches and soon, perhaps, the judicial - the narrowness of his margin
means he doesn't have a popular mandate. Trump has captured the state, but by no means civil society;
therefore, the opposition that seeks to delegitimize him is in a stronger position than it may realize.
Hence the necessity for reflection; seeking truth from facts, as the saying goes. Because
the following talking points prevent a
(vulgar) identity politics -dominated Democrat Party from owning its loss, debunking them is
then important beyond winning your Twitter wars. I'm trying to spike the Blame Cannons!
Trump's win is a reminder of the incredible, unbeatable power of racism
The subtext here is usually that if you don't chime in with vehement agreement, you're a racist
yourself, and possibly a racist Trump supporter. There are two reasons this talking point is false.
First, voter caring levels dropped from 2012 to 2016, especially among black Democrats
.
Carl
Beijer :
From 2012 to 2016, both men and women went from caring about the outcome to not caring.
Among Democratic men and women, as well as Republican women, care levels dropped about 3-4
points; Republican men cared a little less too, but only by one point. Across the board, in
any case, the plurality of voters simply didn't care.
Beijer includes the following chart (based on Edison exit polling cross-referenced with total
population numbers from the US Census):
Beijer interprets:
White voters cared even less in 2016 then in 2012, when they also didn't care; most of that
apathy came from white Republicans compared to white Democrats, who dropped off a little less.
Voters of color, in contrast, continued to care – but their care levels dropped even more,
by 8 points (compared to the 6 point drop-off among white voters). Incredibly, that drop was
driven entirely by a 9 point drop among Democratic voters of color which left Democrats
with only slim majority 51% support; Republicans, meanwhile, actually gained support
among people of color.
Urban areas, where black and Hispanic voters are concentrated along with college-educated
voters, already leaned toward the Democrats, but Clinton did not get the turnout from these
groups that she needed. For instance, black voters did not show up in the same numbers they
did for Barack Obama, the first black president, in 2008 and 2012.
Remember, Trump won Wisconsin by a whisker. So for this talking point to be true, we have to
believe that black voters stayed home because they were racist, costing Clinton Wisconsin.
Second, counties that voted for Obama in 2012 voted for Trump in 2016 .
The Washington Post :
These former Obama strongholds sealed the election for Trump. Of the nearly 700 counties that twice sent Obama to the White House,
a stunning one-third flipped to support Trump
.
The Obama-Trump counties were critical in delivering electoral victories for Trump. Many
of them fall in states that supported Obama in 2012, but Trump in 2016. In all, these flipped
states accounted for 83 electoral votes. (Michigan and New Hampshire could add to this total,
but their results were not finalized as of 4 p.m. Wednesday.)
Here's the chart:
And so, for this talking point to be true, we have to believe that counties who voted for the
black man in 2012 were racist because they didn't vote for the white women in 2016. Bringing me,
I suppose, to sexism.
Talking Point: Clinton was Defeated by Sexism
Here's an article showing the talking point from
Newsweek :
This often vitriolic campaign was a national referendum on women and power.
(The subtext here is usually that if you don't join the consensus cluster, you're a sexist
yourself, and possibly a sexist Trump supporter). And if you only look at the averages this claim
might seem true :
On Election Day, women responded accordingly, as Clinton beat Trump among women 54 percent
to 42 percent. They were voting not so much for her as against him and what he brought to the
surface during his campaign: quotidian misogyny.
There are two reasons this talking point is not true. First, averages conceal, and what
they conceal is class . As you read further into the article, you can see it fall apart:
In fact, Trump beat Clinton among white women 53 percent to 43 percent, with
white women without college degrees going for [Trump]
two to one .
So, taking lack of a college degree as a proxy for being working class, for Newsweek's claim
to be true, you have to believe that working class women don't get a vote in their referendum,
and for the talking point to be true, you have to believe that working class women are sexist.
Which leads me to ask: Who died and left the bourgeois feminists in Clinton's base in charge of
the definition of sexism, or feminism? Class traitor
Tina Brown is worth repeating:
Here's my own beef. Liberal feminists, young and old, need to question the role they played
in Hillary's demise. The two weeks of media hyperventilation over grab-her-by-the-pussygate,
when the airwaves were saturated with aghast liberal women equating Trump's gross comments
with sexual assault, had the opposite effect on multiple women voters in the Heartland.
These are resilient women, often working two or three jobs, for whom boorish men are an
occasional occupational hazard, not an existential threat. They rolled their eyes over Trump's
unmitigated coarseness, but still bought into his spiel that he'd be the greatest job producer
who ever lived. Oh, and they wondered why his behaviour was any worse than Bill's.
Missing this pragmatic response by so many women was another mistake of Robbie Mook's campaign
data nerds. They computed that America's women would all be as outraged as the ones they came
home to at night. But pink slips have hit entire neighbourhoods, and towns. The angry white
working class men who voted in such strength for Trump do not live in an emotional vacuum.
They are loved by white working class women – their wives, daughters, sisters and mothers,
who participate in their remaindered pain. I t is
everywhere in the interviews. "My dad lost his business", "My husband hasn't been the same
since his job at the factory went away" .
Second, Clinton in 2016 did no better than Obama in 2008 with women (although she did
better than Obama in 2012). From
the New York Times analysis of the exit polls, this chart...
So, for this talking point to be true, you have to believe that sexism simultaneously increased
the male vote for Trump, yet did not increase the female vote for Clinton. Shouldn't they move
in opposite directions?
Talking Point: Clinton was Defeated by Stupidity
Here's an example of this talking point from
Foreign Policy , the heart of The Blob. The headline:
Trump Won Because Voters Are Ignorant, Literally
And the lead:
OK, so that just happened. Donald Trump always enjoyed massive support from uneducated,
low-information white people. As Bloomberg Politics reported back in August, Hillary Clinton
was enjoying a giant 25 percentage-point lead among college-educated voters going into the
election. (Whether that trend held up remains to be seen.) In contrast, in the 2012 election,
college-educated voters just barely favored Barack Obama over Mitt Romney. Last night we saw
something historic: the dance of the dunces. Never have educated voters so uniformly rejected
a candidate. But never before have the lesser-educated so uniformly supported a candidate.
The subtext here is usually that if you don't accept nod your head vigorously, you're stupid,
and possibly a stupid Trump supporter. There are two reasons this talking point is not true.
First, even assuming that the author's happy but unconscious conflation of credentials with
education is correct, it wasn't the "dunces" who lost two wars, butchered the health care
system, caused the financial system to collapse through accounting control fraud, or invented
the neoliberal ideology that was kept real wages flat for forty years and turned the industrial
heartland into a wasteland. That is solely, solely down to - only some , to be fair
- college-educated voters. It is totally and 100% not down to the "dunces"; they didn't have the
political or financial power to achieve debacles on the grand scale.
Second, the "dunces" were an important part of Obama's victories. From
The Week :
Not only has polling repeatedly underplayed the importance of white voters without college
degrees, it's underplayed their importance to the Obama coalition: They were one-third of Obama
votes in 2012. They filled the gap between upper-class whites and working-class nonwhites.
Trump gained roughly 15 percentage points with them compared to Romney in 2012.
So, to believe this talking point, you have to believe that voters who were smart when they
voted for Obama suddenly became stupid when it came time to vote for Clinton. You also have to
believe that credentialed policy makers have an unblemished record of success, and that only they
are worth paying attention to.
By just about every metric imaginable, Hillary Clinton led one of the worst presidential campaigns
in modern history. It was a profoundly reactionary campaign, built entirely on rolling back the
horizons of the politically possible, fracturing left solidarity, undermining longstanding left
priorities like universal healthcare, pandering to Wall Street oligarchs, fomenting nationalism
against Denmark and Russia, and rehabilitating some of history's greatest monsters – from Bush
I to Kissinger. It was a grossly unprincipled campaign that belligerently violated FEC Super PAC
coordination rules and conspired with party officials on everything from political attacks to
debate questions. It was an obscenely stupid campaign that all but ignored Wisconsin during the
general election, that pitched Clinton to Latino voters as their abuela, that centered an entire
high-profile speech over the national menace of a few thousand anime nazis on Twitter, and that
repeatedly deployed Lena Dunham as a media surrogate.
Which is rather like running a David Letterman ad in a Pennsylvania steel town. It must have seemed
like a good idea in Brooklyn. After all, they had so many celebrities to choose from.
* * *
All three talking points oversimplify. I'm not saying racism is not powerful; of course it is.
I'm not saying that sexism is not powerful; of course it is. But monocausal explanations in an election
this close - and in a country this vast - are foolish. And narratives that ignore economics and erase
class are worse than foolish; buying into them will cause us to make the same mistakes over and over
and over again.[1] The trick will be to integrate multiple causes, and that's down to the left; identity
politics liberals don't merely not want to do this; they actively oppose it. Ditto their opposite
numbers in America's neoliberal fun house mirror, the conservatives.
NOTES
[1] For some, that's not a bug. It's a feature.
NOTE
You will have noticed that I haven't covered economics (class), or election fraud at all. More
myths are coming.
Lambert Strether has been blogging, managing online communities, and doing system administration
24/7 since 2003, in Drupal and WordPress. Besides political economy and the political scene, he blogs
about rhetoric, software engineering, permaculture, history, literature, local politics, international
travel, food, and fixing stuff around the house. The nom de plume "Lambert Strether" comes from Henry
James's The Ambassadors: "Live all you can. It's a mistake not to." You can follow him on Twitter
at @lambertstrether. http://www.correntewire.com
"No, you are ignorant! You threw away the vote and put Trump in charge." Please, it will be
important to know what derogatory camp you belong in when the blame game swings into full gear.
*snark
'Stupid' was the word I got very tired of in my social net. Two variant targets:
1) Blacks
for not voting their interests. The responses included 'we know who our enemies are' and 'don't
tell me what to think.'
2) Mostly it was vs rural, non-college educated. iirc, it was the Secretary of Agriculture,
pleading for funds, who said the rural areas were where military recruits came from. A young fella
I know, elite football player on elite non-urban HS team, said most of his teammates had enlisted.
So they are the ones getting shot at, having relatives and friends come back missing pieces of
body and self.
My guy in the Reserves said the consensus was that if HRC got elected, they were going
to war with Russia. Not enthused. Infantry IQ is supposedly average-80, but they know who Yossarian
says the enemy is, e'en if they hant read the book.
"... There are some who believe the elites are actually splintered into numerous groups and that domestic US elites have positioned themselves against the banking elites in London's City. ..."
"... US elites are basically in the employ of a handful of families, individuals and institutions in our view. It is confusing because it is hard to tell if Hillary, for instance, is operating on her own accord or at the behest of higher and more powerful authorities. ..."
"... It is probably a combination of both but at root those who control central banks are managing the world's move towards globalism. ..."
"... The vote to propel Trump to the US presidency reflects a profound backlash against open markets and borders, and the simmering anger of millions of blue-collar white and working-class people who blame their economic woes on globalisation and multiculturalism. ..."
"... If indeed Trump's election has damped the progress of TPP, and TTIP, this is a huge event. As we've pointed out, both agreements effectively substituted technocratic corporatism for the current sociopolitical model of "democracy." ..."
"... one of the elite's most powerful, operative memes today is "populism vs. globalism" ..."
"... No matter what, the reality of these two events, the victories of both Trump and Brexit, stand as signal proof that elite stratagems have been defeated, at least temporarily. Though whether these defeats have been self-inflicted as part of a change in tactics remains to be seen. ..."
Was Trump's victory actually created by the very globalist elites that Trump is supposed to have
overcome? There are some who believe the elites are actually splintered into numerous groups and
that domestic US elites have positioned themselves against the banking elites in London's City.
We
see no fundamental evidence of this.
The world's real elites in our view may have substantive histories in the hundreds and
thousands of years. US elites are basically in the employ of a handful of families,
individuals and institutions in our view. It is confusing because it is hard to tell if Hillary,
for instance, is operating on her own accord or at the behest of higher and more powerful
authorities.
It is probably a combination
of both but at root those who control central banks are managing the world's move towards globalism.
History easily shows us who these groups are – and they are not located in America.
This is a cynical perspective to be sure, and certainly doesn't remove the impact of Trump's victory
or his courage in waging his election campaign despite what must surely be death threats to himself
and his family..
But if true, this perspective corresponds to predictions that we've been making for nearly a decade
now, suggesting that sooner or later elites – especially those in London's City – would have to "take
a step back."
More:
The vote to propel Trump to the US presidency reflects a profound backlash against open markets
and borders, and the simmering anger of millions of blue-collar white and working-class people
who blame their economic woes on globalisation and multiculturalism.
"There are a few parallels to Switzerland – that the losers of globalisation find somebody
who is listening to them," said Swiss professor and lawyer Wolf Linder, a former director of the
University of Bern's political science institute.
"Trump is doing his business with the losers of globalisation in the US, like the Swiss People's
Party is doing in Switzerland," he said. "It is a phenomenon which touches all European nations."
... ... ...
If indeed Trump's election has damped the progress of TPP, and TTIP, this is a huge event. As
we've pointed out, both agreements effectively substituted technocratic corporatism for the current
sociopolitical model of "democracy." The elites were trying to move toward a new
model of world control with these two agreements. ...
Additionally, one of the elite's most powerful, operative memes today is "populism vs. globalism"
that seeks to contrast the potentially freedom-oriented events of Trump and Brexit to the discarded
wisdom of globalism. See
here and
here.
No matter what, the reality of these two events, the victories of both Trump and Brexit, stand
as signal proof that elite stratagems have been defeated, at least temporarily. Though whether these
defeats have been self-inflicted as part of a change in tactics remains to be seen.
Conclusion: But the change has come. One way or another the Internet and tens of millions or people
talking, writing and acting has forced new trends. This can be hardly be emphasized enough. Globalism
has been at least temporarily redirected.
Editor's Note: The Daily Bell is giving away a silver coin and a silver "white paper" to subscribers.
If you enjoy DB's articles and want to stay up-to-date for free, please subscribe
here .
The analysis is flawed in that it fails to understand the context for power and influence in the
western alliance. The Crowns in contest are seeking coordinated domination through political proxy,
i.e. the force behind the EU and the UN. The problem is the most influential crown was not in
a mind to destroy the fabric of their civilization and more importantly to continue to bail-out
the "socialist" paradises in the continent and beyond. Britannia has its own socialism to support
much less that of the world.
Trump represents keeping the Colony in line with a growing interest in keeping traditions intact
and in more direct control of Anglo values. Europe has this insane multi-culturalism that is fundamentally
incompatible with a "free" and robust civilization. The whole goal of detente with China was to
convert them to our values via proxy institutions and that is working in the long-run. In the
short-run, the Empire must reunite and solidify its value bulwark against the coming storm from
China and to a lesser extend from the expanded EU states. Russia is playing out on its own.
Most commenters do not realise that it is neoliberalism that caused the current suffering of
working people in the USA and elsewhere...
Notable quotes:
"... Working class wages destroyed. The wages of the low paid lowered. Ordinary people robbed of holiday and sickness pay. Working people priced out of ever owning their own home. Our city centers socially cleansed of the working class. Poor people forced to fight like rats in sacks with even poorer foreigners for jobs, housing, school places and social and health services. ..."
"... Keep going mate. Continue to pump out that snobbish attitude because every time you do you've bagged Mr Trump, Mr Farage and Ms LePen another few votes. ..."
"... I recall a time when any suggestion that immigration may be too high was silenced by cries of racism, eventually that label was misused so often that it lost its potency, one gets the sense that this trend for dubbing those who hold certain opinions as somehow unintelligent will go the same way. People are beginning to see through this most hateful tactic of the Modern Left. ..."
"... Which is why I think Mr D'Ancona and many others are wrong to say that Farage and Trump will face the whirlwind when voters realise that their promises were all unachievable. The promises were much less important than the chance to slap the political world in the face. Given another chance, a lot of voters will do the same again. ..."
"... I think the author completely misses the most salient point from the two events he cites: simply that the *vast* majority of people have become completely disenfranchised with the utter corruption that is mainstream politics today. ..."
"... It doesn't matter who is voted in, the status quo [big business and the super-rich get wealthier whilst the middle is squeezed and the poorest are destroyed] remains. ..."
"... The votes for Brexit and Trump are as much a rejection of "establishment" as anything else. Politicians in both countries heed these warnings at their peril... ..."
"... The majority of the people are sick and tired of PC ism and the zero hour, minimum wage economy that both Britain and America have suffered under "globalisation". And of the misguided "[neo]liberal" agenda of much of the media which simply does not speak to or for society. ..."
"... People in western democracies are rising up through the ballot box to defeat PC [neo]liberalism and globalisation that has done so much to impoverish Europe and America morally and economically. To the benefit of the tax haven corporates. ..."
"... Globalisation disembowelled American manufacturing so the likes of Blair and the Clintons could print money. The illimitable lives they destroyed never entered their calculus. ..."
"... I have stood in the blue lane in Atlanta waiting for my passport to be processed; in the adjoining lane was a young British female student (so she said to the official). The computer revealed she had overstayed her visa by 48 hours the last time she visited. She was marched out by two armed tunics to the next plane home. That's how Europeans get treated if they try to enter America illegally. Why the demented furor over returning illegal Hispanics or anyone else? ..."
Surely the people who voted for Trump and Farage are too stupid to realise the sheer,
criminal folly of their decision...
thoughtcatcher -> IanPitch 12h ago
Working class wages destroyed. The wages of the low paid lowered. Ordinary people
robbed of holiday and sickness pay. Working people priced out of ever owning their own home.
Our city centers socially cleansed of the working class. Poor people forced to fight like rats
in sacks with even poorer foreigners for jobs, housing, school places and social and health
services.
But yeah, they voted against the elite because they are "stupid".
attila9000 -> IanPitch 11h ago
I think at some point a lot of them will realize they have been had, but then they will
probably just blame immigrants, or the EU. Anything that means they don't have to take
responsibility for their own actions. It would appear there is a huge pool of people who can
be conned into acting against their own self interest.
jonnyoyster -> IanPitch 11h ago
Keep going mate. Continue to pump out that snobbish attitude because every time you do
you've bagged Mr Trump, Mr Farage and Ms LePen another few votes. Most people don't
appreciate being talked down to and this arrogant habit of calling those who hold views
contrary to your own 'stupid' is encouraging more and more voters to ditch the established
parties in favour of the new.
I recall a time when any suggestion that immigration may be too high was silenced by
cries of racism, eventually that label was misused so often that it lost its potency, one gets
the sense that this trend for dubbing those who hold certain opinions as somehow unintelligent
will go the same way. People are beginning to see through this most hateful tactic of the
Modern Left.
DilemmataDocta -> IanPitch 11h ago
A lot of the people who put their cross against Brexit or Trump weren't actually voting for
anything. They were just voting against this, that or the other thing about the world that
they disliked. It was voting as a gesture.
Which is why I think Mr D'Ancona and many others are wrong to say that Farage and Trump
will face the whirlwind when voters realise that their promises were all unachievable. The
promises were much less important than the chance to slap the political world in the face.
Given another chance, a lot of voters will do the same again.
Sproggit 12h ago
I think the author completely misses the most salient point from the two events he
cites: simply that the *vast* majority of people have become completely disenfranchised with
the utter corruption that is mainstream politics today.
It doesn't matter who is voted in, the status quo [big business and the super-rich get
wealthier whilst the middle is squeezed and the poorest are destroyed] remains.
The votes for Brexit and Trump are as much a rejection of "establishment" as anything
else. Politicians in both countries heed these warnings at their peril...
NotoBlair 11h ago
OMG, the lib left don't Geddit do they?
The majority of the people are sick and tired of PC ism and the zero hour, minimum wage
economy that both Britain and America have suffered under "globalisation". And of the
misguided "[neo]liberal" agenda of much of the media which simply does not speak to or for
society.
People in western democracies are rising up through the ballot box to defeat PC [neo]liberalism
and globalisation that has done so much to impoverish Europe and America morally and
economically. To the benefit of the tax haven corporates.
The sour grapes bleating of the lib left who refuse to accept the democratic will of the
people is a movement doomed failure.
Frankincensedabit 11h ago
Malign to whom? Wall Street and people who want us all dead?
Globalisation disembowelled American manufacturing so the likes of Blair and the Clintons
could print money. The illimitable lives they destroyed never entered their calculus.
I have stood in the blue lane in Atlanta waiting for my passport to be processed; in the
adjoining lane was a young British female student (so she said to the official). The computer
revealed she had overstayed her visa by 48 hours the last time she visited. She was marched
out by two armed tunics to the next plane home. That's how Europeans get treated if they try
to enter America illegally. Why the demented furor over returning illegal Hispanics or anyone
else?
I likely wouldn't have voted at all. But all my life the occupants of the White House
represented the interests of those nobody could ever identify. The owners of the media and the
numbered accounts who took away the life-chances of U.S. citizens by the million and called
any of them who objected a thick white-trash bigot. Whatever Trump is, he will be different.
by Lambert Strether
Lambert here: Apparently, then, Neoliberal U plans to build "trust-based relations" and offer
"personalised attention" by gutting tenured faculty, shifting the teaching load to contingent faculty,
redistributing salaries to administrators, and socking money into fancy facilities. Let me know how
that works out.
By Philip Oreopoulos, Professor of Economics and Public Policy, University of Toronto, and
Uros Petronijevic, Assistant Professor, Department of Economics, York University.
Originally published at VoxEU .
Questions over the value of a university education are underscored by negative student experiences.
Personalised coaching is a promising, but costly, tool to improve student experiences and performance.
This column presents the results from an experiment comparing coaching with lower cost 'nudge' interventions.
While coaching led to a significant increase in average course grades, online and text message interventions
had no effect. The benefits of coaching appear to derive from the trust-based nature of relationships
and personalised attention.
Policymakers and academics share growing concerns about stagnating college completion rates and
negative student experiences. Recent figures suggest that only 56% of students who pursue a bachelors'
degree complete it within six years (Symonds et al. 2011), and it is increasingly unclear whether
students who attain degrees acquire meaningful new skills along the way (Arum and Roska 2011). Students
enter college underprepared, with those who procrastinate, do not study enough, or have superficial
attitudes about success performing particularly poorly (Beattie et al 2016).
Personalised Coaching to Improve Outcomes
A promising tool for improving students' college outcomes and experiences is personalised coaching.
At both the high school and college levels, an emerging recent literature demonstrates the benefits
of helping students foster motivation, effort, good study habits, and time-management skills through
structured tutoring and coaching. Cook et al. (2014) find that cognitive behavioural therapy and
tutoring generate large improvements in maths scores and high school graduation rates for troubled
youth in Chicago, while Oreopoulos et al. (forthcoming) show that coaching, tutoring, and group activities
lead to large increases in high school graduation and college enrolment among youth in a Toronto
public housing project. At the college level, Scrivener and Weiss (2013) find that the Accelerated
Study in Associates Program – a bundle of coaching, tutoring, and student success workshops – in
CUNY community colleges nearly doubled graduation rates and Bettinger and Baker (2014) show that
telephone coaching by Inside Track professionals boosts two-year college retention by 15% across
several higher-education institutions.
While structured, one-on-one support can have large effects on student outcomes, it is often costly
to implement and difficult to scale up to the student population at large (Bloom 1984). Noting this
challenge, we set out to build on recent advances in social-psychology and behavioural economics,
investigating whether technology – specifically, online exercises, and text and email messaging –
can be used to generate comparable benefits to one-on-one coaching interventions but at lower costs
among first-year university students (Oreopoulos and Petronijevic 2016).
Several recent studies in social-psychology find that short, appropriately timed interventions
can have lasting effects on student outcomes (Yeager and Walton 2011, Cohen and Garcia 2014, Walton
2014). Relatively large improvements on academic performance have been documented from interventions
that help students define their long-run goals or purpose for learning (Morisano et al. 2010, Yeager
et al. 2014), teach the 'growth mindset' idea that intelligence is malleable (Yeager et al. 2016),
and help students keep negative events in perspective by self-affirming their values (Cohen and Sherman
2014). In contrast to these one-time interventions, other studies in education and behavioural economics
attempt to maintain constant, low-touch contact with students or their parents at a low cost by using
technology to provide consistent reminders aimed at improving outcomes. Providing text, email, and
phone call updates to parents about their students' progress in school has been shown to boost both
parental engagement and student performance (Kraft and Dougherty 2013, Bergman 2016, Kraft and Rogers
2014, Mayer et al. 2015), while direct text-message communication with college and university students
has been used in attempts to increase financial aid renewal (Castleman and Page 2014) and improve
academic outcomes (Castleman and Meyer 2016).
Can Lower-Cost Alternatives to One-On-One Coaching Be Effective?
We examine whether benefits comparable to those obtained from one-on-one coaching can be achieved
at lower cost by either of two specific interventions (Oreopoulos and Petronijevic 2016). We examine
a one-time online intervention designed to affirm students' goals and purpose for attending university,
and a full-year text and email messaging campaign that provides weekly reminders of academic advice
and motivation to students. We work with a sample of more than 4,000 undergraduate students who are
enrolled in introductory economics courses at a large representative college in Canada, randomly
assigning students to one of three treatment groups or a control group. The treatment groups consist
of:
A one-time, online exercise completed during the first two weeks of class in the autumn; The online
intervention plus text and email messaging throughout the full academic year; and The online intervention
plus one-on-one coaching in which students are assigned to upper-year undergraduate students who
act as coaches.
Students in the control group are given a personality test measuring the Big Five personality
traits.
Figure 1 summarises our main results on course grades. Overall, we find large positive effects
from the coaching programme, amounting to approximately a 4.92 percentage-point increase in average
course grades; we also find that coached students experience a 0.35 standard-deviation increase in
GPA. In contrast, we find no effects on academic outcomes from either the online exercise or the
text messaging campaign, even after investigating potentially heterogeneous treatment effects across
several student characteristics, including gender, age, incoming high school average, international-student
status, and whether students live on residence.
Figure 1 . Main effects of interventions
Our results suggest that the benefits of personal coaching are not easily replicated by low-cost
interventions using technology. Many successful coaching programmes involve regular student-coach
interaction facilitated either by mandatory meetings between coaches and students or proactive coaches
regularly initiating contact (Scrivener and Weiss 2013, Bettinger and Baker 2014, Cook et al. 2014,
Oreopoulos et al. forthcoming). Our coaches initiated contact and built trust with students over
time, in person and through text messaging. Through a series of gentle, open-ended questions, the
coaches could understand the problems students were facing and provide clear advice, ending most
conversations with students being able to take at least one specific action to help solve their current
problems.
Our text messaging campaign offered weekly academic advice, resource information, and motivation,
but did not initiate communication with individual students about specific issues (e.g. help with
writing or an upcoming mid-term). The text-messaging team often invited students to reply to messages
and share their concerns but was unable to do this with the same efficacy as a coach, nor were we
able to establish the same rapport with students. Our inability to reach out to all students and
softly guide the conversation likely prevented us from learning the important details of their specific
problems. Although we provided answers and advice to the questions we received, we did not have as
much information on the students' backgrounds as our coaches did, and thus could not tailor our responses
to each student's specific circumstances.
Our coaches were also able to build trust with students by fulfilling a support role. Figure 2
provides an example of how the coaching service was more effective than the text messaging campaign
in this respect. The text messages attempted to nudge students in the right direction, rather than
provide tailored support. The left panel of Figure 2 shows three consecutive text messages, in which
we provide a tip on stress management, an inspirational quote, and a time-management tip around the
exam period. As in this example, it was often the case that students would not respond to such messages.
In contrast, the student-coach interaction in the right panel shows our coaches offering more of
a supportive role rather than trying to simply nudge the student in a specific direction. The coach
starts by asking an open-ended question, to which the student responds, and the coach then guides
the conversation forward. In this example, the coach assures the student that they will be available
to help with a pending deadline and shows a genuine interest in the events in the student's life.
Figure 2 . Distinguishing the text-messaging campaign and the coaching programme
Coaches also kept records of their evolving conversations with students and could check in to
ask how previously discussed issues were being resolved. Although we kept a record of all text message
conversations, a lack of resources prevented us from conducting regular check-ups to see how previous
events had unfolded, which likely kept us from helping students effectively with their problem and
from establishing the trust required for students to share additional problems.
Concluding Remarks
In sum, the two key features that distinguish the coaching service from the texting campaign are
that coaches proactively initiated discussion with students about their problems and could establish
relationships based on trust in which students felt comfortable to openly discuss their issues. Future
work attempting to improve academic outcomes in higher education by using technology to maintain
constant contact with students may need to acknowledge that simply nudging students in the right
direction is not enough. A more personalised approach is likely required, in which coaches or mentors
initially guide students through a series of gentle conversations and subsequently show a proactive
interest in students' lives. These conversations need not necessarily occur during face-to-face meetings,
but the available evidence suggests that they should occur frequently and be initiated by the coaches.
While such an intervention is likely to be costlier than the text messaging campaign in our study,
it is also likely to be more effective but still less costly than the personalised coaching treatment.
"Personalised coaching is a promising, but costly, tool to improve student experiences …"
… that used to be called, in the long ago time before the App Store, office hours.
Back in the day when there were these non-administrative inefficiencies called tenure track faculty.
Surely Mechanical Turk can find a disruptive application in this space.
However also way back when few students bothered to go to faculty office hours. (early 1970s)
. In addition how many students go to the departmental seminars in their major field? Again undergraduate
attendance at them is low.
Or join clubs in their major field that invite faculty to come talk about their research (which
is easy to get a prof to do to talk about his research). (Today of course you could do seminars
and the like via podcasts etc).
However of course the mentoring also takes student time which may also be scarce.
Do Economists Promote Ideology as
Science?
: Which is more important in
determining the policy positions of
economists, ideology or evidence? Is
economics, as some assert, little more
than a means of dressing up ideological
arguments in scientific clothing?
This certainly happens, especially among
economists connected to politically
driven think tanks – places like the
Heritage Foundation come to mind.
Economists who work for businesses also
have a tendency to present evidence more
like a lawyer advocating a particular
position than a scientist trying to find
out how the economy really works. But
what about academic economists who are
supposed to be searching for the truth
no matter the political implications?
Can we detect the same degree of bias in
their research and policy positions? ...
rayward :
Thoma's assessment seems fair enough. I'd make the point that, for some
academic economists, no amount of evidence is sufficient to overcome their bias.
"Where's the proof" is the refrain one hears often. And then there's the
question: what is evidence? The availability of lots of data is often used to
"prove" this or that theory, even when the "proof" is contrary to the historical
evidence one can see with her own eyes. Data used as obfuscation rather than
clarification. I appreciate that one historical event following another
historical event does not prove causation, but what's better proof than history.
RogerFox :
, -1
"Shouldn't theory be a guide
when the empirical evidence
is unconvincing one way or
the other?"
No - we don't
allow MDs to prescribe or
treat on the basis of theory
alone. It's unethical for
any professional
practitioner to give advice
that is not supported by
compelling evidence
demonstrating that the
advise is both safe and
effective - 'First, do no
harm.'
To a man, professional
economists shill for the
view that they are morally
free to treat real economies
and real people as their
personal lab rats. As a
group, economists are an
ethically challenged bunch
in this respect, and
probably in other respects
too.
anne ->
RogerFox...
, -1
To a man, professional
economists shill...
[ This
phrase begins a
mean-spirited lie, no matter
how the sentence is
finished. The point of the
malicious post however is
only to be destructive. ]
Avraam Jack Dectis :
, -1
.
Economics is the most
interesting science because
it is not settled and has
great effect upon the
affairs of man.
One of the
things that make it
interesting is the number of
variables that exist in most
economic situations as well
as the strong psychological
and sociological component
to the science, due to its
attempts to predict the
actions of humans, a
hierarchical herd based
status insane animal.
Undoubtedly, the desire
to promote personally
attractive policies is
something everyone must
fight.
On a side note, having
seen this blog referenced
elsewhere and finally
starting to read it
regularly, truly a nice
thing, I notice that Dr.
Thoma and I are the same age
for about three months per
year. I suspect that is
about all we have in common
since I just spent the last
18+ years getting openly and
notoriously poisoned by a
stalker gang, have hit men
following me and am so
unpopular and poorly
connected that I seem
remarkably unable to engage
any law enforcement on the
issue.
Which leads into the next
point-> Is the dynamism of
an economy a function of
freedom of speech, riule of
law, security of the citizen
and so forth. For decades
the USA, as it fought two
opposing powerful systems,
made that case yet now that
no longer seems to be the
case in the USA and in fact
this is confirmed by the
fact that nobody makes that
case convincingly anymore.
Can this deterioration of
culture and embrace of
expediency have a stifling
economic effect?
DeDude :
, -1
Economics as a science is
mainly hurt by two things.
1. The rich plutocrats
have a major stake in
advocating very specific
narratives, so they will
throw large sums behind
those narratives (and the
fight against anything
conflicting with them).
2. Economics does not
have anything resembling the
double blind placebo
controlled trials that help
medicine fight off the
narratives of those with
money and power.
RGC :
, -1
What sort of opinions are
economists allowed to have
if they want tenure, want to
be published in the major
journals or want to make a
living?
Keynes concluded
that government direction
was necessary for a viable
economy. Keynes'
"interpreters" in the US
buried that idea, and thus
became very important
economists - guys like Paul
Samuelson. The first ( and
only) US book to faithfully
represent Keynes' ideas
faded away soon after
publication.
I did not know there was a
debate. Krugman summed it
all up in Peddling
Prosperity. Folks know who
pays the rent, and opine
accordingly.
Syaloch :
, -1
I think problems arise when
economists are called upon
by politicians or the media
to give expert advice.
Within the sciences, "We
don't know the answer to
that" is a perfectly
acceptable response, and in
scientific fields where the
stakes are low that response
is generally accepted by the
public as well. "What is
dark matter made of?" "We
don't know yet, but we're
working on it." But in
politics, where the stakes
are higher, not having a
definitive answer is viewed
as a sign of weakness. How
often do you hear a
politician responding to a
"gotcha" question admit that
they don't know the answer
rather than trying to BS
their way through?
Given the timeliness of
news coverage the media
prefer to consult experts
who offer definitive
answers, especially given
their preference for pro/con
type interviews which
require experts on both
sides of an issue.
Economists who are put on
the spot this way feel
pressured to ditch the error
bars and give unambiguous
answers, even answers based
purely on theory with little
to no empirical backing, and
the more often they do this
the more often they're
invited back.
It is impossible to talk
about economics without
making essentially
ideological distinctions.
Private property and wage
labor are not "natural"
categories. Their adequacy
as human practices therefore
needs to be either defended
or criticized. To simply
take them "as given" is an
ideological waffle that begs
THE question.
Economists thus SHOULD
have, acknowledge and fully
disclose their ideological
biases. When evaluating
evidence they should make
every effort to set aside
and overcome their biases.
And they need to stay humble
about how Sisyphean,
incongruous and incomplete
their attempts at
objectivity are.
Let's not forget that
"The End of Ideology" was a
polemical tract aimed at
designating the ideology of
the managers and symbol
manipulators "above" and
beyond ideology. Similarly,
Marx's brilliant critique of
ideology degenerated into
polemic as its practitioners
adopted the mantle of
"science."
The End of Ideology: On the
Exhaustion of Political
Ideas in the Fifties is a
collection of essays
published in 1960 by Daniel
Bell, who described himself
as a "socialist in
economics, a liberal in
politics, and a conservative
in culture". He suggests
that the older,
grand-humanistic ideologies
derived from the nineteenth
and early twentieth
centuries had been
exhausted, and that new,
more parochial ideologies
would soon arise. He argues
that political ideology has
become irrelevant among
"sensible" people, and that
the polity of the future
would be driven by piecemeal
technological adjustments of
the extant system.
A very big question! Like
"what is the meaning of
life?" At least a
semester-long upper division
seminar course. ;-)
In a
nutshell (to put it
crudely), Marx labelled as
ideologists a cohort of
German followers of Hegel's
philosophy who envisioned
historical progress as the
result of the progressive
refinement of intellectual
ideas. Marx argued instead
that historical change
resulted from struggle
between social classes over
the material conditions of
life, fundamental to which
was the transformation of
nature through human
intervention into means of
subsistence.
Marx labelled as ideologists
a cohort of German followers
of Hegel's philosophy who
envisioned historical
progress as the result of
the progressive refinement
of intellectual ideas. Marx
argued instead that
historical change resulted
from struggle between social
classes over the material
conditions of life,
fundamental to which was the
transformation of nature
through human intervention
into means of subsistence.
[ What a superb introductory
or summary explanation. I
could not be more impressed
or grateful. ]
"And so - though we proceed
slowly because of our
ideologies, we might not
proceed at all without
them."
- Joseph Schumpeter,
"Science and Ideology," The
American Economic Review
39:2 (March 1949), at 359
http://www.jstor.org/stable/1812737
Many guys are not driven by
ideology, rather than
evidence. The problem with
this article is that we
cannot compare with other
professions and say
"economists are more/less
prone to promote ideology
than the average".
All human endeavors are
shaped by "ideology" in many
different ways. What is
important is to be aware of
and explicit about their
influences on our thought
and action.
If there are two sides to an
argument that radically
disagree then it is possible
that both sides may be
ideology, but both sides
cannot be science. Only the
correct argument can be
science. Of course ideology
is a bit too kind of a word
since the incorrect argument
is actually just a con game
by people out to lay claim
on greater unearned wealth.
Economists seem content with
trying to figure out how to
make 'it' work. Far better,
I think, to try and figure
out how it should be.
It was philosophers such as
Hume, Locke, Marx, Smith,
Rawls, ... who asked the
right questions. Laws and
economics come down to us
according to how we think
about such things; they
change when we change the
way we think. Seems we're in
a bit of a philosophical dry
patch, here. Someday, we
will have to develop a
better economic system,
might be now. Likewise,
there are laws rooted in
antiquity that were wrong
then and are wrong still.
"Ideology certainly
influences which questions
academic researchers believe
are the most important, but
there is nothing wrong with
that."
No "experiment" in
economics comes with the
degree of control that
experiments in physical
sciences take for granted,
so there is tremendous room
for ideology to come into
the discussion of whether a
data set really represents
the conditions the model is
supposed to consider. Since
reviewing another
economist's study entails
asking questions those
questions...
DrDick ->
Arne...
, -1
Please describe the
"experimentation" which
takes place in astronomy and
geology. Ideologies also
play important roles in
experimental sciences, such
as biology (for which we
have a lot of evidence.
President-elect Donald J. Trump, who campaigned against the corrupt power of special interests,
is filling his transition team with some of the very sort of people who he has complained have
too much clout in Washington: corporate consultants and lobbyists.
Jeffrey Eisenach, a consultant who has worked for years on behalf of Verizon and other telecommunications
clients, is the head of the team that is helping to pick staff members at the Federal Communications
Commission.
Michael Catanzaro, a lobbyist whose clients include Devon Energy and Encana Oil and Gas, holds
the "energy independence" portfolio.
Michael Torrey, a lobbyist who runs a firm that has earned millions of dollars helping food
industry players such as the American Beverage Association and the dairy giant Dean Foods, is
helping set up the new team at the Department of Agriculture.
What? No steelworker? No auto-plant worker? Not even a family farmer? Might y'all have been
had ?
Who'd a thunk?
Bernie and Elizabeth to the rescue.
Now, please . Now .
But, hey, white blue collar folks: You get what you vote for. The problem for me is that I
get what you vote for. I said roughly 540 times here at AB in the last year: Trump isn't conquering
the Republican Party; he's the Republican Party's Trojan Horse. What was that y'all were saying about
wanting change so badly? Here it is.
Welcome to the concept of
industry regulatory capture
. Perfected to a science, and jaw-droppingly brazen.
LOL . Funny, but Bernie talked about this. Some of you listened. Then. Elizabeth Warren has talked
about it, a lot. Some of you listened. Back then. But she wasn't running for president. Hillary Clinton
was, instead. And
she couldn't talk about it because she had needed all those speaking fees , all the way up to
about a minute before she announced her candidacy.
Aaaaand, here come the judges. And of course the justices. Industry regulatory capture of the
judicial-branch variety.
I called this one right, in the title of
this post yesterday . I mean, why even wait until the body is buried? No reason at all.
So he thinks. But what if he's wrong?
Anyway can't wait for the political cartoons showing Trump on Ryan's lap, with Ryan's arm showing
reaching up under Trump's suit jacket.
It's effing asinine . Everyone's entitled to their little personal delusions, but why the
obsessiveness about this patent silliness? What is exactly is the emotional hold that Hillary Clinton
holds on these people? It's climate-change-denial-like.
Elizabeth Warren would have beaten Donald Trump in a landslide. So would have Bernie Sanders.
And brought in a Democratic-controlled Senate and House. Because both would have run a remarkably
campaign, under normal standards, not a special low bar.
An
organizational chart of Trump's transition team shows it to be crawling with corporate lobbyists,
representing such clients as Altria, Visa, Coca-Cola, General Electric, Verizon, HSBC, Pfizer,
Dow Chemical, and Duke Energy. And K Street is
positively
salivating over all the new opportunities they'll have to deliver goodies to their clients
in the Trump era. Who could possibly have predicted such a thing?
The answer is, anyone who was paying attention. Look at the people Trump is
considering
for his cabinet, and you won't find any outside-the-box thinkers burning to work for the little
guy. It's a collection of Republican politicians and corporate plutocrats - not much different
from who you'd find in any Republican administration.
And from reader EMichael in the Comments thread to this post about 35 minutes ago:
OH, it will be worse than that, much worse.
Bank regulation will go back to the "glory days" of the housing bubble, and Warren's CFPB will
be toast.
Buddy of mine works HR for a large bank. He has been flooded with resumes from current employees
of the CFPB the last couple of days.
Yup. HSBC ain't in that list for nothing. But, not to worry. Trump's kids will pick up lots of
real estate on the (real) cheap, after the crash. Their dad will give them all the tips, from experience.
And the breaking news this afternoon is that Pence–uh-ha;
this Mike Pence –has
replaced Christie as transition team head. Wanna bet that Comey told Trump today that Christie is
likely to be indicted in Bridgegate?
Next up, although down the road a few months: rumors that a grand jury has been convened to try
to learn how, exactly, Giuliani got all that info from inside the FBI two weeks ago. Once the FBI
inspector general completes his investigation. Or once New York's attorney general, Eric Schneiderman,
begins looking into violations of NY state criminal law.
"... my equation of Neoliberalism (or Post-Capitalism) = Wall Street + Identity Politics generated by the dematerialization of Capital. CDO's are nothing but words on paper or bytes in the stream; and identity politics has much less to do with the Body than the culture and language. Trumpists were interpellated as White by the Democrats and became ideological. Capital is Language. ..."
"... "Sanders and Trump inflamed their audiences with searing critiques of Capitalism's unfairness. Then what? Then Trump's response to what he has genuinely seen is, analytically speaking, word salad. Trump is sound and fury and garble. Yet - and this is key - the noise in his message increases the apparent value of what's clear about it. The ways he's right seem more powerful, somehow, in relief against the ways he's blabbing." ..."
"... But Trump's people don't use suffering as a metric of virtue. They want fairness of a sort, but mainly they seek freedom from shame. Civil rights and feminism aren't just about the law after all, they are about manners, and emotions too: those "interest groups" get right in there and reject what feels like people's spontaneous, ingrained responses. People get shamed, or lose their jobs, for example, when they're just having a little fun making fun. Anti-PC means "I feel unfree. ..."
"... The Trump Emotion Machine is delivering feeling ok, acting free. Being ok with one's internal noise, and saying it, and demanding that it matter. Internal Noise Matters. " my emp ..."
I thought someone above talked about Trump's rhetoric
1) Tom Ferguson at Real News Network post at Naked Capitalism says (and said in 2014) that
the Democratic coalition of Wall Street (Silicon Valley) + Identity Politics is imploding, because
it can't deliver populist goodies without losing part of it's core base.
Noted no for that, but for my equation of Neoliberalism (or Post-Capitalism) = Wall Street
+ Identity Politics generated by the dematerialization of Capital. CDO's are nothing but words
on paper or bytes in the stream; and identity politics has much less to do with the Body than
the culture and language. Trumpists were interpellated as White by the Democrats and became ideological.
Capital is Language.
2) Consider the above an intro to
Lauren
Berlant at the New Inquiry "Trump or Political Emotions" which I think is smart. Just a phrase
cloud that stood out for me. All following from Berlant, except parenthetical
It is a scene where structural antagonisms - genuinely conflicting interests - are described
in rhetoric that intensifies fantasy.
People would like to feel free. They would like the world to have a generous cushion for all
their aggression and inclination. They would like there to be a general plane of okayness governing
social relations
( Safe Space defined as the site where being nasty to those not inside is admired and approved.
We all have them, we all want them, we create our communities and identities for this purpose.)
"Sanders and Trump inflamed their audiences with searing critiques of Capitalism's unfairness.
Then what? Then Trump's response to what he has genuinely seen is, analytically speaking, word
salad. Trump is sound and fury and garble. Yet - and this is key - the noise in his message
increases the apparent value of what's clear about it. The ways he's right seem more powerful,
somehow, in relief against the ways he's blabbing."
(Wonderful, and a comprehension of New Media I rarely see. Cybernetics? Does noise increase
the value of signal? The grammatically correct tight argument crowd will not get this. A problem
I have with CT's new policy)
"You watch him calculating, yet not seeming to care about the consequences of what he says,
and you listen to his supporters enjoying the feel of his freedom. "
(If "civil speech" is socially approved signal, then noise = freedom and feeling. Every two
year old and teenage guitarist understands)
"But Trump's people don't use suffering as a metric of virtue. They want fairness of a
sort, but mainly they seek freedom from shame. Civil rights and feminism aren't just about the
law after all, they are about manners, and emotions too: those "interest groups" get right in
there and reject what feels like people's spontaneous, ingrained responses. People get shamed,
or lose their jobs, for example, when they're just having a little fun making fun. Anti-PC means
"I feel unfree."
The Trump Emotion Machine is delivering feeling ok, acting free. Being ok with one's internal
noise, and saying it, and demanding that it matter. Internal Noise Matters. " my emp
Noise again. Berlant worth reading, and thinking about.
What's bought [sic] us to this stage is a policy – whether it's been intentional
or unintentional or a mixture of both – of divide and rule, where society is broken down into
neat little boxes and were told how to behave towards the contents of each one rather than,
say, just behaving well towards all of them.
And this right here is why neoliberalism = identity politics and why both ought to be crushed
ruthlessly.
President-elect Donald J. Trump, who campaigned against the corrupt power of special interests,
is filling his transition team with some of the very sort of people who he has complained have
too much clout in Washington: corporate consultants and lobbyists.
Jeffrey Eisenach, a consultant who has worked for years on behalf of Verizon and other telecommunications
clients, is the head of the team that is helping to pick staff members at the Federal Communications
Commission.
Michael Catanzaro, a lobbyist whose clients include Devon Energy and Encana Oil and Gas, holds
the "energy independence" portfolio.
Michael Torrey, a lobbyist who runs a firm that has earned millions of dollars helping food
industry players such as the American Beverage Association and the dairy giant Dean Foods, is
helping set up the new team at the Department of Agriculture.
What? No steelworker? No auto-plant worker? Not even a family farmer? Might y'all have been
had ?
Who'd a thunk?
Bernie and Elizabeth to the rescue.
Now, please . Now .
But, hey, white blue collar folks: You get what you vote for. The problem for me is that I
get what you vote for. I said roughly 540 times here at AB in the last year: Trump isn't conquering
the Republican Party; he's the Republican Party's Trojan Horse. What was that y'all were saying about
wanting change so badly? Here it is.
Welcome to the concept of
industry regulatory capture
. Perfected to a science, and jaw-droppingly brazen.
LOL . Funny, but Bernie talked about this. Some of you listened. Then. Elizabeth Warren has talked
about it, a lot. Some of you listened. Back then. But she wasn't running for president. Hillary Clinton
was, instead. And
she couldn't talk about it because she had needed all those speaking fees , all the way up to
about a minute before she announced her candidacy.
Aaaaand, here come the judges. And of course the justices. Industry regulatory capture of the
judicial-branch variety.
I called this one right, in the title of
this post yesterday . I mean, why even wait until the body is buried? No reason at all.
So he thinks. But what if he's wrong?
Anyway … can't wait for the political cartoons showing Trump on Ryan's lap, with Ryan's arm showing
reaching up under Trump's suit jacket.
It's effing asinine . Everyone's entitled to their little personal delusions, but why the
obsessiveness about this patent silliness? What is exactly is the emotional hold that Hillary Clinton
holds on these people? It's climate-change-denial-like.
Elizabeth Warren would have beaten Donald Trump in a landslide. So would have Bernie Sanders.
And brought in a Democratic-controlled Senate and House. Because both would have run a remarkably
campaign, under normal standards, not a special low bar.
An
organizational chart of Trump's transition team shows it to be crawling with corporate lobbyists,
representing such clients as Altria, Visa, Coca-Cola, General Electric, Verizon, HSBC, Pfizer,
Dow Chemical, and Duke Energy. And K Street is
positively
salivating over all the new opportunities they'll have to deliver goodies to their clients
in the Trump era. Who could possibly have predicted such a thing?
The answer is, anyone who was paying attention. Look at the people Trump is
considering
for his cabinet, and you won't find any outside-the-box thinkers burning to work for the little
guy. It's a collection of Republican politicians and corporate plutocrats - not much different
from who you'd find in any Republican administration.
And from reader EMichael in the Comments thread to this post about 35 minutes ago:
OH, it will be worse than that, much worse.
Bank regulation will go back to the "glory days" of the housing bubble, and Warren's CFPB will
be toast.
Buddy of mine works HR for a large bank. He has been flooded with resumes from current employees
of the CFPB the last couple of days.
Yup. HSBC ain't in that list for nothing. But, not to worry. Trump's kids will pick up lots of
real estate on the (real) cheap, after the crash. Their dad will give them all the tips, from experience.
And the breaking news this afternoon is that Pence–uh-ha;
this Mike Pence –has
replaced Christie as transition team head. Wanna bet that Comey told Trump today that Christie is
likely to be indicted in Bridgegate?
Next up, although down the road a few months: rumors that a grand jury has been convened to try
to learn how, exactly, Giuliani got all that info from inside the FBI two weeks ago. Once the FBI
inspector general completes his investigation. Or once New York's attorney general, Eric Schneiderman,
begins looking into violations of NY state criminal law.
That's why a British court has effectively overturned the results of the Brexit vote – in
a lawsuit brought by a hedge fund manager and former model – and thrown the fate of the country
into the hands of pro-EU Tories, and their Labor and Liberal Democrat collaborators.
This stunning reversal was baked in to the legislation that enabled the referendum to begin
with, and is par for the course as far as EU referenda are concerned: in 1992,
Danish voters rejected the EU, only to have the Euro-crats demand a rematch with a "modified"
EU treaty which won narrowly. There have been repeated attempts to modify the modifications,
which have all failed. Ireland voted against both the Lisbon Treaty and the Nice Treaty, only
to have the issue brought up again until the "right" result was achieved.
"... "Yet commentators who have been ready and willing to attribute Donald Trump's success to anger, authoritarianism, or racism rather than policy issues have taken little note of the extent to which Mr. Sanders's support is concentrated not among liberal ideologues but among disaffected white men." ... ..."
"... poor pk a leader of the Stalinist press ..."
"... the surprising success of Bernie Sanders -- a Brooklyn-born, Jewish socialist -- in the primaries is solid proof that the electorate was open to a coherent argument for genuine progressive change, and that a substantial portion of that electorate is not acting on purely racist and sexist impulses, as so many progressive commentators say. ..."
"... "I will live my life calmly and my children will be just fine. I will live my life calmly and my children will be just fine." That assumes you're about 85 years old...and don't have long to live! ..."
"... Laid out by whom? By the commercial "media" hype machine that has 12-16 hours of airtime to fill every day with the as sensationalized as possible gossip (to justify the price for the paid advertisements filling the remaining hours). ..."
"... Killary Clinton got no closer than Ann Arbor this weekend, a message! ..."
"... Mr. Krugman forgot to list the collusion of the DNC and the Clinton campaign to work against Sanders. ..."
"... putting crooked in the same sentence as Clinton or DNC is duplicative wording. This mortification is brought to US by the crooked and the stalinist press that calls crooked virtue. ..."
"... Krugman did so much to help create the mass of white working class discontent that is electing Trump. Krugman and co cheering on NAFTA/PNTR/WTO etc, US deindustrialization, collapse of middle class... ..."
"... Hopefully the working class masses will convince our rulers to abandon free trade before every last factory is sold off or dismantled and the US falls to the depths of a Chad or an Armenia. ..."
The Truth About the Sanders Movement
By Paul Krugman
In short, it's complicated – not all bad, by any means, but not the pure uprising of idealists
the more enthusiastic supporters imagine.
The political scientists Christopher Achen and Larry Bartels have an illuminating discussion
of Sanders support. The key graf that will probably have Berniebros boiling is this:
"Yet commentators who have been ready and willing to attribute Donald Trump's success to
anger, authoritarianism, or racism rather than policy issues have taken little note of the extent
to which Mr. Sanders's support is concentrated not among liberal ideologues but among disaffected
white men." ...
[ Yes, I do find defaming people by speculation or stereotype to be beyond saddening. ]
The fact that Obama either won, or did so much better than Hillary appears to be doing with, the
white working-class vote in so many key battleground states, as well as the surprising success
of Bernie Sanders -- a Brooklyn-born, Jewish socialist -- in the primaries is solid proof that
the electorate was open to a coherent argument for genuine progressive change, and that a substantial
portion of that electorate is not acting on purely racist and sexist impulses, as so many progressive
commentators say.
And her opponent was/is incapable of debating on substance, as there was/is neither coherence
nor consistency in any part of his platform -- nor that of his party....
Question is, will Krugman be able to move on after the election...and talk about something useful?
Like how to get Hillary to recognize and deal with inequality...
Barbara Ehrenreich: "Forget fear and loathing. The US election inspires projectile vomiting. The
most sordid side of our democracy has been laid out for all to see. But that's only the beginning:
whoever wins, the mutual revulsion will only intensify... With either Clinton or Trump, we will
be left to choke on our mutual revulsion."
"I will live my life calmly and my children will be just fine. I will live my life calmly
and my children will be just fine." That assumes you're about 85 years old...and don't have long
to live!
Laid out by whom? By the commercial "media" hype machine that has 12-16 hours of airtime to
fill every day with the as sensationalized as possible gossip (to justify the price for the paid
advertisements filling the remaining hours).
Something interesting today.... President Obama came to Michigan. I fully expected him to speak
in Detroit with a get out the vote message. Instead he is in Ann Arbor, speaking to an overwhelmingly
white and white-collar audience. On a related note, the Dems have apparently written off
the white blue collar vote in Michigan, even much of the union vote. the union leaders are pro
Clinton, but the workers not so much. Strange year.
The real danger of serious election-rigging: electronic voting machines. How do we know the machine
*really* recorded everyone's votes correctly? (Did any Florida county ever give Al Gore negative
something votes?)
That's a big subject but you are right, that is the biggest risk of significant fraud. Not just
the voting machines, but the automatic counting systems. Other forms of possible election fraud
are tiny by comparison.
Here is the transcript from 60 Minutes about the Luntz focus group rancor. Instructive to read
about the depth of feeling in case you didn't see the angry, disgusted faces of citizens.
putting crooked in the same sentence as Clinton or DNC is duplicative wording. This mortification
is brought to US by the crooked and the stalinist press that calls crooked virtue.
Before the 1970s the US was both rich and protectionist - no look at our horrible roads and hopeless
people - the miracle of free trade! : ,
November 07, 2016 at 07:13 PM
Krugman did so much to help create the mass of white working class discontent that is electing
Trump. Krugman and co cheering on NAFTA/PNTR/WTO etc, US deindustrialization, collapse of
middle class...
Hopefully the working class masses will convince our rulers to abandon free trade before
every last factory is sold off or dismantled and the US falls to the depths of a Chad or an Armenia.
"... In our artificial economy real things do not matter so much, but politics and managing the
perceptions of the public are of paramount importance. And so the 'Goldilocks' Jobs Report, which is
how the business TV channels described that lukewarm piece of dreck, did little to rally the markets
except fleetingly intraday. ..."
"... The headline includes ALL employees, but if you take out the top 15-20% of managers, the average
hourly earning growth showed a pronounced downward divergence to a lower growth rate. The BLS switched
to this number including all employees a few years ago from the non-supervisory number. As a rule of
thumb, when someone shows you the 'average' number, find out the median number for the same sample.
Especially in these days of historically high inequality. ..."
"The wealth of another region excites their greed; and if it is weak, their lust for power
as well. Nothing from the rising to the setting of the sun is enough for them.
Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape,
and slaughter they falsely call empire; and where they make a desert, they call it peace."
Tacitus
"He who makes a beast of himself gets rid of the pain of being a man."
Samuel Johnson
In our artificial economy real things do not matter so much, but politics and managing the
perceptions of the public are of paramount importance. And so the 'Goldilocks' Jobs Report, which
is how the business TV channels described that lukewarm piece of dreck, did little to rally the markets
except fleetingly intraday.
In the first chart below I take a look inside that 'average hourly earnings growth' number.
The headline includes ALL employees, but if you take out the top 15-20% of managers, the average
hourly earning growth showed a pronounced downward divergence to a lower growth rate. The BLS switched
to this number including all employees a few years ago from the non-supervisory number. As a rule
of thumb, when someone shows you the 'average' number, find out the median number for the same sample.
Especially in these days of historically high inequality.
Be that as it may, the markets overall were in a flight to safety as the financiers bowed to their
fears of the upcoming presidential election, that something might happen that will upset their status
quo.
"... it's easy to imagine a President Trump refusing to heed our own highest court, which, as President Andrew Jackson observed, has no way, other than respect of institutions, to enforce its decisions. ..."
"... It's easy to carp like this but the sclerotic elite in charge of the country has failed to address demographic concerns, and has stamped out any politically incorrect thoughts as being signs of baseness. ..."
"... Now they are so upset that a challenger has arisen. It's unfortunate that this particular challenger has no background in government and will probably harm our economic growth with his lack of skill, but the elites will have to eat the cake they baked. ..."
"... Economists told us that free trade deals and open borders would make us prosperous and yet that hasn't happens. ..."
"... The technicians running trade policy, monetary policy and fiscal policy haven't held up their end of the bargain. ..."
"... Wealth and power has been redistributed upwards. ..."
"... The union movement has been destroyed in outright class war. ..."
"... The corporate media spread lies and distraction. It induces both apathy and a rat race/dog-eat-dog mentality. ..."
"... Consider how far we've moved right, so that Nixon e.g. would be considered hopelessly and radically leftist today. Given that, moving left should be one of the first things you consider. ..."
"... Yes, we've seen right wing policies killing jobs and steering wealth to the wealthy, and that's bad policy. But unfortunately it seems it's always possible to do *worse*. ..."
"... Trump's policies would double down on wealth transfer, while he spouts the typical RW mantra of "(my dopey policy which would destroy jobs) would be good for jobs." ..."
"... Economic growth fueled by foreign oil is nice while it lasts but what will happen to the country when the oil runs out or we are forced to fight a war that disrupts the supply? ..."
More Jobs, a Strong Economy, and a Threat to Institutions : ...Institutions are significant
to economists, who have come to see that countries become prosperous not because they have bounteous
natural resources or an educated population or the most advanced technology but because they have
good institutions. Crucially, formal structures are supported by informal, often unstated, social
agreements. A nation not only needs courts; its people need to believe that those courts can be
fair. ...
Over most of history, a small élite confiscated wealth from the poor. Subsistence farmers lived
under rules designed to tax them so that the rulers could live in palaces and pay for soldiers
to maintain their power. Every now and then, though, a system appeared in which leaders were forced
to accommodate the needs of at least some of their citizens. ... The societies with the most robust
systems for forcing the powerful to accommodate some of the needs of the powerless became wealthier
and more peaceful. ... Most nations without institutions to check the worst impulses of the rich
and powerful stay stuck in poverty and dysfunction. ...
This year's Presidential election has alarmed economists for several reasons. No economist,
save one , supports Donald J. Trump's stated economic plans, but an even larger concern is
that, were he elected, Trump would attack the very institutions that have provided our economic
stability. In his campaign, Trump has shown outright contempt for courts, free speech, international
treaties, and many other pillars of the American way of life. There is little reason to think
that, if granted the Presidency, Trump would soften his stand. ...
...it's easy to imagine a President Trump refusing to heed our own highest court, which, as
President Andrew Jackson observed, has no way, other than respect of institutions, to enforce
its decisions. No one knows what Trump would do as President, but, based on his statements on
the campaign trail, it's possible to imagine a nation where people have less confidence in the
courts, the military, and their rights to free speech and assembly. When this happens, history
tells us, people stop dreaming about what they could have if they invest in education, new businesses,
and new ideas. They focus, instead, on taking from others and holding tightly to what they've
already amassed. Those societies, without the institutions that protect us from our worst impulses,
become poorer, uglier, more violent. That is how nations fail.
It's easy to carp like this but the sclerotic elite in charge of the country has failed to address
demographic concerns, and has stamped out any politically incorrect thoughts as being signs of
baseness.
Now they are so upset that a challenger has arisen. It's unfortunate that this particular
challenger has no background in government and will probably harm our economic growth with his
lack of skill, but the elites will have to eat the cake they baked.
"No one knows what Trump would do as President, but, based on his statements on the campaign trail,
it's possible to imagine a nation where people have less confidence in the courts, the military,
and their rights to free speech and assembly. When this happens, history tells us, people stop
dreaming about what they could have if they invest in education, new businesses, and new ideas.
They focus, instead, on taking from others and holding tightly to what they've already amassed.
Those societies, without the institutions that protect us from our worst impulses, become poorer,
uglier, more violent. That is how nations fail."
This is all true but let's provide a little more context than the totebaggers' paint-by-numbers
narrative.
Economists told us that free trade deals and open borders would make us prosperous and
yet that hasn't happens.
The technicians running trade policy, monetary policy and fiscal policy haven't held up
their end of the bargain.
Wealth and power has been redistributed upwards.
The union movement has been destroyed in outright class war.
The corporate media spread lies and distraction. It induces both apathy and a rat race/dog-eat-dog
mentality.
The Democratic Party has been moved to right as the middle class has struggled.
And more and more people become susceptible to demagogues like Trump as Democrats try to play
both sides of the fence, instead of standing foresquarely behind the job class.
Let's hope we don't find out what Trump does if elected. My guess is that he'd delegate foreign
and domestic policy to Mike Pence as Trump himself would be free to pursue his own personal grudges
via whatever means are available.
Alex S -> Peter K.... , -1
As we can see here, through leftist glasses, the only possible remedy for solving a problem is
moving left.
Consider how far we've moved right, so that Nixon e.g. would be considered hopelessly and radically
leftist today.
Given that, moving left should be one of the first things you consider.
Consider how far we've moved right, so that Nixon e.g. would be considered hopelessly and radically
leftist today.
Given that, moving left should be one of the first things you consider.
Yes, we've seen right wing policies killing jobs and steering wealth to the wealthy, and that's
bad policy. But unfortunately it seems it's always possible to do *worse*.
Trump's policies would
double down on wealth transfer, while he spouts the typical RW mantra of "(my dopey policy which
would destroy jobs) would be good for jobs."
Tim Harford made a good case for trust accounting
for 99% of the difference in per capita GNP between the US and Somalia.
""If you take a broad enough definition of trust, then it would explain basically all the difference
between the per capita income of the United States and Somalia," ventures Steve Knack, a senior
economist at the World Bank who has been studying the economics of trust for over a decade. That
suggests that trust is worth $12.4 trillion dollars a year to the U.S., which, in case you are
wondering, is 99.5% of this country's income (2006 figures). If you make $40,000 a year, then
$200 is down to hard work and $39,800 is down to trust.
How could that be? Trust operates in all sorts of ways, from saving money that would have to
be spent on security to improving the functioning of the political system. But above all, trust
enables people to do business with each other. Doing business is what creates wealth." goo.gl/t3OqHc
Presidents and the US Economy: An Econometric Exploration
By Alan S. Blinder and Mark W. Watson
Abstract
The US economy has performed better when the president of the United States is a Democrat rather
than a Republican, almost regardless of how one measures performance. For many measures, including
real GDP growth (our focus), the performance gap is large and significant. This paper asks why.
The answer is not found in technical time series matters nor in systematically more expansionary
monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly
from more benign oil shocks, superior total factor productivity (TFP) performance, a more favorable
international environment, and perhaps more optimistic consumer expectations about the near-term
future.
Economic growth fueled by foreign oil is nice while it lasts but what will happen to the country
when the oil runs out or we are forced to fight a war that disrupts the supply?
I was in college in the mid 1970's and we asked this question a lot. Some think this worry has
gone away. I don't agree with those types. Which is why a green technology investment drive makes
a lot of sense for so many reasons.
Quote from the paper you linked to: "Arguably, oil shocks have more to do with US foreign policy
than with US economic policy-the two Gulf Wars being prominent examples. That said, several economists
have claimed that US monetary policy played an important role in bringing on the oil shocks. See,
for example, Barsky and Kilian (2002)."
Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative
By Robert B. Barsky and Lutz Kilian
Abstract
This paper argues that major oil price increases were not nearly as essential a part of the
causal mechanism that generated the stagflation of the 1970s as is often thought. There is neither
a theoretical presumption that oil supply shocks are stagflationary nor robust empirical evidence
for this view. In contrast, we show that monetary expansions and contractions can generate stagflation
of realistic magnitude even in the absence of supply shocks. Furthermore, monetary fluctuations
help to explain the historical movements of the prices of oil and other commodities, including
the surge in the prices of industrial commodities that preceded the 1973/74 oil price increase.
Thus, they can account for the striking coincidence of major oil price increases and worsening
stagflation.
My quote dragged on too long. I should have ended it with the first sentence. Monetary policy
could play a role but foreign policy could still be the biggest factor.
"Former Fed Vice Chairman Alan Blinder said he's skeptical that fiscal policy will be loosened
a great deal if Clinton wins the election, as seems likely based on recent voter surveys.
"She is promising not to make budget deficits bigger by her programs," said Blinder, who is
now a professor at Princeton University. "Whatever fiscal stimulus there is ought to be small
enough for the Fed practically to ignore it."
PGL told us that Hillary's fiscal program would be YUGE.
Dean Baker in "Rigged" * reminds me of the lasting limits to growth that appear to follow the
sacrifice of growth, especially to the extent of allowing a recession, for the sake of budget
balancing during a time of surrounding economic weakness:
Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich
Richer
By Dean Baker
Introduction: Trading in Myths
In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential nomination,
a new line became popular among the nation's policy elite: Bernie Sanders is the enemy of the
world's poor. Their argument was that Sanders, by pushing trade policies to help U.S. workers,
specifically manufacturing workers, risked undermining the well-being of the world's poor because
exporting manufactured goods to the United States and other wealthy countries is their path out
of poverty. The role model was China, which by exporting has largely eliminated extreme poverty
and drastically reduced poverty among its population. Sanders and his supporters would block the
rest of the developing world from following the same course.
This line, in its Sanders-bashing permutation, appeared early on in Vox, the millennial-oriented
media upstart, and was quickly picked up elsewhere (Beauchamp 2016). After all, it was pretty
irresistible. The ally of the downtrodden and enemy of the rich was pushing policies that would
condemn much of the world to poverty.
The story made a nice contribution to preserving the status quo, but it was less valuable if
you respect honesty in public debate.
The problem in the logic of this argument should be apparent to anyone who has taken an introductory
economics course. It assumes that the basic problem of manufacturing workers in the developing
world is the need for someone who will buy their stuff. If people in the United States don't buy
it, then the workers will be out on the street and growth in the developing world will grind to
a halt. In this story, the problem is that we don't have enough people in the world to buy stuff.
In other words, there is a shortage of demand. But is it really true that no one else in the world
would buy the stuff produced by manufacturing workers in the developing world if they couldn't
sell it to consumers in the United States? Suppose people in the developing world bought the stuff
they produced raising their living standards by raising their own consumption.
That is how the economics is supposed to work. In the standard theory, general shortages of
demand are not a problem. Economists have traditionally assumed that economies tended toward full
employment. The basic economic constraint was a lack of supply. The problem was that we couldn't
produce enough goods and services, not that we were producing too much and couldn't find anyone
to buy them. In fact, this is why all the standard models used to analyze trade agreements like
the Trans-Pacific Partnership assume trade doesn't affect total employment. Economies adjust so
that shortages of demand are not a problem.
In this standard story (and the Sanders critics are people who care about textbook economics),
capital flows from slow-growing rich countries, where it is relatively plentiful and so gets a
low rate of return, to fast-growing poor countries, where it is scarce and gets a high rate of
return....
It is yuuuuge - and no I did not say anything of the sort. Rather I noted it would be less than
1% of GDP. This is what I get for trying to get the facts right. It gets too complicated for you
even when we simplify things so you get angry and start screaming "liar". Grow up.
Per capta GDP grew from $51,100 to $51,400 between July 1 2015 and July 1 2016. This 0.6% growth
does not seem to me to be a statistic supporting claims of improving employment and improving
wage growth.
Dean has suggested in one of his commentaries that wage growth may be an artifact of a decline
in the quality of health insurance coverage. Wage growth is not figured net of increased outlays
for deductibles and copays related to changes in health insurance. PPACA discourages low deductible
and low copay health plans by placing a "Cadillac tax" on them, or at least threatening to do
so. The consequent rise in wage workers' outlays for copays and deductibles are not captured in
the statistics that claim to measure wage gains. This results in an income transfer from the well
to the sick, but can produce statistics that can be interpreted in politically convenient ways
by those so inclined
I get why the plans are taxed. I don't believe that the results of that policy have been beneficial
for the bulk of the population. Most of the good done by PPACA was done by the expansion of Medicaid
eligibility. I believe that requiring the working poor people to settle for high deductible high
copay policies has had the practical effect of requiring them to choose between adequate medical
and further impoverishment. I do not believe that the PPACA could not have been financed in a
way less injurious to the working poor. As the insurers have been unable to make money in this
deal, the hospital operators seem to have been the only winners in that their bad debt problems
have been ameliorated.
"people stop dreaming about what they could have if they invest in education, new businesses,
and new ideas"
And this is entirely rational, as in the situation described, the fruits of their efforts will
likely be siphoned from their pockets by the elites and generally rent-seekers with higher social
standing and leverage, or at best their efforts will amount to too little to be worth the risk
(including the risk of wasting one's time i.e. opportunity cost). It also becomes correspondingly
harder to convince and motivate others to join or fund any worthwhile efforts. What also happens
(and has happened in "communism") is that people take their interests private, i.e. hidden from
the view of those who would usurp or derail them.
"Those who witness extreme social collapse at first hand seldom describe any deep revelation about
the truths of human existence. What they do mention, if asked, is their surprise at how easy it
is to die.
The pattern of ordinary life, in which so much stays the same from one day to the next, disguises
the fragility of its fabric. How many of our activities are made possible by the impression of
stability that pattern gives? So long as it repeats, or varies steadily enough, we are able to
plan for tomorrow as if all the things we rely on and don't think about too carefully will still
be there. When the pattern is broken, by civil war or natural disaster or the smaller-scale tragedies
that tear at its fabric, many of those activities become impossible or meaningless, while simply
meeting needs we once took for granted may occupy much of our lives.
What war correspondents and relief workers report is not only the fragility of the fabric,
but the speed with which it can unravel. As we write this, no one can say with certainty where
the unraveling of the financial and commercial fabric of our economies will end. Meanwhile, beyond
the cities, unchecked industrial exploitation frays the material basis of life in many parts of
the world, and pulls at the ecological systems which sustain it.
Precarious as this moment may be, however, an awareness of the fragility of what we call civilisation
is nothing new.
'Few men realise,' wrote Joseph Conrad in 1896, 'that their life, the very essence of their
character, their capabilities and their audacities, are only the expression of their belief in
the safety of their surroundings.' Conrad's writings exposed the civilisation exported by European
imperialists to be little more than a comforting illusion, not only in the dark, unconquerable
heart of Africa, but in the whited sepulchres of their capital cities. The inhabitants of that
civilisation believed 'blindly in the irresistible force of its institutions and its morals, in
the power of its police and of its opinion,' but their confidence could be maintained only by
the seeming solidity of the crowd of like-minded believers surrounding them. Outside the walls,
the wild remained as close to the surface as blood under skin, though the city-dweller was no
longer equipped to face it directly.
Bertrand Russell caught this vein in Conrad's worldview, suggesting that the novelist 'thought
of civilised and morally tolerable human life as a dangerous walk on a thin crust of barely cooled
lava which at any moment might break and let the unwary sink into fiery depths.' What both Russell
and Conrad were getting at was a simple fact which any historian could confirm: human civilisation
is an intensely fragile construction. It is built on little more than belief: belief in the rightness
of its values; belief in the strength of its system of law and order; belief in its currency;
above all, perhaps, belief in its future.
Once that belief begins to crumble, the collapse of a civilisation may become unstoppable.
That civilisations fall, sooner or later, is as much a law of history as gravity is a law of physics.
What remains after the fall is a wild mixture of cultural debris, confused and angry people whose
certainties have betrayed them, and those forces which were always there, deeper than the foundations
of the city walls: the desire to survive and the desire for meaning."
Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich
Richer By Dean Baker
Introduction: Trading in Myths
In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential nomination,
a new line became popular among the nation's policy elite: Bernie Sanders is the enemy of the
world's poor. Their argument was that Sanders, by pushing trade policies to help U.S. workers,
specifically manufacturing workers, risked undermining the well-being of the world's poor because
exporting manufactured goods to the United States and other wealthy countries is their path out
of poverty. The role model was China, which by exporting has largely eliminated extreme poverty
and drastically reduced poverty among its population. Sanders and his supporters would block the
rest of the developing world from following the same course.
This line, in its Sanders-bashing permutation, appeared early on in Vox, the millennial-oriented
media upstart, and was quickly picked up elsewhere (Beauchamp 2016). After all, it was pretty
irresistible. The ally of the downtrodden and enemy of the rich was pushing policies that would
condemn much of the world to poverty.
The story made a nice contribution to preserving the status quo, but it was less valuable if
you respect honesty in public debate.
The problem in the logic of this argument should be apparent to anyone who has taken an introductory
economics course. It assumes that the basic problem of manufacturing workers in the developing
world is the need for someone who will buy their stuff. If people in the United States don't buy
it, then the workers will be out on the street and growth in the developing world will grind to
a halt. In this story, the problem is that we don't have enough people in the world to buy stuff.
In other words, there is a shortage of demand. But is it really true that no one else in the world
would buy the stuff produced by manufacturing workers in the developing world if they couldn't
sell it to consumers in the United States? Suppose people in the developing world bought the stuff
they produced raising their living standards by raising their own consumption.
That is how the economics is supposed to work. In the standard theory, general shortages of
demand are not a problem. Economists have traditionally assumed that economies tended toward full
employment. The basic economic constraint was a lack of supply. The problem was that we couldn't
produce enough goods and services, not that we were producing too much and couldn't find anyone
to buy them. In fact, this is why all the standard models used to analyze trade agreements like
the Trans-Pacific Partnership assume trade doesn't affect total employment. Economies adjust so
that shortages of demand are not a problem.
In this standard story (and the Sanders critics are people who care about textbook economics),
capital flows from slow-growing rich countries, where it is relatively plentiful and so gets a
low rate of return, to fast-growing poor countries, where it is scarce and gets a high rate of
return....
More Jobs, a Strong Economy, and a Threat to Institutions : ...Institutions are significant
to economists, who have come to see that countries become prosperous not because they have bounteous
natural resources or an educated population or the most advanced technology but because they have
good institutions. Crucially, formal structures are supported by informal, often unstated, social
agreements. A nation not only needs courts; its people need to believe that those courts can be
fair. ...
Over most of history, a small élite confiscated wealth from the poor. Subsistence farmers lived
under rules designed to tax them so that the rulers could live in palaces and pay for soldiers
to maintain their power. Every now and then, though, a system appeared in which leaders were forced
to accommodate the needs of at least some of their citizens. ... The societies with the most robust
systems for forcing the powerful to accommodate some of the needs of the powerless became wealthier
and more peaceful. ... Most nations without institutions to check the worst impulses of the rich
and powerful stay stuck in poverty and dysfunction. ...
This year's Presidential election has alarmed economists for several reasons. No economist,
save one , supports Donald J. Trump's stated economic plans, but an even larger concern is
that, were he elected, Trump would attack the very institutions that have provided our economic
stability. In his campaign, Trump has shown outright contempt for courts, free speech, international
treaties, and many other pillars of the American way of life. There is little reason to think
that, if granted the Presidency, Trump would soften his stand. ...
...it's easy to imagine a President Trump refusing to heed our own highest court, which, as
President Andrew Jackson observed, has no way, other than respect of institutions, to enforce
its decisions. No one knows what Trump would do as President, but, based on his statements on
the campaign trail, it's possible to imagine a nation where people have less confidence in the
courts, the military, and their rights to free speech and assembly. When this happens, history
tells us, people stop dreaming about what they could have if they invest in education, new businesses,
and new ideas. They focus, instead, on taking from others and holding tightly to what they've
already amassed. Those societies, without the institutions that protect us from our worst impulses,
become poorer, uglier, more violent. That is how nations fail.
It's easy to carp like this but the sclerotic elite in charge of the country has failed to address
demographic concerns, and has stamped out any politically incorrect thoughts as being signs of
baseness. Now they are so upset that a challenger has arisen. It's unfortunate that this particular
challenger has no background in government and will probably harm our economic growth with his
lack of skill, but the elites will have to eat the cake they baked.
"No one knows what Trump would do as President, but, based on his statements on the campaign trail,
it's possible to imagine a nation where people have less confidence in the courts, the military,
and their rights to free speech and assembly. When this happens, history tells us, people stop
dreaming about what they could have if they invest in education, new businesses, and new ideas.
They focus, instead, on taking from others and holding tightly to what they've already amassed.
Those societies, without the institutions that protect us from our worst impulses, become poorer,
uglier, more violent. That is how nations fail."
This is all true but let's provide a little more context than the totebaggers' paint-by-numbers
narrative.
Economists told us that free trade deals and open borders would make us prosperous and
yet that hasn't happens.
The technicians running trade policy, monetary policy and fiscal policy haven't held up
their end of the bargain.
Wealth and power has been redistributed upwards.
The union movement has been destroyed in outright class war.
The corporate media spread lies and distraction. It induces both apathy and a rat race/dog-eat-dog
mentality.
The Democratic Party has been moved to right as the middle class has struggled.
And more and more people become susceptible to demagogues like Trump as Democrats try to play
both sides of the fence, instead of standing foresquarely behind the job class.
Let's hope we don't find out what Trump does if elected. My guess is that he'd delegate foreign
and domestic policy to Mike Pence as Trump himself would be free to pursue his own personal grudges
via whatever means are available.
As Bernie Sanders's campaign demonstrated, there is still hope. In fact hope is growing.
Lucky for us Sanders campaigned hard for Hillary, knowing what the stakes are.
Given the way people like PGL treated Sanders during the campaign and given what Wikileaks
showed, I doubt the reverse would have been true had Sanders won the primary.
The reverse would have been true, because we Democrats would have voted party above all else and
especially in this election year. Remember "party" the thing that Bernie supporters and Bernie
himself denigrated? I believe the term
"elites" was used more than once to describe the party faithful.
Alex S -> Peter K.... , -1
As we can see here, through leftist glasses, the only possible remedy for solving a problem is
moving left.
Consider how far we've moved right, so that Nixon e.g. would be considered hopelessly and radically
leftist today.
Given that, moving left should be one of the first things you consider.
Does the Right Hold the Economy Hostage to Advance Its Militarist Agenda?
That's one way to read Tyler Cowen's New York Times column * noting that wars have often been
associated with major economic advances which carries the headline "the lack of major wars may
be hurting economic growth." Tyler lays out his central argument:
"It may seem repugnant to find a positive side to war in this regard, but a look at American
history suggests we cannot dismiss the idea so easily. Fundamental innovations such as nuclear
power, the computer and the modern aircraft were all pushed along by an American government eager
to defeat the Axis powers or, later, to win the Cold War. The Internet was initially designed
to help this country withstand a nuclear exchange, and Silicon Valley had its origins with military
contracting, not today's entrepreneurial social media start-ups. The Soviet launch of the Sputnik
satellite spurred American interest in science and technology, to the benefit of later economic
growth."
This is all quite true, but a moment's reflection may give a bit different spin to the story.
There has always been substantial support among liberals for the sort of government sponsored
research that he describes here. The opposition has largely come from the right. However the right
has been willing to go along with such spending in the context of meeting national defense needs.
Its support made these accomplishments possible.
This brings up the suggestion Paul Krugman made a while back (jokingly) that maybe we need
to convince the public that we face a threat from an attack from Mars. Krugman suggested this
as a way to prompt traditional Keynesian stimulus, but perhaps we can also use the threat to promote
an ambitious public investment agenda to bring us the next major set of technological breakthroughs.
1. Baker's peaceful spending scenario is not likely because of human nature.
2. Even if Baker's scenario happened, a given dollar will be used more efficiently in a war.
If there is a threat of losing, you have an incentive to cut waste and spend on what produces
results.
3. The United States would not exist at all if we had not conquered the territory.
US Budgetary Costs of Wars through 2016: $4.79 Trillion and Counting
Summary of Costs of the US Wars in Iraq, Syria, Afghanistan and Pakistan and Homeland Security
By Neta C. Crawford
Summary
Wars cost money before, during and after they occur - as governments prepare for, wage, and
recover from them by replacing equipment, caring for the wounded and repairing the infrastructure
destroyed in the fighting. Although it is rare to have a precise accounting of the costs of war
- especially of long wars - one can get a sense of the rough scale of the costs by surveying the
major categories of spending.
As of August 2016, the US has already appropriated, spent, or taken on obligations to spend
more than $3.6 trillion in current dollars on the wars in Iraq, Afghanistan, Pakistan and Syria
and on Homeland Security (2001 through fiscal year 2016). To this total should be added the approximately
$65 billion in dedicated war spending the Department of Defense and State Department have requested
for the next fiscal year, 2017, along with an additional nearly $32 billion requested for the
Department of Homeland Security in 2017, and estimated spending on veterans in future years. When
those are included, the total US budgetary cost of the wars reaches $4.79 trillion.
But of course, a full accounting of any war's burdens cannot be placed in columns on a ledger....
Yes, we've seen right wing policies killing jobs and steering wealth to the wealthy, and that's
bad policy. But unfortunately it seems it's always possible to do *worse*. Trump's policies would
double down on wealth transfer, while he spouts the typical RW mantra of "(my dopey policy which
would destroy jobs) would be good for jobs." Tim Harford made a good case for trust accounting
for 99% of the difference in per capita GNP between the US and Somalia.
""If you take a broad enough definition of trust, then it would explain basically all the difference
between the per capita income of the United States and Somalia," ventures Steve Knack, a senior
economist at the World Bank who has been studying the economics of trust for over a decade. That
suggests that trust is worth $12.4 trillion dollars a year to the U.S., which, in case you are
wondering, is 99.5% of this country's income (2006 figures). If you make $40,000 a year, then
$200 is down to hard work and $39,800 is down to trust.
How could that be? Trust operates in all sorts of ways, from saving money that would have to
be spent on security to improving the functioning of the political system. But above all, trust
enables people to do business with each other. Doing business is what creates wealth." goo.gl/t3OqHc
Presidents and the US Economy: An Econometric Exploration
By Alan S. Blinder and Mark W. Watson
Abstract
The US economy has performed better when the president of the United States is a Democrat rather
than a Republican, almost regardless of how one measures performance. For many measures, including
real GDP growth (our focus), the performance gap is large and significant. This paper asks why.
The answer is not found in technical time series matters nor in systematically more expansionary
monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly
from more benign oil shocks, superior total factor productivity (TFP) performance, a more favorable
international environment, and perhaps more optimistic consumer expectations about the near-term
future.
Economic growth fueled by foreign oil is nice while it lasts but what will happen to the country
when the oil runs out or we are forced to fight a war that disrupts the supply?
I was in college in the mid 1970's and we asked this question a lot. Some think this worry has
gone away. I don't agree with those types. Which is why a green technology investment drive makes
a lot of sense for so many reasons.
Economic growth fueled by foreign oil is nice while it lasts but what will happen to the country
when the oil runs out or we are forced to fight a war that disrupts the supply?
[ Having read and reread this question, I do not begin to understand what it means. There is
oil here, there is oil all about us, there is oil in Canada and Mexico and on and on, and the
supply of oil about us is not about to be disrupted by any conceivable war and an inconceivable
war is never going to be fought. ]
Economic growth fueled by foreign oil is nice while it lasts but what will happen to the country
when the oil runs out or we are forced to fight a war that disrupts the supply?
[ My guess is that this is a way of scarily pitching for fracking for oil right in my garden,
but I like my azealia bushes and mocking birds. ]
Quote from the paper you linked to: "Arguably, oil shocks have more to do with US foreign policy
than with US economic policy-the two Gulf Wars being prominent examples. That said, several economists
have claimed that US monetary policy played an important role in bringing on the oil shocks. See,
for example, Barsky and Kilian (2002)."
Do We Really Know that Oil Caused the Great Stagflation? A Monetary Alternative
By Robert B. Barsky and Lutz Kilian
Abstract
This paper argues that major oil price increases were not nearly as essential a part of the
causal mechanism that generated the stagflation of the 1970s as is often thought. There is neither
a theoretical presumption that oil supply shocks are stagflationary nor robust empirical evidence
for this view. In contrast, we show that monetary expansions and contractions can generate stagflation
of realistic magnitude even in the absence of supply shocks. Furthermore, monetary fluctuations
help to explain the historical movements of the prices of oil and other commodities, including
the surge in the prices of industrial commodities that preceded the 1973/74 oil price increase.
Thus, they can account for the striking coincidence of major oil price increases and worsening
stagflation.
My quote dragged on too long. I should have ended it with the first sentence. Monetary policy
could play a role but foreign policy could still be the biggest factor.
"Former Fed Vice Chairman Alan Blinder said he's skeptical that fiscal policy will be loosened
a great deal if Clinton wins the election, as seems likely based on recent voter surveys.
"She is promising not to make budget deficits bigger by her programs," said Blinder, who is
now a professor at Princeton University. "Whatever fiscal stimulus there is ought to be small
enough for the Fed practically to ignore it."
PGL told us that Hillary's fiscal program would be YUGE.
Dean Baker in "Rigged" * reminds me of the lasting limits to growth that appear to follow the
sacrifice of growth, especially to the extent of allowing a recession, for the sake of budget
balancing during a time of surrounding economic weakness:
Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich
Richer
By Dean Baker
Introduction: Trading in Myths
In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential nomination,
a new line became popular among the nation's policy elite: Bernie Sanders is the enemy of the
world's poor. Their argument was that Sanders, by pushing trade policies to help U.S. workers,
specifically manufacturing workers, risked undermining the well-being of the world's poor because
exporting manufactured goods to the United States and other wealthy countries is their path out
of poverty. The role model was China, which by exporting has largely eliminated extreme poverty
and drastically reduced poverty among its population. Sanders and his supporters would block the
rest of the developing world from following the same course.
This line, in its Sanders-bashing permutation, appeared early on in Vox, the millennial-oriented
media upstart, and was quickly picked up elsewhere (Beauchamp 2016). After all, it was pretty
irresistible. The ally of the downtrodden and enemy of the rich was pushing policies that would
condemn much of the world to poverty.
The story made a nice contribution to preserving the status quo, but it was less valuable if
you respect honesty in public debate.
The problem in the logic of this argument should be apparent to anyone who has taken an introductory
economics course. It assumes that the basic problem of manufacturing workers in the developing
world is the need for someone who will buy their stuff. If people in the United States don't buy
it, then the workers will be out on the street and growth in the developing world will grind to
a halt. In this story, the problem is that we don't have enough people in the world to buy stuff.
In other words, there is a shortage of demand. But is it really true that no one else in the world
would buy the stuff produced by manufacturing workers in the developing world if they couldn't
sell it to consumers in the United States? Suppose people in the developing world bought the stuff
they produced raising their living standards by raising their own consumption.
That is how the economics is supposed to work. In the standard theory, general shortages of
demand are not a problem. Economists have traditionally assumed that economies tended toward full
employment. The basic economic constraint was a lack of supply. The problem was that we couldn't
produce enough goods and services, not that we were producing too much and couldn't find anyone
to buy them. In fact, this is why all the standard models used to analyze trade agreements like
the Trans-Pacific Partnership assume trade doesn't affect total employment. Economies adjust so
that shortages of demand are not a problem.
In this standard story (and the Sanders critics are people who care about textbook economics),
capital flows from slow-growing rich countries, where it is relatively plentiful and so gets a
low rate of return, to fast-growing poor countries, where it is scarce and gets a high rate of
return....
It is yuuuuge - and no I did not say anything of the sort. Rather I noted it would be less than
1% of GDP. This is what I get for trying to get the facts right. It gets too complicated for you
even when we simplify things so you get angry and start screaming "liar". Grow up.
Per capta GDP grew from $51,100 to $51,400 between July 1 2015 and July 1 2016. This 0.6% growth
does not seem to me to be a statistic supporting claims of improving employment and improving
wage growth.
Dean has suggested in one of his commentaries that wage growth may be an artifact of a decline
in the quality of health insurance coverage. Wage growth is not figured net of increased outlays
for deductibles and copays related to changes in health insurance. PPACA discourages low deductible
and low copay health plans by placing a "Cadillac tax" on them, or at least threatening to do
so. The consequent rise in wage workers' outlays for copays and deductibles are not captured in
the statistics that claim to measure wage gains. This results in an income transfer from the well
to the sick, but can produce statistics that can be interpreted in politically convenient ways
by those so inclined
I get why the plans are taxed. I don't believe that the results of that policy have been beneficial
for the bulk of the population. Most of the good done by PPACA was done by the expansion of Medicaid
eligibility. I believe that requiring the working poor people to settle for high deductible high
copay policies has had the practical effect of requiring them to choose between adequate medical
and further impoverishment. I do not believe that the PPACA could not have been financed in a
way less injurious to the working poor. As the insurers have been unable to make money in this
deal, the hospital operators seem to have been the only winners in that their bad debt problems
have been ameliorated.
"people stop dreaming about what they could have if they invest in education, new businesses,
and new ideas"
And this is entirely rational, as in the situation described, the fruits of their efforts will
likely be siphoned from their pockets by the elites and generally rent-seekers with higher social
standing and leverage, or at best their efforts will amount to too little to be worth the risk
(including the risk of wasting one's time i.e. opportunity cost). It also becomes correspondingly
harder to convince and motivate others to join or fund any worthwhile efforts. What also happens
(and has happened in "communism") is that people take their interests private, i.e. hidden from
the view of those who would usurp or derail them.
"Those who witness extreme social collapse at first hand seldom describe any deep revelation about
the truths of human existence. What they do mention, if asked, is their surprise at how easy it
is to die.
The pattern of ordinary life, in which so much stays the same from one day to the next, disguises
the fragility of its fabric. How many of our activities are made possible by the impression of
stability that pattern gives? So long as it repeats, or varies steadily enough, we are able to
plan for tomorrow as if all the things we rely on and don't think about too carefully will still
be there. When the pattern is broken, by civil war or natural disaster or the smaller-scale tragedies
that tear at its fabric, many of those activities become impossible or meaningless, while simply
meeting needs we once took for granted may occupy much of our lives.
What war correspondents and relief workers report is not only the fragility of the fabric,
but the speed with which it can unravel. As we write this, no one can say with certainty where
the unraveling of the financial and commercial fabric of our economies will end. Meanwhile, beyond
the cities, unchecked industrial exploitation frays the material basis of life in many parts of
the world, and pulls at the ecological systems which sustain it.
Precarious as this moment may be, however, an awareness of the fragility of what we call civilisation
is nothing new.
'Few men realise,' wrote Joseph Conrad in 1896, 'that their life, the very essence of their
character, their capabilities and their audacities, are only the expression of their belief in
the safety of their surroundings.' Conrad's writings exposed the civilisation exported by European
imperialists to be little more than a comforting illusion, not only in the dark, unconquerable
heart of Africa, but in the whited sepulchres of their capital cities. The inhabitants of that
civilisation believed 'blindly in the irresistible force of its institutions and its morals, in
the power of its police and of its opinion,' but their confidence could be maintained only by
the seeming solidity of the crowd of like-minded believers surrounding them. Outside the walls,
the wild remained as close to the surface as blood under skin, though the city-dweller was no
longer equipped to face it directly.
Bertrand Russell caught this vein in Conrad's worldview, suggesting that the novelist 'thought
of civilised and morally tolerable human life as a dangerous walk on a thin crust of barely cooled
lava which at any moment might break and let the unwary sink into fiery depths.' What both Russell
and Conrad were getting at was a simple fact which any historian could confirm: human civilisation
is an intensely fragile construction. It is built on little more than belief: belief in the rightness
of its values; belief in the strength of its system of law and order; belief in its currency;
above all, perhaps, belief in its future.
Once that belief begins to crumble, the collapse of a civilisation may become unstoppable.
That civilisations fall, sooner or later, is as much a law of history as gravity is a law of physics.
What remains after the fall is a wild mixture of cultural debris, confused and angry people whose
certainties have betrayed them, and those forces which were always there, deeper than the foundations
of the city walls: the desire to survive and the desire for meaning."
"... fundamentally antiracism and other identitarian programs are not only the left wing of neoliberalism
but active agencies in its imposition of a notion of the boundaries of the politically thinkable " ..."
"... Feminism…? gender discrimination….? racial equality ? …. racism ? Yes, OK, looks good, let's
see what works best for us…. ..."
"... There is still the issue that some professions are more prestigious or lucrative than others
and attract many individuals with a skill set that would better serve other functions. ..."
"... Valuing people for who they are and integrating them into the social order implies that they
have something to contribute and that they have a responsibility for making things better for others,
not just making themselves more comfortable in public. ..."
"... The idea that we have progressed past prior barbarisms … we have forgotten that "the past is
prologue" among other things. ..."
"... This label of progressivism is just so coy and unconvincing in the face of neoliberalism's
full spectrum dominance of all facets of society and culture. ..."
"... I know Reagan was no conservative and Thatcher lost all moorings as an enlightened Tory as
the "project" became all consuming to the detriment of all else. The Tory today isn't conservative –
far from it – a real ideolgical zealot for the promotion of "me, myself and (at most) my class" in most
cases. ..."
"... Is Progressivism just a balm for those who want to feel good about themselves but don't want
to do think about anything in particular? In fact, it is just a cover for I'm ok, screw you pal when
the chips are down? ..."
"These responses [show] how fundamentally antiracism and other identitarian programs
are not only the left wing of neoliberalism but active agencies in its imposition of a notion
of the boundaries of the politically thinkable "
Yes: there we have it.
Neoliberalism (unlike conservatism, often mistaken for each other) has NO social/cultural
values…or, perhaps, more precisely, it has ANY social/cultural values which directly/indirectly
advance the 0.1%'s Will to wealth & power. (Likely, "wealth" is redundant, as it's a manifestation
of power). Neoliberalism is powerful, like all great "evils" because it is completely protean.
( It makes the Nazi's look child-like & naive: after all, the Nazi's actually "believed"
in certain things… [ evil nonsense, but that's not the point at the moment].
Feminism…? gender discrimination….? racial equality ? …. racism ? Yes, OK, looks good,
let's see what works best for us….
I often wonder if liberalism goes hand in hand with the availability of energy and resources…
shrink these and witness a surge in all types of discrimination.
You will notice that genocides are closely tied to the availability and distribution of
resources… we humans seem to be masters at inventing all kinds of reasons to explain why we deserve
the loot and not others.
There is still the issue that some professions are more prestigious or lucrative than others
and attract many individuals with a skill set that would better serve other functions. And
we do this under the guise that we can do whatever we want if we try hard enough.
There is a difference between PC and truly valuing every individual in society no matter their
job or profession.
There is a difference between PC and truly valuing every individual in society no matter
their job or profession.
This.
Mere inclusiveness, while not in itself a bad thing–being aware of other people's circumstances
is simply polite–it doesn't really get you much further past where you already are and in large
part can be satisfied with better rhetoric (or better PR, if you insist on being cynical about
such things), all the while capitalism goes on its merry way, because no real pressure to change
has been applied. Valuing people for who they are and integrating them into the social order
implies that they have something to contribute and that they have a responsibility for making
things better for others, not just making themselves more comfortable in public.
What so often gets lost in these conversations about safe spaces and what have you is that
we should have a sense of shared responsibility, responding TO others' circumstances while also
being responsible FOR the conditions that oppress us all to greater and lesser degrees.
In other words, it's about checking your privilege AND seizing the means of production, because
without the second one, the first just ends up being mere window dressing.
EATF – I really like these. I'll be sad when they conclude!
The idea that we have progressed past prior barbarisms … we have forgotten that "the past
is prologue" among other things. Progressives think that if we completely forget the past,
then the memes that created the sins of the past will become unthinkable, that like interrupted
family violence, a chain will be broken and we can heal. Such people don't believe in the existence
of Evil.
As a socialist, what I miss is the conservative (small c) conversation in our daily affairs.
This label of progressivism is just so coy and unconvincing in the face of neoliberalism's
full spectrum dominance of all facets of society and culture. The conservative gave voice
and depth to our internal doubts about how the future was all brite and new – at least the few
conservatives I knew.
I wonder would a conservative voice (seemingly non-existent any more) have argued for a more
instructive change from industrialisation into what we've now become – might they have mitigated
the course and provided pointers to alternatives?
Maybe they did and I wasn't listening.
I know Reagan was no conservative and Thatcher lost all moorings as an enlightened Tory
as the "project" became all consuming to the detriment of all else. The Tory today isn't conservative
– far from it – a real ideolgical zealot for the promotion of "me, myself and (at most) my class"
in most cases.
Is Progressivism just a balm for those who want to feel good about themselves but don't
want to do think about anything in particular? In fact, it is just a cover for I'm ok, screw you
pal when the chips are down?
I never really liked Disney films as a kid and I certainly don't like them now – but each to
their own.
I'm glad you're making these points. The arc of the story mirrors a number of conversations
I've been having lately with people from poor, white, rural backgrounds. The insistence by good
liberals of making a show of their concern for, and outrage over, both major and minor affronts
to people of color, women, LGBTQI people, etc., while at the same time making jokes about toothless,
inbred trailer-trash, is starting to really piss some people off. These are not conservative people.
These are people to the left of Chomsky.
For some reason, you can slander and shame poor white folks all you want…oh yeah, it's because
they're deplorable racist, fundamentalist Christians who vote for evil Republicans and probably
don't even have a GED, much less a college degree…so f- 'em. The good liberals, on the other hand,
are highly-educated, fundamentalist secular humanists, who've been to college and vote for evil
Democrats…which makes them God's chosen people, apparently. The rest are blasphemers, barely even
human, and deserve whatever they get.
Until we make a real commitment to both listening to everyone's suffering and then to doing
practical things, now, to remedy that suffering, we'll be doomed to Dollary Clump elections and
divide-and-conquer tactics forever after. Let's not go down that road, how about? How's about
let's try treating each other with respect and compassion for once, just to see how it goes? Every
other way lies damnation, imho.
Sorry: I'm not buying this episode: For instance, maybe the reason for the stress on smartness
is plain old class warfare.
The U.S. slavishly follows English fashions, and one of the fashions in England (with which
we have that Special Relationship) is that the upper classes made sure that their kids got into
Eton, Cambridge, Oxford–the whole self-perpetuating educational system of the Pythonesque English
"smart" twit.
So the U S of A has imitated its betters in producing a lot of Tony Blairs. Exhibit A: Chelsea
Clinton.
This has little to do with smartness. It is all about class privilege. (Which has little
to do with postmodernism and its supposed piercing insights.)
The title- Neoliberalisms Boarder Guard" – and this quote:
"Looking now at the other two principles – postmodernism and suffering – Wendy Brown
foretold that, as foci, they would be unable to coexist. Since the time of her prediction,
the balance between the two has shifted dramatically, and it has become clear that Brown was
rooting for the losing side. "
combine to make me wonder. Does liberalism simply accommodate itself to the prevailing ruling
power structure, regardless of that structure's philosophy? Is liberalism today a philosophy or
a social emollient? Desirable social traits do not challenge the ruling neoliberal philosophy,
although they make create a nice space within neoliberalism.
Not buying this episode: "High profile instances of genocide and torture don't appear every
day, and commitment flags without regular stimulation. And so we have taken seriously at least
one idea from postmodernism, the fascination with slight conceptual nuances, and the faith or
fear that these nuances can produce enormously consequential effects."
Oh really?
This sentence is on the order of, Who speaks of the Armenians?
Guantanamo is high profile. Homan Square is high profile. Yemen is genocide. What are the Dakota
Pipeline protests about? Genocide. Your bourgeois eyeglasses just don't allow you to look. It
has nothing to do with micro-aggressions.
"... An awful lot of people out there think we live in a one-party state-that we're ruled by what is coming to be called the "Uniparty." ..."
"... There is a dawning realization, ever more widespread among ordinary Americans, that our national politics is not Left versus Right or Republican versus Democrat; it's we the people versus the politicians. ..."
"... Donald Trump is no nut. If he were a nut, he would not have amassed the fortune he has, nor nurtured the capable and affectionate family he has. ..."
"... To be conservative, then, is to prefer the familiar to the unknown, to prefer the tried to the untried, fact to mystery, the actual to the possible, the limited to the unbounded, the near to the distant, the sufficient to the superabundant, the convenient to the perfect, present laughter to utopian bliss. ..."
"... Trump has all the right instincts. And he's had the guts and courage-and, just as important, the money -to do a thing that has badly needed doing for twenty years: to smash the power of the real nuts in the GOP Establishment. ..."
A couple of remarks in
Professor Susan
McWillams' recent Modern Age piece celebrating the 25th anniversary of Christopher Lasch's
1991 book
The True and Only Heaven , which analyzed the cult of progress in its American manifestation,
have stuck in my mind. Here's the first one:
McWilliams adds a footnote to that: The 19 percent figure is from 2012, she says. Then she tells
us that in 1964, 64 percent of Americans agreed with the same statement.
Wow. You have to think that those two numbers, from 64 percent down to 19 percent in two generations,
tell us something important and disturbing about our political life.
Second McWilliams quote:
In 2016 if you type the words "Democrats and Republicans" or "Republicans and Democrats" into
Google, the algorithms predict your next words will be "are the same".
I just tried this, and she's right. These guesses are of course based on the frequency with which
complete sentences show up all over the internet. An awful lot of people out there think we live
in a one-party state-that we're ruled by what is
coming to be called the "Uniparty."
There is a dawning realization, ever more widespread among ordinary Americans, that our national
politics is not Left versus Right or Republican versus Democrat; it's we the people
versus the politicians.
Which leads me to a different lady commentator: Peggy Noonan, in her October 20th Wall Street
Journal column.
The title of Peggy's piece was:
Imagine
a Sane Donald Trump . [
Alternate link ]Its gravamen:
Donald Trump has shown up the Republican Party Establishment as totally out of touch with their base,
which is good; but that he's bat-poop crazy, which is bad. If a sane Donald Trump had done
the good thing, the showing-up, we'd be on course to a major beneficial correction in our national
politics.
It's a good clever piece. A couple of months ago on Radio Derb I offered up one and a half cheers
for Peggy, who gets a lot right in spite of being a longtime Establishment Insider. So it
was here. Sample of what she got right last week:
Mr. Trump's great historical role was to reveal to the Republican Party what half of its
own base really thinks about the big issues. The party's leaders didn't know! They were shocked,
so much that they indulged in sheer denial and made believe it wasn't happening.
The party's leaders accept more or less open borders and like big trade deals. Half the base
does not! It is longtime GOP doctrine to cut entitlement spending. Half the base doesn't want
to, not right now! Republican leaders have what might be called assertive foreign-policy impulses.
When Mr. Trump insulted George W. Bush and nation-building and said he'd opposed the Iraq invasion,
the crowds, taking him at his word, cheered. He was, as they say, declaring that he didn't want
to invade the world and invite the world. Not only did half the base cheer him, at least half
the remaining half joined in when the primaries ended.
End of pause. OK, so Peggy got some things right there. She got a lot wrong, though
Start with the notion that Trump is crazy. He's a nut, she says, five times. His brain is "a TV
funhouse."
Well, Trump has some colorful quirks of personality, to be sure, as we all do. But he's no nut.
A nut can't be as successful in business as Trump has been.
I spent 32 years as an employee or contractor, mostly in private businesses but for two years
in a government department. Private businesses are intensely rational, as human affairs go-much more
rational than government departments. The price of irrationality in business is immediate and plainly
financial. Sanity-wise, Trump is a better bet than most people in high government positions.
Sure, politicians talk a good rational game. They present as sober and thoughtful on the Sunday
morning shows.
Look at the stuff they believe, though. Was it rational to respond to the collapse of the U.S.S.R.
by moving NATO right up to Russia's borders? Was it rational to expect that post-Saddam Iraq would
turn into a constitutional democracy? Was it rational to order insurance companies to sell healthcare
policies to people who are already sick? Was the Vietnam War a rational enterprise? Was it rational
to respond to the 9/11 attacks by massively increasing Muslim immigration?
Make your own list.
Donald Trump displays good healthy patriotic instincts. I'll take that, with the personality quirks
and all, over some earnest, careful, sober-sided guy whose head contains fantasies of putting the
world to rights, or flooding our country with unassimilable foreigners.
I'd add the point, made by many commentators, that belongs under the general heading: "You don't
have to be crazy to work here, but it helps." If Donald Trump was not so very different from run-of-the-mill
politicians-which I suspect is a big part of what Peggy means by calling him a nut-would he have
entered into the political adventure he's on?
Thor Heyerdahl sailed across the Pacific on a hand-built wooden raft to prove a point, which
is not the kind of thing your average ethnographer would do. Was he crazy? No, he wasn't. It was
only that some feature of his personality drove him to use that way to prove the point he
hoped to prove.
And then there is Peggy's assertion that the Republican Party's leaders didn't know that half
the party's base were at odds with them.
Did they really not? Didn't they get a clue when the GOP lost in 2012, mainly because millions
of Republican voters didn't turn out for Mitt Romney? Didn't they, come to think of it, get the glimmering
of a clue back in 1996, when Pat Buchanan won the New Hampshire primary?
Pat Buchanan is in fact a living counter-argument to Peggy's thesis-the "sane Donald Trump" that
she claims would win the hearts of GOP managers. Pat is Trump without the personality quirks. How
has the Republican Party treated him ?
Our own
Brad Griffin , here at VDARE.com on October 24th, offered a couple more "sane Donald Trumps":
Ron Paul and Mike Huckabee. How did they fare with the GOP Establishment?
Donald Trump is no nut. If he were a nut, he would not have amassed the fortune he
has, nor nurtured the capable and affectionate family he has. Probably he's less well-informed
about the world than the average pol. I doubt he could tell you what
the capital of Burkina Faso is. That's secondary, though. A President has people to look up that
stuff for him. The question that's been asked more than any other about Donald Trump is not, pace
Peggy Noonan, "Is he nuts?" but, "
Is he conservative? "
I'm sure he is. But my definition of "conservative" is temperamental, not political. My touchstone
here is the sketch of the conservative temperament given to us by the English political philosopher
Michael Oakeshott :
To be conservative, then, is to prefer the familiar to the unknown, to prefer the tried
to the untried, fact to mystery, the actual to the possible, the limited to the unbounded, the
near to the distant, the sufficient to the superabundant, the convenient to the perfect, present
laughter to utopian bliss.
That fits Trump better than it fits any liberal you can think of-better also than many senior
Republicans.
For example, it was one of George W. Bush's senior associates-probably Karl Rove-who scoffed at opponents
of Bush's delusional foreign policy as "the reality-based community." It would be hard to think of
a more un -Oakeshottian turn of phrase.
Trump has all the right instincts. And he's had the guts and courage-and, just as important,
the money -to do a thing that has badly needed doing for twenty years: to smash the power
of the real nuts in the GOP Establishment.
I thank him for that, and look forward to his Presidency.
"... He opened his remarks by bashing Donald Trump on student loan debt, but then surprisingly turned to bashing Hillary Clinton from her own stage. "Unfortunately, Hillary doesn't really care about this issue either," Vanfosson said. "The only thing she cares about is pleasing her donors, the billionaires who fund her campaign. The only people that really trust Hillary are Goldman Sachs, CitiGroup can trust Hillary, the military industrial complex can trust Hillary. Her good friend Henry Kissinger can trust Hillary." ..."
"... "She is so trapped in the world of the elite that she has completely lost grip on what it's like to be an average person," Vanfosson continued. "She doesn't care. Voting for another lesser of two evils, there's no point." ..."
Just a few days before the general election, Democratic presidential nominee Hillary Rodham
Clinton and her running mate Sen. Tim Kaine (D-VA) still can't unite her party. Supporters of
Sen. Bernie Sanders of Vermont, her Democratic primary rival, are disrupting her campaign's
efforts to take on GOP nominee Donald J. Trump, and in Iowa on Saturday one prominent Sanders
backer was actually escorted out of a Clinton campaign event for urging those present not to vote
for Clinton-for which he was cheered by the crowd.
Kaleb Vanfosson, the president of Iowa State University's Students for Bernie chapter, bashed
Hillary Clinton and told rally-goers at her own campaign event not to vote for her. He was
cheered.
He opened his remarks by bashing Donald Trump on student loan debt, but then surprisingly
turned to bashing Hillary Clinton from her own stage. "Unfortunately, Hillary doesn't really care
about this issue either," Vanfosson said. "The only thing she cares about is pleasing her donors,
the billionaires who fund her campaign. The only people that really trust Hillary are Goldman
Sachs, CitiGroup can trust Hillary, the military industrial complex can trust Hillary. Her good
friend Henry Kissinger can trust Hillary."
The crowd at the Clinton-Kaine event erupted in applause.
"She is so trapped in the world of the elite that she has completely lost grip on what
it's like to be an average person," Vanfosson continued. "She doesn't care. Voting for another
lesser of two evils, there's no point."
At that point, a Clinton staffer rushed on stage and grabbed the young man by the arm to
escort him off the stage and out of the event.
"... In fact, I would posit that the Ivy League, especially Yale, Princeton, Harvard and MIT, are the principal crime factories in America today. ..."
"... Brownback is in Kansas; UMKC is in Missouri. There is a Kansas City in Kansas, and another Kansas City in Missouri. Missouri is not as red as KS, but it's still a red state. ..."
"... UMKC is part of the state system and most likely receives no funding from the city. It was home to New Letters, a respected literary magazine edited by poet John Ciardi. I hail from Kanasa City and always thought of UMKC as a decent commuter school, mostly catering to the educational needs of adult city dwellers. But the evolution of both the Econ and jazz studies departments lead me to suspect things have changed. Whether that's by design or through organic happenstance I don't know. ..."
"... Couldn't a Marxian analysis of capitalism as a whole also shed some light on this issue? I think Hudson is pretty much right but I think, like Sanders, he's offering a reformist option as opposed to a full on critique of the entire system. ..."
"... Not that a revolution is the option you necessarily want to go with, I just think that Marx's criticism of capitalism has useful information that could help with shaping the perspective here. ..."
Michael
Hudson spends a half hour with Meet the Renegades explaining his views on money, finance, economic
training, rentier capitalism, and how debt overhangs operate. Hudson fans will recognize his regular
themes. This is a good segment for introducing people you know to Hudson and to heterodox economic
ideas.
I've always found it interesting that both Hudson and Bill Black are on the faculty of UMKC,
which is a state university in a pretty conservative state. It's possible that some of the funding
for UMKC comes from the municipality of Kansas City, MO, but that town has never been known as
a hotbed of radical intellectuality either.
Joseph Campbell didn't teach at an Ivy League either. Conformity starts with the faculty in
your own department … and the Ivy League is as status quo and status conscious as it gets.
The Ivy League are not much different than privately held corporations when you consider who
their alma materi are, how much money the alma materi have, and where Ivy League endowments come
from.
In fact, I would posit that the Ivy League, especially Yale, Princeton, Harvard and MIT, are
the principal crime factories in America today.
Please recall that the dood who financed Liberty Lobby and other white supremacist nonsense
was Koch family patriarch, Fred Koch, who was a trustee at MIT. (Ever hear Noam Chomsky complain
about that????? Of course not!)
Ah but is it really an inherently conservative state fiscally, or just socially? That is, are
the people like Brownback appealing to one sort of conservatism and using that to do a "trust
me" on the other sort?
I would say it's not unreasonable for anybody to delegate something they are not so sure of
to somebody they trust for other reasons.
Brownback is in Kansas; UMKC is in Missouri. There is a Kansas City in Kansas, and another
Kansas City in Missouri. Missouri is not as red as KS, but it's still a red state.
UMKC is part of the state system and most likely receives no funding from the city. It was
home to New Letters, a respected literary magazine edited by poet John Ciardi. I hail from Kanasa
City and always thought of UMKC as a decent commuter school, mostly catering to the educational
needs of adult city dwellers. But the evolution of both the Econ and jazz studies departments
lead me to suspect things have changed. Whether that's by design or through organic happenstance
I don't know.
If you are not on the money makers' distribution list, it would make sense to find other ways
to get some of that loot if you can't the traditional way…
You can be conservative in your social values but want change, i.e. liberalism, in the way
the monetary system distributes the money.
The UMKC is also the home of the Kansas City School of Economics, more commonly known as the
MMT School. Neither Hudson nor Black are MMTers per se, but both have grown by their affiliation
with the school.
Thanks for sharing this excellent interview. Watching it I realized the people I actually admire
more than Hudson are his students. They must care more about learning the truth than securing
wealth and job prospects on wall street.
Couldn't a Marxian analysis of capitalism as a whole also shed some light on this issue? I
think Hudson is pretty much right but I think, like Sanders, he's offering a reformist option
as opposed to a full on critique of the entire system.
Not that a revolution is the option you necessarily want to go with, I just think that Marx's
criticism of capitalism has useful information that could help with shaping the perspective here.
I asked Yves Smith at the Dallas meetup last week (paraphrasing) "Do you meet with Michael
Hudson and Bill Black… is the independent media community, or any community, organizing around
Michael Hudson and Bill Black… to not only support and promote Hudson's and Black's perspectives
but to help develop their concepts and 'fine tune' their messaging?" I said to Yves "Hudson and
Black are clearly the leaders we desperately need to rally behind and push into Washington… they
clearly know what needs to be done… a PR machine needs to be developed… to get their messages
out to our families, friends, and acquaintances… unfortunately, the current messaging is not good
enough… I can't get my family, friends, and others to engage and echo the messaging to their family,
friends, etc."
Michael Hudson has been good at repeating his central message… 'by increasing land, monopoly,
and finance rent costs… the 1% are a highly organized mafia methodically looting our economy…
effectively raping, pillaging and consequently destroying every component of our social structures'.
Very unfortunately, Bill Blacks central message seems to have been lost for years now… he doesn't
repeat his central message… 'the crimes must be stopped… there is no alternative… looting criminals
MUST be publicly exposed, investigated, indicted, prosecuted, convicted, punished and their loot
returned to society… by letting cheaters prosper, organized white-collar crime, perpetrated by
the top-most leaders of our public and private institutions, has become an epidemic… the very
fabric of civil society is being destroyed… we have no choice… the criminals must be stopped…
and the only way to do that is to publicly expose, investigate, indict, prosecute, punish, and
take back what is ours'.
In 2008, when I tuned out of the mainstream media and tuned into the independent media, I thought
the messages from Michael Hudson ("they are organized criminals… this is what they're doing…")
and Bill Black ("the criminals must be stopped… here's how we stopped the Savings & Loan criminals…)
would resonate and become common knowledge. I quickly discovered that it didn't even resonate
with close family and friends. Why???
I will send out this video… Michael Hudson at his best, speaking-wise. I don't expect to get
any reaction… why?… very frustrated…
Amen. Once you start noticing, it becomes hard to stop. In looking hard for a silver lining
to the current election storm clouds, public awareness of the MSM seems to have nudged a few toward
slightly more objectivity, although I may just be wishing for that after media fatigue ;)
"... I'll be interested to see how much Hillary tries to "work with Republicans" when it comes to foreign or domestic policy, as she's promising on the campaign trail. ..."
"... In a recent interview Biden was talking about how his "friends" in the Senate like McCain, Lindsy Graham, etc. - the sane ones who hate Trump - have to come out in support of the Republican plan to block Clinton from nominating a Supreme Court judge, because of if they don't, the Koch brothers will primary them. ..."
"... While I agree that the Republican party has been interested in whatever argument will win elections and benefit their donor class, doesn't the Democratic Party also have a donor class? Haven't Bill Clinton, Barack Obama, and Hillary Clinton had a close relationship with some business interests? Did anyone go to jail after the asset bubble? Did welfare reform work or simply shift the problem out of view? How complicit are the Democrats in the great risk shift? ..."
"... I would think the scorched earth politics of the neoliberals required Democrats to shift to the right if they ever hoped to win an election, again. That is what it has looked like to me. The American equivalent of New Labor in Britain. So, we have a more moderate business-interest group of Democrats and a radical business-interest group of Republicans during the past 40 years. I think Kevin Phillips has made this argument. ..."
"... Our grand experimental shift back to classical theory involved supply side tax cuts, deregulation based on the magic of new finance theory, and monetarist pro-financial monetary policy. All of which gave us the masquerade of a great moderation that ended in the mother of all asset bubbles. While we shredded the safety net. ..."
"... Now the population is learning the arguments about free trade magically lifting all boats up into the capitalist paradise has blown up. We've shifted the risk onto the working population and they couldn't bear it. ..."
"... Economists lied to the American people about trade and continue to lie about the issue day in and day out. Brainwashing kids with a silly model called comparative advantage. ..."
This is all true but Krugman always fails to tell the other side of the story.
I'll be interested to see how much Hillary tries to "work with Republicans" when it comes
to foreign or domestic policy, as she's promising on the campaign trail.
The centrists always do this to push through centrist, neoliberal "solutions" which anger the
left.
In a recent interview Biden was talking about how his "friends" in the Senate like McCain,
Lindsy Graham, etc. - the sane ones who hate Trump - have to come out in support of the Republican
plan to block Clinton from nominating a Supreme Court judge, because of if they don't, the Koch
brothers will primary them.
Let's hope Hillary does something about campaign finance reform and Citizen United and takes
a harder line against obstructionist Republicans.
While I agree that the Republican party has been interested in whatever argument will win
elections and benefit their donor class, doesn't the Democratic Party also have a donor class?
Haven't Bill Clinton, Barack Obama, and Hillary Clinton had a close relationship with some business
interests? Did anyone go to jail after the asset bubble? Did welfare reform work or simply shift
the problem out of view? How complicit are the Democrats in the great risk shift?
I would think the scorched earth politics of the neoliberals required Democrats to shift
to the right if they ever hoped to win an election, again. That is what it has looked like to
me. The American equivalent of New Labor in Britain. So, we have a more moderate business-interest
group of Democrats and a radical business-interest group of Republicans during the past 40 years.
I think Kevin Phillips has made this argument.
Our grand experimental shift back to classical theory involved supply side tax cuts, deregulation
based on the magic of new finance theory, and monetarist pro-financial monetary policy. All of
which gave us the masquerade of a great moderation that ended in the mother of all asset bubbles.
While we shredded the safety net.
Now the population is learning the arguments about free trade magically lifting all boats
up into the capitalist paradise has blown up. We've shifted the risk onto the working population
and they couldn't bear it.
Perhaps the less partisan take-way would be - is it possible for any political candidate to
get elected in this environment without bowing to the proper interests? How close did Bernie get?
And, how do we fix it without first admitting that the policies of both political parties have
not really addressed the social adjustments necessary to capture the benefits of globalization?
We need an evolution of both political parties - not just the Republicans. If we don't get it,
we can expect the Trump argument to take even deeper root.
Economists lied to the American people about trade and continue to lie about the issue day
in and day out. Brainwashing kids with a silly model called comparative advantage. East Asian
economists including Ha Joon Chang among others debunked comparative advantage and Ricardianism
long ago.
Manufacturing is everything. It is all that matters. We needed tariffs yesterday. Without them
the country is lost.
The success of [civil rights and anti-apartheid] movements did not end racism, but drove
it underground, allowing neoliberals to exploit racist and tribalist political support while
pursuing the interests of wealth and capital, at the expense of the (disproportionately non-white)
poor.
That coalition has now been replaced by one in which the tribalists and racists are dominant.
For the moment at least, [hard] neoliberals continue to support the parties they formerly controlled,
with the result that the balance of political forces between the right and the opposing coalition
of soft neoliberals and the left has not changed significantly.
There's an ambiguity in this narrative and in the three-party analysis.
Do we acknowledge that the soft neoliberals in control of the coalition that includes the inchoate
left also "exploit racist and tribalist political support while pursuing the interests of wealth
and capital, at the expense of the (disproportionately non-white) poor."? They do it with a different
style and maybe with some concession to economic melioration, as well as supporting anti-racist
and feminist policy to keep the inchoate left on board, but . . .
The new politics of the right has lost faith in the hard neoliberalism that formerly furnished
its policy agenda of tax cuts for the rich, war in the Middle East and so on, leaving the impure
resentment ungoverned and unfocused, as you say.
The soft neoliberals, it seems to me, are using anti-racism to discredit economic populism
and its motivations, using the new politics of the right as a foil.
The problem of how to oppose racism and tribalism effectively is now entangled with soft neoliberal
control of the remaining party coalition, which is to say with the credibility of the left party
as a vehicle for economic populism and the credibility of economic populism as an antidote for
racism or sexism. (cf js. @ 1,2)
The form of tribalism used to mobilize the left entails denying that an agenda of economic
populism is relevant to the problems of sexism and racism, because the deplorables must be deplored
to get out the vote. And, because the (soft) neoliberals in charge must keep economic populism
under control to deliver the goods to their donor base.
"... Grenville regards understanding the opposition to globalization by the Trump constituency as essential. If we are discussing America, we do not need to look to illegal immigration, or undocumented workers to find hostility to out-group immigrants along religious and ethnic lines. ..."
"... These tendencies are thrown into sharper relief when this hostility is directed towards successfully assimilated immigrants of a different color who threaten the current occupants of a space – witness the open racism and hostility displayed towards Japanese immigrants on the west coast 1900-1924, or so. A similar level of hostility is sometimes/often displayed towards Koreans. The out-grouping in Japan is tiered and extends to ethnicity and language of groups within the larger Japanese community, as it does in the UK, although not as commonly along religious lines as it does elsewhere. ..."
"... European workers have done much better in the new global economy.(The problems in Europe center around mass migration of people who resist assimilation and adoption of a Humanistic world view.) The answer is simple and horrifying. ..."
"... A large percentage of American workers consistently vote against their own interest which has allowed the republican party in service to a powerful elite billionaire class ..."
"... The combination of these reliable cadre of deplorables , controlled by faux news and hate radio , and the lack of political engagement by the low income Americans , has essentially turned power over to the billionaire class. ..."
I read an interesting piece in the Nikkei, hardly an left-leaning publication citing Arlie
Hochschild's "Strangers in Their Own Land: Anger and Mourning on the American Right."
Doubtless some here would like to see more misery heaped upon those who do not look to the
Democratic party as saviors, but Hochschild is rarely regarded as a defender of the American right.
Few dispute that a significant subset of any given population is going to regard in-group/out-group
distinctions along the highly imprecise lines of 'race' and ethnicity, or religion. The question,
for some, is what percentage?
The Nikkei article by Stephen Grenville concludes: Over the longer term, the constituency for
globalization has to be rebuilt, the methodology for multilateral trade agreements has to be revived…"
Grenville regards understanding the opposition to globalization by the Trump constituency
as essential. If we are discussing America, we do not need to look to illegal immigration, or
undocumented workers to find hostility to out-group immigrants along religious and ethnic lines.
These tendencies are thrown into sharper relief when this hostility is directed towards
successfully assimilated immigrants of a different color who threaten the current occupants of
a space – witness the open racism and hostility displayed towards Japanese immigrants on the west
coast 1900-1924, or so. A similar level of hostility is sometimes/often displayed towards Koreans.
The out-grouping in Japan is tiered and extends to ethnicity and language of groups within
the larger Japanese community, as it does in the UK, although not as commonly along religious
lines as it does elsewhere.
Generally, I think John is right. The term 'racist' no longer carries any of the stigma
it once held in part because the term is deployed so cynically and freely as to render it practically
meaningless. HRC and Bill and their supporters (including me, at one time) are racists for as
long as its convenient and politically expedient to call them racists. Once that moment has passed,
the term 'racist' is withdrawn and replaced with something like Secretary of State, or some other
such title.
I've no clear 'solution' other than to support a more exact and thoughtful discussion of the
causes of fear and anxiety that compels people to bind together into in-groups and out-groups,
and to encourage the fearful to take a few risks now and again.
I've no clear 'solution' other than to support a more exact and thoughtful discussion of the causes
of fear and anxiety that compels people to bind together into in-groups and out-groups, and to
encourage the fearful to take a few risks now and again.
Here's my take on this. The question
to ask is why has this happened? European workers have done much better in the new global
economy.(The problems in Europe center around mass migration of people who resist assimilation
and adoption of a Humanistic world view.) The answer is simple and horrifying.
A large percentage of American workers consistently vote against their own interest which
has allowed the republican party in service to a powerful elite billionaire class form a
reliable cadre of highly visible and highly vocal deplorables which even though slightly less
than half the population of those who bother to vote have virtually shut down democratic safeguards
which could have mitigated what has happened due to globalization. The combination of these
reliable cadre of deplorables , controlled by faux news and hate radio , and the lack of political
engagement by the low income Americans , has essentially turned power over to the billionaire
class.
... ... ...
Alesis 10.30.16 at 12:13 pm
A strategy that doesn't work inside the tent is DOA outside it. As it stands many liberals (largely
white and this is an important distinction) share with the right a deep discomfort with acknowledging
the centrality of racism to American politics.
Race is the foundational organizing principle
of American life and it represents a considerable strain to keep it in focus. Donald Trump will
win the majority of white voters as the racial resentment coalition has since the 1930s. An effective
strategy for the long term is focused on breaking that near century long hold.
I'd suggest the direct approach. Call racism what it is and ask white voters directly what
good it has done for them lately. Did railing against Mexican rapists brings any jobs back?
Or the racism of the middle class. People are tribal and arguably it is baked into our DNA.
That doesn't excuse the mental laziness of trafficking in stereotypes but one could make a case
that racism is as much a matter of ignorance as of evil character.
Obama with his "bitter clingers" and HIllary with her "deplorables" are talking about people
about whom they probably know almost nothing.
One of the long ago arguments for school integration was that propinquity fosters mutual understanding.
This met with a lot of resistance. And for people like our Pres and would be Pres a broader view
of the electorate would be inconvenient.
Actually until recently (the oil price crash) the question in the US was why not pack up and
move to Willison, ND, or South of San Antonio (Eagle Ford) or the Permian Basin where during those
times a truck driver could make 100k a year.
But if you go back you find that there were 2 different mind sets of folks who came to the
US one group moved nearly every generation (In my family they started in Boston in 1620, moved
to Ct, got kicked out and moved to NJ in the late 1600, moved to Oh in 1816, Ia in 1846 to a different
town in Ia in 1885 or so and to In in 1916. Other ancestors came to an area and stayed in their
community for generations.
So the economist was using the myth of the western migration and the great get rich quick schemes
of 1849 and later (gold rush) as examples.
It would be interesting to try a poll to ask folks if it were 1849 and you had to wagon train
to Ca from the east would you do it. (One could include traveling by ship as that was no piece
of cake to go around Cape Horn)
It was interesting the number of folks forced out of New Orleans who had never been out of
La for example.
However it is the great American myth that folks picked up an moved in the 1800s easily (particularly
when back then it meant loosing contact with loved ones for good. Many may have had been capable
of one such journey across the Atlantic but that was all they could take.) Of course today moving
away does not mean a loss of contact with free long distance on cell phones, emails. etc,
"... In Huntsville Alabama, I was part of a group that visited prisoners in the county jail. I visited the women prisoners every Sat. There was a recession in Reagan's term, and Reagan didn't think the government should help the unemployed. Before the recession, there were usually only one or two women prisoners at a time. The most they had at one time was four. ..."
"... During the recession, the number of prisoners grew greatly. The number of women ballooned to at least a dozen. Because of the increase in the number of male prisoners, the women were all crowded into a single cell, with mattresses on the floor. Most of the women were in jail had children, and were in jail for passing bad checks. ..."
In Huntsville Alabama, I was part of a group that visited prisoners in the county jail. I visited
the women prisoners every Sat. There was a recession in Reagan's term, and Reagan didn't think the government
should help the unemployed. Before the recession, there were usually only one or two women prisoners
at a time. The most they had at one time was four.
During the recession, the number of prisoners grew greatly. The number of women ballooned to at least
a dozen. Because of the increase in the number of male prisoners, the women were all crowded into a
single cell, with mattresses on the floor. Most of the women were in jail had children, and were in
jail for passing bad checks.
When they were able to get jobs, they did not pass bad checks.
There was a national increase in crime at this time, and Reagan claimed that the high rate and long
duration of unemployment did not cause an increase in crime.
If you have ever been out of work so long that you were losing weight because you couldn't afford
enough food, and were in danger of having to live in your car, you would know how wrong Reagan was.
It would have to be much worse for parents. I guess if you are unemployed, you are expected to allow
yourself and your children to starve to death, so as not to inconvenience those more fortunate.
This is one of the reasons that if I believed in such things, I would consider Reagan to be a manifestation
of the anti-Christ.
"...That is, even central banks that follow some kind of Taylor rule in a flexible inflation-targeting
regime are susceptible to the knowledge problem...
The biggest information challenge comes from attempting to measure the output gap in real
time. The output gap is the difference between the economy's actual and potential level of output
and is subject to two big measurement problems.
First, real-time output data generally get revised and often on the same order of magnitude
as the estimated output gap itself.
Second, potential output estimates are based on trends that rely on ever-changing endpoints.
Orphanides finds the latter problem to be the biggest contributor to real-time misperceptions
of the output gap. This means that even if real-time data improved such that there were fewer
revisions, there would still be a sizable problem measuring the real-time output gap."
Conservative ideologues tell us government/central planners are inefficient because of the
"knowledge problem." Well so are private sector central planners. See the big banks and the housing
bubble/financial crisis. Or Samsung and its exploding Note 7. Or Volkswagon and its cheating on
benchmark tests.
This "output gap" is another rightwing diversion. It is useful to them precisely because it
is impossible to measure and therefore people can argue about it ad infinitum.
Meanwhile we have a lot of people who can't get a decent job at a living wage. That can
be easily measured and it could be easily remedied. And it is what average people actually care
about. So they want to make sure that isn't discussed. They want to discuss something with no
clear answer instead.
"Former Fed Vice Chairman Alan Blinder said he's skeptical that fiscal policy will be loosened
a great deal if Clinton wins the election, as seems likely based on recent voter surveys.
"She is promising not to make budget deficits bigger by her programs," said Blinder, who is
now a professor at Princeton University. "Whatever fiscal stimulus there is ought to be small
enough for the Fed practically to ignore it.""
Blinder is skeptical that Clinton will do enough to force the Fed to modulate their plans,
even though PGL and Sanjait tell us otherwise.
Clinton's infrastructure plans should be "substantially" larger as Krugman and Summers write.
This would help close the output gap. This would help with the job market and increasing incomes
and lowering personal debt loads.
But PGL can't admit this because he's a petulant child who thinks Germany still uses the Deutsche
Mark.
"The recent decision by the Fed to raise interest rates is the latest example of the rigged
economic system. Big bankers and their supporters in Congress have been telling us for years that
runaway inflation is just around the corner. They have been dead wrong each time. Raising interest
rates now is a disaster for small business owners who need loans to hire more workers and Americans
who need more jobs and higher wages. As a rule, the Fed should not raise interest rates until
unemployment is lower than 4 percent. Raising rates must be done only as a last resort - not to
fight phantom inflation."
Identity politics provides cover for, and diversion from, class rule and from the deeper structures
of class, race, gender, empire, and eco-cide that haunt American and global life today – structures
that place children of liberal white North Side Chicago professionals in posh 40 th -story
apartments overlooking scenic Lake Michigan while consigning children of felony-branded Black custodians
and fast food workers to cramped apartments in crime-ridden South Side neighborhoods where nearly
half the kids are growing up at less than half the federal government's notoriously inadequate poverty
level. Most of the Black kids in deeply impoverished and hyper-segregated neighborhoods like Woodlawn
and Englewood (South Side) or North Lawndale and Garfield Park (West Side) can forget not only about
going to a World Series game but even about watching one on television. Their parents don't have
cable and the Fox Sports 1 channel. There's few if any local restaurants and taverns with big-screen
televisions in safe walking distance from their homes. Major League Baseball ticket prices being
what they are, few of the South Side kids have even seen the White Sox – Chicago's South Side American
League team, whose ballpark lacks the affluent white and gentrified surroundings of Wrigley Field.
(Thanks in no small part to the urban social geography of race and class in Chicago, the White Sox
winning the World Series in 2005 – thei
... ... ...
There is, yes, I know, the problem of Democrats in the White House functioning to stifle social movements
and especially peace activism (the antiwar movement has still yet to recover from the Obama experience).
But there's more good news here about a Hillary presidency. Not all Democratic presidents are equally
good at shutting progressive activism down. As the likely Green Party presidential candidate Jill
Stein (for whom I took five minutes to early vote in a "contested state" three weeks ago) noted in
an interview with me last April (when the White Sox still held first place in their division), Hillary
Clinton will have considerably less capacity to deceive and bamboozle progressive and young workers
and citizens than Barack Obama enjoyed in 2007-08 . "Obama," Stein noted, was fairly new on the
scene. Hillary," by contrast, "has been a warmonger who never found a war she didn't love forever!"
Hillary's corporatist track record – ably documented in Doug Henwood's book
My
Turn: Hillary Clinton Targets the Presidency (her imperial track record receives equally
impressive treatment in Diana Johnstone's volume
Queen of Chaos:
The Misadventures of Hillary Clinton ) – is also long and transparently bad. All that and
Mrs. Clinton's remarkable lacks of charisma and trustworthiness could be useful for left activism
and politics in coming years.
For what it's worth, the first and most urgent place to restore such activism and politics
is in the area where Barack Obama has been most deadening: foreign policy, also known (when conducted
by the U.S.) as imperialism. When it comes to prospects for World War III, it is by no means clear
that the saber-rattling, regime-changing, NATO-expanding, and Russia-baiting Hillary Clinton is the
"lesser evil" compared to the preposterous Trump. That's no small matter. During a friend's birthday
party the night the Cubs clinched the National League pennant, I asked fellow celebrants and inebriates
if they were prepared for the fundamental realignment of the space-time continuum that was coming
when the North Siders won the league championship. That was a joke, of course, but there's nothing
funny about the heightened chances of a real downward existential adjustment resulting from war between
nuclear superpowers when the "lying neoliberal warmonger" Hillary Clinton gets into office and insists
on recklessly imposing a so-called no-fly zone over Russia-allied Syria.
"... In two party politics, generally political parties are mediating institutions, which moderate the claims of the interest groups composing them. However, when it switches to immutable characteristics, political parties become the vehicles of extremism, as each party tries to the "outbid" the other party in claims for dominance for its members. Further, each victory by the rival party spurs fears and polarization by the losers. Generally, you see de-stablization and violence in its wake. Its a good way to destroy a democracy. ..."
Then comes the final punchline, "Lives That Matter." Obviously, the answer to the question
is "black." But Doug has "a lot to say about this." Which suggests that he doesn't think the answer
is that simple. Perhaps he thinks "all lives matter," or that "blue lives matter," the phrasing
used by those who defend the status quo of policing and criminal justice. Either way, this puts
him in direct conflict with the black people he's befriended. As viewers, we know that "Black
Lives Matter" is a movement against police violence, for the essential safety and security of
black Americans. It's a demand for fair and equal treatment as citizens, as opposed to a pervasive
assumption of criminality.
Thompson, Zamata, and Jones might see a lot to like in Doug, but if he can't sign on to the
fact that black Americans face unique challenges and dangers, then that's the end of the game.
Tucked into this six-minute sketch is a subtle and sophisticated analysis of American politics.
It's not that working blacks and working whites are unable to see the things they have in common;
it's that the material interests of the former-freedom from unfair scrutiny, unfair detention,
and unjust killings-are in direct tension with the identity politics of the latter (as represented
in the sketch by the Trump hat). And in fact, if Hanks' character is a Trump supporter, then all
the personal goodwill in the world doesn't change the fact that his political preferences are
a direct threat to the lives and livelihoods of his new friends, a fact they recognize.
What Bouie doesn't seem to get is that black identity politics and the preferences of those who
espouse them are a direct threat to the livelihoods and interests of many whites - and even, at times,
their lives (
hello, Brian Ogle! ).
Consider this insanity from Michigan State University, pointed out by a reader this morning. It's
the Facebook page of Which Side
Are You On? , radical student organization whose stated purpose is:
Michigan State University has chosen to remain silent on the issue of racial injustice and
police brutality. We demand that the administration release a statement in support of the Movement
for Black Lives; and, in doing so, affirms the value of the lives of its students, alumni, and
future Spartans of color while recognizing the alienation and oppression that they face on campus.
In the absence of open support, MSU is taking the side of the oppressor.
Got that? Either 100 percent agree with them, or you are a racist oppressor. It's fanatical, and
it's an example of bullying. But as we have seen over the past year, year and a half, Black Lives
Matter and related identity politics movements (Which Side Are You On? says it is not affiliated
with BLM) are by no means only about police brutality. If they were, this wouldn't be a hard call.
No decent person of any race supports police brutality. To use Bouie's terms, the material interests
of non-progressive white people are often in direct tension with the identity politics of many blacks
and their progressive non-black allies. This is true beyond racial identity politics. It's true of
LGBT identity politics also. But progressives can't see that, because to them, what they do is not
identity politics; it's just politics.
You cannot practice and extol identity politics for groups favored by progressives without
implicitly legitimizing identity politics for groups disfavored by progressives.
Some of my best friends are supporters of police brutality.
In all seriousness, if one's identity preference is for dominance by your group, then obviously,
a member of your group dominating the other group isn't going to bother you. Nor, on the other
side, will you be troubled if your group shoots perceived agents of the other side. But note,
the justification for racial primacy or racial supremacy is always rhetorically made by asserting
claims or the threat of racial primacy or racial supremacy by the Other. Further, racial tensions
are always caused by the behavior of the Other, and your groups actions are always "self defense".
Of course, your actions are always portrayed as "aggression" by the Other, and lead to ratcheting
up of anti-social behavior, but hey.
I sort of assume that is not how most whites feel, but the reality is whether it is or not,
if you turn the political question from legal equality for blacks to legal primacy or dominance,
then you will push whites into taking the adversary position.
In two party politics, generally political parties are mediating institutions, which moderate
the claims of the interest groups composing them. However, when it switches to immutable characteristics,
political parties become the vehicles of extremism, as each party tries to the "outbid" the other
party in claims for dominance for its members. Further, each victory by the rival party spurs
fears and polarization by the losers. Generally, you see de-stablization and violence in its wake.
Its a good way to destroy a democracy.
I love "Black Lives Matter" as a slogan, because it is ambiguous enough to be either a claim
for dominance or primacy. Obviously, whether a BLM will support the assertion "All Lives Matter"
is a litmus test for whether they are asserting racial supremacy or racial primacy. But plausible
deniability is baked in.
I don't mind identity politics, by which I assume you mean people appealing to voters to vote
for their pet interest because it will help people with a particular set of characteristics or
"identity". This is just people looking out for and lobbying the voting public on their interests,
which is what democracy is all about.
What I don't like is the stunning illogic and flawed reasoning behind some of the appeals,
such as the "you're either with BLM or against black people" arguments, the policing of miniscule
variations in speech (eg pronouns) as signs of haaaaaaaate, and the labeling of all white people
as "white supremacists" unless they self-flagellate and take personal blame for all the police
shootings. And, I think these people know that the reasoning is flawed. It's just that they also
know that if you repeat it long and loud enough and have enough leaders behind you willing to
fire or otherwise silence anyone who points out the flaws in your arguments, then you can convince
everyone that it all makes sense.
I think what is being lost is really the underlying logic of morality itself. Kids are being
taught that it doesn't matter what your intention is, it doesn't matter what your reasoning is,
it doesn't even matter whether an outcome is predictable from your action. What matters is how
the people in identity groups feel about your action. It's consequentialism run amok.
It's as if someone took Catholic reasoning on morality (grave matter, full knowledge, deliberate
consent, don't do wrong things in order to achieve good ends, principle of double effect), reversed
it, and then decided that this upside-down reasoning will be our new publicly mandated morality.
It's fascinating to watch but I feel a bit frightened for my children, because they will have
to deal with this new and deeply flawed public morality.
"Let me explain something to you. Are you sitting down? Because this is going to come as a shock.
Ready? We have been steadily moving away from white identity politics. A lot of people fought
and died to end white supremacy. Replacing it with a form of politics that treats blacks as some
sort of chosen people because of the color of their skin is regress, and puts that progress towards
equal justice for all, regardless of their skin color, in jeopardy."
For the most part, probably a fair observation. And it only took a couple of hundred years
(or more, depending on where you chose to say "white identity politics" started and when (or if)
you chose to say it ended).
Low long have black identity politics had any influence?
How long does it take, and at what "price" to atone for the past? Haven't we been grappling
with that since Lincoln's second inaugural address?
Will black identity politics be around longer than that? And when will white identity politics
end? Not to mention all of the other identity politics in society. But, identity politics always
takes at least two sides. You can never have identity politics without "the other." Black identity
politics wouldn't last without white identity politics, and vice versa. So too for feminism identity
politics, religious identity politics…and…so…on… Each has its counterpart on the other side.
In a perfect world, identity politics would not exist, but in the real world, they have existed
for as long as politics.
Not that I don't see some hope. By and large, the younger generation gives me every hope that,
some day, we might get over this, but probably not until a few score more generational replacements
happen. But that too, might be a source of reassurance. A few score generations isn't really that
long a time, after all.
How in the blue blazes do you possibly do you go from folks having confidence in the police
to them ALSO NOT being bothered by police brutality? How are those two things linked in your mind?
Can you not possibly fathom that another human being could have confidence in an institution (or
a group) while ALSO condemning the bad actors in that institution (or group)? Or in your mind
do a few bad actors condemn an entire group?
Here is your "logic" re-written in another way. Does it help you see my point?
61% of non-white people have either "very little" or a "no" of confidence in the police. I'm not
saying all 61% of those people are OK with attacking or murdering the police, but they seem not
to be that bothered by it.
Now possibly I am the only who finds your thought process disturbing and wonders how many other
folks make the same leap of absurdity.
In reply the religious liberty comments, I think almost everyone who supports BLM would say that
it is about giving African Americans basic human rights in the United States. You might not agree
with that, but that's how things stand from their point of view. To many liberals, religious liberty
seems like special pleading, even though to you it seems like the advancement of a universal principal.
"Political power, properly so called, is merely the organized power of one class for oppressing
another." Karl Marx
"All that is not race in this world is trash… All historical events… are only the expression
of the race's instinct of self-preservation." Adolf Hitler
"Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly
and applying the wrong remedies." Groucho Marx
I do not think that all politics is "identity" politics.
The Populists going after the gold standard, or the New Dealers attempting to deal with the
problems of labor and capital, where not primarily about identity politics.
Certainly, there was lots of identity politics on the state level, whether in the South, or
in states like NY, in the battle between upstate WASPs and ethnic political machines in NYC.
Today we are increasingly nationalizing identity politics. Moreover, we are mainstreaming a
slogan based on racial primacy /supremacy, e.g. "Black Lives Matter". You are seeing increasing
attacks on traditional American symbols and calls for their replacement with "diverse" symbols.
This is not just identity politics, it is ethnopolitics.
The reality is that the political symbol is in the heart of the people a promise that they'll
be treated preferentially. I think that is part of the racial tension post-Obama. We elected an
African-American, who appointed a lot of African-Americans, but on the street, he hasn't done
$#!+ to help Blacks.
Now, if I thought that whites would just lay down and not resist racial subjugation and discrimination,
I wouldn't be concerned. But I doubt whites are seriously going to go gracefully into that good
night as the bottom rung of a racial caste system.
"Virtue signaling" is very different from "virtue"–you can't tell a white nationalist from
a white liberal based on their housing or dating preferences.
If whites collectively grow to FEAR other groups politically, say due to demographic displacement
and claims by minorities for primacy/supremacy, they will change teams overnight. All this anti-racism
rhetoric presupposes white noblese oblige and security.
Any serious movement from equality to some claim of primacy or supremacy is likely to trigger
a counter-movement toward a claim of primacy or supremacy by the other group. Moreover, once you
polarize racially, the political process encourages extremism, not moderation.
One reason not to worship the U.S. Constitution is the limited understanding of factionalism
by Madison, who accounted for interest group factions (which can break up or wax and wane) but
failed to consider identity group factions based on immutable characteristics. It is these identity-based
factions which frequently destroy attempts to create liberal democracy the world over.
The reality is that representative democracy is only an effective system in ethnically homogeneous
societies with a strong ethic of individualism (rooted in Protestant ancestors). While Korea and
Japan get along politically, their political systems are "different" from a Western perspective,
mostly due to lower levels of individualism.
China is probably a better model for most countries than liberal democracy, because multiethnic
societies generally degenerate into authoritarianism anyway.
This is why, given multiculturalism and secularism, the likelihood of a serious institutional
transformation in America seems increasingly a certain bet.
Here's the brutal truth. We created Black Lives Matter.
We did it with 400 years of brutal policies, physical violence, economic apartheid and ill
conceived do gooder nonsense that could not even begin to counter the former impacts.
In the 1950's and 1960's you had one branch of the Federal Government - the Federal Housing
Authority– both building low income housing in the decaying neighborhoods that were the result
of FHA red-lining polices that were was causing the decay - total madness. The black community
has yet to recover from that by the way - trillions in lost equity in today's dollars.
We are incredibly lucky to JUST have Black Lives Matter. It's a miracle that the black community
hasn't amassed in force and burned large swaths of this country to the ground peppering us with
automatic weapons fire along the way for good measure.
It's a testament to their fortitude, generosity and patience as a people. That they have formed
this group is inevitable.
To lump BLM in with the white coddled SJW ignores their unique history and context. BLM has
no obligation whatsoever to be rational, or contrite, or forgiving, or magnanimous.
What has that ever gotten them in this country? Here's a hint, f%$k all. That's what it's gotten
them.
[NFR: Well, BLM can behave however it wants to, but don't be surprised if being irrational
and bullying gets you nowhere, except on campus run by noodle-spined administrators. - RD]
On the other hand, the notion of color-blind standards is a joke.
If you belong to a group that has an average IQ of 100 in economic competition with a group
that has an average IQ of 85, and you believe that hiring/firing be based on merit, you are promoting
a standard that benefits your group over the other guys.
Likewise, if you are from the second group, you are arguing for proportional representation
in the work force (and especially the elite), and you are promoting a standard that benefits your
group over the other guys.
If you look at Anglo-Saxons v. Blacks, Anglo-Saxons always want meritocracy.
However, if you look at elite admissions in the early 20th Century, when Anglo-Saxons were
competing against Jews, they implemented a quota system that benefited Anglo-Saxons. They also
generated a lot of Anti-Semitic conspiracy theories blaming their failures on Jewish nepotism,
rather than say Jews just being smarter.
The problem for America is someone will decide on a standard, and that decision will privilege
one group over another. Always.
The more groups, the more divisive and polarizing each decision becomes, until democracy stops
being capable of functioning, e.g. making decisions, even bad ones.
You can have "racial equality", but not "racial equality" in accordance with a definition that
all groups will ever agree upon. Further, many persons in all groups will secretly desire supremacy
no matter the rhetoric, so will work to undermine and limit nominal "equality" every political
chance they get.
" A lot of people fought and died to end white supremacy"
And what has it done? American social capital has been destroyed, our society is slowly turning
into an atomized hell, and our politics will increasingly resemble tribal warfare. The fiction
that we could make race irrelevant needs to die, group differences are real and ethnic tribalism
is hardwired into humans by our DNA. Our founders chose to limit citizenship to whites of good
character for a reason, just as Japan seeks to remain Japanese for a reason. Diversity + close
proximity = war
All politics is not identity politics. America has a rich tradition in positions of relative privilege
taking on the political cause of disenfranchised groups.
Given how many well off white people, including men, are Democrats, I really don't see why
progressives would even make that argument.
This article showed me how many people in the US live a completely different life than I do. Not
only did it change my understanding of race relations and prompt a great deal more study but it
made me more aware, generally, of how little I know of how the other 99.9% live.
Lots of hypocrites in this comment thread commenting that "identity politics is just politics,
period." Okay, white nationalism it is, then! Time to bring David Duke back out from whatever
rock he's been under and put him at the top of the ticket. Maybe Louis Farrakhan can run for something,
too. After all, why would anti-semitism ever go out of fashion, anyway! Isnt' that just identity
politics which is just regular politics, like marginal tax cuts and subsidies for electric cars?
-I don't think it's that difficult to understand the anger, stridency, and even vitriol coming
from SJW/BLM supporters. With BLM, it's a mostly righteous indignation over a long history of
abusive police tactics and laws, exploded by multiple recent captured instances of police abuse.
As for LGBTQ-issues, I think many advocates–especially those in the vanguard–view themselves
as participants in the Second Civil Rights Movement–that the laws and cultural attitudes they
are fighting against are analogous to Jim Crow and racism. There is some degree of truth to this.
The danger comes with the disturbingly common–or at least effective–practice of refusing to
grant their opponents *any* goodwill. Like racists, opponents of full legal and cultural inclusion–if
not acceptance–are deemed to be totally devoid of any redeeming features, and thus ought to be
opposed relentlessly and by any means necessary. The same goes for those who aren't indulgent
or repentant enough. We can partly thank the poisonous legacy of Marcuse's "tolerance" for this.
We can also thank old-fashioned lust for power–especially to take down "the elite" or to take
revenge–and the intoxicating feeling of being on the cutting edge of righteousness.
How do you deal with this? As KD suggested above, if one group sees itself as against others
and acts accordingly, then those others will fall into the "tribal struggle" mindset as well.
If extremist social justice advocates (SJAs) define themselves in opposition to other attitudes,
values, etc–and more importantly, if they refuse to engage in respectful dialogue and are not
willing to compromise–then those who endorse those attitudes, values, etc will inevitably see
themselves as being defined through opposition to SJAs. Thus the poison of identity politics–it
exacerbates, rather than seeks to contain Us vs Them antagonism.
The only ways I see out of it are direct, full-throated defenses of SJA's targets–such as last
year's "Coddling of the American Mind" and U Chicago's defense of free expression and respectful
challenging debate. Ignoring it–as many seem wont to do by dismissals of "oh, they're just stupid
college kids, they'll grow out of it"–isn't viable because though many will, some will pursue
positions of power and influence. Besides, the less challenged, the more the extreme views will
be seen as respectable if not correct.
-The debate over which groups are or are not practicing identity politics: In (academic) political
theory, "identity politics" narrowly refers to a style of politics based on the self-organization
of *oppressed* groups and pursuit of policy changes to their advantage. Identity comes to the
forefront of members of oppressed groups' consciousness because it is that defining characteristic
that puts them in an inferior position.
The way some have described it here suggests it's more like practicing politics in a way meant
to provide benefits for oneself–but that's just self-interest. A better broad view of identity
politics would focus on the deliberate and open advocacy of benefits for a particular group one
is a member of, when that group is defined by a specific and fundamental trait relevant to one's
sense of self. In other words, if the phrase "As a (adjective) (personal-characteristic noun),
I believe/support/oppose X" is central to your approach to politics, you're practicing identity
politics.
JWJ, you are missing the entire point of identity politics.
The morality inheres in the identity, not in the behavior.
If brutality occurs, it is not a behavior, it is an identity ("Police"). If you are confident
in "Police" you are thus confident in "brutality" because the behavior is not separable from the
identity. And for similar reasons, your confidence in brutes means that you, too are a brute (of
course this goes double if you are white, since all whites are brutes, for similar reasons).
Identity politics is the refusal to separate identity from acts. Whiteness *is* slaveowning,
blackness *is* victimhood, and so on, regardless of whether one has ever owned or been a slave;
these things are irrelevant; they inhere in the identity.
How long does it take, and at what "price" to atone for the past? Haven't we been grappling
with that since Lincoln's second inaugural address?
But here's the problem. It's not like the whites who are supporting Trump got fat, rich and
happy during their period of "white identity." Whatever privilege attaches to whiteness it hasn't
exactly trickled down (even in a Trumped-up fashion) to Trump voters. No doubt Mr. Bonner is either
upper middle class or high status (academic, journalist or government employee). But low status
whites see the world a bit differently. This is the real tragedy (or, if you're a fat cat, the
beauty) of the situation. The lower classes will always fight among themselves for scraps, the
high status (but often low pay) elites would scold the various parties for their various thoughtcrimes
and the fat cats will high five and do the truffle shuffle, bouncing their greased bellies against
each other. Thanks for doing your part.
"Now, you can try to make an argument that they are wrong, that they *are* getting equal treatment
from law enforcement and that this is all in their heads. You can try, but in all fairness, the
anecdotal and empirical evidence seem not to be on your side."
No, when correcting for crime rates, there is no racial discrepancy in police killings. In
fact, blacks are underrepresented and whites overrepresent, given the underlying proportion of
criminality in the communities.
"Replacing it with a form of politics that treats blacks as some sort of chosen people because
of the color of their skin is regress,
Who, exactly, is making this argument? Not BLM and not the mainstream liberal political establishment.
"
Uh, Hilary "whites must listen" Clinton. And lots more.
"However, if you look at elite admissions in the early 20th Century, when Anglo-Saxons were competing
against Jews, they implemented a quota system that benefited Anglo-Saxons. "
Why shouldn't the people who, you know, built the universities remain in charge of them? No
one asks Brandeis to become a WASP bastion.
"In the 1950's and 1960's you had one branch of the Federal Government - the Federal Housing Authority–
both building low income housing in the decaying neighborhoods that were the result of FHA red-lining
polices that were was causing the decay - total madness. The black community has yet to recover
from that by the way - trillions in lost equity in today's dollars"
LOL, someone's been drinking the TNC Kool-aid (purple, I imagine). It causes people to reverse
causality.
The neighborhoods were redlined because they were poor risk. They were poor risk because of
their demographic composition.
"It's a miracle that the black community hasn't amassed in force and burned large swaths of this
country to the ground peppering us with automatic weapons fire along the way for good measure."
There's not one word in the BLM guiding principles page about the police. Not one word. If you
go to their home pager and click on "what we believe" this is what you get.
If we would look into how much blacks have been killed by the police last year, the figure will
be about few hundred at maximum. If we would look into the same category for whites, the result
will be few thouthands, minimum. If we look into the statistics abut the main cause of death for
the same period, it will be black on black homicide for blacks and car accident for whites. Also,
blacks are about 13% of the American population or so, but make at least as much homicides as
whites do. And most homicides are comitted within offenders race group.
If anything, whites become targets of poluce brutality much more often. And yet, BLM are out
there preching, as if police is hunting them for no reason. That's everything you need to know
about BLM and their so called care about black lives.
That's the main problems with such groups. They don't really want to improve the lot of the
groups they are supposedly fighting for. They are just exaggerating the problem and imitating
fighting for something important, because they'll get money and recognition for it. Without real
risk to boot.
The BLM radical movement is built on a lie. Blacks are 12% of the population yet commit 53% of
murders and 70% of gun crime. In this era of cell phones, know the number of black people who
have dubious interactions with police, thanks to the scandalous behavior of the news media. We
can be sure police brutality is not an epidemic because the examples offered as evidence are,at
best , dubious. Each example given, eg Ferguson Missouri or Trayvon Martin, are at best arguably
due to the bad behavior by the black person. The real epidemic is black crime, black fatherlessness,
and too many people indulging this "I'm a victim" culture. Shame on you Mr. Dreher for delineation
this into a black and white cipher in this article. The entire country suffers from this epidemic
of black crime and the false narrative that black people are mistreated by society. This is just
another example of the madness on the political left the radical extreme hateful positions that
are exposed on that side it seems solely.
"What Bouie doesn't seem to get is that black identity politics and the preferences of those who
espouse them are a direct threat to the livelihoods and interests of many whites - and even, at
times, their lives (hello, Brian Ogle!)."
OK, livelihoods and interests I can understand even if there's the fact that if you're an average
white dude, an international student, a student with a soccer scholarship, an out of state student,
or a a legacy admission is just as likely to knock you out of your preferred school as a non-white
student is.
However, can you point me to the radio host, politician, TV commentator, or even popular Twitter
celebrity who says the people who killed Brian Ogle should go free?
Because on the other hand, there's plenty of politicians, TV commentators, writers, radio hosts,
etc. who think the police are doing a great job and that police brutality is just a liberal myth.
But in general, the whole paragraph is why for the most part, black Americans will never trust
white conservatives – you seem to imply that black Americans want carte blanche to kill white
people while in reality, black people just want to be treated as well as a confirmed mass murderer
was treated by police – to be fed some Burger King like Dylan Roof perhaps.
A moderate, peaceful, and democratic form of white identity politics that was widely representative
of the white population would be acceptable as far as I am concerned. The problem is that white
nationalists can't go two seconds without demonizing Jews, denying the holocaust, trying to justify
the Confederacy, attacking the basic assumptions of liberal democracy, and admiring various obscure
mid-20th century fascist/pseudo-fascist far right intellectuals. In that sense, white nationalists
are the equivalent of the New Black Panther Party and the Nation of Islam, as opposed to the NAACP
or BLM. That does not mean that BLM and the NAACP are not harmful to the interests of whites,
but they do not advocate a separate black ethnostate, antisemitism, or ethnic cleansing of whites.
Just watched the SNL skit. Best thing they have done all election season. It's important we understand
the motivations behind Trump's rise instead of pushing them under the surface where they fester.
I hate the term "identity politics." Identity politics are politics. Straight white people, even
liberals (hello Bernie bros), often try to exclude themselves from the definition by casting their
own thoughts as neutral while casting everyone with a marked "identity" as practicing identity
politics. People are always speaking from a point of view, and in politics they are usually advocating
to change things that negatively impact a group they are associated with.
How is the fight for "religious liberty" different from BLM? How is it not a form of identity
politics?
I agree that certain groups, especially at the university level, take into a totalitarian direction,
but casting some activism as "identity politics" while excluding other forms of special pleading
makes no sense to me.
I agree that *all* identity politics are a moral poison, white, black, Christian, Muslim, or anything
else. It is a sad fact of human nature that we are tribal and care more for people like ourselves.
This reminds me of the parable of the Good Samaritan. If we are to follow the parable, then
we are to treat others of different religions and different countries exactly as if they our neighbors,
meaning as if they are in our tribe. This is quite the opposite of identity politics.
"freedom from unfair scrutiny, unfair detention, and unjust killings" for blacks…. are a
direct threat to the livelihoods and interests of many whites.
I've moved things around a bit but in essence this is correct.
If I've got this wrong Rod, kindly let me know how.
Huh.
I didn't realize that oppressing blacks was such a huge industry for white people.
It seems somehow relevant in the context of this discussion.
I'm amazed. Truly and utterly amazed. The demand of blacks to be treated like citizens deserving
the respect and protection of the law and agents of the law like everyone else is "a direct threat
to the livelihoods and interests of many whites."
I mean, I know that white supremacy is a thing in the U.S., but is it really that ingrained
and tenacious? Really?
form of white identity politics that was widely representative of the white population
That's an oxymoron. No form of "white identity" politics would be or could be "widely representative
of the white population."
A lot of the black rhetoric we're getting lately is belated recognition that "black people"
don't really have enduring common interests that bind them all, and the defensive necessity to
provide safety for each other in the face of vicious and pervasive persecution just isn't really
strong enough to maintain a tenuous identity or unity much longer. As Jesse B. Semple remarked
when his "white boss" asked "What does The Negro want now?" … there are fifty eleven different
kinds of Negroes in the USA. That's even more true of "whites," always has been, and the hue an
cry that a bit of affirmative action is tantamount to creating a massive common race interest
is just nonsense.
How is the fight for "religious liberty" different from BLM? How is it not a form of identity
politics?
Because religion is a search for truth, and religious liberty affirms that there are lots of
different searches going on, which are neither binding upon nonbelievers, nor to be suppressed
by the skeptical or powerful?
It is nice to see America can laugh about things this year!
While we can be complain about SJWs and BLMs, doesn't the conservative movement need the same
exact lecture here? What was the speech that made Trump popular with Republicans? It was "Mexicans
are rapist" speech that originally made 35 – 40% of the party support him the summer of 2015.
(And Donald's speeches to African-Americans is not the way to win their votes either!)
I almost think the best thing for the Republican Party this year is for Trump to lose Texas
so the Party learns to better respect Hispanic-Americans. (Unlikely to happen though and Texas
is not turning blue long term.)
Jesse: "However, can you point me to the radio host, politician, TV commentator, or even popular
Twitter celebrity who says the people who killed Brian Ogle should go free?
Because on the other hand, there's plenty of politicians, TV commentators, writers, radio hosts,
etc. who think the police are doing a great job and that police brutality is just a liberal myth….
But in general, the whole paragraph is why for the most part, black Americans will never trust
white conservatives – you seem to imply that black Americans want carte blanche to kill white
people while in reality, black people just want to be treated as well as a confirmed mass murderer
was treated by police – to be fed some Burger King like Dylan Roof perhaps."
+1,000.
I'd add that there are commentators, politicians, writers, etc. who seem to think that police
brutality is justified because of crime rates, as though the Constitution, not to mention just
basic fairness and protection against needless violence, applies only to the law-abiding.
"That does not mean that BLM and the NAACP are not harmful to the interests of whites, but they
do not advocate a separate black ethnostate, "
If they did, they'd be working for the interests of whites.
[NFR: You longtime readers know that I reject M_Young's white identity politics. I want
to take this opportunity to remind you all that when you cheer on left-wing, racial and sexual
identity politics, you implicitly cheer on his. - RD]
There is a literature on the collective behavior of groups in cooperation/competition models.
Groups (even artificial ones created by randomly assigning college undergraduates) will compete
to maximize their relative power against other groups, even if it leads to collectively a lower
standard of living (in other words, they would rather be relatively richer in a poorer world than
than relatively poorer in a richer world).
In interest group politics, say labor v. capital, you have groups which, while fighting each
other for power, are permeable. People move from one group or the other, and even if they don't,
it is possible to move.
Identity groups are based on putatively immutable characteristics. In identity politics, identity
groups struggle against each other for dominance. Claims can be of three varieties: equality ("All
Lives Matter"), primacy ("Black Lives Matter"), and dominance ("Only Black Lives Matter").
When political parties are defined on identity grounds, elections become censuses rather than
"free" elections. You vote for the party that represents your group, because you are afraid of
dominance by the other group. Further, you justify claims for primacy or dominance based on fears
about the relative power of the other group.
Political systems that polarize on identity end up in a census election where the winning coalition
of groups dominates the other groups, and the group in the electoral minority has no possibility
of exercising power. Because elections are censuses, and you don't have the numbers. What typically
happens is that minorities turn to violence, and often racial unrest results in military rule.
It is pretty clear that multiculturalism is precipitating the resurgence of identity politics,
and if we believe the polls, that trend is about to accelerate. Further, ethnic polarization of
one political party always triggers ethnic polarization in other parties, even over elite objections,
as it becomes necessary to appeal to voters.
This is why some version the Alt-Right represents the future of Conservative politics, even
if the Conservative Establishment doesn't like the Alt-Right. It is structural, and you see the
same type of political dynamic in Nigeria, Sri Lanka, post-Independence India, as well as places
like the Ottoman Empire or Germany.
What is fueling the Alt-Right is the policies around immigration and non-assimilation/multiculturalism,
combined with demands for racial primacy and racial dominance by minorities (e.g. safe spaces
where others are forcibly excluded).
It could be halted today, but instead we are doubling down on the root causes of ethnic anxieties.
Further, I don't know what would be "Left-Wing" about pushing whites into a white ethnic voting
block intended to subordinate opponents, given their majority status for a few decades, and even
as a plurality, they would have the largest plurality.
Much as many people desire "racial equality", when one group argues for "primacy", politically,
you are never going to get "equality" unless a rival group claims primacy for itself. This is
basic bargaining theory. Hence, the inevitability of white with egalitarian preferences going
over toward white nationalism. Unfortunately, the most probable result will be greater polarization,
not compromise.
P.S. Yes, I understand "racial primacy" for certain racial groups means "racial equality",
just as "war is peace".
"I hate the term "identity politics." Identity politics are politics. Straight white people,
even liberals (hello Bernie bros), often try to exclude themselves from the definition by casting
their own thoughts as neutral while casting everyone with a marked "identity" as practicing identity
politics. People are always speaking from a point of view, and in politics they are usually advocating
to change things that negatively impact a group they are associated with.
How is the fight for "religious liberty" different from BLM? How is it not a form of identity
politics?"
Exactly.
The phrase "identity politics" is meant to render illegitimate the concerns of the person who
is accused of practicing them. Thus, people don't have to grapple with the actual issue and see
whether or not there's a legitimate problem that needs to be addressed. Rod spends a lot of time
here complaining about the failings of Black Lives Matter, and very little acknowledging that
they have a very legitimate issue that they are pushing to solve.
Religious liberty is not strictly identity politics, because religious affiliations in American
society are voluntary. However, religious preferences are pretty inelastic, so you have approximate
features of identity politics.
However, LGBT ideology claims "sexual orientation" is an immutable characteristic. So LGBT
is identity politics.
In some Islamic societies, apostacy is punished by death, so Islam is pretty immutable. So
in a strict Muslim society seeking to crack down on alcohol sales, the crack down would be an
exercise in identity politics, even if alcohol vendors weren't an identity group.
How is the fight for "religious liberty" different from BLM? How is it not a form of identity
politics?
Religious liberty is a universal freedom and it applies to all, including atheists and agnostics.
(and, contrary to the narrative, being itself a civic right, it doesn't impinge on other "civil
rights")
Identity politics, on the other hand, is the fostering of tribalism. It's a degrading thing: it
considers humans as dogs that have to bite at each other to get a greater share of the kibble
bowl.
If you look at politics post-independence in Trinidad and Guyana, or Sri Lanka, you see the emergence
of ethnic identity politics converting Communist and Socialist parties, and their leaders, from
universalist political programs to ethnic-based programs, depending on what ethnic groups they
derived more political support from.
Although, I suppose some people think that because America is majority white, the same kind
of political trends won't play out here. I think human nature is human nature, and identity politics
is identity politics, and the result is never good for someone.
"No decent person of any race supports police brutality"
I've known FAR too many "decent" middle and upper-middle class burb-dwellers who are perfectly
comfortable with police brutality. They believe that citizens get the policing they deserve. Rodney
King? "If you saw the entire tape, not just the excerpt on the evening news, you'd understand
why the officers acted that way". Black Lives Matter? "All they have to do is follow the law and
not disrespect the police". Unarmed, non-threatening, law-abiding minority killed by police? "There
must be more to the story".
moral blindness? all politics is identity politics. the fact that white, Christian, property-owning,
heterosexual, males looked out for their interests for the first 200+ years of the plutocracy
was identity politics in spades. the push-back from BLM, NOW, the LGBT community, and even Trump
supporters are as well. I had a very good History professor in the 80's. he taught politics is
merely a group or individual looking out for its vested, economic interests. the Karl Marx vs.
Adam Smith stuff (ideology) is merely a demographic extension of this. what you call identity
politics is more about the relationship between wealth and power, than left or right.
It is certainly a peculiar advance that in a country founded on identity color politics those
who have benefited and manipulated color politics to their advantage in every way --
are finding logical flaws in the very system they have created for themselves.
On its face - should raise serious doubts about the veracity of the complaint.
"No decent person of any race supports police brutality." Explain what you mean by "decent" person.
This is a term similar to the term "elites" be bandied about in this election without anyone saying
who they include in that group. All I get in response to my inquiries are quotations from dictionaries.
So, please explain what is meant by "decent person."
[NFR: If you believe it's okay for the police to brutalize people because of their race,
or to brutalize anyone, you are not a decent person, in my view. - RD]
This bit is much better than everything else SNL has commented on the 2016 election. I still think
SNL caters way too much to African American chauvinism though.
How much traction would BLM have if it were not funded by George Soros?, or any other identity
group if they had not been funded by billionaires with an interest in destabilizing the American
polity??
BTW, although it is not necessarily identity politics, the political principle that groups maximize
their relative power over say the welfare of the totality also explains the problem of elites.
All elites want to maximize their relative power over other groups, and so it is really competition
(e.g. fear of revolution or being conquered) that keeps them "honest", otherwise they will grind
the common man down to subsidence if they have the chance.
All of American history includes the strong presence of white identity politics.
Stop pretending otherwise. What else explains racialized chattel slavery and Jim crow and redlining
and so forth?
[NFR: Let me explain something to you. Are you sitting down? Because this is going to come
as a shock. Ready? We have been steadily moving away from white identity politics. A lot of
people fought and died to end white supremacy. Replacing it with a form of politics that treats
blacks as some sort of chosen people because of the color of their skin is regress, and puts that
progress towards equal justice for all, regardless of their skin color, in jeopardy. - RD]
…to be fed some Burger King like Dylan Roof perhaps.
You're either ignorant of the context of that situation, or you're deliberately taking it out
of context. Roof was arrested by a tiny police department and held until the FBI showed up. He
was arrested after 10pm and had not eaten for a while. The police department didn't even have
the facilities to prepare a meal. Instead of automatically being suspicious, maybe you should
consider that the police were making sure to not do something that could harm the prosecution
in such an important case.
But that's how it's done, huh? Exaggerate things to the extreme, and then wonder why white
people don't understand.
"Black Lives Matter and related identity politics movements (Which Side Are You On? says it is
not affiliated with BLM) are by no means only about police brutality."
Yep. It's also about Israeli "genocide" of Palestinians, if you haven't heard:
http://bit.ly/2eJeXDZ
I remember libertarians complaining in the aughts that it was almost impossible to partake
in antiwar demonstrations with the left because it was never about MERELY war. Environmental degradation,
environmental racism (yes, that's a thing), and all manner of other unrelated items were seen
as a mandatory part of what naive libertarians thought was the goal of simply extracting the US
military from the Middle East.
Ideology is a helluva thing. It's an all-encompassing worldview that looks bizarre to people
who aren't already steeped in one.
[NFR: Let me explain something to you. Are you sitting down? Because this is going to come as
a shock. Ready? We have been steadily moving away from white identity politics. A lot of people
fought and died to end white supremacy. Replacing it with a form of politics that treats blacks
as some sort of chosen people because of the color of their skin is regress, and puts that progress
towards equal justice for all, regardless of their skin color, in jeopardy. - RD]
Let me explain something to you too! I'd ask you to sit down, but you're probably already in
your fainting couch!
We have, sort of, in some parts of the country, in some ways moved away from white identity
politics! Just because white identity politics doesn't look like lynching doesn't mean it doesn't
exist.
All politics is identity politics! Why wouldn't it be? We create visions of the good and we
view it through our prism of identity. The fact that in our nation the axis about race doesn't
change that it does exist.
And no one is asking for 'blacks' to be treated as some chosen people – at even the most exaggerated,
most 'blacks' are asking for some acknowledgement that racial damage was done and it's going to
take racially conscious solutions (and some people like reparations!).
But also, here's the reality – the damage to large groups of people in this country was explicitly
because of who they were. Why would the solutions necessarily be universal?
If we both could have had 5, but then I was allowed to unfairly steal 4 from you, it wouldn't
then be fair if my solution to the problem was to give both of us 5 again.
Quote: Taken all in all, though, I am proud to call myself a philosemite, and even at low
points like the Spectator affair still, at the very least, an anti-antisemite. I recall the numberless
kindnesses I have received at the hands of Jews, friendships I treasure and lessons I have learnt.
I cherish those recollections.
"We have been steadily moving away from white identity politics."
The word 'steadily' is doing quite a lot of heavy lifting here. It seems the distance from
full on Jim Crow to 'young bucks eating T bone steaks' is vanishingly small in historical time.
If we could quantify and graph the prevalence of white identity politics, would that graph be
pointing up or down?
The comment made above is entirely correct: identity politics is just ordinary politics. Anyone
who tells you differently is selling something.
"Thompson, Zamata, and Jones might see a lot to like in Doug, but if he can't sign on to the fact
that black Americans face unique challenges and dangers,"
There's the BS right there. Doug might well admit that and accept it and still think that BLM
is full of crap. That's my position. Bouie doesn't get to own the conversation like that and neither
does BLM.
Just like the NRA doesn't get to claim that anyone who fails to bow to its agenda and policies
hates safety.
Just because I disagree with the Sierra Clubs position on zero-cut goals on public land do
they get to say I hate the earth?
"So the desire to be treated fairly is framed as identity politics?"
So black people want to be killed more often by police?
There's at least one famous study famously made famous in the NYT, by a really great black
economist from Harvard, indicating that black people are killed LESS often in interactions with
cops.
Yep. That data is limited and incomplete. But so is the data you prefer.
"We have been steadily moving away from white identity politics. A lot of people fought and died
to end white supremacy… RD"
In fact, the idea of a biologically-based white supremacy never held the political or social
field to itself during the last two centuries in either Europe or America.
This was because it was contested by important currents of both Christian and liberal thought
on human equality. These ideas of Christian and liberal equality were powerful enough to sustain
the successful 60 year international campaign of the world's leading 19th century Empire. the
British, to abolish slavery and were as well a significant factor behind the U.S. civil war.
Any serious reading of the history of the late 19th and early 20th century reveals how ethnic
and "racial" conflicts were created and manipulated by unscrupulous politicians of that time and
how these "identities" contributed to the radical destabilization and destruction of domestic
and international peace.
The 20th century Nazis represented the apogee of "white" supremacy and their European and American
opponents in World War II repudiated with extreme force their odious race "science."
Contemporary identity politics seeks to reassert and re-legitimize a supposed biological basis
for political conflict. The historical evidence is clear that this is not a story that can in
any way end well.
Replacing it with a form of politics that treats blacks as some sort of chosen people..
Chosen people that are still more likely to be the victims of police brutality. I'm pretty
sure they'd rather pass on being chosen and get on with being treated like everyone else.
You act as if "identity politics" only happens on the left. Small-o "orthodox Christians" are
a tribe who practice "identity politics." All politics is local, Tip O'Neill taught us. A corollary
of that is "all politics are tribal."
I (and other liberals) get dismissed as being nonsensical for wanting to be respected on the
basis of our identity, but the minute a Christian baker has to do business equally with a gay
person, it's tyranny.
What is the Benedict Option, if not Christian identity politics put into maximum effect?
The thing that infuriates me (and people like me) is the assumption that we are the "other"
and the view expressed here is the "default." As I see it, it's our tribe against yours. Your
right to lead is no more evident than mine. We fight for the right to lead. Someone wins, and
someone loses.
I realize this a conservative blog, but try approaching the other side as moral equals, instead
of with an a priori assumption that the left is tribal, and the right has the voice of G-d Himself
as their trumpeter of all that is good and true.
In any given society, the dominant majority defines the norm – in every area of life and culture
– by using themselves as the yardstick. They are normal, everybody different (and their different
stuff) is abnormal.
This is all perfectly natural. It's why there's pretty much no such thing as "white music"
or "white food" in America – whatever was traditional to whites was just called music and food.
If it comes from white culture, it doesn't get a special name, and it doesn't get widely recognized
as something specific to white people. It's just the norm.
This is why white identity politics isn't usually called white identity politics, yet any politics
arising out of a nonwhite experience is defined as abnormal and gets a special name.
Seen from any perspective other than the traditionally dominant one, it's rather clear that
the driving force on the American right has long been white identity politics. The Republican
Party didn't get over 90% white by accident. Some people may have the privilege of calling their
own politics the norm and assigning a name to the rest, but it's all identity politics whether
they want to see it or not.
Then comes the final punchline, "Lives That Matter." Obviously, the answer to the question
is "black." But Doug has "a lot to say about this."
The beautiful thing about the skit is that it left all this hanging… it didn't try to write
the final outcome, but left a range of variables and a variety of possible outcomes to the viewer's
imagination.
The problem with over-analysis is that it erases this well done ending, by trying to pin down
exactly what the outcome is or was or would have been or should have been. Of course, each analysis
erases many possibilities, which is a form of vandalism.
In a small way, this reminds me of when I heard a woman state during Bible study that she likes
the New International Version because it makes everything clear. This cemented my late in life
preference for the King James Version, because by trying to make "everything clear," many nuances
and layers of meaning are erased. The KJV is sufficiently poetic, and sufficiently archaic, that
sometimes there may be five or ten or twenty layers of meaning there, and perhaps that is exactly
what God intended.
(Dain, the term "identity politics" was "coined" as much by Nigel Farage, who openly espouses
it, as it was by "the campus left.")
Environmental degradation, environmental racism (yes, that's a thing), and all manner of
other unrelated items were seen as a mandatory part…
This is a mislocation coined by the campus left… more precisely, by 1970s would-be Marxists,
who latched onto the fuzzy notion that Marxism explains everything and that culture is all a "superstructure"
resting on an economic "base." They then promulgated, spontaneously, not with much thought, that
whatever your pet issue is, Marxism will deliver the desired result. And the Maoist slogan "unite
the many to defeat the few" was best served by including everyone's favorite issue in one big
happy family of agendas. There was even a short-lived "Lavender and Red League." It doesn't work,
Marx and Mao may both be turning in their graves over such petty horse manure, Lenin would certainly
call it an infantile disorder, but nobody every accused the post-1970 would-be leftists of professionalism,
or profound strategic thinking, or even ability to articulate a coherent working class demand.
Joe the Plutocrat: "moral blindness? all politics is identity politics."
No, it can and should be a contest of universal principles and ideas. The Marxian idea that
such is just "false consciousness" is bunk and commits the genetic fallacy.
I want to take this opportunity to remind you all that when you cheer on left-wing, racial
and sexual identity politics, you implicitly cheer on his.
Yeppers. Because if "people of color" can have their "safe spaces," off limits to white people,
then white people are utterly and completely justified in seeking "white spaces," off limits to
people of color.
The assertion is that since people of color have historically been oppressed, they now have
additional rights to request accommodations that would never be granted to their historic oppressors.
Nope. Don't work that way. What's good for the goose is indeed good for the gander – no matter
how many "microagressions' the geese detect.
"We have been steadily moving away from white identity politics."
Right… because both political parties in America are just so diverse. Oh wait, one's the white
people party and one is everyone else. In short, the everyone else party isn't the divisive one…
[NFR: It is in the nature of progressive protest movements that they portray all things
as having gotten no better, because if things *have* improved, it's harder for them to hold on
to power and raise money. That's what's happening here. Anybody who doesn't think white supremacy
and the identity politics that supported it is vastly weaker today than it was in 1960 is either
a fool, or willfully blind. - RD]
The original sin of conservatism is not giving "the other" equal rights and privileges. Whether
it is blacks getting shot by police, the war on drugs (that disproportionately affects the poor),
jim crow like immigration laws, not letting gays marry, not giving equal funding to poor school
districts or any of the other many inequalities conservatives want to perpetuate.
Nobody is "the chosen people" just because they gain some kind of right or privilege white
middle class straight people already have.
Thanks for the clarification. I had just assumed that the Narrative - the cops being buddy
buddy with Roof and getting him some BK in the middle of the day on the way back to Charleston
- was correct. I should have known better.
As an interesting comparison, look at the treatment of one Trenton Trenton (I kid you not)
Lovell, killer of LA Sheriff Deputy Steve Owen. Shot himself, he was patched up by paramedics,
sent to the hospital where he was treated at taxpayer expense, and when fit enough for trial,
arraigned.
Good luck getting anyone on the left to recognize the fallacy of special pleading when it's
right in front of their eyes.
This special pleading, I do not think it means what you think it does. BLM is not asking to
that African Americans be treated in a different fashion than anyone else. Rather, their argument
is that they are disproportionately burdened by the manner in which police interact with them
and that they are asking that they be just be treated the same as the majority of the country.
A basic argument for fairness and equality, in other words.
Now, you can try to make an argument that they are wrong, that they *are* getting equal treatment
from law enforcement and that this is all in their heads. You can try, but in all fairness, the
anecdotal and empirical evidence seem not to be on your side.
Replacing it with a form of politics that treats blacks as some sort of chosen people because
of the color of their skin is regress,
Who, exactly, is making this argument? Not BLM and not the mainstream liberal political establishment.
I'm sorry, but I appear to have missed the mainstreaming of black nationalism.
CenturyLink Inc. is in advanced talks to merge with Level 3 Communications Inc., a deal
that would give the telecommunications companies greater heft in a brutally competitive industry.
Terms of the deal couldn't be learned. As of Thursday afternoon before the Journal's report
of the talks, Level 3, based in Broomfield, Colo., had a market value of $16.8 billion. CenturyLink,
based in Monroe, La., was worth $15.2 billion.
CenturyLink is a former rural telephone exchange operator which bought former Baby Bell, Qwest
(U S West) in 2011.
CenturyLink is a miserable, crappy telco - so spectacularly bad it makes the cable company
look like a paragon of customer friendliness by comparison. CTL's share price has declined
by about a third since its acquisition of Qwest, reflecting CTL's braindead managerial incompetence.
If this merger goes through, we'll have a Big Three of dinosaur telcos: AT&T, Verizon, and
CenturyLink.
My experience has been just the opposite. I have had excellent, reliable DSL service from CenturyLink
and good technical support. Perhaps it's because I live somewhere there is still some competition
– a duopoly with Comcast. I do have to call them every 6 or 12 months and talk to a retention
service rep to keep the charges down.
CenturyLink does seem slow in getting fiber to the end of the block everywhere in my city.
I know lots of people who have been stuck for years down at 5Mbps, which is not enough these days.
The routers they provide for customers (which most people call modems even though they're not)
are crap. I tried getting a router from CenturyLink that supports 802.11n so I could use 5GHz
(2.4GHz is very crowded in my neighborhood) – that's when I found out that 5GHz support is OPTIONAL
under the 802.11n standard. Of course CenturyLink went with the cheaper model. Returning the router
was no problem and the refund appeared promptly and correctly on my bill.
The return of monopolization is traced by Barry C. Lynn in his 2010 book, Cornered: The
New Monopoly Capitalism and the Economics of Destruction . It goes back to the decision of the
Reagan administration to reinterpret antitrust regulation to emphasize efficiency over competition.
No previous 20th century administration would have allowed the A&P chain to become a behemoth
like Walmart.
Jump in Inventories Leads to Stronger than Expected GDP
Growth
By Dean Baker
The economy grew at a 2.9 percent annual rate, the
strongest growth rate since the third quarter of 2014. Most
forecasts had put growth for the quarter at just over 2.0
percent. While this number is better than expected, a big
factor was an increase in inventory accumulation, which added
0.61 percentage points to growth. Accumulation was actually
negative in the second quarter, so the rate of accumulation
is likely to be even higher in the fourth quarter.
Most categories of final demand were relatively weak.
Consumption grew at a modest 2.1 percent annual rate.
Residential investment fell at a 6.2 percent annual rate, its
second consecutive decline. Non-residential fixed investment
grew at a 1.2 percent rate, roughly the same pace as in the
second quarter. This follows two quarters of decline. The
collapse of energy prices and the increase in the trade
deficit in manufacturing are the major factors behind the
weakness in this component.
Government expenditures increased at a 0.5 percent annual
rate, with a 2.5 percent increase in federal spending
offsetting a 0.7 percent decline at the state and local
level. This is the second consecutive quarter of decline at
the state and local level.
Exports were a source of strength in the quarter, rising
at a 10.0 percent annual rate, the strongest performance
since the fourth quarter of 2013. As a result of this
increase, net exports added 0.83 percentage points to growth
for the quarter.
One striking figure in this report is the slower pace of
inflation shown in the core personal consumption expenditure
deflator (PCE). This rose at just a 1.7 percent annual rate
in the third quarter. The rate of inflation shown in the core
PCE has been trailing off throughout the year, rising at a
2.1 percent annual pace in the first quarter and a 1.8
percent rate in the second quarter. While there are enough
erratic movements in the quarterly data to avoid treating
this as evidence of deceleration, it is certainly hard to
make a case for acceleration with these data.
You know that money that your bank lent you to
buy your new house? Well, I want to let you in on a little
secret: That wasn't the bank's money they lent you. And it
wasn't some billionaire's money either. It was some of your
own money, along with a little bit of mine and Tom's and
Susie's and everybody else in this country. Can you imagine
that?
It's a fact. It's why Henry Ford supposedly said that "if
people understood our banking and monetary system, I believe
there would be a revolution before tomorrow morning".(1)
When the bank lent you that money it took your promise to
pay them back (a promissory note and title to the house as
collateral) and in exchange it punched some numbers into a
computer, creating your deposit account and thereby creating
the money it lent to you.(2)
But how can that be, you say. How can the bank just invent
money like that? Well they do "just invent money" and they
can do it because our government agrees with them that they
can do it.
But don't they have to pay for that money, you say. No,
they don't. But they do have to be a depository institution (
a place you can keep your money on deposit) and there is some
expense for them to that.
But they are charging me interest on that money, you say.
Yes indeed, they are charging you interest on your own money,
and mine, and Tom's, and Susie's, etc.
But that bank is a private business, and banks make a lot
of profit, why should we pay them to loan us our own money,
you say. Good question.
"But don't they have to pay for that money, you say. No, they
don't. But they do have to be a depository institution ( a
place you can keep your money on deposit) and there is some
expense for them to that."
Again? Take a look at the income
statement of any bank. There is interest expense for them on
those deposits. OK, it is low but then there are those
subsidized services which is why noninterest expenses exceed
noninterest income. Again - no exactly a total expense of 5%
but mortgage rates today are not exactly 6% either.
We all do. But I see you waste no time doing actual financial
economics. If you did, you might realize how to capture
monopoly profits. Look at the average return to equity
compared to what you'd predict from a CAPM model. When I do
this for health insurance companies, their average return is
3 times what they would be from a competitive market. When I
do this for major banks, the average return to equity = the
CAPM prediction. Estimated monopoly profits = 0.
Of course
you have no idea what any of this means as all you know is
word salad.
Banks sell public
money as their product and they extract interest for doing
so. They thus act as a transfer agent of wealth from the real
economy to rentiers.
The return to equity for
banks is about what one would expect from a risk-adjusted
return perspective. Oh yes - the Capital Asset Pricing Model
properly applied would show what utter nonsense this is.
Banks will always exist. Of course proper regulation of
financial institutions can address this problem. But your
word salad has nothing to do with the real issues.
He does but what is the percentage of JPM's total assets? Do
you even know? You might need a microscope to see it. And no
- I am not defending banks. But your word salad is not
getting at the real issues. And yet you persist.
In finance, the capital asset pricing model (CAPM) is a model
used to determine a theoretically appropriate required rate
of return of an asset, to make decisions about adding assets
to a well-diversified portfolio.
Let's do this for a bank. Expected return to assets =
risk-free rate (1%) plus a 1% premium for bearing operational
risk. But then the equity to asset ratio for banks is only
10% so the expected return to equity includes a 10% premium
for bearing both operational risk and leverage risk. As such,
the expected return to equity = 11% for these highly levered
firms. And on average that is their actual return to equity.
For a great application of these thoughts - see that paper by
Sarin and Summers. You may not remember when I put it up
weeks ago but my internet stalker put up a link to it just
yesterday. Of course this was PeterK's childish way of
attacking someone who actually contributes to this blog. I
said he should read it. So should RGC. They might learn
something.
LOL! pgl assumes that banks' investors have a god-given right
to a risk premium of 10%.
Of course, risk premiums are more
in the range 4-5%, far below pgl's banker-coddling
assumption.
"Some economists argue that, although certain markets in
certain time periods may display a considerable equity risk
premium, it is not in fact a generalizable concept. They
argue that too much focus on specific cases – e.g. the U.S.
stock market in the last century – has made a statistical
peculiarity seem like an economic law."
http://www.investopedia.com/terms/e/equityriskpremium.asp#ixzz4OOLOzdqg
As for the economic concept of the time value of money,
whereby savers get rewarded for setting money aside...the
longer the time, the greater the reward, well, central banks
have pretty well destroyed that with negative interest rates.
Time value of money: RIP. Nonetheless investors are still
supposed to reap their extravagant risk premiums!!!
He can't figure out this aggregator thing. He cannot figure
out the investor thing. He certainly has no knowledge of the
secondary market.
He takes tiny little pieces of things,
ignores the rest and then comes to a conclusion. Of course
the conclusion is that MMT makes sense. Everyone knows it
doesn't make sense and cannot work world.
He ignores basic finance. But then so does PeterK as actual
thinking just gets him all angry. Which means you and I are
tagged "liar". This is the intellectual garbage that is
ruining this place.
RGC -> EMichael...
, -1
"Money creation in practice differs from some popular
misconceptions - banks do not act simply as intermediaries,
lending out deposits that savers place with them, and nor do
they 'multiply up' central bank money to create new loans and
deposits."
Inequality As Policy: Selective Trade Protectionism Favors Higher Earners
By Dean Baker
Globalization and technology are routinely cited as drivers of inequality over the last four
decades. While the relative importance of these causes is disputed, both are often viewed as natural
and inevitable products of the working of the economy, rather than as the outcomes of deliberate
policy. In fact, both the course of globalization and the distribution of rewards from technological
innovation are very much the result of policy. Insofar as they have led to greater inequality,
this has been the result of conscious policy choices.
Starting with globalization, there was nothing pre-determined about a pattern of trade liberalization
that put U.S. manufacturing workers in direct competition with their much lower paid counterparts
in the developing world. Instead, that competition was the result of trade pacts written to make
it as easy as possible for U.S. corporations to invest in the developing world to take advantage
of lower labor costs, and then ship their products back to the United States. The predicted and
actual result of this pattern of trade has been to lower wages for manufacturing workers and non-college
educated workers more generally, as displaced manufacturing workers crowd into other sectors of
the economy.
Instead of only putting manufacturing workers into competition with lower-paid workers in other
countries, our trade deals could have been crafted to subject doctors, dentists, lawyers and other
highly-paid professionals to international competition. As it stands, almost nothing has been
done to remove the protectionist barriers that allow highly-educated professionals in the United
States to earn far more than their counterparts in other wealthy countries.
This is clearest in the case of doctors. For the most part, it is impossible for foreign-trained
physicians to practice in the United States unless they have completed a residency program in
the United States. The number of residency slots, in turn, is strictly limited, as is the number
of slots open for foreign medical students. While this is a quite blatantly protectionist restriction,
it has persisted largely unquestioned through a long process of trade liberalization that has
radically reduced or eliminated most of the barriers on trade in goods. The result is that doctors
in the United States earn an average of more than $250,000 a year, more than twice as much as
their counterparts in other wealthy countries. This costs the country roughly $100 billion a year
in higher medical bills compared to a situation in which U.S. doctors received the same pay as
doctors elsewhere. Economists, including trade economists, have largely chosen to ignore the barriers
that sustain high professional pay at enormous economic cost.
In addition to the items subject to trade, the overall trade balance is also very much the
result of policy choices. The textbook theory has capital flowing from rich countries to poor
countries, which means that rich countries run trade surpluses with poor countries. While this
accurately described the pattern of trade in the 1990s up until the East Asian financial crisis
(a period in which the countries of the region enjoyed very rapid growth), in the last two decades
developing countries taken as a whole have been running large trade surpluses with wealthy countries.
This implies large trade deficits in rich countries, especially the United States, which in
turn has meant a further loss of manufacturing jobs with the resulting negative impact on wage
inequality. However, there was nothing inevitable about the policy shifts associated with the
bailout from the East Asian financial crisis that led the developing world to become a net exporter
of capital.
The pattern of gains from technology has been even more directly determined by policy than
is the case with gains from trade. There has been a considerable strengthening and lengthening
of patent and copyright and related protections over the last four decades. The laws have been
changed to extend patents to new areas such as life forms, business methods, and software. Copyright
duration has been extended from 55 years to 95 years. Perhaps even more important, the laws have
become much more friendly to holders of these property claims to tilt legal proceedings in their
favor, with courts becoming more patent-friendly and penalties for violations becoming harsher.
And, the United States has placed stronger intellectual property (IP) rules at center of every
trade agreement negotiated in the last quarter century.
In this context, it would hardly be surprising if the development of "technology" was causing
an upward redistribution of income. The people in a position to profit from stronger IP rules
are almost exclusively the highly educated and those at the top end of the income distribution.
It is almost definitional that stronger IP rules will result in an upward redistribution of income.
This upward redistribution could be justified if stronger IP rules led to more rapid productivity
growth, thereby benefitting the economy as a whole. However, there is very little evidence to
support that claim. Michele Boldrin and David Levine have done considerable research on this topic
and generally found the opposite. My own work, using cross-country regressions with standard measures
of patent strength, generally found a negative and often significant relationship between patent
strength and productivity growth.
There is also a substantial amount of money at stake. In the case of prescription drugs alone,
the United States is on path to spend more than $430 billion in 2016 for drugs that would likely
cost one-tenth of this amount in the absence of patent and related protections. While we do need
mechanisms for financing innovation and creative work, it is almost certainly the case that patent
and copyright monopolies as currently structured are not the most efficient route...
JohnH -> anne... -1
Dean Baker has been on a roll!
Money quote: "The structuring of trade and rules on IP are two important ways in which policy
has been designed to redistribute income upward over the last four decades. There are many other
ways in which the market has been structured to disadvantage those at the middle and bottom of
the income distribution, perhaps most notably macroeconomic policies that result in high unemployment.
While tax and transfer policies that reduce poverty and inequality may be desirable, we should
also be aware of the ways in which policy has been designed to increase inequality. It is much
easier to have an economic system that produces more equality rather than one that needlessly
generates inequality, which we then try to address with redistributive policies."
http://www.nakedcapitalism.com/2016/10/inequality-as-policy-selective-trade-protectionism-favors-higher-earners.html
Now if we could get economists to recognize that a monetary policy that prioritizes the 'wealth
effect' for a decade is really trickle down, then perhaps we could get them to develop policies
to mitigate trickle down aspects and direct monetary policy more towards the broader economy.
"In late 2007, before the recession started, the prime-age
employment-to-population ratio in the U.S. was about the same
as in other Group of Seven developed nations (which also
include Canada, France, Germany, Italy, Japan and the U.K.).
The U.S., however, experienced a much larger decline during
the recession, and remains much farther from undoing the
damage. As of June, the G-7 as a whole had recovered almost
completely, while the U.S. was only 60 percent back from its
lowest point:"
"... An important essay indeed in that ideological influence is pervasive in writing by economists, which should be no problem as such, but economists should be aware of ideological influence in the work that they do. The problem is being unaware that work is ideological, so that the work is presented as simple truth allowing for no alternative presentation and argument. ..."
"... RBC economists are very well compensated for saying that no government intervention is needed in the economy, as are those saying that minimum wages harm employment. ..."
"... Actually a lot of academics are not exactly paid that well. This crowd does this sort as a religion. The problem is that those of us who never accepted perfect markets and instant market clearing were closed out of publications for 30 years. Now if RBC explained the real world - fine. But it had zero explanation for the last 9 years. ..."
"... Mankiw is paid well. ..."
"... Krugman is paid well. ..."
"... Speaking as an academic, in the university system with the lowest paid faculty in the nation, I am well aware of that. It is not the academic salaries, but the research grants and consulting contracts that matter here. ..."
"... Upton Sinclair is always right. ..."
"... "I suspect there is a reluctance among the majority of economists to admit that some among them may not be following the scientific method but may instead be making choices on ideological grounds." ..."
"... The RBC crowd is arrogant enough to argue that Keynes was practicing junk science. They knew his writings and just ignored it. ..."
"... That US economists are completely clueless is obvious to anyone who travels around the world. That free trade economies such as the US are complete basket cases is obvious to anyone who visits mercantilist economies such as Singapore, Japan, Israel etc. US trained economists only have prestige because the masses don't know how backward and poverty-stricken the US has become under the policies they relentlessly justify and apologize for. ..."
Being honest about ideological influence in economics : Noah Smith has an
article that talks about Paul Romer's recent
critique
of macroeconomics. ... He says the fundamental problem with macroeconomics is lack of data,
which is why disputes seem to take so long to resolve. That is not in my view the whole story.
If we look at the rise of Real Business Cycle (RBC) research a few decades ago, that was only
made possible because economists chose to ignore evidence about the nature of unemployment in
recessions. There is overwhelming evidence that in a recession employment declines because workers
are fired rather than choosing not to work, and that the resulting increase in unemployment is
involuntary (those fired would have rather retained their job at their previous wage). Both facts
are incompatible with the RBC model.
In the RBC model there is no problem with recessions, and no role for policy to attempt to
prevent them or bring them to an end. The business cycle fluctuations in employment they generate
are entirely voluntary. RBC researchers wanted to build models of business cycles that had nothing
to do with sticky prices. Yet here again the evidence was quite clear...
Why would researchers try to build models of business cycles where these cycles required no
policy intervention, and ignore key evidence in doing so? The obvious explanation is ideological.
I cannot prove it was ideological, but it is difficult to understand why - in an area which as
Noah says suffers from a lack of data - you would choose to develop theories that ignore some
of the evidence you have. The fact that, as I argue
here , this bias may have expressed itself in the insistence on following a particular methodology
at the expense of others does not negate the importance of that bias. ...
I suspect there is a reluctance among the majority of economists to admit that some among them
may not be following the scientific method but may instead be making choices on ideological grounds.
This is the essence of Romer's critique, first in his own area of growth economics and then for
business cycle analysis. Denying or marginalizing the problem simply invites critics to apply
to the whole profession a criticism that only applies to a minority.
An important essay indeed in that ideological influence is pervasive in writing by economists,
which should be no problem as such, but economists should be aware of ideological influence in
the work that they do. The problem is being unaware that work is ideological, so that the work
is presented as simple truth allowing for no alternative presentation and argument.
The point of Sophocles Oedipus cycle for Sophocles and for Freud was found in the Oracle at Delphi
with which the cycle begins. The inscription at Delphi read "Know Thyself."
Know your ideological bent or leaning. The tragedy of Oedipus was in not knowing himself.
Under Fidel Castro's rule Cuba bucked the historical trend--moving not toward but far away
from political democracy.
Under Fidel Castro it looks as though Cuba lost two generations of economic growth --
generations that other neighboring economies like Mexico, Costa Rica, and Puerto Rico made
very good use of. The only good thing you can say about Castro is that Cuba continued to have
the social indicators of a middle-income country even as it became a poor one.
It was always incomprehensible that an anti-Democratic dictator who managed to turn a
middle-income country into a poor one would have fans. Yet there are still people in the class
not of stooges looking for their Stalin, but fools who have found their Fidel.
-- Brad DeLong
[ Importantly, the economics here happen to be wildly wrong but is there any concern about
how Cuba actually fared in real per capita growth relative to Mexico, Costa Rica or Puerto
Rico since 1971 when record keeping begins?
Since 1971, real per capita GDP in Cuba has grown faster than real per capita GDP in Mexico, Guatemala,
El Salvador, Nicaragua, Costa Rica and Panama, faster than in Puerto Rico, Jamaica, Trinidad and
Bermuda, faster than in Colombia, Venezuela, Brazil and Argentina, faster than in Ecuador, Bolivia,
Uruguay and Paraguay, faster than in Spain and Portugal.
Real per capita growth in the Dominican Republic and Chile alone among Spanish or Portuguese
language countries has been faster than in Cuba.
Since 1971, real per capita GDP in Cuba has also grown faster than real per capita GDP in Peru...
Correcting:
Since 1971, real per capita GDP in Cuba has grown slightly slower than real per capita GDP
in Paraguay...
Completing:
Since 1971, real per capita GDP in Cuba has grown faster than real per capita GDP in Mexico,
Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica and Panama, faster than in Puerto Rico,
Jamaica, Trinidad and Bermuda, faster than in Colombia, Venezuela, Peru, Brazil and Argentina,
faster than in Ecuador, Bolivia and Uruguay, faster than in Spain and Portugal.
Real per capita growth in the Dominican Republic, Chile and Paraguay alone among Spanish or
Portuguese language countries has been faster than in Cuba.
RBC economists are very well compensated for saying that no government intervention is needed
in the economy, as are those saying that minimum wages harm employment.
Actually a lot of academics are not exactly paid that well. This crowd does this sort as a religion.
The problem is that those of us who never accepted perfect markets and instant market clearing
were closed out of publications for 30 years. Now if RBC explained the real world - fine. But
it had zero explanation for the last 9 years.
I write "a lot" and you read "all". More evidence that my internet stalker flunked pre-K. BTW
- Mankiw is not part of the RBC crowd but PeterK is too stupid to know that. Geesh.
Lord - what a stupid comment. Krugman does make his believes against evidence. I see this is another
post you did not bother to read before posting one of your patented pointless rants.
Speaking as an academic, in the university system with the lowest paid faculty in the nation,
I am well aware of that. It is not the academic salaries, but the research grants and consulting
contracts that matter here.
Speaking as an academic, in the university system with the lowest paid faculty in the nation,
I am well aware of that. It is not the academic salaries, but the research grants and consulting
contracts that matter here.
RBC economists are very well compensated for saying that no government intervention is needed
in the economy, as are those saying that minimum wages harm employment.
Real business-cycle theory (RBC theory) are a class of New Classical macroeconomics models
in which business-cycle fluctuations to a large extent can be accounted for by real (in contrast
to nominal) shocks. Unlike other leading theories of the business cycle, RBC theory sees business
cycle fluctuations as the efficient response to exogenous changes in the real economic environment.
That is, the level of national output necessarily maximizes expected utility, and governments
should therefore concentrate on long-run structural policy changes and not intervene through discretionary
fiscal or monetary policy designed to actively smooth out economic short-term fluctuations.
According to RBC theory, business cycles are therefore "real" in that they do not represent
a failure of markets to clear but rather reflect the most efficient possible operation of the
economy, given the structure of the economy.
"I suspect there is a reluctance among the majority of economists to admit that some among them
may not be following the scientific method but may instead be making choices on ideological grounds."
How is the ridiculous RBC theory different from saying, as many prominent economists do, that
presidents do not significantly influence economic growth and job creation?
Thus, I have heard repeatedly that FDR, Reagan, Clinton and Obama should not get credit for
the economic recoveries and job creation that occurred during their presidencies. Likewise, Hoover,
Carter and the Bushes should not be blamed for the economic debacles that occurred during their
presidencies. Apparently, these were all just real business cycles that no president has responsibility
for.
Of course voters do not agree at all, re-electing all of the "lucky" presidents while throwing
out all of the "unlucky" ones. For example, Carter, who is now regarded as a good president, was
buried in a massive landslide: 489-49 by a second rate actor who was regarded as a fool by many.
(Trump will outperform Carter!)
Either RBC is correct or presidents and their policies do matter a lot. Economists have to
decide where they stand.
The RBC crowd never really got that much into politics. Of course assuming markets always clear
and are perfect in every other way is a silly way to model a real world economy.
"you would choose to develop theories that ignore some of the evidence you have". It first this
New Classical/RBC crowd put forth all sorts of fancy new econometrics thinking if you looked at
the data the right way, their model would be confirmed. Only problem is their model says aggregate
demand can have only very transitional effects but the data show persistent effects. Shocks in
other words have sustained real effects.
So when their model was shown to be faulty by the evidence, they gave up on econometrics and
turned to calibration which is just fancy math designed to hide the failure of their models.
SWL continues noting David Card's research on the effects of increases in minimum wages:
'As Card points out in the interview his research involved no advocacy, but was simply about
examining empirical evidence. So the friends that he lost objected not to the policy position
he was taking, but to him uncovering and publishing evidence. Suppressing or distorting evidence
because it does not give the answer you want is almost a definition of an illegitimate science.'
Greg Mankiw searches high and low for anything that goes along with his view that higher wage
floors lead to less employment demand. Of course this kind of bias favors people like Donald Trump
who built that DC hotel under budget by ignoring the minimum wage laws.
Much of the economic models debates hinge on "sticky wages" which are irrefutable from all empirics.
What I haven't seen yet though is a sound testable hypothesis that supports the empirical observation.
In other words, we know by empirics it's true, but we really don't yet know why its true or true
in most, but certainly not all cases -- e.g. Greece recently for example. Many suppositions have
been described but none have to my knowledge been put into the form of testable hypothesis to
suppot the suppositions with "scientific" methods..
How does the relate to RBC models and ideology embedded in models?
RBC ignores the empirics for what can be said to be ideological reasons. But models which include
those observations have no hypothesis proven to support the observations either, so then those
models are equally using unscientific methods in their construction, which just so happens to
support a different ideological position.
I don't disagree at all that models must use observations in their construction but it doesn't
put those models at any greater scientific method advantage.
"It appears, therefore, that we have a sort of asymmetry on the two sides of the critical level
above which true inflation sets in. For a contraction of effective demand below the critical level
will reduce its amount measured in cost-units; whereas an expansion of effective demand beyond
this level will not, in general, have the effect of increasing its amount in terms of cost-units.
"This result follows from the assumption that the factors of production, and in particular
the workers, are disposed to resist a reduction in their money-rewards, and that there is no corresponding
motive to resist an increase. This assumption is, however, obviously well founded in the facts,
due to the circumstance that a change, which is not an all-round change, is beneficial to the
special factors affected when it is upward and harmful when it is downward.
"If, on the contrary, money-wages were to fall without limit whenever there was a tendency
for less than full employment, the asymmetry would, indeed, disappear. But in that case there
would be no resting-place below full employment until either the rate of interest was incapable
of falling further or wages were zero.
"In fact we must have some factor, the value of which in terms of money is, if not fixed, at
least sticky, to give us any stability of values in a monetary system.
"The view that any increase in the quantity of money is inflationary (unless we mean by inflationary
merely that prices are rising) is bound up with the underlying assumption of the classical theory
that we are always in a condition where a reduction in the real rewards of the factors of production
will lead to a curtailment in their supply." The General Theory, pp. 303-304.
yes, Keynes supposition, among other was precisely what I was referring to by knowing the observation
is true but not why it is.
Everybody knows it is true by observation that the sun rises in the east and settles in the
west 1x in roughly 24 hours give or take a winter/summer trend change. But it took an awfully
long time before Copernicus figured out why that was the case... and from his theory testable
hypothesis were developed to show that the hypothesis were confirmed.
With sticky wages we don't know why. E.G.
Wages will not go below [this level] because [insert testable hypothesis]. A testable hypothesis
takes the form
Lower Bound of Wage = [insert independent measurable variables and their relationships here]
As I said, lower bounds to wages are empirically observed. Now show why in repeatable results
with the equations using the independent variables that apply under the conditions imposed by
he hypothesis.
Until that is the observation is used in models because it suits ones interest to do so...
i.e. they like the results of the models better. It isn't a scientifically founded model... the
assumption is no better than rational expectations.
"If, on the contrary, money-wages were to fall without limit whenever there was a tendency
for less than full employment, . . . there would be no resting-place below full employment until
either the rate of interest was incapable of falling further or wages were zero."
Absent sticky wages, at ZLB interest, wages would fall to zero whenever there was a tendency
for less than full employment and nobody works for zero wages.
RBC also ignores anything that would explain why we have recessions at all. Its assumption that
markets instantly clear is key to their model but we know that markets are not so perfect.
A few years ago I would have suggested otherwise. But recent research notes you are right. Obama's
CEA is noting this but he will not be President for long. Our next President needs to take this
head on. Trump won't. Will Clinton? We will see.
"There is overwhelming evidence that in a recession employment declines because workers are fired
rather than choosing not to work, and that the resulting increase in unemployment is involuntary"
see Keynes called it involuntary unemployment NOT cyclical unemployment
as all the politicians are saying now a days, words mean something
Simon-Wren Lewis is making a common mistake as I see it. The limitations and assumptions of a
model should not be conflated with evidence against the model. Not considering certain types of
data is a limitation of a model; not evidence against that model. If an RBC model does not include
certain types of data, then the best approach is to try and understand that data and attempt to
show how it fits into the existing model. Another model should be considered only when certain
limitations appear intractable. Because there are almost always lots of ways to model the same
problem, at least in the social sciences, if you create a new model every time you come across
a limitation, you'll end up running around in circles.
This makes no sense to me. So how about explaining what you meant with real world examples? I
choose the examples of involuntary unemployment and wage stickiness, and the effects of raising
the minimum wage.
"The limitations and assumptions of a model should not be conflated with evidence against the
model."
I don't think this is what SWL is saying and am fairly certain it is not what Romer is saying:
The problem is not limitation or contradiction, it is central variables assumed to confer verisimilitude
that cannot and assumptions considered true that are not.
The assumptions of the model are false and therefore should be construed as evidence against
using the model. I'm saying that's faulty reasoning.
The "my model is better than your model" argument is not a good way to approach problems at
a theoretical level. It's sometimes okay at an applied level. One thing that's hard to wrap one's
head around is that a model can still be useful even when its assumptions are false. When data
is sparse, all useful theories will have to rely on false or incomplete assumptions. Usually a
better approach is to extend rather than start over to keep people from running in too many different
directions.
"Not considering certain types of data is a limitation of a model; not evidence against that
model. If an RBC model does not include certain types of data, then the best approach is to try
and understand that data and attempt to show how it fits into the existing model"
Henry Carey - a real American economist, sadly forgotten to history : , -1
That US economists are completely clueless is obvious to anyone who travels around the world.
That free trade economies such as the US are complete basket cases is obvious to anyone who visits
mercantilist economies such as Singapore, Japan, Israel etc. US trained economists only have prestige
because the masses don't know how backward and poverty-stricken the US has become under the policies
they relentlessly justify and apologize for.
"... Any analysis that starts with the assumption reactionaries still has a great deal to its agenda to achieve, such as promoting regressive taxation; privatization of Social Security; limiting Medicare; privatization of education; expansion of the police state; using the military to support the dollar, banking, world markets, etc., rather than Corey Robin's belief that "the Right" has won is in my view an improvement on the OP. ..."
"... In the end, Putin will be done in by his oligarchs, despite the care he has taken to give them their share if they just refrain from wrecking everything with their excesses. Again, no need for NGOs. ..."
This is a very good analyses. But I am less pessimistic: the blowback against neoliberal globalization
is real and it is difficult to swipe it under the carpet.
There are some signs of the "revolutionary situation" in the USA in a sense that the neoliberal
elite lost control and their propaganda loss effectiveness, despite dusting off the "Red scare"
trick with "Reds in each computer" instead of "Reds under each bed". With Putin as a very convenient
bogeyman.
As somebody here said Trump might be a reaction of secular stagnation, kind of trump card put
into play by some part of the elite, because with continued secular stagnation, the social stability
in the USA is under real threat.
But the problem is that Hillary with her failing health is our of her prime and with a bunch
of neocons in key positions in her administration, she really represents a huge threat to world
peace. She might not last long as the level of stress inherent in POTUS job make it a killing
ground for anybody with advanced stage of Parkinson or similar degenerative neurological disease.
But that might make her more impulsive and more aggressive (and she always tried to outdo male
politicians in jingoism, real John McCain is the red pantsuit).
All-in-all it looks like she in not a solution for neoliberal elite problems, she is a part
of the problem
Adventurism of the US neoliberal elite, and especially possible aggressive moves in Syria by
Hillary regime ("no fly zone"), makes military alliance of Russia and China very likely (with
Pakistan, Iran and India as possible future members). So Hillary might really work like a powerful
China lobbyist, because the alliance with Russia will be on China terms.
Regime change via color revolution in either country requires at dense network of subservient
to the Western interests and financed via shadow channels MSM (including TV channels), strong
network of NGO and ability to distribute cash to selected members of the fifth column of neoliberal
globalization. All those condition were made more difficult in Russia and impossible in mainland
China. In Russia the US adventurism in Ukraine and the regime change of February 2014 (creation
of neo-fascist regime nicknamed by some "Kaganat of Nuland" (Asia Times
http://www.atimes.com/atimes/Central_Asia/CEN-01-100315.html
)) essentially killed the neoliberal fifth column in Russia and IMHO it no longer represent
a viable political force.
Also Russians probably learned well lesson of unsuccessful attempt of regime change by interfering
into Russian Presidential election process attempted by Hillary and Obama in 2011-2012. I would
like to see the US MSM reaction if Russian ambassador invited Sanders and Trump into the embassy
and promised full and unconditional support for their effort to remove criminal Obama regime,
mired in corruption and subservient to Wall Street interests, the regime that produced misery
for so many American workers, lower middle class and older Americans ;-)
Ambassador McFaul soon left the country, NED was banned and screws were tightened enough to
make next attempt exceedingly difficult. Although everything can happen I would discount the possibility
of the next "White Revolution" in Russia. So called "Putin regime" survived the period of low
oil prices and with oil prices over $60 in 2017 Russian economy might be able to grow several
percent a year. At the same time the US "post-Obama" regime might well face the winds of returning
higher oil prices and their negative influence of economy growth and unemployment.
In China recent troubles in Hong Cong were also a perfect training ground for "anti color revolution"
measures and the next attempt would much more difficult, unless China experience economic destabilization
due to some bubble burst.
That means that excessive military adventurism inherent in the future Hillary regime might
speed up loss by the USA military dominance and re-alignment of some states beyond Philippines.
Angela Merkel regime also might not survive the next election and that event might change "pro-Atlantic"
balance in Europe.
Although the list in definitely not complete, we can see that there are distinct setbacks for
attempts of further neoliberalization beyond Brexit and TPP troubles.
So there are some countervailing forces in action and my impression that the Triumphal march
of neoliberalism with the USA as the hegemon of the new neoliberal order is either over, or soon
will be over. In certain regions of the globe the USA foreign policy is in trouble (Syria, Ukraine)
and while you can do anything using bayonets, you can't sit on them.
So while still there is no viable alternative to neoliberalism as a social system, the ideology
itself is discredited and like communism after 1945 lost its hold of hearts and minds of the USA
population. I would say that in the USA neoliberalism entered Zombie stage.
My hope is that reasonable voices in foreign policy prevail, and the disgust of unions members
toward DemoRats (Neoliberal Democrats) could play the decisive role in coming elections. As bad
as Trump is for domestic policy, it represent some hope as for foreign policy unless co-opted
by Republican establishment.
#70 But the problem is that Hillary with her failing health is our of her prime and with a bunch
of neocons in key positions in her administration, she really represents a huge threat to world
peace. She might not last long as the level of stress inherent in POTUS job make it a killing
ground for anybody with advanced stage of Parkinson or similar degenerative neurological disease.
But that might kale her more impulsive and more aggressive (and she always tried to outdo her
male politicians in jingoism, real John McCain is the red pantsuit).
Does the new CT moderation regime have any expectations about the veracity of claims made by
commenters? Because I think it would be useful in cases like this.
Yes, it was late and I was tired, or I wouldn't have said something so foolish. Still, the
point is that after centuries of constant war, Europe went 70 years without territorial conquest.
That strikes me as a significant achievement, and one whose breach should not be taken lightly.
phenomenal cat @64
So democratic structures have to be robust and transparent before we care about them? I'd give
a pretty high value to an independent press and contested elections. Those have been slowly crushed
in Russia. The results for transparency have not been great. Personally, I don't believe that
Ukraine is governed by fascists, or that Ukraine shot down that jetliner, but I'm sure a lot of
Russians do.
Russian leaders have always complained about "encirclement," but we don't have to believe them.
Do you really believe Russia's afraid of an attack from Estonia? Clearly what Putin wants is to
restore as much of the old Soviet empire as possible. Do you think the independence of the Baltic
states would be more secure or less secure if they weren't members of NATO? (Hint: compare to
Ukraine, Georgia, Moldova.)
' .makes military alliance of Russia and China very likely '
Any analysis which arrives at this conclusion is profoundly ignorant.
Meta-comment: Is it permitted to say that a moderation scheme which objects to engels as a
troll, while permitting this tripe from likbez has taken a wrong turn somewhere. Seriously, some
explanation called for.
Does the new CT moderation regime have any expectations about the veracity of claims made
by commenters? Because I think it would be useful in cases like this.
I would like to apologize about the number of typos, but I stand by statements made. Your implicit
assumption that I am lying was not specific, so let's concentrate on three claims made:
1. "Hillary has serious neurological disease for at least four years", 2. "Obama and Hillary tried to stage color revolution in Russia in 2011-2012 interfering in Russian
Presidential elections" 3. "Hillary Clinton is a neocon, a warmonger similar to John McCain"
1. Hillary Health : Whether she suffers from Parkinson disease or not in unclear, but signs
of some serious neurological disease are observable since 2012 (for four years). Parkinson is just
the most plausible hypothesis based on symptoms observed. Those symptoms suggests that she is at
Stage 2 of the disease due to an excellent treatment she gets:
http://www.viartis.net/parkinsons.disease/news/100312.htm
The average time taken to progress from Stage 1 (mild) to Stage 2 (mild but various symptoms)
was 1 year 8 months. The average time taken to progress from Stage 2 to Stage 3 (typical) was
7 years and 3 months. From Stage 3 to Stage 4 (severe) took 2 years. From Stage 4 to Stage 5 (incapacitated)
took 2 years and 2 months. So the stage with typical symptoms lasts the longest. Those factors
associated with faster progression were older age at diagnosis, and longer disease duration. Gender
and ethnicity were not associated with the rate of Parkinson's Disease progression.
These figures are only averages. Progression is not inevitable. Some people with Parkinson's
Disease have either : stayed the same for decades, reduced their symptoms, rid their symptoms,
or worsened at a rapid rate. For more current news go to Parkinson's Disease News.
Concern about Hillary health were voiced in many publications and signs of her neurological disease
are undisputable:
3. The opinion that Hillary as a neocon is supported by facts from all her career , but
especially during her tenure as the Secretary of State. She voted for Iraq war and was instrumental
in unleashing Libya war and Syria war. The amount of evidence can't be ignored:
If you have more specific concerns please voice them and I will try to support my statements with
references and known facts.
stevenjohnson 10.26.16 at 1:50 pm
likbez @70 Any analysis that starts with the assumption reactionaries still has a great
deal to its agenda to achieve, such as promoting regressive taxation; privatization of Social
Security; limiting Medicare; privatization of education; expansion of the police state; using
the military to support the dollar, banking, world markets, etc., rather than Corey Robin's
belief that "the Right" has won is in my view an improvement on the OP. But whether mine
is actually a deep analysis seems doubtful even to me.
But the OP is really limiting itself solely to domestic politics, and in that context the
resistance to "neoliberal globalization," (Why not use the term "imperialism?") is more or
less irrelevant. The OP seems to have some essentialist notion of the "Right" as openly aimed
at restoring the past, ignoring the content of policies. Reaction would be something blatant
like restoring censorship of TV and movies, instead of IP laws that favor giant
telecommunications companies, or abolition of divorce, instead of discriminatory enforcement
of child protection laws that break up poor families. This
cultural/psychological/moralizing/spiritual approach seems to me to be fundamentally a
diversion from a useful understanding.
There may be some sort of confused notions about popular morals and tastes clearly evolving
in a more leftish direction. Free love was never a conservative principle for instance, yet
many of its tenets are now those of the majority of the population. Personally I can only
observe that there's nothing quite like the usefulness of laws and law enforcement,
supplemented by the occasional illicit violence, to change social attitudes. The great model
of course is the de facto extermination of the Left by "McCarthyism." No doubt the
disappearance of the left targeted by "McCarthyism" is perceived to be a purification of the
real left. It is customary for the acceptable "left" to agree with the McCarthys that
communism lost its appeal to the people, rather than being driven out by mass repression. As
to populism, such reactionary goals as the abolition of public education are notoriously sold
as service to the people against the hifalutin' snobs, starting of course with lazy ass
teachers. It seems to me entirely mistaken to see the populist reactionaries as out of
ammunition because the old forms of race-baiting aren't working so well.
By the way, there already is a Chinese bourgeoisie, in Taiwan, Singapore, the Philippines,
Malaysia, Indonesia, Hong Kong, as well as elements in SEZs in China proper and select circles
in various financial capitals. Restoration of capitalism in China has run into the difficulty
that capitalism isn't holding up its end. President Xi Jinping is finding it difficult for
capitalism to keep the mainland economy growing at a sufficiently rapid rate to keep the
working class pacific, much less generate the so-called middle class whose stock market
portfolios will bind them to the new ruling class forever. These are the sources for a
revolution in China, not NGOs or a color revolution. In the end, Putin will be done in by
his oligarchs, despite the care he has taken to give them their share if they just refrain
from wrecking everything with their excesses. Again, no need for NGOs.
Val @72 I remember that there were only rare, vague hints about Reagan, not factual
evidence. So unless you are committed to the proposition his Alzheimer's disease only set in
January 21, 1992, demanding factual evidence about the mental and physical health of our
elective divinities seems unduly restrictive I think.
Layman @79 The Shanghai Cooperation Organization alone makes an analysis that a military
alliance between Russia and China reasonable enough. Even if incorrect in the end, it is not
"profoundly ignorant."
Meta-comment: Engels post was perceived as mocking, which was its offense. As for "trolling,"
that's an internet thing...
"... Geithner's comments about his sacrifices in public service did not elicit any outcry from the media at the time because his perspective was widely shared. The implicit assumption is that the sort of person who is working at a high level government job could easily be earning a paycheck that is many times higher if they were employed elsewhere. In fact, this is often true. When he left his job as Treasury Secretary, Geithner took a position with a private equity company where his salary is likely several million dollars a year. ..."
"... The CEOs who are paid tens of millions a year would like the public to think that the market is simply compensating them for their extraordinary skills. A more realistic story is that a broken corporate governance process gives corporate boards of directors - the people who largely determine CEO pay -little incentive to hold down pay. Directors are more closely tied to top management than to the shareholders they are supposed to represent, and their positions are lucrative, usually paying six figures for very part-time work. Directors are almost never voted out by shareholders for their lack of attention to the job or for incompetence. ..."
"... We also have done little to foster medical travel. This could lead to enormous benefits to patients and the economy, since many high cost medical procedures can be performed at a fifth or even one-tenth the U.S. price in top quality medical facilities elsewhere in the world. In this context, it is not surprising that the median pay of physicians is over $250,000 a year and some areas of specialization earn close to twice this amount. In the case of physicians alone, if pay were reduced to West European-levels the savings would be close to $100 billion a year (@ 0.6 percent of GDP). ..."
"... As a technical matter, the Federal Reserve Bank of New York is a private bank. It is owned by the banks that are members of the Federal Reserve System in the New York District. ..."
Yves here. We are delighted to feature an excerpt from Dean Baker's new book
Rigged , which you can find at
http://deanbaker.net/books/rigged.htm via either a free download
or in hard copy for the cost of printing and shipping. The book argues that policy in five areas, macroeconomics, the financial sector,
intellectual property, corporate governance, and protection for highly paid professionals, have all led to the upward distribution
of income. The implication is that the yawning gap between the 0.1% and the 1% versus everyone else is not the result of virtue ("meritocracy")
but preferential treatment, and inequality would be substantially reduced if these policies were reversed.
I urge you to read his book in full and encourage your friends, colleagues, and family to do so as well.
By Dean Baker, Co-Director, Center for Economic and Policy Research
Chapter 1: Introduction: Trading in myths
In winter 2016, near the peak of Bernie Sanders' bid for the Democratic presidential nomination, a new line became popular among
the nation's policy elite: Bernie Sanders is the enemy of the world's poor. Their argument was that Sanders, by pushing trade policies
to help U.S. workers, specifically manufacturing workers, risked undermining the well-being of the world's poor because exporting
manufactured goods to the United States and other wealthy countries is their path out of poverty. The role model was China, which
by exporting has largely eliminated extreme poverty and drastically reduced poverty among its population. Sanders and his supporters
would block the rest of the developing world from following the same course.
This line, in its Sanders-bashing permutation, appeared early on in Vox, the millennial-oriented media upstart, and was quickly
picked up elsewhere (Beauchamp 2016).
[1] After all, it was pretty irresistible. The ally of the downtrodden and enemy of the rich was pushing policies that would
condemn much of the world to poverty.
The story made a nice contribution to preserving the status quo, but it was less valuable if you respect honesty in public debate.
The problem in the logic of this argument should be apparent to anyone who has taken an introductory economics course. It assumes
that the basic problem of manufacturing workers in the developing world is the need for someone who will buy their stuff. If people
in the United States don't buy it, then the workers will be out on the street and growth in the developing world will grind to a
halt.
In this story, the problem is that we don't have enough people in the world to buy stuff. In other words, there is a shortage
of demand. But is it really true that no one else in the world would buy the stuff produced by manufacturing workers in the developing
world if they couldn't sell it to consumers in the United States? Suppose people in the developing world bought the stuff they produced
raising their living standards by raising their own consumption.
That is how the economics is supposed to work. In the standard theory, general shortages of demand are not a problem.
[2] Economists have traditionally assumed that economies tended toward full employment. The basic economic constraint was a lack
of supply. The problem was that we couldn't produce enough goods and services, not that we were producing too much and couldn't find
anyone to buy them. In fact, this is why all the standard models used to analyze trade agreements like the Trans-Pacific Partnership
assume trade doesn't affect total employment.
[3] Economies adjust so that shortages of demand are not a problem.
In this standard story (and the Sanders critics are people who care about textbook economics), capital flows from slow-growing
rich countries, where it is relatively plentiful and so gets a low rate of return, to fast-growing poor countries, where it is scarce
and gets a high rate of return (Figure 1-1).
So the United States, Japan, and the European Union should be running large trade surpluses, which is what an outflow of capital
means. Rich countries like ours should be lending money to developing countries, providing them with the means to build up their
capital stock and infrastructure while they use their own resources to meet their people's basic needs.
This wasn't just theory. That story accurately described much of the developing world, especially Asia, through the 1990s. Countries
like Indonesia and Malaysia were experiencing rapid annual growth of 7.8 percent and 9.6 percent, respectively, even as they ran
large trade deficits, just over 2 percent of GDP each year in Indonesia and almost 5 percent in Malaysia.
These trade deficits probably were excessive, and a crisis of confidence hit East Asia and much of the developing world in the
summer of 1997. The inflow of capital from rich countries slowed or reversed, making it impossible for the developing countries to
sustain the fixed exchange rates most had at the time. One after another, they were forced to abandon their fixed exchange rates
and turn to the International Monetary Fund (IMF) for help.
Rather than promulgating policies that would allow developing countries to continue the textbook development path of growth driven
by importing capital and running trade deficits, the IMF made debt repayment a top priority. The bailout, under the direction of
the Clinton administration Treasury Department, required developing countries to switch to large trade surpluses (Radelet and Sachs
2000, O'Neil 1999).
The countries of East Asia would be far richer today had they been allowed to continue on the growth path of the early and mid-1990s,
when they had large trade deficits (Figure 1-2). Four of the five would be more than twice as rich, and the fifth, Vietnam, would
be almost 50 percent richer. South Korea and Malaysia would have higher per capita incomes today than the United States.
In the wake of the East Asia bailout, countries throughout the developing world decided they had to build up reserves of foreign
exchange, primarily dollars, in order to avoid ever facing the same harsh bailout terms as the countries of East Asia. Building up
reserves meant running large trade surpluses, and it is no coincidence that the U.S. trade deficit has exploded, rising from just
over 1 percent of GDP in 1996 to almost 6 percent in 2005. The rise has coincided with the loss of more than 3 million manufacturing
jobs, roughly 20 percent of employment in the sector.
There was no reason the textbook growth pattern of the 1990s could not have continued. It wasn't the laws of economics that forced
developing countries to take a different path, it was the failed bailout and the international financial system. It would seem that
the enemy of the world's poor is not Bernie Sanders but rather the engineers of our current globalization policies.
There is a further point in this story that is generally missed: it is not only the volume of trade flows that is determined by
policy, but also the content. A major push in recent trade deals has been to require stronger and longer patent and copyright protection.
Paying the fees imposed by these terms, especially for prescription drugs, is a huge burden on the developing world. Bill Clinton
would have much less need to fly around the world for the Clinton Foundation had he not inserted the TRIPS (Trade Related Aspects
of Intellectual Property Rights ) provisions in the World Trade Organization (WTO) that require developing countries to adopt U.S.-style
patent protections. Generic drugs are almost always cheap -patent protection makes drugs expensive. The cancer and hepatitis drugs
that sell for tens or hundreds of thousands of dollars a year would sell for a few hundred dollars in a free market. Cheap drugs
would be more widely available had the developed world not forced TRIPS on the developing world.
Of course, we have to pay for the research to develop new drugs or any innovation. We also have to compensate creative workers
who produce music, movies, and books. But there are efficient alternatives to patents and copyrights, and the efforts by the elites
in the United States and other wealthy countries to impose these relics on the developing world is just a mechanism for redistributing
income from the world's poor to Pfizer, Microsoft, and Disney. Stronger and longer patent and copyright protection is not a necessary
feature of a 21 st century economy.
In textbook trade theory, if a country has a larger trade surplus on payments for royalties and patent licensing fees, it will
have a larger trade deficit in manufactured goods and other areas. The reason is that, in theory, the trade balance is fixed by national
savings and investment, not by the ability of a country to export in a particular area. If the trade deficit is effectively fixed
by these macroeconomic factors, then more exports in one area mean fewer exports in other areas. Put another way, income gains for
Pfizer and Disney translate into lost jobs for workers in the steel and auto industries.
The conventional story is that we lose manufacturing jobs to developing countries because they have hundreds of millions of people
willing to do factory work at a fraction of the pay of manufacturing workers in the United States. This is true, but developing countries
also have tens of millions of smart and ambitious people willing to work as doctors and lawyers in the United States at a fraction
of the pay of the ones we have now.
Gains from trade work the same with doctors and lawyers as they do with textiles and steel. Our consumers would save hundreds
of billions a year if we could hire professionals from developing countries and pay them salaries that are substantially less than
what we pay our professionals now. The reason we import manufactured goods and not doctors is that we have designed the rules of
trade that way. We deliberately write trade pacts to make it as easy as possible for U.S. companies to set up manufacturing operations
abroad and ship the products back to the United States, but we have done little or nothing to remove the obstacles that professionals
from other countries face in trying to work in the United States. The reason is simple: doctors and lawyers have more political power
than autoworkers.
[4]
In short, there is no truth to the story that the job loss and wage stagnation faced by manufacturing workers in the United States
and other wealthy countries was a necessary price for reducing poverty in the developing world.
[5] This is a fiction that is used to justify the upward redistribution of income in rich countries. After all, it is pretty
selfish for rich country autoworkers and textile workers to begrudge hungry people in Africa and Asia and the means to secure food,
clothing, and shelter.
The other aspect of this story that deserves mention is the nature of the jobs to which our supposedly selfish workers feel entitled.
The manufacturing jobs that are being lost to the developing world pay in the range of $15 to $30 an hour, with the vast majority
closer to the bottom figure than the top. The average hourly wage for production and nonsupervisory workers in manufacturing in 2015
was just under $20 an hour, or about $40,000 a year. While a person earning $40,000 is doing much better than a subsistence farmer
in Sub-Saharan Africa, it is difficult to see this worker as especially privileged.
By contrast, many of the people remarking on the narrow-mindedness and sense of entitlement of manufacturing workers earn comfortable
six-figure salaries. Senior writers and editors at network news shows or at the New York Times and Washington Post
feel entitled to their pay because they feel they have the education and skills to be successful in a rapidly changing global economy.
These are the sort of people who consider it a sacrifice to work at a high-level government job for $150,000 to $200,000 a year.
For example, Timothy Geithner, President Obama's first treasury secretary, often boasts about his choice to work for various government
agencies rather than earn big bucks in the private sector. His sacrifice included a stint as president of the Federal Reserve Bank
of New York that paid $415,000 a year.
[6] This level of pay put Geithner well into the top 1 percent of wage earners.
Geithner's comments about his sacrifices in public service did not elicit any outcry from the media at the time because his perspective
was widely shared. The implicit assumption is that the sort of person who is working at a high level government job could easily
be earning a paycheck that is many times higher if they were employed elsewhere. In fact, this is often true. When he left his job
as Treasury Secretary, Geithner took a position with a private equity company where his salary is likely several million dollars
a year.
Not everyone who was complaining about entitled manufacturing workers was earning as much as Timothy Geithner, but it is a safe
bet that the average critic was earning far more than the average manufacturing worker - and certainly far more than the average
displaced manufacturing worker.
Turning the Debate Right-Side Up: Markets Are Structured
The perverse nature of the debate over a trade policy that would have the audacity to benefit workers in rich countries is a great
example of how we accept as givens not just markets themselves but also the policies that structure markets. If we accept it as a
fact of nature that poor countries cannot borrow from rich countries to finance their development, and that they can only export
manufactured goods, then their growth will depend on displacing manufacturing workers in the United States and other rich countries.
It is absurd to narrow the policy choices in this way, yet the centrists and conservatives who support the upward redistribution
of the last four decades have been extremely successful in doing just that, and progressives have largely let them set the terms
of the debate.
Markets are never just given. Neither God nor nature hands us a worked-out set of rules determining the way property relations
are defined, contracts are enforced, or macroeconomic policy is implemented. These matters are determined by policy choices. The
elites have written these rules to redistribute income upward. Needless to say, they are not eager to have the rules rewritten which
means they have no interest in even having them discussed.
But for progressive change to succeed, these rules must be addressed. While modest tweaks to tax and transfer policies can ameliorate
the harm done by a regressive market structure, their effect will be limited. The complaint of conservatives - that tampering with
market outcomes leads to inefficiencies and unintended outcomes - is largely correct, even if they may exaggerate the size of the
distortions from policy interventions. Rather than tinker with badly designed rules, it is far more important to rewrite the rules
so that markets lead to progressive and productive outcomes in which the benefits of economic growth and improving technology are
broadly shared
This book examines five broad areas where the rules now in place tend to redistribute income upward and where alternative rules
can lead to more equitable outcomes and a more efficient market:
Macroeconomic policies determining levels of employment and output. Financial regulation and the structure of financial markets.
Patent and copyright monopolies and alternative mechanisms for financing innovation and creative work. Pay of chief executive
officers (CEOs) and corporate governance structures. Protections for highly paid professionals, such as doctors and lawyers.
In each of these areas, it is possible to identify policy choices that have engineered the upward redistribution of the last four
decades.
In the case of macroeconomic policy, the United States and other wealthy countries have explicitly adopted policies that focus
on maintaining low rates of inflation. Central banks are quick to raise interest rates at the first sign of rising inflation and
sometimes even before. Higher interest rates slow inflation by reducing demand, thereby reducing job growth, and reduced job growth
weakens workers' bargaining power and puts downward pressure on wages. In other words, the commitment to an anti-inflation policy
is a commitment by the government, acting through central banks, to keep wages down. It should not be surprising that this policy
has the effect of redistributing income upward.
The changing structure of financial regulation and financial markets has also been an important factor in redistributing income
upward. This is a case where an industry has undergone very rapid change as a result of technological innovation. Information technology
has hugely reduced the cost of financial transactions and allowed for the development of an array of derivative instruments that
would have been unimaginable four decades ago. Rather than modernizing regulation to ensure that these technologies allow the financial
sector to better serve the productive economy, the United States and other countries have largely structured regulations to allow
a tiny group of bankers and hedge fund and private equity fund managers to become incredibly rich.
This changed structure of regulation over the last four decades was not "deregulation," as is often claimed. Almost no proponent
of deregulation argued against the bailouts that saved Wall Street in the financial crisis or against the elimination of government
deposit insurance that is an essential part of a stable banking system. Rather, they advocated a system in which the rules restricting
their ability to profit were eliminated, while the insurance provided by the Federal Reserve Board, the Federal Deposit Insurance
Corporation, and other arms of the government were left in place. The position of "deregulators" effectively amounted to arguing
that they should not have to pay for the insurance they were receiving.
The third area in which the rules have been written to ensure an upward redistribution is patent and copyright protection. Over
the last four decades these protections have been made stronger and longer. In the case of both patent and copyright, the duration
of the monopoly period has been extended. In addition, these monopolies have been applied to new areas. Patents can now be applied
to life forms, business methods, and software. Copyrights have been extended to cover digitally produced material as well as the
internet. Penalties for infringement have been increased and the United States has vigorously pursued their application in other
countries through trade agreements and diplomatic pressure.
Government-granted monopolies are not facts of nature, and there are alternative mechanisms for financing innovation and creative
work. Direct government funding, as opposed to government granted monopolies, is one obvious alternative. For example, the government
spends more than $30 billion a year on biomedical research through the National Institutes of Health - money that all parties agree
is very well spent. There are also other possible mechanisms. It is likely that these alternatives are more efficient than the current
patent and copyright system, in large part because they would be more market-oriented. And, they would likely lead to less upward
redistribution than the current system.
The CEOs who are paid tens of millions a year would like the public to think that the market is simply compensating them for their
extraordinary skills. A more realistic story is that a broken corporate governance process gives corporate boards of directors -
the people who largely determine CEO pay -little incentive to hold down pay. Directors are more closely tied to top management than
to the shareholders they are supposed to represent, and their positions are lucrative, usually paying six figures for very part-time
work. Directors are almost never voted out by shareholders for their lack of attention to the job or for incompetence.
The market discipline that holds down the pay of ordinary workers does not apply to CEOs, since their friends determine their
pay. And a director has little incentive to pick a fight with fellow directors or top management by asking a simple question like,
"Can we get a CEO just as good for half the pay?" This privilege matters not just for CEOs; it has the spillover effect of raising
the pay of other top managers in the corporate sector and putting upward pressure on the salaries of top management in universities,
hospitals, private charities, and other nonprofits.
Reformed corporate governance structures could empower shareholders to contain the pay of their top-level employees. Suppose directors
could count on boosts in their own pay if they cut the pay of top management without hurting profitability, With this sort of policy
change, CEOs and top management might start to experience some of the downward wage pressure that existing policies have made routine
for typical workers.
This is very much not a story of the natural workings of the market. Corporations are a legal entity created by the government,
which also sets the rules of corporate governance. Current law includes a lengthy set of restrictions on corporate governance practices.
It is easy to envision rules which would make it less likely that CEOs earn such outlandish paychecks by making it easier for shareholders
to curb excessive pay.
Finally, government policies strongly promote the upward redistribution of income for highly paid professionals by protecting
them from competition. To protect physicians and specialists, we restrict the ability of nurse practitioners or physician assistants
to perform tasks for which they are entirely competent. We require lawyers for work that paralegals are capable of completing. While
trade agreements go far to remove any obstacle that might protect an autoworker in the United States from competition with a low-paid
factory worker in Mexico or China, they do little or nothing to reduce the barriers that protect doctors, dentists, and lawyers from
the same sort of competition. To practice medicine in the United States, it is still necessary to complete a residency program here,
as though there were no other way for a person to become a competent doctor.
We also have done little to foster medical travel. This could lead to enormous benefits to patients and the economy, since many
high cost medical procedures can be performed at a fifth or even one-tenth the U.S. price in top quality medical facilities elsewhere
in the world. In this context, it is not surprising that the median pay of physicians is over $250,000 a year and some areas of specialization
earn close to twice this amount. In the case of physicians alone, if pay were reduced to West European-levels the savings would be
close to $100 billion a year (@ 0.6 percent of GDP).
Changing the rules in these five areas could reduce much and possibly all of the upward redistribution of the last four decades.
But changing the rules does not mean using government intervention to curb the market. It means restructuring the market to produce
different outcomes. The purpose of this book is to show how.
[1] See also Weissman (2016), Iacono (2016), Worstall (2016), Lane (2016), and Zakaria (2016).
[2] As explained in the next chapter, this view is not exactly correct, but it's what you're supposed to believe if you adhere
to the mainstream economic view.
[3] There can be modest changes in employment through a supply-side effect. If the trade deal increases the efficiency of the
economy, then the marginal product of labor should rise, leading to a higher real wage, which in turn should induce some people to
choose work over leisure. So the trade deal results in more people choosing to work, not an increased demand for labor.
[4] For those worried about brain drain from developing countries, there is an easy fix. Economists like to talk about taxing
the winners, in this case developing country professionals and rich country consumers, to compensate the losers, which would be the
home countries of the migrating professionals. We could tax a portion of the professionals' pay to allow their home countries to
train two or three professionals for every one that came to the United States. This is a classic win-win from trade.
[5] The loss of manufacturing jobs also reduced the wages of less-educated workers (those without college degrees) more generally.
The displaced manufacturing workers crowded into retail and other service sectors, putting downward pressure on wages there.
[6] As a technical matter, the Federal Reserve Bank of New York is a private bank. It is owned by the banks that are members
of the Federal Reserve System in the New York District.
"Markets are never just given. Neither God nor nature hands us a worked-out set of rules determining the way property relations
are defined, contracts are enforced, or macroeconomic policy is implemented. These matters are determined by policy choices. The
elites have written these rules to redistribute income upward. Needless to say, they are not eager to have the rules rewritten
which means they have no interest in even having them discussed."
======================================================
It is one of those remarkable hypocrisies that free "unregulated" trade requires deals of thousands of pages .
but if these deals weren't so carefully structured to help the 1%, support would melt like snowmen in Fresno on a July day
Or check your local indy, or one of those that take orders (I refrain from naming my favorite co-op in Chicago, and anyway
I admit there are others). Nice to support those when you can.
Almost no proponent of deregulation argued against the bailouts that saved Wall Street in the financial crisis or against
the elimination of government deposit insurance that is an essential part of a stable banking system.
Actually I believe there were some Republicans who denounced the Wall Street bailout as a violation of capitalist principles.
My state's Mark Sanford comes to mind. It was the Dems at the urging of Pelosi who saved the bailout. On the other hand many of
my local politicians are big on "public/private" partnerships which would be a violation of laissez-faire that they approve. Perhaps
it was simply that there are no giant banks headquartered in SC.
The truth is there is no coherent intellectual basis to how the US economy is currently run. It's all about power and what
you can do with it. Which is to say it is our politics, above all, that is broken.
"That is how the economics is supposed to work. In the standard theory, general shortages of demand are not a problem.[2]
Economists have traditionally assumed that economies tended toward full employment. The basic economic constraint was a lack of
supply. The problem was that we couldn't produce enough goods and services, not that we were producing too much and couldn't find
anyone to buy them. In fact, this is why all the standard models used to analyze trade agreements like the Trans-Pacific Partnership
assume trade doesn't affect total employment.[3] Economies adjust so that shortages of demand are not a problem."
Unbelievable.
By the 1920s they realised the system produced so much stuff that extensive advertising was needed to shift it all.
One hundred year's later, we might take this on board.
What is the global advertising budget?
The amount necessary to shift all the crap the system produces today.
We need to move on from Milton Freidman's ideas and discover what trade in a globalized world is really about.
We are still under the influence of Milton Freidman's ideas of a globalised free trade world.
These ideas came from Milton Freidman's imagination where he saw the ideal as small state, raw capitalism and thought the public
sector should be sold off and entitlement programs whittled down until everything must be purchased through the private sector.
"You are free to spend your money as you choose"
Not mentioning its other meaning:
"No money, no freedom"
After Milton Freedman's "shock therapy" in Russia, people were left with so little money they couldn't afford to eat and starved
to death. In Greece people cannot afford even bread today.
But this is economic liberalism, the economy comes first.
Milton Freidman used his imagination to work out what small state, raw capitalism looked like whereas he could have looked
at it in reality through history books of the 18th and 19th centuries where it had already existed.
The Classical Economists studied it and were able to see its problems first hand and noted the detrimental effects of the rentier
class on the economy. They were constantly looking to get "unearned" income from doing nothing; sucking purchasing power out of
the economy and bleeding it dry.
Adam Smith observed:
"The Labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury.
The Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions
from the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every
savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers."
Adam Smith saw landlords, usurers (bankers) and Government taxes as equally parasitic, all raising the cost of doing business.
He sees the lazy people at the top living off "unearned" income from their land and capital.
He sees the trickle up of Capitalism:
1) Those with excess capital collect rent and interest.
2) Those with insufficient capital pay rent and interest.
He differentiates between "earned" and "unearned" income.
Today we encourage a new rentier class of BTL landlords who look to extract the "earned" income of generation rent for "unearned"
income. If you have a large BTL portfolio you can become a true rentier, do nothing productive at all and live off "unearned"
income extracted from generation rent, the true capitalist parasite. (UK)
The Classical Economists realised capitalism has two sides, the productive side where "earned" income is generated and the
unproductive, parasitic, rentier side where "unearned" income is generated.
You should tax "unearned" income to discourage the parasitic side of capitalism.
You shouldn't tax "earned" income to encourage the productive side of capitalism.
You should provide low cost housing, education and services to create a low cost of living, giving a low minimum wage making
you globally competitive. This is to be funded by taxes on "unearned" income.
The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of
housing, healthcare and student loan repayments.
These all have to be covered by wages and US businesses are now squealing about the high minimum wage.
That's Milton Freidman's imagined small state, raw capitalism.
What he imagined bears little resemblance to the reality the Classical Economists saw firsthand.
We need to move on from Milton Freidman fantasy land.
Small state, raw capitalism as observed by Adam Smith:
"But the rate of profit does not, like rent and wages, rise with the prosperity and fall with the declension of the society.
On the contrary, it is naturally low in rich and high in poor countries, and it is always highest in the countries which are going
fastest to ruin."
When rates of profit are high, capitalism is cannibalising itself by:
1) Not engaging in long term investment for the future
2) Paying insufficient wages to maintain demand for its products and services
In the 18th Century they would have understood today's problems with growth and demand.
Luckily Jeff Bezos didn't inhabit Milton Freidman fantasy land.
He re-invested almost everything to turn Amazon onto the global behemoth it is today.
' The commitment to an anti-inflation policy is a commitment by the government, acting through central banks, to keep wages
down. '
This is strikingly silly. Insert the word 'nominal' before wages, and it's not a howler anymore.
Anti-inflation policy in fact has little influence on real wages (the variable of concern, not nominal wages). But it has a
lot to do with preventing the social chaos of constantly rising prices, strikes for higher wages, inability of first-time home
buyers to borrow at affordable rates, and so on.
Inflationism is greasy kid stuff not to mention a brazen fraud on the public.
As one who walked the corridors of power in a very modest capacity in my country in the early to mid 1990s, can I just say
that people with power or influence then were aware that globalisation would create winners and losers. I recall the consensus
of those I knew then was that steps would need to be taken to compensate the losers. The tragedy is that these steps were never
taken, or, if they were, only to a wholly inadequate degree.
The always elusive referents for cost, price and value the flip-side of social chaos would seem the entropic degradation of
wasted lives, excluded from participating {either-OR} abandoned as irredeemable
Higher interest rates slow inflation by reducing demand, thereby reducing job growth, and reduced job growth weakens workers'
bargaining power and puts downward pressure on wages.
Your assertion that anti-inflation policy has little influence on real wages does not address Baker's statement about the mechanism
by which he says it does. Given an argument between two people, one of whom cites a mechanism he is probably prepared to document
with numbers and one of whom merely declares his belief, which are people more likely to trust? Granted always, they should go
look for the numbers before they fully accept the statement, his credibility is currently higher than yours on this subject.
By contrast, since the 1970s real wages stalled, while interest rates round-tripped back to 2 percent.
Over nearly seven decades, the correlation is quite the opposite from that made up claimed by Dean Bonkers.
Namely, real wages soared under a regime of steadily rising nominal interest rates.
Since my original reply has disappeared in limbo, I will merely note that numbers are probably even crunchier when you don't
generalize across a span of decades: first there was A, then there was B, nothing else happened. It's a sure way to obscure patterns.
And Jim, please quit the ad hominem stuff! It's ugly and needless. If you really have an argument you don't need it, and if
you don't you don't gain by it. You know perfectly well he's not making things up and he's not bonkers. When you say stuff like
that, the obvious presumption is that you just don't want to consider his arguments because they lead somewhere you don't want
to go.
Perhaps I am missing the point being made, but if you are suggesting that increases in real wages in the 1945-1975 period caused
inflation, why not provide the data on inflation which would in fact show that inflation was essentially tame for 20 years in
this period (1952-1972, with a slight hiccup in 1969-1971), thereby contradicting your point? And if you are suggesting that Fed
increases in interest rate have not resulted in suppression of wages you will have to demonstrate that using analysis that takes
into account the lag in time between increase in rate and transmission to wages, and in that case would you not also use the Fed
Funds Rate itself as a variable?
Bulltwacky, they have been globalizing wages downwards while globalizing housing prices upwards!
Every time some stupid and moronic newsy floozy on one of the CorporateNonMedia outlets claims housing purchases may be going
down because consumer confidence is plummeting, they CHOOSE to ignore the foreign buyers of said houses!
Did I get this right? Full employment is an assumed boundary condition and so is fixed balance of trade? If the model is to
work as advertised then the boundary conditions must be hard wired to be true, right?
If the top 25 hedge fund managers saved around $5 billion per year in being taxed on their income at capital gains rate (carried
interest ruling in tax code - utterly corrupt), then think of the amount that is being robbed from the tax base when one considers
ALL the hedge fund people, and ALL the private equity types (who also do this), a conservative amount of tax revenues remitted
should be around $100 billion per year!
Paul Krugman's recent posts have been most peculiar. Several have looked uncomfortably like special
pleading for political figures he likes, notably Hillary Clinton. He has, in my judgement, stooped
rather far down in attacking people well below him in the public relations food chain
Perhaps the most egregious and clearest cut case is his refusal to address the substance of a
completely legitimate, well-documented article by David Dayen outing Krugman, and to a lesser degree,
his fellow traveler Mike Konczal, in abjectly misrepresenting Sanders' financial reform proposals
The Krugman that was early to stand up to the Iraq War, who was incisive before and during the
crisis has been very much in absence since Obama took office. It's hard to understand the loss of
intellectual independence. That may not make Krugman any worse than other Democratic party apparatchiks,
but he continues to believe he is other than that, and the lashing out at Dayen looks like a wounded
denial of his current role. Krugman and Konczal need to be seen as what they are: part of the Vichy
Left brand cover for the Democratic party messaging apparatus. Krugman, sadly, has chosen to diminish
himself for a not very worthy cause.
"The Austerity Tax " was instituted by the GOP as soon as the Brown Guy became president. 8 years
earlier, the same GOP pushed a huge Tax cut as Greenspan worried that the surplus was too big.
The GOP can always be counted on to put party before country. Good riddance.
By 2015, federal spending was 454% higher and the national debt was 20 times greater than
when Pres. Reagan took office in 1981. The result: Real GDP gained 153% and jobs increased
by more than 50 million from 1981.
In total, our debt is now 875 times greater than in 1933 at the bottom of the Great Depression.
Were we better off then?
And no, we are not like Greece because we print our money and all our debt is in U.S. dollars.
As former Fed chairman Alan Greenspan said: "The U.S. can pay any debt it has because we can
always print money to do that. So there is zero probability of default."
The real limit on printing money and increasing the debt/budget deficit is high inflation
which is well controlled by increasing interest rates as the Fed did in 1980 when it cut inflation
from 14.6% to 1.6% in 6 years. Interest on the debt is now 1.2% of GDP (national income) and
has never exceeded 2% during this century.
If Greece is in danger to go under - there are all these other nice Europeans - who save the
Country...
BUT if the almighty US of A is threatening to go under -(like in 2008) - the whole world is
in danger to go under with it too... so we desperately need this Greenspan dude - with his wonderful
printing machine - and if the American people don't trust him -(because the printing machine seemed
to have been not very effective in 2008) - let's tell the people there is always TRUMP - who will
put his name in Gold ON IT -
Oh ja!! - let's get the Greenspan dude out of retirement to print US... some!!
And especially for the people - who really need the dough - like all these depressed workers
-
Let's call up Greenspan and tell him to print RIGHT AWAY - and not waisting any time anymore -
or America will be called 'TRUMP' forever!!
The Fed and other central banks have been demonstrating that they do not have the ability to print
money. Massive QE and record low interest rates have not resulted in the lending by commercial
banks which actually expands the money supply. In practice inflation and expansion of the money
supply have been brought about in the US and other advanced countries in most cases (excluding
the commodity shocks of the 70's) by government spending, especially in wars (or after them as
in Germany in 1922). And when the government spends it obviously increases debt.
It's past time to be relying on the supposed ability of central banks to "print money". The
assumptions involved in the monetary "theory" about this are just wrong.
If the Fed can control inflation, why did it let inflation increase to 14.6% in the first place?
It raised rates continuously from 1977 to 1980 to historic record levels as inflation increased
to its peak. As Dean has pointed out before, inflation began to fall rapidly in early 1980 when
oil price stabilized, not when the Fed raised rates. The squabbling about the true value of NAIRU
is pointless since the Fed has never demonstrated an ability to control inflation.
Inflation increased due to an external shock - the quadrupling of oil and thus food prices. Once
they stopped rising, once prices had permeated through the economy, price rises would have tapered
off without the horrid recession the Fed imposed on the American people.
and seriously - let's raise interest rates 21 percent for everybody who invests her or his money
in speculative assets -(like stocks or downtown SF apartments) - and in exchange let's lower the
interest rates for every credit card holder down to -1 percent.
How does that sound?
-(should be a piece of cake for Dame Yellen!)
As long as you understand - that it would be really a great idea if the low interest rates
would really help 'the people' -(Credit Card holders) - and some high interest rates would help
'the people' too -(all these retirees who would love to get 21 percent from their savings accounts)
- that's OK.
It is nonsense to claim that shrinking national debt is harmful or that the economy only does
well when it is growing. The US debt shrank from its WWII peak in 1947 of 120% of GDP down to
31% in 1975 while the economy was doing very well. There was plenty of spending on things like
infrastructure and housing as well as the military. The British debt shrank from over 250% of
GDP at the end of the Napoleonic wars down to 30% at the start of WWI - this was the period of
British world economic domination.
The shrinkage of debt/GDP was not brought about by running surpluses, it was because of nominal
GDP growth. And that growth was not just inflation - inflation in Britain (and the US) during
the 19th century was generally low. Obviously tax rates were highly progressive during and after
WW II in the US (and in Britain also, whose debt also shrank).
The lesson is that debts can be controlled with appropriate tax rates (if it is important to
do so) and that such rates do not impair growth. There is an enormous amount of foolish economic
discourse which deliberately ignores the basic facts about taxes, debt and economic growth.
"It is nonsense to claim that shrinking national debt is harmful."
During the 1920s, we had a budget surplus every year and 4 separate recessions during that
decade with the last one causing the worst depression in a century.
We had our highest debt-to-GDP ratio after WW II then increased the federal debt 82% and spending
725% over the next quarter century from 1948, producing our greatest prosperity ever: a 168% gain
in Real GDP and a 70% increase in jobs.
It is nonsense to ignore the facts that are undeniable.
When I refer to "national debt" I mean debt/GDP. There is no need to run surpluses to shrink this,
but there is no reason to think that small surpluses are harmful. Spending can be high, as it
was in the post-WWII period, without running large deficits, provided tax rates are adequate.
Surpluses occur - or used to - when the economy is booming and revenues increase and also expenditures
for unemployment relief, etc. are low. It is a fact that booms tend to be followed by recessions
- they don't go on forever. So the correlation you refer to is an inevitable result of the cyclical
nature of economies.
The recessions of 1957, 1960, 1970 and 2001 were all immediately preceded by budget surpluses.
The Great Depression was preceded by a decade of record budget surpluses and the "Roosevelt Recession"
of 1937-38 was caused by FDR's virtual balancing of the federal budget (a deficit of 0.1% of GDP
in fiscal year 1938) while the economy was still very weak.
whitehouse.gov/omb/budget/hist...
Keynes analyzed this situation and his conclusion was unequivocal: "a change-over from a policy
of Government borrowing to the opposite policy of providing sinking funds (for paying off the
principal of a debt) is capable of causing a severe contraction of effective demand." The General
Theory of Employment, Interes, and Money p. 95.
We continue to see a steady drumbeat of news stories and opinion pieces about the problem of men,
and especially less-educated men, in the modern economy. The pieces always start with the fact that
large numbers of prime-age men (ages 25–54) have dropped out of the labor force. The latest entry
is a New York Times column * by Susan Chira that highlighted recent research showing that
a large
percentage of men who are not in the labor force are in poor health and frequent users of pain medication.
... ... ...
Undoubtedly many are, although the extent to which these problems are the result of their unemployment
or a cause will often not be clear. Nonetheless, steps that can improve public health will be a good
thing, but the better place to look to solve the problem of unemployment is Washington.
Men Who Don't Work: When Did Economists Stop Being Wrong About the Economy?
By Cherrie Bucknor and Dean Baker
... ... ...
Since there is a drop in prime-age EPOPs for all groups, this would seem to suggest that
the main problem is a lack of demand and not some new difficulty that some relatively narrow
group of workers has in dealing with the labor market. Before going through these trends, it
is worth making an additional point; this decline in EPOPs was not expected before it happened.
For example, the Congressional Budget Office (CBO) in 2001 projected that EPOPs would continue
to rise from their 2000 peaks. It projected that the potential labor force would grow at an
average annual rate of 1.1 percent over the next decade, implying that it would be 11.6 percent
larger in 2010 than in 2000. This growth was driven in part by population growth, but also
by the expectation that the trend of rising EPOPs for women would continue.
In fact, the labor force in 2010 was just 7.9 percent larger than in 2000. This 3.7 percentage
point difference corresponds to a labor force that was 5 million smaller in 2010 than CBO had
projected for that year in 2001. (It is worth noting that the CBO projections were not an outlier.
CBO tries to ensure that its projections lie close to the middle of the pack for economic forecasters.)
If the argument that structural factors have led to a permanent lowering of prime-age EPOPs
is right, as opposed to just weakness in demand reducing employment, then the 2001 projections
for the growth of the potential labor force were clearly wrong. Of course official projections
have often proven wrong, but this should give us caution about our ability to accurately assess
the structural determinants of employment rates. After all, it's not obvious that our knowledge
of the economy is very much better in 2016 than it was in 2001.
The figure below shows the employment to population ratios for prime-age workers by gender
and education levels.
[Figure]
The ratios for 2000 are set at 100 to allow for a clear view of the drop off from this
peak. As noted, all groups see some drop from this peak, with the smallest drop for college-educated
women, followed by college-educated men. The drop for prime-age workers with some college is
considerably sharper, with the drop for women being somewhat larger than the drop for men.
The drop for workers with a high school degree or less is even greater, but here also the drop
is larger for women than for men.
The decline in EPOPs for prime-age men with a high school
degree or less is 7.8 percent, while the drop for women is 14.0 percent. Given the much sharper
drop in EPOPs for less-educated women, it is difficult to understand why the policy debate
has focused on men leaving the labor force.
The more fundamental issue is that it is difficult to explain a drop in EPOPS for all
workers, regardless of education levels, as being a problem of workers lacking skills or a
desire to work. This looks pretty clearly like a story of weak demand. In other words, the
problem is not them; it is us, where "us" is the people who make economic policy.
[1] This discussion focuses on EPOPs rather than labor force participation rates (LFPR)
because the latter has likely been affected by the tightening of rules for getting unemployment
insurance. It is widely recognized that many unemployed workers drop out of the labor force
when they are no longer eligible for unemployment benefits. With many states having instituted
stricter rules on benefits over this period, we would have expected a decline in LFPR even
with no changes in the workforce or the economy.
JohnH -> anne...
, -1
Economist should also be looking
at labor participation rates in other industrial growth which are experiencing the same economic
stagnation as the US. In the UK and Japan EPOPs are near record highs, while US rates are near
40 year lows. Why such a disparity?
My hunch is that economists are trying to find ways
to explain away the low EPOP rates in the US, because the crux of the problem goes back to
investor friendly/worker hostile policies that they have advocated for years--trade policy
and trickle down monetary policy.
[IMO, Noah muddles the message, but it is a important
topic that gets muddled by everyone else too. Economists with
a financial bent had no problem apparently with the bank
mergers that started in the seventies and everyone loved the
auto maker mergers of the first half of the 2oth century.
Efficiency itself is an amorphous term. Mergers can be an
efficient use of capital since they deliver lower competition
and higher profits. JP Morgan did not want to be in a
industry that he could not dominate. Efficiency is different
for a fish than a capital owner. Mergers are good for
regulatory capture and ineffishient for fish. Mergers are
inefficient for workers that want higher wages or the
unemployed that want jobs. Market power and regulatory
capture can be efficient vehicles for taking advantage of
trade agreements to offshore production and increase returns
to capital all while lowering both prices and quality as well
as reducing domestic wages. Efficiency is in the eyeballs of
the beholder especially if they make good soup.]
Reply
Tuesday,
reason
-> RC AKA Darryl, Ron...
,
October 25, 2016 at 06:58 AM
But Keynes was saying something quite different - he wasn't
actually talking about policy but about economics (the task
of economists). He was saying that understanding short term
fluctuations was as important as predicting the long term.
Still relevant in this age of irrelevant general equilibrium
models.
I always looked at Keynes as a fellow traveler, one who wrote
obtusely at times for the express purpose of couching his
meaning in sweetened platitudes that at a second glance were
drenched in cynicism and sarcasm, at least when it came to
his opinions of economists and politicians and the capital
owning class that they both served.
OK, "obtusely" was a poor choice of words, at least with
regards to Keynes. Keynes realized WWI was a big mistake, the
Treaty at Versailles was an abomination with regards to
German restitution, and he was accused of anti-Semitism just
for being honest about Jewish elites in the Weimar Republic.
It was not that Keynes was insensitive, unpatriotic, or
anti-Semitic, but that Keynes was just correct on all counts.
JohnH -> RC AKA Darryl, Ron...
, -1
This is a good example of economists working in lock step
with investors: "Economists with a financial bent had no
problem apparently with the bank mergers that started in the
seventies and everyone loved the auto maker mergers of the
first half of the 2oth century."
I think it has been
questioned for decades whether increased efficiency in
banking actually materialized in the wake of industry
consolidation. Local market oligopolies may well have
generated higher profits and the appearance of more
efficiency. And concentration certainly facilitated collusion
as we have seen in many markets, including LIBOR.
What concentration indisputably caused was a dramatic
increase in the political power of the Wall Street banking
cartel, which owns not only the Federal Reserve but also a
lot of powerful politicians...a subject on which 'liberal'
economists are generally agnostic, since politics is outside
their silo.
The article ignored the effect of mergers on supplier
relationships, often one of near monopsony (oligopsony?). DOJ
seems to be focused on unit pricing to consumers(though
perhaps not with cable) to the point that most managements
understand that they have free rein to squeeze suppliers. And
so they merge to do so.
It may be that more contribution to increasing margins is
from purchase prices than selling prices.
"... My impression is that Trump_vs_deep_state is more about dissatisfaction of the Republican base with the Republican brass (which fully endorsed neoliberal globalization), the phenomenon somewhat similar to Sanders. ..."
"... Working class and lower middle class essentially abandoned DemoRats (Clinton democrats) after so many years of betrayal and "they have nowhere to go" attitude. ..."
"... Now they try to forge the alliance of highly paid professionals who benefitted from globalization("creative class"), financial speculators and minorities. Which does not look like a stable coalition to me. ..."
"... In other words both Parties are now split and have two mini-parties inside. I am not sure that Sanders part of Democratic party would support Hillary. The wounds caused by DNC betrayal and double dealing are still too fresh. ..."
"... We have something like what Marxists call "revolutionary situation" when the elite loses control of "peons". And existence of Internet made MSM propaganda far less effective that it would be otherwise. That's why they resort to war propaganda tricks. ..."
"That's not untrue, but it seems to me to be getting worse."
Because of economic stagnation and anxiety among lower class Republicans. Trump blames immigration
and trade unlike traditional elite Republicans. These are economic issues.
Trump supporters no longer believe or trust the Republican elite who they see as corrupt
which is partly true. They've been backing Nixon, Reagan, Bush etc and things are just getting
worse. They've been played.
Granted it's complicated and partly they see their side as losing and so are doubling down
on the conservatism, racism, sexism etc. But Trump *brags* that he was against the Iraq war.
That's not an elite Republican opinion.
likbez -> DrDick... , -1
My impression is that Trump_vs_deep_state is more about dissatisfaction of the Republican base with the Republican
brass (which fully endorsed neoliberal globalization), the phenomenon somewhat similar to Sanders.
Working class and lower middle class essentially abandoned DemoRats (Clinton democrats) after
so many years of betrayal and "they have nowhere to go" attitude.
Looks like they have found were to go this election cycle and this loss of the base is probably
was the biggest surprise for neoliberal Democrats.
Now they try to forge the alliance of highly paid professionals who benefitted from globalization("creative
class"), financial speculators and minorities. Which does not look like a stable coalition to
me.
Some data suggest that among unions which endorsed Hillary 3 out of 4 members will vote against
her. And that are data from union brass. Lower middle class might also demonstrate the same pattern
this election cycle.
In other words both Parties are now split and have two mini-parties inside. I am not sure that
Sanders part of Democratic party would support Hillary. The wounds caused by DNC betrayal and
double dealing are still too fresh.
We have something like what Marxists call "revolutionary situation" when the elite loses control
of "peons". And existence of Internet made MSM propaganda far less effective that it would be
otherwise. That's why they resort to war propaganda tricks.
"... Second, it is important to note that the size of the projected shortfall in the Medicare Part A program (the portion funded by its own tax) has fallen sharply in the Obama years. The shortfall for the 75-year planning horizon was projected at 3.53 percentage points of payroll in 2009, the first year of the Obama presidency. It has now fallen by 80 percent to just 0.73 percent of payroll. This reduction is due to a sharp slowdown in the projected growth of health care costs. Some of this predates the Affordable Care Act (ACA), but some of the slowdown is undoubtedly attributable to the impact of the ACA. ..."
"... On Chris Wallace's question, we know now from Hillary Clinton's Wall Street speeches that her plan on debt and entitlements is to support the elitist Bowles-Simpson project, the centerpiece of which was raising the age for Medicare and Social Security. Who do you think Hillary is lying to about benefits - everyday Americans like you (who she deplores) or her Wall Street backers? ..."
"... Japan has been doing this deficit spending thing for 20+ years and borrowed an enormous amount of money. It has not solved anything. Growth continues to be elusive. Progressive economists keep whistling by the graveyard. And the conservatives just want to cut taxes. Both groups look like medieval doctors who prescribe bloodletting no matter what the illness is. Oh, the dismal science! ..."
"... She proudly proclaimed that her programs would not add to the national debt implying no increase in deficit spending. She ridiculed Trump because his tax plan would add significantly to the deficit and national debt. Clearly she wants to portray an image of fiscal responsibility and Wallace's question allowed her to go down that path. ..."
At the debate last night, moderator Chris Wallace challenged both candidates on the question of cutting
Social Security and Medicare. The implication is that the country is threatened by the prospect of
out of control government deficits. The question was misguided on several grounds.
First, as a matter of law the Social Security program can only spend money that is in the trust
fund. This means that, unless Congress changes the law, the program can never be a cause of runaway
deficits.
Second, it is important to note that the
size of the projected shortfall in the Medicare Part A program (the portion funded by its own
tax) has fallen sharply in the Obama years. The shortfall for the 75-year planning horizon was projected
at 3.53 percentage points of payroll in 2009, the first year of the Obama presidency. It has now
fallen by 80 percent to just 0.73 percent of payroll. This reduction is due to a sharp slowdown in
the projected growth of health care costs. Some of this predates the Affordable Care Act (ACA), but
some of the slowdown is undoubtedly attributable to the impact of the ACA.
Anyhow, the implication of Wallace's question, that these programs are somehow out of control
and require some near term fix, is not supported by the data. We will have to make changes to maintain
full funding for Social Security, but there is no urgency to this issue.
On the more general point of deficits, the country's problem since the crash in 2008 has been
deficits that are too small, not too large. The main factor holding back the economy has been a lack
of demand, not a lack of supply. Deficits create more demand, either directly through government
spending or indirectly through increased consumption. If we had larger deficits in recent years we
would have seen more GDP, more jobs, and, due to a tighter labor market, higher wages.
The problem of too small deficits is not just a short-term issue. A smaller economy means less
investment in new plant and equipment and research. This reduces the economy's capacity in the future.
In the same vein, high rates of unemployment cause people to permanently drop out of the labor force,
reducing our future labor supply if these people become unemployable. (Having unemployed parents
is also very bad news for the kids who will have worse life prospects.)
The Congressional Budget Office now puts potential GDP at about 10 percent lower for 2016 than
its projection from 2008, before the recession. Much of this drop is due the decision to run smaller
deficits and prevent the economy from reaching its potential level of output. We can think of this
loss of potential output as a "austerity tax." It currently is at close to $2 trillion a year or
more than $6,000 for every person in the country.
It is unfortunate that Wallace chose to devote valuable debate time to a non-problem while ignoring
the huge problem of needless unemployment and lost output due to government deficits that are too
small.
On Chris Wallace's question, we know now from Hillary Clinton's Wall Street speeches that her
plan on debt and entitlements is to support the elitist Bowles-Simpson project, the centerpiece
of which was raising the age for Medicare and Social Security. Who do you think Hillary is lying
to about benefits - everyday Americans like you (who she deplores) or her Wall Street backers?
and the nerve of this Wallace dude and the nerve of all these other... so called journalist on
this show?
Wallace even didn't notice - the whole time!! - that it was Alec Baldwin -(and not Trump) -
who answered his silly questions - and then the nerve of the so called 'media' to praise Wallace
- that he didn't notice that Alec Baldwin answered his questions.
I am perfectly fine with running deficits to get out of a recession and compensate for temporary
shortfall in private demand. Isn't this the original idea behind deficit spending? But we are
7 years out of a recession.
Japan has been doing this deficit spending thing for 20+ years and borrowed an enormous
amount of money. It has not solved anything. Growth continues to be elusive. Progressive economists
keep whistling by the graveyard. And the conservatives just want to cut taxes. Both groups look
like medieval doctors who prescribe bloodletting no matter what the illness is. Oh, the dismal
science!
The Japanese yen is severely overvalued and therefore Japan's exports no longer can sustain GDP
growth as they did in the past. Combined with Japan's anemic consumer demand, there is nothing
but government spending to spur growth. If Japan now cut its deficit spending, its economy would
collapse.
My point is that American health care is profit driven. The private health insurer companies drive
up the costs in all sectors of health care - whether that be for a simple phlebotomy test or a
urinary catheter or...., or for a visit to a cardiologist after initial treatment for angina in
an emergency dep't.
Health care should be considered a basic human right in any country and not one that is affected
by the amount a person can pay - or the quality of private insurance a person can afford. I worked
in the field for 33 years before retiring and what I saw was, in many cases, very sad and unfortunate.
Those who had money went on with their lives and those who did not often simply died. That is
no way to manage any society.
Dear Michael,I am in TOTALl agreement with you but, as a very satisfied Kaiser Permanente member,
I am a little defensive about maligning the term "HMO" which, I believe, is a beacon of hope for
"Best Practices" in our current profit driven health delivery mess. I am a retired RN who watched
first hand as the system became ruled by consolidation and greed. I remember in the 1980s being
told that consolidation would bring cost down. What a joke that was. So I am working for single
payer, Medicare for all. Carol
"It is unfortunate that Wallace chose to devote valuable debate time to a
non-problem while ignoring the huge problem of needless unemployment
and lost output due to government deficits that are too small." -D. Baker
We should have a Full Employment Fiscal Policy coupled with a Federal Job Guaranty would put an
end to this discussion. Funding the entitlements are not an issue - although the law may need
to be revised - as the government can issue its currency without a problem - inflation being the
constraint. (The increase in demand for apartments, cable subscriptions, and shuffleboards are
unlikely to trigger uncontrolled inflation.)
Dean thinks the debt is not a problem but the majority of voters Clinton was trying to reach probably
do think it is a problem. She proudly proclaimed that her programs would not add to the national
debt implying no increase in deficit spending. She ridiculed Trump because his tax plan would
add significantly to the deficit and national debt. Clearly she wants to portray an image of fiscal
responsibility and Wallace's question allowed her to go down that path.
I did not say that she did not propose to increase spending - just that she would not increase
the debt because everything is "paid for". If everything is paid for by tax increases then there
is no near term stimulus to the overall economy. There may be long term benefits if the projects
are worthwhile but that will take years to surface. She also declined to defend the benefits of
fiscal stimulus after the financial crisis. People hear what they want to hear from these debates.
I think you are wrong about the near term benefits of taxing wealthy people and then using that
money for public spending. The propensity of the wealthy for spending is low and therefore if
you take some of their money and spend it it will be stimulative.
I am aware of this ptc argument but find it weak. I know plenty of "wealthy" couples who save
very little. Anyhow, even if there is some merit to the argument why not borrow now at almost
zero cost and ensure the maximum stimulus.
Another factor - public spending may not find its way into the lowest income levels of our
society. Infrastructure projects, for example, will enrich contractors and materials industries
as much or more than the individual workers. Also, they take a long time to get started as there
really is no such thing as shovel ready. Couple the protracted startup with higher taxes and you
get very little near term benefit.
This whole discussion is of course mute since running deficits does not crowd out investing. And
increasing the debt has no negative implication other then the political effects. The government
can print money and spend money. If it runs deficits it can keep interest rates low by buying
securities.
We need to stimulate DEMAND Now to get the economy revved up and the money flowing. Best way is
the change Social Security such that it doesn't kick in until the earner has made $10,000 (i.e.)
and account for that by lifting the cap accordingly such that 90% of all earned income is taxed:
just as it used to be when Reagan/?? fixed it. Just think what all that money would do in the
economy. It would not be used to by back stock or inflate golden parachutes. It would be immediately
spent. It would be DEMAND.
The $173 Trillion Austerity Tax in the Infinite Horizon
By Lara Merling and Dean Baker
The Peter Peterson-Washington Post deficit hawk gang keep
trying * to scare us into cutting Social Security and
Medicare. If we don't cut these programs now, then at some
point in the future we might have to cut these program or
RAISE TAXES.
There are many good reasons not to take the advice of the
deficit hawks, but the most immediate one is that our economy
is suffering from a deficit that is too small, not too large.
The point is straightforward, the economy needs more demand,
which we could get from larger budget deficits. More demand
would lead to more output and employment. It would also cause
firms to invest more, which would make us richer in the
future.
The flip side in this story is that because we have not
been investing as much as we would in a fully employed
economy, our potential level of output is lower today than if
we had remained near full employment since the downturn in
2008. The Congressional Budget Office estimates that
potential GDP in 2016 is down by 10.5 percent (almost $2.0
trillion) from the level it had projected for 2016 back in
2008, before the downturn.
This is real money, over $6,200 per person. But if we want
to have a little fun, we can use a tactic developed by the
deficit hawks. We can calculate the cost of austerity over
the infinite horizon. This is a simple story. We just assume
that we will never get back the potential GDP lost as a
result of the weak growth of the last eight years. Carrying
this the lost 10.5 percent of GDP out to the infinite future
and using a 2.9 percent real discount rate gives us $172.94
trillion in lost output. This is the size of the austerity
tax for all future time. It comes to more than $500,000 for
every person in the country.
By comparison, we can look at the projected Social
Security shortfall for the infinite horizon. According to the
most recent Social Security Trustees Report, ** this comes to
$32.1 trillion. (Almost two thirds of this occurs after the
75-year projection period.) Undoubtedly many deficit hawks
hope that people would be scared by this number. But compared
to the austerity tax imposed by the deficit hawks, it doesn't
look like a big deal.
That's explains vicious campaign by neoliberal MSM against Trump and swiping under the carpet all
criminal deeds of Clinton family. They feel the threat...
Notable quotes:
"... It should be remembered that fascism does not succeed in the real world as a crusade by race-obsessed lumpen. It succeeds when fascists are co-opted by capitalists, as was unambiguously the case in Nazi Germany and Italy. And big business supported fascism because it feared the alternatives: socialism and communism. ..."
"... That's because there is no more effective counter to class consciousness than race consciousness. That's one reason why, in my opinion, socialism hasn't done a better job of catching on in the United States. The contradictions between black and white labor formed a ready-made wedge. ..."
It should be remembered that fascism does not succeed in the real world as a crusade by
race-obsessed lumpen. It succeeds when fascists are co-opted by capitalists, as was unambiguously
the case in Nazi Germany and Italy. And big business supported fascism because it feared the alternatives:
socialism and communism.
That's because there is no more effective counter to class consciousness than race consciousness.
That's one reason why, in my opinion, socialism hasn't done a better job of catching on in the
United States. The contradictions between black and white labor formed a ready-made wedge.
The North's abhorrence at the spread of slavery into the American West before the Civil War
had more to do a desire to preserve these new realms for "free" labor-"free" in one context, from
the competition of slave labor-than egalitarian principle.[…]
There is more to Clintonism, I think, than simply playing the "identity politics" card to
screw Bernie Sanders or discombobulate the Trump campaign. "Identity politics" is near the core
of the Clintonian agenda as a bulwark against any class/populist upheaval that might threaten
her brand of billionaire-friendly liberalism.
In other words it's all part of a grand plan when the Clintonoids aren't busy debating the finer
points of her marketing and "mark"–a term normally applied to the graphic logo on a commercial product.
"... Hillary Clinton's nomination and the euphoria in the press (one NPR female reporter said she has seen women weeping over the possibility of Hillary becoming president) eclipses any discussion about the real issues facing the country. ..."
"... Notice how the term "women's issues" is used by the media and certain politicians to suggest that there is only one acceptable position for females on any given topic. To the left, women's issues appear to mean abortion rights, same-sex marriage, higher taxes, bigger government and electing more women who favor such things. ..."
"... As the husband of a successful woman with a master's degree and accomplished daughters and granddaughters, that's how we feel about Hillary Clinton. We're all for a female president, just not this one. ..."
Have you heard that Hillary Clinton is the "first woman" ever to be nominated for president by a
major political party? Of course you have. The media have repeated the line so often it is broken
news.
Hillary Clinton's nomination and the euphoria in the press (one NPR female reporter said
she has seen women weeping over the possibility of Hillary becoming president) eclipses any discussion
about the real issues facing the country.
To quote Clinton in another context, "what difference does it make" that she is a woman? A liberal
is a liberal, regardless of gender, race or ethnicity.
Must we go through an entire list of "firsts" before we get to someone who can solve our collective
problems, instead of making them worse? Many of those cheering this supposed progress in American
culture, which follows the historic election of the "first African-American president," are insincere,
if not disingenuous. Otherwise, they would have applauded the advancement of African-Americans like
Gen. Colin Powell, Justice Clarence Thomas, former one-term Rep. Allen West (R-FL), Sen. Tim Scott
(R-SC) and conservative women like Sarah Palin, Rep. Marsha Blackburn (R-TN), former presidential
candidate Carly Fiorina, Rep. Mia Love (R-UT) and many others.
Immigrants who entered the country legally and became citizens are virtually ignored by the media.
They champion instead illegal immigrants and the liberals who support them.
The reason for this disparity in attitude and coverage is that conservative blacks, women and
Hispanics hold positions anathema to the left. Conservative African-Americans have been called all
kinds of derogatory names in an effort to get them to convert to liberal orthodoxy, and they're ostracized
if they don't convert. If conservative, a female is likely to be labeled a traitor to her gender,
or worse.
Notice how the term "women's issues" is used by the media and certain politicians to suggest
that there is only one acceptable position for females on any given topic. To the left, women's issues
appear to mean abortion rights, same-sex marriage, higher taxes, bigger government and electing more
women who favor such things.
When it comes to accomplished conservative female leaders, one of the greatest and smartest of
our time was the late Jeane Kirkpatrick, Ronald Reagan's consequential U.S. ambassador to the United
Nations. As Jay Nordlinger wrote in his review of Peter Collier's book "Political Woman" for National
Review, "In a saner world, Jeane Kirkpatrick would have been lionized by feminists. She had risen
from the oil patch to the commanding heights of U.S. foreign policy. But her views were 'wrong.'"
Collier writes that Kirkpatrick, who was a Democrat most of her life, recalled feminist icon Gloria
Steinem once referring to her as "a female impersonator." Author Naomi Wolf called her "a woman without
a uterus" and claimed that she had been "unaffected by the experiences of the female body." Kirkpatrick
responded, "I have three kids, while she, when she made this comment had none."
The left gets away with these kinds of smears because they largely control the media and the message.
No Republican could escape shunning, or worse, if such language were employed against a female Democrat.
Conservative columnist Michelle Malkin, born in Philadelphia to Philippine citizens, has written
about some of the printable things she's been called -- "race traitor," "white man's puppet," "Tokyo
Rose," "Aunt Tomasina."
As the cliche goes, if liberals didn't have a double standard, they would have no standards at
all.
There's an old joke about a woman with five children who was asked if she had it to do over again
would she have five kids. "Yes," she replied, "just not these five."
As the husband of a successful woman with a master's degree and accomplished daughters and
granddaughters, that's how we feel about Hillary Clinton. We're all for a female president, just
not this one.
"... I'm increasingly interested in the metaphors around banking, which seem to still come out of early 19th c invention of engines, all of which used ' fuel ' as a central tenet: 'the money supply fuels the economy'. Economics seems drenched in outdated, antiquated metaphors where ' fuel ' is always and everywhere a good thing, with no polluting externalities, and no downside costs. ..."
"... Fuels don't lie, cheat, or steal - continuing to use fuel as a central metaphor enables banks, economists, and central bankers to put their fingers in their ears and howl "La! La! La! Using metaphors shaped by sail-powered whaling ships hunting for blubber is working just great for us!!" After all, calculus had been invented by the 1820s - so math + moneyAsEngineSpeak = economics. ..."
"... If money were more widely regarded as a social tool: recognized as a tool that requires communication, social networks, and flourishes within civil society, then Haldane's observations would be met with "Doh, you betcha!" ..."
"... Then, also, Bill Black's observations that crime actually does exist, and often looks exceptionally respectable, would be impossible to ignore. ..."
"... I interpreted Brexit as a 'tea leaf' that the banks could no longer be made fine-proof without triggering social unrest. ..."
"... The way that I read this, contemporary economics and finance leads to utter, unmanageable disaster from which there is absolutely no way out. The engine 'melts down', so to speak. I feel as if I have spent the past 8 years watching systems nearly implode, be saved by extraordinary (lunatic) measures, and in the end the systems of thinking that created these problems are precisely the mental pathways that keep people stuck in a labyrinth of dysfunction. ..."
"... It's hard to work out how "1. Implode, not too violently" could give rise to anything other than lethal shortages, especially in urban environments, and how this could lead to anything but "2. blow up, social unrest" anyway. ..."
"... Money is social relations, power relations, if Gold is law then the powerful will grab the gold. If not, they'll grab the money creating buttons in various spreadsheets, unless opposed by all. ..."
"... Maybe there is a way to make the vulnerability that the central banks and banksters and CorpoStates like GE and Cigna and Goldman Sux nd the rest impose on the vast rest of us into a mutual exposure? ..."
"... There is nothing wrong with interest, as long as the rate is reasonable. It is a service charge for someone handing you money now to buy what you want now instead of waiting to save up the money. Interest does not make an economic system unstable. It's the same as a massage or other service you buy. You just need enough income to cover it, and the principal payment of course. ..."
"... "As noted in the article [money is] a concept created by human beings and should be considered a very malleable tool that we can use to do pretty much whatever we as a society decide we want to with it. If we truly wanted to create a more equitable society there is nothing stopping us from doing so except the greed of the few." ..."
"... The Big Lie that the federal government needs tax revenue in order to operate, so we "can't afford" the social benefits that help the non-rich, must be constantly debunked and rejected. ..."
"... The terminology of finance is designed to hide predatory and extractive activities behind a curtain of beneficial-sounding words. These terms are deeply embedded, and serve both to put some friendly makeup on the business, and allow the "consumers" to feel better about their capitulation. The process is akin to the way politicians wrap themselves in the flag while they sell out the citizenry. We know deep down that they are lying, but we prefer the false patriotism because it serves the lies we prefer to tell ourselves. We bitch and moan, but we play our part, because not doing so leads to trouble. It is the way most of us live our lives. ..."
"... Most people go along the big lie because of hope. ..."
"... Money is nutrition, not a snack. It's food and fertilizer. It makes things grow. You have to share it with other life like bacteria and worms: without these organisms in your gut ecology, you get sick (autism, diabetes, obesity, M.S.). Idiots try to convince us these organisms are parasites instead of symbionts just like Monsanto thinks bees are disposable or Donald Trump likes to think of pregnant women as drags on business profits. ..."
"... If you think altruism is for suckers, your Ayn Rand economy collapses because you confuse parasites with symbionts and symbionts with parasites. You can't distinguish between compensation for earned and unearned income. What's a tax and what's theft? Try living without bacteria making butyrate in your gut. Wells Fargo can no more survive without little people like airport janitors to scrub out the TB and Ebola stains than our cells can breathe without mitochondria. Yet who gets their pay driven down in corporate America? ..."
Clive, FWIW, I'm increasingly interested in the metaphors around banking, which seem to still
come out of early 19th c invention of engines, all of which used ' fuel ' as a central tenet:
'the money supply fuels the economy'. Economics seems drenched in outdated, antiquated metaphors
where ' fuel ' is always and everywhere a good thing, with no polluting externalities, and
no downside costs.
Hence, what matters is 'efficiency': it's moneyAsEngineSpeak, so to speak.
Lordy, it's all petrochemical: from a time when chemical and mechanical engineering (and physics)
were in their relative infancies and whaling schooners were sailing out of Nantucket.
Fuels don't lie, cheat, or steal - continuing to use fuel as a central metaphor
enables banks, economists, and central bankers to put their fingers in their ears and howl "La! La!
La! Using metaphors shaped by sail-powered whaling ships hunting for blubber is working just great
for us!!" After all, calculus had been invented by the 1820s - so math + moneyAsEngineSpeak
= economics.
Egads.
In that paradigm, Bill Black is a mere scold, an oddball, a scruffy prophet in the wastelands,
so to speak.
If money were more widely regarded as a social tool: recognized as a tool that requires communication,
social networks, and flourishes within civil society, then Haldane's observations would be met with
"Doh, you betcha!"
Then, also, Bill Black's observations that crime actually does exist, and often looks exceptionally
respectable, would be impossible to ignore.
Timmy Geithner is probably not a fan of: (a) Bill Black or (b) the idea of money as inherently
social. Fuel is an emotionally sterile construct to work within; it enables one to avoid moral
qualms, or any sense of personal responsibility when ' engines blow up', or when they 'run
out of fuel '.
The fact that Haldane's observations and analysis are not more widely embraced suggests that somehow
the business schools, economics departments, and bankers all still use thought processes shaped in
the era of whalers seeking blubber for lanterns and lamps. Also, they probably still receive endowments
from the Kochs, Exxon, and other fuel obsessed interests.
Egads.
Until the metaphors move to biology, with a concomitant recognition that some kinds of ' fuel
' (aka Coke, Fritos, Doritos, donuts) work for short-term energy bursts, but carry extremely
negative longer term costs, I doubt that even the best attempts to muddle through will get us out
of this mess. Without amendment, this system is going to do one of two things: (1) implode (not too
violently) or else (2) blow up (social unrest).
I have no idea what the banker equivalent of 'chard, lettuce, and celery' would be, but some bright
mind ought to be thinking about it. (You distinguish yourself as such a mind; I hope that my metaphor
is not too offensive…)
I interpreted Brexit as a 'tea leaf' that the banks could no longer be made fine-proof without
triggering social unrest. Then I read your comment, esp:
the U.K. government is stuck with its vast holding in RBS. The only way it could ever be rid
of the RBS albatross is for RBS to have some vague hope of (eventually) earning its way back to
being something other than a complete basket case.
Apart from, ironically, the central banks' own ZIRP policy, the biggest threat to this is endless
redress for wrongdoing.
The way that I read this, contemporary economics and finance leads to utter, unmanageable
disaster from which there is absolutely no way out. The engine 'melts down', so to speak. I feel
as if I have spent the past 8 years watching systems nearly implode, be saved by extraordinary (lunatic)
measures, and in the end the systems of thinking that created these problems are precisely the mental
pathways that keep people stuck in a labyrinth of dysfunction.
Banking needs to be completely rethought, using the social sciences, which include the realities
of criminal conduct corroding the system to such a degree that it is threatening to implode. I'm
moving toward being agnostic as to whether this is a good thing, or not. Either way, the present
systems as I've read you describe them do not seem even remotely sustainable.
The metaphor I think applies is that we use money as both medium of exchange and store of value.
While the first is inherently dynamic, the second is static, so a good analogy is that in the
body, the medium is blood, while the store is fat. The trick has been how to store extreme amounts
of notional wealth and that is largely by having the government borrow it back out and spend in
ways which support the private sector, but don't compete with it in the hunt for profits. So are
all those pallets of money going to fund our wars really about war, or is it about keeping that
money flowing in one end and out the other? Consider all those super secure US savings bonds are
mostly just being poured down various rat holes, rather then building a sustainable society.
This probably goes back to Roosevelt, who borrowed a lot of unemployed capital to put a lot
of unemployed workers back to work.
Money is not a commodity to be mined or manufactured, whether gold or bitcoin, but a contract.
Every asset is the other side of an obligation. It allows a large economy to function, but it
also reduces community reciprocity, creating atomized societies.
Like blood, the economy needs very regulated amounts of money, as it functions as a voucher
system and storing lots of excess vouchers eventually causes the system to collapse, when everyone
tries to dump them at once. If government threatened to tax excess out, people would have to find
other ways to store value, like in stronger communities and healthier environments, aka the commons.
Most people save for the same general reasons, housing, healthcare, retirement, etc, which are
ultimately community functions anyway.
Finance as a public utility doesn't have to be subservient to government. Much as government
is analogous to the central nervous system, finance is to the circulatory system and the head
and heart are separate organs.
Government started out as a private business, institutionalized as monarchy, before becoming
a public utility. Now is the time to do the same with finance.
I'm leaning strongly to the idea that money is information . More specifically, it's
information about general claims on national commerce. That gold coin in your hand is a bidding
right . The obligation isn't to any one person, but your possession of it means that there's
one less gold coin's bidding power throughout the rest of the economy.
I'm still sorting out my thoughts on this, but Frederick Soddy, the Technocrats (a short-lived
1920s – 1930s US movement), and the ecological economists (Georgescu-Roegen, Daly, Boulding, etc.)
seem to make more sense to me.
The more I read of traditional / classical / neoclassical / post-Keynesian monetary theory
the more I suspect nobody has much of a clue.
Excellent and original points that make a tremendous amount of sense. Thank you.
One tiny quibble. It's hard to work out how "1. Implode, not too violently" could give
rise to anything other than lethal shortages, especially in urban environments, and how this could
lead to anything but "2. blow up, social unrest" anyway.
US Grant rode in a horse-drawn carriage from his inauguration to a White House lit with coal-gas,
while oil or candles. Medicine, sanitation, and agriculture was hardly different than it was in
Roman times. The railroad and the telegraph represented technological progress.
A little more than 30 years later McKinley rode in an automobile to a White House lit with
electric lamps, that had running water and sewage. Steel framed buildings could rise more the
3-4 stories off the ground. The causes of many diseases were known and somewhat preventable. The
first radio transmission was months away, and the first powered flight was 3 years away. The standard
of living of an average American doubled during that period. And it was all done under the gold
standard.
DGP per capita of the US peaked in 1973, the same time Bretton Woods formally ended. A dollar
today buys what 3 cents could buy when the Fed was formed. Do these FACTS escape the Krugmans
of the world or are they merely inconvenient and in conflict with what seems to be the true nature
of academic economics, to provide pseudo-science cover to political policy?
By all means let's go back to worshipping a dumb, shiny metal rather than, for instance, removing
all priviledges for the banks. And let's replace theft by inflation and deflation with theft by
deflation alone.
And let's confuse correlation with cause since the massive gold and silver strikes during that
period greatly increased the money supply and indeed, in some places, caused huge price inflation.
And let's forget that it is the government's authority to tax that gives value to fiat and give
gold owners a huge bonanza by making fiat needlessly expensive.
Setting aside your implied straw man, that it's a binary choice between unconstrained credit
creation, and "worshipping" gold, would you argue that today's society is better or worse than
that of 1970, just before the final (golden) constraint was broken?
Does the answer to this question answer the question? Money is social relations, power
relations, if Gold is law then the powerful will grab the gold. If not, they'll grab the money
creating buttons in various spreadsheets, unless opposed by all.
Or both. Hitler thought Chartalism (grandfather to MMT) was a great idea, then invaded France
and stole France's sizeable gold horde too! These greedy people want it all!
just before the final (golden) constraint was broken? Tinky
The central bank should not be allowed to create fiat for the private sector (e.g. Open Market
Purchases) AT ALL so no constraint is needed there other than absolute prohibition.
As for the monetary sovereign, price inflation is a restraint wrt fiat creation since the voters
hate it.
Also, please note that the demand for fiat is greatly reduced via other privileges for the
banks. Eliminate those and the demand for fiat shall greatly increase – greatly increasing the
amount of new fiat that can created without significant price inflation. This will be especially
the case when government provided deposit insurance is properly abolished since a huge amount
of new fiat should be required*.
*For the xfer of at least some currently insured deposits to inherently risk-free accounts
at a Postal Checking Service or equivalent.
Sounds good in theory, but how do you imagine that we might get to the point at which central
banks are prohibited from creating credit for the private sector?
How much of that fiat creation gets done via electronic means? Maybe there is a way to
make the vulnerability that the central banks and banksters and CorpoStates like GE and Cigna
and Goldman Sux nd the rest impose on the vast rest of us into a mutual exposure?
I mean, "they" can leverage and disappear and derivatize "capital" and ZIRP and NIRP with impunity,
and steal people's homes and garnish and change contract terms on personal accounts unilaterally.
Is there a turnabout, or are "we" so terrified of "instability" (where no "stability" really
exists, "disruption " and all that, not to act? As well demonstrated in many posts in this very
blog, it's not like the Fortress of FIRE's walls are any stronger than the foundations it is "coded"
on…
@scott 2 – "A dollar today buys what 3 cents could buy when the Fed was formed."
That something is true does not make it relevant; it can also be misleading. The real (domestic)
purchasing power of a dollar is determined by the amount of labor it takes to earn that dollar.
With the gains in labor productivity since 1913, it takes much less labor to earn today's dollar
than it took to earn that 3 cents 103 years ago. Comparing the nominal cost of a loaf of bread
in 1913 with its nominal cost today tells us nothing useful.
Yes isn't it awful when the prices of goods and services go down, I hate it when I have to
spend less money to eat and obtain shelter and all of the other necessaries of life.
Agricultural productivity rises so food costs less; industrial productivity rises so goods
cost less; and these are what is known as "progress". Increasing productivity is what raises our
standard of living.
But ah, there's a fly in the ointment, we have a debt-based money creation system. Problem
1.): Banks can print the principal but they can't print the interest. This leads to
Problem
2.): people borrow either because they think they can grow money faster than the debt service,
or because they are desperate and have no other choice.
Problem 2 (a) is that debt pulls demand from the future to the present, and when enough demand
is pulled forward people will no longer feel they should borrow for future growth because there
is none in sight. This leaves only desperate people borrowing to service existing outstanding
debt and that prophecy fulfills itself.
We are told this is somehow a "steady state" system but that is mathematically and obviously
incorrect. Even with unnatural acts like interest rates below zero (how can time preference be
below zero, and what does that say for the prospects for growth?) the system winds down and needs
to be completely reset.
The percentage of times that debt-based currency systems have failed in the past and gone to
zero = 100…leave it to alchemists economists to insist they can pull it off though.
Like the Soviet Union we now live in an era of centrally-planned price fixing for the most
important price of all in the economy: the price of money.
It's true that in eras where the price of money fluctuated wildly there were also wild fluctutaions
in the economy, booms and busts.
But someone made the statement: "The Fed makes the economy more stable. But I do not think
that word means what you think it does".
So no more busts…and no more booms, either. So put the periods of fastest economic growth and
fastest rises in the standard of living out of your mind, those are history. And given the mathematics
of "unlimited" debt creation, we'll get the bust anyway.
There is nothing wrong with interest, as long as the rate is reasonable. It is a service
charge for someone handing you money now to buy what you want now instead of waiting to save up
the money. Interest does not make an economic system unstable. It's the same as a massage or other
service you buy. You just need enough income to cover it, and the principal payment of course.
Some people seem to have this idea that x amount of money was created to buy a car, but none
was made to pay the interest. This causes the world to end. Not so. Money circulates and we know
that around a trillion or so in circulation seems to be enough to support our $18 T in annual
GDP. What is does mean is to pay off the 5 year car loan, you spent 4 years paying off the car
and another year paying the interest.
A benefit of interest is it may allow people to live past retirement age – but there there
is little economic focus on this phenomena.
There is nothing wrong with interest, as long as the rate is reasonable.
In principle this is true, but it leads to a paradox in an economy in which money is based
on debt. You start your second paragraph with an acknowledgement of this, but then you back down.
In such an economy, money is created when it is loaned - this money is the principal of the loan.
When the money is paid back, the money disappears.
But wait - the debtor must also pay back more than the principal of the loan; he or she must
also pay back the interest. How is the interest created? The same way as the principal, but it
is created by someone else's loan. So in a debt based economy, the amount of money in existence
is less than the total amount of people's debts.
If everyone is thrifty, and pays back their loans promptly, some people will never be able
to get the money to pay their interest. It's a game of musical chairs.
Pretty close, but consider this. The loan got paid back, the "money" disappeared, but the bank
gained it as new loan capacity. The bank makes a new loan. So far I think I'm repeating what you
stated. One minor problem is you say money is less than debt – it will be – debt is the contract
for the entire amount. But not everyone pays it all off at once – we just need the liquidity to
be there so the payor's personal bank account, or the one of their employer, doesn't run dry.
So at this point it's a matter of the banking system and the Fed managing liquidity. But the
size of the Fed balance sheet and reserves steadily increases over the years to account for growth
and any other liquidity needs the banks may have. It's either done directly with banks – buying
treasury bond assets or loans to banks, or they buy Treasuries in the market, the money goes somewhere,
then there is interbank lending to make it go where it's needed. (all in theory, of course. But
the theory seems sound, when uncorrupted.)
You make it sound like a steady state system, but it's not, debt is *always* issued in excess
of people's capacity to pay whether for political, psychological, or other reasons. The Fed knows
this. So they desperately want to reduce the total indebtedness by inflating it away, and this
puts everyone on a giant rat race treadmill, working two jobs trying to outrun the rise in prices.
Given the rise in productivity we're all supposed to be living like the Jetsons by now but Oh
No gatta keep running to stay in one place.
The Fed has forgotten that there is another way to reduce serial overindebtedness and that is
B-A-N-K-R-U-P-T-C-Y. It has the added advantage of being an actual capitalistic endeavor, and
not the inverted hyper-socialism we have today.The Fed keeps putting out brush fires so the dead
wood keeps building up, eventually there is an unholy crowning conflagration that takes the whole
forest with it.
Firstly, I said there is nothing wrong with interest . If you want to shift to "could
something go wrong with principal_plus_interest in a fractional reserve central banking system",
then, why yes! Plenty!
No, the system is by no means steady state – the economy has ups and downs and there are those
occasional "credit crunch" periods where banks get spooked over some such thing and stop lending
completely and then it seems like all the money disappeared. But that's why we have the Fed and
everyone furiously managing liquidity.
Since we're on a terminology thread (and my grandfather was a whaler), the whaling vessels
out of Nantucket tended to be square-rigged - barques, brigs, etc. Schooners were coastal vessels
used by fishermen more often than by whalers, who travelled long distances to launch their hunts.
Great post - I want to puke every time I hear Wall Street referred to as an "economic engine."
More like "social engineering" - of fraud schemes.
A couple of generations ago most people lived on farms. Many would trade grain to pay the miller.
In essence, hard cash was needed for goods at the general store.
Debt was used to finance big projects that were based on hard assets, land, commodities.
Fast forward to today…. banks still favour collateral based on hard assets yet services are
a much bigger part of our economy. I would venture to say that banks lend on soft collateral when
it is fed by sectors that have hard asset collateral or with a government guarantee.
IMO, get government out of everything and watch the economy drop to an economy of sustenance
based on hard asset collateral which will get increasingly constrained with world population going
from 7 to 9B. Exactly what rentiers LOVE!
Debt was used to finance increases in productivity. Unless you have a sweat shop in your basement,
a house is not a productive asset. It's a slowly appreciating consumer of capital, real and financial
(utilities, maintainance, and taxes). In distorted markets like California, it can make a lucky
few a lot of money while turning the area into a feudal system of land owners and serfs.
A side effect of financialization has been to turn the US economy into one that lives, temporarily,
on housing speculation. When people realize that spending $2 million on a bungalow that should
only cost $40K is the TRUE mis-allocation of capital, let's hope they don't realize that all at
once.
A couple generations ago land in many places was still relatively cheap. Asked my father once
how our family of dairy farmers managed to have as much land as we do and was told that my grandfather
often received land as payment. He'd give someone an animal or a side of beef and they'd give
him an acre they owned abutting his property that they weren't using for anything anyway. I've
seen some of the old ledgers found in his attic and as you noted, cash was not just in essence
but in fact used for goods at the general store. The barn itself was built with the help of the
community although I'm not sure how that was paid for but I'd wager that any financing was minimal.
The economy was a few steps above just sustenance but the population was a lot less and there
weren't nearly as many rich people from the city coming in looking for second (or 3rd or 4th)
homes in the country driving up the cost of real estate. Two generations later land is much more
dear to the point where our family likely wouldn't be able to afford to purchase property if they
needed extra acreage.
There are far too many economists who seem to think that money actually does grow on trees
in the sense that it's a naturally occurring resource that human beings can't control – it's all
determined by markets. In that sense I'd describe money not so much as a fuel but as a weapon.
I believe Jon Perkins had a similar description in his Confessions of an Economic Hitman. Weaponized
war is no longer the first option among advanced economies – first they'll try to bleed other
countries dry with economics. It's only when the victims won't cave that the bombs start dropping
now.
But money does not occur naturally and it should not be considered a fuel or a weapon. As noted
in the article it's a concept created by human beings and should be considered a very malleable
tool that we can use to do pretty much whatever we as a society decide we want to with it. If
we truly wanted to create a more equitable society there is nothing stopping us from doing so
except the greed of the few.
@lyman alpha bob – "As noted in the article [money is] a concept created by human beings
and should be considered a very malleable tool that we can use to do pretty much whatever we
as a society decide we want to with it. If we truly wanted to create a more equitable society
there is nothing stopping us from doing so except the greed of the few."
Adding: The Big Lie that the federal government needs tax revenue in order to operate,
so we "can't afford" the social benefits that help the non-rich, must be constantly debunked and
rejected.
Weaponizing money. That's a valuable concept. It reminds me of the end of David E. Martin's
(true-story-called-fiction-to-avoid-lawsuits) book "The Apostles of Power". And this was the reason
he wrote the book, actually–to fend off a major play to steal all the electronically-stored reserves
of the Fed into their own accounts, and destroy the evidence of their actions by triggering a
nuclear explosion of the precise nuclear power station that provided the power to the NYC/NJ computers
that stored the data. By telling enough about the plan in process (only the minor, human-created
fake "earthquake" at the Santa Ana reactor occurred, as the charges had been set before the book
was published; the book predicts the "earthquake"), a nuclear disaster and major financial theft
were averted.
Martin spoke about this, and the other real events described in the book, in a number of radio
interviews he gave in 2012, the year the book was published.
"Here's the [Machine] trick: Design the machine that will produce the result your analysis
indicates occurs routinely in the situation you have studied. Make sure you have included all
the parts – all the social gears, cranks, belts, buttons, and other widgets – and all the specifications
of materials and their qualities necessary to get the desired result."
Well, great! That part of the great discourse has been decoded and unpacked and all that, I
feel much better for the personal increase in awareness of how fokked things are.
Now, how are "we" going to get billions of other humans to the same state of awareness, to
stop talking about "fuel" when talking (using a gazillion other "terms of art" and memes and tropes
that are similarly opaque and whitewash and FUD-laden) about "the economy" and "economics" and
while generating ever more momentum for those same deadly (but profitable for the few) terms,
tropes, memes and shorthands? "Profitable" being one of them, "profit" being part of the disease
process, because after all, for the individual or the firm s/he belongs to, "profit" (ignoring
externalities, of course) is the summum bonum that lets you buy stuff and experiences galore?
Other Juggernaut words, just a very few: "bonus", "healthcare", "entitlement", "MArket", "free
trade," and a personal favorite, "donor" meaning very simply "BRIBER/corrupter" but hey, those
very few squillionaires who own everything including the "political process" are described millions
of times a DAY on the intertubes as "donors," "donors" to political candidates and PACs and "think
tanks" (??another fave). Giving a kidney to a person with terminal kidney failure, "donating"
one's corneas and body parts or those of deeply loved ones suddenly deceased, those are ""donations."
Not Koch or Adelman or Soros or Gates etc. billions to "Foundations" or operas or art museums.
"We," who are Aware, perceive some of this, often argue and debate and cavil over nitty bits
of those perceptions. That is so very effective, isn't it, the few hundreds or thousands of "us"
who participate in or observe the Flow in NCspace, in bringing about any kind of regression to
a mean that is hardly defined or maybe undefinable, a mean that might actually be "kind" and "decent"
and "fair" and "just" (whatever those terms are taken to mean)?
What is to be done about it? "We" ain't either powerful or certain enough to do something like
a "global search and replace" across the entire internet, with a burning of all the books and
papers, and a quarantine of all the GeithnerDimonGreenspanKrugmans and their myriad of citers
and followers and extenders, that carry the infection forward into the label minds of future "policy
makers" who like most humans who (I am assured by others) are wired to seek dominance and pleasure
and reproductive success? And who obviously are the dominant, successful vector and segment of
the "political economy?"
The plagues that Pandora was tricked into loosing on "humanity" have been out there probably
too long to be re-packaged. Nice effort for those who try, try and try again, but that effort
seems to me mostly pissing into the wind…
TINA. Sadly it's true, we appear somewhat stuck in this mode of what's working. I personally
appreciate the credit union / co-op model of accomplishing financial intermediation but that is
also a continuation of what we have.
Biggest problem in the US, no one competing with the FED.
"some of the recent coinages, like "sharing economy" are downright Orwellian". Yes, but that
phrase can be and is easily replaced in casual conversation with "the sharecropper economy".
(Be prepared to deliver a short explanation what a sharecropper is to the youg 'uns.)
Another valid word out of the past is "the man," as in the giver of overpriced credit to the
sharecropper who often ended up with zero profits and thus was kept in perpetual debt. Central
bankers?
Everybody talks about "thought leaders" but no one ever talks about "thought followers," much
less actually claims to be one. But without "thought followers" how can you have "thought leaders"?
I'm suspicious….
And anyway, wouldn't "thought leader" be applicable to anybody whose thinking ends up being
followed by others, for good or ill? Wouldn't Charles Manson be a "thought leader"? He certainly
was for the Manson Family….just a thought…
I always thought the exhortation to be thought leaders was a ruse for encouraging people to
speak up and try to act as thought leaders. That way those who worked us could identify the taller
daisies and thereby identify which flowers to top.
Seems like some combination of Frederick Soddy and Michael Hudson is called for here. Soddy
is apparently a tough slog even for otherwise intelligent people. So at the risk of over-simplification
here is my attempt to convey his ideas about money and wealth:
Money is not wealth. It is a claim on wealth, i.e. debt.
Wealth. Soddy provides both a practical and a more abstract definition of (the ingredients
of) wealth:
"But economics, in a national sense, is concerned with wealth as what is produced by human
beings to maintain their lives.
Discovery, Natural Energy and Diligence, the Three Ingredients of Wealth
For Discovery, think research and development (R&D) and of course education so R&D is even
possible. For Natural Energy, think, for most of the Industrial Revolution (IR), fossil fuels.
(Pretty obviously we need to do something different if we want to keep the machine the IR built
functioning, sustainably producing the wealth which sustains our civilization.)
One of my favorite passages from Soddy's "Wealth, Virtual Wealth and Debt" is:
"As Ruskin said, a logical definition of wealth is absolutely needed for the basis of economics
if it is to be a science."
But without a science-based definition of wealth, i.e. continuing to use profit and money as
a measure of 'productivity', just 'printing' more money (even Hudson's MMT) will solve nothing.
Put these observations together and you get an idea what should 'back' money – wealth not gold
or as Hudson puts it "Debts that can't be repaid (and) won't be."
Hudson's 'clean slate' provides the other part of the solution. As Hudson notes, the 'miracle
of compound interest' is not sustainable – particularly when the West's 'financial engineers'
are busy cranking out money (as debt) at rates well in excess of going interest rates. Just continuing
to use profit and money as a measure of 'productivity', 'printing' more money (even Hudson's MMT)
will solve nothing. Probably by the middle of the 20th century, the West had 'enough' wealth its
people could begin to find other purposes in life than creating ever more of it (to make ever
more money, i.e. acquire ever more debt to be paid by someone – the unborn?). Again from Soddy
/ Ruskin – real "Wealth rots." That's what's happening to the West's 'culture' as its ruling classes
mindlessly attempt to acquire ever more money.
It isn't just the 1% who are going to have to take their lumps, to stop playing games with
the world's future so they can, as candidate Trump put it, 'run up a bigger score' with money
for which they have no immediate need. It is those of us in the 99% who do not possess the skills
and aptitudes required for the genuine creation of wealth, wealth the world needs and can sustainably
afford. Those numbers are going to grow as the Industrial Revolution succeeds, with human labor
and rote intelligence replaced more and more by machines powered by "natural energy". But, even
if we can't find our niche, I take it as a given that we are all born with a right to life.
Wealth is hard to define because what we view as wealth might be a money pit that guarantees
our decline…
For example, instead of injecting money directly in the faculty of medicine, a university might
have decided to fund a football team to attract the capital and end up building a stadium… Instead
of just funding the faculty.
All these activities related to the sports team contribute to GDP. The bankers might have been
productive and efficient in raising capital, the coach might be productive and make a winning
team, the builders of the stadium might have been very productive building a fine structure but
all these activities sucked up resources and energy that could have been used by other sectors
to better serve the future of the country. Maybe these activities are totally unsustainable. They
might appear as wealth currently but will lead to poverty over time.
Since ou basic needs have been met, we have been investing in a forever greater number of non-essential
resource intensive activities which show how disconnected we have become from the earth supporting
us.
The terminology of finance is designed to hide predatory and extractive activities behind
a curtain of beneficial-sounding words. These terms are deeply embedded, and serve both to put
some friendly makeup on the business, and allow the "consumers" to feel better about their capitulation.
The process is akin to the way politicians wrap themselves in the flag while they sell out the
citizenry. We know deep down that they are lying, but we prefer the false patriotism because it
serves the lies we prefer to tell ourselves. We bitch and moan, but we play our part, because
not doing so leads to trouble. It is the way most of us live our lives.
One of the biggest problems people face in discussing matters financial, is that the very terminology
of the system undercuts the critiques. Just as criticizing the wars invokes in some the specter
of failing to support the troops and the specter of criticizing America, criticizing Wall Street's
predatory aspects invokes in many the specter of criticizing institutions we have been led to
believe represent the essence of American freedom. Doing so makes you at least a malcontent or
troublemaker, and maybe even some sort of subversive pinko. Either way, you're rocking a boat
many do not want rocked.
Using analogies and metaphors to discuss such matters can outflank the loaded-terminology question
to a significant degree. You can cut through a lot of the fog of jargon by describing the activities
in other terms. (E.g., Dave's "sharecropping" for "sharing economy.")
We are in an era in which the financial world is being downsized and consolidated, the giant
speculative bubble which dominated most of our lives is being deflated and wound down before our
eyes. There is still speculative activity, to be sure, but there is also a rise in the use of
rentier income. This downsizing process involves shifting losses wherever possible down the food
chain, including to institutions which previously were integral parts of the system. Insiders
are finding themselves outsiders, jettisoned by other insiders.
This reminds me of the situation of a pack of wolves, grown large in an era of plentiful food,
but now finding that food supply dwindling. The pack must shrink to survive, the excess members
culled in often brutal ways. The strongest eat the most, the rest are left with the scraps, or
nothing at all. The financial system is similar, a pack in which the herd is being culled. Individual
institutions, even important ones like Barings or Lehman, are ephemeral. They come and they go,
just like individual wolves in the pack. But the pack lives on, and so does the financial system.
To the wolves, the pecking order, who lives and who dies, is very important. But for the creatures
the pack eats, such concerns are irrelevant.
Either way, you're rocking a boat many do not want rocked.
Perhaps. Or perhaps the alternatives to our ruling narratives and power mechanisms have been
ruthlessly dismantled and extinguished. For example, I would love to join a union. But I live
in a right-to-work state.
I would love to have representation at my workplace and have some degree of bargaining power.
I guess there's always the complaint box. Or the "freedom" to hit the bricks.
Luckily, I went to school when it was affordable, so I don't have student loan debt. I rent,
and although rents continue to rise every year, I don't have a mortgage hanging over my head.
My younger colleagues are saddled with outrageous student loan debt that they will never likely
repay. Unfortunately many/most of them bought into the housing market. How likely are they to
even entertain the idea of speaking truth to power?
I'm past 50, and you know what that means to my prospects of finding another job. Young and
old, we just keep our mouths shut and do what we're told.
The US represents 5% of world population but consumes a much larger share of world energy and
resources. The 99% are concerned about fairness but if they truly cared, they'd understand that
the global economy needs to shrink their share of resources to 5%. And the leveling is getting
stronger by the day. Most people go along the big lie because of hope.
Question about your numbers - I think our share of resources needs to shrink but I'm not sure
5% is the right number. Are some of the resources in that 5% dedicated to our Industry? Is our
industry productive? and who gets the stuff? It may be we need to shrink our use of resources
to 4%. And what about the who uses how much of what resources? How do you count the resources
used to support our car, bus, and truck industries while deliberately stifling mass transit. I
only make these quibbles to avoid your logic of proportions. Clearly we must take/steal less from
the rest of the world and share what we have. I believe there is enough to go around - once a
few (quite a few) problems here and there are taken care of.
I'm not sure how much hope continues to hold up the big lie. I think the supports for the big
lie need a lot of maintenance to keep it from falling. Maybe we can simply stop using that road.
I don't know what the number is but from my vantage point , it looks like the western work
is heading for a world of pain. Americans want America to be great again but it's based on materialism.
To be great again would mean a different kind of greatness where the economy is based on a
reduction of it share of resources.
But the population is still very far away from the fact that its way of life depends on an
unfair distribution of world resources which will probably lead to a big world struggle meaning
a focus on the military.
This is not what I want by what I see in the horizon.
There's a reason money and fuel are in the same sentence. It's because the a nation's power
depends on energy.
It might seem trite, but if an American is patriotic, he or she will try to reduce the nation's
energy use by using energy efficiently. Whether it's transportation, home heating, home cooling,
or nighttime illumination, one should use the energy efficiently. Aside from the immorality of
using so much more than many other people in the world, it's a way to reduce pollution and to
avoid sending money to the Wahhabi nut jobs in Saudi Arabia. Plus, energy efficiency saves money!
Our country has the capacity to help the world get through the crises of Global Warming and
the end of oil. Our country has responsibility as one of the guilty parties - one of the most
most guilty in taking more than our share and sharing less than we are able or should share. The
meaning of riches is best enjoyed through the sharing of those riches. In ancient times - at least
in some places - that was the privilege and obligation of the rich.
I would feel deep shame for our country if it is to be remembered in the future for what it
has done so far.
Great comment, ROTL! Accords very well with my understanding of the power of metaphors, to
bring into being the world stage on which we strut our stuff.
Many here at NC often comment on the quasi-religious nature of economics. I'm always struck
by the conflation of the organic/natural world with mechanics. Wrongly conceiving of market forces
as natural forces and so on. I think you've struck a blow against this wrong-headed mythos at
its weakest point. If the metaphors that bring into being this world of pain we're living in themselves
are discredited, the whole edifice could come crashing down in no time.
If anyone's interested in a little exercise, trying paying attention to the metaphors one uses
for organic systems, and society at large. Even though I'm aware of their inappropriateness, it's
hard not to think in mechanistic terms. And not just mechanistic, but weaponized, at that. You
can't even listen to a baseball game without hearing metaphors of war all the damn time. Then
there are "Twitter wars" and "Facebook wars" ad nauseaum.
Money is nutrition, not a snack. It's food and fertilizer. It makes things grow. You have
to share it with other life like bacteria and worms: without these organisms in your gut ecology,
you get sick (autism, diabetes, obesity, M.S.). Idiots try to convince us these organisms are
parasites instead of symbionts just like Monsanto thinks bees are disposable or Donald Trump likes
to think of pregnant women as drags on business profits.
Where does he propose business find future workers if not in wombs? From where will his future
customers come?
Perhaps in sharing economy of future America, companies will have to share their dwindling
customers and make do with less?
If you think altruism is for suckers, your Ayn Rand economy collapses because you confuse
parasites with symbionts and symbionts with parasites. You can't distinguish between compensation
for earned and unearned income. What's a tax and what's theft? Try living without bacteria making
butyrate in your gut. Wells Fargo can no more survive without little people like airport janitors
to scrub out the TB and Ebola stains than our cells can breathe without mitochondria. Yet who
gets their pay driven down in corporate America?
Money weaves a supporting web of trust, a mutual network of obligations and payments – and
what happens biologically when that web inside us is broken and friends become enemies and we
treat enemies as friends? Is fraud any different than autoimmunity or cancer?
Well, I was gobsmacked to see this show up when I finally logged on to the Internet today.
Many heartfelt thanks to all who commented so thoughtfully and insightfully; and also to the remarkable
NC crew (Yves, Lambert, Jerri-Lynn, the IT folks), as well of course to Clive.
I think that we are all rooting for the time when Haldane's insights are met with 'Doh', and
when we celebrate Bill Black as a Nobel in Economics ;-)
"... When I signed up for a 401k at my previous job, I wanted to invest in the S&P index fund, as it was the lowest cost option. Given that Putnam used their own fund, it charged 0.35% at a time when Vanguard was at 0.07% and Fidelity at 0.10%. ..."
"... Rule of 72 says that at 7% return for ten years would be $20,000 not $136K. ..."
"... Washington has proven itself incapable of managing its money (our taxes) prudently and efficiently because of our corrupt representatives putting their electoral and personal interests first. The 401K experiment has failed. Very few individuals will be able to rely on them for retirement security, and of those most hail from the higher income brackets. They do virtually nothing for retirement security for the vast, vast majority of the country. ..."
"... Social Security is a proven, cost effective, and reliable deliverer of retirement income for our entire population. 401K's will never come close, and in fact aren't worth shit to most people. But that is not what matters in Washington. ..."
"... The Plan administrator has a fiduciary obligation to manage the options. The administrator can put pressure to make non-Sponsor funds available. With a total company 401k of only about $5mm, I was able to pressure our 401K plan Sponsor to provide access to lower cost equivalent portfolios for investment options such as S&P 500, Russell 2000 and a long-term bond yield (via Vanguard and Fidelity). ..."
"... Difficult to reconcile this with the Department of Labor's new fiduciary rule, which reportedly requires financial advisers to place the interests of clients with retirement-saving accounts ahead of their own. I have read that it will be implemented sometime next year, assuming there are no additional delays. (hat tip Barry Ritholtz) ..."
Thanks for this analysis. I have a 403b through my institution of higher Ed, specifically Tiaa.
Their funds are kind of lousy (compared, say, to a vanguard index) and there's little choice in
which funds seem to be available from one institution to another.
The idea that workers will somehow sit down and process the numbers surrounding badly performing
funds, and then redistribute, is a fantasy. Who has the financial literacy to do that? Like healthcare,it's
another area of personal finance where people are expected to take on time consuming and complex
administrative duties.
Mandatory 401s sounds just great. Can't wait. "You give me your money, you tell me where to
put it among crappy options, wait forty years, and you may or may not ever see it again, based
on the quality of your choices. Pleasure doing business with you."
I love the last line, because it applies to almost everything in our society today: far more
scrutiny and oversight. Thanks to Naked Capitalism for turning up the scrutiny.
We are going to have a fight on our hands if and when HRC gets elected. The fact that our politicians
have gotten away with weakening New Deal programs that actually worked well is all the evidence
I need to believe they are not finished with their attack.
When I signed up for a 401k at my previous job, I wanted to invest in the S&P index fund,
as it was the lowest cost option. Given that Putnam used their own fund, it charged 0.35% at a
time when Vanguard was at 0.07% and Fidelity at 0.10%.
If you put $10k into the fund at 35 bps, you'd have $136k at the end of 10 years (assuming
7% gross return). if you got it at 7 bps, you'd have $137k. Now, if you'd bought a loaded A share
American Fund with a 5.75% sales load and a 65 bps expense ratio, you'd have $126k.
The principle of low fees is important, but you're effectively there with the 35 bps fund.
"…investors might be vigilant enough to recognize that their interests are not being well served…"
Come on. Really. I would wager that the percentage of people knowledgeable and sophisticated
enough to do so at well under 0.1% of the population. The entire system of 401 retirement plans
has been constructed for the purpose of fleecing undisclosed fees from us suckers forced into
these plans.
Washington has proven itself incapable of managing its money (our taxes) prudently and
efficiently because of our corrupt representatives putting their electoral and personal interests
first. The 401K experiment has failed. Very few individuals will be able to rely on them for retirement
security, and of those most hail from the higher income brackets. They do virtually nothing for
retirement security for the vast, vast majority of the country.
Social Security is a proven, cost effective, and reliable deliverer of retirement income
for our entire population. 401K's will never come close, and in fact aren't worth shit to most
people. But that is not what matters in Washington.
I see this as akin to a Board of Driectors governance issue.
The Plan administrator has a fiduciary obligation to manage the options. The administrator
can put pressure to make non-Sponsor funds available. With a total company 401k of only about
$5mm, I was able to pressure our 401K plan Sponsor to provide access to lower cost equivalent
portfolios for investment options such as S&P 500, Russell 2000 and a long-term bond yield (via
Vanguard and Fidelity).
All it required was performing the minimums of being a 401k plan administrator. Quarterly monitoring
of fund performance versus peers via a service like Morningstar (took 4 hours to prebuild screens
that displayed QonQ, YonY and 3Yon3Y), pressing the Sponsor for alternatives and then refusing
the steak dinner to discuss with the Sponsor. I mean for crying out loud this is really simple.
And of course if your plan administrator isn't doing this minimum I'm sure they have fiduciary
insurance so there are alternatives.
Of course many people aren't willing to ask/press these questions of their employer/HR. I've
seen plans administered exceptionally well (utility with a union for about 1/3 of employees and
small family energy firm) and poorly (some larger energy companies). Why somebody doesn't provides
this administrator function as an outsource is beyond me. The real liability can be quite high
and pushing off to a 3rd party who does just that would seem worth the $.
My 401K was administered by Fidelity and I believe there were no restrictions whatsoever. I
could invest in any Fidelity fund or actually any fund through a brokerage account. If you didn't
use a Fidelity brokerage account offered by the plan as an option your choices were restricted.
They are often dodgy too. Great-west/Empower does a real bait and switch on the options offered
for certain 401A funds were there is deeply buried disclosure about proprietary versions charging
much higher fees, than the term sheet prominently displayed as "this is what you're buying if
you select this fund". This is a real racket
Yves, article and analysis insightful, thanks again. "Doggy" in title makes sense, but "dodgy"
may apply as well to Fidelity specifically, read on. Stumbled on to Reuters write up by Tim McLaughlin
about Fidelity this month and began a search for a new money management firm with a "fiduciary"
bone in it's body:
http://www.reuters.com/article/us-usa-fidelity-family-specialreport-idUSKCN1251BG .
Though the article indicates Fidelity's behavior is not "illegal nor unethical" – Yale University
law professor John Morley said Fidelity runs the risk of losing investors by competing with the
funds that serve them.
"What they're doing is not illegal, not even unethical," Morley said. "But it's entirely appropriate
for mutual fund investors to take their money elsewhere because Fidelity has made a decision to
take away some of their potential returns."
Many of us are trapped in the DC funds our employers establish for us. As cdub referenced,
pressuring plan administrators is one way to change options or broaden offerings – but one needs
to understand what pressure to apply.
Difficult to reconcile this with the Department of Labor's new fiduciary rule, which reportedly
requires financial advisers to place the interests of clients with retirement-saving accounts
ahead of their own. I have read that it will be implemented sometime next year, assuming there
are no additional delays. (hat tip Barry Ritholtz)
In a lengthy speech on Saturday night in Manheim, Pennsylvania, Republican nominee for president
Donald J. Trump lambasted his opponent Democratic nominee Hillary Rodham Clinton for a secret tape
recording of her bashing supporters of Sen. Bernie Sanders of Vermont-and even called for Clinton
to be placed in prison and questioned as to whether she has been loyal to her husband former President
Bill Clinton.
Trump said in the speech on Saturday night:
A new audio tape that has surfaced just yesterday from another one of Hillary's high roller
fundraisers shows her demeaning and mocking Bernie Sanders and all of his supporters. You know,
and I'll tell you something we have a much bigger movement that Bernie Sanders ever had. We have
much bigger crowds than Sanders ever had. And we have a more important movement than Bernie Sanders
ever had because we're going to save our country, okay? We're going to save our country. But I
can tell you Bernie Sanders would have left a great, great legacy had he not made the deal with
the devil. He would have really left a great legacy. Now he shows up and 120 people come in to
hear him talk. Bernie Sanders would have left a great legacy had he not made the deal, had he
held his head high and walked away. Now he's on the other side perhaps from us and we want to
get along with everybody and we will-we're going to unite the country-but what Bernie Sanders
did to his supporters was very, very unfair. And they're really not his supporters any longer
and they're not going to support Hillary Clinton. I really believe a lot of those people are coming
over and largely because of trade, college education, lots of other things-but largely because
of trade, they're coming over to our side-you watch, you watch. Especially after Hillary mocks
him and mocks all of those people by attacking him and his supporters as 'living in their parents'
basements,' and trapped in dead-end careers. That's not what they are.
Also in his speech on Saturday night, Trump summed up exactly what came out in the latest Hillary
Clinton tapes in which she mocks Sanders supporters:
She describes many of them as ignorant, and [that] they want the United States to be more like
Scandinavia but that 'half the people don't know what that means' in a really sarcastic tone because
she's a sarcastic woman. To sum up, and I'll tell you the other thing-she's an incompetent woman.
She's an incompetent woman. I've seen it. Just take a look at what she touches. It never works
out, and you watch: her run for the presidency will never ever work out because we can't let it
work out. To sum up, Hillary Clinton thinks Bernie supporters are hopeless and ignorant basement
dwellers. Then, of course, she thinks people who vote for and follow us are deplorable and irredeemable.
I don't think so. I don't think so. We have the smartest people, we have the sharpest people,
we have the most amazing people, and you know in all of the years of this country they say, even
the pundits-most of them aren't worth the ground they're standing on, some of that ground could
be fairly wealthy but ground, but most of these people say they have never seen a phenomenon like
is going on. We have crowds like this wherever we go.
WATCH THE FULL SPEECH:
Later in the speech, Trump came back to the tape again and hammered her once more for it.
"Hillary Clinton all but said that most of the country is racist, including the men and women
of law enforcement," Trump said. "She said that the other night. Did anybody like Lester Holt? Did
anybody question her when she said that? No, she said it the other night. [If] you're not a die hard
Clinton fan-you're not a supporter-from Day One, Hillary Clinton thinks you are a defective person.
That's what she's going around saying."
In the speech, Trump questioned whether Clinton has the moral authority to lead when she considers
the majority of Americans-Trump supporters and Sanders supporters-to be "defective" people. And he
went so far as saying that Clinton "should be in prison." He went on:
How on earth can Hillary Clinton try to lead this country when she has nothing but contempt
for the people who live in this country? She's got contempt. First of all, she's got so many scandals
and she's been caught cheating so much. One of the worst things I've ever witnessed as a citizen
of the United States was last week when the FBI director was trying so hard to explain how she
away with what she got away with, because she should be in prison. Let me tell you. She should
be in prison. She's being totally protected by the New York Times and the Washington Post and
all of the media and CNN-Clinton News Network-which nobody is watching anyway so what difference
does it make? Don't even watch it. But she's being protected by many of these groups. It's not
like do you think she's guilty? They've actually admitted she's guilty. And then she lies and
lies, 33,000 emails deleted, bleached, acid-washed! And then they take their phones and they hammer
the hell out of them. How many people have acid washed or bleached a Tweet? How many?
He returned to the secret Clinton tape a little while later:
Hillary Clinton slanders and attacks anyone who wants to put America First, whether they
are Trump Voters or Bernie Voters. What she said about Bernie voters amazing. Like the European
Union, she wants to erase our borders and she wants to do it for her donors and she wants people
to pour into country without knowing who they are.
Trump later bashed the media as "dishonest as hell" when calling on the reporters at his event
to "turn your cameras" to show the crowd that came to see him.
"If they showed the kind of crowds we have-which people can hear, you know it's interesting: you
can hear the crowd when you hear the television but if they showed the crowd it would be better television,
but they don't know much about that. But it would actually be better television," Trump said.
Trump also questioned whether Hillary Clinton has been loyal to her husband, former President
Bill Clinton. Bill Clinton has been known to cheat on Hillary Clinton with a variety of mistresses
and has been accused of rape and sexual assault by some women.
"Hillary Clinton's only loyalty is to her financial contributors and to herself," Trump
said. "I don't even think she's loyal to Bill, if you want to know the truth. And really, folks,
really: Why should she be, right? Why should she be?"
Throughout the speech, Trump weaved together references to his new campaign theme about Clinton-"Follow
The Money"-with details about the Trans Pacific Partnership (TPP) trade deal. He said:
We're going to take on the corrupt media, the powerful lobbyists and the special interests
that have stolen your jobs, your factories, and your future-that's exactly what's happened. We're
going to stop Hillary Clinton from continuing to raid the industry from your state for her profit.
Hillary Clinton has collected millions of dollars from the same global corporations shipping
your jobs and your dreams to other countries. You know it and everybody else knows it. That's
why Clinton, if she ever got the chance, would 100 percent approve Trans Pacific Partnership-a
total disastrous trade deal. She called the deal the 'gold standard.' The TPP will bring economic
devastation to Pennsylvania and our campaign is the only chance to stop that and other bad things
that are happening to our country. She lied about the Gold Standard the other night at the debate.
She said she didn't say it-she said it. We want to stop the Trans Pacific Partnership and if we
don't-remember this, if we don't stop it, billions and billions [of dollars] in jobs and wealth
will be vacuumed right out of Pennsylvania and sent to these other countries. Just like NAFTA
was a disaster, this will be a disaster. Frankly I don't think it'll be as bad as NAFTA. It can't
get any worse than that-signed by Bill Clinton. All of us here in this massive room here tonight
can prevent this from happening. Together we can stop TPP and we can end the theft of American
jobs and prosperity.
Trump praised Sanders for being strongly opposed to the TPP:
I knew one man-I'm not a big fan-but one man who knew the dangers of the TPP was Bernie
Sanders. Crazy Bernie. He was right about one thing, only one thing, and that was trade. He was
right about it because he knew we were getting ripped off, but he wouldn't be able to do anything
about it . We're going to do a lot about it. We're going to have those highways running the
opposite direction. We're going to have a lot of trade, but it's going to come into our country.
We are going to start benefitting our country because right now it's one way road to trouble.
Our jobs leave us, our money leaves us. With Mexico, we get the drugs-they get the cash-it's that
simple.
Hillary Clinton, Trump noted, is "controlled by global special interests."
"She's on the opposite side of Bernie on the trade issue," Trump said. "She's totally on the opposite
side of Bernie."
He circled back to trade a bit later in the more-than-hour-long speech, hammering TPP and Clinton
cash connections. Trump continued:
Three TPP member countries gave between $6 and $15 million to Clinton. At least four lobbyists
who are actively lobbying for TPP passage have raised more than $800,000 for her campaign. I'm
just telling you Pennsylvania, we're going to make it. We're going to make it. We're going to
make it if we have Pennsylvania for sure. It'll be easy. But you cannot let this pass. NAFTA passed.
It's been the worst trade deal probably ever passed, not in this country but anywhere in the world.
It cleaned out New England. It cleaned out big portions of Pennsylvania. It cleaned out big portions
of Ohio and North Carolina and South Carolina-you can't let it happen.
Trump even called the politicians like Clinton "bloodsuckers" who have let America be drained
out of millions upon millions of jobs.
"These bloodsuckers want it to happen," Trump said. "They're politicians that are getting taken
care of by people that want it to happen. Other countries want it to happen because it's good for
them, but it's not good for us. So hopefully you're not going to let it happen. Whatever Hillary's
donors want, they get. They own her. On Nov. 8, we're going to end Clinton corruption. Hillary Clinton,
dishonest person, is an insider fighting for herself and for her friends. I'm an outsider fighting
for you. And by the way, just in case you're not aware, I used to be an insider but I thought this
was the right thing to do. This is the right thing to do, believe me."
"... I think race-specific programs are a dead end as they will create great resentment, but universal programs and ESPECIALLY a job guarantee would be tremendously helpful in improving the U.S. racial situation. ..."
"... And it prevents the constant attacks on recipients of benefits as being unworthy, criminal, drug-taking, undeserving folk who should be drug-tested, monitored, controlled, suspected. ..."
"... Privileges like the selection of judges or the creation of special loopholes in the tax law, or other privileges only a political donation of the right amount might purchase. And it should be plain that some of the privileges described are not privileges at all but basic rights of human kind borne within any notion of the just. ..."
"... I think race-specific programs are a dead end as they will create great resentment, but universal programs and ESPECIALLY a job guarantee would be tremendously helpful in improving the U.S. racial situation. ..."
"... When the BLM (I think) asked Bernie about reparations, he said he didn't think it was a good idea, that free college etc would help everyone. ..."
PlutoniumKun is 100% on-target. Moreover, non-universal benefits have tremendous overhead cost
in terms of paperwork, qualifications, etc., while a universal benefit can be minimally bureaucratic.
I think race-specific programs are a dead end as they will create great resentment, but
universal programs and ESPECIALLY a job guarantee would be tremendously helpful in improving the
U.S. racial situation.
On the baby bonds, it's foolish to have a "$50 endowment for a child of Bill Gates". Instead
it would be better to just provide $50,000 to ALL babies including Bill Gates' child, and tax
Bill Gates more.
As the saying goes, "programs for the poor are poor programs." Bill Gates' child should be
allowed to use the same public libraries, go to the same (free) public universities, etc. etc.
I doubt Bill Gates' child will need to take up the guaranteed job, but if he needs or wants to
(perhaps because of a quarrel with his parent) he should be able to.
And it prevents the constant attacks on recipients of benefits as being unworthy, criminal,
drug-taking, undeserving folk who should be drug-tested, monitored, controlled, suspected.
Universality removes many of the privileges the rich enjoy - $50K for all babies including
Bill Gates child - and as privileges are dismantled in this way the remaining privileges of the
rich will stand all the more glaring for their unfairness - to all. Privileges like the selection
of judges or the creation of special loopholes in the tax law, or other privileges only a political
donation of the right amount might purchase. And it should be plain that some of the privileges
described are not privileges at all but basic rights of human kind borne within any notion of
the just.
I think race-specific programs are a dead end as they will create great resentment,
but universal programs and ESPECIALLY a job guarantee would be tremendously helpful in improving
the U.S. racial situation.
I've been thinking about this bit a lot. When the BLM (I think) asked Bernie about reparations,
he said he didn't think it was a good idea, that free college etc would help everyone.
I don't recall any elaboration on his part, but I wondered at the time, how would they be allocated?
Full black, one-half black, one quarter, quadroon, octoroon, mulatto, 'yaller'? That's wholly
back to Jim Crow, or worse. I refer, of course to the
artificial division
of Huttus and Tutsis which, you may recall,
did not work out so well
. Barack Obama, would he qualify? None of his ancestors were slaves.
I am looking forward to the book by Darity and Muller, but they would have to do a lot of persuading
to get me to get comfy with reparations.
The country that gives every expecting mother a new baby package is Finland. They started the
practice in the 1930's when their infant mortality rate was at ten percent. Now they have one
of the lowest infant mortality rates in the world.
The Walloon mouse : ...Instead of decrying people's stupidity and ignorance in rejecting trade
deals, we should try to understand why such deals lost legitimacy in the first place. I'd put
a large part of the blame on mainstream elites and trade technocrats who pooh-poohed ordinary
people's concerns with earlier trade agreements.
The elites minimized distributional concerns, though they turned out to be significant for
the most directly affected communities. They oversold aggregate gains from trade deals, though
they have been smallish since at least NAFTA. They said sovereignty would not be diminished though
it clearly was in some instances. They claimed democratic principles would not be undermined,
though they are in places. They said there'd be no social dumping though there clearly is at times.
They advertised trade deals (and continue to do so) as "free trade" agreements, even though Adam
Smith and David Ricardo would turn over in their graves if they read, say, any of the TPP chapters.
And because they failed to provide those distinctions and caveats now trade gets tarred with
all kinds of ills even when it's not deserved. If the demagogues and nativists making nonsensical
claims about trade are getting a hearing, it is trade's cheerleaders that deserve some of the
blame.
One more thing. The opposition to trade deals is no longer solely about income losses. The
standard remedy of compensation won't be enough -- even if carried out. It's about fairness, loss
of control, and elites' loss of credibility. It hurts the cause of trade to pretend otherwise.
... ... ..
Trump would propose and/or enact, he listed the following six:
"A Constitutional Amendment to impose term limits on all members of Congress."
"A hiring freeze on all federal employees."
"A requirement that for every new federal regulation, 2 existing regulations must be eliminated."
"A 5-year ban on White House and Congressional officials becoming lobbyists after they leave government."
"A lifetime ban on White House officials lobbying on behalf of a foreign government."
"A complete ban on foreign lobbyists raising money for American elections."
"
~~WWW~
Lot of reform is needed but may be
The forgotten spirit of American protectionism : , -1
The free traders have human economic history precisely inverted. Countries that practice protectionism
almost uniformly become wealthy and technologically advanced. Countries that don't become or remain
terribly sad, poverty-stricken producers of worthless raw materials and desperate labor migrants.
This has been true at least going back to Byzantium and its economic conquest by Genoa and Venice.
That the US thrived pre-1970 free trade is no coincidence. There is no alternative to protectionism.
Free trade = no industry = no money = no future.
I think he is trying to talk about soft neoliberalism vs rejection of neoliberalism as discredited
economics dogma and ideology. I think like Marxism neoliberalism has religious elements in it (as in
"secular religion") so will not go away completely much like obscure religious cults does not dissapper
they on a given date second coming of Christ did not happen.
Notable quotes:
"... new research showing that policies like public housing , welfare and public education spending are more beneficial than conservatives have recognized in decades past. ..."
"... But there are not one, but two big trends in liberal economic thinking. One wants to modify the economic thinking of the past few decades, and the other wants to rip it up. I expect to see a lot of the economic debate in the coming years play out not between the left and right, but between these two strains of thought. ..."
"... The New Center-Left Consensus is attractive to academics and policy wonks. It draws on an eclectic mix of mainstream economic theory, empirical studies and historical experience. It refuses to assume, as many conservatives and libertarians do, that free markets are always the best unless there is a glaring case for government intervention. ..."
In 2015, Forbes writer Adam Ozimek
suggested that a "new liberal consensus" is forming in the economic-policy world. The data back
him up. Many economics professors now
tend to favor government intervention in the economy more than the general public. And the profession's
biggest public stars, from Paul Krugman to Thomas Piketty to Joseph Stiglitz, are now more likely
to lean
to the left than to the right. Meanwhile, I've tried to document the flood of new research
showing that policies like
public housing ,
welfare and public education
spending are more beneficial than conservatives have recognized in decades past.
But there are not one, but two big trends in liberal economic thinking. One wants to
modify the economic thinking of the past few decades, and the other wants to rip it up. I expect
to see a lot of the economic debate in the coming years play out not between the left and right,
but between these two strains of thought.
The research and people I've been writing about fit into what we might call the New Center-Left
Consensus. This strain of thought is based on data and empiricism. Support for higher minimum wages,
for example,
has grown among economists because a large amount of careful
empirical analysis has
shown that minimum wage hikes don't usually cause sizable immediate disruptions in local labor markets.
These economists aren't ignorant of the basic theory of labor supply and demand -- the kind that
every undergrad econ student is forced to learn. They just realize that
it might not be the right theory in this case.
The New Center-Left Consensus is attractive to academics and policy wonks. It draws on an
eclectic mix of mainstream economic theory, empirical studies and historical experience. It refuses
to assume, as many conservatives and libertarians do, that free markets are always the best unless
there is a glaring case for government intervention. It's more willing to entertain all kinds
of ways that government can improve the economy, from welfare to infrastructure spending to regulation,
but it also recognizes that these won't always work. It embraces a philosophy of careful experimentation.
Sometimes the new center-left is even in favor of deregulation -- for example, loosening
zoning restrictions and reducing
occupational licensing . It's not ideologically opposed to the free market.
The best evangelist of the New Center-Left Consensus might be President Barack Obama. In an amazingly
well-informed
editorial in the Economist, he recently laid out a comprehensive picture of the economy and policy.
I have little doubt that Obama's understanding was heavily informed by his chief economic adviser,
Jason Furman ,
who has become a titan of center-left policy advocacy. Obama mixes a healthy respect for capitalism
with a desire to use government to temper the market's excesses.
But there's a second strain of progressive economic thinking that is gaining attention and strength.
This alternative could be called the New Heterodox Explosion. It's basically a movement to purge
mainstream economics from progressive policy-making and thought.
The New Heterodox Explosion rose in large part out of strongly left-leaning intellectual circles,
particularly sociology, the humanities and other disciplines outside economics. It has also found
a home in some economics departments in other countries (most notably the U.K.). Recently, it has
started to permeate blogs and the media.
The new website Evonomics , for example, is
heavily devoted to strongly worded critiques of the entire edifice of modern [neoliberal] economics
and it's where the work of many of the most outspoken champions of the New Heterodox Explosion appears.
These include evolutionary biologist David Sloan Wilson, activist and venture capitalist Nick Hanauer,
speechwriter Eric Liu and Eric Beinhocker of the Institute for New Economic Thinking. In a spate
of recent blog posts and editorials, these thinkers have
advocated replacing mainstream economic theory with thinking based on evolution, and/or on complexity
theory.
Though it's difficult to boil down these critiques to a few sentences, one basic theme of Wilson,
Hanauer, et al.'s thinking is that modern economics is based on selfishness. Mainstream theories
model human beings as atomistic individuals pursuing their own wants. But, say these Evonomics writers,
people are social beings who care a lot about their fellow humans, and are also deeply embedded in
larger social structures and organizations like communities, nations and cultures.
I'm sympathetic to this point of view. I'm not at all sure that economies can be completely understood
by looking at individual decisions, any more than I'm certain the growth of a tree can be understood
simply by looking at the motions of the particles in the leaves and roots. And I do wish that economists
dedicated a lot more thought and attention to the phenomena they call "
externalities "
and "
social preferences ."
But I'm also very wary of applying the Evonomics ideas to policy-making without a lot more work.
First, the connection to evolution and complexity theory often seems less than solid. Nobody
really knows if economies evolve the way organisms do. And efforts to connect complexity theory
to economics, led by the Santa Fe Institute
, have been going on for quite some time without any dramatic breakthroughs.
So while the New Center-Left Consensus is fully formed and ready for application in the real world,
the New Heterodox Explosion is still in its infancy. Center-left ideas have tons of very careful
academic empirical work behind them, while those wishing to tear up economics and start over are
still working mostly with broad analogies. I hope that the New Heterodox Explosion -- which of course
extends far beyond the few writers and ideas I've cited in this post -- becomes a rich source of
new and innovative economic ideas. But it still has a long way to go to match the intellectual heft
of the center-left.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and
its owners.
Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony
Brook University, and he blogs at Noahpinion.
"... Social mobility is the kind of equality professional and managerial elites support. ..."
"... High rates of social mobility are not inconsistent with systems of stratification that concentrate power and privilege in a ruling elite. Certainly the circulation of elites strengthens the idea of hierarchy furnishing it with fresh talent and legitimating their ascendancy as a function of merit rather than birth. ..."
"... Look at the root of the problem: capitalism is a profit seeking competition based social organization. This is not meant as a judgement, but it can be demonstrated that capitalism and any other form of social organization based on profit seeking, in principle, is unsustainable within a closed system, such as planet Earth, without periodic destruction of its material wealth and human population. ..."
Social mobility is the kind of equality professional and managerial elites support.
Our present society seems quite mobile and highly stratified.
Historically social mobility became an interpretation of opportunity only after more hopeful interpretations
of opportunity (yeoman idea– your own plot of land– rather than Horatio Alger) began to fade out of the
American experience (sometime after 1890 when social stratification could no longer be ignored).
High rates of social mobility are not inconsistent with systems of stratification that concentrate
power and privilege in a ruling elite. Certainly the circulation of elites strengthens the idea of hierarchy
furnishing it with fresh talent and legitimating their ascendancy as a function of merit rather than
birth.
Social policy that would support a wider distribution of land would give a significant support to
a parents' ability to bequeth property to their children–as seen, for example, in the Homstead Act.
Think tradition of Jefferson, Lincoln and Orestes Brownson.
I just listened to this podcast yesterday. It's Glenn Loury not William Darity,
Jr. unless they had practically the same life. But there are at least a dozen lines
that are verbatim from the podcast.
http://loveandradio.org/2016/10/the-enemy-within/
Look at the root of the problem: capitalism is a profit seeking competition
based social organization. This is not meant as a judgement, but it can be demonstrated
that capitalism and any other form of social organization based on profit seeking,
in principle, is unsustainable within a closed system, such as planet Earth, without
periodic destruction of its material wealth and human population. And this destruction
becomes increasingly severe and threatening to the existence of the entire system
as this social organization, such as capitalism, evolves.
As far as the fundamental premise 'that everyone can prosper in the individual race for wealth given
equal starting opportunities are provided' is not questioned all these studies calling for creation
of "truly equal opportunities" will only exacerbate the problem, which is being practically done (explicitly
or implicitly, knowingly or unknowingly) by many famous liberal economists, including Joseph Stiglitz,
Robert Reich, Bill Black, Michael Hudson, etc., who are trying to find the ways to fix and improve capitalism
without touching the fundamentals.
This is not to say that social economic reforms that practically improve the lives of millions poor
people are wrong or useless. Fighting cancer can be helpful, but only until and unless it kills the
host. So, all these studies, policies, proposals, etc. can be helpful and productive only if clear awareness
of the nature of the disease (capitalism) they are trying to treat exists.
"... Clinton says publically she believes that. Meanwhile supposedly smart economists like Tyler Cowen say they don't. Boston Fed President Rosengren says there are too many jobs. We need more unemployed. I'm Fed Up with regional Fed Presidents like him. ..."
"... Class issues are now a tough nut to crack, partly I think because the Democrats and some liberals take demands for economic fairness and try to give us identity politics instead, ..."
"... The meritocratic class who Krugman speaks for and centrist politicians like Clinton will slow-walk class issues like how Tim Geithner slow-walked financial reform. It's part of their job description and milieu. ..."
"... It's funny when neo-liberals/libertarians hate an activity engaged in by workers in what is clearly the product of a free market -- exercising the right of free association and organizing to do collective bargaining -- while think it is perfectly OK -- indeed, so "natural" that any question wouldn't even occur to them -- for owners of capital to organize themselves under the special protections of the state-created corporation. ..."
"... It's understandable, though, that they would consider the corporation to be ordained by natural law: the Founding Fathers, after all, were dedicated to the proposition that all men and corporations are endowed with certain unalienable rights by their Creator. (Never mind that the creator of the corporations is the state.) ..."
I liked how Hillary said in the third debate that she was for raising the minimum wage because
people who work full time shouldn't live in poverty. And "Donald" is against it. That's why people
are voting for her.
That's an ethical or moral notion, combined with "morally neutral" economics. People who work
hard full time, play by the rules and pay their dues shouldn't live in poverty.
Clinton says publically she believes that. Meanwhile supposedly smart economists like Tyler
Cowen say they don't. Boston Fed President Rosengren says there are too many jobs. We need more
unemployed. I'm Fed Up with regional Fed Presidents like him.
Think about the debate between the centrists and progressives over Trump supporters. The centrists
argue Trump supporters (nor anyone else besides a few) aren't suffering from economic anxiety
- that it's racism all of the way down. Matt Yglesias. Dylan Matthews. Krugman. Meyerson. Etc.
The progressives admit there's racism, but there's a wider context. The Nazis were racists,
but there was also the Treaty of Versailles and the Great Depression. And Germany got better in
the decades after the war just as the American South is better than it once was. Steve Randy Waldman
and James Kwak discussed in blog post how the wider context should be taken into consideration.
On some "non-economic issues" there has been progress even though the recent decades haven't
been as booming as the post-WWII decades were with rising living standards for all.
A black President. Legalized gay marriage. Legalized pot. I wouldn't have thought these things
as likely to happen when I was a teenager because of the bigoted authoritarian nature of many
voters and elites. During the Progressive era and when the New Deal was enacted, racism and sexism
and bigotry and anti-science thinking was virulent. Yet economic progress was made on the class
front.
Class issues are now a tough nut to crack, partly I think because the Democrats and some
liberals take demands for economic fairness and try to give us identity politics instead,
not that the latter isn't worthwhile. Partly b/c of what Mike Konczal discussed in his recent
Medium piece.
If we can just apply the morality and politics of electing a black President and legalizing
gay marriage and pot, to class issues. The meritocratic class who Krugman speaks for and centrist
politicians like Clinton will slow-walk class issues like how Tim Geithner slow-walked financial
reform. It's part of their job description and milieu.
But Clinton did talk to it during the third debate when she said she'd raise the minimum wage
because people who work full time shouldn't live in poverty. That is a morale issue as the new
Pope has been talking about.
Hillary should have joked last night about what God's Catholic representative here on Earth
had to say about Trump.
urban legend said...
It's funny when neo-liberals/libertarians hate an activity engaged in by workers in what is
clearly the product of a free market -- exercising the right of free association and organizing
to do collective bargaining -- while think it is perfectly OK -- indeed, so "natural" that any
question wouldn't even occur to them -- for owners of capital to organize themselves under the
special protections of the state-created corporation.
It's understandable, though, that they would consider the corporation to be ordained by
natural law: the Founding Fathers, after all, were dedicated to the proposition that all men and
corporations are endowed with certain unalienable rights by their Creator. (Never mind that the
creator of the corporations is the state.)
So: Hillary Clinton has already said that she will raise Social Security taxes on people who make
less than $118,500 per year, but Donald Trump has not indicated whether he will impose Social Security
taxes on income above $118,500 per year.
Other proposals that have been pushed in order to "replenish the Social Security Trust Fund" -
or to achieve the long-term stability of the Social Security system - mainly focus on three approaches:
One is privatizing Social Security, as Wall Street wants, and which proposal is based on private
gambles that the assets that are
purchased by the Wall
Street firm for the individual investor will continually increase in value, never plunge, and never
be reduced by annual charges to pay Wall Street's fees for management and for transactions, throughout
the worker's career until retirement.
Another approach is gradually reducing
the inflation-adjuster for benefits, the inflation-adjusted value of the benefits that Social
Security recipients will be receiving. President Obama had been trying to get congressional Republicans
to agree with him to do that (which some call "the boiling-frog approach" because it's applied so
gradually), but they continued to hold out for privatizing Social Security, and thus nothing was
done.
And the third option is to increase the retirement-age, as Obama also wanted to do (and which
is really just another form of "boiling-frog approach"), but also couldn't get congressional Republicans
to accept that. (Trump's comment to "Not increase the age and to leave it as it is" is a clear repudiation
by him of this approach. And his promise to not increase taxes would, if taken seriously, also prohibit
him from endorsing Hillary Clinton's approach.)
For-profit colleges may be playing defense in the public perception, but they have not given up their
offensive game, if their recent contributions to Congress are any indication.
For-profit education colleges and trade groups donated more than $1.4 million to federal candidates,
parties and elected officials during the first eight months of 2016, according to the most recent
tally by the Center for Responsive Politics. Lobbyists for the sector spent an additional $2.6 million.
(Nonprofit colleges are not permitted to donate to candidates.)
The top recipients in Congress are, or were, running for election, and all but one of the incumbents
have a leadership position on or are members of one of the powerful committees that help determine
the flow of federal money to for-profit colleges. The top three recipients can count for-profit sector
groups among their top campaign contributors.
For-profit colleges and advocates gave $657,531 to 139 incumbents and candidates running for the
House of Representatives. Click
HERE for list
of House members and candidates (by amount of contribution). There were 54 Senators and candidates
for the Senate who received contributions, for a total of $378,758 between January and August of
this year. Click
HERE for list
of Senators and candidates (by amount of contribution.)
More than a third of the money donated to sitting Senators has gone to members of the Armed Services
committee and most of that went to its powerful chairman, John McCain (R-AZ). Last year the Pentagon
banned the biggest for-profit college, the University of Phoenix, from recruiting on military bases
and receiving federal tuition, citing deceptive practices. But McCain lobbied loud and hard and succeeded
in reversing the ban in January.
Republicans running for Congress scooped up 72 percent of contributions from the for-profit education
sector during the first eight months of this year. That's a change from 2010, when they only received
39 percent of contributions. The Presidential race this year, however, has favored the Democrat,
Hillary Clinton.
Some of the biggest donors so far this year are for-profit institutions that have drawn scrutiny
from federal agencies for high student debt levels and low graduation rates. Bridgepoint, at the
top of the list, is under investigation by the Justice Department; it also must pay millions of dollars
in fines to resolve the Consumer Financial Protection Bureau's accusation that its private student
loan advertisements misled students. Corinthian Colleges filed for bankruptcy last year and this
year was forced to pay massive fines for defrauding students.
Meredith Kolodner
is a staff writer at The Hechinger Report. She previously covered schools for the
New York Daily News and was an editor at InsideSchools.org and for The Investigative Fund at the
Nation Institute. She's also covered housing, schools, and local government for the Press of Atlantic
City and The Chief-Leader newspaper and her work has appeared in the New York Times and the American
Prospect. Kolodner is a graduate of Brown University and Columbia University's Graduate School of
Journalism and an active New York City public school parent. She is grateful to her 11th grade English
teacher who persistently gave her Cs on essays until she finally stopped burying the lead.
"... As I have tirelessly explained, the U.S. economy is not just neoliberal (the code word for
maximizing private gain by any means available, including theft, fraud, embezzlement, political fixing,
price-fixing, and so on)--it is neofeudal , meaning that it is structurally an updated version of Medieval
feudalism in which a top layer of financial-political nobility owns the engines of wealth and governs
the marginalized debt-serfs who toil to pay student loans, auto loans, credit cards, mortgages and taxes--all
of which benefit the financiers and political grifters. ..."
"... The media is in a self-referential frenzy to convince us the decision of the century is between
unrivaled political grifter Hillary Clinton and financier-cowboy Donald Trump. Both belong to the privileged
ruling Elite: both have access to cheap credit, insider information ( information asymmetry ) and political
influence. ..."
"... If you exit the Pentagon, CIA, NSA, etc. at a cushy managerial rank with a fat pension and
lifetime benefits and are hired at a fat salary the next day by a private "defense" contractor--the
famous revolving door between a bloated state and a bloated defense industry--the system works great.
..."
Brimming with hubris and self-importance, the ruling Elite and mainstream media cannot believe
they have lost the consent of the governed.
Every ruling Elite needs the consent of the governed: even autocracies, dictatorships and corporatocracies
ultimately rule with the consent, however grudging, of the governed.
The American ruling Elite has lost the consent of the governed. This reality is being masked by
the mainstream media, mouthpiece of the ruling class, which is ceaselessly promoting two false narratives:
The "great divide" in American politics is between left and right, Democrat/Republican
The ruling Elite has delivered "prosperity" not just to the privileged few but to the unprivileged
many they govern.
Both of these assertions are false. The Great Divide in America is between the ruling Elite and
the governed that the Elite has stripmined. The ruling Elite is privileged and protected, the governed
are unprivileged and unprotected. That's the divide that counts and the divide that is finally becoming
visible to the marginalized, unprivileged class of debt-serfs.
The "prosperity" of the 21st century has flowed solely to the ruling Elite and its army of technocrat
toadies, factotums, flunkies, apparatchiks and apologists. The Elite's army of technocrats and its
media apologists have engineered and promoted an endless spew of ginned-up phony statistics (the
super-low unemployment rate, etc.) to create the illusion of "growth" and "prosperity" that benefit
everyone rather than just the top 5%. The media is 100% committed to promoting these two false narratives
because the jig is up once the bottom 95% wake up to the reality that the ruling Elite has been stripmining
them for decades.
As I have tirelessly explained, the U.S. economy is not just neoliberal (the code word
for maximizing private gain by any means available, including theft, fraud, embezzlement, political
fixing, price-fixing, and so on)--it is neofeudal , meaning that it is structurally an updated
version of Medieval feudalism in which a top layer of financial-political nobility owns the engines
of wealth and governs the marginalized debt-serfs who toil to pay student loans, auto loans, credit
cards, mortgages and taxes--all of which benefit the financiers and political grifters.
The media is in a self-referential frenzy to convince us the decision of the century is between
unrivaled political grifter Hillary Clinton and financier-cowboy Donald Trump. Both belong to the
privileged ruling Elite: both have access to cheap credit, insider information ( information asymmetry
) and political influence.
The cold truth is the ruling Elite has shredded the social contract by skimming the income/wealth
of the unprivileged. The fake-"progressive" pandering apologists of the ruling Elite--Robert Reich,
Paul Krugman and the rest of the Keynesian Cargo Cultists--turn a blind eye to the suppression of
dissent and the looting the bottom 95% because they have cushy, protected positions as tenured faculty
(or equivalent). They cheerlead for more state-funded bread and circuses for the marginalized
rather than demand an end to exploitive privileges of the sort they themselves enjoy.
Consider just three of the unsustainably costly broken systems that enrich the privileged Elite
by stripmining the unprivileged:
healthcare (a.k.a. sickcare because sickness is profitable, prevention is unprofitable),
higher education
Imperial over-reach (the National Security State and its partner the privately owned Military-Industrial
Complex).
While the unprivileged and unprotected watch their healthcare premiums and co-pays soar year after
year, the CEOs of various sickcare cartels skim off tens of millions of dollars annually in pay and
stock options. The system works great if you get a $20 million paycheck. If you get a 30% increase
in monthly premiums for fewer actual healthcare services--the system is broken.
If you're skimming $250,000 as under-assistant dean to the provost for student services (or equivalent)
plus gold-plated benefits, higher education is working great. If you're a student burdened with tens
of thousands of dollars in student loan debt who is receiving a low-quality, essentially worthless
"education" from poorly paid graduate students ("adjuncts") and a handful of online courses that
you could get for free or for a low cost outside the university cartel--the system is broken.
If you exit the Pentagon, CIA, NSA, etc. at a cushy managerial rank with a fat pension and
lifetime benefits and are hired at a fat salary the next day by a private "defense" contractor--the
famous revolving door between a bloated state and a bloated defense industry--the system works great.
If you joined the Armed Forces to escape rural poverty and served at the point of the spear somewhere
in the Imperial Project--your perspective may well be considerably different.
Unfortunately for the ruling Elite and their army of engorged enablers and apologists, they have
already lost the consent of the governed.
They have bamboozled, conned and misled the bottom 95% for decades, but their phony facade of
political legitimacy and "the rising tide raises all boats" has cracked wide open, and the machinery
of oppression, looting and propaganda is now visible to everyone who isn't being paid to cover their
eyes. Brimming with hubris and self-importance, the ruling Elite and mainstream media cannot believe
they have lost the consent of the governed. The disillusioned governed have not fully absorbed this
epochal shift of the tides yet, either. They are aware of their own disillusionment and their own
declining financial security, but they have yet to grasp that they have, beneath the surface of everyday
life, already withdrawn their consent from a self-serving, predatory, parasitic, greedy and ultimately
self-destructive ruling Elite.
"... At bottom, the success of despotic governments and Big Brother societies hinges upon a certain
number of political, financial, and cultural developments. The first of which is an unwillingness in
the general populace to secure and defend their own freedoms, making them completely reliant on corrupt
establishment leadership. For totalitarianism to take hold, the masses must not only neglect the plight
of their country, and the plight of others, but also be completely uninformed of the inherent indirect
threats to their personal safety. ..."
"... The prevalence of apathy and ignorance sets the stage for the slow and highly deliberate process
of centralization. ..."
"... People who are easily frightened are easily dominated. This is not just a law of political
will, but a law of nature. Many wrongly assume that a tyrant's power comes purely from the application
of force. In fact, despotic regimes that rely solely on extreme violence are often very unsuccessful,
and easily overthrown. ..."
"... They instill apprehension in the public; a fear of the unknown, or a fear of the possible consequences
for standing against the state. They let our imaginations run wild until we see death around every corner,
whether it's actually there or not. When the masses are so blinded by the fear of reprisal that they
forget their fear of slavery, and take no action whatsoever to undo it, then they have been sufficiently
culled. ..."
"... The bread and circus lifestyle of the average westerner alone is enough to distract us from
connecting with each other in any meaningful fashion, but people still sometimes find ways to seek out
organized forms of activism. ..."
"... In more advanced forms of despotism, even fake organizations are disbanded. Curfews are enforced.
Normal communications are diminished or monitored. Compulsory paperwork is required. Checkpoints are
instituted. Free speech is punished. Existing groups are influenced to distrust each other or to disintegrate
entirely out of dread of being discovered. All of these measures are taken by tyrants primarily to prevent
ANY citizens from gathering and finding mutual support. People who work together and organize of their
own volition are unpredictable, and therefore, a potential risk to the state. ..."
"... Destitution leads not just to hunger, but also to crime (private and government). Crime leads
to anger, hatred, and fear. Fear leads to desperation. Desperation leads to the acceptance of anything
resembling a solution, even despotism. ..."
"... Autocracies pretend to cut through the dilemmas of economic dysfunction (usually while demanding
liberties be relinquished), however, behind the scenes they actually seek to maintain a proscribed level
of indigence and deprivation. The constant peril of homelessness and starvation keeps the masses thoroughly
distracted from such things as protest or dissent, while simultaneously chaining them to the idea that
their only chance is to cling to the very government out to end them. ..."
"... When law enforcement officials are no longer servants of the people, but agents of a government
concerned only with its own supremacy, serious crises emerge. Checks and balances are removed. The guidelines
that once reigned in police disappear, and suddenly, a philosophy of superiority emerges; an arrogant
exclusivity that breeds separation between law enforcement and the rest of the public. Finally, police
no longer see themselves as protectors of citizens, but prison guards out to keep us subdued and docile.
..."
"... Tyrants are generally men who have squelched their own consciences. They have no reservations
in using any means at their disposal to wipe out opposition. But, in the early stages of their ascent
to power, they must give the populace a reason for their ruthlessness, or risk being exposed, and instigating
even more dissent. The propaganda machine thus goes into overdrive, and any person or group that dares
to question the authority or the validity of the state is demonized in the minds of the masses. ..."
"... Tyrannical power structures cannot function without scapegoats. There must always be an elusive
boogie man under the bed of every citizen, otherwise, those citizens may turn their attention, and their
anger, towards the real culprit behind their troubles. By scapegoating stewards of the truth, such governments
are able to kill two birds with one stone. ..."
"... Citizen spying is almost always branded as a civic duty; an act of heroism and bravery. Citizen
spies are offered accolades and awards, and showered with praise from the upper echelons of their communities.
..."
"... Tyrannies are less concerned with dominating how we live, so much as dominating how we think
..."
"... Lies become "necessary" in protecting the safety of the state. War becomes a tool for "peace".
Torture becomes an ugly but "useful" method for gleaning important information. Police brutality is
sold as a "natural reaction" to increased crime. Rendition becomes normal, but only for those labeled
as "terrorists". Assassination is justified as a means for "saving lives". Genocide is done discretely,
but most everyone knows it is taking place. They simply don't discuss it. ..."
As we look back on the horrors of the dictatorships and autocracies of the past, one particular
question consistently arises; how was it possible for the common men of these eras to NOT notice
what was happening around them? How could they have stood as statues unaware or uncaring as their
cultures were overrun by fascism, communism, collectivism, and elitism? Of course, we have the advantage
of hindsight, and are able to research and examine the misdeeds of the past at our leisure. Unfortunately,
such hindsight does not necessarily shield us from the long cast shadow of tyranny in our own day.
For that, the increasingly uncommon gift of foresight is required…
At bottom, the success of despotic governments and Big Brother societies hinges upon a certain
number of political, financial, and cultural developments. The first of which is an unwillingness
in the general populace to secure and defend their own freedoms, making them completely reliant on
corrupt establishment leadership. For totalitarianism to take hold, the masses must not only neglect
the plight of their country, and the plight of others, but also be completely uninformed of the inherent
indirect threats to their personal safety. They must abandon all responsibility for their destinies,
and lose all respect for their own humanity. They must, indeed, become domesticated and mindless
herd animals without regard for anything except their fleeting momentary desires for entertainment
and short term survival. For a lumbering bloodthirsty behemoth to actually sneak up on you, you have
to be pretty damnably oblivious.
The prevalence of apathy and ignorance sets the stage for the slow and highly deliberate process
of centralization. Once dishonest governments accomplish an atmosphere of inaction and condition
a sense of frailty within the citizenry, the sky is truly the limit. However, a murderous power-monger's
day is never quite done. In my recent article
'The
Essential Rules of Liberty' we explored the fundamentally unassailable actions and mental preparations
required to ensure the continuance of a free society. In this article, let's examine the frequently
wielded tools of tyrants in their invariably insane quests for total control…
People who are easily frightened are easily dominated. This is not just a law of political
will, but a law of nature. Many wrongly assume that a tyrant's power comes purely from the application
of force. In fact, despotic regimes that rely solely on extreme violence are often very unsuccessful,
and easily overthrown. Brute strength is calculable. It can be analyzed, and thus, eventually
confronted and defeated.
Thriving tyrants instead utilize not just harm, but the imminent THREAT of harm. They instill
apprehension in the public; a fear of the unknown, or a fear of the possible consequences for
standing against the state. They let our imaginations run wild until we see death around every
corner, whether it's actually there or not. When the masses are so blinded by the fear of reprisal
that they forget their fear of slavery, and take no action whatsoever to undo it, then they have
been sufficiently culled.
In other cases, our fear is evoked and directed towards engineered enemies. Another race, another
religion, another political ideology, a "hidden" and ominous villain created out of thin air.
Autocrats assert that we "need them" in order to remain safe and secure from these illusory monsters
bent on our destruction. As always, this development is followed by the claim that all steps taken,
even those that dissolve our freedoms, are "for the greater good". Frightened people tend to shirk
their sense of independence and run towards the comfort of the collective, even if that collective
is built on immoral and unconscionable foundations. Once a society takes on a hive-mind mentality
almost any evil can be rationalized, and any injustice against the individual is simply overlooked
for the sake of the group.
In the past, elitist governments would often legislate and enforce severe penalties for public
gatherings, because defusing the ability of the citizenry to organize or to communicate was paramount
to control. In our technological era, such isolation is still used, but in far more advanced forms.
The bread and circus lifestyle of the average westerner alone is enough to distract us from connecting
with each other in any meaningful fashion, but people still sometimes find ways to seek out organized
forms of activism.
Through co-option, modern day tyrant's can direct and manipulate opposition movements. By creating
and administrating groups which oppose each other, elites can then micromanage all aspects of
a nation on the verge of revolution. These "false paradigms" give us the illusion of proactive
organization, and the false hope of changing the system, while at the same time preventing us
from seeking understanding in one another. All our energies are then muted and dispersed into
meaningless battles over "left and right", or "Democrat versus Republican", for example. Only
movements that cast aside such empty labels and concern themselves with the ultimate truth of
their country, regardless of what that truth might reveal, are able to enact real solutions to
the disasters wrought by tyranny.
In more advanced forms of despotism, even fake organizations are disbanded. Curfews are
enforced. Normal communications are diminished or monitored. Compulsory paperwork is required.
Checkpoints are instituted. Free speech is punished. Existing groups are influenced to distrust
each other or to disintegrate entirely out of dread of being discovered. All of these measures
are taken by tyrants primarily to prevent ANY citizens from gathering and finding mutual support.
People who work together and organize of their own volition are unpredictable, and therefore,
a potential risk to the state.
You'll find in nearly every instance of cultural descent into autocracy, the offending government
gained favor after the onset of economic collapse. Make the necessities of root survival an uncertainty,
and people without knowledge of self sustainability and without solid core principles will gladly
hand over their freedom, even for mere scraps from the tables of the same men who unleashed famine
upon them. Financial calamities are not dangerous because of the poverty they leave in their wake;
they are dangerous because of the doors to malevolence that they leave open.
Destitution leads not just to hunger, but also to crime (private and government). Crime
leads to anger, hatred, and fear. Fear leads to desperation. Desperation leads to the acceptance
of anything resembling a solution, even despotism.
Autocracies pretend to cut through the dilemmas of economic dysfunction (usually while
demanding liberties be relinquished), however, behind the scenes they actually seek to maintain
a proscribed level of indigence and deprivation. The constant peril of homelessness and starvation
keeps the masses thoroughly distracted from such things as protest or dissent, while simultaneously
chaining them to the idea that their only chance is to cling to the very government out to end
them.
This is the main symptom often associated with totalitarianism. So much so that our preconceived
notions of what a fascist government looks like prevent us from seeing other forms of tyranny
right under our noses. Some Americans believe that if the jackbooted thugs are not knocking on
every door, then we MUST still live in a free country. Obviously, this is a rather naïve position.
Admittedly, though, goon squads and secret police do eventually become prominent in every failed
nation, usually while the public is mesmerized by visions of war, depression, hyperinflation,
terrorism, etc.
When law enforcement officials are no longer servants of the people, but agents of a government
concerned only with its own supremacy, serious crises emerge. Checks and balances are removed.
The guidelines that once reigned in police disappear, and suddenly, a philosophy of superiority
emerges; an arrogant exclusivity that breeds separation between law enforcement and the rest of
the public. Finally, police no longer see themselves as protectors of citizens, but prison guards
out to keep us subdued and docile.
As tyranny grows, this behavior is encouraged. Good men are filtered out of the system, and
small (minded and hearted) men are promoted.
At its pinnacle, a police state will hide the identities of most of its agents and officers,
behind masks or behind red tape, because their crimes in the name of the state become so numerous
and so sadistic that personal vengeance on the part of their victims will become a daily concern.
Tyrants are generally men who have squelched their own consciences. They have no reservations
in using any means at their disposal to wipe out opposition. But, in the early stages of their
ascent to power, they must give the populace a reason for their ruthlessness, or risk being exposed,
and instigating even more dissent. The propaganda machine thus goes into overdrive, and any person
or group that dares to question the authority or the validity of the state is demonized in the
minds of the masses.
All disasters, all violent crimes, all the ills of the world, are hoisted upon the shoulders
of activist groups and political rivals. They are falsely associated with fringe elements already
disliked by society (racists, terrorists, etc). A bogus consensus is created through puppet media
in an attempt to make the public believe that "everyone else" must have the same exact views,
and those who express contrary positions must be "crazy", or "extremist". Events are even engineered
by the corrupt system and pinned on those demanding transparency and liberty. The goal is to drive
anti-totalitarian organizations into self censorship. That is to say, instead of silencing them
directly, the state causes activists to silence themselves.
Tyrannical power structures cannot function without scapegoats. There must always be an
elusive boogie man under the bed of every citizen, otherwise, those citizens may turn their attention,
and their anger, towards the real culprit behind their troubles. By scapegoating stewards of the
truth, such governments are able to kill two birds with one stone.
Ultimately, the life of a totalitarian government is not prolonged by the government itself,
but by the very people it subjugates. Citizen spies are the glue of any police state, and our
propensity for sticking our noses into other peoples business is highly valued by Big Brother
bureaucracies around the globe.
There are a number of reasons why people participate in this repulsive activity. Some are addicted
to the feeling of being a part of the collective, and "service" to this collective, sadly, is
the only way they are able to give their pathetic lives meaning. Some are vindictive, cold, and
soulless, and actually get enjoyment from ruining others. And still, like elites, some long for
power, even petty power, and are willing to do anything to fulfill their vile need to dictate
the destinies of perfect strangers.
Citizen spying is almost always branded as a civic duty; an act of heroism and bravery.
Citizen spies are offered accolades and awards, and showered with praise from the upper echelons
of their communities. People who lean towards citizen spying are often outwardly and inwardly
unimpressive; physically and mentally inept. For the average moral and emotional weakling with
persistent feelings of inadequacy, the allure of finally being given fifteen minutes of fame and
a hero's status (even if that status is based on a lie) is simply too much to resist. They begin
to see "extremists" and "terrorists" everywhere. Soon, people afraid of open ears everywhere start
to watch what they say at the supermarket, in their own backyards, or even to family members.
Free speech is effectively neutralized.
In the end, it is not enough for a government fueled by the putrid sludge of iniquity to lord
over us. At some point, it must also influence us to forsake our most valued principles. Tyrannies
are less concerned with dominating how we live, so much as dominating how we think. If they
can mold our very morality, they can exist unopposed indefinitely. Of course, the elements of
conscience are inborn, and not subject to environmental duress as long as a man is self aware.
However, conscience can be manipulated if a person has no sense of identity, and has never put
in the effort to explore his own strengths and failings. There are many people like this in America
today.
Lies become "necessary" in protecting the safety of the state. War becomes a tool for "peace".
Torture becomes an ugly but "useful" method for gleaning important information. Police brutality
is sold as a "natural reaction" to increased crime. Rendition becomes normal, but only for those
labeled as "terrorists". Assassination is justified as a means for "saving lives". Genocide is
done discretely, but most everyone knows it is taking place. They simply don't discuss it.
All tyrannical systems depend on the apathy and moral relativism of the inhabitants within
their borders. Without the cooperation of the public, these systems cannot function. The real
question is, how many of the above steps will be taken before we finally refuse to conform? At
what point will each man and woman decide to break free from the dark path blazed before us and
take measures to ensure their independence? Who will have the courage to develop their own communities,
their own alternative economies, their own organizations for mutual defense outside of establishment
constructs, and who will break under the pressure to bow like cowards? How many will hold the
line, and how many will flee?
For every American, for every human being across the planet who chooses to stand immovable
in the face of the very worst in mankind, we come that much closer to breathing life once again
into the very best in us all.
"... In ['William Darity, Jr.'s] his view, the capacity of parents and grandparents to invest in their children is contingent on their wealth position" [ iNet ]. ..."
"... "What drives white-collar criminals? Often, these are successful people who possess great wealth, have impeccable education, and hold much influence within their respective industries, yet they risk it all by breaking the law" [ ProMarket ]. "Incentives specifically play a big role in fostering white-collar crime, according to Soltes, especially when financial managers are pressured to succeed and have to make rapid decisions one after the other, their potential victims far from view. 'I was doing exactly what I was incentivized to do. We wouldn't have gone through all this trouble if we just wanted to cheat,' says Enron CFO Andrew Fastow in the book.'" ..."
"In ['William Darity, Jr.'s] his view, the capacity of parents and grandparents to invest
in their children is contingent on their wealth position" [
iNet ].
"The real driver of inequality, then, is not an individual's level of education and productivity,
but the resources that parents and grandparents are able to transmit." Hence: "[S]tratification economics."
Might go down easier than "class warfare," I dunno.
"What drives white-collar criminals? Often, these are successful people who possess great
wealth, have impeccable education, and hold much influence within their respective industries, yet
they risk it all by breaking the law" [
ProMarket
]. "Incentives specifically play a big role in fostering white-collar crime, according to Soltes,
especially when financial managers are pressured to succeed and have to make rapid decisions one
after the other, their potential victims far from view. 'I was doing exactly what I was incentivized
to do. We wouldn't have gone through all this trouble if we just wanted to cheat,' says Enron CFO
Andrew Fastow in the book.'"
"Mike Konczal has an interesting piece on how the progressives are unlikely to win over Trump's
base of white, male, working class voters – even if they take their concerns to heart and propose
policies that will help them… Konczal might well be right, but I want to entertain the possibility
that he is wrong" [
Dani Rodrik ]. I will say that Konczal knows how to generate buzz. More:
"Konczal might well be right, but I want to entertain the possibility that he is wrong…. If
left-liberals take for granted that the white middle class is essentially racist, hate the federal
government, oppose progressive taxation, don't think big banks and dark money are a problem …
and so on, then indeed many of the remedies that progressives have to offer will fail to resonate
and there is little that can be done. But why should we assume that these are the givens of political
life?
A large literature in social psychology and political economy suggests that identities are
malleable as are voters' perceptions of how the world works and therefore which policies serve
their interests. A large part of the right's success derives from their having convinced lower
and middle class voters that the government is corrupt and inept. Can't progressives alter that
perception?
Note that Rodrik has exactly the same conflation of "progressive," "left," and "liberal" that
Konczal does. Je repete : Liberals (and conservatives) want to divide the working class, and
they use their distinctive flavors of identity politics to do so. The left wishes to unite them.
And both liberals and conservatives will deny that identity is malleable (Clinton's "irredeemables")
not only because to admit that would smash any number of rice bowls, but because it would smash their
social functions as factions. What should give the left hope in Rodrik's rejoinder - hope that Konczal
is, quite naturally, attempting to strangle in its cradle - is the notion that identity is malleable;
Occupy, with the 99% concept, proved that. Thomas Frank, with his 10%, takes the same approach. Of
course, 99 and 10 don't add to 100, so there's some analytical work to be done, but the way forward
beyond identity politics is clear.
For-profit colleges may be playing defense in the public perception, but they have not given up their
offensive game, if their recent contributions to Congress are any indication.
For-profit education colleges and trade groups donated more than $1.4 million to federal candidates,
parties and elected officials during the first eight months of 2016, according to the most recent
tally by the Center for Responsive Politics. Lobbyists for the sector spent an additional $2.6 million.
(Nonprofit colleges are not permitted to donate to candidates.)
The top recipients in Congress are, or were, running for election, and all but one of the incumbents
have a leadership position on or are members of one of the powerful committees that help determine
the flow of federal money to for-profit colleges. The top three recipients can count for-profit sector
groups among their top campaign contributors.
For-profit colleges and advocates gave $657,531 to 139 incumbents and candidates running for the
House of Representatives. Click
HERE for list
of House members and candidates (by amount of contribution). There were 54 Senators and candidates
for the Senate who received contributions, for a total of $378,758 between January and August of
this year. Click
HERE for list
of Senators and candidates (by amount of contribution.)
More than a third of the money donated to sitting Senators has gone to members of the Armed Services
committee and most of that went to its powerful chairman, John McCain (R-AZ). Last year the Pentagon
banned the biggest for-profit college, the University of Phoenix, from recruiting on military bases
and receiving federal tuition, citing deceptive practices. But McCain lobbied loud and hard and succeeded
in reversing the ban in January.
Republicans running for Congress scooped up 72 percent of contributions from the for-profit education
sector during the first eight months of this year. That's a change from 2010, when they only received
39 percent of contributions. The Presidential race this year, however, has favored the Democrat,
Hillary Clinton.
Some of the biggest donors so far this year are for-profit institutions that have drawn scrutiny
from federal agencies for high student debt levels and low graduation rates. Bridgepoint, at the
top of the list, is under investigation by the Justice Department; it also must pay millions of dollars
in fines to resolve the Consumer Financial Protection Bureau's accusation that its private student
loan advertisements misled students. Corinthian Colleges filed for bankruptcy last year and this
year was forced to pay massive fines for defrauding students.
Meredith Kolodner
is a staff writer at The Hechinger Report. She previously covered schools for the
New York Daily News and was an editor at InsideSchools.org and for The Investigative Fund at the
Nation Institute. She's also covered housing, schools, and local government for the Press of Atlantic
City and The Chief-Leader newspaper and her work has appeared in the New York Times and the American
Prospect. Kolodner is a graduate of Brown University and Columbia University's Graduate School of
Journalism and an active New York City public school parent. She is grateful to her 11th grade English
teacher who persistently gave her Cs on essays until she finally stopped burying the lead.
"... Mr. James recommended a proposal by Teresa Ghilarducci, director of the Schwartz Center for Economic Policy Analysis at The New School in New York, to create a retirement savings plan for everyone based on 3% annual salary contributions shared equally among employees and employers. The federal government would guarantee a 2% return, through a modest insurance premium on such accounts . "With corporate profits at an all-time high, this should be a manageable burden," he said, adding that the approach "is going to require us to look beyond the next election cycle." ..."
Blackstone Group's Tony James, likely to be Clinton's Sec of Treasury, advocates a hedgfund enriching
scheme involving MANDATORY government savings plan on all Amercans.
Tony James head of the crooked Blackstone Group, a giant hedge fund connected to many state pension
funds, is likely to be Clinton's Treasury Sec. Hedge funds have donated 125 million to Crooked Hillary,
20k to Trump. This is thievery on the grand, epic biblical scale with the usual bs about "helping"
people.
"We absolutely have to start now," Mr. James said at a Center for American Progress conference
in Washington on Wednesday. " It has to be mandated . Nothing short of a
mandate will provide future generations a secure retirement."
Mr. James recommended a proposal by Teresa Ghilarducci, director of the Schwartz Center for Economic
Policy Analysis at The New School in New York, to create a retirement savings plan for everyone
based on 3% annual salary contributions shared equally among employees and employers. The federal
government would guarantee a 2% return, through a modest insurance premium on such accounts . "With
corporate profits at an all-time high, this should be a manageable burden," he said, adding that
the approach "is going to require us to look beyond the next election cycle."
Mr. James also called for redirecting $120 billion in annual retirement tax deductions to give
every worker a $600 annual tax credit to save for retirement.
small search brings up deluge of corruption, payoffs etc.
This is the smoking gun behind the corruption of the Fed during the 2008 crisis. I want to
see how they tell the world that this was all legal.
END PRIVATE FINANCE! The folks that own private finance also own the US and many other governments.....with
or without vote rigging as one of their tools.
This guy is die hard neoliberal. That's why he is fond of Washington consensus. He does not understand
that the time is over for Washington consensus in 2008. this is just a delayed reaction :-)
Notable quotes:
"... after years of unusually sluggish and strikingly non-inclusive growth, the consensus is breaking down. Advanced-country citizens are frustrated with an "establishment" – including economic "experts," mainstream political leaders, and dominant multinational companies – which they increasingly blame for their economic travails. ..."
"... Anti-establishment movements and figures have been quick to seize on this frustration, using inflammatory and even combative rhetoric to win support. They do not even have to win elections to disrupt the transmission mechanism between economics and politics. ..."
"... They also included attacks on "international elites" and criticism of Bank of England policies that were instrumental in stabilizing the British economy in the referendum's immediate aftermath – thus giving May's new government time to formulate a coherent Brexit strategy. ..."
"... The risk is that, as bad politics crowds out good economics, popular anger and frustration will rise, making politics even more toxic. ..."
"... At one time, the people's government served as a check on the excesses of economic interests -- now, it is simply owned by them. ..."
"... The defects of the maximalist-globalist view were known for years before the "consensus began to break down". ..."
"... In at least some of these cases, the "transmission" of the consensus involved more than a little coercion and undermining local interests, sovereignty, and democracy. This is an central feature of the "consensus", and it is hard to see how it can by anything but irredeemable. ..."
"... However it is not bad politics crowding out out good economics, for the simple reason that the economic "consensus" itself, in embracing destructive and destabilizing economic policy crowded out the ostensibly centrist politics... ..."
"... The Inclusive Growth has remained only a Slogan and Politicians never ventured into the theme. In the changed version of the World.] essential equal opportunity and World of Social media, perspective and social Political scene is changed. Its more like reverting to mean. ..."
In the 1990s and 2000s, for example, the so-called Washington Consensus dominated policymaking
in much of the world...
... ... ...
But after years of unusually sluggish and strikingly non-inclusive growth, the consensus is
breaking down. Advanced-country citizens are frustrated with an "establishment" – including economic
"experts," mainstream political leaders, and dominant multinational companies – which they increasingly
blame for their economic travails.
Anti-establishment movements and figures have been quick to seize on this frustration, using
inflammatory and even combative rhetoric to win support. They do not even have to win elections to
disrupt the transmission mechanism between economics and politics. The United Kingdom proved
that in June, with its Brexit vote – a decision that directly defied the broad economic consensus
that remaining within the European Union was in Britain's best interest.
... ... ...
... speeches by Prime Minister Theresa May and members of her cabinet revealed an intention to
pursue a "hard Brexit," thereby dismantling trading arrangements that have served the economy well.
They also included attacks on "international elites" and criticism of Bank of England policies
that were instrumental in stabilizing the British economy in the referendum's immediate aftermath
– thus giving May's new government time to formulate a coherent Brexit strategy.
Several other advanced economies are experiencing analogous political developments. In Germany,
a surprisingly strong showing by the far-right Alternative für Deutschland in recent state
elections already appears to be affecting the government's behavior.
In the US, even if Donald Trump's presidential campaign fails to put a Republican back in the
White House (as appears increasingly likely, given that, in the latest twist of this highly unusual
campaign, many Republican leaders have now renounced their party's nominee), his candidacy will likely
leave a lasting impact on American politics. If not managed well, Italy's constitutional referendum
in December – a risky bid by Prime Minister Matteo Renzi to consolidate support – could backfire,
just like Cameron's referendum did, causing political disruption and undermining effective action
to address the country's economic challenges.
... ... ...
The risk is that, as bad politics crowds out good economics, popular anger and frustration
will rise, making politics even more toxic. ...
Mr El-Erian, I know you are a good man, but it seems as though everyone believes we can synthetically
engineer a way out of this never ending hole that financial engineering dug us into in the first
place.
Instead why don't we let this game collapse, you are a good man and you will play a role in
the rebuilding of better system, one that nurtures and guides instead of manipulate and lie.
The moral suasion you mention can only appear by allowing for the self annihilation of this
financial system. This way we can learn from the autopsies and leave speculative theories to third
rate economists
It is sadly true that "the relationship between politics and economics is changing," at least
in the U.S.. At one time, the people's government served as a check on the excesses of economic
interests -- now, it is simply owned by them.
It seems to me that the best we can hope for now is some sort of modest correction in the relationship
after 2020 -- and that the TBTF banks won't deliver another economic disaster in the meantime.
Petey Bee OCT 15, 2016
1. The defects of the maximalist-globalist view were known for years before the "consensus
began to break down".
2. In at least some of these cases, the "transmission" of the consensus involved more than
a little coercion and undermining local interests, sovereignty, and democracy. This is an central
feature of the "consensus", and it is hard to see how it can by anything but irredeemable.
In the concluding paragraph, the author states that the reaction is going to be slow. That's absolutely
correct, the evidence has been pushed higher and higher above the icy water line since 2008.
However it is not bad politics crowding out out good economics, for the simple reason that
the economic "consensus" itself, in embracing destructive and destabilizing economic policy crowded
out the ostensibly centrist politics...
Paul Daley OCT 15, 2016
The Washington consensus collapsed during the Great Recession but the latest "consensus" among
economists regarding "good economics" deserves respect.
atul baride OCT 15, 2016
The Inclusive Growth has remained only a Slogan and Politicians never ventured into the theme.
In the changed version of the World.] essential equal opportunity and World of Social media, perspective
and social Political scene is changed. Its more like reverting to mean.
so when people criticize the big deflation in
computer/electronics hardware using baseless measures like
"if the computer has a processor twice as fast then it has
fallen by half in price" they are wackos. but now the real
growth that is artificially generated by this way (quality
improvements) to keep inflation down is being criticized by
Fox. Of course it is completely made up growth. the absurdity
of the economists deal with price inflation. now years later,
everyone realizes we have all taken a big fall in living
standards no matter how many gigahertz my stupid computer is.
Manufacturing hasn't boomed since the 60's. The FRED graphs
are garbage and useless in general. They are improperly
calculated and they have out right admitted they may have
"problems".
Manufacturing is dying out and becoming automated over the
decades. There is no such thing as artificial growth either.
Demand based on consumption is just as valid as industrial
production shipped to other countries.
"The FRED graphs are garbage and useless in general."
No -
your comments are garbage and useless. Actually READ the
post. He did not get his graphs or data from FRED. Seriously
- you need professional help.
poppycock. the garbage on their industrial production chart
in the 90's and 00's was stupid bad. The US hasn't had a
industrial boom since the 60's when our consumption was
surging while we still made most of our products. No wonder
inflation surged by the late 60's. The war against communism
was having a painful bad side effects to rentiers and
bankers, which spread to capital by the late 60's.
"the garbage on their industrial production chart in the 90's
and 00's was stupid bad."
Can we focus on the single word
"their". You think he used FRED. No jackass, he made his own
charts from the source data - BLS. But noooooooo - you are
too stupid to get even this simple point. So the rest of your
ramblings is nothing more than your usual intellectual
garbage.
Auto mfg dropped by half post 2008.
It is now back but has nowhere to grow.
Urbanization makes cars less necessary and less desirable
There is not enough room to park them all now.
People who earn MinWage cannot afford them
Interesting point but many will overinterpret this. Leave in
the expansion of computer and electronics manufacturing value
add, and we have manufacturing output slightly expanding.
Take it out entirely and we have manufacturing output
basically steady.
The difference isn't telling an important
macro story.
The important macro story is the major decline in
manufacturing employment, and that has two big and one
smaller causes.
The two big factors are the increased productivity of
manufacturing globally and the declining share of
manufactured products as a % of GDP globally. The smaller
factor is the US's declining share of global manufacturing
output, which itself is only fractionally attributable to
trade policy.
I don't know anyone who says US manufacturing is
"booming." It certainly isn't. It's treading water. It's
growing slowly as the economy grows, but we can predict with
high confidence that it will continue to contract as a share
of total output over time, because that has been the secular
trend for decades and there's no reason to expect that to
change.
The only big question is how we adapt to the world as it
actually is.
Also, I did not realize I was being presented
with an argument about Chinese growth and sustainability. I
foolishly stopped reading and I am entirely sorry. I have set
down data and begun to answer the argument below on Links:
What is significant though is how China insists on holding to
growth targets that are very likely not sustainable.
Stability is a worthy aim but when growth is achieved through
pushing bad private sector loans, that is ultimately the
enemy of stability.
[ For these 39 past years China has
been holding to and achieving growth targets that were
repeatedly considered unsustainable so I prefer to figure out
why Chinese growth targets have been and from my perspective
are now sustainable. ]
the forgotten spirit of American protectionism :
, -1
YES! Of course US manufacturing isn't booming - how could it?
We have horrible economic policies that are focused almost
entirely on destroying our industrial base. High overvalued
currency, combined with 0% tariffs and we have no VAT, so
foreign imports from countries with a VAT receive export
subsidies but are not taxed on the US side. That we have even
one factory left is amazing and testament to the quality of
American workers. Under Clinton, we'll lose what's left.
Trump is our only hope. If we don't get Trump's protectionism
we will quickly become a country as poor as Armenia or
Moldova - stripped of industry and wealth, dependent on
remittances from our migrant workers in Asia and Europe.
"... Of course it is completely made up growth. the absurdity of the economists deal with price inflation. now years later, everyone realizes we have all taken a big fall in living standards no matter how many gigahertz my stupid computer is. ..."
"... The important macro story is the major decline in manufacturing employment, and that has two big and one smaller causes. ..."
"... I don't know anyone who says US manufacturing is "booming." It certainly isn't. It's treading water. It's growing slowly as the economy grows, but we can predict with high confidence that it will continue to contract as a share of total output over time, because that has been the secular trend for decades and there's no reason to expect that to change. ..."
No, U.S. Manufacturing Isn't Really Booming :...[Is]American manufacturing .. in decline?
An answer frequently offered by wonky economics journalists is that, no, U.S. manufacturing output
has actually kept growing. ...
There's a catch, though. As economist Susan N. Houseman of the W.E. Upjohn Institute for Employment
Research ...
points out , about half of the growth in U.S. manufacturing output since 1997 has been in
just one sector: computer and electronics manufacturing.
If it weren't for computers and electronics (which includes semiconductors), manufacturing
output would still be well below its 2008 peak and only 21 percent higher than in 1997...
The ... way those computers-and-electronics numbers are arrived at is worthy of a closer look.
... Without adjusting for deflation, value added in computer and electronics manufacturing is
up 45 percent since 1997. With the adjustments, it's up 699 percent! What's happening here is
that the Bureau of Economic Analysis has been trying to account for vast improvements in ... quality...
Writes Houseman:
Such quality adjustment ... can make the numbers difficult to interpret..., figures that exclude
this industry ... arguably provide a clearer picture of trends in manufacturing output.
As it stands now, those trends don't look impressive. U.S. manufacturing output has held up
a lot better than manufacturing employment. But it definitely isn't booming.
so when people criticize the big deflation in computer/electronics hardware using baseless
measures like "if the computer has a processor twice as fast then it has fallen by half in price"
they are wackos. but now the real growth that is artificially generated by this way (quality improvements)
to keep inflation down is being criticized by Fox.
Of course it is completely made up growth. the absurdity of the economists deal with price
inflation. now years later, everyone realizes we have all taken a big fall in living standards
no matter how many gigahertz my stupid computer is.
Auto mfg dropped by half post 2008. It is now back but has nowhere to grow. Urbanization makes
cars less necessary and less desirable
There is not enough room to park them all now. People who earn MinWage cannot afford them
Interesting point but many will overinterpret this. Leave in the expansion of computer and electronics
manufacturing value add, and we have manufacturing output slightly expanding. Take it out entirely
and we have manufacturing output basically steady.
The difference isn't telling an important macro story.
The important macro story is the major decline in manufacturing employment, and that has
two big and one smaller causes.
The two big factors are the increased productivity of manufacturing globally and the declining
share of manufactured products as a % of GDP globally. The smaller factor is the US's declining
share of global manufacturing output, which itself is only fractionally attributable to trade
policy.
I don't know anyone who says US manufacturing is "booming." It certainly isn't. It's treading
water. It's growing slowly as the economy grows, but we can predict with high confidence that
it will continue to contract as a share of total output over time, because that has been the secular
trend for decades and there's no reason to expect that to change.
The only big question is how we adapt to the world as it actually is.
Also, I did not realize I was being presented with an argument about Chinese growth and sustainability.
I foolishly stopped reading and I am entirely sorry. I have set down data and begun to answer
the argument below on Links:
What is significant though is how China insists on holding to growth targets that are very likely
not sustainable. Stability is a worthy aim but when growth is achieved through pushing bad private
sector loans, that is ultimately the enemy of stability.
[ For these 39 past years China has been holding to and achieving growth targets that were
repeatedly considered unsustainable so I prefer to figure out why Chinese growth targets have
been and from my perspective are now sustainable. ]
the forgotten spirit of American protectionism : , -1
YES! Of course US manufacturing isn't booming - how could it? We have horrible economic policies
that are focused almost entirely on destroying our industrial base. High overvalued currency,
combined with 0% tariffs and we have no VAT, so foreign imports from countries with a VAT receive
export subsidies but are not taxed on the US side. That we have even one factory left is amazing
and testament to the quality of American workers. Under Clinton, we'll lose what's left. Trump
is our only hope. If we don't get Trump's protectionism we will quickly become a country as poor
as Armenia or Moldova - stripped of industry and wealth, dependent on remittances from our migrant
workers in Asia and Europe.
48% of Trump supporters "completely distrust the economic data reported by the federal government"
including unemployment, spending, jobs. https://t.co/5l9GhucBFI
- Justin Wolfers (@JustinWolfers)
October
15, 2016
That tweet and the
linked article got my attention (no trust of data by 25% of adults!) ... Still why reflect
on this? ... so much else to get stuck on these days. First, I use official statistics in my work
A LOT; second, I am always on the look out for new survey insights; and finally, I am a bit
obsessed lately with models
in which people are not acting on the same information. This level of distrust is troubling
... even though I doubt it's new or entirely about the data ... I want us to think about WHY.
I study consumer behavior as an economist, which in 2016 still means reading lots of research
with dynamic optimization and Euler equations. This is a typical
early morning
ritual for me, that quiet time before my kids wake up when I can still imagine a world in
which we know everything about everything, including ourselves, and we choose calmly and appropriately.
BUT I balance out my openness to such models with a determination to also understand what people
ACTUALLY do and think.
Nevertheless, I am picky about the survey insights that I absorb, pass on, and try to understand.
My cognate in grad school
was survey methodology and I still write survey questions in my research ... thus I understand
how much responses can be manipulated, or even carelessly biased by poor methods and human nature.
Also I want to know what people think, not what someone writing up the survey results wants me
as a reader to think. (I'm not a fan of the tweet, by the way.) So I googled and found the
survey's homepage
, a Marketplace-Edison Research poll designed to measure economic anxiety. And, I found a
description of the
methods AND the
full survey too (see page 30 for this question). It's not the micro data online, so I can't
replicate the statistic in the tweet, but I could see that the "data trust" question was asked
before voting intentions or political affiliation. I have learned from pollsters that
asking about politics conjures up an identity that can be hard to shake in the rest of the survey.
The main roadblock I see in interpreting the data distrust is this survey's short time series;
it only began last fall as a quarterly survey. My hunch is that distrust of economic data is nothing
new but I can't prove that here. Plus changes in attitudes are often more informative than a snapshot,
since subjective questions are tricky to interpret. What does it mean to "trust data" anyway?
Do you trust data?
To be clear, I am not justifying anyone's views, but I am also trying not to be judgmental.
A key principle of surveying is not to make people feel bad or shameful about their views. Because,
guess what, if you do, they are less likely to tell you what they think or did ... then you are
fighting blind and may miss the chance to learn why we sometimes see the world differently. I
am not in the 25% of adults who have "no trust at all" in economic statistics from the
government. In fact, I am in a rare set of adults who spends more time on the
Bureau of Economic Analysis ' website sorting
through spending data than on Amazon adding to it. So what's up with all this distrust? I have
a few hypotheses to take to the data.
Hypothesis 1: government economic data don't match people's life
Sometimes I think the Representative Agent is a frenemy of economists. (Oh, not the
Twitter persona , he's great, but
the concept.) How can a simplifying assumption ... a focus on the typical or aggregate household
... be an enemy in disguise? Well, sometimes it gives theoretical models the focus they need and
other times, especially in empirical work, it glosses over important details. Details, also known
as people . So maybe distrust of economic data comes from not seeing your life experience
in the numbers that roll across the screen. National aggregates get a lot of attention, so maybe
it is minorities that end of distrusting data more, data that doesn't tell their story as loudly.
Not so, at least in terms of data about the economy, minorities are more trusting
than whites. Only 15 percent of African-American have no trust at all in economic data almost
half the fraction of whites. And among Hispanics, only12 percent have complete distrust of data.
With whites comprising over 70 percent of all adults, they are well represented in both aggregate
statistics and the distrust of them. Of course, this is just one cut of the data and not seeing
your life experience in the data may raise other issues (more below). Government agencies have
made a push to improve regional statistics
and even make
neighborhood data more readily accessible and help improve local decision making. And of course,
lots of household level surveys exist too. Another reason to take distrust (or even disinterest)
in government economic data seriously is that the quality of the data we have depends on people's
participation in our surveys. Response rates on numerous surveys
have been falling and
research
suggests that non response could impact official statistics, making them a less accurate reflection
of life experiences.
Hypothesis 2: distrust stems from people being "hurt" by data
One the first Friday of the every month, my Twitter feed is overflowing with chatter about
the latest employment report from the Bureau of
Labor Statistics . That makes me weird. I firmly believe that few people absorb the government
statistics in the way that I and my fellow econos do. Why should they? People confront economic
data when it affects them. One example I can think of is the cost-of-living adjustment, such as
for Social Security benefits. That came to mind when I looked at data distrust by age.
no cost-of-living
adjustment to benefits had led some seniors to "distrust" government data, like the CPI-W?
Again, this hypothesis would be a lot better to test with a time series of data, comparing years
with benefit increases and without. But feeling shortchanged by the data may be understandable
given wide variation relative price changes , few of us exactly consume the representative
basket. Alternatively, as risk aversion appears to rise with age, maybe so too does distrust?
I wrote earlier that age is
more than just a number , the impact of demographic change deserves more study.
Hypothesis 3: it's not the data, it is the way we use them ... the spin
I don't trust data, I trust people. And even then, trust but verify, right? Perfectly measured
data (dream, dream), can be still be suspect. In fact, data can codify a lot of the biases and
mistakes we have made together in the past. Maybe we should also be concerned for the people who
"completely trust" government economic data? (Do read
Cathy O'Neil's book on
Big Data and algorithms.) Yet, I suspect the distrust in the survey is not about data construction
(I've never seen a protest at the ever-interesting
BEA advisory committee meetings
) ... or even about the government employees who construct the statistics in excruciating
detail, and in line with
international
standards . I bet the distrust is more about how the numbers are interpreted and how they
are used in policy making. Drawing conclusions from data is hard and reasonable disagreement is
to be expected. As just one example, the seasonally-adjusted unemployment rate for African Americans
was 8.3 in September
, which is below its average of 10.8 percent over the past 20 years but is almost double the
4.4 percent unemployment rate of whites. Should we call that 8.3 (or 4.4, for that matter) victory
or 'full employment'? And is the unemployment rate even the right statistic to assess? Relative
to the past it may well be but the past can be an imperfect guide for the future. Every data point
has its shortcoming, especially where there is no clear counterfactual or agreed upon target.
My "moderate" growth could easily be your "weaker-than-expected" growth. And, of course, on top
of honest disagreements about data, plenty of motivated reasoning is done with numbers. BUT when
we start with the same data, there are at least some bounds on the disagreement. In contrast,
when government data are wholesale rejected one quarter of adults, it's no surprise that we aren't
living in the same world. And we stop trying to understand each other. I would be lost (and bored
out of my mind) in my work on consumer behavior without data. You don't want me extrapolating
from my tiny circle of experience ... and frankly no one should make decisions with that little
information. We can learn a lot from the data, including these attitudinal surveys. And data adds
accountability, including in how its collected. Even so, no one likes to feel manipulated or,
worse, written off, especially with numbers.
Data can't solve problems but maybe it holds clues to a path forward ... to rebuild trust.
**Opinions here are mine and should not to be attributed to anyone with whom I work.**
Is it just not done to ask people why they distrust Government figures ?
2016-10-17, Stuart Gibson The same thing happened here in Italy with Silvio Berlusconi. He got
a lot of reforms but a lot of people ignored facts.
2016-10-17, pietro No one 'trusts' data. We all have confidence intervals.
This combined with your point number 3 is the main issue I suspect.
Point number 1 is also in play, I think point 2 is essentially irrelevant, it might be true for
some data, but not for data.
As far as economics goes, people intuitively understand that economics attempts to push the envelope
and use data to draw conclusions that are not really addressable with the data. Economists don't
even have agreement on how data is used - thinking mostly of macro. I see no reason to puzzle
on this until you can get economists to all agree. I don't mean this as a challenge, just a description
of the situation.
2016-10-17, Dan The headline unemployment number is obviously false, and this affects confidence
in the other numbers.
There is no particular mystery about what is going on.
2016-10-17, Dave Chapman Because your aggregated statistics does not reflect the experience of
the individuals:
"But several underlying factors also appear to have contributed to the closeness of the race.
For starters, many Americans are economically worse off than they were a quarter-century ago.
The median income of full-time male employees is lower than it was 42 years ago, and it is increasingly
difficult for those with limited education to get a full-time job that pays decent wages.
Indeed, real (inflation-adjusted) wages at the bottom of the income distribution are roughly where
they were 60 years ago. So it is no surprise that Trump finds a large, receptive audience when
he says the state of the economy is rotten. But Trump is wrong both about the diagnosis and the
prescription. The US economy as a whole has done well for the last six decades: GDP has increased
nearly six-fold. But the fruits of that growth have gone to a relatively few at the top – people
like Trump, owing partly to massive tax cuts that he would extend and deepen. "
https://www.project-syndicate.org/commentary/trump-candidacy-message-to-political-leaders-by-joseph-e--stiglitz-2016-10
2016-10-17, PSteele
"... If you insist on focusing on individuals, you may miss the connection, because the worst off
within communities - actual chronic discouraged workers, addicts - are likely to express no opinion
to the degree they can be polled at all. Trump primary voters are white Republicans who vote, automatically
a more affluent baseline* than the white voters generally. ..."
EMichael quotes Steve Randy Waldman and Dylan Matthews in today's links:
""Trump voters, FiveThirtyEight's Nate Silver found, had a median household income of $72,000,
a fair bit higher than the $62,000 median household income for non-Hispanic whites in America."
...
""But it is also obvious that, within the Republican Party, Trump's support comes disproportionately
from troubled communities, from places that have been left behind economically, that struggle
with unusual rates of opiate addiction, low educational achievement, and other social vices."
I followed the link and failed to find any numbers on the "troubled communities" thing. It
seems strange to me that the two comments above are in conflict with each other."
It seems like you are missing the point of Waldman's blog post (and Stiglitz and Shiller)
You didn't quote this part:
"... If you insist on focusing on individuals, you may miss the connection, because the
worst off within communities - actual chronic discouraged workers, addicts - are likely to express
no opinion to the degree they can be polled at all. Trump primary voters are white Republicans
who vote, automatically a more affluent baseline* than the white voters generally.
"Among Republicans, Trump supporters have slightly lower incomes. But what really differentiates
them?"]
"At the community level**, patterns are clear. (See this*** too.) Of course, it could still
all be racism, because within white communities, measures of social and economic dysfunction are
likely correlated with measures you could associate with racism."
Of course, it could still all be racism, because within white communities, measures of social
and economic dysfunction are likely correlated with measures you could associate with racism.
Social affairs are complicated and the real world does not hand us unique well-identified models.
We always have to choose our explanations,**** and we should think carefully about how and why
we do so. Explanations have consequences, not just for the people we are imposing them upon, but
for our polity as a whole. I don't get involved in these arguments to express some high-minded
empathy for Trump voters, but because I think that monocausally attributing a broad political
movement to racism when it has other plausible antecedents does real harm....
"... The corridor between Manhattan and Washington is a well trodden highway for the personalities we have all gotten to know in the period since the massive deregulation of Wall Street: Robert Rubin, Lawrence Summers, Henry Paulson, Timothy Geithner and many others. ..."
"... General Petraeus' expertise in these areas is unclear. His ability to peddle influence, however, is a known and valued commodity. ..."
"... Petraeus also obtained a sinecure as a non-resident senior fellow at the Belfer Center for Science and International Affairs at Harvard. The Ivy League is, of course, the preferred bleaching tub and charm school of the American oligarchy. ..."
"... The Cathedral has no central administrator, but represents a consensus acting as a coherent group that condemns other ideologies as evil. ..."
"... "you believe that morality has been essentially solved, and all that's left is to work out the details." ..."
"... Cultural assimilation is partly a matter of what psychologist Irving L. Janis called "groupthink," the chameleon-like ability of people to adopt the views of their superiors and peers. This syndrome is endemic to Washington: The town is characterized by sudden fads, be it negotiating biennial budgeting, making grand bargains or invading countries. Then, after a while, all the town's cool kids drop those ideas as if they were radioactive. As in the military, everybody has to get on board with the mission, and questioning it is not a career-enhancing move. The universe of people who will critically examine the goings-on at the institutions they work for is always going to be a small one. As Upton Sinclair said, "It is difficult to get a man to understand something when his salary depends upon his not understanding it. ..."
"... A more elusive aspect of cultural assimilation is the sheer dead weight of the ordinariness of it all once you have planted yourself in your office chair for the 10,000th time. ..."
"... No wonder so few people are whistle-blowers, quite apart from the vicious retaliation whistle-blowing often provokes: Unless one is blessed with imagination and a fine sense of irony, growing immune to the curiousness of one's surroundings is easy. To paraphrase the inimitable Donald Rumsfeld, I didn't know all that I knew, at least until I had had a couple of years away from the government to reflect upon it. ..."
"... It's probably not a coincidence that the American media elite live, work, and socialize in New York and Washington, ..."
"... It's a kind of corporatism. ..."
"... They pretend to be merrily neutral servants of the state, giving the best advice possible on national security or financial matters. But they hold a very deep ideology of the Washington consensus at home, which is deregulation, outsourcing, de-industrialization and financialization. ..."
"... And they believe in American exceptionalism abroad, which is boots on the ground everywhere, it's our right to meddle everywhere in the world. And the result of that is perpetual war. ..."
The corridor between Manhattan and Washington is a well trodden highway for the personalities
we have all gotten to know in the period since the massive deregulation of Wall Street: Robert
Rubin, Lawrence Summers, Henry Paulson, Timothy Geithner and many others.
Not all the traffic involves persons connected with the purely financial operations of the
government: In 2013, General David Petraeus
joined KKR (formerly Kohlberg Kravis Roberts) of 9 West 57th Street, New York, a private equity
firm with $62.3 billion in assets. KKR specializes in management buyouts and leveraged finance.
General Petraeus' expertise in these areas is unclear. His ability to peddle influence, however,
is a known and valued commodity. Unlike Cincinnatus, the military commanders of the Deep
State do not take up the plow once they lay down the sword. Petraeus also obtained a sinecure
as a non-resident senior fellow at the
Belfer Center for Science and International Affairs at Harvard. The Ivy League is, of course,
the preferred bleaching tub and charm school of the American oligarchy.
Lofgren goes on to say that Silicon Valley is a node of the Deep State too, and that despite the
protestations of its chieftains against NSA spying, it's a vital part of the Deep State's apparatus.
More:
The Deep State is the big story of our time. It is the red thread that runs through the war
on terrorism, the financialization and deindustrialization of the American economy, the rise of
a plutocratic social structure and political dysfunction. Washington is the headquarters of the
Deep State, and its time in the sun as a rival to Rome, Constantinople or London may be term-limited
by its overweening sense of self-importance and its habit, as Winwood Reade said of Rome, to "live
upon its principal till ruin stared it in the face."
The Cathedral - The self-organizing consensus of Progressives and Progressive ideology
represented by the universities, the media, and the civil service. A term
coined by blogger Mencius Moldbug. The Cathedral has no central administrator, but represents
a consensus acting as a coherent group that condemns other ideologies as evil. Community
writers have enumerated the
platform of Progressivism as women's suffrage, prohibition, abolition, federal income tax,
democratic election of senators, labor laws, desegregation, popularization of drugs, destruction
of traditional sexual norms, ethnic studies courses in colleges, decolonization, and gay marriage.
A defining feature of Progressivism is that "you believe that morality has been essentially
solved, and all that's left is to work out the details." Reactionaries see Republicans as
Progressives, just lagging 10-20 years behind Democrats in their adoption of Progressive norms.
You don't have to agree with the Neoreactionaries on what they condemn - women's suffrage? desegregation?
labor laws? really?? - to acknowledge that they're onto something about the sacred consensus that
all Right-Thinking People share. I would love to see a study comparing the press coverage from 9/11
leading up to the Iraq War with press coverage of the gay marriage issue from about 2006 till today.
Specifically, I'd be curious to know about how thoroughly the media covered the cases against the
policies that the Deep State and the Shallow State decided should prevail. I'm not suggesting a conspiracy
here, not at all. I'm only thinking back to how it seemed so obvious to me in 2002 that we should
go to war with Iraq, so perfectly clear that the only people who opposed it were fools or villains.
The same consensus has emerged around same-sex marriage. I know how overwhelmingly the news media
have believed this for some time, such that many American journalists simply cannot conceive that
anyone against same-sex marriage is anything other than a fool or a villain. Again, this isn't a
conspiracy; it's in the nature of the thing. Lofgren:
Cultural assimilation is partly a matter of what psychologist
Irving L. Janis called
"groupthink," the chameleon-like ability of people to adopt the views of their superiors and peers.
This syndrome is endemic to Washington: The town is characterized by sudden fads, be it negotiating
biennial budgeting, making grand bargains or invading countries. Then, after a while, all the
town's cool kids drop those ideas as if they were radioactive. As in the military, everybody has
to get on board with the mission, and questioning it is not a career-enhancing move. The universe
of people who will critically examine the goings-on at the institutions they work for is always
going to be a small one. As Upton Sinclair said, "It is difficult to get a man to understand something
when his salary depends upon his not understanding it."
A more elusive aspect of cultural assimilation is the sheer dead weight of the ordinariness
of it all once you have planted yourself in your office chair for the 10,000th time. Government
life is typically not some vignette from an Allen Drury novel about intrigue under the
Capitol dome. Sitting and staring at the clock on the off-white office wall when it's 11:00 in
the evening and you are vowing never, ever to eat another piece of takeout pizza in your life
is not an experience that summons the higher literary instincts of a would-be memoirist.
After a while, a functionary of the state begins to hear things that, in another context, would
be quite remarkable, or at least noteworthy, and yet that simply bounce off one's consciousness
like pebbles off steel plate: "You mean the
number of terrorist groups we are fighting is classified?" No wonder so few people
are whistle-blowers, quite apart from the vicious retaliation whistle-blowing often provokes:
Unless one is blessed with imagination and a fine sense of irony, growing immune to the curiousness
of one's surroundings is easy. To paraphrase the inimitable Donald Rumsfeld, I didn't know all
that I knew, at least until I had had a couple of years away from the government to reflect upon
it.
When all you know is the people who surround you in your professional class bubble and your social
circles, you can think the whole world agrees with you, or should. It's probably not a coincidence
that the American media elite live, work, and socialize in New York and Washington, the two
cities that were attacked on 9/11, and whose elites - political, military, financial - were so genuinely
traumatized by the events.
Anyway, that's just a small part of it, about how the elite media manufacture consent. Here's
a final quote, one from
the Moyers interview with Lofgren:
BILL MOYERS: If, as you write, the ideology of the Deep State is not democrat or republican,
not left or right, what is it?
MIKE LOFGREN: It's an ideology. I just don't think we've named it. It's a kind of
corporatism. Now, the actors in this drama tend to steer clear of social issues. They
pretend to be merrily neutral servants of the state, giving the best advice possible on national
security or financial matters. But they hold a very deep ideology of the Washington consensus
at home, which is deregulation, outsourcing, de-industrialization and financialization.
And they believe in American exceptionalism abroad, which is boots on the ground everywhere,
it's our right to meddle everywhere in the world. And the result of that is perpetual war.
This can't last. We'd better hope it can't last. And we'd better hope it unwinds peacefully.
I, for one, remain glad that so many of us Americans are armed. When the Deep State collapses
- and it will one day - it's not going to be a happy time.
Questions to the room: Is a Gorbachev for the Deep State conceivable? That is, could you foresee
a political leader emerging who could unwind the ideology and apparatus of the Deep State, and not
only survive, but succeed? Or is it impossible for the Deep State to allow such a figure to thrive?
Or is the Deep State, like the Soviet system Gorbachev failed to reform, too entrenched and too far
gone to reform itself? If so, what then?
The Hillary Clinton campaign says the hackers behind the leaked
email evidence of their collusion with the major media are from
Russia and linked to the Russian regime. If so, I want to publicly
thank those Russian hackers and their leader, Russian President
Vladimir Putin, for opening a window into the modern workings of
the United States government-corporate-media establishment.
We always knew that the major media were extensions of the
Democratic Party. But the email evidence of how figures like
Maggie
Haberman
of The New York Times,
Juliet
Eilperin
of The Washington Post, and
John
Harwood
of CNBC worked hand-in-glove with the Democrats is
important. The Daily Caller and Breitbart have led the way in
digging through the emails and exposing the nature of this
evidence. It is shocking even to those of us at Accuracy in Media
who always knew about, and had documented, such collusion through
analysis and observation.
The Clinton campaign and various intelligence officials insist
that the purpose of the Russian hacking is to weaken the confidence
of the American people in their system of government, and to
suggest that the American system is just as corrupt as the Russian
system is alleged to be. Perhaps our confidence in our system
should be shaken. The American people can see that our media are
not independent of the government or the political system and, in
fact, function as an arm of the political party in control of the
White House that wants to maintain that control after November 8.
In conjunction with other evidence, including the ability to
conduct vote fraud that benefits the Democrats, the results on
Election Day will be in question and will form the basis for Donald
J. Trump to continue to claim that the system is "rigged" against
outsiders like him.
The idea of an American system of free and fair elections that
includes an honest press has been terribly undermined by the
evidence that has come to light. We are not yet to the point of the
Russian system, where opposition outlets are run out of business
and dissidents killed in the streets. That means that the Russians
have not completely succeeded in destroying confidence in our
system. But we do know that federal agencies like the Federal
Election Commission (FEC) and Federal Communications Commission
(FCC) are poised to strike blows against free and independent
media. Earlier this year the three Democrats on the FEC
voted
to punish
filmmaker Joel Gilbert for distributing a film
critical of President Barack Obama during the 2012 campaign.
The New York Times is
reporting
that
Clinton campaign chairman John Podesta has been contacted by the
FBI about the alleged Russian hackers behind the leaks of his
emails. This is what Podesta and many in the media want to talk
about.
But the Russians, if they are responsible, have performed a
public service. And until there is a thorough house-cleaning of
those in the major media who have made a mockery of professional
journalism, the American people will continue to lack confidence in
their system. The media have been caught in the act of sabotaging
the public's right to know by taking sides in the presidential
contest. They have become a propaganda arm of the Democratic Party,
coordinating with the Hillary Clinton for president campaign, which
apparently was being run out of Georgetown University, where John
Podesta was based. Many emails carry the web address of
[email protected], a reference to the Georgetown
University position held by the chairman of the 2016 Hillary
Clinton presidential campaign. Podesta is a Visiting Professor at
Georgetown University Law Center. His other affiliations include
the George Soros-funded Center for American Progress and the United
Nations High Level Panel on the Post-2015 Development Agenda.
Podesta and the other members of this U.N. panel had proposed "
A
New Global Partnership for the World
," which advocated for a
"profound economic transformation" of the world's economic order
that would result in a new globalist system. Shouldn't the American
people be informed about what Podesta and his Democratic allies
have planned for the United States should they win on November 8?
That Podesta would serve the purposes of the U.N. is not a
surprise. But it is somewhat surprising that he would use his base
at Georgetown University to run the Hillary campaign. On the other
hand, Georgetown, the nation's oldest Catholic and Jesuit
university,
describes
itself
as preparing "the next generation of global citizens to lead and
make a difference in the world."
When a Catholic university serves as the base for the election
of a Democratic Party politician committed to taxpayer-funded
abortion on demand and transgender rights, you know America's
political system and academia are rotten to the core. The
disclosure from WikiLeaks that Podesta used his Georgetown email to
engage in party politics only confirms what we already knew.
If the Russians are ultimately responsible for the release of
these emails, some of which
show
an anti-Catholic animus
on the part of Clinton campaign
officials, we are grateful to them. The answer has to be to clean
out the American political system of those who corrupt it and
demonstrate to the world that we can achieve higher standards of
integrity and transparency.
For its part, Georgetown University should be stripped of its
Catholic affiliation and designated as an official arm of the
Democratic Party.
Paul Kersey
balolalo
Oct 14, 2016 12:02 PM
The well deserved hatred for Hillary and the globalists is so
great, that at least 40% of the males in this country would back
anyone who went up against the Clintons. That's just not the
same thing as "BUYING TRUMPS BULLSHIT HOOK, LINE, AND SINKER".
Trump is exposing the corruption and the hypocrisy of the
Clintons in a way that no one has ever had the guts to do in the
past. He's doing it on national TV with a large national
audience. With Trump we may get anarchy, but with the Clintons,
Deep State is guaranteed. It is Deep State that is working
overtime to finish building the expressway to neofeudalism.
Killary only can beg that voters hold their noses and vote for her. Guardian neoliberal presstitutes
still don't want to understand that Hillary is more dangerous then trump, Sge with her attempt that
she is more militant then male neocons can really provoke a confrontation with Russia or China.
Notable quotes:
"... War at home versus another foreign war, nothing will get through Congress, and either will get impeached...so third party all the way for me. ..."
"... Keep in mind, the election is not over and that drip, drip, drip of Hillary emails may push more people towards Trump. ..."
"... Shameless. Absolutely shameless, Guardian. This is not-even-disguised Clinton sycophancy... ..."
"... Clinton has everything going for her. The media, the banks, big business, the UN, foreign leaders, special interest lobbyists, silicon valley, establishment Republicans. How can she not win in an landslide?! ..."
"... We came, we saw, and he grabbed some pussy. ..."
"... It seems nobody wants to talk about what is really going on here - instead we are fed this bilge from both sides about 'sexual misconduct' and other fluff ..."
"... The stagnation of middle-class incomes in the West may last another five decades or more. ..."
"... This calls into question either the sustainability of democracy under such conditions or the sustainability of globalization. ..."
"... These classes of "globalization losers," particularly in the United States, have had little political voice or influence, and perhaps this is why the backlash against globalization has been so muted. They have had little voice because the rich have come to control the political process. The rich, as can be seen by looking at the income gains of the global top 5 percent in Figure 1, have benefited immensely from globalization and they have keen interest in its continuation. ..."
"... But while their use of political power has enabled the continuation of globalization, it has also hollowed out national democracies and moved many countries closer to becoming plutocracies. Thus, the choice would seem either plutocracy and globalization – or populism and a halt to globalization. ..."
The vast majority of her support comes from people that will be holding their noses as they vote
for her. Seems to me that convincing those same people that you have it in the bag will just cause
them to think voting isn't worth their time since they don't want to anyway.
I know Trump's supporters, the real ones, and the anyone-but-Hillary club will show up as well.
Funny if this backfires and he wins.
I won't be voting for either one and couldn't care less which one wins. War at home versus
another foreign war, nothing will get through Congress, and either will get impeached...so third
party all the way for me.
"Trump has to be the limit, and there has to be a re-alignment"
Trump has shown one must fight fire with fire. The days of the meek and mild GOP are over. Twice
they tried with nice guys and failed. Trump has clearly shown come out with both fists swinging
and you attract needed media and you make the conversation about you. Trump's mistake was not
seeking that bit of polish that leaves your opponent on the floor.
Keep in mind, the election is not over and that drip, drip, drip of Hillary emails may
push more people towards Trump.
Shameless. Absolutely shameless, Guardian. This is not-even-disguised Clinton sycophancy...
tugend49
For every woman that's been sexually harassed, bullied, raped, assaulted, catcalled, groped,
objectified, and treated lesser than, a landslide victory for Clinton would be an especially sweet
"Fuck You" to the Trumps of this world.
Clinton has everything going for her. The media, the banks, big business, the UN, foreign
leaders, special interest lobbyists, silicon valley, establishment Republicans. How can she not
win in an landslide?!
It might be a reaction against Trump, but it's also a depressing example of the power of the
establishment, and their desire for control in democracy. Just look at how they squealed at Brexit.
It seems nobody wants to talk about what is really going on here - instead we are fed this
bilge from both sides about 'sexual misconduct' and other fluff
There is a report from two years ago, July 2014, before the candidates had even been selected,
by the economist Branko Milanovic for Yale 'Global' about the impact of Globalisation on the Lower
Middle Classes in the West and how this was basically going to turn into exactly the choice the
American electorate is facing now
Why won't the media discuss these issues instead of pushing this pointless circus?
These are the penultimate paragraphs of the article on the report (there is a similar one for
the Harvard Business Review
here ):
The populists warn disgruntled voters that economic trends observed during the past three
decades are just the first wave of cheap labor from Asia pitted in direct competition with
workers in the rich world, and more waves are on the way from poorer lands in Asia and Africa.
The stagnation of middle-class incomes in the West may last another five decades or more.
This calls into question either the sustainability of democracy under such conditions
or the sustainability of globalization.
If globalization is derailed, the middle classes of the West may be relieved from the immediate
pressure of cheaper Asian competition. But the longer-term costs to themselves and their countries,
let alone to the poor in Asia and Africa, will be high. Thus, the interests and the political
power of the middle classes in the rich world put them in a direct conflict with the interests
of the worldwide poor.
These classes of "globalization losers," particularly in the United States, have had
little political voice or influence, and perhaps this is why the backlash against globalization
has been so muted. They have had little voice because the rich have come to control the political
process. The rich, as can be seen by looking at the income gains of the global top 5 percent
in Figure 1, have benefited immensely from globalization and they have keen interest in its
continuation.
But while their use of political power has enabled the continuation of globalization, it
has also hollowed out national democracies and moved many countries closer to becoming plutocracies.
Thus, the choice would seem either plutocracy and globalization – or populism and a halt to
globalization.
Globalisation will continue to happen. It has pulled a large part of the world population out
of poverty and grown the global economy.
Sure on the downside it has also hugely benefitted the 1%, while the western middle classes
have done relatively less well and blue collar workers have suffered as they seek to turn to other
types (less well paid) of work.
The issue is the speed of change, how to manage globalisation and spread the wealth more equitably.
Maybe it will require slowing but it cannot and should not be stopped.
on October 10, 2016 In August, I
blogged about
a New York Times story on a corruption investigation of City College President Lisa Coico.
On Friday, the Times
reported that Coico abruptly resigned. Today, the Times has a long
piece on the corruption and potential criminality that led to Coico's resignation (upon threat
of firing).
On the one hand, the piece paints a portrait of a college president so fantastically corrupt,
it's almost comical.
Ms. Coico, who had an annual salary of $400,000 at that point [2011], was using the college's
main fund-raising vehicle, the 21st Century Foundation, to pay tens of thousands of dollars for
housekeeping, furniture, seasonal fruits and organic maple-glazed nuts, among other items .By
August 2011, according to an email between two school officials, the college had begun to itemize
more than $155,000 of her spending in three categories - "college," "personal" and "iffy."
On the other hand, it's just one blood-boiling outrage after another, where the criminality flows,
like lava, from the mountain of largesse that Coico was legally allowed in the first place.
The Times also questioned whether Ms. Coico had repaid a $20,000 security deposit for
a rental home , or kept the money for herself .Ms. Coico had a housing allowance
of $5,000 per month when she was hired, which was increased to $7,500 per month in July
2010. We have adjuncts at CUNY who can't pay their rent. Mostly because the pay is so low, but
sometimes, as occurred at Brooklyn College last month, because CUNY can't be bothered to get its
act together so that people are paid on time. Yet a college president, who's already earning a
$400,000 salary (and remember that was in 2011; God knows what she was raking in upon her resignation)
plus a housing allowance of $7500, gets additional help to put down a $20,000 security deposit
on a rental home in Westchester?
On top of it all, the article makes plain that CUNY officials have been nervous about and watchful
of Coico's spending since her first year at the college:
Behind the scenes, there were also questions about her personal spending going back to the
middle of 2011, roughly a year after her appointment .Anxious about the amount she was spending,
especially given the fact that many of City College's students come from low-income families
and struggle to pay even its modest tuition, some began "questioning its appropriateness, since
the president had a substantial housing allowance meant for such things," said one longtime
official who spoke on the condition of anonymity to avoid being entangled in the investigation.
She was later ordered by Frederick P. Schaffer, CUNY 's general counsel, to repay the college
$51,000, or roughly one-third of the expenses in question, because she had not received prior
approval for moving and other expenses. She fulfilled that obligation by January 2016.
Ms. Coico was also informed that any furniture bought with foundation funds - including
$50,000 worth for a rental home in Larchmont, N.Y. - belonged to City College. Moreover, she
was asked to return a $20,000 security deposit at the end of her lease in Larchmont.
Ms. Coico and her husband bought another home in Westchester County in April 2013, property
records show. When asked if she repaid the $20,000 deposit, the college declined to comment.
But this summer, The Times took a closer look at her expenses, and
reported that CUNY 's Research Foundation , which manages research funds for the entire
system, had ultimately covered Ms. Coico's personal expenses from her early years as president.
Using Research Foundation funds that way raised concerns because they could include money from
federal grants, which are typically earmarked for research-related expenses, such as staff
and equipment, and have strict guidelines about how they are used.
Two weeks after the Times report was published, a subpoena was issued by the office of
Robert L. Capers, the United States attorney for the Eastern District of New York.
The memo in question is just one paragraph long and is bureaucratic in nature.
Addressed to an employee at the provost's office named Luisa Hassan, and dated Sept. 15,
2011, it begins, "As we have discussed," and is attributed to Ron Woodford, a manager at the
college's 21st Century Foundation. It goes on to say that some of Ms. Coico's expenses "were
inadvertently paid" by that foundation, when they should have been paid by CUNY 's Research
Foundation. The memo then asks Ms. Hassan to process an invoice for $155,176 to "rectify the
funding source," for what it calls "start-up expenses associated with the appointment of the
new president."
Were the memo proved to be backdated or manufactured, the responsible parties could be open
to charges such as obstruction of justice, legal experts said.
The whole story, in my experience, is CUNY , all too CUNY . Not just the opéra bouffe of corruption
but also the creaking machinery of self-correction.
Here you have a garden-variety miscreant, thieving one piece of the pie after another from
an institution that has so little to begin with. Even the things Coico did that weren't criminal
should have been enough to get her fired. On ethical grounds alone.
But what did CUNY do? Lots of whispering emails, lots of back and forth between cowed and ineffective
administrators, culminating each time, it seems, with a polite-and sometimes unheeded-request
to Coico that she correct the problem. As if it were all a simple misunderstanding or oversight.
Indeed, in the one instance when CUNY seemed more determined to take action, an extensive internal
investigation of just one of Coico's questionable moves led to her being
exonerated by the institution. Whether she was in that instance correct in her actions, surely
her track record might have raised enough red flags to lead to a much wider investigation rather
than a declaration, with much fanfare, of her innocence.
Not once, it seems, until the very last minute-the Times reported on Friday that it
was a smoking-gun email from the newspaper that led to the abrupt resignation of Coico, leaving
City College with no replacement, save the acting provost, who was herself replacing someone else;
all suggesting that Coico's being pushed out was unplanned, unrehearsed, and unprepared for-did
CUNY execute a plan to get rid of Coico. From what I can tell (and in my experience, as I said,
this is how CUNY often operates), the institution allowed this higher-ed hoodlum to happily continue
in her position, secure in the knowledge that if she ever did anything too egregious or got caught,
that she'd get a mild entreaty to fix the error.
If there is one potential bit of good news in this story, it's this:
And over the weekend, speculation intensified among staff and faculty members as to whether
people close to the president would also be implicated, and whether the federal investigation
would spread to other parts of CUNY , the largest public urban university in the country.
One can only hope that that speculation turns out to be true.
Dr. Hilarius 10.10.16 at 9:05 pm
A good example of the failure of university president as CEO model of governance. Model comes
complete with ineffectual trustees and administrators.
Brett 10.10.16 at 9:34 pm
Aren't there people above her who are supposed to be watch-dogs on this as well? Did they just
not care that she was stealing from the college, because they'd rather not go through the hassle
of hiring another college president? Was it okay as long as she was compliant and enthusiastic
in making budget cuts?
Tabasco 10.10.16 at 10:54 pm
It seems to be a failure on so many levels: a hiring failure (CEOs who lie, cheat and steal almost
always did so in previous jobs); a failure of auditing and accountability systems; a failure of
governance; and most of all, a failure of culture. Unless these are fixed, it will happen again.
From the other coast:
Robert Huttenback.
Thirty years ago, this was, but having witnessed the whole mess from far too close up for
comfort, I suppose I'm not all that surprised at the detailed similarities with the Coico case
you're reporting on here. The Wikipedia entry gives only the gist, but the details in all their
sleaziness are still available elsewhere on the Web for anyone who has the stomach to wade through
them. To quote from our swine of the hour, If you're a star, they let you do it. The depressing
thing is that we don't seem to have any institutions left where this casual breach of trust isn't
routine.
kidneystones 10.11.16 at 3:39 am
"That's what is done by tin-pot dictators spanning the globe from North Korea to Zimbabwe."
Excellent post, Corey. Yes, I'm aware that the quote is from Beauchamp, but I think it fits
just as well, if not better here.
I'm an adjunct with bona fides and a publication history to receive research funding from universities,
just not quite often enough. I reference the tin-pot dictators for two reasons.
Tabasco and Brett get to the nub. Ms. Coico and her husband are earning far more than almost
all faculty and certainly far more than I. There's an enormous gulf separating Ms.Coico and the
adjuncts who can't actually rely on being paid their pennies on time. Suffice to say that Ms.
Coico is likely blissfully aware of that gulf and our problems, and much more painfully aware
on the enormous gulf separating her and her husband from the world-class grifters she aspires
to join, which I suggest is her principal preoccupation.
As the CEO, a large part of her job is groveling for cash before the truly rich. This has to
wear on her. And as we've learned, only partisan imbeciles believe that candidate X is the only
wealthy person paying well to ensure he/she pays the absolute minimum in taxes, and who (occasionally)
moves into the 'grey' areas of compliance. See senior civil servants at both the state and national
level.
There are, like it or not, two sets of rules in America, whether that makes America a tin-pot
dictatorship or no. If one happens to be poor and a minority one can expect to face the full brunt
of the law for even the smallest infraction. And that's if you're not beaten, or shot by 'accident'
along the way. If you're wealthy and white, you can do whatever you like until and after, in many
cases, you get caught.
The reason, I suggest, that those charged with supervising Ms. Coico did not act earlier is
that they did not wish to attract any unwanted legal scrutiny into their own practices, those
of their peers, and especially of the donor class who fork over part of the class.
It's their world, we just live in it.
kidneystones 10.11.16 at 3:42 am
Part of class? Yes, why not that too.
William Timberman puts his finger right into the wound.
Sebastian H 10.11.16 at 5:01 am
The whole thing is crazy, but I can't get past the $20,000 security deposit for a rental home.
What kind of a house is that?
Louis Proyect 10.11.16 at 11:19 am
Interesting that she was hired to boost the science department based on her own scientific background.
Remind you of another college president out in Illinois?
As a non-native speaker of English, I am wondering not for the first time about how the term corrupt
is used in the English world. Is it not correct that corruption means taking money (or some other
form of payment) in exchange for doing somebody an undeserved favour, e.g. a professor accepting
money to pass a student who should really have been failed? I would have thought that what is
described here was embezzlement instead?
Sorry if this is not the most productive contribution, but I am wondering.
steve 10.11.16 at 7:12 pm
Corruption is a general term for premeditated unethical actions. Embezzlement would be a specific
criminal change.
J-D 10.11.16 at 8:58 pm
I think it's common for 'corruption' to be used to refer to the misuse of official authority for
private benefit; so if somebody has official authority to expend funds for stipulated purposes,
and misuses that authority to expend some of those funds for a private benefit unconnected with
those stipulated purposes, that could be described as corrupt conduct.
CCNY Drudge 10.12.16 at 12:50 am
What you don't mention but is how despicable it is that a high level administrator tried to set
up two low level employees with no decision authority with a faked document. Yes, CUNY administrators
should be held accountable for their non-action and sticking their heads in the sand, but don't
exonerate the CCNY faculty who closed their eyes for the ethical problems and remained silent,
just because of their comfortable teaching hours under this president or other perks, or just
because they didn't want to rock the boat, just grumble at the water cooler. They had the academic
freedom and union protection, and the majority of them did nothing. They were like the Republican
Party facing Trump.
Karl Kolchack 10.12.16 at 1:01 am
A professional colleague of mine was prosecuted and fired for falsifying a relocation voucher for
a grand total of around $2200. Of course, this was way back in 1991, when such garbage was far
less tolerated that it seems to be these days.
This demonstrates on so many levels how administrators within CUNY are so poorly managed to the
point where they create their own "Game of Thrones." It is no wonder why the current Governor
of New York has a negative opinion of CUNY and wants a deeper look at our administrative levels
across CUNY. You can bet your last dollar that what the former CCNY President has done, has also
infected many of the departments within CCNY and across CUNY. This was no anomaly. The seeds were
planted ions ago and watered by the City and State at the expense of our students CUNY was meant
to help.
Library Love 10.12.16 at 4:37 pm
This sickens me to no end. I'm a librarian at CCNY and I have taken money out of my own pocket
for office supplies etc. for my office and for students. This is just disgusting. I knew she was
up to something but I had no idea it was this bad.
"Everybody agrees that better education and improved skills, for as many people as
possible, is crucial to increasing productivity and living standards and to tackling rising
inequality. But what if everybody is wrong?… As for inequality, we may need to offset it through
overt redistribution, with higher minimum wages or income support unrelated to people's price in the
job market, and through generous provision of high-quality public goods." Of course, Clinton has
already foreclosed this possibility; after all, some of the redistribution would go to "irredeemables."
Jobless Claims, week of
October 8, 2016: "Unemployment claims remain at or near historic lows,
indicating a lack of layoffs and quick turnaround for those who do lose their
jobs" [
Econoday
].
Or that claims are harder to get. And: "Initial jobless claims continued to
surprise to the downside, plumbing depths not seen in a very long time"
[Amherst Pierpont,
Across the Curve
]. "Not that we should be shocked.
When the labor market gets very tight, firms do not want to lay off
anyone that they suspect they might want to re-hire at some point because
chances are, they will not be available when the firm tries to call them back….
here may be 3 or 4 doves on the FOMC who still believe that there is
substantial slack in the labor market, but the more compelling argument in my
view is that we are moving/have moved into clearly tight territory, which is
why wage hikes are (finally) accelerating to a pace in excess of what
productivity growth and cost-of-living adjustments would dictate." Time to
screw the workers? I mean, a better time than usual?
Import and Export Prices, September 2016: "Progress is the theme in
September's import & export price report where emerging pressures may be
appearing. Import prices rose 0.1 percent in the month with export prices up
0.3 percent. And year-on-year rates are finally coming up for air, at only
minus 1.1 percent for import prices which is the best showing since August
2014. The year-on-year rate for export prices is minus 1.5 percent for their
best showing since October 2014" [
Econoday
].
And: "The month-over-month figures given in the headlines only confuse. At the
current rate of moderation of deflation (trend line) – both imports and export
prices should start inflating by the end of the year" [
Econintersect
].
Bloomberg Consumer Comfort Index, week of October 9, 2016: "[A] tough month
for the consumer comfort index which drifted in the 41 range, well down from
the prior trend at 44" [
Econoday
].
Real Estate: "The U.S. industrial property market is on track for another
record year in 2016, and the market could expand well into 2018 despite the
possibility of higher interest rates that would increase the costs of carrying
inventory, according to a leading industrial real estate and logistics firm" [
DC
Velocity
]. "Richard H. Thompson, JLL's international director, supply chain
and logistics solutions, said demand will be powered by the dramatic growth of
e-commerce and the fulfillment networks developed and expanded to support it."
Can't we just turn the malls into warehouses?
Supply Chain: "The collapse of Hanjin Shipping has brought into sharp relief
the vulnerability of intercontinental supply chains, the spectre of further
bankruptcies among ocean shipping lines, and the likelihood of an acceleration
of nearshoring trends" [
Lloyd's
List
].
Shipping: "Bankrupt Hanjin Shipping has redelivered the majority of its
chartered-in vessels with more to follow, which is swelling the global fleet of
idled containerships, according to research by Alphaliner" [
Splash
247
]. "These redeliveries [of 67 vessels] have caused the fleet of idle
containerships of over 500 teu to surge to 371 vessels (1.33m teu total), as of
October 3, Alphaliner said in its latest weekly report."
Shipping: "For the fourth time in as many months, U.S. aviation safety
regulators have proposed a fine on Amazon.com Inc." [
Wall
Street Journal
, "Safety Regulators Fine Amazon Again Over Hazardous Air
Shipments"]. "According to the Federal Aviation Administration, in August 2015
FedEx Corp. workers at a sorting facility in Cary, Ill., discovered a leaking
package that held two 14-ounce bottles of a flammable, ethanol-based hair
tonic. The shipment, which was flown from Ruskin, Fla., to Algonquin, Ill.,
wasn't packaged or marked properly to show it contained hazardous material, the
FAA alleges, and shipping papers didn't provide required details, including
emergency response information." Amazon's response is priceless: "[Amazon] has
developed sophisticated technologies to detect potential shipping hazards and
use any defects as an opportunity for continuous improvement." I guess when a
plane falls out of the sky that will come under the heading of "continuous
improvement" too?
Shipping: "Amazon.com Inc. plans to hire 20% more seasonal workers for its
U.S. warehouses this holiday season as some competitors have kept hiring
steady." [
Wall
Street Journal
, "Amazon to Add 120,000 Workers for Holidays"]. "The company
said 14,000 seasonal employees were hired full time last year, and the company
plans to bring on more full-time workers this year."
Rail: "It does appear that the downward slide in the one year rolling
averages will pause shortly as the rate of increase in the rate of decline is
continuing to be smaller. But this movement is like watching snails race. Based
on the current trends – rail year-over-year rate of contraction should start
improving by year end" [
Econintersect
].
"Still I am grappling with what this contraction actually means as the USA
economy is not being pulled into a recession."
Rail: "[Railroad] tie production plunged 12.9 percent in July to 2.21
million units, while purchases dropped 11.8 percent to 2.2 million units from
June levels, according to [the
Railway Tie Association]. Compared with July 2015 data, production fell 7.6
percent, while purchases slipped 8.4 percent" [
Progressive
Railroading
].
Commodities: "One of the more eye-catching trends for tanker markets this
quarter is the slowing fuel demand in China, as indicated by multiple
indicators and analysts" [
Lloyd's
List
].
Political Risk: "Economists in The Wall Street Journal's latest monthly
survey of economists put the odds of the next downturn happening within the
next four years at nearly 60%" [
Wall
Street Journal
, "Economists Believe a Recession Is Likely Within Next Four
Years"]. Obama decreasing the deficit should leave Clinton II holding the bag,
exactly as Clinton I reducing the deficit left Bush holding the bag.
Political Risk: "Hard Brexit could turn EU to Ukraine for wheat, rather than
UK" [
Agrimoney
].
"For both wheat, of which the EU buyers accounted for 80% of UK exports last
season, and barley, for which the bloc took 63% of UK sales, the [import
levies] would represent more than half the value of supplies, at 2015 prices,
and would probably render such shipments 'uneconomic'."
Today's Fear & Greed Index: 32, Fear (previous close: 45, Neutral) [
CNN
].
One week ago: 53 (Neutral). (0 is Extreme Fear; 100 is Extreme Greed). Last
updated Oct 13 at 11:43am. Mr. Market finally decides he doesn't like Clinton
all that much after all? War is bad for business, after all.
Big oil companies are no longer able to replace all their
production through conventional exploration, the energy consulting company said in a report
published Tuesday.
We have been hearing a great deal about IMF concerns recently, after the release of its
October 2016 World Economic Outlook and its Annual Meeting October 7-9. The concerns mentioned
include the following:
Too much growth in debt, with China particularly mentioned as a problem
World economic growth seems to have slowed on a long-term basis
Central bank intervention required to produce artificially low interest rates, to produce even
this low growth
Global international trade is no longer growing rapidly
Economic stagnation could lead to protectionist calls
These issues are very much related to issues that I have been writing about:
It takes energy to make goods and services.
It takes an increasing amount of energy consumption to create a growing amount of goods and
services–in other words, growing GDP.
This energy must be inexpensive, if it is to operate in the historical way: the economy
produces good productivity growth; this productivity growth translates to wage growth; and debt
levels can stay within reasonable bounds as growth occurs.
We can't keep producing cheap energy because what "runs out" is cheap-to-extract energy. We
extract this cheap-to-extract energy first, forcing us to move on to expensive-to-extract energy.
Eventually, we run into the problem of energy prices falling below the cost of production
because of affordability issues. The wages of non-elite workers don't keep up with the rising
cost of extraction.
Governments can try to cover up the problem with more debt at ever-lower interest rates, but
eventually this doesn't work either.
Instead of producing higher commodity prices, the system tends to produce asset bubbles.
Eventually, the system must collapse due to growing inefficiencies of the system. The result
is likely to look much like a "Minsky Moment," with a collapse in asset prices.
The collapse in assets prices will lead to debt defaults, bank failures, and a lack of new
loans. With fewer new loans, there will be a further decrease in demand. As a result, energy and
other commodity prices can be expected to fall to new lows.
"Well the bankers called a meeting to the White House they went one day
They was going to call on the President in a quiet and a sociable way
And the afternoon was sunny and the weather it was fine
They counted out our money and no banker was left behind"
JOLTS, August 2016: "In downbeat indications on the labor market, job openings fell a sharp 7.3
percent in August to 5.443 million at the same time that hiring, instead of rising, slowed by 0.9
percent to 5.210 million" [Econoday].
"Though readings in this report remain healthy, the drop in openings and the lack of hiring are consistent
with slowing jobs growth, as seen in both the August and September employment reports." And: "The
BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth,
and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm
job openings were insignificantly changed from last month. In addition, the growth rate trends declined
using the 3 month averages" [Econintersect].
But: " Even with the decline in Job Openings, this is another solid report" [Calculated
Risk]. And: "There was a significant decline in openings in the manufacturing and construction
sectors, while openings were little changed in the retail sector. There was an increase in the leisure
sector, while openings in government declined. More positively, there was an increase in hires in
the manufacturing and construction sectors: [Economic
Calendar]. "The number of hires for the month still exceeded separations by over 250,000, which
still indicates very solid employment growth for the month, and no underlying deterioration.:"
MBA Mortgage Applications, week of October 7, 2016: "Mortgage activity slowed in in the October
7 week, with seasonally adjusted purchase applications for home mortgages falling" [Econoday].
"Versus the comparable week a year ago, however, unadjusted purchase applications were 27 percent
higher, a sharp reversal of the 14 percent year-on-year decline seen in the prior week." But: " Don't
read too much into the year-over-year increase – remember last year there was a sharp increase in
applications the week prior to the TILA-RESPA regulatory change, and the following week applications
plunged 28%. Since this is a comparison to the week following the regulatory change, applications
are up year-over-year. This will smooth out soon" [Calculated
Risk].
Fodder for the Bulls: "Eurozone Industrial Production Rebounds 1.6% In August" [Economic
Calendar]. "There will certainly be caution over the data for August given the risks of faulty
seasonal adjustments as August is a peak holiday season. Any renewed downturn for September would
trigger fresh concerns, although the data overall should boost confidence in the outlook slightly."
Shipping: " Hanjin Shipping Co. is stepping in to help resolve the logistics mess created by the
carrier's thousands of empty containers" [Wall
Street Journal]. "The confusion over boxes is part of the supply-chain mess that's followed the
South Korean carrier's declaration of bankruptcy in August. Questions over shipping payments and
fees remain, however, and those may take longer to resolve than it will take to clear away Hanjin's
empty containers."
Shipping: "General Average is a legal principle of Maritime Law under which, all parties who are
involved in that voyage, shall be asked to proportionally share the losses resulting from such sacrifice"
[Shipping
and Freight Resource]. "Say for example the ship is a container ship and there are 100 containers
on board with 100 customers.. One of the containers caught fire on board which spread to 9 other
containers and all 10 containers had to be thrown overboard in order to save the balance 90 containers,
the ship and the crew. Since the ship, the cargo and the crew were saved due to this action, the
whole burden of the loss will be shared among the 100 customers and not just the 10 customers whose
cargo was thrown overboard." Interestingly,
the principle of "general average" was used to justify fraud in the case of the ship Zong, whose
captain and crew threw its slaves (cargo) overboard to collect on the insurance money.
"... In the West, the priority accorded to the individualist self-regarding norms underlying the Washington Consensus created a nurturing environment for growth in corruption, inequality, and mistrust in governing elites – the unintended consequences of rational-choice, me-first premises. With the emergence in advanced economies of disorders previously associated with developing countries, Swedish political scientist Bo Rothstein has petitioned the Academy of Sciences (of which he is a member) to suspend the Nobel Prize in economics until such consequences are investigated." ..."
Interesting read on the history of the Nobel Prize in
Economics and its ideological tendency:
Avner Offer: "a
group of center-right economists captured the process of
selecting prizewinners...The prize kingmaker was Stockholm
University economist Assar Lindbeck, who had turned away from
social democracy. During the 1970s and 1980s, Lindbeck
intervened in Swedish elections, invoked microeconomic theory
against social democracy, and warned that high taxation and
full employment led to disaster. His interventions diverted
attention from the grave policy error being made at the time:
deregulation of credit, which led to a deep financial crisis
in the 1990s and anticipated the global crisis that erupted
in 2008.
Lindbeck's concerns were similar to those of the
International Monetary Fund, the World Bank, and the US
Treasury. These actors' insistence on privatization,
deregulation, and liberalization of capital markets and trade
– the so-called Washington Consensus – enriched business and
financial elites, led to acute crises, and undermined
emerging economies' growth.
In the West, the priority accorded to the individualist
self-regarding norms underlying the Washington Consensus
created a nurturing environment for growth in corruption,
inequality, and mistrust in governing elites – the unintended
consequences of rational-choice, me-first premises. With the
emergence in advanced economies of disorders previously
associated with developing countries, Swedish political
scientist Bo Rothstein has petitioned the Academy of Sciences
(of which he is a member) to suspend the Nobel Prize in
economics until such consequences are investigated."
"... But if the third globalisation wave is mostly about taking advantage of cheap labour not commodities - whilst simultaneously reducing industrial capacity at home - today's global imbalances could result in a very different type of correction (something which may or may not be happening now). ..."
"... The immediate consequence may be the developed world's desire to engage in significant industrial on-shoring. ..."
"... I'm not convinced the end of globalization and the retrenchment of banking industry are the same thing. There are some things that can't be exp/imported. Maybe we just got to the point where it didn't make sense to order moules marinieres from Brussels!? ..."
"... You forget the third leg - reducing the price of labour for services via immigration of labour from poorer countries. On top of the supply-and-demand effects, it reduces social solidarity (see Robert Putnam) - of which trades union membership and activity is one indicator. It's a win-win for capital. ..."
According to strategists Bhanu Baweja, Manik Narain and Maximillian
Lin the elasticity of trade to GDP - a measure of wealth creating
globalisation - rose to as high as 2.2. in the so-called third wave
of globalisation which began in the 1980s. This compared to an
average of 1.5 since the 1950s. In the post-crisis era, however,
the elasticity of trade has fallen to 1.1, not far from the weak
average of the 1970s and early 1980s but well below the second and
third waves of globalisation.
... ... ...
The anti-globalist position has always been simple. Global trade isn't a net positive for anyone
if the terms of trade relationships aren't reciprocal or if the trade exists solely for the purpose
of taking advantage of undervalued local resources like labour or commodities whilst channeling
rents/profits to a single central beneficiary. That, they have always argued, makes it more akin to
an imperialistic relationship than a reciprocal one.
If the latest wave of "globalisation" is mostly an expression of
American imperialism, then it does seem logical it too will fade as
countries wake-up to the one-sided nature of the current global
value chains in place.
Back in the first wave of globalisation,
of course, much of the trade growth was driven by colonial empires
taking advantage of cheap commodity resources abroad in a bid to
add value to them domestically. When these supply chains unravelled,
that left Europe short of commodities but long industrial capacity
- a destabilising imbalance which coincided with two world wars.
Simplistically speaking, resource rich countries at this point
were faced with only two options: industrialising on their own
autonomous terms or be subjugated by even more oppressive
imperialist forces, which had even grander superiority agendas than
their old colonial foes. That left those empires boasting domestic
industrial capacity but lacking natural resources of their own,
with the option of fighting to defend the rights of their former
colonies in the hope that the promise of independence and friendly
future knowledge exchanges (alongside military protection) would be
enough to secure resource access from then on.
But if the third globalisation wave is mostly about taking
advantage of cheap labour not commodities - whilst simultaneously
reducing industrial capacity at home - today's global imbalances
could result in a very different type of correction (something
which may or may not be happening now).
The immediate consequence
may be the developed world's desire to engage in significant
industrial on-shoring.
But while reversing the off-shoring trend may boost productivity
in nations like the US or even in Europe, it's also likely to
reduce demand for mobile international capital as a whole. As UBS
notes, global cross border capital flows are already decelerating
significantly as a share of GDP post-crisis, and the peak-to-trough
swing in capital inflows to GDP over the past ten years has been
much more dramatic in developed markets than in emerging ones:
To note, in China trade as a % of GDP fell from
65% in 2006 to 42% in 2014. The relationship
between trade and GDP is in reality more variable
than is usually claimed.
I'm not convinced the end of globalization and
the retrenchment of banking industry are the same
thing. There are some things that can't be
exp/imported. Maybe we just got to the point
where it didn't make sense to order moules
marinieres from Brussels!?
"if the third globalisation wave is mostly about taking advantage of cheap labour not
commodities - whilst simultaneously reducing
industrial capacity at home"
You forget the third leg - reducing the
price of labour for services via immigration of
labour from poorer countries. On top of the
supply-and-demand effects, it reduces social
solidarity (see Robert Putnam) - of which trades
union membership and activity is one indicator.
It's a win-win for capital.
The simple problem with globalization is that it was based off economic views which looked
at things in aggregate - but people are
individuals, not aggregates. "On average, GDP
per person has gone up" doesn't do anything for
the person whose income has gone down. "Just
think about all the people in China who are so
much better off than they used to be" isn't going
to do much for an American or European whose
standard of living has slipped from middle class
to working class to government assistance.
"Redistribution" is routinely advertised as
the solution to all of this. I leave it as an
exercise to the reader to figure out how to
redistribute wealth from the areas that have
prospered the most (Asia, particularly China) to
the individuals (primarily in the West) who have
lost the most. In the absence of any viable
redistribution scheme, though, I suspect the most
likely outcome will be a pulling back on
globalization.
@
Terra_Desolata
The aggregates also do apply to countries -
i.e. the US on aggregate has benefited from
globalisation, but median wages have been
stagnant in real terms, meaning that the
benefits of globalisation have not been
well distributed across the country
(indeed, companies like Apple have
benefited hugely from reducing the costs of
production, while you could make the case
that much of the benefits of lower
production costs have been absorbed into
profit margins).
That suggests that redistribution can
occur at the country level, rather than
requiring a cross-border dimension.
@
Meh...
in the US, median male wages were
lower in 2014 than in 1973 - when a
far higher proportion of working-age
males were active in the labour
force.
Growing up in the 1970s, it would
have been unthinkable for wages to
have fallen since the 1930s.
Terra_Desolata
5pts
Featured
8 hours ago
@
Meh...
@
Terra_Desolata
Yes, there has been uneven
distribution of income within
countries as well as between them -
but as the Panama Papers revealed, in
a world of free movement of capital,
incomes can also move freely between
borders. (See: Apple.) While the
U.S. has lower tolerance than Europe
and Asia for such games, any attempts
at redistribution would necessarily
include an effort to keep incomes
from slipping across national
borders, which would have the same
effect: a net reduction in
globalization.
"... The banking and corporate elites certainly have a problem. The agenda for many decades has been to steal and rape enough from the 99% to maintain positive balance sheets and earnings per share. ..."
"... Fewer and fewer of the 99% can now afford to pay for the promoted goods and services. It has reached a tipping point. Name one major bank that could afford to mark-to-mark its balance sheet assets. Name one S&P corporation that has shown solid earnings growth absent stock buybacks. And from here on, it only gets worse. ..."
Global debt has now reached about a hundred and fifty-two trillion dollars
. This includes government debt, household debt, non-financial firms' debt. What does
all this debt mean for the global financial system and for everyday people here, Michael?
That works out to only USD $20,540 for every man, woman and child on the planet. I'm sure the
debt serfs can take double or triple that.
Yup, barely over 2 million dollars per 1 percenter. You can barely buy a passable vacation
mansion for that, let alone staff it with peons. C'mon, guys, work harder for (and borrow more
from) your betters!
The banking and corporate elites certainly have a problem. The agenda for many decades
has been to steal and rape enough from the 99% to maintain positive balance sheets and earnings
per share.
It has worked too well, but pure math has a way of biting the 1% in the ass.
Fewer and fewer of the 99% can now afford to pay for the promoted goods and services. It
has reached a tipping point. Name one major bank that could afford to mark-to-mark its balance
sheet assets. Name one S&P corporation that has shown solid earnings growth absent stock buybacks.
And from here on, it only gets worse.
Deutsche Bank AG Chief Executive Officer John Cryan failed to reach an
agreement with the U.S. Justice Department to resolve a years-long
investigation into its mortgage bond dealings during a meeting in Washington
Friday, Germany's Bild newspaper reported.
Concerns about Deutsche Bank's ability to pay the $14 billion opening
settlement bid from the Justice Department sent the lender's stock to a
record low last month. The bank, which set aside 5.5 billion euros ($6.2
billion) for litigation at the end of June, may face additional penalties to
wrap up other outstanding investigations.
Cryan, a Briton who speaks fluent German, has sought for the last three
weeks to reassure investors that Deutsche Bank can weather the formidable
obstacles to its financial health.
Germany's Schaeuble says too much talk on Deutsche Bank – Reuters
The key word is
"talk"
. If you take this literally it makes
perfect sense and Hillary would know what to do as this quote of her in the
latest Wikileaks trove over at MoonofAlabama makes clear:
*CLINTON SAYS YOU NEED TO HAVE A PRIVATE AND PUBLIC POSITION ON
POLICY*
Clinton: "But if everybody's watching, you know, all of the back room
discussions and the deals, you know, then people get a little nervous, to say
the least. So, you need both a public and a private position."
Can't have the little people becoming nervous. Then they might start asking
questions and want to know what their government is doing and start paying
attention. Then they won't do their national duty and go shopping. Clinton will
know how to continue the ponzi scheme of higher debt Michael Hudson talks about
in the earlier link by saying one thing in public while doing another in
private.
German sources have him using the word
Gerede
, which is more
like "chitchat" or "tittle tattle," meaning not just talk but idle talk. The
headline of
this Frankfurter Rundschau article
also characterizes his comments a
little differently: Idle Talk About Deutsche Bank Worries [literally
"nerves"] Schäuble.
The Reuters article is paraphrasing him correctly, mind you, but the use
of
Gerede
/
gereden
casts the talk in a very particular
light.
"... "In my lifetime I cannot remember anything like the scepticism about these values that we see today," said Suma Chakrabarti, president of the European Bank for Reconstruction and Development. ..."
"... There was much discussion this week about the underlying causes of that scepticism - low growth, stagnant wages and other scars of the 2008 global financial crisis - together with calls for governments to do more to ensure the benefits of globalisation are distributed more widely. ..."
"... Lou Jiwei, China's finance minister, told reporters on Friday, the current "political risks" would in the immediate future lead only to "superficial changes" for the global economy. But underlying them was a deeper trend of "deglobalisation". ..."
The world's economic elite spent this week invoking fears of protectionism and the
existential
crisis facing globalisation
.... ... ...
Mr Trump has raised the possibility of trying to renegotiate the terms of the US sovereign debt
much as he did repeatedly with his own business debts as a property developer. He also has proposed
imposing punitive tariffs on imports from China and Mexico and ripping up existing US trade pacts.
... ... ...
"Once a tariff has been imposed on a country's exports, it is in that country's best interest
to retaliate, and when it does, both countries end up worse off," IMF economists wrote.
It is not just angst over Mr Trump. There are similar concerns over Brexit and the rise of populist
parties elsewhere in Europe. All present their own threats to the advance of the US-led path of economic
liberalisation pursued since Keynes and his peers gathered at Bretton Woods in 1944.
"In my lifetime I cannot remember anything like the scepticism about these values that we
see today," said Suma Chakrabarti, president of the European Bank for Reconstruction and Development.
There was much discussion this week about the underlying causes of that scepticism - low growth,
stagnant wages and other scars of the 2008 global financial crisis - together with calls for governments
to do more to ensure the benefits of globalisation are distributed more widely.
Lou Jiwei, China's finance minister, told reporters on Friday, the current "political risks" would
in the immediate future lead only to "superficial changes" for the global economy. But underlying
them was a deeper trend of "deglobalisation".
"... Weak global trade, fears that the U.K. is marching towards a hard Brexit , and polls indicating that the U.S. election remains a tighter call than markets are pricing in have led a bevy of analysts to redouble their warnings that a backlash over globalization is poised to roil global financial markets-with profound consequences for the real economy and investment strategies. ..."
"... From the economists and politicians at the annual IMF meeting in Washington to strategists on Wall Street trying to advise clients, everyone seems to be pondering a future in which cooperation and global trade may look much different than they do now. ..."
"... "The main risk with potentially tough negotiating tactics is that trade partners could panic, especially if global coordination evaporates." ..."
Weak global trade, fears that the U.K. is marching towards a
hard Brexit , and polls indicating that the U.S. election remains a
tighter call than markets are
pricing in have led a bevy of analysts to redouble their warnings that a backlash over globalization
is poised to roil global financial markets-with profound consequences for the real economy and investment
strategies.
From the economists and politicians at the annual
IMF meeting in Washington to strategists on Wall Street trying to advise clients, everyone seems
to be pondering a future in which cooperation and
global trade may look much different than they do now.
Brexit
Suggestions that the U.K. will prioritize control over its migration policy at the expense of
open access to Europe's single market in negotiations to leave the European Union-a strategy that's
being dubbed a "hard Brexit"-loomed large over global markets. The U.K. government is "strongly supportive
of open markets, free markets, open economies, free trade," said
Chancellor of the Exchequer Philip Hammond during a Bloomberg Television interview in New York
on Thursday. "But we have a problem-and it's not just a British problem, it's a developed-world problem-in
keeping our populations engaged and supportive of our market capitalism, our economic model."
Trade
Citing the rising anti-trade sentiment, analysts from Bank of America Merrill Lynch warned that
"events show nations are becoming less willing to cooperate, more willing to contest," and a
backlash against inequality is likely to trigger more activist fiscal policies. Looser government
spending in developed countries-combined with trade protectionism and wealth redistribution-could
reshape global investment strategies, unleashing a wave of inflation, the bank argued, amid a looming
war against inequality.
U.S. Treasury Secretary Jack Lew did his part to push for more openness. During an interview in
Washington on Thursday, he said that efforts to boost trade, combined with a more equitable distribution
of the fruits of economic growth, are key to ensuring
U.S. prosperity. Rolling back on globalization would be counterproductive to any attempt to boost
median incomes, he added.
Trump
Without mentioning him by name, Lew's comments appeared to nod to Donald Trump, who some believe
could take the U.S. down a more isolationist trading path should he be elected president in November.
"The emergence of Donald Trump as a political force reflects a mood of growing discontent about immigration,
globalization and the distribution of wealth," write analysts at Fathom Consulting, a London-based
research firm. Their central scenario is that a Trump administration might be benign for the U.S.
economy. "However, in our downside scenario, Donald Dark, global trade falls sharply and a global
recession looms. In this world, isolationism wins, not just in the U.S., but globally," they caution.
Analysts at Standard Chartered Plc agree that the tail risks of a Trump presidency could be significant.
"The main risk with potentially tough negotiating tactics is that trade partners could panic, especially
if global coordination evaporates." They add that business confidence could take a big hit in this
context. "The global trade system could descend into a spiral of trade tariffs, reminiscent of what
happened after the
Smoot-Hawley tariff of 1930 , and ultimately a trade war, possibly accompanied by foreign-exchange
devaluations; this would be a 'lose-lose' deal for all."
Market participants are also concerned that populism could take root under a Hillary Clinton administration.
"We believe the liberal base's demands on a Clinton Administration could lead to an overly expansive
federal government with aggressive regulators," write analysts at Barclays Plc. "If the GOP does
not unify, Clinton may expand President Obama's use of executive authority to accomplish her goals."
"... During a panel discussion at the New York Historical Society back in May, the Doubleline Capital CEO revealed that one of his top three recession indicators is when the unemployment rate breaches its 12-month moving average. ..."
"... High-quality bonds perform better in recessions than in expansions. Treasuries love recessions. The 10-year T-note returned an eye-popping 17.7% in the crisis year of 2008, when Treasuries were the last safe harbor on planet Earth. ..."
Bond king Jeffrey Gundlach's recession indicator was triggered this morning:
During a panel discussion at the New York Historical Society back in May, the Doubleline Capital
CEO revealed that one of his top three recession indicators is when the unemployment rate breaches
its 12-month moving average.
September's non-farm payrolls report showed that the unemployment rate in the U.S. ticked up
to 5 percent, while the 12-month moving average held steady at 4.9 percent.
"This indicator is a necessary, but not sufficient, sign of a coming recession," wrote Gundlach
in an email to Bloomberg. "It is worth factoring into economic analysis but not a reason for sudden
alarm."
This indicator briefly gave false positives in 1976, 1985, 1986, 1995, 1996, and 1998. So as Gundlach
says, it's not definitive. No single indicator is.
Nevertheless, if the unemployment rate carries on rising above 5.0 percent this autumn, it would
get my attention.
High-quality bonds perform better in recessions than in expansions. Treasuries love recessions.
The 10-year T-note returned an eye-popping 17.7% in the crisis year of 2008, when Treasuries were
the last safe harbor on planet Earth.
Mankiw should be the lead negotiator for the administration, explaining to
the dining hall workers why they're paid what they're worth, and no more.
Maybe he could throw in e-access codes to his textbook as a sweetener.
When the great crime of this millennium happened and Jabba the Hut was in
charge of Harvaaaaard, Jabba was getting paid millions to lose billions. Too
bad he wasn't paid tens of millions to increase productivty and lose tens of
billions, wiping the fountainhead of corruption out.
This is absolutely deplorable! These folks had to strike for 35K/yr at
rich-ass Harvard? Unreal.
Why is it that White Collar types have such contempt for Blue Collar people?
I'm sick and tired of being looked down upon, made fun of, and laughed at
because I'm not an office drone. I can't stand how these jokers refer to
themselves as "professionals" all the damned time too, as if the rest of us are
a bunch of amateurs, blathering all the goddamned time about free market this,
free market that, this goodthink cause, that goodthink cause, union bad, gov't
bad, private sector good, yada yada.
Absolutely–an inferiority complex. It's why so many white collar types
drive pick-up trucks. Makes them look like they know how to do something
useful.
Yes, the perfectly unscratched pick-up truck more than a year
old. It's such an epic fail because it's "girly" and they were
going instead for "manly". Either is, no doubt, a fine thing, but
not when epically fail.
Soon the elite will have the race track option for their
supercars, an AV version of track lapping where they strap
themselves into the driver's seat and let the car scare the crap
out of them.
"... Krugman is such a deplorable hack. I know we are supposed to accept bribe-taking politicians and the economy run by looting robber barons. But can't we even have a goddamn fourth estate? ..."
"... The way Krugman murders journalism ethics by outright campaigning for one of the most corrupt politicians in American history is outrageous. Barfing up her disgusting campaign memes verbatim as if he's coordinating his columns with her war room. ..."
"... If you're a scientist you would know that economics does not remotely resemble a science. One familiar with the history of math and science will notice that their development (based on discovered facts) forms a tree-like structure. One discovery branches out to more discoveries. The growth is therefore exponential. ..."
Sure...Krugman will occasionally pay lip service to green energy.
The problem is that 'liberal' economists tend to keep separate silos for green energy and infrastructure.
Question is, why do they refuse to connect the dots between climate change mitigation, green
energy, fiscal stimulus, and lots of jobs? And why do they prioritize more road and bridges, which
will only make climate change worse?
Krugman is an abhorrent neoliberal hack (as well as Hillary stooge).
Who actually understand very little about climate change clearly being non-specialist without
any training of physics and geophysics. He is a second rate neoclassical economist with penchant
for mathiness (and a very talented writer).
The key question here is Clinton warmongering and the threat of nuclear war with Russia. Washington
neocon chichenhawks became recently realty crazy. Obama looks completely important and does not
control anything.
I think this is more immediate threat then climate change.
Oil depletion (which already started and will be in full force in a couple of decades) might
take care about climate change as period of "cheap oil" (aka "oil age") probably will last less
then 100 years and as such is just a blip in Earth history.
End of cheap oil also might lead to natural shrinking of human population -- another factor
in the global climate change and a threat to natural ecosystems.
Hillary is the fracking Queen. Claiming she's a champion of the environment is as ridiculous portraying
Donald Trump a feminist.
Obomba is another pretender on the environment. The Paris Agreement commits to absolutely nothing
but more talk at a future time. China signed on and is still keeping its commitment to do absolutely
nothing to reduce emissions until 2030. (By the time the West has exported the lion share of its
emissions to the country in a pointless GHG emissions shell game; emission per capita have skyrocketed
since 2002! a 25% increase!)
Krugman is such a deplorable hack. I know we are supposed to accept bribe-taking politicians
and the economy run by looting robber barons. But can't we even have a goddamn fourth estate?
The way Krugman murders journalism ethics by outright campaigning for one of the most corrupt
politicians in American history is outrageous. Barfing up her disgusting campaign memes verbatim
as if he's coordinating his columns with her war room.
So to all the pretend liberals out there who offer the people nothing more than more corruption,
lies, war-profiteering and public trust liquidation: you deserve Trump. And I pray that you get
him. (After him, a New Deal; and the 'me generation,' the Void.)
If you're a scientist you would know that economics does not remotely resemble a science.
One familiar with the history of math and science will notice that their development (based on
discovered facts) forms a tree-like structure. One discovery branches out to more discoveries.
The growth is therefore exponential.
Economic history does not follow this pattern.
With science there are paradigm shifts that occur with groundbreaking discoveries like the
theories of relativity and quantum mechanics. The Friedmanian paradigm shift was founded on jettisoning
all the enormously successful work Keynes accomplished and digging up failed 19th century ideology,
repeating disastrous history.
Even psychology follows the pattern. Although it began with a lot of unsubstantiated Aristotelian
philosophizing, it was a starting point from which a significant body of definite knowledge and
medical treatments developed. A real social science. (Not perfect. It was recently discovered
that about 50% of published psychological experiments were not reproducible.)
As an anthropologist you should know about cliques and group-think. Have an inkling of how
corruption could gradually develop and spread among upper-echelon cliques to the point where the
government, the economy, the courts and the news media become captured by the upper class. Understand
how cowards would rather look the other way than take a stand and deal with it: "see no evil,
hear no evil, speak no evil."
As an anthropologist, I can assert with confidence that you are babbling about things you do not
really understand at all. I have issues with a lot of economics, but you are completely incoherent.
Completely incoherent? Then it should be easy enough for you to tear apart what I wrote. It was
certainly easy enough for me to tear into Krugman's crass political pandering. But all you got
is lame generalizations. Stock insults that could be said about anything.
What issues do you have with "a lot of economics?" I bet you can't come up with anything. Come
on. Out with it! Say something intelligent about anything, if you are at all capable, Mr. Dick.
I have yet to read anything from you that indicates you have any knowledge about anything.
It is Dr. Dick, since I have a Ph.D. If you ever read the comments on this blog, you would know
full well what those issues are, since I have raised them here many times. For a start the assumption
of "rational actors" (only partially true), the assumption of economic maximization (people maximize
many different things which affect their economic choices), and the assumption of "rational markets"
(this ignores pervasive information assymetry and active deceit).
"... yes rates were higher - but the deductions were huge - if you were wealthy - you could easily buy tax shelters that would offset your income. ..."
"... Pardon me, but this good citizen, Nossir, is shoveling a load of typical BS. We must suffer inequality in good cheer, he or she posits, and tens of millions of us must struggle to put food on our children's tables, or else the all powerful "Investors" will be angry with us and stop being so kind to us. ..."
"... The "Investors" who rule over us, are parasites who are sucking the blood out of our nation, but to their way of thinking, they are kind and magnanimous as they deign to exploit us. ..."
"... look it up nossir. Capital gains tax are not north of 50% even in Denmark Most gains there are taxed at 27%. It's earned income taxes combined with VAT that add up to around 55% in Denmark. ..."
"... For those tax rates they get free and/or subsidized education through university, free health care for all, an infrastructure that puts ours to shame, a vastly superior mass transit system throughout the nation, guaranteed maternity/paternity leave of up to 2 years with income provided by government; hugely subsidized childcare for those too young for kindergarten, etc. etc. ..."
"... Median household income is no indicator of prosperity. If adult children can't make enough money to live apart from their parents, even if they take a minimum wage job the median household income goes up. Per capita income is a much more truthful indicator of a country's prosperity. Obama's (and Clinton's) economic policies hurt the middle class; why do you think "income inequality" has gotten worse in the past eight years - and why Hillary won't release the texts of her Wall Street speeches? ..."
The Census BurEAU recently announced a heartening 5 percent gain in the median household income
between 2014 and 2015, the largest one-year gain on record. Yet a look at the longer-term trends
offers a sobering perspective. The jump in household income merely helps to make up for lost ground;
the median earnings in 2015 were actually lower than back in 1999 - 16 years ago.
While household median incomes have stagnated since the late 1990s, the inflation-adjusted
earnings of poorer households have stagnated for even longer, roughly 40 years. Meanwhile, households
at or near the top of the income distribution have enjoyed sizeable increases of living standards.
The result is a stark widening of the gap between rich and poor households.
There is perhaps no issue in America more contentious than income inequality. Everybody has a
theory as to why the gap between rich and poor has widened and what should be done - if anything
- to close it. A full explanation should help us understand why the United States stands out for
having an especially high and rising inequality of income.
There are three main factors at play: technology, trade, and politics. Technological innovations
have raised the demand for highly trained workers, thereby pushing up the incomes of college-educated
workers relative to high-school-educated workers. Global trade has exposed the wages of industrial
workers to tough international competition from workers at much lower pay scales. And our federal
politics has tended, during the past 35 years, to weaken the political role of the working class,
diminish union bargaining power, and cap or cut the government benefits received by working-class
families.
Consider technology. Throughout modern history, ingenious machines have been invented to replace
heavy physical labor. This has been hugely beneficial: Most (though not all) American workers have
been lucky to escape the hard toil, drudgery, dangers, and diseases of heavy farm work, mining, and
heavy industry. Farm jobs have been lost, but with some exceptions, their backbreaking drudgery has
been transformed into office jobs. Farm workers and miners combined now account for less than 1 percent
of the labor force.
Yet the office jobs required more skills than the farm jobs that disappeared. The new office jobs
needed a high school education, and, more recently, a college degree. So who benefited? Middle-class
and upper-class kids fortunate enough to receive the education and skills for the new office jobs.
And who lost? Mostly poorer kids who couldn't afford the education to meet the rising demands for
skilled work.
Now the race between education and technology has again heated up. The machines are getting smarter
and better faster than ever before - indeed, faster than countless households can help their kids
to stay in the job market. Sure, there are still good jobs available, as long as you've graduated
with a degree in computer science from MIT, or at least a nod in that direction.
Globalization is closely related to technology and, indeed, is made possible by it. It has a similar
effect, of squeezing incomes of lower-skilled workers. Not only are the assembly-line robots competing
for American jobs; so too are the lower-waged workers half a world away from the United States. American
workers in so-called "traded-goods" sectors, meaning the sectors in direct competition with imports,
have therefore faced an additional whammy of intense downward pressure on wages.
For a long time, economists resisted the public's concern about trade depressing wages of lower-skilled
workers. Twenty-two years ago I coauthored a paper arguing that rising trade with China and other
low-wage countries was squeezing the earnings of America's lower-skilled workers. The paper was met
with skepticism. A generation later, the economics profession has mostly come around to recognize
that globalization is a culprit in the rise of income inequality. This doesn't mean that global trade
should be ended, since trade does indeed expand the overall economy. It does, however, suggest that
open trade should be accompanied by policies to improve the lot of lower-wage, lower-skilled workers,
especially those directly hit by global trade but also those indirectly affected.
MANY ANALYSES OF rising income inequality stop at this point, emphasizing the twin roles of technology
and trade, and perhaps debating their relative importance. Yet the third part of the story - the
role of politics - is perhaps the most vital of all. Politics shows up in two ways. First, politics
helps to determine the bargaining power of workers versus corporations: how the overall pie is divided
between capital and labor. Second, politics determines whether the federal budget is used to spread
the benefits of a rising economy to the workers and households left behind.
Unfortunately, US politics has tended to put the government's muscle on behalf of big business
and against the working class. Remember the Reagan revolution: tax cuts for the rich and the companies,
and union-busting for the workers? Remember the Clinton program to "end welfare as we know it," a
program that pushed poor and working-class moms into long-distance commuting for desperately low
wages, while their kids were often left back in dangerous and squalid conditions? Remember the case
of the federal minimum wage, which has been kept so low for so long by Congress that its inflation-adjusted
value peaked in 1968?
There is no deep mystery as to why federal politics has turned its back on the poor and working
class. The political system has become "pay to play," with federal election cycles now costing up
to $10 billion, largely financed by the well-heeled class in the Hamptons and the C-suites of Wall
Street and Big Oil, certainly not the little guy on unemployment benefits. As the insightful political
scientist Martin Gilens has persuasively shown, when it comes to federal public policy, only the
views of the rich actually have sway in Washington.
So in the end, the inequality of income in the United States is high and rising while in other
countries facing the same technological and trade forces, the inequality remains lower, and the rise
in inequality has tended to be less stark. What explains the difference in outcomes? In the other
countries, democratic politics offers voice and representation to average voters rather than to the
rich. Votes and voters matter more than dollars.
To delve more deeply into the comparison between the United States and other countries, it is
useful to measure the inequality of income in each country in two different ways. The first way measures
the inequality of "market incomes" of households, that is, the income of households measured before
taxes and government benefits are taken into account. The second measures the inequality of "disposable
income," taking into account the taxes paid and transfers received by the household.
The difference between the two measures shows the extent of income redistribution achieved through
government taxation and spending. In all of the high-income countries, the inequality of market income
is greater than the inequality of disposable income. The taxes paid by the relatively rich and the
transfers made to the relatively poor help to offset some of the inequality of the marketplace.
THE ACCOMPANYING CHART offers just this comparison for the high-income countries. For each country,
two measures of inequality based on the "Gini coefficient" are calculated. The Gini coefficient is
a measure of income inequality that varies between 0 (full-income equality across households) and
1 (full-income inequality, in which one household has all of the income). Countries as a whole tend
to have a Gini coefficient of disposable income somewhere between 0.25 (low inequality) and 0.60
(very high inequality).
In the figure, we see the two values of the Gini coefficient for each country: a higher value
(more inequality) based on market income and a lower value (less inequality) based on disposable
income (that is, after taxes and transfers). We can see that in every country, the tax-and-transfer
system shifts at least some income from the rich to the poor, thereby pushing down the Gini coefficient.
Yet the amount of net redistribution is very different in different countries, and is especially
low in the United States.
Compare, for example, the United States and Denmark. In the United States, the Gini coefficient
on market income is a very high 0.51, and on disposable income, 0.40, still quite high. In Denmark,
by comparison, the Gini coefficient on market income is a bit lower than the United States, at 0.43.
Yet Denmark's Gini coefficient on disposable income is far lower, only 0.25. America's tax-and-transfer
system reduces the Gini coefficient by only 0.11. Denmark's tax-and-transfer system reduces the Gini
coefficient by 0.18, half-again as high as in the United States.
How does Denmark end up with so much lower inequality of disposable income from its budget policies?
Denmark taxes more heavily than the United States and uses the greater tax revenue to provide free
health care, child care, sick leave, maternity and paternity leave, guaranteed vacations, free university
tuition, early childhood programs, and much more. Denmark taxes a hefty 51 percent of national income
and provides a robust range of high-quality public services. The United States taxes a far lower
31 percent and offers a rickety social safety net. In the United States, people are left to sink
or swim. Many sink.
So, many Americans would suspect, Denmark is miserable and being crushed by taxes, right? Well,
not so right. Denmark actually comes out number 1 in the world happiness rankings, while the United
States comes in 13th. Denmark's life expectancy is also higher, its poverty lower, and its citizens'
trust in government and in each other vastly higher than the equivalent trust in the United States.
SO HEREIN LIES a key lesson for the United States. America's inequality of disposable income is
the highest among the rich countries. America is paying a heavy price in lost well-being for its
high and rising inequality of income, and for its failure to shift more benefits to the poor and
working class.
We have become a country of huge distrust of government and of each other; we have become a country
with a huge underclass of people who can't afford their prescription drugs, tuition payments, or
rents or mortgage payments. Despite a roughly threefold increase in national income per person over
the past 50 years, Americans report to survey takers no higher level of happiness than they did back
in 1960. The fraying of America's social ties, the increased loneliness and distrust, eats away at
the American dream and the American spirit. It's even contributing to a rise in the death rates among
middle-aged, white, non-Hispanic Americans, a shocking recent reversal of very long-term trends of
rising longevity.
The current trends will tend to get even worse unless and until American politics changes direction.
As I will describe in a later column, the coming generation of yet smarter machines and robots will
claim additional jobs among the lower-skilled workers and those performing rote activities. Wages
will be pushed lower except for those with higher training and skills. Capital owners (who will own
the robots and the software systems to operate them) will reap large profits while many young people
will be unable to find gainful employment. The advance in technology could thereby contribute to
a further downward spiral in social cohesion.
That is, unless we decide to do things differently. Twenty-eight countries in the Organization
for Economic Cooperation and Development have lower inequality of disposable income than the United
States, even though these countries share the same technologies and compete in the same global marketplace
as the United States. These income comparisons underscore that America's high inequality is a choice,
not an irreversible law of the modern world economy.
Jeffrey D. Sachs is University Professor and Director of the Center for Sustainable Development
at Columbia University, and author of "The Age of Sustainable Development."
RZwarich 10/03/16 07:08 AM
The "Gini coefficient" is one of the worst, one of the least understandable, measures of inequality
I've ever seen. I'm sure that it is a useful and scientifically accurate tool to economists who
are trained in math and statistics, but to average people, these numbers are just so much 'mumbo
jumbo'.
It's rather like the exponentially based Richter scale for measuring earthquakes, (or the decibel
scale for sound, or any exponentially based scale). Very few people understand that a Richter
6.1 earthquake is TWICE as strong as a Richter 6.0 quake, and that a Richter 7 quake is ten times
as strong as a 6.0 quake.
I would advise Dr. Sachs, and/or other economists trying to illustrate a measure of inequality
in popular mass media, to find or devise some other 'measuring stick'.
As for our good citizen Harry's relevance, try to consider that he is a grown man, (with grandchildren),
who thinks that the old I.P Freeley joke is hilarious. (Harry Arm Pitts. Get it?)
This good citizen posits the most basic precept of true democracy. True Democracy requires a moral
agreement among citizens. "I will respect you, and your interests, if you will respect mine".
Thus, following from this basic moral agreement, we each have an equal 'voice', and an equal vote,
in support of our own interests.
We are thus all connected, each to all, and all to each, in an agreement of mutually intertwined
interests.
The system we have now is an "every person for himself or herself" system. It is not based upon
that moral agreement.
Thus in our system, one person is not required, or even expected, to respect the interests of
others. One person is allowed to have so much, that many do not have even enough to sustain a
minimally dignified life.
In the US today, 22 people, 22 individual citizens, (not even enough to fill the first 6 rows
of a city bus), have as much wealth, combined between them, as 160 MILLION of their fellow citizens.
It is surely no surprise that among those 160 MILLION are many millions (about 50-60) who suffer
in the constant indignity of poverty, with tens of millions of children living in daily 'food
insecurity'. (That means that though they may not be actually starving, they never know where
their next meal is coming from, or when).
Nossir 10/02/16 08:10 PM
The fallacy of composition states that what works on a small scale - say in a country like Denmark
- will not work everywhere, or more specifically, in a 17 trillion dollar economy like the United
States. Investors will not invest the capital needed to maintain an economy of this size with tax
rates north of 50%.
megmuck 10/03/16 06:25 AM
But they did for until the 1980's and the Reagan tax cuts. What happened to make Americans
so much greedier 30 years ago?
tsynchronous 10/03/16 07:18 AM
I lived the economy of the late 1970's early 1980's - let's see - interest rates of 22% - being
1 of 25 individuals applying for a dishwasher job - running out of gasoline - sure - let's bring
those days back.
and yes rates were higher - but the deductions were huge - if you were wealthy - you could
easily buy tax shelters that would offset your income.
RZwarich 10/03/16 07:29 AM
Pardon me, but this good citizen, Nossir, is shoveling a load of typical BS. We must suffer
inequality in good cheer, he or she posits, and tens of millions of us must struggle to put food
on our children's tables, or else the all powerful "Investors" will be angry with us and stop
being so kind to us.
This is the same line of "reasoning" that holds that when 'Investors" exploit the population of
an underdeveloped country, paying slave level wages to people living in squalid poverty, they
are being superbly magnanimous for "providing jobs".
The "Investors" who rule over us, are parasites who are sucking the blood out of our nation,
but to their way of thinking, they are kind and magnanimous as they deign to exploit us.
Such is the sick psychology of the Ruling Classes. Such has it ever been, (and likely will ever
be).
Global Initiative 10/03/16 07:43 AM
RZ.
if only you were in charge, right? You'd make sure it was fair for everyone (including, of course,
yourself?)
bigfoot 201510/03/16 04:22 PM
one of the greatest periods of growth in the United States was the 1950's. Top marginal tax
rate was 90 percent.
rwc2 10/03/16 07:46 PM
look it up nossir. Capital gains tax are not north of 50% even in Denmark Most gains there
are taxed at 27%. It's earned income taxes combined with VAT that add up to around 55% in
Denmark.
For those tax rates they get free and/or subsidized education through university, free
health care for all, an infrastructure that puts ours to shame, a vastly superior mass transit
system throughout the nation, guaranteed maternity/paternity leave of up to 2 years with income
provided by government; hugely subsidized childcare for those too young for kindergarten, etc.
etc.
Considering my approximate 30% total tax rate, I'm pretty sure I spend/spent more than another
20% of my income on all the services provided by the Danish government (and by most of the rest
of Europe, Canada, Australia, New Zealand). As a not an all insubstantial side benefit, there
would be the joy of living in a society not beset by poverty, alienation and hatred. In fact,
that additional tax rate seems a small price to pay I belief.
And what's more, I don't even think the tax rate has to be that high here to provide those services
if we stopped spending way, way too much on the military and our attempt to be world policeman.
RZwarich10/03/16 07:33 AM
This good citizen's heart seems to be in the right place, (generally speaking), but she
or he is very confused.
Per capita income does not measure income distribution.
If 10 people have a per capita income of $1 million, we do not know if they each make $100k,
or one makes $990,000, and the other nine split the other $10k.
Suares23 10/02/16 08:46 PM
Median household income is no indicator of prosperity. If adult children can't make enough
money to live apart from their parents, even if they take a minimum wage job the median household
income goes up. Per capita income is a much more truthful indicator of a country's prosperity.
Obama's (and Clinton's) economic policies hurt the middle class; why do you think "income inequality"
has gotten worse in the past eight years - and why Hillary won't release the texts of her Wall
Street speeches?
Suares2310/04/16 08:17 AM
RZ, please note that my comment specified a country's prosperity, not individual prosperity.
Plus, your example defines "average" prosperity, not "median" prosperity. As you note, "averages"
explain very little; "median" incomes are a much more accurate indicator of individuals' prosperity.
This is the 'religious' dogma of the Elite. Let's produce 'economic growth' and the benefits will
trickle down to all. This dogma has been thoroughly proven top be a 'fairy tale' that never comes
true.
When 'economic growth occurs, the newly created wealth is distributed the same as the old amount
of wealth. Most goes to the top. It does NOT "trickle down".
Since the blood sucking pirates raped our nation, culminating in the economic collapse of 2008,
the taxpayers 'bailed them out'. That's you and me, folks. We EACH paid to make these guys 'whole'.
Ever since, we've had a decent amount of 'economic growth', but almost all of it has gone to those
SAME blood sucking pirates.
The good citizen is 100% correct that "Inequality of incomes is a necessary condition of a free
market economy", but she or he is 100% wrong that in a free market economy "growing the economy
raises more people up".
Growing an economy only "raises more people up" if the "free market is regulated to produce an
equitable (fair, NOT equal), distribution of wealth.
"... I got tired of lambasting macroeconomics a while ago, and the "macro wars" mostly died down in the blogosphere around when the recovery from the Great Recession kicked in. But recently, there have been a number of respected macroeconomists posting big, comprehensive criticisms of the way academic macro gets done. Some of these criticisms are more forceful than anything we bloggers blogged about back in the day! ..."
"... First, there's Paul Romer's latest, " The Trouble With Macroeconomics ". The title is an analogy to Lee Smolin's book " The Trouble With Physics ". Romer basically says that macro (meaning business-cycle theory) has become like the critics' harshest depictions of string theory - a community of believers, dogmatically following the ideas of revered elders and ignoring the data. The elders he singles out are Bob Lucas, Ed Prescott, and Tom Sargent. ..."
"... In response to the observation that the shocks [in DSGE models] are imaginary, a standard defense invokes Milton Friedman's (1953) methodological assertion from unnamed authority that "the more significant the theory, the more unrealistic the assumptions (p.14)." More recently, "all models are false" seems to have become the universal hand-wave for dismissing any fact that does not conform to the model that is the current favorite. ..."
"... We [macroeconomists] tend to view research as being the process of posing a question and delivering a pretty precise answer to that question...The research agenda that I believe we need is very different. It's hugely messy work. We need...to build a more evidence-based modeling of financial institutions. We need...to learn more about how people actually form expectations. We need [to use] firm-based information about residual demand functions to learn more about product market structure. At the same time, we need to be a lot more flexible in our thinking about models and theory, so that they can be firmly grounded in this improved empirical understanding. ..."
"... This is a somewhat misleading way of putting it, but it allows me to illustrate some important points about 'unrealistic' assumptions. In real world modelling in Physics 'unrealistic' assumptions are ubiquitous. What matters is not literal realism of assumptions but robustness.of conclusions. ..."
"... Simplifying assumptions are context specific, ie ad hoc, and never axiomatic.The ad hoc nature of simplifying assumptions is a feature, not a bug as the above example illustrates. ..."
"... Robustness is critical. As we move from our simplifying assumptions towards greater realism/precision, the conclusion should not change in any material way, and we use the simplifications because the gain in accuracy of the conclusions is not worth the added complexity and consequent loss of tractability in the model. ..."
"... This is indeed excellent. The three criteria for evaluating assumptions/simplifications, the precise definition of ad hoc, and the crystal-clear example of point mass for orbits vs rotation. ..."
"... So, we are witnessing a battle between a declining DSGE scam and ascending "Realistic assumptions" scam. ..."
"... Both approaches are worthless, but I guess it will give an excuse to macroeconomists why they are useless: we just used the wrong paradigm, now we are switching to the new one. Just many more years of research is needed and we will be ready. Science!, as they say. ..."
"... Science, IEHO, has three touchstones. Coherence - your model and its assumptions should not contradict each other or lead to contradictory conclusions. Consilience - a good theory has a broad reach for explaining reality. Consensus - a theory which is coherent and consilient should lead to a consensus among practicioners. It is only within a strong consensus that people can talk to each other and extend the field. ..."
"... It appears that macro misses out on a number of these. ..."
"... "Romer basically says that macro (meaning business-cycle theory)" ..."
"... In either case, I think this is another big problem with macro, its obsession with business cycles as opposed to long-term thriving and prosperity. eg, Gerald Friedman got tied in knots by this; he was trying to use "stimulus" thinking and arguments to talk about about multi-decadal possibilities. ..."
"... I'm fond of observing that in addition to "cargo cult science", macroeconomics has often been likened to a religion. What religions do when the mainstream becomes intolerable for one reason or another is schism. Then after a number of years what used to be the mainstream dies out and the former schismatics become the mainstream. ..."
"... Psychology went through this kind of crisis some years ago when the scientists split off from the clinicians, and created the Association for Psychological Science to contrast with the clinically-oriented American Psychological Association (the APA is the one that publishes the unscientific but influential Diagnostic and Statistical Manual). ..."
"... In order to be scientific, the standard method is to actually try predicting. Prediction is messy and provably fails to converge to any possible theory, but there are other authentic sciences that have this same theoretical limitation, like meteorology. This doesn't prevent meteorologists from constructing theories which make predictions that demonstrably get better and better year after year. ..."
"... For twenty years Romer has been implying (and recently saying) that economists who don't accept endogenous growth theory have abandoned the canons of science and are either blind or indifferent to the truth. Over the same twenty years he seems to have produced very little theoretical work, while his targets have remained working economists. (Why, after all, should anyone continue to do theory, since Romer has discovered the truth?) ..."
I got tired of lambasting macroeconomics a while ago, and the "macro wars" mostly died down in
the blogosphere around when the recovery from the Great Recession kicked in. But recently, there
have been a number of respected macroeconomists posting big, comprehensive criticisms of the way
academic macro gets done. Some of these criticisms are more forceful than anything we bloggers blogged
about back in the day! Anyway, I thought I'd link to a couple here.
First, there's Paul Romer's latest, "
The Trouble
With Macroeconomics ". The title is an analogy to Lee Smolin's book "
The Trouble With Physics ". Romer basically says that macro (meaning business-cycle theory) has
become like the critics' harshest depictions of string theory - a community of believers, dogmatically
following the ideas of revered elders and ignoring the data. The elders he singles out are Bob Lucas,
Ed Prescott, and Tom Sargent.
Romer says that it's obvious that monetary policy affects the real economy, because of the Volcker
recessions in the early 80s, but that macro theorists have largely ignored this fact and continued
to make models in which monetary policy is ineffectual. He says that modern DSGE models are no better
than old pre-Lucas Critique simultaneous-equation models, because they still take lots of assumptions
to identify the models, only now the assumptions are hidden instead of explicit. Romer points to
distributional assumptions, calibration, and tight Bayesian priors as ways of hiding assumptions
in modern DSGE models. He cites
an interesting
2009 paper by Canova and Sala that tries to take DSGE model estimation seriously and finds (unsurprisingly)
that identification is pretty difficult.
As a solution, Romer suggests chucking formal modeling entirely and going with more general, vague
but flexible ideas about policy and the macroeconomy, supported by simple natural experiments and
economic history.
Romer's harshest zinger (and we all love harsh zingers) is this:
In response to the observation that the shocks [in DSGE models] are imaginary, a standard
defense invokes Milton Friedman's (1953) methodological assertion from unnamed authority that
"the more significant the theory, the more unrealistic the assumptions (p.14)." More recently,
"all models are false" seems to have become the universal hand-wave for dismissing any fact that
does not conform to the model that is the current favorite.
The noncommittal relationship with the truth revealed by these methodological evasions...goes
so far beyond post-modern irony that it deserves its own label. I suggest "post-real."
Ouch. He also calls various typical DSGE model elements names like "phlogiston", "aether", and "caloric".
Fun stuff
. (Though I do think he's too harsh on string theory, which often is just a kind of math that
physicists do to keep themselves busy, and has no danger of hurting anyone, unlike macro theory.)
Meanwhile, a few weeks earlier, Narayana Kocherlakota wrote a post called "
On the Puzzling Prevalence of Puzzles ". The basic point was that since macro data is fairly
sparse, macroeconomists should have lots of competing models that all do an equally good job of matching
the data. But instead, macroeconomists pick a single model they like, and if data fails to fit the
model they call it a "puzzle". He writes:
To an outsider or newcomer, macroeconomics would seem like a field that is haunted by its lack
of data...In the absence of that data, it would seem like we would be hard put to distinguish
among a host of theories...[I]t would seem like macroeconomists should be plagued by underidentification...
But, in fact, expert macroeconomists know that the field is actually plagued by failures to fit
the data – that is, by overidentification.
Why is the novice so wrong? The answer is the role of a priori restrictions in macroeconomic theory...
The mistake that the novice made is to think that the macroeconomist would rely on data alone
to build up his/her theory or model. The expert knows how to build up theory from a priori restrictions
that are accepted by a large number of scholars...[I]t's a little disturbing how little empirical
work underlies some of those agreed-upon theory-driven restrictions – see p. 711 of Lucas (JMCB,
1980) for a highly influential example of what I mean.
In fact, Kocherlakota and Romer are complaining about much the same thing: the overuse of unrealistic
assumptions. Basically, they say that macroeconomists, as a group, have gotten into the habit of
assuming stuff that just isn't true. In fact, this is what the Canova and Sala
paper
says too, in a much more technical and polite way:
Observational equivalence, partial and weak identification problems are widespread and typically
produced by an ill-behaved mapping between the structural parameters and the coefficients of the
solution.
That just means that the model elements aren't actually real things.
(This critique resonates with me. From day 1, the thing that always annoyed me about macro was how
people made excuses for assumptions that were either unverifiable or just flatly contradictory to
micro data. The usual excuse was the "
pool player analogy " - the idea that the pieces of a model don't have to match micro data as
long as the resulting model matches macro data. I'm not sure that's how Milton Friedman wanted his
metaphor to be used, but that seems to be the way it does get used. And when the models didn't
match macro data either, the excuse was "all models are wrong," which really just seems to be a way
of saying "the modeler gets to choose which macro facts are used to validate his theory". It seemed
that to a large extent, macro modelers were just allowed to do whatever they wanted, as long as their
papers won some kind of behind-the-scenes popularity contest. But I digress.)
So what seems to unite the new heavyweight macro critics is an emphasis on realism . Basically,
these people are challenging the idea, very common in econ theory, that models shouldn't worry about
being realistic. (Paul Pfleiderer is another economist who has recently made
a similar complaint , though not in the context of macro.) They're not saying that economists
need 100% perfect realism - that's the kind of thing you only get in physics, if anywhere. As
Paul
Krugman and
Dani Rodrik have emphasized, even the people advocating for more realism acknowledge that there's
some ideal middle ground. But if Romer, Kocherlakota, etc. are to be believed, macroeconomists aren't
currently close to that optimal interior solution.
Updates
Olivier Blanchard is a bet less forceful, but he's definitely also
one of the new heavyweight
critics . Among his problems with DSGE models, at least as they're currently done, are 1. "unappealing"
assumptions that are "at odds with what we know about consumers and firms", and 2. "unconvincing"
estimation methods, including calibration and tight Bayesian priors. Sounds pretty similar to Romer.
Meanwhile,
Kocherlakota
responds to Romer . He agrees with Romer's criticism of unrealistic macro assumptions, but he
dismisses the idea that Lucas, Prescott, and Sargent are personally responsible for the problems.
Instead, he says it's about the incentives in the research community. He writes:
We [macroeconomists] tend to view research as being the process of posing a question and delivering
a pretty precise answer to that question...The research agenda that I believe we need is very
different. It's hugely messy work. We need...to build a more evidence-based modeling of financial
institutions. We need...to learn more about how people actually form expectations. We need [to
use] firm-based information about residual demand functions to learn more about product market
structure. At the same time, we need to be a lot more flexible in our thinking about models and
theory, so that they can be firmly grounded in this improved empirical understanding.
Kocherlakota says that this isn't a "sociological" issue, but I think most people would call it that.
Since journals and top researchers get to decide what constitutes "good" research, it seems to me
that to get the changes in focus Kocherlakota wants, a sociological change is exactly what would
be required.
Kocherlakota now has another post describing
how
he thinks macro ought to be done . Basically, he thinks researchers - as a whole, not just on
their own! - should start with toy models to facilitate thinking, then gather data based on what
the toy models say is important, then build formal "serious" models from the ground up to match that
data. He contrasts this with the current approach of tweaking existing models.
My question
is: Who is going to enforce this change? If a few established researchers start doing things
the way Kocherlakota wants, they'll certainly still get published (because they're famous old people),
but will the young folks follow? How likely is it that established researchers en masse are going
to switch to doing things this way, and demanding that young researchers do the same, and using their
leverage as reviewers, editors, and PhD advisers to make that happen? This doesn't seem like the
kind of change that can be brought about by a few young smart rebels forcing everyone else to recognize
the value of their approach - the existing approach, which Kocherlakota dislikes, already succeeds
in getting publication and prestige, so the rebels would simply coexist alongside the old approach,
rather than overthrowing it. How could this cultural change be put into effect?
Also: Romer
now has a follow-up
to his original post, defending his original post against the critics. This part stood out to
me as particularly persuasive:
The whine I hear regularly from the post-real crowd is that "it is really, really hard to do research
on macro so you shouldn't criticize any of our models unless you can produce one that is better."
This is just post-real Calvinball used as a shield from criticism. Imagine someone saying to a
mathematician who finds an error in a theorem that is false, "you can't criticize the proof until
you come up with valid proof." Or try this one on and see how it feels: "You can't criticize the
claim that vaccines cause autism unless you can come up with a better explanation for autism."
Sounds right to me. The old like that "it takes a theory to kill a theory" just seems wrong to me.
Sometimes all it takes is evidence.
I've already commented at lenght on Romer at
Mark Thoma's. So I'll just use something you wrote on physics to make a tangential comment
on unrealistic assumptions.
"They're not saying that economists need 100% perfect realism - that's the kind of thing
you only get in physics, if anywhere"
This is a somewhat misleading way of putting it, but it allows me to illustrate some important
points about 'unrealistic' assumptions. In real world modelling in Physics 'unrealistic' assumptions are ubiquitous. What matters is
not literal realism of assumptions but robustness.of conclusions.
Consider a point-mass. There is no such thing. Yet it is a perfectly legitimate simplifying
assumption about a planet if you are interested in studying its orbit around its sun. It is not
a legitimate assumption if you are interested in studying a planet's rotation about its axis
The most important points underlying such simplifying assumptions are:
1. Simplifying assumptions are context specific, ie ad hoc, and never axiomatic.The ad hoc
nature of simplifying assumptions is a feature, not a bug as the above example illustrates.
2. Robustness is critical. As we move from our simplifying assumptions towards greater realism/precision,
the conclusion should not change in any material way, and we use the simplifications because the
gain in accuracy of the conclusions is not worth the added complexity and consequent loss of tractability
in the model.
3. Out of sample performance of the model.
* Richard Feynman:
"...in order to understand physical laws you must understand that they are all some kind of
approximation.
The trick is the idealizations. To an excellent approximation of perhaps one part in 10^10,
the number of atoms in the chair does not change in a minute, and if we are not too precise we
may idealize the chair as a definite thing; in the same way we shall learn about the characteristics
of force, in an ideal fashion, if we are not too precise. One may be dissatisfied with the approximate
view of nature that physics tries to obtain (the attempt is always to increase the accuracy of
the approximation), and may prefer a mathematical definition; but mathematical definitions can
never work in the real world. A mathematical definition will be good for mathematics, in which
all the logic can be followed out completely, but the physical world is complex, as we have indicated
in a number of examples, such as those of the ocean waves and a glass of wine. When we try to
isolate pieces of it, to talk about one mass, the wine and the glass, how can we know which is
which, when one dissolves in the other? The forces on a single thing already involve approximation,
and if we have a system of discourse about the real world, then that system, at least for the
present day, must involve approximations of some kind.
This system is quite unlike the case of mathematics, in which everything can be defined, and
then we do not know what we are talking about. In fact, the glory of mathematics is that we do
not have to say what we are talking about. The glory is that the laws, the arguments, and the
logic are independent of what "it" is.
Indeed. That was part of the reason for redundantly using the phrase :) . The other reason
was that the usage is strictly accurate. ad hoc = for this particular purpose (Shorter OED)
It is difficult to see how simplifying assumptions underlying real world models can be anything
but ad hoc (context-specific)
For a mathematician to object to ad hoc statements would be understandable, but for someone
concerned with real world modelling to do so is mind-boggling.
It is worth pointing out that the economists who do so object have never in their life built
a model that works, for any definition of 'works' acceptable anywhere outside economics.
This is indeed excellent. The three criteria for evaluating assumptions/simplifications, the
precise definition of ad hoc, and the crystal-clear example of point mass for orbits vs rotation.
I'd like to bring in my pet bailiwick, accounting. Our (national) accounting systems are rife
with assumptions and simplifications - they are economic models. (Or in Feynman's excellent
term, "idealizations.") And those assumptions are effectively invisible to almost everyone. If
I had a nickel for every time I've heard "it's an accounting identity" as if that was somehow
synonymous with "truth"...
Just one example, relating to a rather important economic measure - income:
The national-accounting sages know that the appropriateness of this basic conceptual construct
is a very open question. But that fact is invisible to almost everyone. National accounts could
be depicted quite differently (yes, with everything still balancing).
Economists' thinking is completely owned by the conceptual constructs, the idealizations, embodied
in our national-accounting structures. And they frequently display zero understanding of the constructs
that they are (we are) using to think with.
I've been critical of you in the past, but that is a really good comment, 100% on the ball.
But I will add that the simplifying assumption you used to illustrate your point, may not be true,
but it is nearly true (without the scales being considered). And many simplifying assumptions
used in economics are not nearly true.
Informally we might - and sometimes do - say that the assumption (point-mass) is 'nearly true',
but it is not quite correct. It is an idealization that satisfies criterion (2): robustness, and
the resulting model satisfies criterion (3); out-of-sample performance.
Of course this is very different from the sort of assumptions common in economics which are
often patently false - and this is the critical point - making them more realistic materially
changes the conclusions ie the assumptions in the models fail to satisfy the robustness criterion.
And, at least in DSGE/RBC macro to talk of in-sample fit or out-of-sample performance of the resulting
model would imply a libelous misuse of the terms.
Actually, as Romer notes, the situation in economics is often even worse.with assumptions being
not merely false ( with non-robust conclusions) but entirely meaningless in terms of real world
observables. Assumptions of the sort that are deservedly derisively dismissed as not even wrong
in every scientific or engineering discipline.
It's not just an argument about having models with realistic assumptions. It is also an argument
about the extent to which mathematics and models can usefully provide the answers we need to know.
Basically we are going back to Keynes's (1937) arguments about the limitations of "pretty and
polite techniques". Edgeworth was also very much aware of the limitations of mathematics in economics.
And so have many others, for a long time.
I have been critical of Romer in the past. His growth theory for me does not answer the critical
questions that I think are the most important into understanding why certain countries get on
to a growth curve and others do not. But I now really have to admire his honesty.
It is not true that we do not have a lot of macro data. The National Accounts contain scores
of (largely stock-flow consistent) data. The point is: one of the big failures of DSGE economists
is their failureto establish a measurement system which produces data consistent with the DSGE
models. Keynes, who even established his own government statistical office, the present day ONS,
and, in a more indirect sense, Smith, Marshall as well and Veblen did establish systems of measurement
to measure data consistent with their models and ideas. Read Mitra Kahn http://openaccess.city.ac.uk/1276/
or my efforts
DSGE economists never bothered to do this. Weird (well, not that weird - taking account of
real life data would have meant taking unemployment and the government serious... Or the fact
that the National Accounts identities only hold for nominal variables, not for deflated real variables).
Anyway - as there is no system of DSGE consistent measurement of the macro-economy it can't be
called a valid science.There are however systems consistent with the ideas of Keynes and Veblen...
So, we are witnessing a battle between a declining DSGE scam and ascending "Realistic assumptions"
scam.
Both approaches are worthless, but I guess it will give an excuse to macroeconomists why
they are useless: we just used the wrong paradigm, now we are switching to the new one. Just many
more years of research is needed and we will be ready. Science!, as they say.
I'm curious how many economists are simply too blind to understand that this will lead nowhere
and how many are simply cynical beyond belief.
I just don't understand the mentality. Wouldn't you like to do something productive? Like produce
actual knowledge? Can you guys be satisfied with infinite curve fitting?
Science, IEHO, has three touchstones. Coherence - your model and its assumptions should not contradict each other or lead to contradictory
conclusions. Consilience - a good theory has a broad reach for explaining reality. Consensus - a theory which is coherent and consilient should lead to a consensus among practicioners.
It is only within a strong consensus that people can talk to each other and extend the field.
It appears that macro misses out on a number of these.
"Romer basically says that macro (meaning business-cycle theory)"
Are you equating macro with business-cycle theory, or are you saying that Romer does?
In either case, I think this is another big problem with macro, its obsession with business
cycles as opposed to long-term thriving and prosperity. eg, Gerald Friedman got tied in knots
by this; he was trying to use "stimulus" thinking and arguments to talk about about multi-decadal
possibilities.
" (Though I do think he's too harsh on string theory, which often is just a kind of math that
physicists do to keep themselves busy, and has no danger of hurting anyone, unlike macro theory.)"
I find it hard to believe Noah understands string theory well enough to justify such a strong
opinion of it only existing to keep theorists employed. As much as I like "The Trouble With Physics"
those reading should keep in mind that Lee Smolin acknowledges that maybe there is something to
string theory.
And again, the focus of string theory in theoretical physics is harmful to the expansion of
knowledge and economic growth if too many brains not only barked up the wrong tree - nothing wrong
with that - but *continued* to bark up the wrong tree for years, ignoring other paths of understanding
physics, which is Smolin's main point.
I'm fond of observing that in addition to "cargo cult science", macroeconomics has often
been likened to a religion. What religions do when the mainstream becomes intolerable for one
reason or another is schism. Then after a number of years what used to be the mainstream dies
out and the former schismatics become the mainstream.
Psychology went through this kind of crisis some years ago when the scientists split off
from the clinicians, and created the Association for Psychological Science to contrast with the
clinically-oriented American Psychological Association (the APA is the one that publishes the
unscientific but influential Diagnostic and Statistical Manual).
All that heterodox economists need to do is gain some self-confidence and stop calling themselves
derogatory names. That won't make them scientific, but it'll be a step in the right direction.
In order to be scientific, the standard method is to actually try predicting. Prediction is
messy and provably fails to converge to any possible theory, but there are other authentic sciences
that have this same theoretical limitation, like meteorology. This doesn't prevent meteorologists
from constructing theories which make predictions that demonstrably get better and better year
after year.
Why don't all these macro critics stop publishing in "unscientific" mainstream journals and
setup their own J.Econ.Sci. that has rigorous scientific standards? Many of them have tenure or
non-academic jobs (e.g. Roemer) and don't need to kowtow to committees who care only about established
impact factors. It's been done elsewhere. It wasn't so long ago that one of the most prestigious
biology journals Cell, was just an upstart new face on the block. All it takes is a strong editor
and a pool of like-minded peer reviewers.
I think Paul Romer's self-serving ad hominem attacks should be identified as just that. One
would hardly blame the older generation of Nobel laureates of conspiring to deny economic pre-eminence
to Romer - look at how he behaves! - but I think they probably have better things to do.
I admit I haven't completely digested Romer's latest thunderbolt - I'm basing my comments more
on Romer's "mathiness" series of a year ago. In that case, I went back and read the "mathy" papers
that Romer was attacking. Mathy they were, but the Lucas and Moll paper at least was very clear
about why it didn't see increasing returns-to-scale in growth models convincing: the intellectual
property-driven economic sector just isn't, in their view, big enough. (BTW, that's almost exactly
the same argument made by William Nordhaus against the AI "singularity" folks: it could happen,
but none of today's macroeconomic data suggest that it is happening.)
To come back to the current discussion, I have no particular sympathy with the Lucas-Prescott-Sargent
rational expectations / microfoundations / real business cycle approach - but the needed discussion
of the defects of RBC has been underway for some time. And note that Romer's opening distillation
of RBC makes its problems all about a supposed "exogenous" component, for which the subtext is
that RBC's authors don't accept Romer's "endogenous" growth theory.
For twenty years Romer has been implying (and recently saying) that economists who don't accept
endogenous growth theory have abandoned the canons of science and are either blind or indifferent
to the truth. Over the same twenty years he seems to have produced very little theoretical work,
while his targets have remained working economists. (Why, after all, should anyone continue to
do theory, since Romer has discovered the truth?)
I wish Romer well at the World Bank. There is no doubt that his ideas around urbanization,
for example, will bring an important and updated perspective to a development bank. But the very
move suggest to me that the World Bank has not failed to note Romer's ability to propagandize
an economic agenda - and that it values his political skills as much as his reputation as an economic
theorist.
It's easy to poke holes in existing methodology, but it's much more difficult to come up with
viable alternatives and solutions. Do those who knock DSGE models really think we should go back
to 1970's macro and reuse old-school Keynesian models? The empirical evidence against Keynesian
multipliers is overwhelming (See Ramey for an overview). Methodologically, Keynesian models make
just as many implausible, ad hoc assumptions as DSGE models, if not more. Their forecast accuracy
is no better; private forecasters are mostly selling stories and scenarios, not forecasts that
in any way will prove ex post to be accurate.
I think you are repeating - and it is a good reminder - the classic Mark Blaug argument that
economists should not abandon the "best available" theory (even if its deficiencies are manifest)
if there is no better replacement. I have no problem with that.
However, I think the discussion right now is about those manifest defects. And there are stirrings
about what comes next. Noah has blogged several times on the new "empirical turn". And the Keynesians,
who have never gone away, may yet stand up a rehabilitated theory. For a usable business cycle
theory, there are really three tests to satisfy:
1) Normal forecasting capability (as you mention);
2) Convincing comparative statics on the effects of monetary or fiscal intervention. (RBC omitted
this almost by definition.)
3) Some ability to detect pressures that are building toward a major shock. (I call this 'the
Cassandra feature', since the predictions are unlikely to be believed or heeded.) Whether any
model could really offer this is open to question, but it's a real question. The Fed always talks
about "risks to the economy", but is the perception of those risks coming from the model? How
did Warren Buffet know that the pile of financial derivatives would collapse, but bankers and
regulators and economists not know it? One answer, at least for economists, is that rational expectations
theory forces prediction of any kind of discontinuity completely out of the model. That part of
Paul Romer's complaint seems to me to be valid.
"... There is indeed a wing of heterodox economics that is anti-mathematical. Known as "Critical Realism" and centred on the work of Tony Lawson at Cambridge UK, it attributes the failings of economics to the use of mathematics itself... ..."
"... Steve also offers some useful criticism of Milton Friedman's ideas about how to evaluate a model's empirical success ( I agree ). ..."
"... The problem with 'heterodox economics' is that it is self-definition in terms of the other. It says 'we are not them' - but says nothing about what we are. This is because it includes everything outside of the mainstream, from reasonably well-defined and coherent schools of thought such as Post Keynesians, Marxists and Austrians, to much more nebulous and ill-defined discontents of all hues. To put it bluntly, a broad definition of 'people who disagree with mainstream economics' is going to include a lot of cranks. People will place the boundary between serious non-mainstream economists and cranks differently, depending on their perspective. ..."
"... Aside from rejecting standard neoclassical economics, the Marxists and the Austrians don't have a great deal in common. ..."
"... Noah seems to define heterodox economics as 'non-mathematical' economics. This is inaccurate. There is much formal modelling outside of the mainstream. ..."
"... Noah's post unfortunately seems to have elicited some rather defensive responses from the heterodox community, along the lines of " But we DO like mathematics! " or even, " Actually our mathematics is better than yours ". But this is to buy into Noah's core proposition. The heterodox economics community should - and, to be fair, in most cases does - reject it outright. Economics is not, and cannot be , exclusively mathematical...There is no need for the heterodox economic community to be defensive about vagueness. ..."
The other day I wrote
a Bloomberg View post arguing that heterodox macroeconomics is not in any better shape than mainstream
macroeconomics. As you might expect, this drew some lively responses.
One or two of the responses seemed to be arguing against the title of my post, rather than
the contents. That's understandable, since titles are important. In this case, though, it probably
detracted from the debate a great deal. The Bloomberg title people are good, and they usually get
things right, but once in a while the title they choose doesn't quite capture the point I'm trying
to make. This was one of those cases. The title they gave my post was "Economics Without Math Is
Trendy, But It Doesn't Add Up." But actually, this wasn't what I was arguing. My point about non-mathy
models wasn't that these are bad, useless, or inferior. It was that they're different from
mathy models, and so comparing non-mathy models with mathy ones is an apples-to-oranges comparison.
Both types of models have their uses, but you can't really compare one to the other. I make that
pretty clear in the text of
my post , but most of the people who responded tended to focus more on the title. Oh well. These
things happen.
Anyway, on to some of the responses. The numbering here is arbitrary, corresponding to the order
in which the tabs were open on my browser. (Note: The ordering has changed; see #4.)
Response 1: Steve Keen
First, we have
a
response by Steve Keen . Steve, unlike others, did get the point I was making about mathy vs.
non-mathy models (Thanks, Steve!), and had some good commentary on the subject:
There is indeed a wing of heterodox economics that is anti-mathematical. Known as "Critical
Realism" and centred on the work of Tony Lawson at Cambridge UK, it attributes the failings of
economics to the use of mathematics itself...
What Noah might not know is that many heterodox economists are critical of this approach as well.
In response to
a paper by Lawson that effectively defined "Neoclassical" economics as any economics that
made use of mathematics (which would define me as a Neoclassical!), Jamie Morgan edited a book
of replies to Lawson entitled
What is Neoclassical Economics? (including a chapter by me). While the authors agreed with
Lawson's primary point that economics has suffered from favouring apparent mathematical elegance
above realism, several of us asserted that mathematical analysis is needed in economics, if only
for the reason that Noah gave in his article[.]
Steve also offers some useful criticism of Milton Friedman's ideas about how to evaluate a model's
empirical success (
I agree ).
Steve also makes the useful point that linearization critically hampers many mainstream models
(
I agree ).
Steve points out that non-mathy models can make qualitative forecasts. That's true. However, my
point was that these are often a lot less actionable than quantitative forecasts. A non-mathy model
might tell you that private-sector debt is dangerous, but it might not tell you how much of
it is dangerous, or how dangerous. For that, you'd need some kind of mathy model. Steve definitely
seems to get this point too, though, so I'm not disagreeing.
Steve then discusses overfitting of data, and points out that many mainstream models do this too.
That's certainly true, although I think DSGE models tend to be a lot more parsimonious than SFC models
or stuff like FRB/US. Actually, overfitting is one of the big criticisms of the most popular DSGE
models in use at central banks.
Steve then addresses the idea that heterodox models are similar to mainstream ones. I never said
they were, although I said there are some similarities between the FRB/US model and Wynne Godley-type
SFC models. In fact, there are some similarities, though there are also differences. But in general,
most heterodox models are very different from most mainstream models.
Steve also discusses my (admittedly too brief) mention of agent-based models, and has some good
comments:
Largely speaking, this is true - if you want to use these models for macroeconomic forecasting.
But they are useful for illustrating an issue that the mainstream avoids: "emergent properties".
A population, even of very similar entities, can generate results that can't be extrapolated from
the properties of any one entity taken in isolation...Neoclassical economists unintentionally
proved this about isolated consumers as well, in what is known as the Sonnenschein-Mantel-Debreu
theorem. But they have sidestepped its results ever since...Multi-agent modelling may not lead
to a new policy-oriented theory of macroeconomics. But it acquaints those who do it with the phenomenon
of emergent properties - that an aggregate does not function as a scaled-up version of the entities
that comprise it. That's a lesson that Neoclassical economists still haven't absorbed.
I think this is right. Agent-based models have so far served as a demonstration of the fragility
of representative agent models. In the future, they might be much more than that.
So anyway, I'd say I pretty much agree with Steve's response. Good stuff. (Though
this person on Reddit had some problems with it.)
Response 2: Ari Andricopolous
Ari
has a response as well . His response comes in the form of a list of things that he thinks macro
models should not include. The list is:
Microfoundations
Neoliberal_rationality/
Loanable funds
Interest rate effects
The financial sector
It's pretty clear that the last item on this list is misplaced, since Ari thinks one should
include the financial sector in models.
Whether macro models should be microfounded is a big open question, but I'd like to note that
by saying they shouldn't be, Ari is saying that agent-based models are bad. Agent-based models are
as microfounded as they come.
As for rationality, I kind of disagree...humans observe and learn and adapt (OK, some more than
others, I'll grant). Even though perfect rationality is probably pretty unrealistic, to insist that
models totally ignore human observation, learning, and adaptation seems very dangerous for the realism
of any model.
As for the loanable funds thing...yeah, OK, sure.
Response 3: Jo Michell
Jo Michell's response might have been the first to go up, but it's later on this list because...the
numbering is arbitrary!
Jo, which I believe is short for "Jörmungandr", has a helpful diagram of the "schools" of macroeconomic
thought. He also pushes back on the notion that "heterodox" is a useful classification at all:
The problem with 'heterodox economics' is that it is self-definition in terms of the other.
It says 'we are not them' - but says nothing about what we are. This is because it includes everything
outside of the mainstream, from reasonably well-defined and coherent schools of thought such as
Post Keynesians, Marxists and Austrians, to much more nebulous and ill-defined discontents of
all hues. To put it bluntly, a broad definition of 'people who disagree with mainstream economics'
is going to include a lot of cranks. People will place the boundary between serious non-mainstream
economists and cranks differently, depending on their perspective.
Another problem is that these schools of thought have fundamental differences. Aside from
rejecting standard neoclassical economics, the Marxists and the Austrians don't have a great deal
in common.
This is a good and useful point. My Bloomberg post really did bite off more than it could chew. My
point was that there wasn't something better and more successful out there that by rights ought to
already have displaced the (unsuccessful) mainstream approach. But in making that point, I touched
on a number of different types of alternatives that aren't really closely connected. And I left out
others (for example, Steve Keen's own work, and the Austrians).
Jo, unfortunately, appears to have gotten tripped up by the title:
Noah seems to define heterodox economics as 'non-mathematical' economics. This is inaccurate.
There is much formal modelling outside of the mainstream.
Well, no, I don't define it that way, otherwise I wouldn't have discussed SFC models and agent-based
models in my post.
Jo goes on to make some good points about mainstream models, and some of the problems they encounter.
Response 4: Frances Coppola
Frances Coppola, whom I cited in my Bloomberg post,
also has
a response . I responded to this post earlier, but Frances changed it, so I moved my response
down to #4.
Frances still seems to misunderstand my post somewhat, and to have been tripped up by the title:
Noah's core proposition is that economics has no validity unless it is expressed in mathematical
terms. He says that economics without mathematics doesn't add up.
Actually, I didn't make such a claim. Nor do I believe it.
What I wrote was:
Broad idea-sketching is certainly a valuable activity. If theorists get lost in the specifics
of their models, they can blind themselves to truly new hypotheses and mechanisms that would let
them make big, radical changes. I do think this has happened to some degree in mainstream macro...But
that doesn't mean that broad idea-sketching is a replacement for formal models. It's not an apples-to-apples
comparison.
My point is that although non-mathematical econ is often valuable, it's not comparable to mathematical
econ. Both have their place. But to say that a non-quantitative theory was successful at predicting
the Great Recession, while a quantitative theory failed, is to hold the two theories to very different
standards, since "predict" means different things for quantitative theories than it does for non-quantitative
theories.
Frances goes on to discuss some of the limitations of purely quantitative models. She's broadly
right. She then criticizes some heterodox theorists who, in her opinion, focus too much on math:
Noah's post unfortunately seems to have elicited some rather defensive responses from the
heterodox community, along the lines of "
But we DO like mathematics! " or even, "
Actually our mathematics is better than yours ". But this is to buy into Noah's core proposition.
The heterodox economics community should - and, to be fair, in most cases does - reject it outright.
Economics is not,
and cannot be , exclusively mathematical...There is no need for the heterodox economic community
to be defensive about vagueness.
Again, Frances demonstrates a deep misunderstanding of my thesis. I never said that econ theory should
be exclusively mathematical, nor do I believe it. This confusion is partly the result of the title,
and partly the result of me just not explaining my thesis well enough.
Anyway, those are the responses I've seen. Thanks to everyone who took the time to respond!
"... Multinational firms may invest in tax havens to avoid taxation in non-haven countries, but other motives, such as business opportunities in these countries, may also drive such investment. ..."
"... Policies that raise the costs of reallocating profits maybe be effective in attenuating firms' use of tax havens ..."
"Multinational firms may invest in tax havens to avoid taxation in non-haven countries, but other
motives, such as business opportunities in these countries, may also drive such investment. This
column uses data on German firms to investigate the motives for tax haven investment. Tax avoidance
does appear to be a motive, particularly for manufacturing firms.
Policies that raise the costs
of reallocating profits maybe be effective in attenuating firms' use of tax havens."
VoxEU also notes that not every multinational uses tax havens to massively evade taxes. Rudy
G. would have their shareholders sue over this. Of course Rudy G. is an idiot. Of course multinationals
source production in regions with low costs as in "always low wages".
But I have a question - how many factories are located in the Cayman Islands?
"... Some combination of improved public infrastructure, better education, more encouragement for private investment, and more-effective regulation is likely to promote faster growth, which would increase the natural rate of interest and, thus, reduce the probability that we may find ourselves again struggling to avoid Keynes's infamous liquidity trap. If the natural rate can be lifted by appropriate policies, the economic near-stagnation that many countries have experienced in recent years may well turn out not to be that secular after all. ..."
"... A truly orthodox monetarist believes that monetary policy IS a panacea, that counter-cyclical fiscal policy is inflationary and debt expanding such that it should never be used. ..."
[If Vice Chairman Stanley Fischer is not a strictly orthodox monetarist then I cannot see any
reason for anyone else to be one. ]
...But, second, the virtues of sound monetary policy notwithstanding, we must not forget, as former
Fed Chairman Ben Bernanke reminded us on numerous occasions, that "monetary policy is not a panacea."17
For instance, as I mentioned recently elsewhere, policies to boost productivity growth and the
longer-run potential of the economy are more likely to be found in effective fiscal and regulatory
measures than in central bank actions.18
Some combination of improved public infrastructure, better
education, more encouragement for private investment, and more-effective regulation is likely
to promote faster growth, which would increase the natural rate of interest and, thus, reduce
the probability that we may find ourselves again struggling to avoid Keynes's infamous liquidity
trap. If the natural rate can be lifted by appropriate policies, the economic near-stagnation
that many countries have experienced in recent years may well turn out not to be that secular
after all.
[A truly orthodox monetarist believes that monetary policy IS a panacea, that counter-cyclical
fiscal policy is inflationary and debt expanding such that it should never be used.]
Notice that Fishers remedies do not include policy actions to support increased consumption/demand
apparently believing that Investment is done for what purpose? Could he not have said that people
might increase Investment in productive purposes if they felt they could sell their produced offerings
profitably. Then I would like him to say that the creation of credit is not productive as it comes
almost costlessly (a corporate bond, even a mortgage contract cost little to produce), the same
with a govt bond or govt currency, or the electronic registration of a stock, or the creation
of derived financial instruments defined by ink on paper.
Inputs like labor, equipment and supplies of materials produce offerings, but financial assets
need almost none of these inputs. We need much more flow going to getting real offerings marketed.
But why does investing-wherewithal take such risks in hoping to organize all these inputs and
marketing efforts when the huge volumes of high trading frequency lead to returns of added wherewithal
coming to comfortable offices anywhere, to be churned again in the trading of non-production based
financial things.
Have central banks (and others in the financial asset trading club) become so distanced from
the production economics of Wicksall and Keynes that they can no longer even talk about basic
demand for goods and services as a reason to Invest?
How about a set of remarks focused on aggregate demand for real offerings.
How about a set of remarks focused on how to redirect the economic wherewithal churning about
in the financial asset trading marketplaces and convert more and more of this wherewithal into
taking risks on real production and marketing businesses (more than ample supply of wherewithal
now). The central bank leaders could talk more about how they can serve in making this conversion
happen well, in coordination with other public policies such as those that help support more basic
demand and happier more dynamic animal spirits in society, so to speak.
Can we replace Fisher with a deputy who sees everything first via the lens of demand side thinking
followed by labor market considerations, long before they see solutions coming from "encouraging
private investment" in financial assets?
Vice Chairman Stanley Fischer is a very conventional orthodox establishment economist, just not
a strictly orthodox monetarist. I was in no way lauding Fischer other than by just spelling his
last name correctly. However he can serve as a benchmark that distinguishes orthodox establishment
economics from the even more narrow and rigid orthodox monetarism.
My misspelling was not intended as a passive aggressive disrespect. But of course I called for
his replacement, and I did this to bring attention to matters important to me, not just as an
ad hominem attack on Mr. Fischer.
I do not want more policies to encourage capital formation and husbandry, nor do I want managers
of capital to use public means or subsidues so they can get better educated workforces and eak
more out of them so their capital is further favored (of course there are public good reasons
for public effirts here, but its purposes are not just to encourage more investment because it
is further subsidized), and the same with public efforts to build better infrastructure if the
idea of 'better' is because it subsidizes investors (not perhaps because it makes society safer
to have a more reilient and efficient energy delivery system that also helps with climate change
concerns too), or better regulation of the financial system so its risks are spread better and
investors are encouraged to trade even more in them. So here I've taken each of Fischers recommendations
and addressed them, pointing out how these statements can be seen as supporting the investing
class nit the real economy of demand side considerations about economics.
Perhaps the Deputy Director didn't intend for these remarks to be read that way. After all
he talked about Wicksell, and I'm pretty sure his views were tied to the world of real production,
anf Fischer even talked about production. So maybe I'm too willing to read with suspicion, or
he is not cautious enough in his writing, or he needs to be replaced (because I read this the
way he meant it).
Conventional orthodox establishment economists worry about inflation even after they deliver 1.6
percent growth for 2016.
And they insist monetary policy doesn't work well which is somewhat of a contradiction as they're
worrying about inflation and monetary policy working too well.
If you read the Sept. 2008 minutes of the FOMC they are worrying about inflation 48 hours after
Lehman failed and the implosion of the financial system. Just 8 years ago and they don't seem
to have learned.
Noah Smith from yesterday: "Most of the profession does
believe in the power of monetary policy. The dominant form of
macroeconomic model for at least a decade has been so-called
New Keynesian models, which say that interest rates play a
very large role in stabilizing the economy. These are also
the dominant form of modern macro model in use at central
banks...
Now, the big question is whether faith in monetary policy
might have been misplaced. The seemingly small effects of
quantitative easing, and the difficulty of dealing with very
low interest rates, are causing some macroeconomists to cast
about for alternatives to the New Keynesian paradigm.
It sure seems like the economics profession is confused,
very confused. Sadly, that will not keep them from
demagoguing their favorite policy and insulting those who
dare to point out the obvious problems and mistakes.
The other European referendum,
soon to be known as the Italian Job. Interesting the way the article touches on
the issue of
the elite against the people.
"... Smart young things joining the workforce soon discover that, although they have been selected for their intelligence, they are not expected to use it. They will be assigned routine tasks that they will consider stupid. If they happen to make the mistake of actually using their intelligence, they will be met with pained groans from colleagues and polite warnings from their bosses. After a few years of experience, they will find that the people who get ahead are the stellar practitioners of corporate mindlessness. ..."
"... The Stupidity Paradox ..."
"... they quickly found themselves working long hours on 'boring' and 'pointless' routine work. After a few years of dull tasks, they hoped that they'd move on to more interesting things. But this did not happen. As they rose through the ranks, these ambitious young consultants realised that what was most important was not coming up with a well-thought-through solution. It was keeping clients happy with impressive PowerPoint shows. Those who did insist on carefully thinking through their client's problems often found their ideas unwelcome. If they persisted in using their brains, they were often politely told that the office might not be the place for them. ..."
Each summer, thousands of the best and brightest graduates join the workforce. Their well-above-average
raw intelligence will have been carefully crafted through years at the world's best universities.
After emerging from their selective undergraduate programmes and competitive graduate schools,
these new recruits hope that their jobs will give them ample opportunity to put their intellectual
gifts to work. But they are in for an unpleasant surprise.
Smart young things joining the workforce soon discover that, although they have been selected
for their intelligence, they are not expected to use it. They will be assigned routine tasks that
they will consider stupid. If they happen to make the mistake of actually using their intelligence,
they will be met with pained groans from colleagues and polite warnings from their bosses. After
a few years of experience, they will find that the people who get ahead are the stellar practitioners
of corporate mindlessness.
One well-known firm that Mats Alvesson and I studied for our
book The
Stupidity Paradox (2016) said it employed only the best and the brightest. When these smart
new recruits arrived in the office, they expected great intellectual challenges. However,
they quickly found themselves working long hours on 'boring' and 'pointless' routine work. After
a few years of dull tasks, they hoped that they'd move on to more interesting things. But this
did not happen. As they rose through the ranks, these ambitious young consultants realised that
what was most important was not coming up with a well-thought-through solution. It was keeping
clients happy with impressive PowerPoint shows. Those who did insist on carefully thinking through
their client's problems often found their ideas unwelcome. If they persisted in using their brains,
they were often politely told that the office might not be the place for them.
... ... ...
Organisations hire smart people, but then positively encourage them not to use their intelligence.
Asking difficult questions or thinking in greater depth is seen as a dangerous waste. Talented
employees quickly learn to use their significant intellectual gifts only in the most narrow and
myopic ways.
Those who learn how to switch off their brains are rewarded. By avoiding thinking too much,
they are able to focus on getting things done. Escaping the kind of uncomfortable questions that
thinking brings to light also allows employees to side-step conflict with co-workers. By toeing
the corporate line, thoughtless employees get seen as 'leadership material' and promoted. Smart
people quickly learn that getting ahead means switching off their brains as soon as they step
into the office. ... ... ...
We found many ways that all kinds of organisations positively encouraged intelligent people
not to fully use their intelligence. There were rules and routines that prompted them to focus
energies on complying with bureaucracy instead of doing their jobs. There were
doctors who spent
more time 'playing the tick-box game' than actually caring for patients;
teachers who spent more time negotiating new bureaucratic procedures than teaching children.
We met Hans, a manager in a local government agency: after a visit from a regulator, his office
received a list of 25 issues in need of improvement. So Hans's agency developed 25 new policies
and procedures. The result: the regulator was happy, but there was no change in actual practice.
Such stories showed us how mindless compliance with rules and regulations can detract people from
actually doing their jobs. The doctors, teachers and government officials all knew that the rules
and regulations they spent their days complying with were pointless diversions. However, they
chose not to think about this too much. Instead, they just got on with ticking the boxes.
Another significant source of stupidity in firms we came across was a deep faith in leadership.
In most organisations today, senior executives are not content with just being managers. They
want to be leaders. They see their role as not just running their business but also transforming
their followers. They talk about 'vision', 'belief' and 'authenticity' with great verve. All this
sounds like our office buildings are brimming with would-be Nelson Mandelas. However, when you
take a closer look at what these self-declared leaders spend their days doing, the story is quite
different.
... ... ...
As Jan Wallander, the ex-chairman of Sweden's Handelsbanken, said: 'Business leaders are just
as fashion-conscious as teenage girls choosing jeans.' Many companies adopt the latest management
fads, no matter how unsuitable they are. If Google is doing it, then it's good enough reason to
introduce nearly any practice, from mindfulness to big-data analytics.
,,, ,,, ,,,
One last source of corporate stupidity we came across was company culture. Often, these cultures
imprison employees in narrow ways of viewing the world, such as the common obsession with constant
change.
... ... ...
What's more, people in corporations have short attention spans. Perpetrators of blunders will
likely have moved onwards (often upwards) before their mistakes becomes obvious. 'Always try to
outrun your mistakes' was one middle-manager's key career advice.
... ... ...
In a world where stupidity dominates, looking good is more important than being right. Advanced
practitioners of corporate stupidity often spend less time on the content of their work and more
on its presentation. They know that a decision-maker sees only the PowerPoint show and reads just
the executive summary (if they're lucky). They also realise that most stupid ideas are routinely
accepted when they're presented well. Decision-makers will likely forget much of the content by
the time they walk out the door. And when things go wrong, they can say: 'They didn't read the
fine-print.'
Negotiating corporate stupidity also requires assuming that the boss knows best. This means doing
what your boss wants, no matter how idiotic. What is even more important is that you should do
what your boss's boss wants. You will look like you are loyal and it will save time arguing for
your position. When things go wrong, you can blame your boss.
Working in a stupefied firm often means blinding others with bullshit. A very effective way
to get out of doing anything real is to rely on a flurry of management jargon. Develop strategies,
generate business models, engage in thought leadership. This will get you off the hook of doing
any actual work. It will also make you seem like you are at the cutting edge. When things go wrong,
you can blame the fashionable management idea.
I think the reason wealth concentration
becomes inherently unstable is because of the exponential growth of capital, which is essentially
rent the bottom 80% must pay to the top 20% net investment holders in one form or another.
Exponential
growth of capital and no growth of incomes and wealth for the bottom 80% means that the glut of growing
capital aggressively seeking returns will eventually leech so much wealth out of the real world economy
it will cause it to collapse in a deflationary death spiral when people stop borrowing.
In short, the neoclassical Friedmanian era is coming to a close one way or another. One way is
that some European nations reject capitalism for fascism. If that happens, Masters of the Universe
can try shorting civilization. But they won't be taking it with them.
Donald J. Deadbeat got rich working the system. I.e.
legally. The Clintons, on the other hand, got all their
riches from betraying the people, liquidating the public
trust and selling off American government to oligarchs
domestic and foreign. They made over $100-million in
speaking fees alone cashing in on promissory bribes.
For every criticism against Trump there exists one
worse against Hillary.
Whichever bottom-feeder ends up president it will be
bad news for the party they captured. Better for
progressives if Trump blows up the Republican party than
the Goldwater Girl destroying the Democratic party
(saddling it with a 12-year Great Recession by 2020.)
The former will produce a New Deal revolution led by
someone like Elizabeth Warren in 2020, which will usher in
a new era for civilization.
The latter will kick the New Deal can down the road to
2024 with something like a Ted Cruz presidency in 2020.
Given the state of the global economy, which is teetering
on the verge of collapse into fascist revolutions and
world war, that will probably mean just kicking the can.
"... Average US wages rose 350% in the 40 years between 1932 and 1972, but only 22% over the next 40 years. The pattern holds similar across the developed world. In other words, for all their hype, the computer and the internet have done less to lift economic growth than the flush toilet. ..."
"... ahem… the computer and the internet sped outsourcing to countries like China. Ask China or India how their economic growth has been since 1972. The author is mixing up several things at once. ..."
"... When so many of our jobs, technology and investment is offshored to China (and elsewhere), the future for innovation is certainly not bright, and this should be obvious to everyone, including the author. ..."
" Average US wages rose 350% in the 40 years between 1932 and 1972, but only 22% over the next
40 years. The pattern holds similar across the developed world. In other words, for all their hype,
the computer and the internet have done less to lift economic growth than the flush toilet."
ahem… the computer and the internet sped outsourcing to countries like China. Ask China or India
how their economic growth has been since 1972. The author is mixing up several things at once.
Great comments, and please allow me to piggyback off them:
When so many of our jobs, technology and investment is offshored to China (and elsewhere), the
future for innovation is certainly not bright, and this should be obvious to everyone, including
the author.
When so many have contributed so much, only to see their jobs and livelihoods offshored again
and again and again, that great jump the others have will then zero out OUR innovation!
"... At the same time traditional aristocracy is not fixed either and always provided some "meritocratic" mechanisms for entering its ranks. Look, for example, at British system where prominent scientists always were awarded lordship. Similar mechanism was used in many countries where low rank military officers, who displayed bravery and talent in battles were promoted to nobility and allowed to hold top military positions. Napoleonic France probably is one good example here. ..."
"... Neoliberal elite like traditional aristocracy also enjoys the privilege of being above the law. And like in case of traditional aristocracy the democratic governance is limited to members of this particular strata. Only they can be viewed as political actors. ..."
"... The USSR nomenklatura is yet another example of the same. It was so close in spirit to neoliberal elite, that the transition in 1991 was almost seamless. ..."
"... vertical mobility can't be completely suppressed without system losing the social stability and that's was true for classic aristocracy as well as modern neoliberal elite ..."
A side note: there was some conversation above about the interests of an aristocracy, which
of course prompted the idea that the aristocracy is long gone. But meritocracy is a kind of
aristocracy.
This is an interesting observation. BTW other aspect of the same is related to the "Iron law
of oligarchy". Also both aristocracy and meritocracy are just variants of oligarchy. The actual
literal translation from the Greek is the "rule of the few".
At the same time traditional aristocracy is not fixed either and always provided some "meritocratic"
mechanisms for entering its ranks. Look, for example, at British system where prominent scientists
always were awarded lordship. Similar mechanism was used in many countries where low rank military
officers, who displayed bravery and talent in battles were promoted to nobility and allowed to
hold top military positions. Napoleonic France probably is one good example here.
Neoliberal elite like traditional aristocracy also enjoys the privilege of being above
the law. And like in case of traditional aristocracy the democratic governance is limited to members
of this particular strata. Only they can be viewed as political actors.
The USSR nomenklatura is yet another example of the same. It was so close in spirit to neoliberal
elite, that the transition in 1991 was almost seamless.
In other words, vertical mobility can't be completely suppressed without system losing the
social stability and that's was true for classic aristocracy as well as modern neoliberal elite
(actually vertical mobility is somewhat higher in European countries then in the USA; IMHO it
is even higher in former Eastern block).
"... Trump isn't attempting to appeal to neocons or neoliberals. (New Classical or New Keynesian.) That's Hillary's job. So losing this guy (neocon Bush economist) means nothing. ..."
"... Accusations of corruption against Hillary are ridiculous! Have you ever listened to Hillary's voice? Her speeches are like music to the ears! The only reason why corporations across various industrial complexes - financial, healthcare, private prison, military, Big Oil, etc. - pay Hillary $250k a speech is because they can afford to. The rest of society - the moochers - can only dream of being wealthy enough to enjoy a Hillary speech! ..."
"... I'm so tired of people hating on the rich and disparaging the Clintons' 'democratic innovation' techniques. They are clearly nothing more than envious ingrates and ignoramuses! ..."
"... All of the neoclassical tax cutting over the past 35 years has only provided a net benefit to the upper class. Only 30% of the US economy is related to international trade. So very little of the debt created with tax cuts has trickled down into trade deficits. ..."
"... But trade-liberalization/outsourcing policies, on the other hand, explain how a trade deficit has an accompanying budget deficit (according to the Twin Deficits hypothesis.) If a country is spending more on imports than it is earning in exports it will have to borrow the money to pay for them. ..."
"... Trump's absurd tax cuts would only benefit the top 20%. They would not increase demand for imports or increase the trade deficit. All of this money would be in the form of whopping budget deficits and growing government debt. It would be a spectacular failure. A better one than what Hillary would bring: because the Republicans would be on the hook for it. (If Hillary wins, the Democrats are on the hook for a 12 year Great Recession by 2020. That kicks the New Deal can down the road to 2024.) ..."
"... Sanders supporters dislike Republicans more than Hillary supporters do according to polls. They're not going to go for trickle-down economics. Sanders's message was that the problem with the economy and political system are people like Trump. That's why he proposed a significant financial transaction tax. Sanders supporters agree with Sanders, Dean Baker and Jared Bernstein that corporate trade deals could be made more fair. ..."
"... "Corporate" trade deals aren't the issue. It is capital markets. Republicans wants a total abolition of regulations on capital markets. Not only will Trumps deficits need more foreign finance, he will gut the economy to bring that foreign finance in or gut the economy if it doesn't come in if he trade saber rattles. The only other option is much such large government spending cuts, that creates a recession as well creating capital flight. ..."
"... Mankiw reveals like Krugman he's never been to East Asia, nor is he the least bit curious about why the US developed in the first place. If he had studied economic development or East Asia he would know that blistering high interest rates (+50%) were common in the East Asian countries during their periods of stunning growth. Rising interest rates from the reduced flow of capital would also be associated with - for the first time in 40 years -- positive incentives to invest in US tradable goods production. ..."
"... Watch Charles Ferguson's Inside Job for information on how morally and financially compromised US economists are. ..."
"... And Mankiw does this specifically in the context of offering support to idiotic Republican policies, to pander to the Republican mandarins who hire him every 4 years as economic adviser to their Presidential candidate (and to sell more textbooks at Red-state schools). ..."
"... Why does Mankiw think he deserves to sell his own ass like a two-bit prison whore, while Navarro and Ross can't? ..."
Trump isn't attempting to appeal to neocons or neoliberals. (New Classical or New Keynesian.)
That's Hillary's job. So losing this guy (neocon Bush economist) means nothing.
This argument against Trump's economic plan would appear to be nonsensical. Interest rates
are not marked to international markets. They are set by the central bank to manage demand and
inflation. (According to 'orthodox' economics, protectionism would negatively affect GDP and put
a downward pressure on demand, inflation and interest rates. So this argument is doubly senseless.)
I can't imagine that many economists understand international trade or they wouldn't be in
favor of the highly mercantlist global economy that free-trade globalization has produced.
The 35 years of trade deficits the US has run with undeveloped mercantilist countries is a
triple whammy: 1) jobs, production and investment flow out of the country reducing GDP, real incomes
and demand; 2) the trade deficit has an accompanying budget deficit (according to the Twin Deficits
hypothesis); this creates rising government debt; spending cuts further depress demand; 3) for
every dollar that flows out of the country from imported goods, a dollar must flow back into the
country in the form of foreign investment (i.e. debt owed to foreign countries.)
This process is certainly no Carnot engine. Simply a linear process of wealth being transferred
from one source to another (much of it in debt.) A process that is quickly running out of steam.
My impression is that only a return to the progressive Keynesian New Deal era (that began with
FDR and ended with Reagan) can prevent the global economy from collapsing into fascist revolutions
and world war. (Repeating the history of the 1930s; Trump would make a better Herbert Hoover than
Hillary, that's for sure.)
Accusations of corruption against Hillary are ridiculous! Have you ever listened to Hillary's
voice? Her speeches are like music to the ears! The only reason why corporations across various
industrial complexes - financial, healthcare, private prison, military, Big Oil, etc. - pay Hillary
$250k a speech is because they can afford to. The rest of society - the moochers - can only dream
of being wealthy enough to enjoy a Hillary speech!
I'm so tired of people hating on the rich and disparaging the Clintons' 'democratic innovation'
techniques. They are clearly nothing more than envious ingrates and ignoramuses!
All of the neoclassical tax cutting over the past 35 years has only provided a net benefit
to the upper class. Only 30% of the US economy is related to international trade. So very little
of the debt created with tax cuts has trickled down into trade deficits.
But trade-liberalization/outsourcing policies, on the other hand, explain how a trade deficit
has an accompanying budget deficit (according to the Twin Deficits hypothesis.) If a country is
spending more on imports than it is earning in exports it will have to borrow the money to pay
for them.
Clearly any form of non-regulated stimulus (tax cuts or income redistribution) that primes
anemic demand by putting more money in the hands of the bottom 80% will produce a bigger trade
deficit. The only way to eliminate a trade deficit with a mercantilist country is with tariffs.
If Trump's plan is to raise GDP by eliminating the trade deficit with some form of regulatory
measures, then clearly this could not raise the trade deficit.
Trump's absurd tax cuts would only benefit the top 20%. They would not increase demand
for imports or increase the trade deficit. All of this money would be in the form of whopping
budget deficits and growing government debt. It would be a spectacular failure. A better one than
what Hillary would bring: because the Republicans would be on the hook for it. (If Hillary wins,
the Democrats are on the hook for a 12 year Great Recession by 2020. That kicks the New Deal can
down the road to 2024.)
Sanders supporters dislike Republicans more than Hillary supporters do according to polls.
They're not going to go for trickle-down economics. Sanders's message was that the problem with
the economy and political system are people like Trump. That's why he proposed a significant financial
transaction tax. Sanders supporters agree with Sanders, Dean Baker and Jared Bernstein that corporate
trade deals could be made more fair.
Ben Groves -> Peter K.... , -1
"Corporate" trade deals aren't the issue. It is capital markets. Republicans wants a total
abolition of regulations on capital markets. Not only will Trumps deficits need more foreign finance,
he will gut the economy to bring that foreign finance in or gut the economy if it doesn't come
in if he trade saber rattles. The only other option is much such large government spending cuts,
that creates a recession as well creating capital flight.
Sanders doesn't support deregulated capital markets, he can swagger about 'trade'.
Saigo Takamori : , -1
Mankiw reveals like Krugman he's never been to East Asia, nor is he the least bit curious
about why the US developed in the first place. If he had studied economic development or East
Asia he would know that blistering high interest rates (+50%) were common in the East Asian countries
during their periods of stunning growth. Rising interest rates from the reduced flow of capital
would also be associated with - for the first time in 40 years -- positive incentives to invest
in US tradable goods production.
US economists are paid to confuse people and be confused. Watch Charles Ferguson's Inside
Job for information on how morally and financially compromised US economists are.
No wonder the US is an economic basket case on the cusp of becoming a third world country.
Thanks economists! You guys have the best advice! Free trade and comparative advantage are real
winners! Just ask Haiti, the second most open economy in the Americas after the US.
I've watched Mankiw, on video, on several occasions, make patently false claims about economic
policy based on first-year macro that's completely and utterly disproven at even a third-year
level.
And Mankiw does this specifically in the context of offering support to idiotic Republican
policies, to pander to the Republican mandarins who hire him every 4 years as economic adviser
to their Presidential candidate (and to sell more textbooks at Red-state schools).
Why does Mankiw think he deserves to sell his own ass like a two-bit prison whore, while
Navarro and Ross can't?
"... ...First of all, for all extents and purposes they *are* the governing class, and they aren't simply failing to be subversive, they are defending their class interest. I know that this will cue any number of remarks about how someone is a college professor and isn't governing anything - as if someone in corporate upper management somewhere is really governing anything either - but what holds the neoliberal order in place is that it serves the interests of the managerial class, which includes professionals and other symbolic-manipulation people as its lower tier. ..."
"... A side note: there was some conversation above about the interests of an aristocracy, which of course prompted the idea that the aristocracy is long gone. But meritocracy is a kind of aristocracy. ..."
"... I'll quote wiki: "One study […] found that of nine developed countries, the United States and United Kingdom had the lowest intergenerational vertical social mobility with about half of the advantages of having a parent with a high income passed on to the next generation." That's not perfect, but it's getting better. ..."
"... to the extent that the people parroting this line are professional-class hangers-on of the global financial elite and neoliberalism serves their class interests ( at least until academic/media sinecures are next in line for outsourcing ), their aversion to subversive radical politics makes perfect sense as a simple matter of vested interest. ..."
...First of all, for all extents and purposes they *are* the governing class, and they
aren't simply failing to be subversive, they are defending their class interest. I know that this
will cue any number of remarks about how someone is a college professor and isn't governing anything
- as if someone in corporate upper management somewhere is really governing anything either -
but what holds the neoliberal order in place is that it serves the interests of the managerial
class, which includes professionals and other symbolic-manipulation people as its lower tier.
Second, I'm not sure about the merits of the whole Manufacturing Consent line of critique,
but defending elite opinion as the only respectable opinion sort of is accomplishing something.
Sure, individual votes are meaningless, and any one person's contribution negligible. But there
is a recurring trope of people wondering whether someone is a paid troll because people are actually
paid - whether by David Brooks or by Putin - to do exactly this kind of thing. And they are paid
to do it because it works, or at any rate people think that it works. Even better if people do
it on a volunteer basis.
A side note: there was some conversation above about the interests of an aristocracy, which
of course prompted the idea that the aristocracy is long gone. But meritocracy is a kind of aristocracy.
Look at how much effort people put into ensuring that their children are high-status, degreed,
good job holders just like themselves, and how successful that generally is.
I'll quote wiki: "One study […] found that of nine developed countries, the United States
and United Kingdom had the lowest intergenerational vertical social mobility with about half of
the advantages of having a parent with a high income passed on to the next generation." That's
not perfect, but it's getting better.
Will G-R 10.03.16 at 9:33 pm
You're right, Rich: to the extent that the people parroting this line are professional-class
hangers-on of the global financial elite and neoliberalism serves their class interests (
at least
until academic/media sinecures are next in line for outsourcing ), their aversion to subversive
radical politics makes perfect sense as a simple matter of vested interest.
But I like to think of my point as less Chomskian and more Žižekian, in that while Chomsky's
manufactured consent is presented as a simple way to cover other people's interests with ideological
mystification, Žižek's fetishism (like Marx's before him) is presented as a way for people to
cover their own interests by imagining their mystification as itself a demystification.
It's not that professional-class liberals don't realize the truth that they should be fighting
against oppression - they do realize this, but it's false realization concealing from them the
deeper truth that they're actually fighting for oppression.
Tommy Breen, the low profile boss of support services group
DCC who earned
a relatively modest €737,000 in the year to March 2016, offered the best value for money, according
to rankings by consultants Mercer Kepler.
Alison Cooper, chief executive of consumer goods group Imperial Brands, who was paid £3.58m in
2015, and George Weston, boss of international food group
ABF, who
earned £3.05m in 2015, were in second and third place.
The total pay of all three is below the average pay of £5.5m for a FTSE 100 chief executive in
2015, according to the High Pay Centre.
In contrast, only two of the top 10 best paid FTSE 100 CEOs in 2015 made the top 30 in the value
for money rankings. This was
Shire chief
executive Flemming Ornskov, who earned £14.6m last year, and RELX boss Erik Engstrom, who was awarded
£10.9m.
None of the other top 10 best paid bosses last year, which included Sir Martin Sorrell, who earned
£70.4m at WPP
, Rakesh Kapoor, awarded £23.2m at
Reckitt Benckiser
, Jeremy Darroch, on £16.9m at Sky, or Bob Dudley, on £13.3m at
BP , made
the top 30 value for money list. The index only lists the top 30.
Full details of Mrs May's plans will not be laid out until later in the autumn when BIS, the business
department, launches a consultation. Some of the policies are already known: disclosure of pay ratios,
annual binding shareholder votes on pay and having worker and consumer representatives on boards.
Other investors and business groups have been critical of the planned government reforms, warning
that they may force up pay levels. An annual binding vote, they warn, could create uncertainty, which
in turn might prompt demands for extra compensation.
The Mercer survey looks at the relationship between value created and money earned by a chief
executive. The value is calculated by taking the company's total shareholder return relative to the
FTSE and its sector.
Money earned is the chief executive's three-year average realised pay figure, which is adjusted
for the size of the company. Chief executive pay correlates strongly with company size as well as
performance.
Gordon Clark, partner at Mercer Kepler, said: "Our research puts all companies on a level playing
field when comparing whether their executives offer value for money. It does this by controlling
for differences in sector, size and complexity.
"Executives who create the most value for shareholders relative to their peers, and relative to
their pay, offer the best value for money."
"... ...Second, it should acknowledge at least to itself that it has damaged its credibility by repeatedly holding out the prospects of much more tightening than the market anticipated, being ignored by the market, and then having the market turn out to be right. It should recognize output and inflation and unemployment would all be closer to their target levels today and in their forecasts if rates had not been increased last December... ..."
[It is wonderful to see Larry Summers has redeeming social value. As far as monetary policy
goes then Larry has nailed it here.]
...First, it should acknowledge that the neutral rate is now close to zero and it may well remain
under 2 percent for the foreseeable future...
...Second, it should acknowledge at least to itself that it has damaged its credibility by
repeatedly holding out the prospects of much more tightening than the market anticipated, being
ignored by the market, and then having the market turn out to be right. It should recognize output
and inflation and unemployment would all be closer to their target levels today and in their forecasts
if rates had not been increased last December...
...Third, the Fed should make real the idea that its inflation target is symmetric by being clear
that in the late stage of prolonged expansion with low unemployment it is comfortable with inflation
rising a little bit above 2 percent with the confidence that it will decline when the next recession
comes...
... Fourth, the Fed should make clear that it sees risk as asymmetric right now...
[I can agree with all that without changing my view of last December's 25 basis point FFR hike.
That hike did very little to change the economic conditions compared to how much it did to change
the conversation. How could the hawks be capitulating to the doves now had they not gotten their
chance to be proven wrong? That goes double for the neo-Fisherites.]
The crisis exposed some serious flaws in our economic thinking. It has highlighted the need to
look at economic policy with more critical, fresh approaches. It has also revealed the limitations
of existing tools for structural analysis in factoring in key linkages, feedbacks and trade-offs
– for example between growth, inequality and the environment.
We should seize the opportunity to develop a new understanding of the economy as a highly complex
system that, like any complex system, is constantly reconfiguring itself in response to multiple
inputs and influences, often with unforeseen or undesirable consequences. This has many implications.
It suggests policymakers should be constantly vigilant and more humble about their policy prescriptions,
act more like navigators than mechanics, and be open to systemic risks, spillovers, strengths, weaknesses,
and human sensitivities. This demands a change in our mind-sets, and in our textbooks. As John Kenneth
Galbraith once said, "the conventional view serves to protect us from the painful job of thinking."
This is why at the OECD we launched an initiative called New Approaches to Economic Challenges
(NAEC). With this initiative we want to understand better how the economy works, in all its complexity,
and design policies that reflect this understanding. Our aim is to consider and address the unintended
consequences of policies, while developing new approaches that foster more sustainable and inclusive
growth.
Complexity is a common feature of a growing number of policy issues in an increasingly globalised
world employing sophisticated technologies and running against resource constraints.
The report of the OECD Global Science Forum (2009) on Applications of Complexity Science for Public
Policy reminds us of the distinction between complicated and complex systems. Traditional science
(and technology) excels at the complicated, but is still at an early stage in its understanding of
complex phenomena like the climate.
For example, the complicated car can be well understood using normal engineering analyses. An
ensemble of cars travelling down a highway, by contrast, is a complex system. Drivers interact and
mutually adjust their behaviours based on diverse factors such as perceptions, expectations, habits,
even emotions. To understand traffic, and to build better highways, set speed limits, install automatic
radar systems, etc., it is helpful to have tools that can accommodate non-linear and collective patterns
of behaviour, and varieties of driver types or rules that might be imposed. The tools of complexity
science are needed in this case. And we need better rules of the road in a number of areas.
This is not an academic debate. The importance of complexity is not limited to the realm of academia.
It has some powerful advocates in the world of policy. Andy Haldane at the Bank of England has thought
of the global financial system as a complex system and focused on applying the lessons from other
network disciplines – such as ecology, epidemiology, and engineering – to the financial sphere. More
generally, it is clear that the language of complexity theory – tipping points, feedback, discontinuities,
fat tails – has entered the financial and regulatory lexicon. Haldane has shown the value of adopting
a complexity lens, providing insights on structural vulnerabilities that built up in the financial
system. This has led to policy suggestions for improving the robustness of the financial system.
Closer to home, Bill White, Chairman of our Economic and Development Review Committee (EDRC) has
been an ardent advocate of thinking about the economy as a complex system. He has spoken in numerous
OECD meetings – in part as an explanation and in part as a warning – that systems build up as a result
of cumulative processes, can have highly unpredictable dynamics and can demonstrate significant non-linearity.
As a result Bill has urged policymakers to accept more uncertainty and be more prudent. He also urged
economists to learn some exceedingly simple but important lessons from those that have studied or
work with complex systems such as biologists, botanists, anthropologists, traffic controllers, and
military strategists.
Perhaps the most important insight of complexity is that policymakers should stop pretending that
an economy can be controlled. Systems are prone to surprising, large-scale, seemingly uncontrollable,
behaviours. Rather, a greater emphasis should be placed on building resilience, strengthening policy
buffers and promoting adaptability by fostering a culture of policy experimentation.
At the OECD, we are starting to embrace complexity. For several years we have been mapping the
trade "genome" with our Trade in Value Added (TiVA) database to explain the commercial interconnections
between countries.
We have examined the possibilities for coupling economic and other systems models, for example
environmental (climate) and societal (inequalities). Our work on the Costs of Inaction and Resource
Constraints: Implications for Long-term Growth (CIRCLE) is a key example of linking bio-physical
models and economic models to gauge the impact of environmental degradation and climate change on
the economy.
We are also looking at governing complex systems in areas as diverse as education and international
trade policy. And we are looking at the potential for tapping big data – an indispensable element
of complexity modelling approaches. But there remains much to do to fully enrich our work with the
perspectives of complexity.
The OECD is delighted to work with strong partners – the Institute for New Economic Thinking (INET)
Oxford, and the European Commission to help policy-makers advance the use of complex systems thinking
to address some of the most difficult challenges.
An important question remains. How can the insights and methods of complexity science be applied
to assist policymakers as they tackle difficult problems in areas such as environmental protection,
financial regulation, sustainability or urban development?
At the Workshop on Complexity and Policy on 29-30 September at the OECD, we will help find the
answer – stimulate new thinking, new policy approaches and ultimately better policies for better
lives.
[Sometimes when it seems like you are just howling at the moon there really is a new day coming.]
I think it is both correct,
and entirely wrong-headed.
Firstly, we have not believed that the economy can be controlled (we were just trying
to steer it) - the guiding principle was that it didn't need to be controlled which is something
completely different. It also falls into the trap of talking about "the economy" as though
the economy was an organism that had its own purposes, rather than as a set of institutions
that ultimately exist to serve human beings (a job which it achieves with quite varying
degrees of success). I won't say this approach is necessarily bound to fail, I just doubt
that it will be alone sufficient.
The OECD is one of those institutions.
Yep, they have plenty of their own assumptions. Complexity has been mentioned here before.
Exactly what they mean is indeterminable from the general principles mentioned, but examples
are worthwhile. You might read them to mean be cautious about leaps of faith such as financial
deregulation because bad stuff CAN happen.
"...Perhaps the most important
insight of complexity is that policymakers should stop pretending that an economy can be
controlled. Systems are prone to surprising, large-scale, seemingly uncontrollable, behaviours.
Rather, a greater emphasis should be placed on building resilience, strengthening policy
buffers and promoting adaptability by fostering a culture of policy experimentation..."
[In context I took this more to mean that economic models are probabilistic at best rather
than deterministic rather than that it said policy makers in the OECD were performing central
planning of the economy, which everyone knows is not true.]
Firstly, we have not believed
that the economy can be controlled (we were just trying to steer it) - the guiding principle
was that it didn't need to be controlled which is something completely different. It also
falls into the trap of talking about "the economy" as though the economy was an organism
that had its own purposes, rather than as a set of institutions that ultimately exist to
serve human beings (a job which it achieves with quite varying degrees of success)....
Re: Stop pretending that an economy can be controlled -
OECD Insights
"The crisis exposed some serious flaws in
our economic thinking. It has highlighted the need to look
at economic policy with more critical, fresh approaches.
It has also revealed the limitations of existing tools for
structural analysis in factoring in key linkages,
feedbacks and trade-offs – for example between growth,
inequality and the environment.
We should seize the opportunity to develop a new
understanding of the economy as a highly complex system
that, like any complex system, is constantly reconfiguring
itself in response to multiple inputs and influences,
often with unforeseen or undesirable consequences. This
has many implications. It suggests policymakers should be
constantly vigilant and more humble about their policy
prescriptions, act more like navigators than mechanics,
and be open to systemic risks, spillovers, strengths,
weaknesses, and human sensitivities. This demands a change
in our mind-sets, and in our textbooks. As John Kenneth
Galbraith once said, "the conventional view serves to
protect us from the painful job of thinking."
..................................
Complex systems such as chemical processes are managed by
feedback control systems that specify a desired output and
then measure deviation from that control point (the error
signal) to adjust the inputs and thus return to the
desired setpoint.
I have promoted the use of control theory concepts in
economics before. From a previous post:
Auto-control:
Did you ever think about how you keep the temperature
in your house at a comfortable level even though the
weather is unpredictable and can change a lot?
Well, maybe the level of the economy could be controlled
on similar principles. Maybe economists could borrow from
the control theory that is employed in air conditioning
thermostats.
For example, if we wanted to maintain full employment we
could adjust inputs in a similar manner to the way heat
and cooling is adjusted in your house. Just as heat is
added when the temperature gets too low, government jobs
could be added when private employment falls short. When
the temperature starts to get too high ( full employment
is achieved), heat could be sucked out ( no more jobs
would be added and/or higher taxes could be imposed) to
cool things off.
This is an appealing analogy because, like the weather,
the economy is inherently unpredictable and, like the air
conditioning in your house, you could keep things
comfortable without the need of forecasting the
unknowable.
So maybe economists should forsake their DSGE models and
instead study control theory.
...................
In my view such approaches are not promoted because they
require central control by the state and our elite
establishment quashes such threats to their dominance.
That is why Keynes' conclusions were subverted:
"The context is as follows: in an interview with the
leftist British journalist Kingsley Martin (1897–1969) in
the New Statesman of January 1939, Keynes – commenting on
the need for a new interventionist economic system and at
the same time the need to avoid the authoritarianism of
the Fascist and communist states – said this:
"The question is whether we are prepared to move out of
the nineteenth-century laissez faire state into an era of
liberal socialism, by which I mean a system where we can
act as an organized community for common purposes and to
promote social and economic justice, whilst respecting and
protecting the individual-his freedom of choice, his
faith, his mind and its expression, his enterprise and his
property." (Moggridge 1982: 500 = Keynes and Martin 1939:
123).
............
Many people now accept that we have traveled the wrong
path since the 1950's. I would submit that economists
would do well to go back to the ideas of Keynes, Kalecki,
Lerner and perfect those concepts within a framework of
automatic stabilization. This would be greatly facilitated
if some prominent economists would have the guts to say
again what Keynes was saying in the 30's.
What would a recommended reading of or about Abba Lerner
be? Though Lerner is frequently mentioned, I still have no
idea where to begin reading. Would this do?
The Lerner symmetry theorem is a result used in
international trade theory, which states that, based on an
assumption of a zero balance of trade (that is, the value
of exported goods equals the value of imported goods for a
given country), an ad valorem import tariff (a percentage
of value or an amount per unit) will have the same effects
as an export tax. The theorem is based on the observation
that the effect on relative prices is the same regardless
of which policy (ad valorem tariffs or export taxes) is
applied.
The theorem was developed by economist Abba P. Lerner
in 1936.
Functional Finance and Full Employment: Lessons from
Lerner for Today?
By Mathew Forstater
The Asian Crisis, with the fallout in Latin America and
the transition economies; the Russian default; continuing
troubles in Japan; weaknesses in the structure of the new
European EMU; volatility on Wall Street; deflationary
pressures in the global economy: recent economic
developments invite a reconsideration of some of our most
deeply held beliefs concerning economic theory and public
policy. Even within the hallowed halls of mainstream
economics, voices of dissent can be heard. Paul Krugman,
Joseph Stiglitz, and Jeffrey Sachs are among those whose
recent proclamations indicate that we have entered a
period in which orthodox views are being openly
questioned, creating an atmosphere characterized by a
crisis of confidence.
Such periods of impending crisis and open expressions
of self-doubt, questioning our most deeply held beliefs
about the way the world works, creates a climate in which
the ideas of the great unorthodox thinkers of the past may
be revisited. The work of those who in the past dedicated
their lives to formulating solutions to the challenges of
modern capitalist economies may contain lessons applicable
to the contemporary situation. It is in this spirit that
this paper revisits the early works of Abba Lerner,
outlining fifteen such lessons regarding macroeconomic
theory and policy, as fresh in the context of the current
scene as they were some five decades ago when they were
first formulated.
Lesson #1: Full employment, price stability, and a
decent standard of living for all are fundamental
macroeconomic goals, and it is the responsibility of the
state to promote their attainment.
Lesson #2: Policies should be judged on their ability
to achieve the goals for which they are designed and not
on any notion of whether they are "sound" or otherwise
comply with the dogmas of traditional economics.
Lesson #3: "Money Is a Creature of the State"
Lesson #4: Taxing is not a funding operation.
Lesson #5: Government Borrowing is not a funding
operation.
Lesson #6: The primary purpose of taxation is to
influence the behavior of the public.
Lesson #7: The primary purpose of government bond sales
is to regulate the overnight interest rate.
Lesson #8: Bond sales logically follow from, rather
than precede, government spending....
Functional Finance: Monetary and Fiscal Policy for
Sovereign Currencies
By L. Randall Wray
Today we will lay out Abba Lerner's approach to policy.
In the 1940s he came up with what he called the functional
finance approach to policy.
Lerner's Functional Finance Approach. Lerner posed two
principles:
First Principle: if domestic income is too low,
government needs to spend more. Unemployment is sufficient
evidence of this condition, so if there is unemployment it
means government spending is too low.
Second Principle: if the domestic interest rate is too
high, it means government needs to provide more "money",
mostly in the form of bank reserves.
The idea is pretty simple. A government that issues its
own currency has the fiscal and monetary policy space to
spend enough to get the economy to full employment and to
set its interest rate target where it wants. (We will
address exchange rate regimes later; a fixed exchange rate
system requires a modification to this claim.) For a
sovereign nation, "affordability" is not an issue-it
spends by crediting bank accounts with its own IOUs,
something it can never run out of.If there is unemployed
labor, government can always afford to hire it-and by
definition, unemployed labor is willing to work for money.
Lerner realized that this does not mean government
should spend as if the "sky is the limit"-runaway spending
would be inflationary (and, as discussed many times, it
does not presume that government spending won't affect the
exchange rate). When Lerner first formulated the
functional finance approach (in the early 1940s),
inflation was not a major concern-the US had recently
lived through deflation in the Great Depression. However,
over time, inflation became a serious concern, and Lerner
proposed a form of wage and price controls to constrain
inflation that he believed would result as the economy
nears full employment. Whether or not that would be an
effective and desired way of attenuating inflation
pressures is not our concern here. The point is that
Lerner was only arguing that government should use its
spending power with a view to moving the economy toward
fullemployment-while recognizing that it might have to
adopt measures to fight inflation.
Lerner rejected the notion of "sound finance"-that is
the belief that government ought to run its finances as if
it were like a household or a firm. He could see no reason
for the government to try to balance its budget annually,
over the course of a business cycle, or ever. For Lerner,
"sound" finance (budget balancing) was not "functional"-it
did not help to achieve the public purpose (including, for
example, full employment). If the budget were occasionally
balanced, so be it; but if it never balanced, that would
be fine too. He also rejected any attempt to keep a budget
deficit below any specific ratio to GDP, as well as any
arbitrary debt to GDP ratio. The "correct" deficit would
be the one that achieves full employment.
Similarly the "correct" debt ratio would be the one
consistent with achieving the desired interest rate
target. This follows from his second principle: if
government issues too much debt, it has by the same token
issued too few bank reserves and cash. The solution is for
the treasury and central bank to stop selling bonds,and,
indeed, for the central bank to engage in open market
purchases (buying treasuries by crediting the selling
banks with reserves). That will allow the overnight rate
to fall as banks obtain more reserves and the public gets
more cash.
Essentially, the second principle just says that
government ought to let the banks,households, and firms
achieve the portfolio balance between "money" (reserves
and cash) and bonds desired. It follows that government
bond sales are not really a "borrowing" operation required
to let the government deficit spend. Rather, bond sales
are really part of monetary policy, designed to help the
central bank to hit its interest rate target. All of that
is consistent with the modern money view advanced
previously....
Doing what contemporary American economists
suggest: eliminate tariffs, don't worry about huge capital inflows or a ridiculously overvalued dollar,
has led the US from being the envy of the world to being a non-developed economy with worse roads
than Cuba or Ghana.
That US economists are still treated with any degree of credibility it totally
appalling. They are so obviously bought-and-paid for snake oil salesmen that people are finally tuning
them out.
TRUMP 2016: Return America to Protectionism - Screw globalism
[There is a pdf at the link. Olivier Blanchard has
surprised me again. As establishment economists go he is not
so bad. There is plenty that he still glosses over but
insofar as status quo establishment macroeconomics goes he is
thorough and coherent. One might hope that those that do not
understand either the debate for higher inflation targets or
the debate for fiscal policy to accomplish what monetary
policy cannot might learn from this article by Olivier
Blanchard, but I will not hold my breath waiting for that. In
any case the article is worth a read for anyone that can.]
RC AKA Darryl, Ron -> RC AKA Darryl, Ron...
,
Friday, September 30, 2016 at 07:07 AM
Get real! No alumni of the Peterson Institute and IMF is
going to go all mushy on the down sides of globalization and
wealth distribution.
The State of Advanced Economies and Related Policy
Debates: A Fall 2016 Assessment
By Olivier Blanchard
Perhaps the most striking macroeconomic fact about
advanced economies today is how anemic demand remains in the
face of zero interest rates.
In the wake of the global financial crisis, we had a
plausible explanation why demand was persistently weak:
Legacies of the crisis, from deleveraging by banks, to fiscal
austerity by governments, to lasting anxiety by consumers and
firms, could all explain why, despite low rates, demand
remained depressed.
This explanation is steadily becoming less convincing.
Banks have largely deleveraged, credit supply has loosened,
fiscal consolidation has been largely put on hold, and the
financial crisis is farther in the rearview mirror. Demand
should have steadily strengthened. Yet, demand growth has
remained low.
Why? The likely answer is that, as the legacies of the
past have faded, the future has looked steadily bleaker.
Forecasts of potential growth have been repeatedly revised
down. And consumers and firms-anticipating a gloomier
future-are cutting back spending, leading to unusually low
demand growth today....
"... Why all the bullshit jobs? And why are the most necessary and useful jobs, almost inevitably the lowest prestige and lowest paid? Capitalism. It's a nasty, nasty, nasty tangle of perverse incentives and evil. ..."
Why all the bullshit jobs? And why are the most necessary and useful jobs, almost inevitably
the lowest prestige and lowest paid? Capitalism. It's a nasty, nasty, nasty tangle of perverse
incentives and evil.
The answer clearly isn't economic: it's moral and political. The ruling class has figured
out that a happy and productive population with free time on their hands is a mortal danger (think
of what started to happen when this even began to be approximated in the '60s). And, on the other
hand, the feeling that work is a moral value in itself, and that anyone not willing to submit
themselves to some kind of intense work discipline for most of their waking hours deserves nothing,
is extraordinarily convenient for them. David Graeber from
http://evonomics.com/why-capitalism-creates-pointless-jobs-david-graeber/
Also, as several here have noted, one can work without a job if they have such resources as
land or a workshop and, dare I say it, an income.
"... Ridiculing the anachronism of Marxism is a pastime, but what are to do with neoclassical economics? Even if I believed that world leaders ceremonially signing agreements were willing to act in (corrupt) principle, there is still the small matter of technocratic palsy among the economists. I mean, did you read the 5th IPCC summary? Responding will cost growth. ..."
"... What I do get explicitly from Marxism which is mostly only implicit in neoclassical economics is that increasing inequality is bad news for managing resource limits and externalities. ..."
"... The demands of the masses can be crammed down, but at a cost to social discipline as well as poverty. The power of the rich to marshal resources to mitigate the effects and externalize and socialise costs will exacerbate the main drivers. ..."
Throwing around a Marxist accented capitalism label as all purpose explanator does not seem to
me to providing much insight independent of what is projected onto it, and calling for Monty Python
revolution proves as much, imho. That said, neoclassical economics is even less helpful.
Quite apart from the impulses of sociopathic or philanthropic financiers - are they the same
or different people? - the official doctrine of economic analysis, in which framework public policy
must be drawn, has been remarkably unhelpful in developing a common understanding of what needs
to be done, imho.
Ridiculing the anachronism of Marxism is a pastime, but what are to do with neoclassical
economics? Even if I believed that world leaders ceremonially signing agreements were willing
to act in (corrupt) principle, there is still the small matter of technocratic palsy among the
economists. I mean, did you read the 5th IPCC summary? Responding will cost growth.
But, not to worry, we will be able to extract carbon at scale real soon and reverse overshoot.
The optimistic reply seems to reject the need for an overarching framework of ideas to give
context and orientation: apparently, solar electricity will keep getting cheaper - here is a price
per kWh - problem solved. Which problem? . . .?
What I do get explicitly from Marxism which is mostly only implicit in neoclassical economics
is that increasing inequality is bad news for managing resource limits and externalities.
The demands of the masses can be crammed down, but at a cost to social discipline as well
as poverty. The power of the rich to marshal resources to mitigate the effects and externalize
and socialise costs will exacerbate the main drivers.
"... "Over the last 25 years, the number of people living in extreme poverty has been cut from nearly 40 percent of humanity to under 10 percent." This is roughly true, according to World Bank data, but the story of how it happened goes against his whole speech - which argues that this progress is a result of the "globalization" that Washington leads and supports wherever it has influence in the developing world. In fact, the majority of the reduction in extreme poverty during this period (more than 1.1 billion people worldwide) took place in China. But during this period China was really the counterexample to the "principles of open markets" with which Obama insists "we must go forward, not backward." ..."
"... If we go back a bit more and look at 1981–2012, China accounted for even more of the reduction of the world population in extreme poverty, about 70 percent. This would indicate that other parts of the developing world increased their economic and social progress during the 21st century, relative to China, and indeed many developing countries did (as compared to the last two decades of the 20th century). But China played an increasingly large role in reducing poverty in other countries during this period. ..."
"... It was so successful in its economic growth and development - by far the fastest in world history - that it became the largest economy in the world, and pulled up many developing countries through its imports. Chinese imports went from a negligible 0.1 percent of other developing countries' exports to 3 percent, from 1980–2010. China also provided hundreds of billions of dollars in investment, loans, and aid to low- and middle-income countries in the 21st century. (In the last few years, Chinese growth has slowed, along with that of most countries, and that has contributed - although perhaps not as much as Europe has - to the global slowdown since 2011.) ..."
"... the "principles of open markets" that Obama refers to is really code for "policies that Washington supports." ..."
"... In his defense of a world economic order ruled by Washington and its rich country allies, President Obama also asserted that "we have made international institutions like the World Bank and the International Monetary Fund more representative." But that is a gross exaggeration: the most recent reform of IMF voting shares left the US with an unchanged 16.7 percent share, enough to veto many important decisions (that require an 85 percent majority) by itself; and it left Washington and its traditional rich country allies with a solid majority of more than 60 percent of votes. Of course, it is the developing countries, especially poorer ones, that are most subject to IMF decisions. But the IMF is - by a gentleman's agreement among the rich country governments - headed by a European, and the World Bank by an American. It should not be surprising if these institutions do not look out for the interests of the developing world. ..."
President Obama Inadvertently Gives High Praise to China
in UN Speech
By Mark Weisbrot
President Obama's speech at the UN last week was mostly a
defense of the world's economic and political status quo,
especially that part of it that is led or held in place by
the US government and the global institutions that Washington
controls or dominates. In doing so, he said some things that
were exaggerated or wrong, or somewhat misleading. It is
worth looking at some of the things that media reports on
this speech missed.
"Over the last 25 years, the number of people living
in extreme poverty has been cut from nearly 40 percent of
humanity to under 10 percent." This is roughly true,
according to World Bank data, but the story of how it
happened goes against his whole speech - which argues that
this progress is a result of the "globalization" that
Washington leads and supports wherever it has influence in
the developing world. In fact, the majority of the reduction
in extreme poverty during this period (more than 1.1 billion
people worldwide) took place in China. But during this period
China was really the counterexample to the "principles of
open markets" with which Obama insists "we must go forward,
not backward."
China's historically unprecedented economic growth in the
past 25 years (or 35 years, or even more) was accomplished
with state-owned enterprises and banks dominating the
economy. State control over investment, technology transfer,
and foreign exchange was vastly greater than in other
developing countries. China rejected the neoliberal policies
of an "independent central bank," indiscriminate opening to
international trade and investment, and rapid privatization
of state companies. Instead, it chose a gradual transition,
over 35 years, from an overwhelmingly planned economy to a
mixed economy in which the state still plays a leading role.
Even today, China expanded the investment of state-owned
enterprises by 23.5 percent in the first six months of 2016
(as compared to the same period in 2015), to help boost the
economy.
If we go back a bit more and look at 1981–2012, China
accounted for even more of the reduction of the world
population in extreme poverty, about 70 percent. This would
indicate that other parts of the developing world increased
their economic and social progress during the 21st century,
relative to China, and indeed many developing countries did
(as compared to the last two decades of the 20th century).
But China played an increasingly large role in reducing
poverty in other countries during this period.
It was so
successful in its economic growth and development - by far
the fastest in world history - that it became the largest
economy in the world, and pulled up many developing countries
through its imports. Chinese imports went from a negligible
0.1 percent of other developing countries' exports to 3
percent, from 1980–2010. China also provided hundreds of
billions of dollars in investment, loans, and aid to low- and
middle-income countries in the 21st century. (In the last few
years, Chinese growth has slowed, along with that of most
countries, and that has contributed - although perhaps not as
much as Europe has - to the global slowdown since 2011.)
Of course, the "principles of open markets" that Obama
refers to is really code for "policies that Washington
supports." Some of them are the exact opposite of "open
markets," such as the lengthening and strengthening of patent
and copyright protection included in the Trans-Pacific
Partnership (TPP) agreement. President Obama also made a plug
for the TPP in his speech, asserting that "we've worked to
reach trade agreements that raise labor standards and raise
environmental standards, as we've done with the Trans-Pacific
Partnership, so that the benefits [of globalization] are more
broadly shared." But the labor and environmental standards in
the TPP, as with those in previous US-led commercial
agreements, are not enforceable; whereas if a government
approves laws or regulations that infringe on the future
profit potential of a multinational corporation - even if
such laws or regulations are to protect public health or
safety - that government can be hit with billions of dollars
in fines. And they must pay these fines, or be subject to
trade sanctions.
In his defense of a world economic order ruled by
Washington and its rich country allies, President Obama also
asserted that "we have made international institutions like
the World Bank and the International Monetary Fund more
representative." But that is a gross exaggeration: the most
recent reform of IMF voting shares left the US with an
unchanged 16.7 percent share, enough to veto many important
decisions (that require an 85 percent majority) by itself;
and it left Washington and its traditional rich country
allies with a solid majority of more than 60 percent of
votes. Of course, it is the developing countries, especially
poorer ones, that are most subject to IMF decisions. But the
IMF is - by a gentleman's agreement among the rich country
governments - headed by a European, and the World Bank by an
American. It should not be surprising if these institutions
do not look out for the interests of the developing world.
"We can choose to press forward with a better model of
cooperation and integration," President Obama told the world
at the UN General Assembly. "Or we can retreat into a world
sharply divided, and ultimately in conflict, along age-old
lines of nation and tribe and race and religion."
But the rich country governments led by Washington are not
offering the rest of the world any better model of
cooperation and integration than the failed model they have
been offering for the past 35 years. And that is a big part
of the problem....
China's historically unprecedented economic growth in the
past 25 years (or 35 years, or even more) was accomplished
with state-owned enterprises and banks dominating the
economy. State control over investment, technology transfer,
and foreign exchange was vastly greater than in other
developing countries. China rejected the neoliberal policies
of an "independent central bank," indiscriminate opening to
international trade and investment, and rapid privatization
of state companies. Instead, it chose a gradual transition,
over 35 years, from an overwhelmingly planned economy to a
mixed economy in which the state still plays a leading role.
Even today, China expanded the investment of state-owned
enterprises by 23.5 percent in the first six months of 2016
(as compared to the same period in 2015), to help boost the
economy....
Even today, China expanded the investment of state-owned
enterprises by 23.5 percent in the first six months of 2016
(as compared to the same period in 2015), to help boost the
economy....
Yale Professors Offer Economic Prescriptions
By Brenda Cronin - Wall Street Journal
Richard C. Levin, president of Yale - and also a professor
of economics - moderated the conversation among Professors
Judith Chevalier, John Geanakoplos, William D. Nordhaus,
Robert J. Shiller and Aleh Tsyvinski....
An early mistake during the recession, Mr. Levin said, was
not targeting more stimulus funds to job creation. He
contrasted America's meager pace of growth in gross domestic
product in the past few years with China's often double-digit
pace, noting that after the crisis hit, Washington allocated
roughly 2% of GDP to job creation while Beijing directed 15%
of GDP to that goal....
Repeatedly there are warnings from Western economists that
the Chinese economy is near collapse, nonetheless economic
growth through the first 2 quarters this year is running at
6.7% and the third quarter looks about the same. The point is
to ask and describe how after these last 39 remarkable years:
Before the crash, complacent Democrats, ... tended to agree
with them that the economy was largely self-correcting.
Who is a complacent Democrat? Obama ran as a fiscal
conservative and appointed a GOP as his SecTreas. Geithner
was a "banks need to be bailed out" and the economy self
corrects. Geithner was not in favor of cram down or mortgage
programs that would have bailed out the injured little folks.
Democrats like Romer and Summers were in favor a fiscal
stimulus, but not enough of it. I expect to see the Clinton
economic team include a lot more women and especially focus
on economic policies that help working women and families.
I have always thought that a big reason for the Bush
jobless recovery was his lack of true fiscal stimulus. Bush
had tax cuts for the wealthy, but the latest from Summers
shows why trickle down does not work.
Full employment may have been missing from the 1992
platform, but full employment was pursued aggressively by
Bill Clinton. He got AG to agree to allow unemployment to
drop to 4% in exchange for raising taxes and dropping the
middle class tax cuts. Bill Clinton used fiscal policy to tax
the economy and as a break so monetary policy could be
accommodating.
He should include raising the MinWage. Maybe that has not
changed but it is a lynchpin for putting money in the pockets
of the working poor.
"... Will the media ever stop the ridiculous charade of pretending that the path of globalization that we are on is somehow and natural and that it is the outcome of a "free" market? Are longer and stronger patent and copyright monopolies the results of a free market? ..."
"... The NYT should up its game in this respect. It had a good piece on the devastation to millions of working class people and their communities from the flood of imports of manufactured goods in the last decade, but then it turns to hand-wringing nonsense about how it was all a necessary part of globalization. Actually, none of it was a necessary part of a free trade. ..."
"... First, the huge trade deficits were the direct result of the decision of China and other developing countries to buy massive amounts of U.S. dollars to hold as reserves in this period. This raised the value of the dollar and made our goods and services less competitive internationally. This problem of a seriously over-valued dollar stems from the bungling of the East Asian bailout by the Clinton Treasury Department and the I.M.F. ..."
"... The second point is political leaders are constantly working to make patents and copyrights stronger and longer. This raises the price that ordinary workers have to pay for everything from drugs to computer games. The result is lower real wages for ordinary workers and higher incomes for the beneficiaries of these rents. It also slows economic growth since markets are not smart enough to distinguish between a 10,000 percent price increase due to a tariff and a 10,000 percent price increase due to a patent monopoly. (In other words, all the bad things that "free trade" economists say about tariffs also apply to patents and copyrights, except the impact is far larger in the later case.) ..."
Why are none of the "free trade" members of
Congress pushing to change the regulations that require
doctors go through a U.S. residency program to be able to
practice medicine in the United States? Obviously they are
all protectionist Neanderthals.
Will the media ever stop the ridiculous charade of
pretending that the path of globalization that we are on is
somehow and natural and that it is the outcome of a "free"
market? Are longer and stronger patent and copyright
monopolies the results of a free market?
The NYT should up its game in this respect. It had a good
piece on the devastation to millions of working class people
and their communities from the flood of imports of
manufactured goods in the last decade, but then it turns to
hand-wringing nonsense about how it was all a necessary part
of globalization. Actually, none of it was a necessary part
of a free trade.
First, the huge trade deficits were the direct result of
the decision of China and other developing countries to buy
massive amounts of U.S. dollars to hold as reserves in this
period. This raised the value of the dollar and made our
goods and services less competitive internationally. This
problem of a seriously over-valued dollar stems from the
bungling of the East Asian bailout by the Clinton Treasury
Department and the I.M.F.
If we had a more competent team in place, that didn't
botch the workings of the international financial system,
then we would have expected the dollar to drop as more
imports entered the U.S. market. This would have moved the
U.S. trade deficit toward balance and prevented the massive
loss of manufacturing jobs we saw in the last decade.
The second point is political leaders are constantly
working to make patents and copyrights stronger and longer.
This raises the price that ordinary workers have to pay for
everything from drugs to computer games. The result is lower
real wages for ordinary workers and higher incomes for the
beneficiaries of these rents. It also slows economic growth
since markets are not smart enough to distinguish between a
10,000 percent price increase due to a tariff and a 10,000
percent price increase due to a patent monopoly. (In other
words, all the bad things that "free trade" economists say
about tariffs also apply to patents and copyrights, except
the impact is far larger in the later case.)
Finally, the fact that trade has exposed manufacturing
workers to international competition, but not doctors and
lawyers, was a policy choice, not a natural development.
There are enormous potential gains from allowing smart and
ambitious young people in the developing world to come to the
United States to work in the highly paid professions. We have
not opened these doors because doctors and lawyers are far
more powerful than autoworkers and textile workers. And, we
rarely even hear the idea mentioned because doctors and
lawyers have brothers and sisters who are reporters and
economists.
Addendum:
Since some folks asked about the botched bailout from the
East Asian financial crisis, the point is actually quite
simple. Prior to 1997 developing countries were largely
following the textbook model, borrowing capital from the West
to finance development. This meant running large trade
deficits. This reversed following the crisis as the
conventional view in the developing world was that you needed
massive amounts of reserves to avoid being in the situation
of the East Asian countries and being forced to beg for help
from the I.M.F. This led to the situation where developing
countries, especially those in the region, began running very
large trade surpluses, exporting capital to the United
States. (I am quite sure China noticed how its fellow East
Asian countries were being treated in 1997.)
The Guardian is, increasingly (if you'll pardon the phrase) getting on my tits at the moment. Is there anything worse in the
mainstream media than a Progressive In Name Only newspaper?
The BBC's fair and balanced news and current affairs departments (
driven
by its sinister business unit ) are perhaps worse because of its greater reach, but it's a tight race.
Clive, intemperate: The agony of the Guardian is indeed interesting. A while back, I read that its site was the most used among
English-language newspapers, particularly by U.S. readers looking for some balance.
With regard to the U.S. political coverage, and their rah-rah Clintonism, as evinced by the resurrection of the likes of Jill
Abramson, I tend to cut them some slack. I find that many English (in particular, the English) are somewhat tone-deaf about U.S.
culture and folkways. I imagine some Guardian Uxonian editors, who once spent a week in NYC with a side trip to LA, and who have
actually eaten corn on the cob, thinking that they understand the U.S. Constitution and U.S. politics. But they still don't know
how to pronounce Illinois and Arkansas.
The anti-Corbyn hysteria shows detachment from their roots. The Guardian editors should get in a car and head out for a field
trip to Manchester (do they recall Manchester?) to find out more about Brexit and Corbyn. A trip to the English nether-regions
would do them some good.
And yet I can't complain too much: How often do they present Douthat, Bruni, and Brooks as sages?
"... The current US presidential election shows, perhaps better than anything else, just how far that decadence has gone. Hillary Clinton's campaign is floundering in the face of Trump's challenge because so few Americans still believe that the [neo]liberal shibboleths in her campaign rhetoric mean anything at all. ..."
"... Even among her supporters, enthusiasm is hard to find, and her campaign rallies have had embarrassingly sparse attendance. Increasingly frantic claims that only racists, fascists, and other deplorables support Trump convince no one but true believers, and make the concealment of interests behind shopworn values increasingly transparent. Clinton may still win the election by one means or another, but the broader currents in American political life have clearly changed course. ..."
"... Or one could take the idea that "Health" or "College" reform is merely funneling ever more resources to insurance companies and College administrations with precious little if any improvement in the real cost or quality to the users of the service. ..."
Ironies of this sort are anything but unusual in political history. It's astonishingly common
for a movement that starts off trying to overturn the status quo in the name of some idealistic
abstraction or other to check its ideals at the door once it becomes the status quo. If anything,
American liberalism held onto its ideals longer than most and accomplished a great deal more
than many, and I think that most of us-even those who, like me, are moderate Burkean conservatives-are
grateful to the liberal movement of the past for ending such obvious abuses as chattel slavery
and the denial of civil rights to women, and for championing the idea that values as well as
interests deserve a voice in the public sphere. It deserves the modern equivalent of a raised
hat and a moment of silence, if no more, as it finally sinks into the decadence that is the
ultimate fate of every successful political movement.
The current US presidential election shows, perhaps better than anything else, just
how far that decadence has gone. Hillary Clinton's campaign is floundering in the face of Trump's
challenge because so few Americans still believe that the [neo]liberal shibboleths in her campaign
rhetoric mean anything at all.
Even among her supporters, enthusiasm is hard to find, and her campaign rallies have
had embarrassingly sparse attendance. Increasingly frantic claims that only racists, fascists,
and other deplorables support Trump convince no one but true believers, and make the concealment
of interests behind shopworn values increasingly transparent. Clinton may still win the election
by one means or another, but the broader currents in American political life have clearly changed
course.
=====================================
Great article IMHO – I certainly agree about the portion concerning immigration.
And for an example of a contradiction – Police unions and big cities. Unions do much more than
raise wages and pensions – many of the protections of police by hamstringing complaint investigations
against the police are exposing a fissure that has reached the point of earthquake.
Or one could take the idea that "Health" or "College" reform is merely funneling ever more
resources to insurance companies and College administrations with precious little if any improvement
in the real cost or quality to the users of the service.
The Guardian is, increasingly (if you'll pardon the phrase) getting on my tits at the moment. Is there anything worse in the
mainstream media than a Progressive In Name Only newspaper?
The BBC's fair and balanced news and current affairs departments (
driven
by its sinister business unit ) are perhaps worse because of its greater reach, but it's a tight race.
Clive, intemperate: The agony of the Guardian is indeed interesting. A while back, I read that its site was the most used among
English-language newspapers, particularly by U.S. readers looking for some balance.
With regard to the U.S. political coverage, and their rah-rah Clintonism, as evinced by the resurrection of the likes of Jill
Abramson, I tend to cut them some slack. I find that many English (in particular, the English) are somewhat tone-deaf about U.S.
culture and folkways. I imagine some Guardian Uxonian editors, who once spent a week in NYC with a side trip to LA, and who have
actually eaten corn on the cob, thinking that they understand the U.S. Constitution and U.S. politics. But they still don't know
how to pronounce Illinois and Arkansas.
The anti-Corbyn hysteria shows detachment from their roots. The Guardian editors should get in a car and head out for a field
trip to Manchester (do they recall Manchester?) to find out more about Brexit and Corbyn. A trip to the English nether-regions
would do them some good.
And yet I can't complain too much: How often do they present Douthat, Bruni, and Brooks as sages?
To keep a little more of that tuition money, the college is considering slightly ratcheting
down financial aid.
They are also going to offer buyouts to a number of employees later
this fall.
"When you have a reduction in your enrollment, you're going to need a proportionate reduction
in faculty and staff,"
Robinson said. "We definitely need to get smaller."
Adding to the problem, there were fewer unrestricted donations - donations that are free to use
for whatever the college might need - than expected last year, but more donations overall.
Gifts that were received were earmarked for specific programs and buildings on campus, not necessarily
for the general fund.
(can't put your name on a general fund)
By next year the college won't be able to break even, but by 2018 Robinson and his team expects
to present a balanced budget to the Board of Trustees.
Despite the budget issues, the college is still on strong footing and is looking ahead, said Alex
Bertoni, spokesperson for the college.
"The college is doing well, and the students here are thriving," he said. "We're going
to continue to invest in the long-term.
" (that long-term does not look good for a lot of
students, to me)
bolding and comments in () mine. I am an eye-roller for sure, and they got a workout here.
The ghastly horror of competition roils the cozy academic cartel:
Georgia Tech's master's [sic] in computer science costs less than one-eighth as much as its
most expensive rival - if you learn online.
With one of the top 10 computer science departments in the nation, according to U.S. News &
World Report, Georgia Tech had a reputation to uphold. So it made the online program as much like
the residential program as possible.
Tuition for a 30-credit master's in computer science from the University of Southern California
runs $57,000. Syracuse, Johns Hopkins and Carnegie Mellon charge over $43,000 for the same degree.
Most prestigious colleges are currently sticking with the model that lets them offer degrees
for $57,000 instead of the roughly $7,000 that it costs at Georgia Tech.
Paying CEOs so much in stocks puts their focus on the share price instead of building for the
long run.
By
Joe Biden
Sept. 27, 2016 7:14 p.m. ET
135 COMMENTS
Short-termism-the notion that companies forgo long-run investment to boost near-term stock
price-is one of the greatest threats to America's enduring prosperity. Over the past eight years,
the U.S. economy has emerged from crisis and maintained an unprecedented recovery. We are now
on the cusp of a remarkable resurgence. But the country can't unlock its true potential without
encouraging businesses to build for the long-run.
Private investment-from new factories, to research, to worker training-is perhaps the greatest
driver of economic growth, paving the way for future prosperity for businesses, their supply chains
and the economy as a whole. Without it robust growth is nearly impossible. Yet all too often,
executives face pressure to prioritize today's share price over adding long-term value.
The origins of short-termism are rooted in policies and practices that have eroded the incentive
to create value: the dramatic growth in executive compensation tied to short-term share price;
inadequate regulations that allow share buybacks without limit; tax laws that designate an investment
as "long-term" after only one year; a subset of activist investors determined to steer companies
away from further investment; and a financial culture focused on quarterly earnings and short-run
metrics.
Consider the evolution in the structure of CEO compensation. In the 1980s, roughly three-fourths
of executive pay at S&P 500 companies was in the form of cash salary and bonuses, and the rest
in investment options and stock, according to an article in the Annual Review of Financial Economics.
The Omnibus Budget Reconciliation Act of 1993 included a provision to link executive pay to the
performance of the company. But it didn't work as intended. By the time I became vice president,
only 40% of executive pay was in cash, with the bulk being tied to investment options and stock.
Now more than ever, there is a direct link between share price and CEO pay.
Performance-based pay encourages executives to think in the short-term. Ever since the Securities
and Exchange Commission changed the buyback rules in 1982, there has been a proliferation in share
repurchases. Today buybacks are the norm. According to economist William Lazonick , from 2003-12,
companies on the S&P 500 spent 37% of their earnings on dividends and a full 54% on buybacks-leaving
less than 10% for reinvestment.
This emphasis on returning profits to shareholders has led to a significant decline in business
investment. Total investment as a share of the economy has fallen to about 11% today, down from
a high of about 15% in the early 1980s, according to the Bureau of Economic Analysis. With interest
rates at historically low levels, and business confidence in the U.S. far ahead of its economic
competitors, there should be more investment, not less.
I am not blaming CEOs. The business leaders I've met over the course of my career want to build
their firms and contribute to the economy, not simply send checks to investors or buy back their
own stock. Sometimes they succeed. Other times the pressures to lift the short-run share price
are simply too great.
As these short-term pressures mount, most of the harm is borne by workers. As any economist
will tell you, productivity is typically the most important driver of increasing wages. But productivity
will never flourish without businesses investing in endeavors like on-the-job training, new equipment,
and research and development. In short, business investment boosts productivity, which lifts wages.
A continued economic resurgence requires solving the short-termism puzzle. The federal government
can help foster private enterprise by providing worker training, building world-class infrastructure,
and supporting research and innovation. But government should also take a look at regulations
that promote share buybacks, tax laws that discourage long-term investment and corporate reporting
standards that fail to account for long-run growth. The future of the economy depends on it.
[You go, Joe! He even references William Lazonick.
Lazonick wrote about the new economy business model (NEBM) versus the old, but never really
pinned down what changed in the taxation on returns to capital that caused it. Also, Lazonick
seemed to believe that the rapid capital formation used in the NEBM justified the low taxation
on capital gains. That was a big mistake. Scarce capital has never been a obstacle in the US since
early in the 20th century except when a financial shock locked up capital allocation.
Dividends payouts are sometimes seen as short term payouts to shareholders, but if not for
the capital gains tax preference that would not be true. Paying dividends reduces a firms capital,
but increases the desirability of its shares both as a source of income and as a performer which
boost share price more than the underlying reduction of equity due to capital payout. So, dividends
versus capital gains is not an either or in the short term. Over the longer term accumulated dividends
from a firm that invests in itself are a better incentive for reinvestment than a capital gains
windfall at some point in that longer term. The capital gains preference makes selling shares
more desirable than holding shares and M&A more desirable than internal investment.
In 1954 the dividends tax credit was rescinded in that year's tax act. It had been in effect
since 1913 except for 1936-1939. I know that I should provide references, but since I started
writing about this five years ago most of the evidence has been taking off the WWW.
The dividends tax credit returned to the individual taxpayer the amount of their tax liability
on their dividends income that had been paid in corporate taxes by the issuing firms. This served
as an incentive to shareholders to prefer higher corporate tax rates with fewer loopholes. Higher
effective corporate tax rates encourage firms to increase their expenses in wages and exempt reinvestments
that lowers their taxable profits.
If we wanted even less short termism then we should have higher capital gains tax rates with
reductions per year of holding term along with the dividends tax credit. Rescinding the dividends
tax credit might be considered desirable because it was a tax increase on the wealthy, but in
1954 both Congress and POTUS were Republican which is worth considering. Democrats had done it
before in 1936, but reversed it in 1939. Joe Biden's article on short termism is probably a lot
more significant than it will ever been given credit for which goes a long ways to explain how
corporatism and globalization have had such devastating effects on jobs and wages. We not only
do not know what we are doing, but we don't know what we have done either.]
Sure huge executive stock options have a perverse effect on corporate financial decisions, but
"higher capital gains tax rates with reductions per year of holding term along with the dividends
tax credit" would go a long ways to changing the incentives created by stock options as well.
By higher capital gains tax rates I mean much higher, at least before holding term exclusions.
Also, an inflation adjustment to the basis for capital gains calculation for each year of holding
term equal to each year's SSA COLA would eliminate the pressure against SSA COLA that is exerted
by agents of the wealthy against the interest of retired wage class seniors.
The only way to limit executive pay is to tax it at very high levels. Reagan blew up the top tax
rate and set the stage for executive pay to skyrocket.
From that WaPo story: "According to a new paper from Temple University's Steven Balsam published
by the Economic Policy Institute, the big flaw in 162(m) was its broad exemption of "performance-based"
pay. The $1 million cap only applied to traditional salaries, bonuses and grants of company stock."
Sort of a silly way of measuring compensation it seems. I agree that a higher tax rate on income
would help but be careful to define income as total compensation.
Of course the other thing one might consider is to have a Board of Directors that answers to
shareholders and not upper management.
The tax incentives on dividends relative to capital gains work for executive pay, monopoly, investment,
and wage worker channels. Dividends can be used for just taking profits but they produce more
over the longer term from investment returns. Capital gains are never more than a one time windfall
although stable share price is useful for equities as collateral.
RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , -1
Since CEOs are usually the shareholders with the most power then affecting their incentives as
shareholders can be very effective. Getting CEOs to not raise their own pay is futile. Changing
the game for everyone to favor internal investment over M&A as a use for retained earnings is
necessary. The downside of my recommendation is that IPOs will no longer make angel investors
insanely rich over night. Boohoo!
It seems to me this line from Wren-Lewis is the biggie as far
as the Great Recession/Longer Depression is concerned:
"A
recession initiated by a financial crisis is also likely to
see consumers reducing their own borrowing, and so
(erroneous) analogies between governments and households
resonate."
In 2008/9 the public was (rightly) convinced that the
collapse was due to deflation of a financial bubble blown up
by many years of excessive private borrowing and debt-fueled
over-consumption: too much credit card debt; too much
borrowing against (inflated) home values; two much
speculative gambling with, and ponzi profiting from, cutesy
and overvalued financial instruments. That correct,
instinctive evaluation of the situation was backed up by
numbers showing that the total private debt to GDP ratio had
reached a level unseen since 1928, and by the sudden
discovery of the many analyses of many experienced, sober,
but neglected financial observers who had been predicting
some kind of collapse for years.
Since the public was thus primed to believe that, going
forward, the private economy had to reduce its overall debt
load, it was very easy to convince them that governments,
being just another part of the overall economy, had to do the
same thing.
But what Wren-Lewis doesn't seem to mention is that the
public had already been primed by decades of Norquistian,
Petersonian and Rubinite deficit-hectors, debt-despairers and
entitlement-exterminators to believe that our deficits were a
very bad thing, that government was too big, and that we were
headed for a "fiscal train wreck" because of our
undisciplined budgets and government spending. They were thus
easily convinced that the financial crisis also had something
to to with the problems alleged by this bipartisan team of
budget Casandras all finally coming a-cropper.
We had endless cadres of Republican politicians promoting
hysteria over the public debt and also decrying the very size
of government, whether deficit-financed or not.
We had Bill Clinton running around bragging about his
"reinvention" (shrinking) of government and his dot-com
boom-assisted surprise surplus.
We had Joe Biden telling everyone that the financial
collapse was caused by "putting two wars on a credit card".
We had the Concord Coalition and the Peterson Institute
gearing up their zombies for the Fix the Debt onslaught that
eventually saddled us with an economic discourse driven by a
stupid budget-reduction commission in the middle a deep
recession!
Hatred of governments and their spending habits had
already given us years of gradually building stagnation due
to declining public investment and a consequent secular shift
from capital formation to consumption. But the voters saw
only that all of the Serious People in both parties were
strongly in favor of this "disciplined" decimation of
government. So why in the world wouldn't they end up
supporting its continuation?
"... Most workers suffer serious consequences when they mess up on their jobs. Custodians get fired
if the toilet is not clean. Dishwashers lose their job when they break too many dishes, but not all
workers are held accountable for the quality of their work. ..."
"... At the top of the list of people who need not be competent to keep their job are economists.
Unlike workers in most occupations, when large groups of economists mess up they can count on the media
covering up their mistakes and insisting it was just impossible to understand what was going on. ..."
Economists Keep Getting It Wrong Because the Media Coverup Their Mistakes
Most workers suffer serious consequences when they mess up on their jobs. Custodians get
fired if the toilet is not clean. Dishwashers lose their job when they break too many dishes,
but not all workers are held accountable for the quality of their work.
At the top of the list of people who need not be competent to keep their job are economists.
Unlike workers in most occupations, when large groups of economists mess up they can count on
the media covering up their mistakes and insisting it was just impossible to understand what was
going on.
This is first and foremost the story of the housing bubble. While it was easy * to recognize
that the United States and many other countries were seeing massive bubbles that were driving
their economies, which meant that their collapse would lead to major recessions, the vast majority
of economists insisted there was nothing to worry about.
The bubbles did burst, leading to a financial crisis, double-digit unemployment in many countries,
and costing the world tens of trillions of dollars of lost output. The media excused this extraordinary
failure by insisting that no one saw the bubble and that it was impossible to prevent this sort
of economic and human disaster. Almost no economists suffered any consequences to their career
as a result of this failure. The "experts" who determined policy in the years after the crash
were the same people who completely missed seeing the crash coming.
We are now seeing the same story with trade. The New York Times has a major magazine article
** on the impact of trade on the living standards of workers in the United States and other wealthy
countries. The subhead tells readers:
"Trade is under attack in much of the world, because economists failed to anticipate the accompanying
joblessness, and governments failed to help."
Of course many economists did not anticipate the negative impact of trade, but of course many
of us did. The negative impact was entirely predictable and predicted. (Here are a few from Center
for Economic and Policy Research, *** **** ***** there are many more books and papers from my
friends at the Economic Policy Institute.) The argument is straightforward: trade policy has been
designed to put manufacturing workers in direct competition with low paid workers in the developing
world. This costs jobs and puts downward pressure on the wages of these workers. It also puts
downward pressure on the wages of less-educated workers more generally, as displaced manufacturing
workers seek jobs in retail and other sectors. Stagnating wages and increasing inequality are
the predicted result of this pattern of trade, not a surprising outcome.
If economists were like custodians and dishwashers, the failure to recognize this obvious outcome
of trade policy would have put them out on the street. Instead, we get major news outlets like
the New York Times, telling us this is all a remarkable surprise. No one could have seen that
trade would have bad outcomes for large segments of the workforce. Rather than lose their jobs,
economists can still draw comfortable six figure salaries as they tell reporters how it was impossible
for them to understand the economy.
Economic theory tells us that if economists don't face consequences for completely messing
up on the job then they have no incentive to get things right. If the custodian never pays any
price for not cleaning the toilet, then they won't clean the toilet. In the same way, if the media
and the country always grant a "who could have known" amnesty to large chunks of the economics
profession when it gets things completely wrong, then there is no reason to expect that economists
will ever get things right. All they have to do is say the same things as other elite economists
say, and if it turns out to be wrong, the NYT will just run major news articles explaining that
no one could have known better.
There is one other important point that needs emphasis here. There was nothing inherent to
trade that required growing inequality, it was the structure of trade policy that gave us this
result. There are millions of very bright ambitious people in the developing world who would be
very happy to study to meet U.S. standards and work as doctors, dentists, lawyers and other professionals
in the United States. We could have designed trade agreements to facilitate this process.
The result would be massive economic gains in the form of lower cost health care, dental care,
legal services and other professionals services. In the case of physicians alone, if the increased
supply brought the pay of our doctors down to the levels of Western Europe and Canada, we would
save close to $100 billion a year. This comes to roughly $700 a year in savings for every family
in the United States. And, this would lead to a reduction in inequality.
Our elite economists have chosen not to discuss this sort of trade opening. (They also rarely
discuss reducing rather than increasing protectionist barriers like patents and copyrights.) These
issues are discussed in more depth in my forthcoming book, "Rigged: How Globalization and the
Rules of the Modern Economy Were Structured to Make the Rich Richer" (coming to a website near
year in October). But the key point here is that economists should know better, and if they were
doing their job, they did.
"The argument is straightforward: trade policy has been designed to put manufacturing workers
in direct competition with low paid workers in the developing world. This costs jobs and puts
downward pressure on the wages of these workers. It also puts downward pressure on the wages of
less-educated workers more generally, as displaced manufacturing workers seek jobs in retail and
other sectors. Stagnating wages and increasing inequality are the predicted result of this pattern
of trade, not a surprising outcome."
This is surprising to PGL and Krugman who argue the Fed will just adjust to keep full employment
or at least that's what the models tell them.
Dean is talking about protectionism for drug companies, doctors etc. and free trade for the rest
of us. On this score he is exactly right and I have said so many times. This is a very different
issue from the macroeconomic ones. I would accuse you of once again misrepresenting what I have
said. But to be fair - you are too stupid to get these distinctions so maybe you are not lying.
I do wish I had a smarter internet stalker.
Tom aka Rusty -> anne... , -1
Baker get the diagnosis correct.
Baker's standard solutions do very little for blue collar workers. Having a cheaper doctor
and lawyer don't help much for the unemployed and underemployed.
Simon Wren-Lewis has an excellent new paper * trying to
explain the widespread resort to austerity in the face of a
liquidity trap, which is exactly the moment when such
policies do the most harm. His bottom line is that
"austerity was the result of right-wing opportunism,
exploiting instinctive popular concern about rising
government debt in order to reduce the size of the state."
I think this is right; but I would emphasize more than he
does the extent to which both the general public and Very
Serious People always assume that reducing deficits is the
responsible thing to do. We have some polling from the 1930s,
showing a strong balanced-budget bias even then:
[Chart]
I think Simon would say that this is consistent with his
view that large deficits grease the rails for deficit phobia,
since Franklin Roosevelt's administration did run up deficits
and debt that were unprecedented for peacetime. But has there
ever been a time when the public favored bigger deficits?
Meanwhile, as someone who was in the trenches during the
US austerity fights, I was struck by how readily mainstream
figures who weren't especially right-wing in general got
sucked into the notion that debt reduction was THE central
issue. Ezra Klein documented this phenomenon ** with respect
to Bowles-Simpson: ***
"For reasons I've never quite understood, the rules of
reportorial neutrality don't apply when it comes to the
deficit. On this one issue, reporters are permitted to openly
cheer a particular set of highly controversial policy
solutions. At Tuesday's Playbook breakfast, for instance,
Mike Allen, as a straightforward and fair a reporter as
you'll find, asked Simpson and Bowles whether they believed
Obama would do 'the right thing' on entitlements - with 'the
right thing' clearly meaning 'cut entitlements.' "
Meanwhile, as Brad Setser points out, the International
Monetary Fund - whose research department has done heroic
work puncturing austerity theories and supporting a broadly
Keynesian view of macroeconomics - is, in practice, pushing
for fiscal contraction **** almost everywhere.
Again, this doesn't exactly contradict Simon's argument,
but maybe suggests that there is a bit more to it.
Austerity is defined as a fiscal contraction that causes a
significant increase in aggregate unemployment. For the
global economy, or an economy with a flexible exchange rate,
or a monetary union as a whole, an increase in unemployment
following a fiscal consolidation can and should be avoided
because monetary policy can normally offset the demand impact
of the consolidation. The tragedy of global austerity after
2010 was that fiscal consolidation was not delayed until
monetary policy was able to do this.
An individual member of a currency union that requires a
greater fiscal contraction than the union as a whole cannot
use its own monetary policy to offset the impact of fiscal
consolidation. Even in this case, however, a sharp and deep
fiscal contraction is unlikely to be optimal. Providing this
economy is in a union where the central bank acts as a
sovereign lender of last resort, a more gradual fiscal
adjustment is likely to minimise the unemployment cost.
As the theory behind these propositions is simple and
widely accepted, the interesting question is why global
austerity happened. Was austerity an unfortunate accident, or
is there a more general political economy explanation for why
it occurred? Answering this question is vital to avoid the
next global recession being followed by yet more austerity.
The answer is that politicians and pundits have a flawed
understanding of inflation and its relationship to
hyperinflation.
Some economists promoted a seriously flawed interpretation of
the 1970s stagflation that solidified myths about inflation.
As Max Planck said, "Science advances one funeral at a time."
We need the current generation of economists and their failed
models to be replaced by a new generation that does not
suffer from the same mythology.
Peter K. -> anne...
, -1
If one just read Krugman or Kevin Drum you wouldn't
understand how Bill Clinton declared "the era of Big
Government is over" or how after he was first elected he
listened to his top two economic advisers Robert Rubin and
Alan Greenspan and dropped his middle class spending campaign
promise in favor of deficit reduction.
Greenspan promised Clinton lower rates in exchange for
reducing government. Clinton ended "welfare as we knew it."
But Greenspan didn't regulate this increase in private
investment. It led to the tech-stock bubble and a shadow
banking system which was susceptible to a banking panic.
According to Hillary, Bush's tax cuts caused the housing
bubble and Great Recession. It's a little more complicated.
But this cuts against Krugman and Drum's narrative that the
Clinton years were nothing but awesome.
Summers told Brooksley Born that derivatives shouldn't be
regulated b/c the market is magic.
Obama reinforced the narrative that government should
tighten its belt during hard times like households do. This
is exactly wrong.
Maybe it's understandable for politicians to pander for
short-term political expediency but it's hurts the long-term
ideological conflict.
There's the right and there's the left and Obama and
Clinton tried to straddle the two ideologies which just
waters down the left's appeal and pull.
That's why the millennials and more progressive workers
aren't as excited for Hillary's candidacy. That's why Sanders
energized them.
Now I agree with Sanders that a Trump Presidency would be
a disaster, but this doesn't preclude me from correcting
Krugman's outlook as some center-leftists would insist in
their binary thinking.
It seems to me this line from Wren-Lewis is the biggie as far
as the Great Recession/Longer Depression is concerned:
"A
recession initiated by a financial crisis is also likely to
see consumers reducing their own borrowing, and so
(erroneous) analogies between governments and households
resonate."
In 2008/9 the public was (rightly) convinced that the
collapse was due to deflation of a financial bubble blown up
by many years of excessive private borrowing and debt-fueled
over-consumption: too much credit card debt; too much
borrowing against (inflated) home values; two much
speculative gambling with, and ponzi profiting from, cutesy
and overvalued financial instruments. That correct,
instinctive evaluation of the situation was backed up by
numbers showing that the total private debt to GDP ratio had
reached a level unseen since 1928, and by the sudden
discovery of the many analyses of many experienced, sober,
but neglected financial observers who had been predicting
some kind of collapse for years.
Since the public was thus primed to believe that, going
forward, the private economy had to reduce its overall debt
load, it was very easy to convince them that governments,
being just another part of the overall economy, had to do the
same thing.
But what Wren-Lewis doesn't seem to mention is that the
public had already been primed by decades of Norquistian,
Petersonian and Rubinite deficit-hectors, debt-despairers and
entitlement-exterminators to believe that our deficits were a
very bad thing, that government was too big, and that we were
headed for a "fiscal train wreck" because of our
undisciplined budgets and government spending. They were thus
easily convinced that the financial crisis also had something
to to with the problems alleged by this bipartisan team of
budget Casandras all finally coming a-cropper.
We had endless cadres of Republican politicians promoting
hysteria over the public debt and also decrying the very size
of government, whether deficit-financed or not.
We had Bill Clinton running around bragging about his
"reinvention" (shrinking) of government and his dot-com
boom-assisted surprise surplus.
We had Joe Biden telling everyone that the financial
collapse was caused by "putting two wars on a credit card".
We had the Concord Coalition and the Peterson Institute
gearing up their zombies for the Fix the Debt onslaught that
eventually saddled us with an economic discourse driven by a
stupid budget-reduction commission in the middle a deep
recession!
Hatred of governments and their spending habits had
already given us years of gradually building stagnation due
to declining public investment and a consequent secular shift
from capital formation to consumption. But the voters saw
only that all of the Serious People in both parties were
strongly in favor of this "disciplined" decimation of
government. So why in the world wouldn't they end up
supporting its continuation?
Exactly. This all having started with the 70s arrival of
monetarism, essentially a gold standard with no gold. While
no one really paid attention to gold standard (depressionary)
budgeting until Clinton I, the rhetoric was being put into
place such that, even today, the Democrats still hail
Clinton's "balanced budget" disaster as if it were God's
gift, when in reality it was the kickoff to consumers
cannibalizing the home equity just to keep pace, and the
ultimate reason the 2008 crash was so severe on household
spending. Hillary Clinton; be forewarned.
If governmental fat cats and billionaire lobbyists would
spend more time at fixing the obvious, they would have less
time for looting the public treasure. Do you see how they
could have prevented the HD, Hoboken disaster?
They could have removed the overpowered transformers that
oversupplied coulombs to the Catenary wire that supplied
current to the Pantograph of the Hoboken train that just now
crashed into the station full of passengers. All the
transformers at the end of the line should be scaled down to
prevent this sort of disaster, plus all the transformers near
a curves in the roadbed should be scaled back to prevent
excess power from speeding train up enough to jump the track.
No!
You can't always depend on the engineer's judgment to
prevent these disasters. Can't always depend on
high-tech-safety devices to prevent! Hell! High-tech can be
hacked by the North Koreans. You need to change the deep
infrastructure of power available.
Most people have a flawed understanding of inflation.
Sustainable inflation means BOTH wages and prices go up.
Most people think of inflation only in terms of price
increases so we get: Prices go up, wages stay the same: BAD.
A minimum level of inflation is necessary to allow relative
prices and wages to reset smoothly.
Prices and wages are sticky downward.
It is unsustainable for a business to deflate prices below
fixed costs.
A price can be reset downward by inflation (if inflation is
high enough) erosion and thus is less likely to be below
fixed costs.
Businesses don't cut wages of employees, they layoff
employees.
Businesses don't only cut prices, they cut production.
Workers with leverage and fixed payments cannot afford to
work for less.
Inflation allows relative wages to deflate without causing
issues with fixed payments.
Everyone agrees that deflation is bad because it is
associated with lower output and higher unemployment.
Inflation and deflation are a continuum. Inflation that is
too low is only marginally better than deflation.
Inflation must be high enough to absorb relative price resets
demanded by the majority of economic shocks or the process of
resetting wages and prices will be extended and be a
continued drag on an economy.
The evidence clearly suggests that US inflation in the 21st
Century has been much too low. A higher inflation target is
clearly necessary.
People misunderstand hyperinflation.
Hyperinflation is associated with an increased money supply.
The increased money supply is an effect of hyperinflation not
its cause.
Under hyperinflation, an economy needs increasingly larger
amounts of currency for transactions, so governments print
more money to meet demand.
Hyperinflation is caused by loss of confidence in a
currency.
Under hyperinflation, the risk of complete loss of buying
power of a currency factors into the price that vendors are
willing to accept for goods and services.
Example: In the 1865 US, Confederate currency hyper inflated,
not because too much was printed, but because the Confederate
government was facing elimination and the currency no longer
being honored. 90 percent of the currency could have been
eliminated and prices still would have hyperinflated.
Major Myths:
Printing money does not cause hyperinflation, loss of
confidence does.
A higher rate of inflation does not make hyperinflation more
likely.
A lower rate of inflation is NOT always better for an economy
than a higher rate.
Politicians and pundits need to unlearn these inflation
myths.
DrDick -> pgl...
, -1
Krugman makes some good points, adding to Wren Lewis's
excellent observations. I would point out, however, that
neither of them acknowledges that most of our media are
economic and policy illiterates and incapable of
understanding the issues, while the general public has been
sold on the idiocy that national budgets are just like
household budgets (mostly by that same illiterate media).
"... Reuters reports that an investigation conducted by it in 2013 found that around three-fourths of the 50 biggest U.S. technology companies use practices that are similar to Apple's to avoid paying tax. So Verstager has taken on not just one giant, but the worlds corporate elite. She should not lose. But even if she does this time, this is a battle well begun. ..."
"... Thus the power of the multinationals comes not just from their own size and reach, and from the support that their own governments afford them, but from their ability to divide desperate countries seeking the presence of global giants to make a small difference to their economic conditions ..."
"... Those who support globalisation support this power disparity. ..."
The case of Apple's Irish operations is an extreme example of such tax avoidance accounting. It relates
to two Apple subsidiaries Apple Sales International and Apple Operations Europe. Apple Inc US has
given the rights to Apple Sales International (ASI) to use its "intellectual property" to sell and
manufacture its products outside of North and South America, in return for which Apple Inc of the
US receives payments of more than $2 billion per year. The consequence of this arrangement is that
any Apple product sold outside the Americas is implicitly first bought by ASI, Ireland from different
manufacturers across the globe and sold along with the intellectual property to buyers everywhere
except the Americas. So all such sales are by ASI and all profits from those sales are recorded in
Ireland. Stage one is complete: incomes earned from sales in different jurisdictions outside the
Americas (including India) accrue in Ireland, where tax laws are investor-friendly. What is important
here that this was not a straight forward case of exercising the "transfer pricing" weapon. The profits
recorded in Ireland were large because the payment made to Apple Inc in the US for the right to use
intellectual property was a fraction of the net earnings of ASI.
Does this imply that Apple would
pay taxes on these profits in Ireland, however high or low the rate may be? The Commission found
it did not. In two rather curious rulings first made in 1991 and then reiterated in 2007 the Irish
tax authority allowed ASI to split it profits into two parts: one accruing to the Irish branch of
Apple and another to its "head office". That "head office" existed purely on paper, with no formal
location, actual offices, employees or activities. Interestingly, this made-of-nothing head office
got a lion's share of the profits that accrued to ASI, with only a small fraction going to the Irish
branch office. According to Verstager's Statement: "In 2011, Apple Sales International made profits
of 16 billion euros. Less than 50 million euros were allocated to the Irish branch. All the rest
was allocated to the 'head office', where they remained untaxed." As a result, across time, Apple
paid very little by way of taxes to the Irish government. The effective tax rate on its aggregate
profits was short of 1 per cent. The Commissioner saw this as illegal under the European Commission's
"state aid rules", and as amounting to aid that harms competition, since it diverts investment away
from other members who are unwilling to offer such special deals to companies.
In the books, however, taxes due on the "head office" profits of Apple are reportedly treated
as including a component of deferred taxes. The claim is that these profits will finally have to
be repatriated to the US parent, where they would be taxed as per US tax law. But it is well known
that US transnationals hold large volumes of surplus funds abroad to avoid US taxation and the evidence
is they take very little of it back to the home country. In fact, using the plea that it has "permanent
establishment" in Ireland and, therefore, is liable to be taxed there, and benefiting from the special
deal the Irish government has offered it, Apple has accumulated large surpluses. A study by two non-profit
groups published in 2015 has argued that Apple is holding as much as $181 billion of accumulated
profits outside the US, a record among US companies. Moreover, The Washington Post reports that Apple's
Chief Executive Tim Cook told its columnist Jena McGregor, "that the company won't bring its international
cash stockpile back to the United States to invest here until there's a 'fair rate' for corporate
taxation in America."
This has created a peculiar situation where the US is expressing concern about the EC decision
not because it disputes the conclusion about tax avoidance, but because it sees the tax revenues
as due to it rather than to Ireland or any other EU country. US Treasury Secretary Jack Lew criticised
the ruling saying, "I have been concerned that it reflected an attempt to reach into the U.S. tax
base to tax income that ought to be taxed in the United States." In Europe on the other hand, the
French Finance Minister and the German Economy Minister, among others, have come out in support of
Verstager, recognizing the implication this has for their own tax revenues. Governments other than
in Ireland are not with Apple, even if not always for reasons advanced by the EC.
... ... ...
Thus the power of the multinationals comes not just from their own size and reach, and from
the support that their own governments afford them, but from their ability to divide desperate
countries seeking the presence of global giants to make a small difference to their economic
conditions. The costs of garnering that difference are, therefore, often missed. Reuters
reports that an investigation conducted by it in 2013 found that around three-fourths of the 50
biggest U.S. technology companies use practices that are similar to Apple's to avoid paying tax.
So Verstager has taken on not just one giant, but the worlds corporate elite. She should not
lose. But even if she does this time, this is a battle well begun.
I think the common misconception that multinational corporations exist because "they are big
companies that happen to operate in more than one country" is one of the biggest lies ever told.
From the beginning (e.g. Standard Oil, United Fruit) it was clear that multinational status
was an exercise in political arbitrage.
" Thus the power of the multinationals comes not just from their own size and reach, and
from the support that their own governments afford them, but from their ability to divide desperate
countries seeking the presence of global giants to make a small difference to their economic conditions
"
Those who support globalisation support this power disparity.
Last week, Council of Economic Advisers chair Jason Furman took to the
Washington Post to announce that President Obama has "narrowed the inequality gap." Furman's
argument, bolstered by charts and data from a recent
CEA report, has won over some of the more perceptive commentators on the Internet, including
Derek Thompson, who concludes that Obama "did more to combat [income inequality] than any president
in at least 50 years." In 538, the headline on Ben Casselman's summary reads, "The
Income Gap Began to Narrow Under Obama."
But is it true?
I
already wrote about the key misdirection in Furman's argument: his measures of reduced inequality
compare the current world not against the world of eight years ago, but against a parallel universe
in which, essentially, the policies of George W. Bush remained in place. (This is not something either
Thompson or Casselman fell for; they both realized what Furman was actually arguing.) Today I want
to address the larger question of whether inequality is actually getting worse or better.
First, let's orient ourselves. At a high level, there are two sets of forces that affect income
inequality. The first set is underlying economic factors that determine inequality of pre-tax income:
skills gap, globalization, bargaining power of labor, and so on. The second set is government policies
that affect the distribution of income, often referred to as taxes and transfers; these policies
take pre-tax income inequality as an input and produce after-tax income inequality as an output.
(This isn't a perfect distinction, since tax and transfer policies also affect the distribution of
pre-tax income, but I think it's good enough for explanatory purposes.)
Furman's argument is that Obama has improved that second set of policies. That's what this chart
really shows; remember, it's comparing the effect of taxes and transfers next year against the effect
of taxes and transfers under George W. Bush policies.
skunk | September 27, 2016 at 6:01 pm
Either way, we still have an economy which is build on a foundation of debt, that in turn
leads to price increases, and the separation of the haves, and the have nots.
"... If you're wondering why a large portion of American consumers are strung out and breathless and have trouble spending more and cranking up the economy, here's the New York Fed with an answer. And it's going to get worse. ..."
"... That the real median income of men has declined 4% since 1973 is an ugly tidbit that the Census Bureau hammered home in its Income and Poverty report two weeks ago, which I highlighted in this article – That 5.2% Jump in Household Income? Nope, People Aren't Suddenly Getting Big-Fat Paychecks – and it includes the interactive chart below that shows how the real median wage of women rose 36% from 1973 through 2015, while it fell 4% for men... ..."
"... Nominal wages are sticky downwards but not real wages. That is why the FED, the banks, the corporate sector and the economists support persistent inflation, i.e. it lowers real wages. The "study" correlating wage growth with aging is one of those empirical pieces by economists to obscure the role of inflation in lowering real wages. ..."
"... Real Wage Growth chart very interesting, crossing negative at about 55 for no college, and 43 for a Bachelor's degree. 43!! Not even halfway through a work-life, and none better since 2003 at best. ..."
By Wolf Richter, a San Francisco based executive, entrepreneur, start up specialist, and
author, with extensive international work experience. Originally published at
Wolf Street.
The New York Fed published an eye-opener of an article on its blog,
Liberty Street Economics , seemingly about the aging of the US labor force as one of the big
economic trends of our times with "implications for the behavior of real wage growth." Then it explained
why "negative growth" – the politically correct jargon for "decline" – in real wages is going to
be the new normal for an ever larger part of the labor force.
If you're wondering why a large portion of American consumers are strung out and breathless and
have trouble spending more and cranking up the economy, here's the New York Fed with an answer. And
it's going to get worse.
The authors looked at the wages of all employed people aged 16 and older in the Current Population
Survey (CPS), both monthly data from 1982 through May 2016 and annual data from 1969 through 1981.
They then restricted the sample to employed individuals with wages, which boiled it down to 7.6 million
statistical observations.
Then they adjusted the wages via the Consumer Price Index to 2014 dollars and divide the sample
into 140 different "demographic cohorts" by decade of birth, sex, race, and education. As an illustration
of the principles at work, they picked the cohort of white males born in the decade of the 1950s.
That the real median income of men has declined 4% since 1973 is an ugly tidbit that the Census
Bureau hammered home in its Income and Poverty report two weeks ago, which I highlighted in this
article –
That 5.2% Jump in Household Income? Nope, People Aren't Suddenly Getting Big-Fat Paychecks –
and it includes the interactive chart below that shows how the real median wage of women rose 36%
from 1973 through 2015, while it fell 4% for men...
The number of public companies have been cut in half in the last 20 years. Just for one metric.
So for those born in the 50's, reaching middle or senior management by the time they were in
their mid 40's (1999) was increasingly harder as the probability of getting squeezed out multiplied.
In the last ten years, the birth / death rate of startups / small business has reversed as well.
There is probably ten other examples of why age is not the mitigating criteria for the decline
in wages. It's not skill sets, not ambition, not flexibility. Pure number of chances for advancement
and therefore associated higher wages has declined precipitously.
Anti Trust Enforcement went out the window as Neo-Liberal policies converted to political donations
for promoting consolidation.
Now watch even those in their 20-30 age group will experience the same thing as H-1b unlimited
takes hold with the Obama / Clinton TTP burning those at younger demographics. Are you going to
say they are "too old" as well to write software?
Tell me where you want to go, and I will focus on selective facts and subjective interpretation
of those selective facts to yield the desired conclusions.
Barack Peddling Fiction Obama – BS at the B.L.S. – has a multiplicity of these metrics.
Nominal wages are sticky downwards but not real wages. That is why the FED, the banks, the
corporate sector and the economists support persistent inflation, i.e. it lowers real wages. The
"study" correlating wage growth with aging is one of those empirical pieces by economists to obscure
the role of inflation in lowering real wages.
Real Wage Growth chart very interesting, crossing negative at about 55 for no college, and
43 for a Bachelor's degree. 43!! Not even halfway through a work-life, and none better since 2003
at best.
Peter K. :
September 27, 2016 at 06:45 AM DeLong on helicopter money: "The swelling wave of argument and
discussion around "helicopter money" has two origins:
First, as Harvard's Robert Barro says: there has been no recovery since 2010.
The unemployment rate here in the U.S. has come down, yes. But the unemployment rate has come
down primarily because people who were unemployed have given up and dropped out of the labor force.
Shrinkage in the share of people unemployed has been a distinctly secondary factor. Moreover, the
small increase in the share of people with jobs has been neutralized, as far as its effects on how
prosperous we are, by much slower productivity growth since 2010 than America had previously seen,
had good reason to anticipate, and deserves.
The only bright spot is a relative one: things in other rich countries are even worse.
..."
I thought Krugman and Furman were bragging about Obama's tenure.
"Now note that back in 1936 [John Maynard Keynes had disagreed][]:
"The State will have to exercise a guiding influence... partly by fixing the rate of interest,
and partly, perhaps, in other ways.... It seems unlikely that the influence of banking policy on
the rate of interest will be sufficient by itself.... I conceive, therefore, that a somewhat comprehensive
socialisation of investment will prove the only means of securing an approximation to full employment;
though this need not exclude all manner of compromises and of devices by which public authority will
co-operate with private initiative..."
By the 1980s, however, for Keynes himself the long run had come, and he was dead. The Great Moderation
of the business cycle from 1984-2007 was a rich enough pudding to be proof, for the rough consensus
of mainstream economists at least, that Keynes had been wrong and Friedman had been right.
But in the aftermath of 2007 it became very clear that they-or, rather, we, for I am certainly
one of the mainstream economists in the roughly consensus-were very, tragically, dismally and grossly
wrong."
DeLong sounds very much left rather than center-left. His reasons for supporting Hillary over
Sanders eludes me.
Hillary's $275 billion over 5 years is substantially too small as center-leftist Krugman put it.
Now we face a choice:
Do we accept economic performance that all of our predecessors would have characterized as grossly
subpar-having assigned the Federal Reserve and other independent central banks a mission and then
kept from them the policy tools they need to successfully accomplish it?
Do we return the task of managing the business cycle to the political branches of government-so
that they don't just occasionally joggle the elbows of the technocratic professionals but actually
take on a co-leading or a leading role?
Or do we extend the Federal Reserve's toolkit in a structured way to give it the tools it needs?
Helicopter money is an attempt to choose door number (3). Our intellectual adversaries mostly
seek to choose door number (1)-and then to tell us that the "cold douche", as Schumpeter put it,
of unemployment will in the long run turn out to be good medicine, for some reason or other. And
our intellectual adversaries mostly seek to argue that in reality there is no door number (3)-that
attempts to go through it will rob central banks of their independence and wind up with us going
through door number (2), which we know ends badly..."
------------
Some commenters believe more fiscal policy via Congress is politically more realistic than helicopter
money.
I don't know, maybe they're right. I do know Hillary's proposals are too small. And her aversion
to government debt and deficit is wrong given the economic context and market demand for safe assets.
"Moreover, the small increase in the share of people with jobs has been neutralized, as far as
its effects on how prosperous we are, by much slower productivity growth since 2010 than America
had previously seen, had good reason to anticipate, and deserves."
?????? The rate of (measured) productivity growth is not all that important. What has happened
to real median income.
And why are quoting from Robert Barro who is basically a freshwater economist. Couldn't you
find somebody sensible?
Barro wants us to believe we have been at full employment all along. Of course that would mean
any increase in aggregate demand would only cause inflation. Of course many of us think Barro
lost it years ago.
These little distinctions are alas lost on PeterK.
[1] Do we accept economic performance that all of our predecessors would have characterized
as grossly subpar-having assigned the Federal Reserve and other independent central banks a mission
and then kept from them the policy tools they need to successfully accomplish it?
[2] Do we return the task of managing the business cycle to the political branches of government-so
that they don't just occasionally joggle the elbows of the technocratic professionals but actually
take on a co-leading or a leading role?
[3] Or do we extend the Federal Reserve's toolkit in a structured way to give it the tools
it needs?
Helicopter money is an attempt to choose door number (3). Our intellectual adversaries mostly
seek to choose door number (1)-and then to tell us that the "cold douche", as Schumpeter put it,
of unemployment will in the long run turn out to be good medicine, for some reason or other. And
our intellectual adversaries mostly seek to argue that in reality there is no door number (3)-that
attempts to go through it will rob central banks of their independence and wind up with us going
through door number (2), which we know ends badly...""
---------------------
Conservatives want 1 and 2 ends badly, so 3 is the only choice.
Contrary to What AP Tells You, Social Security Is NOT a Main Driver of the Country's Long-term
Budget Problem
The New York Times ran a short Associated Press piece * on Social Security and "why it matters."
The piece wrongly told readers that Social Security is "a main driver of the government's long-term
budget problems." This is not true. Under the law, Social Security can only spend money that is in
its trust fund. If the trust fund is depleted then full benefits cannot be paid. The law would have
to be changed to allow Social Security to spend money other than the funds designated for the program
and in that way contribute to the deficit.
The piece also plays the "really big number" game, telling readers:
"the program faces huge shortfalls that get bigger and bigger each year.In 2034, the program faces
a $500 billion shortfall, according to the Social Security Administration. In just five years, the
shortfalls add up to more than $3 trillion.
"Over the next 75 years, the shortfalls add up to a staggering $139 trillion. But why worry? When
that number is adjusted for inflation, it comes to only $40 trillion in 2016 dollars - a little more
than twice the national debt."
Since this is talking about shortfalls projected to be incurred over a long period of time, it
would be helpful to express the shortfall relative to the economy over this period of time, not debt
at a point in time. This is not hard to do, since there is a table ** right in the Social Security
trustees report that reports the projected shortfall as being equal to 0.95 percent of GDP over the
75-year forecasting horizon. By comparison, the costs of the war in Iraq and Afghanistan came to
around 1.6 percent of GDP at their peaks in the last decade.
The piece also gets the reason for the projected shortfall wrong. It tells readers:
"In short, because Americans aren't having as many babies as they used to. That leaves relatively
fewer workers to pay into the system. Immigration has helped Social Security's finances, but not
enough to fix the long-term problems.
"In 1960, there were 5.1 workers for each person getting benefits. Today, there are about 2.8
workers for each beneficiary. That ratio will drop to 2.1 workers by 2040."
Actually the drop in the birth rate and the declining ratio of workers to beneficiaries had long
been predicted. The reason that the program's finances look worse than when the Greenspan commission
put in place the last major changes in 1983 is the slowdown in wage growth and the upward redistribution
of wage income so that a larger share of wage income now goes untaxed.
In 1983, only 10 percent of wage income was above the payroll tax cap. Today it is close to 18
percent. This upward redistribution explains more than 40 percent *** of projected shortfall over
the next 75 years.
It is also worth noting that the loss in wage income for most workers to upward redistribution
swamps the size of any tax increases that could be needed to maintain full funding for the program.
While AP wants to get people very worried over possible tax increases in future years, it would rather
they ignore the policies (e.g. trade, Federal Reserve policy, Wall Street policy, patent policy)
that have taken money out of the pockets of ordinary workers and put it in the hands of the rich.
fewer workers to pay into the system. Immigration has helped Social Security's finances, but
not enough to fix the long-term
"
~~dB~
Fewer workers who on balance draw smaller pay-check-s within a World of rising prices.
Can you see the long trend of inflation? Do you see how the price of a t-bond has risen steady
on during the past 35 years? As the bond price rises the yield falls. Do you see how much?
This is a long term unstoppable inflation that raises the price of all ships. All nursing
homes and all ships!
That's 139 Trillion with a capital
"T", and that rhymes with "P", and that stands for pool!
And don't look at guys like me to
save Social Security. My unfunded liability for kids shoes alone is over $20,000, and that's
assuming they leave home at 18.
The country's major banks are like trouble-making adolescents. They constantly get involved
in some new and unimagined form of mischief. Back in the housing bubble years it was the pushing,
packaging and selling of fraudulent mortgages. Just a few years later we had JP Morgan, the
country's largest bank, incurring billions in losses from the gambling debts of its "London
Whale" subsidiary. And now we have the story of Wells Fargo, which fired 5,300 workers for
selling phony accounts to the bank's customers.
It is important to understand what is involved in this latest incident at Wells Fargo. The
bank didn't just discover last month that these employees had been ripping off its customers.
These firings date back to 2011. The company has known for years that low-level employees were
ripping off customers by assigning them accounts -- and charging for them -- which they did
not ask for. And this was not an isolated incident, 5,300 workers is a lot of people even for
a huge bank like Wells Fargo.
When so many workers break the rules, this suggests a problem with the system, not bad behavior
by a rogue employee. And, it is not hard to find the problem with the system. The bank gave
these low level employees stringent quotas for account sales. In order to make these quotas,
bank employees routinely made up phony accounts. This practice went on for five years.
As it became aware of widespread abuses, it's hard to understand why the bank would not
change its quota system for employees. One possibility is that they actually encouraged this
behavior, since the new accounts (even phony accounts) would be seen as good news on Wall Street
and drive up the bank's stock price.
Certainly Wells Fargo CEO John Stumpf, as a major share and options holder, stood to gain
from propping up the stock price, as pointed out by reporter David Dayan. In keeping with this
explanation, Carrie Tolsted, the executive most immediately responsible for overseeing account
sales, announced her resignation and took away $125 million in compensation. This is equal
to the annual pay of roughly 5,000 starting bank tellers at Wells Fargo. That is not ordinarily
the way employees are treated when they seriously mess up on the job.
Regardless of the exact motives, the real question is what will be the consequences for
Stumpf and other top executives. Thus far, he has been forced to stand before a Senate committee
and look contrite for four hours. Stumpf stands to make $19 million this year in compensation.
That's almost $5 million for each hour of contrition. Millions of trouble-making high school
students must be very jealous.
There is little reason for most of us to worry about Stumpf contrition, or lack thereof.
His bank broke the law repeatedly on a large scale. And, he was aware of these violations,
yet he nonetheless left in place the incentive structure that caused them. In the adult world
this should mean being held accountable.
This is not a question of being vindictive towards Stumpf, it's a matter of getting the
incentives right. If the only price for large-scale law breaking by the top executives of the
big banks is a few hours of public shaming, but the rewards are tens of millions or even hundreds
of millions in compensation, then we will continue to see bankers disregard the law, as they
did at Wells Fargo and they did on a larger scale during the run-up of housing bubble.
There is another aspect to the Wells Fargo scandal that is worth considering. Insofar as
the bank was booking revenue on accounts that didn't exist, it was also ripping off the banks'
shareholders. The shareholders' interests are supposed to be protected by the bank's board
of directors.
It doesn't seem the shareholders got much help there....
Cellino & Barnes? I hope these
plaintiffs have been attorneys than that. But yea - having a government agency make your case
is a good idea as I'm sure top Wells Fargo management has hired some nasty defense attorneys.
California has
some of the strongest whistle blower protections in the country.
I find it remarkable that(and I have tried but failed to find any evidence) not one of these
mistreated employees filed a lawsuit years ago. The firings started in 2011. Are you telling
me these employees sat around for 5 years without a single one of them taking action?
The other part that bothers me is this bonus level goal. Wells Fargo is not the only company
in the world that sets their bonus levels at points that are almost impossible to obtain.
Not talking whistle blower protections.
Firms like Cellino and Barnes only take cases where they know they can win. Then again - I
am talking about a dirt bag law firm. Why bring a case when the odds are stacked against you?
But I think what you are pointing out is they is a new sheriff in town with respect to gathering
the facts - which of course is always key in winning any law suit.
"not one of these mistreated
employees filed a lawsuit years ago".
A lot of women who have been raped don't bother to
prosecute the creep thinking they can't win anyway. This may have been the thinking of these
employees until now.
I am not saying the law firm is incompetent, I am saying it seems to me they are taking
a case where WF might not want to deal with more bad pr and settle.
The only people, from what I have seen of this case, that have a chance to win on the merits
are those who claimed they called the ethics department at Wells and were fired for that action.
Yes, the lawyers are circling
like vultures.
But it just shows that lawyers evaluate cases before taking them on, and that the cases' prospects
depend on public opinion.
In addition, it is much easier for people to feel empowered, talk
to lawyers, and fight back if they don't feel isolated and vulnerable to retaliation.
"the executive most immediately
responsible for overseeing account sales, announced her resignation and took away $125 million
in compensation. ... That is not ordinarily the way employees are treated when they seriously
mess up on the job."
Based on (public) evidence available to me, I have to inform you that
this *is* ordinarily the way how the higher executive ranks are treated when the have to leave
because of a serious blunder. In many cases, the termination package is written into their
contract, with exceptions mostly for criminal malfeasance, breach of contract, and that type
of thing, or if the management/board deems it is better for everybody else to "convince" the
undesired executive to leave without a big splash, then they will sweeten the deal.
As I have seen in tech, in many companies the rank-and-file are treated to similar arrangements,
only the amounts are several orders of magnitude lower. But it is not very common for somebody
to be outright fired without severance. There are commonly provisions like a few weeks of salary
continuation per year of service, or offering a small sum to get a quick exit instead of a
drawn out and arduous process of managing somebody out and "documenting" everything.
Here's the part that bothers
me about this.(and once again I will mention that I feel almost dirty defending bank execs).
" large-scale law breaking by the top executives of the big banks".
I don't get this at all. It seems that setting huge bonus numbers is somehow large scale
law breaking.
But let's look at the real numbers is some perspective here(which is usually Baker's thing).
The idea seems to be that Stumpf came up with this idea to open accounts that people did
not know they had. Those accounts would both generate revenue and allow him to talk about the
growth of accounts in the bank.
I have seen nothing that shows how many accounts were opened illegally(I would like to see
that) and nothing to show how many legal accounts were opened during this time frame. With
that info you could put this into perspective how Stumpf and other high level execs gained
from this action.
That being said I know one thing. People who had accounts opened illegally were returned
the fees that they paid. That total is $5 million. Not a lot of revenue but it kind of makes
sense. You cannot charge people a lot of fees with products they do not even know they have.
there is no way in the world that anyone can think there was going to be a lot of money made
on accounts that were, to all intents and purposes, dead.
Meanwhile, in the time period that this case covers, Wells Fargo had profits of almost $100
billion. To think the CEO is going to worry about such an insignificant amount of revenue by
"planning" an illegal action is absurd.
I am all in in the bank CEOs committing fraud during the bubble, there was a huge amount
of profit to be made. But to think this thing came from the top, or even five or six levels
down, is silly. There is no reason.
This was the case of front line people committing fraud to make money. It was also the case
of their managers to encourage and/or allow that fraud to make money.
Wells certainly deserves the punishment for allowing this fraud to happen, but thinking
it originated in the executive offices makes no sense from an standpoint.
I don't like the way this is written. Is low volatility in
measured GDP growth and inflation a good thing in and of
itself? I would think that this needs justification. I have
the feeling this is a clear case of proxy creep. We try to
control a proxy for something we care about, and in the end
we forget what it is that we actually care about and the
proxy becomes useless, misleading even. What if the decline
of the middle class that we are so concerned about is the
result precisely of the policies we are using to reduce
volatility?
Reply
Tuesday, September 27, 2016 at 01:58 AM
Paine said in reply to
reason
...
Excellent
Trade-induced increases in inequality of disposable income
erode about 20% of the gains from trade
reason
said...
http://www.nber.org/papers/w22676#fromrss
Didn't read the paper, but in the conclusions this was
important
"Our quantitative results suggest that both corrections are
nonnegligible: trade-induced increases in inequality of
disposable income erode about 20% of the gains from trade,
while the gains from trade would be about 15% larger if
redistribution was carried out via non-distortionary means. "
reason
said...
http://oecdinsights.org/2016/09/26/complexity-theory-and-evolutionary-economics/
"So where should we go with complexity? I believe that a core
component of complexity is and should be evolution. In an
evolutionary view, an economy is an "organism" that is
constantly developing new industries, technologies,
organizations, occupations, and capabilities while at the
same time shedding older ones that new technologies and other
evolutionary changes make redundant. This rate of
evolutionary change differs over time and space, depending on
a variety of factors, including technological advancement,
entrepreneurial effort, domestic policies, and the
international competitive environment. To the extent that
neoclassical models consider change, it is seen as growth
more than evolution. In other words, market transactions
maximize static efficiency and consumer welfare. As Alan
Blinder writes, "Can economic activities be rearranged so
that some people are made better off, but no one is made
worse off? If so we have uncovered an inefficiency. If not,
the system is efficient."
In complexity or evolutionary
economics, we should be focusing not on static allocative
efficiency, but on adaptive efficiency. Douglass North argues
that: "Adaptive efficiency…is concerned with the kinds of
rules that shape the way an economy evolves through time. It
is also concerned with the willingness of a society to
acquire knowledge and learning, to induce innovation, to
undertake risk and creative activity of all sorts, as well as
to resolve problems and bottlenecks of the society through
time." Likewise, Richard Nelson and Sidney G. Winter wrote in
their 1982 book An Evolutionary Theory of Economic Change,
"The broader connotations of 'evolutionary' include a concern
with processes of long-term and progressive change."
This provides a valuable direction. It means that a key
focus for economic policy should be to encourage adaptation,
experimentation and risk taking. It means supporting policies
to intentionally accelerate economic evolution, especially
from technological and institutional innovation. This means
not only rejecting neo-Ludditism in favor of techno-optimism,
it means the embrace of a proactive innovation policy. And it
means enabling new experiments in policy, recognizing that
many will fail, but that some will succeed and become
"dominant species." Policy and program experimentation will
better enable economic policy to support complex adaptive
systems.
"
Yes, I basically agree with this because it is
specifically directed towards policy thinking in the broadest
sense. I was suspicious of the article at first because of
this:
"However, despite what Larry Summers has written, economics
is not a science that applies for all times and places."
This seems to me wrong headed. Do we need a new biology every
time there is some genetic change or do we need a biology
that can cope with genetic change?
Reply
Tuesday, September 27, 2016 at 02:12 AM
RC AKA Darryl, Ron said in reply to
reason
...
We need a new biology that can rewrite the laws of science
whenever we want :<)
"... Global is gone as a main driving force, pan-European is gone, and whether the United States will stay united is far from a done deal. We are moving towards a mass movement of dozens of separate countries and states and societies looking inward. All of which are in some form of -impending- trouble or another. ..."
"... And of course it's confusing that the protests against the 'old regimes' and the growth and centralization -first- manifest in the rise of faces and voices who do not reject all of the above offhand. That is to say, the likes of Marine Le Pen, Donald Trump and Nigel Farage may be against more centralization, but none of them has a clue about growth being over. They don't get that part anymore than Hillary or Hollande or Merkel do. ..."
"... Dems in the US, Labour in the UK, and Hollande's 'Socialists' in France have all become part of the two-headed monster that is the political center, and that is (held) responsible for the deterioration in people's lives. ..."
But nobody seems to really know or understand. Which is odd, because it's not that hard. That
is, this all happens because growth is over. And if growth is over, so are expansion and centralization
in all the myriad of shapes and forms they come in.
Global is gone as a main driving force, pan-European is gone, and whether the United States
will stay united is far from a done deal. We are moving towards a mass movement of dozens of separate
countries and states and societies looking inward. All of which are in some form of -impending-
trouble or another.
What makes the entire situation so hard to grasp for everyone is that nobody wants to acknowledge
any of this. Even though tales of often bitter poverty emanate from all the exact same places
that Trump and Brexit and Le Pen come from too.
That the politico-econo-media machine churns out positive growth messages 24/7 goes some way
towards explaining the lack of acknowledgement and self-reflection, but only some way. The rest
is due to who we ourselves are. We think we deserve eternal growth.
And of course it's confusing that the protests against the 'old regimes' and the growth
and centralization -first- manifest in the rise of faces and voices who do not reject all of the
above offhand. That is to say, the likes of Marine Le Pen, Donald Trump and Nigel Farage may be
against more centralization, but none of them has a clue about growth being over. They don't get
that part anymore than Hillary or Hollande or Merkel do.
So why these people? Look closer and you see that in the US, UK and France, there is nobody
left who used to speak for the 'poor and poorer'. While at the same time, the numbers of poor
and poorer increase at a rapid clip. They just have nowhere left to turn to. There is literally
no left left.
Dems in the US, Labour in the UK, and Hollande's 'Socialists' in France have all become
part of the two-headed monster that is the political center, and that is (held) responsible for
the deterioration in people's lives. Moreover, at least for now, the actual left wing may
try to stand up in the form of Jeremy Corbyn or Bernie Sanders, but they are both being stangled
by the two-headed monster's fake left in their countries and their own parties.
================================================
This is from today's Links, but I didn't have a chance to post this snippet. https://fred.stlouisfed.org/series/A191RL1A225NBEA
Long time since we had 5% – if the whole system is financial scheme is premised on growth,
and there is less and less of it ever year, it doesn't look sustainable. How bad http://www.nakedcapitalism.com/2016/09/200pm-water-cooler-9272016.html#comment-2676054does
it have to get for how many before the model is chucked???
In the great depression, even the bankers were having a tough time. If the rich are exempt
from suffering, I think history has shown that a small elite can impose suffering on masses for
a long time…
'there is nobody left who used to speak for the 'poor and poorer'.
Actually, there are plenty who SPEAK for the poor, there just is NONE who ACT.
How would we measure this growth that is supposed to be over? Yes of course there are the conventional
measurements like GDP, but it's not zero. Yes of course if inflation is understated it would overstate
GDP, and yes GDP measurements may not measure much as many critics have said. But what about other
measures?
Is oil use down, are CO2 emissions down, is resource use in general down? If not it's growth
(or groath). This growth is at the cost of the planet but that's why GDP is flawed. And the benefit
of this groath goes entirely to the 1%ers, but that's distribution.
The left failed, I don't know all the reasons (and it's always hard to oppose the powers that
be, the field always tilts toward them, it's never a fair fight) but it failed. That's what we
see the results of.
Someone very smart said "the Fed makes the economy more stable".
He also quoted The Princess Bride: "You keep using that word, I do not think it means what you
think".
Definition of stable: firm; steady; not wavering or changeable.
As in: US GDP growth of a paltry 1.22% per year.
But hey it only took an additional trillion $ in debt per year to stay "stable".
there are plenty who SPEAK for the poor, there just is NONE who ACT.
========
That's why in 1992 Francis Futurama refirmed the end of history that was predicted by Hegel some
150 years earlier.
Perusing
Palgrave's Dictionary of Political Economy from 1894 alerted me to the odd interaction
of a pair of distinctions. The first distinction was between the study of "what is" and "what ought
to be." The second distinction was between "economic science" (or "economics") and "political economy."
Economic science presumably distinguished itself from political economy by its strict focus on describing
"what is" rather than on prescribing "what ought to be."
Palgrave's explains the latter distinction to have been at least partly motivated by the confusion
that arose over just what kind of laws -- legal or natural -- so-called "laws of political economy"
were. Even after the attempt at rebranding, however:
"...even well-educated persons still occasionally speak of "laws of political economy" as being
"violated" by the practice of statesmen, trades-unions and other individuals and bodies.
You can't "break" scientific laws. They are simply generalized descriptions of fact. A flying airplane
doesn't break the law of gravity. It conforms to a more comprehensive complex of physical laws. The
law of gravity isn't the only law.
Palgrave's Dictionary further noted that the "great complexity and variety of circumstance
which surround every economic problem are such as to render the enunciation of general laws, on a
large scale, barely possible and if possible barely useful."
So the whole "positive" economics rigamarole wasn't just about methodological rigor. It was a
purification ritual to rid the political economist of the stigma of dogma. Economists
who invoke the violation of so-called laws aren't only forfeiting any legitimate claim to
economic science. They are contaminating their profession with atavistic hokum.
Speaking of atavistic hokum, I have been trying to track down ANY accessible published
record of a trade unionist or advocate of the reduction of the hours of labor EVER overtly
expressing the belief that there is a fixed amount of work to be done or a certain quantity of labor
to be performed or whatever synonymous equivalent. There is none.
There is a reasonable explanation for this absence of evidence. The alleged false belief is expressed
in abstract language that was not vernacular to the people accused of harbouring it. It's the wrong
answer to a question workers never asked themselves.
False belief requires two conditions to be fulfilled: 1. the idea is false and 2. it is believed
by someone to be true. The matrix below shows the possible states of belief and falsehood. An idea
does not have to be true to be "not false" and it doesn't have to be believed to be false to be "not
believed to be true." The fallacy claim asserts a simplistic (and false!) polarization in which the
beliefs of the "unenlightened" are "the opposite" of economic orthodoxy.
In an 1861 letter to the Times of London "A Master Builder" alleged that George Potter,
secretary of the carpenters' union, and his associates had "absurdly argued that there was only a
certain amount of work to be done" during a 1859 strike and lock-out of the London building trades.
There is a detailed report on the 1859 strike in an 1860 report on
Trades' Societies and Strikes published by the National Association for the Promotion of
Social Science. The 23-page account presents several items of correspondence from Potter outlining
the union's position with not a hint of a lump in the load. The "certain amount of work to be done"
was what Mr. Master Builder thought he heard when he mentally translated Potter's argument
into his own capitalistic patois .
There was something else interesting in the 685-page document -- an overarching controversy about
whether or not labor was a commodity just like any other and therefore whether or not unions violated the laws of political economy by trying to regulate wages and hours
of work. The employers who maintained this were pretty dogmatic about it. "Rates of wages cannot
be settled by mediation, but must be left to the free operation of supply and demand." It's the law!
This was not simply political economy It was vulgar political economy of the most self-serving
and disingenuous kind. One has no difficulty whatsoever finding multiple evocations by employers
of the so-called laws of political economy but the elusive lump remains "one of the most tenaciously
held and generally least articulated of trade union beliefs."
Least articulated? Least articulated is an understatement. Try NEVER articulated. There
is no there there. The alleged false belief is a pure projection by the laws-of-political-economy
crowd onto the unbeliever. The
eighth annual report of the New York Bureau of Labor Statistics for the year 1890 contains the
responses of over 600 labor union locals to the question of whether and why they support an eight-hour
day. Not one claims there is only a certain quantity of work to be done.
Below is an example of what an overt statement of the theory of the lump of labor looks like.
It is not from a trade union manifesto or a pamphlet of the eight-hour day movement. It is from a
propaganda tract put out by Nassau Senior's crew of Whig-Benthamites in defense of their New Poor
Laws, which abolished outdoor relief and established the workhouse test:
The fact is, there is a certain quantity of work to be done, and the question is who ought to
do it -- those who live by their labour, and their labour only, or those who have thrown themselves
on public charity.
Can anyone find such an unequivocal articulation of the false belief by a trade unionist? Of course
not. It's not the way that workers talk about their work. Work is not an abstract, disembodied
quantity to those who do it. It is part of a lived experience. "A certain quantity of work to
be done" is political economy speak, plain and simple. It's ceteris paribus and "all else
being equal."
Paradoxically, for old school vulgarians there both is and is not a certain quantity
of work to be done. There is a certain quantity of work to be done when it comes to disparaging
the idea that workers might increase wages their through collective action:
There is a certain quantity of work to be done, and a certain number of hands to do it; if there
be much work and comparatively few hands, wages will rise; if little work and an excess of hands,
wages will fall. It is self-evident that combinations and strikes cannot alter this law. They
can neither increase capital, nor diminish population; and, therefore, it is utterly impossible,
in the very nature of things, that they ever can procure a permanent rise of wages.
But there isn't a certain amount of work when it comes to explaining why such foolish action
isn't even necessary:
There is, say they, a certain quantity of labour to be performed. This used to be performed by
hands, without machines, or with very little help from them... The principle itself is false.
There is not a precise limited quantity of labour, beyond which there is no demand. Trade is not
hemmed in by great walls, beyond which it cannot go. By bringing our goods cheaper and better
to market, we open new markets, we get new customers, we encrease the quantity of labour necessary
to supply these, and thus we are encouraged to push on, in hope of still new advantages. A cheap
market will always be full of customers.
Five years ago I compiled a database of over 500 instances of the claim in books and journal articles
between 1890 and 2010 (
Excel file ). That's 500 claims without a single overt statement of the false belief from an
alleged believer. Six claimants (about one percent) named culprits whose argument "arguably depends
upon..." "makes an error equivalent to..." "indicates a belief..." "seems hopelessly involved in..."
"is an example of the strange conclusions to which one may be carried by clinging clinging firmly
to..." and "are driven by implicit assumptions." Each of those turns out to be a false alarm -- an
uncharitable, speculative inference. Five hundred boys crying "wolf" and not a single wolf to be
seen?
This is an astonishing performance. This compulsion to repeat is not "careless" or "dogmatic."
It's neurotic.
The patient cannot remember the whole of what is repressed in him, and what he cannot remember
may be precisely the essential part of it.. He is obliged to repeat the repressed material as
a contemporary experience instead of remembering it as something in the past.
The atavistic return of the repressed "laws of political economy" conforms faithfully to a description
toward the end of chapter 3 of Beyond the Pleasure Principle where Freud talks about the experiences
of "people with whom every human relationship ends in the same way" and gives as a "singularly affecting"
final example the events in a romantic epic, in which the hero, Tancred, repeatedly slays his beloved,
Clorinda, each time she reappears in a different guise. In this example, as Gavriel Reisner notes,
Freud reverses the compulsion to repeat, showing how we will sometimes injure others in order
to avoid injuring ourselves. Freud concludes that we often project the internal, masochistic drive
as the external, sadistic drive, victimizing others to redirect an intent toward self-victimization.
The utilitarian political economists styled themselves advocates for "the greatest good for the greatest
number" and viewed opponents as apologists for narrow special interests. The supposed laws they discovered,
which operated through isolated exchanges between individuals in the market, vindicated a system
of natural liberty and consequently freedom entailed obedience to those laws. Collective action and
collective bargaining violated the laws of individual exchange, resulting in sub-optimal outcomes.
Such perversity could only be motivated by false beliefs. The false beliefs of the adversary were
presumably the opposite of the true beliefs of the faithful: trade unions operated through tyranny
and their bizzaro-world political economy assumed that less output meant more income.
Reality discredited that polemic of political economy and calmer heads sought to rebrand the enterprise
as economics. The ersatz laws were scaled back to tendencies, which operated within the admittedly
abstract ceteris paribus pound of the economist's static model. Real life and the evolution
of economic relations operated outside the ceteris paribus pound but maybe the static model
could shed light on dynamic economic activity.
It was no longer fashionable to denounce "The Evils of Collective Bargaining in Trades' Unions"
(Thomas Cree, 1898) because it was increasingly understood that the so-called laws of supply and
demand operated quite differently with regard to the peculiar commodity of labor power (Richard Ely,
1886):
While those who sell other commodities are able to influence the price by a suitable regulation
of production, so as to bring about a satisfactory relation between supply and demand, the purchaser
of labor has it in his own power to determine the price of this commodity and the other conditions
of sale.
But even as old-guard political economy was being gradually displaced by rebranded economics in the
universities, employers' associations and business journalism emerged to propound and propagate the
old-time religion. The break with quasi-scientific, quasi-legalistic, quasi-religious pseudo-laws
was ambivalent, the reconciliation surreptitious. Employers' associations told the college teachers
what to teach. Textbooks served up a smorgasbord of the obsolescent and the innovative.
In this twilight of science and superstition, the fallacy claim offered uncertain economists a
distinctive advantage. It enabled them to continue to denounce violations of the laws of political
economy without actually having to specify which laws were being violated. That left them
exempt from any obligation to justify the validity of defunct laws. The burden of proof deftly shifted
and the providence of economic science affirmed, albeit by default.
Economic science thus gets to have its "what is" humility... and eat its "what ought to be" hubris
too! Evidence be damned.
That there was one particular offense singled out for condemnation by the self-appointed economic
police is suggested by the example given in Palgrave's Dictionary for the common confusion
between the legislative and scientific senses of law: "Thus it is often said that to regulate the
hours of labour, or to introduce differential import duties, is to break economic law." The anachronism
of such a view should require no explanation. The hours of labor are regulated.
Any proposal to repeal the Fair Labor Standards Act of 1938 on the grounds that it "breaks economic
law" would no doubt be laughed at by Paul Krugman, David Autor, Jonathan Portes or Alan Manning.
But, inadvertently, that is precisely the historical grammar of their lump-of-labor fallacy taunt.
Although there is no logical imperative that links the law-breaking claim to the fallacy claim, they
have been inseparably paired in usage from their inception. To invoke the latter is either to imply
the former or it is a non sequitur.
At long last, economists, have you no scientific self-respect ? On this labor day, 2016,
would you still insist that regulating of the hours of work breaks the laws of economics? Posted
by
Sandwichman at
12:00 AM
"Everybody except Joan Robinson agrees about capital theory." -- Robert Solow (as paraphrased
by Robinson)
An essential text in my researches on mercantilism, usury and bills of exchange is Raymond de Roover's
Gresham on Foreign Exchange, which just happens to be stored in part of SFU's library that
is under construction and thus inaccessible. The immediate unavailability of that book, however,
led to a fortuitous discovery.
I browsed in the call number section of the library's general collection where de Roover's book
would have been and Robert Leeson's Ideology and the International Economy caught my eye.
I flipped through the book and noticed on page 19 the delicious quote from Joan Robinson that, "the
free-trade doctrine is just a more subtle form of mercantilism."
The quote is from a 1966 lecture, "The New Mercantilism" that is included in a collection of essays,
Contributions to Modern Economics, which also contains "Capital Theory Up-to-Date," a 1970
review of C. E. Ferguson's The Neoclassical Theory of Production and Distribution, in which
Robinson reprises her parody of neo-Walrasian, neo-neoclassical capital "
leets. " Leets is steel spelled backward and
makes its debut in "Equilibrium Growth Models," Robinson's 1961 review of James Meade's Neo-Classical
Theory of Economic Growth. This allegedly ectoplasmic representation of capital is, in a nutshell, the crux of the "Cambridge
capital controversy," which Robinson launched with her 1952 challenge, "I leave it to those who draw
production functions to say what marginal productivity and the elasticity of substitution mean when
labour and capital are the factors of production." Looking back, in 1978, on her 1952 essays and
the "long struggle to escape... habitual modes of thought and expression," Robinson stressed that
"it was precisely from the concept of equilibrium that Keynes was struggling to escape..." Contrarily,
though:
"...textbook teaching in the department of so-called macro theory was an attempt to push Keynes
into short-term equilibrium. ... The grand neoclassical synthesis (now known as bastard Keynesianism)
was a more ambitious attempt to reduce the General Theory to a system of equilibrium."
In responding to Robinson's leets critique, Robert Solow began by acknowledging "much truth" to the
objection that "the usual production functions, allowing for more or less substitutability between
capital and labor, attribute to 'capital' a degree of malleability which contradicts common observation."
He then distinguished between the "econometrically-minded person" who would view the overly malleable
capital as a "specification error" and others -- presumably including Robinson -- who judge it to
be "a doctrinal error; and its consequence is a kind of Fall from Grace." Seven years later, Robinson
had this to say about "doctrinal disputes":
Many economists, nowadays, who are interested in practical questions are impatient of doctrinal
disputes. What does it matter, they are inclined to say, let him have his leets, what harm does
it do? But the harm that the neo-neoclassicals have done is, precisely, to block off economic
theory from any discussion of practical questions.
If one is concerned about actual unemployment in an actual economy, Robinson later
explained, one "has to discuss it in terms of processes taking place in actual history. The concept
of equilibrium is incompatible with history. It is a metaphor based on movements in space applied
to processes taking place in time." In other words, it is not just some kind of ethereal affectation
to object to the concept of equilibrium -- it is an argument with irrevocable real-world consequences.
The failure of what Robinson dismissed as "bastard Keynesianism" also had real-world doctrinal
consequences. "In the era of stagflation, this notion [that equilibrium growth can be achieved through
fiscal and monetary 'fine tuning'] has been discredited and the quantity theory of money is blossoming
afresh amongst its ruins." This 'blossoming,' incidentally, was not something Robinson welcomed.
Well, my interlibrary loan of de Roover's Gresham on Foreign Exchange has arrived, so I'm
off up the hill to pick it up.
To be continued...
"... I think that we are led to a very somber conclusion here. In societies with slow growth, upward mobility is limited by the lack of opportunities and the solid grip that those who are on the top keep over the chances of their children to remain on the top. It is either self-delusion or hypocrisy to believe that societies with such unevenness of chances will come close to resembling "meritocracies". But it is also the case that true upward mobility comes with an enormous price tag of lives lost and wealth destroyed. ..."
Branko Milanovic
........................... I think that we are led to a very somber conclusion here. In societies with slow growth, upward
mobility is limited by the lack of opportunities and the solid grip that those who are on the
top keep over the chances of their children to remain on the top. It is either self-delusion or
hypocrisy to believe that societies with such unevenness of chances will come close to resembling
"meritocracies". But it is also the case that true upward mobility comes with an enormous price
tag of lives lost and wealth destroyed.
"... I refuse to use self-checkouts at grocery stores, as well. I see that, and this new Sam's app, as doing nothing more than 'outsourcing' the job onto the customers themselves (but even better, as they have to pay no one), eliminating jobs, while increasing their profits by cutting the overhead for the company we're patronizing. ..."
"... IMO I think we, as the public, should refuse to use such apps, forcing companies such as these to keep employees rather than allowing them to eliminate jobs to increase their profits. The words 'customer service' are rare enough in businesses these days, already. ..."
As of 2014, nearly 30% of the US households no internet access. How do you think that maps onto WalMart
customers? Plue get outside the big cities, you see a big drop in smart phone use. Even in wealthy
Mountain Brook, Alabama (yes, believe it or not, it looks like the better parts of Westchester County),
you see a fraction of the device use in NYC. These analysts need to get out and see more of the heartland.
#1 I am happy that the news industry has found new sources of revenue, because that story read
like a Walmart advertisement. Don't they have to disclose if they are getting paid for it?
#2. They already have these prescan guns in supermarkets. I see a very small percentage of
people us them. I doubt that it saves you any time shopping because the register person can probably
scan the items faster than an amateur. If you wanted to save time at the store you would have
ordered online.
I certainly agree with you on #1. It did read like a Walmart ad.
The part that jumped out at me was: "If the item doesn't have a barcode, it could be easily
looked up."
Really? How is the barcode looked up? And by whom? The customer?
It didn't say how in that 'ad'. (poor reporting)
It all sounds like another way of eliminating employees and forcing the customer to do the
work. Obviously 'checking out' is one job that can't be outsourced, so now they've discovered
a way to still eliminate the employees by forcing the customer to do the work instead.
As Yves mentioned, many of us living rural don't have dumbphones because we don't have service.
I've never had a cell phone because there's never been coverage where I've lived out in the country,
but even if I did, I'd resent having to 'check myself out' to increase the profits of the company.
Oh, hell no!
I refuse to use self-checkouts at grocery stores, as well. I see that, and this new Sam's app,
as doing nothing more than 'outsourcing' the job onto the customers themselves (but even better,
as they have to pay no one), eliminating jobs, while increasing their profits by cutting the overhead
for the company we're patronizing.
SS recently required a cell phone to access your account online.
They quickly dialed that back when they realized that many of us don't have one. Duh? I agree with Yves that these analysts need to get out into the heartland more.
And I hope their vehicle breaks down while there, so reality smacks 'em hard.
To quote a comedian, "Here's your sign!"
Regarding #2, I have no experience with those. My nearest Walmart is hours away so what little
I do buy from them I order online and have it shipped to me.
IMO I think we, as the public, should refuse to use such apps, forcing companies such as these
to keep employees rather than allowing them to eliminate jobs to increase their profits.
The words 'customer service' are rare enough in businesses these days, already.
"... Female labor force participation in the U.S. is well below its pre-crisis level. Maybe video games are now marketed equally toward men and women. ..."
"... Cowen is an idiot. I think the man needs to get some serious first hand experience on how much "fun" unemployment is. ..."
Uneasy Money has a wonderful post on the "all models are false dodge". Nothing really to add
but I especially enjoyed this:
Romer's most effective rhetorical strategy is to point out that the RBC core of modern DSGE models
posit unobservable taste and technology shocks to account for fluctuations in the economic time
series, but that these taste and technology shocks are themselves simply inferred from the fluctuations
in the times-series data, so that the entire structure of modern macroeconometrics is little more
than an elaborate and sophisticated exercise in question-begging.
I used to ask the New Classical crowd what the great negative real shock was during the early 1980's.
The massive real appreciation of the dollar may have lowered net export demand but that was one of
those Keynesian things. One would think the rise in the relative price of domestically supplied goods
would have increased employment. Same with the alleged wonders of the Reagan tax cut. Oh but it was
paid for by reducing transfer payments – another one of those Keynesian things. If poor people got
less government assistance, then they should have gone all Jeb! and worked harder. And of course
we were enjoying the start of the computer and technology revolution. But here is where the list
gets hysterical – the line was that these new tools were being used to do less work in the office.
But before you fall in the floor laughing at this excuse consider a recent excuse ala
Tyler Cowen :
There are a few reasons, but the internet may be the biggest. It is easier to have fun while unemployed.
That's a social problem for some people.
Tyler was debating Noah Smith. Noah had just argued for more infrastructure investment on the Keynesian
notion that we were still below full employment. Tyler seems to think the low employment to population
ratio is still somehow consistent with full employment. Noah disagreed noting that real wage growth
is weak to which Tyler continues:
Maybe employers just aren't that keen to hire those males who prefer to live at home, watch porn
and not get married. Is that more of a personal failure on the part of the worker than a market
failure?
Oh my – boys will be boys! Noah had some good counters including:
Female labor force participation in the U.S. is well below its pre-crisis level. Maybe video games
are now marketed equally toward men and women.
Thankfully Tyler did not respond by suggesting the ladies in the office were going crazy over hot
dudes on Instragram. Posted by
ProGrowthLiberal
at
4:50 AM
Sweet spreadable Jeebus on a matzoh, Cowen is an idiot. I think the man needs to get some serious
first hand experience on how much "fun" unemployment is.
The Washington Post article noted this presentation:
"Leisure Luxuries and the Labor Supply of Young Men"
Presenter: Mark Bils, University of Rochester
Coauthors: Mark Aguiar, Kerwin Charles, and Erik Hurst
Discussant: John Kennan, University of Wisconsin
As it happens, Dean Baker was the only person who noted that "the drop in employment rates
among less-educated women over the last 15 years has been even sharper. Furthermore there has
been a decline in employment rates among all groups of prime age workers (25-54), even those
with college degrees."
This seems to put a pretty big whole in the idea from the get go, doesn't it?
Anon- Dean's point was pretty clear. We have seen a broad based drop in the employment to population
ratio which is better described by weak aggregate demand than some strange tale that the kids
stay home to watch video games. And the weakness in real wage growth is better explained by
demand rather than supply factors. The rest is details.
"... "In 2015, the work rate (or employment-to-population ratio) for American males ages 25 to 54 was slightly lower than it had been in 1940, at the tail end of the Great Depression. If we were back at 1965 levels today, nearly 10 million additional men would have paying jobs. The collapse of male work is due almost entirely to a flight out of the labor force-and that flight has on the whole been voluntary. The fact that only 1 in 7 prime-age men are not in the labor force points to a lack of jobs as the reason they are not working." ..."
"... "these unworking men are floated by other household members (wives, girlfriends, relatives) and by Uncle Sam. Government disability programs figure prominently in the calculus of support for unworking men-ever more prominently over time." ..."
"In 2015, the work rate (or employment-to-population
ratio) for American males ages 25 to 54 was slightly lower
than it had been in 1940, at the tail end of the Great
Depression. If we were back at 1965 levels today, nearly 10
million additional men would have paying jobs. The collapse
of male work is due almost entirely to a flight out of the
labor force-and that flight has on the whole been voluntary.
The fact that only 1 in 7 prime-age men are not in the labor
force points to a lack of jobs as the reason they are not
working."
Uh Nick – thanks for telling us what we already knew –
labor force participation is down. But do you realize how you
just contradicted yourself. Keynesians like myself would
agree that is due to a lack of jobs (aka low aggregate
demand). So is this a voluntary thing?
Let's read on:
"these unworking men are floated by other household
members (wives, girlfriends, relatives) and by Uncle Sam.
Government disability programs figure prominently in the
calculus of support for unworking men-ever more prominently
over time."
Since government provided benefits have not been scaled up
by our policy makers – he must think the hard working ladies
are cuddling young men for their good lucks or something. Uh
Nick – come to NYC and you will see that the ladies here
think this is so stupid. His next excuse is all those dudes
in prison. Seriously? Does this AEI clown not realize crime
is much lower than it was a generation ago? This piece was
dumb even by AEI "standards". But at least he did not dwell
on the Tyler Cowen porn thing.And at the risk of repeating
myself (and Noah Smith) if their thesis that young men had
suddenly decided to loaf, then the inward shift of the labor
supply curve would mean higher real wages than we are seeing.
Fortunately I will have very little spare time for idle or
addle minded leisure now until well after the election and
even well after the subsequent coronation save those days so
rainy that outdoor activity is entirely impractical.
"At the same time, outside the liberal tent, the feeling
of being suffocated by the left's cultural dominance is
turning voting Republican into an act of cultural rebellion -
which may be one reason the Obama years, so good for
liberalism in the culture, have seen sharp G.O.P. gains at
every level of the country's government. This spirit of
political-cultural rebellion is obviously crucial to Trump's
act."
Vote for a racist like Trump because liberals are
suffocating. Did I say I really do not like Ross Douhart?
Again we agree. (Signs of the apocalypse? I guess Trump is
going to win.)
Douchehat is the worst hypocrite. He wants
readers to believe he's an expert in morality and morale
rectitude and that's what conservative should be known for
when in reality Republicans chose Trump as their candidate,
one grand example of immorality and dishonesty.
And still Douthat turns on the liberals as behaving badly.
Suffocating? Howabout the insanity of the Republican
convention? That was suffocating.
He even quotes Internet Troll Steve Sailor!!!
*rubs eyes*
"(The alt-right-ish columnist Steve Sailer made the punk
rock analogy as well.)"
It's like Douthat writing about JohnH or BINY. Every one
of Sailor's Internet comments would be racist ones about
immigration. He's mentally unhinged.
"But it remains an advantage for the G.O.P., and a
liability for the Democratic Party, that the new cultural
orthodoxy is sufficiently stifling to leave many Americans
looking to the voting booth as a way to register dissent."
Clueless Douthat. The culture is getting better in certain
ways because the TV executives just want to sell advertising
and these performers are popular. It's capitalism at work.
Kudos to John Oliver for winning an Emmy.
"Among millennials, especially, there's a growing
constituency for whom right-wing ideas are so alien or
triggering, left-wing orthodoxy so pervasive and
unquestioned, that supporting a candidate like Hillary
Clinton looks like a needless form of compromise."
Note the disdain for millennials. "Triggering."
Conservative like Douthat and Bobo Brooks "trigger" the
hate and anger centers of my brain.
The fact is that Samantha Bee is right and NBC facilitated
the rise of Trump with the Apprentice and treating him well
on other shows like Jimmy Fallon and SNL.
The minor reason is they have a nice paper on the Dutch
Disease – something JohnH thinks he understands but he needs
to read up on this topic. But the main reason has to do with
a stupid comment from Paine on my Econospeak post, which goes
to show how very little Paine actually learned in graduate
school.
I was try to paint a picture of some Real Business Cycle
claim that Bruno and Sachs emphasized when I was in graduate
school. I never truly bought their story as I was (and still
am) a die hard Keynesian. But here is how it went as applied
to the early 1980's (the period I was talking about). If a
nation enjoys a massive real appreciation and if aggregate
demand does not matter (the New Classical view which we
Keynesians do not buy) then the real wages of its domestic
workers rise. These workers supply more labor driving down
wages relative to domestic prices. So domestic firms hire
more workers.
That is their story. I do not buy it as I was clearly
mocking it. Alas Paine never learned this. And so he mocks
someone who did. Just another day at the EV comment section.
Aals.
Debating Government's Role in Boosting Growth: Cowen and
Smith
By Tyler Cowen & Noah Smith
Smith: If that's true -- if we're seeing a greater
preference for leisure -- why are we not seeing wages go up
as a result? Is that market also broken?
Cowen: Maybe employers just aren't that keen to hire those
males who prefer to live at home, watch porn and not get
married. Is that more of a personal failure on the part of
the worker than a market failure?
Reply
Sunday,
DrDick -> djb...
,
Sunday, September 25, 2016 at 07:49 AM
Why seek truth from facts
When from scratch
story telling pays so much better
DrDick -> Paine ...
, -1
;-)
cm -> djb...
, -1
And I thought it was "video
games".
There will always be
water carriers "explaining" lack
of success by lack of virtue.
Likewise, before large scale
automation and "globalization", we
didn't need PISA studies to
highlight the failures of the
education systems and alleged lack
of student/graduate preparedness.
Sandwichman had multiple
expositions on the early lump of
labor fallacy debates where the
plight of laborers was ascribed to
their carrying their money to the
ale house.
pgl -> djb...
, -1
He lacks basic logic. If his story was valid, real wages
would have risen. Inward shift of the supply curve v.
movement along a supply curve? Hello? What do they teach the
kids at GMU?
Peter K. -> pgl...
, -1
This month's Time magazine - with Kaepernick on the cover -
has a column by an AEI hack, Eberstadt, who pushes the exact
same line Cowen is pushing. The lazy/entertained male meme.
His reasoning is that the decline in the labor force
participation rate is consistent through boom times and
recessions. (I'm not going to bother linking.)
"Consider: America's prime-male workforce participation
has been declining at a virtually linear rate for half a
century - a trajectory unaffected by good times or
recessions."
Again I suspect the conservatives are just lying. The Age
of Niallism.
Excellent Econospeak post by PGL. He can be quite good
when not trolling or mud-wrestling with trolls.
If Men Don't Work Because of Video Games, What Explains
Women Not Working?
by Dean Baker
Published: 24 September 2016
As is widely known the Washington Post never misses an
opportunity to blame the victims of policy for bad outcomes,
rather than rich and powerful folks who design policy. We are
treated to yet another example of this charade with the Post
running a major article that claims that video games are a
major reason that fewer young men are working today than 15
years ago.
The basic story is that many young men, particularly those
with less education, have dropped out of the labor force in
the last 15 years. According to survey data, they appear to
be spending much of their time playing video games. They also
report to be relatively happy. See, all you people who
thought it was a bad economy are mistaken, the problem is the
video games are just too much fun.
Okay, that's a great Trumpian level of analysis, but let's
get back to the real world. Less-educated young men are not
the only group with declines in employment rates. In fact,
the drop in employment rates among less-educated women over
the last 15 years has been even sharper. Furthermore there
has been a decline in employment rates among all groups of
prime age workers (25-54), even those with college degrees.
This general drop in employment rates might suggest that
the real problem is a lack of demand. In other words, young
men are not working for the same reason young women are not
working, the Washington Post and other advocates of austerity
have been successful in reducing demand in the economy by
reducing the government budget deficit. So the problem has
little to do with video games, the problem is the policy, but
hey, if the Post can use video games to distract attention
from what its favored policies are doing to people -- why
not?
What, is there a presumption that young women don't play
video games? (Or indulge in other online/"social media"
entertainment formats?)
Of course lack of employment is not
the consequence but the cause of filling one's day with any
available entertainment - and due to cheap offshore
manufacturing the hardware is overall a minor expenditure, as
well as due to the near zero marginal cost of software
replication, the games are quite affordable. For online games
there are data center expenses but they are distributed over
many players which fits the budget of involuntary or
semi-voluntary "Hotel Mama" residents.
Of course puritans cannot have it that the
un(der)employeds are not suffering every inconvenience there
is, particularly the soul crushing boredom of an absence of
any engaging activity. Hence the mindset that the welfare
state must provide exactly the measure of life support that
keeps the beneficiaries from death but in this particular
state of suffering. Being able to play games or having sexual
relations (with others or oneself) defeats the whole purpose.
You mean reducing Spending in the economy, and yes via
political controls that stop the govt from spending at levels
that might fill the gaps.
But the point is, to me, that
private spending is where it is and will not increase to fill
the gaps. Only the public acting as society's agent vua its
govt can increase spending to fill the gaps - uh, jusy as
Keynes and many ithers have said for quite some time.
I'm pretty sure you agree, but the point is about
spending, not about the fiscal math (a deficit is just 2nd
grade math, not a policy). The other party does not want to
fill gaps and does not want the public to understand its role
in governance - political control for infirm reasons, and
that is not a word containing a typo.
I will have to take a peek at this Eberstadt piece. Maybe he
will explain to us how a supposed inward shift of the labor
supply curve is consistent with weak real wage growth. Oh
wait - he writes for the AEI so maybe not.
Just posted a link to this really awful piece from this AEI
goofball. Thanks for the tip. Along with the link, I rip its
sheer stupidity. Tyler Cowen was really bad but this AEI guy
is incredibly incoherent.
I see standard aka Econ 101 theory - which is what the New
Classical crowd pushes - is lost on you. Do try to follow the
discussion before your usual babbling. Jesus H. Christ - even
JohnH is trying to grasp the economics of the Dutch disease.
OK - he is doing his usual terrible job but you do not even
try.
Real business-cycle theory (RBC theory) are a class of New
classical macroeconomics models in which business-cycle
fluctuations to a large extent can be accounted for by real
(in contrast to nominal) shocks. Unlike other leading
theories of the business cycle, RBC theory sees business
cycle fluctuations as the efficient response to exogenous
changes in the real economic environment. That is, the level
of national output necessarily maximizes expected utility,
and governments should therefore concentrate on long-run
structural policy changes and not intervene through
discretionary fiscal or monetary policy designed to actively
smooth out economic short-term fluctuations.
According to RBC theory, business cycles are therefore
"real" in that they do not represent a failure of markets to
clear but rather reflect the most efficient possible
operation of the economy, given the structure of the economy.
DrDick -> pgl...
, -1
Conservative economics, like RBC, cannot survive exposure to
reality. Your post in the list today quite nicely shreds that
kind of nonsense.
Peter K. :
September 25, 2016 at 07:01 AM
This is a large problem for the left. (and I see the prospect
of enacting "maximum wage laws" as pretty slim. Maybe I'm
wrong.)
You read progressive commenters like David and
EMichael here pondering the returns on their investments. Not
that there's anything fundamentally wrong with it. It's just
a problem needed to be solved by public policy so everyone is
facing the same rules.
You Voted to Pay Wells Fargo CEO John Stumpf $19.5 Million
by Dean Baker
Published: 24 September 2016
You don't remember casting that vote? Well, you didn't
actually cast it, but if you have a 401(k) someone like
Blackrock CEO Larry Fink cast the vote for you.
Most middle income people have 401(k)s for their
retirement and most of this money is in mutual funds. These
mutual funds have control over the proxy votes for the shares
they hold. This means that funds like Blackrock, which has
more than $5 trillion in assets, have enormous say over the
distribution of income in this country. And, as Gretchen
Morgenson points out in her NYT column this morning, these
folks almost always endorse outlandish pay packages for CEOs.
As they say in Wall Street circles, what's a few million
dollars between friends.
Folks need to keep their $$$$ out of mutual funds, keep their
$$$$ out of 401(k). Plus you will avoid the load. When stocks
fall your t-bonds will rise by virtue of their negative beta.
Is that why investment bankers are contributing more to
Clinton Dynasty Foundation? To Clinton election slush fund?
Than to Trump University? Because the strongly suspect that
stocks will collapse when the Donald moves into White House?
Do you know where your assets are? When was the last
I hate to remark on so obvious a matter. A TBTF bank CEO
bonus of $19.5million is a low bonus by industry standards.
Back in the 90s and oughties a $2million bonus for a managing
director was an insult or an indication that you were on your
way out. $10million was a good bonus, $5 million was OK. A
$20 million bonus was really good for an MD. CEOs and leaders
of successful business units could see 9 figure bonuses, like
Mr Blankfein's $130million 2010 bonus, and he was not the
highest paid GS exec that year. A bonus below $20million for
a current day CEO could be read as bad news and is probably
read as such by his friends. He is probably on his way out.
Bonuses today are not as sumptuous as they were in 2010
when the Obama bailout money was considered income and
bonuses were paid out in proportion to the income of the
business unit.
It seems Wells Fargo may have avoided the disasterous decline
in stock valuations that BofA and Citigroup experienced but
this is not exactly a large increase either:
Sad part, is that now pgl will tell us about the woes of one
or two of his favorite banks and try to project that to the
industry...or he'll put in a link showing declines in net
interest margins...because he's a dissembling sleazebag.
This dude is so confused that he doesn't even know the
difference between net INCOME margin (profit) and net
INTEREST margin!
"... By Matthew Weinzierl, Assistant Professor of Business Administration, Harvard Business School. Originally published at VoxEU ..."
"... The trick or con being played by the elite is to convince enough of us that the game of life is being played fair. And when that fails, the con or lie becomes that its the fault of (insert target minority group). ..."
"... From two complementary sociological points of view -- conflict theory and symbolic interactionism -- this article is naive -or a red herring- in the ways you suggest. ..."
"... Indeed, the issue is about people accepting a "definition of the situation" that is in fact detrimental to their material interests (Pierre Bourdieu terms this "misrecognition"). Erving Goffman, who was trained as an interactionist, studied con artists to describe how they successfully created a definition of situation -- which means a version of social reality -- that their marks would internalize as reality itself. A sociologist would not begin a discussion of socioeconomic inequality with tax policy. ..."
"... Control over arguments regarding political economy in the public sphere have to be wrested from economists, so that we can start to talk about what actually matters. Sanders' popularity, despite his numerous problems, lay in how he took control of the argument and laid bare the absurdities of those who benefit from the status quo. ..."
"... I say we boycott economists. Sure some of them are not terrible, but in the main the discipline needs to be torn down and rebuilt from the ground up. ..."
"... Many economists function as members of the courtier class, justifying what the rich and powerful want to occur. Most citizens already boycott economists in that they don't use their services except when required to attend an Econ class at school. ..."
"... But economists do influence average citizens lives via their justification of tax policy, land use policy, labor policy, trade policy and law implementation. ..."
"... Economic education has been a failure of the left. Everyone needs to know how money and finance works. Only then can that power be put to various uses. It is not that you don't need economists, you need economists working in your interest. ..."
"... I could get behind this. And I would have to agree that harping against the evils of capitalism, which are very real, often comes from those who don't really understand how it works. ..."
"... The post indicates this guy is Assistant Professor of Business Administration - at Harvard Business School - so I'm not sure I would give him even so much regard as I might give an economist. I wonder how he and his will regard the fairness of luck while they wait in line to be serviced at the guillotine they're building - much as Scrooge crafted his chain and weights for his afterlife. ..."
"... Interesting reference to Scrooge -- the power of art to enlighten the human condition cannot be underestimated. As I get older, it seems to me that the capitalism system debases everything it touches. Anything of real value will be found outside this system. It has become the box that confines us all. ..."
"... It's also worth noting how his examples are still a function of the neoliberal canard that privilege is simply a boost on the ladder of meritocracy. The game is still implicitly understood to be fair. ..."
"... Yet, it's not clear to me what Alice Walton, for instance, has done to justify being a multi-billionaire. People who are born not just with spoons but entire silver foundries in their mouths could redistribute 90% of the wealth they acquired by virtue of being someone's baby and still be absurdly rich. ..."
"... Learning must be for its own sake. Like you, I spent many hours in the library. BUT it was to scratch an itch I have not been able to quell - even in these many years since I was in that library. ..."
"... "The putative "father of the Euro", economist Robert Mundell is reported to have explained to one of his university of Chicago students, Greg Palast: "the Euro is the easy way in which Congresses and Parliaments can be stripped of all power over monetary and fiscal policy. Bothersome democracy is removed from the economic system" Michael Hudson "Killing the Host" ..."
"... The neoclassical economists didn't have a clue as the Minsky Moment was approaching. ..."
Yves here. This article argues that people don't mind inequality due to "brute luck"…but is one man's
brute luck another man's rigged system?
By Matthew Weinzierl, Assistant Professor of Business Administration, Harvard Business
School. Originally published at
VoxEU
Tax policy to correct inequality assumes that nobody is entitled to advantages due to luck alone.
But the public largely rejects complete equalisation of 'brute luck' inequality. This column argues
that there is near universal public support for an alternative, benefit-based theory of taxation.
Treating optimal tax policy as an empirical matter may help us to close the gap between theory and
reality.
... .... ...
In this case, the optimal tax policy aggressively offsets inequality. Only the need to retain
incentives to work and the desire to reward extra effort justify allowing inequality to persist.
... ... ...
Brute Luck and Economic Inequality
What explains the gap between scholarly and popular views of the moral status of pre-tax income?
A clue might be our attitude to luck.
The view that individuals have no moral claim to their pre-tax incomes relies on the ethical assumption
that nobody is entitled to advantages due to factors outside his or her control. Philosophers such
as Cohen (2011) call this 'brute luck'. Given the importance of brute luck (for example, natural
ability, childhood home environment, and early schooling) to a person's economic status, this assumption
directly leads to a rejection of moral claims to pre-tax income.
... ... ...
The 2016 US presidential campaign's attention to inequality fits these findings. Some candidates
complain of a 'rigged system' and rich individuals and corporations who do not pay their 'fair' share.
Critically, gains due to a rigged system or tax avoidance are due to unjust actions, not brute luck.
They are due to the toss of a loaded coin, not a fair one.
... ... ...
These are early steps in developing a new approach to tax theory that I have called 'positive
optimal taxation'. This approach modifies the standard optimal tax analysis by treating the
objective for taxation as an empirical matter. It uses a variety of sources – including opinion
surveys, political rhetoric, and analysis of robust policy features – to highlight gaps between
the standard theory and prevailing reality of tax policy. It also identifies and incorporates
into the theory alternative goals – and the philosophical principles behind them – that better
describe the public's views on policy.
One piece of logic missing from the research analysis is accounting for the game itself. If
I agree to play a game of chance that is fairly played I am by default also agreeing that I accept
the possibility that the outcomes will not be equal, otherwise why would I play. It shouldn't
be a surprise that in the end people are willing to maintain that inequality because they originally
agreed to it by the fact that they agreed to play.
As Yves points out, if you change the scenario where one of the players was allowed to collude
with the person executing the game and the other player was informed of this you might get a very
different answer. You might even get a punishing answer.
The trick or con being played by the elite is to convince enough of us that the game of life
is being played fair. And when that fails, the con or lie becomes that its the fault of (insert
target minority group).
From two complementary sociological points of view -- conflict theory and symbolic interactionism
--
this article is naive -or a red herring- in the ways you suggest.
Indeed, the issue is about people
accepting a "definition of the situation" that is in fact detrimental to their material interests
(Pierre Bourdieu terms this "misrecognition"). Erving Goffman, who was trained as an interactionist,
studied con artists to describe how they successfully created a definition of situation -- which
means a version of social reality -- that their marks would internalize as reality itself. A sociologist
would not begin a discussion of socioeconomic inequality with tax policy.
A sociologist would not begin a discussion of socioeconomic inequality with tax policy.
But an economist would, and therein lies the problem. Control over arguments regarding political economy in the public sphere have to be wrested
from economists, so that we can start to talk about what actually matters. Sanders' popularity,
despite his numerous problems, lay in how he took control of the argument and laid bare the absurdities
of those who benefit from the status quo.
I say we boycott economists. Sure some of them are not terrible, but in the main the discipline
needs to be torn down and rebuilt from the ground up.
Many economists function as members of the courtier class, justifying what the rich and powerful
want to occur. Most citizens already boycott economists in that they don't use their services except when
required to attend an Econ class at school.
But economists do influence average citizens lives via their justification of tax policy, land
use policy, labor policy, trade policy and law implementation.
Even if we tore down the profession, it could likely regrow to provide the same functionality.
The profession provides a valuable service, as it is valued by the class with power and money
throughout the world.
Economic education has been a failure of the left. Everyone needs to know how money and finance
works. Only then can that power be put to various uses. It is not that you don't need economists,
you need economists working in your interest.
All knowledge and technology works this way. It is the purposeful use of information that matters,
not the information itself. The left wastes time, effort, and resources trying to convince people
to change their minds. Instead, they need to focus on building things in the real world, using
all the economic tools at their disposal.
I could get behind this. And I would have to agree that harping against the evils of capitalism,
which are very real, often comes from those who don't really understand how it works.
Maybe the solution is more co-ops and less rhetoric.
Using the power of the boycott is another. The powerless need to rediscover what power they
truly wield in this system. That was the other failure of the left. Yes, they were actively crushed
by corporate power, but the ideas live on. They can only be exterminated through lack of use.
A new ideology needs to be born of the ashes. If the predictions of climate disruption are
anywhere near accurate, a proactive, and positive direction can be undertaken. My experience is
that caring, healthy people are driven to help others in times of adversity. Well, those times
are coming. We are once again going to have to face the choice between choosing abject fear or
rolling up our sleeves and getting back to work making everyones lives better.
You don't need corporate sponsorship to do that. They need us more than we need them. In the
end, I have a feeling that the current system will come down very quickly. Being prepared for
that outcome is what should be driving the actions of those not vested in keeping the status quo
going.
The post indicates this guy is Assistant Professor of Business Administration - at Harvard
Business School - so I'm not sure I would give him even so much regard as I might give an economist.
I wonder how he and his will regard the fairness of luck while they wait in line to be serviced
at the guillotine they're building - much as Scrooge crafted his chain and weights for his afterlife.
For a historian, making connections between past and present situations is the root of their
insight. As in all walks of life, your efforts can gain value to your fellow citizens or they
can be used as a tool for your own self interest- whatever that might be. How interesting are
these repeating cycles in the human drama.
Interesting reference to Scrooge -- the power of art to enlighten the human condition cannot
be underestimated. As I get older, it seems to me that the capitalism system debases everything
it touches. Anything of real value will be found outside this system. It has become the box that
confines us all.
When your viewpoint of the world and your relationship to it shrink to only seeking profits,
the depravity of that situation is hidden from view unless shocked back to awareness.
As Peter Gabriel would say- Shock the Monkey
Shock the monkey to life
Shock the monkey to life
Cover me when I run
Cover me through the fire
Something knocked me out' the trees
Now I'm on my knees
Cover me darling please
Monkey, monkey, monkey
Don't you know you're going to shock the monkey
Fox the fox
Rat on the rat
You can ape the ape
I know about that
There is one thing you must be sure of
I can't take any more
Darling, don't you monkey with the monkey
Monkey, monkey, monkey
Don't you know you're going to shock the monkey
Wheels keep turning
Something's burning
Don't like it but I guess I'm learning
Shock! – watch the monkey get hurt, monkey
Cover me, when I sleep
Cover me, when I breathe
You throw your pearls before the swine
Make the monkey blind
Cover me, darling please
Monkey, monkey, monkey
Don't you know you're going to shock the monkey
Too much at stake
Ground beneath me shake
And the news is breaking
Shock! – watch the monkey get hurt, monkey
Shock the monkey
Shock the monkey
Shock the monkey to life
This is tangential to topic of this thread:
I was particularly struck by your comment about art: "the power of art to enlighten the human
condition cannot be underestimated." I recall a similar assertion made in one of Howard Zinn's
speeches - sorry I can't recall the exact phrasing of his statement or its context.
I'm retired and found a strange calling to make art - a calling I never listened to when I
had to worry about supporting a household. I find it difficult to make art that isn't political,
satirical or in some way didactic. Whether anyone else would regard my works as art I don't know
and in a way I don't care. Art has become a way in which I must express something inside me I
don't understand but whose direction I must follow. I suppose similar feeling drive many expressions
of art. Perhaps that explains something of the power of art you refer to.
For the erosion in income inequality to be fixed, economic policies need fixed. The disparity
between income quintiles will continue to widen. Social unrest will continue to proliferate. This
situation will simply never get corrected until the commercial banks are driven out of the savings
business (however bizarre one might think that solution is).
Vladimir Lenin, leader of the 1917 Russian Revolution said: "The best way to destroy the capitalist
system is to debauch the currency." Not so. The best way to destroy capitalists is the deregulation
of deposit caps for saver-holders' accounts in the commercial banking system. This policy error
simply increased the bank's costs with no increase in their income. Bottling up savings, is first
observed by the decline in money velocity, then by a decline in AD (secular stagnation), and when
the Fed attempts to offset this decline, by an increase in stagflation.
Vi is contrived. Vt is money actually exchanging counterparties. But since Ed Fry discontinued
the G.6 debit and demand deposit turnover release in Sept. 1996, the Fed has no rudder or anchor.
Required reserves are a surrogate, though the underweight Vt. But RRs are based on payments
(money turning over). And 95 percent of all demand drafts clear thru transaction based accounts.
The "code" you speak of relates to the volume of financial transactions consummated. Financial
transactions are not random. Financial speculation is a function of money flows. The volume of
bank debits during the housing crisis would have stood out like a sore thumb (as it captured both
new and existing real-estate transactions).
Only price increases generated by demand, irrespective of changes in supply, provide evidence
of inflation. There must be an increase in aggregate demand which can come about only as a consequence
of an increase in the volume and/or transactions velocity of money. The volume of domestic money
flows must expand sufficiently to push prices up, irrespective of the volume of financial transactions,
the exchange value of the U.S. dollar, and the flow of goods and services into the market economy.
The "administered" prices would not be the "asked" prices, were they not "validated" by (M*Vt),
i.e., "validated" by the world's Central Banks.
I'm not sure that what you just spewed even makes sense to you, or that you even bothered to
read the link provided…but the "code" is about concurrent monetary AND fiscal policy to serve
a purpose other than making the rich richer and the poor poorer…
If someone gets the waterfront property just because he/she was born first so got there first,
he better do something positive for the next generation… The next generation will understand the luck factor as not everyone can be standing in the
same spot at the same time, but it will not accept the scrooge.
If people are entitled, even in part, to their pre-tax incomes, the optimal tax policy would
no longer offset inequality as aggressively. Taxes would, instead, be focused on raising funds
for government activities in a way that tries to respect those entitlements.
which seems fair-ish, but also
Given the importance of brute luck (for example, natural ability, childhood home environment,
and early schooling)
Oh my! Childhood home environment and (gasp!) early schooling are matters of luck? Oh those
Haaahvaahd guys! No, professor, winning the lottery is a matter of luck, and can happen to anyone
at any point in their life. Being born in poverty, into a class 15% of whose male population is
incarcerated or having to go to a crappy school are *systemic* results of deliberate social structures,
the elites just prefer to call it "bad luck". Thus we see how the Ivies serve the elites.
Yes, HotFlash. And these 'deliberate social structures,' the 'red-lining' policies, the wildly
unequal sentences for crack versus cocaine, the casual brutality of the prison system (over 200,000
male rapes per year), the laws preventing people who have served their sentence for a felony from
voting, public housing, scholarship aid, welfare .. in other words, from living and improving
their lives .. are structural violence. And then we are 'surprised' when people who have lived
their lives under a regime of these subtle but unrelenting acts of economic, social and spiritual
violence, finally hit back.
It's also worth noting how his examples are still a function of the neoliberal canard that
privilege is simply a boost on the ladder of meritocracy. The game is still implicitly understood
to be fair.
Yet, it's not clear to me what Alice Walton, for instance, has done to justify being a multi-billionaire.
People who are born not just with spoons but entire silver foundries in their mouths could redistribute
90% of the wealth they acquired by virtue of being someone's baby and still be absurdly rich.
The paper seems totally oblivious to the fact that in the scenario presented, all the gains
enjoyed by both players are due to luck. Player B is getting a windfall either way, so
there's no sense of real unfairness. The perception would be quite different if it was only the
difference between A and B that was assigned randomly, while each had to earn some baseline.
And I think the "popular acceptance" part is given a huge boost when the young, black, nominally-Democrat
president keeps insisting everything is awesome and anyone who says otherwise is "peddling fiction".
I think this paper goes to great lengths to build a question around the ideas of the fairness
behind progressive taxation. This post hardly seems to pose a question worthy of study. Our tax
systems so much favor Corporations and the wealthy that considerations of "fairness" are at best
comical - and I'm not laughing.
Yes, the outcome of self awareness will always be Anarchism. I came be an advocate, not through
economics or politics, but thought Buddhism and Daoism. It is a story older than humanity that
we are just starting to remember.
So here I am sitting, watching, waiting for the rest of the world to catch up.
What kind of self-knowledge did Hitler find in his imprisonment? It didn't lead to anything
I would call peaceable. Was there some inner Hitler he didn't reach in his prison contemplations?
If I had only known it was luck, I would not have spent so many late nights in the library
during undergrad and grad schools. However, I enjoyed those nights and was enriched by them. Is
that taxable?
Learning must be for its own sake. Like you, I spent many hours in the library. BUT it was
to scratch an itch I have not been able to quell - even in these many years since I was in that
library.
Will future generations, if there are any, be able to look back and reflect," what were these
people thinking?"
There is no justification for the levels of inequality and environmental destruction we are
experiencing. Period. We can all consider ourselves fools, even for entertaining debating these
issues much longer. We need to be discussing concrete actions, not theoretical justifications.
Everyone must face the randomness of the universe every day. The only certainty know is the
one WE create as human beings- one and together. Why is it do you think that the elite never break
ranks. They are creating their own certainty in an uncertain world. Heads I win, tails you loose.
TBTF. Race to the bottom. The new normal. Political capture using the revolving door techniques.
Human evolution is racing toward a crisis point. Ending inequality and world conflict are at
the focal point of this outcome. Leaders that continue to use the outdated modes of social control
will either drive us over the cliff to destruction, or will loose the ability to control outcomes
as their numbers dwindle. The day the revelation is made that the elite are full of crap, is the
day change becomes possible.
It seems large social structures will always come crashing down. The weakness in human nature
and flaws in our social structures lead to eventual failure. Greed and selfish action is seldom
tolerated is smaller structures.
I think there will always be inequality between people on many many dimensions. I am constantly
humbled by how much I don't know that other people know, people less well educated and I suspect
less intelligent - whatever that means - than I am. I celebrate this inequality and sincerely
hope this larger knowledge shared with mine and the knowledge of many others will suffice to address
the great challenges we face in the all too near future.
HOWEVER - inequality as a matter of power relations - that is different matter. If I were my
great great grandson I could never forgive what I have allowed through my cowardice and intent
to have a surviving great great grandson - or granddaughter.
I am not sure I really understand the intention of this paper. The example used, that 20% of
$90,000 income must be paid in taxes, and then taking surveys of how that distribution should
work seems to ignore whether or not the respondents actually understand basic math.
Why do I say this?
The "easy" answer is that Person A pays $15,000 and person B pays $3,000 which is the equivalent
of a flat tax. And yet, that's not how most responded. Only 5% selected the easy answer. Which
makes me wonder if the targets of the survey even understand basic math.
Actually the easiest answer is for person A to pay the whole $18,000. He's the one who is getting
more money before taxes, and if he pays the $18,000, he's still getting $12,000 more than person
B. The "flat tax" is probably the second easiest answer. However, since neither person is doing
any tangible work to receive the money, the fairest result is for both to get the same after "taxes".
If person A pays $24,000, $18,000 will go to the "state", and $6,000 will go to person B, and
both A and B will each get $36,000. Person B can force person A to agree to this, because if they
don't agree, then person A only gets $600 and person B gets $300.
If we want to get complicated, then the result should be such that the difference between person
A's portion and person B's portion is $300, whether they agree or not. So if they agree, person
A would pay $23,850 ($18,000 to the "state" and $5,850 to person B), and person A would get $36,150.
In that case, person B would get $35,850. The difference between person A's income and person
B's income is $300, just as it would have been if they had not agreed.
In terms of the money and wealth of the people who run our government and economy, and control
and direct our lives and the lives of millions of others - $90K barely registers.
I have little faith in studies like these. My first question is always, "What's a respondent?"
Define Person, please.
Notice how they're treated as entirely substitutable standardized parts. That is, as if people
were molecules or atoms. But try as it might, social science ain't physics. You can't just grab
the nearest few people, sit them down at a keyboard to play your game (for credit? for fun? on
assignment?) and then substitute their behavior for the behavior of all people everywhere.
Which people, where, under what conditions, and how many? Was the sample representative? Did
the author go to prisons, ghettos, farm fields, etc. and ask them? Or was it proximity and ease
of access that defined it?
It's the old "college sophomores in the lab" problem. As an undergrad psych student, I saw
time and time again how people gamed the system, yet PhD candidates and professors took the data
as gospel. It's only too often more a demonstration of ability to work the method, to play the
academic game, than testing hypotheses.
Also you might ask what meaning to attribute to a questionable measure of human opinions about
a concept like "what is fair" in an environment completely dominated by promotion of ideas of
fairness which to my mind are quite unfair.
So I agree with you and wonder why you don't pres further.
This post frames inequality in terms of "fairness" and luck/pluck and treats money as some
form of prize in an economic "game". I suppose this way of looking at things works up to a point
as long as we look to those below us and congratulate our merit while accepting some greater luck
of those above us which help rationalize our merit. But any concepts of fairness or the justice
things rapidly fractures if we look past those in our own neighborhood. Riding a bubble through
the slums here and elsewhere in the world it becomes very difficult to rationalize justice and
merit. Looking in the other direction toward the high rises and gated estates and manifestations
of wealth I can't even imagine and the fragments of the fairness or justice of things evaporates
completely. The "findings" of this post do not scale - at all.
Aside from the living standard which money/wealth affords the notions of "fairness" "merit"
and "luck" this post contemplates there is no discussion of other aspects of money/wealth conveniently
passed over and ignored.
In our society our money-culture money/wealth is equated with merit. It packages demand for
automatic respect and deference. This pecuniary one-size-fits all measure for character, intellect,
excellence, creativity, leadership, even physical attractiveness undermines all these values reducing
them to commodities of the marketplace.
But the ability of money/wealth to control and command the lives of others and the collective
resources of society is far more pernicious. What concept of "fairness" or "justice" can justify
this aspect of inequality?
JG – Rogge covers this in his book: "World Poverty and Human Rights: Cosmopolitan Responsibilities
and Reforms" (
https://en.wikipedia.org/wiki/World_Poverty_and_Human_Rights
) using the perfect example of the acquisition and management of natural resources.
Your comment to mine leaves me quizzical. Though I value any comments to mine given my wondering
how far I am from what is reasonable - global poverty is far beyond the complexity of anything
I might address in my comments. I grant global poverty is not a problem beyond solution - but
first we need to address the problems of economic philosophy used to justify and enable the gross
inequalities of our world.
I have not read Rogge's book. There are far too many books I have not read and of the books
i have read there are far too many I have not really understood. I am also concerned by how little
this post seems to have stimulated our commentariat - an entity I have come to greatly respect.
Please elaborate on what you mean. I am concerned by this post's lack of consideration of the
political power money/wealth confers - something beyond and to some degree outside considerations
of poverty and the suffering inequality fosters - even celebrates.
My poor non-economist head reels at this article. OK, it's a mind exercise to determine attitudes
toward taxation. But it's completely made up – Fig. 1 Tossing a fair coin, doesn't scan for me,
it's like a crap game. At the random flip of a coin, A gets twice as much as B, but where did
the $18k penalty come from? Is it arbitrary? Why "could" one have to pay more, and who decides?
And where did the $24k figure come from? Seems obvious to me A got twice as much, and so should
pay 2 out of 3 parts of the penalty. So, re brute luck and tax policy, if inherited wealth or
investment income (i.e. rent) vs. wage income is really what's meant here, please say so.
I view this post - at least in part - as questioning the basis for a progressive tax rate based
on attitudes toward what is "fair" in turn based on a - sorry - hokey experiment to test attitudes
about what is fair. To me the problem is a problem of scale. If we're talking about my place opposed
to that of the fellow in the house on the hill or the house down the street - I might - on a good
day - buy-in to this post's notions about "fairness". Those notions do NOT scale and they don't
give any consideration to the powers of control and command which great wealth confers.
What I can accept in the way of inequality between myself and the guy on the hill does NOT
scale when the guy on the hill doesn't live on the hill and only owns the house on the hill as
a reminder of his lowly beginnings. He lives in a multi-million dollar 10,000 sq. ft. condominium
high in New York City and a similar flat in London, and in Tai Pei and Shanghai and Paris and
… and lives in none of them really. And I cannot accept the poverty and oppression found in Camden,
New Jersey, Southside Chicago, … in Brazilian favelas or the slums of Seoul.
Perhaps the failure to scale arises from the compounded flaws that, first, this post is all
about "I" and speaks not at all to "we"; and, second, as your comments point out, uses money in
typical fashion as the lowest common denominator determining utility and fairness when, 'we' demands
a focus on the highest not lowest common denominator (and that's not mathematically or logically
convenient).
Further, 'we' must be something more meaningful than a mere agglomeration of "I's". Those are
at best 'thin we's' easily seduced into theoretical constructs that, in fact, have nothing to
do with the actual experience of 'we' in any meaningful way.
Real, 'thick' we's comprised of actual people who persistently interact and truly know they
share some to a lot of their shared fates respond to questions of brute luck, fairness and inequality
together (whether democratically or otherwise or blends of ways). They don't determine their shared
fates with an eye on abstract individualism grounded in lowest common denominators of 'utility'.
They actually care about 'what makes most sense for us together' and balk at devices, questions
- indeed swindles - aimed at tearing apart the fabric of 'we'.
Milton Freidman, the man that wrecked the world with bad economics.
Milton Freidman's charm, energy and charisma seduced his students and global elites alike into
believing he had come up with an economics that could transform the world. His students loved the idea of transforming the world through economics as it made them feel
so important. Global elites loved his economics as it worked so well for them and gave a scientific backing
for a world that was one that they had always wanted.
Unfortunately, there were a lot of problems with his economics that are making themselves felt
today.
His economics was missing:
1) The work of the Classical Economists
2) The true nature of money and debt
3) The work of Irving Fischer in the 1930s
The Classical Economists were the first economists to look at and analyse the world
around them, a world of small state, raw capitalism.
They noted how the moneyed classes were always rent seeking and looking to maintain themselves
in luxury and leisure, through rent and interest. This sucked money out of the productive side
of the economy, reducing the purchasing power within the nation.
They noted how the cost of living must be kept low, to keep the basic minimum wage low, so
nations could be competitive in the international arena.
This knowledge is missing today.
The UK dream is to live like the idle, rich rentier, with a BTL portfolio extracting "unearned"
rental income from the "earned" income of generation rent.
In the US they removed all the things that kept the cost of living down, not realising these
costs would have to be covered by wages. The US now has a very high minimum wage due to soaring
costs of housing, healthcare and student loans and US businesses are squealing.
The true nature of money and debt were understood in the 1930s when the Chicago Plan
was put forward after a thorough investigation into the 1929 bust.
Money and debt are opposite sides of the same coin.
If there is no debt there is no money.
Money is created by loans and destroyed by repayments of those loans.
This knowledge is missing today.
Today's ubiquitous housing boom is like a printing press creating more and more money as the
new mortgage debt comes into existence.
The money supply expands and pours into the real economy making everything look really good.
The only thing that is really happening is the inflation of the price of things that exist
already, houses. All the debt being created is not productive investment.
The cost of living goes up and more and more money gets sucked into mortgage and rent payments
sucking purchasing power out of the economy. The increasing cost of living, raises the basic minimum
wage pricing labour out of international labour markets.
Irving Fisher also looked into the 1929 bust and developed a theory of economic crises
called debt-deflation, which attributed the crises to the bursting of a credit bubble.
Irving Fisher looked into debt inflated asset bubbles and realised the huge danger they pose
to the whole economy. This knowledge is missing today. The ubiquitous housing boom is a debt inflated asset bubble, with huge amounts of debt spread
through the whole economy, when it bursts there is hell to pay.
This was first seen in Japan in 1989, its economy has never recovered.
It was repeated in the US and leveraged up with derivatives leading to 2008.
Ireland and Spain have also wrecked their economies with housing bubbles.
There are housing bubbles around the world, ready to burst and pull that nation into debt deflation.
Milton Freidman, the man that wrecked the world with bad economics.
Milton Freidman worked at the Chicago School of Economics and was the global ambassador for
his dire economics. This dire economics and the University of Chicago were also behind the design of the Euro,
no wonder it doesn't work.
"The putative "father of the Euro", economist Robert Mundell is reported to have explained
to one of his university of Chicago students, Greg Palast: "the Euro is the easy way in which
Congresses and Parliaments can be stripped of all power over monetary and fiscal policy. Bothersome
democracy is removed from the economic system" Michael Hudson "Killing the Host"
Their dire economics predicts the Euro-zone economies will converge into a stable equilibrium.
The reality – the economies are diverging and the poorer nations are going under. It's bad. 2008 – How did that happen?
The neoclassical economists didn't have a clue as the Minsky Moment was approaching.
Two people who did see 2008 coming (there aren't many).
Steve Keen – A whole book "Debunking Economics" on this dire neoclassical economics and the
problems of not using realistic assumptions on money and debt.
Michael Hudson – Calls it "junk" economics and has written a whole book on the problems of
forgetting the world of Classical Economics – Killing the Host.
Naomi Klein "Shock Doctrine" goes into the brutality of the Chicago Boys and Berkeley Mafia
in implementing their economic vision. A right wing "Khmer Rouge" that descended on developing
nations to wipe away left wing thinking.
Marginalist economics tends to be characterised primarily by a couple of distinct axioms that
operate 'under the surface' to produce its key results. these are simplistically characterise
as: the axiom of methodological individualism; the axiom of methodological instrumentalism; and
the axiom of methodological equilibration, where models derived from them have ex-ante predictive
power.
This is historically Epicurean philosophy, example, Epicurus wrote,
"The magnitude of pleasure reaches its limit in the removal of all pain. When such pleasure
is present, so long as it is uninterrupted, there is no pain either of body or of mind or of both
together."
Which is a reflection of its materialistic atomism which is basically identical with the marginalist
focus on atomistic individuals and makes it an atomistic doctrine. Thorstein Veblen where he wrote
in his Why is Economics Not an Evolutionary Science?:
"The hedonistic conception of man is that of a lightning calculator of pleasure and pains,
who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli
that shift him about the area, but leave him intact. He has neither antecedent nor consequent.
He is an isolated definitive human datum."
Which in turn is just Epicurean ontology where everything becomes objects and not subjects
where Epicurean ethics involves individuals maximising pleasure and minimising pain - or, as the
marginalists would put it, maximising utility and minimising disutility - it simply follows from
the basic ontological position that is put forward.
Just to put a more modern perspective on it – see: Note that the patient suffering from schizophrenia
tends not to answer the questions directed at him but rather responds with complete non-sequiturs.
"In his book, King lays out how economists have tried to establish supposedly disaggregated
"microfoundations" with which to rest their macroeconomics upon. The idea here is that Keynesian
macroeconomics generally deals with large aggregates of individuals – usually entire national
economies – and draws conclusions from these while largely ignoring the actions of individual
agents. As King shows in the book, however, the idea that a macro-level analysis requires such
microfoundations is itself entirely without foundation. Unfortunately though, since mainstream
economists are committed to methodological individualism – that is, they try to explain the world
with reference to what they think to be the rules of individual behaviour – they tend to pursue
this quest across the board and those who proclaim scepticism about the need for microfoundations
can rarely articulate this scepticism as they too are generally wedded to the notion that aggregative
behaviour can only be explained with reference to supposedly disaggregated behaviour."
You might also like – Le Bon, Gustave. The Crowd: A Study of the Popular Mind, you can get
it free online.
Additionally – The Myth of the Rational Market: Wall Street's Impossible Quest for Predictable
Markets – by Justin Fox
Chronicling the rise and fall of the efficient market theory and the century-long making of
the modern financial industry, Justin Fox's "The Myth of the Rational Market" is as much an intellectual
whodunit as a cultural history of the perils and possibilities of risk. The book brings to life
the people and ideas that forged modern finance and investing, from the formative days of Wall
Street through the Great Depression and into the financial calamity of today. It's a tale that
features professors who made and lost fortunes, battled fiercely over ideas, beat the house in
blackjack, wrote bestselling books, and played major roles on the world stage. It's also a tale
of Wall Street's evolution, the power of the market to generate wealth and wreak havoc, and free
market capitalism's war with itself.
The efficient market hypothesis -- long part of academic folklore but codified in the 1960s at
the University of Chicago -- has evolved into a powerful myth. It has been the maker and loser of
fortunes, the driver of trillions of dollars, the inspiration for index funds and vast new derivatives
markets, and the guidepost for thousands of careers. The theory holds that the market is always
right, and that the decisions of millions of rational investors, all acting on information to
outsmart one another, always provide the best judge of a stock's value. That myth is crumbling.
Disheveled Marsupial…. Main stream econnomics is an extenuation of much deeper metaphysical
and resultant ideological beliefs….
"... By Miguel Niño-Zarazúa, Research Fellow, UNU-WIDE, Laurence Roope, Researcher, Health Economics Research Centre, University of Oxford, and Finn Tarp, Director, UNU-WIDER. Originally published at VoxEU ..."
"... See original post for references ..."
"... John Ross argues that the reduction in poverty has been pretty much all China. I'm also not convinced China is actually that much richer than before. A sweatshop worker has a higher income than a traditional farmer, but probably has a lower standard of living, and while the traditional farmer maintains the natural resource base, the industrial worker destroys it. ..."
"... Globalization is an economic and ecological disaster. We have outsourced wealth creation to China and they do it in the most polluting way possible, turning their country into a toxic waste dump in the process. ..."
"... The peasants slaving away in the cinder block hellholes of their factories churning out the crapola on Wal-Mart's shelves also get paid squat, while the leaders of the Chinese Criminal Party steal half of their effort for themselves and smuggle the loot out, to get away from the pollution. The other half gets stolen by the likes of Wal-Mart and Apple. ..."
"... The elites sold globalization as something that would generate such a munificent surplus that those in harms way would be helped. It ends up as a lie, where the elites the world over help themselves to the stolen sweat of the lowest people in society, with nothing left over, except for a polluted planet. ..."
"... Yes, those who "have seen their incomes stagnating in real terms for over 20 years" are indeed experiencing "considerable discontent." But this anodyne phrasing masks the reality of entire communities seeing their means of livelihood ripped out and shipped across the globe. This rhetoric makes it sound like, Oh those prosperous American workers can't buy as many luxuries now, boo hoo, when the standard practice from NAFTA on of globalization-as-corporate-welfare has meant real impoverishment for hundreds of thousands of individuals, entire cities and large chunks of whole states. As Lambert always says, Whose economy? ..."
...if you look at absolute inequality, as opposed to relative inequality, inequality has increased
around the world. This calls into question one of the big arguments made in favor of globalization:
that the cost to workers in advanced economies are offset by gains to workers in developing economies,
and is thus virtuous by lowering inequality more broadly measured.
By Miguel Niño-Zarazúa, Research Fellow, UNU-WIDE, Laurence Roope, Researcher, Health
Economics Research Centre, University of Oxford, and Finn Tarp, Director, UNU-WIDER. Originally published
at VoxEU
Since the turn of the century, inequality in the distribution of income, together with concerns
over the pace and nature of globalisation, have risen to be among the most prominent policy issues
of our time. These concerns took centre stage at the recent annual G20 summit in China. From President
Obama to President Xi, there was broad agreement that the global economy needs more inclusive and
sustainable growth, where the economic pie increases in size and is at the same time divided more
fairly. As President Obama emphasised, "[t]he international order is under strain." The consensus
is well founded, following as it does the recent Brexit vote, and the rise of populism (especially
on the right) in the US and Europe, with its hard stance against free trade agreements, capital flows
and migration.
... ... ...
The inclusivity aspect of growth is now more imperative than ever. Globalisation has not been
a zero sum game. Overall perhaps more have benefitted, especially in fast-growing economies in the
developing world. However, many others, for example among the working middle class in industrialised
nations, have seen their incomes stagnating in real terms for over 20 years. It is unsurprising that
this has bred considerable discontent, and it is an urgent priority that concrete steps are taken
to reduce the underlying sources of this discontent. Those who feel they have not benefitted, and
those who have even lost from globalisation, have legitimate reasons for their discontent. Appropriate
action will require not only the provision of social protection to the poorest and most vulnerable.
It is essential that the very nature of the ongoing processes of globalisation, growth, and economic
transformation are scrutinised, and that broad based investments are made in education, skills, and
health, particularly among relatively disadvantaged groups. Only in this way will the world experience
sustained – and sustainable – economic growth and the convergence of nations in the years to come.
John Ross argues that the reduction in poverty has been pretty much all China. I'm also
not convinced China is actually that much richer than before. A sweatshop worker has a higher
income than a traditional farmer, but probably has a lower standard of living, and while the traditional
farmer maintains the natural resource base, the industrial worker destroys it.
Only in this way will the world experience sustained – and sustainable
– economic growth and the convergence of nations in the years to come.
Globalization is an economic and ecological disaster. We have outsourced wealth creation
to China and they do it in the most polluting way possible, turning their country into a toxic
waste dump in the process.
The peasants slaving away in the cinder block hellholes of their factories churning out
the crapola on Wal-Mart's shelves also get paid squat, while the leaders of the Chinese Criminal
Party steal half of their effort for themselves and smuggle the loot out, to get away from the
pollution. The other half gets stolen by the likes of Wal-Mart and Apple.
The elites sold globalization as something that would generate such a munificent surplus
that those in harms way would be helped. It ends up as a lie, where the elites the world over
help themselves to the stolen sweat of the lowest people in society, with nothing left over, except
for a polluted planet.
The notable presence of public policies that exacerbate racial and economic inequality and
the lack of will by Washington to change the system mean that the ethnic/racial wealth gap is
becoming more firmly entrenched in society.
"broad based investments are made in education, skills, and health, particularly among relatively
disadvantaged groups. Only in this way will the world experience sustained – and sustainable
– economic growth and the convergence of nations in the years to come."
…I guess if the skills were sustainable low chemical and diverse farming in 5 acre lots or
in co-ops then I might have less complaint, however the skills people apparently are going to
need are supervising robots and going to non jobs in autonomous vehicles and being fed on chemical
mush shaped like things we used to eat, a grim dystopia.
Yesterday I had the unpleasant experience of reading the hard copy nyt wherein kristof opined
that hey it's not so bad, extreme poverty has eased (the same as in this article, but without
this article's Vietnamese example where 1 v. 8 becomes 8 v. 80),ignoring the relative difference
while on another lackluster page there was an article saying immigrants don't take jobs from citizens
which had to be one of the most thinly veiled press releases of some study made by some important
sounding acronym and and, of course a supposed "balance" between pro and anti immigration academics.
because in this case, they claim we're relatively better off.
So there you have it, it's all relative. Bi color bird cage liner, dedicated to the ever shrinking
population of affluent/wealthy who are relatively better off as opposed to the ever increasing
population of people who are actually worse off…There was also an article on the desert dwelling
uighur and their system of canals bringing glacier water to farm their arid land which showed
some people who were fine for thousands of years, but now thanks to fracking, industrial pollution
and less community involvement (kids used to clean the karatz, keeping it healthy) now these people
can be uplifted into the modern world(…so great…) that was reminiscent of the nyt of olde which
presented the conundrum but left out the policy prescription which now always seems to be "the
richer I get the less extreme poverty there is in the world so stop your whining and borrow a
few hundred thousand to buy a PhD "
Yes, those who "have seen their incomes stagnating in real terms for over 20 years" are
indeed experiencing "considerable discontent." But this anodyne phrasing masks the reality of
entire communities seeing their means of livelihood ripped out and shipped across the globe. This
rhetoric makes it sound like, Oh those prosperous American workers can't buy as many luxuries
now, boo hoo, when the standard practice from NAFTA on of globalization-as-corporate-welfare has
meant real impoverishment for hundreds of thousands of individuals, entire cities and large chunks
of whole states. As Lambert always says, Whose economy?
Three reading recommendations for anyone who doesn't grasp your sentiment, shared by millions:
Sold Out , by Michelle Malkin Outsourcing America , by Ron Hira America: Who
Stole the Dream? , by Donald L. Barlett
Reply ↓
"... the true rate of pay is often around the minimum wage. ..."
"... i was an adjunct professor of urban studies at new york university for 12 years. the entire academic department was staffed by adjuncts and part-time instructors except for the chairman, who was ironically a tenured professor of labor history. ..."
"... Having come up through the academic process and seeing the handwriting on the wall deciding to opt out of trying for an academic career, I think I can comment a bit. ..."
"... First, no one is forcing these folks to be adjuncts. It's their choice. ..."
"... The real issue is one of information and honesty or at least reality over hopeful expectations. When I was an undergrad my professors encouraged me to go to grad school and were pleased when I decided to pursue a Ph.D. They all implied, if not said, that I would be able to then get an academic job. I think they really believed this, but the reality was far different even at that time. By the time I graduated, unemployment in my field was at an all time high. The reality was that only 20-25% of graduates would get "potentially permanent" positions in either academia or research. So, when I finally graduated I posted a letter for the undergraduates informing them of the future in the field. Needless to say the faculty were taken aback, but when they checked they found that my data was correct. ..."
"... Yes, their choice. They can abandon the academic pursuit and choose another career. Most people with advanced degrees do just that. ..."
"... I agree that their are way too many grad students and they become the adjuncts that are desperate for full time jobs. But grad students serve an important purpose as cheap labor, particularly in research universities. ..."
"... What if the point of a review process was to improve teaching methods and get feedback from students about what works and what doesn't? ..."
"... We are looking at the decades long pursuit of making higher education "more like business". The mantra of privatization and that attitude that segments of our society which served the public: schools, universities, hospitals, departments of governments at all levels, etc., would all be better if they were run as businesses has been proven false a million times over. ..."
"... University Boards have, for decades, been stacked with advocates of market based systems which have been imposed on institutions which formerly served their students and the public. Students are no longer viewed as students but as revenue streams. Public funding for higher education has similarly declined as the cult of the marketplace including that institutions serving a public purpose needed to be more self funding. Because forcing them to have more skin in the game would force them to trim the fat and innovate. You know, like Walmart. ..."
"... This is a false hope–especially in higher education. The University, the large corporation, the particular governmental agency, are now beyond internal reform and we all know this in our bones. ..."
"... Somehow we must individually and collectively find the courage and creativity to move, maneuver and survive outside of these institutions–trading in the fear and anxiety of trying to succeed in dying institutions for the fear and anxiety which comes with creating new institutions. ..."
"The work is there," Wangerin tells me, "they just don't want to pay."
A one-time adjunct and contract lecturer myself, I decide to look into the
matter more deeply. Are Wangerin's contentions particular to her own experience
or are they more widely shared across the United States? And if they are, what
does this mean for higher education?
Information, as it turns out, isn't hard to come by. I write one message
to a long-time Twitter contact who also happens to be a contingent faculty member
and my inbox explodes. As I sort through my e-mails a picture of higher education
begins to emerge and, far removed from the conventional image of pipe-smoking
professors in book-lined studies, it is largely one of exploitation and control.
"I am currently teaching one class, and in all honesty, unemployment benefits
pay double that," a community college lecturer who wished to remain anonymous
told me, "I would be better off not teaching at all."
An art professor from Ohio writes in to tell me that she's just thrown in
the towel after more than a decade of work: "My class was canceled two weeks
before classes start and I decided to get my Alternative Educator License and
teach at the high school level."
I hear of a lecturer whose courses were allocated to someone else after he
spoke out about a contract clause that demanded access to his DNA; about an
adjunct who could not afford to pay property taxes on the family home after
20 years of teaching; and of someone who was fired after a student complaint
that he was a "black racist." "Whatever that means," the adjunct reporting the
incident grumbles.
... ... ...
"Education claims to ameliorate class stratification, but it actually reinforces
it," says Alex Kudera, who has taught college writing and literature off the
tenure track for over twenty years.
It's not hard to see what he means. The average adjunct lecturer receives
only
$2700 per course taught. While that amount is sometimes portrayed as easy
money, in addition to time spent in class lecturers must also prepare course
content, create exams and assignments, grade, advise students, and, of course,
travel from campus to campus. When academics are employed on a casual basis,
such activity is not compensated, meaning that the true rate of pay is often
around the minimum wage.
'Academics may enjoy more intellectual freedom than many workers,
but they also have a duty that does not generally fall on others: to research
and to publish the results of that research regardless of how unpopular
it may be.'
Proposal for a joint Econ/Law paper
Thesis : US academia is a Racketeer Influenced and Corrupt Organization
Synopsis : using de facto antitrust immunity garnered by its politically
connected administrators, academia relentlessly hikes tuitions as well as
its intake of governmental funding.
Via false and deceptive marketing, students are promised nonexistent
benefits from earning a degree, then subjected to a loan sharking racket
which indebts them for life, at inflated cartelized prices, without informing
them of the non-dischargeability of those debts.
Systemic marketing fraud is further enabled by glossy alumni magazines
touting the achievements of tenured faculty, without divulging that a majority
of classes are taught by adjuncts.
Recommendations : RICO the entire industry; consolidate it; convict
the managers; reopen it under new leadership (former politicians banned
for life), under new legislation prohibiting marketing fraud and loan sharking.
Seems like the logical solution and the only way to avoid actual collapse
of the institutions. This higher education scam can only continue until
parental funds are tapped out, which is this current generation of collage
age families. New entrants into the workforce, on whole, will not be able
to save enough, or have job security to even consider college for their
children.
The social contract that the elite are forging ahead with is the bond
and willingness to be scammed. It is amazing to see their disbelieving expressions
when any form of resistance is encountered. The rational response would
be to ease up on the exploitation, but doesn't seem to be happening. Other
forces will have to be brought to bear.
"non-tenure track teaching staff – commonly referred to as adjuncts and
contingent faculty – now make up approximately 70% of all teaching staff
in American higher education. This means that roughly three out of every
four courses a student takes are taught by someone without job security
who is working on minimal pay."
Is this actually true? If say some adjuncts are full-time other job &
teach only 1 course, some adjuncts are perma-temp FT & teach ~4 courses,
& tenure-track teach ~4 courses; then you could have a situation where say
1 portion of teachers that are adjuncts. The article mentioned 70% of ANY
teachers teaching at least 1 course in a given semester at Universities
are adjuncts
2 portion of courses taught that are taught by adjuncts: A lower number,
say 40% of the courses taught at Univs are taught by adjuncts, due to having
tenure-track Profs teaching ~4 courses & adjuncts teaching ~1 course each.
The author seems to make a logic error assuming that metric #2 is the
same as #1. It may happen to be, but doesn't necessarily need to be.
What actually is the metric #2 number?
I have empathy for the perma-temp FT adjuncts, IMHO it is no different
than perma-temp FT workers in other occupations, despite the prestige of
Unviersities perhaps somewhat masking its practice.
You're right that we don't have enough info to know #2 from the article,
but I also don't know that you've got it quite right.
If full time instructors are half-and-half tenure/tenure-track and adjunct
(for instance), that would mean that 30% of profs are tenure and 30% are
full time adjuncts. That would leave another 40% of the total that are less-than-full
time adjuncts. So you'd have a majority of classes being taught by adjuncts.
But, of course, we need more info to figure it out for sure, but it seems
more likely to me, based on my experience (~ half my classes were taught
by adjuncts during my college days, which were in the late nineties-early
aughties) that adjuncts represent a firm majority of both personnel and
classroom hours.
I'm not an adjunct but I'm a non-tenure track faculty member in the Electrical
and Computer Engineering department at a very large university. I teach
8 technical courses a year (3/3/2) while the tenured faculty teach 3 or
4 (2/1/0). We also have adjuncts who typically teach one course a semester.
I bring this up because it could be that, from the author's perspective,
I still fall into the adjunct category because my contract must be renewed
yearly and the administration can choose not to renew without cause. I would
say that non-tenure track faculty are responsible for about 50% of the courses
in this department but, being in engineering, our department is small relative
to something in the College of Liberal Arts.
This fits in, sort of, to this posting the dean of the B-school, with
a $500K salary, a supposed expert on "risk management" at Syracuse University,
busted in a prostitution sting:
More of a question here, as I see the author teaches in Ireland. If Dr.
Fuller comes below the line I'd be interested to hear her thoughts on whether
the same process is infecting Irish and other European universities. I know
if at least one college administrator in Itelamd who loudly proclaims the
superiority if the US system. One can only wonder why
Superior in what way? Science? Technical research? Economic research?
For the US undergad, adjunct instructors is the norm. (My local community
college has 70% adjunct instructors.). My local University has slightly
less, but uses more experienced gad students to guide less experienced grad
students. In any event, the product/experience has been cheapened.
Nearly half of the nation's undergraduates show almost no gains in
learning in their first two years of college, in large part because
colleges don't make academics a priority, a new report shows.
Morris Berman has pointed out that US college has become a social rather
than a learning experience. I suspect this cultural shift has made academics
themselves replaceable. Does it really matter who babysits these four-year
party retreats?
i was an adjunct professor of urban studies at new york university for
12 years. the entire academic department was staffed by adjuncts and part-time
instructors except for the chairman, who was ironically a tenured professor
of labor history.
my classes were always bursting to seams, we studied contemporary
issues and were focusing on the sub-prime crisis back in 1995. one class
toward the end of my lecture, i wrote the math for my salary on the blackboard.
it came down to twenty-five cents per student per class, a tiny fraction
of their per semester tuition. a student from the business school remarked
that i could probably make more panhandling the same hours outside in washington
square park. everyone laughed. by the time i got back to the department
less than 20 minutes later, the chair invited me into his office. "don't
talk about salary issues with your students. GOT IT!" someone had ratted
me out. guess i spoiled their day. easier to discuss poor people in the
outer boroughs than someone on your doorstep. in the following years i spent
my spare time organizing the first adjunct faculty union. door-to-door,
button-holing adjuncts on the sidewalk or in the hallways. the less experience
they had, the more reluctant they were to get involved for fear of ruining
their chances for a F/T tenure track position. they wouldn't listen, when
i explained, once an adjunct, always an adjunct. after five more years,
they began to see the light and wanted union. then the uaw swooped in, demanding
my lists and fealty. they knew nothing about activism on an urban campus
and didn't want to listen. when i tried to participate in meetings, i was
accused of disrespecting the regional organizer who commuted to the union
hqtrs. from her home in litchfield, ct. at one meeting they told us who
our "friends" were on campus. yep, heading the list was my dept chair, the
good-old red-diaper baby himself. finally, there was a vote, the union won
a shitty package that deliberately excluded any new hires. end of the semester
the dept chair sends me an email, you're fired! meet the new boss, same
as the old boss.
I do this with my students as well, noting that about 10% of their tuition
goes to me, while the rest goes to the University.
I also like to point out that they pay six six times the tuition compared
to what the people running the university did, and that's before you take
into consideration that they didn't have to pay an extra 1K in "fees."
If they simply cut me a check for the percentage of their tuition that
goes to the class, I'd make upwards of 300K a year.
Thanks for sharing your story. I am sorry to hear that you were fired,
apparently for exercising you human & Constitutional right to labor-organize.
The fact that your boss was "a labor history Prof" is worst-tier hypocrisy
& irony. Reminds me of Constitutional Law Prof 0bama, who continually defecates
on the Constitution with his assasination of US citizens overseas program,
NSA bulk spying, etc.
I hope you found an alternative job that had better working conditions
& a fairer boss.
"Tin soldiers and Nixon coming, We're finally on our own. This summer
I hear the drumming, Four dead in Ohio." CSNY
It seems the "social unrest" stemmed from the collective consciousness
permitted by
unrestrained objectivity. The master-client relationship was overwhelmed
by repeated
gestures that breached the ordained demeandor of prostrate obedience.
The balance between confusion and illumination (consciousness) must be
modified!
After all, successful marketing/propaganda begins where consciousness ends
I was fortunate enough (a long time ago) to attend an Ivy League university,
with my brother attending the same two class years ahead of me. I became
frustrated at one point, finding my courses to always be a number of degrees
more abstract in what they were teaching than I had anticipated, and sought
my brother's advice. "Brown," he said, "doesn't make engineers; they make
graduate students." As I would later come to say, we were not taught to
be mathematicians or chemists or historian; we were taught to think like
them. I can't tell you how valuable that approach to education has turn
out to be for me, both professionally and personally, as I've made my way
through life. These are things you don't unlearn.
I think about this whenever I read articles (like this one) about the
direction of education today, especially but not limited to the college
level. These experiences are being lost as we turn our schools into trade
schools and our students into mere mechanics; OK at any situation for which
they have been specifically trained, but kind of useless for those when
that has not been the case. Our elites tell us that this is what the market
wants, but I never see any of them actually asking the students, and when
I check back at the Ivy, I find that the elites still teach their own the
way I was taught. The answer is clear. we are deliberately being divided
by education into a world where the children of the elites, whether they
have earned it or not, will find no intellectual competition from the classes
below them. The Poors really will be stupid, but it will be intentional,
and built in to the Nature and Nurture the elites have allowed them to have.
Excellent comment, Benedict. The art of teaching people how to think
instead of what to think – the educator who can do this is invaluable, now
more than ever.
1. The shift needed to understand the modern University is to think of
it not as an institution of higher learning, but as a processing plant –
it produces "students" and "graduates, and adjuncts are the staff assigned
the role of processors. The model is industrial. Elite institutions of all
sorts have conspired with the University to require professional credentials
for more and more of the occupations they staff, in order to assure large
flows of people pass through. This also means that larger populations are
drawn into the debt system and thereby depoliticized.
2. The most important role an adjunct can play is to bring the issues
associated with the industrializing of the university into the classroom.
Make students aware of the labor situation, and what they're buying.
Explain to them that adjuncts, like nurses in hospitals, are expected to
overperform, and that their overperformance is what props up a diseased,
corrupt institution. It's very, very important for adjuncts not to get caught
up in the official institutional morality that guilts them into overperformance
(hospitals are probably the leader in this respect). How much overperformance
you indulge in is a personal decision, in my view, but it should never be
taken on uncritically.
My own individualized response to this system has been to take on as
many classes as I humanly can, so that a) my wages actually compare to those
of my tenured colleagues, and b) to demonstrate to students by so doing
that the University does not give a shit about their education. No one pays
attention to how many courses I teach or how prepared I am to teach them.
I've taught hundreds of courses (no exaggeration) and no one ever supervises
me or even checks in (It's happened twice in 25 years) .Fact is, I happen
to be prepared, but I stress that that is not at all a concern of the University.
I've been asked to teach courses in subjects where I have absolutely no
expertise, but since I'm teaching undergrads, know how to read, construct
a syllabus, and make compelling arguments, I get by, sometimes even comfortably.
Many get by this way. But it shouldn't be confused with providing student
a good education. And I'm getting too old to maintain the pace, as we all
do.
According to the evaluation numbers I'm somehow still providing students
with an above-average experience in their courses, but I do so full in the
knowledge that I WILL NOT overperform without making the students aware
that that is what unfairly is expected of me, even though I'm given none
of the resources tenured faculty are given. I cancel classes sometimes,
for the express purpose of the fact I need a break (I don;t get sabbaticals).
They almost invariably understand. They also are sometimes infuriated that
this state of affairs persists, though like adjuncts they fear making waves.
3. Tenured faculty are the enemy (unfortunately) or PT faculty. Eevn
the labor activists among them have different class interests than PT faculty
at most large universities. Full-time faculty are dominated by the administration
and feel themselves to be under siege, but one response to this is that
they dominate PT faculty as a means of freeing themselves as much as possible
from the industrial-style teaching of large University life. As a rule,
they are not willing to equitably share the burdens PT faculty face, and
there's no getting around that.
Having come up through the academic process and seeing the handwriting
on the wall deciding to opt out of trying for an academic career, I think
I can comment a bit.
First, no one is forcing these folks to be adjuncts. It's their choice.
The real issue is one of information and honesty or at least reality
over hopeful expectations. When I was an undergrad my professors encouraged
me to go to grad school and were pleased when I decided to pursue a Ph.D.
They all implied, if not said, that I would be able to then get an academic
job. I think they really believed this, but the reality was far different
even at that time. By the time I graduated, unemployment in my field was
at an all time high. The reality was that only 20-25% of graduates would
get "potentially permanent" positions in either academia or research. So,
when I finally graduated I posted a letter for the undergraduates informing
them of the future in the field. Needless to say the faculty were taken
aback, but when they checked they found that my data was correct.
Do these adjuncts believe that a "potentially permanent" position awaits
them if they keep going on their present path? Are they being told that
by the universities? If so, then they are being deceived. Or, is this just
a case of blind optimism and not wanting to give up their dream? In this
case, it goes back to being their choice. Or do they want a career as a
serial adjunct, and just want the job to be better? The this is just typical
employer/employee bargaining and back to their choice.
So, they can agitate for more money, security, authority, etc. which
is what they appear to be doing, or they can leave the field for one that
is more lucrative, which is what the vast majority of us have done.
It's their "choice" to be an adjunct. Really? If there was a true choice
wouldn't the vast majority "choose" to be full-time faculty with benefits
and equivalent pay? Free marketeers keep using the word "choice", but the
choice they offer is usually one where you get to "choose" between homelessness
and and marginal survival at $11 an hour. A mighty impressive choice!
Do they "believe" they're going to get a full-time position, because
realistic career expectations wouldn't help universities get cheap grad
student labor?
Or maybe they end up in grad school like a lot of people I know - because
the job market was so terrible that the idea of staying in school for another
couple of years was their best "choice" at that point in time? Since the
media constantly tells us education is always good, and those who don't
have it will fall behind, the idea that more education isn't always better
comes as a foreign idea to a lot of 22 year olds. An assembly line of cheap
grad student labor then gets funneled into adjunct teaching.
Yes, their choice. They can abandon the academic pursuit and choose another
career. Most people with advanced degrees do just that.
I agree that their are way too many grad students and they become the
adjuncts that are desperate for full time jobs. But grad students serve
an important purpose as cheap labor, particularly in research universities.
Why would they want to give that up? Again, this is an issue of information,
which is why I posted my letter. If undergrads knew the actual prospects
for grad students after they graduate perhaps they would choose a different
path. But, grad school and academia are extremely attractive pursuits for
many people so they readily put up with all the impediments in the hope
of making it as a professor. The reality is that academia has become an
avocation, a hobby, rather than a vocation for most people.
Here's a thought: maybe if our education system weren't built around
fear, we'd be able to present a more united front.
Consider: instructors are tasked with judging students and, if they grade
on the curve, punishing some of them regardless of their skill or effort and
often enough this sorting is accomplished through BS methods like high-stakes,
time-limited testing. So yeah, sometimes students get resentful of the instructors
who get seen as the enemy. And so, they take it out be leaving a bad review.
The reviews, just like the tests and grading systems, are being used
to sort and punish profs. Bad reviews from students can be devastating financially
and career-wise, as detailed in the article. So profs get scared and therefore
fail to ask much of the students, so as to come off as a "nice guy/gal."
The students live in fear and don't learn, and the teachers live in fear
and don't teach. But what if we did things differently?
What if the point of a review process was to improve teaching methods
and get feedback from students about what works and what doesn't? What if
reviews were done in a way aimed at supporting instructors, rather than
censuring them? And what if students were treated the same way. What if,
instead of a reprimand and a shaming, students were given support and encouragement
(more like Evergreen and Sarah Lawrence)?
Maybe then we'd stop being afraid of each other and be able to support
eachother as we demand an answer to the question of how it is that tuitions
keep going up while faculty pay keeps going down. Demand in no uncertain
terms that the top Admins take major pay cuts or step down so their secretary
can take over for them (with a hefty pay raise, of course, but something
reasonable ).
We are looking at the decades long pursuit of making higher education
"more like business". The mantra of privatization and that attitude that
segments of our society which served the public: schools, universities,
hospitals, departments of governments at all levels, etc., would all be
better if they were run as businesses has been proven false a million times
over.
University Boards have, for decades, been stacked with advocates of market
based systems which have been imposed on institutions which formerly served
their students and the public. Students are no longer viewed as students
but as revenue streams. Public funding for higher education has similarly
declined as the cult of the marketplace including that institutions serving
a public purpose needed to be more self funding. Because forcing them to
have more skin in the game would force them to trim the fat and innovate.
You know, like Walmart.
For decades, political contributions bought politicians who in turn mandated
that federal student loans had to be administered by banks, thereby siphoning
off billions, if not tens of billions, of dollars that could have otherwise
gone to students and universities. The politicians also permit these banks
to gouge students on interest rates, to pass laws making it harder or impossible
to discharge loan debt through bankruptcy, or to refinance their loans.
None of these abuses of students served a public interest. All of these
abuses exemplify our current model for how to apply business practices to
higher education.
In the business sense, the only concern a University has for its product
is its relationship to the revenue stream. A little like the charter school
model. Universities have a need for instructors, and in applying the methods
of successful business as it is defined today they will seek to fill that
labor need at the absolute lowest cost achievable. Those who long for the
past are out of luck; universities are never going back. Faculty pay will
keep going down as long there are new warm bodies to take the place of those
who don't like it, and adjuncts will be squeezed for all that can be wrung
from them.
Adjuncts are nameless, faceless, and entirely forgettable as far the
University administration is concerned. The administration will blow as
much smoke up adjunct's asses as needed to keep their slots filled. Adjuncts
are in an abusive relationship, whether they understand it or not. The abuse
is never going to end, as the obstacles are not just the administration
and the university Board, but the politicians, the big donors, and the attitudes
of our society at large.
What you have so precisely described is yet another Ponzi scheme. Of
course it is because that is what post capitalist Capitalism is .
Think
of it like this : there is approximately 7 billion of us living on planet
Earth and between us we can and do produce enough food, clothing and could
produce enough housing ( that's another matter ) for all 7 billion.
So the
problem for the capitalist is how do I create the illusion of scarcity upon
which Capitalism works. Answer : grab by any and every means possible –
legal and illegal , it's all the same thing – the lions share of what already
exists ; in other words steal it . That's the 1 % .
And then con the 99%
into believing resources are scarce etc, etc and bending to the will of
the 1 %.
Most of us continue to hope that we will eventually find a secure/meaningful
position somewhere in one of the major institutions that make-up our society.
This is a false hope–especially in higher education. The University, the large corporation, the particular governmental agency,
are now beyond internal reform and we all know this in our bones.
Somehow we must individually and collectively find the courage and creativity
to move, maneuver and survive outside of these institutions–trading in the
fear and anxiety of trying to succeed in dying institutions for the fear
and anxiety which comes with creating new institutions.
"... traditional ways of life are dissolving as a new class of entrepreneur-warriors are wielding unprecedented power - and changing the global landscape. ..."
"... It's a huge psychological dent in people's faith in the system. I think what's going to happen in the next few years is huge unemployment in the middle class in America because a lot of their jobs will be outsourced or automated. ..."
Novelist Rana Dasgupta recently turned to nonfiction to explore the explosive
social and economic changes in Delhi starting in 1991, when India launched a
series of transformative economic reforms. In
Capital: The Eruption of Delhi, he describes a city where the epic hopes
of globalization have dimmed in the face of a sterner, more elitist world. In
Part 1 of an interview with the
Institute for New Economic
Thinking, Dasgupta traces a turbulent time in which traditional ways
of life are dissolving as a new class of entrepreneur-warriors are wielding
unprecedented power - and changing the global landscape.
Lynn Parramore: Why did you decide to move from New York to Delhi
in 2000, and then to write a book about the city?
Rana Dasgupta: I moved to be with my partner who lived in Delhi, and soon
realized it was a great place to have landed. I was trying write a novel and
there were a lot of people doing creative things. There was a fascinating intellectual
climate, all linked to changes in society and the economy. It was 10 years since
liberalization and a lot of the impact of that was just being felt and widely
sensed.
There was a sense of opportunity, not any more just on the part of business
people, but everyone. People felt that things were really going to change in
a deep way - in every part of the political spectrum and every class of society.
Products and technology spread, affecting even very poor people. Coke made ads
about the rickshaw drivers with their mobile phones -people who had never had
access to a landline. A lot of people sensed a new possibility for their own
lives.
Amongst the artists and intellectuals that I found myself with, there were
very big hopes for what kind of society Delhi could become and they were very
interested in being part of creating that. They were setting up institutions,
publications, publishing houses, and businesses. They were thinking new ideas.
When I arrived, I felt, this is where stuff is happening. The scale of conversations,
the philosophy of change was just amazing.
LP: You've interviewed many of the young tycoons who emerged during
Delhi's transformation. How would you describe this new figure? How do they
do business?
RD: Many of their fathers and grandfathers had run significant provincial
businesses. They were frugal in their habits and didn't like to advertise themselves,
and anyway their wealth remained local both in its magnitude and its reach.
They had business and political associates that they drank with and whose weddings
they went to, and so it was a tight-knit kind of wealth.
But the sons, who would probably be now between 35 and 45, had an entirely
different experience. Their adult life happened after globalization. Because
their fathers often didn't have the skills or qualifications to tap into the
forces of globalization, the sons were sent abroad, probably to do an MBA, so
they could walk into a meeting with a management consultancy firm or a bank
and give a presentation. When they came back they operated not from the local
hubs where their fathers ruled but from Delhi, where they could plug into federal
politics and global capital.
So you have these very powerful combinations of father/son businesses. The
sons revere the fathers, these muscular, huge masculine figures who have often
done much more risky and difficult work building their businesses and have cultivated
relationships across the political spectrum. They are very savvy, charismatic
people. They know who to give gifts to, how to do favors.
The sons often don't have that set of skills, but they have corporate skills.
They can talk finance in a kind of international language. Neither skill set
is enough on its own by early 2000's: they need each other. And what's interesting
about this package is that it's very powerful elsewhere, too. It's kind of a
world-beating combination. The son fits into an American style world of business
and finance, but the thing about American-style business is that there are lots
of things in the world that are closed to it. It's very difficult for an American
real estate company or food company to go to the president of an African country
and do a deal. They don't have the skills for it. But even if they did, they
are legally prevented from all the kinds of practices involved, the bribes and
everything.
This Indian business combination can go into places like Africa and Central
Asia and do all the things required. If they need to go to market and raise
money, they can do that. But if they need to sit around and drink with some
government guys and figure out who are the players that need to be kept happy,
they can do that, too. They see a lot of the world open to themselves.
LP: How do these figures compare to American tycoons during, say,
the Gilded Age?
RD: When American observers see these people they think, well, we had these
guys between 1890 and 1920, but then they all kind of went under because there
was a massive escalation of state power and state wealth and basically the state
declared a kind of protracted war on them.
Americans think this is a stage of development that will pass. But I think
it's not going to pass in our case. The Indian state is never going to have
the same power over private interests as the U.S. state because lots of things
have to happen. The Depression and the Second World War were very important
in creating a U.S. state that was that powerful and a rationale for defeating
these private interests. I think those private interests saw much more benefit
in consenting to, collaborating in, and producing a stronger U.S. state.
Over time, American business allied itself with the government, which did
a lot to open up other markets for it. In India, I think these private interests
will not for many years see a benefit in operating differently, precisely because
continents like Africa, with their particular set of attributes, have such a
bright future. It's not just about what India's like, but what other places
are like, and how there aren't that many people in the world that can do what
they can do.
LP: What has been lost and gained in a place like Delhi under global
capitalism?
RD: Undeniably there has been immense material gain in the city since 1991,
including the very poorest people, who are richer and have more access to information.
What my book tracks is a kind of spiritual and moral crisis that affects rich
and poor alike.
One kind of malaise is political and economic. Even though the poorest are
richer, they have less political influence. In a socialist system, everything
is done in the name of the poor, for good or for bad, and the poor occupy center
stage in political discourse. But since 1991 the poor have become much less
prominent in political and economic ideology. As the proportion of wealth held
by the richest few families of India has grown massively larger, the situation
is very much like the break-up of the Soviet Union, which leads to a much more
hierarchical economy where people closest to power have the best information,
contacts, and access to capital. They can just expand massively.
Suddenly there's a state infrastructure that's been built for 70 years or
60 years which is transferred to the private domain and that is hugely valuable.
People gain access to telecommunication systems, mines, land, and forests for
almost nothing. So ordinary people say, yes, we are richer, and we have all
these products and things, but those making the decisions about our society
are not elected and hugely wealthy.
Imagine the upper-middle-class guy who has been to Harvard, works for a management
consultancy firm or for an ad agency, and enjoys a kind of international-style
middle-class life. He thinks he deserves to make decisions about how the country
is run and how resources are used. He feels himself to be a significant figure
in his society. Then he realizes that he's not. There's another, infinitely
wealthier class of people who are involved in all kinds of backroom deals that
dramatically alter the landscape of his life. New private highways and new private
townships are being built all around him. They're sucking the water out of the
ground. There's a very rapid and seemingly reckless transformation of the landscape
that's being wrought and he has no part in it.
If he did have a say, he might ask, is this really the way that we want this
landscape to look? Isn't there enormous ecological damage? Have we not just
kicked 10,000 farmers off their land?
All these conversations that democracies have are not being had. People think,
this exactly what the socialists told us that capitalism was - it's pillage
and it creates a very wealthy elite exploiting the poor majority. To some extent,
I think that explains a lot of why capitalism is so turbulent in places like
India and China. No one ever expected capitalism to be tranquil. They had been
told for the better part of a century that capitalism was the imperialist curse.
So when it comes, and it's very violent, and everyone thinks, well that's what
we expected. One of the reasons that it still has a lot of ideological consensus
is that people are prepared for that. They go into it as an act of war, not
as an act of peace, and all they know is that the rewards for the people at
the top are very high, so you'd better be on the top.
The other kind of malaise is one of culture. Basically, America and Britain
invented capitalism and they also invented the philosophical and cultural furniture
to make it acceptable. Places where capitalism is going in anew do not have
200 years of cultural readiness. It's just a huge shock. Of course, Indians
are prepared for some aspects of it because many of them are trading communities
and they understand money and deals. But a lot of those trading communities
are actually incredibly conservative about culture - about what kind of lifestyle
their daughters will have, what kinds of careers their sons will have. They
don't think that their son goes to Brown to become a professor of literature,
but to come back and run the family business.
LP: What is changing between men and women?
RD: A lot of the fallout is about families. Will women work? If so, will
they still cook and be the kind of wife they're supposed to be? Will they be
out on the street with their boyfriends dressed in Western clothes and going
to movies and clearly advertising the fact that they are economically independent,
sexually independent, socially independent? How will we deal with the backlash
of violent crimes that have everything to do with all these changes?
This capitalist system has produced a new figure, which is the economically
successful and independent middle-class woman. She's extremely globalized in
the sense of what she should be able to do in her life. It's also created a
set of lower-middle-class men who had a much greater sense of stability both
in their gender and professional situation 30 years ago, when they could rely
on a family member or fellow caste member to keep them employed even if they
didn't have any marketable attributes. They had a wife who made sure that the
culture of the family was intact - religion, cuisine, that kind of stuff.
Thirty years later, those guys are not going to get jobs because that whole
caste value thing has no place in the very fast-moving market economy. Without
a high school diploma, they just have nothing to offer. Those guys in the streets
are thinking, I don't have a claim on the economy, or on women anymore because
I can't earn anything. Women across the middle classes - and it's not just across
India, it's across Asia -are trying to opt out of marriage for as long as they
can because they see only a downside. Remaining single allows all kinds of benefits
– social, romantic, professional. So those guys are pretty bitter and there's
a backlash that can become quite violent. We also have an upswing of Hindu fundamentalism
as a way of trying to preserve things. It's very appealing to people who think
society is falling apart.
LP: You've described India's experience of global capitalism as traumatic.
How is the trauma distinct in Delhi, and in what ways is it universal?
RD: Delhi suffers specifically from the trauma of Partition, which has created
a distinct society. When India became independent, it was divided into India
and Pakistan. Pakistan was essentially a Muslim state, and Hindis and Sikhs
left. The border was about 400 kilometers from Delhi, which was a tiny, empty
city, a British administrative town. Most of those Hindis and Sikhs settled
in Delhi where they were allocated housing as refugees. Muslims went in the
other direction to Pakistan, and as we know, something between 1 and 2 million
were killed in that event.
The people who arrived in Delhi arrived traumatized, having lost their businesses,
properties, friends, and communities, and having seen their family members murdered,
raped and abducted. Like the Jewish Holocaust, everyone can tell the stories
and everyone has experienced loss. When they all arrive in Delhi, they have
a fairly homogeneous reaction: they're never going to let this happen to them
again. They become fiercely concerned with security, physical and financial.
They're not interested in having nice neighbors and the lighter things of life.
They say, it was our neighbors that killed us, so we're going to trust only
our blood and run businesses with our brother and our sons. We're going to build
high walls around our houses.
When the grandchildren of these people grow up, it's a problem because none
of this has been exorcised. The families have not talked about it. The state
has not dealt with it and wants to remember only that India became independent
and that was a glorious moment. So the catastrophe actually becomes focused
within families rather than the reverse. A lot of grandchildren are more fearful
and hateful of Muslims than the grandparents, who remembered a time before when
they actually had very deep friendships with Muslims.
Parents of my generation grew up with immense silence in their households
and they knew that in that silence was Islam - a terrifying thing. When you're
one year old, you don't even know yet what Islam is, you just know that it's
something which is the greatest horror in the universe.
The Punjabi businessman is a very distinct species. They have treated business
as warfare, and they are still doing it like that 70 years later and they are
very good at it. They enter the global economy at a time when it's becoming
much less civilized as well. In many cases they succeed not because they have
a good idea, but because they know how to seize global assets and resources.
Punjabi businessmen are not inventing Facebook. They are about mines and oil
and water and food -things that everyone understands and needs.
In this moment of globalization, the world will have to realize that events
like the Partition of India are not local history anymore but global history.
Especially in this moment when the West no longer controls the whole system,
these traumas explode onto the world and affect all of us, like the Holocaust.
They introduce levels of turbulence into businesses and practices that we didn't
expect necessarily.
Then there's the trauma of capitalism itself, and here I think it's important
for us to re-remember the West's own history. Capitalism achieved a level of
consensus in the second half of the 20th century very accidentally, and by a
number of enormous forces, not all of which were intended. There's no guarantee
that such consensus will be achieved everywhere in the emerging world. India
and China don't have an empire to ship people off to as a safety valve when
suffering become immense. They just have to absorb all that stuff.
For a century or so, people in power in Paris and London and Washington felt
that they had to save the capitalist system from socialist revolution, so they
gave enormous concessions to their populations. Very quickly, people in the
West forgot that there was that level of dissent. They thought that everyone
loved capitalism. I think as we come into the next period where the kind of
consensus has already been dealt a huge blow in the West, we're going to have
to deal with some of those forces again.
LP: When you say that the consensus on capitalism has been dealt
a blow, are you talking about the financial crisis?
RD: Yes, the sense that the nation-state - I'm talking about the U.S. context
- can no longer control global capital, global processes, or, indeed, it's own
financial elite.
It's a huge psychological dent in people's faith in the system. I think
what's going to happen in the next few years is huge unemployment in the middle
class in America because a lot of their jobs will be outsourced or automated.
Then, if you have 30-40 percent unemployment in America, which has always
been the ideological leader in capitalism, America will start to re-theorize
capitalism very profoundly (and maybe the Institute of New Economic Thinking
is part of that). Meanwhile, I think the middle class in India would not have
these kinds of problems. It's precisely because American technology and finance
are so advanced that they're going to hit a lot of those problems. I think in
places like India there's so much work to be done that no one needs to leap
to the next stage of making the middle class obsolete. They're still useful.
Lynn Parramore is contributing editor at AlterNet. She is cofounder of Recessionwire,
founding editor of New Deal 2.0, and author of "Reading the Sphinx: Ancient
Egypt in Nineteenth-Century Literary Culture." She received her Ph.D. in English
and cultural theory from NYU. Follow her on Twitter @LynnParramore.
"... Moscow did indeed support secessionist pro-Russia rebels in East Ukraine. But did not the U.S. launch a 78-day bombing campaign on tiny Serbia to effect a secession of its cradle province of Kosovo? ..."
"... Russia is reportedly hacking into our political institutions. If so, it ought to stop. But have not our own CIA, National Endowment for Democracy, and NGOs meddled in Russia's internal affairs for years? ..."
"... Scores of the world's 190-odd nations are today ruled by autocrats. How does it advance our interests or diplomacy to have congressional leaders yapping "thug" at the ruler of a nation with hundreds of nuclear warheads? ..."
"... Very good article indeed. Knee-jerk reaction of american politicians and journalists looks extremely strange. As a matter of fact they look like idiots or puppets. ..."
"... Rubio and Graham are reflexively ready to push US influence everywhere, all the time, with military force always on the agenda, and McCain seems to be in a state of constant agitation ..."
"... Very sensible article. And as the EU falls further into disarray and possible disintegration, due to migration and other catastrophically mishandled problems, a working partnership with Russia will become even more important. Right now, we treat Russia as an enemy and Saudi Arabia as a friend. That makes no sense at all. ..."
"... As I've stated many times, Obama the narcissist hates Putin because Putin doesn't play the sycophantic lapdog yapping about how good it is to interact with the "smartest person in the room". ..."
"... I'm serious. Obama craves sources of narcissistic supply and has visceral contempt for sources of narcissistic injury. I.e., people who may reveal the mediocrity that he actually is. Obama considers Putin a threat in that context. ..."
"... The downside for the U.S. is that Obama has extended hating Putin to hating Russia. And yes, Washington is flooded with sources of sycophantic narcissistic supply for Obama including the MSM. And they are happy to massage his twisted ego by enthusiastically playing along with the Putin/Russia fear-monger bashing. ..."
"... P.S. too bad Hillary is saturated with her own psychopathology that portends more Global Cop wreckage. ..."
"... Anyway, what Buchanan is saying is, "We have to deal with him," not "favor him." The two terms should not be confused. ..."
"... There are a lot of "allies" of questionable usefulness that the US should stop "favoring," and a lot of competitors (and potential allies in the true sense) out there the US should begin "dealing" with. ..."
"... Everything the Western elite does is about dollar hegemony and control of energy. ..."
"... As long as Russia is not a puppet of the globalist banking cartel they will be presented as an "enemy". Standing in the way of energy imperialism was the last straw for the all out hybrid war being launched on Russia now. ..."
"... If the Western public wasn't so lazy and stupid we would remove the globalists controlling us. Instead people, especially liberals, get in bed with the globalists plans against Russia bc they can't stand Russia is Christian and supports the family. ..."
"... Every word about Russia allowed in the Western establishment are lies funded and molded by people like Soros and warmongers. This is the reality. Nobody who will speak honestly or positively about Russia is allowed any voice. And scumbag neoliberal globalists like Kasperov are presented as "Russians" while real Russian people are given zero voice. ..."
"... What the Western elite is doing right now in Ukraine and Syria is reprehensible and its all our fault for letting these people control us. ..."
...Arriving on Capitol Hill to repair ties between Trump and party elites,
Gov. Mike Pence was taken straight to the woodshed.
John McCain told Pence that Putin was a "thug and a butcher," and Trump's
embrace of him intolerable.
Said Lindsey Graham: "Vladimir Putin is a thug, a dictator … who has
his opposition killed in the streets," and Trump's views bring to mind Munich.
Putin is an "authoritarian thug," added "Little Marco" Rubio.
What causes the Republican Party to lose it whenever the name of Vladimir
Putin is raised?
Putin is no Stalin, whom FDR and Harry Truman called "Good old Joe" and "Uncle
Joe." Unlike Nikita Khrushchev, he never drowned a Hungarian Revolution in blood.
He did crush the Chechen secession. But what did he do there that General Sherman
did not do to Atlanta when Georgia seceded from Mr. Lincoln's Union?
Putin supported the U.S. in Afghanistan, backed our nuclear deal with Iran,
and signed on to John Kerry's plan have us ensure a cease fire in Syria and
go hunting together for ISIS and al-Qaida terrorists.
Still, Putin committed "aggression" in Ukraine, we are told. But was that
really aggression, or reflexive strategic reaction? We helped dump over a pro-Putin
democratically elected regime in Kiev, and Putin acted to secure his Black Sea
naval base by re-annexing Crimea, a peninsula that has belonged to Russia from
Catherine the Great to Khrushchev. Great powers do such things.
When the Castros pulled Cuba out of America's orbit, we decided to keep Guantanamo,
and dismiss Havana's protests?
Moscow did indeed support secessionist pro-Russia rebels in East Ukraine.
But did not the U.S. launch a 78-day bombing campaign on tiny Serbia to effect
a secession of its cradle province of Kosovo?
... ... ...
Russia is reportedly hacking into our political institutions. If so,
it ought to stop. But have not our own CIA, National Endowment for Democracy,
and NGOs meddled in Russia's internal affairs for years?
... ... ...
Is Putin's Russia more repressive than Xi Jinping's China? Yet, Republicans
rarely use "thug" when speaking about Xi. During the Cold War, we partnered
with such autocrats as the Shah of Iran and General Pinochet of Chile, Ferdinand
Marcos in Manila, and Park Chung-Hee of South Korea. Cold War necessity required
it.
Scores of the world's 190-odd nations are today ruled by autocrats. How
does it advance our interests or diplomacy to have congressional leaders yapping
"thug" at the ruler of a nation with hundreds of nuclear warheads?
>>During the Cold War, we partnered with such autocrats as the Shah
of Iran and General Pinochet of Chile, Ferdinand Marcos in Manila, and Park
Chung-Hee of South Korea
buttressed could be even more pertinent)
Very good article indeed. Knee-jerk reaction of american politicians
and journalists looks extremely strange. As a matter of fact they look like
idiots or puppets.
Rubio
and Graham are reflexively ready to push US influence everywhere, all the
time, with military force always on the agenda, and McCain seems to be in
a state of constant agitation whenever US forces are not actively engaged
in combat somewhere. They are loud voices, yes, but irrational voices, too.
Very sensible article. And as the EU falls further into disarray
and possible disintegration, due to migration and other catastrophically
mishandled problems, a working partnership with Russia will become even
more important. Right now, we treat Russia as an enemy and Saudi Arabia
as a friend. That makes no sense at all.
"Just" states the starvation of the Ukraine is a western lie. The Harvest
of Sorrow by Robert Conquest refutes this dangerous falsehood. Perhaps "Just"
believes The Great Leap Forward did not lead to starvation of tens of millions
in China. After all, this could be another "western lie". So to could be
the Armenian genocide in Turkey or slaughter of Communists in Indonesia.
As I've stated many times, Obama the narcissist hates Putin because
Putin doesn't play the sycophantic lapdog yapping about how good it is to
interact with the "smartest person in the room".
I'm serious. Obama craves sources of narcissistic supply and has
visceral contempt for sources of narcissistic injury. I.e., people who may
reveal the mediocrity that he actually is. Obama considers Putin a threat
in that context.
The downside for the U.S. is that Obama has extended hating Putin
to hating Russia. And yes, Washington is flooded with sources of sycophantic
narcissistic supply for Obama including the MSM. And they are happy to massage
his twisted ego by enthusiastically playing along with the Putin/Russia
fear-monger bashing.
And so the U.S. – Russia relationship is wrecked by the "smartest person
in the room".
P.S. too bad Hillary is saturated with her own psychopathology that
portends more Global Cop wreckage.
John asks, "We also have to deal with our current allies. Whom would
Mr. Buchanan like to favor?"
Well, we could redouble our commitment to our democracy and peace loving
friends in Saudi Arabia, we could deepen our ties to those gentle folk in
Egypt, and maybe for a change give some meaningful support to Israel. Oh,
and our defensive alliances will be becoming so much stronger with Montenegro
as a member, we will need to pour more resources into that country.
Anyway, what Buchanan is saying is, "We have to deal with him," not
"favor him." The two terms should not be confused.
There are a lot of "allies" of questionable usefulness that the US
should stop "favoring," and a lot of competitors (and potential allies in
the true sense) out there the US should begin "dealing" with.
"During the Cold War, we partnered with such autocrats as the Shah of
Iran and General Pinochet of Chile, Ferdinand Marcos in Manila, and Park
Chung-Hee of South Korea. Cold War necessity required it (funny, you failed
to mention Laos, South Vietnam, Nicaragua, Noriega/Panama, and everyone's
favorite 9/11 co-conspirator and WMD developer, Saddam Hussein). either
way how did these "alliances" work out for the US? really doesn't matter,
does it? it is early 21st century, not mid 20th century. there is a school
of thought in the worlds of counter-terrorism/intelligence operations, which
suggests if you want to be successful, you have to partner with some pretty
nasty folks. Trump is being "handled" by an experienced, ruthless (that's
a compliment), and focused "operator". unless, of course, Trump is actually
the superior operator, in which case, this would be the greatest black op
of all time.
"From Russia With Money - Hillary Clinton, the Russian Reset and Cronyism,"
"Of the 28 US, European and Russian companies that participated in Skolkovo,
17 of them were Clinton Foundation donors" or sponsored speeches by former
President Bill Clinton, Schweizer told The Post.
Everything the Western elite does is about dollar hegemony and control
of energy. Once you understand that then the (evil)actions of the Western
elite make sense. Anyone who stands in the way of those things is an "enemy".
This is how they determine an "enemy".
As long as Russia is not a puppet of the globalist banking cartel
they will be presented as an "enemy". Standing in the way of energy imperialism
was the last straw for the all out hybrid war being launched on Russia now.
If the Western public wasn't so lazy and stupid we would remove the
globalists controlling us. Instead people, especially liberals, get in bed
with the globalists plans against Russia bc they can't stand Russia is Christian
and supports the family.
Every word about Russia allowed in the Western establishment are
lies funded and molded by people like Soros and warmongers. This is the
reality. Nobody who will speak honestly or positively about Russia is allowed
any voice. And scumbag neoliberal globalists like Kasperov are presented
as "Russians" while real Russian people are given zero voice.
What the Western elite is doing right now in Ukraine and Syria is
reprehensible and its all our fault for letting these people control us.
You need to substitute PIC (a.k.a., The Elites or Political Class)) for
neoliberal elite for the article to make more sense.
Notable quotes:
"... Our nation is in the grip of such poisonous thinking. The DNC with its "Super Delegates" already has a way to control who will be their candidate. In an irony to beat all ironies, the DNC's Super Delegates were able to stop Bernie Sanders... ..."
"... The reason Trump is still rising (and I believe will win handily) is he clearly represents the original image of America: a self made success story based on capitalism and the free market. ..."
This election cycle is so amazing one cannot help but think it has been scripted
by some invisible, all-powerful, hand. I mean, how could we have two completely
opposite candidates, perfectly reflecting the forces at play in this day and
age? It truly is a clash between The Elites and The Masses!
Main Street vs Wall & K Street.
The Political Industrial Complex (PIC – a.k.a., The Elites or Political Class)
is all up arms over the outsider barging in on their big con. The PIC is beside
itself trying to stop Donald Trump from gaining the Presidency, where he will
be able to clean out the People's House and the bureaucratic cesspool that has
shackled Main Street with political correctness, propaganda, impossibly expensive
health care, ridiculous taxes and a national debt that will take generations
to pay off.
The PIC has run amok long enough – illustrated perfectly by the defect ridden
democrat candidate: Hillary Clinton. I mean, how could you frame America's choices
this cycle
any better than this --
Back in July, Democratic presidential nominee and former Secretary of
State Hillary Clinton said, "there is
absolutely no connection between anything that I did as secretary of
state and the Clinton Foundation."
On Monday of this week,
ABC's Liz Kreutzer reminded people of that statement, as a new batch
of emails reveal that there was a connection, and
it was cash .
…
The Abedin emails reveal that the longtime Clinton aide apparently served
as a conduit between Clinton Foundation donors and Hillary Clinton while
Clinton served as secretary of state. In more than a dozen email exchanges,
Abedin provided expedited, direct access to Clinton for donors who had contributed
from $25,000 to $10 million to the Clinton Foundation. In many instances,
Clinton Foundation top executive Doug Band, who worked with the Foundation
throughout Hillary Clinton's tenure at State, coordinated closely with Abedin.
In Abedin's June deposition to Judicial Watch, she conceded that part of
her job at the State Department was taking care of "
Clinton family matters ."
This is what has Main Street so fed up with Wall & K street (big business,
big government). The Clinton foundation is a cash cow for Clinton, Inc. So while
our taxes go up, our debt sky rockets and our health care becomes too expensive
to afford, Clan Clinton has made 100's of millions of dollars selling access
(and obviously doing favors, because no one spends that kind of money without
results).
The PIC is circling the wagons with its news media arm shrilly screaming
anything and everything about Trump as if they could fool Main Street with their
worn out propaganda. I seriously doubt it will work. The Internet has broken
the information monopoly that allowed the PIC in the not too distant past to
control what people knew and thought.
Massachusetts has a long history of using the power of incumbency to
cripple political opponents. In fact, it's a leading state for such partisan
gamesmanship. Dating back to 1812, when Gov. Elbridge Gerry signed into
law a redistricting plan for state Senate districts that favored his Democratic-Republican
Party, the era of Massachusetts rule rigging began. It has continued, unabated,
ever since.
Given the insider dealing and venality that epitomized the 2016 presidential
primary process, I'd hoped that politicians would think twice before abusing
the power of the state for political purposes. Galvin quickly diminished
any such prospect of moderation in the sketchy behavior of elected officials.
He hid his actions behind the thin veil of fiscal responsibility. He claimed
to be troubled by the additional $56,000 he was going to have to spend printing
ballots to accommodate Independent voters. He conveniently ignored the fact
that thousands of these UIP members have been paying taxes for decades to
support a primary process that excludes them.
…
In my home state of Kansas, where my 2014 candidacy threatened to take
a U.S. Senate seat from the Republicans, they responded predictably. Instead
of becoming more responsive to voters, our state's highly partisan secretary
of state, Kris Kobach, introduced legislation that would bring back one
of the great excesses of machine politics: straight party-line voting –
which is designed to discourage voters from considering an Independent candidacy
altogether. Kobach's rationale, like Galvin's, was laughable. He described
it as a "convenience" for voters.
The article goes on to note these acts by the PIC are an affront to the large
swath of the electorate who really choose who will win elections:
In a recent Gallup poll, 60 percent of Americans said they do not feel
well-represented by the Democrats and Republicans and believe a third major
party is needed. Fully 42 percent of Americans now describe themselves
as politically independent .
That means the two main parties are each smaller in size than the independents
(68% divided by 2 equals 34%), which is why independents pick which side will
win. If the PIC attacks this group – guess what the response will look like?
I recently had a discussion with someone from Washington State who is pretty
much my opposite policy-wise. She is a deep blue democrat voter, whereas I am
a deep purple independent who is more small-government Tea Party than conservative-GOP.
She was lamenting the fact that her state has caucuses, which is one method
to blunt Main Street voters from having a say. It was interesting that we quickly
and strongly agreed on one thing above all else: open primaries. We both knew
that if the voters had the only say in who are leaders
would be, all sides could abide that decision easily. It is when PIC intervenes
that things get ugly.
Open primaries make the political parties accountable to the voters. Open
primaries make it harder for the PIC to control who gets into office, and reduces
the leverage of big donors. Open primaries reflect the will of the states and
the nation – not the vested interests (read bank accounts) of the PIC.
Without doubt, one of the most troublesome aspects of the current system
is its gross inefficiency. Whereas generations ago selecting a nominee
took relatively little time and money , today's process has resulted
in a near-permanent campaign. Because would-be nominees have to
win primaries and open caucuses in several states, they must put
together vast campaign apparatuses that spread across the nation, beginning
years in advance and raising tens of millions of dollars.
The length of the campaign alone keeps many potential candidates on the
sidelines. In particular, those in positions of leadership at various
levels of our government cannot easily put aside their duties and
shift into full-time campaign mode for such an extended period.
It is amazing how this kind of thinking can be considered legitimate. Note
how independent voters are evil in the mind of the PIC, and only government
leaders need apply. Not surprising, their answer is to control access to the
ballot:
During the week of Lincoln's birthday (February 12), the Republican Party
would hold a Republican Nomination Convention that would borrow from the
process by which the Constitution was ratified. Delegates to the
convention would be selected by rank-and-file Republicans in their local
communities , and those chosen delegates would meet, deliberate,
and ultimately nominate five people who, if willing, would each
be named as one of the party's officially sanctioned finalists for its presidential
nomination. Those five would subsequently debate one another a half-dozen
times.
Brexit became a political force because the European Union was not accountable
to the voters. The EU members are also selected by members of the European PIC
– not citizens of the EU. Without direct accountability to all citizens (a.k.a.
– voters) there is no democracy –
just a variant
of communism:
During the Russian Civil War (1918–1922), the Bolsheviks nationalized
all productive property and imposed a policy named war communism,
which put factories and railroads under strict government control,
collected and rationed food, and introduced some bourgeois management of
industry . After three years of war and the 1921 Kronstadt rebellion,
Lenin declared the New Economic Policy (NEP) in 1921, which was to give
a "limited place for a limited time to capitalism." The NEP lasted until
1928, when Joseph Stalin achieved party leadership, and the introduction
of the Five Year Plans spelled the end of it. Following the Russian Civil
War, the Bolsheviks, in 1922, formed the Union of Soviet Socialist Republics
(USSR), or Soviet Union, from the former Russian Empire.
Following Lenin's democratic centralism, the Leninist parties
were organized on a hierarchical basis, with active cells of members as
the broad base; they were made up only of elite cadres approved by higher
members of the party as being reliable and completely subject to party discipline
.
Emphasis mine. Note how communism begins with government control of major
industries. The current con job about Global Warming is the cover-excuse for
a government grab of the energy sector. Obamacare is an attempt to grab the
healthcare sector. And Wall Street already controls the banking sector. See
a trend yet?
This is then followed by imposing a rigid hierarchy of "leaders" at all levels
of politics – so no opposing views can gain traction. Party discipline uber
alles!
Our nation is in the grip of such poisonous thinking. The DNC with its "Super
Delegates" already has a way to control who will be their candidate. In an irony
to beat all ironies, the DNC's Super Delegates were able to stop Bernie Sanders...
The reason Trump is still rising (and I believe will win handily) is he clearly
represents the original image of America: a self made success story based on
capitalism and the free market.
His opponent is the epitome of the Political Industrial Complex – a cancer
that has eaten away America's free market foundation and core strength. A person
who wants to impose government on the individual.
"... Centralization, egalitarianism, and coercive multiculturalism were not the right answers, Nisbet would reiterate throughout his career. ..."
"... Localism, kinship, and liberty make a society secure. Leviathan smothers the human spirit through sheer size, regulation, bureaucracy, and fiat. ..."
In one of our first "adult"
conversations, when I asked earnestly about equality, Nisbet
insisted on making a bright-line distinction between what was
possible, equal opportunity and equality before the law, and
what was not, a coercive dream of managed, equal outcomes.
During the McGovern years, contesting equality's
self-evident virtues was shocking coming from a senior professor
and established social critic. But as I listened to Nisbet's
faultless reasoning, that was the moment, I realized a good
while later, I became a "conservative" in mind.
The growth of national government
during the 1960s through massive military and administrative
expansion, Nisbet feared, prefigured "the centralized state of
the masses," empowered by the "crumbling of the pre-democratic
strata of values and institutions" that "alone made political
freedom possible." Worse, he thought, a growing number of
clients might welcome its power and largess at the expense of
family and freedom.
Centralization,
egalitarianism, and coercive multiculturalism were not the right
answers, Nisbet would reiterate throughout his career.
What
induced social harmony and individual fulfillment, he
observed-long before Robert Putnam wrote
Bowling Alone
(2000)-were communities of churches and schools, volunteer
groups, families, and tribes.
Localism, kinship, and liberty
make a society secure. Leviathan smothers the human spirit
through sheer size, regulation, bureaucracy, and fiat.
If unobtainable forms of equality
become cornerstones of national policy, he argued, the onslaught
on institutions to try to achieve the impossible would be
unlimited. Intrusive state power promising to cure inequality
would let government take on powers formerly reserved to other
authorities. Stripped of religion, the public was imbibing
liberal elixirs that rendered individuals blameless, turning
them into victims of a society that "glistens with corruption,"
he once said to me. Guilt and wishful thinking quickened the
politics of equality.
... ... ...
The success of his 1975 book,
Twilight of Authority
,
was rather a surprise. The writing, as with much of Nisbet, ranges from
dense and stilted to lucid and aphoristic. It is not an easy book. But its
discursive, prescient, panoramic indictment of shifting authorities found a
distinguished audience, and it drew him further into debate over
socio-cultural policies.
... ... ...
Nisbet had no patience for sloth.
His youthful circumstances had been Depression rough, and he
escaped a troubled household. With studied poise, he was
unfailingly civil, with measured, formal manners, and
considerable sangfroid.
He thought that boredom was
civilization's number-one self-poisoner. Wealth and leisure
could undermine the collective good sense of the masses, he
felt, stimulating euphoria at a cost. Efforts to offset
boredom-through video games, television, sports, pornography, or
drugs-could be fatal to community. Facebook's artificial
communities and the politics of Twitter, he might say, give the
illusion of social cement while causing the real thing to crack.
Much of what Nisbet foresaw
decades ago has come to be. Americans surf big-screen HDTV
channels, seeking relief and distraction. Hoping politics will
make things right, the nation follows the plot like a
serial-some on Fox, others on CNN-accepting politics as a
televised reality show.
"... cultural nationalism is the only ideology capable of being a legitimising ideology under the prevailing global and national political economy. ..."
"... Neoliberalism cannot perform this role since its simplicities make it harsh not just towards the lower orders, but give it the potential for damaging politically important interests amongst capitalist classes themselves. ..."
"... In this form, cultural nationalism provides national ruling classes a sense of their identity and purpose, as well as a form of legitimation among thelower orders. ..."
"... As Gramsci said, these are the main functions of every ruling ideology. Cultural nationalism masks, and to a degree resolves, the intense competition between capitals over access to the state for support domestically and in the international arena – in various bilateral and multilateral fora – where it bargainsfor the most favoured national capitalist interests within the global and imperial hierarchy. ..."
This is where cultural nationalism comes in. Only it can serve to mask, and
bridge, the divides within the 'cartel of anxiety' in a neoliberal context.
Cultural nationalism is a nationalism shorn of its civic-egalitarian and developmentalist
thrust, one reduced to its cultural core. It is structured around the culture
of thee conomically dominant classes in every country, with higher or lower
positions accorded to other groups within the nation relative to it. These positions
correspond, on the whole, to the groups' economic positions, and as such it
organises the dominant classes, and concentric circles of their allies, into
a collective national force. It also gives coherence to, and legitimises, the
activities of the nation-state on behalf of capital, or sections thereof, in
the international sphere.
Indeed, cultural nationalism is the only ideology capable of being a legitimising
ideology under the prevailing global and national political economy.
Neoliberalism
cannot perform this role since its simplicities make it harsh not just towards
the lower orders, but give it the potential for damaging politically important
interests amongst capitalist classes themselves. The activities of the state
on behalf of this or that capitalist interest necessarily exceed the Spartan
limits that neoliberalism sets. Such activities can only be legitimised as being
'in the national interest.'
Second, however, the nationalism that articulates
these interests is necessarily different from, but can easily (and given its
function as a legitimising ideology, it must be said, performatively) be mis-recognised
as, nationalism as widely understood: as being in some real sense in the interests
of all members of the nation. In this form, cultural nationalism provides national
ruling classes a sense of their identity and purpose, as well as a form of legitimation
among thelower orders.
As Gramsci said, these are the main functions of every
ruling ideology. Cultural nationalism masks, and to a degree resolves, the intense
competition between capitals over access to the state for support domestically
and in the international arena – in various bilateral and multilateral fora
– where it bargainsfor the most favoured national capitalist interests within
the global and imperial hierarchy.
Except for a commitment to neoliberal policies, the economic policy content
of this nationalism cannot be consistent: within the country, and inter-nationally,
the capitalist system is volatile and the positions of the various elements
of capital in the national and international hierarchies shift constantly as
does the economic policy of cultural nationalist governments. It is this volatility
that also increases the need for corruption – since that is how competitive
access of individual capitals to the state is today organised.
Whatever its utility to the capitalist classes, however, cultural nationalism
can never have a settled or secure hold on those who are marginalised or sub-ordinated
by it. In neoliberal regimes the scope for offering genuine economic gains to
the people at large, however measured they might be, is small.
This is a problem for right politics since even the broadest coalition of
the propertied can never be an electoral majority, even a viable plurality.
This is only in the nature of capitalist private property. While the left remains
in retreat or disarray, elec-toral apathy is a useful political resource but
even where, as in most countries, political choices are minimal, the electorate
as a whole is volatile. Despite, orperhaps because of, being reduced to a competition
between parties of capital, electoral politics in the age of the New Right entails
very large electoral costs, theextensive and often vain use of the media in
elections and in politics generally, and political compromises which may clash
with the high and shrilly ambitiou sdemands of the primary social base in the propertied
classes. Instability, uncertainty ...
"... What is "Globalization" and "Free Trade" really?… Does it encompass the slave trade, trading in narcotics, deforestation and export of a nation's tropical hardwood forests, environmentally damaging transnational oil pipelines or coal ports, fisheries depletion, laying off millions of workers and replacing them and the products they make with workers and products made in a foreign country, trading with an enemy, investing capital in a foreign country through a subsidiary or supplier that abuses its workers to the point that some commit suicide, no limits on or regulation of financial derivatives and transnational financial intermediaries?… the list is endless. ..."
"... As always, the questions are "Cui bono?"… "Who benefits"?… How and Why they benefit?… Who selects the short-term "Winners" and "Losers"? And WRT those questions, the final sentence of this post hints at its purpose. ..."
"... Yeah, how is European colonialism - starting in, what, like the 15th century, or something - not "globalisation"? What about the Roman and Persian and Selucid empires? Wasn't that globalisation? I think we've pretty much always lived in a globalised world, one way or another (if "globalised world" even makes sense). ..."
"... Bring back the broader, and more meaningful conception of Political Economy and some actual understanding can be gained. The study of economics cannot be separated from the political dimension of society. Politics being defined as who gets what in social interactions. ..."
"... The neoliberal experiment has run its course. Milton Friedman and his tribe had their alternative plan ready to go and implemented it when they could- to their great success. The best looting system developed-ever. This system only works with the availability of abundant resources and the mental justifications to support that gross exploitation. Both of which are reaching limits. ..."
"... If only the Milton Friedman tribe had interested itself in sports instead of economics. They could have argued that referees and umpires should be removed from the game for greater efficiency of play, and that sports teams would follow game rules by self-regulation. ..."
"... Wouldn't the whole thing just work out more efficiently if you leave traffic lights and rules out of it? Just let everyone figure it out at each light, survival of the fittest. ..."
"... With increasingly free movement of people as tourists whose spending impacts nations GDP, where does it fit in to discussions on globalization and trade? ..."
What is "Globalization" and "Free Trade" really?… Does it encompass
the slave trade, trading in narcotics, deforestation and export of a nation's
tropical hardwood forests, environmentally damaging transnational oil pipelines
or coal ports, fisheries depletion, laying off millions of workers and replacing
them and the products they make with workers and products made in a foreign
country, trading with an enemy, investing capital in a foreign country through
a subsidiary or supplier that abuses its workers to the point that some
commit suicide, no limits on or regulation of financial derivatives and
transnational financial intermediaries?… the list is endless.
As always, the questions are "Cui bono?"… "Who benefits"?… How and
Why they benefit?… Who selects the short-term "Winners" and "Losers"? And
WRT those questions, the final sentence of this post hints at its purpose.
diptherio
Yeah, how is European colonialism - starting in, what, like the 15th
century, or something - not "globalisation"? What about the Roman and Persian
and Selucid empires? Wasn't that globalisation? I think we've pretty much
always lived in a globalised world, one way or another (if "globalised world"
even makes sense).
Norb
Bring back the broader, and more meaningful conception of Political
Economy and some actual understanding can be gained. The study of economics
cannot be separated from the political dimension of society. Politics being
defined as who gets what in social interactions.
What folly. All this complexity and strident study of minutia to bring
about what end? Human history on this planet has been about how societies
form, develop, then recede form prominence. This flow being determined by
how well the society provided for its members or could support their worldview.
Talk about not seeing the forest for the trees.
The neoliberal experiment has run its course. Milton Friedman and
his tribe had their alternative plan ready to go and implemented it when
they could- to their great success. The best looting system developed-ever.
This system only works with the availability of abundant resources and the
mental justifications to support that gross exploitation. Both of which
are reaching limits.
Only by thinking, and communicating in the broader terms of political
economy can we hope to understand our current conditions. Until then, change
will be difficult to enact. Hard landings for all indeed.
flora
If only the Milton Friedman tribe had interested itself in sports
instead of economics. They could have argued that referees and umpires should
be removed from the game for greater efficiency of play, and that sports
teams would follow game rules by self-regulation.
LA Mike September 17, 2016 at 8:15 pm
While in traffic, I was thinking about that today. For some time now,
I've viewed the traffic intersection as being a good example of the social
contract. We all agree on its benefits. But today, I thought about it in
terms of the Friedman Neoliberals.
Why should they have to stop at red lights. Wouldn't the whole thing
just work out more efficiently if you leave traffic lights and rules out
of it? Just let everyone figure it out at each light, survival of the fittest.
sd
Something I have wondered for some time, how does tourism fit into trade?
With increasingly free movement of people as tourists whose spending
impacts nations GDP, where does it fit in to discussions on globalization
and trade?
I Have Strange Dreams
Other things to consider:
– negative effects of immigration (skilled workers leave developing countries
where they are most needed)
– environmental pollution
– destruction of cultures/habitats
– importation of western diet leading to decreased health
– spread of disease (black death, hiv, ebola, bird flu)
– resource wars
– drugs
– happiness
How are these "externalities" calculated?
(gizmodo.com)
419
Posted
by manishs
on Tuesday September 06, 2016 @12:40PM
from the
goodbye
dept.
Reader
Joe_Dragon
shares a Gizmodo report:
ITT
Technical Institute is officially closing all of its
campuses following federal sanctions imposed against
the company. The for-profit college announced the
changes in a statement: "It is with profound regret
that we must report that ITT Educational Services,
Inc. will discontinue academic operations at all of
its ITT Technical Institutes
permanently after approximately 50 years of
continuous service
. With what we believe is a
complete disregard by the U.S. Department of
Education for due process to the company, hundreds
of thousands of current students and alumni and more
than 8,000 employees will be negatively affected."
ITT Tech announced it was closing all of its
campuses just one week after it stopped enrolling
students following a federal crackdown on for-profit
colleges. ITT Tech and other higher education
companies like it have been widely criticized for
accepting billions of dollars in government grants
and loans while failing to provide adequate job
training for its students. Last year, ITT Tech
received an estimated $580 million in federal money
(aka taxpayer dollars), according to the Department
of Education.
(computerworld.com)
338
Posted
by manishs
on Friday September 09, 2016 @01:14PM
from the
big-questions
dept.
Earlier this week, University of California
hired India-based IT company HCL to outsource some
of its work offshore
. As part of the
announcement, it announced that it was laying off 17
percent of UCSF's total IT staff. The U.S. lawmaker,
Rep. Zoe Lofgren (D-Calif) and the IEEE-USA
find the outsourcing job "wrong."
dcblogs
writes:
A decision by the University of
California to lay off IT employees and send their
jobs overseas is under fire from U.S. Rep. Zoe
Lofgren (D-Calif) and the IEEE-USA. "How are they
[the university] going to tell students to go into
STEM fields when they are doing as much as they can
to do a number on the engineers in their
employment?" said U.S. Rep. Zoe Lofgren (D-Calif).
Peter Eckstein, the president of the IEEE-USA, said
what the university is doing "is just one more sad
example of corporations, a major university system
in this case, importing non-Americans to eliminate
American IT jobs." The university recently informed
about 80 IT workers at its San Francisco campus,
including contract employees and vendor contractors,
that it hired India-based HCL, under a $50 million
contract, to manage infrastructure and
networking-related services. The affected employees
will leave their jobs in February, after they train
their contractor replacements.
Posted
by
BeauHD
on Wednesday September 07, 2016 @11:30PM
from the
outsourced
dept.
dcblogs
writes from a report via Computerworld:
The
University of California is
laying off a group of IT workers at its San
Francisco campus
as part of a plan to move work
offshore. Laying off IT workers as part of a shift
to offshore is somewhere between rare and unheard-of
in the public sector. The layoffs will happen at the
end of February, but before the final day arrives
the IT employees expect to train foreign
replacements from India-based IT services firm HCL.
The firm is working under a university contract
valued at $50 million over five years. This layoff
affects 17% of UCSF's total IT staff, broken down
this way: 49 IT permanent employees will lose their
jobs, along with 12 contract employees and 18 vendor
contractors. This number also includes 18 vacant IT
positions that won't be filled, according to the
university. Governments and publicly supported
institutions, such as UC, have contracted with
offshore outsourcers, but usually it's for new IT
work or to supplement an existing project. The HCL
contract with UCSF can be used by other UC campuses,
which means the layoffs may expand across its 10
campuses. HCL is a top user of H-1B visa workers.
(gizmodo.com)
419
Posted
by manishs
on Tuesday September 06, 2016 @12:40PM
from the
goodbye
dept.
Reader
Joe_Dragon
shares a Gizmodo report:
ITT
Technical Institute is officially closing all of its
campuses following federal sanctions imposed against
the company. The for-profit college announced the
changes in a statement: "It is with profound regret
that we must report that ITT Educational Services,
Inc. will discontinue academic operations at all of
its ITT Technical Institutes
permanently after approximately 50 years of
continuous service
. With what we believe is a
complete disregard by the U.S. Department of
Education for due process to the company, hundreds
of thousands of current students and alumni and more
than 8,000 employees will be negatively affected."
ITT Tech announced it was closing all of its
campuses just one week after it stopped enrolling
students following a federal crackdown on for-profit
colleges. ITT Tech and other higher education
companies like it have been widely criticized for
accepting billions of dollars in government grants
and loans while failing to provide adequate job
training for its students. Last year, ITT Tech
received an estimated $580 million in federal money
(aka taxpayer dollars), according to the Department
of Education.
"... [Dave Elder-Vass accepted my invitation to write a response to my discussion of his recent
book, ..."
"... Profit and Gift in the Digital Economy ..."
"... ). Elder-Vass is Reader in sociology at Loughborough University and author as well of ..."
"... The Causal Power of Social Structures: Emergence, Structure and Agency ..."
"... The Reality of Social Construction ..."
"... , discussed ..."
"... . Dave has emerged as a leading voice in the philosophy of social science, especially in the
context of continuing developments in the theory of critical realism. Thanks, Dave!] ..."
"... Profit and Gift in the Digital Economy ..."
"... Financial Times ..."
"... the argument for Pareto optimality of real market systems is patently false, but it continues
to be trotted out constantly. ..."
We need to move on from existing theories of the economy
Let me begin by thanking Dan Little for his very perceptive review of my book
Profit and Gift in the Digital Economy . As he rightly says, it's more ambitious than
the title might suggest, proposing that we should see our economy not simply as a capitalist market
system but as a collection of "many distinct but interconnected practices". Neither the traditional
economist's focus on firms in markets nor the Marxist political economist's focus on exploitation
of wage labour by capital is a viable way of understanding the real economy, and the book takes
some steps towards an alternative view.
Both of those perspectives have come to narrow our view of the economy in multiple dimensions.
Our very concept of the economy has been derived from the tradition that began as political economy
with Ricardo and Smith then divided into the Marxist and neoclassical traditions (of course there
are also others, but they are less influential). Although these conflict radically in some respects
they also share some problematic assumptions, and in particular the assumption that the contemporary
economy is essentially a capitalist market economy, characterised by the production of commodities
for sale by businesses employing labour and capital. As Gibson-Graham argued brilliantly in their
book
The End Of Capitalism (As We Knew It): A Feminist Critique of Political Economy , ideas seep
into the ways in which we frame the world, and when the dominant ideas and the main challengers
agree on a particular framing of the world it is particularly difficult for us to think outside
of the resulting box. In this case, the consequence is that even critics find it difficult to
avoid thinking of the economy in market-saturated terms.
The most striking problem that results from this (and one that Gibson-Graham also identified)
is that we come to think that only this form of economy is really viable in our present circumstances.
Alternatives are pie in the sky, utopian fantasies, which could never work, and so we must be
content with some version of capitalism – until we become so disillusioned that we call for its
complete overthrow, and assume that some vague label for a better system can be made real and
worthwhile by whoever leads the charge on the Bastille. But we need not go down either of these
paths once we recognise that the dominant discourses are wrong about the economy we already have.
To see that, we need to start defining the economy in functional terms: economic practices
are those that produce and transfer things that people need, whether or not they are bought and
sold. As soon as we do that, it becomes apparent that we are surrounded by non-market economic
practices already. The book highlights digital gifts – all those web pages that we load without
payment, Wikipedia's free encyclopaedia pages, and open source software, for example. But in some
respects these pale into insignificance next to the household and family economy, in which we
constantly produce things for each other and transfer them without payment. Charities, volunteering
and in many jurisdictions the donation of blood and organs are other examples.
If we are already surrounded by such practices, and if they are proliferating in the most dynamic
new areas of our economy, the idea that they are unworkably utopian becomes rather ridiculous.
We can then start to ask questions about what forms of organising are more desirable ethically.
Here the dominant traditions are equally warped. Each has a standard argument that is trotted
out at every opportunity to answer ethical questions, but in reality both standard arguments operate
as means of suppressing ethical discussions about economic questions. And both are derived from
an extraordinarily narrow theory of how the economy works.
For the mainstream tradition, there is one central mechanism in the economy: price equilibration
in the markets, a process in which prices rise and fall to bring demand and supply into balance.
If we add on an enormous list of tenuous assumptions (which economists generally admit are unjustified,
and then continue to use anyway), this leads to the theory of Pareto optimality of market outcomes:
the argument that if we used some other system for allocating economic benefits some people would
necessarily be worse off. This in turn becomes the central justification for leaving allocation
to the market (and eliminating 'interference' with the market).
There are many reasons why this argument is flawed. Let me mention just one. If even one market
is not perfectly competitive, but instead is dominated by a monopolist or partial monopolist,
then even by the standards of economists a market system does not deliver Pareto optimality, and
an alternative system might be more efficient. And in practice capitalists constantly strive to
create monopolies, and frequently succeed! Even the Financial Times recognises this:
in today's issue (Sep 15 2016) Philip Stevens argues, "Once in a while capitalism has to be rescued
from the depredations of, well, capitalists. Unconstrained, enterprise curdles into monopoly,
innovation into rent-seeking. Today's swashbuckling "disrupters" set up tomorrow's cosy cartels.
Capitalism works when someone enforces competition; and successful capitalists do not much like
competition".
So the argument for Pareto optimality of real market systems is patently false, but it
continues to be trotted out constantly. It is presented as if it provides an ethical justification
for the market economy, but its real function is to suppress discussion of economic ethics: if
the market is inherently good for everyone then, it seems, we don't need to worry about the ethics
of who gets what any more.
The Marxist tradition likewise sees one central mechanism in the economy: the extraction of
surplus from wage labour by capitalists. Their analysis of this mechanism depends on the labour
theory of value, which is no more tenable that mainstream theories of Pareto optimality (for reasons
I discuss in the book). Marxists consistently argue as if any such extraction is ethically reprehensible.
Marx himself never provides an ethical justification for such a view. On the contrary, he claims
that this is a scientific argument and disowns any ethical intent. Yet it functions in just the
same way as the argument for Pareto optimality: instead of encouraging ethical debate about who
should get what in the economy, Marxists reduce economic ethics to the single question of the
need to prevent exploitation (narrowly conceived) of productive workers.
We need to sweep away both of these apologetics, and recognise that questions of who gets what
are ethical issues that are fundamental to justice, legitimacy, and political progress in contemporary
societies. And that they are questions that don't have easy 'one argument fits all' answers. To
make progress on them we will have to make arguments about what people need and deserve that recognise
the complexity of their social situations. But it doesn't take a great deal of ethical sophistication
to recognise that the 1% have too much when many in the lower deciles are seriously impoverished,
and that the forms of impoverishment extend well beyond underpaying for productive labour.
I'm afraid that I have written much more than I intended to, and still said very little about
the steps I've taken in the book towards a more open and plausible way of theorising how the economy
works. I hope that I've at least added some more depth to the reasons Dan picked out for attempting
that task.
"This in turn becomes the central justification for leaving allocation to the market (and eliminating
'interference' with the market)."
Krugman is a neoliberal, although a softer, kinder neoliberal much better than Mankiw, Cowen
or the Republicans.
"pgl -> Peter K....
Please find me a Krugman discussion where he says nothing can be done about income inequality.
This is so straw man that the winds have blown this stupid lie away.
Wisdom, Courage and the Economy
by Paul Krugman
AUG. 15, 2016
It's fantasy football time in political punditry, as commentators try to dismiss Hillary Clinton's
dominance in the polls - yes, Clinton Derangement Syndrome is alive and well - by insisting that
she would be losing badly if only the G.O.P. had nominated someone else. We will, of course, never
know. But one thing we do know is that none of Donald Trump's actual rivals for the nomination
bore any resemblance to their imaginary candidate, a sensible, moderate conservative with good
ideas.
Let's not forget, for example, what Marco Rubio was doing in the memorized sentence he famously
couldn't stop repeating: namely, insinuating that President Obama is deliberately undermining
America. It wasn't all that different from Donald Trump's claim that Mr. Obama founded ISIS. And
let's also not forget that Jeb Bush, the ultimate establishment candidate, began his campaign
with the ludicrous assertion that his policies would double the American economy's growth rate.
Which brings me to my main subject: Mrs. Clinton's economic vision, which she summarized last
week. It's very much a center-left vision: incremental but fairly large increases in high-income
tax rates, further tightening of financial regulation, further strengthening of the social safety
net.
It's also a vision notable for its lack of outlandish assumptions. Unlike just about everyone
on the Republican side, she isn't justifying her proposals with claims that they would cause a
radical quickening of the U.S. economy. As the nonpartisan Tax Policy Center put it, she's "a
politician who would pay for what she promises."
So here's my question: Is the modesty of the Clinton economic agenda too much of a good thing?
Should accelerating U.S. economic growth be a bigger priority?
For while the U.S. has done reasonably well at recovering from the 2007-2009 financial crisis,
longer-term economic growth is looking very disappointing. Some of this is just demography, as
baby boomers retire and growth in the working-age population slows down. But there has also been
a somewhat mysterious decline in labor force participation among prime-age adults and a sharp
drop in productivity growth.
The result, according to the Congressional Budget Office, is that the growth rate of potential
G.D.P. - what the economy could produce at full employment - has declined from around 3.5 percent
per year in the late 1990s to around 1.5 percent now. And some people I respect believe that trying
to get that rate back up should be a big goal of policy.
But as I was trying to think this through, I realized that I had Reinhold Niebuhr's famous
Serenity Prayer running through my head: "Grant me the serenity to accept the things I cannot
change, courage to change the things I can, and wisdom to know the difference." I know, it's somewhat
sacrilegious applied to economic policy, but still.
After all, what do we actually know how to do when it comes to economic policy? We do, in fact,
know how to provide essential health care to everyone; most advanced countries do it. We know
how to provide basic security in retirement. We know quite a lot about how to raise the incomes
of low-paid workers.
I'd also argue that we know how to fight financial crises and recessions, although political
gridlock and deficit obsession has gotten in the way of using that knowledge.
On the other hand, what do we know about accelerating long-run growth? According to the budget
office, potential growth was pretty stable from 1970 to 2000, with nothing either Ronald Reagan
or Bill Clinton did making much obvious difference. The subsequent slide began under George W.
Bush and continued under Mr. Obama. This history suggests no easy way to change the trend.
Now, I'm not saying that we shouldn't try. I'd argue, in particular, for substantially more
infrastructure spending than Mrs. Clinton is currently proposing, and more borrowing to pay for
it. This might significantly boost growth. But it would be unwise to count on it.
Meanwhile, I don't think enough people appreciate the courage involved in focusing on things
we actually know how to do, as opposed to happy talk about wondrous growth.
When conservatives promise fantastic growth if we give them another chance at Bushonomics,
one main reason is that they don't want to admit how much they would have to cut popular programs
to pay for their tax cuts. When centrists urge us to look away from questions of distribution
and fairness and focus on growth instead, all too often they're basically running away from the
real issues that divide us politically.
So it's actually quite brave to say: "Here are the things I want to do, and here is how I'll
pay for them. Sorry, some of you will have to pay higher taxes." Wouldn't it be great if that
kind of policy honesty became the norm?
"For while the U.S. has done reasonably well at recovering from the 2007-2009 financial crisis,"
Reasonably well?
"Now, I'm not saying that we shouldn't try. I'd argue, in particular, for substantially more
infrastructure spending than Mrs. Clinton is currently proposing, and more borrowing to pay for
it. "
Then why was he for Hillary over Bernie Sanders who did campaign on substantially more infrastructure
spending?
Instead Krugman argues that we need to lower our hopes and expectations.
"According to the budget office, potential growth was pretty stable from 1970 to 2000, with
nothing either Ronald Reagan or Bill Clinton did making much obvious difference. "
So the market price mechanism rules and we government can't do much?
"So here's my question: Is the modesty of the Clinton economic agenda too much of a good thing?
Should accelerating U.S. economic growth be a bigger priority?"
Her agenda is unambitious. It is "center-left" as Krugman puts it which is partly why her poll
numbers are in the dumps.
" It's very much a center-left vision: incremental but fairly large increases in high-income
tax rates, further tightening of financial regulation, further strengthening of the social safety
net."
Point me to a blog post where Krugman spells out exactly where he explains how Clinton proposes
to do things.
President Trump has proposed a $25000 standard deduction for each of us, but $50,000 for married
couples who prove that they have consummated. Hey! IRS Agents like to watch.
Can you see how this minimum federal standard-deduction is de-fang-ed by lower state-standard-deduction?
Tell me something!
When state minimum wage is $5 / hour but federal minimum wage is $9 / hour, does employer hiring
in same state have to pay $5 or $9? Do you see how that works?
State's rights are dissolved by the federal statute.
This dissolution of state's rights means that Congress could as easily pass a law to establish
minimum standard-deduction for all state's income tax collection. Tell me something else!
Would such a minimum standard deduction on all state income tax collection cause any unemployment?
Would it bankrupt any small businesses?
Of course not! By contrast, the federal minimum wage regulation does cause unemployment, does
close down some employers of entry level workers, a danger to employment and poverty.
Economics is all about opportunity costs. The opportunity cost of federal minimum wage is the
possibility of federal minimum standard deduction, a more harmless subsidy.
State's rights are dissolved by the federal statute.
This dissolution of state's rights means that Congress could as easily pass a law to establish
minimum standard-deduction for all state's income tax collection. Tell me something else!
Would such a minimum standard deduction on all state income tax collection cause any unemployment?
Would it bankrupt any small businesses?
Of course not! By contrast, the federal minimum wage regulation does cause unemployment, does
close down some employers of entry level workers, a danger to employment and poverty.
[ Ah, understood. A clever and important argument that I am thinking through. Like the rational
for the federal Earned Income Tax Credit. ]
The United States federal earned income tax credit or earned income credit (EITC) is a refundable
tax credit for low- to moderate-income working individuals and couples, particularly those with
children. The amount of EITC benefit depends on a recipient's income and number of children. For
a person or couple to claim one or more persons as their qualifying child, requirements such as
relationship, age, and shared residency must be met. In the 2013 tax year, working families, if
they have children, with annual incomes below $37,870 to $51,567 (depending on the number of dependent
children) may be eligible for the federal EITC. Childless workers who have incomes below about
$14,340 ($19,680 for a married couple) can receive a very small EITC benefit.
Growth is a fixed investment. The investments have been made. Especially older societies, consumption
and leisure become more important the nature of purchases change.
I see Space Exploration as the only thing that will change that narrative. That would probably
create another computer revolution, industrial revolution kind of change. People just aren't into
it thought. People are happy with the dopamine economy and just want to get high.
"Second, less relevant to Sims but very relevant to other helicopter people, a deficit ultimately
financed by inflation is just as much of a burden on households as one ultimately financed by
ordinary taxes, because inflation is a kind of tax on money holders. From a Ricardian point of
view, there's no difference.
So I'm trying to figure out exactly what Sims is saying. What, ahem, is his model?"
Inflation hits people with savings who don't have debt.
Inflation helps people with debt by eating away at the principle. Inflation signals tight job
markets with growing incomes as well. That's why you have price pressures. That's why low inflation
and loose job markets can be just as bad as deflation.
Who taxes hit depends on how the government has set up its tax system. Some people and corporations
like Apple, Mitt Romney and presumably Trump pay little in taxes.
Capitalism was invented by Sephardic Jews who immigrated to Iberia in the 15th and 16th century.
They eventually invented market based economy.
By 1600's they had a swirling business sector located in Amsterdam and William the Orange spread
it into England during the latter 17th century, creating the Bank of England in 1694 and became
the worlds central bank via commodity money.
There is nothing to see here people. It is ponzi scheme and nothing more. Capitalism has only
made it because of liberalism. You have to be open to market expansion and have the resources
to make it work. It is why "konservatism" is a farce. One, the konservatives were the ones that
pushed the decaying "feudal" aristocracy to merge with the merchant caste in the first place and
create the bourgeois, despite the aristocracy being the birth place of most of the technology
we have now. This morphed into what we call capitalism. Basically the Jews are the Parasites(Finance),
"Whites"(the capitalists, which has a abnormal % of homosexuals) the Host and the non-whites the
cattle(mass famines and genocide during the 19th and 20th century are what really powered the
manpower behind anti-capitalism. Aka the British Empire led to 150 million deaths globally. All
global fraternities and organizations like the Skull in Bones to the Council of Foreign relations
are a conservative institutions. Yet, those cons won't admit it. As Butler said about his Pacific
"campaigns" is is all about spreading capitalism. It is indeed a racket.
These same forces are what created "Protestantism" and "Mormanism", which were a global financed
movement. First led by Catholic turncoat Martin Luther, who was financed by the Jews, then run
by Jewish John Cohen(Calvin) who spread the judeo-christian revolution globally. This also led
to the farce of "sovereignty" nonsense Mormons have tried to use in the last 40 years to push
a plutocracy. Then the other bible thumpers caught on. Destroy the nation, bring on the market
totalitarianism. Dumb sheep.
This is what we have long been used to from Mr. Groves. Ramblings in this style pretty much comment
on their own merit and don't need to be graced with rebuttals, as that implies an acknowledgement
that at some level a sort of identifiable argument was made.
"America's economic performance peaked in the late 1990s, and erosion in crucial economic indicators
such as the rate of economic growth, productivity growth, job growth, and investment began well
before the Great Recession.
Workforce participation, the proportion of Americans in the productive workforce, peaked in
1997. With fewer working-age men and women in the workforce, per-capita income for the U.S. is
reduced.
Median real household income has declined since 1999, with incomes stagnating across virtually
all income levels. Despite a welcome jump in 2015, median household income remains below the peak
attained in 1999, 17 years ago. Moreover, stagnating income and limited job prospects have disproportionately
affected lower-income and lower-skilled Americans, leading inequality to rise."
and something I have been going hoarse saying:
"The U.S. lacks an economic strategy, especially at the federal level. The implicit strategy
has been to trust the Federal Reserve to solve our problems through monetary policy."
the charts alone are worth the effort to check out this excellent study.
" Neither the traditional economist's focus on firms in markets nor the Marxist political economist's
focus on exploitation of wage labour by capital is a viable way of understanding the real economy,
and the book takes some steps towards an alternative view. "
Why did East Asia become Star Trek instead of the US? Why didn't the hopeful visions of mid-1960's
America become reality for the Americans? Read Ha Joon Chang if you want to know why East Asia
is on track to be as rich as the US/USSR portrayed in 2001 Space Odyssey. Western provincialism,
or perhaps the corruption of economists by looting banks (as documented by Charles Ferguson) has
led Western economists to offer really, really terrible advice to their own governments: free
trade forever, don't worry about massive deindustrialization, there will be new jobs, there's
no chance the US ends up like Mali.
One of the big problems of economics is how little of our society it explains. Exactly how many
people of either sex actually sit down and decide to have children based on a return on investment
calculation? How many people spend time with their friends and families based on some kind of
maximization function? When you visit a dying friend or family member at the hospital is this
the result of some gift exchange calculus? What about the time one spends listening to music,
watching a baseball game or browsing Facebook?
It might help to start with anthropology and think about human societies and their organization.
Start with something like the Lynds' Middletown books to get away from the implicit exoticism
that the term anthropology invokes. Societies have certain basic functions: raising children,
caring for those who cannot care for themselves, earning a living, spending free time, recognizing
one's place in the universe, participating in civil society and so on. Economics only looks at
a tiny piece of this, just part of the earning a living section. It's as if chemists never studied
anything except hydrogen molecules.
Economics really does need some new thinking. Starting with Pareto optimality is simply the
argument that we live in the best of all possible worlds. It is so transparently bogus that it
is hard to believe that anyone ever took it seriously. Oil lamps were hard on torch makers and
the automobile destroyed the buggy whip business. We need an economic system to regulate the production
and allocation of goods and services, but we also need child custody laws and burial customs.
I'm a capitalist at heart, but I view capitalism as I view fire. There is nothing quite like
fire for cooking food, lighting the dark, scaring wild animals, firing pottery and so on, but
fire also needs to be carefully controlled, constantly monitored and subject to societal sanction.
Economics fashions itself (or is being fashioned) as a science, and as such has to restrict itself
to measurable, identifiable, and (in principle) predictable phenomena.
What you are describing is more in the realm of philosophy, psychology, and moral judgement.
The problem starts when the economics profession and related occupations (business media, etc.)
pretend to have identified "market mechanisms" as the unifying theory of society and world, including
"explaining" social dynamics in terms of "objective/rational" market transactions and motivations.
But the desire for grand unified theories and "whole truths" is ever strong, lending credence
and support to such efforts.
Now is the time to push for my leisure theory of value. All goods and services traded in the economy
are intermediate goods, and value is actually created during leisure time!
"...a full 95% of the cash that went to Greece ran a trip through Greece
and went straight back to creditors which in plain English is banks. So,
public taxpayers money was pushed through Greece to basically bail out banks...So
austerity becomes a side effect of a general policy of bank bailouts that
nobody wants to own. That's really what happened, ok?
Why are we peddling nonsense? Nobody wants to own up to a gigantic bailout
of the entire European banking system that took six years. Austerity was
a cover.
If the EU at the end of the day and the Euro is not actually improving
the lives of the majority of the people, what is it for? That's the question
that they've brought no answer to.
...the Hamptons is not a defensible position. The Hamptons is a very
rich area on Long Island that lies on low lying beaches. Very hard to defend
a low lying beach. Eventually people are going to come for you.
What's clear is that every social democratic party in Europe needs to
find a new reason to exist. Because as I said earlier over the past 20 years
they have sold their core constituency down the line for a bunch of floaters
in the middle who don't protect them or really don't particularly care for
them. Because the only offers on the agenda are basically austerity and
tax cuts for those who already have, versus austerity, apologies, and a
minimum wage."
Mark Blyth
Although I may not agree with every particular that Mark Blyth may say, directionally
he is exactly correct in diagnosing the problems in Europe.
And yes, I am aware that the subtitles are at times in error, and sometimes
outrageously so. Many of the errors were picked up and corrected in the comments.
No stimulus, no plans, no official actions, no monetary theories can be sustainably
effective in revitalizing an economy that is as bent as these have become without
serious reform at the first.
This was the lesson that was given by Franklin Roosevelt's New Deal. There
will be no lasting recovery without it; it is a sine qua non . One cannot
turn their economy around when the political and business structures are systemically
corrupt, and the elites are preoccupied with looting it, and hiding their spoils
offshore.
"Massachusetts Senator Elizabeth Warren on Thursday requested a formal
investigation into why the Obama administration did not bring criminal
charges individuals and corporation involved in the 2007-2008 financial
crisis" [International Business Times]. Why now? Liz edging her hat
toward the ring if Clinton comes up lame?
I can see two possible interpretations for this.
First, as much as I hate to draw the analogy, she could be positioning
herself to take the reigns after a loss in the way that Richard Nixon, Paul
Ryan, and later Bill Clinton did. Richard Nixon sat back and concentrated
on building up credibility as Barry Goldwater melted down and then quietly
stepped in to take over the party after the loss to set up his eventual
run. Paul Ryan quietly permitted or perhaps aided the coup against Boehner.
And Bill Clinton, through the DLC teed up his control of the party after
Dukakis lost.
Second, with Wells-Fargo and bank fraud once again in the news she could
be working to keep prior decisions current both to force better action this
time or to nudge the Clinton and Trump into making promises of stronger
action in the future.
It seems to me that both those objectives would be served by continuing
to hammer on Wells Fargo, so the question "Why now?" isn't really answered
in your comment.
But if you wanted to take out an option on running a full-throated populist
campaign - and throwing bankers in jail would be wildly popular across the
entire political spectrum (except Clinton's 10%-ers on up) - in the unhappy
event that the party's candidate came up lame, then calling for an account
of regulatory decision making in 2009 would be one way to signal that. Note
also that would call Obama's "legacy" into question, too; the whole "stand
between you and the pitchforks" thing. This is a big deal.
Commissioner Ohlhausen had some pretty strong words. ... Specifically, she implies a very strong
presumption against public interference in private markets, as indicated by her argument that
there is not yet sufficient evidence that we have a monopoly problem. The argument seems to be
that we must wait until we are very, very sure, beyond any reasonable econometric doubt, apparently,
that there's something wrong before we step in. ...
She is mistaken, and she ignores roughly a library-full of well-known..., sophisticated empirical
work. ...
In the end, the irony of these remarks is captured in this point: Commissioner Ohlhausen is
pretty witheringly dismissive of a certain kind of evidence of market power, and implies that
it would not support increased enforcement unless it can overcome a high methodological bar. But
for her own countervailing evidence that in fact American markets are "fierce[ly] competiti[ve],"
she says this: "Consider the new economy, which is a hotbed of technological innovation. That
environment does not strike me as one lacking competition."
In other words, the presumption against antitrust is so strong that evidence of harm must meet
the most exacting standards of social science. To prove that markets are in fact competitive,
however, needs nothing more than seat-of-the-pants anecdotes. Again, I mean no disrespect, and
I think we have an honest difference of opinion. But this stance is not social science, and it
is not good, empirically founded public policy. It is just ideology. ...
It's definitely true that the agencies have brought a bunch of challenges to a bunch of nasty
mergers, and perhaps total enforcement numbers have gone up a bit. But that is because we are
in the midst of a merger wave in which parties have been proposing breathtakingly massive, overwhelmingly
consolidating horizontal deals. While there is a track record to be proud of in the administration's
enforcement, especially, as the commissioner observes, in the Commission's campaign against hospital
mergers, reverse-payment deals, SEP problems, and patent trolls, and who knows how many other
matters, the fact remains that by and large the administration has mostly not taken action that
any administration would not have taken, including the Reagan and both Bush administrations. ...
If we were actually serious about antitrust, which we very much should be, we would not only block
most of these mergers, but break up many of existing behemoths (like the big banks, the media
giants, Comcast, and many others).
I'm all for breaking up the behemoths when they are indeed stifling competition. The Reagan Revolution
to anti-trust was based on a contention that some mergers were about efficiency effects. I think
this argument is sometimes overblown but it is not per se false. I do object (see below) to the
weak evidence that goes like this. Collective shareholder value rose so ergo the merger is about
efficiency effects. Anyone who argues that (see Don Luskin and the premium ice cream proposed
merger) is not very bright.
Exactly. Corporations being able to suck more profit out of the costumers (and as a result share
prices rising) is the proof that anti-trust has failed. In a fully functional competitive market
companies do not make much profit.
Accounting profits? Maybe you should read that paper by the commissioner as she makes a very clear
statement about what accounting profit would look like in a competitive market. And it is not
zero. Return to capital? Hello?
No if it was zero the whole thing breaks down. However, a small return on capital is an indication
that companies are forced to cut prices because of competition- and that is a healthy market.
So yes there is (some but) not much profit in a fully functional competitive market.
Let's define "small return". Standard financial economics puts this at the risk-free rate plus
a premium for bearing systematic risk. OK - the risk-free return now is quite small. Say 2%. But
if the risk premium is say 4%, then we are talking about a 6% expected return to assets. If that
is what you mean by small - cool.
Of course I have seen a lot of "professionals" argue for much higher returns. Of course these
professionals would flunk a Finance 101 class.
I don't think the risk premium needs to be more than about 2% unless/until the economy enter a
phase where demand outstrips supply (and more investment money needs to be attracted). If there
is a glut of investment money then the price of it (=risk free returns) should go down.
This is the kind of thinking that got Hassett and Glassman to tell us about DOW 36000. Some people
overestimate the risk premium but 2% is what a regulated utility or a leasing company gets. And
neither bears commercial risk. Dude - you can make up whatever number your heart desires but there
is market evidence on these things.
Ability to better suck profit out of a captive base of customers is an efficiency of a sort. Instead
of investing in risky new business processes or technologies one merely has to buy out your competitors.
This is practically risk free.
"Though she says that "[e]fficiencies are real"-citing no evidence for it in a speech critical
of everyone else for failure to supply evidence-there is in fact no meaningful proof that consolidation
generates social benefits. Especially in the case of mergers, a large and sophisticated empirical
literature has been hunting for decades for evidence that mergers produce "efficiencies" or other
benefits. The evidence has not been found. At least with respect to deals among publicly traded
firms, the evidence tends to suggest that mergers do no good on average for shareholders of either
acquiring or target firms, and if there were some efficiencies or larger social benefits, they
should be measurable as benefits to shareholders. The empirical evidence has therefore confirmed
the popular wisdom shared on Wall Street for years-that all this activity is not serving any good
social purpose, though it might be helping executives and their bankers quite a lot."
The conservative (Reagan) approach to anti-trust did indeed ask DOJ and FTC to consider whether
the merger was about beneficial efficiency effects v. anti-competitive effects. But let's suppose
two firms merged and their collective value did rise benefiting shareholders. That does not prove
the efficiency effects dominate. No – mergers that lead to less competition will often raise shareholder
value even if there are no efficiency effects. Those mergers should be disallowed.
Proof of Monopoly Power - Verizon and ATT's pricing and apparent lack of any interest in maintaining
or even knowing where their physical plant is installed. Also - see directTV's recent price increases.
American markets are "fierce[ly] competiti[ve]," she says this: "Consider the new economy, which
is a hotbed of technological innovation. That environment does not strike me as one lacking competition."
In other words, the presumption against antitrust is so strong
"
You are assumed properly competing until proved monopoly-based. The burden of proof is on the
victims. Tell me something!
Does the government always appear as crystal clear as the mirror of Alice? When we look at
local, county, state, and federal rulers, do we always see ourselves? Our own bias? Our own agenda?
The government apes its voters.
Do you see how today's polity is begging for less competition? Less free trade from our trading
partners? Do you see how we want to make a monopoly out of America? Build a fence around it so
that nobody is allowed to buy anything from anyone other than our monopoly?
" We have identified the enemy, ourselves. " ~~Pogo~
Yes you need at least a dozen independent businesses delivering the same (substitutable) products
to ensure that there is indeed a competitive market that will not be gamed against the consumers.
This is not just needed to ensure that consumers will be offered a fair price, but also to ensure
that companies will be forced to continue to innovate and offer better and better products. The
oversight of mergers has been a scandal and needs to be tightened by new laws. Obviously we have
to make the "dozen rule" a law rather than just common sense guidance.
The dozen rule? Where did that come from? Depends on the market but I would hope we have more
than 12 suppliers of beer. BTW - it would be nice to have 12 health insurance companies but we
could break up this oligopoly with such one more - the government aka the public option.
Yes some products can benefit from more variation, but at least with 12 suppliers you would not
have anybody able to corner the market. The dozen rule is mine, that is how I get my eggs. If
Ohlhausen can just make it up - so can I.
The FTC has ignored a many major health care mergers but has gone litigation guns a blazin' into
small mergers in such less-than-major metro centers as Moscow Idaho and Toledo Ohio.
The sad fact is that the right-wing Law and Economics scholars have literally been trained to
believe that the only correct null hypothesis is "free markets are good". When the null is not
rejected with a 95% confidence interval, they actually think they've won the argument, while you're
sitting there scratching your head saying, but when the null hypothesis is "free markets are bad",
we can't reject that either. I've never seen logic get much traction with this crowd, because
they are literally willing to tell you that economics demonstrates that "free markets are good",
so that's the correct null.
It's very sad, but also very common when talking to lawyers. In fact, I often wonder whether
the right-wing didn't create the "Law and Economics" movement in order to slow the exposure of
the legal profession to the actual tools of modern economic analysis.
It would be a start if we would simply stop seeing hostile takeovers as something positive (you
know ex-ante efficiency improvements) and start seeing them for the interference in natural selection
that they actually are (no 40-40 foresight exists).
"But part of the answer lies in something Americans have a hard time
talking about: class. Trade is a class issue. The trade agreements we have
entered into over the past few decades have consistently harmed some
Americans (manufacturing workers) while just as consistently benefiting
others (owners and professionals). …
To understand "free trade" in such a way has made it difficult for people
in the bubble of the consensus to acknowledge the actual consequences of the
agreements we have negotiated over the years."
"... Despite the neoliberal obsession with wage suppression, history suggests that such a policy is self-destructive. Periods of high wages are associated with rapid technological change. ..."
"... On the ideological front, the South adopted a shallow, but rigid libertarian perspective which resembled modern neoliberalism. Samuel Johnson may have been the first person to see through the hypocrisy of the hollowness of southern libertarianism. ..."
"... the famous Powell Memo helped to spark a well-financed movement of well-finance right-wing political activism which morphed into right-wing political extremism both in economics and politics. ..."
"... In short, neoliberalism was surging ahead and the economy of high wages was now beyond the pale. These new conditions gave new force to the southern "yelps of liberty." The social safety net was taken down and reconstructed as the flag of neoliberalism. The one difference between the rhetoric of the slaveholders and that of the modern neoliberals was that entrepreneurial superiority replaced racial superiority as their battle cry. ..."
Despite the neoliberal obsession with wage suppression, history suggests
that such a policy is self-destructive. Periods of high wages are associated
with rapid technological change.
... ... ...
On the ideological front, the South adopted a shallow, but rigid libertarian
perspective which resembled modern neoliberalism. Samuel Johnson may have been
the first person to see through the hypocrisy of the hollowness of southern
libertarianism. Responding to the colonists' complaint that taxation by
the British was a form of tyranny, Samuel Johnson published his 1775 tract,
"Taxation No Tyranny: An answer to the Resolutions and Address of the American
Congress," asking the obvious question, "how is it that we hear the loudest
yelps for liberty among the drivers of Negroes?" In The Works of Samuel Johnson,
LL. D.: Political Tracts. Political Essays. Miscellaneous Essays (London: J.
Buckland, 1787): pp. 60-146, p. 142.
... ... ...
By the late 19th century, David A Wells, an industrial technician who later
became the chief economic expert in the federal government, by virtue of his
position of overseeing federal taxes. After a trip to Europe, Wells reconsidered
his strong support for protectionism. Rather than comparing the dynamism of
the northern states with the technological backward of their southern counterparts,
he was responding to the fear that American industry could not compete with
the cheap "pauper" labor of Europe. Instead, he insisted that the United States
had little to fear from, the competition from cheap labor, because the relatively
high cost of American labor would ensure rapid technological change, which,
indeed, was more rapid in the United States than anywhere else in the world,
with the possible exception of Germany. Both countries were about to rapidly
surpass England's industrial prowess.
The now-forgotten Wells was so highly regarded that the prize for the best
economics dissertation at Harvard is still known as the David A Wells prize.
His efforts gave rise to a very powerful idea in economic theory at the time,
known as "the economy of high wages," which insisted that high wages drove economic
prosperity. With his emphasis on technical change, driven by the strong competitive
pressures from high wages, Wells anticipated Schumpeter's idea of creative destruction,
except that for him, high wages rather than entrepreneurial genius drove this
process.
Although the economy of high wages remained highly influential through the
1920s, the extensive growth of government powers during World War I reignited
the antipathy for big government. Laissez-faire economics began come back into
vogue with the election of Calvin Coolidge, while the once-powerful progressive
movement was becoming excluded from the ranks of reputable economics.
... ... ...
With Barry Goldwater's humiliating defeat in his presidential campaign,
the famous Powell Memo helped to spark a well-financed movement of well-finance
right-wing political activism which morphed into right-wing political extremism
both in economics and politics. Symbolic of the narrowness of this new
mindset among economists, Milton Friedman's close associate, George Stigler,
said in 1976 that "one evidence of professional integrity of the economist is
the fact that it is not possible to enlist good economists to defend minimum
wage laws." Stigler, G. J. 1982. The Economist as Preacher and Other Essays
(Chicago: University of Chicago Press): p. 60.
In short, neoliberalism was surging ahead and the economy of high wages
was now beyond the pale. These new conditions gave new force to the southern
"yelps of liberty." The social safety net was taken down and reconstructed as
the flag of neoliberalism. The one difference between the rhetoric of the slaveholders
and that of the modern neoliberals was that entrepreneurial superiority replaced
racial superiority as their battle cry.
One final irony: evangelical Christians were at the forefront of the abolitionist
movement. Today, some of them are providing the firepower for the epidemic of
neoliberalism.
"... the US has been successful in dictating neoliberal policies, acting partly through the IMF and World Bank and partly through direct pressure. ..."
"... From roughly the mid 1930s to the mid 1970s a new "interventionist" approach replaced classical liberalism, and it became the accepted belief that capitalism requires significant state regulation in order to be viable. In the 1970s the Old Religion of classical liberalism made a rapid comeback, first in academic economics and then in the realm of public policy. ..."
"... Neoliberal theory claims that a largely unregulated capitalist system (a "free market economy" not only embodies the ideal of free individual choice but also achieves optimum economic performance with respect to efficiency, economic growth, technical progress, and distributional justice. ..."
"... The policy recommendations of neoliberalism are concerned mainly with dismantling what remains of the regulationist welfare state. ..."
"... This paper argues that the resurgence and tenacity of neoliberalism during the past two decades cannot be explained, in an instrumental fashion, by any favorable effects of neoliberal policies on capitalist economic performance. On the contrary, we will present a case that neoliberalism has been harmful for long-run capitalist economic performance, even judging economic performance from the perspective of the interests of capital. It will be argued that the resurgence and continuing dominance of neoliberalism can be explained, at least in part, by changes in the competitive structure of world capitalism, which have resulted in turn from the particular form of global economic integration that has developed in recent decades. The changed competitive structure of capitalism has altered the political posture of big business with regard to economic policy and the role of the state, turning big business from a supporter of state-regulated capitalism into an opponent of it. ..."
"... Second, the neoliberal model creates instability on the macroeconomic level by renouncing state counter-cyclical spending and taxation policies, by reducing the effectiveness of "automatic stabilizers" through shrinking social welfare programs,3 and by loosening public regulation of the financial sector. This renders the system more vulnerable to major financial crises and depressions. Third, the neoliberal model tends to intensify class conflict, which can potentially discourage capitalist investment.4 ..."
"... The evidence from GDP and labor productivity growth rates supports the claim that the neoliberal model is inferior to the state regulationist model for key dimensions of capitalist economic performance. There is ample evidence that the neoliberal model has shifted income and wealth in the direction of the already wealthy. However, the ability to shift income upward has limits in an economy that is not growing rapidly. Neoliberalism does not appear to be delivering the goods in the ways that matter the most for capitalism's long-run stability and survival. ..."
"... Once capitalism had become well established in the US after the Civil War, it entered a period of cutthroat competition and wild accumulation known as the Robber Baron era. In this period a coherent anti-interventionist liberal position emerged and became politically dominant. Despite the enormous inequalities, the severe business cycle, and the outrageous and often unlawful behavior of the Goulds and Rockefellers, the idea that government should not intervene in the economy held sway through the end of the 19th century. ..."
"... Small business has remained adamantly opposed to the big, interventionist state, from the Progressive Era through the New Deal down to the present. This division between big and small business is chronicled for the Progressive Era in Weinstein (1968). In the decades immediately following World War II one can observe this division in the divergent views of the Business Roundtable, a big business organization which often supported interventionist programs, and the US Chambers of Commerce, the premier small business organization, which hewed to an antigovernment stance. ..."
"... By contrast, the typical small business faces a daily battle for survival, which prevents attention to long-run considerations and which places a premium on avoiding the short-run costs of taxation and state regulation. This explains the radically different positions that big business and small business held regarding the proper state role in the economy for the first two-thirds of the twentieth century. ..."
"... This long-standing division between big business and small business appeared to vanish in the US starting in the 1970s. Large corporations and banks which had formerly supported foundations that advocated an active government role in the economy, such as the Brookings Institution, became big donors to neoliberal foundations such as the American Enterprise Institute and the Heritage Foundation. As a result, such right-wing foundations, which previously had to rely mainly on contributions from small business, became very wealthy and influential.10 It was big business=s desertion of the political coalition supporting state intervention and its shift to neoliberalism that rebuilt support for neoliberal theories and policies in the US, starting in the 1970s. With business now unified on economic policy, the shift was dramatic. Big grants became available for economics research having a neoliberal slant. The major media shifted their spin on political developments, and the phrase "government programs" now could not be printed except with the word "bloated" before it. ..."
"... Globalization is usually defined as an increase in the volume of cross-border economic interactions and resource flows, producing a qualitative shift in the relations between national economies and between nation-states (Baker et. al., 1998, p. 5; Kozul-Wright and Rowthorn, 1998, p. 1). Three kinds of economic interactions have increased substantially in past decades: merchandise trade flows, foreign direct investment, and cross-border financial investments. We will briefly examine each, with an eye on their effects on the competitive structure of contemporary capitalism. ..."
"... By the close of the twentieth century, capitalism had become significantly more globalized than it had been fifty years ago, and by some measures it is much more globalized than it had been at the previous peak of this process in 1913. The most important features of globalization today are greatly increased international trade, increased flows of capital across national boundaries (particularly speculative short-term capital), and a major role for large TNCs in manufacturing, extractive activities, and finance, operating worldwide yet retaining in nearly all cases a clear base in a single nation-state. ..."
"... Some analysts argue that globalization has produced a world of such economic interdependence that individual nation-states no longer have the power to regulate capital. However, while global interdependence does create difficulties for state regulation, this effect has been greatly exaggerated. Nation-states still retain a good deal of potential power vis-a-vis capitalist firms, provided that the political will is present to exercise such power. For example, even such a small country as Malaysia proved able to successfully impose capital controls following the Asian financial crisis of 1997, despite the opposition of the IMF and the US government. ..."
"... Globalization appears to be one factor that has transformed big business from a supporter to an opponent of the interventionist state. It has done so partly by producing TNCs whose tie to the domestic markets for goods and labor is limited. ..."
"... Globalization has produced a world capitalism that bears some resemblance to the Robber Baron Era in the US. Giant corporations battle one another in a system lacking well defined rules. Mergers and acquisitions abound, including some that cross national boundaries, but so far few world industries have evolved the kind of tight oligopolistic structure that would lay the basis for a more controlled form of market relations. Like the late 19th century US Robber Barons, today's large corporations and banks above all want freedom from political burdens and restraints as they confront one another in world markets.18 ..."
"... The existence of a powerful bloc of Communist-run states with an alternative "state socialist" socioeconomic system tended to push capitalism toward a state regulationist form. It reinforced the fear among capitalists that their own working classes might turn against capitalism. It also had an impact on relations among the leading capitalist states, promoting inter-state unity behind US leadership, which facilitated the creation and operation of a world-system of state-regulated capitalism.19 The demise of state socialism during 1989-91 removed one more factor that had reinforced the regulationist state. ..."
"... If state socialism re-emerged in one or more major countries, perhaps this might push the capitalist world back toward the regulationist state. However, such a development does not seem likely. Even if Russia or Ukraine at some point does head in that direction, it would be unlikely to produce a serious rival socioeconomic system to that of world capitalism. ..."
Department of Economics and Political Economy Research Institute Thompson Hall
University of Massachusetts Amherst, MA 01003 U.S.A. Telephone 413-545-1248
Fax 413-545-2921 Email [email protected] August, 2000 This paper was published
in Rethinking Marxism, Volume 12, Number 2, Summer 2002, pp. 64-79.
Research assistance was provided by Elizabeth Ramey and Deger Eryar. Research
funding was provided by the Political Economy Research Institute of the University
of Massachusetts at Amherst. Globalization and Neoliberalism 1 For some
two decades neoliberalism has dominated economic policymaking in the US and
the UK. Neoliberalism has strong advocates in continental Western Europe and
Japan, but substantial popular resistance there has limited its influence so
far, despite continuing US efforts to impose neoliberal policies on them. In
much of the Third World, and in the transition countries (except for China),
the US has been successful in dictating neoliberal policies, acting partly through
the IMF and World Bank and partly through direct pressure.
Neoliberalism is an updated version of the classical liberal economic thought
that was dominant in the US and UK prior to the Great Depression of the 1930s.
From roughly the mid 1930s to the mid 1970s a new "interventionist" approach
replaced classical liberalism, and it became the accepted belief that capitalism
requires significant state regulation in order to be viable. In the 1970s the
Old Religion of classical liberalism made a rapid comeback, first in academic
economics and then in the realm of public policy.
Neoliberalism is both a body of economic theory and a policy stance.
Neoliberal theory claims that a largely unregulated capitalist system (a "free
market economy" not only embodies the ideal of free individual choice but also
achieves optimum economic performance with respect to efficiency, economic growth,
technical progress, and distributional justice. The state is assigned a
very limited economic role: defining property rights, enforcing contracts, and
regulating the money supply.1 State intervention to correct market failures
is viewed with suspicion, on the ground that such intervention is likely to
create more problems than it solves.
The policy recommendations of neoliberalism are concerned mainly with
dismantling what remains of the regulationist welfare state. These recommendations
include deregulation of business; privatization of public activities and assets;
elimination of, or cutbacks in, social welfare programs; and reduction of taxes
on businesses and the investing class. In the international sphere, neoliberalism
calls for free movement of goods, services, capital, and money (but not people)
across national boundaries. That is, corporations, banks, and individual investors
should be free to move their property across national boundaries, and free to
acquire property across national boundaries, although free cross-border movement
by individuals is not part of the neoliberal program. How can the re-emergence
of a seemingly outdated and outmoded economic theory be explained? At first
many progressive economists viewed the 1970s lurch toward liberalism as a temporary
response to the economic instability of that decade. As corporate interests
decided that the Keynesian regulationist approach no longer worked to their
advantage, they looked for an alternative and found only the old liberal ideas,
which could at least serve as an ideological basis for cutting those state programs
viewed as obstacles to profit-making. However, neoliberalism has proved to be
more than just a temporary response. It has outlasted the late 1970s/early 1980s
right-wing political victories in the UK (Thatcher) and US (Reagan). Under a
Democratic Party administration in the US and a Labor Party government in the
UK in the 1990s, neoliberalism solidified its position of dominance.
This paper argues that the resurgence and tenacity of neoliberalism during
the past two decades cannot be explained, in an instrumental fashion, by any
favorable effects of neoliberal policies on capitalist economic performance.
On the contrary, we will present a case that neoliberalism has been harmful
for long-run capitalist economic performance, even judging economic performance
from the perspective of the interests of capital. It will be argued that the
resurgence and continuing dominance of neoliberalism can be explained, at least
in part, by changes in the competitive structure of world capitalism, which
have resulted in turn from the particular form of global economic integration
that has developed in recent decades. The changed competitive structure of capitalism
has altered the political posture of big business with regard to economic policy
and the role of the state, turning big business from a supporter of state-regulated
capitalism into an opponent of it.
The Problematic Character of Neoliberalism
Neoliberalism appears to be problematic as a dominant theory for contemporary
capitalism. The stability and survival of the capitalist system depends on its
ability to bring vigorous capital accumulation, where the latter process is
understood to include not just economic expansion but also technological progress.
Vigorous capital accumulation permits rising profits to coexist with rising
living standards for a substantial part of the population over the long-run.2
However, it does not appear that neoliberalism promotes vigorous capital accumulation
in contemporary capitalism. There are a number of reasons why one would not
expect the neoliberal model to promote rapid accumulation. First, it gives rise
to a problem of insufficient aggregate demand over the long run, stemming from
the powerful tendency of the neoliberal regime to lower both real wages and
public spending. Second, the neoliberal model creates instability on the
macroeconomic level by renouncing state counter-cyclical spending and taxation
policies, by reducing the effectiveness of "automatic stabilizers" through shrinking
social welfare programs,3 and by loosening public regulation of the financial
sector. This renders the system more vulnerable to major financial crises and
depressions. Third, the neoliberal model tends to intensify class conflict,
which can potentially discourage capitalist investment.4
The historical evidence confirms doubts about the ability of the neoliberal
model to promote rapid capital accumulation. We will look at growth rates of
gross domestic product (GDP) and of labor productivity. The GDP growth rate
provides at least a rough approximation of the rate of capital accumulation,
while the labor productivity growth rate tells us something about the extent
to which capitalism is developing the forces of production via rising ratios
of means of production to direct labor, technological advance, and improved
labor skills.5 Table 1 shows average annual real GDP growth rates for six leading
developed capitalist countries over two periods, 1950-73 and 1973-99. The first
period was the heyday of state-regulated capitalism, both within those six countries
and in the capitalist world-system as a whole. The second period covers the
era of growing neoliberal dominance. All six countries had significantly faster
GDP growth in the earlier period than in the later one.
While Japan and the major Western European economies have been relatively
depressed in the 1990s, the US is often portrayed as rebounding to great prosperity
over the past decade. Neoliberals often claim that US adherence to neoliberal
policies finally paid off in the 1990s, while the more timid moves away from
state-interventionist policies in Europe and Japan kept them mired in stagnation.
Table 2 shows GDP and labor productivity growth rates for the US economy for
three subperiods during 1948-99.6 Column 1 of Table 2 shows that GDP growth
was significantly slower in 1973-90 B a period of transition from state-regulated
capitalism to the neoliberal model in the US B than in 1948-73. While GDP growth
improved slightly in 1990-99, it remained well below that of the era of state-regulated
capitalism. Some analysts cite the fact that GDP growth accelerated after 1995,
averaging 4.1% per year during 1995-99 (US Bureau of Economic Analysis, 2000).
However, it is not meaningful to compare a short fragment of the 1990s business
cycle expansion to the longrun performance of the economy during 1948-73.7
Column 2 of Table 1 shows that the high rate of labor productivity growth
recorded in 1948- 73 fell by more than half in 1973-90. While there was significant
improvement in productivity growth in the 1990s, it remained well below the
1948-73 rate, despite the rapid spread of what should be productivity-enhancing
communication and information-management technologies during the past decade.
The evidence from GDP and labor productivity growth rates supports the
claim that the neoliberal model is inferior to the state regulationist model
for key dimensions of capitalist economic performance. There is ample evidence
that the neoliberal model has shifted income and wealth in the direction of
the already wealthy. However, the ability to shift income upward has limits
in an economy that is not growing rapidly. Neoliberalism does not appear to
be delivering the goods in the ways that matter the most for capitalism's long-run
stability and survival.
The Structure of Competition and Economic Policy
The processes through which the dominant economic ideology and policies
are selected in a capitalist system are complex and many-sided. No general rule
operates to assure that those economic policies which would be most favorable
for capitalism are automatically adopted. History suggests that one important
determinant of the dominant economic ideology and policy stance is the competitive
structure of capitalism in a given era. Specifically, this paper argues that
periods of relatively unconstrained competition tend to produce the intellectual
and public policy dominance of liberalism, while periods of relatively constrained,
oligopolistic market relations tend to promote interventionist ideas and policies.
A relation in the opposite direction also exists, one which is often commented
upon. That is, one can argue that interventionist policies promote monopoly
power in markets, while liberal policies promote greater competition. This latter
relation is not being denied here. Rather, it will be argued that there is a
normally-overlooked direction of influence, having significant historical explanatory
power, which runs from competitive structure to public policy. In the period
when capitalism first became well established in the US, during 1800-1860, the
government played a relatively interventionist role. The federal government
placed high tariffs on competing manufactured goods from Europe, and federal,
state, and local levels of government all actively financed, and in some cases
built and operated, the new canal and rail system that created a large internal
market. There was no serious debate over the propriety of public financing of
transportation improvements in that era -- the only debate was over which regions
would get the key subsidized routes.
Once capitalism had become well established in the US after the Civil
War, it entered a period of cutthroat competition and wild accumulation known
as the Robber Baron era. In this period a coherent anti-interventionist liberal
position emerged and became politically dominant. Despite the enormous inequalities,
the severe business cycle, and the outrageous and often unlawful behavior of
the Goulds and Rockefellers, the idea that government should not intervene in
the economy held sway through the end of the 19th century.
From roughly 1890 to 1903 a huge merger wave transformed the competitive
structure of US capitalism. Out of that merger wave emerged giant corporations
possessing significant monopoly power in the manufacturing, mining, transportation,
and communication sectors. US industry settled down to a more restrained form
of oligopolistic rivalry. At the same time, many of the new monopoly capitalists
began to criticize the old Laissez Faire ideas and support a more interventionist
role for the state.8 The combination of big business support for state regulation
of business, together with similar demands arising from a popular anti-monopoly
movement based among small farmers and middle class professionals, ushered in
what is called the Progressive Era, from 1900-16. The building of a regulationist
state that was begun in the Progressive Era was completed during the New Deal
era a few decades later, when once again both big business leaders and a vigorous
popular movement (this time based among industrial workers) supported an interventionist
state. Both in the Progressive Era and the New Deal, big business and the popular
movement differed about what types of state intervention were needed. Big business
favored measures to increase the stability of the system and to improve conditions
for profit-making, while the popular movement sought to use the state to restrain
the power and privileges of big business and provide greater security for ordinary
people. The outcome in both cases was a political compromise, one weighted toward
the interests of big business, reflecting the relative power of the latter in
American capitalism.
Small business has remained adamantly opposed to the big, interventionist
state, from the Progressive Era through the New Deal down to the present. This
division between big and small business is chronicled for the Progressive Era
in Weinstein (1968). In the decades immediately following World War II one can
observe this division in the divergent views of the Business Roundtable, a big
business organization which often supported interventionist programs, and the
US Chambers of Commerce, the premier small business organization, which hewed
to an antigovernment stance.
What explains this political difference between large and small business?
When large corporations achieve significant market power and become freed from
fear concerning their immediate survival, they tend to develop a long time horizon
and pay attention to the requirements for assuring growing profits over time.9
They come to see the state as a potential ally. Having high and stable monopoly
profits, they tend to view the cost of government programs as something they
can afford, given their potential benefits. By contrast, the typical small
business faces a daily battle for survival, which prevents attention to long-run
considerations and which places a premium on avoiding the short-run costs of
taxation and state regulation. This explains the radically different positions
that big business and small business held regarding the proper state role in
the economy for the first two-thirds of the twentieth century.
This long-standing division between big business and small business appeared
to vanish in the US starting in the 1970s. Large corporations and banks which
had formerly supported foundations that advocated an active government role
in the economy, such as the Brookings Institution, became big donors to neoliberal
foundations such as the American Enterprise Institute and the Heritage Foundation.
As a result, such right-wing foundations, which previously had to rely mainly
on contributions from small business, became very wealthy and influential.10
It was big business=s desertion of the political coalition supporting state
intervention and its shift to neoliberalism that rebuilt support for neoliberal
theories and policies in the US, starting in the 1970s. With business now unified
on economic policy, the shift was dramatic. Big grants became available for
economics research having a neoliberal slant. The major media shifted their
spin on political developments, and the phrase "government programs" now could
not be printed except with the word "bloated" before it.
This switch in the dominant economic model first showed up in the mid 1970s
in academic economics, as the previously marginalized Chicago School spread
its influence far beyond the University of Chicago. This was soon followed by
a radical shift in the public policy arena. In 1978- 79 the previously interventionist
Carter Administration began sounding the very neoliberal themes B deregulation
of business, cutbacks in social programs, and general fiscal and monetary austerity
B that were to become the centerpiece of Reagan Administration policies in 1981.
What caused the radical change in the political posture of big business regarding
state intervention in the economy? This paper argues that a major part of the
explanation lies in the effects of the globalization of the world capitalist
economy in the post-World War II period.
Globalization and Competition
Globalization is usually defined as an increase in the volume of cross-border
economic interactions and resource flows, producing a qualitative shift in the
relations between national economies and between nation-states (Baker et. al.,
1998, p. 5; Kozul-Wright and Rowthorn, 1998, p. 1). Three kinds of economic
interactions have increased substantially in past decades: merchandise trade
flows, foreign direct investment, and cross-border financial investments. We
will briefly examine each, with an eye on their effects on the competitive structure
of contemporary capitalism.
Table 3 shows the ratio of merchandise exports to gross domestic product
for selected years from 1820 to 1992, for the world and also for Western Europe,
the US, and Japan. Capitalism brought a five-fold rise in world exports relative
to output from 1820-70, followed by another increase of nearly three-fourths
by 1913. After declining in the interwar period, world exports reached a new
peak of 11.2% of world output in 1973, rising further to 13.5% in 1992. The
1992 figure was over fifty per cent higher than the pre-World War I peak.
Merchandise exports include physical goods only, while GDP includes services,
many of which are not tradable, as well as goods. In the twentieth century the
proportion of services in GDP has risen significantly. Table 4 shows an estimate
of the ratio of world merchandise exports to the good-only portion of world
GDP. This ratio nearly tripled during 1950-92, with merchandise exports rising
to nearly one-third of total goods output in the latter year. The 1992 figure
was 2.6 times as high as that of 1913.
Western Europe, the US, and Japan all experienced significant increases in
exports relative to GDP during 1950-92, as Table 3 shows. All of them achieved
ratios of exports to GDP far in excess of the 1913 level. While exports were
only 8.2% of the total GDP of the US in 1992, exports amounted to 22.0% of the
non-service portion of GDP that year (Economic Report of the President,
1999, pp. 338, 444).
Many analysts view foreign direct investment as the most important form of
cross-border economic interchange. It is associated with the movement of technology
and organizational methods, not just goods. Table 5 shows two measures of foreign
direct investment. Column 1 gives the outstanding stock of foreign direct investment
in the world as a percentage of world output. This measure has more than doubled
since 1975, although it is not much greater today than it was in 1913. Column
2 shows the annual inflow of direct foreign investment as a percentage of gross
fixed capital formation. This measure increased rapidly during 1975-95. However,
it is still relatively low in absolute terms, with foreign direct investment
accounting for only 5.2 per cent of gross fixed capital formation in 1995.
Not all, or even most, international capital flows take the form of direct
investment. Financial flows (such as cross-border purchases of securities and
deposits in foreign bank accounts) are normally larger. One measure that takes
account of financial as well as direct investment is the total net movement
of capital into or out of a country. That measure indicates the extent to which
capital from one country finances development in other countries. Table 6 shows
the absolute value of current account surpluses or deficits as a percentage
of GDP for 12 major capitalist countries. Since net capital inflow or outflow
is approximately equal to the current account deficit or surplus (differing
only due to errors and omissions), this indicates the size of net cross-border
capital flows. The ratio nearly doubled from 1970-74 to 1990-96, although it
remained well below the figure for 1910-14.
Cross-border gross capital movements have grown much more rapidly
than cross-border net capital movements.11 In recent times a very large
and rapidly growing volume of capital has moved back and forth across national
boundaries. Much of this capital flow is speculative in nature, reflecting growing
amounts of short-term capital that are moved around the world in search of the
best temporary return. No data on such flows are available for the early part
of this century, but the data for recent decades are impressive. During 1980-95
cross-border transactions in bonds and equities as a percentage of GDP rose
from 9% to 136% for the US, from 8% to 168% for Germany, and from 8% to 66%
for Japan (Baker et. al., 1998, p. 10). The total volume of foreign exchange
transactions in the world rose from about $15 billion per day in 1973 to $80
billion per day in 1980 and $1260 billion per day in 1995. Trade in goods and
services accounted for 15% of foreign exchange transactions in 1973 but for
less than 2% of foreign exchange transactions in 1995 (Bhaduri, 1998, p. 152).
While cross-border flows of goods and capital are usually considered to be
the best indicators of possible globalization of capitalism, changes that have
occurred over time within capitalist enterprises are also relevant. That is,
the much-discussed rise of the transnational corporation (TNC) is relevant here,
where a TNC is a corporation which has a substantial proportion of its sales,
assets, and employees outside its home country.12 TNCs existed in the pre-World
War I era, primarily in the extractive sector. In the post-World War II period
many large manufacturing corporations in the US, Western Europe, and Japan became
TNCs.
The largest TNCs are very international measured by the location of their
activities. One study found that the 100 largest TNCs in the world (ranked by
assets) had 40.4% of their assets abroad, 50.0% of output abroad, and 47.9%
of employment abroad in 1996 (Sutcliffe and Glyn, 1999, p. 125). While this
shows that the largest TNCs are significantly international in their activities,
all but a handful have retained a single national base for top officials and
major stockholders.13 The top 200 TNCs ranked by output were estimated to produce
only about 10 per cent of world GDP in 1995 (Sutcliffe and Glyn, 1999, p. 122).
By the close of the twentieth century, capitalism had become significantly
more globalized than it had been fifty years ago, and by some measures it is
much more globalized than it had been at the previous peak of this process in
1913. The most important features of globalization today are greatly increased
international trade, increased flows of capital across national boundaries (particularly
speculative short-term capital), and a major role for large TNCs in manufacturing,
extractive activities, and finance, operating worldwide yet retaining in nearly
all cases a clear base in a single nation-state.
While the earlier wave of globalization before World War I did produce a
capitalism that was significantly international, two features of that earlier
international system differed from the current global capitalism in ways that
are relevant here. First, the pre-world War I globalization took place within
a world carved up into a few great colonial empires, which meant that much of
the so-called "cross-border" trade and investment of that earlier era actually
occurred within a space controlled by a single state. Second, the high level
of world trade reached before World War I occurred within a system based much
more on specialization and division of labor. That is, manufactured goods were
exported by the advanced capitalist countries in exchange for primary products,
unlike today when most trade is in manufactured goods. In 1913 62.5% of world
trade was in primary products (Bairoch and Kozul-Wright, 1998, p. 45). By contrast,
in 1970 60.9% of world exports were manufactured goods, rising to 74.7% in 1994
(Baker et. al., 1998, p. 7).
Some analysts argue that globalization has produced a world of such economic
interdependence that individual nation-states no longer have the power to regulate
capital. However, while global interdependence does create difficulties for
state regulation, this effect has been greatly exaggerated. Nation-states still
retain a good deal of potential power vis-a-vis capitalist firms, provided that
the political will is present to exercise such power. For example, even such
a small country as Malaysia proved able to successfully impose capital controls
following the Asian financial crisis of 1997, despite the opposition of the
IMF and the US government. A state that has the political will to exercise
some control over movements of goods and capital across its borders still retains
significant power to regulate business. The more important effect of globalization
has been on the political will to undertake state regulation, rather than on
the technical feasibility of doing so. Globalization has had this effect by
changing the competitive structure of capitalism. It appears that globalization
in this period has made capitalism significantly more competitive, in several
ways. First, the rapid growth of trade has changed the situation faced by large
corporations. Large corporations that had previously operated in relatively
controlled oligopolistic domestic markets now face competition from other large
corporations based abroad, both in domestic and foreign markets. In the US the
rate of import penetration of domestic manufacturing markets was only 2 per
cent in 1950; it rose to 8% in 1971 and 16% by 1993, an 8-fold increase since
1950 (Sutcliffe and Glyn, 1999, p. 116).
Second, the rapid increase in foreign direct investment has in many cases
placed TNCs production facilities in the home markets of their foreign rivals.
General Motors not only faces import competition from Toyota and Honda but has
to compete with US-produced Toyota and Honda vehicles. Third, the increasingly
integrated and open world financial system has thrown the major banks and other
financial institutions of the leading capitalist nations increasingly into competition
with one another.
Globalization appears to be one factor that has transformed big business
from a supporter to an opponent of the interventionist state. It has done so
partly by producing TNCs whose tie to the domestic markets for goods and labor
is limited. More importantly, globalization tends to turn big business
into small business. The process of globalization has increased the competitive
pressure faced by large corporations and banks, as competition has become a
world-wide relationship.17 Even if those who run large corporations and financial
institutions recognize the need for a strong nationstate in their home base,
the new competitive pressure they face shortens their time horizon. It pushes
them toward support for any means to reduce their tax burden and lift their
regulatory constraints, to free them to compete more effectively with their
global rivals. While a regulationist state may seem to be in the interests of
big business, in that it can more effectively promote capital accumulation in
the long run, in a highly competitive environment big business is drawn away
from supporting a regulationist state.
Globalization has produced a world capitalism that bears some resemblance
to the Robber Baron Era in the US. Giant corporations battle one another in
a system lacking well defined rules. Mergers and acquisitions abound, including
some that cross national boundaries, but so far few world industries have evolved
the kind of tight oligopolistic structure that would lay the basis for a more
controlled form of market relations. Like the late 19th century US Robber Barons,
today's large corporations and banks above all want freedom from political burdens
and restraints as they confront one another in world markets.18
The above interpretation of the rise and persistence of neoliberalism attributes
it, at least in part, to the changed competitive structure of world capitalism
resulting from the process of globalization. As neoliberalism gained influence
starting in the 1970s, it became a force propelling the globalization process
further. One reason for stressing the line of causation running from globalization
to neoliberalism is the time sequence of the developments. The process of globalization,
which had been reversed to some extent by political and economic events in the
interwar period, resumed right after World War II, producing a significantly
more globalized world economy and eroding the monopoly power of large corporations
well before neoliberalism began its second coming in the mid 1970s. The rapid
rise in merchandise exports began during the Bretton Woods period, as Table
3 showed. So too did the growing role for TNC's. These two aspects of the current
globalization had their roots in the postwar era of state-regulated capitalism.
This suggests that, to some extent, globalization reflects a long-run tendency
in the capital accumulation process rather than just being a result of the rising
influence of neoliberal policies. On the other hand, once neoliberalism became
dominant, it accelerated the process of globalization. This can be seen most
clearly in the data on cross-border flows of both real and financial capital,
which began to grow rapidly only after the 1960s.
Other Factors Promoting Neoliberalism
The changed competitive structure of capitalism provides part of the explanation
for the rise from the ashes of classical liberalism and its persistence in the
face of widespread evidence of its failure to deliver the goods. However, three
additional factors have played a role in promoting neoliberal dominance. These
are the weakening of socialist movements in the industrialized capitalist countries,
the demise of state socialism, and the long period that has elapsed since the
last major capitalist economic crisis. There is space here for only some brief
comments about these additional factors.
The socialist movements in the industrialized capitalist countries have declined
in strength significantly over the past few decades. While Social Democratic
parties have come to office in several European countries recently, they no
longer represent a threat of even significant modification of capitalism, much
less the specter of replacing capitalism with an alternative socialist system.
The regulationist state was always partly a response to the fear of socialism,
a point illustrated by the emergence of the first major regulationist state
of the era of mature capitalism in Germany in the late 19th century, in response
to the world=s first major socialist movement. As the threat coming from socialist
movements in the industrialized capitalist countries has receded, so too has
to incentive to retain the regulationist state.
The existence of a powerful bloc of Communist-run states with an alternative
"state socialist" socioeconomic system tended to push capitalism toward a state
regulationist form. It reinforced the fear among capitalists that their own
working classes might turn against capitalism. It also had an impact on relations
among the leading capitalist states, promoting inter-state unity behind US leadership,
which facilitated the creation and operation of a world-system of state-regulated
capitalism.19 The demise of state socialism during 1989-91 removed one more
factor that had reinforced the regulationist state.
The occurrence of a major economic crisis tends to promote an interventionist
state, since active state intervention is required to overcome a major crisis.
The memory of a recent major crisis tends to keep up support for a regulationist
state, which is correctly seen as a stabilizing force tending to head off major
crises. As the Great Depression of the 1930s has receded into the distant past,
the belief has taken hold that major economic crises have been banished forever.
This reduces the perceived need to retain the regulationist state.
Concluding Comments
If neoliberalism continues to reign as the dominant ideology and policy stance,
it can be argued that world capitalism faces a future of stagnation, instability,
and even eventual social breakdown.20 However, from the factors that have promoted
neoliberalism one can see possible sources of a move back toward state-regulated
capitalism at some point. One possibility would be the development of tight
oligopoly and regulated competition on a world scale. Perhaps the current merger
wave might continue until, as happened at the beginning of the 20th century
within the US and in other industrialized capitalist economies, oligopoly replaced
cutthroat competition, but this time on a world scale. Such a development might
revive big business support for an interventionist state. However, this does
not seem to be likely in the foreseeable future. The world is a big place, with
differing cultures, laws, and business practices in different countries, which
serve as obstacles to overcoming the competitive tendency in market relations.
Transforming an industry=s structure so that two to four companies produce the
bulk of the output is not sufficient in itself to achieve stable monopoly power,
if the rivals are unable to communicate effectively with one another and find
common ground for cooperation. Also, it would be difficult for international
monopolies to exercise effective regulation via national governments, and a
genuine world capitalist state is not a possibility for the foreseeable future.
If state socialism re-emerged in one or more major countries, perhaps
this might push the capitalist world back toward the regulationist state. However,
such a development does not seem likely. Even if Russia or Ukraine at some point
does head in that direction, it would be unlikely to produce a serious rival
socioeconomic system to that of world capitalism.
A more likely source of a new era of state interventionism might come from
one of the remaining two factors considered above. The macro-instability of
neoliberal global capitalism might produce a major economic crisis at some point,
one which spins out of the control of the weakened regulatory authorities. This
would almost certainly revive the politics of the regulationist state. Finally,
the increasing exploitation and other social problems generated by neoliberal
global capitalism might prod the socialist movement back to life at some point.
Should socialist movements revive and begin to seriously challenge capitalism
in one or more major capitalist countries, state regulationism might return
in response to it. Such a development would also revive the possibility of finally
superceding capitalism and replacing it with a system based on human need rather
than private profit.
"... Elites can continue on the current path of pursuing integration projects and defending existing
integration, hoping to win enough popular support that their efforts are not thwarted. On the evidence
of the U.S. presidential campaign and the Brexit debate, this strategy may have run its course. ...
..."
"... I think some fellows already had this idea: "Much more promising is this idea: The promotion
of global integration can become a bottom-up rather than a top-down project" -- "Workers of the World,
Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848 ..."
"... Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of
China to Bangladesh. Like $3 an hour is just way too high for workers. ..."
"... The "populists" are raging against global trade which benefits the world poor. The Very Serious
economists know what is really going on and have to interests of the poor at heart. Plus they are smarter
than the "populists" who are just dumb hippies. ..."
"... And what about neocolonialism and debt slavery ? http://historum.com/blogs/solidaire/245-debt-slavery-neo-colonialism-neoliberalism.html
..."
"... International debtors are the modern colonialists, sucking the marrow of countries; no armies
are needed anymore to keep those countries subjugated. Debt is the modern instrument of enslavement,
the international banks, corporations and hedge funds the modern colonial powers, and its enforcers
are instruments like the Global Bank, the IMF, and the corrupt, collaborationist governments (and totalitarian
regimes) of those countries, supported and propped up by these neo-colonials. ..."
"... Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious,
planned attack on homogeneous societies in Western Europe, the US, and now Japan? ..."
"... The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically
a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans
to get into the US -- but easier for non-Europeans. Now why would that be? Hmm .... ..."
"... The only trade that is actually free is trade not covered by laws and/or treaties. All other
trade is regulated trade. ..."
"... Here's a good rule to follow. When someone calls something the exact opposite of what it is,
in all probability they are trying to hustle your wallet. ..."
"... ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's group,
just like "COMMUNISM!!!!" to control people. To manipulate them. ..."
"... Guys, the bourgeois state is a protection racket and always has been. It makes you feel safe,
secure and "feel like man". So we can enjoy every indulgent individual lust the world has to offer.
Then comes in dialectics of what that protection racket should do. ..."
"... To me, the bourgeois state is nothing more than a protection racket for the rich, something
you should not forget. ..."
"... I find it rather precious that Summers pretends not to understand why people hate TPP. I do
not think there is any real widespread antipathy toward global integration, though it does pose some
rather substantial systemic dangers, as we saw in the global financial collapse. What people, including
me, oppose is how that integration is structured. These agreements are about is not "free trade", but
removing all restrictions on global capital and that is a big problem. ..."
"... TPP is not free trade. It is protectionism for the rich. ..."
"... All or most modern "free trade" agreements are like that. What people oppose is agreements
which impoverish them and enrich capital. ..."
"... More free trade arrangement are not always better trade arrangements. People have seen the
results of the labor race to the bottom caused by earlier free trade agreements; and now they are guessing
we're going to get the same kind of race to the bottom with TPP when we have to put all of our environmental
laws and other domestic regulations into capitalist competition with backward countries. ..."
"... progressive states (WA, OR, CA, NV, IL, NY, MD) could simply treat union busting the same way
any OTHER major muscling or manipulation of the free market is treated: make it a felony. ..."
"... Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and
environmental groups -- sounds great to me, but I can't for the life of me figure out why the goods
and service producers (i.e. capital owners) would have any incentive to promote trade under such a negotiated
trade agreement... or that trade would actually occur. You'd have to eliminate private enterprise incentives
to profit I think.. not something the U.S.'s "individualism" god can't tolerate. ..."
"... Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either increased
global trade is irrelevant to war and peace, or World War I didn't happen. Your pick which to believe.
..."
What's behind the revolt against global integration? : Since the end of World War II, a broad
consensus in support of global economic integration as a force for peace and prosperity has been
a pillar of the international order. ...
This broad program of global integration has been more successful than could reasonably have
been hoped. ... Yet a revolt against global integration is underway in the West. ...
One substantial part of what is behind the resistance is a lack of knowledge. ...The core of
the revolt against global integration, though, is not ignorance. It is a sense - unfortunately
not wholly unwarranted - that it is a project being carried out by elites for elites, with little
consideration for the interests of ordinary people. ...
Elites can continue on the current path of pursuing integration projects and defending
existing integration, hoping to win enough popular support that their efforts are not thwarted.
On the evidence of the U.S. presidential campaign and the Brexit debate, this strategy may have
run its course. ...
Much more promising is this idea: The promotion of global integration can become a bottom-up
rather than a top-down project. The emphasis can shift from promoting integration to managing
its consequences. This would mean a shift from international trade agreements to international
harmonization agreements, whereby issues such as labor rights and environmental protection would
be central, while issues related to empowering foreign producers would be secondary. It would
also mean devoting as much political capital to the trillions of dollars that escape taxation
or evade regulation through cross-border capital flows as we now devote to trade agreements. And
it would mean an emphasis on the challenges of middle-class parents everywhere who doubt, but
still hope desperately, that their kids can have better lives than they did.
I think some fellows already had this idea: "Much more promising is this idea: The promotion
of global integration can become a bottom-up rather than a top-down project" -- "Workers of the
World, Unite. You have nothing to lose but your chains!" ~Marx/Engels, 1848
Krugman sort of said this when he saw that apparel multinationals were shifting jobs out of
China to Bangladesh. Like $3 an hour is just way too high for workers.
A large part of the concern over free trade comes from the weak economic performances around the
globe. Summers could have addressed this. Jared Bernstein and Dean Baker - both sensible economists
- for example recently called on the US to do its own currency manipulation so as to reverse the
US$ appreciation which is lowering our net exports quite a bit.
What they left out is the fact that both China and Japan have seen currency appreciations as
well. If we raise our net exports at their expense, that lowers their economic activity. Better
would be global fiscal stimulus. I wish Larry had raised this issue here.
The "populists" are raging against global trade which benefits the world poor. The Very Serious
economists know what is really going on and have to interests of the poor at heart. Plus they
are smarter than the "populists" who are just dumb hippies.
One of the most fundamental reasons for the poverty and underdevelopment of Africa (and of
almost all "third world" countries) is neo-colonialism, which in modern history takes the shape
of external debt.
When countries are forced to pay 40,50,60% of their government budgets just to pay the interests
of their enormous debts, there is little room for actual prosperity left.
International debtors are the modern colonialists, sucking the marrow of countries; no
armies are needed anymore to keep those countries subjugated. Debt is the modern instrument of
enslavement, the international banks, corporations and hedge funds the modern colonial powers,
and its enforcers are instruments like the Global Bank, the IMF, and the corrupt, collaborationist
governments (and totalitarian regimes) of those countries, supported and propped up by these neo-colonials.
In reality, not much has changed since the fall of the great colonial empires. In paper, countries
have gained their sovereignty, but in reality they are enslaved to the international credit system.
The only thing that has changed, is that now the very colonial powers of the past, are threatened
to become debt colonies themselves. You see, global capitalism and credit system has no country,
nationality, colour; it only recognises the colour of money, earned at all cost by the very few,
on the expense of the vast, unsuspected and lulled masses.
Debt had always been a very efficient way of control, either on a personal, or state level.
And while most of us are aware of the implementations of personal debt and the risks involved,
the corridors of government debt are poorly lit, albeit this kind of debt is affecting all citizens
of a country and in ways more profound and far reaching into the future than those of private
debt.
Global capitalism was flourishing after WW2, and reached an apex somewhere in the 70's.
The lower classes in the mature capitalist countries had gained a respectable portion of the
distributed wealth, rights and privileges inconceivable several decades before. The purchasing
power of the average American for example, was very satisfactory, fully justifying the American
dream. Similar phenomena were taking place all over the "developed" world.
Cover your a$$ much Larry? No mention of mass immigration? No mention of the elites' conscious,
planned attack on homogeneous societies in Western Europe, the US, and now Japan?
There is of course no reasonable answering to prejudice, since prejudice is always unreasonable,
but should there be a question, when was the last time that, say, the United States or the territory
that the US now covers was a homogeneous society?
Before the US engulfed Spanish peoples? Before the US engulfed African peoples? Before the
US engulfed Indian peoples? When did the Irish, just to think of a random nationality, ruin "our"
homogeneity?
I could continue, but how much of a point is there in being reasonable?
The US was 88% European as of 1960. As of 1800 it was like 90% English. So yes, it was basically
a homogeneous society prior to the immigration act of 1965. Today it is extremely hard for Europeans
to get into the US -- but easier for non-Europeans. Now why would that be? Hmm ....
ISIS was invented by Wall Street who financed them. ISIS is a scam, just like Bin Laden's
group, just like "COMMUNISM!!!!" to control people. To manipulate them.
It is like using the internet to think you are "edgy". Some dudes like psuedo-science scam
artist Mike Adams are uncovering secrets to this witty viewer............then you wonder why society
is degenerating. What should happen with Mike Adams is, he should be beaten up and castrated.
My guess he would talk then. Boy would his idiot followers get a surprise and that surprise would
have results other than "poor mikey, he was robbed".
This explains why guys like Trump get delegates. Not because he uses illegal immigrants in
his old businesses, not because of some flat real wages going over 40 years, not because he is
a conman marketer.........he makes them feel safe. That is purely it. I think its pathetic, but
that is what happens in a emasculated world. Safety becomes absolute concern. "Trump makes me
feel safe".
Guys, the bourgeois state is a protection racket and always has been. It makes you feel
safe, secure and "feel like man". So we can enjoy every indulgent individual lust the world has
to offer. Then comes in dialectics of what that protection racket should do.
To me, the bourgeois state is nothing more than a protection racket for the rich, something
you should not forget.
I find it rather precious that Summers pretends not to understand why people hate TPP. I do
not think there is any real widespread antipathy toward global integration, though it does pose
some rather substantial systemic dangers, as we saw in the global financial collapse. What people,
including me, oppose is how that integration is structured. These agreements are about is not
"free trade", but removing all restrictions on global capital and that is a big problem.
Actually, this is my first actual response to the post itself, but you were too busy being and
a*****e to notice. All or most modern "free trade" agreements are like that. What people oppose
is agreements which impoverish them and enrich capital.
This has become a popular line, and it's not exactly false. But so what if it were a "free trade"
agreement? More free trade arrangement are not always better trade arrangements. People have
seen the results of the labor race to the bottom caused by earlier free trade agreements; and
now they are guessing we're going to get the same kind of race to the bottom with TPP when we
have to put all of our environmental laws and other domestic regulations into capitalist competition
with backward countries.
" The promotion of global integration can become a bottom-up rather than a top-down project. "
" ... whereby issues such as labor rights and environmental protection would be central ...
"
+1
Now if we could just adopt that policy internally in the United States first we could then
(and only then) support it externally across the world.
Easy approach: (FOR THE TEN MILLIONTH TIME!) progressive states (WA, OR, CA, NV, IL, NY,
MD) could simply treat union busting the same way any OTHER major muscling or manipulation of
the free market is treated: make it a felony. FYI (for those who are not aware) states can
add to federal labor protections, just not subtract.
A completely renewed, re-constituted democracy would be born.
Biggest obstacle to this being done in my (crackpot?) view: human males. Being instinctive
pack hunters, before they check out any idea they, first, check in with the pack (all those other
boys who are also checking in with the pack) -- almost automatically infer impossibility to overcome
what they see (correctly?) as wheels within wheels of inertia.
Self-fulfilling prophecy: nothing (not the most obvious, SHOULD BE easiest possible to get
support for actions) ever gets done.
I'm not the only one seeking a new path forward on trade.
by Jared Bernstein
April 11th, 2016 at 9:20 am
"...
Here's Larry's view of the way forward:
"The promotion of global integration can become a bottom-up rather than a top-down project.
The emphasis can shift from promoting integration to managing its consequences. This would
mean a shift from international trade agreements to international harmonization agreements,
whereby issues such as labor rights and environmental protection would be central, while issues
related to empowering foreign producers would be secondary. It would also mean devoting as
much political capital to the trillions of dollars that escape taxation or evade regulation
through cross-border capital flows as we now devote to trade agreements. And it would mean
an emphasis on the challenges of middle-class parents everywhere who doubt, but still hope
desperately, that their kids can have better lives than they did.
Good points, all. "Bottom-up" means what I've been calling a more representative, inclusive
process. But what's this about "international harmonization?""
It's a way of saying that we need to reduce the "frictions" and thus costs between trading
partners at the level of pragmatic infrastructure, not corporate power. One way to think of
this is TFAs, not FTAs. TFAs are trade facilitation agreements, which are more about integrating
ports, rail, and paperwork than patents that protect big Pharma.
It's refreshing to see mainstreamers thinking creatively about the anger that's surfaced
around globalization. Waiting for the anger to dissipate and then reverting back to the old
trade regimes may be the preferred path for elites, but that path may well be blocked. We'd
best clear a new, wider path, one that better accommodates folks from all walks of life, both
here and abroad."
Summers: "Pie in the Sky" So trade negotiations would have to be lead by labor advocates and
environmental groups -- sounds great to me, but I can't for the life of me figure out why the
goods and service producers (i.e. capital owners) would have any incentive to promote trade under
such a negotiated trade agreement... or that trade would actually occur. You'd have to eliminate
private enterprise incentives to profit I think.. not something the U.S.'s "individualism" god
can't tolerate.
Imagine a trade deal negotiated by the AFL-CIO. Labor wins a lot and capital owners lose a little.
We can all then smile and say to the latter - go get your buddies in Congress more serious about
the compensation principle. Turn the table!
"consensus in support of global economic integration as a force for peace and prosperity " --
"The Great Illusion" (
https://en.m.wikipedia.org/wiki/The_Great_Illusion
)
That increased trade is a bulwark against war rears its ugly head again. The above book which
so ironically delivered the message was published in 1910.
Alas, the Kaiser, the Tsar, and the Emperor did not act in accord with its tenets. Either
increased global trade is irrelevant to war and peace, or World War I didn't happen. Your pick
which to believe.
Our problems began back in the 1970s when we abandoned the Bretton Woods international capital
controls and then broke the unions, cut taxes on corporations and upper income groups, and deregulated
the financial system. This eventually led a stagnation of wages in the US and an increase in the
concentration of income at the top of the income distribution throughout the world:
http://www.rwEconomics.com/Ch_1.htm
When combined with tax cuts and financial deregulation it led to increasing debt relative to
income in the importing countries that caused the financial catastrophe we went through in 2008,
the economic stagnation that followed, and the social unrest we see throughout the world today.
This, in turn, created a situation in which the full utilization of our economic resources can
only be maintained through an unsustainable increase in debt relative to income:
http://www.rwEconomics.com/htm/WDCh3e.htm
This is what has to be overcome if we are to get out of the mess the world is in today, and
it's not going to be overcome by pretending that it's just going to go away if people can just
become educated about the benefits of trade. At least that's not the way it worked out in the
1930s: http://www.rwEconomics.com/LTLGAD.htm
"... From Tunis to Tel Aviv, Madrid to Oakland, a new generation of youth activists is challenging the neoliberal state that has dominated the world ever since the Cold War ended. ..."
"... young rebels are reacting to a single stunning worldwide development: the extreme concentration of wealth in a few hands thanks to neoliberal policies of deregulation and union busting. They have taken to the streets, parks, plazas and squares to protest against the resulting corruption, the way politicians can be bought and sold, and the impunity ..."
"... In the "glorious thirty years" after World War II, North America and Western Europe achieved remarkable rates of economic growth and relatively low levels of inequality for capitalist societies, while instituting a broad range of benefits for workers, students and retirees. From roughly 1980 on, however, the neoliberal movement, rooted in the laissez-faire economic theories of Milton Friedman, launched what became a full-scale assault on workers' power and an attempt, often remarkably successful, to eviscerate the social welfare state. ..."
"... "Washington consensus" meant that the urge to impose privatisation on stagnating, nepotistic postcolonial states would become the order of the day. ..."
"... While neoliberalism has produced more unequal societies throughout the world, nowhere else has the income of the poor declined quite so strikingly. The concentration of wealth in a few hands profoundly contradicts the founding principles of Israel's Labour Zionism, and results from decades of right-wing Likud policies punishing the poor and middle classes and shifting wealth to the top of society. ..."
"... Juan Cole is the Richard P. Mitchell Professor of History and the director of the Centre for South Asian Studies at the University of Michigan. His latest book, ..."
"... Engaging the Muslim World , is just out in a revised paperback edition from Palgrave Macmillan. He runs the Informed Comment website. ..."
"... A version of this article was first published on Tom Dispatch . ..."
"... The views expressed in this article are the author's own and do not necessarily reflect Al Jazeera's editorial policy. ..."
ANN ARBOR, MICHIGAN - From Tunis to Tel Aviv, Madrid to Oakland, a new
generation of youth activists is challenging the neoliberal state that has dominated
the world ever since the Cold War ended. The massive popular protests that
shook the globe this year have much in common, though most of the reporting
on them in the mainstream media has obscured the similarities.
Whether in Egypt or the United States, young rebels are reacting to a
single stunning worldwide development: the extreme concentration of wealth in
a few hands thanks to neoliberal policies of deregulation and union busting.
They have taken to the streets, parks, plazas and squares to protest against
the resulting corruption, the way politicians can be bought and sold, and the
impunity
ANN ARBOR, MICHIGAN - From Tunis to Tel Aviv, Madrid to
Oakland, a new generation of youth activists is challenging the neoliberal state
that has dominated the world ever since the Cold War ended. The massive popular
protests that shook the globe this year have much in common, though most of
the reporting on them in the mainstream media has obscured the similarities.
Whether in Egypt or the United States, young rebels are reacting to a single
stunning worldwide development: the extreme concentration of wealth in a few
hands thanks to neoliberal policies of deregulation and union busting. They
have taken to the streets, parks, plazas and squares to protest against the
resulting corruption, the way politicians can be bought and sold, and the impunity
of the white-collar criminals who have run riot in societies everywhere. They
are objecting to high rates of unemployment, reduced social services, blighted
futures and above all the substitution of the market for all other values as
the matrix of human ethics and life.
Pasha the Tiger
In the "glorious thirty years" after World War II, North America and
Western Europe achieved remarkable rates of economic growth and relatively low
levels of inequality for capitalist societies, while instituting a broad range
of benefits for workers, students and retirees. From roughly 1980 on, however,
the neoliberal movement, rooted in the laissez-faire economic theories of Milton
Friedman, launched what became a full-scale assault on workers' power and an
attempt, often remarkably successful, to eviscerate the social welfare state.
Neoliberals chanted the mantra that everyone would benefit if the public
sector were privatised, businesses deregulated and market mechanisms allowed
to distribute wealth. But as economist David Harvey
argues, from the beginning it was a doctrine that primarily benefited the
wealthy, its adoption allowing the top one per cent in any neoliberal society
to capture a disproportionate share of whatever wealth was generated.
In the global South, countries that gained their independence from European
colonialism after World War II tended to create large public sectors as part
of the process of industrialization. Often, living standards improved as a result,
but by the 1970s, such developing economies were generally experiencing a levelling-off
of growth. This happened just as neoliberalism became ascendant in Washington,
Paris and London as well as in Bretton Woods institutions like the International
Monetary Fund. This "Washington consensus" meant that the urge to impose
privatisation on stagnating, nepotistic postcolonial states would become the
order of the day.
Egypt and Tunisia, to take two countries in the spotlight for sparking the
Arab Spring, were successfully pressured in the 1990s to privatise their relatively
large public sectors. Moving public resources into the private sector created
an almost endless range of opportunities for staggering levels of corruption
on the part of the ruling families of autocrats
Zine El Abidine Ben Ali in Tunis and
Hosni Mubarak in Cairo. International banks, central banks and emerging
local private banks aided and abetted their agenda.
It was not surprising then that one of the first targets of Tunisian crowds
in the course of the revolution they made last January was the
Zitouna bank, a branch of which they torched. Its owner? Sakher El Materi,
a son-in-law of President Ben Ali and the notorious owner of
Pasha, the well-fed pet tiger that prowled the grounds of one of his sumptuous
mansions. Not even the way his outfit sought legitimacy by practicing "Islamic
banking" could forestall popular rage. A 2006 State Department cable released
by WikiLeaks
observed, "One local financial expert blames the [Ben Ali] Family for chronic
banking sector woes due to the great percentage of non-performing loans issued
through crony connections, and has essentially paralysed banking authorities
from genuine recovery efforts." That is, the banks were used by the regime to
give away money to his cronies, with no expectation of repayment.
Tunisian activists similarly directed their ire at foreign banks and lenders
to which their country owes $14.4bn. Tunisians are still railing and rallying
against the repayment of all that money, some of which they believe was
borrowed profligately by the corrupt former regime and then squandered quite
privately.
Tunisians had their own one per cent, a thin commercial elite,
half of whom were related to or closely connected to President Ben Ali.
As a group, they were accused by young activists of mafia-like, predatory practices,
such as demanding pay-offs from legitimate businesses, and discouraging foreign
investment by tying it to a stupendous system of bribes. The closed, top-heavy
character of the Tunisian economic system was blamed for the bottom-heavy waves
of suffering that followed: cost of living increases that hit people on fixed
incomes or those like students and peddlers in the marginal economy especially
hard.
It was no happenstance that the young man who
immolated himself and so sparked the Tunisian rebellion was a hard-pressed
vegetable peddler. It's easy now to overlook what clearly ties the beginning
of the Arab Spring to the European Summer and the present American Fall: the
point of the Tunisian revolution was not just to gain political rights, but
to sweep away that one per cent, popularly imagined as a sort of dam against
economic opportunity.
Tahrir Square, Zuccotti Park, Rothschild Avenue
The success of the Tunisian revolution in removing the octopus-like Ben Ali
plutocracy inspired the dramatic events in Egypt, Libya, Yemen, Syria and even
Israel that are redrawing the political map of the Middle East. But the 2011
youth protest movement was hardly contained in the Middle East. Estonian-Canadian
activist Kalle Lasn and his anti-consumerist colleagues at the Vancouver-based
Adbusters Media Foundation
were inspired by the success of the revolutionaries in Tahrir Square in
deposing dictator Hosni Mubarak.
Their organisation specialises in combatting advertising culture through
spoofs and pranks. It was Adbusters magazine that sent out the call
on Twitter in the summer of 2011 for a rally at Wall Street on September 17,
with the now-famous hash tag #OccupyWallStreet. A thousand protesters gathered
on the designated date, commemorating the 2008 economic meltdown that had thrown
millions of Americans out of their jobs and their homes. Some camped out in
nearby Zuccotti Park, another unexpected global spark for protest.
The Occupy Wall Street movement has now spread throughout the United States,
sometimes in the face of serious acts of repression, as in
Oakland, California. It has followed in the spirit of the Arab and European
movements in demanding an end to special privileges for the richest one per
cent, including their ability to more or less buy the US government for purposes
of their choosing. What is often forgotten is that the Ben Alis, Mubaraks and
Gaddafis were not simply authoritarian tyrants. They were the one per
cent and the guardians of the one per cent, in their own societies - and loathed
for exactly that.
Last April, around the time that Lasn began imagining Wall Street protests,
progressive activists in Israel started planning their own movement. In July,
sales clerk and aspiring filmmaker Daphne Leef found herself
unable
to cover a sudden rent increase on her Tel Aviv apartment. So she started
a protest Facebook page similar to the ones that fuelled the Arab Spring and
moved into a tent on the posh Rothschild Avenue where she was soon joined by
hundreds of other protesting Israelis. Week by week, the demonstrations grew,
spreading to cities throughout the country and
culminating on September 3 in a massive rally, the largest in Israel's history.
Some 300,000 protesters came out in Tel Aviv, 50,000 in Jerusalem and 40,000
in Haifa. Their demands
included not just lower housing costs, but a rollback of neoliberal policies,
less regressive taxes and more progressive, direct taxation, a halt to the privatisation
of the economy, and the funding of a system of inexpensive education and child
care.
Many on the left in Israel are also
deeply troubled by the political and economic power of right-wing settlers
on the West Bank, but most decline to bring the Palestinian issue into the movement's
demands for fear of losing support among the middle class. For the same reason,
the way the Israeli movement was inspired by Tahrir Square and the Egyptian
revolution has been downplayed, although
"Walk like an Egyptian" signs - a reference both to the Cairo demonstrations
and the 1986 Bangles hit song - have been spotted on Rothschild Avenue.
Most of the Israeli activists in the coastal cities know that they are victims
of the same neoliberal order that displaces the Palestinians, punishes them
and keeps them stateless. Indeed, the Palestinians, altogether lacking a state
but at the complete mercy of various forms of international capital controlled
by elites elsewhere, are the ultimate victims of the neoliberal order. But in
order to avoid a split in the Israeli protest movement, a quiet agreement was
reached to focus on economic discontents and so avoid the divisive issue of
the much-despised West Bank settlements.
There has been little reporting in the Western press about a key source of
Israeli unease, which was palpable to me when I visited the country in May.
Even then, before the local protests had fully hit their stride, Israelis I
met were complaining about the rise to power of an Israeli one per cent. There
are now
16 billionaires in the country, who control $45bn in assets, and the current
crop of 10,153 millionaires is 20 per cent larger than it was in the previous
fiscal year. In terms of its distribution of wealth, Israel is now among the
most unequal of the countries in the Organisation for Economic Cooperation
and Development. Since the late 1980s, the average household income of families
in the bottom fifth of the population has been declining at an annual rate of
1.1 per cent. Over the same period, the average household income of families
among the richest 20 per cent went up at an annual rate of 2.4 per cent.
While neoliberalism has produced more unequal societies throughout the
world, nowhere else has the income of the poor declined quite so strikingly.
The concentration of wealth in a few hands profoundly contradicts the founding
principles of Israel's Labour Zionism, and results from decades of right-wing
Likud policies punishing the poor and middle classes and shifting wealth to
the top of society.
The indignant ones
European youth were also inspired by the Tunisians and Egyptians - and by
a similar flight of wealth. I was in Barcelona on May 27, when the police attacked
demonstrators camped out at the Placa de Catalunya, provoking widespread consternation.
The government of the region is currently led by the centrist Convergence and
Union Party, a moderate proponent of Catalan nationalism. It is relatively popular
locally, and so Catalans had not expected such heavy-handed police action to
be ordered. The crackdown, however, underlined the very point of the protesters,
that the neoliberal state, whatever its political makeup, is protecting the
same set of wealthy miscreants.
Spain's "indignados" (indignant ones) got
their start in mid-May with huge protests at Madrid's Puerta del Sol Plaza
against the country's persistent 21 per cent unemployment rate (and double that
among the young). Egyptian activists in Tahrir Square
immediately sent a statement of warm support to those in the Spanish capital
(as they would months later to New York's demonstrators). Again following the
same pattern, the Spanish movement does not restrict its objections to unemployment
(and the lack of benefits attending the few new temporary or contract jobs that
do arise). Its targets are the banks, bank bailouts, financial corruption and
cuts in education and other services.
Youth activists I met in Toledo and Madrid this summer
denounced
both of the country's major parties and, indeed, the very consumer society that
emphasised wealth accumulation over community and material acquisition over
personal enrichment. In the past two months Spain's young protesters have concentrated
on demonstrating against cuts to education, with crowds of 70,000 to 90,000
coming out more than once in Madrid and tens of thousands in other cities. For
marches in support of the Occupy Wall Street movement,
hundreds of thousands reportedly took to the streets of Madrid and Barcelona,
among other cities.
The global reach and connectedness of these movements has yet to be fully
appreciated. The Madrid education protesters, for example, cited for inspiration
Chilean students who, through persistent, innovative, and large-scale demonstrations
this summer and fall, have forced that country's neoliberal government, headed
by the increasingly unpopular billionaire president Sebastian Pinera, to inject
$1.6bn in new money into education. Neither the crowds of youth in Madrid nor
those in Santiago are likely to be mollified, however, by new dorms and laboratories.
Chilean students have
already moved on from insisting on an end to an ever more expensive class-based
education system to demands that the country's lucrative copper mines be nationalised
so as to generate revenues for investment in education. In every instance, the
underlying goal of specific protests by the youthful reformists is the neoliberal
order itself.
The word "union" was little uttered in American television news coverage
of the revolutions in Tunisia and Egypt, even though factory workers and sympathy
strikes of all sorts played a
key role in them. The right-wing press in the US actually went out of its
way to contrast Egyptian demonstrations against Mubarak with the Wisconsin rallies
of government workers against Governor Scott Walker's measure to cripple the
bargaining power of their unions.
The Egyptians, Commentary typically
wrote,
were risking their lives, while Wisconsin's union activists were taking the
day off from cushy jobs to parade around with placards, immune from being fired
for joining the rallies. The implication: the Egyptian revolution was against
tyranny, whereas already spoiled American workers were demanding further coddling.
The American right has never been interested in recognising this reality:
that forbidding unions and strikes is a form of tyranny. In fact, it wasn't
just progressive bloggers who saw a connection between Tahrir Square and Madison.
The head of the newly formed independent union federation in Egypt dispatched
an
explicit expression of solidarity to the Wisconsin workers, centering on
worker's rights.
At least,Commentary did us one favour: it clarified
why the story has been told as it has in most of the American media. If the
revolutions in Tunisia, Egypt and Libya were merely about individualistic political
rights - about the holding of elections and the guarantee of due process - then
they could be depicted as largely irrelevant to politics in the US and Europe,
where such norms already prevailed.
If, however, they centered on economic rights (as they certainly did), then
clearly the discontents of North African youth when it came to plutocracy, corruption,
the curbing of workers' rights, and persistent unemployment deeply resembled
those of their American counterparts.
The global protests of 2011 have been cast in the American media largely
as an "Arab Spring" challenging local dictatorships - as though Spain, Chile
and Israel do not exist. The constant speculation by pundits and television
news anchors in the US about whether "Islam" would benefit from the Arab Spring
functioned as an Orientalist way of marking events in North Africa as alien
and vaguely menacing, but also as not germane to the day to day concerns of
working Americans. The inhabitants of Zuccotti Park in lower Manhattan clearly
feel differently.
Facebook flash mobs
If we focus on economic trends, then the neoliberal state looks eerily similar,
whether it is a democracy or a dictatorship, whether the government is nominally
right of centre or left of centre. As a package, deregulation, the privatisation
of public resources and firms, corruption and forms of insider trading and interference
in the ability of workers to organise or engage in collective bargaining have
allowed the top one per cent in Israel, just as in Tunisia or the US, to capture
the lion's share of profits from the growth of the last decades.
Observers were puzzled by the huge crowds that turned out in both Tunis and
Tel Aviv in 2011, especially given that economic growth in those countries had
been running at a seemingly healthy five per cent per annum. "Growth", defined
generally and without regard to its distribution, is the answer to a neoliberal
question. The question of the 99 per cent, however, is: Who is getting the increased
wealth? In both of those countries, as in the US and other neoliberal lands,
the answer is: disproportionately the one per cent.
If you were wondering why outraged young people around the globe are chanting
such similar slogans and using such similar tactics (including Facebook "flash
mobs"), it is because they have seen more clearly than their elders through
the neoliberal shell game.
Juan Cole is the Richard P. Mitchell Professor of History and
the director of the Centre for South Asian Studies at the University of Michigan.
His latest book,
Engaging the Muslim World, is just out in a revised paperback edition from
Palgrave Macmillan. He runs the
Informed Comment website.
A version of this article was first published on
Tom Dispatch.
The views expressed in this article are the author's own and
do not necessarily reflect Al Jazeera's editorial policy.
Yet another response [ to globalization] is that I term 21stcentury fascism.The ultra-right is an insurgent force in many countries. In broad strokes,
this project seeks to fuse reactionary political power with transnational capital
and to organise a mass base among historically privileged sectors of the global
working class – such as white workers in the North and middle layers in the
South – that are now experiencing heightened insecurity and the specter of downward
mobility. It involves militarism, extreme masculinisation, homophobia, racism
and racist mobilisations, including the search for scapegoats, such as immigrant
workers and, in the West, Muslims. Twenty-first century fascism evokes mystifying
ideologies, often involving race/culture supremacy and xenophobia, embracing an
idealised and mythical past. Neo-fascist culture normalises and glamorises warfare
and social violence, indeed, generates a fascination with domination that is portrayed
even as heroic.
Notable quotes:
"... over-accumulation ..."
"... Cyclical crises ..."
"... . Structural crises ..."
"... systemic crisis ..."
"... social reproduction. ..."
"... crisis of humanity ..."
"... 1984 has arrived; ..."
"... The crisis has resulted in a rapid political polarisation in global society. ..."
"... In broad strokes, this project seeks to fuse reactionary political power with transnational capital and to organise a mass base among historically privileged sectors of the global working class ..."
"... It involves militarism, extreme masculinisation, homophobia, racism and racist mobilisations, including the search for scapegoats, such as immigrant workers and, in the West, Muslims. ..."
"... Neo-fascist culture normalises and glamorises warfare and social violence, indeed, generates a fascination with domination that is portrayed even as heroic. ..."
World capitalism is experiencing the worst crisis in its 500 year history.
Global capitalism is a qualitatively new stage in the open ended evolution of
capitalism characterised by the rise of transnational capital, a transnational
capitalist class, and a transnational state. Below, William I. Robinson argues
that the global crisis is structural and threatens to become systemic, raising
the specter of collapse and a global police state in the face of ecological
holocaust, concentration of the means of violence, displacement of billions,
limits to extensive expansion and crises of state legitimacy, and suggests that
a massive redistribution of wealth and power downward to the poor majority of
humanity is the only viable solution.
The New Global Capitalism and the 21st Century Crisis
The world capitalist system is arguably experiencing the worst crisis in
its 500 year history. World capitalism has experienced a profound restructuring
through globalisation over the past few decades and has been transformed in
ways that make it fundamentally distinct from its earlier incarnations. Similarly,
the current crisis exhibits features that set it apart from earlier crises of
the system and raise the stakes for humanity. If we are to avert disastrous
outcomes we must understand both the nature of the new global capitalism and
the nature of its crisis. Analysis of capitalist globalisation provides a template
for probing a wide range of social, political, cultural and ideological processes
in this 21st century. Following Marx, we want to focus on the internal dynamics
of capitalism to understand crisis. And following the global capitalism perspective,
we want to see how capitalism has qualitatively evolved in recent decades.
The system-wide crisis we face is not a repeat of earlier such episodes such
as that of the the 1930s or the 1970s precisely because capitalism is fundamentally
different in the 21st century. Globalisation constitutes a qualitatively new
epoch in the ongoing and open-ended evolution of world capitalism, marked by
a number of qualitative shifts in the capitalist system and by novel articulations
of social power. I highlight four aspects unique to this epoch.1
First is the rise of truly transnational capital and a new global production
and financial system into which all nations and much of humanity has been integrated,
either directly or indirectly. We have gone from a world economy, in
which countries and regions were linked to each other via trade and financial
flows in an integrated international market, to a global economy, in
which nations are linked to each more organically through the transnationalisation
of the production process, of finance, and of the circuits of capital accumulation.
No single nation-state can remain insulated from the global economy or prevent
the penetration of the social, political, and cultural superstructure of global
capitalism. Second is the rise of a Transnational Capitalist Class (TCC), a
class group that has drawn in contingents from most countries around the world,
North and South, and has attempted to position itself as a global ruling class.
This TCC is the hegemonic fraction of capital on a world scale. Third
is the rise of Transnational State (TNS) apparatuses. The TNS is constituted
as a loose network made up of trans-, and supranational organisations together
with national states. It functions to organise the conditions for transnational
accumulation. The TCC attempts to organise and institutionally exercise its
class power through TNS apparatuses. Fourth are novel relations of inequality,
domination and exploitation in global society, including an increasing importance
of transnational social and class inequalities relative to North-South inequalities.
Cyclical, Structural, and Systemic Crises
Most commentators on the contemporary crisis refer to the "Great Recession"
of 2008 and its aftermath. Yet the causal origins of global crisis are to be
found in over-accumulation and also in contradictions of state
power, or in what Marxists call the internal contradictions of the capitalist
system. Moreover, because the system is now global, crisis in any one place
tends to represent crisis for the system as a whole. The system cannot expand
because the marginalisation of a significant portion of humanity from direct
productive participation, the downward pressure on wages and popular consumption
worldwide, and the polarisation of income, has reduced the ability of the world
market to absorb world output. At the same time, given the particular configuration
of social and class forces and the correlation of these forces worldwide, national
states are hard-pressed to regulate transnational circuits of accumulation and
offset the explosive contradictions built into the system.
Is this crisis cyclical, structural, or systemic? Cyclical crises
are recurrent to capitalism about once every 10 years and involve recessions
that act as self-correcting mechanisms without any major restructuring of the
system. The recessions of the early 1980s, the early 1990s, and of 2001 were
cyclical crises. In contrast, the 2008 crisis signaled the slide into astructural
crisis. Structural crises reflect deeper contradictions that can only
be resolved by a major restructuring of the system. The structural crisis of
the 1970s was resolved through capitalist globalisation. Prior to that, the
structural crisis of the 1930s was resolved through the creation of a new model
of redistributive capitalism, and prior to that the structural crisis of the
1870s resulted in the development of corporate capitalism. A systemic crisis
involves the replacement of a system by an entirely new system or
by an outright collapse. A structural crisis opens up the possibility
for a systemic crisis. But if it actually snowballs into a systemic crisis –
in this case, if it gives way either to capitalism being superseded or to a
breakdown of global civilisation – is not predetermined and depends entirely
on the response of social and political forces to the crisis and on historical
contingencies that are not easy to forecast. This is an historic moment of extreme
uncertainty, in which collective responses from distinct social and class forces
to the crisis are in great flux.
Hence my concept of global crisis is broader than financial. There are multiple
and mutually constitutive dimensions – economic, social, political, cultural,
ideological and ecological, not to mention the existential crisis of our consciousness,
values and very being. There is a crisis of social polarisation, that is, of
social reproduction. The system cannot meet the needs or assure the
survival of millions of people, perhaps a majority of humanity. There are crises
of state legitimacy and political authority, or of hegemony and
domination. National states face spiraling crises of legitimacy as they
fail to meet the social grievances of local working and popular classes experiencing
downward mobility, unemployment, heightened insecurity and greater hardships.
The legitimacy of the system has increasingly been called into question by millions,
perhaps even billions, of people around the world, and is facing expanded counter-hegemonic
challenges. Global elites have been unable counter this erosion of the system's
authority in the face of worldwide pressures for a global moral economy. And
a canopy that envelops all these dimensions is a crisis of sustainability rooted
in an ecological holocaust that has already begun, expressed in climate change
and the impending collapse of centralised agricultural systems in several regions
of the world, among other indicators.
By a crisis of humanity I mean a crisis that is approaching systemic
proportions, threatening the ability of billions of people to survive, and raising
the specter of a collapse of world civilisation and degeneration into a new
"Dark Ages."2
Global capitalism now couples human and natural history in such a way
as to threaten to bring about what would be the sixth mass extinction in the
known history of life on earth.
This crisis of humanity shares a
number of aspects with earlier structural crises but there are also several
features unique to the present:
The system is fast reaching the ecological limits of its reproduction.
Global capitalism now couples human and natural history in such a way as
to threaten to bring about what would be the sixth mass extinction in the
known history of life on earth.3 This mass extinction would
be caused not by a natural catastrophe such as a meteor impact or by evolutionary
changes such as the end of an ice age but by purposive human activity. According
to leading environmental scientists there are nine "planetary boundaries"
crucial to maintaining an earth system environment in which humans can exist,
four of which are experiencing at this time the onset of irreversible environmental
degradation and three of which (climate change, the nitrogen cycle, and
biodiversity loss) are at "tipping points," meaning that these processes
have already crossed their planetary boundaries.
The magnitude of the means of violence and social control is unprecedented,
as is the concentration of the means of global communication and symbolic
production and circulation in the hands of a very few powerful groups.
Computerised wars, drones, bunker-buster bombs, star wars, and so forth,
have changed the face of warfare. Warfare has become normalised and sanitised
for those not directly at the receiving end of armed aggression. At the
same time we have arrived at the panoptical surveillance society and the
age of thought control by those who control global flows of communication,
images and symbolic production. The world of Edward Snowden is the world
of George Orwell; 1984 has arrived;
Capitalism is reaching apparent limits to its extensive
expansion. There are no longer any new territories of significance that
can be integrated into world capitalism, de-ruralisation is now well advanced,
and the commodification of the countryside and of pre- and non-capitalist
spaces has intensified, that is, converted in hot-house fashion into spaces
of capital, so that intensive expansion is reaching depths never
before seen. Capitalism must continually expand or collapse. How or where
will it now expand?
There is the rise of a vast surplus population inhabiting a "planet
of slums,"4 alienated from the productive economy, thrown
into the margins, and subject to sophisticated systems of social control
and to destruction – to a mortal cycle of dispossession-exploitation-exclusion.
This includes prison-industrial and immigrant-detention complexes, omnipresent
policing, militarised gentrification, and so on;
There is a disjuncture between a globalising economy and a nation-state
based system of political authority. Transnational state apparatuses
are incipient and have not been able to play the role of what social scientists
refer to as a "hegemon," or a leading nation-state that has enough power
and authority to organise and stabilise the system. The spread of weapons
of mass destruction and the unprecedented militarisation of social life
and conflict across the globe makes it hard to imagine that the system can
come under any stable political authority that assures its reproduction.
Global Police State
How have social and political forces worldwide responded to crisis? The
crisis has resulted in a rapid political polarisation in global society.
Both right and left-wing forces are ascendant. Three responses seem to be in
dispute.
One is what we could call "reformism from above." This elite reformism is
aimed at stabilising the system, at saving the system from itself and from more
radical responses from below. Nonetheless, in the years following the 2008 collapse
of the global financial system it seems these reformers are unable (or unwilling)
to prevail over the power of transnational financial capital. A second response
is popular, grassroots and leftist resistance from below. As social and political
conflict escalates around the world there appears to be a mounting global revolt.
While such resistance appears insurgent in the wake of 2008 it is spread very
unevenly across countries and regions and facing many problems and challenges.
Yet another response is that I term 21stcentury fascism.5
The ultra-right is an insurgent force in many countries. In broad
strokes, this project seeks to fuse reactionary political power with transnational
capital and to organise a mass base among historically privileged sectors of
the global working class – such as white workers in the North and middle
layers in the South – that are now experiencing heightened insecurity and the
specter of downward mobility. It involves militarism, extreme masculinisation,
homophobia, racism and racist mobilisations, including the search for scapegoats,
such as immigrant workers and, in the West, Muslims. Twenty-first century
fascism evokes mystifying ideologies, often involving race/culture supremacy
and xenophobia, embracing an idealised and mythical past. Neo-fascist culture
normalises and glamorises warfare and social violence, indeed, generates a fascination
with domination that is portrayed even as heroic.
The need for dominant groups around the world to secure widespread, organised
mass social control of the world's surplus population and rebellious forces
from below gives a powerful impulse to projects of 21st century fascism. Simply
put, the immense structural inequalities of the global political economy cannot
easily be contained through consensual mechanisms of social control. We have
been witnessing transitions from social welfare to social control states around
the world. We have entered a period of great upheavals, momentous changes and
uncertainties. The only viable solution to the crisis of global capitalism is
a massive redistribution of wealth and power downward towards the poor majority
of humanity along the lines of a 21st century democratic socialism, in which
humanity is no longer at war with itself and with nature.
About the Author
William I. Robinson is professor of sociology, global and
international studies, and Latin American studies, at the University of California-Santa
Barbara. Among his many books are Promoting Polyarchy (1996),
Transnational Conflicts (2003), A Theory of Global Capitalism
(2004), Latin America and Global Capitalism (2008),
and
Global Capitalism and the Crisis of Humanity (2014).
On Tuesday, the Census Bureau released its annual
poverty report declaring that 43.1 million Americans
lived in poverty in 2015.
We should be concerned about any American living in
real material hardship, but much of what the Census
reports about poverty is misleading.
Here are 15
facts about poverty
in America that may
surprise you. (All statistics are taken from U.S.
government surveys.)
- Poor households routinely report spending
$2.40 for every $1 of income the Census says they
have.
- The average poor American lives in a house or
apartment that is in good repair and has more living
space than the average nonpoor person in France,
Germany, or England.
- Eighty-five percent of poor households have
air conditioning.
- Nearly three-fourths of poor households have a
car or truck, and 31 percent have two or more cars
or trucks.
- Nearly two-thirds of poor households have
cable or satellite TV.
- Half have a personal computer; 43 percent have
internet access.
- Two-thirds have at least one DVD player
- More than half of poor families with children
have a video game system, such as an Xbox or
PlayStation.
- One-third have a wide-screen plasma or LCD TV.
(The above data on electronic appliances owned by
poor households come from a 2009 government survey so
the ownership rates among the poor today are most likely
higher.)
Poverty and Hunger:
Activist groups spread alarming stories about
widespread
hunger
in the nation, but in reality, most of
the poor do not experience hunger or food shortages. The
U.S. Department of Agriculture collects data on these
topics in its household food security survey. For 2009,
the survey showed:
- Only 4 percent of poor parents reported that
their children were hungry even once during the
prior year because they could not afford food.
- Some 18 percent of poor adults reported they
were hungry even once in the prior year due to lack
of money for food.
Poverty and Housing
The following are facts about the housing conditions
of the poor.
- Poverty and homelessness are sometimes
confused. Over the course of a year, only 4 percent
of poor persons become homeless (usually a temporary
condition).
- Only 9.5 percent of the poor live in mobile
homes or trailers; the rest live in apartments or
houses.
- Forty percent of the poor own their own homes,
typically, a three-bedroom house with one-and-a-half
baths that is in good repair.
Facts About Extreme Poverty
- The left claims that one in 25 families with
children live in "
extreme
poverty
" on less than $2 per person per day.
Government surveys of self-reported spending by families
show the actual number is one in 4,469, not one in 25.
The typical family allegedly in "extreme poverty"
reports spending $25 for every $1 of income the left
claims they have.
In Calculating Poverty, Census Ignores the
Almost Entire Welfare State:
Why does the Census identify so many individuals as
"poor" who do not appear to be poor in any normal sense
of the term? The answer lies in the misleading way the
Census measures "poverty." The Census defines a family
as poor if its income falls below a specified income
threshold. (For example, the poverty threshold for a
family of four in 2015 was $24,036.) But in counting
"income," the Census excludes nearly all welfare
benefits.
In 2014, government spent over $1 trillion on
means-tested welfare for poor and low income people.
(This figure does not include Social Security or
Medicare.) Welfare spending on cash, food, and housing
was $342 billion.
The cash, food, and housing spending alone was 150
percent of the amount needed to eliminate all poverty in
the U.S. But the Census ignored more than four-fifths of
these benefits for purposes of measuring poverty.
Effectively, the Census counts poverty in the U.S. by
ignoring almost the entire welfare state.
Poverty and Self-Sufficiency
Do the higher living standards of families receiving
welfare mean the
welfare state is successful
? The answer is
no. The real aim of welfare should be to make families
self-sufficient: capable of supporting themselves above
the poverty income threshold without reliance on
government welfare aid.
Despite having spent over $25 trillion on
means-tested welfare since the beginning of the War on
Poverty under President Lyndon Johnson, many Americans
are less capable of self-sufficiency today than when the
War on Poverty began.
The pathways to self-sufficiency are work and
marriage. We should
reform the welfare state
to promote these.
Able-bodied recipients should be required to work or
prepare for work as a condition of getting aid.
Penalties against marriage in welfare programs should be
removed.
Spirited defense of the establishment from one of financial oligarchy members.
" The economy overall is doing just fine." Does this include QE? If the Fed is pouring
billions of new money into the economy, how accurate is it to say that the economy
is doing just fine?
Notable quotes:
"... "That was a number that was devised, statistically devised, to make politicians - and in particular, presidents - look good. And I wouldn't be getting the kind of massive crowds that I'm getting if the number was a real number." ..."
"... In the 1950s and 1960s, for instance, organized labor was fairly convinced that the government was purposely underestimating inflation and the cost of living to keep Social Security payments low and wages from rising. George Meany, the powerful head of the American Federation of Labor at the time, claimed that the Bureau of Labor Statistics, which compiled both employment and inflation numbers, had "become identified with an effort to freeze wages and is not longer a free agency of statistical research." ..."
"... Employment figures are sometimes seen as equally suspect. Jack Welch, the once-legendary former CEO of GE, blithely accused the Obama administration of manipulating the final employment report before the 2012 election to make the economic recovery look better than it was. "Unbelievable jobs numbers … these Chicago guys will do anything … can't debate so change numbers," he tweeted ..."
"... His arguments were later fleshed out by New York Post columnist John Crudele , who went on to charge the Census Bureau (which works with BLS to create the samples for the unemployment rate) with faking and fabricating the numbers to help Obama win reelection. ..."
"... The chairman of the Gallup organization, Jim Clifton, sees so many flaws with the way unemployment is measured that he has called the official rate a "Big Lie." In the Democratic presidential campaign, Bernie Sanders has also weighed in, saying the real unemployment rate is at best above 10 percent. ..."
"... What a useless article. The author explains precisely nothing about what the official statistics do and do not measure, what they miss and what they capture. ..."
"... I had the same impression as well. Notice he does not mention that the Gallop number is over 10% and is based on their polling data. ..."
"... But never mentioned that Reagan changed how Unemployment was figured in the early 80's. He included all people in the military service, as employed. Before that, they was counted neither way. He also intentionally left out that when Obama, had the unemployed numbers dropped one month before the election, from 8.1% to 7.8% --because it was believed that no one could be reelected if it was above 8%. ..."
"... U6 is 9.8% for March 2016. We still have 94 million unemployed and you want to say its 5 % what journalistic malpractice. ..."
"... Trump has emphasized that he is looking at the percent of the population that is participating in the workforce - and that this participation rate is currently at historical lows -- and Trump has been clear that his approach to paying down the national debt is based on getting the participation rates back to historical levels ..."
"... "The government can't lie about a hundred billion dollars of Social Security money stolen for the Clinton 'balanced budget', that would be a crime against the citizens, they would revolt. John, come one now. " ..."
"... I didn't say it first, Senator Ernest Hollings did, on the Senate floor. ..."
"... And here is how they did it: http://www.craigsteiner.us/articles/16 ..."
"... There is plenty of evidence the figures are cooked, folks, enough to fill a book: Atlas Shouts. Don't believe trash like this article claims. GDP, unemployment and inflation are all manipulated numbers, as Campbell's Law predicts. ..."
"... I can't believe the Washington Post prints propaganda like this. ..."
"... I do remember when the officially-announced unemployment rate stopped including those who were no longer looking for work. That *was* a significant shift, and there's no doubt it made politicians (Reagan, I think it was) look better; of course, no President since then has reversed it, as it would instantly make themselves look worse. ..."
"... Working one hour a week, at minimum wage, is 'employed', according to the government. No wonder unemployment is at 5%. ..."
"... Add in people who are working, but want and need full time jobs, add in people who have dropped out of the labor market and/or retired earlier than they wanted to, and unemployment is at least 10%. Ten seconds on Google will show you that. ..."
"... The writer should be sacked for taking a very serious issue and turning it into a piece of non-informative fluff. Bad mouthing Trump and Sanders is the same as endorsing Hilly. ..."
Yes, Donald Trump is wrong about unemployment. But he's not the only one. -
The Washington Post
Listen to President Obama, and you'll hear that job growth is stronger than
at any point in the past 20 years, and - as
he said in his final State of the Union address - "anyone claiming that
America's economy is in decline is peddling fiction."
Listen to Donald Trump and you'll hear something completely different. The
billionaire Republican candidate for president told The Washington Post last
week that
the economy is one big Federal Reserve bubble waiting to burst, and that
as for job growth, "we're not at 5 percent unemployment. We're at a number that's
probably into the 20s if you look at the real number." Not only that, Trump
said, but the numbers are juiced: "That was a number that was devised, statistically
devised, to make politicians - and in particular, presidents - look good. And
I wouldn't be getting the kind of massive crowds that I'm getting if the number
was a real number."
It's easy enough to dismiss - as a phalanx of economists and analysts
did - Trump's claims as yet another one of his all-too-frequent campaign
lines that have little to do with reality. But with this one, at least, Trump
is tapping into a deep and mostly overlooked well of popular suspicion of government
numbers and a deeply held belief that what "we the people" are told about the
economy by the government is
lies, damn
lies and statistics designed to benefit the elite at the expense of the
working class. The stubborn persistence of these beliefs should be a reminder
that just because the United States is doing well in general, that doesn't mean
everyone in the country is. It's also a warning to experts and policymakers
that in the real world,
there is no "the economy," there are many, and generalizations have a way
of glossing over some very rough patches.
Since the mid-20th century, when the U.S. government began keeping
and compiling our modern suite of economic numbers, there has been constant
skepticism of the reports, coming from different corners depending on economic
trends and the broader political climate. In the 1950s and 1960s, for instance,
organized labor was fairly convinced that the government was purposely underestimating
inflation and the cost of living to keep Social Security payments low and wages
from rising. George Meany, the powerful head of the American Federation of Labor
at the time, claimed that the Bureau of Labor Statistics, which compiled both
employment and inflation numbers, had "become identified with an effort to freeze
wages and is not longer a free agency of statistical research."
Over the decades, those views hardened. Throughout the 1970s, as workers
struggled with unemployment and stagflation, the government continually tweaked
its formulas for measuring prices. By and large, these changes and new formulas
were designed to make the figures more accurate in a fast-changing world. But
for those who were already convinced the government was trying to paint a deliberately
false picture, the tweaks and innovations were interpreted as a devious way
to avoid spending money to help the ailing middle class, not trying to measure
what was actually happening to design policies to help address it. The commissioner
of BLS at the time, Janet Norwood, dismissed those concerns
in testimony to Congress in the late 1970s, saying that when people don't
get the number they want, "they feel there must be something wrong with the
indicator itself."
Employment figures are sometimes seen as equally suspect. Jack Welch,
the once-legendary former CEO of GE,
blithely accused the Obama administration of manipulating the final employment
report before the 2012 election to make the economic recovery look better than
it was. "Unbelievable jobs numbers … these Chicago guys will do anything … can't
debate so change numbers," he tweeted after that last October report showed
better-than-expected job growth and lower-than-anticipated unemployment rate.
His arguments were later fleshed out by New York Post columnist
John Crudele, who went on to charge the Census Bureau (which works with
BLS to create the samples for the unemployment rate) with faking and fabricating
the numbers to help Obama win reelection.
These views are not fringe. Type the search terms "inflation
is false" into Google, and you will get reams of articles and analysis from
mainstream outlets and voices, including investment guru Bill Gross (who referred
to inflation numbers as a "haute
con job"). Similar results pop up with the terms "real
unemployment rate," and given how many ways there are to count employment,
there are legitimate issues with the headline number.
The cohort that responds to Trump reads those numbers in a starkly different
light from the cohort laughing at him for it. Whenever the unemployment rate
comes out showing improvement and hiring, those who are experiencing dwindling
wages and shrinking opportunities might see a meticulously constructed web of
lies meant to paint a positive picture so that the plight of tens of millions
who have dropped out of the workforce can be ignored. The chairman of the
Gallup organization, Jim Clifton, sees so many flaws with the way unemployment
is measured that he has called the
official rate a "Big Lie." In the Democratic presidential campaign,
Bernie Sanders has also weighed in, saying the real unemployment rate is
at best above 10 percent.
Beneath the anger and the distrust - which extend to a booming stock market
that helps the wealthy and banks flush with profit even after the financial
crisis - there lies a very real problem with how economists, the media and policymakers
discuss economics. No, the bureaucrats in the Labor and Commerce departments
who compile these numbers aren't a cabal engaged in a cover-up. And no, the
Fed is not an Illuminati conspiracy. But the idea that a few simple big numbers
that are at best averages to describe a large system we call "the economy" can
adequately capture the stories of 320 million people is a fiction, one that
we tell ourselves regularly, and which millions of people know to be false to
their own experience.
It may be true that there is a national unemployment rate measured at
5 percent.
But it is also true that for white men without a college degree, or white men
who had worked factory jobs until the mid-2000s with no more than a high school
education, the unemployment reality is much worse (though it's even worse for
black
and Hispanic men, who don't seem to be responding by flocking to Trump in
large numbers). Even when those with these skill sets can get a job, the pay
is woefully below a living wage. Jobs that don't pay well still count, in the
stats, as jobs. Telling people who are barely getting by that the economy is
just fine must appear much more than insensitive. It is insulting, and it feels
like a denial of what they are experiencing.
The chords Trump strikes when he makes these claims, therefore, should be
taken more seriously than the claims themselves. We need to be much more diligent
in understanding what our national numbers do and do not tell us, and how much
they obscure. In trying to hang our sense of what's what on a few big numbers,
we risk glossing over the tens of millions whose lives don't fit those numbers
and don't fit the story. "The economy" may be doing just fine, but that doesn't
mean that everyone is. Inflation might be low, but millions can be struggling
to meet basic costs just the same.
So yes, Trump is wrong, and he's the culmination of decades of paranoia and
distrust of government reports. The economy overall is doing just fine.
But people are still struggling. We don't have to share the paranoia or buy
into the conspiratorial narrative to acknowledge that. A great nation, the one
Trump promises to restore, can embrace more than one story, and can afford to
speak to those left out of our rosy national numbers along with those whose
experience reflect them.
the3sattlers, 4/8/2016 1:05 PM EDT
" The economy overall is doing just fine." Does this include QE? If the
Fed is pouring billions of new money into the economy, how accurate is it
to say that the economy is doing just fine?
james_harrigan, 4/8/2016 10:14 AM EDT
What a useless article. The author explains precisely nothing about
what the official statistics do and do not measure, what they miss and what
they capture.
Derbigdog, 4/8/2016 11:40 AM EDT
I had the same impression as well. Notice he does not mention that
the Gallop number is over 10% and is based on their polling data.
captdon1, 4/8/2016 5:51 AM EDT
Not reported by WP
The first two years of Obama's presidency Democrats controlled the house
and Senate. The second two years, Republicans controlled the Senate. The
last two years of Obama's term, the Republicans controlled house and Senate.
During this six years the national debt increase $10 TRILLION and the Government
collected $9 TRILLION in taxes and borrowed $10 TRILLION. ($19 Trillion
In Six Years!!!) (Where did our lovely politicians spend this enormous amount
of money??? (Republicans and Democrats!)
reussere, 4/8/2016 1:43 AM EDT
Reading the comments below it strikes me again and again how far out
of whack most people are with reality. It's absolutely true that using a
single number for the employment rate reflects the overall average of the
economy certainly doesn't measure how every person is doing, anymore than
an average global temperature doesn't measure any local temperatures.
One thing not emphasized in the article is that there is a number of
different statistics. The 5% figure refers to the U-3 statistic. Nearly
all of the rest of the employment statistics are higher, some considerably
so because they include different groups of people. But when you compare
U-3 from different years, you are comparing apples and apples. The rest
of the numbers very closely track with U-3. That is when U-3 goes up and
down, U-6 go up and down pretty much in lockstep.
It is unfortunate that subpopulations of Americans are doing far worse
(and some doing far better) than average. But that is the nature of averages
after all. It is simply impossible for a single number (or even a group
of a dozen different employment measurements) to accurately reflect a complex
reality.
Smoothcountryside, 4/8/2016 12:04 PM EDT
The alternative measures of labor underutilization are defined as U-1
through U-6 with U-6 being the broadest measure and probably the closes
to the "true" level of unemployment. Otherwise, all the rest of your commentary
is correct.
southernbaked, 4/7/2016 11:02 PM EDT
Because this highly educated writer is totally bias, he left out some
key parts, I personally lived though. He referred back to the late 70's
twice. But never mentioned that Reagan changed how Unemployment was
figured in the early 80's. He included all people in the military service,
as employed. Before that, they was counted neither way. He also intentionally
left out that when Obama, had the unemployed numbers dropped one month before
the election, from 8.1% to 7.8% --because it was believed that no one could
be reelected if it was above 8%.
Then after he was sworn in--- in January, they had to readjust the numbers
back up. They blamed it on one employees mistakes-- PS. no one was fired
or disciplined for fudging. Bottom line is, for every 1.8 manufacturing
job, there are 2 government jobs, that is disaster. Because this writer
is to young to have lived in America when it was great. When for every 1
government job, you had 3 manufacturing jobs.
I will enlighten him. I joined the workforce -- With no higher education
-- when you merely walked down the road, and picked out a job. Because jobs
hang on trees like apples. By 35 I COMPLETELY owned my first 3 bedroom brick
house, and the 2 newer cars parked in the driveway. Anyone care to try that
now ??
As for all this talk about education-- I have a bit of knowledge about
that subject-- because I paid in full to send all under my roof through
it. Without one dime of aide from anyone. The above writer is proof-- you
can be heavily educated, and DEAD WRONG. There is nothing good about this
economy. Signed, UN-affiliated to either corrupted party
Bluhorizons, 4/7/2016 9:43 PM EDT
"we're not at 5 percent unemployment. We're at a number that's probably
into the 20s if you look at the real number." Trump is correct. The unemployment
data is contrived from data about people receiving unemployment compensation
but the people who's unemployment has ended and people who have just given
up is invisible.
"It may be true that there is a national unemployment rate measured at
5 percent. But it is also true that for white men without a college degree,
or white men who had worked factory jobs until the mid-2000s with no more
than a high school education, the unemployment reality is much worse "
The author goes on and on about the legitimate distrust of government
unemployment data and then tells us Trump is wrong. But the article convinces
us Trump is right! So, this article its not really about the legitimate
distrust of government data is is about the author's not liking Trump. Typical
New Left bs
Aushax, 4/7/2016 8:24 PM EDT
Last jobs report before the 2012 election the number unusually dropped
then was readjusted up after the election. Coincidentally?
George Mason, 4/7/2016 8:15 PM EDT
U6 is 9.8% for March 2016. We still have 94 million unemployed and
you want to say its 5 % what journalistic malpractice.
F mackey, 4/7/2016 7:57 PM EDT
hey reporter,Todays WSJ, More than 40% of the student borrowers aren't
making payments? WHY? easy,they owe big $ money$ & cant get a job or a well
paying job to pay back the loans,hey reporter,i'd send you $10 bucks to
buy a clue,but you'd probably get lost going to the store,what a %@%@%@,another
reporter,who doesn't have a clue on whats going on,jmo
SimpleCountryActuary, 4/7/2016 7:57 PM EDT
This reporter is a Hillary tool. Even the Los Angeles Times on March
6th had to admit:
"Trump is partly right in saying that trade has cost the U.S. economy
jobs and held down wages. He may also be correct - to a degree - in saying
that low-skilled immigrants have depressed salaries for certain jobs or
industries..."
If this is the quality of reporting the WaPo is going to provide, namely
even worse than the Los Angeles Times, then Bezos had better fire the editorial
staff and buy a new one.
Clyde4, 4/7/2016 7:34 PM EDT [Edited]
This article dismissing Trump is exactly what is wrong with journalism
today - all about creating a false reality for people instead of investigating
and reporting
Trump has emphasized that he is looking at the percent of the population
that is participating in the workforce - and that this participation rate
is currently at historical lows -- and Trump has been clear that his approach
to paying down the national debt is based on getting the participation rates
back to historical levels
The author completely ignored the big elephant in the room -- that is
irresponsible journalism
The author may want to look into how the unemployment rate shot up in
2008 when the government extended benefits and then the unemployment rate
plummeted again when unemployment benefits were decrease (around 2011, I
believe) - if I were the author I would do a little research into whether
the unemployment rate correlates with how much is paid out in benefits or
with unemployment determined through some other approach (like surveys
dangerbird1225, 4/7/2016 7:25 PM EDT
Bunch of crap. If you stop counting those that stop looking for a job,
your numbers are wrong. Period. Why didn't this apologist for statistics
mention that?
"The government can't lie about a hundred billion dollars of Social
Security money stolen for the Clinton 'balanced budget', that would be a
crime against the citizens, they would revolt. John, come one now. "
I didn't say it first, Senator Ernest Hollings did, on the Senate
floor.
"Both Democrats and Republicans are all running this year and next
and saying surplus, surplus. Look what we have done. It is false. The
actual figures show that from the beginning of the fiscal year until
now we had to borrow $127,800,000,000." - Senate speech, Democratic
Senator Ernest Hollings, October 28, 1999
Go to New Orleans Chicago Atlanta Los Angeles Detroit stop anybody on
the street and ask if unemployment is 5% and that there is a 95% chance
a guy can get a job.
Then you will have a statistic reference point. Its not a Democratic
or republican issue because both of them have manipulated the system for
so long its meaningless. Go Trump 2016 and get this crap sorted out with
common sense plain English
AtlasRocked, 4/7/2016 4:37 PM EDT
There is plenty of evidence the figures are cooked, folks, enough
to fill a book: Atlas Shouts. Don't believe trash like this article claims.
GDP, unemployment and inflation are all manipulated numbers, as Campbell's
Law predicts.
I can't believe the Washington Post prints propaganda like this.
TimberDave, 4/7/2016 2:23 PM EDT
I do remember when the officially-announced unemployment rate stopped
including those who were no longer looking for work. That *was* a significant
shift, and there's no doubt it made politicians (Reagan, I think it was)
look better; of course, no President since then has reversed it, as it would
instantly make themselves look worse.
astroboy_2000, 4/7/2016 1:28 PM EDT
This would be a much more intelligent article if the writer actually
said what the government considers as 'employed'.
Working one hour a week, at minimum wage, is 'employed', according
to the government. No wonder unemployment is at 5%.
Add in people who are working, but want and need full time jobs,
add in people who have dropped out of the labor market and/or retired earlier
than they wanted to, and unemployment is at least 10%. Ten seconds on Google
will show you that.
The writer should be sacked for taking a very serious issue and turning
it into a piece of non-informative fluff. Bad mouthing Trump and Sanders
is the same as endorsing Hilly.
Manchester0913, 4/7/2016 2:12 PM EDT
The number you're referencing is captured under U6. However, U3 is the
traditional measure.
Son House, 4/7/2016 2:24 PM EDT
The government doesn't claim that working one hour a week is employed.
Google U 3 unemployment. Then google U 6 unemployment. You can be enlightened.
Liz in AL, 4/7/2016 7:21 PM EDT
I've found this compilation of all 6 of the "U-rates" very useful. It
encompasses the most restrictive (and thus smallest) U-1 rate, though the
most expansive U-6. It provides brief descriptions of what gets counted
for each rate, and (at least for more recent years) provides the ability
to compare at the monthly level of detail.
U6 Unemployment Rate Portal Seven
This
article outlines the main elements of
rupture and continuity in the global political economy since the global
economic crisis of
2008-2009. While the current calamity poses a more systemic challenge to
neoliberal
globalization than genetically similar turbulences in the
semi-periphery during the 1990s, we find that evidence for its
transformative significance remains mixed. Efforts to reform the distressed
capitalist models in the North encounter severe resistance, and the
broadened multilateralism of the G-20 is yet
to provide effective global economic governance. Overall,
neoliberal
globalization looks set to survive, but in more heterodox and
multipolar fashion. Without tighter coordination between old and emerging
powers, this new synthesis is unlikely to inspire lasting solutions to
pressing global problems such as an unsustainable international financial
architecture and the pending environmental catastrophe, and may even fail to
preserve some modest democratic and developmental gains
of the recent past.
"... A growing body of research indicates that the financial and psychological damage from a period of joblessness can be significant and long-lasting, especially for people who remain out of work for an extended period. ..."
"... Friedman is just doing his job. The Saddam's WMDs paper endorsed Hillary on Jan 31st, and is part of the campaign of lies, deceptions and cover-ups. ..."
"... As with television, it's healthier not to pollute one's mind with NYT propaganda. Reading the idiotic headlines is enough to realize that the "content" is crap. ..."
"... Predictably, the comments on the NYT op-ed (by the "Suck on this, Iraq!" Friedman) are more thoughtful and reality-based than the author's column. ..."
"... Libya and Syria and Ukraine were NOT just bad judgment calls. However, they were three consecutive bad judgment calls, with no good ones to offset. That still matters. ..."
"... Libya and Syria and Ukraine were also lies, coming from the mouth of Hillary, and harming the country by tossing us into more wars. ..."
"... I really wonder how Friedman and the other NYT Iraq war cheerleaders can look at themselves in the mirror each morning. And excellent point about Snowden, of course. ..."
It's not hard to see the thinking behind BIG from the Silicon Valley,
elite perspective. They understand that putting everybody out of work from
robotics or out-sourcing is a sure-fire way to create massive discontent.
They think this is a clever way of keeping the losers contented (enough
to not revolt) while maintaining their elevated position within the system.
They don't care what the system looks like, really, just so long as they
get to sit on top. They think this is a way to avert the revolution that
they know, from reading Marx and thinking about it a little, their actions
are sure to lead to, ceteris paribus .
However, I think they underestimate the extent to which our continual
trade deficits are predicated on the US dollar being the world's reserve
currency. That status may not be in danger in the short term, but I think
it's doomed to extinction over the medium term, as the BRICS and other countries
maneuver their way out from under the thumb of the petro-dollar.
But the up-side is that they're mainstreaming an MMT understanding of
macroeconomics and, as old John used to say, "ideas have a way of taking
on a life of their own." Also, some poor people might actually end up being
benefited as a side-effect of the elites trying to keep the lower orders
manageable. I mean, that's really what the New Deal was about, no? FDR wasn't
fighting for the working man, he just realized that exploiting them too
much could crash the whole system and be much worse for his class, the elites,
than a little Social Security was. FDR wasn't looking to overturn class
relations, but maintain them. He just had a more nuanced understanding of
self-interest than many of his class peers (that oughta get some people
fuming). Still, whatever the motivation, the programs had the practical
effect of making a lot of people's lives better. Why shouldn't it be the
same in this situation?
Not that I'm foily, but if you combine the abolition of cash, BIG in
the form of a digital deposit, retail tracking everywhere, and the precedent
(from ObamaCare) of a mandate to participate in certain markets, you can
concoct quite a dystopia….
I think we need to have a movement to defend cash. Small business owners
should lead the charge, since card fees hit them the hardest. I see a possible
coalition…anti-surveillance activists and guys like the owner of the pizza
joint I frequent whose register bears a sign that reads "Cards accepted,
Cash preferred."
Also, a BIG would be a great excuse to start-up the Postal Bank. Everybody
will get an account tied to their SSN that their BIG gets deposited in,
accessible (in cash) at any post office. It might just be sell-able…at least
to the public, if not to Wall Street.
Whenever I hear about TPTB doing away with cash I am reminded of Margaret
Atwood's prescient (from the 80s I think!) novel about a patriarchal dystopian
future, The Handmaid's Tale – freezing the bank accounts is how it all started.
"A growing body of research indicates that the financial and psychological
damage from a period of joblessness can be significant and long-lasting,
especially for people who remain out of work for an extended period."
quelle surprise! are poor, working, and middle-class people's well-being
actually closely tied to how many days in their lives they can work? hoocoodanode?
I hear they have really low well being in Europe with their 6 weeks vacations
and way more holidays and stuff. They throw themselves off bridges at the
start of every vacation season. Nah it's tied to having an income or not,
not how many days they work.
i always forget about that because i've always worked as in independent
contractor, staying sane by pretending benefits and paid holidays and vacations
are not all that important in life. and i must say, lately i do see TPTB
cashing in on my idea, bigtime. i should have placed some bets on that happening…
I haven't worked a paying job for about 14 years….the wife works the
day gig, while I maintain the abode, do household repairs, garden, tend
to the bees & chickens…..etc. …… I'm 'working' my way on the downslope of
collapse…'avoiding the rush' as John M Greer is fond of saying…..
i meant, in our current industrialized, work-ethic-based western society.
which not coincidentally has had a lousy mental and physical health outcome
for millions of people over time.
but never mind. a rising water floats all boats.
until it doesn't.
'Hillary's fibs or lack of candor are all about bad judgments she
made on issues that will not impact the future of either my family or
my country. Private email servers? Cattle futures? Goldman Sachs lectures?
All really stupid, but my kids will not be harmed by those poor
calls. Debate where she came out on Iraq and Libya, if you
will, but those were considered judgment calls, and if you disagree
don't vote for her" [The Moustache of Understanding, New York Times].
You tell 'em, Tommy! Who cares about corruption? Corruption had nothing
to do with Iraq!
Of course they won't. You are well-off, well-connected, and work for
a virtual organ of the state that has backed her every move. You
and your framily are on the inside track and will of course be protected.
Friedman is just doing his job. The Saddam's WMDs paper endorsed
Hillary on Jan 31st, and is part of the campaign of lies, deceptions and
cover-ups.
Journo-hos … the only surprise is that you can buy them so cheap.
As with television, it's healthier not to pollute one's mind with
NYT propaganda. Reading the idiotic headlines is enough to realize
that the "content" is crap.
Sounds like everyone should work for an organ (or a virtual organ, either
way) of the state. Just make sure you're well-connected (the importance
of being social – don't just bury yourself in books).
Predictably, the comments on the NYT op-ed (by the "Suck on this,
Iraq!" Friedman) are more thoughtful and reality-based than the author's
column. Here is a sample:
Thomas Friedman on lies that hurt the country? Let's start that with
the Iraq War.
I agree that the emails probably didn't hurt the country, even if
they were illegal and even if she does lie about them. However, Snowden
did not hurt the country either, he told the truth, and Hillary goes
after him with a vengeance for doing that in ways that benefited the
country, that the NYT of Pentagon Papers days should support. She does
that even while she lies about her emails, and that is a relevant character
issue for the power she seeks.
Libya and Syria and Ukraine were NOT just bad judgment calls.
However, they were three consecutive bad judgment calls, with no good
ones to offset. That still matters.
Libya and Syria and Ukraine were also lies, coming from the mouth
of Hillary, and harming the country by tossing us into more wars.
I really wonder how Friedman and the other NYT Iraq war cheerleaders
can look at themselves in the mirror each morning. And excellent point about
Snowden, of course.
The author goes on to write which I find a bit odd " To me, income inequality
is an overrated problem in American life, and has even propelled the American
entrepreneurial spirit. "
He then seems to imply that maybe there is an emergent, de facto bad outcome:
Yet it remains true that, considering all federal government policies, including
tax exemptions, the rich schools have benefited more than the poor ones -- a
regressive social policy that many would argue is inconsistent with using higher
education as a tool in promoting the American Dream.
Anyway, direct funding of third-level education by federal and state subsidies
seems like a great idea and something that I would be very happy for my tax
dollars to be used towards and -- moreover -- I would be happy paying more
taxes if they were put to such purposes.
"... By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Jointly published with New Economic Perspectives ..."
"... he's pursued abroad many also intuitively believe that there's no one who will hit back harder. There's some of that 'he may be a son-of-a-bitch but he's our son-of-a-bitch' quality to the president's support on national security issues. ..."
"... Hence teachers weren't divisive enough and therefore are/were seen as part of the "problem". ..."
Yves here. One has to wonder if the prosecutorial investment in bringing
down a public school test-cheating ring has less to do with concern about the
students and more to do with charter schools.
By Bill Black, the author of The Best Way to Rob a Bank is to
Own One and an associate professor of economics and law at the University of
Missouri-Kansas City. Jointly published with
New Economic Perspectives
The New York Times
ran the story on April Fools' Day of a jury convicting educators of gaming
the test numbers and lying about their actions to investigators.
ATLANTA - In a dramatic conclusion to what has been described as the
largest cheating scandal in the nation's history, a jury here on Wednesday
convicted 11 educators for their roles in a standardized test cheating scandal
that tarnished a major school district's reputation and raised broader questions
about the role of high-stakes testing in American schools.
On their eighth day of deliberations, the jurors convicted 11 of the
12 defendants of racketeering, a felony that carries up to 20 years in prison.
Many of the defendants - a mixture of Atlanta public school teachers, testing
coordinators and administrators - were also convicted of other charges,
such as making false statements, that could add years to their sentences.
This was complicated trial that took six months to present and required eight
days of jury deliberations. It was a major commitment of investigative and prosecutorial
resources. But it was not investigated and prosecuted by the FBI and AUSAs,
but by state and local officials. In addition to the trial success, the prosecutors
secured 21 guilty pleas.
Atlanta's public schools, of course, did not engage in "the largest cheating
scandal in the nation's history." The big banks' cheating scandals left the
Atlanta educators in the dust.
The two obvious questions are why the educators cheated and how they got
caught. "High-stakes testing" cannot explain the scandal because we have had
such tests for over 50 years. The article explains the real drivers – compensation,
promotions, fear, and ego (aka "reputation").
"Officials said the cheating allowed employees to collect bonuses and helped
improve the reputations of both Dr. Hall and the perpetually troubled school
district she had led since 1999.
Investigators wrote in the report that Dr. Hall and her aides had 'created
a culture of fear, intimidation and retaliation' that had permitted "cheating
- at all levels - to go unchecked for years."
Any reader familiar with my work should be running over in their mind Citigroup's
vastly larger cheating frauds that senior managers produced by using exactly
the same tactics to produce hundreds of billions of dollars in fraud.
How did people become suspicious and decide to conduct a real investigation?
They realized that the reported results were too good to be true. That too is
directly parallel to Citi, where massive purchases of "liar's" loans known to
be 90% fraudulent supposedly led to massive profits.
The dozen educators who stood trial, including five teachers and a principal,
were indicted in 2013 after years of questions about how Atlanta students
had substantially improved their scores on the
Criterion-Referenced Competency Test, a standardized examination given
throughout Georgia.
In 2009,
The Atlanta Journal-Constitution started publishing a series of articles
that sowed suspicion about the veracity of the test scores, and Gov. Sonny
Perdue ultimately ordered an investigation.
Wow, a newspaper did a series of articles, and documented a scandal built
on deceit. Imagine if the New York Times and the Wall Street Journal were to
do an "unsparing" investigation into banking fraud – and into Attorney General
Eric Holder's refusal to prosecute. What if they actually looked at culpability
in the C-suites?
The inquiry, which was completed in 2011, led to findings that were startling
and unsparing: Investigators concluded that cheating had occurred in at
least 44 schools and that the district had been troubled by "organized and
systemic misconduct." Nearly 180 employees, including 38 principals, were
accused of wrongdoing as part of an effort to inflate test scores and misrepresent
the achievement of Atlanta's students and schools.
The investigators wrote that cheating was particularly ingrained in individual
schools - at one, for instance, a principal wore gloves while she altered
answer sheets - but they also said that the district's top officials, including
Superintendent Beverly L. Hall, bore some responsibility.
Dr. Hall, who died on March 2, insisted that she had done nothing wrong
and that her approach to education, which emphasized data, was not to blame.
"I can't accept that there's a culture of cheating," Dr. Hall
said in an interview in 2011. "What these 178 are accused of is horrific,
but we have over 3,000 teachers."
Of course, Hall's "approach to education" did not "emphasize data" – it emphasized
faux data – like Citi's accounting alchemists under Robert Rubin who
transmuted fraudulent net liabilities (liar's loans) into supposedly wondrously
valuable assets that had zero risk (Super Senior CDO tranches).
A more general point is in order. Atlanta is the culmination of destructive
national trends and failing to mention Houston in the story was unfortunate.
First, the "reinventing government" movement decided the public sector was bad
and the private sector was magnificent and said that the public sector should
adopt private sector approaches including quite specifically "performance pay"
based on quantitative measures. This brought to the public sector the perverse
incentives that were ruining the private sector and about to bring on Enron-era
fraud epidemic and then the most recent three fraud epidemics. Second, we were
assured by proponents of the change that a concern for "reputation" would trump
any perverse incentives. What the proponents failed to see, of course, was that
in both the private and public sectors the way to create a superb reputation
was to report inflated data.
Reputation, instead of the "trump" ensuring good conduct, was a leading motive
to engage in bad conduct. Third, we were told that giving public administrators
far more power to squash teachers was the key to success in education. Lord
Acton warned that absolute power leads to absolute corruption whether in Atlanta
or Citi's C-suite.
Houston should have been mentioned because the modern movement toward educational
fraud began in Houston under Rod Paige – who became Secretary of Education based
on massive fraudulent misrepresentation of data. Paige kicked off the testing
insanity, claiming it would produce objective, fact-based policies based on
what educational measures actually worked. As a famous
takedown of Paige's claims ends – the lesson is that it was too good to
be true. President Bush, however, bought it hook, line, sinker, bobber, rod,
and the boat Paige rowed out in.
In any event, if Fulton County, Georgia can jail educators who lie and gimmick
the data, Holder can send the elite bankers to prison on the same grounds.
lakewoebegoner, April 2, 2015 at 10:41 am
*** One has to wonder if the prosecutorial investment in bringing
down a public school test-cheating ring has less to do with concern
about the students and more to do with charter schools. ***
I believe it's even simpler than that…..prosecuting teachers is perfect
fodder for the local 11 o'clock news-you're prosecuting publiclly paid low-hanging
fruit, the crime is understandable (versus explaining accounting fraud or
intentional misvaluation of assets) and of course-my gosh, think of the
children!
NotTimothyGeithner, April 2, 2015 at 11:07 am
Local DAs have incentive to prosecute large cases, and Holder made sure
to make token plea deals with the banks. A successful state AG who brought
down a major financial player would destroy the Obama Administration just
by existing two years into the first term because there would be no excuse.
Plenty of loyal Team Blue voters if pressed will explain the lack of prosecution
as a GOP plot, but with a counter example in the papers they would be more
demoralized than they are.
RUKidding, April 2, 2015 at 12:11 pm
Neither Team Blue or Team Red voters want to confront reality and truly
see and acknowledge what's going on. The crooks in the District of Criminals
have perfected their Kabuki Show of "hiding" behind each other's skirts
and blaming the other side for all kinds of ills and perfidy. Tribalistic
authoritarians can be lazy and not have to think for themselves and really
DO something; just pass the clicker; lets all watch some "reality" tv show
instead. Talk about the matrix….
An example is my rightwing family members just recently celebrating quite
a bit that Harry Reid has announced his retirement – as IF that'll be this
amazingly good thing. Like: what will happen then? HOW, exactly, will "things
get better" just bc they can't kick Harry Reid around anymore.
Disclaimer: no love lost on my part vis Harry Reid. He's as much of a
crook and worthless waste of space as all of the others, no matter which
Team Jacket they wear. My take? What possible difference will it make if
Reid retires or stays in the Senate indefinitely?
RUKidding, April 2, 2015 at 10:59 am
Teachers have no money. Bankers have a TON of money. Sucks to be in the
99s.
Good comments. Right now, too, teachers have been deliberately painted
to be the evilest of the vile because unions! get paid too much! can't be
fired! blah de blah…. it's something easy for the masses to grasp – all
those dreadful overpaid teachers who can't be fired "robbing" us of our
taxes, while allegedly doing a totally shitty job. Yeah right. Of course
privatized school teachers would most definitely do a "better" jawb.
It's all "look over there!!!!!" while the bankers are the ones robbing
us blind deaf dumb stupid etc.
And yes, Charter Schools! Another way for the crooks at the top to rip
off the 99s! woot!
And the beat down goes on…..
djrichard, April 2, 2015 at 12:09 pm
I remember back when the Supreme Court was debating W vs Gore, I put
it to my neighbors that W would be under the influence of big oil and other
powers that be. One of my neighbors countered that Gore would be under the
influence of teachers. I was the minority opinion in that conversation.
RUKidding, April 2, 2015 at 12:14 pm
No love lost on my part vis Gore, but seriously??? LIke Gore is "under
the influence" of teachers??? Yeah, unions, but really? Like it's just so
ridiculous. Teachers v Big Oil. Uh, er, that's pretty much like David v
Goliath, but in this case Goliath/BigOil has totally crushed David/the 99s.
djrichard, April 2, 2015 at 12:37 pm
I'm surprised I found
this, but I think
this captures it.
Bush's bully-boy campaign tactics play to his strengths, albeit unstated
and unlovely ones. Many of the polls of the president have shown that
while people don't necessarily agree with the specific policies
he's pursued abroad many also intuitively believe that there's no one
who will hit back harder. There's some of that 'he may be a son-of-a-bitch
but he's our son-of-a-bitch' quality to the president's support on national
security issues.
This was from W v Kerry days. But I think the same principle was operating
during W v Gore. During 2004, the idea was to continue to inflict W on the
middle east. During 2000, I think the idea was to inflict W on the "deserving
elements" inside the US (whatever those deserving elements are/were at the
time).
Teachers if anything represent a "big tent" mind-set, one in which there
are no losers, or vice-versa one in which everyone is deserving of winning.
Hence teachers weren't divisive enough and therefore are/were seen as
part of the "problem".
So I was peacefully drinking my coffee this morning, and was accosted by someone waving the latest
Wall Street Journal editorial on the dollar * in my face, demanding my reaction. Um, this is not cool.
Also, with apologies to Brad DeLong, when reading WSJ editorials you need to bear two things in mind:
1. The WSJ editorial page is wrong about everything.
2. If you think the WSJ editorial page is right about something, see rule #1.
After all, here's what you would have believed if you listened to that page over the years: Clinton's
tax hike will destroy the economy, you really should check out those people suggesting that Clinton
was a drug smuggler, Dow 36000, the Bush tax cuts will bring surging prosperity, Saddam is backing Al
Qaeda and has WMD, there isn't any housing bubble, US households have a high savings rate if you measure
it right. I'm sure I missed another couple of dozen high points.
Today's editorial was in the grand tradition. A few months ago falling stock prices showed Obama's
failure - never mind, we meant the falling dollar. And just to provide extra spice, the editorial cited
David Malpass ** as the wise expert on all this.
But more specifically, you need to see the Journal's fear of a weak dollar in terms of its long-term
gold-bug position. The Journal has always maintained that changes in exchange rates play no useful role,
that stable exchange rates - preferably enforced by some barbarous relic like the gold standard - are
the essence of sound policy.
I explained why this is all wrong a long time ago. *** But it's especially important to understand
the wrongness of this view right now. If there's one overwhelming lesson from the Great Depression,
it is that putting a higher priority on stabilizing your currency than on domestic recovery is utterly
disastrous. Barry Eichengreen **** pointed out years ago that major economies went off gold in the following
order: Japan, Britain, Germany, US, France. And here's what happened to their industrial output:
[Slowest to leave the gold standard, slowest to recover.
All that glitters went off gold.]
The WSJ may not realize it, but it wants us to be France in the 1930s. Let's not.
The legend of King Midas has been generally misunderstood. Most people think the curse that turned
everything the old miser touched into gold, leaving him unable to eat or drink, was a lesson in the
perils of avarice. But Midas' true sin was his failure to understand monetary economics. What the gods
were really telling him is that gold is just a metal. If it sometimes seems to be more, that is only
because society has found it convenient to use gold as a medium of exchange--a bridge between other,
truly desirable, objects. There are other possible mediums of exchange, and it is silly to imagine that
this pretty, but only moderately useful, substance has some irreplaceable significance.
But there are many people--nearly all of them ardent conservatives--who reject that lesson. While
Jack Kemp, Steve Forbes, and Wall Street Journal editor Robert Bartley are best known for their promotion
of supply-side economics, they are equally dedicated to the belief that the key to prosperity is a return
to the gold standard, which John Maynard Keynes pronounced a "barbarous relic" more than 60 years ago.
With any luck, these latter-day Midases will never lay a finger on actual monetary policy. Nonetheless,
these are influential people--they are one of the factions now struggling for the Republican Party's
soul--and the passionate arguments they make for a gold standard are a useful window on how they think.
There is a case to be made for a return to the gold standard. It is not a very good case, and most
sensible economists reject it, but the idea is not completely crazy. On the other hand, the ideas of
our modern gold bugs are completely crazy. Their belief in gold is, it turns out, not pragmatic but
mystical.
The current world monetary system assigns no special role to gold; indeed, the Federal Reserve is
not obliged to tie the dollar to anything. It can print as much or as little money as it deems appropriate.
There are powerful advantages to such an unconstrained system. Above all, the Fed is free to respond
to actual or threatened recessions by pumping in money. To take only one example, that flexibility is
the reason the stock market crash of 1987--which started out every bit as frightening as that of 1929--did
not cause a slump in the real economy.
While a freely floating national money has advantages, however, it also has risks. For one thing,
it can create uncertainties for international traders and investors. Over the past five years, the dollar
has been worth as much as 120 yen and as little as 80. The costs of this volatility are hard to measure
(partly because sophisticated financial markets allow businesses to hedge much of that risk), but they
must be significant. Furthermore, a system that leaves monetary managers free to do good also leaves
them free to be irresponsible--and, in some countries, they have been quick to take the opportunity.
That is why countries with a history of runaway inflation, like Argentina, often come to the conclusion
that monetary independence is a poisoned chalice. (Argentine law now requires that one peso be worth
exactly one U.S. dollar, and that every peso in circulation be backed by a dollar in reserves.)
So, there is no obvious answer to the question of whether or not to tie a nation's currency to some
external standard. By establishing a fixed rate of exchange between currencies--or even adopting a common
currency--nations can eliminate the uncertainties of fluctuating exchange rates; and a country with
a history of irresponsible policies may be able to gain credibility by association. (The Italian government
wants to join a European Monetary Union largely because it hopes to refinance its massive debts at German
interest rates.) On the other hand, what happens if two nations have joined their currencies, and one
finds itself experiencing an inflationary boom while the other is in a deflationary recession? (This
is exactly what happened to Europe in the early 1990s, when western Germany boomed while the rest of
Europe slid into double-digit unemployment.) Then the monetary policy that is appropriate for one is
exactly wrong for the other. These ambiguities explain why economists are divided over the wisdom of
Europe's attempt to create a common currency. I personally think that it will lead, on average, to somewhat
higher European unemployment rates; but many sensible economists disagree.
"... The deficit obsession that governments have shown since 2010 has helped produce a recovery that has been far too slow, even in the US. ..."
"... The Zero Lower Bound (ZLB) raises an acute problem for what I call the consensus assignment (leaving macroeconomic stabilisation to an independent, inflation targeting central bank), but add in austerity and you get major macroeconomic costs. ICBs appear to rule out the one policy (money financed fiscal expansion) that could combat both the ZLB and deficit obsession. ..."
Simon Wren-Lewis has a follow-up to his recent post on central bank independence:
The 'strong case' critically examined : Perhaps it was too unconventional
setting out an argument (against independent central banks, ICBs) that
I did not agree with, even though I made it abundantly clear that was what
I was doing. It was too much for one blogger, who reacted by deciding that
I did agree with the argument, and sent a series of tweets that are best
forgotten. But my reason for doing it was also clear enough from the final
paragraph. The problem it addresses is real enough, and the problem appears
to be linked to the creation of ICBs.
The deficit obsession that governments have shown since 2010 has
helped produce a recovery that has been far too slow, even in the US.
It would be nice if we could treat that obsession as some kind of aberration,
never to be repeated, but unfortunately that looks way too optimistic.
The Zero Lower Bound (ZLB) raises an acute problem for what I call
the consensus assignment (leaving macroeconomic stabilisation to an independent,
inflation targeting central bank), but add in austerity and you get major
macroeconomic costs. ICBs appear to rule out the one policy (money financed
fiscal expansion) that could combat both the ZLB and deficit obsession.
I wanted to put that point as strongly as I could. Miles Kimball does
something similar
here , although without the fiscal policy perspective ...
Skipping ahead (and omitting quite a bit of the argument):
... The basic flaw with my strong argument against ICBs is that the ultimate
problem (in terms of not ending recessions quickly) lies with governments.
There would be no problem if governments could only wait until the recession
was over (and interest rates were safely above the ZLB) before tackling
their deficit, but the recession was not over in 2010. Given this failure
by governments, it seems odd to then suggest that the solution to this problem
is to give governments back some of the power they have lost. Or to put
the same point another way, imagine the Republican Congress in charge of
US monetary policy.
But if abolishing ICBs is not the answer to the very real problem I set
out, does that mean we have to be satisfied with the workarounds? One possibility
that a few economists
like Miles Kimball have argued for is to effectively abolish paper money
as we know it, so central banks can set negative interest rates. Another
possibility is that the government (in its saner moments) gives ICBs
the power to undertake helicopter money.
Both are complete solutions to
the ZLB problem rather than workarounds. Both can be accused of endangering
the value of money. But note also that both proposals gain strength from
the existence of ICBs: governments are highly unlikely to ever have the
courage to set negative rates, and ICBs stop the flight times of helicopters
being linked to elections.
These are big (important and complex) issues. There should be no taboos
that mean certain issues cannot be raised in polite company. I still think
blog posts are the best medium we have to discuss these issues, hopefully
free from distractions like partisan politics.
"... We don't get to do many controlled experiments in economics, so history is mainly what we have to go on. ..."
"... What did orthodox salt-water macroeconomists believe about disinflation on the eve of the Paul Volcker contraction? As it happens, we have an excellent source document: James Tobin's "Stabilization Policy Ten Years After," * presented at Brookings in early 1980. ..."
"... Unemployment shot up faster than in Tobin's simulation, then came down faster, because the Fed didn't follow the simple rule he assumed. But the basic shape - a clockwise spiral, with inflation coming down thanks to a period of very high unemployment - was very much in line with what standard Keynesian macro said would happen. ..."
"... trade between any two regional economies is roughly proportional to the product of their GDPs and inversely related to distance. Neat. ..."
We don't get to do many controlled experiments in economics, so history
is mainly what we have to go on. Unfortunately, many people who imagine
that they know how the economy works go with what they think they heard
about history, not with what actually happened. And I'm not just talking
about the great unwashed; quite a few well-known economists seem not to
have heard about FRED, or at least haven't picked up the habit of doing
a quick scan of the actual data before making assertions about facts.
And there's one decade in particular where people are weirdly unaware
of the realities: the 1980s. A lot of this has to do with Reaganolatry:
the usual suspects have repeated so often that it was a time of extraordinary,
incredible success that I often encounter liberals who believe that something
special must have happened, that somehow the events were at odds with what
the prevailing macroeconomic models of the time said would happen.
But nothing special happened, aside from the unexpected willingness of
the Federal Reserve to impose incredibly high unemployment in order to bring
inflation down.
What did orthodox salt-water macroeconomists believe about disinflation
on the eve of the Paul Volcker contraction? As it happens, we have an excellent
source document: James Tobin's "Stabilization Policy Ten Years After," *
presented at Brookings in early 1980. Among other things, Tobin laid out
a hypothetical disinflation scenario based on the kind of Keynesian model
people like him were using at the time (which was also the model laid out
in the Dornbusch-Fischer and Robert Gordon textbooks).
These models included
an expectations-augmented Phillips curve, ** with no long-run tradeoff between
inflation and unemployment - but expectations were assumed to adjust gradually
based on experience, rather than changing rapidly via forward-looking assessments
of Fed policy.
This was, of course, the kind of model the Chicago School dismissed scathingly
as worthy of nothing but ridicule, and which was more or less driven out
of the academic literature, even as it continued to be the basis of a lot
of policy analysis.
So here was Tobin's picture:
[Picture]
Here's what actually happened:
[Graph]
Unemployment shot up faster than in Tobin's simulation, then came down
faster, because the Fed didn't follow the simple rule he assumed. But the
basic shape - a clockwise spiral, with inflation coming down thanks to a
period of very high unemployment - was very much in line with what standard
Keynesian macro said would happen. On the other hand, there was no sign
whatsoever of the kind of painless disinflation rational-expectations models
suggested would happen if the Fed credibly announced its disinflation plans.
Now that's fun: Adam Davidson tells us * about trade in the ancient Near
East, as documented by archives found in Kanesh - and reports that the volume
of trade between Kanesh and various trading partners seems to fit a gravity
equation: trade between any two regional economies is roughly proportional
to the product of their GDPs and inversely related to distance. Neat.
But what does the seemingly universal applicability of the gravity equation
tell us? Davidson suggests that it's an indication that policy can't do
much to shape trade. That's not where I would have gone, and it's not where
those who have studied the issue closely ** have gone.
Here's my take: Think about two cities with the same per capita GDP -
we can relax that assumption in a minute. They will trade if residents of
city A find things being sold by residents of city B that they want, and
vice versa.
So what's the probability that an A resident will find a B resident with
something he or she wants? Applying what one of my old teachers used to
call the principle of insignificant reason, a good first guess would be
that this probability is proportional to the number of potential sellers
- B's population.
And how many such desirous buyers will there be? Again applying insignificant
reason, a good guess is that it's proportional to the number of potential
buyers - A's population.
So other things equal we would expect exports from B to A to be proportional
to the product of their populations.
What if GDP per capita isn't the same? You can think of this as increasing
the "effective" population, both in terms of producers and in terms of consumers.
So the attraction is now the product of the GDPs.
Is there anything surprising about the fact that this relationship works
pretty well? A bit. Standard pre-1980 trade theory envisaged countries specializing
in accord with their comparative advantage - England does cloth, Portugal
wine. And these models suggest that how much countries trade should have
a lot to do with whether they are similar or not. Cloth exporters shouldn't
be selling much to each other, but should instead do their trading with
wine exporters. In reality, however, there's basically no sign of any such
effect: even seemingly similar countries trade about as much as a gravity
equation says they should.
Calibrated models of trade have long dealt with this reality, somewhat
awkwardly, with the so-called Armington assumption, *** which simply assumes
that even the apparently same good from different countries is treated by
consumers as a differentiated product - a banana isn't just a banana, it's
an Ecuador banana or a Saint Lucia banana, which are imperfect substitutes.
The new trade theory some of us introduced circa 1980 - or as some now call
it, the "old new trade theory" - does a bit more, and possibly better, by
introducing monopolistic competition and increasing returns to explain why
even similar countries produce differentiated products.
And there's also a puzzle about both the effect of distance and the effect
of borders, both of which seem larger than concrete costs can explain. Work
continues.
Does any of this suggest the irrelevance of trade policy? Not really.
Changes in trade policy do have obvious effects on how much countries trade.
Look at what happened when Mexico opened up starting in the late 1980s,
as compared with Canada, which was fairly open all along - and which, like
Mexico, mainly trades with the US:
[Graph]
So what does gravity tell us? Simple Ricardian comparative advantage
is clearly incomplete; the process of international trade is subtler, with
invisible as well as visible costs. Not trivial, but not too unsettling.
And gravity models are very useful as a benchmark for assessing other effects.
One morning, just before dawn, an old man named Assur-idi loaded up two
black donkeys. Their burden was 147 pounds of tin, along with 30 textiles,
known as kutanum, that were of such rare value that a single garment cost
as much as a slave. Assur-idi had spent his life's savings on the items,
because he knew that if he could convey them over the Taurus Mountains to
Kanesh, 600 miles away, he could sell them for twice what he paid.
At the city gate, Assur-idi ran into a younger acquaintance, Sharrum-Adad,
who said he was heading on the same journey. He offered to take the older
man's donkeys with him and ship the profits back. The two struck a hurried
agreement and wrote it up, though they forgot to record some details. Later,
Sharrum-Adad claimed he never knew how many textiles he had been given.
Assur-idi spent the subsequent weeks sending increasingly panicked letters
to his sons in Kanesh, demanding they track down Sharrum-Adad and claim
his profits.
These letters survive as part of a stunning, nearly miraculous window
into ancient economics. In general, we know few details about economic life
before roughly 1000 A.D. But during one 30-year period - between 1890 and
1860 B.C. - for one community in the town of Kanesh, we know a great deal.
Through a series of incredibly unlikely events, archaeologists have uncovered
the comprehensive written archive of a few hundred traders who left their
hometown Assur, in what is now Iraq, to set up importing businesses in Kanesh,
which sat roughly at the center of present-day Turkey and functioned as
the hub of a massive global trading system that stretched from Central Asia
to Europe. Kanesh's traders sent letters back and forth with their business
partners, carefully written on clay tablets and stored at home in special
vaults. Tens of thousands of these records remain. One economist recently
told me that he would love to have as much candid information about businesses
today as we have about the dealings - and in particular, about the trading
practices - of this 4,000-year-old community.
Trade is central to every key economic issue we face. Whether the subject
is inequality, financial instability or the future of work, it all comes
down to a discussion of trade: trade of manufactured goods with China, trade
of bonds with Europe, trade over the Internet or enabled by mobile apps.
For decades, economists have sought to understand how trade works. Can we
shape trade to achieve different outcomes, like a resurgence of manufacturing
or a lessening of inequality? Or does trade operate according to fairly
fixed rules, making it resistant to conscious planning?
Economists, creating models of trade, have faced a challenge, because
their data have derived exclusively from the modern world. Are their models
universal or merely reflections of our time? It's a crucial question, because
many in our country would like to change our trading system to protect American
jobs and to improve working conditions here and abroad. The archives of
Kanesh have proved to be the greatest single source of information about
trade from an entirely premodern milieu.
In a beautifully detailed new book - ''Ancient Kanesh,'' written by a
scholar of the archive, Mogens Trolle Larsen, to be published by Cambridge
University Press later this year - we meet dozens of the traders of Kanesh
and their relatives back home in Assur. Larsen has been able to construct
family trees, detailing how siblings and cousins, parents and spouses, traded
with one another and often worked against one another. We meet struggling
businessmen, like Assur-idi, and brilliant entrepreneurs, like Shalim-Assur,
who built a wealthy dynasty that lasted generations. In 2003, while covering
the war in Iraq, I traveled to many ancient archaeological sites; the huge
burial mounds, the carvings celebrating kings as relatives to the gods,
all gave the impression of a despotic land in which a tiny handful of aristocrats
and priests enjoyed dictatorial control. But the Kanesh documents show that
at least some citizens had enormous power over their own livelihoods, achieving
wealth and power through their own entrepreneurial endeavors.
The details of daily life are amazing, but another scholar, Gojko Barjamovic,
of Harvard, realized that the archive also offered insight into something
potentially more compelling. Many of the texts enumerate specific business
details: the price of goods purchased and sold, the interest ate on debt,
the costs of transporting goods and the various taxes in the many city-states
that the donkey caravans passed on the long journey from Assur to Kanesh.
Like most people who have studied Kanesh, Barjamovic is an Assyriologist,
an expert in ancient languages and culture. Earlier this year, he joined
some economists, as well as some other Assyriologists and archaeologists,
on a team that analyzed Kanesh's financial statistics. The picture that
emerged of economic life is staggeringly advanced. The traders of Kanesh
used financial tools that were remarkably similar to checks, bonds and joint-stock
companies. They had something like venture-capital firms that created diversified
portfolios of risky trades. And they even had structured financial products:
People would buy outstanding debt, sell it to others and use it as collateral
to finance new businesses. The 30 years for which we have records appear
to have been a time of remarkable financial innovation....
Multipliers: What We Should Have Known
By Paul Krugman
There's a very nice interview * with Olivier Blanchard, who is leaving
the International Monetary Fund, in which among other things Olivier says
the right thing about changing one's mind:
"With respect to outside, the issue I have been struck by is how to indicate
a change of views without triggering headlines of 'mistakes,' 'Fund incompetence,'
and so on. Here, I am thinking of fiscal multipliers. The underestimation
of the drag on output from fiscal consolidation was not a 'mistake' in the
way people think of mistakes, e.g. mixing up two cells in an excel sheet.
It was based on a substantial amount of prior evidence, but evidence which
turned out to be misleading in an environment where interest rates are close
to zero and monetary policy cannot offset the negative effects of budget
cuts. We got a lot of flak for admitting the underestimation, and I suspect
we shall continue to get more flak in the future. But, at the same time,
I believe that we, the Fund, substantially increased our credibility, and
used better assumptions later on. It was painful, but it was useful."
Indeed. There are a lot of people out there whose idea of a substantive
argument is "you used to say X, now you say Y" - never mind the reasons
why you changed your view, and whether it was right to do so.It's important
not to fall into the trap of being afraid to let new evidence or analysis
speak.
One thing I would say, however, is that on this particular issue the
Fund should have known better. Olivier says that the evidence "turned out
to be misleading in an environment where interest rates are close to zero
and monetary policy cannot offset the negative effects of budget cuts",
but didn't we know that? I certainly did. **
And let me also beat one of my favorite drums: the prediction that multipliers
would be much larger in a liquidity trap came out of IS-LMish macro (or,
to be fair, New Keynesian models) and has been overwhelmingly confirmed
by experience. So this was yet another victory for Keynesian analysis, the
success story nobody will believe.
Barry Eichengreen and Kevin O'Rourke have lately been scoring a series
of research coups, based on the combination of historical perspective and
a global view. Most famously, they showed that on a global basis the first
year of the current crisis was every bit as severe * as the first year of
the Great Depression.
Now they and collaborators have a new piece on policy effects, ** especially
fiscal multipliers.
The background here is that there are two problems with estimating multipliers
relevant to our current situation. First, you need to look at what happens
under liquidity-trap conditions - and except in Japan,these haven't prevailed
anywhere since the 1930s. The second is that in the United States, fiscal
policy was never forceful enough to provide a useful natural experiment.
We didn't have a really big fiscal expansion until World War II; and WWII
isn't a good experiment because the surge in defense spending was accompanied
by government policies that suppressed private demand, such as rationing
and restrictions on investment. (I really, really don't understand why this
point has been so hard to get across.)
What E&R do here is use a broad international cross-section to overcome
this problem. This works because a number of countries had major military
buildups during the 1930s - fiscal expansions that can be regarded as exogenous
to the economic situation, since they were
"driven above all by Hitler's rearmament programmes and other nations'
efforts to match the Nazis in this sphere, and by one-off events like Italy's
war in Abyssinia."
What do E&R find? Initial fiscal multipliers of 2 or more, although they
shrink over time. Yes, fiscal expansion is expansionary.
So how does the decade of the 1980s end up being perceived as a defeat
for Keynesians? To see it that way you have to systematically misrepresent
both what happened to the economy and what people like Tobin were saying
at the time. In reality, Tobinesque economics looks very good in the light
of events.
In economics, the Phillips curve is a historical inverse relationship
between rates of unemployment and corresponding rates of inflation that
result in an economy. Stated simply, decreased unemployment, (i.e. increased
levels of employment) in an economy will correlate with higher rates of
inflation.
Future Economists Will Probably Call
This Decade the 'Longest Depression'
:
... Back before 2008, I used to teach my
students that during a disturbance in
the business cycle, we'd be 40 percent
of the way back to normal in a year. The
long-run trend of economic growth, I
would say, was barely affected by
short-run business cycle disturbances.
There would always be short-run bubbles
and panics and inflations and
recessions. They would press production
and employment away from its long-run
trend -- perhaps by as much as 5
percent. But they would be transitory.
After the shock hit, the economy would
rapidly head back to normal. The
equilibrium-restoring logic and magic of
supply and demand would push the economy
to close two-fifths of the gap to normal
each year. After four years, only a
seventh of the peak disturbance would
remain.
In the aftermath of 2008, Stiglitz was
indeed one of those warning that I and
economists like me were wrong. Without
extraordinary, sustained and aggressive
policies to rebalance the economy, he
said, we would never get back to what
before 2008 we had thought was normal.
It Pays to Work: Work Incentives and the
Safety Net: Isaac Shapiro, Robert
Greenstein, Danilo Trisi, and Bryann
DaSilva, CBPP
: Some critics of
various low-income assistance programs
argue that the safety net discourages
work. In particular, they contend that
people receiving assistance from these
programs can receive more, or nearly as
much, from not working - and receiving
government aid - than from working. Or
they argue that low-paid workers have
little incentive to work more hours or
seek higher wages because losses in
government aid will cancel out the
earnings gains.
Careful analysis of the data and
research demonstrates, however, that
such charges are largely incorrect and
that it pays to work. In the
overwhelming majority of cases, in fact,
adults in poverty are significantly
better off if they get a job, work more
hours, or receive a wage hike.
Various
changes in the safety net over the past
two decades have transformed it into
more of what analysts call a "work-based
safety net" and substantially increased
incentives to work for people in
poverty. ...
Why is U.S. labor market fluidity
drying up
?: The U.S. labor
market is a far less dynamic place
than it was 30 years ago. Workers
today are less likely to get a job
while unemployed, move into
unemployment, switch jobs, or move
across state lines. You'd think just
the opposite would be true given
some of the discussion about our
rapidly changing digital economy,
but the data show what the data
show. Even still, the reason-or
reasons-for the decline in fluidity
aren't known.
A
new working paper
-by economists
Raven Molloy, Christopher L. Smith,
and Riccardo Trezzi of the Federal
Reserve and Abigail Wozniak of the
University of Notre Dame-takes a
closer look at the decline in labor
market fluidity and tries to find
the causes. While the authors find
nothing close to a smoking gun, they
point to interesting avenues of
future research. ...
No, DrDick, a person's
income does not change
mobility unless it is
extraordinarily low (in
other words, they already
can't pay rent and pay for a
moving truck). If absolute
income reduced mobility,
then we would expect
mobility to have been lower
in the past.
You obviously have no idea
what you are talking about.
Your last statement is
clearly false, if you
control for inflation.
Minimum wage in 1960
($1.65), for instance
translates into over
$10/hour today. It is
certainly true that even
relatively poor people will
move if there are no jobs
available locally, as in the
Dust Bowl migrations or the
migrations from the Rust
Belt to Texas, Oklahoma, and
Louisiana in the late 70s.
No such mobility exists for
low to moderate income
people unless they are truly
desperate.
Home ownership also
substantially reduces
mobility, particularly if
you're unlucky enough to
live in a region suffering
from long-term economic
decline.
Close but cost of housing in
certain markets is also a
hindrance for labor
mobility. Hard to move to
places like Seattle or New
York where there are jobs
and high wages but the cost
of housing has outpaced the
salary increases.
Urban specialization in the
industries of Healthcare,
Technology, Finance and
Logistics. High cost of
living acts as an economic
filter to ensure "the best
people" are local.
Alan Greenspan recognized *
early on that the nature of
business cycles in the
United States was changing
from inventory adjustment to
labor adjustment cycles. As
business inventory was made
learner and leaner, with a
movement to the just-in-time
inventory delivery practices
followed through Japan,
Greenspan suggested that as
economic conditions changed
businesses would react by
adjusting employment.
The
recession of the Bush
presidency in the early
1990s unlike the Reagan
recession of the early 1980s
was for Greenspan an
employment adjustment rather
than inventory adjustment
recession. Employment then
has become accepted as less
and less of a long term
commitment by employers to
workers and workers have
have more poorly
accordingly.
* I do not know where the
Greenspan speech on the
changing nature of
businesses cycles can be
found and would be grateful
for a reference.
[ Here is Alan Greenspan
speaking of the speed of
inventory adjustments, but I
think Greenspan had
recognized this before he
became Federal Reserve Chair
in 1987. The problem he
confronted at the Fed was
employment adjustment.
Again, I will look for
earlier discussion of the
matter. ]
Swings in employment were
always part of the cycle
I find green spans
distinction to be......
Politics
It might be the case that
a relatively closed economy
with high employment share
in industrial production
Would show cuts in
production and inventory
shrink
Where a open system would
show a drop in imports
We have become more open
since we dropped the dollar
to gold peg
And industries job share has
dropped
This is only part of an
answer to the numbers
Which btw show lower lay off
rates per drop in output
The quit rate shows both
longer periods of low rates
then in cycles from the 50's
I have read the criticism
several times, but do not
quite understand what is
being argued. Employment
recovery has surely become
increasingly lengthy in each
recession since 1981-1982:
I have read the criticism
several times, but do not
quite understand what is
being argued. Privater
employment recovery has
surely become increasingly
lengthy in each recession
since 1981-1982:
https://www.youtube.com/watch?v=TCbFEgFajGU
"running classified ads with
the goal of NOT finding any
qualified applicants, and
the steps they go through to
disqualify even the most
qualified Americans in order
to secure green cards for
H-1b workers"
3. Employers are
overworking /stretching
existing (overtime pay
exempt) staff
4. Weak aggregate demand.
5. Increased use of
informal and 1099/contractor
positions
Johnny Backho beat me to it
regarding dual careers.
Single earner households are
much more likely to be
prepared to move. It also
causes people to leave
companies or turn down
promotions, as well.
This is obvious and
observable, but you will see
a chunk of people vigorously
deny it for two reasons:
1) They project an
anti-feminist perspective
onto it. In other words,
they think that finding
anything at all that could
be perceived to be not
positive about dual incomes
is an assault on women
working outside the home.
2) Even more twisted, they
think that because many
people are in dual income
households for economic
reasons (they need both
incomes for "basic" needs),
that declaring that the dual
income reduces mobility is a
negative comment about the
dual income households.
But I should also point out
that the flow of government
money has become less
decentralised over time (if
not regionally, then in
terms of individuals) so
that financial incentives to
move have also fallen. Money
flows up, not down and if
there is no decentralising
force (for instance
government services and
transfer payments) it tends
to increasingly concentrate.
It's called hunkering down,
holding onto your desk.
This seems like an area of
research as much for
(social) psychologists as
economists. Consider the
behavior of people after
they have suffered or
witnessed a (series of)
traumatic event(s). Everyone
who lost a job and got
another is holding onto it
like a life raft. Those who
didn't lose their jobs hold
on as dearly, knowing that
if they lose it, they could
be out in the wilderness for
a long time and never get
back to where they were.
And movement from life
raft to life raft is hardly
tempting, in most cases.
Little salary or no bump
with uncertain stability.
The devil you know is better
than the devil you don't
know.
And we have to wonder if
there is hysteresis with
productivity. In other
words, fearful workers are
less likely to embrace
projects and systems that
increase productivity and
management is less likely to
pursue them due to docile,
affordable workers.
I think fear, (actually,
sheer terror) explains 99%
of this. It's like the
entire workforce is
experiencing PTSD.
There
is very little confidence
that you'll be able to find
a new job if you get laid
off, and even less
confidence that a new job
will be any better than your
current one.
I know that professional
STEM recruiters are having a
much tougher time getting
people to leave an existing
job. Oddly, the one thing
that I find perplexing is
that the bias against hiring
someone who's unemployed is
much stronger than ever.
Recruiter and HR
biases and inefficiencies
are quite unhelpful.
Further, I would never,
ever, ever leave a job
without a raise and a legit,
iron-clad, in-hand and
legally enforceable signed
offer.
Nick Corcodilos, a
recruiter in Silicon Valley,
often talks about a rash of
rescinded offers. The whole
process of changing jobs is
filled with a series of
landmines that could land
you into unemployment
leprosy if things don't work
out perfectly.
Related to fear: Declining
job tenure length, and maybe
the growth of corporate
'rightsizing' - an MBA
finance VP I know had 3
sizable companies shot out
from under him during his
career, and was constantly
upgrading software skills to
stay within shouting
distance of up to date.
The late 70s 80s inflation was due to 2 components.
1. Wage inflation fueled by COLA.
2. Price inflation fueled by the oil shock and the response of fuel switching
and conservation, both of which were expensive and subtracted from productivity.
(Same amount of product made, more work if you count work dedicated to remediation).
Volcker overcorrected and defanged labor to the delight of the wealthy
elites.
That inflation did not return even when unemployment declined to low levels
validates that other factors were driving inflation (oil) and that was corrected
by Carter energy policy.
The wealthy elites give zero credit to regulatory and fiscal policy under
Carter for fixing the problem. Reagan fiscal policy made inflation worse,
but by then, Carter energy policy had taken full effect.
During the Great Moderation, we do see inflation start to appear during
oil shocks (such as Gulf War 1).
We have rewritten history discounting policies
that worked, thus preventing us from learning the truth about the value
of fiscal and regulatory policy and limitations of monetary policy.
Monetary
policy only worked by creating a bad recession with high unemployment.
Fiscal
and regulatory policy tackled the energy issues without causing the social
harm from high unemployment.
"... Most investors do fairly well at "buying" but stink at "selling." The reason is purely emotional driven primarily by "greed" and "fear." Like pruning and weeding a garden; a solid discipline of regularly taking profits, selling laggards and rebalancing the allocation leads to a healthier portfolio over time. ..."
"... once you run out of chips you are out of the game. ..."
Submitted by Lance Roberts via STA Wealth Management,
As markets hover near all-time highs, investors have become quite complacent
that the current bull market trend will continue indefinitely. But why shouldn't
they? After all, the Central Banks of the world have made it a primary mission
to ensure that asset prices don't fall in order to keep extremely weak economies
limping along. Interest rates hover near historic lows, and inflationary pressures
are non-existent. Of course, these arguments are used to justify the second
highest levels of valuation in history and a market that has set records for
the longest stretch without a 10% correction. This time is truly different...right?
Of course, a quick look at history tells us that this time is not different.
In March of 2008, I was giving a seminar discussing why we had already likely
entered into a recession and that a market swoon of mass proportions was approaching.
While that advice fell on deaf ears as we were in a "Goldilocks" economy, and
"subprime" was contained, the bubble ended just a few short months later. Why?
Because that "bubble" was no "different" than any other time in history. The
slide below was from the presentation:
this time is different
Of course, the next time I make this presentation I will have to add "Central
Bank Interventions" to the list.
The reality is that markets cycle from peaks to troughs as excesses built
up during the previous bull market cycle are liquidated. The chart below shows
the secular cycles of the market going back to 1871 adjusted for inflation.
What is important is that historically, bull markets are launched from ver low
valuations (buy low) and have historically ended with valuations around 23x
earnings (sell high).
SP500-PE-Recessions-031815
This time is not different. The excesses being built up in the markets today
will eventually revert just as they have been at every other peak in market
history. The only question, of which no one has the answer to, is exactly when
this occurs.
With this in mind, there are 10-basic investment rules that have historically
kept investors out of trouble over the long term. These are not unique by any
means but rather a list of investment rules that in some shape, or form, has
been uttered by every great investor in history.
1) You are a "saver" - not an investor
Unlike Warren Buffet who takes control of a company and can affect its financial
direction - you are speculating that a purchase of a share of stock today can
be sold at a higher price in the future. Furthermore, you are doing this with
your hard earned savings. If you ask most people if they would bet their retirement
savings on a hand of poker in Vegas they would tell you "no." When asked why,
they will say they don't have the skill to be successful at winning at poker.
However, on a daily basis these same individuals will buy shares of a company
in which they have no knowledge of operations, revenue, profitability, or future
viability simply because someone on television told them to do so.
Keeping the right frame of mind about the "risk" that is undertaken in a
portfolio can help stem the tide of loss when things inevitably go wrong. Like
any professional gambler - the secret to long term success was best sung by
Kenny Rogers; "You gotta know when to hold'em...know when to fold'em."
2) Don't forget the income.
As stated by the "Investment Brothers," an investment is an asset or item
that will generate appreciation OR income in the future. In today's highly correlated
world, there is little diversification left between equity classes. Markets
rise and fall in unison as high-frequency trading and monetary flows push related
asset classes in a singular direction. This is why including other asset classes,
like fixed income which provides a return of capital function with an income
stream, can reduce portfolio volatility. Lower volatility portfolios will consistently
outperform over the long term by reducing the emotional mistakes caused by large
portfolio swings.
3) You can't "buy low" if you don't "sell high"
Buy-Low-Sell-High-Rogers
Most investors do fairly well at "buying" but stink at "selling." The
reason is purely emotional driven primarily by "greed" and "fear." Like pruning
and weeding a garden; a solid discipline of regularly taking profits, selling
laggards and rebalancing the allocation leads to a healthier portfolio over
time.
Most importantly, while you may "beat the market" with "paper profits" in
the short term, it is only the realization of those gains that generate "spendable
wealth."
4) Patience And Discipline Are What Wins
Most individuals will tell you that they are "long-term investors." However,
as Dalbar studies have repeatedly shown investors are driven more by emotions
than not. The problem is that while individuals have the best of intentions
of investing long-term, they ultimately allow "greed" to force them to chasing
last year's hot performers. However, this has generally resulted in severe underperformance
in the subsequent year as individuals sell at a loss and then repeat the process.
This is why the truly great investors stick to their discipline in good times
and bad. Over the long term - sticking to what you know, and understand, will
perform better than continually jumping from the "frying pan into the fire."
5) Don't Forget Rule No. 1
As any good poker player knows - once you run out of chips you are out
of the game. This is why knowing both "when" and "how much" to bet is critical
to winning the game. The problem for most investors is that they are consistently
betting "all in, all of the time."
The "fear" of missing out in a rising market leads to excessive risk buildup
in portfolios over time. It also leads to a violation of the simple rule of
"sell high."
As discussed recently, the reality is that opportunities to invest in the
market come along as often as taxi cabs in New York City. However, trying to
make up lost capital by not paying attention to the risk is a much more difficult
thing to do.
6) You most valuable, and irreplaceable commodity, is "time."
Since the turn of the century, investors have recovered, theoretically, from
two massive bear market corrections. After 15 years, investors are now back
to where they were in 2000 after adjusting for inflation. The problem is that
there has been an irreplaceable loss; the "time" that was available to "save"
for retirement is gone, forever.
For investors getting back to even is not an investment strategy. We are
all "savers" that have a limited amount of time within which to save money for
our retirement. If we were 15 years from retirement in 2000 - we are now staring
it in the face with no more to show for it than what we had over a decade ago.
Do not discount the value of "time" in your investment strategy.
7) Don't mistake a "cyclical trend" as an "infinite direction."
The-trend-is-your-friend
There is an old Wall Street axiom that says the "trend is your friend." Unfortunately,
investors repeatedly extrapolate the current trend into infinity. In 2007, the
markets were expected to continue to grow as investors piled into the market
top. In late 2008, individuals were convinced that the market was going to zero.
Extremes are never the case.
It is important to remember that the "trend is your friend." That is as long
as you are paying attention to it and respecting its direction. Get on the wrong
side of the trend, and it can become your worst enemy.
8) Success breeds over-confidence
Overconfidence
Individuals go to college to become doctors, lawyers, and even circus clowns.
Yet, every day, individuals pile into one of the most complicated games on the
planet with their hard earned savings with little, or no, education at all.
For most individuals, when the markets are rising, their success breeds confidence.
The longer the market rises; the more individuals attribute their success to
their own skill. The reality is that a rising market covers up the multitude
of investment mistakes that individuals make by taking on excessive risk, poor
asset selection or weak management skills. These errors are revealed by the
forthcoming correction.
9) Being a contrarian is tough, lonely and generally right.
Buy-Fear-Sell-Greed
Howard Marks once wrote that:
""Resisting – and thereby achieving success as a contrarian – isn't easy.
Things combine to make it difficult; including natural herd tendencies and the
pain imposed by being out of step, since momentum invariably makes pro-cyclical
actions look correct for a while. (That's why it's essential to remember that
'being too far ahead of your time is indistinguishable from being wrong.')
Given the uncertain nature of the future, and thus the difficulty of being
confident your position is the right one – especially as price moves against
you – it's challenging to be a lonely contrarian."
The best investments are generally made when going against the herd. Selling
to the "greedy" and buying from the "fearful" are extremely difficult things
to do without a very strong investment discipline, management protocol, and
intestinal fortitude. For most investors the reality is that they are inundated
by "media chatter" which keeps them from making logical and intelligent investment
decisions regarding their money which, unfortunately, leads to bad outcomes.
10) Comparison is your worst investment enemy
paint-dry
The best thing you can do for your portfolio is to quit benchmarking against
a random market index that has absolutely nothing to do with your goals, risk
tolerance or time horizon.
Comparison in the financial arena is the main reason clients have trouble
patiently sitting on their hands, letting whatever process they are comfortable
with work for them. They get waylaid by some comparison along the way and lose
their focus. If you tell a client that they made 12% on their account, they
are very pleased. If you subsequently inform them that 'everyone else' made
14%, you have made them upset. The whole financial services industry, as it
is constructed now, is predicated on making people upset so they will move their
money around in a frenzy. Money in motion creates fees and commissions. The
creation of more and more benchmarks and style boxes is nothing more than the
creation of more things to COMPARE to, allowing clients to stay in a perpetual
state of outrage."
The only benchmark that matters to you is the annual return that is specifically
required to obtain your retirement goal in the future. If that rate is 4%, then
trying to obtain 6% more than doubles the risk you have to take to achieve that
return. The end result of taking on more risk than necessary will be the deviation
away from your goals when something inevitably goes wrong.
It's all in the risk
Robert Rubin, former Secretary of the Treasury, changed the way I thought
about risk when he wrote:
"As I think back over the years, I have been guided by four principles for
decision making. First, the only certainty is that there is no certainty. Second,
every decision, as a consequence, is a matter of weighing probabilities. Third,
despite uncertainty we must decide and we must act. And lastly, we need to judge
decisions not only on the results, but on how they were made.
Most people are in denial about uncertainty. They assume they're lucky, and
that the unpredictable can be reliably forecast. This keeps business brisk for
palm readers, psychics, and stockbrokers, but it's a terrible way to deal with
uncertainty. If there are no absolutes, then all decisions become matters of
judging the probability of different outcomes, and the costs and benefits of
each. Then, on that basis, you can make a good decision."
It should be obvious that an honest assessment of uncertainty leads to better
decisions, but the benefits of Rubin's approach goes beyond that. For starters,
although it may seem contradictory, embracing uncertainty reduces risk while
denial increases it. Another benefit of "acknowledged uncertainty" is it keeps
you honest. A healthy respect for uncertainty, and a focus on probability, drives
you never to be satisfied with your conclusions. It keeps you moving forward
to seek out more information, to question conventional thinking and to continually
refine your judgments and understanding that difference between certainty and
likelihood can make all the difference.
The reality is that we can't control outcomes; the most we can do is influence
the probability of certain outcomes which is why the day to day management of
risks and investing based on probabilities, rather than possibilities, is important
not only to capital preservation but to investment success over time.
Average:
3.076925
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Your rating: None Average: 3.1 (13 votes)
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.
Zirpedge
#11 Money Talks and Bullshit Walks
#12 Cash is King!
summerof71
"What's a trillion between friends?" - Bernank
kaiserhoff
kaiserhoff's picture
So what's the point in saving if the return is less than zero...,
a lot less?
max2205
Only go all in when the fed owns and buys the market every Fucking day for 8
Fucking years
asteroids
Don't fucking play! Stay in cash and wait for the inevitable crashes. They will
happen. Buy gold and silver to keep away the fucking vampires. Invest in yourself.
malek
Seems Robert Rubin optimized principles out of the equations. The outcomes from
his decisions support that view.
A Lunatic
#13. Sell in March, have nuclear holocaust in May........
ronron
well the fucker left out. sell in may and run away.
indaknow
#11.......Don't get high on your own supply
Seek_Truth
Missed one:
"The rich rule over the poor, and the borrower is slave to the lender." -
Proverbs 22:7
Eo Ipso: Never buy what you can't afford without borrowing.
Tinky
My personal favorite:
Journalist: "To what do you attribute your great success in the market?"
Bernard Baruch: "Selling too early."
davidalan1
"You can get more money but not more time"...ok...this was demonstrated to me
one beautiful Saturday in spring. I had an almost 30yr old toro lawnmower that
I LOVED. Called him "the old man" during his last days. 2.5 briggs and stratton.
Towards the end he was put together with liquid cement. Looked like hell, but
i kept the blade sharp. At one point i took him to the shop to get a pull string
replace and the workers thought it was a junk mower and took it 45min away to
be junked. Much to their chagrin the small motor shop had to go retrieve the
old man.
Anyhoo...back to the story. He started cutting out on inclines. Took the
carb apart, googled and shit to no avail... Had him out front on said Saturday
in question. An old guy, maybe 80-90 years old pulls up out of NOWHERE.. walks
up and says. "Thats an old toro". I said yes sir it is, appreciating his knowledge.
He says. "having any trouble with her"...I was blown away. Explained the situation
and he says, "got a flashlight and flat head"? "Yes Sir"...anyway he fixed it..I
was BLOWN away...
As he was walking back to his car, I made the stupid comment. "You should
open a lawnmower shop you could make alot of money". Omg what a dork comment.
He turns around and says. "son I have plenty of money, its time Im running
out of"...
True story
A Lunatic
Just goes to show you that having a flat head is very important.......
I Write Code
I'm a mediocre investor, so stop rubbing it in already.
Panic Mode
The house always wins.
stant
I was only helping the muppets over the yield fence
King Rear
In the short term the market is a voting mechanism, in the long run it is a
weighing mechanism. - Ben Graham
Patton
#1 is Horseshit. Studies have shown that holding the best American companies
over the long term can generate crazy returns. Look where you would be right
now if you had held companies like IBM, KO, WMT, MCD, T, V, GOOG, etc even through
all the crashes. Markets crash, but they ALWAYS recover. This is an undisputable
fact. If you hold stocks for decades and reinvest the dividends, you will be
rich. That's a guarantee.
TheGreatRecovery
Since 1988, the SP500 has returned 8.17% compounded annually. I agree with you
BUT I fear that inflation may actually be running 8%, and therefore eating up
everything a stock market investor makes. (Of course, 8% inflation would more
than eat up everything a bond investor makes, and I think it would eat up even
what a buy-and-hold real estate investor "makes".)
Michigander
Even a stopped clock is right twice a day. So what the fuck do you if you needed
your "riches" on 1/1/09?
#11 Timing is everything.
Who was that ma...
Who was that masked man's picture
#11 "The person who risks nothing, does nothing, has nothing, is nothing,
and becomes nothing. He may avoid suffering and sorrow, but he simply cannot
learn and feel and change..."
Leo Buscaglia
#12 "I am more interested in the return of my capital than the return
on my capital."
Mark Twain
#13 "You've got to go out on a limb sometimes because that's where the
fruit is."
#14 Don't gamble; take all your savings and buy some good stock and hold
it till it goes up, then sell it. If it don't go up, don't buy it.
– Will Rogers (1879 – 1935)
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WTFRLY
WTFRLY's picture
9/11 Truth: Judges shocked by first time seeing video of WTC 7 collapse
in Denmark court
FPearl602
"If you liked it at $50, you gotta LOVE it at $40; if ya luvved it at $40,
u gotta ADORE it at $20; if it continues to drop, shoot yourself."
- Jim Cramer
kchrisc
"10 Investment Quotes To Live By"
10 Investment Quotes to Survive By
1. Buy and hold gold and silver.
2. Buy and hold steal.
3. Buy and hold lead.
4. Buy and hold brass.
5. Buy and hold primers and powder.
6. Buy and hold food and water.
7. Buy and hold filters.
8. Buy and hold fuel.
9. Buy and hold land.
10. Buy and use guillotines.
The banksters need to repay us.
83_vf_1100_c
'The banksters need to repay us.'
I like your tag line but you do know it will never happen. Maybe after
all the descendants of slaves finally get their 40 acres and a mule... never.
kchrisc
You are thinking of payment in gold or silver, when heads will also gladly
be accepted.
With that said, they WILL repay us.
The banksters need to repay us.
Login or register to post comments
Thu, 03/19/2015 - 06:52 | 5905303 Firewood
Firewood's picture
2. Buy and hold steal
I think that should be
2. Steal hold and buy
Login or register to post comments
Thu, 03/19/2015 - 00:16 | 5904979 Kina
Kina's picture
Nobody ever lost money taking their profits.
Plenty lose money waiting for higher and higher profits.
Never chase a climbing stock price.
Always take your losses at your pre-decided margin.
"... I think Trump is afraid the imperial global order presided by the US is about to crash and thinks he will be able to steer the country into a soft landing by accepting that other world powers have interests, by disengaging from costly and humiliating military interventions, by re-negotiating trade deals, and by stopping the mass immigration of poor people. Plus a few well-placed bombs ..."
"... Much has been written about the internet revolution, about the impact of people having access to much more information than before. The elite does not recognize this and is still organizing political and media campaigns as if it were 1990, relying on elder statesmen like Blair, Bush, Mitterrand, Clinton, and Obama to influence public opinion. They are failing miserably, to the point of being counterproductive. ..."
"... I don't think something as parochial as racism is sustaining Trump, but rather the fear of the loss of empire by a population with several orders of magnitude more information and communication than in 2008, even 2012. ..."
"... No one has literally argued that people should be glad to lose employment: that part was hyperbole. But the basic argument is often made quite seriously. See e.g. outsource Brad DeLong . ..."
"... The same thing has happened in Mexico with neoliberal government after neoliberal government being elected. There are many democratically elected neoliberal governments around the world. ..."
"... In the case of Mexico, because Peña Nieto's wife is a telenovela star. How cool is that? It places Mexico in the same league as 1st world countries, such as France, with Carla Bruni. ..."
"... To the guy who asked- poor white people keep voting Republican even though it screws them because they genuinely believe that the country is best off when it encourages a culture of "by the bootstraps" self improvement, hard work, and personal responsibility. They view taxing people in order to give the money to the supposedly less fortunate as the anti thesis of this, because it gives people an easy out that let's them avoid having to engage in the hard work needed to live independently. ..."
"... The extent to which "poor white people" vote against their alleged economic interests is overblown. To a large extent, they do not vote at all nor is anyone or anything on the ballot to represent their interests. And, yes, they are misinformed systematically by elites out to screw them and they know this, but cannot do much to either clear up their own confusion or fight back. ..."
"... The mirror image problem - of elites manipulating the system to screw the poor and merely middle-class - is daily in the news. Both Presidential candidates have been implicated. So, who do you recommend they vote for? ..."
"... I think you're missing Patrick's point. These voters are switching from one Republican to another. They've jettisoned Bush et. al. for Trump. These guys despise Bush. ..."
"... They've figured out that the mainstream party is basically 30 years of affinity fraud. ..."
"... My understanding is trumps support disproportionately comes from the small business owning classes, Ie a demographic similar to the petite bourgeoisie who have often been heavily involved in reactionary movements. This gets oversold as "working class" when class is defined by education level rather than income. ..."
"... Layman - Why are these voters switching from Bush et al to Trump? Once again, Corey's whole point is that there is very little difference between the racism of Trump and the mainstream party since Nixon. Is Trump just more racist? Or are the policies of Trump resonating differently than Bush for reasons other than race? ..."
"... Eric Berne, in The Structures and Dynamics of Organizations and Groups, proposed that among the defining characteristics of a coherent group is an explicit boundary which determines whether an individual is a member of the group or not. (If there is no boundary, nothing binds the assemblage together; it is a crowd.) The boundary helps provide social cohesion and is so important that groups will create one if necessary. Clearly, boundaries exclude as well as include, and someone must play the role of outsider. ..."
"... For a time, the balkanization of American political communities by race, religion and ethnicity was an effective means to the dominance of an tiny elite with ties to an hegemonic community, but it backfired. Dismantling that balkanization has left the country with a very low level of social affiliation and thus a low capacity to organize resistance to elite depredations. ..."
I think Trump is afraid the imperial global order presided by the US is about to crash
and thinks he will be able to steer the country into a soft landing by accepting that other world
powers have interests, by disengaging from costly and humiliating military interventions, by re-negotiating
trade deals, and by stopping the mass immigration of poor people. Plus a few well-placed bombs
.
Much has been written about the internet revolution, about the impact of people having
access to much more information than before. The elite does not recognize this and is still organizing
political and media campaigns as if it were 1990, relying on elder statesmen like Blair, Bush,
Mitterrand, Clinton, and Obama to influence public opinion. They are failing miserably, to the
point of being counterproductive.
I don't think something as parochial as racism is sustaining Trump, but rather the fear
of the loss of empire by a population with several orders of magnitude more information and communication
than in 2008, even 2012.
Layman 08.04.16 at 11:59 am
Rich P: "Neoliberals often argue that people should be glad to lose employment at 50 so
that people from other countries can have higher incomes "
I doubt this most sincerely. While this may be the effect of some neoliberal policies, I can't
recall any particular instance where someone made this argument.
Rich Puchalsky 08.04.16 at 12:03 pm
"I can't recall any particular instance where someone made this argument."
No one has literally argued that people should be glad to lose employment: that part was
hyperbole. But the basic argument is often made quite seriously. See e.g.
outsource
Brad DeLong .
engels 08.04.16 at 12:25 pm
While this may be the effect of some neoliberal policies, I can't recall any particular instance
where someone made this argument
Maybe this kind of thing rom Henry Farrell? (There may well be better examples.)
Is some dilution of the traditional European welfare state acceptable, if it substantially
increases the wellbeing of current outsiders (i.e. for example, by bringing Turkey into the club).
My answer is yes, if European leftwingers are to stick to their core principles on justice, fairness,
egalitarianism etc
Large numbers of low-income white southern Americans consistently vote against their
own economic interests. They vote to award tax breaks to wealthy people and corporations, to
cut unemployment benefits, to bust unions, to reward companies for outsourcing jobs, to resist
wage increases, to cut funding for health care for the poor, to cut Social Security and Medicare,
etc.
The same thing has happened in Mexico with neoliberal government after neoliberal government
being elected. There are many democratically elected neoliberal governments around the world.
Why might this be?
In the case of Mexico, because Peña Nieto's wife is a telenovela star. How cool is that?
It places Mexico in the same league as 1st world countries, such as France, with Carla Bruni.
Patrick 08.04.16 at 4:32 pm
To the guy who asked- poor white people keep voting Republican even though it screws them
because they genuinely believe that the country is best off when it encourages a culture of "by
the bootstraps" self improvement, hard work, and personal responsibility. They view taxing people
in order to give the money to the supposedly less fortunate as the anti thesis of this, because
it gives people an easy out that let's them avoid having to engage in the hard work needed to
live independently.
They see it as little different from letting your kid move back on after college and smoke
weed in your basement. They don't generally mind people being on unemployment transitionally,
but they're supposed to be a little embarrassed about it and get it over with as soon as possible.
They not only worry that increased government social spending will incentivize bad behavior, they
worry it will destroy the cultural values they see as vital to Americas past prosperity. They
tend to view claims about historic or systemic injustice necessitating collective remedy because
they view the world as one in which the vagaries of fate decree that some are born rich or poor,
and that success is in improving ones station relative to where one starts. Attempts at repairing
historical racial inequity read as cheating in that paradigm, and even as hostile since they can
easily observe white people who are just as poor or poorer than those who racial politics focuses
upon. Left wing insistence on borrowing the nastiest rhetoric of libertarians ("this guy is poor
because his ancestors couldn't get ahead because of historical racial injustice so we must help
him; your family couldn't get ahead either but that must have been your fault so you deserve it")
comes across as both antithetical to their values and as downright hostile within the values they
see around them.
All of this can be easily learned by just talking to them.
It's not a great world view. It fails to explain quite a lot. For example, they have literally
no way of explaining increased unemployment without positing either that everyone is getting too
lazy to work, or that the government screwed up the system somehow, possibly by making it too
expensive to do business in the US relative to other countries. and given their faith in the power
of hard work, they don't even blame sweatshops- they blame taxes and foreign subsidies.
I don't know exactly how to reach out to them, except that I can point to some things people
do that repulse them and say "stop doing that."
bruce wilder 08.04.16 at 5:50 pm
The extent to which "poor white people" vote against their alleged economic interests is
overblown. To a large extent, they do not vote at all nor is anyone or anything on the ballot
to represent their interests. And, yes, they are misinformed systematically by elites out to screw
them and they know this, but cannot do much to either clear up their own confusion or fight back.
The mirror image problem - of elites manipulating the system to screw the poor and merely
middle-class - is daily in the news. Both Presidential candidates have been implicated. So, who
do you recommend they vote for?
There is serious deficit of both trust and information among the poor. Poor whites hardly have
a monopoly; black misleadership is epidemic in our era of Cory Booker socialism.
bruce wilder 08.04.16 at 7:05 pm
Politics is founded on the complex social psychology of humans as social animals. We elevate
it from its irrational base in emotion to rationalized calculation or philosophy at our peril.
T 08.04.16 at 9:17 pm
@Layman
I think you're missing Patrick's point. These voters are switching from one Republican
to another. They've jettisoned Bush et. al. for Trump. These guys despise Bush.
They've figured out that the mainstream party is basically 30 years of affinity fraud.
So, is your argument is that Trump even more racist? That kind of goes against the whole point
of the OP. Not saying that race doesn't matter. Of course it does. But Trump has a 34% advantage
in non-college educated white men. It just isn't the South. Why does it have to be just race or
just class?
Ronan(rf) 08.04.16 at 10:35 pm
"I generally don't give a shit about polls so I have no "data" to evidence this claim, but
my guess is the majority of Trump's support comes from this broad middle"
My understanding is trumps support disproportionately comes from the small business owning
classes, Ie a demographic similar to the petite bourgeoisie who have often been heavily involved
in reactionary movements. This gets oversold as "working class" when class is defined by education
level rather than income.
This would make some sense as they are generally in economically unstable jobs, they tend to
be hostile to both big govt (regulations, freeloaders) and big business (unfair competition),
and while they (rhetorically at least) tend to value personal autonomy and self sufficiency ,
they generally sell into smaller, local markets, and so are particularly affected by local demographic
and cultural change , and decline. That's my speculation anyway.
T 08.05.16 at 3:12 pm
@patrick @layman
Patrick, you're right about the Trump demographic. https://fivethirtyeight.com/features/the-mythology-of-trumps-working-class-support/
Layman - Why are these voters switching from Bush et al to Trump? Once again, Corey's whole
point is that there is very little difference between the racism of Trump and the mainstream party
since Nixon. Is Trump just more racist? Or are the policies of Trump resonating differently than
Bush for reasons other than race?
Are the folks that voted for the other candidates in the primary less racist so Trump supporters
are just the most racist among Republicans? Cruz less racist? You have to explain the shift within
the Republican party because that's what happened.
Anarcissie 08.06.16 at 3:00 pm
Faustusnotes 08.06.16 at 1:50 pm @ 270 -
Eric Berne, in The Structures and Dynamics of Organizations and Groups, proposed that among
the defining characteristics of a coherent group is an explicit boundary which determines whether
an individual is a member of the group or not. (If there is no boundary, nothing binds the assemblage
together; it is a crowd.) The boundary helps provide social cohesion and is so important that
groups will create one if necessary. Clearly, boundaries exclude as well as include, and someone
must play the role of outsider. While Berne's theories are a bit too nifty for me to love
them, I have observed a lot of the behaviors he predicts. If one wanted to be sociobiological,
it is not hard to hypothesize evolutionary pressures which could lead to this sort of behavior
being genetically programmed. If a group of humans, a notably combative primate, does not have
strong social cohesion, the war of all against all ensues and everybody dies. Common affections
alone do not seem to provide enough cohesion.
In an earlier but related theory, in the United States, immigrants from diverse European communities
which fought each other for centuries in Europe arrived and managed to now get along because they
had a major Other, the Negro, against whom to define themselves (as the White Race) and thus to
cohere sufficiently to get on with business. The Negro had the additional advantage of being at
first a powerless slave and later, although theoretically freed, was legally, politically, and
economically disabled - an outsider who could not fight back very effectively, nor run away. Even
so, the US almost split apart and there continue to be important class, ethnic, religious, and
regional conflicts. You can see how these two theories resonate.
It may be that we can't have communities without this dark side, although we might be able
to mitigate some of its destructive effects.
bruce wilde r 08.06.16 at 4:28 pm
I am somewhat suspicious of leaving dominating elites out of these stories of racism as an
organizing principle for political economy or (cultural) community.
Racism served the purposes of a slaveholding elite that organized political communities to
serve their own interests. (Or, vis a vis the Indians a land-grab or genocide.)
Racism serves as an organizing principle. Politically, in an oppressive and stultifying hierarchy
like the plantation South, racism not incidentally buys the loyalty of subalterns with ersatz
status. The ugly prejudices and resentful arrogance of working class whites is thus a component
of how racism works to organize a political community to serve a hegemonic master class. The business
end of racism, though, is the autarkic poverty imposed on the working communities: slaves, sharecroppers,
poor blacks, poor whites - bad schools, bad roads, politically disabled communities, predatory
institutions and authoritarian governments.
For a time, the balkanization of American political communities by race, religion and ethnicity
was an effective means to the dominance of an tiny elite with ties to an hegemonic community,
but it backfired. Dismantling that balkanization has left the country with a very low level of
social affiliation and thus a low capacity to organize resistance to elite depredations.
engels 08.07.16 at 1:02 am
But how did that slavery happen
Possible short answer: the level of technological development made slavery an efficient way
of exploiting labour. At a certain point those conditions changed and slavery became a drag on
further development and it was abolished, along with much of the racist ideology that legitimated
it.
Lupita 08.07.16 at 3:40 am
But how did that slavery happen
In Mesoamerica, all the natives were enslaved because they were conquered by the Spaniards.
Then, Fray Bartolomé de las Casas successfully argued before the Crown that the natives had souls
and, therefore, should be Christianized rather than enslaved. As Bruce Wilder states, this did
not serve the interests of the slaveholding elite, so the African slave trade began and there
was no Fray Bartolomé to argue their case.
It is interesting that while natives were enslaved, the Aztec aristocracy was shipped to Spain
to be presented in court and study Latin. This would not have happened if the Mesoamericans were
considered inferior (soulless) as a race. Furthermore, the Spaniards needed the local elite to
help them out with their empire and the Aztecs were used to slavery and worse. This whole story
can be understood without recurring to racism. The logic of empire suffices.
"... The film, directed by Meera Menon and written by Amy Fox , is as ruthless and hypnotic a study of a cutthroat species as the documentary I saw about the carnivorous fish. Maybe it is even more so, as it is a story of alpha females, as well as males. ..."
"... a movie implicitly critical of Wall Street and explicitly damning of hedge funds. ..."
Not long ago, I saw a documentary about sharks in the wild. The male bites the frisky female
on her flank, both to show his interest and to subdue her as he attempts penetration. Initially
the female resists; one was filmed wriggling free of a series of circling males until she becomes
exhausted and an alpha male has his way with her.
According to the narrator, shark reproduction favors the most powerful males and strongest
females. Over time, the female evolves tougher skin to endure, or perhaps elude, the male love
bite.
If that's what happens in the open sea, what must it be like in tighter quarters?
"Equity," an intelligent and enthralling thriller set in a shark tank of New York investment
bankers, hedge-fund executives and tech entrepreneurs, imagines just that.
The film, directed by
Meera Menon and written by Amy Fox, is
as ruthless and hypnotic a study of a cutthroat species as the documentary I saw about the
carnivorous fish. Maybe it is even more so, as it is a story of alpha females, as well as males.
This female-driven production about driven females stars Anna Gunn ("Breaking Bad") as banker
Naomi Bishop, the firm rainmaker lately experiencing a drought. Sarah Megan Thomas is Erin
Manning, her assistant, and Alysia Reiner ("Orange is the New Black") plays Samantha, an
assistant U.S. attorney investigating Gunn's firm. That storyline provides one of the plot's
conflicts. Another is that banker and assistant each want promotions and are denied.
At the outset, it's hard to like Naomi. She announces herself as the female Gordon Gekko (the
character Michael Douglas played in "Wall Street"). While he exhorted that "greed is good," she
forthrightly admits that she "likes money." She likes the numbers, likes the adrenaline rush of
risking it on a new venture and, most of all, she likes the power it represents.
She makes few concessions to femininity and none to glamor. Her body is womanly, rather than
girlish, her clothes purely functional. Naomi lets off steam by slipping into boxing gloves and
taking the stuffing out of the punching bag. She is in control of her emotions.
At the outset, it's easy to like Erin and Samantha, both model-slim and flirty (even though
both are married). From Erin's perspective, Naomi is the boss from hell. From Samantha's, the
banker is insufficiently idealistic. "Equity" asks us at first to align with the younger women
because, well, they look like the sexy creatures of most Hollywood films. But as it continues,
the movie asks us to question our first impressions. It's a film about not making snap judgments,
in business, in love or in life.
Is there a difference when women are behind both the camera and the story? In this case, yes
and no. It's no surprise that this movie features a trio of three-dimensional women at its
center. For the most part, though, its male characters are generic and cardboard-flat. There's
entitled hedge-fund guy Michael (James Purefoy), Naomi's mentor and boyfriend, all about the
money and the game. There's the entitled tech entrepreneur Ed (Samuel Roukin), who is all about
the money and the sex. The one good guy is a warm and supportive U.S. attorney who steers
Samantha toward remaining in her ethical lane. Here is a movie implicitly critical of Wall Street
and explicitly damning of hedge funds.
Despite the one-dimensional men, I was surprised by the film's deceptions and detours. The
greatest asset of "Equity" is Gunn, whose face is a Kabuki mask and whose skin is impenetrable as
that of a female shark. While watching her I thought once or twice that hers was a one-note
performance. But by movie's end, I realized it was a symphony of invincibility and vulnerability.
"... In June, 38 community colleges announced plans to make free online materials standard in every course in some degree programs as part of a new effort coordinated by Achieving the Dream. Just a few weeks later, Gov. Jerry Brown of California, a Democrat, signed a 2016-17 budget that includes $5 million for community colleges in the state to create their own ZTC degrees ..."
"... Hal Plotkin, a longtime advocate of open education resources, or OER, says the moves could eventually save students billions of dollars. As he argued in a recent commentary, California's new ZTC program is "easily the most ambitious state-level effort to promote the use of OER in public higher education to date." ..."
The Chronicle of Higher Education By Goldie Blumenstyk July 12, 2016
It's been a big few weeks for the movement to replace commercial textbooks
with free online materials, thanks to the sudden rise of something called the
Zero Textbook Cost degree.
In June, 38 community colleges announced plans to make free online materials
standard in every course in some degree programs as part of a new effort coordinated
by Achieving the Dream. Just a few weeks later, Gov. Jerry Brown of California,
a Democrat, signed a 2016-17 budget that includes $5 million for community colleges
in the state to create their own ZTC degrees.
Hal Plotkin, a longtime advocate of open education resources, or OER,
says the moves could eventually save students billions of dollars. As he argued
in a recent commentary, California's new ZTC program is "easily the most ambitious
state-level effort to promote the use of OER in public higher education to date."
Yet while cheering both the California and Achieving the Dream initiatives,
Mr. Plotkin, a senior open-policy fellow at Creative Commons USA, argues that
college leaders could and should be doing far more to promote the use of free,
openly licensed materials, to prevent publishers from treating students "like
walking cash registers."
"... The euro would really do its work when crises hit, Mundell explained. Removing a government's control over currency would prevent nasty little elected officials from using Keynesian monetary and fiscal juice to pull a nation out of recession. ..."
"... He cited labor laws, environmental regulations and, of course, taxes. All would be flushed away by the euro. Democracy would not be allowed to interfere with the marketplace ..."
"... Mundell was also the driving force for Reagan's supply side economics. ..."
The euro would really do its work when crises hit, Mundell explained.
Removing a government's control over currency would prevent nasty little
elected officials from using Keynesian monetary and fiscal juice to
pull a nation out of recession.
"It puts monetary policy out of the reach of politicians," he said.
"[And] without fiscal policy, the only way nations can keep jobs is
by the competitive reduction of rules on business."
He cited labor laws, environmental regulations and, of course,
taxes. All would be flushed away by the euro. Democracy would not be
allowed to interfere with the marketplace
Mundell was also the driving force for Reagan's supply side economics.
"... At the same time that people like you and me are thriving beyond the dreams of any plutocrats in history, the rest of the country-the 99.99 percent-is lagging far behind. The divide between the haves and have-nots is getting worse really, really fast. In 1980, the top 1 percent controlled about 8 percent of U.S. national income. The bottom 50 percent shared about 18 percent. Today the top 1 percent share about 20 percent; the bottom 50 percent, just 12 percent. ..."
"... The model for us rich guys here should be Henry Ford, who realized that all his autoworkers in Michigan weren't only cheap labor to be exploited; they were consumers, too. Ford figured that if he raised their wages, to a then-exorbitant $5 a day, they'd be able to afford his Model Ts. ..."
Memo: From Nick Hanauer To: My Fellow Zillionaires
You probably don't know me, but like you I am one of those .01%ers, a proud
and unapologetic capitalist. I have founded, co-founded and funded more than
30 companies across a range of industries-from itsy-bitsy ones like the night
club I started in my 20s to giant ones like Amazon.com, for which I was the
first nonfamily investor. Then I founded aQuantive, an Internet advertising
company that was
sold to Microsoft in 2007 for $6.4 billion. In cash. My friends and I own
a bank. I tell you all this to demonstrate that in many ways I'm no different
from you. Like you, I have a broad perspective on business and capitalism. And
also like you, I have been rewarded obscenely for my success, with a life that
the other 99.99 percent of Americans can't even imagine. Multiple homes, my
own plane, etc., etc. You know what I'm talking about. In 1992, I was selling
pillows made by my family's business, Pacific Coast Feather Co., to retail stores
across the country, and the Internet was a clunky novelty to which one hooked
up with a loud squawk at 300 baud. But I saw pretty quickly, even back then,
that many of my customers, the big department store chains, were already doomed.
I knew that as soon as the Internet became fast and trustworthy enough-and that
time wasn't far off-people were going to shop online like crazy. Goodbye, Caldor.
And Filene's. And Borders. And on and on.
Realizing that, seeing over the horizon a little faster than the next guy,
was the strategic part of my success. The lucky part was that I had two friends,
both immensely talented, who also saw a lot of potential in the web. One was
a guy you've probably never heard of named Jeff Tauber, and the other was a
fellow named Jeff Bezos. I was so excited by the potential of the web that I
told both Jeffs that I wanted to invest in whatever they launched, big time.
It just happened that the second Jeff-Bezos-called me back first to take up
my investment offer. So I helped underwrite his tiny start-up bookseller. The
other Jeff started a web department store called Cybershop, but at a time when
trust in Internet sales was still low, it was too early for his high-end online
idea; people just weren't yet ready to buy expensive goods without personally
checking them out (unlike a basic commodity like books, which don't vary in
quality-Bezos' great insight). Cybershop didn't make it, just another dot-com
bust. Amazon did somewhat better. Now I own a very large yacht.
But let's speak frankly to each other. I'm not the smartest guy you've ever
met, or the hardest-working. I was a mediocre student. I'm not technical at
all-I can't write a word of code. What sets me apart, I think, is a tolerance
for risk and an intuition about what will happen in the future. Seeing where
things are headed is the essence of entrepreneurship. And what do I see in our
future now?
I see pitchforks.
At the same time that people like you and me are thriving beyond the
dreams of any plutocrats in history, the rest of the country-the 99.99 percent-is
lagging far behind. The divide between the haves and have-nots is getting worse
really, really fast. In 1980, the top 1 percent
controlled about 8 percent of U.S. national income. The bottom 50 percent
shared about 18 percent. Today the top 1 percent share about 20 percent;
the bottom 50 percent,
just 12 percent.
But the problem isn't that we have inequality. Some inequality is intrinsic
to any high-functioning capitalist economy. The problem is that inequality is
at historically high levels and getting worse every day. Our country is rapidly
becoming less a capitalist society and more a feudal society. Unless our policies
change dramatically, the middle class will disappear, and we will be back to
late 18th-century France. Before the revolution.
Memo: From Nick Hanauer To: My Fellow Zillionaires
You probably don't know me, but like you I am one of those .01%ers, a proud
and unapologetic capitalist. I have founded, co-founded and funded more than
30 companies across a range of industries-from itsy-bitsy ones like the night
club I started in my 20s to giant ones like Amazon.com, for which I was the
first nonfamily investor. Then I founded aQuantive, an Internet advertising
company that was
sold to Microsoft in 2007 for $6.4 billion. In cash. My friends and I own
a bank. I tell you all this to demonstrate that in many ways I'm no different
from you. Like you, I have a broad perspective on business and capitalism. And
also like you, I have been rewarded obscenely for my success, with a life that
the other 99.99 percent of Americans can't even imagine. Multiple homes, my
own plane, etc., etc. You know what I'm talking about. In 1992, I was selling
pillows made by my family's business, Pacific Coast Feather Co., to retail stores
across the country, and the Internet was a clunky novelty to which one hooked
up with a loud squawk at 300 baud. But I saw pretty quickly, even back then,
that many of my customers, the big department store chains, were already doomed.
I knew that as soon as the Internet became fast and trustworthy enough-and that
time wasn't far off-people were going to shop online like crazy. Goodbye, Caldor.
And Filene's. And Borders. And on and on.
Realizing that, seeing over the horizon a little faster than the next guy,
was the strategic part of my success. The lucky part was that I had two friends,
both immensely talented, who also saw a lot of potential in the web. One was
a guy you've probably never heard of named Jeff Tauber, and the other was a
fellow named Jeff Bezos. I was so excited by the potential of the web that I
told both Jeffs that I wanted to invest in whatever they launched, big time.
It just happened that the second Jeff-Bezos-called me back first to take up
my investment offer. So I helped underwrite his tiny start-up bookseller. The
other Jeff started a web department store called Cybershop, but at a time when
trust in Internet sales was still low, it was too early for his high-end online
idea; people just weren't yet ready to buy expensive goods without personally
checking them out (unlike a basic commodity like books, which don't vary in
quality-Bezos' great insight). Cybershop didn't make it, just another dot-com
bust. Amazon did somewhat better. Now I own a very large yacht.
But let's speak frankly to each other. I'm not the smartest guy you've ever
met, or the hardest-working. I was a mediocre student. I'm not technical at
all-I can't write a word of code. What sets me apart, I think, is a tolerance
for risk and an intuition about what will happen in the future. Seeing where
things are headed is the essence of entrepreneurship. And what do I see in our
future now?
I see pitchforks.
At the same time that people like you and me are thriving beyond the dreams
of any plutocrats in history, the rest of the country-the 99.99 percent-is lagging
far behind. The divide between the haves and have-nots is getting worse really,
really fast. In 1980, the top 1 percent
controlled about 8 percent of U.S. national income. The bottom 50 percent
shared about 18 percent. Today the top 1 percent share about 20 percent;
the bottom 50 percent,
just 12 percent.
But the problem isn't that we have inequality. Some inequality is intrinsic
to any high-functioning capitalist economy. The problem is that inequality is
at historically high levels and getting worse every day. Our country is rapidly
becoming less a capitalist society and more a feudal society. Unless our policies
change dramatically, the middle class will disappear, and we will be back to
late 18th-century France. Before the revolution.
And so I have a message for my fellow filthy rich, for all of us who live
in our gated bubble worlds: Wake up, people. It won't last.
If we don't do something to fix the glaring inequities in this economy, the
pitchforks are going to come for us. No society can sustain this kind of rising
inequality. In fact, there is no example in human history where wealth accumulated
like this and the pitchforks didn't eventually come out. You show me a highly
unequal society, and I will show you a police state. Or an uprising. There are
no counterexamples. None. It's not if, it's when.
Many of us think we're special because "this is America." We think we're
immune to the same forces that started the Arab Spring-or the French and Russian
revolutions, for that matter. I know you fellow .01%ers tend to dismiss this
kind of argument; I've had many of you tell me to my face I'm completely bonkers.
And yes, I know there are many of you who are convinced that because you saw
a poor kid with an iPhone that one time, inequality is a fiction.
Here's what I say to you: You're living in a dream world. What everyone wants
to believe is that when things reach a tipping point and go from being merely
crappy for the masses to dangerous and socially destabilizing, that we're somehow
going to know about that shift ahead of time. Any student of history knows that's
not the way it happens. Revolutions, like bankruptcies, come gradually, and
then suddenly. One day, somebody sets himself on fire, then thousands of people
are in the streets, and before you know it, the country is burning. And then
there's no time for us to get to the airport and jump on our Gulfstream Vs and
fly to New Zealand. That's the way it always happens. If inequality keeps rising
as it has been, eventually it will happen. We will not be able to predict when,
and it will be terrible-for everybody. But especially for us.
***
The most ironic thing about rising inequality is how completely unnecessary
and self-defeating it is. If we do something about it, if we adjust our policies
in the way that, say, Franklin D. Roosevelt did during the Great Depression-so
that we help the 99 percent and preempt the revolutionaries and crazies, the
ones with the pitchforks-that will be the best thing possible for us rich folks,
too. It's not just that we'll escape with our lives; it's that we'll most certainly
get even richer.
The model for us rich guys here should be Henry Ford, who realized that
all his autoworkers in Michigan weren't only cheap labor to be exploited; they
were consumers, too. Ford figured that if he
raised their wages, to a then-exorbitant $5 a day, they'd be able to afford
his Model Ts.
What a great idea. My suggestion to you is: Let's do it all over again. We've
got to try something. These idiotic trickle-down policies are destroying my
customer base. And yours too.
It's when I realized this that I decided I had to leave my insulated world
of the super-rich and get involved in politics. Not directly, by running for
office or becoming one of the big-money billionaires who back candidates in
an election. Instead, I wanted to try to change the conversation with ideas-by
advancing what my co-author, Eric Liu, and I call "middle-out" economics. It's
the long-overdue rebuttal to the trickle-down economics worldview that has become
economic orthodoxy across party lines-and has so screwed the American middle
class and our economy generally. Middle-out economics rejects the old misconception
that an economy is a perfectly efficient, mechanistic system and embraces the
much more accurate idea of an economy as a complex ecosystem made up of real
people who are dependent on one another.
Which is why the fundamental law of capitalism must be: If workers have more
money, businesses have more customers. Which makes middle-class consumers, not
rich businesspeople like us, the true job creators. Which means a thriving middle
class is the source of American prosperity, not a consequence of it. The middle
class creates us rich people, not the other way around.
On June 19, 2013, Bloomberg published an
article I wrote called "The Capitalist's Case for a $15 Minimum Wage."
Forbes
labeled it "Nick Hanauer's near insane" proposal. And yet, just weeks after
it was published, my friend David Rolf, a Service Employees International Union
organizer, roused fast-food workers to go on strike around the country for a
$15 living wage. Nearly a year later, the city of Seattle
passed a $15 minimum wage. And just 350 days after my article was published,
Seattle Mayor Ed Murray signed that ordinance into law. How could this happen,
you ask?
It happened because we reminded the masses that they are the source of growth
and prosperity, not us rich guys. We reminded them that when workers have more
money, businesses have more customers-and need more employees. We reminded them
that if businesses paid workers a living wage rather than poverty wages, taxpayers
wouldn't have to make up the difference. And when we got done, 74 percent of
likely Seattle voters in a
recent poll agreed that a $15 minimum wage was a swell idea.
The standard response in the minimum-wage debate, made by Republicans and
their business backers and plenty of Democrats as well, is that raising the
minimum wage costs jobs. Businesses will have to lay off workers. This argument
reflects the orthodox economics that most people had in college. If you took
Econ 101, then you literally were taught that if wages go up, employment must
go down. The law of supply and demand and all that. That's why you've got John
Boehner and other Republicans in Congress insisting that if you price employment
higher, you get less of it. Really?
The thing about us businesspeople is that we love our customers rich
and our employees poor.
Because here's an odd thing. During the past three decades, compensation
for CEOs grew 127 times faster than it did for workers. Since 1950, the CEO-to-worker
pay ratio has increased 1,000 percent, and that is not a typo. CEOs
used to earn 30 times the median wage; now they rake in 500 times. Yet no
company I know of has eliminated its senior managers, or outsourced them to
China or automated their jobs. Instead, we now have more CEOs and senior executives
than ever before. So, too, for financial services workers and technology workers.
These folks earn multiples of the median wage, yet we somehow have more and
more of them.
The thing about us businesspeople is that we love our customers rich and
our employees poor. So for as long as there has been capitalism, capitalists
have said the same thing about any effort to raise wages. We've had 75 years
of complaints from big business-when the minimum wage was instituted, when women
had to be paid equitable amounts, when child labor laws were created. Every
time the capitalists said exactly the same thing in the same way: We're all
going to go bankrupt. I'll have to close. I'll have to lay everyone off. It
hasn't happened. In fact, the data show that when workers are better treated,
business gets better. The naysayers are just wrong.
Most of you probably think that the $15 minimum wage in Seattle is an insane
departure from rational policy that puts our economy at great risk. But in Seattle,
our current minimum wage of $9.32 is already nearly 30 percent higher than the
federal minimum wage. And has it ruined our economy yet? Well, trickle-downers,
look at the data here: The two cities in the nation with the highest rate of
job growth by small businesses
are
San Francisco and Seattle. Guess which cities have the highest minimum wage?
San Francisco and Seattle. The
fastest-growing big city in America? Seattle. Fifteen dollars isn't a risky
untried policy for us. It's doubling down on the strategy that's already allowing
our city to kick your city's ass.
It makes perfect sense if you think about it: If a worker earns $7.25 an
hour, which is
now
the national minimum wage, what proportion of that person's income do you
think ends up in the cash registers of local small businesses? Hardly any. That
person is paying rent, ideally going out to get subsistence groceries at Safeway,
and, if really lucky, has a bus pass. But she's not going out to eat at restaurants.
Not browsing for new clothes. Not buying flowers on Mother's Day.
Is this issue more complicated than I'm making out? Of course. Are there
many factors at play determining the dynamics of employment? Yup. But please,
please stop insisting that if we pay low-wage workers more, unemployment will
skyrocket and it will destroy the economy. It's utter nonsense. The most insidious
thing about trickle-down economics isn't believing that if the rich get richer,
it's good for the economy. It's believing that if the poor get richer, it's
bad for the economy.
I know that virtually all of you feel that compelling our businesses to pay
workers more is somehow unfair, or is too much government interference. Most
of you think that we should just let good examples like Costco or Gap lead the
way. Or let the market set the price. But here's the thing. When those who set
bad examples, like the owners of Wal-Mart or McDonald's, pay their workers close
to the minimum wage, what they're really saying is that they'd pay even less
if it weren't illegal. (Thankfully both companies have recently said they would
not oppose a hike in the minimum wage.) In any large group, some people absolutely
will not do the right thing. That's why our economy can only be safe and effective
if it is governed by the same kinds of rules as, say, the transportation system,
with its speed limits and stop signs.
Wal-Mart is our nation's largest employer with some 1.4 million employees
in the United States and more than
$25 billion in pre-tax profit. So why are Wal-Mart employees the largest
group of Medicaid recipients in many states? Wal-Mart could, say, pay each of
its 1 million lowest-paid workers an extra $10,000 per year, raise them all
out of poverty and enable them to, of all things, afford to shop at Wal-Mart.
Not only would this also save us all the expense of the food stamps, Medicaid
and rent assistance that they currently require, but Wal-Mart would still earn
more than $15 billion pre-tax per year. Wal-Mart won't (and shouldn't) volunteer
to pay its workers more than their competitors. In order for us to have an economy
that works for everyone, we should compel all retailers to pay living wages-not
just ask politely.
We rich people have been falsely persuaded by our schooling and the affirmation
of society, and have convinced ourselves, that we are the main job creators.
It's simply not true. There can never be enough super-rich Americans to power
a great economy. I earn about 1,000 times the median American annually, but
I don't buy thousands of times more stuff. My family purchased three cars over
the past few years, not 3,000. I buy a few pairs of pants and a few shirts a
year, just like most American men. I bought two pairs of the fancy wool pants
I am wearing as I write, what my partner Mike calls my "manager pants." I guess
I could have bought 1,000 pairs. But why would I? Instead, I sock my extra money
away in savings, where it doesn't do the country much good.
So forget all that rhetoric about how America is great because of people
like you and me and Steve Jobs. You know the truth even if you won't admit it:
If any of us had been born in Somalia or the Congo, all we'd be is some guy
standing barefoot next to a dirt road selling fruit. It's not that Somalia and
Congo don't have good entrepreneurs. It's just that the best ones are selling
their wares off crates by the side of the road because that's all their customers
can afford.
So why not talk about a different kind of New Deal for the American people,
one that could appeal to the right as well as left-to libertarians as well as
liberals? First, I'd ask my Republican friends to get real about reducing the
size of government. Yes, yes and yes, you guys are all correct: The federal
government is too big in some ways. But no way can you cut government substantially,
not the way things are now. Ronald Reagan and George W. Bush each had eight
years to do it, and they failed miserably.
Republicans and Democrats in Congress can't shrink government with wishful
thinking. The only way to slash government for real is to go back to basic economic
principles: You have to reduce the demand for government. If people are getting
$15 an hour or more, they don't need food stamps. They don't need rent assistance.
They don't need you and me to pay for their medical care. If the consumer middle
class is back, buying and shopping, then it stands to reason you won't need
as large a welfare state. And at the same time, revenues from payroll and sales
taxes would rise, reducing the deficit.
This is, in other words, an economic approach that can unite left and right.
Perhaps that's one reason the right is beginning, inexorably, to wake up to
this reality as well. Even Republicans as diverse as Mitt Romney and Rick Santorum
recently came out in favor of raising the minimum wage, in defiance of the Republicans
in Congress.
***
One thing we can agree on-I'm sure of this-is that the change isn't
going to start in Washington. Thinking is stale, arguments even more so. On
both sides.
But the way I see it, that's all right. Most major social movements have
seen their earliest victories at the state and municipal levels. The fight over
the eight-hour workday, which ended in Washington, D.C., in 1938, began in places
like Illinois and Massachusetts in the late 1800s. The movement for social security
began in California in the 1930s. Even the Affordable Health Care Act-Obamacare-would
have been hard to imagine without Mitt Romney's model in Massachusetts to lead
the way.
Sadly, no Republicans and few Democrats get this. President Obama doesn't
seem to either, though his heart is in the right place. In his State of the
Union speech this year, he mentioned the need for a higher minimum wage but
failed to make the case that less inequality and a renewed middle class would
promote faster economic growth. Instead, the arguments we hear from most Democrats
are the same old social-justice claims. The only reason to help workers is because
we feel sorry for them. These fairness arguments feed right into every stereotype
of Obama and the Democrats as bleeding hearts. Republicans say growth. Democrats
say fairness-and lose every time.
But just because the two parties in Washington haven't figured it out yet
doesn't mean we rich folks can just keep going. The conversation is already
changing, even if the billionaires aren't onto it. I know what you think: You
think that Occupy Wall Street and all the other capitalism-is-the-problem protesters
disappeared without a trace. But that's not true. Of course, it's hard to get
people to sleep in a park in the cause of social justice. But the protests we
had in the wake of the 2008 financial crisis really did help to change the debate
in this country from death panels and debt ceilings to inequality.
It's just that so many of you plutocrats didn't get the message.
Dear 1%ers, many of our fellow citizens are starting to believe that capitalism
itself is the problem. I disagree, and I'm sure you do too. Capitalism, when
well managed, is the greatest social technology ever invented to create prosperity
in human societies. But capitalism left unchecked tends toward concentration
and collapse. It can be managed either to benefit the few in the near term or
the many in the long term. The work of democracies is to bend it to the latter.
That is why investments in the middle class work. And tax breaks for rich people
like us don't. Balancing the power of workers and billionaires by raising the
minimum wage isn't bad for capitalism. It's an indispensable tool smart capitalists
use to make capitalism stable and sustainable. And no one has a bigger stake
in that than zillionaires like us.
The oldest and most important conflict in human societies is the battle over
the concentration of wealth and power. The folks like us at the top have always
told those at the bottom that our respective positions are righteous and good
for all. Historically, we called that divine right. Today we have trickle-down
economics.
What nonsense this is. Am I really such a superior person? Do I belong at
the center of the moral as well as economic universe? Do you?
My family, the Hanauers, started in Germany selling feathers and pillows.
They got chased out of Germany by Hitler and ended up in Seattle owning another
pillow company. Three generations later, I benefited from that. Then I got as
lucky as a person could possibly get in the Internet age by having a buddy in
Seattle named Bezos. I look at the average Joe on the street, and I say, "There
but for the grace of Jeff go I." Even the best of us, in the worst of circumstances,
are barefoot, standing by a dirt road, selling fruit. We should never forget
that, or forget that the United States of America and its middle class made
us, rather than the other way around.
Or we could sit back, do nothing, enjoy our yachts. And wait for the pitchforks.
Financial oligarchy rule is now indisputable and subservience of politicians in congress and
administration is close to absolute. Financial oligarchy is the dominant power under neoliberalism.
No question about it. As Andrew Mellon (US Treasury Secretary, 1921 to 1932) used to say "Strong men
have sound ideas, and the force to make these ideas effective." Making Al Capone famous quote
more modern, "You can get more with a kind word and money than you can with a kind word alone."
Notable quotes:
"... I think that as Greenberger points out, once we were able to see Obama's early financial appointments, we knew that we had been had, once again. Despite his soaring rhetoric for change, he was a loyal member of the Wall Street wing. ..."
"... Obama and the Wall Street wing of the Democratic party, founded by the Clintons, is a brand , cobbled together and groomed for office by the moneyed interests, designed to misdirect and diffuse the angry reaction for reform by the people in the aftermath of the financial crisis. And it was a job well done. ..."
"... I strongly believe that Hillary has been and still remains a product of Wall Street money, and will continue to follow the money once in office no matter what rhetoric she may wear during any political campaign. ..."
Michael Greenberger has long been one of my favorite commenters on regulation, and in particular
on
futures price manipulation.
Within the context of the uphill battle against the status quo, Gary Gensler and Bart Chilton may
have looked 'good' as regulators, but all in all they looked better only by comparison with some very
horrible alternatives. Chilton, as you may recall, did not waste much time going through the
revolving door to put on the feedbag from the HFT crowd.
I think that as Greenberger points out, once we were able to see Obama's early financial appointments,
we knew that we had been had, once again. Despite his soaring rhetoric for change, he was a loyal
member of the Wall Street wing.
Obama and the Wall Street wing of the Democratic party, founded by the Clintons, is a
brand, cobbled together and groomed for office by the moneyed interests, designed
to misdirect and diffuse the angry reaction for reform by the people in the aftermath of the financial
crisis. And it was a job well done.
No matter what she says, no matter what promises she may make, no matter what identity branding
they may choose to spin for her, I strongly believe that Hillary has been and still remains a product
of Wall Street money, and will continue to follow the money once in office no matter what rhetoric
she may wear during any political campaign.
Further, the only major difference between the parties now is that the Republicans have sold out
wholesale to the moneyed interests, whereas the Dems have been doing it one despicable betrayal at
a time. They merely wear different masks. Money conquers all with this venal brood of vipers.
Financial reform comes with political campaign money reform. The two are inseparable.
"... I think this *might* be true if one disregards the fact that China has already negotiated major energy deals, including oil, that are settled in yuan and not dollars. ..."
Because Oil Is Priced in Euros, China Will Buy Less Oil Now That the
Value of the Yuan Has Fallen
Yes, I know, oil is priced in dollars, not euros, but it doesn't make
one iota of difference. In an article on the meaning of the drop in the
value of the yuan on people in the United States, USA Today told readers:
*
"China, the world's second largest economy, consumes a lot of oil, second
only to the U.S. However, oil prices are denominated in dollars, so a gutted
yuan means China's purchasing power is reduced, which could prompt the Chinese
to spend less on oil-based products. That reduction in demand could lower
prices, an upside for American drivers."
Everything in this paragraph would be equally true if oil was priced
in euros. The Chinese currency is now worth less measured in dollars, euros,
yen, or oil. The loss of purchasing power will lead China to buy less of
everything that is produced abroad, including oil. The fact that oil is
priced in dollars matters not at all.
As a practical matter, anyone hoping to get super cheap gas due to less
demand from China is likely to be disappointed. If we assume that the 2
percent drop in the value of the yuan leads to 2 percent higher gas prices
in China, and we assume an elasticity of demand of 0.3, then China's gas
consumption will fall by roughly 0.6 percent as a result of the devaluation.
This almost certainly has less impact on the demand for gas than even a
one-year reduction in China's growth rate by 2 percentage points. If the
devaluation and other stimulatory policies speed growth in China, then we
may see increased rather than decreased demand for oil from China.
The piece also gets the story of U.S. companies manufacturing in China
somewhat confused. It tells readers:
"Many U.S. companies do a considerable amount of their business abroad,
either selling directly to Chinese consumers, manufacturing or via overseas
units that produce income in the local currency. Apple, for example, relies
on China to make its iPhone and iPad. A stronger dollar compared to the
yuan means any income generated in China loses value as it is repatriated
back to America."
Actually the impact is the opposite. The lower valued yuan increases
the profits from manufacturing in China rather than the United States. Apple
will likely still sell its iPhones and iPads at the same price in the United
States and other countries, even though it now costs them less money to
manufacture them because of the lower price of the yuan. This means greater
profits.
This is an important point because the issue of currency values is often
presented as one pitting the United States against China. That is not accurate.
Many companies that manufacture in China or rely on importing low cost goods
produced in China, like Walmart, have a real stake in keeping down the value
of the yuan against the dollar. These powerful interests are a main reason
that the United States has not made raising the value of the yuan a top
priority in trade negotiations with China.
If it really was the case that the United States government considered
it a top priority to raise the value of the yuan against the dollar, and
was prepared to make concessions in other areas, like enforcement of Microsoft's
copyrights and Pfizer's patents, then China would almost certainly have
agreed to raise the value of the yuan by more than it has.
I think this *might* be true if one disregards the fact that China has
already negotiated major energy deals, including oil, that are settled in
yuan and not dollars.
I posted this same comment at Dean's site when he first wrote this.
Am I the only one who is watching China closely? There are some very
big changes in the world economy underway, particularly with regard to the
long standing Bretton Woods II agreement as some have called it, and few
are noticing them.
anne said in reply to Jesse...
I think this *might* be true if one disregards the fact that China has
already negotiated major energy deals, including oil, that are settled in
yuan and not dollars.
[ Right, right, China has negotiated a range of important long term oil
and gas, and delivery, agreements this year. ]
Looks like now line in 1920th the global pendulum moves toward nationalism.
So in a way neoliberalism breeds nationalism and transnational elite paves the way
for dictators like Mussolini, Hitler and Stalin in the past. Transnational elites
start to recognize the danger, but they can do nothing about it as Trump has shown
so vividly in the USA.
High unemployment logically lead to nationalism and all
those neoliberal politicians understood that they are destroying the county but
continue to plunder it anyway. Biden already cried uncle about the danger of far
right nationalism on CNN. But reality in the USA is not then different from the
reality in Britain.
Notable quotes:
"... No wonder Donald Trump's campaign has ignited a growing nationalism movement. We're creating jobs and giving them away. We've let globalization get away from us. It's abundantly clear that we don't have the right public policies in place to incentivize corporations to keep Americans gainfully employed. ..."
"... Grove's bold piece was embraced by some, panned by others and largely ignored. Whether he or Trump have exactly the right solution to the globalization and immigration problems plaguing free-market economies throughout the western world doesn't matter. What matters is that they've identified a problem that needs to be solved before it's too late. So did the British people when they voted to exit the EU. ..."
"... Economic prosperity and security must trump political correctness and ideology. The Brits got it right. Will we? ..."
It's hard to say if that was the wakeup call that led to a sharp reversal and
Thursday's historic vote to leave the EU, but it was nevertheless a stunning
realization that Prime Minister David Cameron had failed to stem the tide of
immigrant workers flooding the UK's job market, as he had promised to do.
Meanwhile, a laundry list of commentators from the
Washington Post and
Esquire to
Vox and the
New York Times chalked it all up to millions of racist xenophobes who are
terrified of immigrants mucking up their pristine white privileged world. If
that sounds at all similar to the anti-Trump rhetoric, you can sort of see where
this is going.
The thing is, there's nothing even remotely irrational or bigoted about the
alarming
transformation of Britain's job market. Since 1997, the number of foreign-born
workers has doubled to one in six. And since 2014, three EU migrants have found
jobs for every Brit, according to official government figures. And, as we'll
see in a minute, there are concerning parallels on this side of the pond, as
well.
I hear from college grads and experienced professionals looking for jobs
all the time, but a recent inquiry from a 27-year-old Edinburgh, Scotland woman
with a BS in microbiology and excellent grades got my attention. She has applied
for more than 400 jobs without managing to secure an interview. Not a single
one.
More concerning is that the workforce itself has continued to shrink over
the same period. Whether that reflects increasing competition, lack of in-demand
skillsets or both doesn't really matter. The net result is that foreigners are
getting more of our jobs, and that's as true of offshore jobs as it is of onshore
jobs.
Think about it. Apple has created well over a million jobs, but 90% of them
are outsourced to China. Google may not make phones and tablets, but the vast
majority of Android-enabled mobile devices are manufactured in Asia. Of course,
that's true of nearly every industry, old or new.
We may not face the identical migrant worker problem that the UK has, but
the net result is the same: By giving up more and more jobs we create to foreign-born
immigrants and offshore contractors, that leaves fewer and fewer jobs and increasing
competition for American citizens.
No wonder Donald Trump's campaign has ignited a growing nationalism
movement. We're creating jobs and giving them away. We've let globalization
get away from us. It's abundantly clear that we don't have the right public
policies in place to incentivize corporations to keep Americans gainfully
employed.
Back in 2010, former Intel chairman Andy Grove penned How America Can Create
Jobs. The front-page Bloomberg BusinessWeek feature clearly outlined the perils
of losing our manufacturing muscle and declared the need for public policy that
puts jobs first, even if it does means constraining free trade with tariffs,
trade war be damned.
Grove's bold piece was embraced by some, panned by others and largely ignored.
Whether he or Trump have exactly the right solution to the globalization and
immigration problems plaguing free-market economies throughout the western world
doesn't matter. What matters is that they've identified a problem that needs
to be solved before it's too late. So did the British people when they voted
to exit the EU.
Economic prosperity and security must trump political correctness and ideology.
The Brits got it right. Will we?
"You're living in poverty, your schools are no good, you have no jobs, 58% of your youth is unemployed.
What the hell do you have to lose" by voting for Trump? the candidate asked. "At the end of four
years, I guarantee I will get over 95% of the African American vote."
The statement – highly unlikely given how poorly Republicans fare among black voters – continues
a theme the GOP presidential nominee has pounded this week as he courted African American voters.
He said Democrats take black voters for granted and have ignored their needs while governing cities
with large African American populations.
"America must reject the bigotry of Hillary Clinton, who sees communities of color only as votes,
not as human beings worthy of a better future," he said of his Democratic opponent.
... ... ...
Trump argued that Democratic presidential nominee Hillary Clinton's policies on issues such as
immigration and refugee resettlement harm African Americans.
=== quote ===
It has recently become commonplace to argue that globalization can leave people behind, and that
this can have severe political consequences. Since 23 June, this has even become conventional
wisdom. While I welcome this belated acceptance of the blindingly obvious, I can't but help feeling
a little frustrated, since this has been self-evident for many years now. What we are seeing,
in part, is what happens to conventional wisdom when, all of a sudden, it finds that it can no
longer dismiss as irrelevant something that had been staring it in the face for a long time.
=== end of quote ==
This is not about "conventional wisdom". This is about the power of neoliberal propaganda,
the power of brainwashing and indoctrination of population via MSM, schools and universities.
And "all of a sudden, it finds that it can no longer dismiss as irrelevant something that had
been staring it in the face for a long time." also has nothing to do with conventional wisdom.
This is about the crisis of neoliberal ideology and especially Trotskyism part of it (neoliberalism
can be viewed as Trotskyism for the rich). The following integral elements of this ideology no
longer work well and are starting to cause the backlash:
1. High level of inequality as the explicit, desirable goal (which raises the productivity).
"Greed is good" or "Trickle down economics" -- redistribution of wealth up will create (via higher
productivity) enough scrapes for the lower classes, lifting all boats.
2. "Neoliberal rationality" when everything is a commodity that should be traded at specific
market. Human beings also are viewed as market actors with every field of activity seen as a specialized
market. Every entity (public or private, person, business, state) should be governed as a firm.
"Neoliberalism construes even non-wealth generating spheres-such as learning, dating, or exercising-in
market terms, submits them to market metrics, and governs them with market techniques and practices."
People are just " human capital" who must constantly tend to their own present and future market
value.
3. Extreme financialization or converting the economy into "casino capitalism" (under neoliberalism
everything is a marketable good, that is traded on explicit or implicit exchanges.
4. The idea of the global, USA dominated neoliberal empire and related "Permanent war for permanent
peace" -- wars for enlarging global neoliberal empire via crushing non-compliant regimes either
via color revolutions or via open military intervention.
5. Downgrading ordinary people to the role of commodity and creating three classes of citizens
(moochers, or Untermensch, "creative class" and top 0.1%), with the upper class (0.1% or "Masters
of the Universe") being above the law like the top level of "nomenklatura" was in the USSR.
6. "Downsizing" sovereignty of nations via international treaties like TPP, and making transnational
corporations the key political players, "the deciders" as W aptly said. Who decide about level
of immigration flows, minimal wages, tariffs, and other matters that previously were prerogative
of the state.
So after 36 (or more) years of dominance (which started with triumphal march of neoliberalism
in early 90th) the ideology entered "zombie state". That does not make it less dangerous but its
power over minds of the population started to evaporate. Far right ideologies now are filling
the vacuum, as with the discreditation of socialist ideology and decimation of "enlightened corporatism"
of the New Deal in the USA there is no other viable alternatives.
The same happened in late 1960th with the Communist ideology. It took 20 years for the USSR
to crash after that with the resulting splash of nationalism (which was the force that blow up
the USSR) and far right ideologies.
It remains to be seen whether the neoliberal US elite will fare better then Soviet nomenklatura
as challenges facing the USA are now far greater then challenges which the USSR faced at the time.
Among them is oil depletion which might be the final nail into the coffin of neoliberalism and,
specifically, the neoliberal globalization.
"... It is fascinating that younger US neoliberals (e.g. Matthew Yglesias) are totally sold on the the positives of 'metrics', statistics, testing, etc, to the point where they ignore all the negatives of those approaches, but absolutely and utterly loathe being tracked, having the performance of their preferred policies and predictions analyzed, and called out on the failures thereof. Is sure seems to me that the campaign to quash the use of the US, Charles Peters version of neoliberal is part of the effort to avoid accountability for their actions. ..."
"... If "conservative" is to be a third way to the opposition of "reactionary" and "revolutionary", the "liberals" are a species of conservative - like all conservatives, seeking to preserve the existing order as far as this is possible, but appealing to reason, reason's high principles, and a practical politics of incremental reform and "inevitable" progress. The liberals disguise their affection for social and political hierarchy as a preference for "meritocracy" and place their faith in the powers of Reason and Science to discover Truth. ..."
"... Liberalism adopts nationalism as a vehicle for popular mobilization which conservatives can share and as an ideal of governance, the self-governing democratic nation-state with a liberal constitution. ..."
"... It wasn't Liberalism Triumphant that faced a challenge from fascism; it was the abject failures of Liberalism that created fascism. ..."
"... he Liberal projects to create liberal democratic nation-states ran aground in Germany, Austria-Hungary and Russia between 1870 and 1910 and instead of gradual reform of the old order, Europe experienced catastrophic collapse, and Liberalism was ill-prepared to devise working governments and politics in the crisis that followed. ..."
"... What is called neoliberalism in American politics has a lot to do with New Deal liberalism running out of steam and simply not having a program after 1970. Some of that is circumstantial in a way - the first Oil Crisis, the breakup of Bretton Woods - but even those circumstances were arguably results of the earlier program's success. ..."
= = = I am actually honestly suggesting an intellectual exercise which, I think, might
be worth your (extremely valuable) time. I propose you rewrite this post without using the
word "neoliberalism" (or a synonym). = = =
It is fascinating that younger US neoliberals (e.g. Matthew Yglesias) are totally sold
on the the positives of 'metrics', statistics, testing, etc, to the point where they ignore all
the negatives of those approaches, but absolutely and utterly loathe being tracked, having the
performance of their preferred policies and predictions analyzed, and called out on the failures
thereof. Is sure seems to me that the campaign to quash the use of the US, Charles Peters version
of neoliberal is part of the effort to avoid accountability for their actions.
bruce wilder 09.03.16 at 7:47 pm
In the politics of antonyms, I suppose we are always going get ourselves confused.
Perhaps because of American usage of the root, liberal, to mean the mildly social democratic
New Deal liberal Democrat, with its traces of American Populism and American Progressivism, we
seem to want "liberal" to designate an ideology of the left, or at least, the centre-left. Maybe,
it is the tendency of historical liberals to embrace idealistic high principles in their contest
with reactionary claims for hereditary aristocracy and arbitrary authority.
If "conservative" is to be a third way to the opposition of "reactionary" and "revolutionary",
the "liberals" are a species of conservative - like all conservatives, seeking to preserve the
existing order as far as this is possible, but appealing to reason, reason's high principles,
and a practical politics of incremental reform and "inevitable" progress. The liberals disguise
their affection for social and political hierarchy as a preference for "meritocracy" and place
their faith in the powers of Reason and Science to discover Truth.
All of that is by way of preface to a thumbnail history of modern political ideology different
from the one presented by Will G-R.
Modern political ideology is a by-product of the Enlightenment and the resulting imperative
to find a basis and purpose for political Authority in Reason, and apply Reason to the design
of political and social institutions.
Liberalism doesn't so much defeat conservatism as invent conservatism as an alternative to
purely reactionary politics. The notion of an "inevitable progress" allows liberals to reconcile
both themselves and their reactionary opponents to practical reality with incremental reform.
Political paranoia and rhetoric are turned toward thinking about constitutional design.
Mobilizing mass support and channeling popular discontents is a source of deep ambivalence
and risk for liberals and liberalism. Popular democracy can quickly become noisy and vulgar, the
proliferation of ideas and conflicting interests paralyzing. Inventing a conservatism that competes
with the liberals, but also mobilizes mass support and channels popular discontent, puts bounds
on "normal" politics.
Liberalism adopts nationalism as a vehicle for popular mobilization which conservatives
can share and as an ideal of governance, the self-governing democratic nation-state with a liberal
constitution.
I would put the challenges to liberalism from the left and right well behind in precedence
the critical failures and near-failures of liberalism in actual governance.
Liberalism failed abjectly to bring about a constitutional monarchy in France during the first
decade of the French Revolution, or a functioning deliberative assembly or religious toleration
or even to resolve the problems of state finance and legal administration that destroyed the ancient
regime. In the end, the solution was found in Napoleon Bonaparte, a precedent that would arguably
inspire the fascism of dictators and vulgar nationalism, beginning with Napoleon's nephew fifty
years later.
It wasn't Liberalism Triumphant that faced a challenge from fascism; it was the abject
failures of Liberalism that created fascism. And, this was especially true in the wake of
World War I, which many have argued persuasively was Liberalism's greatest and most catastrophic
failure. T he Liberal projects to create liberal democratic nation-states ran aground in Germany,
Austria-Hungary and Russia between 1870 and 1910 and instead of gradual reform of the old order,
Europe experienced catastrophic collapse, and Liberalism was ill-prepared to devise working governments
and politics in the crisis that followed.
If liberals invented conservatism, it seems to me that would-be socialists were at pains to
re-invent liberalism, and they did it several times going in radically different directions, but
always from a base in the basic liberal idea of rationalizing authority. A significant thread
in socialism adopted incremental progress and socialist ideas became liberal and conservative
means for taming popular discontent in an increasingly urban society.
Where and when liberalism actually was triumphant, both the range of liberal views and the
range of interests presenting a liberal front became too broad for a stable politics. Think about
the Liberal Party landslide of 1906, which eventually gave rise to the Labour Party in its role
of Left Party in the British two-party system. Or FDR's landslide in 1936, which played a pivotal
role in the march of the Southern Democrats to the Right. Or the emergence of the Liberal Consensus
in American politics in the late 1950s.
What is called neoliberalism in American politics has a lot to do with New Deal liberalism
running out of steam and simply not having a program after 1970. Some of that is circumstantial
in a way - the first Oil Crisis, the breakup of Bretton Woods - but even those circumstances were
arguably results of the earlier program's success.
It is almost a rote reaction to talk about the Republican's Southern Strategy, but they didn't
invent the crime wave that enveloped the country in the late 1960s or the riots that followed
the enactment of Civil Rights legislation.
Will G-R's "As soon [as] liberalism feels it can plausibly claim to have . . .overcome the
socialist and fascist challenges [liberals] are empowered to act as if liberalism's adaptive response
to the socialist and fascist challenges was never necessary in the first place - bye bye welfare
state, hello neoliberalism" doesn't seem to me to concede enough to Clinton and Blair entrepreneurially
inventing a popular politics in response to Reagan and Thatcher, after the actual failures
of an older model of social democratic programs and populist politics on its behalf.
I write more about this
over at
my blog (in a somewhat different context).
John Quiggin 09.04.16 at 6:57 am
RW @113 I wrote a whole book using "market liberalism" instead of "neoliberalism", since I wanted
a term more neutral and less pejorative. So, going back to "neoliberalism" was something I did
advisedly. You say
The word is abstract and has completely different meanings west and east of the Atlantic. In
the USA it refers to weak tea center leftisms. In Europe to hard core liberalism.
Well, yes. That's precisely why I've used the term, introduced the hard/soft distinction and explained
the history. The core point is that, despite their differences soft (US meaning) and hard (European
meaning) neoliberalism share crucial aspects of their history, theoretical foundations and policy
implications.
=== quote ===
Neoliberalism is an ideology of market fundamentalism based on deception that promotes "markets"
as a universal solution for all human problems in order to hide establishment of neo-fascist regime
(pioneered by Pinochet in Chile), where militarized government functions are limited to external
aggression and suppression of population within the country (often via establishing National Security
State using "terrorists" threat) and corporations are the only "first class" political players.
Like in classic corporatism, corporations are above the law and can rule the country as they see
fit, using political parties for the legitimatization of the regime.
The key difference with classic fascism is that instead of political dominance of the corporations
of particular nation, those corporations are now transnational and states, including the USA are
just enforcers of the will of transnational corporations on the population. Economic or "soft"
methods of enforcement such as debt slavery and control of employment are preferred to brute force
enforcement. At the same time police is militarized and due to technological achievements the
level of surveillance surpasses the level achieved in Eastern Germany.
Like with bolshevism in the USSR before, high, almost always hysterical, level of neoliberal
propaganda and scapegoating of "enemies" as well as the concept of "permanent war for permanent
peace" are used to suppress the protest against the wealth redistribution up (which is the key
principle of neoliberalism) and to decimate organized labor.
Multiple definitions of neoliberalism were proposed. Three major attempts to define this social
system were made:
Definitions stemming from the concept of "casino capitalism"
Definitions stemming from the concept of Washington consensus
Definitions stemming from the idea that Neoliberalism is Trotskyism for the rich. This
idea has two major variations:
Definitions stemming from Professor Wendy Brown's concept of Neoliberal rationality
which developed the concept of Inverted Totalitarism of Sheldon Wolin
Definitions stemming Professor Sheldon Wolin's older concept of Inverted Totalitarism
- "the heavy statism forging the novel fusions of economic with political power that he
took to be poisoning democracy at its root." (Sheldon Wolin and Inverted Totalitarianism
Common Dreams )
The first two are the most popular.
likbez 09.04.16 at 5:03 pm
bruce,
@117
Thanks for your post. It contains several important ideas:
"It wasn't Liberalism Triumphant that faced a challenge from fascism; it was the abject failures
of Liberalism that created fascism."
"What is called neoliberalism in American politics has a lot to do with New Deal liberalism
running out of steam and simply not having a program after 1970. Some of that is circumstantial
in a way - the first Oil Crisis, the breakup of Bretton Woods - but even those circumstances were
arguably results of the earlier program's success."
Moreover as Will G-R noted:
"neoliberalism will be every bit the wellspring of fascism that old-school liberalism was."
Failure of neoliberalism revives neofascist, far right movements. That's what the rise of far
right movements in Europe now demonstrates pretty vividly.
"... The article on the difficulty of taking over the Democratic Party hits the nail on the head, but it misses the Michels-ian problem: organizations have a tendency (but not this is a tendency, not a rule or fate) towards increasing oligarchy over time, and organizational members are socialized to trust and obey party leadership. ..."
"... if you and a faction entered and created a "Destroy the Dems" faction you'd be ignored or hunted out of the party, especially if you pointedly attacked the Dems oligarchy and were openly hostile to their officials, platform and the president – though I would argue you'd need exactly a "Destroy the Dems" faction to succeed in smashing the party oligarchy and changing the culture. ..."
"... Lack of democracy is a persistent theme in studies of parties for the last century. ..."
The article on the difficulty of taking over the Democratic Party hits the nail on the head,
but it misses the Michels-ian problem: organizations have a tendency (but not this is a tendency,
not a rule or fate) towards increasing oligarchy over time, and organizational members are socialized
to trust and obey party leadership. Factional dissidents within the Dems have to contend not
only with the party oligarchy and its formidable resources, the decentralized and sprawling nature
of the organization, but with a membership that barely participates but, when it does, turns out
when and how the leadership wants.
The Militant Labour tendency example isn't perfect – entryism into a Parliamentary party is easier
than our party system – but it speaks volumes. To get a hearing from the party membership you can
only criticize so much of the organization itself; if you and a faction entered and created a
"Destroy the Dems" faction you'd be ignored or hunted out of the party, especially if you pointedly
attacked the Dems oligarchy and were openly hostile to their officials, platform and the president
– though I would argue you'd need exactly a "Destroy the Dems" faction to succeed in smashing the
party oligarchy and changing the culture.
Keep in mind I do say this as a Green and a person who did his PhD on inner-party democracy (or
lack thereof). Lack of democracy is a persistent theme in studies of parties for the last century.
It would make more sense to really unite the left around electoral reform in the long run and
push for proportional representation at the state/local level for legislatures and city councils.
While it would probably be preferable for democracy's sake to have one big district elected with
an open-list vote, in the US context we'd probably go the German route of mixed-member proportional
that combines geographical single-member districts with proportional voting.
The same morons that gave us "lean manufacturing" have also given us "lean
logistics".
Redundancy is "money left on the table". Excess capacity in case of Black
Swans and "Plan Bs"are a big waste of money. Any law that forces you to
incorporate some redundancy (in spite of yourself) is "excess regulation"
Of course, costs must be reduced and corners must be cut, when you are
competing against bankster returns of 5-6%, with any losses made good by Uncle
Sugar
Since each modern container ship holds between 3,000 and 14,000 shipping
containers, 98 ships stranded with cargo is a lot of freight. S. Korea should
probably think twice about not bailing them out (unless all the cargo is from
China and they want to do some damage??)
Re the Hanjin bankruptcy, the "2.9% of world shipping trade" figure
understates Hanjin's overall share in the market that matters most to US
retailers and consumers: the transpacific trade, where Hanjin handles 7.8% of
the volume per Forbes.
So at the very least, we're looking at a significant reduction in already
falling (US) intermodal rail traffic, and quite possibly a small reduction in
the trade deficit as imports are reduced. Hanjin's bankruptcy also could not
possibly have come at a worse time, as Sept./ Oct. is traditionally "peak
season" for US imports ahead of the holiday retail season, which will probably
also take a hit.
Personally, I'm shocked that a carrier as large and dominant as Hanjin could
go under.
"... By Leith van Onselen is an economist and has previously worked at the Australian Treasury, Victorian Treasury, and Goldman Sachs. Originally published at MacroBusiness . ..."
Lambert here: It looks like the United States isn't the only country to have credentialism and
corruption problems in its universities; or too few jobs chasing too much student debt.
By Leith van Onselen is an economist and has previously worked at the Australian Treasury,
Victorian Treasury, and Goldman Sachs. Originally published at
MacroBusiness .
I have complained previously that Australia's universities have turned into 'degree factories',
whereby they teach as many students as possible to accumulate Commonwealth government funding through
HELP/HECS debts. At the same time, quality of teaching, and students' ability to secure subsequent
employment, remain distant priorities.
This view is evidenced by the escalation of total outstanding HELP loans, much of which will never
be repaid, putting increasing pressures on the federal Budget:
... ... ...
There is, however, one segment of society that has benefited greatly from the uncapping of university
places in 2009, which led to a
$2.8 billion taxpayer-funded bonanza for universities: vice chancellors. As reported in The
Australian earlier this week (
here and
here ), vice chancellors have seen their salaries balloon since the demand-driven university
system was implemented, with nine now earning more than $1 million per year:
Nine vice-chancellors earned more than $1 million each last year, with University of Sydney
chief Michael Spence topping the list with a salary package of $1,385,000. [Dr Spence's] salary
package has increased by more than 60 per cent since 2010 when he earned $849,000
In a classic university setting, the point of getting an education . . . is to become educated.
Employment prospects are incidental, as it is assumed that someone who has the capability and
perseverance to attain a degree has learned *how* to learn, how to negotiate the tricky choices
of young adulthood, and how to survive the many perils of academia, would be a good employment
prospect.
'degree factories' Hah. In Michigan we have "dropout" factories that accomplish the same objectives
– full employment at high wages for executives and administrators of said universities. As you
say "Nice work if you can get it!" Better have a phd and connections though .
"... The scholarly publishing world has become quite a racket. I work at a small
community college and our monograph budget has been eaten away over the years due
to the high & continually increasing costs of subscriptions to academic journals,
trade and general magazines. ..."
"... In 2015, Elsevier reported a profit margin of approximately 37% on revenues
of £2.070 billion. ..."
"... I'm sensing a resurgence of the conversation, what with trade pacts and
digital rights and whatnot. How can an abstraction have wants? Information may be
very cheap to reproduce but takes energy to maintain. ..."
As a librarian in Canada, I can tell you that my profession has long
advocated for open access to scholarly research. There are many institutions
with policies that ask or expect their faculty to publish in open access
journal or institutional repositories.
https://en.m.wikipedia.org/wiki/Open_access
The scholarly publishing world has become quite a racket. I work
at a small community college and our monograph budget has been eaten away
over the years due to the high & continually increasing costs of subscriptions
to academic journals, trade and general magazines.
It is crazy that libraries in public institutions are paying so much
money to access research funded wholy or in part by themselves or other
public institutions. Advocating for open access and advising faculty about
their options and advocating that they not give away copyright to big publishers
like Wiley and Elsevier is part of what many academic librarians do these
days.
I'm sensing a resurgence of the conversation, what with trade pacts
and digital rights and whatnot. How can an abstraction have wants? Information
may be very cheap to reproduce but takes energy to maintain.
"I am the spirit that negates.
And rightly so, for all that comes to be
Deserves to perish wretchedly;
'Twere better nothing would begin.
Thus everything that that your terms, sin,
Destruction, evil represent-
That is my proper element."
Reason enough for the Green Party of Switzerland to call for a fundamental change in the
country's economic system. Its initiative gathered about 110,000 signatures within the
required 18 months and was handed in to the authorities in 2012.
It calls for a "circular economy strategy", including measures to adopt new product
regulations, encourage recycling, and promote research and innovation, thereby reducing the
country's ecological footprint by two-thirds.
The proponents want Switzerland to play a pioneering role, promoting a sustainable model
for the economy, including a tax policy tied to the use of natural resources. The government
is asked to define sustainability targets both for a short and medium term and present a
progress report every four years.
A Facebook friend (we're barely acquaintances really) asked this question on Friday:
"What do you think are the most critical things (I'm talking specific processes,
policies, and structures rather than values) that make up non-competitive and more
collaborative and caring workplaces? Spaces where people are encouraged to really praise
and acknowledge someone else's work rather than hide someone else's contribution, where
people want to spend time on the collective good rather than next personal gain, and where
the often invisible and gendered work of caring and 'organisation culture' is prioritised
and publicly valued as critically important? What are some practical things you can
implement, aside from the destruction of capitalism? Ideas, you wise group of souls?"
I've spent the last couple of years working with an incredible bunch of people to build an
organisation that is exactly like that: caring, collaborative, and non-competitive, a space
where we praise and acknowledge each other, where the work of caring is shared equally,
regardless of gender.
Cripes I am a lucky dude, it rules. It is a total privilege, so I'm trying to figure out if
there's something about our organisation that we can share with others.
It's a subtle thing, so I'm not sure if I can totally nail it down with words. Let's try
something…
"... So, what benefit does society get from all this secondary market trading, besides very rich and self-satisfied bankers like Blankfein? The bankers would tell you that we get "liquidity"–the ability for investors to sell their investments relatively quickly. The problem with this line of argument is that Wall Street is providing far more liquidity (at a hefty price-remember that half-trillion-dollar payroll) than investors really need. Most of the money invested in stocks, bonds, and other securities comes from individuals who are saving for retirement, either by investing directly or through pension and mutual funds. These long-term investors don't really need much liquidity, and they certainly don't need a market where 165 percent of shares are bought and sold every year. ..."
"... In 1976, when the transactions costs associated with buying and selling securities were much higher, fewer than 20 percent of equity shares changed hands every year. Yet no one was complaining in 1976 about any supposed lack of liquidity. Today we have nearly 10 times more trading, without any apparent benefit for anyone (other than Wall Street bankers and traders) from all that "liquidity." ..."
So, what benefit does society get from all this secondary market trading, besides very
rich and self-satisfied bankers like Blankfein? The bankers would tell you that we get "liquidity"–the
ability for investors to sell their investments relatively quickly. The problem with this line
of argument is that Wall Street is providing far more liquidity (at a hefty price-remember that
half-trillion-dollar payroll) than investors really need. Most of the money invested in stocks,
bonds, and other securities comes from individuals who are saving for retirement, either by investing
directly or through pension and mutual funds. These long-term investors don't really need much
liquidity, and they certainly don't need a market where 165 percent of shares are bought and sold
every year.
They could get by with much less trading-and in fact, they did get by, quite happily. In
1976, when the transactions costs associated with buying and selling securities were much higher,
fewer than 20 percent of equity shares changed hands every year. Yet no one was complaining in
1976 about any supposed lack of liquidity. Today we have nearly 10 times more trading, without
any apparent benefit for anyone (other than Wall Street bankers and traders) from all that "liquidity."
=====================================
Thing of it is, the most thirsty never get a drink….
As a individual who graduated from Nampa(Idaho) High School before 1980,
I find the "Charter School" as a classic neoliberal and libertarian wet
dream. No collective contract interference, the support of Bill Gates(educated
exclusively in private schools) and another crony capitalism scheme. The
public education system has been fu**ked.
Worth noting: The "reformers" (like Michelle Rhee) promote merit pay
(because teachers are so financially motivated), (union-busting) charter
schools and testing, testing, testing as the means to improve educational
outcomes. No science validates this.
Yet with billionaire funding, "reformers" have even made a propaganda
film: "Waiting for Superman" touting Michelle Rhee's "tough love" approach
to school management (she fired lots of D.C. teachers), and holding up Finnish
schools as the ones to emulate.
Don't get me wrong, the Finns have great schools. But Waiting for Superman
neglects to mention that the Finnish teachers are well-paid, tenured and
unionized. Curious omissions, no?
So while the "reformers'" tactics fail scientific validation when compared
to educational outcomes, one thing does not fail: Educational outcomes correlate
strongly with levels of childhood poverty.
Finland's childhood poverty rate: 2%. Meanwhile, in the U.S., it's 23%
(and headed north).
Could this entire focus on schools out of their social context, without
any reference to what science says, be a gigantic campaign of misdirection,
distracting Joe Public from the plutocracy we live in?
The other cool thing about schools in Finland is the teachers stay with
their students as they move up in grades.
Years ago the gentleman who created the Finnish system was asked why
he didn't come to Amerika and help our system. The answer was Amerika is
head down and no one in power cares. Doomed
Chaster schools are about one thing, and one thing only. Wall street
gets access to (and takes a cut of) the cash flow stream of our tax money
before it gets to where we wanted it spent. All privatization efforts are
about this same thing.
Secure steady cash flows (and tax levies are one of the largest) have
a valur, and that value can be sold to private investors. That's what Wall
Street does with privatization; sell off the value of our taxes as cash
flow.
All of this means less of your tax money gets to where you want it to
go.
"... The Elites have successfully revolted against the political and economic constraints on their wealth and power, and now the unprivileged, unprotected non-Elites are rebelling in the only way left open to them: voting for anyone who claims to be outside the privileged Elites that dominate our society and economy. ..."
The Elites have successfully revolted against the political and economic constraints on their
wealth and power.
Ours is an
Age of Fracture (the 2011 book by Daniel Rodgers) in which "earlier notions of history and society
that stressed solidity, collective institutions, and social circumstances gave way to a more individualized
human nature that emphasized choice, agency, performance, and desire."
A society that is fragmenting into cultural groups that are themselves fracturing into smaller
units of temporary and highly contingent solidarity is ideal for Elites bent on maintaining political
and financial control.
A society that has fragmented into a media-fed cultural war of hot-button identity-gender-religious
politics is a society that is incapable of resisting concentrations of power and wealth in the hands
of the few at the expense of the many.
If we set aside the authentic desire of individuals for equal rights and cultural liberation and
examine the political and financial ramifications of social fragmentation, we come face to face with
Christopher Lasch's insightful analysis on
The Revolt of the Elites and the Betrayal of Democracy (1996 book).
"The new elites, the professional classes in particular, regard the masses with mingled scorn
and apprehension.... Middle Americans, as they appear to the makers of educated opinion, are hopelessly
shabby, unfashionable, and provincial, ill informed about changes in taste or intellectual trends,
addicted to trashy novels of romance and adventure, and stupefied by prolonged exposure to television.
They are at once absurd and vaguely menacing."
Extreme concentrations of wealth and power are incompatible with democracy, as Elites buy political
influence and promote cultural narratives that distract the citizenry with emotionally charged issues.
A focus on individual liberation from all constraints precludes an awareness of common economic-political
interests beyond the narrow boundaries of fragmenting culturally defined identities.
In a society stripped of broad-based social contracts and narratives that focus on the structural
forces dismantling democracy and social mobility, the Elites have a free hand to consolidate their
own personal wealth and power and use those tools to further fragment any potential political resistance
to their dominance.
The Elites have successfully revolted against the political and economic constraints on their
wealth and power, and now the unprivileged, unprotected non-Elites are rebelling in the only way
left open to them: voting for anyone who claims to be outside the privileged Elites that dominate
our society and economy.
"... It sounds like the rentiers are beginning to get a little nervous. Good. Whatever we can do to drain some money out of the FIRE sector is a good thing. I wonder what those fund managers think about the folks over at Vanguard. ..."
Re: Passive Investing Is Worse for Society Than Marxism
It sounds like the rentiers are beginning to get a little nervous. Good. Whatever we can do
to drain some money out of the FIRE sector is a good thing. I wonder what those fund managers
think about the folks over at Vanguard.
One way to judge the likely outcome is to look at what has happened
in the past. ...Kenneth Scheve ... and David Stasavage ... looked
at 20 countries over two centuries to see how societies have
responded to the less fortunate. Their primary finding may seem
disheartening: Taxes on the rich generally have not gone up when
inequality and economic hardship has increased. ...
Professor Scheve and Professor Stasavage found that democratic
countries have not consistently embraced more redistributive tax
policies, and most people do not vote strictly in their narrow
self-interest. ...
This is consistent with my own survey results, which focused on
inheritance taxes. ... Taxing around a third of wealth, more or
less, seemed fair to people. And perhaps it is reasonable, in the
abstract, yet what will we do in the future if this degree of
taxation won't produce enough revenue to meaningfully help the very
poor as well as the sagging middle class? ...
Angus Deaton..., commenting on what he called the "grotesque
expansions in inequality of the past 30 years," gave a pessimistic
prediction: "Those who are doing well will organize to protect what
they have, including in ways that benefit them at the expense of
the majority. " And Robert M. Solow ... said, "We are not good at
large-scale redistribution of income." ...
No one seems to have an effective plan to deal with the possibility
of much more severe inequality, should it develop. ...
Despite past failures, we should not lose hope in our ability to
improve the world. ...
Shiller made his name challenging the Efficient Markets
Hypothesis. I would call that heterodox even if it won him
a Nobel Prize. BTW - many economists have noted that we
have not done nearly enough to slow growing inequality.
Good to see Shiller's emphasis on this.
rayward :
, -1
Excessive inequality is self-correcting, absent
intervention by the government and the central bank.
History confirms it, recent history (2008) no less.
Excessive inequality leads to excessive risk taking (as
aggregate demand and returns falter) and ultimately
financial crisis and collapsing asset prices. Collapsing
asset prices, in turn, correct excessive inequality (since
the wealthy own most of the assets). Of course, the
correction can be painful; hence, intervention by the
government and central bank to restore asset prices and,
hence, inequality for the process to repeat. In his book,
Piketty assumes that governments and central banks will
always intervene in a financial crisis. Really?
Death Cry O F A Rally -> rayward...
, -1
collapsing asset prices. Collapsing asset prices, in turn,
correct excessive inequality (since the wealthy own most
of the assets). Of course, the correction can be painful;
"
painful to those who own the assets, the overlords!
Painful until FG buy up enough MBS, mortgage backed
securities to prop the price of both MBS and the
underlying asset, the houses enough to reinforce the
inequality, buy up securities and simultaneously expand
the money stock to inflate prices. Hey! If we can just
prop up the price of your home, them poor folks will never
be able to move into your neighbourhood. Happiness is
never having to say, "There goes the
"Despite past failures, we should not lose hope in our
ability to improve the world. In a recent column, I
described ways in which society might change a deep-rooted
sense of entitlement by radically broadening wage and job
insurance. Such a program would be a start in getting us
prepared to deal with some of the immense challenges that
may lie ahead."
And what are Hillary's center-left
proposals to tackle inequality? Minimal. Even center-left
flack Krugman admits her infrastructure plans are
substantially too small.
What are her plans for revenue sharing and aid to the
states? Does she have any? I doubt it.
Just the typical "leverage" the private sector with
inducements.
We need to become much more like the European
welfare-states but center-leftists like Hillary say it's a
bad idea.
pgl :
, -1
ECB buying corporate bonds. An enhanced version of QE:
In Europe, it is only 0.35% right now. Maybe the FED
should do something similar.
ken melvin :
, -1
How to cope with our changing economics:
Citizens of the United States and Europe now live in a
very changed economic environment, an economic environment
different from that of the middle twentieth century,
different from any we have ever known, different from any
that ever existed. Coming off a period of some forty years
of the mid twentieth century during which jobs in industry
provided the basis of the economy, and, through unions,
the most significant means of wealth distribution, we are
now well into the post industrial age, an age of
technology, a time when we don't have good and sufficient
mechanisms for insuring wealth distribution. Going
forward, there will less and less demand for labor for
fewer and fewer good jobs; labor will lose leverage, any
claim to parity it might once have had.
What to do in the face of this great transition? In the
past, with such periods of great transitions, we simply
muddled through. It took about 175 years to go from
agrarian based economic model to an industrial based
economic model that worked well. During which, every
draconian solution imaginable was applied at least once
while good, well intentioned minds sought solutions to the
problems presented by the transition.
The first step may be to recognize the change, the
magnitude of the change. How long before the leaders of
the eighteenth century grasp the scope, scale of the
change? What prompted Smith to take his critical look? Was
Smith without prejudice? Why the appearance of continuum
from slavery, serfdom, and capitalism? How great the
weight of the status quo when looking at a time of
transition?
We are now some forty years into this great transition.
Its coming was not a real surprise; but rather a common
topic in every computer science class in every university
by the late nineteen sixties. Was Rawls our Smith? Who
will be the Marx and how long before he or she steps on
stage? Fair to say any great insight will again come from
philosophers? Why philosophers? Because such as laws and
economics change when we change the way we think about
such things. This mean that we will not break the bonds of
the past until we take a critical look at the present. The
answer to the problems created by this great transition do
not lie in the past. No, presidential and congressional
candidates, we do not need to go back to what we were
doing in the past; we need to adapt to the reality of our
new technology based age.
Most of the economic models in use today evolved to
facilitate the economics of the industrial age. Our
adaptation to this new technologically dominated, resource
constrained, era will certainly require changes to these
economic models. We might even be better off to start
anew; to not carry forward the remnants of slavery,
serfdom, … capitalism - to let the application dictate.
most people do not vote strictly in their narrow
self-interest. ...
This is consistent with
"
~~Robert Shiller~
Most folks do vote strictly their own interest when
there is a policy to vote. In USA most of what we vote is
not policy but nominee. Sure!
There was proposition 13 in California, but most of our
choices are between two nearly identical candidates
equally capable of robbing the poor.
At the moment political solution to inequality is
merely a dream. A more practical solution to inequality is
frugality, hard work, and strict birth control that will
shrink the labour force thus raise wages by the law of
supply and demand
unemployed work force / wage level / job openings
supply / price / demand
Birth control will raise wages. Politicians will only
rob the poor. Hey! They can't rob the wealthy. Wealthy are
heavily armed,
armed and
dangerous --
Il carnevale di Venezia -> Information
Subway...
, -1
Did a famous investor once quip, "I can pay half the
workers to knock up the other half of the workers"?
The problem of income inequality, which has been deepening
these past thirty years, is profound and has potentially
complex consequences.
First is economic. Advanced
economies still depend largely on consumer spending. IF
that money is sitting in equities accounts or tax havens
it's sitting idle and demand is slack.
Second is ethical:the purpose our government is to
"promote the general welfare". Human well being, because
we are social and sentient, is relative; if we are poorer
than our neighbor, we feel bad. If we are poorer than our
parents, we feel a failure (some at least).
Third, most darkly, is political.If we continue down
the current path of inequality, demagogues, racial
acrimony and scapegoating, and all manner of instability
could ensue.
The US is still a very rich country, and there is no
need to risk divisions that would harm even the top 1
percent.
Peter K. -> David ...
, -1
"Third, most darkly, is political.If we continue down the
current path of inequality, demagogues, racial acrimony
and scapegoating, and all manner of instability could
ensue."
The sellout totebaggers like PGL want to point
the finger at Republicans but it's the center-left who are
not doing enough to solve the problem.
Many people believe that higher education is a de facto scam. Trump University, Donald Trump's
real-estate institution, was a de jure one.
First thing first, Trump University was never a university. When the "school" was established
in 2005, the New York State Education Department warned that it was in violation of state law
for operating without a NYSED license. Trump ignored the warnings. (The institution is now called,
ahem, "Trump Entrepreneur Initiative.") Cue lawsuits.
Trump University is currently the defendant in three lawsuits - two class-action lawsuits filed
in California, and one filed in New York by then-attorney general Eric Schneiderman, who told
CNN's New Day in 2013: "We started looking at Trump University and discovered that it was a classic
bait-and-switch scheme. It was a scam, starting with the fact that it was not a university."
Trump U "students" say the same. In his affidavit, Richard Hewson reported that he and his
wife "concluded that we had paid over $20,000 for nothing, based on our belief in Donald Trump
and the promises made at the [organization's] free seminar and three-day workshop." But "the whole
thing was a scam."
In fact, $20,000 is only a mid-range loss. The lead plaintiff in one of the California suits,
yoga instructor Tarla Makaeff, says she was "scammed" out of $60,000 over the course of her time
in Trump U.
How could that have happened? The New York suit offers a suggestion:
'The free seminars were the first step in a bait and switch to induce prospective students
to enroll in increasingly expensive seminars starting with the three-day $1495 seminar and ultimately
one of respondents' advanced seminars such as the "Gold Elite" program costing $35,000. At the
"free" 90-minute introductory seminars to which Trump University advertisements and solicitations
invited prospective students, Trump University instructors engaged in a methodical, systematic
series of misrepresentations designed to convince students to sign up for the Trump University
three-day seminar at a cost of $1495.'
The Atlantic, which got hold of a 41-page "Private & Confidential" playbook from Trump U, has
attested to the same:
'The playbook says almost nothing about the guest speaker presentations, the ostensible reason
why people showed up to the seminar in the first place. Instead, the playbook focuses on the seminars'
real purpose: to browbeat attendees into purchasing expensive Trump University course packages.'
To do that, instructors touted Trump's own promises: that students would be "mentored" by "handpicked"
real-estate experts, who would use Trump's own real-estate strategies.
But according to the New York complaint, none of the instructors was "handpicked" by Trump,
many of them came from fields having nothing to do with real estate, and Trump "'never' reviewed
any of Trump University's curricula or programming materials." The materials were "in large part
developed by a third-party company that creates and develops materials for an array of motivational
speakers and seminar and timeshare rental companies."
Furthermore, Trump's promises that the three-day seminar ($1,495) would include "access to
'private' or 'hard money' lenders and financing," that it would include a "year-long 'apprenticeship
support' program," and that it would "improve the credit scores" of students were empty.
Those empty promises are the subject of a new series of anti-Trump ads by superPAC American
Future Fund. According to Bob, "I never heard from anybody about giving me a list of hard-money
lenders". Kevin, another Trump U "student," says Trump University "ruined" his credit score. And
according to Sherri, a single mother who participated in Trump U: "It was all supposedly supervised
by Donald Trump, run by Donald Trump. All of it was just a fake."
In fact, Sherri isn't alone. No student ever met the Donald. Despite hints from Trump University
instructors that Trump was "going to be in town," "often drops by," or "might show up," he never
did. As Matt Labash recounted in The Weekly Standard: "At one seminar, attendees were told they'd
get to have their picture taken with Trump. Instead, they ended up getting snapped with his cardboard
cutout." Bob, above, had such an "opportunity".
There could be many more ads to come. The New York lawsuit alone represents some 5,000 victims.
Meanwhile, Trump - who maintains that Trump University was "a terrific school that did a fantastic
job" - has tried to bully his opponents out of the suit. Lawyers for Tarla Makaeff have requested
a protective order from the court "to protect her from further retaliation." According to court
documents, Trump has threatened to sue Makaeff personally, as well as her attorneys. He's already
brought a $100 million counterclaim against the New York attorney general's office.
But it's not working. Trump himself will have to take the witness stand in San Diego federal
court sometime during the election season - and because of the timeline of the cases, a "President
Trump" would be embroiled in these suits long after November.
Meanwhile, if there is any doubt that Trump U was designed to be a scam, The Atlantic puts
that to rest with a few other choice tidbits from that "Private & Confidential" playbook used
by Trump presenters:
'Every university has admission standards and Trump University was no exception. The playbook
spells out the one essential qualification in caps: "ALL PAYMENTS MUST BE RECEIVED IN FULL." Basically,
anyone with a valid credit card was "admitted" to Trump University. . . . If a member of the media
happened to approach the registration table, Trump staffers were instructed not to talk to him
or her under any circumstance. "Reporters are rarely on your side and they are not sympathetic,"
the playbook advises.'
And: At one point, the playbook advises Trump staffers: "If a district attorney arrives on
the scene, contact the appropriate media spokesperson immediately." Sounds legit.
"... The corruption I'm going to describe seems more along the lines of converting a public institution to serve private purposes (assuming higher education to be a public institution, which I do, because education is a public good)[3]. ..."
"... Now, human nature being what it is, a certain amount of empire-building and concern for one's rice bowl has always been inevitable, but when greed for one's self, or one's class, becomes the institutional driver, it's time for a thorough cleansing. ..."
"... New York University students carry some of the highest debt loads in the nation, a fact they are bound to remember through gritted teeth when they read the New York Times report about the school's loans to top faculty for vacation homes in places like Fire Island and the Hamptons. ..."
"... The house, which is owned by John Sexton, the president of New York University, was bought with a $600,000 loan from an N.Y.U. foundation that eventually grew to be $1 million, according to Suffolk County land records. ..."
"... I think this perfectly describes what I've observed with public school superintendents also. They are like 'The Music Man.' Selling dreams that our children will be smarter, better looking, and above average if we just get with the program. While our school district has a local in charge who appears to be here for the long term, a neighboring district had a 'Music Man' or rather, woman, who got the city to float a $10 million bond issue so every fourth grader could have an I-Pad. She then left to do the same (for a higher salary) in another state. Another, much poorer, district nearby wanted to get rid of a super who had allegedly threatened subordinates with bodily harm: they bought out her contract for $300,000. In a county with a population of 20,000 and ten percent unemployment. ..."
"... It is not only at the college level that those in charge are engaging is questionable behavior. It is a society wide problem. ..."
"... To a naive student with no experience in institutional politics, their stories of resentment, gossip, backbiting, and the politics of personal reputational destruction were like a glimpse into an unimagined world. ..."
"... It used to be that there was a saying in academe: the competition is so great because the stakes are so low. But, if there is a path to six or seven figures, now I see that there is serious cash to be banked to justify working in the university racket. ..."
I haven't posted on higher education before, and a series of posts on credentialism really should
focus on the institutions where those credentials are, in the main, granted. But rather than a serious
analytical piece on the state of the university, this will be a light-hearted romp through some spectacular
examples of executive malfeasance at NYU, Baylor, and Penn State.[1] (Tomorrow I'll look at the adjunct
system, and potential effects of
yesterday's NLRB decision . And there will be more posts to come on this topic, as I come to
understand it better.)
Before I begin, though, let's recall Zephyr Teachout's definition of corruption. Not a quid pro
quo - that's the Citizen's United doctrine, now supported by the Clinton campaign - but the use of
public office for private ends. What does corruption look like in a university setting, given that
some universities are private to begin with, and that "ends," in the ancient and tricky academe,
may not always be immediately evident?
Here's a story from the University of Maine, Maine's "flagship" university. Our last President,
Robert Kennedy, gave the contract for sports broadcasting to ClearChannel, thereby moving the profits
out of state, because he took the contract away from Stephen King's radio station (yes, that Stephen
King). Naturally, this ticked King off, and King - up to that point the university's largest donor,
and the funder of many good works round the state, like dental clinics and libraries - decided he
would no longer give to the university. (Kennedy then rotated out to the University of Connecticut,
for a hefty salary increase, where he was shortly
axed by the Regents for a cronyism scandal . Dodged a bullet, there, Maine!)
Dollying back to the larger picture, King came up through the much despised and derided English
Department, in the humanities, which powerful institution forces in the administration and the Board
of Trustees are shifting resources away from, in favor of more pragmatic, "business-friendly," corporate
majors (graduates, that is, that they themselves can hire[2]. Even though King was the university's
largest donor.)
Is there corruption here? I would argue yes, but I'm not sure that Teachout's definition quite
meets the case. The corruption I'm going to describe seems more along the lines of converting
a public institution to serve private purposes (assuming higher education to be a public institution,
which I do, because education is a public good)[3]. This is evident from the King story in two
ways. First, Kennedy is only one of
many university administrators
who stay a couple years at an institution, punch their ticket, and move on to a higher salaried position
elsewhere. Second, optimizing university curricula, grounds, personnel decisions, etc. for corporate
ends is about as corrupt as you can get (as are the concomitant rationalizations and cover-ups that
occur when scandal breaks). Now, human nature being what it is, a certain amount of empire-building
and concern for one's rice bowl has always been inevitable, but when greed for one's self, or one's
class, becomes the institutional driver, it's time for a thorough cleansing.
With that, let's look at the case of John Sexton, once President of NYU. (NYU is an important
nexus for the Democrat nomenklatura , so we'll have more to say about NYU in the future.)
NYU gave president's aspiring actor son apartment on campus
Jed Sexton, whose sole affiliation with NYU was his status as the president's son, for years
enjoyed a spacious faculty apartment while the university experienced a "severe" housing shortage,
The Post has learned.
In spring 2002, NYU ordered that a pair of one-bedroom apartments normally reserved for law
school faculty be combined into a lavish, two-story spread in the heart of Greenwich Village,
property records show.
The Harvard-educated Sexton, who was a 33-year-old aspiring actor at the time, shared the new
duplex with his newlywed wife, Danielle Decrette, for the next five years, according to documents
and people briefed on the situation.
That's despite the fact that NYU officials, just weeks earlier, had warned in a written report
of a "severe housing shortage" for faculty, "especially of larger units."
NYU Offers Top Talent a Path to Beachfront Property
New York University students carry some of the highest debt loads in the nation, a fact
they are bound to remember through gritted teeth when they read the New York Times report about
the school's loans to top faculty for vacation homes in places like Fire Island and the Hamptons.
The loans, which have gone to at least five faculty members in the medical and law schools
as well as university president John Sexton, sometimes get forgiven over time as their recipients
continue to work at the university. Mortgage loans apparently aren't unheard of as compensation
packages for professors and executives in tight real estate markets, but they're usually for homes,
not vacation properties.
From
the New York Times , which broke the story, it seems that Sexton gifted himself a house,
an "an elegant modern beach house that extends across three lots":
The house, which is owned by John Sexton, the president of New York University, was bought
with a $600,000 loan from an N.Y.U. foundation that eventually grew to be $1 million, according
to Suffolk County land records.
Since the late 1990s, at least five medical or law school faculty members at N.Y.U. have received
loans on properties in the Hamptons or Fire Island, in addition to Dr. Sexton.
While that feeling is understandable, it is important to note the economic truth that the markets
for different positions often dictate different levels of compensation, whether that is embodied
in salary payments, loans, or an overarching agreement about terms of employment. And, when we
commit to provide such compensation, we do so only when we are sure
that the benefit to the University far exceeds the cost.
First,
CEO compensation
and shareholder returns are inversely correllated ; even if we grant Dorph's premise, and a corporate
model for the university, it's just not clear that top compensation means top talent. Second, why
doesn't NYU simply pay its talent more? Why complicate matters by bringing in vacation housing?
Why not just write a fatter check? The answer can only be
arbitrage of some sort: NYU giving access to property that otherwise isn't on the market, tax
advantages of some kind, a better rate on the mortgage, or whatever; some way in which NYU uses its
muscle on behalf of the compensated. But that is, precisely, converting a public institution to serve
private purposes. Not to mention Sexton openly using NYU facilities to house his son and for his
own vacation home on Fire Island. Come on. Why is that not self-dealing? And the rest of looks suspiciously
like powerful faculty members feathering their own nests. "Why not? We deserve it."
The 19th and topmost floor of the building will be turned into a master-bedroom suite, where
Dr. Hamilton will have private exits - one from the bedroom and one from the bathroom - onto a
terrace overlooking Washington Square and, to the south, the financial district skyline, according
to documents filed with New York City.
Baylor University, the country's largest Baptist university and a bastion of Christian values,
has just been denounced in
a blistering
report by the
University's Board of Regents for "mishandling" - covering up might be a more apt description
- credible allegations of horrific sexual violence against female students, especially alleged
assaults by members of the football team. The Board of Regents said it was "shocked," "outraged"
and "horrified" by the extent of the acts of sexual violence on the campus, which covered years
2012 through 2015, and the failure of the University to take appropriate action to punish violators
and prevent future violations. The Board issued an "apology to Baylor Nation," fired the football
coach, and "transitioned" (the Regents' term) Baylor's President, Kenneth Starr, to the role of
Chancellor. Starr also was allowed to retain his lucrative Chair and Professorship of constitutional
law at Baylor's law school .
As Baylor's president from 2010 to 2016, the vexing question is the level of Starr's culpability
for the "shocking," "outrageous," and "horrendous" sex scandal. What exactly did Starr know? The
allegations of sexual violence on the campus were rampant and notorious, especially by the football
players. Starr had to know something about the extent of the University's response to the complaints,
and most likely the failure to address these complaints properly. Indeed, there were several Title
IX investigations by the Justice Department at the time that Starr must have known about. Moreover,
there are plenty of egregious examples of sexual violence on the campus that had to have been
reported. In one egregious case, an All-Big 12 football player was accused in 2013 of sexual violence
against a student. Although Waco police contacted university officials, nobody in the university
investigated the case until two years later, after a Title IX investigation was underway, and
media reports highlighted the case. This was after several other Baylor football players were
indicted and convicted of sexual assaults. It was only then that the University hired an outside
investigator. Notably, the headlines also prompted a public outcry, and a candlelight vigil at
Starr's residence.
The Board of Regents Report describes the breadth of the independent investigation into the
university's failure to properly address the University's dereliction. The investigators interviewed
numerous University officials, but there is no mention whether they interviewed Starr, and if
so, what he may have said. Starr may have claimed to be unaware of the repeated failures of
university officials to investigate these complaints, but is that contention credible? Starr presumably
had to know that aggressively investigating these allegations - indeed, as aggressively as he
investigated the sexual misdeeds of President Clinton - might have interfered with his intensive
multi-million dollar fundraising efforts to build a new and lavish football stadium, which opened
in 2014. And Starr may have believed that getting too deep into the mud of the roiling sexual
scandal would undermine the public perception of Baylor's "Christian commitment within a caring
community" - again the Board of Regents' description - as well as compromise the heroic efforts
of the Baylor football team to win a national championship.
So Starr is no longer the university's president. To be sure, it's a demotion of sorts. He
was allowed to keep his Chancellorship, which he just relinquished, but he still gets to keep
his Chair and Professorship at the Law School. One might think this is not a very harsh result,
certainly not if Starr knowingly violated federal law, or by his deliberate indifference allowed
serious criminal conduct to take place at the university he led.
Not to put too fine of a point on it, but Ken Starr is accused of ignoring sexual violence
at Baylor University mostly because doing something about it would have jeopardized a cash cow.
(Note that the disgraced Baylor football coach's salay,
$6 million , was six (6) times college President "Judge Starr." Starr will also retain his position
on the faculty. Priorities!)
The New York Times says what Alternet says , in its own more muffled language:
[Baylor] also fired the football coach, Art Briles, whose ascendant program brought in millions
of dollars in revenue but was dogged by accusations of sexual assault committed by its players
- an increasingly familiar combination in big-time college sports.
Among the firm's findings was that football coaches and athletics administrators at the school
in the central Texas city of Waco had run their own improper investigations into rape claims and
that in some cases they chose not to report such allegations to an administrator outside of athletics.
By running their own "untrained" investigations and meeting directly with a complainant, football
staff "improperly discredited" complainants' claims and "denied them a right to a fair, impartial
and informed investigation."
Starr wanted the revenues. Briles wanted the revenues, the facilities, the salaries, the ticket
to be punched, etc. Again, this is quite directly converting a public institution to serve private
purposes. And like NYU, Baylor appears to have learned nothing. Starr still has a job, and was never
censured. The full report was never released. And
from an ad taken out by Baylor alumni : "Thank You Judge Ken Starr - For your integrity, leadership,
character and humble nature."
ERIC J. BARRON: We actually have launched a whole program, which is titled
" Invent Penn State ," and there are several
different elements of this. One is to do more to incentivize people on campus to get their ideas
out into the marketplace. We have many, many student events that are competitions and have scholarship
funds at the end of it. The second part of it is to add more visibility to our intellectual property.
A third part is to build an ecosystem around our campuses that promote startups and partnerships
with communities.
A general view, in my opinion, is that many universities are focused on this topic as a source
of revenue, not as educational experiences for students and opportunities for them to do startups.
We have a lot of effort on the student side. The minors have expanded. I think we have six or
seven entrepreneurship minors now that are embedded in curriculum for different colleges if you
want. Last year, we started having any student with any major to be able to get all the credits
equivalent to a minor in business. There's a lot on that side plus startup weeks and other activities
with a scholarship side of it.
We have funded but have not yet cut the ribbon on a total of 20 incubators and accelerators
around the state of Pennsylvania associated with our campuses. In March, we cut the ribbon on
what's called Happy Valley Launch Box, which is here in State College, with the idea of having
30 startups in there at any one time. I think we had about 15 before even 30 days. All of these
have gone through some sort of vetting process or competition for which they were winners. It's
growing just left and right. Many of them, we've given them seed money and they've gotten many
times more money from their community and other partners that want to enable the students.
Never mind converting an entire student population into "winners" and "losers."
Never mind that 90% of start-ups
fail . Never mind that when startups succeed, it's as much a matter of luck, and especially the
luck of having been born into the right social network. Thomas Frank has already described Barron's
program, and where it leads. This is
the innovation cult ! Quoting Frank once more:
I just finished Thomas Frank's excellent Listen, Liberal , and he has a great rant about
"innovation," of which I will show a great slab here, from p 186 et seq. Frank even helpfully
quotes the more egregious bullshit tells, so I don't have to highlight them! Do read it in full.
After visiting hollowed out mill town Fall River, Frank goes to Boston:
And:
Let's also leave aside the issue of whether "innovation" culture increases "income inequality."
Suppose Penn State structures its curriculum to optimize for startups (and not for education as such;
critical thinking skills, the construction of narratives, the sciences, research, even (relatively)
humdrum majors like accounting). What happens to the students when 90% of their startups fail,
as history tells us they will? What will they have to fall back on, if everything has been optimized
for startups, and the rest of the university's assets have been stripped?
The future lies ahead on that question. For now, I'm uncertain whether "the innovation" cult is
corrupt as such, or not. Certainly it provides almost limitles opportunities for backscratching,
logrolling, bezzle creation, and so forth. And Barron seems to conceive of it as a big revenue generating
opportunity for Penn State (rather like the football team, if it comes to that). If the program fails,
and is seen to fail, will Penn State learn from the experience? It's hard to know, but
Barron's handling of the fallout from the Sandusky matter does not inspire confidence .
Conclusion
So, what we've got here is an NYU President handing a New York apartment, meant for faculty, to
his son, and what looks rather like powerful faculty members feathering their own nests with cheap
housing; we've got a Baylor President not wanting to cross a powerful and wealthy football team,
even to the extent of failing to handle a rape scandal; and at Penn State we've got a President who's
a member of the "innovation cult," when it's not at all clear this will benefit the student body
as a whole. Have any of these institutions learned from these experiences? No. Are these college
Presidents personally responsible for corruption at their universities - for converting a public
institution to serve private purposes? Sexton and Start, yes. For Barron, the jury is still out.
And these are the institutions of higher education that are granting credentials. Not a good look.
More examples from readers welcome!
NOTES
[1] I should disclose my priors and/or prejudices: I'm a university brat with a humanities
background. Family tradition mandates that I instinctively distrust college administrators, Big
Football, fraternities, and sororities (and, my parents would urge, for very good reasons). Only
the first two will be at issue here.
[2] That is, they're creating hires, as opposed to creating graduates some of whom might be
creative enough to come up with businesses that compete with their own.
[3] If you think that implies that neoliberalism is intrinsically corrupt, since it will put
everything up for sale, including itself, you're not wrong.
'First, Kennedy is only one of many university administrators who stay a couple years at an
institution, punch their ticket, and move on to a higher salaried position elsewhere.'
I think this perfectly describes what I've observed with public school superintendents
also. They are like 'The Music Man.' Selling dreams that our children will be smarter, better
looking, and above average if we just get with the program. While our school district has a local
in charge who appears to be here for the long term, a neighboring district had a 'Music Man' or
rather, woman, who got the city to float a $10 million bond issue so every fourth grader could
have an I-Pad. She then left to do the same (for a higher salary) in another state. Another, much
poorer, district nearby wanted to get rid of a super who had allegedly threatened subordinates
with bodily harm: they bought out her contract for $300,000. In a county with a population of
20,000 and ten percent unemployment.
It is not only at the college level that those in charge are engaging is questionable behavior.
It is a society wide problem.
It is not only at the college level that those in charge are engaging is questionable behavior.
It is a society wide problem.
That is my impression as well-corruption is a society wide problem from top to bottom. The
small town mayors, courts, police, newspapers, insiders, etc may be playing with small potatoes
but corruption is corruption whether it is $1000 or a $1,000,000. I know it can't be everyone
with a little power but way too many. Makes you doubt the whole system.
Greetings from one of those coworking spaces that Mr. Frank took to task in Listen, Liberal
.
Let me tell you a dirty little secret about this place. And, no, I'm not talking about who
left a lunch in the fridge for too long. This is an even dirtier secret. Here it is:
Most of us are not innovators.
That's right. I said it.
The truth is, most of us are working on things that are, well, pretty run of the mill. Guy
behind me is doing digital marketing work for his out-of-state employer, an ad agency. Lady over
there is doing marketing for a resort in Mexico. Oh, and the guy who's my best friend here? We're
both photographers. His other main hustle is graphic design and mine is writing for business.
We have a handful of what could be described as startups, but those businesses are definitely
in the minority.
Well we don't need a sh&t pot full of "innovators" . we need people that can do what they do
well. Does everybody have to create something "new"?? I don't think so.* Edison wasn't the greatest
guy in the world overall, but as he said getting something up is 99% perspiration and only 1%
inspiration – I think he would have spit at the word "innovation", btw.
In fact, he has another lesson for the "innovators" in that a lot of his perspiration was generated
due to his efforts in stealing ideas from other people. Which is going to happen to almost all
of the (if we take their optimistic slices) 10% that do come up with something anybody cares about.
*For a good example, I love the improvement of the American pub scene over the past few decades.
But the best beer and grub isn't the best because it is "innovative" - sometimes it is a bit different,
sometimes not - but because it is very, very well done.
Slim, in your home town town there is one of the perfumed princes that could have fit nicely
into Lambert's post. Us AZ residents are paying neoliberal scumbag a premium price for their "talents"
of enriching themselves.
Oh, brother. Ann Weaver Hart. Don't get me started.
Okay, I am started. So, here goes
A couple of summers ago, I was meeting with a longtime acquaintance and potential client on
the University of Arizona campus. Madame Presidente was about to move her office into Old Main,
which is the UA's oldest building. It's revered as this sacred space. Or something like that.
Any-hoo, I was in a pretty spacious office in a building near Old Main. But my meeting host
told me that Ann Weaver Hart's Old Main *bathroom* was bigger than that office.
Yeesh.
Oh, as for the work space, were you involved in the one that had a pirate theme? Because that
place was - and is - full of pump -n- dump startups.
'King came up through the much despised and derided English Department, in the humanities.'
Although not a product of the English department at my alma mater, Whatsamatta U., I knew some
professors in the department.
To a naive student with no experience in institutional politics, their stories of resentment,
gossip, backbiting, and the politics of personal reputational destruction were like a glimpse
into an unimagined world.
It used to be that there was a saying in academe: the competition is so great because the
stakes are so low. But, if there is a path to six or seven figures, now I see that there is serious
cash to be banked to justify working in the university racket.
Nowadays I bristle when someone describes me as "faculty," even though it's technically correct,
because it papers over the fact that some of the people doing the exact same job as me have full
employment, a full salary, and fringe benefits, where the people in my position get paid per credit
with no benefits. We are "permitted" to buy into university health insurance, at full cost, but
that's the extent of our bennies.
If you're getting to the employment situation in a further post, I'll save my more extensive
comments for that.
Update: one of the articles cited in this essay says Ken Starr resigned from Baylor Law School
and severed all ties with the university this past Friday.
As someone who has a university background, as a grad student in three different universities,
and short stints as a faculty member and an administrator (I was shoved out/left in disgust from
administration)- I attest that this kind of neoliberal thinking, which automatically generates
converting public responsibility to private advantage, is commonplace. As readers here know, the
university is a place where one must strive to present oneself - and simultaneously fool oneself
- as creative and independent-minded within the confines of the matrix. This is most pronounced
in the professional school because they are most beholden to corporate money. A final note: you
will find the best to the worst of humanity in universities.
One more for the honor roll: West Virginia University's former president Michael Garrison,
who ordered the granting of an M.B.A. to moral leper Mylan CEO and Epi-Pen price
optimizer Heather Bresch in 2007,
I have to repeat my favorite historical anecdote here (h/t the late, great Paul Goodman, from
his Compulsory Miseducation, I believe).
It seems that in the summer of 1650, while the faculty was away helping in the fields, Henry
Dunster sold Harvard to a group of Boston businessmen, creating the first Corporation in the New
World, and making himself "President" thereof.
Now Wikipedia claims that Dunster "set up as well as taught Harvard's entire curriculum alone
for many years, graduating the first college class in America, the Class of 1642". So perhaps
Dunster was simply ahead of his time in creating the prototype for Trump University.
Administrators in academia hold themselves to the same high ethical standards as officials
in government. In other words, they do whatever they can get away with, and then sputter about
future "transparency," and "doing better," when their misdeeds come to light.
This blather from Austin, Texas, could just as well have come from Washington, D.C.:
"I've read the report a half-dozen times in totality, and I found no willful misconduct
, no criminal activity on the part of any of the folks at the University of Texas
at Austin, and have told the Board of Regents that I intend to take no disciplinary action,"
he said.
"Can we do things better? You bet," he continued. "Should we have been more transparent?
Absolutely. Are we going to get this fixed? No doubt about it."
Mr. Powers pushed back against the report's suggestion that he had not been forthcoming,
saying he had been "truthful and not evasive" in his dealings with investigators.
My $2c; apologies that they're a bit unpolished: One question you/we might ponder is how (a
desire for) obvious nepotism engenders privatization, versus more "principled" demands
for privatization of public goods/services. To give a very brief summary of the developments since
WWII inspired by my reading of David Harvey's The Enigma of Capital : privatization became
important once western economies 'matured', because of how this meant that there were ever fewer
(obvious) opportunities for growth. And secondly because, once more and more people started getting
degrees, there was an explosion in the number of people who were "trained" (only) for middle/upper
management positions; for who there was fairly little demand in public institutions, probably
because workers had decent unions/voice, so that the people who ran those places couldn't easily
justify managerial metastasis and the taking away of job-related autonomy (to create demand for
"decision-makers") by creating cultures of institutionalized distrust (via yammering about the
importance of "accountability"). (Though the latter was/is still an issue, it gets worse the more
neoliberalized the organizational mode gets, because of neoliberalisms implicit (rational-actor)
misanthropic world view.) Those developments strike me as separate from the more narcissistic
( professional class/meritocratic-reasoning )-related forms of corruption/grift/etc. that
you discuss above, though.
(To clarify, Harvey doesn't talk about professionalization; that's just me combining observations
made by Graeber with those made by Tom Frank in Listen, Liberal .)
Harvey's book is great; as for Frank & Graeber, I was thinking of Graeber's remarks about what
he (in Debt) calls the crisis of inclusion (which he's also talked about elsewhere, e.g. in the
Army of Altruists essay in Revolutions in Reverse ). Graeber there (as I assume you recall)
only talks about the fact that those who don't belong to what Frank calls the professional class
(and those who self-identify with them), only have the army and the church open to them if they
wish to pursue goals other than accumulating money/power; yet the higher-ed explosion must've
also had enormous consequences for the supply of people with managerial and similar training.
But I only started pondering that question recently, after reading Frank woke me up to the obvious.
How about Cooper Union president Jamshed Bharucha - who managed to screw up the school's endowment
that had been in place since 1859. Check out the movie "Ivory Tower".
NYU is a school run by money, and it's so transparent that for a board populated by billionaires,
run by a press-shy guy who helped a lot of them become billionaires, that they prop up the flamboyant
Sexton's supposed fundraising abilities and
"imperial" presidency. Fortunately for Sexton and NYU, he's paid enough money to take the
press's lashings like a good boy.
But surely such a mediocre pedant isn't the mastermind behind the bloated, technocratic, real
estate development company and vanity project (which also offers classes, which are taught by
#publicintellectuals).
Pam Martens has written several posts at Wallstreetonparade talking about NYU's corruption,
connections to Wall St, and Jack Lew. Don't have links handy but easy to Google.
I would like to point out that Chancellors Linda Katehi (UC Davis)and Nicholas Dirks (UC Berkeley)
have both recently resigned under pressure from UC Top Honcho Janet Napolitano. It seems Administrator
transgressions (impunity and self-dealing) are finding its way into the "sunlight".
Some people starting up can get "small loans" of $1,000,000 from the old man and have those
kinds of resources to fall back on if they flop. The other 99.99% of us? Not so much. How is this
innovation dogma supposed to work for those of us who can't buy our way into the Creative Class?
Many people believe that higher education is a de facto scam. Trump University, Donald Trump's
real-estate institution, was a de jure one.
First thing first, Trump University was never a university. When the "school" was established
in 2005, the New York State Education Department warned that it was in violation of state law
for operating without a NYSED license. Trump ignored the warnings. (The institution is now called,
ahem, "Trump Entrepreneur Initiative.") Cue lawsuits.
Trump University is currently the defendant in three lawsuits - two class-action lawsuits filed
in California, and one filed in New York by then-attorney general Eric Schneiderman, who told
CNN's New Day in 2013: "We started looking at Trump University and discovered that it was a classic
bait-and-switch scheme. It was a scam, starting with the fact that it was not a university."
Trump U "students" say the same. In his affidavit, Richard Hewson reported that he and his
wife "concluded that we had paid over $20,000 for nothing, based on our belief in Donald Trump
and the promises made at the [organization's] free seminar and three-day workshop." But "the whole
thing was a scam."
In fact, $20,000 is only a mid-range loss. The lead plaintiff in one of the California suits,
yoga instructor Tarla Makaeff, says she was "scammed" out of $60,000 over the course of her time
in Trump U.
How could that have happened? The New York suit offers a suggestion:
'The free seminars were the first step in a bait and switch to induce prospective students
to enroll in increasingly expensive seminars starting with the three-day $1495 seminar and ultimately
one of respondents' advanced seminars such as the "Gold Elite" program costing $35,000. At the
"free" 90-minute introductory seminars to which Trump University advertisements and solicitations
invited prospective students, Trump University instructors engaged in a methodical, systematic
series of misrepresentations designed to convince students to sign up for the Trump University
three-day seminar at a cost of $1495.'
The Atlantic, which got hold of a 41-page "Private & Confidential" playbook from Trump U, has
attested to the same:
'The playbook says almost nothing about the guest speaker presentations, the ostensible reason
why people showed up to the seminar in the first place. Instead, the playbook focuses on the seminars'
real purpose: to browbeat attendees into purchasing expensive Trump University course packages.'
To do that, instructors touted Trump's own promises: that students would be "mentored" by "handpicked"
real-estate experts, who would use Trump's own real-estate strategies.
But according to the New York complaint, none of the instructors was "handpicked" by Trump,
many of them came from fields having nothing to do with real estate, and Trump "'never' reviewed
any of Trump University's curricula or programming materials." The materials were "in large part
developed by a third-party company that creates and develops materials for an array of motivational
speakers and seminar and timeshare rental companies."
Furthermore, Trump's promises that the three-day seminar ($1,495) would include "access to
'private' or 'hard money' lenders and financing," that it would include a "year-long 'apprenticeship
support' program," and that it would "improve the credit scores" of students were empty.
Those empty promises are the subject of a new series of anti-Trump ads by superPAC American
Future Fund. According to Bob, "I never heard from anybody about giving me a list of hard-money
lenders". Kevin, another Trump U "student," says Trump University "ruined" his credit score. And
according to Sherri, a single mother who participated in Trump U: "It was all supposedly supervised
by Donald Trump, run by Donald Trump. All of it was just a fake."
In fact, Sherri isn't alone. No student ever met the Donald. Despite hints from Trump University
instructors that Trump was "going to be in town," "often drops by," or "might show up," he never
did. As Matt Labash recounted in The Weekly Standard: "At one seminar, attendees were told they'd
get to have their picture taken with Trump. Instead, they ended up getting snapped with his cardboard
cutout." Bob, above, had such an "opportunity".
There could be many more ads to come. The New York lawsuit alone represents some 5,000 victims.
Meanwhile, Trump - who maintains that Trump University was "a terrific school that did a fantastic
job" - has tried to bully his opponents out of the suit. Lawyers for Tarla Makaeff have requested
a protective order from the court "to protect her from further retaliation." According to court
documents, Trump has threatened to sue Makaeff personally, as well as her attorneys. He's already
brought a $100 million counterclaim against the New York attorney general's office.
But it's not working. Trump himself will have to take the witness stand in San Diego federal
court sometime during the election season - and because of the timeline of the cases, a "President
Trump" would be embroiled in these suits long after November.
Meanwhile, if there is any doubt that Trump U was designed to be a scam, The Atlantic puts
that to rest with a few other choice tidbits from that "Private & Confidential" playbook used
by Trump presenters:
'Every university has admission standards and Trump University was no exception. The playbook
spells out the one essential qualification in caps: "ALL PAYMENTS MUST BE RECEIVED IN FULL." Basically,
anyone with a valid credit card was "admitted" to Trump University. . . . If a member of the media
happened to approach the registration table, Trump staffers were instructed not to talk to him
or her under any circumstance. "Reporters are rarely on your side and they are not sympathetic,"
the playbook advises.'
And: At one point, the playbook advises Trump staffers: "If a district attorney arrives on
the scene, contact the appropriate media spokesperson immediately." Sounds legit.
This market looks precarious. It may continue on higher as long as real, versus manufactured,
volume remains unusually low.
There are enough corporate buyback programs and sovereign entities, including central banks,
willing to buy US equities at these levels. The general public and institutions seem to be sitting
this one out.
I suspect that when an event of sufficient magnitude or type occurs, as they do from time to
time, a slide will be triggered, and the wash and rinse of the general public, their pensions
and their savings, will begin once again.
The longer this goes on, the broader the set of events that can trigger the unlikely slide
of consequence seems to grow.
Still, an outright crash would favor the orange-haired presidential contender, and not the
poster child for the financial establishment. So that may be an unlikely bet to make before November.
They seem to be going all out to sustain the unsustainable.
This is exciting only if you can see the tensions growing beneath the surface, which is dullsville
to the casual observer to say the least. I have to admit I have been growing jaded on this nonsense
of late. But a whiff of Autumn is in the air, and after many a Summer, dies the swan.
"... That said, what I believe is needed in the USA is a doubling down on Corporate Boards of Directors and CEOs to create a crisis, an American intervention, if you will, that demands companies bring back the idea that Profits alone are not all that matters. Serving the Nation you are born in, raised in, educated in, and then making a profitable income from certainly needs to be focused in on. ..."
"... An additional factor in the financial woes of the falling middle class is the changing demographics here in the US - the growing numbers of single mothers, who are far more likely to struggle financially than a two income household. I make no judgment regarding how people form their family units, but life is especially hard for single mothers. ..."
"... Its even more difficult for journalists in Guardian. They have to destroy chances of only candidate addressing inequality and climate change (Bernie), completely surrender their integrity to corporations, lament over those issues post factum, and yet be paid miserably only in hundreds of thousands for such colossal betrayal of humanity. Its worth at billions to actively participate in destroying future of your kids. Or is it? ..."
"... We need a new Federal Minimum Wage, and the wealthiest need to start paying up. Trump claims that business in the US pay the highest tax rate. That's just not true. I'm not talking about putting the burden on small business, but the multi-nationals and Wall Street. ..."
"... And we can blame Billary and Hussein for it. Their "free-trade" decisions, along with their shameful endorsement of open-borders, have lowered wages for everyone, except for financiers. Interestingly, it was those who've suffered the brunt of the elites' decisions who voted for Britain to leave the EU. Ironically, those who professed to stand for the middle and lower classes, revealed their hypocrisy when they joined the Mandarins in opposing for Britain to leave the totalitarian EU. ..."
"... Like the Trojans fearing present-giving presents, so should the working man loath the elites who promised to have their best interests at heart. That is the same promise communism gave the workers, only to turn on and enslave them. Today the workers don't stand a chance: the Marxists and bankers are on the same side sneering at the working classes who are demeaned as being racist, jingoistic xenophobes. ..."
"... An article in Forbes that explains why Obamacare is a scam. ObamaCare Enriches Only The Health Insurance Giants and Their Shareholders ..."
"... I agree with you that he never did. Obama is a corporatist and globalist. If you think Obamacare is bad wait until his trade deals are past. He sold Americans out for the profits of multinational corporations. Hillary will continue his work. I understand the true meaning of his words now. ..."
"... The US middle class has been disintegrating for decades as inequity grows ..."
"... Clinton is in hiding. I can't find her in the Guardian today. She is a habitual liar and the whole world has all the evidence it needs. All of her promises are bullshit. Bernie has been right the whole time and he is smart not to endorse. Bernie has always known what she is and Bernie's supporters have no reason to support her. ..."
"... It means she is corrupt, dishonest, and unqualified to be anything but an inmate. ..."
"... the middle class has been decimated.. This financial category is only about 35% of was it was in the early 70's.. additionally the definition of middle class has changed drastically as well.. believe it or not your middle class if your earn more than 50k a year!.. this is part of the reason we are as a nation borrowing a trillion dollars a year.. when will the silenced majority wake up and start voting and stop spending on products that are vastly over priced. ..."
"... My kid had a persistent tummy ache. Doc said intestinal blockage; take him to the ER immediately. Seven hours and one inconclusive CAT scan later, he's home again with symptoms unchanged. Two days later the pain went away. Cost: $12,000 with about $10,000 covered by union health insurance. So that's at least $2,000 out of pocket to me for seven hours in hospital, zero diagnosis and zero relief from symptoms. Medicine as a criminal enterprise? So what? Who's gonna stop it? The press? The law? ..."
"... I sympathize. I also agree with you. The US medical system is criminal. It is cruel, discriminatory, ruthless, often ineffective, and often incompetent. The only reason the administrators ("health" maintenance corporations) aren't in jail is because they use some of their obscene profits to buy Congress -- which passes laws like Obama's ACA or Bush's big Pharma swindle. I have no idea what to do about it though -- maybe if everyone refused to pay their premiums and medical bills, the money managers would notice. A sort of strike. ..."
"... SIngle-payer is the answer. Of course, the insurance companies and big pharma use scare tactics to stop that from happening. They talk about government waste, completely ignoring their own waste. They ignore the billions of dollars that they skim off of the top each year before applying any money for actual medical care. Wake up, people. Medical care should be run by the government or non-profit organizations, not by for-profit corporations. ..."
"... Despite the financial situation in middle-and lower income families that has been steadily declining under the past 8 years of the Obama administration, most in that group will support Hillary and propagate the Same problems for 4 more years. They stand no hope unless they break from the knee-jerk support of the "Democratic" Party. ..."
"... So they should support Donald Trump and the conservative party? Last time I checked raising taxes on the middle class while lowering taxes on the rich didn't really help anyone but the rich. The Republican party never gave two shits about middle and lower class, and there's no point believing they will start now. ..."
"... Isn't choosing to have three children very selfish if you cannot support them financially. People always find someone else to blame. ..."
"... "Race" card!!?? Where the hell did I mention anything about race or are you really as dumb as your reply suggests. Plus, you don't require a test to decide if you can afford children or not. It basic family planning. It's people like you in society that has the place in a mess with your "blame anyone but meself attitude" If I'm considered horrible, at least I'm not totally dumb and irrisponsible like you. ..."
"... Bill Maher recently (July 1, 2016; Overtime) editorialized about the state "laboratories" where new ideas are tested and evaluated. Maher compared the divergent fates of California and Kansas plus Louisiana. ..."
"... It's interesting. According to my household income I'm in the "upper" tier for the DC-metro region. But it really doesn't feel that way. Even those of us who make a good income are more and more stretched. In comparison to most of the country, I am well off. I own a car, just bought a house, I can afford to go out to eat a couple times a week. But, I even get to the end of the month with only $100 in the bank. That's because other downward pressures on pay aren't taken into account, such as student debt. My expensive undergraduate and graduate education didn't come cheap, and while that education affords people higher pay, if you end up taking less of it home. It kinda equals out. ..."
"... Sometimes my husband and I think about having kids, and then we realise that even with our good paying jobs, we can't afford day care in our area. I get paid the most, so I can't quit my job but if my husband quit to care for a child, we would really be strapped. Can I really be considered an upper tier household if I can't afford to have kids? If I can't afford to go on vacation once a year? If I haven't bought new clothes in two years? If I have no savings and a freak medical bill might just tip me over the edge? ..."
"... Suggest you give Andrew Tobias' book a read to think outside the box a good education often constructs for us: https://www.amazon.com/Only-Investment-Guide-Youll-Ever/dp/0544781937?ie=UTF8&ref_=asap_bc ..."
"... You can cut student debt in the U.S. by attending a good community college for two years and then transferring to a state university. Most kids are unwilling to do this--no frats or prestige in community colleges! ..."
"... Beginning in the 1970s, a majority of the middle class began to resent the taxation needed to continue support for these liberal policies, and they began to vote for conservative politicians who promised to remove them as they "only helped the undeserving poor." White racism played a role in this as the lower class was invariably portrayed in political speeches and advertising as group of lazy black people. ..."
"... No, it was created in response to the Bolshevik revolution, in particular, to that genius who said "Let's just shoot the royal family and be done with this." ..."
"... All of these things have come under attack since the USSR fell apart, probably on that exact day. And who overthrew the USSR? Overeducated middle class, not the poor or the rich. Who was Occupy Wall Street, Arab Spring... the recent protests against the French labor law tightenings, ALL the middle class. ..."
"... The greatest threat to governments has, and always will be, from within. And this threat is from the middle class, almost exclusively. Therefore, we are to be crushed and controlled tightly ..."
"... funny how this media outlet didn't publish these types of reports while the primary was hot. It was all "Hilary is inevitable and supporting Bernie is supporting Trump" type garbage. ..."
"... Probably he means to say Americans habitually ask new acquaintances, "What do you do for a living?" That's absolutely a query about income and personal worth, though slightly disguised, and it's a question I have never widely encountered anywhere else in the world, nor while living overseas the last ten years. ..."
"... This article is extremely dishonest. First, it claims that she has 'three other jobs'. Second, she has children, for whom she presumably gets child support. So what's her *real* income? ..."
"... When those in poverty or on the verge of it are single mothers, you tend to wonder if there are some other issues as well. I don't recall a time in American history where a single mother of several children could take care of herself when completely on her own. ..."
"... I teach in inner city schools. There are so many problems, money is one of them but all the money won't solve the problem of poor learning attitudes, disaffection, poor discipline and nonexistent work ethic . ..."
"... A lot of the students get no discipline at home and their parents don't expect them to learn anything. They are resistant to the whole process of focus on new knowledge , absorb, drill, recall , deploy newly learned thing. ..."
"... I don't know what solution there is to this. My nieces and nephews did well in school, studied hard, and went on to university. They didn't do drugs, rape or be raped, and stayed away from unsavory kids. BUT--they went home to two parents every night, a father and mother, which I think would have made them successful at school no matter what their income. ..."
"... The US economy isn't competitive anymore. It started with the labor cost being too high, so factories moved out. Then the entire supply chain moved out. Now the main consumer market is also moving out. Once that is gone, we will have no more leverage. ..."
"... The US education is good, but students are lazy, undisciplined, and incurious. In silicon valley, more than 75% of highly paid technical personnel are foreign born. Corporations making money with foreign workers here and abroad, on foreign markets. Taking these away and you will see the economy crash. ..."
"... Labor costs were too high. Have some more kool-aid. The elite didn't want labor to have any bargaining power whatsoever . They wanted to dictate the terms to labor believing that they were the only ones who should have any say in matters. The elite wanted to maximize their profits at the expense of their own citizens. They wanted slave labor . They wanted powerless people to dance to their tune. How could an advanced nation's labor possibly compete with slave labor . ..."
"... Sadly ..... thee isn't any hope for these people in the foreseeable future . Their economic decline has been happening for quite some time now and shows no sign of abating whatsoever . The economic foundations of their lives have been steadily pulled out from under them by the financial elite and their subservient political cultures , the Republican and Democratic Parties . The Republicans have never really given a damn about them and the Democrats have long abandoned them . These poor people of North Carolina are adrift on a sinking raft on easy ocean of indifference by the political cultures of America . To those in power , they don't exist . They don't count . They don't matter . ..."
"... The trend in the U.S, along with almost every other major nation in the world over the past 35 years has been to exclusively serve the interests of the financial elite and only their needs . All sense of fairness , justice and decency have been totally discarded . ..."
"... Tax breaks after tax breaks , tax shelters , free movement of capital , etc., etc. would sum up the experience of the financial elite over the past 35 years . They have become incredibly wealthy now and are still not satisfied . They want more . They want it all . They want what little you have and their political servants which help them get . ..."
"... Political discourse pertaining to the plight of those like these folks in North Carolina is all window dressing . In the end , you can be certain that it will amount to nothing . Just like it has for decades now . The financial elite are in control and they are not going to give any of that control up . As a matter of fact , they are going to tighten their grip . They will invent crisis to have their agendas imposed upon an increasingly powerless and bewildered public . They will take advantage of every naturally occurring crisis to advance their agenda . ..."
"... The problem is the job exporting American elite class. NAFTA was an economics, political, and social experiment with all the downside on the former, mostly lower middle class. Non-aligned examination of the available data shows how disastrous NAFTA has been to America's bubbas. Thanks to Bush 41 and Bill Clinton. WTO was all Bill. Of the mistakes Obama has made TPP would be the worst. The question is, really, do we favor global fairness (an even playing field for all earth's peoples) and a climate-killing consumerist world, or our own disadvantaged (courtesy of our financial and political elite) citizens. Not an easy choice. Death by poison or hanging. No treaty can benegotiated fairly in secret. ..."
"... The tragic irony is that the anger against rule by the 1% manifests in things like support for Trump, a typical example of the greed and excess of the 1%. Americans need to question outside their desperately constrained paradigms more. It will help focus their anger more strategically, and possibly lead to solutions. Don't hold your breath, the inequality gap is accelerating the wrong way. ..."
"... I think the US is heDing for trouble. It is the middle class that maintains civil society and gives a sense of hope. This is an interesting open letter by a zillionaire to his peers warning them what happens without a string middle class. A thought provoking read. http://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014 ..."
"... The elite of the USA have done exactly what the Romans did and what the Pre-Revolutionary French did.... drain the lower classes while enriching themselves. "Taxes are for little people" is not just a pithy quote, it has become the reality as the elite rig the system so they benefit and the lower classes pay. They need to wake up or they will get exactly what the Romans Got (collapsed empire) or the French got (Violent Revolution). Wake up America! It is time to choose your side in the class war the elite continue to execute while telling us there is no "Class War" - you can't pull yourself up by your boot straps while they are pulling the rug out from under you! ..."
"... My wife used to employ recent graduates from Georgetown University with poli. sci., psychology, sociology degrees, to stack books for $10/hr. It took them on average 2-3 years, before finding work in their field. ..."
"... Education is NOT about finding a job! It's about learning ways to seek wisdom and rationality, and to assimilate (not deny) new knowledge throughout your life--and that's exactly what's lacking in the US! Our schools are factories to turn out standard robots to be used by the owners of this country, whether they practice law or flip burgers. ..."
I was stumped by the very idea that someone has the $money, the time, the energy to
go out and study for 3 bachelor degrees. This woman doesn't look old enough to have had time to get
3 degrees.
That said, what I believe is needed in the USA is a doubling down on Corporate Boards
of Directors and CEOs to create a crisis, an American intervention, if you will, that demands companies
bring back the idea that Profits alone are not all that matters. Serving the Nation you are born
in, raised in, educated in, and then making a profitable income from certainly needs to be focused
in on.
Why on earth isn't Main Stream Media doing this, along with all of CONGRESS and the President?
What is their excuse? Even if you brought back all the robotic jobs to US soil, you would also end
up bringing a large number of administrative jobs back here, too, just to keep up with the business
at hand. It is critical that we rebuild our infrastructure, yet we see NO immediate or Long-term
plans to do so. How can we, without the support of the Business Class to support the whole nation
through Paying their Taxes to the US Tax System? There is no excuse that will do, in my book. Profits
to the top tier need to be STOPPED so long as businesses are going outside of the United States Borders.
Period.
Typical of what's happening around the world. The trillions of dollars lurking in tax havens is
the reason why economies are stagnating. Money makes the world go round, however detouring to
the Cayman Islands, the flow stops and the poverty begins. Spend locally and reject multi national
corporations. Give your local communities a chance to prosper,
An additional factor in the financial woes of the falling middle class is the changing demographics
here in the US - the growing numbers of single mothers, who are far more likely to struggle financially
than a two income household. I make no judgment regarding how people form their family units,
but life is especially hard for single mothers.
"The 2016 presidential race has superficially been dominated by talk of this declining middle.
First from Bernie Sanders, then Hillary Clinton and even Donald Trump's promise to Make America
Great Again"
"And even"??? What a laugh. Even if you hate Trump its clear The Guardian has written every
article possible to prevent his rise and they have failed miserably. Hillary amd Sanders are dominating
conversatiin. Trump is by far.
One thing us for sure. 15 million illegals and thousands more every month is not making the
middle class more secure.
They are shrinking, and you expect them to tolerate "Make America Mexico Again"? In these times?
Donor money is ruining the country. They hate Trump because he doesnt need these arrogant donors
who have never heard "no" their whole lives.
Its even more difficult for journalists in Guardian. They have to destroy chances of only candidate
addressing inequality and climate change (Bernie), completely surrender their integrity to corporations,
lament over those issues post factum, and yet be paid miserably only in hundreds of thousands
for such colossal betrayal of humanity. Its worth at billions to actively participate in destroying
future of your kids. Or is it?
It isn't immigration that costing jobs - it's employers who know they can pay these people
less for their work. We need a new Federal Minimum Wage, and the wealthiest need to start
paying up. Trump claims that business in the US pay the highest tax rate. That's just not
true. I'm not talking about putting the burden on small business, but the multi-nationals and
Wall Street.
You can see in western Europe at the moment that a minimum wage desn't work without a whole host
of other protective legislation. A minimum wage doesn't reach to the self employed, and it doesn't
prevent the use of flexible or non-guaranteed hours contracts making use of a larger than is required
labour pool. Not to mention the black market / cash in hand trade.
And we can blame Billary and Hussein for it.
Their "free-trade" decisions, along with their shameful endorsement of open-borders, have lowered
wages for everyone, except for financiers.
Interestingly, it was those who've suffered the brunt of the elites' decisions who voted for Britain
to leave the EU.
Ironically, those who professed to stand for the middle and lower classes, revealed their hypocrisy
when they joined the Mandarins in opposing for Britain to leave the totalitarian EU.
Like the Trojans fearing present-giving presents, so should the working man loath the elites
who promised to have their best interests at heart.
That is the same promise communism gave the workers, only to turn on and enslave them.
Today the workers don't stand a chance: the Marxists and bankers are on the same side sneering
at the working classes who are demeaned as being racist, jingoistic xenophobes.
You realize most of the votes in favor of NAFTA were Republican and most against were Democratic,
right? You know that "free trade" has been an item in the Republican platform (and increasingly
the Democratic one) for years before Clinton and Obama were ever in office, right? Know some elementary
facts about U.S, politics before posting nonsense.
Ed Thurmann: it's not teacher-bashing, it's just the old recycled "black family values" spiel
that was introduced into the poverty debate in the '60s by Daniel Patrick Moynihan. Moynihan,
not so BTW, is Hillary Clinton's intellectual hero. So you can expect a hell of a lot more of
these cliches after January of next year.
An article in Forbes that explains why Obamacare is a scam. ObamaCare Enriches Only The Health Insurance Giants and Their Shareholders
Robert Lenzner , CONTRIBUTOR
I'm trying to wise up 300 million people about money & finance
So far in 2013 the value of the S& P health insurance index has gained 43%. Thats more than
double the gains made in the broad stock market index, the S & P 500. The shares of CIGNA are
up 63%, Wellpoint 47% and United Healthcare 28%. And if you go back to the early 2010 passage
of ObamaCare, you will find that Obama's sellout of the public interest has allowed the public
companies the ability to raise their premiums, especially on small business, dramatically multiply
their profits and send the value of their common stocks up by 200%-300%. This is bloody scandalous
and should be a cause for concern even as the Republican opponents of the bill threaten the close-down
of the government.
We warned you back on December4, 2009 in my blog " The Horrendous Truth About Health Care Reform"
that the Obama White House was handing a " free ride for the health insurance industry" that would
allow premium hikes of 8%-10% a year by CIGNA, Humana HUM +1.56%, Aetna AET +0.45%, UnitedHealth
Group UNH +0.58% and Wellpoint, and as well a $500 billion taxpayer subsidy, a half trillion dollars
without any requirement that the health insurers had to spend the subsidy on medical care. Several
US Senators including Jay Rockefeller of West Virginia spoke to me openly of the outrageous sellout
being foisted on the nation's uninsured citizens.
At the time I wrote, Goldman Sachs research operation estimated that the 5 giants would increase
profits by 10% a year from 2010 to 2019, sending their shares up an average of 59%. In truth,
the shares of CIGNA and some others are up a multiple of several times since the contest was resolved
by a very tight vote in early 2010. One startling reason for this amazing performance was that
Obama took off the table "proposals to significantly reduce health care costs" as the giveaway
in getting the bill through, according to Ron Susskind's best-selling book ,"Confidence Men,"
which I wrote about in a blog on September 24, 2011. ( "Obama's Incoherent Policy-Making") Some
3 years later, UnitedHealthCare Group(UNH) was rewarded by being added to the elite list of the
Dow 30 industrials.
I understood belatedly that there would have been no Affordable Care Act of 2010 if the White
House had not given into demands from the giant profit-making health insurance companies. Had
he not done so, I am being assured that there would have been no bill passed, a priority goal
that Obama promised in his 2008 Presidential campaign. How the profits have risen so impressively
requires further investigation as the bill is meant to limit the profits earned to 20% of the
revenues.
One of the other downsides to the supposed reform bill was the surprisingly unfair treatment
of small business owners who faced even larger potential premiums for their employees. It has
been the fear of these higher health costs that has resulted in the overwhelming trend toward
hiring part-time employees whom the employers need not offer healthcare insurance.
So much for the reforms embedded in the mis-labeled Affordable Care Act of 2010. It may not
die a bloody demise this month, but it is certain to be reformed itself, let's hope for the benefit
of the 300 million, not just the millions of lucky shareholders who may have understood the ramification
of ObamaCare, which was to multiply the profits of five giant insurance companies, just as the
major bank oligopoly was rewarded by the federal bailouts and Fed monetary policy.
I agree with you that he never did. Obama is a corporatist and globalist. If you think Obamacare
is bad wait until his trade deals are past. He sold Americans out for the profits of multinational
corporations. Hillary will continue his work. I understand the true meaning of his words now.
"We are a nation of immigrants" meaning he prefers cheap illegal labor when 46 million Americans
live in poverty. Soon cheap foriegn will be unlimited and legal in the US with worker mobility.
Even for professional jobs. Can you imagine competing with foreigners in the US who make 30 cents
an hour? It's depressing really. Here are some of the highlights of the TPP that will throw Americans
further into poverty.
My heart goes out to these beleaguered families. In the late 1970s/80s I held down a full-time
job in DC and freelanced feverishly to make ends meet. I lived below the official poverty line
in an expensive, yet thoroughly crappy, flat. That recession-riddled era of energy chaos, leading
into Reagan's 'voodoo' economics regime (the risible idea of 'trickle-down', the US becoming the
world's largest debtor), was another hot mess.
The US middle class has been disintegrating for
decades as inequity grows, thanks in large part to the poor governance of Republican presidents
(Nixon's stagflation, the disastrous shifts under GW Bush).
Clinton is in hiding.
I can't find her in the Guardian today.
She is a habitual liar and the whole world has all the evidence it needs.
All of her promises are bullshit.
Bernie has been right the whole time and he is smart not to endorse.
Bernie has always known what she is and Bernie's supporters have no reason to support her.
Her disapproval ratings will top Trump now.
The voters are now going to show her what the meaning of is, really is.
It means she is corrupt, dishonest, and unqualified to be anything but an inmate.
Her disapproval ratings are high, but not up with Trump's and they never will be. You can vote
for Jill Stein, the Green Party candidate, in November. Or Gary Johnson, the Libertarian. But
Bernie will not be a candidate, and he will eventually endorse Clinton -- after he is sure he's
won certain concessions in the Democratic platform. That's your reality in July 2016, not in February.
the middle class has been decimated.. This financial category is only about 35% of was it was
in the early 70's.. additionally the definition of middle class has changed drastically as well..
believe it or not your middle class if your earn more than 50k a year!.. this is part of the reason
we are as a nation borrowing a trillion dollars a year.. when will the silenced majority wake
up and start voting and stop spending on products that are vastly over priced..Turn off your phone,
stop buying all but essentials.. we need to force prices down until we complain and start voting
with our dollars little will change
What about the millions of married couples with kids..when the parents lose their jobs? That happens
very frequently. Should we take the kids away? Are you suggesting that poor people not be allowed to have children?
Then we have the religious nutcases that are against contraception and abortion, yet demonize
poor women for having children.
My kid had a persistent tummy ache. Doc said intestinal blockage; take him to the ER immediately.
Seven hours and one inconclusive CAT scan later, he's home again with symptoms unchanged. Two
days later the pain went away. Cost: $12,000 with about $10,000 covered by union health insurance. So that's at least $2,000 out of pocket to me for seven hours in hospital, zero diagnosis and
zero relief from symptoms. Medicine as a criminal enterprise? So what?
Who's gonna stop it? The press? The law?
Medicine as a criminal enterprise? So what?
Who's gonna stop it? The press? The law?
I sympathize. I also agree with you. The US medical system is criminal. It is cruel, discriminatory, ruthless, often ineffective, and often incompetent. The only reason the administrators ("health" maintenance corporations) aren't in jail is because
they use some of their obscene profits to buy Congress -- which passes laws like Obama's ACA or
Bush's big Pharma swindle. I have no idea what to do about it though -- maybe if everyone refused to pay their premiums
and medical bills, the money managers would notice. A sort of strike.
SIngle-payer is the answer. Of course, the insurance companies and big pharma use scare tactics to stop that from happening.
They talk about government waste, completely ignoring their own waste. They ignore the billions
of dollars that they skim off of the top each year before applying any money for actual medical
care. Wake up, people. Medical care should be run by the government or non-profit organizations,
not by for-profit corporations.
Corporations have only one goal...to make as much money as possible for themselves. Health
care is just a necessary nuisance.
Despite the financial situation in middle-and lower income families that has been steadily declining
under the past 8 years of the Obama administration, most in that group will support Hillary and
propagate the Same problems for 4 more years. They stand no hope unless they break from the knee-jerk
support of the "Democratic" Party.
So they should support Donald Trump and the conservative party? Last time I checked raising taxes
on the middle class while lowering taxes on the rich didn't really help anyone but the rich. The
Republican party never gave two shits about middle and lower class, and there's no point believing
they will start now.
This article mentions Latonia Best and her three children.
Is there a Mr Best around? It has always been tough to raise a family on the salary of a single parent.
The breakdown of the American family is a probably the biggest reason for the supposed struggles
of the middle class. People have to take responsibility for their lives.
traditionally, the middle class had the guy going out to work, and his wife staying at home to
look after the kids. Once children are in school and childcare is reduced, I don't see how a
woman working and raising her kids alone, is any more expensive than a man supporting himself,
his wife and their kids.
It used to be possible. It used to be doable. wealth disparity ind income inequality mean that
is no longer the case, at least certainly not for the average middle class. In the UK anyway,
it's now a sign of wealth. This has nothing top do with the family and everything to do with income
disparity.
Ah. I was waiting for some "bubba" to pull the race card. Congratulations.
Maybe we should make everyone take a test to prove that they can afford children. No children for poor people. Nice.
"Race" card!!?? Where the hell did I mention anything about race or are you really as dumb as
your reply suggests.
Plus, you don't require a test to decide if you can afford children or not. It basic family planning.
It's people like you in society that has the place in a mess with your "blame anyone but meself
attitude" If I'm considered horrible, at least I'm not totally dumb and irrisponsible like you.
$3,333.33 is actually not a lot of money to raise a family of four on. Let's do some math, shall
we?!
Taxes: $800 (rough estimate)
Health Insurance: I'm going to estimate $300 because she probably has dependents on her coverage
and that's what I paid one dependent a while back.
Car: I'm going to estimate $150. My car payment is $300, but let's say she got a cheaper, used
car.
Rent: Let's say $1,000/month (I did a quick search and found that this seemed like a good price
for a two bedroom)
Bills: Let's round up to $150/month for gas, electricity, water, sewage
Food: Let's say she spends $80/week, so roughly $320 a month (you know, she's a thrifty shopper)
All of that leaves about $313 left for gas, phone, college tuition, maybe internet and cable
at home. I don't know how she does it.
Worst of all was the town of Goldsboro – one of three metropolitan areas in North Carolina
at the bottom of the national league table.
North Carolina, Michigan, Kansas, Louisiana, Oklahoma ... more ...
Sad stories in states run by Republicans. Toxic rivers, shootings, poisoned tap water, bankruptcy,
daily earthquakes ...
Bill Maher recently (July 1, 2016; Overtime) editorialized about the state "laboratories"
where new ideas are tested and evaluated. Maher compared the divergent fates of California and
Kansas plus Louisiana.
Only five countries produced more last year than California: the U.S., China, Japan, Germany
and the United Kingdom.
So -- North Carolina with fouled rivers, a collapsing middle class, discriminatory laws --
or a thriving California?
Goldsboro remains far from the sort of economic catastrophe seen in parts of the rust belt,
but these are signs of financial stress that are hard to ignore. The strain on the middle class
across much of the country may not have gone unnoticed by politicians, but locals here fear
there is little talk of the investment in skills, high-paying jobs and civic infrastructure
needed to arrest the slide.
Republican shills will have to admit -- finally that Republican policies ruin lives, ruin the
economy and ruin the environment. Truth appears more powerful than slogans and slanders. Who knows?
They might even acknowledge climate change.
I believe it is the wars and needs of the military-industrial-banking complex that sap far too
much from the economy. Both parties are guilty of supporting them.
North Carolina with fouled rivers, a collapsing middle class, discriminatory laws -- or a thriving
California?
Since 2013, North Carolina has the fastest GDP growth of any state. The NC economy is not in bad
shape. This lady lives in one of the poorest areas in the state, she should move 45 minutes north
to thriving Raleigh or Durham - the population in that area is booming, they need teachers.
The dumping of coal ash into the Dan river was a corporate crime, not a policy decision. Neither
party is responsible for criminal actions by individuals or corporations, that's just silly. (The
republicans have been too lax in holding Duke Energy to account but the damage done is not a political
issue)
HB2 is a disgrace but the legislature is in the process of correcting it and the Governor is likely
to lose the election in the fall which bodes well for anti-HB2 people. Don't forget that California
voters voted to ban gay marriage not even 10 years ago. It's not a paradise of wealth and enlightenment,
no place is.
Why should we feel sorry for the American middle class they have elected for all the misery that
has befallen them!
If America was a fascist state I could sympathise but it's not. Americans have let their social
rights being eroded by a mendacious and cunning establishment.
One good example of how Americans don't give a shit is the very expensive wars in Iraq and
Afghanistan which have cost gazillions to the US taxpayer and not a whimper from the US population.
If one can compare that to the Vietnam war which created its own critical cinema genre, protest
songs, large demonstrations etc...you know that todays average Americans responsibility for the
mess they find themselves in is non existent. They just bend over and take it and have little
whine about it from time to time.
What about the people that didn't vote for the "misery" as you call it?
What about the fact that whichever way you vote in the US you're screwed?
And I don't know about you, but you must not know many Americans. The number of my friends
who have been tear gassed during marches against the Iraq war flies in the face of your argument.
Have you, yourself, even uttered a whimper against it?
I will support proper child-support and healthcare and everything that can be done to make this
woman's life easier and secure her kids' futures BUT
Three kids is a LOT for two people to handle, let alone one.
To paraphrase Lady Bracknell, to raise one child alone may be regarded as a misfortune; to
attempt to raise three looks like carelessness. To try to raise three alone in the United States
is MADNESS.
I live in the USA. I'm in a stable long-term relationship. I don't make much money. I can't
afford kids.
2 + 2 = 4
Poor me. I don't say I have a right to kids because I need them or I have so much love to give
or blah, blah, blah. I just can't. Not here. This is a cruelly individualistic country. It is
built to serve those who serve themselves. Namely, the young, healthy, smart, motivated and single.
There is no political foundation or tradition of altruism here. Maybe back in Ireland where there's
a system to support me and some healthcare and family. Not here. Madness.
But she's got the kids now. What is she supposed to do? Hand them back to someone? If she and
the childrens' father had them when life was looking more stable and she didn't have to work 4
jobs to make ends meet, she can hardly be blamed now for their existence.
You are living in the now and choose not to have children because you feel you can't afford
them. However, in the future, you may find that you can afford them, and therefore choose to conceive.
If your circumstances change after that and you are no longer able to afford to care for them
without working excessive hours and living in poverty, there's not a lot you can do other than
get on with it. No point blaming her for something that is irreversible.
It's interesting. According to my household income I'm in the "upper" tier for the DC-metro region.
But it really doesn't feel that way. Even those of us who make a good income are more and more
stretched. In comparison to most of the country, I am well off. I own a car, just bought a house,
I can afford to go out to eat a couple times a week. But, I even get to the end of the month with
only $100 in the bank. That's because other downward pressures on pay aren't taken into account,
such as student debt. My expensive undergraduate and graduate education didn't come cheap, and
while that education affords people higher pay, if you end up taking less of it home. It kinda
equals out.
Sometimes my husband and I think about having kids, and then we realise that even with our
good paying jobs, we can't afford day care in our area. I get paid the most, so I can't quit my
job but if my husband quit to care for a child, we would really be strapped. Can I really be considered
an upper tier household if I can't afford to have kids? If I can't afford to go on vacation once
a year? If I haven't bought new clothes in two years? If I have no savings and a freak medical
bill might just tip me over the edge?
There's something very, very wrong. How rich do you need to be before you don't feel like you're
struggling?
You can cut student debt in the U.S. by attending a good community college for two years and then
transferring to a state university. Most kids are unwilling to do this--no frats or prestige in
community colleges!
The huge middle class in the USA was created by the liberal economic polices of the 1930s, which
were designed to help the lower class.
Beginning in the 1970s, a majority of the middle class began to resent the taxation needed
to continue support for these liberal policies, and they began to vote for conservative politicians
who promised to remove them as they "only helped the undeserving poor." White racism played a
role in this as the lower class was invariably portrayed in political speeches and advertising
as group of lazy black people.
What the middle class did not understand was that their continued existence depended on these
liberal programs, as most of the benefits went to the middle class, not the lower class as they
assumed. As the liberal programs began to disappear, so did the economic security of the middle
class.
One would think they would have figured all of this out by now, but they have not, and they
continue to vote for conservatives.
No, it was created in response to the Bolshevik revolution, in particular, to that genius who
said "Let's just shoot the royal family and be done with this."
When that happened, the ruling class got scared, and said "OK, minimum wage, vacation, sick
pay, 40 hr work week, no child labor, great schooling, etc"
All of these things have come under attack since the USSR fell apart, probably on that exact
day. And who overthrew the USSR? Overeducated middle class, not the poor or the rich. Who was
Occupy Wall Street, Arab Spring... the recent protests against the French labor law tightenings,
ALL the middle class.
The greatest threat to governments has, and always will be, from within. And this threat is
from the middle class, almost exclusively. Therefore, we are to be crushed and controlled tightly.
" squeezed middle class tell tales of struggle " Too bad they voted for the big squeeze herself -- Bernie
could have set them free from the path of exploitation she has planned for them immediately after
her election by imposing the TPP upon the very fools who will elect her. Stop watching
the Kartrashians and read about actual policy implications for your family and especially your
children, if you had, none of you would have supported Clinton.
funny how this media outlet didn't publish these types of reports while the primary was hot. It
was all "Hilary is inevitable and supporting Bernie is supporting Trump" type garbage.
I lived in Pittsburgh for 8 years, being European I sent them to public school...well, after a
year in which my six years old son was suspended twice for running around at lunchtime when he
shouldn't (six years old tend to do that), numerous recesses where they were put in front of a
TV (we cannot send them outside, insurance doesn't cover if they get hurt and we got sued before),
and notes from teachers full of spelling mistakes......I had to send them to private school perpetuating
a cycle of poor people in public system and rich people (or middle class as i was at the time)
to private schools....
i don't know what needs to be done to fix the issue but it's the whole society that is really
divided along money lines and race lines and inequality is getting worse. But money trumps everything,
the US is the only place int he world where it's not considered unpolite to ask people :"what's
your worth?" meaning how much you make, what are your assets, etc.....instilling in people a mentality
of self worth based on money and consequentially a cutthroat environment where the more you have
the more you are worth, so at the top they squeeze the lower end, to make more money but also
because they think they are really not that worthy....its a perverse cycle that history taught
us doesn't bring any good because at a certain point the poor reach a critical mass that will
just revolt......I'm waiting for that, good luck...
I'm afraid my friend we disagree on that, excellent public schools are exceptions, there are some
but they are a minority (International statistics on education quality validate that), I don't
live in the US anymore but travel a lot there for business (at least 20 times a year). As for
the worth question I had it asked to me quite a few times and kind of everywhere, maybe it's unpolite,
I believe it's unpolite, but it happens regularly and only in the US (let me rephrase, in the
rest of the world it wouldn't be considered unpolite, that's too mild of a term, it would be considered
inconceivable). Said that I hope the US makes it and the "American Values" that you talk about
prevail, but i am afraid those values have changed and being substituted by less noble ones...
Probably he means to say Americans habitually ask new acquaintances, "What do you do for a living?"
That's absolutely a query about income and personal worth, though slightly disguised, and it's
a question I have never widely encountered anywhere else in the world, nor while living overseas
the last ten years. The question is so ingrained, though, that Americans who ask it don't think
of it as a query about net worth. They do, however, react with overflowing respect toward those
who answer in certain ways, and something akin to sympathy to those who answer in other ways.
All my foreign friends have noticed it, and all think it's weird.
This article is extremely dishonest. First, it claims that she has 'three other jobs'. Second,
she has children, for whom she presumably gets child support. So what's her *real* income?
Agree, I did my last year of high school in the US, in North Carolina of all places, in a top
private school, i was a middling student in Europe with flashes of brilliance in some subjects
but definitely far from the top of the class. When I arrived (it was in the 80s) I didn't speak
English. Well, I graduated with high honors int he top 5% and got my high school diploma, honestly
without having to study that much, school was not totally comparable but definitely way less challenging.
Contrary to conventional wisdom, a lot of private schools in the United States are severely lacking
in the rigor department. This is even true for many--not all--private schools that cater to well-to-do
families.
When those in poverty or on the verge of it are single mothers, you tend to wonder if there are
some other issues as well. I don't recall a time in American history where a single mother of
several children could take care of herself when completely on her own.
I know of single mothers
who are doing fine, but they employed and are also being helped by siblings and parents who already
have some wealth and free time to take care of the child. Maybe the issue is the fact that these
people are having kids at the wrong time or without enough thought. Divorce rates are incredibly
high in the US, and the percentage of children who have non-birth parents is very high as well.
What this all means is that the USA isn't teaching its citizens about having kids and the responsibility.
The USA is also not teaching men and women about birth control, or about being holding potential
partners to higher standards (and I don't mean looks). A lot of people in the USA are too shallow
and focus too much on aesthetics over reliability and now we have single mothers with fathers
who refuse to pay child support at all costs. There are too many problems with the USA, but I
feel that personal hygiene and responsibility with sexual partners should be on the top.
I teach in inner city schools. There are so many problems, money is one of them but all the money
won't solve the problem of poor learning attitudes, disaffection, poor discipline and nonexistent
work ethic .
A lot of the students get no discipline at home and their parents don't expect them
to learn anything. They are resistant to the whole process of focus on new knowledge , absorb,
drill, recall , deploy newly learned thing.
Americans have a religious reverence for individualism
and learning new things is a humbling experience and many people don't like it. Sure the adults
bang on about education but they aren't serious about it. They think all you need is to spend
more money , not do any actual work.
The problems in the inner city are so intransigent that I doubt anything can fix it. I have three
friends, all dedicated teachers, who taught in inner city schools in New Jersey and the stories
they have told me make my mind reel: a mother who punched a teacher (and gave her a concussion)
who "disrespected" her kid (by failing him, deservedly, in algebra), 15-year-olds who had pagers
so their pimps could call them, children who had five brothers and sisters--all with different
fathers. You couldn't make this stuff up.
I don't know what solution there is to this. My nieces and nephews did well in school, studied
hard, and went on to university. They didn't do drugs, rape or be raped, and stayed away from
unsavory kids. BUT--they went home to two parents every night, a father and mother, which I think
would have made them successful at school no matter what their income.
The Pew survey you cited noted that "...the share living in middle-income households fell from
55% in 2000 to 51% in 2014. Reflecting the accumulation of changes at the metropolitan level,
the nationwide share of adults in lower-income households increased from 28% to 29% and the share
in upper-income households rose from 17% to 20% during the period." In other words, most of the
decline in the middle class was due to their moving into the upper class.
The article was mostly about a declining rural area. The Guardian grinding its usual axes and
reaching the conclusion it intended to reach?
Middle class job death inflicted by cronie capitalism entertained by the political establishment
(examples): Private equity is not scrutinized by anti-trust legislation, buys any company and
sends jobs overseas. Cronie supporters of politicians get help in that some industry gets indicted
(e.g. more or less entire coal industry) or regulated into oblivion, for fake reasons, so that
cronie (solar panel) company gets subsidies. Of course, the latter goes under, no company on IV
survives without IV. Banks get bailed out, others not. GM gets bailed out, to maintain jobs, then
outsources.
The old members of middle class are not tolerated by our government and the cronies. Who is tolerated
as middle class is any kind of civil servant, and new immigrants. Revenge from 2 sides. Or call
it cultural revolution Mao style: Take their habitat.
Growing up in the SF Bay Area during the 70's there was a large disparity in academics between
schools even in the same district. At 11 years old the school district was rezoned and the new
school that I attended had much lower standards. So much so, that I came home the very first day
and complained to my mother that I had been assigned to a class for slow learners. Being so bored,
my grades started to drop. At 13 years, I tested out of mathematics and eventually tested out
of high school altogether and joined the military.
There my intelligence was appreciated (believe
it or not). The military provided a valuable work ethic and training in technology that have provided
a decent career and lifestyle since. It's too bad that America can't seem to provide adequate learning to the vast majority.
The US economy isn't competitive anymore. It started with the labor cost being too high, so factories
moved out. Then the entire supply chain moved out. Now the main consumer market is also moving
out. Once that is gone, we will have no more leverage.
The US education is good, but students are lazy, undisciplined, and incurious. In silicon valley,
more than 75% of highly paid technical personnel are foreign born. Corporations making money with
foreign workers here and abroad, on foreign markets. Taking these away and you will see the economy
crash.
Then you have Hillary wanting to sub divide a rapidly diminishing pie, and Trump wanting to
return to 1946. Good luck to them both.
Labor costs were too high. Have some more kool-aid. The elite didn't want labor to have any bargaining power whatsoever . They wanted to dictate
the terms to labor believing that they were the only ones who should have any say in matters. The elite wanted to maximize their profits at the expense of their own citizens. They wanted slave labor . They wanted powerless people to dance to their tune. How could an advanced nation's labor possibly compete with slave labor .
This is the same argument that slave owning , southern plantation owners used to fight against
the freeing of slaves . They to said that they would not longer be competitive and the overall
economy would suffer .
Are you telling us that an economy needs slave labor to exist ?
Sadly ..... thee isn't any hope for these people in the foreseeable future .
Their economic decline has been happening for quite some time now and shows no sign of abating
whatsoever . The economic foundations of their lives have been steadily pulled out from under them by the
financial elite and their subservient political cultures , the Republican and Democratic Parties
. The Republicans have never really given a damn about them and the Democrats have long abandoned
them . These poor people of North Carolina are adrift on a sinking raft on easy ocean of indifference
by the political cultures of America . To those in power , they don't exist . They don't count . They don't matter .
The trend in the U.S, along with almost every other major nation in the world over the past
35 years has been to exclusively serve the interests of the financial elite and only their needs
. All sense of fairness , justice and decency have been totally discarded .
Tax breaks after tax breaks , tax shelters , free movement of capital , etc., etc. would sum
up the experience of the financial elite over the past 35 years . They have become incredibly wealthy now and are still not satisfied . They want more . They
want it all . They want what little you have and their political servants which help them get
.
Political discourse pertaining to the plight of those like these folks in North Carolina is
all window dressing . In the end , you can be certain that it will amount to nothing . Just like
it has for decades now . The financial elite are in control and they are not going to give any of that control up .
As a matter of fact , they are going to tighten their grip . They will invent crisis to have their
agendas imposed upon an increasingly powerless and bewildered public . They will take advantage
of every naturally occurring crisis to advance their agenda .
There will be an end to their abuse , greed and domination until one day when everything changes
. The day when people have had enough . When people can't take it any more . History has demonstrated
this fact so often before . The mighty do fall . They always fall ..... but their fall is nowhere
to be seen at this time .
There is going to a great deal more pain for average folk before things get better .
A Presidential election featuring Donald Trump and Hillary Clinton is clear evidence of this
fact.
Hopefully , these two bottom feeding , utter human failures represent the bottom of the barrel
but I doubt if they do .
Good luck to the good folks of North Carolina and countless others like them .... they / we
/ myself are going to need it .
On the contrary .... it's money that the elite have not paid out in wages .
It's money that the elite have illegally hidden from the taxman . It's money the the elite need to pay for the infrastructure that makes it possible to do business
in the first place . It's money that has been made from insider trading and backroom deals . It's money from the wealth that labour has basically created in the first place .
It's money that contributes to the social maintenance on a safe , civil society . It's money that the wealthy do not need .... they have all they could ever need now .
It is money that when distributed fairly keeps money in motion creating it's transfer into
additional hands which further circulates that money creating even more spending by people and
the consumption of goods and services which result in the creation of even more wealth .
Static capital kills economies .
I know that the elite like to think that they are the exclusive ones to create wealth but wealth
creation is the marriage between capital and labour . You can have all of the capital in the world
but without labour transforming it into greater wealth it can not possibly grow .
If anyone is guilty of stealing money it is the elite who steal from the economy causing the
economy's ill health .
The last 35 years are more than testimony to this fact .
Economies are dying wherever the elite have gotten their way .
The elite are the real killers of wealth and economies . Just look at any economy in the world
throughout history where the elite had all of the wealth to themselves . Their economies are highly
dysfunctional and their societies are full of social problems and crime .
This is an indisputable fact .
Greed kills wealth development .
Wealth development is directly tied to the well being of labour which allows for mass consumption
of goods and services .
You would have to be a complete idiot not to see this fact .
So my good doctor .... the money in any given economy really belongs to everyone , not just
the greedy elite .
You need to get a real perspective instead of constantly eyeing you own pile of wealth .
so the woman chose to have 3 daughters, is now choosing to foot the bill for their college education,
and wants me to feel sorry because she has to work her ass off to do all these things? how about
this.... don't have children you can't afford. a little personal responsibility in one's life
goes a long, long way.
We need to redefine middle class. I grew up middle class. We had one TV. Not a lot of clothes.
Took short, cheap vacations. Had no credit cards. Our lives were perfectly enjoyable. Many people
here in the US live way beyond their means.
We piled into the station wagon and headed out on short trips in the region. We visited historic
sites and were enriched by the experience. None of this $1000s on the trip to Disneyland. We didn't
feel deprived or entitled.
The key is not money but optimism. America is still richer, cleaner, and better run than most
other places. But the gap is rapidly closing. Scaling back the spending would not help here. It
would only further reduce the drive.
As a North Carolinian, there are two major issues. One, the right to bear arms and also, teacher
tenure and working conditions. Republicans have already taken away tenure from my younger colleagues,
but as an older teacher, I still have mine. Secondly, democrats want to take away gun rights on
the federal level, but state dems are usually more pro-gun in the conservative state.
SO for me, I will vote for a democratic state government and a republican federal government.
I will be proudly putting a Roy Cooper bumper sticker on my car. But due to the peaceful liberals,
I would be afraid to put a TRUMP sticker on my car because of recent violence against Trump supporters.
The problem is the job exporting American elite class. NAFTA was an economics, political, and
social experiment with all the downside on the former, mostly lower middle class. Non-aligned
examination of the available data shows how disastrous NAFTA has been to America's bubbas. Thanks
to Bush 41 and Bill Clinton. WTO was all Bill. Of the mistakes Obama has made TPP would be the
worst. The question is, really, do we favor global fairness (an even playing field for all earth's
peoples) and a climate-killing consumerist world, or our own disadvantaged (courtesy of our financial
and political elite) citizens. Not an easy choice. Death by poison or hanging. No treaty can benegotiated
fairly in secret.
The tragic irony is that the anger against rule by the 1% manifests in things like support for
Trump, a typical example of the greed and excess of the 1%.
Americans need to question outside their desperately constrained paradigms more. It will help
focus their anger more strategically, and possibly lead to solutions. Don't hold your breath, the inequality gap is accelerating the wrong way.
Fake, fake fake.
A woman with $40k and three children would *not* be paying 1/3 of her income in tax.
This woman does *not* live on $40k net or gross - she has three other jobs.
And her name looks *very* made up.
The elite of the USA have done exactly what the Romans did and what the Pre-Revolutionary French
did.... drain the lower classes while enriching themselves. "Taxes are for little people" is not
just a pithy quote, it has become the reality as the elite rig the system so they benefit and
the lower classes pay. They need to wake up or they will get exactly what the Romans Got (collapsed
empire) or the French got (Violent Revolution). Wake up America! It is time to choose your side
in the class war the elite continue to execute while telling us there is no "Class War" - you
can't pull yourself up by your boot straps while they are pulling the rug out from under you!
My wife used to employ recent graduates from Georgetown University with poli. sci., psychology,
sociology degrees, to stack books for $10/hr. It took them on average 2-3 years, before finding
work in their field. I keep telling my kids you need to earn a degree that has a skill for life
and will always be in demand, i.e. doctor, dentist, vet, engineer, scientist. Additionally, include
work oversees in your career.
Education is NOT about finding a job! It's about learning ways to seek wisdom and rationality,
and to assimilate (not deny) new knowledge throughout your life--and that's exactly what's lacking
in the US! Our schools are factories to turn out standard robots to be used by the owners of this
country, whether they practice law or flip burgers.
I was lucky that my parents were born and
raised before that happened. They went to what used to be called "country schools"--my dad to
a 1-room schoolhouse. Some of the so-called "knowledge" was patriotic trash, serving only the
rich elites, but they learned to be sturdy and to think for themselves, so I was lucky and learned
a lot at home. Without parents who practice the empathetic, rational morality needed in a democracy,
all the jobs in the world--especially if most are for flipping burgers--won't save this dreary
country.
You make an excellent point. Thinking about your life rather than just going for a crip major
in college would be an excellent way NOT to wind up stacking books for $10 an hour with a degree.
I can't count the number of my kids friends who select communications majors, or sociology or
women's studies and then are completely surprised when there are no jobs demanding their educational
background. What is it that they think they will be qualified to do after college?
From the article....
"Some lucky families saw themselves promoted to the upper income bracket." Here in a nutshell we see the author's underlying worldview. Getting to the upper income bracket has nothing to do with effort. Rather it's the result of
luck. It's something that is done to you by an outside force.
"... During the 15 months that I worked at Pitt, I felt the brunt of this lady's abuse. She'd call me into the office, launch into a blistering tirade, and I would sit there, stunned. And, to her, that was another cause for anger. Why was I just sitting there and not reacting? ..."
"... The authors fail to get to the real fundamentals of this phenomenon. The two ends of the spectrum that they delineate can be housed under a single umbrella, that of neoliberalism. And it is obvious that neoliberalism can kill. And Durkheim would have agreed readily that ideas can kill, and not just via suicide. ..."
"... Give yourself a break inode_buddha. Thirty years ago, you, and myself as well, made a rational decision as to what direction to take. At the time, construction and the associated trades were honourable and respectable. A decent living could be made, and a future was in sight. Neo-Liberalism has, since then, destroyed most things that benefited anyone other than the criminal management classes. Humanity has had to stand up and fight for decency and equality throughout history. ..."
"... I have to tell you, as a small business owner myself, this "regulations are burdensome" argument is a crock. Lobbyists in DC learned decades ago that the best way to put a sympathetic face on their efforts to get waivers for big businesses is to have small business owners act as their mouthpieces. And there are enough extreme libertarians everywhere that it's not hard to find someone to screech that the regulations he is subject to are horrible irrespective of how much a burden they really are. ..."
"... "Perhaps this world is another planet's hell." – Aldous Huxley. Yes, it is definitely. Perhaps pretty soon they will start strip search employees when they come to work. ..."
"... Increasing numbers of suicides are one outcome of these environments. But as the writers point out, there are a number of other symptoms associated with these toxic workplaces, none good. They range from physical and mental health issues, to various forms of addiction, burnout, and secondary effects on employees' personal lives and those of their family members or partners. ..."
"... I agree that neoliberal ideology, globalization, and the basic structures of our debt-based economy all play a key role in enabling the intentional development of these organizational environments. ..."
"... I believe the roots of the problem lie in a broader and deeper systemic failure. ..."
"... market failure ..."
"... This article highlights suicide, but drug and alcohol abuse are just as much a result of poor employment outcomes as suicide and for the same reasons. ..."
Yves here. It's hardly a secret that employers have become more abusive towards employees because
they can get away with it. The difficulty of finding new employment, particularly for mid and senior
level jobs, combined with the fact that most workers (even comparatively well paid ones) are only
a paycheck or two away from financial desperation, means bosses have tremendous leverage over workers.
And more and more firms embrace coerciveness as a virtue. In the past, it's more often taken the
form of cultishness, which is a very effective business model, as Goldman and Bain attest, but more
recently, outright mistreatment is becoming common. For instance, Amazon has so successfully cultivated
a "culture of fear" that t
he overwhelming majority of employees cry at work .
Note the claim in the article about elevated suicide rates at Apple supplier Foxconn is contested;
some contend that statistically, its rate of suicides is no higher than for other employers. However,
many of the dorms apparently had mesh canopies to prevent suicides, so one wonders if direct comparisons
are apt.
By Sarah Waters, a Senior Lecturer in French Studies, University of Leeds and Jenny Chan,
a Departmental Lecturer in Sociology and China Studies, University of Oxford. Originally published
at The Conversation
A Paris prosecutor
recently called for the former CEO and six senior managers of telecoms provider, France Télécom,
to face criminal charges for workplace harassment. The recommendation followed a lengthy inquiry
into the suicides of a number of employees at the company between 2005 and 2009. The prosecutor accused
management of deliberately "destabilising" employees and creating a "stressful professional climate"
through a company-wide strategy of "harcèlement moral" – psychological bullying.
All deny any wrongdoing and it is now up to a judge to decide whether to follow the prosecutor's
advice or dismiss the case. If it goes ahead, it would be a landmark criminal trial, with implications
far beyond just one company.
Workplace suicides are sharply on the rise internationally, with increasing numbers of employees
choosing to take their own lives in the face of extreme pressures at work.
Recent studies in the United States, Australia, Japan, South Korea, China, India and Taiwan all
point to a steep rise in suicides in the context of a generalised deterioration in working conditions.
Rising suicides are part of the profound transformations in the workplace that have taken place
over the past 30 years. These transformations are arguably rooted in the political and economic shift
to
globalisation that has radically altered the way we work.
In the post-war Fordist era
of industry (pioneered by US car manufacturer Henry Ford), jobs generally provided stability
and a clear career trajectory for many, allowing people to define their collective identity and their
place in the world. Strong trade unions in major industrial sectors meant that employees could negotiate
their working rights and conditions.
Now, it is not enough simply to work hard. In the words of Marxist theorist Franco Berardi,
"the soul is put to work"
and workers must devote their whole selves to the needs of the company.
For the economist Guy Standing, the
precariat is the
new social class of the 21st century, characterised by the lack of job security and even basic stability.
Workers move in and out of jobs which give little meaning to their lives. This shift has had deleterious
effects on many people's experience of work, with rising cases of acute stress, anxiety, sleep disorders,
burnout, hopelessness
and, in some cases, suicide .
Holding Companies to Account
Yet, company bosses are rarely held to account for inflicting such misery on their employees.
The suicides at France Télécom preceded another well-publicised case in a large multinational company
– Foxconn Technology Group in China – where 18 young migrant workers aged between 17 and 25 attempted
suicide at one of Foxconn's main factories in 2010 (14 of whom
died ).
The victims all worked on the assembly line making electronic gadgets for some of the world's
richest corporations, including Samsung, Sony and Dell. But it was Apple that received the most criticism,
as Foxconn was its main supplier at the time.
One of our son's best friends from high school was a funny, bright kid that got a BS/MS in
Computer Science from Rochester Institute of Technology (RIT) a few years ago. He did his first
coop at a software firm in Boston that dealt with electricity demand management.
Then he went to work for Apple, first as a coop then as an employee.
By the time his name was announced to the media, everything about him on Facebook, LinkedIn,
etc had disappeared. They scrubbed him off the internet. We don't know if he posted anything before
his death, but our son said his pages were pretty generic for a 25 year old.
Let it suffice to say something went terribly wrong in the libertarian paradise of Silicon
Valley, really just a ritzier version of FoxConn. Having known him through high school and occasional
visits thereafter, one never would have thought such an end would have been possible.
It's happening on the job, at school, and damn near any other social institution where the
stakes can be ratcheted up in intensity. Suicide is one end of the spectrum of dysfunction.
Going postal is another. Our elites don't like wet work much, so they find other ways to get
rid of the undesirables. I doubt they planned it this way, but isn't it sweet that all you have
to do is stop being fake-nice as a boss and the problem takes care of itself?
It's not only corporations, of course, that have problems with endemic abuse and need to be
taking responsibility, nor is the issue restricted to institutions where profits take precedence
über alles. Here is the link for the site "Academia Is Killing My Friends," which is described
in the "About" section like this:
I am a final year PhD student in the Social Sciences. Last year a fellow PhD student committed
suicide after being harassed by a lecturer. I got angry and made this site. This site is a
response to the cultures of violence, fear and silence I have witnessed and experienced in
my academic community. Sexual harassment, mental illness and unpaid labor are the accepted
and expected norms. Abusive academics are well known and yet remain in the community. We are
powerless and afraid of backlash, unemployment and failure. All of this gets worse as public
spending is cut and universities become increasingly neoliberal institutions. This site is
a 'fuck you' to the silence and fear. It is, I hope, a space where we can share our stories
of abuse, exploitation and suffering in academia.
There are now 104 stories and counting. An excerpt from a recent post (#103):
I started out an idealistic and hopeful student. Worked to pay for college, good grades,
got into a good PhD program. Worked hard, had a good mentor, published, moved on to postdoc.
I thought that I could keep working hard, publish and move into some reasonable career trajectory.
Right?
Well, we all know why we're here. I can't even go into the details. It's a familiar story
– sexism, racism. Abuse by an advisor, with nowhere to turn. Rampant discrimination and harassment.
When I looked for help (from the wrong people, apparently), I was told to suck it up, work
harder. Constant financial worries. Every little setback used up my savings. I got sick and
never really recovered… stress and overwork guaranteed that. I was good at living modestly,
but that wasn't enough to sustain me. Now, I'm just trying to pick up the pieces. I feel floored
by the lack of opportunities and support through most of my career. I had no idea how much
a career in academia would rely on having money to begin with. I feel like this work has stolen
my life away. And I'm not the only one – I know plenty of people who have had a similar experience.
The best people leave early.
Worst of all, I don't even feel that I can tell my story. Nobody wants to hear it. Nobody
would lift a finger to protect me from retribution. Nobody wants to address problems like this.
I feel so much grief for the good I might have done in another profession, the life I could
have lived. I don't know what to do with this grief.
Some of the worst abuse I ever experienced was in academia. Here's an example:
During the mid-1980s, I was on the staff of a journal at the University of Pittsburgh. My boss,
the departmental librarian, must have come from the Attila the Hun School of Management, because
that's how she treated people. Shortly after I started my job, I got on her bad side. I
have no idea why this happened. Thirty years late, I still can't figure it out.
It may have had something to do with the introductory meeting we were supposed to have with
the journal's publisher.
Well, being the good little employee that I thought I was, I had my office clock set to the
correct time. I didn't know it at the time, but the library clock was 10 minutes fast. Yep, the
same trick that bars pull on their customers. Getting them out the door before the official closing
time.
So, I got to the library a few minutes before 9 a.m. Plenty of time to for the boss and me
to walk over to the publisher's office. Bossola was SEETHING. I was LATE! Just look at that CLOCK!
It was already after nine!
Over to the publisher's office we walked, and guess what. They weren't even ready for us. So
we sat in the waiting area for a while.
The publisher and his staff couldn't have been nicer. The polar opposite of my boss.
During the 15 months that I worked at Pitt, I felt the brunt of this lady's abuse. She'd
call me into the office, launch into a blistering tirade, and I would sit there, stunned. And,
to her, that was another cause for anger. Why was I just sitting there and not reacting?
During her final tirade, when she told me to start looking for another job, I'd had enough.
I told her that I was going to start looking for another city.
Well, guess who sat there, stunned.
She insisted that I didn't have to do anything THAT drastic. But my mind was made up. I was
done with her, done with Pitt, and done with Pittsburgh.
Three and a half months and several wonderful bicycling miles later, I landed in Tucson, and
I'm still here. Without that nasty boss, I probably wouldn't be in this wonderful city.
As for Ms. Nasty, she left Pitt and went on to become the head librarian at Chatham College,
which was nearby. Small women's college. Known for its caring, friendly, and supportive environment.
Ms. Nasty didn't last very long there.
And she didn't last very long at St. Michael's College in northern Vermont. I think that she
was fired from that institution, but I'm not sure. Let's just say that I hope she was, because
she deserved a taste of her own medicine.
Here is a story that scared shit of Academia's organized crime ring for a little while in the
early 90s.
"The University of Iowa shooting took place at the University of Iowa in Iowa City, Iowa on
November 1, 1991. The gunman was Gang Lu, a 28-year-old former graduate student at the university.
He killed four members of the university faculty and one student, and seriously wounded another
student, before taking his own life."
Damn. Thing is I've heard this from Actuarials and docs. It's everywhere the "well, just work
harder". But some of it is on the employees. None have the frame of mind to kick back, to unionize,
and hard (when was unionizing ever easy?). None. All have the neoliberal view that: work hard
and you'll be fine. And so when that button is pushed, they go for broke until burned out. It's
that or be labeled lazy. Well, being unemployed is also an issue, but there's also the matter
of having the language to fight back, to not feel guilty for working less than 100 hours a week
etc.
I think an important point about Unions which people forget is that they provide an opportunity
for people to vent and let off frustration. I've been a Union rep at various places and many times
I would have people come in to have a rant about a certain manager or policy. At the end I would
say 'do you want to make a formal complaint?' and the answer would be no – the person just wanted
to get it off their chest in a confidential manner.
And to know that if they needed it, there was back up. Non-union places I've worked in, even
good ones, lack that safety valve.
I'm in the process of paying a personal price for this BS as I type this, having walked off
the job a few months ago. I'm not gonna drive 30 miles each way for 1/2 of what I should be making
only to be treated like shit by management brown-nosers. Bad news is, I'm mid-career and not a
spring chicken. Considering leaving the field altogether or doing my own startup. But if I had
known then what I know now, I would have had the voice recorder app on my phone, recording everything….
The authors fail to get to the real fundamentals of this phenomenon. The two ends of the
spectrum that they delineate can be housed under a single umbrella, that of neoliberalism. And
it is obvious that neoliberalism can kill. And Durkheim would have agreed readily that ideas can
kill, and not just via suicide.
Ugh. After twenty years in commercial construction, I thought our industry was an outlier for
abuse, psychotic management, and general HR mayhem. Apparently not. Arizona Slim, I could have
profiled Mrs. Nasty at any number of firms I worked for…she's not unusual.
I stay at smaller companies with good people for less money because I just can't handle the
high pressure and abusive environment of Big Time Construction Firms. I also have zero interest
in big projects anymore – too many psycho Owners who appear to delight in torturing the contractor
as a hobby. The men I work with think I'm nuts to turn down some work. I tell them, there's no
reward for it. No pot of gold at the end of the rainbow, no big promotion – just health problems
and more commuting for the same old, same old.
You too? Abuse, and psycho management is why I'm considering leaving the trade altogether,
too bad I've invested 30 years and a few schools into it…. but of course, nobody *made* me invest
in myself and believe in the american dream /sarc
Give yourself a break inode_buddha. Thirty years ago, you, and myself as well, made a rational
decision as to what direction to take. At the time, construction and the associated trades were
honourable and respectable. A decent living could be made, and a future was in sight. Neo-Liberalism
has, since then, destroyed most things that benefited anyone other than the criminal management
classes. Humanity has had to stand up and fight for decency and equality throughout history.
The decent living in the construction trades, for me anyways, has started and (so far) ended
as a contract employee. I'm at the cusp of 50 and am looking at disaster if I can't find something
permanent. My spouse has her dream job (that unfortunately comes with mediocre pay) so moving
the fam for a job is our of the question. I'm one dropped contract away from my professional expiration
date – too old for entry level, not experienced enough for management, unable to move to a better
job market if such a thing existed.
But at least I paid off my student loans, so that's not hanging over my head like the sword
of Damocles.
Living on the road, out of town, at the jobsite, etc. etc. There's a reason why so many of
the Superintendents and Foremen I've encountered on big jobs drink to excess.
I've had my share of Mz/Mr Nasty bosses. The worst thing one can do to one of these persons,
as I learned one afternoon, is to laugh at them when they "put you in your place." The program
is going south anyway. If the wherewithall is available for a drive home, go ahead and let 'them'
know you're not going to put up with abuse anymore. (Easier said than done, I'll agree, but, as
long as you and yours aren't starving, why not? You'll sleep better at night. Take my word for
it.)
Smaller outfits are, from my experience, easier to get along with because the manager is often
the owner or family and not divorced from the ground floor experience. Reason is used instead
of formula.
I used to hold the same belief about construction being the bilge of the work world. Then I
worked for the USPS for almost three years. Then the dreaded Lowes Home Improvement set its avernal
brand sizzling on my soul.
Ah my, what a picaresque novel all this would make.
Picaresque novel or hilarious TV show. I've written the scripts in my head a thousand times….clueless
architects, raging Owners, ridiculous Inspectors, overfed upper management/sales staff, etc. etc.
I agree that laughter is truly the best medicine in this business. As a friend once told me,
"Sometimes you gotta let the crazy people be crazy."
Some titles: "Faking, Inc.," "Department of Imaginary Tools," "Bargain Employee of the Month,"
and the annual winner, "Going Out of Business Sale: Season Three."
Since I'll need to go back to work for a few years, until my miniscule SS kicks in, I might do
a Home Depot Equal Opportunity for Exploitation Edition.
(When I grow up I want to be a Day Trader! Maybe I'll take a flutter in pork bellies on the
Chicago Exchange.)
In her own strange way, Ms. Nasty had quite a positive effect on my life. As our relationship
deteriorated, I started piling up the savings. I was planning my escape, even before that final
tirade.
My last six weeks at Pitt were amazing. After I tended my resignation (on Friday, February
13, 1987), the whole department was impressed with how relaxed and happy I was. It was as if a
different Slim had moved into my body.
Yes, there was that farewell luncheon where Ms. Nasty refused to raise her glass in a toast,
but you know what? I was going to be out the door in a few hours, so I no longer cared. In fact,
I found her refusal rather amusing.
What came next was even better. That pile of savings was deployed for something I really enjoyed.
Long-distance bike touring! Rode thousands of miles in a little over three months! And then I
settled here in Tucson!
Where I found a job similar to my Pitt job, but with a nice boss. That was my last FT job.
I've been a freelancer since 1994.
So, Ms. Nasty, thanks for the motivation. And I do hope that you learned how to be nice to
people who are, ahem, beneath you.
That's what Labor (or socialist) political parties used to do, and Corbyn's trying to re-institute
in the UK.
One cannot be pro-trade (as currently defined) and pro democratic not pro citizen, not pro-labor.
The US has never permitted socialism, and prefers crony capitalism, which is actually close
to fascism.
The whole defense Military Industry Complex of Government and Industry is a definition of fascism
in the US. I place no regard on Ike's warning about the MIC as he did noting until the end of
his reign, and then made a speech.
At long last I've finally managed to get out of a job I couldn't stand after working there
for nearly a decade. The pay was ridiculously low, even relative to the industry standard. Management
routinely promoted narcissistic, ignorant cronies who never told them the word "no." I couldn't
be happier it's finally over. They've had so much turnover in the past couple of years entire
departments are composed of entirely new people. The CEO cares about nothing except looking good
to the shareholders and owners, and that's pretty much the attitude from the top on down. Look
good to the people with power and to hell with the rest.
I'd be surprised if the company still existed 5-10 years from now.
Soooo glad I'm retired. I was starting to see more and more of this over the last couple of
decades, and it escalated as times worsened. I wish libertarians and free-marketers would contemplate
the situations described here, and consider what kind of a world it would be if financial oligarchs
held even more power. What hope would there be to counter this sort of abuse?
I wouldn't exactly call myself a libertarian (I'm not sure what I am), but I think that the
libertarian response would be that if there were fewer pointless regulations people would be much
more readily able to work for themselves, and not for an abusive boss. It is unbelievably hard
to start a business now, even a solo one, due to regs. And I'm not talking about reasonable regs
(don't dump toxins in waterways). I'm talking about regs that have been invented by big existing
businesses to keep upstarts from starting.
A number of years ago there was an article about someone who tried to start a storage company
in the CT/RI area and how they eventually gave up because the regs made the process insane; there's
not much that's simpler than a storage company. Most small business owners I know tell me they
could not start now because it has all gotten too complicated; they have been able to cobble together
responses to the new regs as they go, but starting at this point would be impossible for them.
Picture what it would be like if you could look at your skill set, and go out and work for
yourself without a huge amount of extremely complex taxes and paperwork. A strange thought, isn't
it?
I'm not saying this would be an option for most people ( not at all
), but it does not now even exist as an escape valve. Now you have to have millions in
start-up funds to start some BS company (e.g. one more stupid company that delivers food to patron's
homes) that isn't actually meant to make money (it just exists to get money from investors), and
you need that much to deal with the paperwork.
And, if someone wants to pop up and say "the paperwork is not so bad and complicated," please
remember that you are a NC poster and are in the top ten percent of the population for ability
to deal with paperwork.
I have to tell you, as a small business owner myself, this "regulations are burdensome"
argument is a crock. Lobbyists in DC learned decades ago that the best way to put a sympathetic
face on their efforts to get waivers for big businesses is to have small business owners act as
their mouthpieces. And there are enough extreme libertarians everywhere that it's not hard to
find someone to screech that the regulations he is subject to are horrible irrespective of how
much a burden they really are.
Specifically, regarding a storage business, I can't fathom your view that storage companies
should not be regulated. If I am putting my valuable stuff in the hands of someone else, I sure
as hell want protection that they won't cut all the locks and run off with everything, or find
more legitimate ways of stealing, like create excuses to jack up my storage costs by 10X and hold
my goods hostage. And what about requiring them to have adequate fire protection and security?
Even if they aren't crooks, cheap and reckless will also result in my property being stolen or
damaged.
In general, entrepreneurship is way oversold in America to legitimate the bad treatment of
workers: "If things are as bad as you say, why put up with it? Go start your own business!" That's
ridiculous since staring your own business requires that you be both a good salesman and a good
general manager, and good salesmen are almost without exception terrible managers, as anyone in
Corporate America will tell you. And it's extremely hard to make partnerships work unless the
principals worked together in the same company for years (ie, they grew up with the same training
and rules, and so will default to the same assumptions as to how things are done). Even in consulting,
I've seldom seen people who come of of different large firms work well together absent a strong
organization around them.
The proof that pretty much no one should go into business for themselves is 9 out of every
10 businesses fail within three years. The percentabe is no doubt higher if you extend the time
frame to five years. I've started two successful businesses in the US and one that didn't work
out in Oz, but an overseas launch is much harder and it seemed too dodgy to go beyond the two
years I'd invested (as in I might have made it a go had I kept on, but I decided it was more prudent
to cut my losses).
And I don't know where you get your information about new business from. It's pretty clear
you aren't in that world. You don't need millions in funds. The overwhelming majority of new ventures
are funded from savings, credit cards, and loans from friends and family.
And if you aren't able to handle regulatory filings (or find a lawyer or accountant who can
help) you aren't competent to be in business for yourself. Running a business means you run into
obstacles all the time and need to find ways around them. Do you not think that private firms
also require paperwork, like vendor approval processes and documenting your invoices? If you can't
handle paperwork, you need to stay on a payroll.
While I agree with Yves that there is too much libertarian bitching about regulations, there
are a lot of really stupid laws on the books that we could easily do without. As an example, I
was recently looking at an RFP from a public agency in the state of MI. One of the requirements
for bidders responding was to provide a notarized affidavit that the company was not controlled
by the Republic of Iran! Apparently this is Michigan Public Act 517 of 2012. BTW, the winning
bidder, a large US corporation, certified they are not secretly controlled by the evil Ayatollahs.
yes but most people won't be able to work until they are dead, because they aren't able to
or because noone is going to hire them (it's why people collect social security at 62, it's not
because this is the smartest financial plan, it's clearly not) and I hope most don't take the
"therefore middle aged or senior aged suicide" route.
If you are able to work until you die a natural death good for you I guess (even better to
be able to choose to retire of course), but it's not going to be an option for many people even
if they want it to be, health or the job market WILL force them out.
"Perhaps this world is another planet's hell." – Aldous Huxley. Yes, it is definitely.
Perhaps pretty soon they will start strip search employees when they come to work.
Excellent and timely article. As the writers observe, the problem is global in nature. If you
work in or have worked in corporate America, you likely have personally experienced or seen the
results of the deliberate creation of a stressful professional climate and workplace environment,
abusive psychological bullying, and intentional destabilization of employees.
Increasing numbers of suicides are one outcome of these environments. But as the writers
point out, there are a number of other symptoms associated with these toxic workplaces, none good.
They range from physical and mental health issues, to various forms of addiction, burnout, and
secondary effects on employees' personal lives and those of their family members or partners.
Although it seems that individuals with psychopathic characteristics often rise in management
in many of these organizations, I believe the roots of the problem lie in a broader and deeper
systemic failure. I agree that neoliberal ideology, globalization, and the basic structures
of our debt-based economy all play a key role in enabling the intentional development of these
organizational environments.
It may be a global problem, but it seems particularly acute in the US.
Ian Welsh's observations
ring true to me:
One of the most striking things about much of American culture is the simple meanness of
it. The cruelty… There is also a culture of punching down… America has a high-violence, high-bullying
society… [Y]ou can have a high-violence society in which it is considered unacceptable to attack
the weak (doing so is viewed as cowardice), but that's not the case in America. In American
culture, the weak are the preferred target. Failure is punishable by homelessness, suffering,
and death… You'd better get down on your knees and do whatever your boss wants, because if
you're fired or let go you may never work again, and if you do hang on at a bottom-wage job,
well, your life will suck… Having learned that the right way to treat anyone who is weaker
than them is with demands for acquiescence and dominance displays, to many Americans, to interpret
any sign of weakness as requiring them, as a moral duty, to dominate and hurt the weak person.
People become what is required of them. They learn from authority figures how to behave… The
entire process makes America a far more unpleasant place to live or visit than is necessary.
The structure of dominance, meanness and cruelty is palpable to the visitor, and distressing;
even as it warps the best inhabitant.
I believe the roots of the problem lie in a broader and deeper systemic failure.
Yes, a systemic failure, but to be more precise, it is ultimately a particular kind of
market failure that gives employers an incentive to abuse their employees.
The best way to understand what I mean is to imagine a labor market where there are always
more jobs available than there are people to fill them. In an economy that is experiencing a chronic
labor shortage, employers would have a market incentive to actually start treating their employees
with respect.
In markets where labor surpluses are carefully maintained (virtually every market you've ever
known), business owners/managers feel free to express anger at any employee shehe feels a 'power
advantage' over. They sense they have this advantage when/if they believe the employee fears losing
hiser job more than the employer fears losing the employee.
It really would force a profound change in employer-employee relations, generally. Employers
would be compelled by the marketplace to not only find ways to motivate their employees to work
hard, but also to find ways to make them feel content , psychologically.
In an economy that is experiencing a sustained labor shortage, the crudest and least sympathetic
methods of motivating employees would be gradually phased out.
'Bottom feeders' in the competition for scarce labor would have a constant incentive to try
to retain employees, and to 'go the extra mile' to work with people who are having problems. Individuals
who are having personal problems would not be simply cast aside, as they are now.
The national government could do something to help those businesses that are struggling within
very [price-] competitive markets, providing counseling services, etc., to help those employees
who are struggling with various problems outside of the job environment.
In our current labor surplus economy, lawsuits may give some employers an incentive
to treat their people with respect, but it won't get anywhere close to providing THE solution
to the problem that we would experience if we were to create and indefinitely maintain a labor
shortage in the economy.
And to think that Pink Floyd recorded the verse; "Hanging on in quiet desperation is the English
way." Back in 1968.
Quiet desperation is a characteristic of a declining society.
As far as I can tell quiet desperation is the life of most people. This article highlights suicide, but drug and alcohol abuse are just as much a result of poor
employment outcomes as suicide and for the same reasons.
When people stop being quietly desperate is when change happens.
I refer to CCR's Effigy although as
a Gen-X -er I Prefer the Uncle Tupelo
version
Guys. You're also forgetting that if the U.S. took in the Nazi Scientists and Death Specialists
and used them and their techniques to crush real democratic, fair, egalitarian societies in Latin
America (Chomsky) and then learned to transmute overt war (+nazi techniques) and colonialism into
Finance (Hudson)–then we are currently dealing with something 'worse than Nazi Germany' (my 90
year old neighbor).
Amazon review of Thomas Frank's The Wrecking Crew... the word "conservative" was replaced by "neoliberal" as it more correctly
reflect the concept behind this social process.
Notable quotes:
"... Neoliberal ideology is championed on behalf of corporate elites who have now secured total control, even ownership, of the federal government. ..."
"... Elites need federal government revenue transferred to their realm via fat government contracts and juicy subsidies. They want government without regulation, and they want taxation imposed on the masses without real representation, but not on them. ..."
"... Neoliberals drew up a long term strategy to sabotage and disrupt the liberal apparatus. There ensued a vast selling-off of government assets (and favors) to those willing to fund the neoliberal movement. The strategy was concocted as a long term plan - the master blueprint for a wholesale transfer of government responsibilities to private-sector contractors unaccountable to Congress or anyone else. An entire industry sprung up to support conservatism - the great god market (corporate globalism) replaced anti-communism as the new inspiration. (page 93) ..."
"... But capitalism is not loyal to people or anything once having lost its usefulness, not even the nation state or the flag ..."
"... According to Frank, what makes a place a free-market paradise is not the absence of governments; it is the capture of government by business interests. ..."
"... Neoliberals don't want efficient government, they want less competition and more profits - especially for defense contractors. Under Reagan, civil servants were out, loyalists were in. ..."
"... Contractors are now a fourth branch of government with more people working under contracts than are directly employed by government - making it difficult to determine where government stops and the contractors start in a system of privatized government where private contractors are shielded from oversight or accountability ..."
"... The first general rule of neoliberal administration: cronies in, experts out. ..."
"... Under Reagan, a philosophy of government blossomed that regarded business as its only constituent. ..."
"... Watergate poisoned attitudes toward government - helping sweep in Ronald Reagan with his anti-government cynicism. Lobbying and influence peddling proliferated in a privatized government. Lobbying is how money casts its vote. It is the signature activity of neoliberal governance - the mechanism that translates market forces into political action. ..."
"... Neoliberalism speaks of not compromise but of removing adversaries from the field altogether. ..."
"... One should never forget that it was Roosevelt's New Deal that saved capitalism from itself. Also, one should not forget that capitalism came out of the classical liberal tradition. Capitalists had to wrest power away from the landowning nobility, the arch neoliberal tradition of its time. ..."
Thomas Frank's The Wrecking Crew is another classic. This work, along with his more notable What's
The Matter With Kansas?, is another ground breaking examination into a major phenomenon of American
politics by one of America's foremost social analysts and critics. While What's The Matter With
Kansas? looked more at cultural behavior in explaining why Red State Americans have embraced corporate
elitist ideology and ballot casting that militates against their own economic self-interest, even
their very survival, this title deals more with structural changes in the government, economy,
and society that have come about as a result of a Republican right wing agenda. It is a perplexing
and sorry phenomenon that deserves the attention of a first rate pundit like Frank.
Neoliberal ideology is championed on behalf of corporate elites who have now secured total
control, even ownership, of the federal government. The Wrecking Crew is about a Republican
agenda to totally eliminate the last vestiges of the New Deal and Great Society, which have provided
social safety nets for ordinary working class Americans through programs such as Social Security
and Medicare. Corporate elites want to demolish only that part of government that doesn't benefit
the corporation. Thus, a huge military budget and intrusive national security and police apparatus
is revered, while education, health, welfare, infrastructure, etc. are of less utility for the
corporate state. High taxes on the corporations and wealthy are abhorred, while the middle class
is expected to shoulder a huge tax burden. Although Republicans rail against federal deficits,
when in office they balloon the federal deficits in a plan for government-by-sabotage. (Page 261)
Elites need federal government revenue transferred to their realm via fat government contracts
and juicy subsidies. They want government without regulation, and they want taxation imposed on
the masses without real representation, but not on them. The big government they rail at
is the same government they own and benefit from. They certainly do not want the national security
state (the largest part of government) or the national police system to go away, not even the
IRS. How can they fight wars without a revenue collection system? The wellspring of conservatism
in America today -- preserving connections between the present and past -- is a destroyer of tradition,
not a preserver. (Page 267)
Neoliberals drew up a long term strategy to sabotage and disrupt the liberal apparatus.
There ensued a vast selling-off of government assets (and favors) to those willing to fund the
neoliberal movement. The strategy was concocted as a long term plan - the master blueprint for
a wholesale transfer of government responsibilities to private-sector contractors unaccountable
to Congress or anyone else. An entire industry sprung up to support conservatism - the great god
market (corporate globalism) replaced anti-communism as the new inspiration. (page 93)
Market populism arose as business was supposed to empower the noble common people. But
capitalism is not loyal to people or anything once having lost its usefulness, not even the nation
state or the flag. (page 100) While the New Deal replaced rule by wealthy with its brain
trust, conservatism, at war with intellectuals, fills the bureaucracy with cronies, hacks, partisans,
and creationists. The democracy, or what existed of it, was to be gradually made over into a plutocracy
- rule by the wealthy. (Page 252) Starting with Reagan and Thatcher, the program was to hack open
the liberal state in order to reward business with the loot. (Page 258) The ultimate neoliberal
goal is to marketize the nation's politics so that financial markets can be elevated over vague
liberalisms like the common good and the public interest. (Page 260)
According to Frank, what makes a place a free-market paradise is not the absence of governments;
it is the capture of government by business interests. The game of corporatism is to see
how much public resources the private interest can seize for itself before public government can
stop them. A proper slogan for this mentality would be: more business in government, less government
in business. And, there are market based solutions to every problem. Government should be market
based. George W. Bush grabbed more power for the executive branch than anyone since Nixon. The
ultra-rights' fortunes depend on public cynicism toward government. With the U.S. having been
set up as a merchant state, the idea of small government is now a canard - mass privatization
and outsourcing is preferred. Building cynicism toward government is the objective. Neoliberals
don't want efficient government, they want less competition and more profits - especially for
defense contractors. Under Reagan, civil servants were out, loyalists were in.
While the Clinton team spoke of entrepreneurial government - of reinventing government - the
wrecking crew under Republicans has made the state the tool of money as a market-based system
replaced civil service by a government-by-contractor (outsourcing). Page 137 This has been an
enduring trend, many of the great robber barons got their start as crooked contractors during
the Civil War. Contractors are now a fourth branch of government with more people working under
contracts than are directly employed by government - making it difficult to determine where government
stops and the contractors start in a system of privatized government where private contractors
are shielded from oversight or accountability. (Page 138)
The first general rule of neoliberal
administration: cronies in, experts out. The Bush team did away with EPA's office of enforcement
- turning enforcement power over to the states. (Page 159) In an effort to demolish the regulatory
state, Reagan, immediately after taking office, suspended hundreds of regulations that federal
agencies had developed during the Carter Administration. Under Reagan, a philosophy of government
blossomed that regarded business as its only constituent. In recent years, neoliberals have
deliberately piled up debt to force government into crisis.
Watergate poisoned attitudes toward government - helping sweep in Ronald Reagan with his
anti-government cynicism. Lobbying and influence peddling proliferated in a privatized government.
Lobbying is how money casts its vote. It is the signature activity of neoliberal governance -
the mechanism that translates market forces into political action. (Page 175)
It is the goal of the neoliberal agenda to smash the liberal state. Deficits are one means
to accomplish that end.- to persuade voters to part with programs like Social Security and Medicare
so these funds can be transferred to corporate contractors or used to finance wars or deficit
reduction.. Uncle Sam can raise money by selling off public assets.
Since liberalism depends on fair play by its sworn enemies, it is vulnerable to sabotage by
those not playing by liberalism's rules/ (Page 265) The Liberal State, a vast machinery built
for our protection has been reengineered into a device for our exploitation. (Page 8) Liberalism
arose out of a long-ago compromise between left-wing social movements and business interests.
(Page 266) Neoliberalism speaks of not compromise but of removing adversaries from the field altogether.
(Page 266) No one dreams of eliminating the branches of state that protect Neoliberalism's constituents
such as the military, police, or legal privileges granted to corporations, neoliberals openly
scheme to do away with liberal bits of big government. (Page 266)
Liberalism is a philosophy of
compromise, without a force on the Left to neutralize the magneticism exerted by money, liberalism
will be drawn to the right. (Page 274)
Through corporate media and right wing talk show, liberalism has become a dirty word. However,
liberalism may not be dead yet. It will have to be resurrected from the trash bin of history when
the next capitalist crisis hits. One should never forget that it was Roosevelt's New Deal
that saved capitalism from itself. Also, one should not forget that capitalism came out of the
classical liberal tradition. Capitalists had to wrest power away from the landowning nobility,
the arch neoliberal tradition of its time.
"... This extreme form of market capitalism, also called neo-liberalism in economics and neo-conservatism in foreign policy, has worked its way into the mindset of the ruling elites of many of the developed nations, and has taken a place in the public consciousness through steady repetition. I has become the modern orthodoxy of the fortunate few, who have been initiated into its rites, and served and been blessed by their god. ..."
"... The adherents become blind by their devotion to their gods. ..."
"... This is not something new. It is a madness that has appeared again and again throughout history in the form of Mammon, the golden idol of the markets. It is a way of looking at people and the world that is as old as Babylon, and as evil as sin. ..."
There is a lack of critical assessment of the past. But you have to understand that the current
ruling elite is actually the old ruling elite. So they are incapable of a self-critical approach
to the past."
Ryszard Kapuscinski
But they maintain a firm grasp on information and power, for their own sake, and sidetrack and stifle
any meaningful reform.
In October 2000 Thomas Frank published a prescient critical social analysis
titled,
One Market Under God: Extreme Capitalism, Market Populism, and the End of Economic Democracy
.
In the video below from 2015, Thomas Frank looks back over the past 15 years to when he wrote
this insightful book, and ends with this observation.
"I want to end with the idea that the market is capable of resolving all of our social conflict,
fairly and justly. That is the great idea of the 1990's. And we all know now what
a
crock
that is. I think what we need in order to restore some kind of sense of fairness
is not the final triumph of markets over the body and soul of humanity, but something that
confronts
markets, and that refuses to think of itself as a
brand
."
The book was not received well at the time in the waning days of the Clinton revolution and the birth
of the era of the neo-cons in foreign policy and neo-liberals in economics.
This religion of the
markets had yet to suffer the serial failures and decimation of the real economy which it would see
over the next sixteen years.
This is an ideology, a mindset, and as Frank calls it a religion, of taking market capitalism
to such an extreme that it dispenses with the notion of restraints by human or policy consideration.
It comes to consider the market as a god, with its orthodoxy crafted in think tanks, its temples
in the exchanges and the banks, and its oracles on their media and the academy.
This extreme form of market capitalism, also called neo-liberalism in economics and neo-conservatism
in foreign policy, has worked its way into the mindset of the ruling elites of many of the
developed nations, and has taken a place in the public consciousness through steady repetition.
I has become the modern orthodoxy of the fortunate few, who have been initiated into its rites, and
served and been blessed by their god.
It is the taking of an idea, of a way of looking at things, that may be substantially practical
when used as a tool to help to achieve certain outcomes, and placing it in such an extreme and inappropriate
place as an end in itself, as the very definition and arbiter of what is good and what is not, that
it becomes a kind of anti-human force that is itself considered beyond all good and evil, like a
natural law.
It is born of and brings with it an extreme tendency that kills thought, and stifles the ability
to make distinctions between things. If not unfettered capitalism then what,
communism
?
The
adherents become blind by their devotion to their gods.
This is not something new. It is a madness that has appeared again and again throughout
history in the form of Mammon, the golden idol of the markets. It is a way of looking at people
and the world that is as old as Babylon, and as evil as sin.
"... By Daniela Gabor is associate professor in economics at the University of the West of England, Bristol. Originally published at the Institute for New Economic Thinking website ..."
"... For a detailed account see Gabor, D. (2016) The (impossible) repo trinity : the political economy of repo markets, Review of International Political Economy, doi 10.1080/09692290.2016.1207699 ..."
Since the 1980s, central banks have been increasingly freed from
fiscal dominance , the obligation to monetize government debt. The new regime of monetary dominance
celebrated the (price) stability benefits of insulating scientific monetary policy from poorly theorized,
highly politicized fiscal policy. Yet the growing dominance of the 'monetary science, fiscal
alchemy' view in both academia and
policy circles played a critical role in the rapid rise of shadow banking. The untold story of shadow
banking is the story of (failed) attempts to separate monetary from fiscal policy, and of the bordeland
that connects them, mapped onto the
repo market .
While the state withdrew from economic life, privatizing state-owned enterprises or state banks,
and putting macroeconomic governance in the hands of independent central banks, its role in financial
life grew bigger. Sovereign debt evolved into the cornerstone of modern financial systems, used as
benchmark for pricing private assets, for hedging and
as base asset for credit creation via shadow banking . The state's role as debt issuer, passive
and systemic at once, has been reliant, beyond the arithmetic of budget deficits, on the intricate
workings of the repo trinity.
The repo trinity captures a consensus in central bank circles emerging after the 1998 Russian
crisis, the first systemic crisis of collateral-intensive finance, that financial stability requires
liquid government bond markets and liberalized repo markets (fig. 1).
Figure 1 The repo trinity
The repo-government bond market nexus took shape in the 1980s. In the US, securities dealers
preferred repos to secured lending against collateral because market convention treated repos
as outright sales and repurchases of collateral that allowed dealers to re-use collateral for a wide
range of activities (short-selling, hedging, selling to a third party). When bankruptcy courts decided
that repos would be subjected to automatic stay rules, Paul Volcker, then the Federal Reserve chairperson,
successfully lobbied Congress to exempt repos with US Treasuries (UST) and agency securities collateral.
Then, Salomon Brothers short-squeezed the UST market in 1991 by becoming the only repo supplier of
a two-year note. This allowed Salomon to fund securities through repo transactions at exceptionally
low rates. The ensuing public enquiry into the Salomon scandal showed little appetite for regulating
repos. Rather, the Fed and the Treasury
introduced new practices to fix gaps in repo plumbing, celebrating repos as innovative, liquidity
enhancing instruments that would support the state in the post fiscal-dominance era.
The UST blueprint diffused rapidly to Europe. Pressured to adjust to a world of independent central
banks, market-based financing and global competition for liquidity, European states embarked on a
project of creating modern government bond markets, with
modernity understood to mean the structural features of the US government bond market: regular
auctions, market-making based on primary dealers and a liberalised repo market.
Central banks were at first divided on the benefits of opening up repo markets. While Banque de
France followed the US Fed in assuming a catalyst role for the repo-sovereign bond market nexus,
Bundesbank and Bank of England worried that deregulated repo markets would unleash structural changes
in finance that could undermine the conduct of monetary policy and financial stability. In the architecture
of the US government bond market, the Bundesbank saw the conditions nurturing
short-term , fragile finance.
Seeking to keep banks captive on the uncollateralized segment of interbank markets, Bundesbank imposed
reserve requirements on repo liabilities. In parallel, as government's fiscal agent, Bundesbank followed
a conservative strategy, with irregular auctions, issuance concentrated at long maturities and repo
rules that increased the costs of funding bunds via repos. German banks responded by moving (bund)
repo activities to London and warned that France's open repo strategy would make it into the benchmark
sovereign issuer for the Euroarea. For similar reasons, the Bank of England exercised strict control
over the repo gilt market for 10 years after the 1986 Big Bang liberalisation of financial markets.
Under intense pressure from the financial industry and Ministries of Finance, the two central banks
liberalized repo markets by 1997.
As the fragilities of the new, collateral-intensive world became apparent in the 1998 Russian
crisis, central banks working together in the Committee on the Global Financial System subscribed
to the policy goals of the repo trinity. The
CGFS argued that financial
stability in market-based finance required global safe assets, issued in government bond markets,
in turn 'lubricated' by free repo markets with carefully designed (but not regulated) risk management
regimes.
In pursuing the objectives of the repo trinity, central banks helped consolidate the critical
role that sovereign bonds play in modern financial markets. Throughout the 2000s, the shortage of
US government bonds saw the trinity extended to include securitization markets, while the Euro project
galvanized consensus for a European repo trinity, whereby central banks encouraged the European banks
dominating the repo market to treat all Euro sovereign debt as high-quality
collateral
.
After Lehman, central banks and the Financial Stability Board recognized the impossible nature
of the repo trinity, attributing cyclical leverage, fire sales and elusive liquidity in collateral
markets, including government bond markets, to free repo markets. Central banks, with the
Bank of England leading the way, now accept that financial stability means supporting liquidity
in collateral markets in times of stress rather than supporting banking institutions as in the traditional
lender of last resort (LOLR) model. Paradoxically, LOLR support, implemented through repo loans,
can
destabilize (shadow) banks where central banks' collateral framework follows collateral market
valuations (figure 2).
Figure 2 The impossible repo trinity
The quiet revolution in crisis central banking that involves direct support for core markets may
appear like, but does not entail a return to, fiscal dominance. Rather, it creates
financial dominance , defined
as asymmetric support for falling asset prices. While financial dominance should be addressed by
direct regulatory interventions, the quest for biting repo rules has so far proved illusive. The
precise impact of Basel III liquidity and leverage rules is yet to be determined, whereas the failed
attempts to include repos in the European
Financial
Transactions Tax and the FSB's watered-down repo proposals suggest that (countercyclical) collateral
rules are only possible once states design alternative models of organizing their sovereign debt
markets. Paradoxically, new initiatives in Europe suggest that a return to the repo trinity is rather
more likely: the Capital Market Union plans to create Simple, Transparent and Standardized (
STS ) securitisation again illustrate the catalyst role that central banks choose to play in
market-driven solutions to safe asset shortages.
For a detailed account see Gabor, D. (2016)
The (impossible)
repo trinity : the political economy of repo markets, Review of International Political Economy,
doi 10.1080/09692290.2016.1207699
Uhhh. The article is one of the rare "too short, wish it was longer" breed.
I'll hazard a remark: how can securitization be "transparent" if, as one of the articles yesterday
discussed, central banks intervene to support banks so as to allow them to avoid having the market
deliver a price verdict on asset value?
Any time you let central banks like the Federal Bank of NY create money from debt; bankruptcy
is on the horizon. This has only been proven true for around five thousand years.
For a recent example have a look at the difference in government debt in Canada now verses
when it had a public banking system.
"Throughout the 2000s, the shortage of US government bonds saw the trinity extended to include
securitization markets,"
This started treating asset based securities similar to US Treasuries
Also this:
"fire sales and elusive liquidity in collateral markets, including government bond markets,"
I don't think the European government bond market can be treated as sovereign government bonds
as they don't have that guarantee of backing from a central bank.
----
Quite simply, US Treasuries can be put to much better use than supporting asset prices and
other financial products.
Repos hide risk and makes it possible to increase leverage. Why would anyone but financial
institutions want that?
But since financial institutions rule all then I suppose that repos will continue and as a gesture
of goodwill (dressed up as something else) they'll just become more and more complex – those (high)
fees for the professionals enabling the practice has to be justified somehow…
With about 1900 megawatt output, this was once the largest power plant in the world according
to a news story. The plant will likely be out of service for many months if not a few years assuming
that there is sufficient economic justification to undertake the repairs.
Stress kill. Stress combined with mental overload is even more dangerous.
Notable quotes:
"... One in three female students in the UK has a mental health problem, a survey suggests. This compared with about a fifth of male undergraduates, the YouGov survey of 1,061 students found. Overall, some 27% of the students said they had a mental health problem. ..."
"... Of those surveyed, 30% of males and 27% of females said they would not feel comfortable in talking about their mental illness with friends or family. ..."
One in three female students in the UK has a mental health problem,
a survey suggests. This compared with about a fifth of male undergraduates,
the YouGov survey of 1,061 students found. Overall, some 27% of the students said they had a mental health problem. This rose to 45% among
lesbian, gay, bisexual and transgender students.
Universities UK said institutions were working hard to develop good services that linked in with
the NHS.
Of those students who said they had a mental health problem:
In May,
statistics published by the ONS showed student suicides had risen to their highest level since
numbers were first recorded in 2007.
These figures - for 2014 - showed there were 130 suicides in England and Wales among full-time
students aged 18 or above. Of those, 97 deaths were for male students and 33 were females.
There has been concern about the level of mental health support services provided by universities. But the survey showed students were broadly aware of the mental health services offered by their
universities.
Seeking help
Anyone affected by mental health issues can contact a number of organisations, such as:
Some 18% of students had already made contact with university mental health services, and, of
those who had, nearly nine out of 10 had seen a counsellor.
Of those surveyed, 30% of males and 27% of females said they would not feel comfortable in talking
about their mental illness with friends or family.
Challenging stigmas
Chief executive of Universities UK Nicola Dandridge said universities took student mental health
"very seriously". "For some students, an unfamiliar higher education environment can be stressful, particularly
for those who already have an underlying illness. "Some students are reluctant to disclose their difficulties, which can also present a challenge
for universities seeking to support them."
But she added that the development of policies and anti-stigma campaigns was beginning to address
these issues. "The challenge for universities is to build on the support services and external links that exist
already, enabling referral to the NHS where necessary," she said. "It is important to remember that university wellbeing services, however excellent, cannot replace
the specialised care that the NHS provides for students with mental illnesses."
Universities UK also said it had issued guidance to all universities last year with advice on
dealing with students with mental health issues.
Stiglitz: AUG 5, 2016 8
Globalization and its New Discontents
NEW YORK – Fifteen years ago, I wrote a little book, entitled Globalization
and its Discontents, describing growing opposition in the developing world
to globalizing reforms. It seemed a mystery: people in developing countries
had been told that globalization would increase overall wellbeing. So why
had so many people become so hostile to it?
Now, globalization's opponents in the emerging markets and developing
countries have been joined by tens of millions in the advanced countries.
Opinion polls, including a careful study by Stanley Greenberg and his associates
for the Roosevelt Institute, show that trade is among the major sources
of discontent for a large share of Americans. Similar views are apparent
in Europe.
How can something that our political leaders – and many an economist
– said would make everyone better off be so reviled?
One answer occasionally heard from the neoliberal economists who advocated
for these policies is that people are better off. They just don't know it.
Their discontent is a matter for psychiatrists, not economists.
But income data suggest that it is the neoliberals who may benefit from
therapy. Large segments of the population in advanced countries have not
been doing well: in the US, the bottom 90% has endured income stagnation
for a third of a century. Median income for full-time male workers is actually
lower in real (inflation-adjusted) terms than it was 42 years ago. At the
bottom, real wages are comparable to their level 60 years ago.
The effects of the economic pain and dislocation that many Americans
are experiencing are even showing up in health statistics. For example,
the economists Anne Case and Angus Deaton, this year's Nobel laureate, have
shown that life expectancy among segments of white Americans is declining.
Things are a little better in Europe – but only a little better.
Branko Milanovic's new book Global Inequality: A New Approach for the
Age of Globalization provides some vital insights, looking at the big winners
and losers in terms of income over the two decades from 1988 to 2008. Among
the big winners were the global 1%, the world's plutocrats, but also the
middle class in newly emerging economies. Among the big losers – those who
gained little or nothing – were those at the bottom and the middle and working
classes in the advanced countries. Globalization is not the only reason,
but it is one of the reasons.
Under the assumption of perfect markets (which underlies most neoliberal
economic analyses) free trade equalizes the wages of unskilled workers around
the world. Trade in goods is a substitute for the movement of people. Importing
goods from China – goods that require a lot of unskilled workers to produce
– reduces the demand for unskilled workers in Europe and the US.
This force is so strong that if there were no transportation costs, and
if the US and Europe had no other source of competitive advantage, such
as in technology, eventually it would be as if Chinese workers continued
to migrate to the US and Europe until wage differences had been eliminated
entirely. Not surprisingly, the neoliberals never advertised this consequence
of trade liberalization, as they claimed – one could say lied – that all
would benefit.
The failure of globalization to deliver on the promises of mainstream
politicians has surely undermined trust and confidence in the "establishment."
And governments' offers of generous bailouts for the banks that had brought
on the 2008 financial crisis, while leaving ordinary citizens largely to
fend for themselves, reinforced the view that this failure was not merely
a matter of economic misjudgments.
In the US, Congressional Republicans even opposed assistance to those
who were directly hurt by globalization. More generally, neoliberals, apparently
worried about adverse incentive effects, have opposed welfare measures that
would have protected the losers.
But they can't have it both ways: if globalization is to benefit most
members of society, strong social-protection measures must be in place.
The Scandinavians figured this out long ago; it was part of the social contract
that maintained an open society – open to globalization and changes in technology.
Neoliberals elsewhere have not – and now, in elections in the US and Europe,
they are having their comeuppance.
Globalization is, of course, only one part of what is going on; technological
innovation is another part. But all of this openness and disruption were
supposed to make us richer, and the advanced countries could have introduced
policies to ensure that the gains were widely shared.
Instead, they pushed for policies that restructured markets in ways that
increased inequality and undermined overall economic performance; growth
actually slowed as the rules of the game were rewritten to advance the interests
of banks and corporations – the rich and powerful – at the expense of everyone
else. Workers' bargaining power was weakened; in the US, at least, competition
laws didn't keep up with the times; and existing laws were inadequately
enforced. Financialization continued apace and corporate governance worsened.
Now, as I point out in my recent book Rewriting the Rules of the American
Economy, the rules of the game need to be changed again – and this must
include measures to tame globalization. The two new large agreements that
President Barack Obama has been pushing – the Trans-Pacific Partnership
between the US and 11 Pacific Rim countries, and the Transatlantic Trade
and Investment Partnership between the EU and the US – are moves in the
wrong direction.
The main message of Globalization and its Discontents was that the problem
was not globalization, but how the process was being managed. Unfortunately,
the management didn't change. Fifteen years later, the new discontents have
brought that message home to the advanced economies.
It's surprising to me how little talk there is about the estate tax. When Bill
Clinton was president, the estate tax rate was 55% on estates over $1.5 million.
The Bush tax cuts eliminated the estate tax, but only in the last year of the ten
years that the tax cuts were in effect. So, certain high asset taxpayers like
George Steinbrenner of NY Yankees fame, paid no estate tax because they died that
year.
When the Democratic congress was unable to pass a new tax law in the fall of 2010,
with all of the Bush tax cuts expiring, Obama was left to negotiate with
Republicans on the new tax rates. The estate tax rate is now 40% on estates over
$5 million.
If Democrats ever regain control of Congress, I suggest that they consider a
tiered estate tax, similar to the tiered income tax. Let the 40% rate stay for
estates from $5 million to say $25 million. Then, move to a 50% rate for estates
from $25 to $100 million. Finally, have a 60% rate for estates above $100 million.
Zachary Smith
August 6, 2016 11:12 am
"We have starved the IRS while assigning it more and more functions, meaning it
is much harder for the IRS to effectively enforce the laws, allowing wealthy
people and big corporations with sophisticated lawyers a better chance to scam the
system while ordinary people pay taxes due through withholding."
I'd quibble with the "we" part of this statement, but this was a really good
read overall.
I don't see things getting any better. Both of the presidential candidates are
quite wealthy. One was born with a silver spoon in his mouth, and has no idea at
all what it's like to live in the "real world". The other is nouveau riche, and
that mix of relative poverty and newly found wealth has warped her viewpoint of
the world.
I'm a hardliner on the estate tax. Anything exceeding some arbitrary point –
say $100 million – would be taxed at 95%. Can't see THAT happening, either. The
propagandists for the rich would use extreme examples – What If You Won The Power
Ball? And Joe Sixpack would buy it. Just as he has been against his own interests
for generations.
EMichael
August 6, 2016 11:25 am
ZS,
Nice to see your consistency. Amazing how you can come to an opinion about
different topics(like the estate tax) and what Clinton believes without making any
effort to find out the truth.
Must be nice to know everything without reading anything.
Joel
August 6, 2016 1:42 pm
Why not tax estates like income? The person who inherits the windfall didn't
earn it, I know, but like every taxable transaction, money has changed hands.
Tax inherited income as income. Tax dividend income as income. Why privilege
some kinds of income over others?
"... We are all "banks", but we don't have the capacity to socialise costs and privatise benefits. The problem is thereby, a problem of the power structure and accountability. Of institutional decay and corruption. ..."
"... Capitalism has always favored the few at the expense of the many. Yet there have been places and moments, like in post-WWII U.S., where effort has gone into making the financial system at least appear somewhat transparent and predictable. Today we simply suffer the unrestrained looting of kleptocrats who laugh in our faces if we dare to complain. They violate "rules" that are already tilted in their favor with impunity. Meanwhile, if you are a poor person, unable to pay a traffic ticket in a timely fashion, you may well lose your liberty, or even your life. ..."
"... The problem we have is that the system is rigged. Bad actors in the upper class can destroy their bank for fun and profit. Individuals father down the scale cannot discharge student loans under any circumstances. This is the largest source of discontent and a problem elites refuse to address. ..."
"... And the elites won't address it until they are jailed or guillotined. Why should they? ..."
"... The article starts off well enough, but then loses track of the critical standpoints it initially sets out. For example, within the above idea, the author can't talk about dimensions of life that are not monetizable because they are a capitalist prerogative. For instance, if someone is forced to work mandatory overtime because their employer doesn't want to hire enough workers to cover demand without overtime, you either do the overtime or you exit. You can't buy your time off. Etc. ..."
"... I'm not sure what point this article is attempting to make. The distinction between money and debt becomes moot if money is a debt - which if I understand his arguments correctly is what Michael Hudson argues in "Killing the Host". I do like the reading list at the bottom. I'm behind many of the rest of the commenters in not having read any of these oft cited books. ..."
"... I agree with other comments the formula "we are each of us banks" is lame. I think it matches nicely with the oft repeated analogy between government finance and a family business. ..."
"... Financialization is about middlemen and looters skimming off money as it flows through; whether this is good or bad in a particular case depends upon whether those middlemen add value or simply act as rentiers. ..."
"... money is the mental construct, the idea, by which we value human labor and transport that value across spacetime. ..."
Not sure the bank thing is a good analogy. Seams when a financial system raises the cost of
an asset like land through speculation to the point where a debtor has not enough income to cover
outflow to provide basics of survival….. food, water, shelter, community etc……..then does the
crrditor/speculator thus owe society because, it was through speculation and Mal-investment that
society was damaged.
Thomas Jefferson….I think, said something along the lines…… if banks get a hold of credit creation
then, by inflation and deflation the citizens of this country will be left homeless upon the land
their fathers established.
We are all "banks", but we don't have the capacity to socialise costs and privatise benefits. The problem is thereby, a problem of the power structure and accountability. Of institutional
decay and corruption.
Capitalism has always favored the few at the expense of the many. Yet there have been places
and moments, like in post-WWII U.S., where effort has gone into making the financial system at
least appear somewhat transparent and predictable. Today we simply suffer the unrestrained looting
of kleptocrats who laugh in our faces if we dare to complain. They violate "rules" that are already
tilted in their favor with impunity. Meanwhile, if you are a poor person, unable to pay a traffic
ticket in a timely fashion, you may well lose your liberty, or even your life.
Capitalism has always favored the few at the expense of the many.
I'm curious what makes capitalism unique for you in that regard? I agree that there are problems
with market-based economics, but you seem to be suggesting that other forms of political economy
don't have problems of concentration of wealth and power?
Capitalism without democracy and individual rights absolutely favors the few at the expense
of the many. That's why our intellectual enablers have spent so much energy trying to separate
economics from politics: to camouflage political choices as if they are natural economic outcomes.
I'm not sure what "other forms" you have in mind for comparison. But I would suggest it is
a huge failure of imagination to suggest humans have exhausted all possible forms of economic
organization and are stuck with contemporary global capitalism. Time for some innovation!
And as Mehring points out: "Focusing on what money really is – whether gold or state fiat –
shifts attention away from what credit really is, which is to say away from the center of discontent."
It's the quality of that debt, what it is and why, that needs far more examination. At present,
it is at the root of much discontent: why should I and mine be expected to salvage bank balance
sheets that are essentially fraudulent in terms of crap mortgages?
The institutional decay is really some kind of measure of the quality of crappy debt, which
is making many of us seriously discontent at being expected to cover crap bets.
The problem we have is that the system is rigged. Bad actors in the upper class can destroy
their bank for fun and profit. Individuals father down the scale cannot discharge student loans
under any circumstances. This is the largest source of discontent and a problem elites refuse
to address.
From a money view perspective, the origin of discontent seems to lie in the fact that each
of us, in our interface with the essentially financial system that is modern capitalism, operates
essentially as a bank, meaning a cash inflow, cash outflow entity.
The article starts off well enough, but then loses track of the critical standpoints it initially
sets out. For example, within the above idea, the author can't talk about dimensions of life that
are not monetizable because they are a capitalist prerogative. For instance, if someone is forced
to work mandatory overtime because their employer doesn't want to hire enough workers to cover
demand without overtime, you either do the overtime or you exit. You can't buy your time off.
Etc.
I'm not sure what point this article is attempting to make. The distinction between money and
debt becomes moot if money is a debt - which if I understand his arguments correctly is what Michael
Hudson argues in "Killing the Host". I do like the reading list at the bottom. I'm behind many
of the rest of the commenters in not having read any of these oft cited books.
I agree with other comments the formula "we are each of us banks" is lame. I think it matches
nicely with the oft repeated analogy between government finance and a family business.
The close: "fundamental misunderstanding of the nature of the system" leaves me hanging. Where
is the explanation which clarifies things and repairs my misunderstanding? I missed it in the
presentation above and the concluding absurdity - "… we are each of us banks, managing our daily
cash inflow and cash outflow relative to the larger system which is society." - hardly serves
as clarification of anything. It just makes me annoyed that I bothered to read down that far.
Bad analogy: If each of us were our own bank, then we would be able to create money like banks
and loan out with interest and make billions each quarter because sometimes we could speculate
or gamble and make billions more while our fellow citizens become poorer because of our efforts.
Unlike some commenters, I do happen to like the imagery of all of us being banks. That's what
we all do: our labor flows out, other people's labor flows in. Imbalances can (and in fact, almost
by definition have to) occur over arbitrarily short time frames, but over longer timeframes, these
inflows and outflows do have to roughly balance. It also helps lay bare the fallacy of bailing
out individual banks (TBTF) as some kind of means of saving the banking system rather than those
specific banks bailed out. If the USFG gave Wash a trillion buck bailout, Wash Banking Inc would
be very grateful and fix lots of things in Wash Town USA and make lots of jawbs and groaf and
all dat. Does that make it good policy, either for the residents of Wash Town or the residents
of Dry Town across the valley?
Where I don't quite follow the author's point is in distinguishing money/credit/financialization/etc.
The easiest way to understand money at a macro level is that money is labor. Or a bit more complexly,
money is the mental construct, the idea, by which we value human labor and transport that value
across spacetime.
The issue of financialization isn't market vs. non-market or money vs. non-money or something
like that. Financialization is about the subset of money called currency, particularly currency
units issued by a sovereign government, being used to allocate resources in areas where currency
units are poor allocators of resources. Financialization is about middlemen and looters skimming
off money as it flows through; whether this is good or bad in a particular case depends upon whether
those middlemen add value or simply act as rentiers.
The biggest areas of financialization in
contemporary western culture, especially in the heart of the free world in DC, are not markets
at all. They are government sponsored enterprises carrying out that age old quest of the Will
to Power. Remove USFG policy choices to run a global empire abroad and create massive inequality
at home, and our supposedly market-based financial system would shrink to a much smaller size
overnight.
"Financialization is about middlemen and looters skimming off money as it flows through; whether
this is good or bad in a particular case depends upon whether those middlemen add value or simply
act as rentiers."
You hit the nail on the head here. Profits from financial transactions differ from those derived
in trading commodities and services. The former are occult whereas the latter originate in the
value of labor power. The claim that financial profits track interest rates doesn't work because
they remain linked to credit and ultimately commodity exchange. If you listen to the Blankfeins
and Dimons, they will say they are compensated for some special managerial skills that add values
to the financial transaction. This is only nonsense to justify their mega-salaries, themselves
only a fraction of the huge profits in finance. According to Hilferding's Finance Capital, the
source of profit in finance is "sui generis" and derives from what we now call transaction fees.
Whether legitimate or not, we need to understand how those rates are determined relative to the
other variables.
money is the mental construct, the idea, by which we value human labor and transport that
value across spacetime.
But even this has to be qualified by tradition, power relations, etc. as there are many, many
forms of human labor (often those forms traditionally performed by women) that we value but do
not compensate with money. Also, who is "we?" And when did "we" decide that 2 and 20 was appropriate
compensation for the "value" provided by hedge funders?
This "economist" alludes to, but fails to make the connection of the "asymmetrical" AND disproportionate
power between creditors and debtors, that has been legislated, ratified and codified into the
creditor castle (institution) of banking, currently run by banksters and moated with pols, judges,
story-tellers masquerading as "journos"/"economists" etc….e.g.-assuming it were possible to make
a sharp distinction between speculating and investing, by what reasonable definition of creditor
can vultures be classified as creditors?
Also doesn't seem to challenge the presupposition of "self-regulation" in the abstract "logic"(and
language) of "markets", which is innate in thinking of "money" as a commodity. This abstract "logic"(and
language) has "supplied" the fodder for neoliberal zealots to rationalize de-regulation, which
many have concluded has been a major driver of the "defining issue of our time" and the disdainful
polarization between the "haves" and "have-nots".
Also seems to fail to recognize the conflict when thinking about money as a commodity and the
effects of compounding interest…
Thanks for this. I followed the link and have started reading Louis Brandeis' Other People's
Money , which I've never read before. We've learned little in the ensuing 100 years…
@72 Many good USians have been murdered (Phill Marshall, sen. Paul Wellstone, JFK junior - competing
with Hitlary for the Senate seat), silenced, imprisoned, intimidated, disenfranchised for standing
up to the criminal elite.
They deserve our utmost respect.
Do not use collective responsibility, Bolshevik style.
They are the top five holdings in the Nasdaq 100 index, which hit a record high yesterday.
Technically, Amazon is classified in the Consumer Discretionary sector (and the internet retailing
industry), whereas the other four are in the Technology sector. But Amazon's value derives from
the technology of its internet platform, its cloud services, etc.
If you think that this picture seems to rhyme with the Internet Bubble of 1999 … you're
right!
Also Google and Facebook income are just big advertising and marketing (data mining) companies
disguised as tech companies. Their core business is not producing and selling any tech (specially
Facebook).
"... The values and ideology represented in the Economics textbook Bill Black analyzed didn't arise in a vacuum. The points Black lists reflect the ideology, values, ethics and interests of a narrow segment of our society who have accumulated enormous personal wealth through a variety of extra-legal and illegal mechanisms, and who use a small portion of that wealth to fund "Economics Chairs" in our public and private universities; economics "think tanks"; and speeches, books, consulting engagements, and board memberships for "prominent economists". ..."
"... Mankiw is a shill/useful idiot for his oligarchs patrons. #11 explains the idiocy of the previous 10. ..."
"... Did the banks which loaned billions to the gas frackers of North Dakota know that production would exceed demand and cause a crash? Perhaps the loan officer might have such concern, but would more likely be most concerned with his/her own bottom line – a meme Yves explores in Econned. ..."
"... Newly-printed money CAN cause inflation, but WHERE the price rises happen depends greatly on the pockets in which the money lands. ..."
"... stocks, real estate, luxury goods, premium educations, etc. ..."
"... This kind of ignorant cluelessness is pretty prevalent among the oligarchy and its supporters like Mankiw. Just like that guy in Davos who simply couldn't understand why there's so much social unrest in the world today. They live in a completely different world. ..."
"... My first exposure to Mankiw's principles was actually an early version of the talk by Yoram Bauman in this video. It hits several of the points Mr. Black makes and is also pretty funny. It definitely demonstrates how Mankiw attempts to cloak his biases in supposedly neutral terms. ..."
"... I doubt Mankiw will accept 100% estate tax on the justification that the cost of bequests is zero to the recipient. (and thus a 100% estate tax doesn't incur large costs on the recipient) ..."
"... My paper lists four principles claimed to be at the core of modern economics by Mankiw and then shows how all four principles are false: Amir-ud-Din, Rafi and Zaman, Asad, Failures of the 'Invisible Hand' (July 15, 2013). Forum for Social Economics, Vol. 45, Iss. 1, 2016. Available at SSRN: http://ssrn.com/abstract=2293940 or http://dx.doi.org/10.2139/ssrn.2293940 ..."
By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate
professor of economics and law at the University of Missouri-Kansas City. Jointly published with
New Economic Perspectives
This is the second column in a series on the N. Gregory Mankiw's myths and dogmas that he spreads
in his economic textbooks. The first column exposed the two (contradictory) meta-myths that begin
his preface. This column de-mythologizes Mankiw's unprincipled "
principles " of economics – the ten commandments of theoclassical economics' priestly caste.
Some of these principles, correctly hedged, could be unobjectionable, but in each case Mankiw dogmatically
insists on pushing them to such extremes that they become Mankiw myths.
To understand Mankiw's mythical 10 commandments, one must understand "Mankiw morality" – a morality
that remains hidden in each of his textbooks. Few people understand how radically theoclassical economics
has moved in the last thirty years. Milton Friedman famously argued that CEOs should operate exclusively
in the interest of shareholders. Mankiw, however, is a strong supporter of the view that CEOs will
not only defraud customers, but also shareholders and creditors by looting the firm. "[I]t would
be irrational for savings and loans [CEOs] not to loot." "Mankiw morality" decrees that if you have
an incentive as CEO to loot, and fail to do so, you are not moral – you are insane. Mankiw morality
was born in Mankiw's response as discussant to George Akerlof and Paul Romer's famous 1993 article
"Looting: The Economic Underworld of Bankruptcy for Profit."
Mankiw's textbooks preach the wonders of the indefensible a system he has helped design to allow
elite CEOs to loot the shareholders with impunity – the antithesis of Friedman's stated goal. Mankiw
morality helps create the "criminogenic environments" that produce the epidemics of "control fraud"
that drive our recurrent, intensifying financial crises. It is essential to interpret Mankiw's ten
myths in light of his unacknowledged immoral views about how CEOs will and should respond to incentives
to rig the system against the firm's consumers, employees, creditors, and shareholders. His textbooks
religiously avoid any disclosure of Mankiw morality or its implications for perverting his ten commandments
into an unethical and criminogenic dogma that optimizes the design of a criminogenic environment.
Mankiw's myths
People Face Tradeoffs. To get one thing, you have to give up something else.
Making decisions requires trading off one goal against another.
This can be true, but Mankiw pushes his principle to the point that it becomes a myth. Life
is filled with positive synergies and externalities. If you study logic or white-collar criminology
you will make yourself a far better economist. You may trade off hours of study, but not "goals."
If your "goal" is to become a great economist you will not be "trading off one goal against another"
if you become a multidisciplinary scholar – you will strongly advance your goal. If you study
diverse research methods you will be a far better economist than if you study only econometrics.
The Cost of Something is What You Give Up to Get It. Decision-makers have
to consider both the obvious and implicit costs of their actions.
"Opportunity costs" are an important and useful economic concept, but Mankiw's definition sneaks
ideological baggage into both sentences that turns his principle into multiple myths. Mankiw implicitly
assumes fraud and other forms of theft out of existence in the first sentence. "Cost" is often
not measured in economics by "what you give up to get it." If your inherit a home that lacks fire
insurance and immediately burns down there is a cost to you (and society) even though you gave
up nothing to inherit the home. If the CEO loots "his" firm he gave up nothing to get the millions,
but if he loses those millions he will consider it to have a "cost." Theoclassical economists
have a primitive tribal taboo against even using the "f" word (fraud).
Decision-makers frequently ignore the "costs of their actions." There is nothing in economic
theory or experience that supports the claim that the "decision-makers" "have" to consider costs.
It is rare that decision-makers must do – or not do – anything.
It is likely that Mankiw means that optimization requires decision-makers to "consider" all
"costs of their actions," but that too is a myth. Theoclassical optimization requires perfect,
cost-free information, pure "rationality," and no externalities. None of these conditions exist.
Car buyers have no means of knowing the costs of buying a particular car. If they bought a GM
car the ignition mechanism defect could cause the driver to lose the ability to control the car
– turning it into an unguided missile hurtling down (or off) a highway at 70 mph. The car buyer
does not know of the defect, does not know who will be driving when the defect becomes manifest,
does not know who the passengers will be, and does not know who and what else could be injured
or damaged as a result of the defect. The theoclassical view is that the buyer who "considers"
the costs of buying his defective car to others (negative externalities) and pays more money to
buy a car that minimizes those negative externalities is not acting ethically, but irrationally.
It is typically cheaper (for the producer, not society) to produce goods of inferior (but difficult
to observe) quality. The inability of the consumer to "consider" even the true costs to the consumer
and the consumer's loved ones of these hidden defects means that economists began warning 46 years
ago that "market forces" could become criminogenic. George Akerlof's 1970 article on markets for
"lemons" even coined the term "Gresham's" dynamic to describe the process. A Gresham's dynamic
is a leading form of a criminogenic environment.
[D]ishonest dealings tend to drive honest dealings out of the market. The cost of dishonesty,
therefore, lies not only in the amount by which the purchaser is cheated; the cost also must
include the loss incurred from driving legitimate business out of existence.
Akerlof was made a Nobel laureate in economics in 2001 for this body of work. Economics is
the only field in which someone would write a textbook ignoring a Nobel laureate whose work has
proven unusually accurate on such a critical point. There is only one reason to exclude this reality
from Mankiw's myths – Akerlof's work falsifies Mankiw's myths, so Akerlof's work disappears from
Mankiw's principles, as does the entire concept of fraud.
Rational People Think at the Margin . A rational decision-maker takes action
if and only if the marginal benefit of the action exceeds the marginal cost.
The mythical nature of this principle flows from the multiple errors I have described. Mankiw
is being deliberately disingenuous. Theoclassical economics does not claim, for example, that
a firm produces a product "only if the marginal benefit of the action exceeds the marginal cost."
Theoclassical economists claim that a firm sells a product "only if the marginal benefit of the
action to the seller exceeds the marginal cost to the seller." The seller ignores social costs
and benefits.
For the sake of brevity, I will summarize that Mankiw's third principle is a myth for five
reasons known to every economist. First, it implicitly assumes out of existence positive and negative
externalities, which means that supposedly rational, self-interested decision-makers he postulates,
even if they had perfect, cost-free information, would not contract to maximize social welfare.
Second, as Mankiw morality implicitly admits, the actual optimization principle under theoclassical
economics would be determined by the marginal benefits and costs of an action to the decision-maker
– the CEO – not the firm, and certainly not society. Theoclassical economists, however, refuse
to admit that explicitly, so it disappears from Mankiw's 10 commandments.
Third, the information provided by CEOs is often not simply incomplete and costly, but deliberately
deceptive. Where information is merely incomplete, consumers may pay far more for a product than
they will benefit from the purchase. Where the seller provides deceptive information about quality,
the buyer and members of the public may be harmed or even killed. The CEO may also be looting
"his" firm as well as the customers. Mankiw has implicitly assumed perfect, cost-free information
and implicitly assumed that fraud does not exist.
Fourth, conflating rationality with optimization of personal costs and benefits is wrong on
multiple grounds. It defines ethical behavior as "irrational" where the consumer or CEO takes
into account social costs and benefits and protects the interests of others in an altruistic manner.
Everything we know from behavioral economics also makes clear that humans are not "rational" in
the manner predicted by theoclassical economics. Mankiw has implicitly assumed out of existence
thirty years of economic research on how people actually behave and make decisions.
Fifth, firms with monopoly power, according to theoclassical economics, maximize their profits
by deliberately reducing production to a point that the social cost of producing the marginal
unit is less than the marginal benefit to the consumer. Mankiw has implicitly assumed away monopolies.
People Respond to Incentives. Behavior changes when costs or benefits change.
I have responded to this myth in a
prior article . The implications of his fourth principle in conjunction with Mankiw morality
are devastating for theoclassical economics. CEOs create the incentives and understand how "behavior
changes" among their agents, employees, and subordinate officers in response to those incentives.
Under theoclassical principles this will unambiguously lead "rational" CEOs to set incentives
to rig the system in favor of the CEO. Because fraud and abuse creates a "sure thing" that is
certain to enrich the CEO, Mankiw's fourth commandment predicts that control frauds led by CEOs
will be ubiquitous. Fortunately, many CEOs are ethical and remain ethical unless they are subjected
to a severe Gresham's dynamic. As a result, Mankiw's commandments over-predict the incidence of
fraud and abuse by CEOs. Similarly, experiments demonstrate that humans frequently act in altruistic
manners despite financial incentives to act unfairly.
Trade Can Make Everyone Better Off .
Trade allows each person to specialize in the activities he or she does best. By trading with
others, people can buy a greater variety of goods or services.
See my
article on faux "trade deals" that exposes this myth.
Markets Are Usually a Good Way to Organize Economic Activity .
Households and firms that interact in market economies act as if they are guided by an "invisible
hand" that leads the market to allocate resources efficiently. The opposite of this is economic
activity that is organized by a central planner within the government.
Again, the key interaction under theoclassical theory is between CEO and consumers, employees,
creditors, shareholders, and the general public. "Markets" are vague constructs and they work
best when ethical and legal provisions reduce fraud to minor levels. When these ethical and legal
institutions are not extremely effective against fraud, the incentives created by the market can
be so perverse that they create a criminogenic environment that produces epidemic levels of fraud.
Mankiw's myth is to describe only one possible incentive and treat it as the sole possibility
other than what he falsely describes as "the opposite" – a government planner. The opposite incentive
to the so-called "invisible hand" is the Gresham's dynamic. Mankiw mythically presents the government
as the threat to an effective economy rather than an institution that is essential to producing
and enforcing the rule of law that prevents a Gresham's dynamic.
Governments Can Sometimes Improve Market Outcomes .
When a market fails to allocate resources efficiently, the government can change the outcome through
public policy. Examples are regulations against monopolies and pollution.
The myth here is that government only has a desirable role where there is a "market fail[ure]."
Mankiw treats "markets" as the norm and implicitly assumes that the government normally has nothing
to do with making markets succeed. Even conservative classical economists admitted that the rule
of law was essential to an effective economy and required an effective government. Well-functioning
governments always improve "market outcomes." Indeed, they are typically essential to making possible
well-functioning "markets."
Mankiw also fails to explain that "markets" will be fictional and massively distort resource
allocation (that is what a hyper-inflated bubble does) when there is an epidemic of control fraud.
As I have explained, Mankiw's own principles predict (indeed, over-predict) that deregulated "markets"
will frequently prove so criminogenic that they will produce epidemics of control fraud.
A Country's Standard of Living Depends on Its Ability to Produce Goods and Services.
Countries whose workers produce a large quantity of goods and services per unit of time
enjoy a high standard of living. Similarly, as a nation's productivity grows, so does its average
income.
First, the CEOs of sectors such as finance that are immensely unproductive – so unproductive
that they cause enormous losses rather than growth, and receive exceptional income because they
loot. Income is often based not on productivity, but on the CEOs' wealth and economic and political
power that allows them to rig the economy. A nation's standard of living also depends on its employment
levels, which can be crushed by economic policies such as austerity.
The issue is not what happens to "average income," but what happens to median income, wealth,
the income and wealth of the lowest quartile or particular minorities, and to income and wealth
inequality. A nation can have high average productivity, yet have poor performance for decades
in these other critical measures.
Consider what has happened to the folks who tried to do everything right to boost their productivity
according to the theoclassical economic "experts'" advice. This is what has happened to Latino
and black households where a head of the household has at least a college degree. The source is
economists at the extremely conservative
St. Louis Fed .
Hispanic and black families headed by someone with a four-year college degree, on the other
hand, typically fared significantly worse than Hispanic and black families without college
degrees. This was true both during the recent turbulent period (2007-2013) as well as during
a two-decade span ending in 2013 (the most recent data available).
White and Asian college-headed families generally fared much better than their less-educated
counterparts. The typical Hispanic and black college-headed family, on the other hand, lost
much more wealth than its less-educated counterpart. Median wealth declined by about 72 percent
among Hispanic college-grad families versus a decline of only 41 percent among Hispanic families
without a college degree. Among blacks, the declines were 60 percent versus 37 percent.
One of the reasons that college-educated Latino and black families lost so much wealth compared
to their white and Asian-American counterparts is that they were more likely to get their degrees
from the for-profit colleges that theoclassical economists touted – colleges that frequently provided
a very expensive and very poor education, often involving defrauding the students. Another reason
that college-educated Latino and black families lost so much wealth compared to their white and
Asian-American counterparts is that they were far more likely to be the victims of predatory home
lending – an activity for which theoclassical economists served as the primary apologists.
Mankiw also ignores critical factors that determine "a country's standard of living." Yes,
China reports higher growth, but it is also operating in an unsustainable fashion that has destroyed
much of its environment and threatens to be a major contributor to the global suicide strategy
of causing severe climate change.
Prices Rise When the Government Prints Too Much Money . When a government
creates large quantities of the nation's money, the value of the money falls. As a result, prices
increase, requiring more of the same money to buy goods and services.
No, and Mankiw knew this was a myth when he wrote it. First, "prices rise" for many reasons.
Pharmaceutical prices rise because hedge fund managers take over pharma firms or encourage others
to do so in order to increase prices on existing drugs by hundreds, sometimes thousands of percent.
Prices rise because accounting control fraud recipes hyper-inflated the largest bubble in history
in U.S. real estate. Prices rise because of cartels. Prices rise because oil cartels cause oil
shocks. Prices rise due to real bottlenecks, e.g., shortages of a skill or material.
Inflation has not risen, indeed general price levels have often fallen (deflation) despite
record creation of money by central banks and private banks. Theoclassical economists have regularly
predicted hyper-inflation. As Paul Krugman emphasizes, virtually none of them even admits their
serial prediction failures.
Society Faces a Short-Run Tradeoff Between Inflation and Unemployment . Reducing
inflation often causes a temporary rise in unemployment. This tradeoff is crucial for understanding
the short-run effects of changes in taxes, government spending and monetary policy.
Mankiw ends his ten myths with a series of myths. Foolish, counterproductive austerity often
causes inflation to fall to harmfully low – even negative (deflation) – levels that can lead to
prolonged recessions that cause severe damage to people and economies. Stimulus provides a win-win
that improves economic growth and reduces human suffering without causing harmful inflation.
A nation is able to operate at extremely high levels of employment without producing harmful
inflation. Mankiw is a partisan Republican. When Republican presidents in the modern era are faced
with recessions they junk their theoclassical dogmas and adopt stimulus programs, though they
generally do so largely through the economically inefficient and less effective means of slashing
tax rates for the wealthy.
Democrats: Please Renounce Mankiw's Myths
Unlike the Republicans, who always rise above their theoclassical principles when their president
is in office and faces a recession, the "New Democrats" are the ones who seem to have drunk the theoclassical
Kool-Aid and strive endlessly to create the self-inflicted wound of austerity when they are in power.
New Democrats also love to bash Republican presidents for running deficits even when those deficits
produced no harmful inflation and helped produce recovery. It is sensible and honest to point out
that tax cuts for the wealthy are a far less effective form of stimulus and to present and support
superior alternatives such as job guarantee and infrastructure programs. It would be superb if Democrats
were to point out that by far the most effective, prompt means of cutting taxes to stimulate the
economy in response to a recession is to cease collecting the Social Security taxes for several years.
It is not fine to praise Bill Clinton for taking the harmful step of running a budget surplus or
to bash Republicans because they – correctly – increased fiscal stimulus (and therefore the short-term
deficit) in response to a recession.
Democrats also need to stop spreading the myth that Bill Clinton was an economic marvel. He was
the luckiest president in history in terms of timing. His economic "success" was the product of two
of the largest bubbles in history (the dot.com and real estate bubbles). The real estate bubble is
the only thing that prevented his dot.com bubble from causing an economic collapse during his term.
The real estate bubble was so enormous that it made it easy for the fraudulent CEOs to "roll" (refinance)
the fraudulent loans they made, which helped cause the bubble to hyper-inflate. The saying in the
trade is "a rolling loan gathers no loss." This meant that the bubble was Bill Clinton and George
Bush's bubble, but it collapsed on George Bush's watch so Clinton gets the credit for the high employment
produced by the twin bubbles and Bush gets the blame for the massive unemployment that a massive
bubble will create when it collapses (if it is not replaced by an even larger bubble).
The pots are calling the kettles black; standard politics, redundancy easily replaced by automation.
You do know that Bernie isn't going after Hillary because he has his skeletons, especially
in the medical university complex, don't you. Ever live in Vermont. You did notice that Hillary
just threatened him, to the core of his argument.
This… "Energy is information, most of which humans ignore."…and this… "Public Education policies
are disgusting to anyone who really wants to learn…" are the important elements although I would
add that humans don't ignore so much as don't know/are not taught, and I would say Public education
has been purposefully corroded to the point of disgusting.
Pharmaceutical prices rise because hedge fund managers take over pharma firms or encourage
others to do so in order to increase prices on existing drugs by hundreds, sometimes thousands
of percent. Prices rise because accounting control fraud recipes hyper-inflated the largest bubble
in history in U.S. real estate. Prices rise because of cartels. Prices rise because oil cartels
cause oil shocks. Prices rise due to real bottlenecks, e.g., shortages of a skill or material.
- Bill Black
----–
All of these examples treat relative price rises in the affected sector, not the general
inflation which saw the U.S. CPI increase by a factor of ten (10) since 1950. Hedge funds and
cartels couldn't do that, no matter how successful they were in increasing their share of the
pie.
The same logic is used by union busters to claim that "greedy labor unions" cause inflation
- an equally false notion. Labor can increase its share of national income at the expense of corporate
profit, but it cannot cause a general inflation.
This unprecedented secular inflation did, however, coincide with government bonds surpassing
gold as the Federal Reserve's largest holding in 1945, and with the dollar's gold link being severed
in 1971.
Bill Black evidently hews to the scholarly tradition of the eminent Argentine economist and
former central banker Mercedes Marcó del Pont:
"It is totally false to say that the printing more money generates inflation; price increases
are generated by other phenomena like supply and external sector's behaviour," said Marcó del
Pont.
I would argue that the real estate bubble caused genuine inflation because it was a credit
bubble, but I agree on your other points. Intuitively I think of inflation as a rise in prices
without a corresponding rise in (average) affordability. It's why a Big Mac today can cost multiple
times what it did 30 years ago without being any less affordable for the average customer.
Mankiw's definition isn't precisely wrong but it's oversimplified. He doesn't address the role
of banks in money creation, he doesn't define money (what about credit?) he doesn't discuss the
factors that might cause government to print more or less money, and he doesn't say how much is
too much. Without more rigor than he provides, it's only useful as a plausibility argument after
the fact.
Regarding Black's comment:
Inflation has not risen, indeed general price levels have often fallen (deflation) despite
record creation of money by central banks and private banks.
I would say this was because they were doing it during the deflation of a credit bubble on
a large enough scale that money creation by the government was a drop in the bucket by comparison,
and that was what caused deflation. Which again points to the importance of defining terms and
operating constraints (why couldn't the government print money on a massive scale to compensate?
What are the drawbacks and limitations on that approach?)
Economists do love to make doomsday hyperinflation predictions that never seem to pan out.
As far as I can tell, that's because they think that the economy is inherently unstable and will
lapse naturally into massive inflation (see: wage-price spiral) or some other disastrous state
without the wise guiding hand of a central banker to prevent it. There seems to be very little
evidence of this actually happening in reality, and the few genuine examples of hyperinflation
(Weimar, Zimbabwe) have typically resulted from a collapse in production coupled with debts denominated
in other currencies that (a) considerably exceed the country's ability to pay and (b) require
the attempt to be made anyway.
Notice that Mankiw managed to say nothing about "Economic instability or deflation, and eventually
economic depression, is caused when the government prints TOO LITTLE money", which is actually
true and happens quite reliably.
If it is physically impossible for something to occur, it won't, and finance be damned.
Economics is first and foremost a branch of the physical sciences, though most economists have
forgotten this.
Supply and demand.
Unintended consequences.
High productivity does not create high wages. High wages create high productivity. If you
spend a lot of money on water-conservation technology at the base of Niagara Falls, will it
increase the economic value of water there?
The physical utility of a commodity (including labor) is not related to its economic value.
Adam Smith did get something right.
Nothing in this universe can grow exponentially for very long. Societies with sustained
high fertility rates will always be miserably poor, and only societies that have first reduced
their fertility rate can hope to become rich.
A (more-or-less) free market is indeed a powerful and essential optimization mechanism
("the invisible hand") but it is nonlinear. Like all such nonlinear optimization mechanisms,
it can and does get stuck in local minima and require external directed efforts to move to
a more optimal solution. This is basic math.
Inflation occurs when prices go up. That's it.
"Capitalism" guarantees neither poverty nor prosperity. The market is neutral. Even as
the laws of physics are obeyed equally well by a building that stands tall as by one that collapses
into a heap of rubble, the laws of the market are also obeyed in miserably poor Bangladesh
as well as in prosperous Switzerland. With 100 desperate people competing for every job, wages
for the many will be low and profits for the few will be high. And vice versa. Blaming "capitalism"
for poverty is silly, as if I threw someone off a cliff and then blamed the law of gravity
for their death. Trying to deny market forces is equally silly, like trying to legislate gravity
out of existence. It simply must be worked with.
"Free to choose to own or employ slaves", "Free trade includes the ability of big corporations
to restrict trade to maximize their profits", "Free to buy politicians and have them loot the
public treasury in your interest" … Strict libertarianism is logically incoherent and ethically
vile.
I quibble with 6 & 8. "A more or less free market" is a well regulated market. How much "more
free" or "less free" a market needs to be to best distribute its product depends entirely on its
particular conditions and vagaries. The insinuation that a market should be "stuck in a local
minima" before oversight can improve its performance echoes Mankiw's 7th misconstruction, that
(in Bill Black's words) "government only has a desirable role when there is a market failure."
I especially disagree that markets are neutral. Markets exist at the pleasure of the Capitalists
who create and smother them for profit. Capitalists are forever cajoling "market opportunities"
out from under every rock they can turn over. They invent, shape, split, combine, dissect, analyze,
produce, reproduce, abandon, corner and strangle markets in pursuit of lucre. There is no market
for Ford electric cars in California beyond the handful required by statute, despite ample demand,
because individuals at Ford have determined that creating that particular market will eat into
the personal profit they might extract from other markets. "Efficient" markets, that only return
a gazilionth of a point on investment because of optimal competition, cease to be because the
margin is too low to justify the hassle or the capital risk. Switching gears, labor markets in
Bangladesh & Switzerland exist when Capitalists decide to hire workers. Hirees agree to be paid
what Capitalists choose to pay, whether "freely" or under the duress of the State.
There is no market equivalent to gravity or the law of planetary motion. The model of supply
and demand is a hypothetical post rationalization of a shifting negotiation – while it's helpful
to a degree, supply/demand doesn't make "lawfull" (or useful) predictions until demand nears infinity
(see health care: "how much will that be, doc?" – "how much have you got?", or housing: "how much
can you borrow from a fractional reserve player who lends without risk and won't verify your income?")
As the local monopolists of violence, States can engage markets as they see fit. They can supply
(Volkswagon & the post office), demand (food stamps, R&D grants), regulate, open (ACA) or close
them (pharmaceutical imports) to their hearts desire. Good or bad outcomes depend entirely on
the wisdom of the policy.
Whoa. Exhale. To be sure, I inhaled. Too many words when I should just say:
Nice.
Its good we agree that policy should be just and compassionate.
The values and ideology represented in the Economics textbook Bill Black analyzed didn't
arise in a vacuum. The points Black lists reflect the ideology, values, ethics and interests of
a narrow segment of our society who have accumulated enormous personal wealth through a variety
of extra-legal and illegal mechanisms, and who use a small portion of that wealth to fund "Economics
Chairs" in our public and private universities; economics "think tanks"; and speeches, books,
consulting engagements, and board memberships for "prominent economists".
This matter is really about whose values will control government economic policy and law.
Excellent analysis. Thank you, Bill Black, for all you do and have done.
I see much of the underlying theory of classical economics as simplifications that make the
math easier. One of my favorite examples of misallocation of resources was the market for Burbank
Russet potatoes in 2001. Basically, producers wanted $6.50 per hundredweight for spuds. The big
buyer, Simplot offered farmers $4.50 pre-season. Many farmers decided to wait until harvest, hoping
the spot market would give them a better price. I should also mention that in Idaho, farmers not
wishing to plant in a given year, could sell their water to other farmers, or to the federal government
which uses the water to help salmon and to produce hydropower. Thus, producing potatoes carried
the opportunity cost of water leasing. But leasing water leasing to the federal government is
culturally taboo in the ag. community. 2001 was a dry year and most of the ag. water was consumed
growing spuds.
The outcome was a banner year in production, driving the spot market price to $0.50 per hundredweight,
far less than the cost of production. Many acres of potatoes were plowed under – a total loss
– to everyone.
My point is – there is no way to know, in advance, what the price of a commodity will be in
the future unless you know, or can limit, the rate of production and control demand.
Did the banks which loaned billions to the gas frackers of North Dakota know that production
would exceed demand and cause a crash? Perhaps the loan officer might have such concern, but would
more likely be most concerned with his/her own bottom line – a meme Yves explores in Econned.
I suppose I am a bit defensive of classical microeconomics because it is elegant. But I am
also terribly suspicious of its answers because one never has either the information or the control
to be anywhere near as certain as the calculus would suggest.
On point #9: "Prices Rise When the Government Prints Too Much Money". Recent inflation data
suggests it's a myth. But if restated as "When government prints money, prices rise on the goods
and services that the people who receive the money tend to buy", then it's NOT a myth.
That was the whole problem with the Federal Reserve's damned QE efforts. They printed gobs
of money, and it all landed in the pockets of the wealthy. The stuff they buy (stocks, real estate,
luxury goods, premium educations, etc.) has seen prices rise MUCH faster than nominal inflation.
And the people who didn't get any of the newly printed money (i.e., most of us)… Well, these sad
folks couldn't afford to spend any more than before, so anybody who attempted to impose prices
hikes on low-end consumer goods saw a loss of sales volume.
Newly-printed money CAN cause inflation, but WHERE the price rises happen depends greatly
on the pockets in which the money lands.
stocks, real estate, luxury goods, premium educations, etc.
But it's hard to produce more of those, so with an increase in money chasing them their prices
will rise. If the government handed money to poor people, they would buy food, clothes, cars,
televisions, etc. In other words, things that society can produce more of. That's my read, anyway.
Partially. Prices for good where quantities are truly fixed (like acres of land in San Francisco)
can rise sharply when extra money pours in.
But even when there is opportunity to increase production, manufacturers must purchase equipment
(like farm equipment for more food) or hire more workers (thereby tightening the labor market
and pushing wages up). These result in price hikes. More modest price hikes than San Francisco
real estate, but still real hikes. It's the classic supply vs. demand curve from classic microeconomics.
That said, "QE to the people" is certainly less objectionable than the "QE to the bankers and
the 1%" that we've seen over the past five years. Prices would go up, but people would get to
buy more things they want or need, and hiring would likely go up as well. [And at a minimum, there
needs to be at least *some* growth in the money supply to keep up with population growth. Otherwise
we see deflation and the ability to become wealthier by hoarding cash.]
"Here is a fact that you might not have heard from the Occupy Wall Street crowd: The incomes
at the top of the income distribution have fallen substantially over the past few years.
"According to the most recent IRS data, between 2007 and 2009, the 99th percentile income
(AGI, not inflation-adjusted) fell from $410,096 to $343,927. The 99.9th percentile income
fell from $2,155,365 to $1,432,890. During the same period, median income fell from $32,879
to $32,396."
This kind of ignorant cluelessness is pretty prevalent among the oligarchy and its supporters
like Mankiw. Just like that guy in Davos who simply couldn't understand why there's so much social
unrest in the world today. They live in a completely different world.
The big difference being that $70k to the 99th percentile means the difference between a new
Beemer this year or next while $500 for the median family means choosing which child goes hungry
for the second half of December.
And of course, Anonymous's excellent point. You are cherry picking old data based on a stock
market and real estate bubble crash. Median income families don't "own" real estate and certainly
don't own stocks.
Mankiw is either psychotic or was gleefully obfuscating when he presenting that out-dated analysis.
I say Kill the Rich and feed their bodies to the poor. It's not a solution at all (and I am
rich myself) but it would be deeply, deeply satisfying!
My first exposure to Mankiw's principles was actually an early version of the talk by Yoram
Bauman in this video. It hits
several of the points Mr. Black makes and is also pretty funny. It definitely demonstrates how
Mankiw attempts to cloak his biases in supposedly neutral terms.
As for number 6, I couldn't disagree with you more. Organisational power is dependent on it
being enforced BY THE GOVERNMENT. Without that coercion, individuals would find other solutions
for the want provided for by that particular organisation. I would suggest that you look at the
history of Pennsylvania circa 1681-1690 or Moresnet (in what is now Aachen) circa 1816 until the
end of WWI to understand what is possible when the free market really operates.
I am actually a returning undergrad student and starting an econ course next week. I just
looked at the text book… and its Mankiw. Should be a fun semester.
Don't argue with the PR. You need to be strategic. Regurgitate the BS but be sure to read enough
corrective material that the toxins don't infect your brain.
I doubt Mankiw will accept 100% estate tax on the justification that the cost of bequests
is zero to the recipient. (and thus a 100% estate tax doesn't incur large costs on the recipient)
"... Real income stagnation over a far longer period than any since the second world war is a fundamental political fact. But it cannot be the only driver of discontent. For many of those in the middle of the income distribution, cultural changes also appear threatening. So, too, does immigration - globalisation made flesh. Citizenship of their nations is the most valuable asset owned by most people in wealthy countries. They will resent sharing this with outsiders. Britain's vote to leave the EU was a warning. ..."
"... First, understand that we depend on one another for our prosperity. It is essential to balance assertions of sovereignty with the requirements of global co-operation. ..."
"... Second, reform capitalism. The role of finance is excessive. The stability of the financial system has improved. But it remains riddled with perverse incentives. The interests of shareholders are given excessive weight over those of other stakeholders in corporations. ..."
"... Above all, recognise the challenge. Prolonged stagnation, cultural upheavals and policy failures are combining to shake the balance between democratic legitimacy and global order. The candidacy of Mr Trump is a result. ..."
Real income stagnation over a longer period than any since the war is a fundamental political
fact
For every complex problem, there is an answer that is
clear, simple and wrong." HL Mencken could have been thinking of today's politics. The western
world undoubtedly confronts complex problems, notably, the dissatisfaction of so many citizens. Equally,
aspirants to power, such as Donald Trump in the US and Marine Le Pen in France, offer clear, simple
and wrong solutions - notably, nationalism, nativism and protectionism.
The remedies they offer are bogus. But the illnesses are real. If governing elites continue to
fail to offer convincing cures, they might soon be swept away and, with them, the effort to marry
democratic self-government with an open and co-operative world order.
What is the explanation for this backlash? A large part of the answer must be economic. Rising
prosperity is a good in itself.
But it also creates the possibility of positive-sum politics. This underpins democracy because
it is then feasible for everybody to become better off at the same time. Rising prosperity reconciles
people to economic and social disruption. Its absence foments rage.
The
McKinsey Global Institute sheds powerful light on what has been happening in a report entitled,
tellingly, Poorer than their Parents?, which demonstrates how many households have been suffering
from stagnant or falling real incomes. On average between 65 and 70 per cent of households in 25
high-income economies experienced this between 2005 and 2014. In the period between 1993 and 2005,
however, only 2 per cent of households suffered stagnant or declining real incomes. This applies
to market income. Because of fiscal redistribution, the proportion suffering from stagnant real disposable
incomes was between 20 and 25 per cent. (See charts.)
McKinsey has examined personal satisfaction through a survey of 6,000 French, British and Americans.
The consultants found that satisfaction depended more on whether people were advancing relative to
others like them in the past than whether they were improving relative to those better off than themselves
today. Thus people preferred becoming better off, even if they were not catching up with contemporaries
better off still. Stagnant incomes bother people more than rising inequality.
The main explanation for the prolonged stagnation in real incomes is the financial crises and
subsequent weak recovery. These experiences have destroyed popular confidence in the competence and
probity of business, administrative and political elites. But other shifts have also been adverse.
Among these are ageing (particularly important in Italy) and declining shares of wages in national
income (particularly important in the US, UK and Netherlands).
Real income stagnation over a far longer period than any since the second world war is a fundamental
political fact. But it cannot be the only driver of discontent. For many of those in the middle of
the income distribution, cultural changes also appear threatening. So, too, does immigration - globalisation
made flesh. Citizenship of their nations is the most valuable asset owned by most people in wealthy
countries. They will resent sharing this with outsiders. Britain's vote to leave the EU was a warning.
So what is to be done? If Mr Trump were to become president of the US,
it might already be too late. But suppose that this does not happen or, if it does, that the
result is not as dire as I fear. What then might be done?
First, understand that we depend on one another for our prosperity. It is essential to
balance assertions of sovereignty with the requirements of global co-operation. Global governance,
while essential, must be oriented towards doing things countries cannot do for themselves. It
must focus on providing the
essential global public goods. Today this means climate change is a higher priority than further
opening of world trade or capital flows.
Second, reform capitalism. The role of finance is excessive. The stability of the financial
system has improved. But it remains riddled with perverse incentives. The interests of shareholders
are given excessive weight over those of other stakeholders in corporations.
Third, focus international co-operation where it will help governments achieve significant
domestic objectives.
Perhaps the most important is taxation. Wealth owners, who depend on the security created
by legitimate democracies, should not escape taxation.
Fourth, accelerate economic growth and improve opportunities. Part of the answer is stronger
support for aggregate demand, particularly in the eurozone. But it is also essential to promote
investment and innovation.
It may be impossible to transform economic prospects. But higher minimum wages and generous
tax credits for working people are effective tools for raising incomes at the bottom of the distribution.
Fifth, fight the quacks. It is impossible to resist pressure to control flows of unskilled
workers into advanced economies. But this will not transform wages. Equally, protection against
imports is costly and will also fail to raise the share of manufacturing in employment significantly.
True, that share is far higher in Germany than in the US or UK. But Germany runs a huge trade
surplus and has a strong comparative advantage in manufacturing. This is not a generalisable state
of affairs. (See chart.)
Above all, recognise the challenge. Prolonged stagnation, cultural upheavals and policy failures
are combining to shake the balance between democratic legitimacy and global order. The candidacy
of Mr Trump is a result. Those who reject the chauvinist response must come forward with imaginative
and ambitious ideas aimed at re-establishing that balance. It is not going to be easy. But failure
must not be accepted.
Our civilisation itself is at stake.
High stock prices are "not evidence of a healthy economy":
Bull Market Blues, by Paul Krugman, NY Times
: Like most
economists, I don't usually have much to say about stocks. Stocks
... have a lot less to do with the state of the economy or its
future prospects than many people believe. ...
Still, we shouldn't completely ignore stock prices. The fact that
the major averages have lately been hitting new highs ... is
newsworthy and noteworthy. What are those Wall Street indexes
telling us?
The answer, I'd suggest, isn't entirely positive..., in some ways
the stock market's gains reflect economic weaknesses, not
strengths. ...
We measure the economy's success by the extent to which it
generates rising incomes for the population. But stocks ... only
reflect the part of income that shows up as profits.
This wouldn't matter if the
share of profits
in overall income were stable; but it isn't.
The share of profits ... has been a lot higher in recent years than
it was during the great stock surge of the late 1990s ... making
the relationship between profits and prosperity weak at best. ...
When investors buy stocks, they're buying a share of future
profits. What that's worth to them depends on what other options
they have for converting money today into income tomorrow. And
these days those options are pretty poor... So investors are
willing to pay a lot for future income, hence high stock prices for
any given level of profits. ...
This may seem, however, to present a paradox. If the private sector
doesn't see itself as having a lot of good investment
opportunities, how can profits be so high? The answer, I'd suggest,
is that these days profits often seem to bear little relationship
to investment in new capacity. Instead, profits come from some kind
of market power... And companies making profits from such power can
simultaneously have high stock prices and little reason to spend.
Consider the fact that the three
most valuable companies
in America are Apple, Google and
Microsoft. None of the three spends large sums on bricks and
mortar. ...
In other words, while record stock prices do put the lie to claims
that the Obama administration has been anti-business, they're not
evidence of a healthy economy. If anything, they're a sign of an
economy with too few opportunities for productive investment and
too much monopoly power.
So when you read headlines about stock prices, remember: What's
good for the Dow isn't necessarily good for America, or vice versa.
Paul Krugman actually did not make any predictions on
the stock market, so those looking to get investment
advice from everyone's favorite Nobel Prize winning
economist will be disappointed. But he did make some
interesting comments * on the market's new high. Some of
these are on the mark, but some could use some further
elaboration.
I'll start with what is right. First, Krugman points
out that the market is horrible as a predictor of the
future of the economy. The market was also at a record
high in the fall of 2007. This was more than a full year
after the housing bubble's peak. At the time, house prices
were falling at a rate of more than 1 percent a month,
eliminating more than $200 billion of homeowner's equity
every month. Somehow the wizards of Wall Street did not
realize this would cause problems for the economy. The
idea that the Wall Street gang has some unique insight
into the economy is more than a bit far-fetched.
The second point where Krugman is right on the money
(yes, pun intended) is that the market is supposed to be
giving us the value of future profits, not an assessment
of the economy. This is the story if we think of the stock
market acting in textbook form where all investors have
perfect foresight. The news that the economy will boom
over the next decade, but the profit share will plummet as
workers get huge pay increases, would be expected to give
us a plunging stock market. Conversely, weak growth
coupled with a rising profit share should mean a rising
market. Even in principle the stock market is not telling
us about the future of the economy, it is telling us about
the future of corporate profits.
Okay, now for a few points where Krugman's comments
could use a bit deeper analysis. Krugman notes the rise in
profit shares in recent years and argues that this is a
large part of the story of the market's record high, along
with extremely low interest rates. Actually, the profit
story is a bit different than Krugman suggests.
The profit share had soared in the early days of the
recovery. The before tax share of net corporate income
went from a recession low of 16.9 percent of net income to
27.0 percent in the second quarter of 2014. The after-tax
share peaked at 20.4 percent in the first quarter of 2012.
However since then the profit share has trended downward.
In the most recent quarter the before-tax profit share was
23.9 percent, while the after-tax share was 17.5 percent.
This is most of the way back to the mid-1990s shares when
before-tax profits were around 21.0 percent of net
corporate income and after-tax shares were around 15.5
percent.
So, while profits had soared, the current market high
cannot be explained by a soaring profit share. We are
substantially below the peak shares from earlier in the
recovery. One caution here is that the quarterly data are
erratic and subject to large revisions. It is possible
that this picture will look very different when the
Commerce Department releases revised data later in the
month.
The next issue is how we should think about a market
high. If the stock market moves in step with corporate
profits (i.e. the price to earnings ratio remains
constant), and the profit share of GDP remains constant,
then we should expect the stock market to continually
reach new highs. In other words, market peaks are not like
a new world record time in the mile, they are more like
the tree in the backyard growing each year. They should
not come as a surprise, nor be any cause for celebration.
The third point is that the stock market highs of the
late 1990s were definitely not cause for celebration. The
stock market was in a gigantic bubble. This was serious
bad news for the economy and millions of 401(k) holders
who saw their savings plummet in the crash of 2000-2002.
(Yes, they should have sat tight, but a lot of people
didn't realize this and it's not their job to be
professional investors.) From the standpoint of the
economy it was bad news because the crash led to a serious
downturn in the labor market.
The strong wage growth of the late 1990s quickly
dissipated as the labor market weakened. While the
recession officially ended in December of 2001, we didn't
begin to create jobs again until the fall of 2003. We
didn't get back the jobs lost in the downturn until
January of 2005. At the time, this was the longest period
without net job growth since the Great Depression.
For what it's worth, the Clinton crew was clueless on
the bubble. They wanted to put Social Security money in
the stock market assuming that the real returns would
average 7.0 percent annually. The actual average has been
about half of this rate.
Finally, Krugman notes that the most highly valued
companies in today's market are Apple, Google, and
Microsoft. Krugman points out that none of these companies
"spends large sums on bricks and mortar" and all three are
sitting on large cash hoards.
Both points are well taken. Investment in plant and
equipment has actually been falling in recent quarters.
This would be fine if the decline was offset by a boom in
research and development spending, but it hasn't been. Our
great idea companies don't have many good ideas about what
to do with all of their money.
But there is another point worth noting about the Big
Three. All three are companies that depend to a large
extent on government-granted monopolies in the form of
patent and copyright protection. We have made these
protections much stronger and longer over the last four
decades through a variety of laws and trade agreements.
Of course the point of these protections is to give an
incentive for innovation and creative work. But in a
period where we are supposedly troubled by an upward
redistribution from people who work for a living to people
who "own" the technology, perhaps we should not be giving
those people ever stronger claims to ownership of
technology. (Yes, this involves the Trans-Pacific
Partnership, among other policies.)
Anyhow, perhaps our leading economists will one day
take note of this issue. It took a long time to notice
that we had an $8 trillion housing bubble and that yes, it
could be a problem. But let's hope our economists is
learning.
Dean Baker's response to Paul Krugman is excellent, and we
might consider arguing the matter further along both lines
with the need for increased domestic investment the focus.
Shares of Gross Domestic Product for Private Fixed
Nonresidential & Residential Investment Spending,
Government Consumption & Gross Investment and Exports of
Goods & Services, 2007-2016
Shares of Gross Domestic Product for Private Fixed
Nonresidential & Residential Investment Spending,
Government Consumption & Gross Investment and Exports of
Goods & Services, 2007-2016
The problem in fostering growth comes to either increasing
nonresidential investment or government spending
(hopefully for infrastructure formation). There is no
reason to think exports will increase significantly given
the relatively strong dollar and weak international growth
and slower population growth should not allow for
significant residential investment increases for some
time.
Either nonresidential investment or government
spending is the answer then.
Yeah, DB calls out Krugman for not mentioning monopoly
rents right after Krugman explicitly mentions them, and
the Bernista crowd trumpets how great Baker is.
It's not just Apple, Google and Microsoft. The whole
economy is increasingly dominated by monopolies and
oligopolies who can raise prices irrespective of demand.
Think about phone companies (Verizon, AT&T), cable TV
(Comcast, TimeWarner), Wall Street banks, soft drinks
(Coke, Pepsi), consumer goods (Procter and Gamble,
Unilever), airplanes (Boeing, Airbus), oil refineries,
pharmaceuticals, etc. etc.
Krugman is right that "profits come from some kind of
market power... And companies making profits from such
power can simultaneously have high stock prices and little
reason to spend."
For many of these companies, it is not about
intellectual property monopoly. Rather, it is about lack
of aggressive anti-trust enforcement over the last 30
years, the Obama years being about the worst on record.
Wow - liberal economist Paul Krugman got something right.
As far as your last fact free claim, I'll leave this issue
to those who actually know what they are talking about:
The article takes a circuitous route to show that Obama
has been more aggressive than Bush was...hardly a
resounding endorsement of Obama, given Bush's lax
enforcement.
I stand corrected--Obama wasn't the worst...thanks only
to Bush 43's dismal record.
The 3 month Treasury interest rate is at 0.27%, the 2
year Treasury rate is 0.70%, the 5 year rate is 1.14%,
while the 10 year is 1.59%.
The Vanguard Aa rated short-term investment grade bond
fund, with a maturity of 3.3 years and a duration of 2.6
years, has a yield of 1.57%. The Vanguard Aa rated
intermediate-term investment grade bond fund, with a
maturity of 6.4 years and a duration of 5.4 years, is
yielding 2.29%. The Vanguard Aa rated long-term investment
grade bond fund, with a maturity of 22.0 years and a
duration of 13.2 years, is yielding 3.35%. *
The Vanguard Ba rated high yield corporate bond fund,
with a maturity of 5.7 years and a duration of 4.5 years,
is yielding 5.28%.
The Vanguard unrated convertible corporate bond fund,
with an indefinite maturity and a duration of 5.4 years,
is yielding 2.07%.
The Vanguard A rated high yield tax exempt bond fund,
with a maturity of 17.0 years and a duration of 6.3 years,
is yielding 2.13%.
The Vanguard Aa rated intermediate-term tax exempt bond
fund, with a maturity of 8.7 years and a duration of 4.8
years, is yielding 1.22%.
The Vanguard Government National Mortgage Association
bond fund, with a maturity of 5.7 years and a duration of
3.4 years, is yielding 1.89%.
The Vanguard inflation protected Treasury bond fund,
with a maturity of 8.7 years and a duration of 8.2 years,
is yielding - 0.26%.
* Vanguard yields are after cost. Federal Funds rates
are no more than 0.50%.
Nit picking Dean Baker, favorite of the disaffected
Bernistas who still haven't forgiven Paul Krugman,
sarcastically calls for Krugman to talk about monopolistic
rents for the big three tech companies but doesn't seem to
notice that Krugman explicitly mentioned monopolistic
rents for the big three tech companies in his blog post.
Possibly an aside, though I would argue this is related
and is surely important:
There has long been a steady
refrain from most Western economists that China is doomed.
Lately the refrain has been that we will soon find Chinese
growth if continuing still slowing dramatically. Today, it
turns out that Chinese growth which was 6.7% on a yearly
basis in the first quarter was 6.7% in the second quarter.
For the New York Times and Wall Street Journal however...
China GDP Sends Troubling Signal on Economic Reform
Slower growth rate would have indicated country was
tackling excess industrial production, rising corporate
debt
By MARK MAGNIER - Wall Street Journal
BEIJING-China maintained its growth pace of 6.7% in the
second quarter-a bad sign to those who were looking for
indications of economic restructuring.
Economists say a slower growth rate in the second
quarter over the first quarter's 6.7% pace would have sent
a welcome signal that China was tackling excess industrial
production, rising corporate debt and state-owned
enterprise reform.
Instead, by ramping up government spending and opening
the credit taps, Beijing is likely to fuel overcapacity
and see private companies crowded out by risk-averse state
banks and bloated state companies.
This comes despite repeated calls by Prime Minister Li
Keqiang and other senior officials to foster innovation,
entrepreneurship and structural reform in order to shift
the economy from credit-fueled infrastructure to high-tech
industry and services....
China is doomed? I don't think so. Talk to any
multinational and China is the new future. Although they
complain that the Chinese SAT is really tough on transfer
pricing enforcement. Our tax authority should take lessons
from their Chinese counterparts.
Talk to any multinational and China is the new future.
Although they complain that the Chinese State
Administration Of Taxation is really tough on transfer
pricing enforcement....
Talk to any multinational and China is the new future.
Although they complain that the Chinese State
Administration Of Taxation is really tough on transfer
pricing enforcement....
[ Again, critical for China and
just what Stephen Roach of Yale has noticed and several
times argued when interviewed on Bloomberg. ]
So Chinese growth less than 6.7% would mean China was
nearing doom, while growth at 6.7% means China is doomed,
because growth less than 6.7% would mean that even though
China slowing growth means doom for China at least slowing
growth would show that the advice to restructure the
economy of so many Western economists was being listened
to, but 6.7% growth shows China is not listening to the
advice of so many Western economists and that means, well,
you know...
Chinese growth is 6.7% with massive and unsustainable
government interventions, and potentially some book
cooking.
Meanwhile, people like Anne self-righteously
accuse anyone who points to China's poor econ fundamentals
and trends as being Western Imperialists, or something.
But if you feel so confident, go ahead and invest your
money in China. The opportunity cost is low, given low
rates in the devloped world, and they would certainly
welcome the cash influx.
IOW the real interest rate (CPI now @ 1.0%) is negative
for 3 month and two year treasuries, 0.14% for 5 years,
.57% for 10 years. If you invest in anything longer, a
saver runs the risk of losing your shirt if a) rates
unexpectedly go up or b) inflation rises forcing interest
rates up.
It seems that economists enamored with
inflation are oblivious (willfully?) to the consequences
of saddling peopling with as much poor yielding secure
debt as possible. Sure it will cheapen the real value of
government debt, their primary goal, but only by screwing
savers.
Unfortunately, higher inflation will make a lot of long
term lenders bankrupt (think mortgage companies) as
interest rates on borrowing short term exceed the interest
rates on mortgages, which are currently at historical
lows. To make matters worse, mark-to-market accounting
will decimate the value of their holdings.
IMO anyone who lends long term, institutions or
individuals buying 30 year bonds, is completely nuts.
Without long term lending to support economic growth, how
can the economy possibly grow?
Unfortunately, higher inflation will make a lot of long
term lenders bankrupt (think mortgage companies) as
interest rates on borrowing short term exceed the interest
rates on mortgages, which are currently at historical
lows. To make matters worse, mark-to-market accounting
will decimate the value of their holdings....
[ The
question to ask is how can and will a mortgage company
such as a Wells Fargo handle an increase in long term
interest rates. There is a reason Warren Buffett has Well
as a key Berkshire Hathaway holding and has recently been
buying more of the company. Wells will be fine, but how?
"t seems that economists enamored with inflation are
oblivious"
More dishonest intellectual garbage.
Economist are not for high inflation. We are for full
employment. OK, OK - we know you are against full
employment but hey!
Oh, puleez! If 'liberal' economists were for full
employment, they would obsess about the Fed's employment
target. But they don't...they obsess about not enough
inflation, witout being very fussy about how to get more
of it.
Do 'liberal' economists have such difficulty with
the English language that they constantly substitute the
word ' inflation' for 'employment?' Reading economic
papers or Yellen's statements, one might think so. it's
easy to see how much they struggle expressing their ideas.
But constantly substituting 'inflation' for 'employment'
is a bit over the top, even for tongue tied economists.
Technical but important point: it's not the *current*
profit share that matters for stock prices but rather the
way current share reflects on expectations of the future
that really matter.
So while Dean Baker, in his quest to
nit pick everything Paul Krugman says in order to bring
cheer to butt hurt Sandernistas everywhere (Who still
haven't forgiven PK for daring to criticize their
Beloved), does correctly note that profit share has
declined, he fails to realize that a cyclical factor
moving cyclically doesn't mean expectations of future
profit share haven't also risen.
The real weakness in investment is the lack of wage growth
which has limited consumer demand. Flat, or even
shrinking, consumer demand means flat or shrinking demand
for investment. When there is nothing to invest in, your
best bet is the stock market.
Industrial Production, June 2016:
"Vehicles held down industrial
production in May but not in June, making for a big 0.6 percent gain that is just outside Econoday's
high-end estimate" [
Econoday
].
"Looking at details deeper in the report, the output of business equipment rose a solid 0.7 percent
but the year-on-year rate, in what is definitive evidence of weakness in business investment, is
in the negative column at minus 0.6 percent. The output of consumer goods, up 1.6 percent on the
year, rose 1.1 percent in the month in what is another good showing in this report." However: "The
headlines say seasonally adjusted Industrial Production (IP) improved. The year-over-year data remains
in contraction but the trend lines are now pointing towards improvement" [
Econintersect
].
"Economic downturns have been signaled by only watching the manufacturing portion of Industrial Production.
Historically manufacturing year-over-year growth has been negative when a recession is imminent.
This index is nearing the warning area for a recession."
Empire State Mfg Survey, July 2016:
"The first anecdotal report on the factory sector for
the month of July is not very promising as the Empire State index barely held in the plus column"
[
Econoday
]
Business Inventories, May 2016:
" Businesses are keeping their inventories in check amid
slow sales. Inventories rose only 0.2 percent in May following April's even leaner 0.1 percent rise.
Sales in May also rose 0.2 percent keeping the inventory-to-sales ratio unchanged at 1.40, which
is a little less lean than this time last year when the ratio was at 1.37″ [
Econoday
].
"Retail inventories did rise an outsized 0.5 percent in May in a build, however, that looks to be
drawn down by what proved to be very strong retail sales in June. Manufacturing inventories fell
0.1 percent in May with wholesalers up 0.1 percent." But: "Econintersect's analysis of final business
sales data (retail plus wholesale plus manufacturing) shows unadjusted sales improved compared to
the previous month – but due to backward revisions the rolling averages declined. Inventory growth
was moderate. The inventory-to-sales ratios remain at recessionary levels" [
Econintersect
].
Retail Sales, June 2016:
"June proved a fabulous month for the consumer though May, after
revisions, proved only so so." Above consensus [
Econoday
].
"Ex-auto ex-gas offers a gauge on underlying trends in consumer spending, a dominant one of which
is ecommerce as nonstore retailers popped a 1.1 percent surge in the month which follows even stronger
gains in prior months. Department stores, up 0.9 percent, show a big comeback in the month with sporting
goods & hobbies strong for a second month. An outsized gain, one that hints at adjustment issues
and the risk of a downward revision, is a 3.9 percent surge in building materials & garden equipment,
a component that had been lagging…. This report is a major plus for the second-half economic outlook
not to mention coming data on the second quarter (sales for April, after the second revision, are
at a standout plus 1.2 percent). The job market is healthy and the consumer is alive and spending."
A little cold water: "Retail sales improved according to US Census headline data. Our view of this
month's data is similar but there was a decline in the rolling averages – and downward revision to
last month's data" [
Econintersect
].
This Maine bear sunk more money into shelter and did a lot of gardening. I hate to think I'm an ideal
type.
Consumer Price Index, June 2016:
"Price pressures evident the last two months down the
supply chain are not yet appearing in consumer prices" [
Econoday
].
Caveat: "[I]nflation does not correlate well to the economy – and cannot be used as a economic indicator"
[
Econintersect
].
Consumer Sentiment:
"In perhaps an early indication of a U.S. Brexit effect, the consumer
sentiment flash for July is down a sharp 4.0 points to 89.5. Weakness is centered in the expectations
component which fell 5.3 points to 77.1 for one of the very weakest readings of the last two years.
Weakness in expectations ultimately points to doubts over the jobs outlook" [
Econoday
].
But: ""Prior to the Brexit vote, virtually no consumer thought the issue would have the slightest
impact on the U.S. economy. Following the Brexit vote, it was mentioned by record numbers of consumers,
especially high income consumers," [Richard Curtin, the survey of consumers chief economist] said."
Shipping:
"[T]he National Retail Federation is forecasting only a modest pickup at U.S.
ports, with container volume that would hardly amount to a peak at all" [
Wall
Street Journal
].
Shipping:
"Transportation-sector analysts believe that rail volumes, which have declined
over the past year, may be bottoming out. Things are looking brighter for the second half of the
year, as natural gas and oil prices recover, driving more energy-related shipments. Seasonal grain
exports should also provide a boost" [
Wall
Street Journal
, "Has U.S. Rail Traffic Found Its Rebound?"].
Supply Chain:
"By creating a permanent record that can't be altered, blockchain is well-suited
for tracking diamonds and other goods where buyers want to know the origins and previous owners,
said Bill Fearnley Jr., a research director at International Data Corp" [
Wall
Street Journal
].
Shipping:
"UPS and FedEx expand pharmaceutical shipping channels to global market" [
DC
Velocity
]. Seems to be optimized for clinical trials and testing, however. "The international
drug market is swelling rapidly to accommodate the 20 to 30 million new Americans who have recently
become insured under the Affordable Care Act and, more broadly, the "silvering" of an aging global
population with growing medical needs." Because I don't get how the ACA spurs demands for international
pharma shipments to patients.
Housing:
"Big Wall Street investors stopped buying real estate in large quantities back
in late 2014. In many cases big investors had front row seats at banks and were able to buy in bulk
and for incredibly low prices not offered to the public. This crowding out of course has caused two
major things to unfold: inventory to dwindle and a push up in prices for regular families looking
to buy. For the first time in history many things happened in the housing market including nationally
falling prices but also a large interest from Wall Street in single family homes. Now with prices
near previous peak levels many of these large investors are making the full exit by offering to sell
the homes to current tenants, for of course a modest increase. Those bailouts that were geared to
helping the public actually created a system that has slammed the homeownership rate lower and has
now jacked home prices up once again. Large investors are now making their final play by cashing
out" [
Dr
Housing Bubble
]. I'd want Yve's views on this, but selling to the little guy at the peak of the
market sure looks like a PE scam to me. Readers, do any of you have direct experience with this?
Helicopter Money:
"Monetary financing of public sector spending isn't a giant leap from
where Japan is today – it could get there in a series of small steps. It would be more a case of
'drone money' than 'helicopter money' if the BOJ were to go from buying longer and longer-dated debt
with lower and lower coupons to something indistinguishable from zero-coupon perpetuals. But away
from such idle speculation, with monetary and fiscal policy working hand-in-hand to drive inflation
expectations up, and to drive investors out of domestic assets, there's room for the yen to weaken
(quite a lot) further; all the more so as the US economy stabilises" [SocGen,
Across the Curve
]. You can borrow
money for free and there's no government infrastructure program. Speaking of cashing out, is that
what the elites are doing globally? Not that I'm foily. The best science fiction novel with autonomous
vehicles that I can recall is Philip K. Dick's
Game Players of Titan
, and that was a depopulated
world…
The Bezzle:
"[F]or Google, the ultimate outcome does not look bright. A new EU competition
chief is overseeing this barrage of cases, as European corporate giants line up against the Silicon
Valley behemoth. Meanwhile, as Google relies more on artificial intelligence to automate a range
of tasks that run its services behind the scenes, it could face a whole new round of conflict with
Europe. In the end, Google in Europe could wind up as a very different thing than Google at home"
[
Wired
].
The Bezzle:
"BP announced on Thursday it believes the final pre-tax cost of its Deepwater
Horizon spill will be $61.6bn or $44bn after tax" [
Splash247
].
But no jail time for executives, since they have elite impunity, say for ecocide. I say let's look
forward and not back.
Political Risk:
"[S]hipping companies fear the [Hague Tribunal's] ruling [on the "Nine-Dash
Line"] could embolden the Philippines and other smaller nations to assert their rights to the waters
more aggressively and that any conflict would disrupt ship-borne trade in the waters between Hong
Kong and Indonesia. Thousands of ships transit those waters daily, and a third of the world's liquefied
natural gas passes through the Straits of Malacca to the South China Sea" [
Wall
Street Journal
]. " Even if shipping isn't disrupted, companies say they face higher costs if
the standoff escalates since insurance companies are likely to drive up rates."
"That empowerment must be both economic and political. Workers deserve
to be compensated fairly for their work, and have generous social support
programs to rely upon when economic changes that are out of their control
throw them out of work or force them to accept lower paying jobs.
We should not hesitate to ask those who have gained so much from
globalization and technological change to give something back to those
who have paid the costs of their success."
All this would have been especially great, say, forty or even thirty
years ago.
"... The report dismisses the myths that access to Social Security disability or that men are not choosing to work as culprits. More than a third were in poverty. Fewer that 25% of the men not working have a spouse supporting them and that percentage has dropped in the last 50 years. The CEA's analysis find that Social Security disability explains at most 0.5% of the reduction. ..."
"... Similarly, the problem with European-style job training programs is that US employers do not want to hire people with general training, even in a particular skill area. Their strong preference is to hire someone who is doing the exact same job for a similar company, so as to minimize their effort (in theory; in practice, the extra time spent on the search probably offsets the theoretical savings). The cure for that is a much more robust job market, where employers realize they are not going to find the perfect candidate and take someone approximate and give them the training and other guidance they need to become productive. ..."
"... Friends of mine visited Germany last year, noticed that for curb, pothole repair where in the US you see 2-3 guys and a bunch of equipment, there he would see 8 guys with shovels and little to no equipment. ..."
"... Yes, when I was working at UT-Austin, they cut the janitorial staff so that offices were only vacuumed once a month. ..."
"... The reality of what is happening is on the economic/political level. It involves a small number of people, living in a rich, opulent high tower, who for years acted and enacted without the slightest bit of empathy or selflessness. These same people have literally no depth to their thought and are ruled by the very gluttony/ego so valued in todays consumerist society. This type used to live in Rome during Diocletian's rule, in Egypt during the Hyskos invasion, in the Mayan Empire during the Postclassic period, etc ad infinitum. The overall picture has repeated itself, as an empire is a microcosm of any living organism; it gets old and becomes very susceptible to change, that is, the ruling class become so removed from reality that their decision making begins to deviate further and further from the actuality of the current situation. The Housing Crisis is a prime example. The banks saw fit to literally scam their own customers with no government intervention! Twice! This type of thinking quickly affects the entire nation. People begin to see a futility in living morally and truthfully, and start to wonder if the entire system is a scam. ..."
"... I've visited enough towns in the Mid West where everyone is on some pharmaceutical, usually Percocet or valium, yet have no money for a proper house with heating and cooling. ..."
"... So entire industries now eschew people older than 30 in favor of being staffed entirely by 20 something's. This will surely end well. ..."
"... They are bring these workers from India where starting IT salaries are $10,000/year. Check early in the morning and late at night and you will see the buses delivering the workers who lived crammed in surrounding apartments. One told me his Indian outsourcers had eight of them living in a two-bedroom apartment with one bathroom - while working 80-100 hours per week. They are threatened with deportation if they complain, and in some cases, their families back home are physically threatened. ..."
"... granting automatic work authorization to all H-1B spouses. ..."
"... expanding Bush's "Optional Practical Training" now allowing stem graduates to work for three years ..."
"... lowered qualifying requirements for L-1B visas. L-1b visas allow corporations to import their foreign employee to work in the US at the home nation salaries. And has lead to widespread abuse such as foreign employees being paid $1.73/hour. ..."
"... modified the B-1 visa, used attended training and meetings, to incorporate the "B-1 in lieu of H-1B" which now allows some foreign workers to work in the US on the B-1 visa ..."
"... There are now well over a million foreign guest workers in the US and the numbers are growing. Curiously (ha ha!), DHS does not even keep count of the above admissions. ..."
"... Wow, didn't know they expanded the student work permission to three years. Used to be one year. Essentially if you go to college here you have bought yourself a ticket to live in America and take a job from an American. ..."
"... I was replaced by a 20-something. Actually, at my last job (3 years ago) both the older employees, myself and another employee, were replaced. One employee who had worked there for 15 years and was 60, so TWO years away from retirement, was let go. (I hope he sued the pants off that horrible firm!) ..."
"... Yes indeed, there's a reason big business doesn't want medicare for all – it would result in the ultimate 'flexible workforce'. Workers immediately bailing out of every shit show employment situation they manage to fall into at the drop of the hat with no COBRA or insurance dead zones. But on the other side of the coin, it would ramp up the Uber jitney economy of on-demand disposable workers lined up holding signs displaying their skill sets for a day's pay at the highway on-ramps at 6:30 AM (or, as the neo-liberal mindset would frame it – the entrepreneurs). ..."
"... Thats pretty much how the movie/tv industry operates in Hollywood. ..."
"... History of Work Comp as I remember it - speaking of how "the company" counts its beans: Johns Manville had a problem with people getting slowly sicker on the job (handling asbestos) starting late in the 1800s paid doctors to do studies that proved the asbestos-asbestosis-mesothelioma connection, and gave some rates of worsening of the diseases and hence points at which workers could no longer work. The researchers and doctors were paid for and threatened into silence on the findings, and required to ignore their Hippocratic obligations. Workers had to go to company doctors, who would nurse them along until they were fired for inability. ..."
"... All labor reform policies put forth by Republicans and their policy activation arm (Dems) have been to make life easier and richer for CEO's, not to help workers. So now economists are surprised by the results? What a useful profession they are. ..."
"... The 40 hour work week was established under Roosevelt. If you wish to reverse or stave off the declining Participation Rate, then decrease the required number of hours work to 32. We have agreed before that Labor is the lowest cost when compared to Overhead or Materials. In the end, the difference in cost would be made up by higher productivity. ..."
A new Council
of Economic Advisers study released by the White House on the fall in labor force participation among
men of prime working age (25 to 54) should be subtitled, "It's the Neoliberal Economy, Stupid."
The report does a useful job in documenting where the level and nature of the decline in male
workforce participation, which peaked at 98% in 1954 and is now at 88%, the third lowest among OECD
countries. The decline is concentrated among less educated:
Blacks have been hit harder than other groups:
And the general outlook for employment has been deteriorating over time. However, bear in mind
that this decay somewhat overlaps with the story that less educated groups have been harder hit.
US educational attainment has fallen over time.
The report dismisses the myths that access to Social Security disability or that men are not choosing
to work as culprits. More than a third were in poverty. Fewer that 25% of the men not working have
a spouse supporting them and that percentage has dropped in the last 50 years. The CEA's analysis
find that Social Security disability explains at most 0.5% of the reduction.
The cause is the state of the job market:
• Participation has fallen particularly steeply for less-educated men at the same time as their
wages have dropped relative to more-educated men, consistent with a decline in demand.
o In recent decades, less-educated Americans have suffered a reduction in their wages relative
to other groups. From 1975 until 2014, relative wages for those with a high school degree fell
from over 80 percent of the amount earned by workers with at least a college degree to less
than 60 percent
While doing a fine job dimensioning profile of the groups that have been hit the worst, the authors,
after invoking hoary neoliberal defenses, as in these workers are the losers in a globalized market,
the paper gives a coded acknowledgment that policies that are hostile to workers have produced the
expected result:
This reduction in demand, as reflected in lower wages, could reflect the broader evolution
of technology, automation, and globalization in the U.S. economy.
Conventional economic theory posits that more "flexible" labor markets-where it is easier to
hire and fire workers-facilitate matches between employers and individuals who want to work. Yet
despite having among the most flexible labor markets in the OECD-with low levels of labor market
regulation and employment protections, a low minimum cost of labor, and low rates of collective
bargaining coverage-the United States has one of the lowest prime-age male labor force participation
rates of OECD member countries.
It is remarkably cheeky to see the authors attempt to depict "flexible" labor markets, where workers
can be tossed on the trash heap, as beneficial to laborers.
The recommendations are tepid, and the authors assert "A number of policies proposed by the Administration
would help to boost prime-age male labor force participation." In other words, we are to believe
the problem is those Republican meanies in Congress, as opposed to Obama not pushing hard for these
measures in his first term, when he had the opportunity to pass wide-ranging reforms.
One proposal is the new conventional wisdom of more infrastructure spending to create more jobs
for unskilled workers directly, improving community colleges and other training so workers will have
skills that line up with hot job markets. The problem with the latter idea is that demand can shift
quickly (look at how the oil patch was robust a few years back and is now just starting to get back
on its feet). Moreover, employers are extremely prejudiced against both older people and people who've
been out of the workforce, and the age which is deemed to be "older" has collapsed.
Per Wolf Richter (emphasis original):
Now I've come across a fascinating piece on MarketWatch, an article on what to do to get into
the cross hairs of a recruiter whose algos are combing through millions of profiles on LinkedIn.
No recruiter in his right might is personally clicking through LinkedIn profiles. They're all
scanned by algos by the millions in nanoseconds. And so the trick is structuring your profile
to get the algos to pay attention. This isn't a human-to-human scenario, but a human-to-algo scenario.
You're trying to second-guess an algo that's going to decide your future….
But apparently the lifespan of a degree has been shortened from 20 or 25 years to just 10 years!
Then it rots, and it has to be swept under the rug. The article put it this way (emphasis added):
Older job-seekers….
I mean, I'm already seething.
Older job-seekers need to walk a fine line. Unless you made the cover of
"Time" or discovered a solar galaxy, experience has a shelf life on LinkedIn, says Scott Dobroski,
career trends analyst at Glassdoor. There's no need to wax lyrical about a job that's more
than 10 years old, he says. And those who g raduated from college a decade ago
may want to exclude the date they graduated. "Your college graduation date will age
you," he says, "and although ageism is illegal, it's happening all the time." On the other
hand, if you're applying for a job as CEO of a Fortune 500 company and you graduated in 1986,
it's okay to leave the date, Dobroski says.
Note the word "older job seekers" in connection with a college degree from 10 years ago. Those
older job seekers are early Millennials!
Yves here. Admittedly, candidates on LinkedIn are more educated than the group this study is most
concerned about, but consider the message: even among the educated, the shelf life of a degree has
diminished greatly due to ageism. Why would it be less bad among the less well educated?
Similarly, the problem with European-style job training programs is that US employers do not want
to hire people with general training, even in a particular skill area. Their strong preference is
to hire someone who is doing the exact same job for a similar company, so as to minimize their effort
(in theory; in practice, the extra time spent on the search probably offsets the theoretical savings).
The cure for that is a much more robust job market, where employers realize they are not going to
find the perfect candidate and take someone approximate and give them the training and other guidance
they need to become productive.
And finally, the report claims that Obama has been pumping for one of the most needed remedies:
Increasing wages for workers by raising the minimum wage, supporting collective bargaining,
and ensuring that workers have a strong voice in the labor market.
Help me.
So I'm at a loss to understand the political purpose of this report. It's useless as a policy
driver given that this is an election year when Obama is a lame duck. Perhaps it is a weak effort
at legacy-bolstering by showing that even though the decline in labor force participation among men
was marked in the Obama Administration, it started long before he took office. But it still ignores
some elephants in the room, like the fact that employers stopped sharing the benefits of productivity
gains with workers starting in the mid-1970s and lack of sufficient demand in the economy. What it
does reveal is one of the many time-bombs that Obama has left for the next President.
Time to start blaming those darn
"stay-at-home" dads!! (PEW via CalculatedRisk) How much more evidence will it take for orthodox
economists to stop manufacturing silly excuses for a crappy job market.
Economists since the 1970s have been primarily involved with explaining away unemployment;
that is, saying it doesn't exist. This is because their theory of inflation (printing money =
inflation) breaks the rules of elementary algebra if unemployment does exist. To normal people
(non-economists) confronted with such a situation, the theory would quickly be abandoned as nonsense,
but to economists this is not an option, because this theory also says that big government is
bad, a truism that in the economics profession needs no explanation.
So you see, Marco, there is no crappy jobs market because there's no such thing as unemployment.
Ask any economist. They'll tell you.
Here are some nice nuggets from the CEA study on the stay-at-home dad myth:
"Participation rates have fallen for both parents and nonparents alike, but prime-age
males without children saw a larger decline of 9.4 percentage points since 1968 compared
to 4.9 percentage points among prime-age males with children. This suggests that men dropping
out of the labor force to be stay-at-home fathers is likely not an important factor in the overall
decline; moreover, only around a quarter of prime-age men who are not in the labor force are parents
(down from around 40 percent in 1968)."
and
"Based on [American Time Use Survey] data, there is little evidence that men are staying
home to care for children or to do house work. "
Blame technology.
Low skilled workers are easiest to replace.
Example, you used to have people sweeping and washing floors in shopping centers or subway stations.
Now you have one person on a sweeper or washer.
And how well is that working out? I'm serious. Perhaps they need a couple of more people ALONG
with the washers and sweepers. Sorry to use Disney, but part of the reason the parks are pristine
is because they have a whole lot of people going along picking up the trash and sweeping up.
It is not just technology, it is a management that doesn't understand how much labor they really
need and ignore the signs they do not have enough, because then their numbers might be down. And
this is even when their numbers are already down.
It's really about how the priorities are set and by whom.
In a sane society, the issuer of the currency would pay people to do things people like to
do or benefit from doing themselves and pay for equipment/robots to do things people don't like.
Friends of mine visited Germany last year, noticed that for curb, pothole repair where in the
US you see 2-3 guys and a bunch of equipment, there he would see 8 guys with shovels and little
to no equipment.
It is not as simple as "technology". I often find that those who say lines like "robots are
going to take away all the jobs!" are those without actual degrees in those subjects. Technology
simply moves the plane of thought, processing, manufacturing, etc to the next level. The invention
of the computer spawned an entire multi-TRILLION dollar industry with millions of jobs. Robotics
will be/is the same.
The reality of what is happening is on the economic/political level. It involves a small number
of people, living in a rich, opulent high tower, who for years acted and enacted without the slightest
bit of empathy or selflessness. These same people have literally no depth to their thought and
are ruled by the very gluttony/ego so valued in todays consumerist society. This type used to
live in Rome during Diocletian's rule, in Egypt during the Hyskos invasion, in the Mayan Empire
during the Postclassic period, etc ad infinitum. The overall picture has repeated itself, as an
empire is a microcosm of any living organism; it gets old and becomes very susceptible to change,
that is, the ruling class become so removed from reality that their decision making begins to
deviate further and further from the actuality of the current situation. The Housing Crisis is
a prime example. The banks saw fit to literally scam their own customers with no government intervention!
Twice! This type of thinking quickly affects the entire nation. People begin to see a futility
in living morally and truthfully, and start to wonder if the entire system is a scam.
Now imagine the modern US economy as a sinking ship. The top level execs, elites, are busy
pillaging as much as they can, because they all see that US supremacy isn't going to last. Manufacturing
all moved to China, now Mexico, retail is dead in the water, the US consumer is getting weaker
and weaker. Only healthcare is staying afloat, due more to political reasons than anything else.
The easiest and most common method to increase your salary as a corporate exec is to get rid
of overhead: sell off portions of the business, layoffs, etc. They are all doing it regularly
with no impunity. US manufacturing is all but GONE. Its all been sold to PE firms that install
a puppet as the CEO, who then begins the extraction process of selling off parts of the business,
instating capital controls, and layoffs. Now it moved to retail. Eventually, America will be a
literal husk. Every place will just have the same options of a few fast food and retail chains.
The entire Midwest is already there, hence "Rust Belt". The only places that will be spared in
America will be the bubble of wealth concentrated on the coasts, but even these will begin to
whither as wealth starts to move to other, happier countries.
So in this milieu, put yourself in the place of a average HS educated American. You have two
options for your career: work your ass off and make next to nothing, or go to college and graduate
a debt-slave, also making next to nothing. However, a third option presents itself, complements
of the Welfare State: collect unemployment and have all the free time in the world. Then imagine
what you see and hear everyday. Banks illegally foreclosing on homes, executives getting away
with fraud in the hundreds of millions, a militarized police, potent pharmaceuticals given away
like candy, a plant that causes mild decrease in heart pressure illegalized, politicians lying
again and again, the wealthy talking on TV about how "easy" it is to open a business and selling
books about it, etc. It all concentrates down to the worst of all emotions: depression, self-loathing,
and envy.
The depression comes from the hopelessness of most American's situation: poorly educated with
no future career, not even a path to take which will ensure a brighter future. The self-loathing
comes from the media, as most people get an HOURLY reminder of how shitty they look, how poor
they are. Even shows like Shameless don't touch on the reality of being poor in America. It isn't
a day to day struggle to pay bills. Its a day to day struggle to even feel worth something. To
feel part of society.
Then there's envy. You feel envious of the wealth, the attractiveness of others you see in
the media, which you misplace as being the vast majority of people in America because you see
them everyday and everywhere: online, on billboards, in movies, commercials, etc. You begin to
feel like SOMETHING should be given to you. The Government, fearing rebellion, realized this during
the last Great Depression when they began to expand the Welfare State. Welfare is a form of suppression.
It keeps people on the lowest rung just happy enough to forget about rebelling. Big Pharma is
a BIG factor in this as well. I've visited enough towns in the Mid West where everyone is on some
pharmaceutical, usually Percocet or valium, yet have no money for a proper house with heating
and cooling.
So in summary, the extraction of wealth by the upper class, (through "global" trade agreements,
stock market manipulation, tax evasion, offshoring, etc) along with lax regulation & prosecution
by the political body (they are very much one and the same these days) caused immense physical
(monetary) and mental depression/suppression of the masses, which are steadily moving toward Welfare
as it becomes the only of options with a glimmer of stability & free time.
They are bring these workers from India where starting IT salaries are $10,000/year. Check
early in the morning and late at night and you will see the buses delivering the workers who lived
crammed in surrounding apartments. One told me his Indian outsourcers had eight of them living
in a two-bedroom apartment with one bathroom - while working 80-100 hours per week. They are threatened
with deportation if they complain, and in some cases, their families back home are physically
threatened.
With the defeat of H-1B expansion, Obama has now vastly increased foreign guest workers through
executive actions that include:
granting automatic work authorization to all H-1B spouses.
expanding Bush's "Optional Practical Training" now allowing stem graduates to work for
three
years in the US on a student visa. The OPT has no caps, little labor protections,
and no salary requirement.
lowered qualifying requirements for L-1B visas. L-1b visas allow corporations to import their
foreign employee to work in the US at the home nation salaries. And has lead to widespread abuse
such as foreign employees being paid $1.73/hour.
modified the B-1 visa, used attended training and meetings, to incorporate the "B-1 in lieu
of H-1B" which now allows some foreign workers to work in the US on the B-1 visa
There are now well over a million foreign guest workers in the US and the numbers are growing.
Curiously (ha ha!), DHS does not even keep count of the above admissions.
Wow, didn't know they expanded the student work permission to three years.
Used to be one year.
Essentially if you go to college here you have bought yourself a ticket
to live in America and take a job from an American.
I was replaced by a 20-something. Actually, at my last job (3 years ago) both the older employees,
myself and another employee, were replaced. One employee who had worked there for 15 years and
was 60, so TWO years away from retirement, was let go. (I hope he sued the pants off that horrible
firm!)
Oh, they're all out beating down the door over in Philadelphia to work as substitute teachers
for $75 per day. Just google 'substitute teacher shortage' and you'll see plenty of job opportunities.
Its called "turnover" and companies use it nowadays to suppress wages. Why pay a 30 yr old
85K when you can pay a 20 yr old 50k?
Most of the work is simple anyways, unless you work in the STEM field. And unfortunately, in
the STEM field, the largest industry (software) takes this approach to the next level.
Incentives matter – if the end all and be all is GDP, you get GDP. TPP is an "industrial" policy,
or more accurately a re-distribution policy – yeah – re-distribution – the fact that it is re-distribution
from the poorer to the richer is a novel use of the concept, but we should never under estimate
the cleverness of Davos man.
The fact that it is espoused by those who incessantly yammer about how government policy should
be "neutral" exposes that these people are just making the rules for their own benefit. The fact
that so many laws ("reforms") must be instituted to advance this agenda just exposes the intellectual
dishonesty. Or would they have us believe that the advent of neoliberalism and the increase in
inequality is just a happy (sarc) coincidence? The idea that this is some unstoppable force of
nature just wants to make me puke.
If you think that work matters, that participation in society is important, and that a nation
is more than airbnb beds for Davos man conference attendees, you can have policies that punish
outsourcing, decide that limiting H4B workers increases demand for workers here with commensurate
increases in wages. There are a zillion ways the tax code as well as other laws are inimical to
US workers. It STARTS with the idea that paying labor more does NOT harm society….
These policies are not a function of physics or of God's will – they are made by men at the
behest of the few to reward the few. It can be changed if we choose to change it – although I
fear we are rapidly reaching a point, and may have already reached it, where we are a defacto
plutocracy and any "reform" is mere window dressing.
I agree with you wholeheartedly. We are on a straight path to plutocracy and I too fear we
have already passed the point of no return. I hear (read) daily the awful word, redistribution;
always in the context of taking a small amount away from the rich and powerful to give to those
not as fortunate; but never in the context of what is actually happening on a grand scale; the
taking from the lower classes and giving it to the upper 1% and above. When will it stop? I don't
know; I do know that unless we continue to try and make the masses actually understand what is
happening to them and to get them off their apathetic arses and involved in the political process,
thereby voting out of office the scrads of politicians devoted to and enamored of neoliberalism,
we will continue down this prophetic road of self destruction. It is our choice. It will be hard.
It may, in fact, already be too late. But, we have to try. We have to keep working; working to
explain the awful policies of neoliberalism.
Agreed. So what MUST the demand be ? Let the capitalist go after FULL AUTOMATION and balance
that with UNIVERSAL BASIC INCOME . Everything to do with money can be defined as a balance sheet
so this should be the balance sheet for the 21st Century . The demand should come from all . And
it's coming. I know the Swiss just rejected it , but the fact that they just called a referendum
to decide it ( for now ) tells us it's there in the ether and the Swiss are not alone ; the Dutch,
the Finns are all working on this . It's the genuine great leap forward.
sorry but basic income guarantee is simply creating demand for the plutocrats, and is exactly
why food stamps are in the agriculture budget. This is why the 13,000/yr BIG floated a week or
two ago already, at it's inception, takes 3,000 and puts it towards medical care-oops, i mean
insurance- you won't get care unless you pay extra, don't kid yourself. And this gravy train will
have as many cars attached to it as it can carry, how much will your BIG be in the form of food
stamps? rent subsidy? by the time it's implemented the person at the root of the issue won't get
a thin dime, but the cronies will have a basic income guarantee, the true purpose of this terrible
idea, I and others like me want things to do, not a snap card (more likely digital wallet brought
generously to you by apple and jp morgan, which of course will charge a fee, and conveniently
keep track of where you are at all times) that allows me to buy gmo food (yes, there will be foods
that are for the poor and foods for the rich, want organic? what's your net worth?) The silicon
valley parlors where these moronic ideas are hatched are filled with people who are trying to
cement their presence in the upper class which is funny on the meritocrat side because many of
my tech friends didn't go to college, they were good at video games and now it's robots robots
robots because that's their gravy train and the BIG is their lame ass apology, while getting some
demand into the economy to pay for their craptastic junk toys.
Excellent, my vote post of the week. The best answer is to pay people to actually work, the
work would be to pay them to undo the damage of the last 300 years of industrial revolution. We
had created a large middle middle class and secure working class destroying the planet, we can
create the same wealth cleaning it up. Instill hope on a dying planet, and for the first time
in its history give humanity a reason to get up in the morning other than just exploiting each
other in a rat race.
One way of looking at how a BIG can be manipulated by owners is considering slavery. It seems
we are entering a new phase in the never ending capitalist struggle to secure cheep labor. Cheep
labor and resources are the driving force of the current system. The logical end result is to
have a self-sustaining labor force. One that makes just enough to survive and work- with little
room for anything else. That is where we are headed.
Advancing technology and the desire to shed costs related to slave upkeep can be argued as
important factors in slavery's demise in it's original social form as one individual owning another
as property. Why bother taking on the responsibility for slave upkeep when you can rig the system
in ways that require workers to enslave themselves to businesses and the system as a whole. You
need the labor power, not the person.
A BIG will be sold for all the typical humanitarian half-truths, but in reality is a natural
development to maintain the capitalist system. The powers that be have demonstrated no interest
in maintaining a middle class workforce. Debt bondage and BIG coercion are on the horizon.
As Goethe observed: None are more hopelessly enslaved than those who falsely believe they are
free.
Why does there have to be a political purpose for the release of the report? I would guess
that the end of a presidency works a little like late Friday afternoon when stuff get dumped to
the public at their point of lowest interest.
Raising the minimum wage works at cross purposes. It helps in the short run but in the longer
run – other things held constant – it makes automation more likely.
When the small company I worked for years ago was faced with replacing a piece of equipment,
at some point after the minimum wage had been raised, the company replaced it with one that was
more automated and took few people to operate. The cost of labor had moved up and cost of capital
was lower due the interest rates. The numbers were close enough that it could have gone either
way but the feeling was that the cost of labor would continue to go up. Going with the more automated
equipment locked in more of our costs.
It's weird how people can pretend to conflate technology assisting labor with replacing labor
with cheaper labor, in order to derail the subject.
As far as your "point", they invented the nail and hammer and now we don't have to drill holes
and put pegs in. Fine. Nobody is talking about going technologically backwards, in fact just the
opposite. We are talking about the race to the bottom in labor itself. I suspect a bit of looking
around can find a lot of places where 1 American + 1 machine is slightly more expensive than 4
third-worlders + shipping + no machine. Sometimes the machines have progressed so fast that work
has moved back onshore (and funny that all the moaning about "helping people that live on 2cents/day"
isn't heard when that happens), which is cool but it still is the exception.
But: how limited is the number of "capitalists" that are going to bother to invest in bringing
down the cost of that machine when you can drive the cost of humans down in almost unlimited fashion?
- there are actually limits, and we will eventually hit them but it will get a lot uglier if we
do it that way.
And the whole issue is treating fellow human beings as less deserving, less worthy of employment
just because of their nationality.
There will always be that other half of the working class that can be used to kill the other
half when pushed hard enough, any definition will do for separating the class in to us vs them,
so that the war can start. Unions blew it when in the 1970s when their leadership sold out, refused
to go international with trade agreements, and focused on protecting an indefensible position,
indefensible from both an economics view and from an ethics view.
During the cold war the American Labor union movement was thoroughly anti-communist and in
bed with the CIA as far coordinating with international labor. See wiki on Jay Lovestone for a
bit of the flavor of the times.
My point was that we ended up with one less minimum wage job because the cost of labor made
it better for the company to buy the more automated piece of equipment.
That example had nothing to do with off-shoring – though I now work in a company of about two
dozen people who has off-shored some work. I am going to guess about the equivalent of two full
time jobs.
I was quite surprised when that decision was made given our small size but it has worked as
explained to us when it started.
Looked at that way, the machine buys it's consumables and raw material used in the process.
It would have done that anyway, were Bill's company to decide to buy a simpler machine and employ
one more person, but because of the automation, and as long as sales justify it, the more advanced
machine will process more raw material and use more consumables because it has the potential to
run 24 hours per day, whereas an employee would be seeing stars after an eight hour shift, due
to repetitious boring work.
Good point. Also consider litigation costs which to most employers in Ca at least is a huge
financial and management burder. A couple of worker's comp sore backs or knees combined with chiropractor,
"pain management doctors," surgeons, secondary psychic stress etc. makes a lot of employers including
me realize that every employee is a ticking liability time bomb just waiting to call that 1-800-hurt
at work number. No business can hire Americans in this legal environment unless they are very
well paid well beyond their value so they have no option but to do the job. In fact, in my business
litigation/medical/disability costs are far more significant than hourly wages. We just can't
take the risk and we outsource everything and hire as few as possible and I am not alone.. We
do everything possible to avoid hiring low level workers and when we do we want young recent immigrants
who are not "Americanized" and lawyer prone. Even then we get burned more often than not with
claims for age related conditions. Then it is simply 1-800-Lastimado en Trabajo and you can see
the ads all over the busses in TJ before they come over….ads for Ca worker's comp attorneys!!!!
Lawyers, since they control the democratic party are a huge part of our unemployment problem.
No employer can take the worker's comp risk of an older employee. If they feel back ache or knee
ache or neck ache on the job…it is "aggravated" and the employer is often out hundreds of thousands….thanks
to the lawyers who write the laws. Don't count on this lawyer in chief or the next one to do anything
about it. Age discrimination and automation and outsourcing are survival tactics for most of the
businesses I work with, including my own.
Yes indeed, there's a reason big business doesn't want medicare for all – it would result in
the ultimate 'flexible workforce'. Workers immediately bailing out of every shit show employment
situation they manage to fall into at the drop of the hat with no COBRA or insurance dead zones.
But on the other side of the coin, it would ramp up the Uber jitney economy of on-demand disposable
workers lined up holding signs displaying their skill sets for a day's pay at the highway on-ramps
at 6:30 AM (or, as the neo-liberal mindset would frame it – the entrepreneurs).
Damn it, we could unleash potent forces if we just got rid of the lawyers. When a person's
knee gets torn up on the job, give em' a couple grand, an aspirin and tell them to get over it.
That's all you need to do.
Think about this. If the states weren't so desperate for money, they wouldn't have to run the
system on the cheap. If health costs were lowered, then the system wouldn't be so expensive. A
worker's comp agency has to balance its objectives between not bankrupting the state and not screwing
over hurt people. A hurt worker without an advocate is a sitting duck. One way to make lawyers
go away is to abolish worker's rights. Alternatively the worker's comp system would be cheaper
if health costs were cheaper, and realistic settlements without the assistance of a lawyer might
be possible if states had more revenue to pay bills.
History of Work Comp as I remember it - speaking of how "the company" counts its beans: Johns
Manville had a problem with people getting slowly sicker on the job (handling asbestos) starting
late in the 1800s paid doctors to do studies that proved the asbestos-asbestosis-mesothelioma
connection, and gave some rates of worsening of the diseases and hence points at which workers
could no longer work. The researchers and doctors were paid for and threatened into silence on
the findings, and required to ignore their Hippocratic obligations. Workers had to go to company
doctors, who would nurse them along until they were fired for inability.
At first, the court system's tort law provided the persistent with some compensation and support
commensurate with the harm. Many cases settled, but all contained non-disclosure mousetraps (tell
anyone and you lose everything.) And of course the "experts" who testified for both sides were
sworn to secrecy too, for money or from fear. But Manville and other corporate creatures got inspired,
starting around the 1890s I think, to pitch and successfully write (lobby) into law that "workers
comp" system that persists - places an administratively determined value on the "injury," percent
of disability, and the rest, bars tort litigation for WC-"covered" injuries. Even with all that,
a lawyer is often needed because the fokking corporate swine do everything in their considerable
power and corrupting reach to avoid even paying out the pittance WC provides, especially long-term
treatments and care for the many horrific injuries. Once again, the hope is that the injured worker
will GO DIE. And yes, there are cheaters, but gee, how surprising that the profits from fokking
over the workers so far outweigh the little bits that a few people scam from the other side. Many
of the patients I tried to help when I worked as a nurse were WC, and the treatment they got from
the insurers, and the "employee advocates" and "nurse case managers" and defense lawyers acting
on screw-the-worker policies of long standing, was amazingly cruel.
"Bankrupting the state?" WC is paid, far as I know, at least in FL, out of an insurance pool
that is funded by employers. Subject to the same kinds of actuarial calculations that any other
large-pool insurance game undertakes in underwriting. And yes, universal health care (not Obamacare)
would, if it could be managed without the full usual apparently inescapable corruption by neoliberal
interests and thinking, reduce EVERYONE's costs. And states are "desperate for money" largely
because the Chamber of Commerce and other neoliberal fokkers like the Kochs have strangled the
public general-welfare income stream and diverted most of what is left to various kinds of "white
man's welfare" and corporate gifts.
Here in FL, "worker's rights" are already largely abolished, and the mopping up continues.
Just so's you know. There are still lawyers who will (for a cut of the limited amounts that WC
will pay out if they finally prevail, to the worker's and family's detriment, "take cases." What
I learned in law school, first week in Contracts and Torts and Constitutional Law, is that "There
are no rights without effective remedies." What remedies do workers have?
And for those who want to shoot at the VA, on "inefficiency" grounds and the other neoliberal
overt and covert assaults, VA disability is a Workers Comp program too. Max payout for a GI who
is 100% permanently and totally disabled is around $30,000 a year. There is no component as with
other kinds of insurance structures for enhanced damages for "bad faith" on the part of the government
and the privatized functions that make up the disability administration. "Thank you for your service,
Sucker!!" And that "award" usually only comes after a decade or more of fighting with a well documented
opposition from the people who administer the "system" and requires persistence, luck, and occasionally
benefits (not so much any more) from intervention by the injured GI's elected representative…
All this talk of workplace injury, lawyers and workers comp misses the obvious point that some
of these workplaces must be UNSAFE. (It's always the other workplace that's unsafe–"our" worker
comp payouts are always rorts).
The answer to all worker comp issues is the same: universal mandatory insurance run by the state
and work that minimises physical/psychological injury.
Naturally it won't occur as its a cost to business….
Heaven forbid employers pay for the body parts they use up and destroy in their workers.
I agree with Anon, universal health care would resolve a lot of these issues. When the cost
is spread out employers whine less when their workers are hurt.
Yet despite having among the most flexible labor markets in the OECD-with low levels of
labor market regulation and employment protections, a low minimum cost of labor, and low rates
of collective bargaining coverage-the United States has one of the lowest prime-age male labor
force participation rates of OECD member countries.
This song was made in 1983…and the same crap that Run-DMC mention in the lyrics still exists
today:
Unemployment at a record highs
People coming, people going, people born to die
Don't ask me, because I don't know why
But it's like that, and that's the way it is
People in the world tryin to make ends meet
You try to ride car, train, bus, or feet
I said you got to work hard, you want to compete
It's like that, and that's the way it is
Huh!
Money is the key to end all your woes
Your ups, your downs, your highs and your lows
Won't you tell me the last time that love bought you clothes?
It's like that, and that's the way it is
Bills rise higher every day
We receive much lower pay
I'd rather stay young, go out and play
It's like that, and that's the way it is
Huh!
Wars going on across the sea
Street soldiers killing the elderly
Whatever happened to unity?
It's like that, and that's the way it is
The thing about being a man near the bottom in a country with low social mobility means it
is extremely hard to get girls. Jordan B Peterson said in The Age of Unequals discussion that
the primary motivation for men to become criminals is because it is the only way to have a chance
at attractive women. That has been my personal experience with crime too.
Ageism takes many forms, some more subtle than others. When your friendly local HR department
makes a few tweaks to benefits, the newer employees don't notice, but the wizened veterans take
notice. They see the handwriting earlier, and brace themselves for the next steps.
The HR folks are acting rationally in their supply-side worldview as they look out for shareholders
first and consider employees well down the list, if not at the bottom. That treatment of personnel
represents a policy of a very high effective discount rate on human capital in the aggregate.
When parsed out, there are a few nuances that make the picture clearer. When the top handful get
outsized payouts, they are incentivized to reinforce that high human capital discount rate, to
the detriment of those down range.
The graphics showed an acceleration in the ominous trends in the early and mid 1990s. That
coincided with the great outsourcing, re-engineeing, re-euphemising of jobs and the economy. In
that era, Fortune magazine published a series of articles about the changing nature of the social
contract at work.
One takeaway reflected the new bargain: companies needed to provide interesting work to retain
employees, and the latter had to continue to make themselves employable. Those veteran employees
referenced above discerned that there wasn't a bargain but a mandate to become more efficient,
all presented with the window dressing of so-called interesting work.
A more honest presentation would have said work that meets the interest or discount rate, as
part of the increasing financialization of the world. The decline in trust also accelerated during
that period, whether in companies or the media. We continue to reap the results of that widespread
mistrust and discontent during the current election cycle.
a different Chris , please listen (see below) and read what Clayton Christensen has been saying.
Big companies are mostly brands now. Have offshored main parts of company. Last stage in that
development is decline of company, as in case of steel. IBM is presently also classic case as
on road to failure as well for same reason. It started at IBM with Gerstner.
In a labor market that contains for the sake of argument 50% rich country workers (e.g., American
raised) and 50% poor country workers (anywhere else raised) - must be something like Chicago which
is 40% white, 40% black, 20% Hispanic …
… where pay is set by what I call "subsistence-plus"; meaning set STARTING at the absolute minimum
pay workers will tolerate (e.g., $800/wk for American born taxi drivers, me; $400 for foreign
born) and then PLUS some more for each additional level of skill (bottom for McDonald's, more
for better English in Starbucks, more for college English and more competent organizing in Whole
foods?) …
instead of pay set by the highest price the consumer is willing to pay - by collective bargaining
or a minimum wage …
… a huge dropout of low skilled, rich country workers will occur as low skilled work pays much
below what rich country workers look at as "minimum subsistence" (the labor market will not clear).
E.g., American born taxi drivers (me again) and the Crips and the Bloods. How else explain that
100,000 out of my guesstimate 200,000 Chicago, gang-age males are in street gangs?
To make the psychological point about "minimum subsistence", today's rich county labor would
gladly work for half of today's poor country minimum - if it were 100 years ago and that's the
best a much less productive economy could pay. It's psychological, but a lot of psychological
if DNA immutable.
Now here's the wind-up - that should implant permanently the unquestionable need for collective
bargaining in all labor transactions: A what I call subsistence-plus labor market with
100% rich country workers will have lower pay levels than a collective bargaining labor market
with 50% rich/50% poor country workers.
That's the whole law and the profits about the need to make union busting a felony (starting
in progressive states) as far as I'm concerned.
PS. This is not an endorsement of Donald Trump's anti-immigration bender - that would kick
down the pillars that our whole civilization is built on (sorry Native Americans) - that could
mean 250 million Americans by 2050 instead of the anticipated 500 million. This IS an endorsement
or rebuilding high labor union density - the missing balance-of-power pillars of our civilization.
(Don't forget centralized bargaining - the "compleat" balance-of-power pillar of a unionized labor
market.
David Simon covered this in "The Wire" and "Show me a Hero", you have entire sections of the
population that are forced to leave or participate in crime as a viable form of employment. We
have a surplus population now- and going forward that are not supporter by their labor or any
other resource other than transfer payments.
Please pause a moment and consider that concept. We have a paucity of credible jobs that people
can cobble together a living, let alone increase their opportunities going forward.
when everyone is trying to game the system no one has the right to cry morality.
i have some small businesses that i am selling off. Too many overhead, insurance and legal
costs. The line of business is becoming a slave to govt mandated costs and regulations. Customers
more interested in injury lawsuits. IQ and attitude of younger employees noticeably poor.
"THE LONG-TERM DECLINE IN PRIME-AGE MALE LABOR FORCE PARTICIPATION" report states:
"Conventional economic theory posits that more 'flexible' labor markets-where it is easier
to hire and fire workers-facilitate matches between employers and individuals who want to work.
Yet despite having among the most flexible labor markets in the OECD-with low levels of labor
market regulation and employment protections, a low minimum cost of labor, and low rates of
collective bargaining coverage-the United States has one of the lowest prime-age male labor
force participation rates of OECD member countries."
I have been following this so-called "conventional economic theory" closely for nearly 20 years
now and can attest that it is not a theory but a hollow assertion. Empirical "evidence" for this
assertion is based on "strong priors": models containing assumptions that generate outcomes consistent
with the assertions. GIGO!
At the core of the flexible labour markets dogma is obeisance to the great god NAIRU, which
Jamie Galbraith exposed in all its Emperor's New Clothes nakedness 20 long years ago: "Time to
Ditch the NAIRU"
"The concept of a natural rate of unemployment, or non-accelerating inflation rate of unemployment
(NAIRU), remains controversial after twenty-five years. This essay presents a brief for no-confidence,
in four parts. First, the theoretical case for the natural rate is not compelling. Second,
the evidence for a vertical Phillips curve and the associated accelerationist hypothesis that
lowering unemployment past the NAIRU leads to unacceptable acceleration of inflation is weak.
Third, economists have failed to reach professional consensus on estimating the NAIRU. Fourth,
adherence to the concept as a guide to policy has major social costs but negligible benefits."
In "Unemployment: Macroeconomic Performance and the Labour Market" Richard Layard, Stephen
Nickell and Richard Jackman grafted the dubious NAIRU concept onto the anachronistic lump-of-labor
fallacy claim to create the hybrid chimera "LUMP-OF-OUTPUT FALLACY" in which central banks enforcing
NAIRU anti-inflation policy would ensure that you couldn't redistribute working time. You can't
make this stuff up. But Layard, Nickell and Jackman did. Nonsense on stilts.
"To many people, shorter working hours and early retirement appear to be common-sense solutions
for unemployment. But they are not, because they are not based on any coherent theory of what
determines unemployment. The only theory behind them is the lump-of-output theory: output is
a given. In this section we have shown that output is unlikely to remain constant."
This is simply not true. Shorter working hours is based on the same theory as the
theory of full employment fiscal policy. Keynes's theory. But don't take my word for it. In an
April 1945 letter to T.S. Eliot, Keynes wrote:
"The full employment policy by means of investment is only one particular application of
an intellectual theorem. You can produce the result just as well by consuming more or working
less. Personally I regard the investment policy as first aid. In U.S. it almost certainly will
not do the trick. Less work is the ultimate solution."
Galbraith's "Time to Ditch NAIRU" has 293 citations on Google Scholar. Layard et al's "Unemployment"
has 5824. Economists flock to dogma like flies to shit.
Some strong starting points without requiring additional govt interference:
Shut down both legal and illegal immigration. When you can not employ the ones who are here
why let more in.
Inforce the borders and deport people who are here illegally.
Get rid of anchor babies
Put tariffs on imports and I mean substantial tariffs. Worrying about Smoot Hawley is a canard.
At that time the US was the biggest exporter now we are the biggest importer. I would also have
a sliding scale depending upon labor rights. Some would scream we need to worry about the poor
in these countries. How about worrying about the poor in this country. It has reached the point
that you need to look around at your family and friends and say what would you do so that these
people prosper. If you are not willing to say practically anything legally then you will probably
not prosper.
Cut back govt at all levels. This is a major misallocation of resources. This is especially
true of the military industrial security area. Come up with new health care laws. Focus resources
to generate more doctors in the US and less people with unproductive degrees.
One other thing, if you look at a lot of the jobs that men use to take and make a good living
it was construction, plumbing, gardening, janitorial, cooks and etc. All of these jobs have been
filled by illegal aliens who live 25 to a house, pay no taxes, get free health care and suppress
wages.
Assuming there are enough natural resources, it is quite possible to arrange an economy in
a way that benefits the population of the recipient country. Think about it. The immigrants are
healthy, hardworking adults. So you get their labour without investing in twenty years of raising
them and then taking on the burden of those who are unhealthy or anti-social.
The US is an immigrant country with a weak safety net so an intelligent policy could easily
benefit both parties.
With respect, if your givens were in the least interesting or useful to the greater good, rather
than articles of faith (which is just a polite term for self-delusion that benefits the power
structure) designed to benefit your imaginary friends, satisfy your need to dominate and abuse
others, and give your poor lonely misery some company, you might have something worth a detailed,
thoughtful response. As it is, I think you need to explain yourself a bit better.
Seems very clear to me. You must have a low IQ if you need someone to explain it to you.
Illegal aliens generally do not pay taxes because they get paid with cash! Sorry, if they have
to pay such taxes like sales tax that everyone else needs to pay.
"Stupid" is typical American conformist speak for "would offend my bosses".
You had two points that sounded reasonable: "Shut down both legal and illegal immigration.
When you can not employ the ones who are here why let more in." Because markets. Those who own
a government that was designed to be bought want to drive down the price and increase the availability
("flexibility") of all labor, of course. Plenty of Americans would be happy to work off the books
for a less demeaning wage under less demeaning conditions and less demeaning people. (As if Social
Security isn't going to be looted by the oligarchs by the time I'm of age to retire) They wouldn't
risk death and torture to come here if EMPLOYERS weren't withdrawing the benefits of employment
from those already here and offering those benefits to others. While stopping the influx would
be a fine idea, until you get control over those who are paying them to come here - making EMPLOYERS
into felons for any support of immigration violations would be a far, far more effective use of
enforcement power than beating down brown people at arm's length to satisfy your cultural conceits
- supply and demand works both ways.
And "Put tariffs on imports and I mean substantial tariffs" is in the right spirit, but fails
to acknowledge, with the usual hostility to self-awareness and past actions that defines the USAmerican
"mind", that other nations have just as much right to respond any way they feel like, and the
"trade agreements" the USA has signed grant them contractual grounds (pacta sunt servandum, remember?)
to respond disproportionately with their own tariffs, penalties against the USG, and other demerits
in the international sphere which are not constrained by your triumphalism in any way. Those means
would not be as effective as simply repudiating every multilateral "trade"-related agreement the
USA has ever signed and not, quite literally, pawning the USA for a mess of bourgeois pottage.
It's ridiculous that you should be depending on the US government to evaluate human rights
conditions, when human authorities are never bound by evidence unless they want to be. Malaysia's
admission into the TPP, and the politically-driven mulligan they received on their human rights
conditions, shows the utter folly of letting ambitious bourgeois careerists hide behind corporate
veils of any sort.
If you only believe that people who pay taxes should have rights, you support the very definition
of plutocracy, and that makes you a disease vector.
"illegal aliens…pay no taxes, get free health care"
You have it back-a*ward. Undocumented workers pay taxes (FICA, SS, etc deductions), that they
will not receive when they reach old/SS age, even if they are in the US at that future time. There
is no "free health care" for undocumented workers, not eligible for Medicaid or ACA. Emergency
room service does not qualify as health care.
Even US citizens have to go through a bureaucratic nightmare to get & maintain Medicaid or
ACA, which is CRAPPY INSURANCE, not ACTUAL HEALTH CARE. At the point of needing actual health
care, USians are often denied the service or the insurance refuses to pay after the service is
done & face another bureaucratic nightmare in fighting the payment refusal. Undocumented workers
lack access to even this crapified level of "health coverage".
I do agree that increasing supply (H1-B for STEM pros, undocumented for HS-degreed workers)
lowers wages. Also, restricting supply (AMA restricting physician graduates such that US physicians
per capita lower than OECD levels) increases wages. Econ101 supply & demand, perhaps neoliberal
economists need "retraining" & should enroll in Econ101 at the local community college.
If there was an actual desire to limit undocumented immigration, the solution is large fines
on Illegal Employers. How about $100K per undocumented worker found. In addition, end the Drug
War, which causes violence & refugees, especially in Mexico & Central America. Revoke or at least
amend NAFTA to un-decimate the MEX agricultural industry.
People who work "off the books" don't pay income taxes regardless of their immigration status.
They do pay many other types of taxes, often regressive – sales tax, excise tax, property tax
(or their landlord's property tax.
1. "When you can not employ the ones who are here why let more in."
Cui bono? Because EMPLOYERS love it, from large corporations to my neighbors who hire low-paid
gardeners. Maybe this class-ifies me, but that would have considered to be an extravagance when
I was growing up. I wonder how many people who complain about illegal immigrants actually rely
on their services?
2. "Inforce the borders and deport people who are here illegally. Get rid of anchor babies"
Bit late for that. I do agree we really have made a mess that needs attention and an intelligent
cleanup. Even so, do you think we could competently amend the Constitution at this point, which
is what it would take? Practically, I do think that better border security coupled with (really)
improved labor conditions, both here and in Mexico (Imagine! An international labor effort!) could
improve things. But TTIP and TTP are pushing the other way.
3. "Put tariffs on imports and I mean substantial tariffs."
I like the idea, but only sovereign nations can do this, and we're not. We're subject to international
courts. In this case, specifically, expect corporate lawsuits against the USA, arguing that the
US should compensate corporations for loss of profits caused by said tariffs. These will be arbitrated
by Investor-State Dispute Resolution panels, courtesy of said TTIP and TTP, where the no-appeal
panels are staffed by international trade lawyers, who otherwise work for international corporations.
Yes, by all means, worry about the poor in this country, but don't leave out anyone else.
4. "Cut back government at all levels."
Down with traffic lights! (This statement of yours hooked me into writing this entire reply).
Strict libertarians strike me as being more than a little Pollyann-ish. The only historical example
that comes close are now called the dark ages. In those idyllic times, a bunch of French Norman
good-ol' boys could hie themselves over to Italy and wreak havoc, I mean make their fortune. Governments
are necessary to contain dispute resolution, and so require power superior to all other factions,
but, for the sake of equal justice, should be accountable in some way to all. I could go on, but
"no government" advocacy in our times leaves a power vacuum just at a time when corporations and
financiers are doing their best to take over. As the Federalists argued, we do need a
strong government, to ensure that the will of the people can be vigorously asserted. Not to say
that it's working out so great right now, but it would be nice if we could in some way place competent
people at the helm to right the ship. Speaking of Pollyanna….
All labor reform policies put forth by Republicans and their policy activation arm (Dems) have
been to make life easier and richer for CEO's, not to help workers. So now economists are surprised
by the results? What a useful profession they are.
You already have him on your thread. The 40 hour work week was established under Roosevelt.
If you wish to reverse or stave off the declining Participation Rate, then decrease the required
number of hours work to 32. We have agreed before that Labor is the lowest cost when compared
to Overhead or Materials. In the end, the difference in cost would be made up by higher productivity.
Sandwichman is a proponent of this and I agree with his analysis.
"... Shallow, when analyzing the economics of a well, or field, or entire "play," of course it matters
how oil and or natural gas production is reported. You are 100 % correct for being perturbed by this
SCOOP/STACK stuff. Reporting a well whose revenue stream is 75-80% gas, as oil or liquids, by gas to
oil "equivalents" is absurd. ..."
"... That stuff up there is no different that any other unconventional resource play. It declines
like an anchor being dropped from VLCC in the open ocean and is hugely unprofitable. ..."
"... The key strategy for long term survival has been and will be, during boom times set money aside:
during frenzy's, go to the beach: during bust allocate reserved capital for future growth. ..."
"... What on earth does the BTU content of gas have to do with reporting gas as though it were oil?
This makes no sense to me whatsoever. ..."
"... Personally, if I believed we would be in a $2.50mm/btu and $60/BBoil environment for the foreseeable
future, I would not be drilling anywhere. ..."
"... I believe that to keep production steady we need at least $4mm/btu and $70Bo, may be even higher.
..."
Shallow, when analyzing the economics of a well, or field, or entire "play," of course it
matters how oil and or natural gas production is reported. You are 100 % correct for being perturbed
by this SCOOP/STACK stuff. Reporting a well whose revenue stream is 75-80% gas, as oil or liquids,
by gas to oil "equivalents" is absurd. It is a distortion of the facts and meant to be misleading.
Until three years ago even the most prominent of distorters would report BOE as a percentage of
liquids, now most of them have quit doing that. Wonder why? For one reason, to get 1.2 MBOE EUR's -- For another reason, 58 degree condensate prices take a big negative hit to actual oil prices.
I don't know what the price of natgas is in OK. If it's like Texas, it sucks. Its discounted
value at the moment is less than zilch. If at $ 1.50 net per MCF (and I am being very liberal)
the gas to oil conversion should be 25-30:1, NOT 6:1. Therefore the notion that this OK stuff
has some secret oil leg that has yet to be developed, awaiting higher oil prices, is a little
wonky.
With regard to RI and ORRI, I can sometimes be guilty of irrational exuberance myself. Then
the operator in me takes over and reality sets in. That stuff up there is no different that
any other unconventional resource play. It declines like an anchor being dropped from VLCC in
the open ocean and is hugely unprofitable.
Mike,
goodness, I have been drilling wells with my own money for over 30 years. We made money in each
of the last 3 quarters on our mix of properties across several states and our mix of product and
our mix of interest, ORRI, WI,RI . I know first hand about some of the production in scoop. You
may not be open to the facts and that is fine, leaves more room for those with opens mind to exploit.
NO skin off my nose. By the way the Btu content of scoop gas is 135o. This is not investment advice
but you have a couple of contributors to this blog that have been right with regard to the market
fundamentals and exploiting the unrealistically low prices we have seen of late.
They have made money, just satin one last quick point, based on interest in a couple of dozen
wells in scoop, I can say at $4nat gas and $80oil, the roi will be as good or better, risk weighted,
than most anything I have participated in, over the entirety of my career. I am not all wells
in scoop, but in the core areas.
All our production in onshore US, its the mix of assets. My only point SS is I do know how to
run a business and economically evaluate an oil prospect. That is what keeps me between the lines
so to speak, I can't constantly be wrong like climate change scientist and still make a living
:-). The key strategy for long term survival has been and will be, during boom times set money
aside: during frenzy's, go to the beach: during bust allocate reserved capital for future growth.
What on earth does the BTU content of gas have to do with reporting gas as though it were
oil? This makes no sense to me whatsoever. I am very open to facts, I deal with them every
day. Production data does not lie. It takes time to sort the BS out but ultimately it can be done,
as Shallow has proven. Tell your SCOOP/STACK boys to quit the BOE BS and start being transparent.
Here is what is going on in the SCOOP, because the same thing is happening in the PB: The word
is out on the Bakken, Eagle Ford and Niobrara. UR is not going to fall in line with the EUR bunk
and the economics are bleak. Money is getting scarce. So now everyone is running to new territory
where there is little data to support the same old shale oil propaganda machine. Accordingly,
some shale oil companies are getting good mileage out of being the first in the new subdivision
and even raising some more money, believe it or not. Lenders, for the most part, have ADD. Lets
talk in three years when there is more data. That stuff will suck just as bad as any other shale
play, betcha.
you ask about the price of gas in okla. I gave you the information to help determine what the
price was/is
we do not have WI in the Bakken, hayneseville, Barnett or Eagle ford. We do have WI in scoop,
we do have RI in a number of those plays. All shale is not created equal, as an oil man you should
know that.
As for betting, i do that every time I drill a well and I'll let the drill bit keep score :-)
texas tea: Can you educate me a bit about the Scoop Play. I haven't worked the area much since
my Gulf Oil days working Hunton in the area. In your opinion, how many months would bring payout
(at $2.50mm/BTU, and $60/BB oil, 75% NRI lease, to a WI owner in the top 20% of wells.
It is really to big of question because of the number of variables. What I can say is that
in the gas/condensate window, with the parameters you mentioned, most wells will provide a real
rate of return based on the wells we have interests in. Personally, if I believed we would
be in a $2.50mm/btu and $60/BBoil environment for the foreseeable future, I would not be drilling
anywhere.
I believe that to keep production steady we need at least $4mm/btu and $70Bo, may be even
higher. I can add for SS that i have the updated production on the Good martin unit oil window
Woodford Scoop (46 API) the production across the 8 wells in the unit over the last 4 months,
and if the number are correct they are not impressive. As say said, i do not draw conclusion until
i have all facts.
Mike: Glad to see you still fighting the good fight of putting some real world oilfield sense
in the discussions.
Question: 1.
We in US have we are told we have a huge stockpile hangover. If the oil in pipelines is counted
as storage, how many long huge cross country pipelines have been built during the boom through
your area? We have one through us that goes from west Texas through central to Houston. If those
pipe volumes are counted as storage, they will probably never be drawn down after the initial
volume is added.
2. Do you believe that the promoters of LTO will have money shoved to them fast enough to bring
about another price collapse as the market seems to believe.?
Hope you are finding some good purchases to take some pain out of this downturn.
Hi, Doodle; I hope this finds you well. I can make money at 45 dollars but I still get a burr
under my saddle over the shale oil industry's bullshit. Which seems to be getting worse.
Question 1 is a good point, sir. I side with our old friend Jeffrey Brown on this issue of
supply overhang and the quality of the oil in storage and not in very good favor with end users.
When Mexico stops being a net exporter, and Venezuela implodes, LTO is going to take some big
price whacks simply because there won't be anything left to blend it with. I look for it to take
a long time for Cushing to drain. I produce a lot of low gravity sweet stuff and its getting a
premium price now for the first time in four years.
Question 2: LTO reserve inventory is not being replaced and the discounted value of those PDP
reserves is dropping like a rock. Some companies are now in a bind with the SEC over EUR's and
the IRS is bearing down on PUD reserves. The bottom line is the debt to asset ratios of all but
2 to 3 public shale oil companies is abysmal and new OCC regulations imply most of those guys
can't legally borrow more money; they have 2-3 mortgages on their homes already, and their MasterCards
are maxed out. The shale oil industry is dead in the water if it cannot borrow more money and
that gets harder every day, IMO. I think the shale boom is over, thankfully, and we should not
worry too much about another 70% price collapse, no.
Thanks man: We're shaking off the dust and starting to "think" of getting busy again.There's still
good oil out there under the right rock and we are determined to find it! We had a good little
discovery that has pulled us through this Depression, though it was a shame to give the oil away
to hold on.
Shallow,
I think at this point it does not matter if they are oil or gas fields or how the fields are classified.
With Fed announcing that would not have legal problem pursuing negative rates it is completely
clear that main goal is to keep broke debtors alive and prevent the gigantic debt bubble from
imploding. With negative rates being essentially tax on the savings Fed is basically saying to
investors to keep sinking money in anything that resemblance of hard assets in some distant hope
that prices will recover before they run out of oil or gas. Good luck with that in the case of
high depleting shale. So with negative rates boxes of brass fixtures could be more attractive
than cash tomorrow. Markets are broken.
By the late 1930s, the worst of the Depression had passed after the U.S. President Franklin Roosevelt
jolted the economy through the "New Deal," which focused on the "three Rs" - relief, recovery and
reform.
At the same time, private investment was at poor levels, as individuals chose to pay down their
debts rather than spend. Inflation was also on the low side, and the government started to back off
its fiscal stimulus programs and implement a tightening of financial policy.
Sounds a bit like 2016 doesn't it?
Business Insider, citing a research report by analysts at Morgan Stanley, made the case that
2016 is no different from 1938.
"The critical similarity between the 1930s and the 2008 cycle is that the financial shock and
the relatively high levels of indebtedness changed the risk attitudes of the private sector and triggered
them to repair their balance sheets," Business Insider quoted the analysts as saying. "During the
deleveraging process, the private sector becomes risk-averse and shifts its attention towards restoring
health to its balance sheets."
"... as to GS public statements relating to oil and gold, the money has been by taking the other side of the trade, I have little doubt that what their trading desk does. ..."
Goldman Sachs has dismissed what's been described by some analysts as a recovery in the global
oil markets.
The uber bear said it expects a "modest" deficit in the coming months due to current prices, before
the market returns to surplus early next year.
Rising demand, falling US oil output as well as supply disruptions have helped the black stuff
recover from below $28 per barrel in January to just under $50 today.
Read more: North Sea to warn MPs subsea sector risks losing world-leading position
But Damien Courvalin, an analyst at Goldman Sachs, said that this was, at best, the first signs
of a turnaround.
"Canadian production is finally restarting, production from other Organisation of Petroleum Exporting
Countries' members continues to beat our expectations."
Courvalin continued: "The recent recovery in prices risks that non-Opec production declines
less than we expect, especially in the US."
What is it they say? A sucker is born every day? This should be illegal!
as to GS public statements relating to oil and gold, the money has been by taking the other side
of the trade, I have little doubt that what their trading desk does.
The United States, along with the
European Central Bank
and
Bank of Japan
, are stuck
overseeing 'Peter Pan' economies that refuse to wean themselves off cheap money policies.
... ... ...
"A Peter Pan economy is an economy that just doesn't want to grow up," Michael Contopoulos
recently told "
Futures Now
." The
central bankers of the U.S., Japan and Europe "are like three nannies managing the economies.
And, that's what they're supposed to be doing.
What's happening is the same what happed with them in the USSR. Only Party (in case of
neoliberalism replace the Party with "financial oligarchy") sanctioned content can be taught
and the stress is on neoclassical economics as this is one of the foundation of neoliberalism (along
with liberalism, Ann Rand, and similar psudo theories).
Notable quotes:
"... Chipping away at the humanities in schools jeopardizes the issues of social justice in education. Arguably, it is safe to say that the humanities and any liberal arts program are undervalued specifically because they involve knowledges, practices and traditions that usually cannot adhere to immediate short-term use ..."
The number of college students majoring in
English, according to some contested reports, has plummeted. In general, the humanities are taking
a back seat to more "pragmatic" majors in college. Students, apparently, are thinking more about
jobs than about general learning. Given this trend, should schools be scaling back on the humanities?
... ... ...
Some might say that since top universities like MIT have decided to focus on management, business
analytics, finance and mathematical economics (or trading), secondary schools should follow suit.
It would be a mistake, however, for secondary schools to cave to this argument and scale back on
the humanities.
The piece goes on to explain how, back in 2010, MSNBC anchor
Tamron Hall said, "Students
wanting to take up majors like art history and literature are now making the jump to more-specialized
fields like business and economics, and it's getting worse." This comment was juxtaposed with a chart
that indicated a spiral. Prominent New York Times journalist
David Brooks also jumped on the bandwagon when he remarked, "The humanities [have] turned from
an inward to an outward focus." The "sky is falling" myth then led to serious underfunding, becoming
a self-fulfilling prophecy.
Bérubé argues that mainstream accounts of the decline of the humanities in undergraduate education
are "factually, stubbornly, determinedly wrong." He says there was a plummet, but it was between
1970 and 1980.
In reality, English isn't dying; it's just that at one time, it was unprecedentedly popular. English
majors rose from
17,000
to 64,000 over a span of 30 years, from 1940 to 1970, and then declined to 34,000 by the 1990s.
This does not mark a death to the humanities.
Are fields like art history and literature really "elite, niche-market affairs that will render
students unemployable," as Bérubé argues? Are students abandoning the humanities because they are
"callow,
market-driven careerists?" No, this is not true. Bérubé states that "undergraduate enrollment
in the humanities have held steady since 1980 (in relation to all degree holders, and in relation
to the larger age cohort), and undergraduate enrollments in the arts and humanities combined are
almost precisely where they were in 1970."
... ... ...
Chipping away at the humanities in schools jeopardizes the issues of social justice in education.
Arguably, it is safe to say that the humanities and any liberal arts program are undervalued specifically
because they involve knowledges, practices and traditions that usually cannot adhere to immediate
short-term use by preservation seeking administrations and teachers.
... .,. ...
Dan Falcone has a master's degree in modern US history from LaSalle University in Philadelphia and
currently teaches secondary education. He has interviewed Noam Chomsky, Edward Herman, Richard Falk,
William Blum, Medea Benjamin and Lawrence Davidson. He resides in Washington, DC.
Greenspan phony "Shocked disbelief" reminds classic "...I am shocked - shocked, there is gambling
going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart
& Claude Rains in Casablanca. Compare with "... "Those of us who have looked to the self-interest
of lending institutions to protect shareholders' equity, myself included, are in a state of shocked
disbelief," he said. ..."
Notable quotes:
"... "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself included, are in a state of shocked disbelief," ..."
"... Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless banks to do reckless things. ..."
"... Private greed, not public good, caused this catastrophe: "The evidence now suggests, but only in retrospect, that this market evolved in a manner which if there were no securitization, it would have been a much smaller problem and, indeed, very unlikely to have taken on the dimensions that it did. It wasn't until the securitization became a significant factor, which doesn't occur until 2005, that you got this huge increase in demand for subprime loans, because remember that without securitization, there would not have been a single subprime mortgage held outside of the United States, that it's the opening up of this market which created a huge demand from abroad for subprime mortgages as embodied in mortgage-backed securities. ..."
"... But having admitted the failure of his faith, Greenspan could not abandon it. Credit default swaps had to be "restrained," he admitted. Those who create mortgages should be mandated to retain a piece of them to insure responsible lending. Otherwise, the old faith still applied. No new regulations were needed, because the markets "for the indefinite future will be far more restrained than would any currently contemplated new regulatory regime." ..."
"... The only Guantanamo that the United States has any business running is a concentration camp for the hundreds of wall street executives and their cronies in Bushland that conspired to defraud the American people from their hard earned dollar. ..."
"... There are no free markets in America, any more than there is free lunch. ..."
"... So it wasn't the military-industrial complex that did us in after all . . . ..."
"... It's clear from comments on this contribution that few readers of Truthout believe Alan Greenspan's sorry testimony before Congress. What has faith in something to do with enforcing the policies of fiduciary responsibility already on the books? All these so-called "experts" on capitalism are now coming out to say "I'm sorry." Well, I won't be sorry for them until they are held monetarily and criminally responsible for their actions, inept or not. ..."
"... If it looks like class warfare, as David Harvey, author of Neoliberalism, has stated, call it class warfare and act accordingly. ..."
"... it doesn't take a genius to understand that when financial instruments are created based on crap (subprime mortgages), that eventually problems will occur with those instruments. In fact, Greenspan and his cronies knew that, which is why they resisted these instruments being regulated by the SEC or even the CFTC. ..."
"... Sounds like the "maestro" hit a flat note in his orchestra of greed and deregulation. ..."
"... Did anybody even bother to consult the Math PhDs who created these instruments to run possible scenarios -- just in case? why bother when you know you can scare congress, the president and the treasury and ultimately the people into bailing your ass out of worldwide collapse? ..."
"... Shocked Disbelief is a ploy. When they were all riding high, they didn't give a crap. They were going to come out richer than hell anyway. ..."
"... Where's Ayn Rand when you need her? Give me a break Mr Greenspan. Never let history and reality get in the way of the big unregulated celebration of greed like we have had since "Saint Ronald Wilson Reagan", and the other "Free Market" "government is the problem" ideologues ..."
"... What about the 1994 Act of Congress that required the Fed to monitor and regulate derivatives? The Act Greenspan ignored? ..."
"... "...I am shocked - shocked, there is gambling going on in this establishment...." "...here are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca ..."
by: Robert Borosage, The Campaign for America's Future
On October 23, former Federal Reserve Chairman Alan Greenspan testified before a House Oversight
and Government Reform Committee hearing on the role of federal regulators in the current financial
crisis.
It marks the end of an era. Alan Greenspan, the maestro, defender of the market fundamentalist faith,
champion of deregulation, celebrator of exotic banking inventions, admitted Thursday in a hearing
before Rep. Henry Waxman's House Committee and Oversight and Government Reform that he got it wrong.
"Those of us who have looked to the self-interest of lending institutions to protect shareholders'
equity, myself included, are in a state of shocked disbelief," he said.
As to the fantasy that banks could regulate themselves, that markets self-correct, that modern
risk management enforced prudence: "The whole intellectual edifice, however, collapsed in the summer
of last year."
Greenspan spurned the Republican acolytes trying desperately to defend the faith and blame
the crisis on the Community Reinvestment Act and the powerful lobby of poor people who forced powerless
banks to do reckless things. Greenspan dismissed that goofiness in response to a question from
one of its right-wing purveyors, Rep. Todd Platts, R-Pa., noting that subprime loans grew to a crisis
only as the unregulated shadow financial system securitized mortgages, marketed them across the world,
and pressured brokers to lower standards to generate a larger supply to meet the demand. Private
greed, not public good, caused this catastrophe:
"The evidence now suggests, but only in retrospect, that this market evolved in a manner which
if there were no securitization, it would have been a much smaller problem and, indeed, very unlikely
to have taken on the dimensions that it did. It wasn't until the securitization became a significant
factor, which doesn't occur until 2005, that you got this huge increase in demand for subprime
loans, because remember that without securitization, there would not have been a single subprime
mortgage held outside of the United States, that it's the opening up of this market which created
a huge demand from abroad for subprime mortgages as embodied in mortgage-backed securities.
But having admitted the failure of his faith, Greenspan could not abandon it. Credit default
swaps had to be "restrained," he admitted. Those who create mortgages should be mandated to retain
a piece of them to insure responsible lending. Otherwise, the old faith still applied. No new regulations
were needed, because the markets "for the indefinite future will be far more restrained than would
any currently contemplated new regulatory regime."
Now hung over from their bender, the banks could be depended upon to remain sober "for the indefinite
future." Or until taxpayers' money relieves their headaches, and they are free to party once more.
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Comments
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Sun, 10/26/2008 - 23:37 - Captain America (not verified)
The only Guantanamo that the United States has any business running is a concentration camp
for the hundreds of wall street executives and their cronies in Bushland that conspired to defraud
the American people from their hard earned dollar.
What they did dwarfs the damage caused to this country by 911, (no disrespect for the many
innocents who died). However, here, every single citizen is a victim of fraud and corruption on
a scale that was heretofore inconceivable. Greenspan, Bush and now Paulson have done more than
Bin Laden and his hordes could do in a 100 years.
By the way, if you protest YOU wind up locked up for being un-American. What happened America
?
There are no free markets in America, any more than there is free lunch. The game was always
fixed and Greenspan was the ultimate shill for the fixers. The past thirty years have been an orgy
of greed with common sense shoved aside for the sake of uncommon expediency. Americans became infatuated
by arcane formulas and dense incomprehensible mathematics to the point that they forget simple arithmetic.
America wake up it was only a dream, and a bad one at that.
It's clear from comments on this contribution that few readers of Truthout believe Alan Greenspan's
sorry testimony before Congress. What has faith in something to do with enforcing the policies
of fiduciary responsibility already on the books? All these so-called "experts" on capitalism
are now coming out to say "I'm sorry." Well, I won't be sorry for them until they are held monetarily
and criminally responsible for their actions, inept or not. The truth is as plain as the
nose on your face: Greenspan, the Federal Reserve, the investment banks, the Bush administration
and several members of Congress unobtrusively acted to consciously and knowingly to rob the national
treasury for the sake of capitalism's sacred cow: capital accumulation on behalf of the nation's
political and economic elite. If it looks like class warfare, as David Harvey, author of Neoliberalism,
has stated, call it class warfare and act accordingly.
We have heard statements like "the mathematical models used for knowing the behavior of derivatives
based on subprime mortgages were too difficult to understand", etc. But it doesn't take a
genius to understand that when financial instruments are created based on crap (subprime mortgages),
that eventually problems will occur with those instruments. In fact, Greenspan and his cronies
knew that, which is why they resisted these instruments being regulated by the SEC or even the
CFTC. And this is why they turned a blind eye to many of the rating agencies giving many
of these instruments AAA ratings. I am sure that a real investigation will reveal numerous instances
of fraudulent activity in conjunction with this debacle. Those perpetrators must be identified
and brought to justice. While this will not fix our current problem, it hopefully should serve
as a deterrent to those who would in the future attempt to again engage in such activities.
Sun, 10/26/2008 - 08:13 - Robert Iserbyt (not verified)
Well here you have it a confessional lie from the biggest fraud perpetrator in the history of
American finance Why the markets ever listened to this criminal in the first place is evidence
that our entire nation should be required to take a full year of real unfettered economics just
in case they don't understand what is going on now. All the pundits on MSNBC and all the talking
heads should be removed from the airwaves. The Bailout what will that do? the answer lies before
you.
Sounds like the "maestro" hit a flat note in his orchestra of greed and deregulation.
Come on, do you really think we are all so stupid to buy into the story that you couldn't predict
a melt down knowing that those writing the subprimes held no responsibility for their actions?
That's like giving a "get out of jail card" to someone who just created a felony! Did anybody
even bother to consult the Math PhDs who created these instruments to run possible scenarios --
just in case? why bother when you know you can scare congress, the president and the treasury
and ultimately the people into bailing your ass out of worldwide collapse?
I'm a former real estate broker and my son is a mortgage broker. From about 2004 through the beginning
of this "greatest financial crisis since '29", we frequently talked on the phone about the disaster
which would ensue when the real estate value appreciation stopped, and people were no longer fueling
the economy with money borrowed against their equity, and the sub-prime loan fiasco would end.
We knew it would be disastrous, and both of us were astonished that neither the FED nor congress
was willing to say or do anything about it. Anyone who has witnessed over the years the cycle
of boom/bust/boom/bust in the real estate market knew that after eleven years of unprecedented
"boom" -- '96 through '2007 -- the "bust" would be like an earthquake. Paulson and Greenspan and
their ilk now denying that they suspected this is just is just their lying to protect the GOP
which was benefitting from the booming economy. They should both end up in prison, with all of
the GOP members of congress who have had their hands in the cash register.
Dance clown, dance. First you were against the FED until you became head of the FED. Then you
were for trickle down economics and letting the "system" regulate itself until you saw the inevitable
destruction it caused. Dance clown, dance. You should be the first one sent to prison under the
"Un-American activities act". The arrogance of your testimony before the committee was appalling.
You honestly couldn't believe you were wrong !!!
This is like telling the Fox to watch the Hens and then walking away and trusting him to do the
right thing. Government has to return to regulation and see that there is no hanky, Banky going
on anymore. Monopolies have to be busted up, like the Communication industry's, the Drug industries
and any other Corporations that control to much of the way the Country operates. No more Outsourcing
any Government duties.
Where's Ayn Rand when you need her? Give me a break Mr Greenspan. Never let history and reality
get in the way of the big unregulated celebration of greed like we have had since "Saint Ronald
Wilson Reagan", and the other "Free Market" "government is the problem" ideologues. We can
spend trillions on war and corporate bailouts, but we can't have a single payer health system?
We can't rebuild our infrastructure? Say it again- give me a break!
"...I am shocked - shocked, there is gambling going on in this establishment...." "...here
are your winnings..." exchange between Humphrey Bogart & Claude Rains in Casablanca
What's happening is the same what happed with them in the USSR. Only Party (in case of
neoliberalism replace the Party with "financial oligarchy") sanctioned content can be taught
and the stress is on neoclassical economics as this is one of the foundation of neoliberalism (along
with liberalism, Ann Rand, and similar psudo theories).
Notable quotes:
"... Chipping away at the humanities in schools jeopardizes the issues of social justice in education. Arguably, it is safe to say that the humanities and any liberal arts program are undervalued specifically because they involve knowledges, practices and traditions that usually cannot adhere to immediate short-term use ..."
The number of college students majoring in
English, according to some contested reports, has plummeted. In general, the humanities are taking
a back seat to more "pragmatic" majors in college. Students, apparently, are thinking more about
jobs than about general learning. Given this trend, should schools be scaling back on the humanities?
... ... ...
Some might say that since top universities like MIT have decided to focus on management, business
analytics, finance and mathematical economics (or trading), secondary schools should follow suit.
It would be a mistake, however, for secondary schools to cave to this argument and scale back on
the humanities.
The piece goes on to explain how, back in 2010, MSNBC anchor
Tamron Hall said, "Students
wanting to take up majors like art history and literature are now making the jump to more-specialized
fields like business and economics, and it's getting worse." This comment was juxtaposed with a chart
that indicated a spiral. Prominent New York Times journalist
David Brooks also jumped on the bandwagon when he remarked, "The humanities [have] turned from
an inward to an outward focus." The "sky is falling" myth then led to serious underfunding, becoming
a self-fulfilling prophecy.
Bérubé argues that mainstream accounts of the decline of the humanities in undergraduate education
are "factually, stubbornly, determinedly wrong." He says there was a plummet, but it was between
1970 and 1980.
In reality, English isn't dying; it's just that at one time, it was unprecedentedly popular. English
majors rose from
17,000
to 64,000 over a span of 30 years, from 1940 to 1970, and then declined to 34,000 by the 1990s.
This does not mark a death to the humanities.
Are fields like art history and literature really "elite, niche-market affairs that will render
students unemployable," as Bérubé argues? Are students abandoning the humanities because they are
"callow,
market-driven careerists?" No, this is not true. Bérubé states that "undergraduate enrollment
in the humanities have held steady since 1980 (in relation to all degree holders, and in relation
to the larger age cohort), and undergraduate enrollments in the arts and humanities combined are
almost precisely where they were in 1970."
... ... ...
Chipping away at the humanities in schools jeopardizes the issues of social justice in education.
Arguably, it is safe to say that the humanities and any liberal arts program are undervalued specifically
because they involve knowledges, practices and traditions that usually cannot adhere to immediate
short-term use by preservation seeking administrations and teachers.
... .,. ...
Dan Falcone has a master's degree in modern US history from LaSalle University in Philadelphia and
currently teaches secondary education. He has interviewed Noam Chomsky, Edward Herman, Richard Falk,
William Blum, Medea Benjamin and Lawrence Davidson. He resides in Washington, DC.
"... Increased regulation, the holding of high-yield debt by "less stable" investors such as mutual funds, which are likely to unload the bonds quickly in the event of a drop, and the increased size of the low-quality leveraged loan market could all make the tidal wave even worse than in the past. ..."
Boys crouch behind a wall as they play in the massive surf at Sydney's Narrabeen Beach in
February 2004.
A tidal wave may be coming to the bond market, and it's not going to be pretty.
At least that's the view of Matthew Mish, credit strategist at UBS. To Mish, the elevated rates
of default in the commodity sector and high risk bonds are a harbinger of things to come for the
broader debt market.
"First, our quantitative framework is signaling a broader deterioration in the default outlook,
with our model projecting default rates of 4.3% over the next 12 months (versus 2.6% one year
prior)," Mish wrote in a note to clients on Thursday.
Mish's research asks whether the recent uptick in default rates is simply a "rogue wave" that
will dissipate or the "start of a tsunami" that will bring the rate of defaults much higher over
the long term.
Mish is in the latter camp. He cites three short-term reasons for a coming increase in the number
of firms unable to pay back their debt. They are:
Decreasing profits: Mish notes that corporate profits fell 7.6% in the first quarter
against the same period a year ago. In order to pay back loans, companies need to continue to
make more, and with less cash coming in, there will be less to allocate to debt.
Lending standards are getting tighter: Firms also have the ability to pay down debt
that is coming to maturity by issuing new debt, effectively kicking the can down the road.
Lending conditions for new debt, however, are getting tighter as banks focus on higher quality
borrowers. In turn, this makes it tougher for companies to pay for debt with more debt.
Debt is getting more expensive: Loan spreads, or the difference between what banks
have to pay to borrow money and what they charge companies in interest on loans they then give
out, are starting to widen. In other words, new debt is getting more expensive.
This trouble is not just limited to the commodity space. Mish estimates that the default rate
for nonenergy firms will creep up to 3.5% in 2016, up from 1.5% currently.
"Higher frequency data suggest default stress is rising specifically in the media/entertainment,
consumer/service, retail and aerospace/industrial sectors (as well as the non-bank financials),"
Mish wrote.
As these defaults start to pile up, Mish said, long-term shifts in the credit markets could
snowball and make the situation even worse.
Increased regulation, the holding of high-yield debt by "less stable" investors such as
mutual funds, which are likely to unload the bonds quickly in the event of a drop, and the
increased size of the low-quality leveraged loan market could all make the tidal wave even worse
than in the past.
Soon the US government will start bailing out states like California and Illinois. The
precedent has already been set with the bailing out of GM and others. Their excuse will be the
States are too big to fail. Taxpayers and the heirs across the nation will be footing the bill
for corruption, mismanagement and just plain stupidity of these states and others that will
soon follow. Of course, eventually the financial strain will overpower the producers who fund
the non producers and all hell will break loose. One just has to witness current events like
Venezuela's economic collapse to see our future. Maybe not today or tomorrow, but someday.
Kim
No surprise, the economy has been creeping on borrowed money without interest. The Fed kept
pumping money to keep the economy afloat while Obama borrowed $10 trillion to put into the
economy and regulated into the economic collapse. That borrowed money will have to be paid.
When the interest goes up, we will have to pay the interest and less money for anything else.
Obama has been destroying our economy without consequences just like Bill Clinton did in 1996
with the expansion of the subprime lending rate, except it is gravely worse now with our
massive debt.
At the same time, the unemployment rate tumbled to 4.7 percent from 5 percent, the Labor
Department said Friday, its lowest point since November 2007. The rate fell for a problematic
reason: Nearly a half-million jobless Americans stopped looking for work and so were no
longer officially counted as unemployed.
Susan
The unemployment rate is just a bunch of #$%$. The only jobs avail are low paying PT with
no benefits. I spent so much time and money on my education and now finding it's worthless. I
use to make $50k a year with benefits and another $20k freelancing from home. I've been
unemployed now for a while and even went back and got my masters degree. Still no work. So now
I'm suppose to work for min wage? This is my reality. This is the reality for many people. Do
they really expect us to pretend everything is sunshine and smiles. Our economy is collapsing
people. Don't be fooled.
"... At more than $30,000, the average auto loan for a new car is also at an all-time high, according to Experian. Also, at more than $500, the average monthly auto loan payment is at a record. ..."
In May, the total amount of auto loans
cracked the $1 trillion mark for the first time, marking a 10 percent increase. It comes as auto
sales have hovered around record highs.
At more than $30,000, the average auto loan for a new car is also at an all-time high, according
to Experian. Also, at more than $500, the average monthly auto loan payment is at a record.
The Experian research also noted that more subprime borrowers are borrowing for new auto purchases.
"The continued rise in new vehicle costs have kept many consumers exploring options to keep their
monthly payments affordable," said Melinda Zabritski, Experian's senior director of automotive finance,
in a statement that accompanied Thursday's research. "As long as vehicle prices continue to rise,
we can expect leasing rates to grow along with them. However, consumers need to understand the nuances
of their lease agreements and make sure that leasing fits their lifestyle."
In his June investment outlook released Thursday, the widely followed bond fund manager contended
that bond and stock returns realized in the last 40 years are "a grey if not black swan event that
cannot be repeated." Investors should not expect 7 percent returns on bonds or returns in the high
single digits or double digits on stocks, Gross told CNBC on Thursday.
"The markets are entirely different and it would pay to travel to Mars as opposed to stay on Earth,
because the returns here are very, very low," the manager of the Janus Capital Unconstrained Bond
Fund, said on CNBC's "Power Lunch".
Gross said easy central bank policy could hold down bond returns. Central banks in Europe and Japan
have adopted negative interest rates, while the U.S. Federal Reserve's target rate is at 0.25 to
0.50 percent.
German and Japanese 10-year bonds currently have negative yields, while their 30-year bonds yield
less than 1 percent. The U.S. 10-year Treasury note yield sat around 1.8 percent Thursday.
Gross contended those rate trends can hurt not only savers but also the broader economy. He said
Fed policymakers, who have signaled they could hike rates at least once this year, realize they need
to normalize policy.
"Ultimately, they have to move back up and I think a certain number of Fed governors realize that
the normalization process is necessary in order to save business models and to save capitalism basically
because capitalism doesn't work at 0 percent and it doesn't work at negative interest rates," he
said.
Gross added that investors should "basically go the other way" by holding liquid cash. He said
they should not buy corporate bonds and resist buying high-yield bonds or riskier stocks.
"... In the USA, those at the bottom collaborate based on the 'promise' that the American Dream offers them a shot at the top, if they hold the party line. ..."
"... What they do not realize is that the "party" counts on the weight of their mass to hold that line for THEMSELVES ALONE. The people who back it all are thrown under the bus with great regularity. They never see it until the wheel roll over them and by that time they have sucked millions of others into the illusion that they are the "one" special one who will make it from the bottom and be welcomed as a peer into the 1%. ..."
"... It is not so surprising. Hope is a hard thing to kill and an easy thing to exploit. ..."
"... He is being sued for "deceptive business practices" which is to do with the content of his so-called University courses. You can be a snake oil salesman and pressure people into buying more expensive stuff, but you can't sell them lemons. There are consumer protection laws to prevent that, and that's what these lawsuits are doing. ..."
"... 'Just following orders', which is basically what you are trying to justify, in a business context, has been discredited as a modus operandi and is not a legal defence (hence the lawsuit, with which I wish them the very best of luck). ..."
"... Meanwhile, the more one learns about the judge and the more this judge is in conflict of interest (IMO). This judge is for open borders and illegal immigration, is a strong advocate for La Raza (yes, that anti-White and pro-illegal Mexican hate group), has links to the Clintons (Hillary) and appointed two prosecutors to the case who are extremely generous donators towards Hillary, including paying her significant $ for speeches. ..."
"... Though, I think, not everybody who attends boarding school becomes a sociopath. But sociopathy runs in families. And sociopathic parents tend to put kids into boarding school or reformatory for that matter. Just to get rid off them. ..."
"... In such a naked, dog-eat-dog society, there should also be no personal bankruptcy protection or ring-fencing for those who fail in business. All their assets siezed to pay off creditors. Not sure Trump would be so keen on that. ..."
"... Shamelessness is not a crime in the USA, but crime (fraud) is still a crime. ..."
"... Nothing will come out of this, that will effect the election. The practices documented in the papers released is a high pressure sales tactic which are used by many. The focus should be on what Trump stands for and bring the fight to him. Hillary Clinton is the wrong person in the wrong year to be able to take on Trump. She is flawed beyond repair, and is fighting not to lose, so careful with her words that they don't resonate. ..."
"... He's being sued, so it's a civil case. Documents can be made public if it's in the public interest to know about them. And when it looks very much like a con man is on his way to the Whitehouse, I'd call that a big yes for public interest. ..."
"... Killary attacks the MANY women who accuse her husband of rape, lies to the grand jury over White Water, to congress and the people about Benghazi, runs guns to ISIS, takes money from Saudi Arabia the worst women's rights violator, lies about being shot at landing in Bosnia, approves uranium mining deal to Russian concerns while SOS and receives millions to her foundation at the same time, starts an unregistered hedge find in Columbia of all places, takes millions from banks and you fault Trump for greed and making his own way without influence peddling while in public office. ..."
"... A snake oil salesman, a 'boiler room' operator, a phishing scammer, that's all Trump is. Honestly, is there any lie this sociopath could not tell? Is there any con game too crooked and despicable for even him? ..."
"... Sounds like a third world country with no social contract other than the "opportunity" to exploit one another. ..."
"... HRC was paid $385,000 for 3 speeches given to Goldman Sachs, nearly 10 times what the Trump 3 day course costs per person. Based on the speeches we hear from HRC, what could have been in these speeches that made them so valuable? Afterward there may have been the same buyer's remorse felt by Trump-course attendees. The comments that say that the U.S. is full of scams like this are on target, starting with the $1 lottery ticket. It is the dream that brought and brings people to the U.S., and if it turns out to be an expensive nightmare, the answer is "caveat emptor." ..."
More than 400 pages of released Trump University files describe how staff should target
financial weaknesses to sell high-priced real estate courses
A federal judge has given the world an unprecedented glimpse into the ruthless business practices
Donald Trump used to build his business empire.
US district court judge Gonzalo Curiel on Tuesday made public more than 400 pages of Trump University
"playbooks" describing how Trump staff should target prospective students' weaknesses to encourage
them to sign up for a $34,995 Gold Elite three-day package.
Trump University staff were instructed to get people to pile on credit card debt and to target their
financial weaknesses in an attempt to sell them the high-priced real estate courses.
The documents contained an undated "personal message" from Trump to new enrollees at the school:
"Only doers get rich. I know that in these three packed days, you will learn everything to make a
million dollars within the next 12 months."
The courses are now subject to legal proceedings from unhappy clients.
This shows someone who was absolutely shameless in his willingness to lie
to people - Eric Schneiderman
Judge Curiel released the documents, which are central to a class-action lawsuit against Trump
University in California, despite sustaining repeated public attacks from Trump, who had fought to
keep the details secret.
Curiel ruled that the documents were in the public interest now that Trump is "the front-runner in
the Republican nomination in the 2016 presidential race, and has placed the integrity of these court
proceedings at issue".
... ... ...
The playbook contains long sections telling Trump U team members how to identify buyers and push
them to sign up for the most expensive package, and to put the cost on their credit cards.
"If they can afford the gold elite don't allow them to think about doing anything besides the
gold elite," the document states.
If potential students hesitate, teachers are told to read this script.
As one of your mentors for the last three days, it's time for me to push you out of your comfort
zone. It's time for you to be 100% honest with yourself. You've had your entire adult life
to accomplish your financial goals. I'm looking at your profile and you're not even close to
where you need to be, much less where you want to be. It's time you fix your broken plan, bring
in Mr. Trump's top instructors and certified millionaire mentors and allow us to put you and
keep you on the right track. Your plan is BROKEN and WE WILL help you fix it. Remember you
have to be 100% honest with yourself!
Trump University staff are instructed in how to persuade students to put the cost of the course
on their credit cards, even if they have just battled to pay off debts.
Do you like living paycheck to paycheck? ... Do you enjoy seeing everyone else but yourself
in their dream houses and driving their dreams cars with huge checking accounts? Those people
saw an opportunity, and didn't make excuses, like what you're doing now.
Trump staff are told to spend lunch breaks in sign-up seminars "planting seeds" in potential students
minds about how their lives won't improve unless they join the programme. They are also told to ask
students personal questions to discover weaknesses that could be exploited to help seal the deal.
Collect personalized information that you can utilize during closing time. (For example: are
they a single parent of three children that may need money for food? Or are they a middle-aged
commuter that is tired of traveling for 2 hours to work each day?)
New York attorney general Eric Schneiderman, who has also
sued Trump University
, renewed his attacks on Trump on Tuesday. "You are not allowed to protect
the trade secrets of a three-card Monte game," Schneiderman said ahead of the document's release.
"If you look at the facts of this case, this shows someone who was absolutely shameless in his willingness
to lie to people, to say whatever it took to induce them into his phony seminars," Schneiderman said.
Urban2 -> Karlyn Isaak Lotney
1 Jun 2016 09:17
This is no more of a fraud then lotion for baldness or pills for losing weight. Or anything else
being sold for that matter. And it's district attorney that is using terms like shamelessness
and lying. Those are defamatory terms, not legal.
Jonathan Shearer -> Susan Victoria
1 Jun 2016 09:14
Could you please name the prosecutors, giving dates and amounts of these donations? Can I have
verified quote from Curiel where he expresses his STRONG support for La Raza? Exactly what are
these "links" to Hillary?
No judge is in favor of illegal immigration, though he may be in favor of changes to law to
change the status of illegal immigrant and/or to make legal immigration easier. Judges are not
in favor of illegal activity.
Let's make America honest and verifiable (again).
Urban2 -> CaptainRogers
1 Jun 2016 09:13
If it were a civil case, they wouldn't have been in possession of Trump's internal documents.
Besides nothing would stop the plaintiffs from disclosing documents themselves. Public interest
would therefor not even be an issue. Now of course I'm not aware of all the intricacies, but it
does look sinister. At least to me.
Sanibel -> Paul Freeman
1 Jun 2016 09:10
"And I think that they want a president who is not afraid of making tough, ruthless decisions
(in America's interests)." The US already does that with poor defenseless countries. Problem is
if Trump tries that with powerful countries( with nukes like China) it may not end so well...
SakkiSelznick Susan Victoria 1 Jun 2016 09:10
"Collect personalized information that you can utilize during closing time. (For example: are
they a single parent of three children that may need money for food?" The judge didn't write that.
Mr. Trump's university did.
Debra Smith -> J Nagarya
1 Jun 2016 09:10
In the USA, those at the bottom collaborate based on the 'promise' that the American Dream
offers them a shot at the top, if they hold the party line.
What they do not realize is that the "party" counts on the weight of their mass to hold
that line for THEMSELVES ALONE. The people who back it all are thrown under the bus with great
regularity. They never see it until the wheel roll over them and by that time they have sucked
millions of others into the illusion that they are the "one" special one who will make it from
the bottom and be welcomed as a peer into the 1%.
It is not so surprising. Hope is a hard thing to kill and an easy thing to exploit.
SakkiSelznick -> RogerColin
1 Jun 2016 09:07
A sales playbook that teaches seeking out "a single parent with three kids who struggles to buy
food" and targeting them for credit card debt" is not only cruel but illegal. And it's far from
buying low and selling high.
tonichicago -> Wordblind
1 Jun 2016 09:07
He appeals to those who hate "big government". Ironically, they don't seem to realise that his
threats to curtail the "nasty and dishonest" press simply mean that we will end up with unfettered
government. There will be no accounting to anyone.
tonichicago -> Aaron Rosier
1 Jun 2016 09:04
He is being sued for "deceptive business practices" which is to do with the content of his
so-called University courses. You can be a snake oil salesman and pressure people into buying
more expensive stuff, but you can't sell them lemons. There are consumer protection laws to prevent
that, and that's what these lawsuits are doing.
He sold them all a bill of goods.
Debra Smith -> downhillracer117
1 Jun 2016 09:01
You have hit at the crux of the matter.
This is TEAM BASED. Americans are indoctrinated to TEAM from very early in life. Every sport
event, the high school team, the prom and everything in college life is TEAM BASED. You are "in"
or you are "out" (meaning human or not human) by the colour of your jersey. Truth, justice, facts,
are all dismissed based on what team you belong to.
ID446302
1 Jun 2016 09:00
An American success story? Exceptionalism to its core. Hidden in the shadows of our IRS and our
exceptional judicial, until you threaten the political establishment by running for president.
J Nagarya -> bobkolker
1 Jun 2016 09:00
He is being sued NOW, and he is attacking the judge because he KNOWS he is being exposed for the
crook he is.
Stop defending criminality: he is being sued for his tactics because they are NOT legal.
Pay attention to the news reports on his methods, as exposed in the Trump "University" materials
he DIDN'T WANT released, but which now the court has released as result of his baseless slanders
against the judge presiding over the case because HE KNOWS they expose his criminality.
keepsmiling -> Echocell
1 Jun 2016 09:00
Hate to tell you this, but what was written in the playbook is called "sales techniques."
It's used by every company on the planet that has a product to sell. Don't hate the player,
hate the game (capitalism).
'Just following orders', which is basically what you are trying to justify, in a business
context, has been discredited as a modus operandi and is not a legal defence (hence the lawsuit,
with which I wish them the very best of luck).
You have to fight the players - 'capitalism' is too nebulous a concept to 'fight', so you end
up not seeing the wood for the trees. Exposing them one at a time is fine - it's all part of the
big picture and is educational. There's a lot of educating to be done with regard to Trump's followers.
Susan Victoria
1 Jun 2016 08:56
Here we go again... the public will be fed a series of quotes, almost all taken out of context,
designed to bash Trump and spread even more hate.
Meanwhile, the more one learns about the judge and the more this judge is in conflict of
interest (IMO). This judge is for open borders and illegal immigration, is a strong advocate for
La Raza (yes, that anti-White and pro-illegal Mexican hate group), has links to the Clintons (Hillary)
and appointed two prosecutors to the case who are extremely generous donators towards Hillary,
including paying her significant $ for speeches.
Very interesting testimony coming out of Clinton's deposed staff re her email server, including
she didn't have a password... the mysterious fire... and more. But who cares? Trump-bashing is
the order of the day.
youssou -> Ortho
1 Jun 2016 08:53
Lol interesting theory ... ;-)
I had to google it ... and yes: http://www.businessinsider.com/new-york-military-academy-closes-2015-9?IR=T
Though, I think, not everybody who attends boarding school becomes a sociopath. But sociopathy
runs in families. And sociopathic parents tend to put kids into boarding school or reformatory
for that matter. Just to get rid off them.
Guthrum -> MartinMckay
1 Jun 2016 08:49
In such a naked, dog-eat-dog society, there should also be no personal bankruptcy protection
or ring-fencing for those who fail in business. All their assets siezed to pay off creditors.
Not sure Trump would be so keen on that.
To do otherwise would be rewarding failure, using the state to prop up losers.
AntonZ1 -> BiggyZ
1 Jun 2016 08:49
Donald Trump University is not a religion. Drumpf is more cult leader than religious scholar.
Karlyn Isaak Lotney Urban2
1 Jun 2016 08:47
Shamelessness is not a crime in the USA, but crime (fraud) is still a crime.
ClearItUp
1 Jun 2016 08:45
Nothing will come out of this, that will effect the election. The practices documented in
the papers released is a high pressure sales tactic which are used by many. The focus should be
on what Trump stands for and bring the fight to him. Hillary Clinton is the wrong person in the
wrong year to be able to take on Trump. She is flawed beyond repair, and is fighting not to lose,
so careful with her words that they don't resonate.
CaptainRogers -> Urban2
1 Jun 2016 08:44
He's being sued, so it's a civil case. Documents can be made public if it's in the public
interest to know about them. And when it looks very much like a con man is on his way to the Whitehouse,
I'd call that a big yes for public interest.
Tom Voloshen
1 Jun 2016 08:42
Killary attacks the MANY women who accuse her husband of rape, lies to the grand jury over
White Water, to congress and the people about Benghazi, runs guns to ISIS, takes money from Saudi
Arabia the worst women's rights violator, lies about being shot at landing in Bosnia, approves
uranium mining deal to Russian concerns while SOS and receives millions to her foundation at the
same time, starts an unregistered hedge find in Columbia of all places, takes millions from banks
and you fault Trump for greed and making his own way without influence peddling while in public
office.
OpineOpiner
1 Jun 2016 08:40
A snake oil salesman, a 'boiler room' operator, a phishing scammer, that's all Trump is. Honestly,
is there any lie this sociopath could not tell? Is there any con game too crooked and despicable
for even him?
PostTrotskyite -> MartinMckay
1 Jun 2016 08:36
Sounds like a third world country with no social contract other than the "opportunity" to
exploit one another.
Btw, supplanting content with the cheer leading, rhetoric, hate, and cheap one liners is the
creed of the Trumpeteers.
AntonZ1 -> Aaron Rosier
1 Jun 2016 08:34
A 'predatory capitalist' is a thief, no matter how "biased" or "naive" you are.
Aaron Rosier -> ElfenLied2
1 Jun 2016 08:28
Clinton is already tirelessly working to drive voters away with her beams of blind arrogance,
pretentiousness, divisiveness, unwillingness to accept/acknowledge consequence of her glaring
failures of judgement, the naked pandering, the belligerent "campaign theme", and of course all
of the old hits (Slick Billy and the Slimers, NAFTA, welfare reform, KXL, TPP, Fracking, Wall
Street Transcripts, etc).
Donald Trump will feast on Clinton's garbage, while slowly moderating his platform positions,
and steering his rhetoric slowly back to professional (from simpleton).
karmarama -> elemenohpee
1 Jun 2016 08:21
You seem to misunderstand me. Like several other posters on this thread, I am suggesting that
Trump's practices are part of the wider world of business, and not so far from normal (not, in
my view the same as 'acceptable') practices. The use of the name 'University' was certainly fraud,
but why was it not caught right away by whoever is in charge of that in the US? His sales pitch,
while pretty sleazy, is not far away from normal practice in brokerage, real-estate, holiday sales
and many other areas of business, including the bottom of the education industry - indeed, doesn't
every university 'oversell' itself to students, hence the need for independent surveys, and aren't
there a host of 'degree for sale' schools in the US?
As a socialist I consider it all to be 'unacceptable', and I hope you don't take me for a Trump
supporter, which I suspect you do. He is even more unacceptable than the Bush clan was! However
those who are using this to smear Trump are walking a tightrope between 'normal' and 'fraud' when
I think that the distinction is not at all clear.
ID673139 -> Carl123
1 Jun 2016 08:18
Clinton has a pretty shady past as well, like covering up potential rape allegations for Bill.
I'm not saying it is a defence at all, but as soon as Trump becomes a presidential candidate
suddenly its front page news. He not done anything illegal, and if your so upset over these business
practices why not look at the industry as a whole and people who do skin people with these practices.
I said it before with Clinton or Trump either of them is a bad choice for president.
bbqtv -> ConnecticutNutmeg
1 Jun 2016 08:18
Student loans are encouraged even for courses & "degrees" that have no future earning potential.
Colleges & universities increase non teaching & non research "staff" using these funds because
they have money to spend for which there is NO accounting. [Why do you need to hire two assistants?
So I don't have to teach!"
ConnecticutNutmeg
1 Jun 2016 08:10
Trump U. apparently targeted adults-not teenagers.
If only all the millions of students who were coerced by high school guidance counselors and
campus administrators to sign contracts for government student loans, and are now on the hook
for hundreds of thousands of dollars of debt without any good job prospects in this Obama economy,
could sue the government for failing them as these students are suing Trump. Many of these students
had no business going on to college and many drop out without getting the degree-but they still
owe the money.
By having the students sign these loan agreements (not their parents) , government considers
college students adults . But when it comes time to repay these loans, all of a sudden all the
Democrats whine about these poor kids and their debt. Make up your mind. Are they old enough to
take on the responsibility of signing a contract or not? If not, perhaps they should not be given
the ballot either.
Muz Murray -> c0n0r
1 Jun 2016 08:03
Just about everything, if past presidents and their cronies are anything to go by. They are in
it for the business of making money and feathering their own nests, while blithely blabbering
about doing it 'for America.'
Martin Cohen
1 Jun 2016 07:55
I just don't understand how the US has wound up with a Clinton or Trump choice. Can the electorate
be so politically disengaged as to allow one of these two into the most powerful job in the Western
world? If Trump is simply the anti-establishment protest vote, that is all very well but someone
as divisive and offensive as him can never unite a country. There are already protests on the
streets that thankfully haven't turned too violent yet but it won't take much for heavily armed
riot police to trigger something unthinkable. Being President always seemed to be a unifying job
that commanded loyalty and respect even from staunch opponents. I always admired that about the
Presidency. I don't see much evidence of it these days. Has respect for politics and politicians
reached at an all time low in The States too? Trump isn't the answer, nor is a shady Clinton.
We need politics and our politicians to once again embrace the concept of public service, morality
and the precise rule of law. It would have been tremendous if more principled candidates had emerged
victorious and given a much needed shot of public confidence in such a maligned vocation. I fear
for the future. We may have stopped the cycle of European wars but globally it's more dangerous
than ever. A competent steady hand on the tiller is what's needed now, especially in America.
Paul Freeman
1 Jun 2016 07:47
Unfortunately, american's tend to believe that businesses should be ruthless - except, of course,
if it is them who has been the victim of a ruthless scam. And I think that they want a president
who is not afraid of making tough, ruthless decisions (in America's interests). So it would not
surprise me if these revelation actually boost Trump's popularity.
Tommo68 -> HardboiledChicken
1 Jun 2016 07:39
anyone who can stump up 35 grand for a three day course doesn't need the course in the first place...
HiramsMaxim -> garth25
1 Jun 2016 07:11
I'm not going to analyse all 50 States. US elections come down to a very few swing States.
Those three are the most important.
The "Latino" vote in Florida is primarily not Mexican. Assuming legal immigrants will automatically
support illegals from a different country is probably not wise. The real power in Florida is the
retirees, although as Florida's population continues to grow, that is diminishing.
I very much doubt bill Clinton can capture white rural voters from Trump.
Clinton has nowhere near the support that Obama had among black voters. And, it doesn't do any
good to win California with a bigger margin, the electoral votes remain the same.
I have no idea what the outcome will be, but I can say that Mrs. Clinton's huge lead has evaporated
in about a month.
Tom Voloshen -> Maharaja Brovinda Singh
1 Jun 2016 07:09
We came we saw he died...the human Killary.....
Tom Voloshen 1 Jun 2016 07:09
The US keeps the the piece around the world using 720 military bases in foreign countries under
the direction of people like Killary and the result is 15 years of war, death, destruction, millions
dead, countries dissolved, missile batteries ringing Russia, our economy debt/GDP equal to Greece
with NO END INSIGHT.....and you speak about Trump's lack of success? Lets talk of Killary's, Obama's,
Bush's, Billy's....vote for anyone but Killary.
RussZimm
1 Jun 2016 07:07
HRC was paid $385,000 for 3 speeches given to Goldman Sachs, nearly 10 times what the Trump
3 day course costs per person. Based on the speeches we hear from HRC, what could have been in
these speeches that made them so valuable? Afterward there may have been the same buyer's remorse
felt by Trump-course attendees. The comments that say that the U.S. is full of scams like this
are on target, starting with the $1 lottery ticket. It is the dream that brought and brings people
to the U.S., and if it turns out to be an expensive nightmare, the answer is "caveat emptor."
Karen Poyser -> HardboiledChicken
1 Jun 2016 07:06
What a horrible way to see the world! These are vulnerable people being prayed upon, desperation
can make people do stupid things. Considering all the ''american dream'' capitalist propaganda
thrust on people from the minute they are old enough to comprehend, its surprising more don't
fall for this sort of thing.
tempestteacup
1 Jun 2016 07:27
Am I alone in finding the steady drip of tidbits regarding Trump's business practices interminable?
It is not news and it is not even particularly illuminating. This is all known grown that merely
lends him greater exposure and entrenches his supporters in their view that he is the victim of
an establishment conspiracy to smear, discredit and misunderstand.
Meanwhile, we have next to nothing on the devastating IG report on Clinton's e-mail server. We
have almost no analysis on how the Republican Party is quietly, begrudgingly, rallying around
Trump at exactly the moment that the Democrats are doing the opposite and degenerating into a
fractious mess because they meretriciously anointing a terrible candidate 18 months ago.
Trump has received millions of votes. He has decimated a crowded Republican field, most of them
smooth political operators with huge financial backing. This did not happen because there are
millions of racists in America. It is because we are entering a potentially bloody phase in America's
Culture Wars, with an increasingly mindless adherence to identity politics pitted against the
historic grievances of a working class that now feels abandoned by the left (Bernie notwithstanding).
Anything about that, instead of fanning the flames of Trump's Plot Against America-style campaign?
*tumbleweed*
edithamy -> ljonesjr
1 Jun 2016 06:48
Salesman uses corrupt and illegal sales techniques to generate sales would be even more of
a shock headline.
The real problem here is that Obama got elected, who had such a checkered past yet the media
have him a pass. The media is still giving Hillary a pass.
At least with Trump, by the time he gets in office, I have a feeling he will be thoroughly vetted.
What a nice change from having no clue about the man in the White House for the last 8 years!
Was he born in Kenya as a book jacket reported? Was he born in Hawaii as a dubious birth certificate
stated? Who was his mom? Who was is dad? Who were his mentors? Where did he go to school? What
were his grades? Lots of questions that we were told several answers to, but he was NEVER really
vetted by the press, only anointed.
I'd rather know for sure what I'm getting! I think I know how ruthless Trump is...even before
this article....that's why I'm voting for him.
"... we are now feeding the growth of the "underclass" by lifting ever higher and out of reach the upward mobility ladder, once the banner of opportunity now fallen behind the supposedly sclerotic welfare states of Europe. ..."
"... The reason Trump and Sanders are doing well in the US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or is in the process of gutting, societies. Workers and other formerly "safe" white collar workers are seeing their job security, income security, retirement security all go up in smoke. Neoliberals are trying to snip and cut labor protections, healthcare, environmental regulations all for corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources and protecting their markets, cause massive refugee flows which strain social structures in Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course the people will lean fascist. ..."
"... Selected Skeptical Comments ..."
"... seanseamour asks "What does that have to do with education?" and answers "Everything if one considers the elitist trend…" This question & answer all but brings tears to my eyes. It is so utterly on point. My own experience of it, if I may say so, comes from inside the belly of the beast. As a child and a product of America's elite universities (I have degrees from Harvard and Yale, and my dad, Richard B. Sewall, was a beloved English prof at Yale for 42 years), I could spend all morning detailing the shameful roles played by America's torchbearing universities – Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators to maintaining the health of the nation's public school system.* ..."
"... And as I suspect seanseymour would agree, when a nation loses public education, it loses everything. ..."
"... accountable ..."
"... And I hear a few others saying that Americans are too dumbed down, too busy, too polarized or too just plain stupid to make intelligent, constructive use of a non-partisan, problem-solving Civic Media. But I would not underestimate the intelligence of Americans when they can give their considered input – by vote, by comment or by active participation – in public forums that are as exciting and well managed as an NFL game or a Word Series final. ..."
Posted on
June 2, 2016 by Yves
Smith Yves here. The first comment came in on a post that had gone cold, and I thought it was
so revealing that it needed to be seen widely. The second is a synchronistic complement.
As much as I carry on about the isolation of the Acela-riding classes from the acute distress
in much of the US, I only have a very distant feel for it. For instance, I grew up moving through
many small towns where a paper mill was a major, and in some cases, the biggest local employer. Those
mill jobs were well paid and the workers could buy houses, cars, and had pensions. One of my brothers
works for a paper mill that should have been world competitive through his retirement, but it's been
wrecked by a series of private equity owners, starting with Cerberus, and in now in bankruptcy. The
town in which he lives, Escanaba, Michigan, has lost over 20% of its population since the mid 1980s.
Similarly, my uncle lived below the poverty line in Maine, lobstering until his knees gave out. But
he had a fully paid for house he had inherited, and access to VA hospitals and doctors, so it could
have been a lot worse. But Maine is a poor state, so even visiting there as a tourist in the summers,
it's not hard to see the signs of struggle even in those who are getting by.
The first comment gives a window into the hidden desperation in America that is showing up in
statistics like increasing opioid addiction and suicides, rather than in accounts of how and why
so many people are suffering. I hope readers will add their own observations in comments.
We recently took three months to travel the southern US from coast to coast. As an expat
for the past twenty years, beyond the eye opening experience it left us in a state of shock.
From a homeless man convulsing in the last throes of hypothermia (been there) behind a fuel
station in Houston (the couldn't care less attendant's only preoccupation getting our RV off
his premises), to the general squalor of near-homelessness such as the emergence of "American
favelas" a block away from gated communities or affluent ran areas, to transformation of RV
parks into permanent residencies for the foreclosed who have but their trailer or RV left,
to social study one can engage while queuing at the cash registers of a Walmart before beneficiaries
of SNAP.
Stopping to take the time to talk and attempt to understand their predicament and their
beliefs as to the cause of their plight is a dizzying experience in and of itself. For a moment
I felt transposed to the times of the Cold War, when the Iron Curtain dialectics fuzzed the
perception of that other world to the west with a structured set of beliefs designed to blacken
that horizon as well as establish a righteous belief in their own existential paradigm.
What does that have to do with education? Everything if one considers the elitist trend
that is slowly setting the framework of tomorrow's society. For years I have felt there is
a silent "un-avowed conspiracy", why the seeming redundancy, because it is empirically driven
as a by-product of capitalism's surge and like a self-redeeming discount on a store shelf crystalizes
a group identity of think-alike know-little or nothing frustrated citizens easily corralled
by a Fox or Trump piper. We have re-rcreated the conditions or rather the reality of "Poverty
In America" barely half a century after its first diagnostic with one major difference :
we are now feeding the growth of the "underclass" by lifting ever higher and out of reach
the upward mobility ladder, once the banner of opportunity now fallen behind the supposedly
sclerotic welfare states of Europe.
So Richard Cohen now fears American voters because of Trump. Well, on Diane Reem today (NPR)
was a discussion on why fascist parties are growing in Europe. Both Cohen and the clowns on
NPR missed the forest for the trees. The reason Trump and Sanders are doing well in the
US while fascists are doing well in Europe is the same reason: neoliberalism has gutted, or
is in the process of gutting, societies. Workers and other formerly "safe" white collar workers
are seeing their job security, income security, retirement security all go up in smoke. Neoliberals
are trying to snip and cut labor protections, healthcare, environmental regulations all for
corporate profit. In Europe this is all in addition to a massive refugee crisis itself brought
on by neoliberalism (neocon foreign policy is required for neoliberal social policy, they go
hand-in-hand). The US and NATO destabilize countries with the intent of stealing their resources
and protecting their markets, cause massive refugee flows which strain social structures in
Europe (which falls right into the hands of the gutters and cutters of neoliberalism). Of course
the people will lean fascist.
In the US we don't have the refugees, but the neoliberalism is further along and more damaging.
There's no mystery here or in Europe, just the natural effects of governments failing to represent
real people in favor of useless eater rich.
Make the people into commodities, endanger their washes and job security, impose austerity,
and tale in floods of refugees. Of COURSE Europeans stay leaning fascist.
What a comment from seanseamour. And the "hoisting" of it to high visibility at the site is
a testament to the worth of Naked Capitalism.
seanseamour asks "What does that have to do with education?" and answers "Everything if
one considers the elitist trend…" This question & answer all but brings tears to my eyes. It is
so utterly on point. My own experience of it, if I may say so, comes from inside the belly of
the beast. As a child and a product of America's elite universities (I have degrees from Harvard
and Yale, and my dad, Richard B. Sewall, was a beloved English prof at Yale for 42 years), I could
spend all morning detailing the shameful roles played by America's torchbearing universities –
Harvard, Yale, Stanford etc – in utterly abandoning their historic responsibility as educators
to maintaining the health of the nation's public school system.*
And as I suspect seanseymour would agree, when a nation loses public education, it loses
everything.
But I don't want to spend all morning doing that because I'm convinced that it's not too late
for America to rescue itself from maelstrom in which it finds itself today. (Poe's "Maelstrom"
story, cherished by Marshall McLuhan, is supremely relevant today.)
To turn America around, I don't look to education – that system is too far gone to save itself,
let alone the rest of the country – but rather to the nation's media: to the all-powerful public
communication system that certainly has the interactive technical capabilities to put citizens
and governments in touch with each other on the government decisions that shape the futures of
communities large and small.
For this to happen, however, people like the us – readers of Naked Capitalism – need to stop
moaning and groaning about the damage done by the neoliberals and start building an issue-centered,
citizen-participatory, non-partisan, prime-time Civic Media strong enough to
give all Americans an informed voice in the government decisions that affect their lives. This
Civic media would exist to make citizens and governments responsive and accountable
to each other in shaping futures of all three communities – local, state and national – of
which every one of us is a member.
Pie in the sky? Not when you think hard about it. A huge majority of Americans would welcome
this Civic Media. Many yearn for it. This means that a market exists for it: a Market of the Whole
of all members of any community, local, state and national. This audience is large enough to rival
those generated by media coverage of pro sports teams, and believe it or not much of the growth
of this Civic media could be productively modeled on the growth of media coverage of pro sports
teams. This Civic Media would attract the interest of major advertisers, especially those who
see value in non-partisan programming dedicated to getting America moving forward again. Dynamic,
issue-centered, problem-solving public forums, some modeled on voter-driven reality TV contests
like The Voice or Dancing with the Stars, could be underwritten by a "rainbow" spectrum of funders,
commercial, public, personal and even government sources.
So people take hope! Be positive! Love is all we need, etc. The need for for a saving alternative
to the money-driven personality contests into which our politics has descended this election year
is literally staring us all in the face from our TV, cellphone and computer screens. This is no
time to sit back and complain, it's a time to start working to build a new way of connecting ourselves
so we can reverse America's rapid decline.
OK, so I hear some of you saying, corporate America will never let this Civic Media get off
the ground. My short answer to this is that corporations do what makes money for them, and in
today's despairing political climate there's money to be made in sponsoring something truly positive,
patriotic and constructive. And I hear a few others saying that Americans are too dumbed down,
too busy, too polarized or too just plain stupid to make intelligent, constructive use of a non-partisan,
problem-solving Civic Media. But I would not underestimate the intelligence of Americans when
they can give their considered input – by vote, by comment or by active participation – in public
forums that are as exciting and well managed as an NFL game or a Word Series final.
seanseymour, thanks for your insights and thanks, Yves, for putting them where we can see them.
I found it amusing that Goldman raised their price target (causing a rally in the
stock) hours before underwriting a capital raise that cause a decline in Tesla's stock.
Although, to be fair there are SEC rules that are very explicit, with severe consequences,
if Goldman Sachs' underwriting dept talked or leaked anything to their analysts.
Goldman Sachs does plenty of shady things to make a profit – like selling Mortgage Backed Securities
as AAA investments, and simultaneously, knowing they're crap, betting on them going bad (covered
in the critically acclaimed documentary "Inside Job"), or helping Greece hide their budget deficit
with accounting magic… so they can sell them debt… that they know will go bad.
However, as odd as it is, none of those actions were illegal. THIS would actually be illegal,
and Goldman Sachs is smarter than that. I'd guess it is a genuine coincidence.
On a separate note, I find it important to note that Tesla FIRST scouted out battery suppliers
to supplement their battery supply 1 DAY before announcing the amount of their capital raise.
My hypothesis, Tesla's accelerated Model 3 ramp-up meant that they will need a large supply
of additional batteries as the Gigafactory will not be able to accelerate it's schedule enough
to match the accelerated vehicle production ramp.
This also tells me that Tesla is confident enough in their accelerated Model 3 production schedule
that they needed to arrange a multi-million dollar contract with battery suppliers to supplement
their capacity until the Gigafactory can meet demand.
Although, to be fair there are SEC rules that are very explicit, with severe consequences,
if Goldman Sachs' underwriting dept talked or leaked anything to their analysts.
This is all about corruption of regulators and impunity of TBTF financial institutions under
neoliberalism - which is an immanent feature of neoliberalism aka "casino capitalism"…
Goldman's role in the growth of casino capitalism in the USA is similar to that of other players,
except for one thing: Goldman didn't believe its own hype. The now famous Rolling Stone magazine
article in 2009 by Matt Taibbi unforgettably referred to Goldman Sachs, the world's most powerful
investment bank, as a "great vampire squid wrapped around the face of humanity, relentlessly jamming
its blood funnel into anything that smells like money." (
http://www.forbes.com/sites/jakezamansky/2013/08/08/the-great-vampire-squid-keeps-on-sucking/
)
Impunity is epidemic in America. The rich and powerful get away with their heists in broad
daylight. When a politician like Bernie Sanders calls out the corruption, the New York Times
and Wall Street Journal double down with their mockery over such a foolish "dreamer." The Journal
recently opposed the corruption sentence of former Virginia governor Bob McDonnell for taking
large gifts and bestowing official favors - because everybody does it. And one of its columnists
praised Panama for facilitating the ability of wealthy individuals to hide their income from
"predatory governments" trying to collect taxes. No kidding.
Our major institutions, the ones that should know better, are often gross enablers of impunity.
Consider my alma mater, Harvard University, and its recent nuptial with hedge-fund manager
John Paulson. Paulson was the co-conspirator with Goldman Sachs of one of the most notorious
scams of the recent financial bubble.
Professional financial hackers have a lot of common with the organized crime. And not only
in respect to common addictions to cocaine and prostitutes. But there is a subtle difference:
financial hackers make it daily (and very lucrative) business to figure out ways to abide by
the letter of the law while violating its spirit. Although the claim that they do not break
the law has very little credibility. They do break the law, but at the same time their political
influence is big enough to keep them out of jail. In 2012 Lanny Breuer, then the head of the
Justice Department's criminal division openly admitted that. In a speech at the New York City
Bar Association he said that he felt that it was his duty to consider the health of the company,
the industry, and the markets in deciding whether or not to file charges. Which in case of
Goldman represents insurmountable obstacle to criminal prosecution.
In any case GS converted itself into a special type of TBTF company, the company that specialized
in hacking financial system. And in a large company internal politic can turn really destructive
both to the firm and society at large. In fact, in large companies there are people with very
high IQ at the top with personal traits that makes them more dangerous in comparison with bosses
of Mexican gangs. It also makes internal political battles more vicious. BTW, a lot of psychopaths
have above average IQ.
In a way the USA never had a subprime crisis. What we had was systemic, neoliberalism-induced
crisis that involves FED, government, congress, banking, ratings, insurance, investment and
financial industries (the banks were at the center of this crime syndicate and they were the
largest beneficiaries of the crimes committed), one manifestation of which was 2008 subprime
crisis. Large banks became huge, dominant political force and based on their political weight,
they hacked the financial system in the same way computer hackers hack computers systems to
suit their short term needs and first of all for enrichment of the brass (appetite for "make
money fast" schemes was greatly raised during dot-com crisis).
As Simon Johnson wrote in May 2009 the USA had a The Quiet Coup with banks becoming the most
favored and the most protected industry of the Congress. Financial system is essentially a
system of rules. If a rich and powerful organization is directed toward hacking the rules:
finding weaknesses and exploiting them it is undistinguishable from mafia in a very precise
meaning of the term (organize crime syndicate with strong ethnic component), only more sophisticated.
Again they are not gangsters in traditional meaning of this word, they are of a hackers, and
as such they are much more difficult to prosecute. As a comment to blog post at EconomistView
by "Eric" (Paul Krugman The Unwisdom of Elites) aptly stated:
Villains….who exactly? The principle reason that there have been few prosecutions of high level
bankers is that not so much that got done was illegal. Reckless, maybe. But even here is it
really reckless behavior if you have a belief - which turns out to be true - that public finances
will bear the downside risks on your behalf?
In hindsight it feels like these things should have been illegal, but the available serious
punishments, such as not bailing out AIG, not allowing various investment firms to become bank
holding entites, not backstopping the GSEs (read their debt issues and you'll see that nowhere
is a claim made for public backing), not taking first loss positions on Bear Stearn assets,
etc., etc., were foregone by voluntary actions by public officials.
Make peace with the truth that there will be no sweeping prosecutions, least of all by the
federal government of the USA.
"... The shalies will say anything to keep the money coming in. I would only trust the data you can see at the well level. In the Bakken, CLR has touted 800,000 EUR's. In their recent 10-K, they actually booked about 170,000 in reserves per completed well in the Bakken in 2015. Their problem nowis there are actual well histories. They can't book high PDP given what their past wells have produced. ..."
I think the presentations and reports by CLR and other shalies have to be looked at very skeptically
as their breakevens are much, much higher than the numbers they tout. I have looked at loads of presentations
by LTO players the last 5 years. Even with high oil prices, almost all their claims were disproven
by the poor to mediocre financial results posted.
The shalies will say anything to keep the money
coming in. I would only trust the data you can see at the well level. In the Bakken, CLR has touted
800,000 EUR's. In their recent 10-K, they actually booked about 170,000 in reserves per completed
well in the Bakken in 2015. Their problem nowis there are actual well histories. They can't book
high PDP given what their past wells have produced.
"... The only thing you can trust is that Goldman Sach's values don't include giving a damned about average Americans even if in Blankfein's delusional mind he is doing "Gods work. It would go a way toward restoring trust in the system if these rip off artists would consent to paying more taxes on their ill deserved gains in order to help bring down some of the nations debt and relieve the misery their unethical behavior created. But that will never happen voluntarily. Basically they are immoral creeps killing the golden goose that is our country. ..."
"... Run corruption out of DC and there will be much more trust of big business. Do not buy the garbage that politicians are critical of the Wall Street crowd. Has Hillary released her speeches yet? NO. Don't expect she ever will. (aside: I do not find this article informative, and I'm dismayed by the comments I've read here.) ..."
"... "I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country. …corporations have been enthroned and an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until all wealth is aggregated in a few hands and the Republic is destroyed." ..."
"... The mass of Americans are too powerless to fight back against the reign of the money powers. As Lincoln predicted, our Republic is destroyed. What awaits us now is dictatorship or even worse ... theocracy. ..."
Brilliance is often accidental, and so it was at Goldman Sachs' annual meeting on Friday.
In an attempt to pinpoint exactly what's wrong with the global economy - why demand is weak, why
growth is anemic, why jitters on one side of the planet can turn into panic all over - CEO Lloyd
Blankfein happened upon why Wall Street is so hated.
It was, as I said, an accident.
Blankfein said that what the world needs now is confidence. In investment banking, when people
are confident t
here are "more financings, more equity raises, because people invest more money
in their own businesses when they're confident," he said, according to
Business Insider's Portia Crowe
, who was on the scene.
This explanation sounds right. When people think they can make money they put their money to work.
The problem is that "confidence" doesn't go far enough. More than confidence, for people to invest
in the world they have to trust in it - in the systems and people that make it work.
The fact that Blankfein missed that mark, though, explains exactly why people hate Wall Street.
The financial crisis, the scandals and the fraud and the dark headlines, have all helped erode
that trust. And that lack of trust is what is holding the world back right now.
This is not a drill
Think of a simple trust-building exercise, the fall game. When you're the fall guy, you can be
confident that everyone is going to catch you. That, after all, is how the game is completed. You
have to believe that everyone understands the rules.
What's better than knowing that everyone understands the rules, though? Trusting that everyone
around you is going to catch you - believing beyond a shadow of a doubt that they
want to follow
the rules
.
That's the difference between trust and conviction. Trust is something you can rely on, beyond
certainty.
Now one can operate in markets without trust, with only conviction.
Conviction doesn't demand that you, or anyone else, play by the rules, though. It just demands
that you understand what's going on (and what motivates everyone around you) at all times. It's a
daunting task that neither the common person nor Wall Street's all-seeing CEOs were able to accomplish
before the financial crisis. It is, however, part of the latter's full-time job - mitigating risk,
seeing the unforeseen.
Of course, some of that burden would be lifted if we operated on more trust and less conviction.
Your correspondent is hardly the only person thinking this way. This week, Andrew G. Haldane,
chief economist of the Bank of England, gave an incredibly compelling speech on what's wrong with
global economy. Unlike Blankfein, though, he got it right. The speech was called
The Great Divide,
and he argued that the only way to close that divide is with trust.
"Evidence has emerged, both micro and macro, to suggest trust may play a crucial role in value
creation. At the micro level, there is now ample evidence the degree of trust or social capital within
a company contributes positively to its value creation capacity," said Haldane.
"At the macro level, there is now a strong body of evidence, looking across a large range of countries
and over long periods of time, that high levels of trust and co-operation are associated with higher
economic growth. Put differently, a lack of trust jeopardizes one of finance's key societal functions
- higher growth."
Watchers on the wall
Back in 2014, when the market was roaring and everyone thought we were on the road to recovery,
Dylan Grice, a portfolio manager at Aeris Capital, put forth the same idea. He saw in declining relations
between the US and China, between Russia and the world, and between citizens and corporations what
could only be perceived as our descent into the trough of a cycle of trust.
And, as he pointed out, credit - one of the main forces for moving money from place to place -
comes from the Latin word for trust.
Over at HSBC, economist
Stephen King wrote a note called
Unhappy Families: The Case for International Policy Coordination
in which he argued that the
global economy could actually be saved quite easily if we trusted each other. If the countries that
could save us - the US, China, and Germany - acted unselfishly and in coordination and simply did.
But they won't, because there is no trust.
"Yet it would be easy, too easy, to point the finger at finance alone," Haldane said in his speech.
"For this Great Divide exists not just between the financial elites, but between elites generally
and wider society. It is not just bankers who have suffered a loss of public trust. In varying degrees,
this is also true of big business, government and, yes, politicians and central banks."
Man, see this mirror
This brings us back to Goldman Sachs, which happened to have had a very embarrassing little incident
last week when one of its analysts recommended buying Tesla just before the bank announced that it
would be helping the automaker with an equity offering.
The stock upgrade is a detailed argument for why you, the investors,
should buy the shares. As a result, investors buy.
This report is delivered just as Goldman's sales force is about to
hit the phones to push $1.4 billion of those very shares for a nice fat fee for Goldman and a dilutive
hit to the shareholders.
So then there are investors who, based on Archambault's note, bought
the shares in the morning only to learn by that afternoon that Goldman would have a hand in diluting
their newly acquired ownership stake.
And the popular view says Goldman knew this was going to happen the
whole time.
If you're thinking the worst, this snafu was a breach of Wall Street's famous Chinese Wall between
research and investment banking. What's more, because of this trust deficit, most people were thinking
the worst because that's what they do when they think of Goldman Sachs.
View gallery
.
Lloyd on a vampire squid. Sorry bro, too easy.
And because of that some people don't trust, or put their money in, the market.
And because of that the market doesn't move.
Haldane sees this fear as a loss of social capital arising from the crisis.
"Social capital is inextricably linked to trust," he said in his speech. "And banking is quintessentially
a trust business. At root, it involves swapping promises to pay. These promises rely on trust."
It's the belief that these promises
will be kept
that the market is lacking, not necessarily
that they
can be kept.
This is the difference between trust and confidence. And with every
scandal and fraud, every dark headline telling of financial ruin that comes from the financial sector,
some of that trust is lost.
Haldane thinks that recreating the local bank, a bank with the kind of accountability that comes
from knowing someone by name and looking them in the eye, is part of the solution. But banking isn't
moving that way. Every day we hear about how it's becoming more automated.
He acknowledges this, recognizing that banking must "seek new ways to nurture generalized, or
anonymous, trust on the part of the public. Technology may be a great enabler here."
But in the end it doesn't matter how we fix this. We just have to fix it.
"Whatever business model is adopted, success will hinge on whether the public have faith in banks
pursuing a purpose aligned with their needs, that they are fulfilling their fiduciary function. There
is a mountain to climb on this front, not just for banking but for business generally," he said.
"If not at an all-time low, public trust in big business is plumbing the depths. And the chorus
of criticism of business is not confined to the general public. It is shared by politicians, academics,
investors and indeed sometimes by companies themselves."
Everyone is holding on to their money. Everyone is trying to look someone the eye and finding
their counterparties' gaze shifting to wherever self-interest guides them. The counterparties are
confident they'll find money there, sure, but the trust that makes the market go around is being
lost in the process.
It takes so much more to build it up than to break it down.
GS, Chase ,BofA,Wells Fargo.....,and some others big banks created the crisis past 2008-09.
Any
one of the executives pass a day in prison, they pay cents on the dollars and happy cumballa until
the next scam. Gov it's corrupt with a "revolving door" infiltrating the key position, every official
working in White House or with the executive branch did work for a big bank first or going to
work after!!!
They want trust, trust they themselves self smash, hundreds of case in courts from US citizens
right now vs Government Why?
Because Gov. trying to steal ,expropriating private property without
compensation and ignoring constitution. The rest of the population are worring about what wearing Kardashian!!! Our next election will be a show top level globally!!! Our founding fathers will
be revolting in their tombs for now
PhilOSophocle
What the world needs now --- is love, sweet love. It's the only thing that there's just too
little of, or so Burt Bacharach, Hal David & Jackie DeShannon said. But seriously folks . . .
people hate Wall Street because of the unbridled greed everywhere. The Great Recession wasn't
caused by real estate speculation --- it was caused by easy money from Wall Street when they
packaged together risky mortgages & investment bankers sold them to banks as great
investments, and then betting on them to fail on the side using Credit Default Swaps. It's
very similar to what Joe Kennedy and his cronies did in the 1920's using market manipulation
by cornering stocks & then doing a bear raid on it, which is illegal now. What the Wall
Streeters did in 2000-2007 is still not illegal.
ey02kdv98
I agree. Trust needs to be restored. This requires Wall Street firms to be honest, and to
weed out the greedy, psychopathic and sociopathic brokers, bankers, CEOs and chiefs, and
assorted other criminals. By running firms honestly to a fault, investors would at first shy
away because they'd think it was some kind of trick. Over a short period, good experiences
will increase business to the point that it would exceed current sales many times over, even
beyond your wildest imagination. There is a lot of $$$$$$$$$$$$ to be made in honestly run
business. It's never to late to start.
Mark14
The only thing you can trust is that Goldman Sach's values don't include giving a
damned about average Americans even if in Blankfein's delusional mind he is doing "Gods work.
It would go a way toward restoring trust in the system if these rip off artists would consent
to paying more taxes on their ill deserved gains in order to help bring down some of the
nations debt and relieve the misery their unethical behavior created. But that will never
happen voluntarily. Basically they are immoral creeps killing the golden goose that is our
country.
DavBG
The repeal of Glass Stegal (which Roosevelt put in place after the last great depression)
which prevented banks from investing depositors money in the stock market, is the root cause
here. Banks were only allowed to make loans on real property, like businesses and mortgages.
This put the money in savings back to work. Money placed in the house of cards, ponzi scheme,
stock market, just sits there. Like a giant sponge sucking up the spare capital so that a 1%
few can reap the benefit. Then insiders can cause booms and busts which slowly siphon the life
out of a country and enslave it. The mortgage rate is now the lowest it has ever been in the
US. Now with everyone's money in the stock market the next crash will bankrupt us since all
the banks will have is worthless paper stock certificates.
Rp
Trust is not created through slick marketing and strategic press releases about speeches
made by banking insiders, to other insiders, intended to convince those outside their cozy
system, that they get it now, no more underhanded dealings, really this time, partners 50-50.
We promise, no fingers crossed, everything above board from now on, you can trust us, really
this time. That bs is played out, to ask for trust, is to confirm the fact that they should
not, can not, be trusted. Trust, if it ever returns, to any degree, in any form, will be
created by the numbers. The real numbers. The ones written under our names. The ones that
stick. Trust is not a marketing concept, it can't be put where it doesn't belong, it can't
grow where it isn't planted, protected, and nurtured.
Pat
Wall Street manipulators could not succeed without the complicity of Government. STOP
REGULATING WALL STREET AND START DEMANDING THAT POLITICIANS CANNOT BE CONTROLLED BY LOBBYISTS.
There should be a law that politicians bought by lobbyists WILL be prosecuted. It is
Government that is guilty of capitulation. GOVERNMENT WRITES THE LAWS AND THE TAX CODES.
Run corruption out of DC and there will be much more trust of big business. Do not buy
the garbage that politicians are critical of the Wall Street crowd. Has Hillary released her
speeches yet? NO. Don't expect she ever will. (aside: I do not find this article informative,
and I'm dismayed by the comments I've read here.)
Freethinker
It's so simple: the bank robbers have been given (or have taken) the combination to the
bank vault and looted it. Then they were given raises and bonuses for this heist.
Doubt me? That canny corporate lawyer Abraham Lincoln anticipate our modern condition as far
back as 1864, when he wrote:
"I see in the near future a crisis approaching that unnerves me and causes me to
tremble for the safety of my country. …corporations have been enthroned and an era of
corruption in high places will follow, and the money power of the country will endeavor to
prolong its reign by working upon the prejudices of the people until all wealth is
aggregated in a few hands and the Republic is destroyed."
The mass of Americans are too powerless to fight back against the reign of the money
powers. As Lincoln predicted, our Republic is destroyed. What awaits us now is dictatorship
or even worse ... theocracy.
"... Three-quarters of people in households making less than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have difficulty coming up with $1,000 to cover an unexpected bill. ..."
"... I have known personally some of those types; they tend to be all about winning at all costs, and then act all surprised when the game is ruined for everyone else. Generally they call it "sour grapes" instead of considering their own behavior. ..."
"... Class Warfare – http://www.reuters.com/article/us-pope-slavery-idUSKCN0YA1GQ ..."
Two-thirds of Americans would have difficulty coming up with the money to cover a $1,000
emergency, according to an exclusive poll released Thursday, a signal that despite years after
the Great Recession, Americans' finances remain precarious as ever.
These difficulties span all incomes, according to the poll conducted by The Associated Press-NORC
Center for Public Affairs Research. Three-quarters of people in households making less
than $50,000 a year and two-thirds of those making between $50,000 and $100,000 would have
difficulty coming up with $1,000 to cover an unexpected bill.
Even for the country's wealthiest 20 percent - households making more than $100,000 a year
- 38 percent say they would have at least some difficulty coming up with $1,000. …
I think the real issue isn't so much about being able to come up with $1000 as it is the reasons
why: the lower and working classes never had that much to begin with, any increase was
swiped by the upper class. And the upper class is in a Death-race 2000 to out do each other, keeping
up with the Joneses via corporate methods.
I have known personally some of those types; they tend to be all about winning at all costs,
and then act all surprised when the game is ruined for everyone else. Generally they call it "sour
grapes" instead of considering their own behavior.
"... Also claims as such do a slight of hand and imply that the world economy is a zero sum. So for the people living on $2/day to improve their lot the people in the wealthy countries need to give up wealth. IE, the current system is working for everyone but you which means you're a loser who needs to STFU. ..."
"... It really is a "zero sum game" to some extent, given that the economy, local or global, is finite at any point in time. However, the "winners" (can you really call bandits winners?) are the global plutocracy, who have sucked up almost all economic gains for more than 30 years. ..."
Travel day -- will post more later if and when I can.
This is a review
of Branko Milanovic's "Global Inequality: A New Approach for the Age of
Globalization" by Miles Corak:
Worlds of
Inequality, The American Prospect
: This book begins by posing a
question: "Who has gained from globalization?" Many thoughtful
Americans have the confidence to answer in a sentence. The gains have
been captured by the top 1 percent. And the book ends with another
question: "Will inequality disappear as globalization continues?" Many
might be just as quick to answer: Of course not, the rich will get
richer! But life is not so simple. Between these two questions Branko
Milanovic offers us not just a plethora of facts about income
inequality that will surely make his readers think twice. More
importantly, he shows us the power of bringing the facts into focus by
putting a new lens over these pressing issues-a global perspective.
...
The most striking fact that motivates his book is a graph that the
Twittersphere has already termed "the elephant curve." This is the
one-sentence, or rather one-picture, answer to the first question:
"The gains from globalization are not evenly distributed." ...
Clearly evident are the rise of a global middle class, in some
important measure reflecting the great march out of poverty in China,
and the equally amazing rise in the incomes of the top 1 percent
globally. The winners of globalization were many people who three
decades ago were dirt-poor, and though a big percentage increase in a
very low income still amounts to a rather low income by the standards
of the average person in the rich countries, it is a major movement in
the right direction. But the great winners of globalization were also
a relatively few people in the already-rich countries, a global
plutocracy who also experienced income gains of over 50 percent, but
from a much higher starting point. Both of these changes are without
precedent in the history of humanity.
But the elephant curve also shows that even though some have
gained, others have not seen their prospects improve at all-indeed,
probably leading lives of more insecurity and more worry, not just
about their prospects but also the prospects of their children. The
big losers in these global income sweepstakes have been middle- and
lower-income people of the rich countries...
That book is on my shelf for my summer reading. I would add,
as implied in the review, that most of the decline in global
inequality (between countries) has come from the decrease in
the number of people living on $2/day or less, though their
incomes remain very low. In contrast, within country
inequality has increased globally.
Also claims as such do a slight of hand and imply that the
world economy is a zero sum. So for the people living on
$2/day to improve their lot the people in the wealthy
countries need to give up wealth. IE, the current system is
working for everyone but you which means you're a loser who
needs to STFU.
It really is a "zero sum game" to some extent, given that the
economy, local or global, is finite at any point in time.
However, the "winners" (can you really call bandits winners?)
are the global plutocracy, who have sucked up almost all
economic gains for more than 30 years.
"... By Gerald Friedman, Professor of Economics, University of Massachusetts, Amherst. A version of this post first appeared at the Institute for New Economic Thinking website ..."
"... Lesser Depression ..."
"... The reason why elite economists and politicians were so angry at my analysis of Sanders' proposals was that it disrupted a consensus that nothing can be done by government to improve the performance of the economy. After all, if things are already as good as they can be, it is irresponsible pie-in-the-sky to even suggest to the general public that we can do better. Instead, the task of economists and other policy elites becomes to explain to the general public why they should accept stagnant incomes and rising inequality, and applaud the anemic growth of recent years as the best possible outcome. But the real danger of such thinking is that it leaves liberals like Hillary Clinton with few policy options to offer in response to the siren song of demagogues like Donald Trump. The self-proclaimed "responsible" elite economists see their role as to persuade the public that nothing can be done, in the hope of heading off the challenge of those who would capitalize on the electorate's appetite for change. They have to slap down critics. "Responsible" elite economists have to keep the party of "good arithmetic" from overpromising at all costs. It should not surprise us, though, that those whose living standards have suffered most from stagnant growth are more inclined to believe politicians promising change. ..."
"... John Maynard Keynes showed how active government policy can raise employment and output; his followers, including Joan Robinson and Nicholas Kaldor, showed how full employment encourages further investments and leads businesses to find ways to raise labor productivity to match increasing product demand. New Deal American economists, such as Rexford Tugwell and John Maurice Clark, showed how active government policy can raise growth rates with investments in infrastructure, in public services, in human capital development, and in research and development. By listening to these ideas, economists associated with liberal American politics helped produce 25 years of relatively rapid and egalitarian growth after World War II. Abandoning these ideas, we have suffered 30 years of relatively slow growth and rising inequality, culminating in the current Lesser Depression. ..."
"... I had dinner last night with two excellent people who happen to be doing well at this time. They could not comprehend why anyone would be voting for Trump, whom they saw as a dangerous lunatic. They have supported Sanders and voted for him in the NY primary, but are absolutely going to vote for Clinton in the Fall. What I view as the credible case against Clinton has not reached them with any strength or registered at all. I was asked (because I had said nothing while they talked–I hate this kind of confrontation) what problem people could have with Hillary? I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking about and although I spoke up for why I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know any of the details and we left it at that. ..."
"... HRC's recap of Reaganite Latin America policy is her most vile achievement. If anything demonstrates a continuity of imperialist strategy across administrations, that's it. ..."
"... " I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking about and although I spoke up for why I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know any of the details and we left it at that." ..."
"... I run into this all the time. Utter and complete foreign policy illiteracy, particularly from otherwise politically correct millennials who know so little that Hillary gets a complete pass. ..."
"... This is a common story and illustrates that our current detachment from the world around us and our fellow citizens is coming to an end. We are being forced out of our individual bubbles. Modern corporations have supplied the populations of the world with abundance of goods, but in order to accomplish this feat, have destroyed and are destroying the cultural glue, if you will, that holds society together. ..."
"... TINA will be maintained by propaganda and physical force. We see that the propaganda is starting to weaken because the contradictions of the message can no longer be hidden. The destruction is too widespread and the inequality can no longer be hidden. You can hollow out a social system only so much before it collapses. The collapses we are witnessing is the promise of democracy. A collapse of the ideals of moderation and compromise. ..."
"... We are entering a phase of civil war. It is still carried out in a polite manner and intellectually, the discussion is still couched in Orwellian doublespeak. However, criticisms of the ruling elite are becoming more straightforward and more people are waking up to the fact that the system is rigged against them. ..."
"... This civil war is a battle over leadership. It is a battle to demand good government instead of no government. It is a battle to demand a government for and by the people. A battle for the common good. Evaluated not in some abstract terms like "trickle down" economics, but direct support and action. The hearts and minds of the population was won over long ago to wholeheartedly support capitalism and private ownership of the world's resources. This is proving to be a disaster. ..."
"... Supporters of unfettered capitalism know only one way. Privatization of ALL the worlds resources and potential. They showed their hand in 2008 with the bailouts and implementation of austerity policies. In their minds, there is no turning back. To compromise means failure. For them, TINA is real and logical. This is the perspective of owners of capital. They gain strength and advantage from seeming to compromise, but in the end know they can always reverse course and regain private control. Subterfuge and force allows the resilience of capitalism as the reigning social order. ..."
"... Jonathan Haidt is a psychologist, sometimes featured in the New York Times, who apparently believes the capability of people to be convinced by reasoned argument is not strong. From my limited reading of his work, he suggests that humans are instinctive beings who, when they have strong beliefs, their reasoning powers are used to justify these beliefs, not to cast doubt about these beliefs. ..."
"... For example, I believe HRC is little more than a well-connected and well traveled mediocrity, with a record of few positives and many egregious negatives that justifies this assessment. I view her as potentially more damaging to the USA, as President, than Trump. ..."
"... Successful big ideas and big projects require cheap abundant energy, resources and intelligent design. It'll be mighty funny when the Keynesians finally implement their plan to overhaul the national highway infrastructure, creating tons of high paying jobs and speeding up the economy–right when our access to cheap oil collapses. That's dumb design at its finest, yet this sort of thing is almost certainly the best that the lobotomized Keynesian planners will be able to think up and do. ..."
"... A truly innovative program to get the economy moving in a positive direction would be to outlaw personal vehicles and rebuild the nation's railway network. ..."
"... I share your antipathy toward freeways. I remember the big Freeway they built in Fresno when I was a child, destroying hundreds, if not thousands of modest homes (we had to move from a grand rental to a dilapidated house that cost more – were the landlords behind getting rid of a surplus of houses????) – to save maybe – maybe at the most 3 minutes in transit time over driving an existing surface street. Jobs were part of the rationale. ..."
"... "Sorry, nothing more can be done for you." TINA. ..."
The ferocious
reaction
to my
assessment
that Senator Bernie Sanders' economic and health care proposals could create long-term economic
growth shows how mainstream economists who view themselves as politically liberal in America have
abandoned progressive politics to embrace a political economy of despair. Rationalizing personal
disappointment and embracing market-centric economic theories according to which government can do
little more than fuss around the edges, their conclusions - and the political leadership that embraces
them - have little to offer millions of angry ordinary people for whom the economy simply isn't working.
It has certainly been a rough seven years for the economists in the Obama Administration. While
avoiding a Great Depression, the Administration has presided over what Paul Krugman and Brad DeLong
call a "
Lesser Depression ." One might almost forgive them for a certain defeatism after seven
years of painfully slow economic recovery, and the dismay of seeing urgently needed programs blocked
by the Republican congressional majority. After so many compromises and let-downs, perhaps it is
easier to tell those who expect more that it just can't happen. There is comfort in the Thatcherite
phrase, "There Is No Alternative" (TINA).
Combined with orthodox neoclassical microeconomics, however, rationalization has produced a toxic
political economy that abandons progressive ideals and surrenders political space to xenophobes and
the populist rightwing (see: Donald Trump). The mainstream economists who have attacked my embrace
of Keynesian economics have abandoned, in practice, the notion that government can effectively intervene
in the economy to raise levels of employment, and to promote economic growth and equity. Instead,
they have returned to pre-Keynesian Classical thinking, where the very suggestion that government
action can raise growth rates or wages is taken to be obviously wrong. Criticisms of the
orthodox model and its conservative policies are deemed worthy of scorn, to be dismissed tout
court because they are obviously at variance not only with textbook economics, but with what
we need to believe in order to accept failure .
The mechanism of economic policy paralysis among the liberals who espouse market-centric economics
works like this: If we accept the (flawed) premise that the total supply of goods and services equals
total demand, then we can agree with the Congressional Budget Office (CBO) that potential output
is best measured by observing actual output. And, with that - presto! - unemployment magically disappears,
and we no longer suffer from slow growth. Conveniently align growth projections with the otherwise-disappointing
performance during the Lesser Depression, and, as the CBO has done, estimates of potential growth
now equal actual growth: Instead of the 3 percent average annual growth of the 1959-2007 period,
not to mention the 4 percent growth 1947-73, we are now told to accept 2 percent growth not as a
disappointment, but as recognition of an unfortunate necessity. Such reevaluations say to policy
elites, "Hey, we are doing as well as can be expected." To the general public, the message is: "Sorry,
nothing more can be done for you." TINA.
The reason why elite economists and politicians were so angry at my analysis of Sanders' proposals
was that it disrupted a consensus that nothing can be done by government to improve the performance
of the economy. After all, if things are already as good as they can be, it is irresponsible pie-in-the-sky
to even suggest to the general public that we can do better. Instead, the task of economists and
other policy elites becomes to explain to the general public why they should accept stagnant incomes
and rising inequality, and applaud the anemic growth of recent years as the best possible outcome.
But the real danger of such thinking is that it leaves liberals like Hillary Clinton with few policy
options to offer in response to the siren song of demagogues like Donald Trump. The self-proclaimed
"responsible" elite economists see their role as to persuade the public that nothing can be done,
in the hope of heading off the challenge of those who would capitalize on the electorate's appetite
for change. They have to slap down critics. "Responsible" elite economists have to keep the party
of "good arithmetic" from overpromising at all costs. It should not surprise us, though, that those
whose living standards have suffered most from stagnant growth are more inclined to believe politicians
promising change.
It was only by rejecting classical economics that Franklin Roosevelt was able to save the American
economy and bring about a revolution in social policy. And only by rejecting the new classical economics
and the policy of so-called responsible elite economists can Clinton meet our current economic crisis.
John Maynard Keynes showed how active government policy can raise employment and output; his
followers, including Joan Robinson and Nicholas Kaldor, showed how full employment encourages further
investments and leads businesses to find ways to raise labor productivity to match increasing product
demand. New Deal American economists, such as Rexford Tugwell and John Maurice Clark, showed how
active government policy can raise growth rates with investments in infrastructure, in public services,
in human capital development, and in research and development. By listening to these ideas, economists
associated with liberal American politics helped produce 25 years of relatively rapid and egalitarian
growth after World War II. Abandoning these ideas, we have suffered 30 years of relatively slow growth
and rising inequality, culminating in the current Lesser Depression.
The debate over my little report showed how mainstream economics has left us with a smugly certain
macroeconomics lacking in imagination, and offering no effective policies to move beyond economic
stagnation and escalating inequality. If these economists cannot do better, then we risk more than
personal disappointment; we gamble our liberal political economy against the likes of Donald Trump
and Ted Cruz. Hillary Clinton can do better. And Americans deserve better.
A very bold thing for a man like this to say. I know he will be criticized (vilified?) for
his misplaced belief that Clinton can "do better", but considering who this man is and where he
is coming from, condemning him at this stage of the game would be churlish. He's taken on The
Bigs and the stifling orthodoxy they embody and for that we owe him.
I had dinner last night with two excellent people who happen to be doing well at this time.
They could not comprehend why anyone would be voting for Trump, whom they saw as a dangerous lunatic.
They have supported Sanders and voted for him in the NY primary, but are absolutely going to vote
for Clinton in the Fall. What I view as the credible case against Clinton has not reached them
with any strength or registered at all. I was asked (because I had said nothing while they talked–I
hate this kind of confrontation) what problem people could have with Hillary? I said: Libya, Ukraine,
and Nicaragua. They really didn't know what I was talking about and although I spoke up for why
I thought this made her a neocon like the ones that surrounded Dubya, they simply didn't know
any of the details and we left it at that.
I've had many similar recent encounters. I find that if I ask for a positive reason to vote
Clinton, the first three or four reasons they raise can be dismissed by single phrase references
to past betrayals, Sister Solja, End of Welfare, Nafta etc. and the next few by scandals, Lewensky
or what should be scandals as you mentioned. As a rule after four or five tries I get to watch
them self censor before each subsequent try and don't have to make any negative claims myself.
I doubt I've changed minds, but they no longer doubt mine.
I think that was a slip, but an historically correct one I can completely sympathize with.
HRC's recap of Reaganite Latin America policy is her most vile achievement. If anything
demonstrates a continuity of imperialist strategy across administrations, that's it.
" I said: Libya, Ukraine, and Nicaragua. They really didn't know what I was talking
about and although I spoke up for why I thought this made her a neocon like the ones that surrounded
Dubya, they simply didn't know any of the details and we left it at that."
I run into this all the time. Utter and complete foreign policy illiteracy, particularly
from otherwise politically correct millennials who know so little that Hillary gets a complete
pass.
This is a common story and illustrates that our current detachment from the world around
us and our fellow citizens is coming to an end. We are being forced out of our individual bubbles.
Modern corporations have supplied the populations of the world with abundance of goods, but in
order to accomplish this feat, have destroyed and are destroying the cultural glue, if you will,
that holds society together.
TINA will be maintained by propaganda and physical force. We see that the propaganda is
starting to weaken because the contradictions of the message can no longer be hidden. The destruction
is too widespread and the inequality can no longer be hidden. You can hollow out a social system
only so much before it collapses. The collapses we are witnessing is the promise of democracy.
A collapse of the ideals of moderation and compromise.
We are entering a phase of civil war. It is still carried out in a polite manner and intellectually,
the discussion is still couched in Orwellian doublespeak. However, criticisms of the ruling elite
are becoming more straightforward and more people are waking up to the fact that the system is
rigged against them.
This civil war is a battle over leadership. It is a battle to demand good government instead
of no government. It is a battle to demand a government for and by the people. A battle for the
common good. Evaluated not in some abstract terms like "trickle down" economics, but direct support
and action. The hearts and minds of the population was won over long ago to wholeheartedly support
capitalism and private ownership of the world's resources. This is proving to be a disaster.
Supporters of unfettered capitalism know only one way. Privatization of ALL the worlds
resources and potential. They showed their hand in 2008 with the bailouts and implementation of
austerity policies. In their minds, there is no turning back. To compromise means failure. For
them, TINA is real and logical. This is the perspective of owners of capital. They gain strength
and advantage from seeming to compromise, but in the end know they can always reverse course and
regain private control. Subterfuge and force allows the resilience of capitalism as the reigning
social order.
I bring up the notion of a civil war because these ideas are too important to be left to chance.
In America, the citizenry has been complacent with their lot in life and so have lost control
over their fate. As the world changes around them, they desperately attempt to hold onto their
position while not realizing they are supporting their own impoverishment. Speaking ideas of the
common good -for ALL- and notions of public ownership of land, natural resources, citizens natural
rights to jobs, basic income, and healthcare divide family and friends. Those who are comfortable
don't want to cause trouble and those feeling the pressures brought down upon them by an unrelenting
system are too weak and fearful to act.
In a sense, the revolution has already begun. It is the revolution to convince people that
there is a better and different way to live our lives.
Jonathan Haidt is a psychologist, sometimes featured in the New York Times, who apparently
believes the capability of people to be convinced by reasoned argument is not strong. From my
limited reading of his work, he suggests that humans are instinctive beings who, when they have
strong beliefs, their reasoning powers are used to justify these beliefs, not to cast doubt about
these beliefs.
This can explain why attempting to convince someone to change their political/religious beliefs
is fated to be largely futile.
For example, I believe HRC is little more than a well-connected and well traveled mediocrity,
with a record of few positives and many egregious negatives that justifies this assessment. I
view her as potentially more damaging to the USA, as President, than Trump.
Per Haidt, maybe my beliefs are instinctive and I am willfully blind to all of Clinton's accomplishments
over the last 40 years.
I think that if there are to be any Keynesian big ideas and projects that will help lift us
out of this stagnation, they will much more likely come from a Trump Administration than a Clinton
one.
Successful big ideas and big projects require cheap abundant energy, resources and intelligent
design. It'll be mighty funny when the Keynesians finally implement their plan to overhaul the
national highway infrastructure, creating tons of high paying jobs and speeding up the economy–right
when our access to cheap oil collapses. That's dumb design at its finest, yet this sort of thing
is almost certainly the best that the lobotomized Keynesian planners will be able to think up
and do.
A truly innovative program to get the economy moving in a positive direction would be to
outlaw personal vehicles and rebuild the nation's railway network. But this society isn't
even anywhere close to having something so useful on its agenda. So we'll do some Keynesian program,
funnel the few remaining resources we have left down into some stupid dead end rathole, and then
in a couple of years we'll be envious here in America of the extravagant lifestyles that the Mexicans
are leading. Hell Trump's wall will be a lot more useful keeping the Mexicans in who are trying
to flee. That is the end result of Keynesian programs in a delusional society with bass-ackward
priorities. Way more harm than good.
I share your antipathy toward freeways. I remember the big Freeway they built in Fresno
when I was a child, destroying hundreds, if not thousands of modest homes (we had to move from
a grand rental to a dilapidated house that cost more – were the landlords behind getting rid of
a surplus of houses????) – to save maybe – maybe at the most 3 minutes in transit time over driving
an existing surface street. Jobs were part of the rationale.
I have been gone 20 years, and they had gone on a real freeway building tear while I was gone.
The whole city crisscrossed with freeways laid out as if someone had thrown a bowl of spaghetti
on a map – apparently so every neighborhood can enjoy the sound of traffic.
Really, Fresno is just not that physically big to justify all these freeways. And with its
high unemployment and no real "center" there aren't any places with traffic congestion anyway
– but you get these dubious justifications that millions of dollars are wasted because an implausible
auto trip is 4 minutes longer without the freeway….
There seems to be a developing narrative that the Obama Administration has just been brimming
with big ideas that have been thwarted by evil Republicans.
I don't remember it this way. I do remember an Obama Administration that turned to austerity
shortly after the 2009 stimulus, and one that has been patting itself on the back all along about
what a great job it has done.
"All across America, families are tightening their belts and making hard choices. Now, Washington
must show that same sense of responsibility."
President Obama, April 2009(!)
Now that the pictures we snapped of Obama are finally beginning to develop, where we thought
we had photographed his lush jungle, we're now seeing just a single thin sapling planted for "the
future." And Clinton will soon have a picture of her snapped at this sad tree, with her big lying
smile.
I don't think Friedman is saying this, unless Rex Tugwell has been secretly disinterred and
is serving under Obama. The capitalist ideological counteroffensive that got going in the 70s
has been hegemonically successful. Friedman doesn't acknowledge that enough, he instead focuses
on what sounds more like disciplinary politics.
This type of article or perhaps, all articles about the Economy, deal with the Economy as a
substance to which people are appended as accidents. The economy is the sum total of the effort
of the people and if the people think that enjoying this very present is preferable to an effort
to build a future nothing can be done about it. It is the mind of the people that has to be changed.
Wars are very good mechanisms for that.
I can't remember if I got this link from an NC comment, or elsewhere. In any case, it's a scary
read: "The 14 Defining Characteristics of Facism," augmented by a selection from "They Thought
They Were Free." http://rense.com/general37/fascism.htm
Brings Obama and HRC to mind just as much as Trump, if not more.
"The ferocious reaction to my assessment that Senator Bernie Sanders' economic and health care
proposals could create long-term economic growth shows how mainstream economists who view themselves
as politically liberal in America have abandoned progressive politics to embrace a political economy
of despair."
==========================
Here is the problem: "a political economy of despair" – accepting that economists are a real
objective academic discipline is a BIG mistake – the idea that these technocrats, who never seem
to recognize how much fraud, rent seeking, and capture of the political system
((because the people paying them don't WANT THEM TO)),
decides things like how much inequality there is, which than decides how much demand there is,
and NOT knowing, and apparently NOT WANTING TO KNOW, that it is a POLITICAL economy, and politics
decides how resources are often allocated.
We can have single payer heath care if we choose it and free college education (it wasn't all
that long ago that I went to a CA college essentially for free). HOW is it college used to be
free when GDP was less than 1/6 of what it is now??????
It just doesn't make sense that we used to be able to afford free college and we can't now. It
is a POLITICAL decision – when Krugman says Sanders plan is "too expensive" Krugman is making
a political decision – not some objective scientific assessment. And if he is not even smart enough
to ponder why it used to be free and it is not free now – well, theres your problem right there!
Nice to see this article. When I talk about economics, most people who know anything, only
know what someone on TV tells them, so they often question, well who agrees with you? Nice to
have another name to list.
And then…
"Sorry, nothing more can be done for you." TINA.
Of course for those at the tippy-top, "How can I help you today?"
In what many considered to be a flagrantly criminal abuse of investment
bank "restricted lists", yesterday Goldman underwrote a $2 billion equity
offering for Tesla (to find its amusing expansion strategy) just hours
after Goldman upgraded the stock to a Buy.
... however we are confident the regulators are paid far better to
remain unalerted.
So for those curious what Goldman's research analyst who upgraded
Tesla, Patrick Archambault, had to say about this "odd, very odd
coincidence", here it is straight from the mouth of the horse which
obviously remains stabled safely on the other side of the Chinese wall
located at 200 West.
Commentary: Tesla announces equity offering and provides
further details on Model 3 reservations
News
After the close on May 18, Tesla announced a 6.8mn primary share
offering. The offering includes a greenshoe option which, if
exercised, would increase the number of shares sold to approximately
8.2mn. Based on the May 18 closing price of $211.17, this would result
in a total value of $1.4bn for the offering, or $1.7bn if the
greenshoe option is exercised. In addition, Elon Musk, CEO, will sell
2.8mn shares to satisfy tax implications from exercising 5.5mn in
stock options that expire at year-end. The company noted that Mr. Musk
also plans to donate 1.2mn shares to charity and that the net result
of these actions will be to increase his holdings to 31.1mn shares
from 29.6mn.
All said, based on the latest closing share price
and including the primary offering, greenshoe, and Mr. Musk's sale,
the total size of the transactions would be $2.3bn.
In the preliminary prospectus, the company also provided an update
on Model 3 reservations and announced that it had 373k deposits as of
May 15, 2016. This is net of 8k (approx. 2% of total) in customer
cancelations and 4.2k (approx. 1% of total) reservations deemed to be
duplicates.
Implications
Adjusting for the announced transaction and the supplemental stock
options outstanding, and for restricted stock units (RSU) information,
our EPS estimates would be unchanged for 2016-2017. Including
the greenshoe, our 2016-2017 EPS estimates would decline by less than
1% on average.
Our take
We maintain our Buy rating and EPS estimates following the
announcement
. Additionally, our 6-month price target of $250
remains unchanged,
derived from five probability-weighted
automotive scenarios plus stationary storage optionality
, all
of which embed a 20% cost of capital. While the announced capital
raise of $1.4bn (or $1.7bn with the greenshoe) is ultimately higher
than our $1bn estimate, after factoring in the updated supplemental
RSU and option information, dilution to our estimates would be
immaterial. Consistent with our previously published research (see
Putting in our reservation for the Model 3; upgrading TSLA to Buy, May
18)
we believe the funding level is adequate for the Tesla
Model 3 roll-out. The reservations of 373k are in line with the
company's recent comments of "approaching 400k", though they imply
slowing growth
(even adding back the cancellation and
duplicates)
as reservations had already hit 325k one week
after the Model 3 unveil.
Risks:
Decline in overall investor sentiment
impacting the appetite for concept stocks, further delays in the Model
X production ramp which could force a guidance reduction as well as
exacerbate FCF burn, and higher-than-forecast operating expenses
and/or capex investments.
Actually the biggest risk factor, and what is most hilarious about
this whole incident is that in the Goldman upgrade, which was clearly
rushed, and in which Goldman itself admitted there is a two-thirds
likelihood the stock will plunge to $125 or lower and the only upside is
due to a "key man provision" and a ridiculous thesis that Musk alone is
worth tens of billions in market cap (somehow excluding tens of billions
in taxpayer grants)...
... is that all those who bought TSLA on the Goldman report (and/or
Goldman stock offering) will actually read it.
Would it really be that surprising if it did hit 250? I wouldn't
be the least bit surprised. It makes no sense where it is now,
another 20% up would be par for the course for this "market". It's
probably just more muppet slaying by Goldman, but I could see them
releasing those cars that will of course get stellar reviews and
have a full retard price spike. Dumber shit has happened.
How to Comply
The Standards of Practice Handbook provides a number of
operational suggestions that one should recommend for
adoption by the compliance department.
Establish a restricted list
-
This is to limit research on those firms that have a business
relationship with that company. If an adverse opinion would
hurt this business relationship, the company stock should be
restricted from the research universe, and only factual
information on the company should be disseminated.
The worst part in my opinion is that by keeping Musk
going makes him look like a God to all of the sheeple
when in reality he's just using other people's money
and other people's ideas to become famous. Basically
the definition of the current United States.
Yes something is broken... must be the porn filters at the SEC
again. Don't expect people who's future (once they pass thru the
revolving door) depends on them not finding any malfeasance, to do
the right thing.
Who are these "many" you speak of? Clearly does not include the
financial and regualtory elite.
Similar to politicians and one D Trump claiming they could shoot
someone on the Senate floor - or Times Square - and not get arrested I
think that CNBC should have a reality hour where finanial elites and
regulators carry out obvious fraud on live TV. You know, just to see
what happens...
Should I even care about this? The people who own Tesla shares are
functionally retarded. If it wasn't Tesla stealing their money for the
sake raising capital, some other questionablle enterprise would get
their money just as quickly. I'm thinking horse racing and lottery
tickets.
While Tesla's cars may be a rare sight for others in the U.S. if
you drive around the SF Bay Area they are as common as anyother make
of car. While the stock is at a nutty value, I'd bet you'd find that
80% of individual owners of it reside around Silicon Valley and are
convinced this is the next Apple.
Personally I see no appeal to a car which has such a limited
driving range....you really cannot take a trip with it.
Economic Models Must Account for Who Has the Power''
: Nobel Prize
winning economist
Joseph
Stiglitz recently highlighted
two schools of thought on how income
is distributed to different groups of people in the economy. Which
school is correct has important implications for our understanding of
the forces that have caused the rise in inequality, and for the
policies needed to reverse this trend. It also relates to another
controversy that has flamed up recently, how economics should be
taught in principles of economics courses. ...
And according to Sraffa's
side in the Cambridge capital controversy labour and capital
do not receive their marginal products, which leaves the
distribution of income to some extent socially or politically
determined.
Now please make a donation to Project Syndicate, and check
out Robert Skidelsky at the same site.
Excellent. It will be taught in graduate school, long after
the little ones have been indoctrinated in reactionary
thought be Econ 101.
P.S. The school of thought that
accepts inequality as a Teh Awesome result of merit cannot
explain why inherited wealth should be allowed to accumulate
- another aspect of how power writes the economic rules.
"It will be taught in graduate school, long after the little
ones have been indoctrinated in reactionary thought be Econ
101."
Joan Robinson's writing on market power was required
reading when I was in graduate school. My undergrad profs
touched on this issue but not as much. I wonder if Greg
Mankiw teaches market imperfections to his undergrad students
at Harvard.
"I wonder if Greg Mankiw teaches market imperfections to his
"undergrad students at Harvard."
According to theoclassical
doctrine, all market imperfections are the result of gummint
innerference. Left to themselves, markets hum with music of
the perfect spheres.
We are way past just one or the other of those explanations
being true. Opportunities come in many forms, but just not
for many people. Competition becomes limited in the womb and
then they go from there. Better schools across all zip codes
and public day care with universal pre-K would be a start.
Even that is doomed to the catch-22 of making a better
informed public requires a better informed public to demand
being better informed. Down east they say "You can't get thar
from here."
I was fortunate enough to grow up in Prince
William County VA in the late sixties just as it was
beginning to boom from growth proximate to the DC Beltway. We
had a new and progressive school system even relative to
NoVA. Still by the 7th grade it was evident to me that the
pedagogy related to reality in dogmatic POVs that were only
relevant to the next generation of yuppie kids that had
gotten a half step advantage in some various way from their
parents.
My half step came from an unusual source though. My dad
was illiterate and my mom only finished the 8th grade, but
they were stoics with exceedingly powerful work ethics
transferred more by their example of excellence in every
menial thing that they did rather than by belittling and
cajoling me. My dad was the best hunter, the most successful
fisherman, grew the most beautiful and bountiful garden, and
was self-sufficient in caring for his car and home. His
position with the state highway department was limited by his
illiteracy to maintenance superintendent, but due to his
ability he still got to supervise the construction of roads
and bridges without the benefit of commensurate pay.
My mom was the best cook, kept the cleanest house, and as
at home day care for a few friends was the best a dealing
with troubled children from potty training to outbursts of
anger. It was a tough act to follow. Furthermore it did not
fit the status quo mold that public schools were designed to
reinforce. My half step freed me to reject the intellectual
authority of my instructors even though their administrative
authority was still sacrosanct in my home. I did well in
school and even better on tests eking by to enter the Honor
Society and passing the SAT test well enough to qualify for
Mensa, but I dropped out of college first semester mostly
just to relocate away from home to find a job in the city.
So, I got drafted and went to Viet Name, but was lucky enough
to survive and develop a successful career in IT systems
management large systems capacity planning and performance
management. The best break that I got was being laid off in
June 2015 with a severance package good enough to afford me a
retirement income equal after the change in expenses from
leaving the professional world behind to what I had been
making while working.
The moral to my story is that one can despise our
education system and still do very well by themselves with
it. One can reject our higher education and still do very
well by themselves without it. One can despise our corporate
"meritocracy" system and still have a successful career and
maybe even a comfortable retirement, but the ladder has been
raised for the latter. How anyone can be successful in school
and/or in career without recognizing their own half step
advantage or recognizing the intellectually and morally
vacant institutions that they traversed in their journey is
deeply puzzling to me.
P.S. I had the good fortune to relocate from Prince William
County to Orange County VA in summer 1966 before my senior
year in high school when my dad cashed out his state
retirement fund saving to start an electric motor/ john boat
livery and concession stand at Lake Orange, a VA Game and
Fisheries Commission state fishing lake.
The high school teachers were probably just as intelligent as
in Manassas Park, but far more socially challenged at least
in the academic curriculum. Still, the kids with that half
step from their successful parents did well enough to attend
decent colleges, but academic performance overall was much
lower than it had been in Manassas Park back in Prince
William County. The kids in Orange with really successful
parents all attended private prep schools.
P.P.S. Relative to the thread topic then we have a fairly
rigid establishment that favors the haves and keeps the
have-nots at bay. Monopoly rents are just one of the
luxurious rent extracting tools of an aristocracy of social
exclusion. Bankers, proto-industrialists, and slave owners
established the meme of republicanism as the conservative
power that protects us all from tyranny of the majority, but
perhaps a little too well. More importantly they established
the US Constitution as a nearly inviolable foundation for
preserving their world view of well-deserved elite privilege.
And they did it all in the name of democracy while showing
Thomas Paine the door.
It's a cool rainy day in central VA. Being retired and
primarily a person of outdoor interests then today I have an
abundance of time to waste. And commenting on the EV blog
sure beats a colonoscopy, which is what I will be getting
this time next week :<)
John Kenneth Galbraith used to write about countervailing
power. Unfortunately Galbraith has been pretty much consigned
to the dustbin. Even when he was writing, economics courses
did not talk about his ideas much...I guess he did not use
enough math symbols.
Business has long understood the
concept of what I'll call leverage points...critical
intellectual property, experience, and know how. Control of
these critical factors is a key to pricing power and
profitability. As one example, Symbol Technologies dominated
the handheld bar code scanner market for years, not because
they had superior technology or marketing, but because they
held the patent on the trigger, which was critical to
activating the scanner for reading. Their market power
affected not only competitors but suppliers and customers as
well.
Leverage points like this are commonplace in business
today. Yet I'm not aware that economics, with its orientation
towards competitive markets, has ever tried to model this
common behavior or even dealt with it.
Likewise, businesses have also understood the importance
of market and marketing channel domination to their long term
survival and profitability. Firms who fail to dominate must
specialize. These concepts are considered elementary in
business schools. Yet I don't know that economists have ever
managed (or even tried) to incorporate them into their
models.
It might help if more economists took business courses to
understand how the game is played...
I still say that until economists can reach consensus on the
objective of an economy, they remain divided on the
objective. Simply defining it as "for the general good" is a
cop-out --- and economists and everybody else know this full
well. Define what "general good means"....then see if
consensus can be reached. I seriously conclude this cannot be
done, since only by compromises can they reach consensus, and
this means defining the objective in subjective, vague
terms... just like "the general good" is vague and
subjective.
The cop-out used by economists is at the heart
of what Thomas' blog subject is about: Policy makers .. i.e.
gov't decides the objectives of an economy, which is to say
that economic power defines it. And of course economic power
will define it to maintain and extend their economic
power.... and at the very least to minimize any erosion
thereof.
So one must wonder how, if gov't is controlled by economic
power, that gov't will NOT insure the maintenance and
extension of that economic power? Is it possible in a
democracy defined by the U.S. constitution to significantly
reduce the economic power of those who have it? The
constitution in fact makes it impossible.
Even when congress occasionally finds a large enough
majority to make law to erode or reduce economic power in
gov't, the constitution enables 5 people in robes to deem it
unconstitutional OR the next congress, or the next will make
law that erode or reduce the effect of prior congress's law(s)
that reduced or eroded economic power.
If this were not the case we'd long since have had
universal single payer health care, strong labor unions, tax
policies that don't give unearned income a huge break, and
don't give offshore income an out by not taxing it until its
"repatriated", welfare systems that don't keep people in
poverty, and an educational system that provide free & equal
education to all (not one that gives communities, county's,
and States with the highest incomes & property values the
best education and everybody else with a lesser one.
Nor, will I add would it be possible to rape the nation's
environment by contaminating the nation's rivers, soils, and
the air with green-house gases .. not just "paying" fines
after the fact for doing so or putting low cost "caps" on
green-house gas emissions.
So what does "the general good" actually mean? Economists
can't agree on it, nor the means of achieving it of course
nor can policy makers.... and this is the fundamental problem
not being addressed.
One comment: You wrote "...individuals are
rewarded according to their contributions to the economic
well being of society. Those who contribute the most to the
production of the goods and services we all enjoy receive the
highest rewards and climb to the top of the income
distribution." I would add that having power includes being
able to dictate that rewards are allotted according to
economic contributions as opposed to other contributions. Cue
my go-to Chris Lasch quote: "... individuals cannot learn to
speak for themselves at all, much less come to an intelligent
understanding of their happiness and well-being, in a world
in which there are no values except those of the market....
the market tends to universalize itself. It does not easily
coexist with institutions that operate according to
principles that are antithetical to itself: schools and
universities, newspapers and magazines, charities, families.
Sooner or later the market tends to absorb them all. It puts
an almost irresistible pressure on every activity to justify
itself in the only terms it recognizes: to become a business
proposition, to pay its own way, to show black ink on the
bottom line. It turns news into entertainment, scholarship
into professional careerism, social work into the scientific
management of poverty. Inexorably it remodels every
institution in its own image."
"Inequality is a euphemism, a kind of shorthand, for all of the things that have gone to make
the lives of the rich so much more delicious, year on year, for the last three decades.
And also for the things that have made the lives of working people so wretched and so precarious
in that same time.
This word inequality. It's visible in the ever rising costs of healthcare and college, in the
coronation of Wall Street, and the slow blighting of wherever it is that you happen to live. And
you catch a glimpse of inequality every time you hear about someone that had to declare bankruptcy
because a child got sick, or you read about the lobbying industry that drives Washington DC, or
the new political requirement, the new constitutional requirement that every presidential candidate
has to be a billionaire's favorite, or a billionaire themselves.
Inequality is about the way in which speculators, and even criminals, get a helping hand from
Uncle Sam, while the Vietnam Vet down the street from you loses his house. Inequality is the reason
that some people find such incredible significance in the ceiling height of an entrance foyer,
or the hop content of a beer, while other people will never believe in anything again."
Thomas Frank
Change is coming. It must come, because the status quo is unsustainable, and has been so for some
time.
How many times will our 'very serious people' with access to the public information channels
continue to miss the obvious dissonance of the common reality from the official story that they tell
each other about everything from the economy to politics?
At the root of this inequality, hidden as it is in the fog of fine sounding theories and economic
models, is simple injustice.
The longer that change is delayed, the longer that the professional class continues to insulate
itself, looking down on the broader public with smug contempt from privileged perches, blinding themselves
with hypocritical arguments that deny what is happening all around them, the more disruptive that
change will finally be.
And, as always, 'no one,' or at least no one who matters in their world, will have ever been able
to see it coming. Because by definition no one who is an insider can ever publicly admit
that the insiders have blown it completely, once again.
"People of privilege will always risk their complete destruction rather than surrender any material
part of their advantage. Intellectual myopia, often called stupidity, is no doubt a reason.
But the privileged also feel that their privileges, however egregious they may seem to others,
are a solemn, basic, God-given right. The sensitivity of the poor to injustice is a trivial thing
compared with that of the rich."
"Two-thirds of the directors at the New York Fed are
hand-picked by the same bankers that the Fed is in charge
of regulating.
Today, the United States is No. 1 in corporate profits,
No. 1 in CEO salaries, No. 1 in childhood poverty, and No.
1 in income and wealth inequality in the industrialized
world.
Today, the top one-tenth of 1% owns nearly as much wealth
as the bottom 90%. The economic game is rigged, and this
level of inequality is unsustainable. We need an economy
that works for all, not just the powerful.
I think what the American people are saying is enough is
enough. This country, this great country, belongs to all
of us. It cannot continue to be controlled by a handful of
billionaires who apparently want it all."
Bernie Sanders
The Banks must be restrained, and the financial system
reformed, with balance restored to the economy, before there
can be any sustainable recovery.
"... Third parties like "Drilling Info", BTU Analytics, CERA, etc. provide their looks at the market for very high prices, and as such are much more granular than those from government data providers. As much as they try, they are still limited by the availability of international data and reporting time lags domestically, not to mention their own biases. ..."
"... Inevitably, we will have another price shock – or at minimum an upside surprise. It's unavoidable at this point. Oil never transitions smoothly. Just like all the oil bulls had to be run out during the declining price stage, all the price bears, like Dennis Gartman, will be run out when fundamentals hit them over the head. Gartman, to his credit, will change his tune 180 degrees when he sees the actual data shaping up. That's how he has survived so long and profitably as a trader. ..."
"... My prediction - $80/bbl in 18 months, but it won't last very long. I think $60 - $70/bbl is a healthy range. ..."
I follow oil pretty closely given our exposure. As such, I get frustrated with
many press and news show accounts of the commodity. It gets worse when the pundits
and writers should know better. Frequently inexact terminology leads to misconceptions
and sometimes I see outright falsehoods that completely distort the truth.
As a former oil analyst and professional energy investor, I feel compelled
to take those to task. As a realist, I see that all markets require a difference
of opinion and all investors talk their "book". For this reason, when Jeff Currie
at Goldman Sachs Commodities Group gets on CNBC and opines about future price
movements, I give little notice. Jeff is posturing for his customers' and GSs'
positions. Jeff can spin the story either way and chooses his statistics accordingly...That's
what he is paid very well to do.
Last week (March 28, 2016), I heard Dennis Gartman of the Gartman Letter,
a trader and investor that I respect and have learned much from, spout an outright
falsehood on CNBC. Everyone can have a bad day, but I've been hearing various
versions of this for months. Dennis said in essence that oil prices could not
rise very much because of "all the capped wells that could be brought on line
very rapidly". He predicted no more than $42/bbl this year. He estimated that
at current strip pricing, you could lock in $45/bbl in 12 months, making large
numbers of these "capped" wells profitable. The implication being that at current
prices, the market would be rapidly flooded with new oil.
I'll take the over on price, the under on production and bet all my capital
that I'm right. (Oh, I already did that...). Dennis should know better. For
fun though, I thought I'd like to take apart his thesis.
First, there are no "capped" wells in the U.S. To my knowledge not
one well has been capped due to low prices, especially relatively young horizontal
shale wells. Older wells are capped all the time when production is no longer
sufficient to pay operating expenses for the well. Generally, onshore wells
may cost something in the order of only $2,000 per month to operate. At $40
dollar oil, 3 barrels per day of production (gross) should cover operating costs.
What Dennis is likely referring to is the "Drilled Uncompleted" or DUC well
inventory in the various shale plays. Some estimates have shown as many as 4,000
of these DUCs exist and the numbers are rising. Many pundits cite these DUCs
as an effective ceiling on oil prices.
However, a DUC is very different from Gartman's implied "capped" well. There
are many reasons why a producer would drill and not complete a well. They may
have had a rig under contract, they may want to beat competitors, retain their
or their service companies' good employees, they may be able to hold expiring
acreage, they may just want to see what the rocks look like in a particular
area. However, the most likely reason is that the completion costs of these
wells can amount to over 60 percent of well cost maybe – $3 to $4 million per
well. As such, this investment is very difficult to recoup if a well's flush
initial production is sold at low prices. This is compounded when whole well
pads are completed at the same time to increase efficiency. If you don't like
the price one well gets, six wells coming on line at the same time is worse.
This also flows into the other reasons why this production will not flood
the market, namely the intersection of costs, timing and decline rates.
• Costs – 4,000 wells at even $3 million per well is $12
billion dollars. Given the upheaval among producers, where does Dennis suppose
the $12 billion will come from to "instantly" "uncap" these wells and increase
production? Not from the banks, the high yield market is tight, equity investors
have stepped up for some Permian and Eagle Ford producers, but $12 billion is
a lot of money.
• Time – Let's say that oil prices above $40/bbl equals
a green light for energy producers to attack their DUCs. (There appears to be
no factual basis for this, but let's pretend.) A quick look at C&J energy services,
which controls the country's third largest frac fleet as well as other completion
services, tells part of the story. Today, just over 50 percent of the companies'
fleet is working and the rest is "stacked" or to be retired. The people were
laid off months ago. Clearly, when they get the signal that their customers
want more completion services, they will begin to reactivate some of this idle
iron – one frac fleet at a time. The problem is the C&Js stock price is $1.46
and they have close to $1.2 billion in debt. Where will the money come from
to rehire people, and reactivate idle equipment? After that, will the people
return? Yes, but slowly and at a high cost. What about Baker and Schlumberger?
Both are in better financial shape but their fleets have been stacked also and
at this time, investors are in no mood to hear a company talk about adding capacity.
When these companies return fleets to active status, they will be competing
to hire a smaller pool of laid off workers.
• Decline rates – Wells producing from tight rock or shale
(wells that must be fracked) exhibit steep decline curves on the order of 75
percent during the first year of production. The implication is that producers
are on a never ending treadmill in order to maintain or grow production volumes.
That is, they must complete new wells in order replace the natural declines
from existing wells. There are two critical points associated with these steep
decline curves that pundits like Gartman don't appear to grasp. The first is
that based on current data, the four key liquids rich shale plays have declined
by over 600,000 bopd since their peak of production in March, 2015. This production
is gone. These wells have depleted. They can't be turned back on. The only way
to increase production again is new completions and new wells – in other words
massive new reinvestment. This is very different from past cycles when OPEC
dialed back production by idling a major field or two until demand rebounded.
These OPEC giant and super giant fields are a totally different animal. It's
all about the infrastructure, not the productivity of a single well. The entire
complex can be shut down, reworked, maintenance performed, etc. then turned
back on…more akin to a refinery than typical single or multiple well fields.
But that's another story. Bottom line – that 600,000 bopd is not magically coming
back. It took the onshore industry something like 12 months running flat out
to add those volumes. Given oil prices, it will be quite a while and it will
take higher prices before the industry even gets back to a steady walk, much
less a flat run.
Another key thing to understand about decline curves is that they are continuous
and right now declines are accelerating. However for example purposes, let's
look at the Eagle Ford. There are some 10,000 wells in the Eagle Ford producing
today, and they are all in decline. The EIA estimates the average Eagle Ford
well adds 800 bopd in its first month of production. Last month, Eagle Ford
production is estimated to have declined by 60,000 bopd. That implies that 75
new wells per month must be drilled and completed to just replace this 60,000
bopd. Assuming it takes 15 days to drill a well, that implies around 38 rigs
drilling and around 25 frac fleets running above what is running today! Today,
there are 42 rigs drilling for oil and we estimate 10 – 15 frac fleets running
in the Eagle Ford…so just to replace production, the industry would have to
increase rigs running by nearly 100 percent and frac fleets by 150 – 200 percent.
This would require a massive mobilization of capital and manpower. During this
whole mobilization process, production from existing wells is declining, month
after month. Don't get me wrong, I believe this will happen. However, I know
this won't happen quickly and won't happen at $40/bbl oil, making Gartman's
thesis and pricing argument completely false.
Production data, or lack thereof, is a primary hindrance to clear and transparent
oil fundamentals. The mechanics of the above discussion would be more obvious
if we could measure field production in real time. In fact, production data
in Texas takes some three months to even estimate, and these estimates are often
revised. The same goes for well completion data. The EIA tries to model this
through its "Drilling Productivity Report". However, there are no similar efforts
for the rest of the global oil industry, in fact, OPEC publications use third
party reporting not internal or "real" data from the companies themselves.
In Saudi Arabia, production statistics are a state secret. Not surprisingly,
many countries distort the data to suit their own needs. That's why the IEAs
look at G7 storage data is an important industry statistic. It is widely recognized
that both global demand and supply data is inaccurate, but changes in storage
inventories should reflect supply and demand changes. The only problem with
this approach is they only get data for around 2/3 of the global storage capacity.
This is what led to the recent headlines "800,000 bopd of oil is missing". Supply
estimates exceeded demand estimates by 800,000 bopd during the quarter, yet
storage didn't build, leaving the question of where did the oil go? The answer
is that there never was this extra oil…if it existed, it was burned. More than
likely, both supply and demand estimates were off by that amount.
Third parties like "Drilling Info", BTU Analytics, CERA, etc. provide
their looks at the market for very high prices, and as such are much more granular
than those from government data providers. As much as they try, they are still
limited by the availability of international data and reporting time lags domestically,
not to mention their own biases.
Generally it takes 18 months before the world has a decent picture of supply
and demand. This is little consolation to those trying to do real time analysis
on the direction of prices. That is why I can say categorically "the fix is
in". In other words, fields are declining, meaning investment is far below levels
required just to replace production. The only thing that will change the vector
of these declines is more spending, lots more spending, and the only thing will
spur lots more spending is higher prices. Significantly higher than $40/bbl.
In conclusion, we have a typical commodity price cycle. Prices have dropped
to levels destroying capital, bankrupting businesses, idling massive amounts
of equipment and manpower. The cycle is reversing now. The weekly EIA numbers
are showing steady declines in production (this is a balancing item – not real
production estimates) and also increasing demand – In the United States. The
IEA is showing the same thing in their monthly report that has a decent look
at the G7 countries and attempts to look at the G20. Between these two, there
is a large world with little accurate measurement. China for instance jailed
a Platts reporter for espionage when he tried to put together a fundamental
energy statistics database.
Inevitably, we will have another price shock – or at minimum an upside
surprise. It's unavoidable at this point. Oil never transitions smoothly. Just
like all the oil bulls had to be run out during the declining price stage, all
the price bears, like Dennis Gartman, will be run out when fundamentals hit
them over the head. Gartman, to his credit, will change his tune 180 degrees
when he sees the actual data shaping up. That's how he has survived so long
and profitably as a trader.
But by then it will be too late, the world will want incremental supplies
immediately – yet the industry cannot scale in real time. In order to motivate
producers to get busy and provide incremental supplies, prices must increase
sharply from current levels. My prediction - $80/bbl in 18 months, but it
won't last very long. I think $60 - $70/bbl is a healthy range.
"... By John Weeks, a member of the Union for Radical Political Economics (URPE) in London, one of the founders of the UK-based Economists for Rational Economic Policies, and part of the European Research Network on Social and Economic Policy. Receive podcasts of his weekly radio program by Twitter, @johnweeks41. Originally published at Triple Crisis ..."
"... I have dear friends from H to VI, but sleep walking through life, while natural resources are needlessly strip mined for the sake of maintaining artificial scarcity, is a good way to put it. ..."
"... The dual mandate is a fiction. There's nothing the Fed can do to lower unemployment (though it can raise it by mistake.) The unemployment rate is set by the fiscal policies of Congress and the Executive. The unemployment rate, should they desire, can even be set to zero. That it is not should be sufficient cause for the guillotines. ..."
"... primum non nocere ..."
"... I think the process of corporate control of the EU was so slow and gradual plenty of left wingers in Europe still haven't really grasped what has happened. From the beginning, there was always a tension within Europe between pressure from corporations for more business friendly policies and the generally social democrat lite views of the original founders. I think though to call it 'neoliberal' is not quite correct – for me 'neoliberal' implies a specific set of policies associated with the Anglosphere – I think in Germany what we've seen is the takeover by a more German flavoured right of centre view – it is similar, but is more generally corporatist and mercantilist in nature with a strong dash of Austrian economics. ..."
"... Well of course the 'competition' is a myth. As anyone who has witnessed what has happened in electricity markets can see, it has, if anything, raised prices of electricity for consumers. But various powerful interests have done very well indeed. you can see the same process in water and waste services and pretty much anything that has been directly regulated and privatised. The only areas where I think it can be shown that consumers have benefited from competition are in telecommunications and in air travel. And in the former, I suspect the consolidation of the telecom industry will reverse those gains. ..."
"... "To render the rule Kafkaesque, after the EC bureaucracy calculates that a government will not meet the hypothetical target, it then mandates contractionary policies that guarantee that the target cannot be achieved. The problem is imaginary and the solution contradictory." ..."
"... "The "independent institutions" include the European Commission itself, which adds a distinctly Orwellian character to the already Kafkaesque Treaty." ..."
"... "Thus, not restricting surpluses carries an implicit mercantilist message." EU guidelines fix trade surplus at 6%, Germany is, I believe, in its seventh year of violation and should be fined. That it doesn't happen maybe shows that the elite ruling the EU is German. ..."
Yves here. Anyone who has paid attention to how the various sovereign debt crises have played out
in Europe can't help noticing that a bureaucratic elite is calling the shots and riding roughshod
over popular will. But what are the mechanisms which allow these perverse outcomes to come to pass?
This post describes the major steps that enabled neoliberalism to become the ruling doctrine.
By John Weeks, a member of the Union for Radical Political Economics (URPE) in London,
one of the founders of the UK-based Economists for Rational Economic Policies, and part of the European
Research Network on Social and Economic Policy. Receive podcasts of his weekly radio program by Twitter,
@johnweeks41. Originally published at
Triple Crisis
The EU: Hold Your Nose and Vote "Stay"
Most Americans and many U.S. progressives hold a favorable view the European Union. This positive
assessment persists despite the crushing of the Greek challenge to austerity conditionalities set
by the European Commission and European Central Bank aided and abetted by the International Monetary
Fund.
The primary basis for pro-EU sentiments may be that Americans consider the European Union a bastion
of social democracy in contrast to the neoliberal ideology of the Republican and Democratic parties,
which Bernie Sanders has so eloquently attacked. However, the institutions of the European Union,
especially its executive the European Commission practice a neoliberal ideology and pro-business
policies as aggressive as counterparts in the United States.
This is not a recent change, but a long-maturing trend going back at least to when Helmut Kohl
of the right-wing Christian Democratic Union replaced the Social Democrat Helmut, Schmidt, as chancellor
of Germany. The misplaced belief that
Jacques Delors , EC president
for ten years, was committed to social democracy perpetuated the illusion of a progressive EU. While
no reactionary like Kohl, the French socialist politician supported market oriented "reform" of the
European Union's economic policies.
By the 2000s neoliberals had taken firm control of the European Commission, manifested most obviously
in the 1992 Maastricht Treaty. The step-by-step legal codification of EU reactionary economic policies
goes far beyond legislation enacted in the United States. As a result, it should surprise no one
that in Britain and on the continent support for membership in the European Union splits progressives.
In Britain the issues looms large, with a referendum on continued membership scheduled for 23 June.
The progressive case of membership is a hard row to hoe.
Loss of Democracy in the European Union
History provides many examples of authoritarian rule achieved through formally democratic procedures.
To these we should add the 2012 EU Treaty on Stability, Coordination and Governance (
TSCG ), adopted by 25 democratically elected EU governments (the Czech Republic and the United
Kingdom took
opt-outs ). On an EU website we find the overall purpose of the TSCG
boldly
highlighted :
The European Union's economic governance framework aims to detect, prevent, and correct problematical
economic trends such as excessive government deficits or public debt levels, which can stunt growth
and put economies at risk.
This bureaucratically bland sentence asserts the power of the unelected European Commission, as
the executive of the European Union, to monitor ("detect") whether the public budget of an elected
member government conforms to EU fiscal rules. If it does not, the Commission claims the power to
prevent the implementation of that budget and to specify the changes ("corrections") required.
No one can miss the ideological asymmetry of the "governance framework" – deficits can be excessive,
but not surpluses. In practice a budget surplus usually goes along with a trade surplus, so that
the contractionary effect of the former will be offset the expansionary impact of the latter. Thus,
not restricting surpluses carries an implicit mercantilist message.
The EU website goes on to explain "detection" or "monitoring"
as follows ,
Each year, the EU countries that share the euro as their currency submit draft budgetary plans
to the European Commission. The Commission assesses the plans to ensure that economic policy among
the countries sharing the euro is coordinated and that they all respect the EU's economic governance
rules. The draft budgetary plans are graded as either compliant, partially compliant, or at risk
of non-compliance.
When the EC implements this paragraph literally as it did in Greece, the role national legislatures
is to endorse what the Commission judges as "compliant." The TSCG de facto makes member
governments formulate their budgets for the Commission not their legislatures, because there would
be little point and considerable embarrassment by submitting to parliament a budget that the EC would
reject. After the Commission judges the budget as satisfactory the national legislature goes through
a pro forma approval process. It will be a small step to require,
as in Greece , approval by the EC before revealing the budget to the public.
The TSCG transfers sovereignty from democratic institutions to an unelected bureaucracy. Were
it the case that the EU parliament possessed substantial control over the Commission (which it does
not), the TSCG would still be profoundly authoritarian because of the power of the EC bureaucracy
over what should be decided democratically.
Treaty-Protected Mismanagement
EU fiscal rules, from the Maastricht Treaty to the TSCG are anti-democratic, as well as inflexible
to change. The Treaty specifically commits the adopting government to embed the fiscal rules in law
in a manner ensuring their "permanent character, preferably constitutional." Embodied in treaties,
they can only change through repeal or adoption of additional treaties. Both involve extremely cumbersome
and time consuming processes.
Were the fiscal rules theoretically and practically sound their anti-democratic and inflexible
nature would still discredit them. Far from sound, they are technically flawed, mandating macroeconomic
mismanagement. The Treaty mandates specific limits to fiscal policy.
[The Treaty] requires contracting parties to respect/ensure convergence towards the country-specific
medium-term…with a lower limit of a structural deficit (cyclical effects and one-off measures
are not taken into account) of 0.5% of GDP; (1.0% of GDP for Member States with a debt ratio significantly
below 60% of GDP).
Before considering the wisdom of the 0.5% deficit target, two major technical mistakes standout,
1) the Treaty uses an unsound measure of the fiscal deficit; and 2) the key concept, "structural
deficit," is theoretical nonsense.
The TSCG adopts the Maastricht deficit specification, total revenue minus total expenditure, which
is the overall deficit. As the IMF explains in its
guidelines for fiscal
management , the appropriate measure for sound fiscal management is the primary deficit, which
excludes interest payments on the public debt (which if reduced would imply partial default).
When the TSCG specifies the 0.5% as a "structural deficit" we go from the inappropriate to the
absurd. The Commission as well as the usually competent OECD defines "structural deficit" as the
deficit that would appear by eliminating cyclical effects; i.e., the deficit when an economy operates
at normal capacity.
Making this concept operational requires an analytically sound method of eliminating cyclical
effects, then a clear and consistent measure of normal capacity. The EU structural deficit fails
on both criteria. In practice the EC bean-counters make no attempt to eliminate cyclical effects.
The method of calculation of normal capacity ignores the cycle altogether by defining normal capacity
to the level of output at which the rate of unemployment implies stable inflation (the "non-accelerating
inflation rate of unemployment,"
NAIRU
). Again, the EC bureaucrats reveal their ideology by taking inflation not output or unemployment
as measure of economic health.
The NAIRU would be sufficiently problematical were attempt made to adapt it to the specific institutional
characteristics of each country at specific time periods. For example, if the concept has operational
validity, it is extremely unlikely that it would assume the same value before and after the 2008-10
global recession. An inspection of the
eurostat tables for the
actual and "structural" deficits shows no evidence of estimations with country specific adjustments.
The decidedly dubious nature of the NAIRU is indicated by its nom de guerre , "the natural
rate of unemployment." This phrase betrays an underlying ideology that 1) unemployment is a natural
phenomenon to which all economies automatically adjust; and 2) inflation always results from excess
demand. If the first were true the global recession would not have occurred. The second ignores price
pressures arising from traded goods and services, petroleum being the most obvious and price-volatile.
The possibility of calculating country and time specific normal capacity would not save the 0.5%
rule the realm of ideological nonsense. First and foremost, it represents static analysis applied
to a dynamic process. The formal statement of the 0.5% would be as follows:
Economy A operates below normal capacity with a fiscal deficit of 2.5% (for example). Other
things unchanged, were economy A at normal capacity the deficit would be 1.5% (for example), above
the 0.5% requirement. Therefore, the government of country A must now take steps to reduce expenditure
or raise taxes, so if the economy were at full capacity the hypothetical deficit would be 0.5%.
The 0.5% rule is a hypothetical outcome based on analytically unsound calculations. This "what
if" calculation by statisticians is used by an undemocratic bureaucracy to force elected governments
to implement contractionary economic policies. The technically unsound, hypothetical 0.5% target
mandates a pro-cyclical macroeconomic policy. To render the rule Kafkaesque, after the EC bureaucracy
calculates that a government will not meet the hypothetical target, it then mandates contractionary
policies that guarantee that the target cannot be achieved. The problem is imaginary and the solution
contradictory.
The wording of the TSCG makes it clear that deviant fiscal behavior by a member country will
not be tolerated,
Correction mechanisms should ensure automatic action to be undertaken in case of deviation from
the [structural deficit target] or the adjustment path towards it, with escape clauses for exceptional
circumstances. Compliance with the rule should be monitored by independent institutions.
The "independent institutions" include the European Commission itself, which adds a distinctly
Orwellian character to the already Kafkaesque Treaty.
Painted into a Recessionary Corner
Market economies pass through cycles of recession and expansion. They suffer from fiscal deficits
in recessions, because falling or slow-growing output results in falling or slow-growing revenue.
Such circumstances typically result from a drop in private investment or exports. Economies most
effectively overcome recessions by the public sector using its spending powers to compensate for
the inadequate private demand.
The TSCG legally prohibits the implementation of this effective countercyclical fiscal policy.
It forces member governments to apply policies analogous to the practice 200 years ago of bloodletting
to restore health to the ill. It is a Treaty designed to maintain perpetual stagnation across the
European continent.
The term "Six-Pack", the secondary legislation linked to the treaty, is frequently used as synonymous
with the TSCG. This is a singularly appropriate nickname for the enabling legislation. The Six-Pack
contains the economic equivalent of a pernicious snake oil, a witch's brew to turn minor fiscal problems
into recessionary downturns. For those dedicated to a prosperous and harmonious European Union, repeal
or replacement of the TSCG stands out as an urgent priority. Fiscal integration on the basis of the
TSCG would be disastrous.
What most Americans know about Europe is on a postcard, or the propaganda they were taught
in school. The vast majority on this planet is dependent on a MAD money laundering scheme built
by Wall Street, copied globally, and automated by WS of the West, silly valley, now strip mining
the planet, on auto pilot, with a belief in political discourse, among completely insulated, puppet
politicians.
Back in the day, before joining, Robert R actually said some intelligent things about labor.
The crashing actuarial ponzi has been in operation so long it is an assumption. On the one hand
money enslaves future generations to the present, and on the other we are all supposed to seek
a feudal pension. The casino wins in both directions.
I have dear friends from H to VI, but sleep walking through life, while natural resources are
needlessly strip mined for the sake of maintaining artificial scarcity, is a good way to put it.
We don't even need oil, but the economy is leveraged on that contract price, to maintain subservient
populations. We are choking on excess oil, storing it all over the ocean, and preventing iran/iraq
from putting its product on the market, all to confirm a psychology of dependence, like an ant
farm, assuming that individual humans can only wander randomly without the benefit of the collective,
serving the sociopathic psychologist writing the scripts.
Funny, there is a shortage of private demand for more incompetent government.
Another fundamental difference between the US and EU is the difference in central bank mandates,
with the Fed having its dual inflation/employment mandate in its bylaws, but under Maastricht
the ECB only has a mandate for low inflation.
That said, the Fed has a dual way for getting around the dual mandate: playing fast and loose
with what is defined as unemployment, and just straight out ignoring it (eg, raising interest
rates at the first whiff of possibility that there might be a rumour that someone's uncle's cousin's
best-friend's roommate thinks there could eventually be a slight uptick in the CPI). This means,
yes there are differences in the founding documents, but is there anywhere in US economic governance
that NAIRU is not assumed either?
The dual mandate is a fiction. There's nothing the Fed can do to lower unemployment (though
it can raise it by mistake.) The unemployment rate is set by the fiscal policies of Congress and
the Executive. The unemployment rate, should they desire, can even be set to zero. That it is
not should be sufficient cause for the guillotines.
I definitely agree w/r/t fiscal policy, but I think the point is that at least in the US there
is a nominal (but ignored) primum non nocere written into the Fed's by-laws. It is supposed
to take actions that will "promote effectively the goals of maximum employment, stable prices
and moderate long-term interest rates." What this means is that raising interest rates at the
mere rumour of inflation is going against the Fed's mandate– not that anyone in power cares. Meanwhile
in Europe they just dispense with the whole fiction of not having a monetary policy that kills
employment.
I think the process of corporate control of the EU was so slow and gradual plenty of left wingers
in Europe still haven't really grasped what has happened. From the beginning, there was always
a tension within Europe between pressure from corporations for more business friendly policies
and the generally social democrat lite views of the original founders. I think though to call
it 'neoliberal' is not quite correct – for me 'neoliberal' implies a specific set of policies
associated with the Anglosphere – I think in Germany what we've seen is the takeover by a more
German flavoured right of centre view – it is similar, but is more generally corporatist and mercantilist
in nature with a strong dash of Austrian economics.
I see the results every day when I step outside my apartment in Dublin. Thats to a focus on
privatisation and 'competition', what was once a fully functioning waste collection service in
my city has now become a chaotic privatised service, with competing companies driving down the
quality. No more proper wheelie bins collected on the same day, instead there are plastic bin
bags everywhere, there to be torn apart by seagulls and foxes, scattering rubbish everywhere.
All in the name of 'competition', driven by EU Directives. The focus on 'internal competition'
is gradually eroding sensible regulation in energy, waste and telecommunications. Supposedly in
the interest of the consumer, but we all know who really benefits.
Well of course the 'competition' is a myth. As anyone who has witnessed what has happened in
electricity markets can see, it has, if anything, raised prices of electricity for consumers.
But various powerful interests have done very well indeed. you can see the same process in water
and waste services and pretty much anything that has been directly regulated and privatised. The
only areas where I think it can be shown that consumers have benefited from competition are in
telecommunications and in air travel. And in the former, I suspect the consolidation of the telecom
industry will reverse those gains.
The airlines are a terrible example – in fact, there was a great article treating the airlines
as a classic example of "crapification". The seating has become ridiculously cramped (as a way
to then "sell" seats that someone can actually sit in!), the service has been basically reduced
to the bare minimum, luggage charges are outrageous and ticket prices continue to climb even though
one of the major expenses (i.e. fuel!) has become cheaper by 50 per cent. No, the airlines were
a bad example.
Nice to read such an excellent analysis. And with very appropriate metaphors.
"To render the rule Kafkaesque, after the EC bureaucracy calculates that a government will
not meet the hypothetical target, it then mandates contractionary policies that guarantee that
the target cannot be achieved. The problem is imaginary and the solution contradictory."
"The "independent institutions" include the European Commission itself, which adds a distinctly
Orwellian character to the already Kafkaesque Treaty."
I would suggest that any country that doesn't like these rules failed to read the agreement
and should exit the EU and start issuing worthless currency. In doing so they can feel free to
devalue, run large deficits, borrow all they want and then leave the "neo-liberals" to it. When
the banks and hedge funds that over-lend to fund these deficits fail or demand collateral (
http://www.npr.org/sections/money/2012/10/22/163384810/why-a-hedge-fund-seized-an-argentine-navy-ship-in-ghana
) you will discuss their predatory nature.
"Thus, not restricting surpluses carries an implicit mercantilist message." EU guidelines fix
trade surplus at 6%, Germany is, I believe, in its seventh year of violation and should be fined.
That it doesn't happen maybe shows that the elite ruling the EU is German.
Given half a chance some human beings who never got much loving as a child will seek to correct
the imbalance by "weaponizing" money and using it against the interests of the majority. For those
who've read the psychoanalyst Alice Miller books they will recognize her argument that resentment
builds up in the child and needs expression in the form of subconsciously motivated vengeance
as an adult!
Yves here. I want to clarify one key issue about a transaction tax. Its purpose is
not to raise revenue. Its purpose is to discourage excessive trading, which is socially unproductive.
Recently, many studies have found that an outsized financial sector is as drag on growth. The finer-grained
ones have identified too many resources devoted to secondary market trading as the cause. "Secondary
market trading" is all the buying and selling that happens after a company raises money, as in among
investors, not sales of newly-issued securities from a company to investors to raise money. A certain
level of secondary market trading is necessary and desirable so that an investor can sell if he wants
to (as in he needs liquidity). But overly cheap liquidity makes it attractive to trade for purely
speculative purposes, as the collapse in average holding times of NYSE stocks attests.
Now a transaction tax may indeed raise a lot of revenue. But the intent is to discourage undesirable
activity, and it's hard to estimate in advance how much trading volumes would fall with a well-designed
transaction tax.
By Robert Reich. Originally published at
his website
Why is there so little discussion about one of Bernie Sanders's most important proposals – to
tax financial speculation?
Buying and selling stocks and bonds in order to beat others who are buying and selling stocks
and bonds is a giant zero-sum game that wastes countless resources, uses up the talents of some of
the nation's best and brightest, and subjects financial market to unnecessary risk.
High-speed traders who employ advanced technologies in order to get information a millisecond
before other traders get it don't make financial markets more efficient. They make them more vulnerable
to debacles like the "Flash Crash" of May 2010.
Wall Street Insiders who trade on confidential information unavailable to small investors don't
improve the productivity of financial markets. They just rig the game for themselves.
Bankers who trade in ever more complex derivatives – making bets on bets – don't add real value.
They only make the system more vulnerable to big losses, as occurred in the financial crisis of 2008.
All of which makes Bernie Sanders's proposal for a speculation tax right on the mark.
He wants to tax stock trades at a rate of 0.5 percent (a trade of $1,000 would cost of $5), and
bond trades at 0.1 percent.
The tax would reduce incentives for high-speed trading, insider deal-making, and short-term financial
betting. (Hillary Clinton also favors a financial transactions tax but only on high-speed trading.)
Another big plus: Given the gargantuan size of the financial market and the huge volume of trading
occurring within it every day, this tiny tax would generate lots of revenue.
Even a 0.01 percent transaction tax (a basis point is one-hundredth of a percentage point, or
0.01 percent) would raise $185 billion over 10 years, according to the nonpartisan
Tax Policy Center.
Sanders's 0.5 percent tax could thereby finance public investments that enlarge the economic pie
rather than merely rearrange its slices – like tuition-free public education.
After all, Americans pay sales taxes on all sorts of goods and services yet Wall Street traders
pay no sales taxes on the stocks and bonds they buy.
Naysayers led by the financial industry's lobbyists (the Financial Services Roundtable and Financial
Markets Association) warn that even a small tax on financial transactions would drive trading overseas,
since financial trades can easily be done anywhere.
Baloney. The U.K. has had a tax on stock trades for decades yet remains one of the world's financial
powerhouses. Incidentally, that tax raises about 3 billion pounds yearly (the equivalent of $30 billion
in an economy the size of the U.S.), which is pure gravy for Britain's budget.
At least 28 other countries also have such a tax, and the European Union is well on the way to
implementing one.
Industry lobbyists also claim the costs of the tax will burden small investors such as retirees,
business owners, and average savers.
Wrong again. The tax wouldn't be a burden if it reduces the volume and frequency of trading –
which is the whole point.
In fact, the tax is highly progressive. The Tax Policy Center
estimates that 75 percent of it would be paid by the richest fifth of taxpayers, and 40 percent
by the top 1 percent.
It's hardly a radical idea.
Between 1914 and 1966, the United States itself taxed financial transactions. During the Great
Depression, John Maynard Keynes urged wider use of such a tax to reduce excessive speculation by
financial traders. After the Wall Street crash of October 1987, even the first President George Bush
endorsed the idea.
Americans are fed up with Wall Street's financial games. Excessive speculation contributed to
the near meltdown of 2008 – which cost millions of people their jobs, savings, and homes.
So why is it only Bernie Sanders who's calling for a financial transactions tax? Why aren't politicians
of all stripes supporting it? And why isn't it a major issue in the 2016 election?
Because a financial transactions tax directly threatens a major source of Wall Street's revenue.
And, if you hadn't noticed, the Street uses a portion of its vast revenues to gain political clout.
So even though it's an excellent idea championed by a major candidate, a financial transactions
tax isn't being discussed this election year because Wall Street won't abide it.
Which maybe one of the best reasons for enacting it.
important point – UK has FTT on stocks, it's called stamp duty. despite that, footsie is considered
one of the most important non us markets worldwide… so cries of how it would kill the sector are
a bit overdone..
mind you, the rise of cfds and similar to bypass sd led to issues of its own
I would think that would be part of the plan, particularly given the volumes. Sanders tends
to do himself a disservice by staying at the 30,000 foot level, which is where execs generally
are anyhow. But he doesn't have enough surrogates going into the weeds on his behalf.
I'm more of a right winger, but this is one Sanders proposal I can fully support. There's something
seriously wrong with an economy that spends gigantic sums on building tunnels for optic cables
so transactions can be processed two miliseconds faster. This automated flash trading is against
everything financial markets are supposed to be about, it's even against everything that speculation
is supposed to be about. I also agree with Yves's assessment that this isn't about revenue extraction,
but about curtailing harmful activities. However, given high levels of corruption in US politics
and huge profits this new industry enjoys, is such an idea even feasible?
I believe I can appreciate why your statement took that discouraged turn. But the next move
would be to say that, if such a good idea is made infeasible by a corrupt political order, doesn't
that then contribute to its indictment? That's one reason why the current political situation
is so changed from ten years ago.
I would add underclocking the stock exchange to augment the effect of transaction tax. It is
perfectly sufficient for healthy economic activity to settle the transactions only in equal discrete
time intervals, say once every minute. This would starve all HFT parasites, reduce the size of
financial sector and its rent extraction from productive economic activity.
Sanders' campaign has been mostly kept dark by the M$M (which includes National Propaganda
Radio). If one hears/reads much about Sanders in the usual sources, it's usually to patiently
explain why he simply cannot win.
It's exceedingly rare to hear/read much of what the substance of Sanders' campaign compromises,
and mostly then, what you'll hear is fatuous twaddle about Sanders' proposal (which isn't fatuous
but is presented that way) about free college.
So one has to come to blogs, such as this one, to learn more. Too bad most citizens don't do
that, but that's the way it is. And there's a reason for it. Clearly Sanders, at least, annoys
the .01%. They don't want his message getting out. There's a reason for that, as well.
Hmm, I took this as another mark of Bernie's genius. I figure that the 'free public college
education' was not only a demonstrable and desirable social good but also a nice carrot to sell
the FTT.
Agree w/Teddy and others about the unfairness of a market that permits nano-second trading
for the suitably connected. Secondary market trading beyond basic liquidity does not benefit the
real economy. The beneficiaries are speculators and managers whose remuneration is tied to share
prices - that is, useless eaters.
The reason it is being ignored is because Bernie touted the tax as way to pay for college for
all. The tax on financial transactions makes most people's eyes glaze over, but they are very
interested in the idea of free college. So I get the hook, but this means the the tax debate never
occurs, all the discussion is about free college. Now both ideas have merit, but each should have
its own debate. It would be also a way to build a consensus around a broader policy of finally
reigning in Wall Street, including bring back the best parts of Glass Stegall. That's how you
get the discussion going. Decouple and debate.
The benefits of free academic tuitions are so large they are inestimable due to the myriad
of benefits that would cascade throughout the economy. Why would anyone oppose such and how is
such a plan pushed aside? Only through the greatest imbalance of invisible intransigent power
the world has ever known.
This is an important idea, but I don't think I've ever heard at what point such a tax would
be imposed. If a large majority of high-speed automated trading results in cancelled trades, it
would be of little use in curbing that if it were only applied to completed transactions.
The point is not necessarily to raise revenue (please, MMT anyone?) but to control behaviour.
Putting a drag on HST would in itself be a public good. As I have said before, free tuition is
a way to sell a tax on financial transactions. Debate all you like, but decoupling will lose the
tax.
I concur that a drag on HFT would be a public good. But my question doesn't imply raising revenue,
rather how such a tax would be a drag on HFT in particular. A tax on transactions would (by definition
it seems) not apply to cancelled transactions. So how would it impact the behavior of HFT, which
relies heavily on cancelled trades, any more than it would any trading?
Probably "quantized" settling as proposed in another comment would have a greater effect.
You are right. If the purpose of the tax is to discourage HFT, the tax should be levied on
each and every bid, not just completed transactions. According to Eric
Hunsader HFT traders pay big bucks so they can have millisecond faster access to the market
– which they use to place multiple bids they never intend to complete, thereby manipulating price,
creating volume interest where little exists, etc. To end HFT you would have to tax each bid (at
an very small rate, say .01%).
Are things like ETF's included in this? I understand the need to curb many of the dangerous
games of all the value detracting speculation and trading etc,. What I'm struggling with is I
may make a few trades a year simply to rebalance my portfolio (amount of trades depends on whether
markets are volatile or steady) once certain levels of over/under are reached. My rough calculation
of this .05% tax, is it would cost me $500-$1000 maybe more a year. Not outrageous but a sizable
enough increase for an infrequent trader/investor and I'm pretty sure, not part of the problem
that is trying to be solved here. Plus, as if I'm not angry enough at Wall Street (I used to work
in the industry, left of my own volition) it makes me wonder if I'm not being financially penalized
for their greed and criminality. I want to support this but I hope there will be a little nuance
(not too much though to ruin the whole purpose) to not ensnare everyone who makes a trade once
in awhile.
Unlikely. I suspect the 0.5% mark is an initial bargaining position. What everyone seems to
be anxious to forget (or have forgotten) is that Sen. Bernie "amendment king" Sanders has been
in Congress for a loonnng time. If he's floating 0.5% in position papers, policy proposals, etc.,
it's because he's aiming to get 0.1 – 0.2% enacted. 200 bucks a year won't injure anyone who can
manage to maintain a brokerage account.
If the guy were truly the absent-minded, flyaway-haired nutty old dodderer the MSM wants him
to be, he'd never have made it this far in life.
I realize that probably most of the objection to this is being fueled by the large houses own
high frequency trading. I mean when you finance your own algorithms to figure out how to micro
trade at high volume…you are talking about a lot of money. But I would also bet that some of it
is the mutual fund and individual trader sector of the market. It isn't really about hurting the
small investor, it is about discouraging the small investor from trading as frequently. They are
seeing their commissions get cut, because Mom and Pop don't like the tax and put the brakes on.
The stability of our economy and of our markets be damned, not to mention customer service.
My worry is that the financial giants would put enough lawyers on this to try and try to create
a way to avoid paying this financial tax in pretty much the same way that they figured out how
to not pay title recording fees. They would create an exchange (no doubt called something different)
that would own large numbers of shares and trade some sort of "future" or agreement to transfer
amongst each other. Can you have a 1 second future contract? .01 second?
You echo a concern I have about this as well. These parasites and their shyster lawyers are
very good at finding or creating loopholes that benefits them, alone.
That said, it's worth investigating and attempting to implement. It's equally worth more wide-spread
discussion about why it's needed and what's happening, but I won't hold my breath on that score.
There have been one or two programs highlighting these high speed transactions on NPR, fwiw,
albeit I don't believe – no surprise – that any solution was suggested.
Correct. No tax by the sovereign issuer of the currency has as it's purpose the raising of
revenue, of which the sovereign issuer already has an infinite supply. Taxes by the sovereign
issuer merely serve to regulate demand.
Of course, try to explain to anyone inside the beltway how their currency actually works, and
they'll think you are crazy. They've been told incorrectly for 40 years, and DAMMIT! That's enough
to make it right.
Forgive my ignorance, but I don't see why a blanket transaction tax of 0.5% or whatever would
be preferable to a transaction tax of 5-10% applicable to the actual bad actors, i.e., the high-frequency
traders. It seems like it would be easy enough to assess a genuinely punitive tax against the
actual "speculators" who are flipping shares over the course of single trading session, i.e.,
to tax both HFT and day-trading out of existence. I also fail to see how a transaction tax of
general application would significantly inhibit insider trading.
I think Reich is being a bit tone-deaf here. In a ZIRP environment, conservative investors
are effectively foisted into the stock market, and are then reviled as speculators. Is it no longer
politically acceptable for the little people to invest accumulated capital? We can't all live
off of political consulting and paid speeches like former Clinton-era cabinet ministers.
Oh, please. I've been "in the market" in mutual funds and lesser amounts of directly held stock
for 20 years. If I traded enough to generate +$200 in transaction taxes, it would be a sign that
I was getting bad advice, & was stupid enough to take it. If Bernie's transaction tax were enacted,
it would eradicate most institutional HFT efforts in under a year. Over a decade, it's greatest
benefit may be in slowing the erosion of middle class wealth by reducing excessive trading and
associated fee skimming.
The guys in dress shirts in your local MSSB office in flyover are not actually your friends,
and their service fees are much, much larger than they need to be in this era of electronic trading.
Guys in dress shirts in flyover country? Uh …. what? I'm not sure I'm following but you appear
to be saying that you've conducted less than $40,000 in stock & mutual fund trades over the course
of twenty years; in other words you don't care about the actual merits of this transaction-tax
proposal because you don't have any money to invest anyway. Not a particularly compelling argument.
At any rate, I thought the point of the proposal was to curb rank speculation, not to discourage
old ladies from buying utility stocks. So why not target the actual speculators?
Sanders' proposal of a securities transaction tax is being ignored for the same underlying
reason proposals to tax accumulated wealth have been ignored.
"Behind every great fortune there is a great crime." -Balzac
The bottom line of why this tax is ignored is the majority of people who vote doesn't understand
how the markets work. So they don't understand how this would work and help. They keep voting
for people who won't make any significant changes to our society. Hillary won't be any different
she is going to be the same old horse leading the way. Sheeple --
Cancelled and no-op trades wielded with impunity are the root of the HFT problem. I'm not sure
why many here are claiming a tax wouldn't affect cancellations. The tax should be punitive especially
for order cancellations under a reasonable holding period. It should also be much higher for non-listed
OTC derivatives, repos, and all manner of exotic structured products, special vehicles, and dark
pool (un)liquidity. The point is to force skin in the game.
Our gentle host wrote, "I want to clarify one key issue about a transaction tax. Its purpose
is not to raise revenue. Its purpose is to discourage excessive trading, which is socially unproductive."
Makes perfect sense – it's the old adage, "If you tax something, you get less of it. The more
you tax, the less you get."
And if the revenue generated covers enforcement costs, that's weevils in the porridge!
The bond part puzzles me to some extent. At least as applied to below investment grade stuff,
because obviously Treasuries and IG are different animals.
First, the whole "high speed, high frequency" thing. Much of the time, it really isn't. I mean,
these are instruments that still trade through humans (via the phone or Bloomberg chat), and many
of even $500 million plus issues don't trade very often, period. In many bonds probably the most
volume you see is immediately after issuance, and that's more a matter of people either flipping
a small allocation or topping up to get to their target, with the dealer often pretty much setting
up the trades with their allocation strategy. So that's a different animal than straight-up speculation
(high frequency or otherwise).
Second, ok, you're "taxing" bonds effectively 1/8 (0.1%, but I'm rounding as bonds are actually
quoted in eighths, maybe sixteenths sometimes), presumably paid by one or both counterparties
(split equally between buyer and seller?). I…don't see how that is going to alter much of the
trading that goes on. The bid-ask is effectively a bit wider, your mark when you buy something
is a little lower (if you use bid-side), people complain more than usual. But High Yield is generally
not something where paying up 1/8 is going to make or break your trading strategy, unlike with
equities (where the high frequency guys play on fractions of fractions). At most you're looking
at trades in "on the margin" issues having a tougher time getting done in stable markets (because
in a hot market everyone pays up anyway, while in a rout there is often no bid, period).
All a long way of saying, bonds – fine. Define the word "bonds". Treasuries? IG? HY? Structured?
And you want to realize how much in revenues from that?
Equities, on the other hand – no brainer. Tax away. If anything, tax them more than is currently
proposed, because the point – to me – is not to raise revenue, but to severely disincentivize
speculation (of either the high frequency or the regular kinds). Imagine, for example, if the
tax was at 10% of the pre-commission trade value (i.e. just shares times price), payable by both
buyer and seller. "But Panda, you'll destroy secondary equity trading!" Precisely, children, because
at the end of the day most of such contributes absolutely nothing productive to either the society
or the economy. Now, maybe I'm much more extreme than the consensus, but my point is that what
Sanders is currently proposing is well within what the industry can "eat" without changing its
behaviour too much, in my opinion.
Of course before deregulation of commissions the US had a private version of the financial
transaction tax in terms of the fixed commissions. One way to compare is to look at commissions
compared to the modern commission+ ftt. If the commissions were greater than unless you believe
the market 30 years ago was defective it won't make a lot of difference.
"... By James A. Kidney, former SEC attorney. Originally published at Watch the Circus ..."
"... Pro Publica ..."
"... Pro Publica's ..."
"... The New York Times ..."
"... The New York Times ..."
"... The New York Times ..."
"... The New York Times ..."
"... Dodd-Frank at best imposes generalized rules about bank size and other generic issues, rather than addressing the kinds of fraudulent actions that actually occurred. It is appropriate for the SEC or Federal Reserve to impose narrower changes in corporate practice to address specific kinds of fraud. They are called "undertakings" and are often imposed by civil settlements with the SEC or in litigated relief. It did not happen with the Big Bank frauds. ..."
"... The only reason to keep the information secret is to prevent embarrassment to the SEC or to those people who made decisions for the agency. Most of them left the SEC years ago. For public consumption, I have tried to redact all names of the non-supervisory personnel in the Division of Enforcement who worked on Goldman. I also must add that, as the emails show, for a period of time those dedicated investigators were excited about the notion of bringing at least a slightly broader action than their supervisors wanted. As is the case with much of the Division of Enforcement, the worker bees try hard and usually are fearless. It is their bosses who frequently suppress their enthusiasm for policy, political, or personal reasons. ..."
"... The author is trying very hard to be nice to the point of being delusional. This is criminality and corruption through and through, and it didn't end in '08. Don't be sad… get mad. ..."
"... This man has risked a lot to do what he did. He's lost more than many of you will realize. If he can't just crap on the old life and the old profession, please, cut the man a little slack. You don't want to be him. ..."
"... James A. Kidney, former trial attorney with the Securities and Exchange Commission, retired from the SEC in 2014 at the age of 66 after 24 years working there. Looks like he had a full career, although had to put up with a lot of bullshit, and possibly soured some relationships on his way out. ..."
"... Very similar situation here. Going on 50, unemployed in my chosen field, etc. And yes, its hard to just walk away sometimes… I have to keep my mind focused ahead instead of looking back. ..."
"... I know other whistleblowers and internal dissenters who wound up losing their jobs who initially blame themselves, than come to accept that the system in which they operated was fundamentally corrupt, that even if some people locally really were trying to do the right thing, it was bound to either 1. go nowhere, 2. be allowed to proceed to a more meaningful level if it was cosmetic or served some larger political purpose or 3. got elevated because the organization was suddenly in trouble and they needed to burnish their cred in a big way (a variant of 2, except with 3, you might have a something serious take place by happenstance of timing). ..."
Yves here. Two things struck me about Jim Kidney's article below. One is that he still wants to
think well of his former SEC colleagues. I know other whistleblowers and internal dissenters who
wound up losing their jobs who initially blame themselves, than come to accept that the system in
which they operated was fundamentally corrupt, that even if some people locally really were trying
to do the right thing, it was bound to either 1. go nowhere, 2. be allowed to proceed to a more meaningful
level if it was cosmetic or served some larger political purpose or 3. got elevated because the organization
was suddenly in trouble and they needed to burnish their cred in a big way (a variant of 2, except
with 3, you might have a something serious take place by happenstance of timing). Kidney does criticize
corrosive practices, particularly the SEC stopping developing its own lawyers and becoming dependent
on the revolving door, but his criticisms seem muted relative to the severity of the problems.
Number two, and related, are the class assumptions at work. The SEC does not want to see securities
professionals at anything other than bucket shops as bad people. At SEC conferences, agency officials
are virtually apologetic and regularly say, "We know you are honest people who want to do the right
thing." Please tell me where else in law enforcement is that the underlying belief.
By James A. Kidney, former SEC attorney. Originally published at
Watch the Circus
The New Yorker and
Pro Publica websites today posted an article by Pro Publica's Jesse Eisinger
about the de minimis investigation by the Securities and Exchange Commission into the conduct
of Goldman Sachs in the sale of derivatives based on mortgage-backed securities during the run-up
to the Great Recession of 2008. The details of the SEC's failure to aggressively pursue Goldman in
the particular investigation, Abacus, and its refusal to investigate fully misconduct by Goldman
and other "Too Big to Fail" banks, stands not only as a historic misstep by the SEC and its Division
of Enforcement, but undermines the claim that the Obama Administration has been "tough on Wall Street."
The Pro Publica version contains links to a few of the documents I provided.
No one in authority who was involved in the Goldman investigation ever gave me an explanation
for why the effort was so slight. Mr. Eisinger's article doesn't offer any explanation from the one
investigation participant brave enough to comment. The details of the investigation into Abacus at
my level as trial counsel, which I provided to Pro Publica earlier this year, compels the
conclusion that the SEC, its chairman at the time, Mary Schapiro, and the leadership of the Division
of Enforcement were more interested in a quick public relations hit than in pursuing a thorough investigation
of Goldman, Bank of America, Citibank, JP Morgan and other large Wall Street firms.
Although the emails and documents I produced to Pro Publica stemming from my role as
the designated (later replaced) trial attorney for the Division of Enforcement are excruciatingly
boring to all but the most dedicated securities lawyer, even a lay person can observe that the Division
of Enforcement was more anxious to publicize a quick lawsuit than to follow the trail of clues as
far up the chain-of-command at Goldman as the evidence warranted. Serious consideration also never
was given to fraud theories in any of the Big Bank cases stemming from the Great Recession that would
better tell the story of how investors were defrauded and who was responsible, due either to dereliction
or design.
Instead, the SEC restricted its investigation to the narrowest theory of liability, had to be
pressed (by me) to go even one short rung above the lowest level Goldman supervisor in its investigation
(which took months to push through, though investigative subpoenas are frequently issued on far less
in far smaller cases) and finally dropped other investigations of Goldman in return for a $550 million
settlement
announced July 15, 2010. To my knowledge (I retired in March 2014), the SEC never again pursued
Goldman for its mortgage securities fraud or other major fraud. There is no evidence on the SEC website
that it did so.
At a minimum, it can be said that the SEC left 90 percent of the money on the table at a time
when a more aggressive investigation of the company, as well as others, could have counted for something
by disclosing, in a detailed court complaint, Wall Street wrongs that might have helped policy makers
better address the subject and allow damaged individuals and entities to bring their own lawsuits.
It is very important to emphasize emphatically several points. First, I have zero evidence, and
would be very surprised, if any of the individuals at the Division of Enforcement, including senior
supervisors or the SEC chairman or associate commissioners, acted unlawfully or were motivated principally
to protect Goldman and other big banks. All of these people appeared well-intentioned from their
point of view, even they never really explained, to me, or to many others at the Commission, their
motives in limiting investigations. The most senior level supervisors left more lucrative jobs in
the private sector to head the Division of Enforcement, taking plum jobs but at significant personal
sacrifice. (They then returned to even more lucrative employment or even more high-profile public
positions.) All of them were gentlemen. These factors make it all the more surprising that I never
got a clear answer as to why the investigation was so constipated, as it obviously was. Its range
was clearly limited from the outset: we will sue the bank and not look hard for evidence of individual
participation beyond the lowest levels.
By the same token, it is unfair to assume as a fact that any of the individuals at Goldman not
sued, or anyone at Paulson & Co., violated the securities laws, civilly or criminally. Like any citizen,
they are entitled to a day in court. Absent such opportunity, they are innocent of any wrongdoing.
Arguments in my internal correspondence that evidence was sufficient to sue should be viewed only
as that - arguments.
So my point in releasing these documents to Pro Publica is not to chastise or hold up
to public criticism those involved at the SEC, Paulson & Co. or Goldman, though criticism of the
process and of the underlying financial conduct certainly is inevitable. All of these institutions
have substantial influence in the investment industry. Rather, it is to bring to light the actual
conduct of one of several SEC investigations into Big Bank fraud leading up to the 2008 financial
crisis.
As I told Mr. Eisinger when I met him, I hoped he would go to the individuals in charge of the
SEC investigation at the time and find out why the investigation was so limited. I have spent six
years wondering what is the true answer to that question. Perhaps there were sound reasons, other
than the urge to get out a quick press release, which led experienced criminal prosecutors with histories
in Wall Street to smother a major investigation by limiting it to the lowest level employee possible,
to express total resistance to even investigating further up the chain of command, and ignoring without
serious explanation and analysis what I and others, including my own immediate supervisors, viewed
as the more appropriate theory for civil prosecution. I hope there are such reasons. As a trial attorney
at the SEC for over 20 years, I bled SEC blue. I believed that the agency usually tried to do the
best it could, using analog era procedures and processes to combat fraud in a digital age. I am saddened
to release this information. But the notion that "the Administration was tough on Wall Street" must
be addressed by facts, not press releases and self-serving interviews, else the system's problems
cannot be adequately addressed and repaired to deal with the next financial crisis.
Not only is the issue of how the financial sector enforcement agencies handled the wrongs of the
Great Recession an important political issue, but it is important to history. It is important that
the facts not be shielded from the public so that we can all learn for the future. And it is a melancholy
thought that, presented with the opportunity for a rigorous investigation and airing of facts in
civil or criminal proceedings gone, history will be denied a fairer story of both the financial crisis
itself and how the government responded.
As
many news organizations have noted , the taxpayer and Goldman shareholders will pay the combination
of penalties and repayments in the DOJ settlement. No individual was named as liable in the civil
settlement with Goldman nor in any of the other similar, and even larger, financial settlements entered
into with the Department of Justice, all of which are vastly greater than what the SEC obtained in
its "quick hit, one and done" enforcement actions. DOJ must be credited with what appears to have
been a far more thorough investigation of wrongdoing than the SEC performed, but the public is properly
mystified that no individuals were charged, criminally or civilly, although the DOJ press releases
contains the usual caveat that "the investigation continues."
The settlements with Goldman and other Big Banks were resolved under the Financial Institutions
Reform, Recovery and Enforcement Act (FIRREA), which allows the Feds to ignore the normal five-year
statute of limitations for fraud, but does not permit suit by private party victims. As has been
the practice with DOJ when dealing with Wall Street, no criminal charge was brought. In fact, no
complaint was filed in any of these cases. Instead, DOJ entered into contractual arrangements with
the banks. Failing to fulfill their obligations under the contract would subject them to civil enforcement
as a breach of contract matter, not a contempt charge in federal District Court.
Contrary to claims by politicians, it is clear that the Obama Administration has not been hard-hitting
on Wall Street fraudsters. The large fines obtained by the Department of Justice, while a short-term
pinch, are simply a cost of doing business. Relying on fines to penalize rich Wall Street banks,
which, after all, specialize in making money and do it well, if not always honestly, is like fining
Campbell Soup in chicken broth. It costs something, but doesn't change anything in the way of operations
or personnel.
Despite billions in fines representing many more billions in fraud, the enforcement agencies of
the United States have been unable to find anyone responsible criminally or civilly for this huge
business misconduct other than a janitor or two at the lowest rung of the companies. Nor have they
sought to impose systemic changes to these banks to prevent similar frauds from happening again.
Yessir, according to the Obama administration, Goldman Sachs, JP Morgan, Bank of America, Citibank
and other institutions made their contributions to tearing down the economy, but no one was responsible.
They are ghost companies. And nothing needs to be done to prevent such intent or dereliction in the
future.
Law enforcement by contract? Clearly, the banks made it a condition of settlement that no complaint,
civil or criminal, be filed. That might gum up the works by requiring state regulators to take action
under their own rules, or cause other collateral consequences.
Ah, say the defenders of the status quo, don't forget about Dodd-Frank, the unwieldy legislation
passed by feckless Democrats influenced by big money contributors and their own fear of appearing
too aggressive (a particular Democratic Party contagion). Dodd-Frank was and is a virtual chum pool
for Wall Street lawyers and lobbyists, leaving most of the substance to regulatory agencies such
as the SEC and the Federal Reserve, who for years have been significantly captured by those they
are supposed to regulate. The private sector lawyers and lobbyists have open doors to these places
to "help" write the rules and add complexity, which they later complain about in court, challenging
those same rules as too complex.
Dear citizen, just remember this: complexity favors fraud, and certainly favors Wall Street and
corporate America. You can't understand the rules and neither can Congress or all but the most dedicated
experts. That's a lot of room to disguise misdeeds. To take a current example, which came to my attention
just before completing this post, Congress is trying to use sentencing reform, generally thought
of as intending to remove inequities from the criminal justice system, to also make it even tougher
to prosecute and punish white-collar crime. Is this why the Koch Brothers suddenly show such public
attention to the poor and needy by favoring such legislation?
See this discussion of adding the "mens rea" requirement to such legislation. Burying an important
but legalistic issue in otherwise liberal leaning legislation is a current example of disguising
lax enforcement of white-collar crime in a complicated package. As one Democratic congressman suggested,
how can a liberal vote against sentencing reform? The explanation of the badger buried in the woodpile
is too complicated for the average voter.
Not coincidentally, adding a requirement to the law that it is a defense to either the crime itself
or to sentencing that "I didn't know my acts were against the law" is a get out of jail free card
as the complexity of laws addressed to ever more sophisticated business misconduct grows. Wall Street
clearly has shown no shame in using the defense that "no one knew". Can't blame them. It has worked
so far. Maybe they don't even need new legislation.
I was told repeatedly when I entered the Goldman investigation that synthetic CDOs were just too
complex for me to understand. Of course, it appeared to be plain vanilla fraud selling a product
designed to fail but nicely packaged for chumps to buy. Claims of complexity hide many easily understood
sins.
At least for the major sins, we don't need even more complex regulations. Instead, put leadership
in place who will aggressively enforce the laws we have already. That would raise plenty of eyebrows
and put some bums in prison, or at least make them pay civil and criminal penalties personally. As
many have noted, prison or, at least, personal financial liability, beats corporate concessions every
time and pays back in future reluctance to break the law. The country should try it sometime.
So back to little me, a small and ineffective cog in the larger system. Why is this release of
documents so long after the investigation?
My friends know that I have been upset since 2010 about the way the SEC handled the Goldman case
and, in my view (confirmed by other trial lawyers), that it became a template for other SEC civil
suits against the Big Banks. In 2011 I wrote an anonymous letter to The New York Times complaining
about the lack of investigative effort by the Division of Enforcement and the impact of the "revolving
door" bringing Wall Street defense lawyers into the highest reaches of the SEC. This is a practice
that Obama has continued at most departments and agencies having to do with the financial system,
following in Bill Clinton's footsteps. The New York Times letter was based entirely on publicly
available information.
I was dismayed to not find any follow-up to my letter in The New York Times . I gave
up trying to bring attention to the investigative lassitude of the agency. Interest appeared to be
over.
A year after I retired, I sent a copy of the letter to The Times , under a cover letter
identifying myself. One of the addressees on the original letter called and told me the original
letter never was received. The caller suggested that was because I misaddressed it to the old location
of The New York Times . I felt foolish, of course, but I guess that in 2014, when the letter
was finally received, The Times didn't see fit to follow-up the information even knowing
its source. This was another indication to me that the time for debate over the law enforcement treatment
of wrong doers on Wall Street had passed.
Once, years earlier and only for a brief time, the SEC was an agency that was at least sometimes
fearless of Wall Street institutions. In those days, the directors of the Division of Enforcement
were home-grown, not imported from Wall Street law firms. After 1996, that ended. Every director
since has been nurtured as a Wall Street defense lawyer. The decline in performance has followed
an expected arc. No one has seemed bothered by this. It seems the phrase "lawyers represent client
interests" is sufficient explanation to insulate this practice from critics. In this view (pushed
by lawyers), lawyers are the only people in America who are not influenced by their work experience,
including friendships and defense of client practices. They are SO exceptional! So give it up, Jim,
I finally told myself. It's the nature of Washington to put foxes in hen houses and claim they are
protecting the fowl.
But in April 2015, Sen. Bernie Sanders announced his presidential candidacy, based principally
on anger over how Wall Street has escaped being held seriously responsible for its misdeeds. If you
credit Sanders with nothing else, praise him for not letting go of the notion of justice for those
who suffered and those who caused pain and anger for millions. Yes, the banks are not solely responsible
for the Great Recession, but they contributed more than their fair share and leveraged immensely
the damage initially caused by others.
Sanders was not treated seriously. The publications I read made it clear that Sanders was, like
Donald Trump, a flash in the pan. Jeb Bush and Hillary Clinton would be nominated. Anger against
Wall Street and inequality were issues, but not worthy vehicles for a political campaign. Nothing
here. Move on.
It turns out that the ravages caused by Wall Street are the gift that keeps on giving. As Sanders
campaigned with far more success than predicted, and Secretary of State Clinton defended President
Obama as "tough on Wall Street," it was evident that my small contribution to correcting the record
might be timely.
So here it is.
Do I think Obama is responsible for the ineffective and embarrassing lay downs at the SEC and
DOJ? Yes, I do. I have no idea if the President communicated to his law enforcement appointees that
they should "go easy on Wall Street." Rarely is such overt instruction necessary in Washington. But
it is not hard to believe that in some fashion he did send such signals, since he came into office
with a mantra of letting bygones be bygones, including in the far more important arena of the false
narratives for invading Iraq.
In any event, the chairman of the SEC and the attorney general are appointed by the President.
At a minimum, we can say with certainty that Obama was satisfied with their performance. It is difficult
to conceive that, as a Harvard educated lawyer who also taught law at the University of Chicago,
it never crossed his mind how massive civil or criminal misconduct could go on without the supervision
or knowledge of at least mid-level executives. Certainly, the public criticism was brought to his
attention. His response was to create a joint task force on the subject of fraud in general. Its
main visible public function is to collect all the press releases on fraud prosecutions, including
small-time fraud, on one website . It also
offers advice to "elders" on how to avoid fraudulent scams. The pro forma mention of the
task force in DOJ's announcement of the Goldman settlement signals that the Task Force doesn't do
much. Again, law enforcement by press release.
The alternative possibility, never mentioned because it is preposterous, is that big Wall Street
firms so lack supervision of their lower level employees that fraud on a huge scale can be conducted
without the knowledge of even mid-level executives. At the SEC, at least, such a conclusion should
call for application of its "regulatory" function to impose supervisory conditions on the banks.
No such action was ever undertaken. Instead, it was "pay up some money and nevermind."
Dodd-Frank at best imposes generalized rules about bank size and other generic issues, rather
than addressing the kinds of fraudulent actions that actually occurred. It is appropriate for the
SEC or Federal Reserve to impose narrower changes in corporate practice to address specific kinds
of fraud. They are called "undertakings" and are often imposed by civil settlements with the SEC
or in litigated relief. It did not happen with the Big Bank frauds.
I believe that the American public is entitled to accurate information about how their government
works, including the important regulatory agencies. One way to do this is to fully disclose how the
sausage is made, especially when the process is defective. Self-promoting press releases swallowed
by a fawning business press is not sufficient. I knew I would not disclose any non-public information
about the Goldman investigation while the lawsuit against Fabrice Tourre was pending. He was the
one guy at Goldman the SEC sued personally. In fact, I think he was the only guy employed by any
of the big banks sued personally. (Another fellow who worked with the banks - not for the banks -
was sued in another case. He was found not liable, with the jury asking how come higher-ups were
not in the dock and urging the investigation to continue. It wasn't.) The Tourre case concluded a
few years ago with a verdict against the defendant. All appeals are exhausted. The statute of limitations
has expired for private actions. Disclosure of the information I had can do no harm to the public
or to pending litigation.
The only reason to keep the information secret is to prevent embarrassment to the SEC or to
those people who made decisions for the agency. Most of them left the SEC years ago. For public consumption,
I have tried to redact all names of the non-supervisory personnel in the Division of Enforcement
who worked on Goldman. I also must add that, as the emails show, for a period of time those dedicated
investigators were excited about the notion of bringing at least a slightly broader action than their
supervisors wanted. As is the case with much of the Division of Enforcement, the worker bees try
hard and usually are fearless. It is their bosses who frequently suppress their enthusiasm for policy,
political, or personal reasons.
As final egotistical end note, I must say that, despite all of my personal reservations about
his dedication to effective law enforcement in the financial sector, I voted for the President twice.
I will vote for whoever is the Democratic nominee. But I ask myself: Is this the best that two political
parties given de facto monopoly over selection of presidential candidates can do?
Whoever is nominated and elected, Republican or Democrat, I hope that he or she will recognize
the need to end the practice of hiring Wall Street personnel to run our financial enforcement agencies.
They should begin by looking to home-trained personnel to lead the major departments and agencies,
such as Treasury, the SEC and the Department of Justice, including the chief of the Antitrust Division.
These are the people who are responsible for these institutions on a daily basis and also understand
the nature and importance of their mission. They have a career stake in doing an effective job. Outsiders
are, in general, more interested in resume polishing for the next private job. Additionally, much
great talent leaves these agencies for their own more lucrative private careers when they see their
own chances for advancement blocked by outsiders or their energies trying to fairly but aggressively
enforce the law sapped by timid leadership.
One party has chastised our government on every occasion for nearly 40 years and shows no intention
of reining in Big Business or Wall Street. Directly or by implication, these attacks tarnish government
employees in general, making a public service career less attractive to our most talented citizens.
The other party has been indifferent or ineffective in its defense of civil service and has addressed
financial sector wrongs by adding to the complexity of the system rather than cutting through it.
As a result, some of our businesses are above the law.
Something has got to change. It will. The question is, will it be for the better?
The author is trying very hard to be nice to the point of being delusional. This is criminality
and corruption through and through, and it didn't end in '08. Don't be sad… get mad.
A little history: I was hired, first as an adjunct, then a tenure-track professor, by the interdisciplinary
Freshman teaching unit at my old university. Two years before I would have come up for tenure
(and gotten it) they axed the program and switched me, against its will, to the History Department.
And they reset my tenure clock to zero. Long story short, they were never going to tenure me.
So I slogged on and earned my pay and got my two kids through high school. By then, my wife wanted
out of the suburbs and said she was leaving, preferably with me, but leaving. So we moved to the
country. This cut me off from the academic life (and nice $72,000 a year paycheck) that I had
struggled for years to enter and excel in.
So what? So, It's gone. I'm cut off. My intended life's work is ruined. At 51 I'm an unemployed
naval historian with two books and seven refereed journal articles and I can't get an interview
for a full-time job at a community college. How painful is this? It's murder. Hurts all the time.
No more exciting lectures to give. No more university library at my beck and call. No more access
to journals. No more conferences. It's an occasional one-off course and driving a delivery van.
This man has risked a lot to do what he did. He's lost more than many of you will realize.
If he can't just crap on the old life and the old profession, please, cut the man a little slack.
You don't want to be him.
Mr Levy, I am very sympathetic to your situation – long story short, I was in the forefront
of the late 70s to the present, layoffs in various industries where I found myself game-fully
employed. I too, no longer believe I will ever be employed full time at any job.
But I argue that it is not that the gods do not favour us; it is that we are the outcome of
bad gov't policies and unregulated (regulated for the consumer) businesses practices. Hence, my
lack of sympathy or willingness to tolerate breast beating (see my April 24, 2016 at 6:44 am posting)
by those who put us here.
James A. Kidney, former trial attorney with the Securities and Exchange Commission, retired
from the SEC in 2014 at the age of 66 after 24 years working there. Looks like he had a full career,
although had to put up with a lot of bullshit, and possibly soured some relationships on his way
out.
Very similar situation here. Going on 50, unemployed in my chosen field, etc. And yes,
its hard to just walk away sometimes… I have to keep my mind focused ahead instead of looking
back.
Are there any yacht clubs nearby you? There is like 4 of them within 10 minutes of me (I'm
on the Great Lakes) You could teach sailing and rigging no doubt. Bonus: Union crane operators
are required to know their rigging – they may need teachers too.
More than ever, I am convinced the capitalist system needs to be rejected as the means determining
how goods and services are delivered. The injustice and inequality generated are too great. Finding
a positive expressive outlet for this dissatisfaction will require leadership- and a new vision
for the future.
The amount of social damage being inflicted by the elite is almost beyond comprehension. Since
they have successfully insulated themselves form the consequences of their actions, they remain
aloof and uncaring for the plight of ordinary people, not to mention the health of the planet.
This system will continue to cut more and more people off from the benefits of collective social
action and effort. The work of the many, supporting the desires of the few cannot stand.
We all have to decide the level of inequality we are willing to live with. How people answer
this question will naturally sort them into common communities. Leave the isolated gated communities
to the elite. Careerism, like capitalism, is a dead end if your position cannot be guaranteed.
The amount of talent and passion for work wasted under the current system is another undercounted
fact. Sustainability and democracy are not compatible with capitalism.
Getting mad is only the beginning. The anger must be directed in some productive fashion. Any
resistance to the current order must have broad social support and that support only has strength
if self-reliant. Building these self-reliant structures is what the future will hold. If the plutocrats
can build a world for themselves, why can't the common man. It only takes work,discipline, and
control over the means of production.
Workers without power, influence, and the means to obtain life necessities are slaves. Is the
best the human mind can conceive a life of benevolent serfdom?
By the way, I believe I would enjoy sitting in on one of your lectures. I'm sure I would learn
much- and be a better man for it.
@James Levy … sorry to hear. I know a few who have been chewed up by the academic meat grinder.
I hope you can find a productive outlet for your scholarship. Exile is hard.
"The explanation of the badger buried in the woodpile is too complicated for the average voter."
That's it! Stop right there! I will not let you (speaking to the author) BS your guilty conscience
over my internet link. The average voter clearly knows they are getting screwed, that Wall Street
and the voter's own bank is ripping the voter off, and most clearly, that the justice department,
from state and local to federal, is enabling this injustice.
You sir, are swimming with sharks. Your morality is "is it legal?", your justification is "for
the shareholder". Therefore, you refuse to see the mendacity and instead excuse it for ignorance.
I know other whistleblowers and internal dissenters who wound up losing their jobs who
initially blame themselves, than come to accept that the system in which they operated was fundamentally
corrupt, that even if some people locally really were trying to do the right thing, it was bound
to either 1. go nowhere, 2. be allowed to proceed to a more meaningful level if it was cosmetic
or served some larger political purpose or 3. got elevated because the organization was suddenly
in trouble and they needed to burnish their cred in a big way (a variant of 2, except with 3,
you might have a something serious take place by happenstance of timing).
Wow, that's a mouthful – and it's only one sentence. Whilst I love your pieces, I've noticed
that many of the articles – at least the run up summation to the articles – tend to be written
in a stream-of-consciousness style that, frankly, is hard to digest. This seems to be the case
more now than in the past. I don't know if you're harried or on an impossible schedule, but could
you please make your syntax easier to read? Thanks from a long-time reader and donator.
Because it's a Sunday and I have time to goof off, one potential revision - b/c I believe what
Mr Kidney has to say is important enough for me to spend a few minutes on one potential suggestion.
I've amended and added what I hope are accurate meanings:
----
Focusing on these as the key subject /verb pairs: I know (other whistleblowers) (other whistleblowers) [lost their jobs] (other whistleblowers) [blamed themselves – initially]
(other whistleblowers) [finally… accept] the system in which they operated … [was corrupt]
… even if… (some employees) tried to [be competent]
(It - there's a problem with 'it' as the subject, because we are unclear what 'it'
refers back to - I'll interpret 'it' as 'investigating fraud' ) was bound to…
-------------–
I know other whistleblowers and internal dissenters. They wound up losing their jobs.
Initially, they blamed themselves, until they finally came to accept that the system in which
they operated was so fundamentally corrupt that they could not retain a sense of their own integrity
while working within the organization.
Despite the fact that some people really were trying to do the right thing, for reasons that
I will explain, investigating fraud was bound to go in one of only three directions:
1. fraud would not be investigated at all,
2. fraud investigation would serve the agency's need for better public relations - in other words,
the appearance of fraud investigation would be allowed to proceed, but only if it was merely cosmetic
(or served some larger political purpose), or else
3. fraud investigation became temporarily elevated, but only because the organization* was suddenly
in trouble – and consequently, needed to burnish its credibility by actually investigating fraud.
(Although 3 is a variant of 2, in the third option, credible fraud investigation could occur
if, and only if, political necessity enabled competent SEC employees to actually investigate fraud
in order to maintain the reputation of the SEC).
[NOTE: *It's not entirely clear here whether 'the organization' is the target business, or
whether it is the SEC (which would need to burnish it's cred in the face of bad publicity)]
------------
Not sure how close I came to the author's intended meanings, but I thought that I'd give it
a shot.
The sentence parses correctly even though it is long. Stream of consciousness often does not
parse correctly, plus another characteristic is the jumbling of ideas or observations. The point
is to try to recreate the internal state of the character.
For instance, from David Lodge's novel "The British Museum Is Falling Down":
It partook, he thought, shifting his weight in the saddle, of metempsychosis, the way his
humble life fell into moulds prepared by literature. Or was it, he wondered, picking his nose,
the result of closely studying the sentence structure of the English novelists? One had resigned
oneself to having no private language any more, but one had clung wistfully to the illusion
of a personal property of events. A find and fruitless illusion, it seemed, for here, inevitably
came the limousine, with its Very Important Personage, or Personages, dimly visible in the
interior. The policeman saluted, and the crowd pressed forward, murmuring 'Philip', 'Tony',
'Margaret', 'Prince Andrew'.
More generally:
The Stream of Consciousness style of writing is marked by the sudden rise of thoughts and
lack of punctuations.
The sentence may be longer than you like but this is not stream of consciousness. A clear logical
structure ("first, second, third") is the antithesis of stream of consciousness.
I fail to see why fraud is not prosecuted. We can get cute with fancy words but fraud is clear
and simple. Also – Enron results in SARBOX which seems to be clearly ignored. Yves – do we know
of any SARBOX prosecutions? Clinton started deregulation, Bush implemented deregulation and Obama
maintains it. No wonder the kids are mad. The financial industry makes the Koch brothers look
like pikers.
There is actually a high legal bar to prosecuting fraud.
I have written at length re Sarbox and the answer is no. And under Sarbox, you don't need to
prosecute, you can start with a civil case and flip it to criminal if you get strong enough evidence
in discovery. There was only one case (IIRC, with Angelo Mozilo) where the SEC filed Sarbox claims,
one in which it also filed securities law claims. The judge threw out the Sarbox claims with no
explanation. I assume it was because the judge regarded that as doubling up: you can do Sarbox
or securities law (the claims to have some similarity) but not both. But the SEC as it so often
does seems to have lost its nerve after that one.
I don't know if an election would have consequences and if a new administration headed by Sanders
would make it the SEC more responsible to the taxpayers and not the investors / banks.
It only took a decade for Markopolos to have his ponzi scheme information read by SEC.
I want to like this guy, I really do. But then he goes and says stuff like this:
The most senior level supervisors left more lucrative jobs in the private sector to head
the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They
then returned to even more lucrative employment or even more high-profile public positions.)
All of them were gentlemen. These factors make it all the more surprising that I never got
a clear answer as to why the investigation was so constipated, as it obviously was.
So he doesn't understand how the revolving door works…or he does but he's being purposefully
obtuse about it. Sacrifice my ass! Gentleman my heiny! And claiming that there's no proof of criminality
when, as is pointed out above, Sarbanes-Oxley was obviously violated isn't helping things either.
Listen dude, pick a side. It's either the American people or Wall Street crooks and their abettors
in government. You don't get to have it both ways. This kind of minimization and wishy-washyness
is only helping the crooks. More disappointing than I exepected.
these kinds of articles are nothing more than defensive measures against a growing public
rage !!!
I don't actually agree. I think the guy feels a little guilty for not doing more, now he's
trying to salve his conscience. Still, he can't quite bring himself to admit that the people he
was working for may well have been criminals. They were just so nice!
Self-reflection is not comfortable, and most people don't have much tolerance for it. I think
this guy's legitimately trying to do the right thing (not cover up for criminality) it's just
that it's really psychologically difficult to admit certain aspects of reality. It's not like
he's the only one.
I find it telling that suddenly now (within the last year or so) that all these people ( people
in high finance, their underlings, traders, hedge funders, and other assorted enablers of massive
fraud upon the general public, are suddenly having a 'come to hayzeus' epiphany! I'm not buying
whatever faux sincerity they're trying to project…….
They've screwed millions of trusting people with their fraudulent grifting!
> I find it telling that suddenly now (within the last year or so) that all these people […],
are suddenly having a 'come to hayzeus' epiphany!
Especially when it comes after a fat retirement and a lengthy career of going along. I have
much more respect for people who really did put their daily bread on the line, and there are plenty
of those people, a lot of whom Obama sent to jail. So, yeah, great, you finally told the truth…
but where were you when the country needed you to speak out?
Couldn't we use civil forfeiture to go after them regardless of whether we can prove any actual
crime? What's good for the average citizen is surely good for the elite banker…
It's a good thing they're gentlemen. I don't know if I could handle all the looting and self-dealing
if it came from common ruffians. Truly we are fortunate to be in such hands, my fellow countrymen!
According to Bill Black in a ted talk 2014. After the Savings and loans debacle, where the
regulators went after the worst of the worst criminals, they made 30.000 criminal referrals and
1000 procecutions with a 90% succes rate.
Now after the 2008 crisis, which was 70 times bigger causing 10 million job losses and costing
11 trillion dolllars, the Obama administration has not made one single criminal referral.
https://www.youtube.com/watch?v=-JBYPcgtnGE
Today I fell over some information about the IMF, that the organization is exempt from legal
prosecutions and taxes. Can this be true?
From the article: "The employees who bare the IMF badge are pretty much exempt from all forms
of government intervention. And, according to LisaHavenNews, the IMF "law book," the Articles
of Agreement lists the reasons and requirements for exclusion from government mandate."
Thank you, I was hoping someone would mention Bill Black.
I'm a software/hardware product/business development engineer. In 2008, after 20 years of reading
the WSJ and stunned by the sellout to Murdoch, I went to the internet independent media (IM) to
follow the 'economic crisis'. Within a few months it was clear to me 1) I had learned nothing
of substance reading the WSJ, 2) the U.S. MSM, education system, and government are thoroughly
captured/corrupt.
Being a 'reader' (note: I don't know anyone who reads non-fiction) for me this 'worldview transition'
was quite natural, nothing really surprised me, and it was a big relief to discover such good
information/analysis so easily available on the internet. However, eight years later, I have yet
to meet a single person who has rejected the MSM or tuned in to what's happening, via the IM or
otherwise. In fact, after leaving the university in 1990, I have yet to meet a single person with
any basic understanding of (or the slightest interest in, or concern about) the extreme institutional
criminality of the the Savings & Loan Crisis, Asian Economic Crisis, Technology Bubble, the 2008
crisis, or the many economic/military wars-of-aggression methodically destroying one government/economy/country
after another.
To me, nothing made the global/economic/organized/mafia criminality more clear than the 2008/2009
articles by Bill Black. Back then I again foolishly assumed people would rally behind Dr. Black
to reestablish basic law enforcement against yet another obvious largest-ever "epidemic" of organized
crime. Looking back, the highly organized (and very successful) criminality of the Paulson/Obama/Geithner/Bernanke/etc.
cabal was truly an amazing operation to behold. Perhaps the most shocking news came in 2010 when
numerous studies confirmed that the top 7% of Americans had already "profited" from the economic
crisis, that the criminally organized upper class had not only increased their net wealth but,
more importantly, had increased their rate of wealth accumulation relative to the bottom 93%.
Still, to me, infinitely more amazing, the bottom 93% didn't, and still don't, seem to care, or
if they do, they've done absolutely nothing to even start to fight back.
Today, when reading these articles, I'm astounded how completely meek and 'unorganized' the
bottom 93% are compared to the extremely vicious and organized top 7%. Year after year the wealthy
elite, who's core organizing philosophy is "take or be taken, kill or be killed", increasingly
wallow in dangerously high and unprecedented levels of wealth accumulated by blatant/purposeful/methodical/criminal/vicious
looting while their victims, the bottom 93% 'working class', do absolutely nothing (what are they
doing?…. other than playing with their phone-toys, facebook, video games, movies?). At this point,
the main (only?) reason I continue to 'read' is to perhaps someday 'behold' the working class
93% attempting to educate themselves and consequently 'organize' to defend themselves.
I sympathize with Mr. Kidney and applaud him for doing what he can to try to rectify this abhorrent
situation. I also applaud him for placing the blame squarely on Obama and his reasons for doing
so are solid.
What I find much harder to understand is why he would vote for Obama even in 2012 after it
became apparent that Obama was ultimately responsible for stonewalling his investigation, and
his complete willingness to vote for the corrupt Democrat party no matter what going forward.
As long as enough people continue to have that attitude things will never change until the
whole system comes crashing down. I'd much rather see an FDR-type overhaul of the system rather
than a complete collapse as I'm rather fond of civilization. But I've come to expect the latter
rather than the former so I'll be reading my weekly Archdruid report for the foreseeable future.
The most senior level supervisors left more lucrative jobs in the private sector to head
the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They
then returned to even more lucrative employment or even more high-profile public positions.)
All of them were gentlemen. These factors make it all the more surprising that I never got
a clear answer as to why the investigation was so constipated, as it obviously was.
Yes poor babies for that "significant personal sacrifice" that resulted in "even more lucrative"
private employment. The author explains the problem then scratches his head over what it might
be.
In a rational world there would be a strict separation between the regulated and the regulators.
The government would hire professional experts at decent salaries and they never ever would be
allowed to then move on to jobs with the regulated. Clearly the assumption underlying our current–irrational–system
is that these high status technocrats are "gentlemen" with a code of honor. Welcome to the 19th
century. Those long ago plutocrats in their stately English mansions were all gentlemen and therefore
entitled to their privileges by their superior breeding. They were the better sort.
Meanwhile for lesser mortals it seems totally unsurprising when laws are ignored because you
hire your police from the ranks of the criminal gangs. No head scratching needed.
Reid Muoio (boss of kidney @ $EC) has a brother at a major tall bldg law firm whose job is
to help fortune 500 companies deal with D & O insurance issues…so when in the article Muoio says
"He" did not go thru the revolving door…it was fraud by omission…his brother sits on the opposite
side of these private settlement agreements…
so is Kidney unaware…leaving us to maybe accept he was never much of an investigator…or just
forgot to point it out for us…
The world is full of govt types who tell us TINA…
The wealthy Elliott Spitzer told us he would have loved to help "the little people" but the
OCC and then scotus with waters v wachovia…except scotus ruled only direct subsidiaries get protection
and the OCC specifically said the trustee operations of OCC regulated entities are also not covered/protected…
Does anyone else think this was insider demolition – not just the failure to prosecute, but
the whole financial implosion in the first place? Who writes up nothing but "shitty deals" – all
the while saying to each other: IBGYBG and survives to slink away? They must have had a heads
up that the financial system as we had known it in the 20th c. was done. They had a heads up and
then they got free passes. My only question is, Wasn't there a better way to bring down the system,
an honest way that protected us all? By the end of the cold war money itself had become an inconvenience
because of diminishing returns. And now the stuff is just plain dangerous because everyone who
got screwed (99%) wants their fair share still. It is paralyzing our thinking. Obama maintains
he personally "prevented another depression". I honestly think he might be insane. What we need
is a recognition that the old system was completely irrational and it isn't coming back. And most
of us are SOL. Somebody is going to figure out how to maintain both the value and usefulness of
money very soon, because we've got work to do.
The GFC was the first great financial crime of this millenium, and Goldman Sachs was at the
epicenter. A heist of gargantuan proportions, they didn't even need a safecracker after Bernanke
spun the dials and opened the door wide.
Imagine if the FBI and the Mafia exchanged their top leaders every few months. That's what
we have here with the SEC and Wall Street.
Bernie Sanders: The business of Wall Street is fraud and greed.
We can add to that. The business of the SEC is to provide cover.
In Yves intro she shares her views, first, that Kidney still wants to think well of his former
SEC colleagues and his criticisms seem muted relative to the severity of the problems, and second,
that there are class assumptions at work.
The first is obvious, as the SEC is an utter failure in its responsibility to investigate and
prosecute financial criminals. While Mr. Kidney devotes a fair amount of his passages pondering
how it can be that no individuals within these financial institutions bear personal responsibility,
Mr. Kidney fails to see the SEC through that same lens. To say Kidney's criticism of his coworkers
is muted is an understatement. The individuals at the SEC are corrupt. The individuals at the
Justice Department are corrupt. Probably all nice people: husbands, wives, fathers, mothers, friends,
etc. Just like those folks at the financial institutions. Mr. Kidney cuts them slack because of
his personal relationships with them. Mr. Kidney chooses to give them the benefit of doubt when
the totality of their professional performance at the SEC make clear this cannot be true.
With respect to class assumptions at work, Yves illustrates with the deference shown by SEC
officials and investigators toward these financial criminals and their presumption that these
individuals are honest. Mr. Kidney does share some of his disappointment in President Obama and
Obama's administration but fails to properly connect the dots. In short, the lack of financial
crime prosecutions is the result of a deliberate, planned and orchestrated effort.
Mr. Kindney's investigations were prevented in going forward by his superiors. He was never
given an explanation for this despite his asking. But Kidney believes his superiors are all good
people.
No, they are not. They are compromised people who have placed their career employment above
their sworn duty. The fact that their bosses have done the same, as have those in the Justice
Department as well as President Obama, should not diminish this fact. The phrase "class assumptions"
is too euphemistic when describing a system where there is no justice for the victims of financial
crimes, a system where the Justice Department and Administration coordinate to shield financial
criminals based on where they work.
This is America. In today's America the fact is certain individuals are above the law because
our elected officials at all levels accept that this is okay. Victims of these individuals will
be prevented access to their legal recourse, and that these criminals are protected from the highest
level of our government down. This goes way, way beyond class assumptions.
Yves has written extensively about how corporate interests have funded academic sinecures,
as well as continuing legal education seminars attended by attorneys and judges. This is part
of the fallout; if you want more, check out her section of ECONned where she explains how legal
thinking was perverted by business interests.
As someone who has fallen on their sword more than once (and again recently), I just want to
say that "placed their career employment above their sworn duty" is accurate but also oversimplifies
the situation.
People with families tell themselves that they balance performance of most (some?) of those
duties, while shirking the balance in order to protect their families (a "good" (as in, expensive)
college for the kids)… this actually comes down to sustaining their social status, in a culture
(political as well as corporate) where loyalty is valued equal to and above performance, and honorable
action is diminished, trivialized, even ridiculed; and not just within the context of the financial
industry.
This is not at all a defense of the choice, but the choice is made in a very class-stratified
social context, and arises in that general context. People take out loans to buy cars and houses,
they squirrel earnings away into investments (to avoid taxes) which they are reluctant to draw
from… they feel less ready to abandon their addictive income streams for honor, and fudge their
responsibilities. It's not isolated to regulators, or government, or even finance. It occurs so
constantly and on so many fronts that addressing specific cases doesn't make a dent in the compromise
of the entire culture. And that compromise is fueled and maintained by a very twisted set of ideas
about money, and career, and social status (not to mention compromises in journalism, education,
science, you name it).
I read Mr kidney as being very sarcastic. I could not write this with a serious sarcastic (Lawsuit
Avoiding) view:
The most senior level supervisors left more lucrative jobs in the private sector to head
the Division of Enforcement, taking plum jobs but at significant personal sacrifice. (They
then returned to even more lucrative employment or even more high-profile public positions.)
taking plum jobs but at significant personal sacrifice
Oh really? Must have hurt. And from a legal point of view does not appear libelous.
"... Alternative theories would have led to very different policies. For instance, the tax cut in 2001 and 2003 under President Bush. Economists that are very widely respected were cutting taxes at the top, increasing inequality in our society when what we needed was just the opposite. Most of the models used by economists ignored inequality. They pretended that macroeconomy was unaffected by inequality. I think that was totally wrong. The strange thing about the economics profession over the last 35 year is that there has been two strands: One very strongly focusing on the limitations of the market, and then another saying how wonderful markets were. Unfortunately too much attention was being paid to that second strand. ..."
"... ditto...everyone from Tyler Cohen to Mark Perry of the AEI does daily posts about the markets working for everything...a daily "Market Failure in Everything" would provide a useful alternative to that point of view... ..."
"... Nobel-prize winner Joseph Stiglitz said monetary policies have exacerbated inequality and need to be redirected to better target getting money flowing into economies and helping small and medium-size businesses. ..."
"... policies such as quantitative easing were a "version of trickle-down economics" and the subsequent increase in asset prices only affected the wealthiest in society ..."
"... "The key problem is the access of credit to small and medium-size enterprises, is getting that flow of money into the real economy," Stiglitz said. It's "nice to have a stock market bubble if you have a lot of stock. But if you are in the bottom 80 percent of America, you have a little stock and you can feel a little good about the stock going up. But let's face it, the overwhelming bulk of our stock market is owned by the 1 percent." ..."
"... Oh my god. He lumps in Bernanke with Greenspan. What are the Fed worshippers going to do now? Their deity is under attack from Stiglitz. Of course it is nothing but fact that bernanke denied that bubbles in real estate were possible OR that a bubble could become s problem for the economy. Hats off to Stiglitz. ..."
"... How much more evidence do we need that the current trickle down monetary policy has failed? "The weak growth for the quarter puts this recovery even further behind any prior recovery at the same stage. After eight and a quarter years, the economy is only 10.1 percent larger than its pre-recession level of output. A more typical recovery would have seen at least twice as much growth." ..."
...White: ... To what extent do you feel economist and economic theory
is culpable for the crisis? What is the role of an economist going
forward?
Stiglitz: The prevalent ideology-when I say prevalent it's not all
economists- held that markets were basically efficient, that they were
stable. You had people like Greenspan and Bernanke saying things like
"markets don't generate bubbles." They had precise models that were
precisely wrong and gave them confidence in theories that led to the
policies that were responsible for the crisis, and responsible for the
growth in inequality.
Alternative theories would have led to very
different policies. For instance, the tax cut in 2001 and 2003 under
President Bush. Economists that are very widely respected were cutting
taxes at the top, increasing inequality in our society when what we
needed was just the opposite. Most of the models used by economists
ignored inequality. They pretended that macroeconomy was unaffected by
inequality. I think that was totally wrong. The strange thing about
the economics profession over the last 35 year is that there has been
two strands: One very strongly focusing on the limitations of the
market, and then another saying how wonderful markets were.
Unfortunately too much attention was being paid to that second strand.
What can we do about it? We've had this very strong strand that is
focused on the limitations and market imperfections. A very large
fraction of the younger people, this is what they want to work on.
It's very hard to persuade a young person who has seen the Great
Recession, who has seen all the problems with inequality, to tell them
inequality is not important and that markets are always efficient.
They'd think you're crazy. ...
When I first started blogging, I used to do posts with the title
"Market Failure in Everything." as a counter to "the prevalent ideology."
Maybe I should revive something similar.
ditto...everyone from Tyler Cohen to Mark Perry of the
AEI does daily posts about the markets working for
everything...a daily "Market Failure in Everything" would
provide a useful alternative to that point of view...
Nothing about Ricardian Equivalence or RBC fallacies.
While
inequality is certainly important for consumption demand, PCE
has not been a significant problem in the recovery. OTOH,
reduction of the federal budget deficit explains virtually
all of the deficient demand we have experienced. Obama and
the Dems bought into RE and are paying the price now.
"Nobel-prize winner Joseph Stiglitz said monetary policies have exacerbated inequality
and need to be redirected to better target getting money
flowing into economies and helping small and medium-size
businesses.
In a Bloomberg Television interview Tuesday with Francine
Lacqua and Michael McKee in New York, he said policies such
as quantitative easing were a "version of trickle-down
economics" and the subsequent increase in asset prices only
affected the wealthiest in society.
"The key problem is the access of credit to small and
medium-size enterprises, is getting that flow of money into
the real economy," Stiglitz said. It's "nice to have a stock
market bubble if you have a lot of stock. But if you are in
the bottom 80 percent of America, you have a little stock and
you can feel a little good about the stock going up. But
let's face it, the overwhelming bulk of our stock market is
owned by the 1 percent."
Stiglitz's comments come as some central banks around the
world are being forced to delve deeper into their policy
tools to help support their economies. As policy makers
struggle to find a way out of the economic malaise, some have
even raised the idea of helicopter money, which aims to
direct cash straight to consumers.
The Columbia University professor, who said the Federal
Reserve can do more to "channel" money to small companies and
the economy, was also critical of negative rates. This is
partly because of their potential impact on lending.
"The dangers of negative interest rates -- if you don't
manage it extraordinarily well; some countries are doing it
reasonably well, some are not -- is that it actually weakens
the banking system," he said. "If it weakens the banking
system, the banks are going to provide even less credit.
While it might have some effect on financial markets, in
terms of what we really should be concerned about, which is
the flow of credit to businesses, that's not working."
http://www.bloomberg.com/news/articles/2016-04-26/stiglitz-says-misdirected-monetary-policies-increased-inequality
What's the point of low interest rates, if they only serve
the interests of Wall Street banks and their wealthy
clientele? Oh, right! That IS the point. And most economists
are just fine with that.
Oh my god. He lumps in Bernanke with Greenspan. What are
the Fed worshippers going to do now? Their deity is under
attack from Stiglitz. Of course it is nothing but fact that
bernanke denied that bubbles in real estate were possible OR
that a bubble could become s problem for the economy. Hats
off to Stiglitz.
Falling Investment and Rising Trade Deficit Lead to Weak
First Quarter
By Dean Baker
Health care costs remain well-contained, barely growing as
a share of GDP.
GDP grew at just a 0.5 percent annual rate in the first
quarter. This weak quarter, combined with the 1.4 percent
growth rate in the 4th quarter, gave the weakest two quarter
performance since the 3rd and 4th quarters of 2012 when the
economy grew at just a 0.3 percent annual rate.
Growth was held down by both a sharp drop in
non-residential investment and a further rise in the trade
deficit. Equipment investment fell at an 8.6 percent annual
rate, while construction investment dropped at a 10.7 percent
annual rate. The latter is not a surprise, given the
overbuilding in many areas of the country. The drop in
equipment investment was undoubtedly in part driven by the
worsening trade situation, as many factories curtailed
investment plans as U.S.-made products lost out to foreign
competition, weakening demand growth. There was also a drop
in information processing equipment, indicating that those
who are expecting that robots will replace us all will have
to wait a bit longer.
The rise in the trade deficit was due to a 2.6 percent
drop in exports, as imports were nearly flat for the quarter.
Trade subtracted 0.34 percentage points from growth for the
quarter.
Consumption continued to grow at a modest 1.9 percent
annual rate, adding 1.27 percentage points to growth.
Consumption growth was held down in part by weaker demand for
new cars, which subtracted 0.33 percentage points from growth
for the quarter. This was the second consecutive decline in
the sector. It is likely that car purchases will be up
somewhat in future quarters.
The savings rate for the quarter was 5.2 percent, which is
up slightly from the 5.0 percent from the prior three
quarters and the 4.8 percent rates from 2013 and 2014, before
people started saving their oil dividends. But seriously,
there may be some modest room for this rate to decline, but
for the most part consumption growth will depend on income
growth going forward.
Health care services added 0.26 percentage points to
growth, its smallest contribution since a reported decline in
the first quarter of 2014. Spending in the sector remains
well contained, growing at just a 3.8 percent annual rate
over the last quarter and by 4.4 percent over the last year
in nominal spending.
Housing grew at a 14.8 percent annual rate, adding 0.49
percentage points to growth. Housing has being growing at a
double digit rate since the fourth quarter of 2014. While the
sector is likely to continue to grow in subsequent quarters,
the pace is almost certain to slow.
The government sector was a modest positive in the
quarter, growing at a 1.2 percent rate. State and local
spending increased at a 2.9 percent annual rate, more than
offsetting a 1.6 percent drop in federal spending, all of it
on the military side. Future quarters are likely to show
comparable growth, although the composition may be somewhat
different.
A slower rate of inventory accumulation reduced growth by
0.33 percentage points, as final sales of domestic product
grew at a 0.9 percent rate. This is the third consecutive
quarter in which the pace of inventory accumulation slowed,
although the current pace is not especially low. It is likely
that inventories will grow somewhat more quickly in the rest
of the year, being at least a small positive in the growth
story.
The weak growth for the quarter puts this recovery even
further behind any prior recovery at the same stage. After
eight and a quarter years, the economy is only 10.1 percent
larger than its pre-recession level of output. A more typical
recovery would have seen at least twice as much growth.
[Graph]
On the whole this is a weak report. The headline 0.5
percent figure probably overstates the weakness somewhat, but
it is not a good sign when two consecutive quarters have an
average growth rate of less than 1.0 percent. Inflation
remains well under control, although there was a modest
uptick in the rate of inflation shown by the core personal
consumption expenditure deflator to 1.7 percent over the last
year. Nonetheless, with an economy barely growing and an
inflation rate that remains below target, it is difficult to
envision the Federal Reserve raising interest rates further
any time soon.
How much more evidence do we need that the current trickle
down monetary policy has failed? "The weak growth for the
quarter puts this recovery even further behind any prior
recovery at the same stage. After eight and a quarter years,
the economy is only 10.1 percent larger than its
pre-recession level of output. A more typical recovery would
have seen at least twice as much growth."
Market failures aren't really market failures but market
responses to market conditions. They are failures only in the
sense that something deemed bad (e.g., falling home prices)
is the market response. An extreme example is what's being
called secular stagnation, which is just the market response
to the shift of an enormous volume of production and income
from the U.S. and Europe to China and other like places with
much higher levels of inequality and savings. It's a market
failure only in the sense that something bad (wage
stagnation, slow economic growth) happened in the U.S. and
Europe. Those responsible for the shift in production and
income to China et al. (i.e., U.S. and European business
executives) were either ignorant of the likely market
response or didn't care as long as it increased profits (via
lower costs). But that's not a market failure, it's an
executive failure.
Peter, -1
"I think almost surely both Hillary and Bernie Sanders are
very very committed to a pro-equality agenda, and the
differences are more in details, more in one's confidence in
their ability to execute this in a political context."
Disappointing. I guess we'll find out if he's right. Also his
suggestion that the economy would have done just as well with
no QEs is very disappointing.
"Stiglitz: I think they were right. They originally said,
"When we hit 6 percent that's full employment." Now they know
that 4.9 isn't full employment, there's weak labor market.
They should have focused more on improving the channel of
credit to make sure that money was going to small and
medium-sized enterprises They should have said to the
bank-like some other countries have done-if you want access
to the Fed window you have to be lending to SMEs. "
Which was Bernie's suggestion. Hillary has said nothing.
"... 'There's an interesting theory – called the 'green paradox' – that low oil prices are in part the reaction of an industry fearful of the impacts of climate change policy on its future revenues. ..."
"... The German economist Hans-Werner Sinn has argued that "if suppliers feel threatened by a gradual greening of economic policies.. they will extract their stocks more rapidly" thus pushing their prices down' ..."
There's a new parliamentary group in UK on Limits to Growth that had it's
first meeting this week.
'A 2015 analysis of the remaining fossil fuel resources in China, USA,
Canada and Australia, which includes unconventional resources, suggests
that overall oil production is in fact peaking already'
I hadn't heard this before:
'There's an interesting theory – called the 'green paradox' – that
low oil prices are in part the reaction of an industry fearful of the impacts
of climate change policy on its future revenues.
The German economist Hans-Werner
Sinn has argued that "if suppliers feel threatened by a gradual greening
of economic policies.. they will extract their stocks more rapidly" thus
pushing their prices down'
"... The following is a preview of a chapter by Claudia von Werlhof in "The Global Economic Crisis: The Great Depression of the XXI Century." (2009) ..."
"... To read more, order the book online. Help us spread the word: "like" the book on Facebook and share with your friends -- ..."
No one asks these questions because they seem absurd. Yet, no one can escape
them either. Until the onslaught of the global economic crisis, the motto of
so-called "neoliberalism" was TINA: "There Is No Alternative!"
No alternative to "neoliberal globalization"?
No alternative to the unfettered "free market" economy?
What Is "Neoliberal Globalization"?
Let us first clarify what globalization and neoliberalism are, where they
come from, who they are directed by, what they claim, what they do, why their
effects are so fatal, why they will fail and why people nonetheless cling to
them. Then, let us look at the responses of those who are not – or will not
– be able to live with the consequences they cause.
This is where the difficulties begin. For a good twenty years now we have
been told that there is no alternative to neoliberal globalization, and that,
in fact, no such alternative is needed either. Over and over again, we have
been confronted with the TINA-concept: "There Is No Alternative!" The "iron
lady", Margaret Thatcher, was one of those who reiterated this belief without
end.
The TINA-concept prohibits all thought. It follows the rationale that there
is no point in analyzing and discussing neoliberalism and so-called globalization
because they are inevitable. Whether we condone what is happening or not does
not matter, it is happening anyway. There is no point in trying to understand.
Hence: Go with it! Kill or be killed!
Some go as far as suggesting that globalization – meaning, an economic system
which developed under specific social and historical conditions – is nothing
less but a law of nature. In turn, "human nature" is supposedly reflected by
the character of the system's economic subjects: egotistical, ruthless, greedy
and cold. This, we are told, works towards everyone's benefit.
The question remains: why has Adam Smith's "invisible hand" become a "visible
fist"? While a tiny minority reaps enormous benefits from today's neoliberalism
(none of which will remain, of course), the vast majority of the earth's population
suffers hardship to the extent that their very survival is at stake. The damage
done seems irreversible.
All over the world media outlets – especially television stations – avoid
addressing the problem. A common excuse is that it cannot be explained.[1] The
true reason is, of course, the media's corporate control.
What Is Neoliberalism?
Neoliberalism as an economic policy agenda which began in Chile in 1973.
Its inauguration consisted of a U.S.-organized coup against a democratically
elected socialist president and the installment of a bloody military dictatorship
notorious for systematic torture. This was the only way to turn the neoliberal
model of the so-called "Chicago Boys" under the leadership of Milton Friedman
– a student of Friedrich von Hayek – into reality.
The predecessor of the neoliberal model is the economic liberalism of the
18th and 19th centuries and its notion of "free trade". Goethe's assessment
at the time was: "Free trade, piracy, war – an inseparable three!"[2]
At the center of both old and new economic liberalism lies:
Self-interest and individualism; segregation of ethical principles and economic
affairs, in other words: a process of 'de-bedding' economy from society; economic
rationality as a mere cost-benefit calculation and profit maximization; competition
as the essential driving force for growth and progress; specialization and the
replacement of a subsistence economy with profit-oriented foreign trade ('comparative
cost advantage'); and the proscription of public (state) interference with market
forces.[3]
Where the new economic liberalism outdoes the old is in its global claim.
Today's economic liberalism functions as a model for each and everyone: all
parts of the economy, all sectors of society, of life/nature itself. As a consequence,
the once "de-bedded" economy now claims to "im-bed" everything, including political
power. Furthermore, a new twisted "economic ethics" (and with it a certain idea
of "human nature") emerges that mocks everything from so-called do-gooders to
altruism to selfless help to care for others to a notion of responsibility.[4]
This goes as far as claiming that the common good depends entirely on the
uncontrolled egoism of the individual and, especially, on the prosperity of
transnational corporations. The allegedly necessary "freedom" of the economy
– which, paradoxically, only means the freedom of corporations – hence consists
of a freedom from responsibility and commitment to society.
The maximization of profit itself must occur within the shortest possible
time; this means, preferably, through speculation and "shareholder value". It
must meet as few obstacles as possible. Today, global economic interests outweigh
not only extra-economic concerns but also national economic considerations since
corporations today see themselves beyond both community and nation.[5] A "level
playing field" is created that offers the global players the best possible conditions.
This playing field knows of no legal, social, ecological, cultural or national
"barriers".[6] As a result, economic competition plays out on a market that
is free of all non-market, extra-economic or protectionist influences – unless
they serve the interests of the big players (the corporations), of course. The
corporations' interests – their maximal growth and progress – take on complete
priority. This is rationalized by alleging that their well-being means the well-being
of small enterprises and workshops as well.
The difference between the new and the old economic liberalism can first
be articulated in quantitative terms: after capitalism went through a series
of ruptures and challenges – caused by the "competing economic system", the
crisis of capitalism, post-war "Keynesianism" with its social and welfare state
tendencies, internal mass consumer demand (so-called Fordism), and the objective
of full employment in the North. The liberal economic goals of the past are
now not only euphorically resurrected but they are also "globalized". The main
reason is indeed that the competition between alternative economic systems is
gone. However, to conclude that this confirms the victory of capitalism and
the "golden West" over "dark socialism" is only one possible interpretation.
Another – opposing – interpretation is to see the "modern world system" (which
contains both capitalism and socialism) as having hit a general crisis which
causes total and merciless competition over global resources while leveling
the way for investment opportunities, i.e. the valorization of capital.[7]
The ongoing globalization of neoliberalism demonstrates which interpretation
is right. Not least, because the differences between the old and the new economic
liberalism can not only be articulated in quantitative terms but in qualitative
ones too. What we are witnessing are completely new phenomena: instead of a
democratic "complete competition" between many small enterprises enjoying the
freedom of the market, only the big corporations win. In turn, they create new
market oligopolies and monopolies of previously unknown dimensions. The market
hence only remains free for them, while it is rendered unfree for all others
who are condemned to an existence of dependency (as enforced producers, workers
and consumers) or excluded from the market altogether (if they have neither
anything to sell or buy). About fifty percent of the world's population fall
into this group today, and the percentage is rising.[8]
Anti-trust laws have lost all power since the transnational corporations
set the norms. It is the corporations – not "the market" as an anonymous mechanism
or "invisible hand" – that determine today's rules of trade, for example prices
and legal regulations. This happens outside any political control. Speculation
with an average twenty percent profit margin edges out honest producers who
become "unprofitable".[9] Money becomes too precious for comparatively non-profitable,
long-term projects,
or projects that only – how audacious! – serve a good life. Money instead
"travels upwards" and disappears. Financial capital determines more and more
what the markets are and do.[10] By delinking the dollar from the price of gold,
money creation no longer bears a direct relationship to production".[11] Moreover,
these days most of us are – exactly like all governments – in debt. It is financial
capital that has all the money – we have none.[12]
Small, medium, even some bigger enterprises are pushed out of the market,
forced to fold or swallowed by transnational corporations because their performances
are below average in comparison to speculation – rather: spookulation – wins.
The public sector, which has historically been defined as a sector of not-for-profit
economy and administration, is "slimmed" and its "profitable" parts ("gems")
handed to corporations (privatized). As a consequence, social services that
are necessary for our existence disappear. Small and medium private businesses
– which, until recently, employed eighty percent of the workforce and provided
normal working conditions – are affected by these developments as well. The
alleged correlation between economic growth and secure employment is false.
When economic growth is accompanied by the mergers of businesses, jobs are lost.[13]
If there are any new jobs, most are precarious, meaning that they are only
available temporarily and badly paid. One job is usually not enough to make
a living.[14] This means that the working conditions in the North become akin
to those in the South, and the working conditions of men akin to those of women
– a trend diametrically opposed to what we have always been told. Corporations
now leave for the South (or East) to use cheap – and particularly female – labor
without union affiliation. This has already been happening since the 1970s in
the "Export Processing Zones" (EPZs, "world market factories" or "maquiladoras"),
where most of the world's computer chips, sneakers, clothes and electronic goods
are produced.[15] The EPZs lie in areas where century-old colonial-capitalist
and authoritarian-patriarchal conditions guarantee the availability of cheap
labor.[16] The recent shift of business opportunities from consumer goods to
armaments is a particularly troubling development.[17]
It is not only commodity production that is "outsourced" and located in the
EPZs, but service industries as well. This is a result of the so-called Third
Industrial Revolution, meaning the development of new information and communication
technologies. Many jobs have disappeared entirely due to computerization, also
in administrative fields.[18] The combination of the principles of "high tech"
and "low wage"/"no wage" (always denied by "progress" enthusiasts) guarantees
a "comparative cost advantage" in foreign trade. This will eventually lead to
"Chinese wages" in the West. A potential loss of Western consumers is not seen
as a threat. A corporate economy does not care whether consumers are European,
Chinese or Indian.
The means of production become concentrated in fewer and fewer hands, especially
since finance capital – rendered precarious itself – controls asset values ever
more aggressively. New forms of private property are created, not least through
the "clearance" of public property and the transformation of formerly public
and small-scale private services and industries to a corporate business sector.
This concerns primarily fields that have long been (at least partly) excluded
from the logic of profit – e.g. education, health, energy or water supply/disposal.
New forms of so-called enclosures emerge from today's total commercialization
of formerly small-scale private or public industries and services, of the "commons",
and of natural resources like oceans, rain forests, regions of genetic diversity
or geopolitical interest (e.g. potential pipeline routes), etc.[19] As far as
the new virtual spaces and communication networks go, we are witnessing frantic
efforts to bring these under private control as well.[20]
All these new forms of private property are essentially created by (more
or less) predatory forms of appropriation. In this sense, they are a continuation
of the history of so-called original accumulation which has expanded globally,
in accordance with to the motto: "Growth through expropriation!"[21]
Most people have less and less access to the means of production, and so
the dependence on scarce and underpaid work increases. The destruction of the
welfare state also destroys the notion that individuals can rely on the community
to provide for them in times of need. Our existence relies exclusively on private,
i.e. expensive, services that are often of much worse quality and much less
reliable than public services. (It is a myth that the private always outdoes
the public.) What we are experiencing is undersupply formerly only known by
the colonial South. The old claim that the South will eventually develop into
the North is proven wrong. It is the North that increasingly develops into the
South. We are witnessing the latest form of "development", namely, a world system
of underdevelopment.[22] Development and underdevelopment go hand in hand.[23]
This might even dawn on "development aid" workers soon.
It is usually women who are called upon to counterbalance underdevelopment
through increased work ("service provisions") in the household. As a result,
the workload and underpay of women takes on horrendous dimensions: they do unpaid
work inside their homes and poorly paid "housewifized" work outside.[24] Yet,
commercialization does not stop in front of the home's doors either. Even housework
becomes commercially co-opted ("new maid question"), with hardly any financial
benefits for the women who do the work.[25]
Not least because of this, women are increasingly coerced into prostitution,
one of today's biggest global industries.[26] This illustrates two things: a)
how little the "emancipation" of women actually leads to "equal terms" with
men; and b) that "capitalist development" does not imply increased "freedom"
in wage labor relations, as the Left has claimed for a long time.[27] If the
latter were the case, then neoliberalism would mean the voluntary end of capitalism
once it reaches its furthest extension. This, however, does not appear likely.
Today, hundreds of millions of quasi-slaves, more than ever before, exist
in the "world system."[28] The authoritarian model of the "Export Processing
Zones" is conquering the East and threatening the North. The redistribution
of wealth runs ever more – and with ever accelerated speed – from the bottom
to the top. The gap between the rich and the poor has never been wider. The
middle classes disappear. This is the situation we are facing.
It becomes obvious that neoliberalism marks not the end of colonialism but,
to the contrary, the colonization of the North. This new "colonization of the
world"[29] points back to the beginnings of the "modern world system" in the
"long 16th century", when the conquering of the Americas, their exploitation
and colonial transformation allowed for the rise and "development" of Europe.[30]
The so-called "children's diseases" of modernity keep on haunting it, even in
old age. They are, in fact, the main feature of modernity's latest stage. They
are expanding instead of disappearing.
Where there is no South, there is no North; where there is no periphery,
there is no center; where there is no colony, there is no – in any case no "Western"
– civilization.[31]
Austria is part of the world system too. It is increasingly becoming a corporate
colony (particularly of German corporations). This, however, does not keep it
from being an active colonizer itself, especially in the East.[32]
Social, cultural, traditional and ecological considerations are abandoned
and give way to a mentality of plundering. All global resources that we still
have – natural resources, forests, water, genetic pools – have turned into objects
of utilization. Rapid ecological destruction through depletion is the consequence.
If one makes more profit by cutting down trees than by planting them, then there
is no reason not to cut them.[33] Neither the public nor the state interferes,
despite global warming and the obvious fact that the clearing of the few remaining
rain forests will irreversibly destroy the earth's climate – not to mention
the many other negative effects of such actions.[34] Climate, animal, plants,
human and general ecological rights are worth nothing compared to the interests
of the corporations – no matter that the rain forest is not a renewable resource
and that the entire earth's ecosystem depends on it. If greed, and the rationalism
with which it is economically enforced, really was an inherent anthropological
trait, we would have never even reached this day.
The commander of the Space Shuttle that circled the earth in 2005 remarked
that "the center of Africa was burning". She meant the Congo, in which the last
great rain forest of the continent is located. Without it there will be no more
rain clouds above the sources of the Nile. However, it needs to disappear in
order for corporations to gain free access to the Congo's natural resources
that are the reason for the wars that plague the region today. After all, one
needs diamonds and coltan for mobile phones.
Today, everything on earth is turned into commodities, i.e. everything becomes
an object of "trade" and commercialization (which truly means liquidation, the
transformation of all into liquid money). In its neoliberal stage it is not
enough for capitalism to globally pursue less cost-intensive and preferably
"wageless" commodity production. The objective is to transform everyone and
everything into commodities, including life itself.[35] We are racing blindly
towards the violent and absolute conclusion of this "mode of production", namely
total capitalization/liquidation by "monetarization".[36]
We are not only witnessing perpetual praise of the market – we are witnessing
what can be described as "market fundamentalism". People believe in the market
as if it was a god. There seems to be a sense that nothing could ever happen
without it. Total global maximized accumulation of money/capital as abstract
wealth becomes the sole purpose of economic activity. A "free" world market
for everything has to be established – a world market that functions according
to the interests of the corporations and capitalist money. The installment of
such a market proceeds with dazzling speed. It creates new profit possibilities
where they have not existed before, e.g. in Iraq, Eastern Europe or China.
One thing remains generally overlooked: the abstract wealth created for accumulation
implies the destruction of nature as concrete wealth. The result is a "hole
in the ground" and next to it a garbage dump with used commodities, outdated
machinery and money without value.[37] However, once all concrete wealth (which
today consists mainly of the last natural resources) will be gone, abstract
wealth will disappear as well. It will, in Marx's words, "evaporate". The fact
that abstract wealth is not real wealth will become obvious, and so will the
answer to the question of which wealth modern economic activity has really created.
In the end it is nothing but monetary wealth (and even this mainly exists virtually
or on accounts) that constitutes a monoculture controlled by a tiny minority.
Diversity is suffocated and millions of people are left wondering how to survive.
And really: how do you survive with neither resources nor means of production
nor money?
The nihilism of our economic system is evident. The whole world will be transformed
into money – and then it will disappear. After all, money cannot be eaten. What
no one seems to consider is the fact that it is impossible to re-transform commodities,
money, capital and machinery into nature or concrete wealth. It seems that underlying
all "economic development" is the assumption that "resources", the "sources
of wealth",[38] are renewable and everlasting – just like the "growth" they
create.[39]
The notion that capitalism and democracy are one is proven a myth by neoliberalism
and its "monetary totalitarianism".[40]
The primacy of politics over economy has been lost. Politicians of all parties
have abandoned it. It is the corporations that dictate politics. Where corporate
interests are concerned, there is no place for democratic convention or community
control. Public space disappears. The res publica turns into a res privata,
or – as we could say today – a res privata transnationale (in its original Latin
meaning, privare means "to deprive"). Only those in power still have rights.
They give themselves the licenses they need, from the "license to plunder" to
the "license to kill".[41] Those who get in their way or challenge their "rights"
are vilified, criminalized and to an increasing degree defined as "terrorists"
or, in the case of defiant governments, as "rogue states" – a label that usually
implies threatened or actual military attack, as we can see in the cases of
Yugoslavia, Afghanistan and Iraq, and maybe Syria and Iran in the near future.
U.S. President Bush had even spoken of the possibility of "preemptive" nuclear
strikes should the U.S. feel endangered by weapons of mass destruction.[42]
The European Union did not object.[43]
Neoliberalism and war are two sides of the same coin.[44] Free trade, piracy
and war are still "an inseparable three" – today maybe more so than ever. War
is not only "good for the economy" but is indeed its driving force and can be
understood as the "continuation of economy with other means".[45] War and economy
have become almost indistinguishable.[46] Wars about resources – especially
oil and water – have already begun.[47] The Gulf Wars are the most obvious examples.
Militarism once again appears as the "executor of capital accumulation" – potentially
everywhere and enduringly.[48]
Human rights and rights of sovereignty have been transferred from people,
communities and governments to corporations.[49] The notion of the people as
a sovereign body has practically been abolished. We have witnessed a coup of
sorts. The political systems of the West and the nation state as guarantees
for and expression of the international division of labor in the modern world
system are increasingly dissolving.[50] Nation states are developing into "periphery
states" according to the inferior role they play in the proto-despotic "New
World Order".[51] Democracy appears outdated. After all, it "hinders business".[52]
The "New World Order" implies a new division of labor that does no longer
distinguish between North and South, East and West – today, everywhere is South.
An according International Law is established which effectively functions from
top to bottom ("top-down") and eliminates all local and regional communal rights.
And not only that: many such rights are rendered invalid both retroactively
and for the future.[53]
The logic of neoliberalism as a sort of totalitarian neo-mercantilism is
that all resources, all markets, all money, all profits, all means of production,
all "investment opportunities", all rights and all power belong to the corporations
only. To paraphrase Richard Sennett: "Everything to the Corporations!"[54] One
might add: "Now!"
The corporations are free to do whatever they please with what they get.
Nobody is allowed to interfere. Ironically, we are expected to rely on them
to find a way out of the crisis we are in. This puts the entire globe at risk
since responsibility is something the corporations do not have or know. The
times of social contracts are gone.[55] In fact, pointing out the crisis alone
has become a crime and all critique will soon be defined as "terror" and persecuted
as such.[56]
IMF Economic Medicine
Since the 1980s, it is mainly the Structural Adjustment Programs (SAPs) of
the World Bank and the IMF that act as the enforcers of neoliberalism. These
programs are levied against the countries of the South which can be extorted
due to their debts. Meanwhile, numerous military interventions and wars help
to take possession of the assets that still remain, secure resources, install
neoliberalism as the global economic politics, crush resistance movements (which
are cynically labeled as "IMF uprisings"), and facilitate the lucrative business
of reconstruction.[57]
In the 1980s, Ronald Reagan and Margaret Thatcher introduced neoliberalism
in Anglo-America. In 1989, the so-called "Washington Consensus" was formulated.
It claimed to lead to global freedom, prosperity and economic growth through
"deregulation, liberalization and privatization". This has become the credo
and promise of all neoliberals. Today we know that the promise has come true
for the corporations only – not for anybody else.
In the Middle East, the Western support for Saddam Hussein in the war between
Iraq and Iran in the 1980s, and the Gulf War of the early 1990s, announced the
permanent U.S. presence in the world's most contested oil region.
In continental Europe, neoliberalism began with the crisis in Yugoslavia
caused by the Structural Adjustment Programs (SAPs) of the World Bank and the
IMF. The country was heavily exploited, fell apart and finally beset by a civil
war over its last remaining resources.[58] Since the NATO war in 1999, the Balkans
are fragmented, occupied and geopolitically under neoliberal control.[59] The
region is of main strategic interest for future oil and gas transport from the
Caucasus to the West (for example the "Nabucco" gas pipeline that is supposed
to start operating from the Caspian Sea through Turkey and the Balkans by 2011.[60]
The reconstruction of the Balkans is exclusively in the hands of Western corporations.
All governments, whether left, right, liberal or green, accept this. There
is no analysis of the connection between the politics of neoliberalism, its
history, its background and its effects on Europe and other parts of the world.
Likewise, there is no analysis of its connection to the new militarism.
NOTES
[1] Maria Mies and Claudia von Werlhof (Hg), Lizenz zum Plündern. Das Multilaterale
Abkommen über Investitionen MAI. Globalisierung der Konzernherrschaft – und
was wir dagegen tun können, Hamburg, EVA, 2003 (1998), p. 23, 36.
[2] Johann Wolfgang von Goethe, Faust: Part Two, New York, Oxford University
Press, 1999.
[3] Maria Mies, Krieg ohne Grenzen. Die neue Kolonisierung der Welt, Köln,
PapyRossa, 2005, p. 34.
[4] Arno Gruen, Der Verlust des Mitgefühls. Über die Politik der Gleichgültigkeit,
München, 1997, dtv.
[5] Sassen Saskia, "Wohin führt die Globalisierung?," Machtbeben, 2000, Stuttgart-München,
DVA.
[6] Maria Mies and Claudia von Werlhof (Hg), Lizenz zum Plündern. Das Multilaterale
Abkommen über Investitionen MAI. Globalisierung der Konzernherrschaft – und
was wir dagegen tun können, Hamburg, EVA, 2003 (1998), p. 24.
[7] Immanuel Wallerstein, Aufstieg und künftiger Niedergang des kapitalistischen
Weltsystems, in Senghaas, Dieter: Kapitalistische Weltökonomie. Kontroversen
über ihren Ursprung und ihre Entwicklungsdynamik, Frankfurt, 1979, Suhrkamp;
Immanuel Wallerstein (Hg), The Modern World-System in the Longue Durée, Boulder/
London; Paradigm Publishers, 2004.
[8] Susan George, im Vortrag, Treffen von Gegnern und Befürwortern der Globalisierung
im Rahmen der Tagung des WEF (World Economic Forum), Salzburg, 2001.
[9] Elmar Altvater, Das Ende des Kapitalismus, wie wir ihn kennen, Münster,
Westfälisches Dampfboot, 2005.
[10] Elmar Altvater and Birgit Mahnkopf, Grenzen der Globalisierung. Ökonomie,
Ökologie und Politik in der Weltgesellschaft, Münster, Westfälisches Dampfboot,
1996.
[11] Bernard Lietaer, Jenseits von Gier und Knappheit, Interview mit Sarah
van Gelder, 2006,
www.transaction.net/press/interviews/Lietaer 0497.html; Margrit Kennedy,
Geld ohne Zinsen und Inflation, Steyerberg, Permakultur, 1990.
[12] Helmut Creutz, Das Geldsyndrom. Wege zur krisenfreien Marktwirtschaft,
Frankfurt, Ullstein, 1995.
[13] Maria Mies and Claudia von Werlhof (Hg), Lizenz zum Plündern. Das Multilaterale
Abkommen über Investitionen MAI. Globalisierung der Konzernherrschaft – und
was wir dagegen tun können, Hamburg, EVA, 2003 (1998), p. 7.
[14] Barbara Ehrenreich, Arbeit poor. Unterwegs in der Dienstleistungsgesellschaft,
München, Kunstmann, 2001.
[15] Folker Fröbel, Jürgen Heinrichs, and Otto Kreye, Die neue internationale
Arbeitsteilung. Strukturelle Arbeitslosigkeit in den Industrieländern und die
Industrialisierung der Entwicklungsländer, Reinbek, Rowohlt, 1977.
[16] Veronika Bennholdt-Thomsen, Maria Mies, and Claudia von Werlhof, Women,
The Last Colony, London/ New Delhi, Zed Books, 1988.
[17] Michel Chossudovsky, War and Globalization. The Truth Behind September
11th, Oro, Ontario, Global Outlook, 2003.
[18] Folker Fröbel, Jürgen Heinrichs, and Otto Kreye, Die neue internationale
Arbeitsteilung. Strukturelle Arbeitslosigkeit in den Industrieländern und die
Industrialisierung der Entwicklungsländer, Reinbek, Rowohlt, 1977.
[19] Ana Isla, The Tragedy of the Enclosures: An Eco-Feminist Perspective
on Selling Oxygen and Prostitution in Costa Rica, Man., Brock Univ., Sociology
Dpt., St. Catherines, Ontario, Canada, 2005.
[20] John Hepburn, Die Rückeroberung von Allmenden – von alten und von neuen,
übers. Vortrag bei, Other Worlds Conference; Univ. of Pennsylvania; 28./29.4,
2005.
[21] Claudia von Werlhof, Was haben die Hühner mit dem Dollar zu tun? Frauen
und Ökonomie, München, Frauenoffensive, 1991; Claudia von Werlhof, MAInopoly:
Aus Spiel wird Ernst, in Mies/Werlhof, 2003, p. 148-192.
[22] Andre Gunder Frank, Die Entwicklung der Unterentwicklung, in ders. u.a.,
Kritik des bürgerlichen Antiimperialismus, Berlin, Wagenbach, 1969.
[23] Maria Mies, Krieg ohne Grenzen, Die neue Kolonisierung der Welt, Köln,
PapyRossa, 2005.
[24] Veronika Bennholdt-Thomsen, Maria Mies, and Claudia von Werlhof, Women,
the Last Colony, London/New Delhi, Zed Books, 1988.
[25] Claudia von Werlhof, Frauen und Ökonomie. Reden, Vorträge 2002-2004,
Themen GATS, Globalisierung, Mechernich, Gerda-Weiler-Stiftung, 2004.
[26] Ana Isla, "Women and Biodiversity as Capital Accumulation: An Eco-Feminist
View," Socialist Bulletin, Vol. 69, Winter, 2003, p. 21-34; Ana Isla, The Tragedy
of the Enclosures: An Eco-Feminist Perspective on Selling Oxygen and Prostitution
in Costa Rica, Man., Brock Univ., Sociology Department, St. Catherines, Ontario,
Canada, 2005.
[27] Immanuel Wallerstein, Aufstieg und künftiger Niedergang des kapitalistischen
Weltsystems, in Senghaas, Dieter: Kapitalistische Weltökonomie. Kontroversen
über ihren Ursprung und ihre Entwicklungsdynamik, Frankfurt, Suhrkamp, 1979.
[28] Kevin Bales, Die neue Sklaverei, München, Kunstmann, 2001.
[29] Maria Mies, Krieg ohne Grenzen, Die neue Kolonisierung der Welt, Köln,
PapyRossa, 2005.
[30] Immanuel Wallerstein, Aufstieg und künftiger Niedergang des kapitalistischen
Weltsystems, in Senghaas, Dieter: Kapitalistische Weltökonomie. Kontroversen
über ihren Ursprung und ihre Entwicklungsdynamik, Frankfurt, Suhrkamp, 1979;
Andre Gunder Frank, Orientierung im Weltsystem, Von der Neuen Welt zum Reich
der Mitte, Wien, Promedia, 2005; Maria Mies, Patriarchy and Accumulation on
a World Scale, Women in the International Division of Labour, London, Zed Books,
1986.
[31] Claudia von Werlhof, "Questions to Ramona," in Corinne Kumar (Ed.),
Asking, We Walk. The South as New Political Imaginary, Vol. 2, Bangalore, Streelekha,
2007, p. 214-268
[32] Hannes Hofbauer, Osterweiterung. Vom Drang nach Osten zur peripheren
EU-Integration, Wien, Promedia, 2003; Andrea Salzburger, Zurück in die Zukunft
des Kapitalismus, Kommerz und Verelendung in Polen, Frankfurt – New York, Peter
Lang Verlag, 2006.
[34] August Raggam, Klimawandel, Biomasse als Chance gegen Klimakollaps und
globale Erwärmung, Graz, Gerhard Erker, 2004.
[35] Immanuel Wallerstein, Aufstieg und künftiger Niedergang des kapitalistischen
Weltsystems, in Senghaas, Dieter: Kapitalistische Weltökonomie. Kontroversen
über ihren Ursprung und ihre Entwicklungsdynamik, Frankfurt, Suhrkamp, 1979.
[36] Renate Genth, Die Bedrohung der Demokratie durch die Ökonomisierung
der Politik, feature für den Saarländischen Rundfunk am 4.3., 2006.
[37] Johan Galtung, Eurotopia, Die Zukunft eines Kontinents, Wien, Promedia,
1993.
[38] Karl Marx, Capital, New York, Vintage, 1976.
[39] Claudia von Werlhof, Loosing Faith in Progress: Capitalist Patriarchy
as an "Alchemical System," in Bennholdt-Thomsen et.al.(Eds.), There is an Alternative,
2001, p. 15-40.
[40] Renate Genth, Die Bedrohung der Demokratie durch die Ökonomisierung
der Politik, feature für den Saarländischen Rundfunk am 4.3., 2006.
[41] Maria Mies and Claudia von Werlhof (Hg), Lizenz zum Plündern. Das Multilaterale
Abkommen über Investitionen MAI. Globalisierung der Konzernherrschaft – und
was wir dagegen tun können, Hamburg, EVA, 2003 (1998), p. 7; Maria Mies, Krieg
ohne Grenzen, Die neue Kolonisierung der Welt, Köln, PapyRossa, 2005.
[42] Michel Chossudovsky, America's "War on Terrorism," Montreal, Global
Research, 2005.
[43] Michel Chossudovsky, "Nuclear War Against Iran," Global Research, Center
for Research on Globalization, Ottawa 13.1, 2006.
[44] Altvater, Chossudovsky, Roy, Serfati, Globalisierung und Krieg, Sand
im Getriebe 17, Internationaler deutschsprachiger Rundbrief der ATTAC – Bewegung,
Sonderausgabe zu den Anti-Kriegs-Demonstrationen am 15.2., 2003; Maria Mies,
Krieg ohne Grenzen, Die neue Kolonisierung der Welt, Köln, PapyRossa, 2005.
[45] Hazel Hendersen, Building a Win-Win World. Life Beyond Global Economic
Warfare, San Francisco, 1996.
[46] Claudia von Werlhof, Vom Wirtschaftskrieg zur Kriegswirtschaft. Die
Waffen der, Neuen-Welt-Ordnung, in Mies 2005, p. 40-48.
[47] Michael T. Klare, Resource Wars. The New Landscape of Global Conflict,
New York, Henry Holt and Company, 2001.
[48] Rosa Luxemburg, Die Akkumulation des Kapitals, Frankfurt, 1970.
[49] Tony Clarke, Der Angriff auf demokratische Rechte und Freiheiten, in
Mies/Werlhof, 2003, p. 80-94.
[50] Sassen Saskia, Machtbeben. Wohin führt die Globalisierung?, Stuttgart-München,
DVA, 2000.
[51] Michael Hardt and Antonio Negri, Empire, Cambridge, Harvard Univ. Press,
2001; Noam Chomsky, Hybris. Die endgültige Sicherstellung der globalen –Vormachtstellung
der USA, Hamburg-Wien, Europaverlag, 2003.
[52] Claudia von Werlhof, Speed Kills!, in Dimmel/Schmee, 2005, p. 284-292
[53] See the "roll back" and "stand still" clauses in the WTO agreements
in Maria Mies and Claudia von Werlhof (Hg), Lizenz zum Plündern. Das Multilaterale
Abkommen über Investitionen MAI. Globalisierung der Konzernherrschaft – und
was wir dagegen tun können, Hamburg, EVA, 2003.
[54] Richard Sennett, zit. "In Einladung zu den Wiener Vorlesungen," 21.11.2005:
Alternativen zur neoliberalen Globalisierung, 2005.
[55] Claudia von Werlhof, MAInopoly: Aus Spiel wird Ernst, in Mies/Werlhof,
2003, p. 148-192.
[56] Michel Chossudovsky, America's "War on Terrorism," Montreal, Global
Research, 2005.
[57] Michel Chossudovsky, Global Brutal. Der entfesselte Welthandel, die
Armut, der Krieg, Frankfurt, Zweitausendeins, 2002; Maria Mies, Krieg ohne Grenzen.
Die neue Kolonisierung der Welt, Köln, PapyRossa, 2005; Bennholdt-Thomsen/Faraclas/Werlhof
2001.
[58] Michel Chossudovsky, Global Brutal. Der entfesselte Welthandel, die
Armut, der Krieg, Frankfurt, Zweitausendeins, 2002.
[59] Wolfgang Richter, Elmar Schmähling, and Eckart Spoo (Hg), Die Wahrheit
über den NATO-Krieg gegen Jugoslawien, Schkeuditz, Schkeuditzer Buchverlag,
2000; Wolfgang Richter, Elmar Schmähling, and Eckart Spoo (Hg), Die deutsche
Verantwortung für den NATO-Krieg gegen Jugoslawien, Schkeuditz, Schkeuditzer
Buchverlag, 2000.
"... With respect to the longer term, however, capital expenditure cuts are slowly becoming visible. Non-OPEC supply growth (year-over-year) stood at 2.9 million barrels per day at the end of 2014. Supply did not grow in December and January and preliminary data indicate large year-on-year declines in February and March 2016. Low oil prices curbed capital spending worldwide by an estimated 24 percent last year and could trim another 20 percent from capex this year. ..."
Giovanni Staunovo, commodities analyst at UBS Wealth Management
Oil prices are under pressure following the failure of OPEC and major
non-OPEC producers to agree on a production freeze at Sunday's meeting in
Doha.
We expect Brent crude prices to drop toward $30 a barrel during the
current quarter but recover to $55 a barrel in 12 months as the oversupply
of oil dissipates towards the end of this year.
... ... ...
With respect to the longer term, however, capital expenditure cuts
are slowly becoming visible. Non-OPEC supply growth (year-over-year) stood
at 2.9 million barrels per day at the end of 2014. Supply did not grow in
December and January and preliminary data indicate large year-on-year
declines in February and March 2016. Low oil prices curbed capital spending
worldwide by an estimated 24 percent last year and could trim another 20
percent from capex this year.
"... The severance and extraction tax takes 10% off the top. So call it $20. Then look at company 10K for LOE, gathering and transportation, G & A. Also, look at the interest expense. Keep in mind those figures are in BOE. ..."
"... Bakken well produces 3,000 barrel of oil and 3,000 mcf of gas. Assume 20% royalty (in TX I'd say assume 25% royalty). Net is 2,400 barrel of oil and 2,400 mcf of gas. Divide the gas production by six and we get 2,800 BOE. Assume $22 oil price and $1.50 gas price at the well. So we sold $52,800 of oil and $3,600 of gas. So if my math is correct, the $ realized per BOE is $20.14. 10%, or $2.01 comes off the sales, in state severance and extraction taxes, so now down to $18.13. Then subtract the rest. There couldn't have been much, if any cash flow for CAPEX. I will say the larger companies likely received closer to $25-26 per barrel of oil in Q1. ..."
"... Hedging will make a tremendous difference in Q1 2016. ..."
"... http://www.theoildrum.com/node/9821 A good discussion from yesteryear worth reviewing. 10,898 wells at 6 million each is a major investment. The more than 64 billion dollar gamble. No different than launching a satellite into space, flying it by wire to Mars then it crashes into the Martian surface because you forgot to change from miles to kilometers. Everybody makes mistakes. ..."
Of course, if you have any skin in the game, the most important statistic
in the post is that the average posted price for oil in the Williston Basin
for the last three months is $22.
The severance and extraction tax takes 10% off the top. So call it
$20. Then look at company 10K for LOE, gathering and transportation, G &
A. Also, look at the interest expense. Keep in mind those figures are in
BOE.
A typical Bakken producer had $8 LOE, $3 of G & A, $2 of gathering and
transport and $5 of interest expense, all on a BOE basis.
I have looked at the earnings forecasts for Q1, WOW!! Reno Hightower
,
04/16/2016 at 9:30 am
So with a 20% royalty (I have no idea what their nets are) they are
getting back $16 before you take out the $8 LOE, $3 G&A, $2 gathering
and $5 interest for a loss of $2 per barrel produced. All before you
factor in the Drilling and Completion and acreage costs.
Reno. US companies report BOE produced after payment of royalties.
Example:
Bakken well produces 3,000 barrel of oil and 3,000 mcf of gas. Assume
20% royalty (in TX I'd say assume 25% royalty). Net is 2,400 barrel of oil
and 2,400 mcf of gas. Divide the gas production by six and we get 2,800
BOE. Assume $22 oil price and $1.50 gas price at the well. So we sold $52,800
of oil and $3,600 of gas. So if my math is correct, the $ realized per BOE
is $20.14. 10%, or $2.01 comes off the sales, in state severance and extraction
taxes, so now down to $18.13. Then subtract the rest. There couldn't have
been much, if any cash flow for CAPEX. I will say the larger companies likely
received closer to $25-26 per barrel of oil in Q1.
http://www.theoildrum.com/node/9821
A good discussion from yesteryear worth reviewing. 10,898 wells at 6 million
each is a major investment. The more than 64 billion dollar gamble. No different
than launching a satellite into space, flying it by wire to Mars then it
crashes into the Martian surface because you forgot to change from miles
to kilometers. Everybody makes mistakes.
It forecasts that "After a brief retrenchment due to low prices and falling
investment, US tight oil production is now expected to plateau in the 2030s
at nearly 8 Mb/d, accounting for almost 40% of total US oil production."
US shale gas is expected to grow by around 4% p.a. over the Outlook.
This causes US shale gas to account for around three-quarters of total US
gas production in 2035 and almost 20% of global output.
An alternative scenario implies that tight oil and shale gas have even
greater potential.
"North American tight oil output increases to 16 Mb/d by 2035, nearly twice
its level in the base case, with its share of global liquids output reaching
14%. "
North American shale gas production is around 72 Bcf/d higher by 2035,
with North American shale gas accounting for almost a third of global gas
supplies in the 'stronger shale' case.
----------–
What do they know about shale oil and gas that we don't know?
And what has changed since BP's last year's forecast?
Base case U.S. tight oil forecast vs. previous years' projections
"... Minsky famously quipped that everyone can create new money; the problem is to get it accepted as such by others. ..."
"... But even money-proper is not the same for everyone. Central banks create the money in which banks pay each other, while private banks create money for households and firms. Money is hierarchical , and moneyness is a question of immediate convertibility without loss of value (at par exchange, on demand). ..."
"... To convert shadow money into settlement money in case of default, repo lenders sell collateral. An intricate collateral valuation regime, consisting of haircuts, mark-to-market, and margin calls, maintains collateral's exchange rate into (central) bank money. ..."
"... What makes repos money – at par exchange between "cash" and collateral – is what makes finance more fragile in a Minskyan sense. ..."
"... Liquid markets become more fragile, he argued, by giving investors the "illusion" that they can exit before prices turn against them. This is a crucial insight for crises of shadow money. ..."
"... Criminality and corruption is embedded at the top of the financial food chain, by law. ..."
"... Motion seconded: Government sanctioned counterfeiting. ..."
"... …and does anyone remember the triumph of the desk slaves of the Crimson Permanent Assurance? Monty Python understood something about political economies and how one might achieve more fairness in outcomes… https://vimeo.com/111458975 ..."
"... Shadow money sounds to me like fictional capital by another name. And contractual based deposits sounds like counterfeiting. With the distinction that the man with counterfeit printing press robs the train, while the man who runs the Wall St Investment bank repo trading desk robs the whole railroad. ..."
"... Therefore, Money becomes a victim of the ontological argument for God by St Anselm. If God does not exist, an all powerful, all knowing, all present infinitely great in all categories of Supreme Being could not be written or spoken about, lacking the quality of existence. The fact that we CAN speak about an Omnipotent Supreme Deity means that one in fact exists, due to existence is part and parcel of Omnipotence. But of course, because we can talk or write about something, does not make it real. ..."
"... It can become socially acceptable as in the case of shadow money, but it is fictional capital, a shadow of the real thing. Time to get out of the cave of finance with its shadows dancing from the light of the fires and walk eyes wide open in the bright light of sunshine! ..."
"... Money is actually the easiest thing to write about, because it's formless energy. It's not that the phenomenon is shadow money, it's shadow assets. ..."
"... You have to be able to separate in your mind the ideas of 1) Quantity and 2) Form. That's why economics is a mental disorder, because it doesn't separate quantity and form. If you can't or don't, then yes, it's diabolically hard to write about because you're writing about two different things simultaneously without realizing it. Money is a quantity that is infinite and continuous, but form is an idea that is discontinuous and finite. People do what the forms tell them to do. The money is just like electricity that powers the animation of the forms. Repo is a form it's not money. It's existence results in a certain ordering of social relations, that's also a form. But money is just the energy that makes the forms potent. ..."
"... I guess that's why they used to call it "political economy" before the mental disorder fully usurped the power of perception and reasoning. ..."
"... Marx failed to acknowledge that supposedly hard-headed Capitalism is actually all about living beyond your means and mortgaging the future. ..."
"... It was designed from the Fuggars' and the Medici's to be about debt and fractional reserves and interest. A system based on a finite supply of money is going to grow not much faster, at best, than the money available allows. ..."
"... Capitalism allows explosive growth by supplying explosive amounts of credit. All this shadow banking activity is designed to get around reserve requirements; nothing else I can see calls all this complexity into existence. The banks always need more, because lending is how they make their money, so they want an infinite amount to lend in order to drive their profits towards the infinite. ..."
"... This article I think defines shadow money alright as starting where bank deposits leave off but as the above comments suggest seems to miss some key points. I think a major problem with the article is seeing central banks as separate from the state rather than seeing the central bank along with the Treasury as the state itself. ..."
"... The article gets Treasury debt wrong by seeing it as the central bank funding the state rather than as actually coming from the state. This leads to wrong policy choices such as this state money being used to bail out useless financial transactions and asset appreciation rather than the public purpose. I think crazyman has it right. We left behind the power of perception and reasoning by not realizing the importance of political economy . ..."
"... This is reminscent of Gramsci's idea that the state and civil society are to be distinguished only for purposes of exposition. ..."
By Daniela Gabor, associate professor in economics at the University of the West of England,
Bristol, and Jakob Vestergaard, senior researcher at the Danish Institute for International Studies.
Originally published at the Institute for New Economic Thinking
website
Struggles over shadow money today echo 19th century struggles over bank deposits.
Money, James Buchan once
noted , "is diabolically hard to write about." It has been described as a promise to pay, a social
relation,
frozen
desire , memory, and fiction. Less daunted, Hyman Minsky was interested by promises of unknown
and changing
properties
. "Shadow" promises would have
fascinated him. Indeed, Perry Mehrling, Zoltan
Pozsar , and
others argue that in shadow banking, money begins where bank deposits end. Their insights are
the starting point for the first paper of our Institute for New Economic Thinking
project on shadow money. The footprint of shadow money, we argue,* extends well beyond opaque
shadow banking, reaching into government bond markets and regulated banks. It radically changes central
banking and the state's relationship to money-issuing institutions.
Minsky famously quipped that everyone can create new money; the problem is to get it accepted
as such by others.
General acceptability relies on the strength of promises to exchange for proper money, money
that settles debts. Banks' special role in money creation, Victoria Chick
reminds us, was sealed
by states' commitment that bank deposits would convert into state money (cash) at par. This social
contract of convertibility materialized in bank regulation, lender of last resort, and deposit guarantees.
But even money-proper is not the same for everyone. Central banks create the money in which
banks pay each other, while private banks create money for households and firms. Money is
hierarchical , and moneyness is a question of immediate convertibility without loss of value
(at par exchange, on demand).
Using a money hierarchy lens, we define shadow money as repurchase agreements (repos), promises
to pay backed by tradable collateral. It is the presence of collateral that confers shadow money
its distinctiveness. Our approach advances the debate in several ways.
First, it allows us to establish a clear picture of modern money hierarchies. Repos are nearest
to money-proper, stronger in their moneyness claims than other short-term shadow
liabilities . Repos rose in money hierarchies as finance sidestepped the state, developing its
own convertibility rules over the past 20 years. To convert shadow money into settlement money
in case of default, repo lenders sell collateral. An intricate collateral valuation regime, consisting
of haircuts, mark-to-market, and margin calls, maintains collateral's exchange rate into (central)
bank money.
Second, we put banks at the center of shadow-money creation. The growing shadow-money literature,
however original in its insights, downplays banks' activities in the shadows because its empirical
terrain is U.S. shadow banking with its institutional peculiarities. There, hedge funds issue shadow
money to institutional cash pools via the balance sheet of securities dealers. In
Europe or
China , it's also banks issuing shadow money to other banks to fund capital market activities.
LCH Clearnet SA, a pure shadow bank, offers a glimpse into this world. Like a bank, it backs money
issuance with central bank (Banque de France) money. Unlike a bank, LCH Clearnet only issues shadow
money.
Third, we explore the critical role of the state beyond simple guarantor of convertibility. Like
bank money, shadow money relies on sovereign structures of authority and credit worthiness. Shadow
money is mostly issued against government bond collateral, because liquid securities make repo convertibility
easier and cheaper. The legal right to re-use (re-hypothecate) collateral allows various (shadow)
banks to issue shadow money against the same government bond, which becomes akin to a
base asset with "velocity." Limits to velocity place demands on the state to issue debt, not
because it needs cash but because shadow money issuers need collateral.
With finance ministries unresponsive to such demands, we note two points in the historical development
of shadow money in the early 2000s. In the United States, persuasive lobbying exploited concerns
that U.S. Treasury debt would fall to dangerously
low levels
to relax regulation on repos collateralized with asset and mortgage-backed
securities
. In Europe, the ECB used the mechanics of monetary policy implementation to the same end. When
it lent reserves to banks via repos, the ECB used its collateral valuation practices to generate
base-asset privileges for "periphery" government bonds, treating these as
perfect substitutes for German
government bonds, with the
explicit
intention of powering market liquidity.
Fourth, we introduce fundamental uncertainty in modern money creation. What makes repos money
– at par exchange between "cash" and collateral – is what makes finance more fragile in a
Minskyan sense. Knightian uncertainty bites harder and faster because convertibility depends
on collateral-market liquidity.
The collateral valuation regime that makes repos increasingly acceptable ties securities-market
liquidity into appetite for leverage. Here, Keynes' concerns with the social benefits of private
liquidity become relevant. Keynes voiced strong doubts about the idea of "the more liquidity the
better" in stock markets (concerns now routinely
voiced by central banks for securities markets). Liquid markets become more fragile, he argued,
by giving investors the "illusion" that they can exit before prices turn against them. This is a
crucial insight for crises of shadow money.
A promise backed by tradable collateral remains acceptable as long as lenders trust that collateral
can be converted into settlement money at the agreed exchange rate. The need for liquidity may become
systemic once collateral falls in market value, as repo issuers must provide additional collateral
or cash to maintain at par. If forced to sell assets, collateral prices sink lower, creating a liquidity
spiral
. Converting shadow money is akin to climbing a ladder that is gradually sinking: The faster
one climbs, the more it sinks.
Note that sovereign collateral does not always stop the sinking, outside the liquid world of U.S.
Treasuries. Rather, states can be dragged down with their shadow-money issuing institutions. As Bank
of England
showed , when LCH Clearnet tightened the terms on which it would hold shadow money backed with
Irish and Portuguese sovereign collateral, it made the sovereign debt crisis worse. Europe had its
crisis
of shadow money, less visible than the Lehman Brothers demise, but no less painful. "Whatever
it takes" was a
promise
to save the "shadow" euro with a credible commitment to support sovereign collateral values.
Shadow money also constrains the macroeconomic policy options available to the state. That's because
what makes shadow liabilities money also greatly complicates its stabilization: it requires a radical
re-think of many powerful ideas about money and central banking. The first point, persuasively made
by Perry
Mehrling , and more recently by
Bank of England , is that central banks need a (well-designed) framework to backstop markets
, not only institutions . Collateralized debt relationships can withstand a systemic need
for liquidity if holders of shadow money are confident that collateral values will not drop sharply,
forcing margin calls and fire sales. Yet such overt interventions raise
serious moral hazard issues.
Less well understood is that central banks need to rethink lender of last resort. Their collateral
framework can perversely destabilize shadow money. Central banks cannot mitigate convertibility
risk for shadow money
when they use the same fragile convertibility practices. Rather, central banks should lend unsecured
or
without seeking to preserve collateral parity.
We suggest that the state, as base-asset issuer, becomes a de facto shadow central bank.
Its fiscal policy stance and debt management matter for the pace of (shadow) credit expansion and
for financial stability. Yet, unlike the central bank, the state has no means to stabilize shadow
money or protect itself from its fragility. It has to rely on its central bank, caught in turn between
independence and shadow money (in)stability, which may require direct interventions in government
bond markets.
The bigger task that follows from our analysis, is to define the social contract between the three
key institutions involved in shadow money: the state as base collateral issuer, the central bank,
and private finance. In the new
FSB
or Basel III provisions, we
are witnessing a struggle over shadow money with many echoes from the long struggle over bank money.
The more radical options, such as disentangling sovereign collateral from shadow money, were never
contemplated in regulatory circles. Even a partial disentanglement has proven
difficult
because states depend on repo markets to support
liquidity in government bond markets. Our next step, then, will be to map how the crisis has
altered the contours of the state's relation to the shadow money supply, comparing the cases of the
U.S., the Eurozone, and China.
Financial anarchy is my interpretation of shadow banking.
. . . The legal right to re-use (re-hypothecate) collateral allows various (shadow) banks
to issue shadow money against the same government bond , which becomes akin to a base asset
with "velocity." Limits to velocity place demands on the state to issue debt, not because it
needs cash but because shadow money issuers need collateral .
---- The bigger task that follows from our analysis, is to define the social contract between the
three key institutions involved in shadow money: the state as base collateral issuer, the central
bank, and private finance .
Who does shadow banking serve? It is so far from capitalism, it should be illegal.
Bernie Sanders: The business of Wall Street is fraud and greed.
Well…yes and no. There is real "need" for some shadow banking services. However, the idea of
having Central Banks (issuers of money, or whatever) loaning based on … nothing?
Less well understood is that central banks need to rethink lender of last resort. Their
collateral framework can perversely destabilize shadow money. Central banks cannot mitigate
convertibility risk for shadow money when they use the same fragile convertibility practices.
Rather, central banks should lend unsecured or without seeking to preserve collateral parity.
"Europe had its crisis of shadow money, less visible than the Lehman Brothers demise, but
no less painful. "Whatever it takes" was a promise to save the "shadow" euro with a credible
commitment to support sovereign collateral values."
Yes, but Lehman was not a taxing authority (although to be fair, Ireland et.al. were not money-issuing
sources).
I am having a hard time understanding all of this–but as far as I can tell, the authors are
basically suggesting that sovereign governments should be backing up the shadow banking system.
However, I have not seen them suggest any reason for it except that the entire house of cards
could come falling down. Boo hoo for the banksters–tell them to do things out of the "shadows".
Why is there a need for 'shadow money' in the first place?
Afaik, banks create money when they loan and central banks(especially the Fed) issues the most
secure assets, their securities, which are used as collateral.
Thanks Yves for sharing Gabor…what a Mess! towards the end of 2012 the US shadow banking was
said to be around
67 Trillion …did something get baked-in? 2014 the IMF has a much smaller 'account'…(Japan
being the worst laughing stock). the gaps are no small detail:
The IMF's latest Global Financial Stability Report analyzes the growth in shadow banking in
recent years in both advanced and emerging market economies and the risks involved.
According to the report, shadow banking amounts to between 15 and 25 trillion dollars in the
United States, between 13.5 and 22.5 trillion in the euro area, and between 2.5 and 6 trillion
in Japan-depending on the measure- and around 7 trillion in emerging markets. In emerging markets,
its growth is outpacing that of the traditional banking system.
https://www.imf.org/external/pubs/ft/survey/so/2014/pol100114a.htm
That sure seems a Rx for destabilizing the world currencies to precipitate a collapse. Track
and publicize the visits of Congressmen and Senators to the BIS and COL to start. Why are they
making these visits under cover? Who are they meeting with? Are they being prepared as to what
to expect a deliberate world currency crash? . Our political elite are so beholden to the bankers
to allow for the theft of the wealth of nations for unattainable expanding growth and skimming
of millions. Is it possible in regard the corporate banks to have the strings attached on the
use of shadow money at time of chartering or in the case of the do over at time of bankruptcy?.
How is this done? I'd also like to know a good proposal for the private investment boutique banks.
Have any bills at state and federal levels been proposed and if not, why not? What would the main
sections of such a bill look like. Thanks.
A derivative promise made by a Wall Street prostitute, ultimately contingent upon the ability
to liquidate the very users of the instrument, with currency debasement, and war to restock.
Paying people to buy stuff from others being paid to buy stuff, with the full faith and credit
of dependent seniors in a collapsing actuarial ponzi, with nothing more than made for TV mercenaries,
isn't likely to end well.
Craps, the bank moves to the next suckers, with nothing more than the promise of an exotic
vacation, billed to someone else.
– Limits to velocity place demands on the state to issue debt, not because it needs cash but
because shadow money issuers need collateral.
There's a dirty linchpin. Even if the diabolical multiplier from cnchal's quote were removed,
and the dollar was hard-pinned to a pound of silver to pay the sheriff with, infinite debt issuance
can step in to the feed the hungry beast.
Promises to pay kept mercenaries in line during the city-states. If you didn't win you didn't
get paid. Unless you turned around and took your employers gold instead. Which is a bit like capturing
the central banks.
Still, debt can be put to good uses. Infrastructure, maybe. Basic necessities and health. 'When
the people are strong, the nation is strong.' Instead, the gearing seem like the machine in Princess
Bride, sucking time from peoples lives.
Ask any highway patrolman, the faster the speed limit, the worse the accidents.
On the famed autobahns of Europe, the no speed limit means that when an accident occurs, the
results are likely to be catastrophic.
And I really love the observation that central banks need a mechanism to backstop the market.
Reminds me of the main problem with the famous Vincent Black Shadow motorcycle, it could attain
speeds close to 200 mph, but brake designs at the time didn't work at those speeds, so as Hunter
S. Thompson remarked;
"If you rode the Black Shadow at top speed for any length of time, you would almost certainly
die."
Wall $treet wants to go fast, the faster the better, but they haven't got any brakes, and worse
than that, we're all along for the ride whether we like it or not.
Oh, says Red Molly to James, "That's a fine motorbike
A girl could feel special on any such like"
Says James to Red Molly, "My hat's off to you
It's a Vincent Black Lightning, 1952"
[James gets shot in a robbery]
When she came to the hospital, there wasn't much left
He was running out of road, he was running out of breath
But he smiled to see her cry
And said I'll give you my Vincent to ride
Oh, he reached for her hand then he slipped her the keys
He said, "I've got no further use for these
I see angels on Ariels, in leather and chrome
Swooping down from heaven to carry me home"
And he gave her one last kiss and died
And he gave her his Vincent to ride
It was sorta like that when Bernanke handed J-Yel the keys to his QE penny farthing bike.
The Bernanke and J-Yel witnessed the header that Greenspan took on that bike, and decided to
leave it standing against the wall. When you consider the fact that neither of them could reach
the pedals, let alone mount the thing and ride, that was probably a good idea.
When did the central banks' framework to backstop markets morph into an organized effort to
push the value of repo collateral relentlessly upward forever?…
What about increasing the relentless decline in the Velocity of Money by gradually increasing
interest rates? Yes, that might be a catalyst to trigger a "liquidity spiral". So what? We now
have moral hazard in spades and at some point will have to cross the Rubicon, whether willingly
or not.
i am reading one of the
links from the post titled "Regulating money creation after the crisis", and it's even worse
than government approved fraud. I am only part way through it, but here is a gem.
On page 10
. . . Instead, OLA was designed to preserve the value of the assets of failed financial
firms until they are liquidated, a worthy aim, but a very different one. At the same time,
the Dodd-Frank Act has imposed significant new limitations on the government's freestanding
panic-fighting tools . These limitations, absent future congressional action, would render
next to impossible the kind of aggressive government rescue operation that was staged
during the recent crisis.
Criminality and corruption is embedded at the top of the financial food chain, by law.
Before we complicate the issue, it is fairly obvious no one understands conventional money
and it is one of the best kept secrets on the planet.
Learn how normal money works and how its mismanagement has led to many of today's problems.
Banks create money out of nothing to allow you to buy things with loans and mortgages (fractional
reserve banking).
After years of lobbying the reserve required is often as good as nothing. Mortgages can be
obtained with the reserve contained in the fee.
After the financial crisis there were found to be £1.25 in reserves for every £100 issued on
credit in the UK.
Having no reserve shouldn't be a problem with prudent lending.
Creating money out of nothing is the service they really provide to let you spend your own
future income now.
They charge interest to cover their costs, for the risk involved and the service they provide.
Your repayments in the future, pay back the money they created out of nothing.
The asset bought covers them if you default, they will repossess it and sell it to recover
the rest of the debt unpaid.
At the end all is back to square one.
The bank has received the interest for its service.
You have paid for the asset you have bought plus the interest to the bank for its service of
letting you use your own money from the future.
Today's massive debt load is all money borrowed from the future for things already bought.
It can also go wrong another way, when banks lend into asset bubbles that collapse very quickly.
The repossessed asset doesn't cover the outstanding debt and money gets destroyed on the banks
balance sheets.
When banks lend in large amounts, on margin, into stock markets, the bust shreds their balance
sheets (1929).
When banks lend in large amounts on mortgages into housing markets, the bust shreds their balance
sheets (2008).
If banks don't lend prudently you are in trouble.
Then they developed securitisation …… oh dear (no need to lend prudently now).
Housing booms and busts around the world …… oh dear.
All that money borrowed from the future and already spent …… oh dear.
This is so interesting. It seems to be approaching the subject that Wray speculated about a
while back – that we should give central banks fiscal responsibility. Because otherwise a sovereign
state has no control over its sovereign money? It seems to me that money itself becomes a rehypothecated
asset by virtue of being invested over and over again – if it is well allocated and under good
fiscal control all is well. If not we get the Great Recession.
So let the state become the defacto shadow central bank so it had direct control of its own
money. Instead of hanging on to the old gold standard mindset of top down management, why not
think of people, not collateral, as the root of the system – the grass roots. How much money does
a system – a sovereign country – need per person. And then establish a sovereign central bank
to deal directly, bringing the shadows into the sunlight of fiscal control.
…and does anyone remember the triumph of the desk slaves of the Crimson Permanent Assurance?
Monty Python understood something about political economies and how one might achieve more fairness
in outcomes… https://vimeo.com/111458975
Moneyness, like doggitas, you just can't scratch behind its ears. If shadow money is distinguished
by its relationship to collateral, as opposed to money issued by the state, with the entire human
enterprise of civilization as its basis, it still seems to me that at the top of the money hierarchy
is fiat money, the real money by the real social order empowered by the social forms of power
that sustain human life in all of its aspects, not just the financial conveniences. Shadow
money sounds to me like fictional capital by another name. And contractual based deposits sounds
like counterfeiting. With the distinction that the man with counterfeit printing press robs the
train, while the man who runs the Wall St Investment bank repo trading desk robs the whole railroad.
Am I right or Am I right. What a bunch of Losers!!!
And if there is any doubt about the fictional quality of $Trillions and $ Trillions of dollars,
physicists can not find anything naturally occurring in the universe beyond billions and billions.
Money, simply a numbered record, a counting or cardinal number, transforms into money in name
only, MINO, when it refers to fictional amount that can only appear contractually as words, and
do not count how much economic activity or output has been produced.
Therefore, Money becomes a victim of the ontological argument for God by St Anselm. If
God does not exist, an all powerful, all knowing, all present infinitely great in all categories
of Supreme Being could not be written or spoken about, lacking the quality of existence. The fact
that we CAN speak about an Omnipotent Supreme Deity means that one in fact exists, due to existence
is part and parcel of Omnipotence. But of course, because we can talk or write about something,
does not make it real.
It can become socially acceptable as in the case of shadow money, but it is fictional capital,
a shadow of the real thing. Time to get out of the cave of finance with its shadows dancing from
the light of the fires and walk eyes wide open in the bright light of sunshine!
I don't know about this one. It seems to me to be some pretty queasy thinking. It kind of wanders
around in circles of confusion. "my existence led by confusion boats, mutiny from stern to bow".
That's pretty funny somebody would say that money is diabolically hard to write about. That's
pretty funny.
Money is actually the easiest thing to write about, because it's formless energy. It's
not that the phenomenon is shadow money, it's shadow assets.
You have to be able to separate in your mind the ideas of 1) Quantity and 2) Form. That's
why economics is a mental disorder, because it doesn't separate quantity and form. If you can't
or don't, then yes, it's diabolically hard to write about because you're writing about two different
things simultaneously without realizing it. Money is a quantity that is infinite and continuous,
but form is an idea that is discontinuous and finite. People do what the forms tell them to do.
The money is just like electricity that powers the animation of the forms. Repo is a form it's
not money. It's existence results in a certain ordering of social relations, that's also a form.
But money is just the energy that makes the forms potent.
The primary challenge is to come up with an ordered way of thinking about the forms themselves.
That's frankly not easy. The ideal would be to understand them in the manner in which Euclid understood
geometrical ideas. If you can get the vision, then you can see all the possibilities for structure
and ordered relationships. there's really no triangle in reality and there's no point and there's
no line and there's no plane. They just made them up to approximate physical reality. Then they
thought to themselves "Holy shit! These ideas interrelated in an astounding range of symmetries
and causations." Then they became a lens or a framework through which physical reality was interpreted.
But they didn't confuse the idea of "number" with the idea of "triangle" or "circle".
Certainly in math the algebraic interpretation doesn't rely completely on the geometrical interpretation.
But if there is no geometrical interpretation and it's only algebra, then so much is missing,
so much is lost. I guess that's why they used to call it "political economy" before the mental
disorder fully usurped the power of perception and reasoning.
Certainly in math the algebraic interpretation doesn't rely completely on the geometrical
interpretation. But if there is no geometrical interpretation and it's only algebra, then so
much is missing, so much is lost.
With that firmly in mind, I think it's necessary to mention the fact that the " study
" of "economics" relies on calculus, wherein we are introduced to the notion of change over
time, volume, motion, acceleration, rates of change, vectors, etc.
Algebra and geometry are, as you point out, obvious abstractions, but once you add volume motion,
and rates of change, the models become very seductive, and it's easy to see how one can be convinced
that they are approaching an understanding of 'reality'.
The trouble is of course, that the egg-heads busy trying to describe economic "reality" with
calculus, are, for the most part in the employ of savages who will forever cling to a simple arithmetic
where their only interest is in "having it all".
Genius employed to make excuses for demented indifference.
'Central banks should lend unsecured … we suggest that the state, as base-asset issuer,
becomes a de facto shadow central bank.' - Daniela "Zsa Zsa" Gabor
This statement desperately needs Walter Bagehot's qualifications: "to solvent institutions"
and "at a penalty rate."
Otherwise, we're just talking about another squalid round of "TARP for Jamie," as we peasants
reach for our pitchforks.
It should however be pointed out that the idea of shadow banking is not remotely new. The
concept was presaged well over a century ago by Walter Bagehot, the legendary English banker,
essayist, and theorist. In 1873, Bagehot wrote Lombard Street: A Description of the Money Market,
his canonical work on the money market and central banking. In it, he observed that the great
London banks were accompanied by a parallel set of financial firms, known as "bill brokers," which
in many ways resembled modern-day securities dealers. Like today's dealers, these bill-brokers
financed themselves with borrowings that, Bagehot informs us, were "repayable at demand, or at
very short notice."
Formally speaking these firms were not banks but to Bagehot they might as well be. "The London
bill brokers," he observes, "do much the same [as banks]. Indeed, they are only a special sort
of bankers who allow daily interest on deposits, and who for most of their money give security
[i.e., collateral]. But we have no concern now with these differences of detail." At times, Bagehot
is careful to note that the short-term obligations of bill-brokers were not technically deposits;
he observes that the maturing of these liabilities "is not indeed a direct withdrawal of money
on deposit," although "its principal effect is identical."
Other times, however, Bagehot dispenses even with this distinction: "It was also most natural
that the bill-brokers should become, more or less, bankers too, and should receive money on deposit
without giving any security for it." Here we have an unambiguous identification of the shadow
banking phenomenon about 140 years ago .
I would posit that there are two types of money
A – money of the 0.001% – if they walk into a casino, real estate transaction, or any asset for
that matter they can NOMINALLY lose money – in fact the 0.001% NEVER lose any of THEIR money,
they just lose your money. All winnings, of anybody doing anything anywhere, belong to them.
B – money of everybody else – this money nominally is yours to do with as you see fit, but it
ALL belongs to the 0.001%. The collateral that backs it up is everything you earn and own and
when necessary your, and your family's, internal organs…
"The nation [England] was not a penny poorer by the bursting of these soap bubbles of nominal
money capital. All these securities actually represent nothing but accumulated claims, legal titles
to future production. Their money or capital value either does not represent capital at all …
or is determined independently of the real capital value they represent."
– Marx
Banking Capital's Component Parts
Capital: Volume Three
James Levy , April 17, 2016 at 6:07 am
Marx failed to acknowledge that supposedly hard-headed Capitalism is actually all about
living beyond your means and mortgaging the future.
It was designed from the Fuggars' and the Medici's to be about debt and fractional reserves
and interest. A system based on a finite supply of money is going to grow not much faster, at
best, than the money available allows.
Capitalism allows explosive growth by supplying explosive amounts of credit. All this shadow
banking activity is designed to get around reserve requirements; nothing else I can see calls
all this complexity into existence. The banks always need more, because lending is how they make
their money, so they want an infinite amount to lend in order to drive their profits towards the
infinite.
A sovereign can create its own currency, but theoretically couldn't it create any currency?
Couldn't Greece for example click a few key boards put some ones and zeros in and say, "oh our
account with $1,000,000 US is actually $10,000,000,000 US?
This article I think defines shadow money alright as starting where bank deposits leave
off but as the above comments suggest seems to miss some key points. I think a major problem with
the article is seeing central banks as separate from the state rather than seeing the central
bank along with the Treasury as the state itself.
The article gets Treasury debt wrong by seeing it as the central bank funding the state
rather than as actually coming from the state. This leads to wrong policy choices such as this
state money being used to bail out useless financial transactions and asset appreciation rather
than the public purpose. I think crazyman has it right. We left behind the power of perception
and reasoning by not realizing the importance of political economy.
Some issues with the piece and questions for the authors (and fellow NCers):
I really wish such analyses would use the more-precise term "credit-money" in reference to
money creation by banks, to distinguish it from government money creation, which similarly may
have repayment requirements attached (bonds), but need not be so. The "need not be so" may occur
via outright fiat emission, but more commonly appears in form of a public debt stock which continually
increases with time, at least in nominal terms.
The legal right to re-use (re-hypothecate) collateral allows various (shadow) banks to
issue shadow money against the same government bond, which becomes akin to a base asset with
"velocity."
Fine, but what about that other crucial element of modern bank credit-money creation, leverage?
Are there any practical limits on shadow banks' issuance of multiple units of shadow money against
the same government-bond money unit? If so, how are they enforced (if at all)? Note also the key
concept of "implied leverage" inherent in such schemes, where the leverage ratio may fluctuate
drastically with the mark-to-market valuation of the collateral. Banks play endless games with
"fictional reserves"; it would be naive to imagine that non-bank shadow lenders don't do similarly
with their alleged collateral.
The first point, persuasively made by Perry Mehrling, and more recently by Bank of England,
is that central banks need a (well-designed) framework to backstop markets, not only institutions.
Erm, markets are the *only* thing the government should be committed to ensuring functioning
of - we have overwhelming evidences from multiple boom-bust-crisis episodes over the last 3 decades
of the toxic results of governments backstopping hyperleveraged fraud-riddled institutions and
the crooks running same.
The above book which so ironically delivered the message
was published in 1910.
Alas, the Kaiser, the Tsar, and the Emperor did not act in
accord with its tenets. Either increased global trade is
irrelevant to war and peace, or World War I didn't happen.
Your pick which to believe.
Our problems began back in the 1970s when we abandoned the
Bretton Woods international capital controls and then broke
the unions, cut taxes on corporations and upper income
groups, and deregulated the financial system. This eventually
led a stagnation of wages in the US and an increase in the
concentration of income at the top of the income distribution
throughout the world:
http://www.rwEconomics.com/Ch_1.htm
When combined with tax cuts and financial deregulation it
led to increasing debt relative to income in the importing
countries that caused the financial catastrophe we went
through in 2008, the economic stagnation that followed, and
the social unrest we see throughout the world today. This, in
turn, created a situation in which the full utilization of
our economic resources can only be maintained through an
unsustainable increase in debt relative to income:
http://www.rwEconomics.com/htm/WDCh3e.htm
This is what has to be overcome if we are to get out of
the mess the world is in today, and it's not going to be
overcome by pretending that it's just going to go away if
people can just become educated about the benefits of trade.
At least that's not the way it worked out in the 1930s:
http://www.rwEconomics.com/LTLGAD.htm
Global integration and the liberalization of capital flows
outside of national boundaries, and outside of the
constraints of national solidarity, has pushed Americans
further into a ruthless capitalist struggle for strictly
individual measures of "success", and intensified economic
insecurity and the gaps between winners and losers.
Economists find the resistance to these trends mysterious;
others not so much.
Economic leaders after WW2 had a Colonialist attitude
entrenched within. They made a plan for global economic
integration, which only considered the economic needs and
realities of developed western nations.
China/India/Indonesia/etc...were never at the conceptual
table.
Now, the tides have turned. The China-India nexus
historically accounted for roughly 40% of the global economy.
That 'normal' state was eclipsed for 1.5 centuries, and we
may regress to that norm. If so, a ton of jobs, and economic
activity, may shift from the West, to Asia. If so, the
western middle classes are screwed.
Up till now globalism has mostly been conducted by laissez
faire neo liberal elite...for the needs of the elite.
That's not entirely a bad thing. Wars are started over the
needs and desires of our elites. Common folks left to their
own, won't find reason to go off and kill their
counterparts... it only after "the other" has been
dehumanized and demonized by the elite that common people
will allow themselves to be organized to kill one another.
By allowing and encouraging the world's elite to operate
within a system of mutual dependence, we decrease the
incentive for the elite to marshal and deploy their captive
populations against one another.
But once that international system has been
solidified...as it has now... The objective should be to tear
it down...it should be to make it democratized, unionised,
and transparent .
We need to move from laissez faire neo liberalism to
social democratic neo liberalism.
"... "Judge Collyer repeatedly complained that the regulators had failed to do a cost-benefit analysis." What Professor Krugman omits here is that so-called "cost-benefit analysis" has been corrupted by the fallacious Kaldor-Hicks compensation principle. The house cleaning has a lot further to go than "Republicans." ..."
Snoopy the Destroyer, by Paul Krugman, NY Times : Has Snoopy just doomed us to another severe
financial crisis? Unfortunately, that's a real possibility, thanks to a bad judicial ruling that
threatens a key part of financial reform. ...
At the end of 2014 the regulators
designated MetLife
, whose business extends far beyond individual life insurance, a systemically important financial
institution. Other firms faced with this designation have tried to get out by changing their business
models. For example,
General Electric ... sold off much of its finance business. But MetLife went to court. And
it has won a favorable ruling from
Rosemary Collyer , a Federal District Court judge.
It was a peculiar ruling. Judge Collyer repeatedly complained that the regulators had failed to
do a cost-benefit analysis, which the law doesn't say they should do, and for good reason. Financial
crises are, after all, rare but drastic events; it's unreasonable to expect regulators to game
out in advance just how likely the next crisis is, or how it might play out, before imposing prudential
standards. To demand that officials quantify the unquantifiable would, in effect, establish a
strong presumption against any kind of protective measures.
Of course, that's what financial firms want. Conservatives like to pretend that the "systemically
important" designation is actually a privilege, a guarantee that firms will be bailed out. Back
in 2012
Mitt Romney described this part of reform as "a kiss that's been given to New York banks"...,
an "enormous boon for them." Strange to say, however, firms are doing all they can to dodge this
"boon" - and MetLife's
stock rose sharply when the ruling came down.
The federal government will appeal..., but even if it wins the ruling may open the floodgates
to a wave of challenges to financial reform. And that's the sense in which Snoopy may be setting
us up for future disaster.
It doesn't have to happen. As with so much else, this year's election is crucial. A Democrat in
the White House would enforce the spirit as well as the letter of reform - and would also appoint
judges sympathetic to that endeavor. A Republican, any Republican, would make every effort to
undermine reform, even if he didn't manage an explicit repeal.
Just to be clear, I'm not saying that the 2010 financial reform was enough. The next crisis might
come even if it remains intact. But the odds of crisis will be a lot higher if it falls apart.
There are two big lessons from GE's announcement * that it is planning to get out of the finance
business. First, the much maligned Dodd-Frank financial reform is doing some real good. Second,
Republicans have been talking nonsense on the subject. OK, maybe point #2 isn't really news, but
it's important to understand just what kind of nonsense they've been talking.
GE Capital was a quintessential example of the rise of shadow banking. In most important respects
it acted like a bank; it created systemic risks very much like a bank; but it was effectively
unregulated, and had to be bailed out through ad hoc arrangements that understandably had many
people furious about putting taxpayers on the hook for private irresponsibility.
Most economists, I think, believe that the rise of shadow banking had less to do with real
advantages of such nonbank banks than it did with regulatory arbitrage - that is, institutions
like GE Capital were all about exploiting the lack of adequate oversight. And the general view
is that the 2008 crisis came about largely because regulatory evasion had reached the point where
an old-fashioned wave of bank runs, albeit wearing somewhat different clothes, was once again
possible.
So Dodd-Frank tries to fix the bad incentives by subjecting systemically important financial
institutions - SIFIs - to greater oversight, higher capital and liquidity requirements, etc. And
sure enough, what GE is in effect saying is that if we have to compete on a level playing field,
if we can't play the moral hazard game, it's not worth being in this business. That's a clear
demonstration that reform is having a real effect.
Now, the more or less official GOP line is that the crisis had nothing to do with runaway banks
- it was all about Barney Frank somehow forcing poor innocent bankers to make loans to Those People.
And the line on the right also asserts that the SIFI designation is actually an invitation to
behave badly, that institutions so designated know that they are too big to fail and can start
living high on the moral hazard hog.
But as Mike Konczal notes, ** GE - following in the footsteps of others, notably MetLife ***
- is clearly desperate to get out from under the SIFI designation. It sure looks as if being named
a SIFI is indeed what it's supposed to be, a burden rather than a bonus.
"Judge Collyer repeatedly complained that the regulators had failed to do a cost-benefit analysis." What Professor Krugman omits here is that so-called "cost-benefit analysis" has been corrupted
by the fallacious Kaldor-Hicks compensation principle. The house cleaning has a lot further to go than "Republicans."
A Kaldor–Hicks improvement, named for Nicholas Kaldor and John Hicks, also known as the Kaldor–Hicks
criterion, is a way of judging economic re-allocations of resources among people that captures
some of the intuitive appeal of Pareto improvements, but has less stringent criteria and is hence
applicable to more circumstances.
A re-allocation is a Kaldor–Hicks improvement if those that
are made better off could hypothetically compensate those that are made worse off and lead to
a Pareto-improving outcome. The compensation does not actually have to occur (there is no presumption
in favor of status-quo) and thus, a Kaldor–Hicks improvement can in fact leave some people worse
off.
"Consider a transfer of an apple from Mary to John and a transfer of $0.75 from John to Mary.
Use Kaldor-Hicks to evaluate each part as a "project" with the other part as the "compensation".
Using money as the numeraire and the apple transfer as the "project", we see under the assumptions
that the transfer of the apple increases social wealth measured in dollars so that is the recommendation
based on "efficiency", and the payment of the "compensation" of $0.75 is a matter of "equity"
of concern to politician, theologians, and philosophers but not to the professional economist.
Now reverse the numeraire taking apples as the numeraire and the transfer of the $0.75 as the
"project". Then the transfer of the apple (= "compensation") does not change social wealth = size
of the apple pie, but the transfer of the $0.75 increases the size of the social apple pie by
3/4 of an apple so it is the transfer of the $0.75 that is recommended on efficiency grounds by
hard-nosed economists while the transfer of the apple is left to politicians, theologians, and
the like as a matter of "equity." Thus the outcome of the KH analysis is reversed by a change
in the numeraire used to describe the exact same pair of transfers."
#NUM!éraire, Shmoo-méraire: Nature doesn't truck and barter
The commodity in terms of which the prices of all the others are expressed is the numéraire.
-- Leon Walras, Elements of Pure Economics.
But the numéraire is a purely technical device, introduced simply for the purpose of making
exchange values explicit. In no way does the introduction of a standard of value alter the fundamental
nature of the economy in question. It remains a barter economy, since goods are exchanged solely
for other goods. -- André Orléan, The Empire of Value.
Yossarian looked at him soberly and tried another approach. 'Is Orr crazy?'
'He sure is,' Doc Daneeka said.
'Can you ground him?'
'I sure can. But first he has to ask me to. That's part of the rule.'
'Then why doesn't he ask you to?'
'Because he's crazy,' Doc Daneeka said. 'He has to be crazy to keep flying combat missions
after all the close calls he's had. Sure, I can ground Orr. But first he has to ask me to.'
'That's all he has to do to be grounded?'
'That's all. Let him ask me.'
'And then you can ground him?' Yossarian asked.
'No. Then I can't ground him.'
'You mean there's a catch?'
'Sure there's a catch,' Doc Daneeka replied. 'Catch-22. Anyone who wants to get out of combat
duty isn't really crazy.'
There was only one catch and that was Catch-22, which specified that a concern for one's own
safety in the face of dangers that were real and immediate was the process of a rational mind.
Orr was crazy and could be grounded. All he had to do was ask; and as soon as he did, he would
no longer be crazy and would have to fly more missions. Orr would be crazy to fly more missions
and sane if he didn't, but if he was sane, he had to fly them. If he flew them, he was crazy and
didn't have to; but if he didn't want to, he was sane and had to. Yossarian was moved very deeply
by the absolute simplicity of this clause of Catch-22 and let out a respectful whistle.
Also known as the double-bind in Gregory Bateson's analysis.
And why the big fuss about the Panama Papers? Doesn't the Laffer Curve tell us that if the
1% evade taxes by hiding their money in off-shore accounts, it will cause so much economic growth
that government tax revenues will actually increase?
Laffer curves, Kaldor-Hicks cost-benefit swindles and lump-of-labor fantasies are not "incidentals"
of an otherwise sound economic discipline. They are symptoms of an ideology that is rotten to
the core.
Yes, those supply-siders must love it when companies hide their income offshores. Just think how
many more jobs they must be creating with their lower tax rate!
"The federal government will appeal the MetLife ruling, but even if it wins the ruling may open
the floodgates to a wave of challenges to financial reform. And that's the sense in which Snoopy
may be setting us up for future disaster."
As soon as Dodd-Frank was passed the large financial institutions got their legal teams busy
trying to undermine it. One would think all progressives would rally behind enforcing Dodd-Frank.
Of course Rusty wants us to believe enforcing Dodd-Frank is just too complicated. It is complicated
only because the lawyers for the financial sector get paid big bucks to obscure what is sensible
regulation.
I bet Rusty will protest this by saying he is not being paid that much. Which would be cool but
the notion that we should just trash Dodd-Frank strikes me as bad financial economics. Now if
we can improve on Dodd-Frank, that would be awesome if it makes Jamie Dimon really mad.
LOL!!! "A Democrat in the White House would enforce the spirit as well as the letter of reform"...just
like the incumbent Democrat sent bankers to jail for rampant mortgage fraud.
Oh, right! Obama and Holder actually made the investigation of mortgage fraud JOD's lowest
priority and brought no criminal indictments...undermining the rule of law, giving bankers a 'get
out of jail free' card, and encouraging them to commit yet more fraud.
Krugman is becoming just ridiculous, a partisan hack on steroids.
"The episode showed that traditional financial regulation, which focuses on deposit-taking banks,
is inadequate in the modern world."
What Krugman fails to inform his reader - one can only say so much in a column is that Bill
Clinton repeatedly reappointed Alan Greenspan as regulator in chief.
The shadow-banking system was created during Greenspan's tenure and he saw no need to regulate
it b/c free markets are awesome! And so the shadow-banking system promptly had a bank run.
Not "promptly"--it took fifteen years. That was Clinton's biggest weakness--he was good at dealing
with urgent obvious problems, but he would sometimes let longer-term issues fester. This is why
Obama will be remembered as a better president than Clinton--he plays the long game.
Notable examples of urgent problems that Clinton addressed effectively included the Mexico crisis
of 1994, the East Asian crisis of 1997, and the collapse of Long Term Capital Management in 1998.
Any one of these crises could have turned into a broader meltdown and spawned a depression similar
to the 2008 one, but Clinton and his appointees (including Greenspan) did a good job of containing
the damage. Unfortunately they did nothing to address the underlying problems that had made it
necessary for them to act in the first place.
Bernie or no Bernie, 'Times' columnist Paul Krugman is wrong about the banks
Paul Krugman wrote an op-ed in the New York Times today called "Sanders Over the Edge." He's
been doing a lot of shovel work for the Hillary Clinton campaign lately, which is his right of
course. The piece eventually devolves into a criticism of the character of Bernie Sanders, but
it's his take on the causes of the '08 crash that really raises an eyebrow.
"It doesn't have to happen. As with so much else, this year's election is crucial. A Democrat
in the White House would enforce the spirit as well as the letter of reform - and would also appoint
judges sympathetic to that endeavor. A Republican, any Republican, would make every effort to
undermine reform, even if he didn't manage an explicit repeal.
Just to be clear, I'm not saying that the 2010 financial reform was enough."
The Republicans are going to lose so Krugman's lesser evil argument doesn't really work.
Does Krugman discuss Hillary's reforms? No of course not.
Your comment only makes sense if you believe that either
(1) designating a financial institution "systemically important" is trivial or totally meaningless
compared to criminal indictments for previous actions, or (2) a Republican would enforce this
designation just as much as Obama has. Which is it?
LOL!!! Eric Blair asserts that it is "totally meaningless" to sending bankers to prison for fraud
that threatened systemically threatened the economy!
And he assumes that Obama would behave less deferentially to Wall Street banks when it comes
to enforcing any regulation that bankers don't approve of.
Republicans have no monopoly on servility to the interests of Wall Street and their wealthy clientele,
but Krugman obviously prefers Democratic corruption to its Republican cousin...
No, I did not say what you claim that I said. And whether Obama is being deferential to someone
is at most a side issue. The important questions are first, does the rule help make the financial
system more stable, and second, would it be enforced less by Republicans. I believe the answer
to both questions is yes.
LOL!!! How can it get less than zero...which is the number of bank fraud indictments Obama
issued against prominent Wall Street bankers?
It's hilarious how Wall Street Democrats try to claim that the Democratic Party is less corrupt
than Republicans, when both parties feed from the same trough.
"The house cleaning has a lot further to go than "Republicans."
How about the leader of the Democrats, President Obama?
Real Democrats can hardly wait for good ol authentic, honest Bernie Sanders to start attacking
President Obama – he's certainly not qualified to be president, taking all that Wall Street cash
and letting the big banks off scot-free, like he and Holder did back 2009 -- unqualified.
But good ol straight shootin Bernie aint gona do that, is he? Nope, because even Bernie understands
that Democrats actually like, maybe even love President Obama.
Bernie probably even understands that most Democrats like their democratic representatives,
senators, governors, mayors, city councilors, etc as well. So railing against the establishment
is not nearly as effective for Bernie as it is for Trump, Cruz and the tea party railing against
the Republican establishment. You see this in most Sanders surrogates carefully leaving "democratic"
off when criticizing the establishment, heck they might be confused with Republicans or Independents.
Even the more excitable online Berniacs rarely use the term democratic establishment, instead
invoking the generically ominous and evil "establishment."
It would have been much better (and honest) if Bernie had not turned his back on 28 years as
a proud Independent and run for president as a proud Independent instead of his gimmick to garner
more media attention by running as a Democrat.
His ego trip would have been much shorter, and Bernie certainly wouldn't be able to raise as
much cash running as an independent, he'd likely struggle to exceed Nader's 3% general election
vote in 2000, but he could have honestly taken on the real leader of the (democratic) establishment,
President Obama.
Nonetheless, Bernie is bringing critical economic issues into public discourse, issues that Wall
Street Democrats have long tried to suppress or occasionally pay lip service to...issue such as
minimum wages, trade policy, etc.
Even better, Bernie is showing socialist Democrats how to campaign and win against corrupt,
incumbent Wall Street Democrats.
That looks suspiciously just what Charles Murray proposed in his book "By the People: Rebuilding
Liberty Without Permission", to litigate against norms that regulate corporations.
Well not all SI's are equal. The drubbing AIG took even as it was used to launder cash to more
favored institutions is no doubt seen as the template. There's that nowhere to be found independent
insurance guy with no clout on FSOC that's another message. Woodall,a former insurance regulator
from Kentucky is the definition of outsider.
Last there's Jack Lew lecturing everyone on financial stability,truly a nice irony given Citi's
illegal Traveler's deal and the horrific consequences.
No doubt the lawsuit is about positioning and they'll be more by other players who worry about
being sacrificed to save the clout-heavy.
This is totally predictable given the power structure of FSOC.
Posted on
April 11, 2016 by
Yves Smith
As strange as it may seem, a confluence of developments in the banking industry means the Panama
Papers revelations looks likely make it a lot more difficult for offshore money, as tax evasions
and tax secrecy are often politely called, to stay hidden. This would serve as a marked contrast
to the last international-headlines-gripping leaks, the Snowden revelations. Even though Snowden
gave a big window into the reach of the surveillance state, not all that much has changed, save the
Chinese making more active efforts to avoid cloud computing and US technology vendors, and the Europeans
bashing US concerns over violations of their privacy laws.
By contrast, the massive Mossack Fonseca records haul feeds into trends in banking that mean that
a lot of these funds are going to find it hard remain secret. We'll summarize them below.
Tax base expansion initiatives . The US and European Union have been working
on a program to expand the base of income that is subject to tax. Budget-starved European member
states have been moving the plan forward ahead of schedule. This is one of the few positive developments
to come of of governments failing to understand the implications of having a fiat currency (you can
and typically need to run deficits, since the private sector sets unduly high return targets and
chronically underinvests; the constraint on deficit spending is creating too much inflation).
Increasingly tough "know your customer" rules . The US going aggressively after
foreign banks that have falsified records as a part of money-laundering has led to increased compliance.
Even Standard Chartered, which thought the US had no business telling it not to do business with
Iran, was brought to heel and its CEO forced to resign for his continued intransigence.
Now the US can throw its weight around only as far as dollar-based transactions are concerned,
since those ultimately clear through US facilities. But the UK has also adopted stringent "know your
customer" rules. It now takes weeks to open a new account that is not a personal account, say for
your rugby club.
There is a new urgency in the tone of the lawyers and advisers for offshore asset holders.
The essential message is that you are the Shah of Iran, this is 1979, and you and your money will
find yourselves hopscotching from one unwelcoming landing place to another…
If you or your clients think this is about tax cheats or the merely middle rich, they should
think again…
As this column and others have noted, by next year Switzerland, along with Luxembourg, the
Channel Islands and other European offshore investment management centres, will start exchanging
tax information with their counterparts.
There are a very large number of beneficiaries, ie globalised rich people, who have until the
end of this year to get their money safely onshore. The one Western country that does not have
a deadline for complying with the Common Reporting Standard is the US.
Almost everyone who has non-criminally sourced capital would like to have at least some of
it accessible within the dollar-based clearing system. But the clerical and legal checklists to
set up accounts for legitimate money have become so long that it will take months to accomplish
this even for those willing to pay the transaction costs.
And before you think the US banks are therefore the answer…. US banks are shunning money
from the rich these days. . Dizard again:
The largest US banks do not really want to take more deposits, or even do the cursory know-your-customer
due diligence work to open new special purpose accounts for old customers. Americans I know with
legitimately acquired nine- or ten-figure investment portfolios now have to scrounge around to
open accounts in midsize US banks.
Those rich Americans do not have the logistical or legal problems that Panama Papers-related
flight capital will have in "onshoring" their money.
Moreover, US legislators are calling for the US tax havens like Delaware corporations and Wyoming
limited liability companies, to report on who their ultimate beneficiaries are. Given the tone of
his Guardian op-ed, Carl Levin sound like he is warming up for hearings:
Global revulsion against shell company abuses, offshore tax havens, and the lawyers that promote
them has generated new public pressure to tackle these problems. Here are three steps to consider.
Outlaw corporations with hidden owners
….G20 world leaders have made a start with a joint commitment to increase corporate transparency.
The United Kingdom is leading the way, mandating public disclosure of the true owners – the "beneficial
owners" – of UK companies. The European Union has followed…
The United States is far behind. We now require more information to get a library card than
to form a US corporation. ….The biggest impediment is opposition from the secretaries of state
of our 50 states, who financially benefit from forming new corporations and don't want to ask
questions that might jeopardize their revenue. Our states need to wake up to the damage they are
doing and stop forming corporations with hidden owners.
Get tough on offshore tax abuse
Tax authorities should use existing tax information exchange agreements, including the US-Panama
agreement, to go after tax cheats and determine whether Mossack Fonseca facilitated illegal conduct.
Offshore tax abuse goes beyond individuals. Some multinational corporations use tax havens
to arrange secret tax deals or declare earnings offshore. The international community is finally
demanding that large multinationals file reports disclosing the profits they make and the taxes
they pay on a country-by-country basis. The United States has proposed regulations requiring those
reports; the next step is to finalize them. A bigger issue: making those reports public.
Get tough on lawyers promoting misconduct
….Lawyers should be subject to the "know your client" requirements of anti-money laundering
laws. In addition, banks should scrutinize suspicious accounts of law firms and require them to
certify that they will not use those accounts to help clients circumvent the bank's own anti-money
laundering controls.
Note that Levin doesn't seem to have a good answer about what to do about states that find it
attractive to act as secrecy jurisdictions, but in the past, the Feds have used cutting off various
Federal funds as a stick to force cooperation, Moreover, if Congress were to pass laws with "know
your client" requirements with criminal sanctions and tough fines, that in and of itself would choke
off a lot of domestic activity.
Information technology risk . Mossack Fonseca exposed in a very dramatic way
that secrecy isn't just a function of the design of legal arrangements and the choice of jurisdiction
and bank, but also of the integrity of the registered agent's IT security. There's no way to do due
diligence on that. Those with offshore accounts must already be nervous that they could be exposed
by a similar hack. Dizard's fallback remedy for the rich who want to keep their money hidden, "…you
and your money will find yourselves hopscotching from one unwelcoming landing place to another,"
might work for the relatively small and fleet of foot to stay ahead of the taxman and the bank transparency
moves, but it won't reduce IT risk.
Dizard's article, despite being informative, weirdly rails against crackdown on large-scale international
capital transactions" as populist and ill-informed, due to limiting the mobility of international
capital. Someone needs to clue him on the research by Ken Rogoff and Carmen Reihart, who are hardly
of the pinko persuasion, who found that high levels of international capital movements are powerfully
correlated with more severe and frequent financial crises. Dizard also tries to depict reducing capital
movements as being Smoot-Hawley revisited. First, the notion that Smoot-Hawley caused the Depression
had been well debunked. Second and more important, international capital flows these days are at
such high levels (over 60 times trade flows) that the Bank of International Settlement has said that
large international transactions are not about facilitating trade, and that excessive financial "elasticity"
was the cause of the crisis.
He also depicts banks as winding up being beneficiaries, which contradicts his message that they
regard onshored money as more hassle (which means cost) that its worth:
This will, within the next two years or so, lead to a one-time transfer from the global rich
to the staff and owners of US financial institutions. But that will be followed by a long drought
for new business, as the global wealth that did not move quickly enough gets slotted into endless
holding patterns in the mid-Atlantic or mid-Pacific.
It's hard to see what good it will do someone to have money moving around the few finessable locations
and banks that remain. Pray tell, how does it spent? Money you can't readily touch, or get into a
jurisdiction where you'd like to spend it, does not seem terribly useful.
And the big point that Dizard misses is that onshoring these funds will make the future investment
income on them subject to tax. Hidden untaxed wealth has contributed to rising inequality; Gabriel
Zucman of UC Berkeley has estimated that 6% to 8% of global wealth is offshore, and most of that
not reported to tax authorities. So the more the rich are discomfited by their overly-clever machinations,
the better.
Well, if you live in a state where you can name an LLC for your nominee trust, it doesn't get
any better. File the off shore LLC in Nevada where they don't ask any questions, and use it for
your real estate vehicle to launder your monies. Any question to why high end real estate is on
fire? The opaqueness in some states is intentional, as it took me about 10 minutes of random searching
of properties (over $2 million) to find the off shore LLC owner, with people and entities that
did not exists in the SoS filings. The activity index for RE sales over $750K is almost equal
to the index under $400K and below combined. If you add the $500K and above sales, it crushes
the entire index below $500K.
Owning an entity does not open a bank account…a party almost always has to be vetted for a
new enterprise…wired in funds for the benefit of an entity helps break the corporate veil…govt
officials rambling to the public that this corporate charade is just "impossible" to deal with
or stop are just laughing at the public (or need to hand back their law license to the bar)…money
can Always be traced…a real estate closing will have closing instructions and in those instructions
will be to whom to send back the funds and to what name if the transaction is not concluded….since
title companies are state regulated enterprises….and there are basically only four major title
insurance umbrella companies….this myth that a state title insurance investigator could not walk
in and obtain the beneficiary of the source of funds is one big second city improv skit
All they have to do is have real estate fall under FinCen Suspicious Activity Reporting (SAR)
requirements, but the NAR is simply too powerful and well funded with a more than accepting sold
out CONgress,
Not defending nar but state title insurance investigators have the absolute right to walk in
unannounced and spot audit files…a new corp will not have all these closing funds in hand and
for a proper corp veil to stand and hold, the funds had to be in a bank account in the name of
corp…might I suggest that the funds do not arrive from a source matching the corporate name…thus
revealing the actual party in interest….
After this amazing seminar from Yves MERS is making much more sense… and as always Utah stands
squarely behind the banks by ruling in appeals court that you can make a ham sandwich your agent.
Another piece of the problem is the difficulty of "piercing the corporate veil" in so many
legal domains (almost said "states and nations," but those are mostly convenient fictions themselves).
There's been a long tail of effort by the Few and the Corrupt and the Criminal to make it very
difficult, ever increasingly difficult, to hang liability for what little remains of proscriptions
and penalties for vicious and renter-driven personal (from "behind the veil") actions that offend
what are supposed to be police-powers (health, safety, welfare, nuisance and environmental destruction,
etc.), hang it where it belongs, with penalties that actually matter to the sociopath, if behaviors
are going to change - around the necks of the individual rotten humans that plot and plan and
operate all the stuff that is killing ordinary people and the planet.
Corporate "beneficial owners"
get to hide behind the screen of opacity and deflection that comes from the perversion of the
notion that "business" needs require immunity of individuals from the consequences of "corporate"
behavior. "Piercing the veil" requires meeting an extreme burden of proof that the corporation
is a fraudulent shell, or merely an alter ego of the individual officer/owner. And if course the
Wealthy and their advisers and facilitators and wholly owned political actors are still in the
game, with huge resources even if currently under some increasing and likely temporary constraints,
and they will be doing their damndest to preserve existing moats and walls and veils and find
new ways to pervert the legitimacy-granting functions of law-making to protect their pleasure
palaces and "specialness."
Eat the Rich, reads the old bumper sticker from Hippier days… With a plate of fava beans, and
a nice sauce of Retribution and a side of Restitution…
I have seen one case in particular, where the CEO made one set of sworn statements to the SEC
in the 10k, and said the exact opposite in Federal court in the same month. Neither legal team
picked up on this or mentioned it, and neither did the judge. It was incredibly aggravating to
watch. In this case he rode the company into the ground while pumping and dumping like mad, and
got away with it. The lawsuit was simply another vehicle to pump the stock, it didn't matter if
it even had any merit - which it didn't. Years later, the company imploded ithe only a few employees
left, the execs walked away with millions, etc. and they made a lot of enemies along the way.
Hopefully greater regulation and international cooperation will surface the tax evaders and
capture their previously unpaid taxes. But it will also drive many of them deeper into organized
crime-style hiding schemes. For example, using squeaky-clean nominees acting as beards: here's
how it works in many communities – one guy "owns" many rental properties for which there are long-term
tenants, and the rent equals exactly the carrying cost of the property. The tenants happen to
be businessmen and their families who run pretty close to the wind and whose assets are thereby
continually at risk – effectively, they protect their houses from creditors by holding them in
a trustworthy nominee name – the "legal owner" is a hidden agent for the actual owners. Totally
undetectable. But enforcement of this type of contract is extra-legal – organized crime-style
– and communal.
This type of setup is also a classic money-laundering vehicle – involving property flips between
ostensibly unrelated parties but in reality coordinated. Hence distorted real estate markets as
noted by Northeaster above. First $500,000 of profit on a principle residence sale is non taxable.
I'd suggest the IRS focus on auditing house sales for which the principle residence exemption
has been claimed, especially when people make close to the limit several times over (say) a ten-year
period.
Way back when dinosaurs roamed the Earth, and I was taking Income Tax in law school, I couldn't
shake the feeling that the whole point of the class was to assist people (corporations are people,
my friend) to scam the government. While no one likes to pay taxes, these taxes provide services
that people do, in fact like. It's all I can do to resist slapping folks who complain about the
condition of the roads, and then in the next breath, whine about their tax burden.
Anyway, cheating the government out of one's fair share of the tax burden means 2 things:
1.) The remaining burden falls more heavily on those who DO pay; and
2.) Unpunished cheating encourages more people (and corporations) to cheat. "If they're not paying,
why should I pay?"
After that class, I couldn't run fast enough away from tax law as it seemed to attract classmates
I rather loathed. I couldn't agree more that tax lawyers who encourage cheating should face disbarment
and fines. Apologies to my tax law brethren who try to do the right thing. I know some fine CPAs
and tax guys. It just wasn't my calling.
I began my career as a CPA in the early '70s in the SF Bay area and virtually all of the lawyers
I came in contact with had the same thoughts about taxes as you did. One of my accounting professors
used to go on about how it was incredible that an attorney could pass the bar and practice law
without ever having taken one tax course.
Particularly when you consider that there is very little
that a lawyer does that does not in some way involve taxes. So for us CPAs this was just an opening
for us to specialize in an area where lawyers had little or no interest.
In those days I recall
that when you actually needed a tax attorney he was usually – I won't say loathsome – but kind
of an odd sort. Recently I spoke to my ex-partner who took over our practice and the subject of
tax attorneys came up. He reported to me that in the Bay Area tax attorneys are now billing $900
to $1,000 per hour. I guess you can call this supply side economics at work. As the number of
mega zillionaires grows in the SF/Silicon Valley area, demand has apparently been created for
a new category of super lawyer. The Free Market really can do some wonderful things when manipulated
properly.
You have to have your brain turned inside out to understand tax well enough to be a tax lawyer.
Most regular lawyers have some antipathy for tax lawyers (I've sensed this and confirmed it).
The logic of tax is extremely arcane, non-intuitive, and pedantic. Plus it does not have commercial
value added.
this is thing…..nearly every establishment related profession seems, in my mind at least, to
be corrupted by fraud and graft……be it Pharma, Financials, Medical, MIC, Education, Agriculture,
Law & Judicature, Transportation & Energy, National social policy, Foreign & National & Security
policy……..
I'm an American citizen living overseas. For me an "offshore account" is not an option, it's
a fact of life. Creating fair laws to control tax evasion are therefore of interest to me.
One example of the opposite of fair law is FATCA. This is quite a terrifying bit of poorly
conceived legislation; intended to go after blatant tax evaders and sanction evaders, but instead
creating penalties that can be life ruining for a middle class expat that makes an honest mistake
in their reporting. The penalties on banks (and by extension foreign countries) that did not want
to subject themselves to US law are also overly aggressive. So aggressive that many financial
institutions refused to deal with any Americans, even for things as simple as a savings account.
"Knowing your customer" became discrimination based on citizenship.
I'm just hoping that any changes to enforcement or regulation that come about from the PPs
take this into account.
Regarding Standard Chartered, I'm not quite sure it's absolutely clear cut that they were in
the wrong:
They may have settled just to make the problem go away, and to maintain access to the US financial
system. The US has a habit of imposing it's laws on the rest of the world, or ignoring international
law it doesn't like. In my opinion, the sanctions on Iran were in many ways outright bullying,
very much like with those on Cuba.
Buh? Standard Chartered defied the advice of its US outside counsel and falsified wire transfer
documents in a systematic manner after having been previously sanctioned for handling the transfer
of funds to Iran for its oil sales, and to Sudan and other prohibited jurisdictions. You clearly
have not read Benjamin Lawsky's order against the bank. Standard Chartered had a branch in New
York to do dollar operations, and all dollar transactions ultimately clear (have to clear) through
that branch.
These were clear-cut violations of NY banking rules and
Lawsky could have yanked Standard Chartered's NY banking license, which would have been a cataclysmic
event for the bank. And after Federal regulators initially acting offended that Lawsky had end
run and embarrassed them, they stepped up and issued big fines against Standard Chartered of their
own.
You also omit that Standard Chartered got yet another round of fines for failing to comply
with the changes required! That led to the ouster of CEO Peter Sands, who had been defiant all
along. From the New York Times in 2014,
Caught Backsliding, Standard Chartered Is Fined $300 Million :
It took $667 million in fines and a promise to behave for the British bank Standard Chartered
to emerge from the regulatory spotlight. All it took to return there was its failure to fully
keep that promise.
In a settlement announced on Tuesday by New York State's financial regulator, Standard Chartered
will pay a $300 million fine and suspend an important business activity because of its failure
to weed out transactions prone to money-laundering, a punishing reminder of settlements in
2012. Those settlements with state and federal authorities resolved accusations that Standard
Chartered, in part through its New York branch, processed transactions for Iran and other countries
blacklisted by the United States.
The New York regulator, Benjamin M. Lawsky, has now penalized Standard Chartered for running
afoul of the 2012 settlement, which he said required the bank to "remediate anti-money-laundering
compliance problems."
An independent monitor, hired as part of Mr. Lawsky's 2012 settlement, recently detected
that the bank's computer systems failed to flag wire transfers flowing from areas of the world
considered vulnerable to money-laundering, according to Mr. Lawsky's order. The order did not
specify the number of transactions that the bank's filters failed to identify, but a person
briefed on the matter said that it was "in the millions."
Please stop defending crooked bank behavior. Plus this is agnotology, which is against our
house rules.
Thanks for this. The problem with the Panama Papers for those of us outside economics and finance
is that we don't understand the mechanisms and regulations that ease all of this movement of money.
Even though I have stocks in my IRA, it isn't as if the companies report their financial messes
in the proxy statements. Au contraire, it's all the glory of Jeffrey Immelt all the time.
You may want to check McClatchy's website as they have some explanatory videos and terrific
reporting.
I got started on all the tax haven skullduggery by reading Yves, so it's wonderful to see this
getting a far wider, fully documented exposition.
Also, Nicholas Shaxson's Treasure Islands: Tax Havens and the Men Who Stole the World
is one of the best books that I've ever read. His blog is here:
http://treasureislands.org
Earlier this week, a friend said, "Is it a good day?" I said, "It's an AWESOME day! All the
sleaze is finally coming out into the sunlight."
'It now takes weeks to open a new account that is not a personal account, say for your rugby
club.'
… which is why workarounds, both old school (gold) and new (anonymous digital currencies),
will be found to sidestep the politicization of government currencies, which now come bundled
with odious surveillance that makes their use increasingly unattractive.
These are both property, not money, and not at all workable for anyone who needs them for transactions.
Both are volatile and bitcoin with its blockchain makes its entire history of past holders accessible.
That's not a desirable feature for someone hiding from the taxman.
Good grief. What's the world coming to? Are we now expected to visit our offshore paradise
and suitcase money home? The gentlemen in Customs will be checking every flight from the Caymans.
"The one Western country that does not have a deadline for complying with the Common Reporting
Standard is the US." – Ahh ha – is this part of the solution to falling inwards investment?
"... Perhaps that's the problem with economics: the economists are so wrapped up in politics they can't tell where one starts and the other ends. Economics becomes nothing more than politics with math thrown in to lend authority to "very serious" agendas. ..."
"... Much like theology, it's a matter of culture and clique. Fitting they break up the field into Orthodox and Heterodox. Perhaps they should have economic cardinals that elect an economic pope. ..."
"... "When economic power became concentrated in a few hands, then political power flowed to those possessors and away from the citizens, ultimately resulting in an oligarchy or tyranny." John Adams ..."
"... Politics and economic matters cannot be separated. Most politics are an expression of economic interests; in fact almost all - things that appear to be about "power", social dominance, and social mores are also mostly motivated by arranging or sustaining an environment where certain groups get to decide matters of the economy at the expense of others. ..."
"... Have you heard the phrase "follow the money", and even older "cui bono"? It's the same principle. Most motivations are based in economic affairs and conflicts. ..."
...Krugman may be an economist, but this politicking op-ed has nothing to do with economics.
Perhaps that's the problem with economics: the economists are so wrapped up in politics they
can't tell where one starts and the other ends. Economics becomes nothing more than politics with
math thrown in to lend authority to "very serious" agendas.
BTW, how are economic ideas established, in any case? We know with science, falsifiable hypotheses
are put forward and put to the test. Economists know enough about statistics to hide behind the
ethics problem of running economic experiments. Even though they ARE running economic experiments
with their Aristotelian notions that almost always get it wrong: from "efficient" taxation nonsense
that gives the rich big tax breaks, to investor-protecting inflation targeting that ran the economy
into the ground -- which they call the Great Moderation; etc.
Much like theology, it's a matter of culture and clique. Fitting they break up the field into
Orthodox and Heterodox. Perhaps they should have economic cardinals that elect an economic pope.
Politics is deeply connected to economics. Especially under neoliberalism. It is actually difficult
to distinguish two and many economic issues are highly political ("role of the market in the society").
Moreover:
"When economic power became concentrated in a few hands, then political power flowed to those
possessors and away from the citizens, ultimately resulting in an oligarchy or tyranny." John
Adams
Politics and economic matters cannot be separated. Most politics are an expression of economic
interests; in fact almost all - things that appear to be about "power", social dominance, and
social mores are also mostly motivated by arranging or sustaining an environment where certain
groups get to decide matters of the economy at the expense of others.
Have you heard the phrase "follow the money", and even older "cui bono"? It's the same principle.
Most motivations are based in economic affairs and conflicts.
Financial booms have become a chronic feature of the global financial system. When these booms
end in crises, the impact on economic conditions can be severe.
Carmen M. Reinhart and Kenneth S. Rogoff
of Harvard pointed out that banking crises have been associated with deep downturns in output
and employment, which is certainly consistent with the experience of the advanced economies in the
aftermath of the global crisis. But the after effects of the booms may be even deeper and more long-lasting
than thought.
Gary Gorton
of Yale and Guillermo Ordoñez of the University of Pennsylvania have released a study of "good
booms" and "bad booms," where the latter end in a crisis and the former do not. In their model, all
credit booms start with an increase in productivity that allows firms to finance projects using collateralized
debt. During this initial period, lenders can assess the quality of the collateral, but are not likely
to do so as the projects are productive. Over time, however, as more and more projects are financed,
productivity falls as does the quality of the investment projects. Once the incentive to acquire
information about the projects rises, lenders begin to examine the collateral that has been posted.
Firms with inadequate collateral can no longer obtain financing, and the result is a crisis. But
if new technology continues to improve, then there need not be a cutoff of credit, and the boom will
end without a crisis. Their empirical analysis shows that credit booms are not uncommon, last ten
years on average, and are less likely to end in a crisis when there is larger productivity growth
during the boom.
Claudio Borio, Enisse Kharroubi,
Christian Upper and Fabrizio Zampolli of the Bank for International Settlements also look at
the dynamics of credit booms and productivity, with data from advanced economies over the period
of 1979-2009. They find that credit booms induce a reallocation of labor towards sectors with lower
productivity growth, particularly the construction sector. A financial crisis amplifies the negative
impact of the previous misallocation on productivity. They conclude that the slow recovery from the
global crisis may be due to the misallocation of resources that occurred before the crisis.
How do international capital flows fit into these accounts?
Gianluca Benigno of the London School of Economics, Nathan Converse of the Federal Reserve Board
and Luca Forno of Universitat Pompeu Fabra write about capital inflows and economic performance.
They identify 155 episodes of exceptionally large capital inflows in middle- and high-income countries
over the last 35 years. They report that larger inflows are associated with economic booms. The expansions
are accompanied by rises in total factor productivity (TFP) and an increase in employment, which
end when the inflows cease.
Moreover, during the boom there is also a reallocation of resources. The sectoral share of tradable
goods in advanced economies, particularly manufacturing, falls during the periods of capital inflows.
A reallocation of investment out of manufacturing occurs, including a reallocation of employment
if a government refrains from accumulating foreign assets during the episodes of large capital inflows,
as well as during periods of abundant international liquidity. The capital inflows also raise the
probability of a sudden stop. Economic performance after the crisis is adversely affected by the
pre-crisis capital inflows, as well as the reallocation of employment away from manufacturing that
took place in the earlier period.
Alessandra Bonfiglioli of Universitat Pompeu Fabra looked at
the
issue of financial integration and productivity (working
paper here). In a sample of 70 countries between 1975 and 1999, she found that de jure
measures of financial integration, such as that provided by the IMF, have a positive relationship
with total factor productivity (TFP). This occurred despite the post-financial liberalization increase
in the probability of banking crises in developed countries that adversely affects productivity.
De facto liberalization, as measured by the sum of external assets and liabilities scaled
by GDP, was productivity enhancing in developed countries but not in developing countries.
Ayhan
Kose of the World Bank, Eswar S. Prasad of Cornell and Marco E. Terrones of the IMF also investigated
this issue (working paper here) using
data from the period of 1966-2005 for 67industrial and developing countries. Like Bonfiglioli, they
reported that de jure capital openness has a positive effect on growth in total factor productivity
(TFP). But when they looked at the composition of the actual flows and stocks, they found that while
equity liabilities (foreign direct investment and portfolio equity) boost TFP growth, debt liabilities
have the opposite impact.
The relationship of capital flows on economic activity, therefore, is complex. Capital inflows
contribute to economic booms and may increase TFP, but can end in crises that include "sudden stops"
and banking failures. They can also distort the allocation of resources, which affects performance
after the crisis. These effects can depend on the types of external liabilities that countries incur.
Debt, which exacerbates a crisis,
may also adversely divert resources away from sectors with high productivity. Policymakers in emerging
markets who think about the long-term consequences of current activities need to look carefully at
the
debt that private firms in their countries have been incurring.
And therein lies the half of Keynesian Economics that is ignored - running surpluses during the booms to tamp them down, and to have a reserve to pump into the economy during the busts.
\Blatant lies are in blue. Libya can't rump up production as civil war is
still ongoing and there is no signs ofreconsiliation betwtnn two major pforces
with ISIS as a third force, a spoler.
By the end of 2015, Saudi Arabia supplied 8.1 percent of the global oil
demand, which is higher than the 2014 figure of 7.9 percent, but still well
below its 8.5 percent global market share in 2013.
Saudi Arabia realized that the price war was not helping it to increase
its market share, instead, the price was taking a toll on revenue due to
plummeting crude oil prices. Ballooning budget deficits, depleting foreign
reserves, and the necessity of introducing unpopular measures brought about
memories of the
Arab
Spring.
Similarly, Russia, which is pumping at close to its peak capacity, is
worried about losing its market share in
Europe to Saudi Arabia.
The other nations participating in the meeting are also pumping near
maximum limits. With a production freeze, most nations will retain their
existing clients without worrying about losing them to the competitors.
This excludes Iran and Libya, which will
not take part in the production freeze talks, as both are in the process
of ramping up production.
Initially, this all started out as a price war with U.S. shale oil drillers
as the Saudi's feared they would lose their dominant hold over the oil markets.
But the outcome was not what the Saudi's expected. The Saudi's found themselves
isolated with no support from the U.S., fearing alienation if they continued
to oppose the majority demand of the OPEC nations to cut production.
"... Self-employment has risen substantially since the ACA took effect. ..."
"... One of the desired outcomes from the ACA was that it would free people from dependence on their employer for health care insurance, allowing them to work part-time or start a business if they so choose and get insurance through the exchanges. ..."
"... Yes labor force participation has increased but it still is only 63%. Yes the employment to population ratio is now 59.9% but it should be 62%. Slow progress with a long way to go. ..."
"... But the negatives, especially among the series that lead, are beginning to outweigh the positives. Revisions were mixed. The manufacturing workweek declined, and manufacturing jobs are now down YoY. Although temporary jobs rose this month, they have failed to top their December peak for the last 3 months. Short term unemployment has continued to rise slightly. A coincident indicator, aggregate hours, also failed to exceed its January high. ..."
The economy added 215,000 jobs in March, with the unemployment rate rounding up to 5.0 percent
from February's 4.9 percent. However, the modest increase in unemployment was largely good news,
since it was the result of another 396,000 people entering the labor force. There has been a large
increase in the labor force over the last six months, especially among prime-age workers. Since
September, the labor force participation rate for prime-age workers has increased by 0.8 percentage
points. This seems to support the view that the people who left the labor market during the downturn
will come back if they see jobs available. However, even with this recent rise, the employment-to-population
ratio for prime-age workers is still down by more than two full percentage points from its pre-recession
peak. Another positive item in the household survey was a large jump in the percentage of unemployment
due to voluntary quits. This sign of confidence in the labor market rose to 10.5 percent, the
highest level in the recovery to date, although it's still more than a percentage point below
the pre-recession peaks and almost five percentage points below the peak reached in 2000.
Other items in the household survey were mixed. The number of people involuntarily working
part-time rose by 135,000, reversing several months of declines. However, involuntary part-time
work is still down by 550,000 from year-ago levels. The number of people voluntarily working part-time
fell in March, but it is still 654,000 above its year-ago level.
One of the desired outcomes from the ACA was that it would free people from dependence on their
employer for health care insurance, allowing them to work part-time or start a business if they
so choose and get insurance through the exchanges. There has been a substantial rise in self-employment
since the exchanges began operating in 2014. In the first quarter of 2016, incorporated self-employment
was up by more than 400,000 (7.8 percent) from the same quarter of 2013. Unincorporated self-employment
was also up by almost 360,000 (3.9 percent).
While the employment growth in the establishment survey was in line with expectations, average
weekly hours remained at 34.4, down from 34.6 in January. This indicates that February's drop
in hours was not just a result of bad weather. As a result, the index of aggregate hours worked
is down by 0.2 percent from the January level. This could be a sign of slower job growth in future
months. ...
The average hourly wage rose modestly in March after a reported decline in February. There
is zero evidence of any acceleration in wage growth. The average for the last three months increased
at an annualized rate of 2.3 percent compared with the average of the prior three months. This
is virtually identical to the increase over the last year.
On the whole this is a positive report, both because the economy continues to create jobs at
a healthy pace and even more importantly because it indicates that people are returning to the
labor market. The continuing weakness in wage growth is discouraging, but also should signal to
the Fed that there is little reason to raise interest rates.
PPaine :
The job markets are coming alive
But is the punch bowl headed for the kitchen sink ?
We need to set much higher target ratios for E to P
We need 15 million more jobs in short order
To get near vickrey zone conditions on job markets
Obviously we won't go there
But just how far will we go
Before the bastards turkey wire the system ?
PPaine -> PPaine ...
We need the quit rate to go up another 30% at least
PPaine -> PPaine ...
I mean on top of the 50% rise to match the high water mark of the Clinton miracle
[ The quits rate only needs to climb 15% to get back to the Clinton level. ]
anne -> PPaine ...
Never ever explain what "Vickrey zone conditions" are, as long as there is no concern with being
understood.
RC AKA Darryl, Ron -> anne...
[Google William Vickrey. Highlights of Wikipedia:]
...Vickrey's economic philosophy was influenced by John Maynard Keynes and Henry George. He
was sharply critical of the Chicago school of economics and was vocal in opposing the political
focus on achieving balanced budgets and fighting inflation, especially in times of high unemployment...
Selected works[edit]
"Counterspeculation, Auctions, and Competitive Sealed Tenders", Journal of Finance, 1961. The
paper originated auction theory, a subfield of game theory.
"Fifteen Fatal Fallacies of Financial Fundamentalism: A Disquisition on Demand Side Economics".
October 5, 1996.
Arrow, Kenneth Joseph; Arnott, Richard J.; Atkinson, Anthony A.; Drèze, Jacques (editors) (1997).
Public Economics: Selected Papers by William Vickrey. Cambridge, UK: Cambridge University Press.
ISBN 0-521-59763-3.
Warner, Aaron W.; Forstater, Mathew; Rosen, Sumner M. (editors) (2000). Commitment to Full Employment:
The Economics and Social Policy of William S. Vickrey. Armonk, N.Y: M.E. Sharpe. ISBN 0-7656-0633-X.
Pavlina R. Tcherneva; Forstater, Mathew (2004). Full Employment and Price Stability: The Macroeconomic
Vision of William S. Vickrey. Edward Elgar Publishing. ISBN 1-84376-409-1.
[Paine repeatedly references William Vickrey because of his substantial commitment to full employment
policy as sound economics (as if human well being for the masses actually mattered).]
RC AKA Darryl, Ron -> RC AKA Darryl, Ron...
And Anne repeatedly asks "What does this reference to Vickrey mean?" Maybe Anne's battery is almost
dead and working memory gets reset each time the solar generator powers down. The programming
still functions because it is stored in non-volatile memory on the hard drive, but volatile RAM
is wiped each time that the sunsets after the battery storage is exhausted.
anne -> PPaine ...
We need 15 million more jobs in short order.
To get near Vickrey zone conditions on job markets
[ Where did the 15 million number come from, and I still have no idea what Vickrey zone conditions
are? ]
pgl :
Yes labor force participation has increased but it still is only 63%. Yes the employment to population
ratio is now 59.9% but it should be 62%. Slow progress with a long way to go.
pgl -> pgl...
I may be setting the bar too low with my call for a 62% employment to population ratio. Brad DeLong
puts it north of 62.5%:
But the negatives, especially among the series that lead, are beginning to outweigh the positives.
Revisions were mixed. The manufacturing workweek declined, and manufacturing jobs are now down
YoY. Although temporary jobs rose this month, they have failed to top their December peak for
the last 3 months. Short term unemployment has continued to rise slightly. A coincident indicator,
aggregate hours, also failed to exceed its January high.
So while we can cheer yet another month of jobs added to the economy, and the jump in participation,
this report just adds to my concern about next year.
pgl -> New Deal democrat...
I won't cheer until the employment to population ratio reaches 62% and real wages actually rise
on a consistent basis.
sanjait -> New Deal democrat...
Don't look at peaks in monthly data, look at rolling average trends.
Also, while manufacturing specific data can be meaningful ... these days the dynamics in those
data are largely dominated by swings in O&G, which is in a historic funk.
sanjait :
In general, the trends look good. The working age E/P number is, to me, the most meaningful single
indicator we have, and it appears to be continuing to rise and at an accelerating rate. That's
a very good sign. It's very arguable that things could and should be improving at a faster rate,
but when this stat is rising things are indeed improving.
Baker's note about ACA and self-employment is also an important one. One important aspect of ACA
is that it is GREAT for entrepreneurship. People are more free to leave jobs and start companies
when their ability to get health insurance isn't predicated on their working for a large company
with a group plan.
The GOP makes a lot of noise about how ACA supposedly kills jobs and stifles
industry, but the reality is that tomorrow's tech leaders, and major employers, are getting a
boost today from ACA.
Ben Groves :
It is not sustainable and will reverse in April imo. Driving unemployment down.
gdd9000
4h
cant spend what you dont have unless you borrow, and that
noose is starting to tighten for the vehicle market. And
leasing is the next victim, as the flood of off leases are
now rolling in and killing residuals. uh, buhbye
People want decent paying jobs instead of getting more
debts/credits while deleverage from past profligate. Banks
sitting on trillions of reserves because of lack of demand
for fund as well as risk averse behavior in debt markets.
Pushing string.
"... By C.P. Chandrasekhar, Professor of Economics, Jawaharlal Nehru University, New Delhi and Jayati Ghosh, Professor of Economics and Chairperson at the Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi. Cross posted from Triple Crisis ..."
Posted on
April 1, 2016
by
Yves Smith
By C.P. Chandrasekhar, Professor of Economics, Jawaharlal Nehru
University, New Delhi and Jayati Ghosh, Professor of Economics and Chairperson
at the Centre for Economic Studies and Planning, Jawaharlal Nehru University,
New Delhi. Cross posted from
Triple Crisis
Much has been made of how there has been a
substantial shift in the balance of economic power between the advanced
capitalist economies (or the "North") and some economies of the global South.
It is true that very recently the hype surrounding "emerging markets" has died
down, as international capital flows have swung away from them and many of them
have shown decelerating growth or even declines in income as global exports
fall. Nevertheless, the feeling persists that – in spite of a supposedly
resurgent US economy – the advanced economies are generally in a process of
relative decline, while the developing world in general and certain economies
in particular have much better chances of future economic dynamism. And this
process is generally seen to be the result of the forces of globalisation,
which have enabled developing countries, especially some in Asia, to take
advantage of newer and larger export markets and improved access to
internationally mobile capital to increase their rates of economic expansion.
Chart 1
But how significant has this process actually been?
In fact, there has definitely been some change over the past three and a
half decades, but it has been more limited in time than is generally presumed.
Chart 1 plots the share of the advanced economies in global GDP in current US
dollar prices, calculated at market exchange rates. (Data for all the charts
have been taken from the IMF World Economic Outlook October 2015 database.)
This shows that the share of advanced economies declined from around 83 per
cent in the late 1980s to around 60 per cent now, which is really quite a
substantial decline. However, the bulk of this change occurred in a relatively
short period: the decade 2002 to 2012, when the share dropped from 80 per cent
to 62 per cent. The periods before and after have shown much less variation,
and indeed, the share seems to have stabilised at around 61 per cent
thereafter.
Chart 2 looks at the obverse of this process – the change in the shares in
global GDP of the major developing regions, with China treated as a separate
category on its own. This shows a somewhat more surprising pattern, because it
indicates that the dominant part of this shift is due to the increase in
China's share, which rose from around 3 per cent to more than 15 per cent. Once
again, this happened essentially during the decade after 2005, when the share
of China in global GDP at market exchange rates jumped by more than ten
percentage points. Indeed, the change in China's share alone explains 87 per
cent of the entire decline in the share of the advanced economies in the period
1980 to 2015. Considering only the last decade, that is after 2005, the
relative increase in China's GDP accounts for a slightly lower proportion of
the change, at 67 per cent – which is still hugely significant.
Chart 2
The change in shares of other regions provides some interesting insights.
The Latin American region experienced a medium term decline in relative income
share over the 1980s (the "lost decade"), recovered somewhat in the 1990s
before declining once again in the late 1990s and early 2000s. The global
commodity boom of 2003 onwards was associated with a revival in the region's
economic fortunes and the share of the region increased from 5 per cent in 2003
to more than 8 per cent in 2011, but thereafter it has stagnated and fallen
with the unwinding of that boom.
The income share of the MENA region (Middle East and North Africa) appears
to be very strongly driven by global oil prices, with sharp peaks in period of
high oil prices and stagnation or decline otherwise, and over the entire period
there has been a stagnation in income share rather than any increase. An even
more depressing story emerges for Sub Saharan Africa, which showed decline in
income share for a prolonged period between 1980 and 2002, and subsequently a
slight recovery (from 1.1 per cent in 2002 to around 2 per cent in 2012 and
thereafter) that was still well below the share of more than 3 per cent in
1980.
The only developing region that shows a clear increase is developing Asia,
which in this chart excludes China to clarify the respective significance of
both. But the increase in the income share of this region (minus China) has
been much less marked than that for China, and most of it occurred after 2002,
as the income share rose from 3.5 per cent in 2002 to 6.4 per cent in 2015.
Chart 3
Chart 3 indicates the changes in shares of the largest Asian developing
countries other than China. It is evident that in terms of increasing share of
global GDP, India has been the most impressive performer over the past decade
in particular, with its share increasing from 1.8 per cent in 2005 to 3 per
cent in 2015. Note, however, that this is still tiny in comparison to China,
and indeed, just the increase in China's share over that decade has been more
than three times of India's aggregate share. South Korea's share has also
increased, mostly over the 1980s and early 1990s, while Indonesia's share
increase occurred mostly during the commodity boom of the 2000s.
In terms of per capita GDP, however, the Indian performance looks much less
impressive than those of the major Asian counterparts. Interestingly, even the
Chinese experience appears not as sharply remarkable, although still hugely
better than that of India. Chart 4 tracks the movements of per capita GDP,
measured now in Purchasing Power Parity (PPP) exchange rates rather than market
rates. There are numerous problems with the use of the PPP measure, but for
current comparative purposes it does provide some kind of indicator. This shows
that by far the most impressive performance in terms of increasing per capita
GDP has been in South Korea, followed by Malaysia. India shows the least
improvement among these five economies, despite its apparently more rapid
increase in terms of share of world GDP in the last decade.
Chart 4
Overall, therefore, while the world economy has changed over the past three
decades, this change should not be exaggerated for most developing regions, or
even for most countries in what is apparently the most dynamic region of Asia.
That China accounts for almost all of the shift isn't so much new news, as
repeatedly memory-holed news. It's not surprising that it keeps going down the
memory hole, as it completely destroys the case for the neoliberal policy
consensus that China flouted over that period.
Every talking head who extolls the Washington Consensus for "lifting the
poor of the world out of poverty" is a stone cold liar. The real goal of
"globalization" isn't general prosperity, it's the continued domination of "us"
over the "lesser breeds".
It is the bringing the advantages of the third world to the others.
Why should we get paid more than them?
Look at all the billionaires that were lifted out of poverty in these
countries.
Our useless eaters get much more than their useless eaters,
PPP is a scam. To someone displaced here, it matters zero that the
worker in Mexico, for example, can get by on one tenth the wage that used
to be payed to someone here.
Look at all the billionaires that were lifted out of poverty in
these countries.
Look at the billions that did all the lifting. They still make as
close to zero as you can get.
Imagine for a moment, Tim Cook does the underground boss thing and
sneaks himself into the Foxconn factory for a spot on the assembly line
for a month. If he could get by the first few days and not scrap too many
phones, and become proficient and last the whole month at 60 hours a
week, what do you think his pay for this work would be? Would you like
your monthly pay to match it?
Thanks to multinationals being effectively stateless due to tax arbitrage
games, who actually has global economic power but the corporations themselves?
In the end, the States do, because the corporations need the military and
other coercive power of States to enforce contracts and extract their pounds
of flesh. The USA has the world largest GNP (or GDP, I can never keep the
two straight although when I was a kid in the 1970s, it was GNP) and the
world's most destructively powerful military (it may not be able to "defeat"
you, but it can make you wish you had never screwed with Uncle Sam). GNP
backstops military power and other nasty forms of coercion. Poor countries
simply can't throw their weight around effectively in what is still an
international jungle. Rich ones can.
It'd be interesting to see what Chart 2 looks like if measured in PPP rather
than at market rates. It might demonstrate how much the structure of global
markets effects the valuation of production, and how not-flat the globalized
economy is. I'd like to see measures other than GDP as well, especially
industrial commodities, capital goods, automobile, and shipping production.
When it comes down to it where does the industrial capacity actually reside,
and how has this shifted over the years?
Since April 2011 - nearly five years ago - commodity prices have fallen a
harrowing 48%, measured by the CCI-TR index. Over the same period, the US
dollar index (DXY) rose almost 30%.
These two trends contributed to the recent flattening out of developing
economy gains in GDP share, measured in USD.
Commodities are sufficiently depressed that on a valuation basis, a
turnaround might be expected, and indeed may already have commenced in the
CCI's 5.7% rise from its 15 Jan 2016 low.
In a more favorable global macro environment, developing economies likely
will gain more relative GDP share over the next five years than they did in the
headwinds of the past five.
That's a logical premise and it implies that developing countries, with a
sparse and elitist infrastructure, will be the ones to do big new infra that
promotes equality and stability, but do not waste their opportunity to
balance their economies by using old ideas about investing in all the
mistakes and boondoggles of neoliberalism… etc. This opportunity is part of
a global power shift which demands environmental cooperation. Just
personally hoping all the carpet baggers go directly to jail.
The obamacare mandate will go down as the straw that broke the camel's back,
and Chinas printing will reverse, with scant more to show for itself than
Japan's push behind the internet.
Pushing government religion is one thing; mandating participation is
another.
The collapse in oil prices has demolished investment in new projects,
the results of which will be felt in the 2018 to 2021 timeframe, due to
multiyear lead times
Oil production in the UK actually
increased a bit in 2015, after about two decades of steady declines.
The additional 100,000 barrels per day came from new offshore oil projects
that were initiated in 2012 when oil prices were much higher, plus extra
oil squeezed out from existing fields.
The collapse in oil prices has demolished investment in new projects,
the results of which will be felt in the 2018 to 2021 timeframe, due to
multiyear lead times. The number of new projects greenlighted in 2015 was
less than half of the level seen in 2013 and 2014.
As a result, beginning in 2018, the UK could see more severe production
declines.
Oil prices have hovered at $40 per barrel for much of the last week, as the
markets try to avoid falling back after the strong rally since February.
Investors
see shale production falling and demand continuing to rise, which point to the
ongoing oil market balancing.
But it is unclear at this point if the rally from
$27 per barrel in February to today's price just below $40 per barrel is here
to stay. Fundamentals, while trending in the right direction, are still weak.
As the witch hunt on the rich still goes on feverishly, people forget that an economical
successful society needs trailblazers like McClendon. A society must be open to extreme characters
for good and bad as these people stir up the pond and keep the wheels running. The current process
in society of reverting to the mean, when only incompetent bureaucrats can earn big money combined
with a top down centralized decision making process will make society much poorer over time.
Society must allow concepts and new ideas through a bottom up process managed by exceptional individuals
like McClendon. The European Union -which becomes more and more a top down society similar to the
Sowjet Union – and especially France are already good examples how fast a society can vanish through
a centralized approach holding down individual activity.
This has been even recognized by China when Deng Xiao Ping famously said: 'Unfortunately we have
to allow some people to become millionaires.' Should centrists get its grip to power, millionaires
will be poorer and the poor will not be richer. It is not that Cuba becomes the new USA, it will
turn the US into the new Cuba.
"... Shiller said that he's concerned about recent volatility and "spectacular drops" in U.S. stocks and overseas markets, warning that further weakness could lead to a loss of confidence and cause investors to develop a "wait-and-see attitude." ..."
"It's not bubble territory yet, but bubbles are always a possibility," said Shiller. "Right
now we're sitting where we were in 2003, and that developed over the next three years into quite
a bubble." In 2006, there were more than 1.2 million foreclosure filings, a rate of one
foreclosure filing for every 92 U.S. households nationwide.
Taking a look at the broader picture, Shiller said that he's concerned about recent
volatility and "spectacular drops" in U.S. stocks and overseas markets, warning that further
weakness could lead to a loss of confidence and cause investors to develop a "wait-and-see
attitude." He's also keeping an eye on the recent plunge in oil prices, saying it would be
"worrisome if these fears return."
Just
over three months after the authorities lifted the four-decade ban on crude oil exports, the U.S.
has actually exported less this year than it did over the same period the year before, when the ban
was still in place.
According to Clipper Data market intelligence cited by the
Financial Times , we've seen a 5 percent decline in U.S. crude oil export volumes since the beginning
of this year. The data suggests that on average we are exporting (waterborne) 325,000 barrels per
day now, compared to 342,000 barrels per day during the first months of 2015.
And there's no official data yet-not since the beginning of this year, when the U.S. Energy Information
Administration (EIA) noted that during the
week ending 22 January , the U.S. had exported just shy of 400,000 barrels of oil, which again
was 25 percent less than what was exported for the same week in 2014.
An oil tanker that reached a French port in January was the first post-ban delivery of U.S. crude
oil, but things haven't really picked up pace since then.
January's cargoes, totaling about 11.3 million barrels, marked a 7 percent decline from U.S. crude
exports in December, according to data by the
U.S. Census Bureau . Shipments during January went to Curacao and France, in addition to Canada,
the primary destination. The total number of tankers that have set sail with U.S. crude oil will
not be known until comprehensive data on February's shipments is released by the U.S. Census Bureau.
The immediate beneficiaries of the ban suspension are gas and oil companies such as Chevron and
Exxon Mobil-among the most tireless lobbyers against the ban-and oil trading giants such as Vitol
Group BV and Trafigura Ltd Pet.
Europe and Asia are flooded with oil from Russia and the Middle East, though the first two shipments
to leave the U.S. post-export ban went to Europe: one to Germany and the other to France, to be used
in a
refinery in Switzerland . Dutch media outlets
reported in January that a tanker from Houston had reached Rotterdam port, but this remains just
a drop in the global export bucket.
In Asia, even China's state-run Sinopec-the world's second-largest refiner-has imported a consignment
of U.S. oil, according to a
Reuters source . Japan's Cosmo Oil was the first Asian buyer of U.S. oil, purchasing some 300,000
barrels of U.S. crude in mid-January, which will be delivered to its refineries in mid-April.
The current market turmoil has created a once in a generation opportunity for savvy energy investors.
Whilst the mainstream media prints scare stories of oil prices falling through the floor smart investors
are setting up their next winning oil plays.
The very first South American country that will import U.S. crude oil is Venezuela. In early February,
Venezuela's state-run oil company PDVSA imported a 550,000-barrel cargo of West Texas Intermediate
(WTI) through its U.S.-based
Citgo
Petroleum affiliate . Venezuela started importing foreign crudes in 2014 amid a fall in its own
production - buying mostly Angolan and Nigerian light grades.
WTI is also expected to be exported to
Israel, where Swiss commodities house Trafigura will ship some 700,000 barrels. Atlantic Trading
& Marketing, the U.S. trading unit of French Total SA, has been planning an export cargo of U.S.
crude from Cushing.
Also, earlier this month, Exxon
became the first U.S. oil company to export U.S. crude, sending a tanker from Texas to a refinery
it owns in Italy.
However, storage is now at the highest level in at least a decade.
U.S., crude storage levels
hit 487 million barrels in early November, closing in on the 80-year high of 518 million barrels
in the last week of February.
According to the EIA ,
about 60 percent of the U.S. working storage capacity is filled.
Globally, the picture isn't much better, with the International Energy Agency (IEA) saying that
1 billion barrels were added to storage in 2015 alone. OPEC has reported that crude oil stockpiles
in OECD countries currently exceed the running five-year average by 210 million barrels.
Bloomberg still promotes oil glut myth. There are paranoidal about rising oil
prices and for a good reason: the US economy might well be toast if proces return
to $100 level.
Notable quotes:
"... Iran boosted output by 187,800 barrels a day to 3.13 million a day in February, the biggest monthly gain since 1997, OPEC said in a report on Monday. Brazil will also add more than 100,000 barrels of supply this year and has shown little interest in taking part. ..."
There are reasons to be doubtful that the planned freeze can radically alter
an oil market that's fallen victim to a global fight for market share, causing
stockpiles to rise to a record. Most significantly, Iran is seeking to increase
production after the end of economic sanctions and has said it won't participate
in any accord until its output has recovered.
Iran boosted output by 187,800
barrels a day to 3.13 million a day in February, the biggest monthly gain since
1997, OPEC said in a report on Monday. Brazil will also add more than 100,000
barrels of supply this year and has shown little interest in taking part.
Saudi Arabia boosted oil exports to a 10-month high of 7.84 million barrels
a day in January, just weeks before the initial freeze agreement, according
to the Joint Organisations Data Initiative, an oil industry group overseen by
the International Energy Forum.
"We will now see if OPEC and Russia are able to freeze the bears in the oil
market," said Olivier Jakob, managing director at consultants Petromatrix GmbH.
"The significance of the agreement is that it could remove the perception that
OPEC is fighting for market share."
Other forces have driven prices higher in recent weeks. Outages from Iraq
and Nigeria have disrupted more than 800,000 barrels a day of supply and tightened
the Brent market, according to Citigroup Inc. And falling drilling activity
in the U.S. shale industry has seen analysts raise forecasts for declines in
North American production.
One key question is how fast shale production could come back if OPEC and
some non-OPEC producers succeed in driving prices higher.
Oil ministers for Argentina, Venezuela and Colombia didn't immediately respond
to questions on whether they would attend. Ecuador's oil minister said he still
plans to gather Latin American producers before April 17, after a planned meeting
earlier this month was postponed.
"It's not surprising they'd be willing to agree to this because the outlook
for a further production increase was quite limited," Jeff Currie, global head
of commodities research at Goldman Sachs Group Inc., said in an interview on
Bloomberg Television. "You can't operate a cartel the way you used to."
"... Gramm seems pretty firmly in free market ideologue territory. Cruz deciding to bring him in as an economic advisor is certainly noteworthy. ..."
"... The short version: the Glass Steagall repeal allowed the banks to become "Too Big To Fail" and gave them enormous political leverage. It's the political leverage - the ability to count on Uncle Sam to come to the rescue, and provide easy terms for rent-seeking - that GLB provided. If they were separated, and only the investment banks could make risky investments, we would let the investment banks fail while protecting the boring old payments system. You won't get an argument on CFMA, however: it was worse. And that has Gramm's fingerprints all over it. And it might not have passed if the SIFIs were smaller. ..."
"... When I think of the villains of the Great Recession, Phil Gramm is always Public Enemy #1. ..."
"... The Glass Steagall repeal was not my biggest problem with Phil Gramm. My big problem is he wanted to have a completely deregulated financial sector. Sort of like when Newt Gingrich talked about "rational regulation" which was code for no regulation. But anyone who understands financial economics and our financial system knows that no regulations whatsoever is a recipe for a complete melt down. Which is what happened. ..."
Some people look at subprime lending and see evil. I look at subprime lending and I see the
American dream in action. -- former U.S. Senator Phil Gramm, Nov. 16, 2008
...Gramm has been brought on as a senior economic adviser to Republican presidential candidate
Ted Cruz. This isn't a promising development for Cruz... Not to put too fine a point on it, but
I believe -- as do many others -- that Gramm was one of the major figures who helped set the stage
for the crisis. ...
Gramm was a key sponsor of the ...
Gramm-Leach-Bliley Act , which effectively repealed the piece of the
Glass-Steagall
Act... The damage caused by rolling back Glass-Steagall pales compared with ... the
Commodity
Futures Modernization Act of 2000 . Gramm was a co-sponsor of the legislation, which exempted
many derivatives and swaps from regulation. Not only was the law problematic, but it veered into
potential conflict-of-interest territory. ...
We got a chance to see those consequences a few years later when American International Group
failed, thanks in part to swaps ... on $441 billion of securities that turned out to be junk.
AIG wasn't required to put up much in the way of collateral, set aside capital or hedge its risk
on the swaps. Why would it, when the law said it didn't have to? The taxpayers were then called
upon to bailout AIG to the tune of more than $180 billion.
Maybe it isn't too surprising that Cruz would seek advice from Gramm. Cruz, after all, seems
to want to hobble modern economic policy by returning to the gold standard. ... We have seen these
movies before, and they end in tragedy and tears.
He also talks about Gramm's sad performance in his brief appearance as one of McCain's advisors
in 2008.
pgl :
Phil Gramm says he got his economic degree from the University of Georgia. Well - it was from
the Terry College of Business which is a business school. Not the graduate program of economics
of the University of Georgia. I guess this makes Gramm one notch above Stephen Moore, Donald Luskin,
and Lawrence Kudlow (aka the three stooges).
"Gramm's most notable moment in that position came on July 10, 2008, when he dismissed the
developing economic crisis as "a mental recession" in an interview -- and video -- released by
the conservative Washington Times. "We've never been more dominant," he said. "We've never had
more natural advantages than we have today. We've sort of become a nation of whiners." McCain
immediately disavowed the remarks, and a few days later Gramm stepped down as his campaign co-chairman."
OK that was July. Menzie Chinn always notes that Luskin was saying the same thing as late as
September 2008.
sanjait :
Gramm seems pretty firmly in free market ideologue territory. Cruz deciding to bring him in
as an economic advisor is certainly noteworthy.
Though I'm still struck by how determined some people seem to lump Graham Leach Bliley in as
a cause/major contributor to the crisis.
The CFMA very plausibly serves that purpose. If we want to mark Gramm as a villain, his sponsorship
of that bill should be sufficient, as well as his abject refusal to acknowledge the crisis in
real time.
But for whatever reason people have picked up Glass Steagall as a Very Important rule, and
seem to be pushing to rationalize that by claiming it is a big part of the crisis story.
Ritholtz, to his credit, is qualified and nuanced about this. He notes that CFMA is the big
story, and says GLB wasn't didn't "cause" the crisis.
But following through the links to his WaPo piece, he still looks like he is reaching for a
reason to label it a major contributor to the crisis.
He claims that removing G-S restrictions caused the major banks to in turn cause the shadow
banking entities like AIG, Bear, etc. to "bulk up" their holdings of subprime, based on ... nothing
that I can see.
Sure, the major banks were customers and counterparties for those shadow banks, but Ritholtz
seems to assume that if G-S weren't in place that demand would somehow have been less. Why?
Take a major bank with mixed commercial and investment banking activity and split the parts.
Would that have changed their activities? Not much. The commercial banking side still would have
held MBS (and purchase insurance on them) and the I-banks would still make speculative investments
of various types.
No one, as far as I've seen, ever bothers to tell a complete story where the structural incentives
in the financial sector changed as a result of Glass Steagall in a way that materially impacted
the depth or serverity of the housing crisis. How would splitting megabanks into separate big
C- and I-banks have changed anything? Bueller?
Instead I see a great many people, including well credentialed economists, just assume or hand
waive the claim that it made a big impact without bothering to model or specify it. I'm not saying
such an explanation couldn't exist that I'm not aware of ... but at this point I do see the absence
of explanation as evidence of absence.
pgl -> sanjait...
Gramm dismissing the concern over a recession in the summer of 2008 is the kicker for me!
The short version: the Glass Steagall repeal allowed the banks to become "Too Big To Fail"
and gave them enormous political leverage. It's the political leverage - the ability to count
on Uncle Sam to come to the rescue, and provide easy terms for rent-seeking - that GLB provided.
If they were separated, and only the investment banks could make risky investments, we would let
the investment banks fail while protecting the boring old payments system. You won't get an argument
on CFMA, however: it was worse. And that has Gramm's fingerprints all over it. And it might not
have passed if the SIFIs were smaller.
When I think of the villains of the Great Recession, Phil Gramm is always Public Enemy
#1.
The Glass Steagall repeal was not my biggest problem with Phil Gramm. My big problem is he
wanted to have a completely deregulated financial sector. Sort of like when Newt Gingrich talked
about "rational regulation" which was code for no regulation. But anyone who understands financial
economics and our financial system knows that no regulations whatsoever is a recipe for a complete
melt down. Which is what happened.
The Rage :
Cruz just wants to make money for his buddies while waving the bible. JDR was there 100+ years
before that "Ted".
"Unlike an enthusiastic bull or a scary bear, a bunny market hops about a bit but really
doesn't go anywhere, and bunnies have often dominated the stock market during the latter stages
of past economic recoveries," Paulsen said in a report this week for clients.
"... During the November-January period, 378 of the S&P 500 companies bought back their own shares, according to FactSet . Total buybacks in the quarter rose 5.2% from a year ago, to $136.6 billion. Over the trailing 12 months (TTM), buybacks totaled $568.9 billion. That's an enormous amount of corporate cash that was dumped on the market! ..."
"... Apple alone blew $6 billion in the quarter, even as its stock was tanking. Relative to its average share price over the period, it paid a 13% premium, the second highest premium paid by S&P 500 companies, after Symantec! Over the trailing 12 months, Apple blew nearly $40 billion on buybacks, and yet its stock dropped 15.5%. ..."
"... And yet, despite the current heroic efforts to prop up their shares, companies have seen their shares get hammered. ..."
"... Clearly, financial engineering is kaput! Buybacks no longer function reliably in inflating stock prices. The opposite seems to be happening. Perhaps investors are finally starting to see through these shenanigans, and perhaps they're now beginning to fret about all the debt these companies take on in order to fund buybacks! ..."
"... The bull market from early 2009 into May 2015 looks just like every bubble in history, and there's one sign after the next that we did indeed peak last May. The dominant pattern in the stock market is the "rounded top" pattern. ..."
"... what is missing here is stock options sales, stock being sold right about now. my guess is that stock option sales are rising and peaking soon. they know wtf is coming down and are basically cashing out. ..."
"... fucking corporations. and the majority get what 15/hr-30. they get millions. not saying some of these fucks aren't very intelligent people well deserving of their rewards, but really, millions while the serfs make squat... ..."
Companies are still borrowing and spending billions on buying back their own shares – one of the
big drivers behind the blistering stock market rally of the past few years. It worked wonderfully
and without fail. But suddenly, it's doing the opposite, and now the shares of the biggest buyback
queens are getting hammered. Something broke in the gears of this financially engineered market!
During the November-January period, 378 of the S&P 500 companies bought back their own shares,
according to
FactSet
. Total buybacks in the quarter rose 5.2% from a year ago, to $136.6 billion. Over the trailing
12 months (TTM), buybacks totaled $568.9 billion. That's an enormous amount of corporate cash that was dumped on the market!
The sector that blew – "blew" because that's how it turned out – the most money on this type of
financial engineering project was Information Technology, with $33.2 billion in buybacks last quarter.
Four of the top 10 buyback queens were Information Technology: Apple, Microsoft, Oracle, and Visa.
Apple alone blew $6 billion in the quarter, even as its stock was tanking. Relative to its average
share price over the period, it paid a 13% premium, the second highest premium paid by S&P 500 companies,
after Symantec! Over the trailing 12 months, Apple blew nearly $40 billion on buybacks, and yet its
stock dropped 15.5%.
This table shows the top 10 buyback queens in order of the amount spent on a TTM basis, and the
mostly dismal performance of their shares over the same period.
GE didn't quite make this list (though it bought back $3.1 billion in Q4), but it was very active
in different ways, following through on its $50-billion buyback program announced in April last year.
FactSet:
In addition to the repurchase program, GE completed a stock swap with the former GE Capital
retail finance division, Synchrony Financial, which had an effect on shares outstanding that was
equivalent to a $20.4 billion buyback. As a result, the shares outstanding for GE were reduced
by 6.7% in the last twelve months.
Total buybacks are ballooning in proportion to net income, which declined over the TTM period
for the first time since 2009. So buybacks as a percent of income rose from 64.9% a year ago to 68.1%
at the end of the quarter. In terms of free cash flow after dividends, share buybacks have now ballooned
to 101.7%. This was, as FactSet put it, "a huge jump from the year ago quarter when the ratio was
81.6%."
The culprit? With income down over the TTM period, aggregate free cash flow has dropped 9.5% year-over-year.
FactSet's chart shows the declining net income (green bars), the nearly flat share-buybacks (blue
bars), and the rising buyback-to-income ratio (red line, right scale). Note what happened last time
income began to decline (2007) and share buybacks followed in 2008: the stock market crashed.
And yet, despite the current heroic efforts to prop up their shares, companies have seen their
shares get hammered.
As FactSet's chart below shows, over the past 12 months, the S&P 500 total return index, which
included dividends, rose 1.3% (green line). But the total return of SPDR S&P 500 Buyback ETF, which
tracks the 100 companies in the S&P 500 with the highest buyback ratio, dropped 7.6% (blue line):
Clearly, financial engineering is kaput! Buybacks no longer function reliably in inflating stock
prices. The opposite seems to be happening. Perhaps investors are finally starting to see through
these shenanigans, and perhaps they're now beginning to fret about all the debt these companies take
on in order to fund buybacks!
When companies borrow billions to then blow that moolah on buying their own shares that then promptly
decline in value, it doesn't create a loss on the income statement. Instead, those billions quietly
go up in smoke. What's left behind? Fewer shares outstanding, piles of additional debt, mauled cash
balances, and much higher financial risk.
But once companies see that share buybacks are becoming toxic as their shares decline despite
buybacks, they curtail them. And last time this happened – in 2008 – it pulled the rug out from under
the already teetering markets.
The bull market from early 2009 into May 2015 looks just like every bubble in history, and there's
one sign after the next that we did indeed peak last May. The dominant pattern in the stock market
is the "rounded top" pattern.
Math is hard. Stock buybacks are supposedly driving the market higher. Yet, this article
indicates corporations which engage in buyback activity instead underperform the market.
Therefore, logically, buyback queens are impeding the market by slowing the advance of the
subject firm's equity prices. HUH?
PlayMoney
Wondered why Jamie Dimon spent so much on personal stock purchases....until a month or so
later JPM announces a big buyback. Thus inflating his recent purchase....should be a law
against that. Criminals.
new game
what is missing here is stock options sales, stock being sold right about now. my guess
is that stock option sales are rising and peaking soon. they know wtf is coming down and are
basically cashing out. 10 million, 50 million, 2 million. yea, all legal, but that is the
game, do the time, grind to the top, cash out the options and live the life.
fucking corporations. and the majority get what 15/hr-30. they get millions. not saying
some of these fucks aren't very intelligent people well deserving of their rewards, but
really, millions while the serfs make squat...
One month ago, as we pounded the table on the biggest threat to the fundamental case for oil,
namely that even a modest rebound in oil prices could unleash another round of production by the
"marginal", US shale oil producers, we warned that a rebound in the price of oil as modest as $40
per barrel, could be sufficient to get drillers to resume production.
As
noted in late February , among the companies prepared to flip the on switch at a moment's notice
are Continental Resources led by billionaire wildcatter Harold Hamm, which said it is prepared to
increase capital spending if U.S. crude reaches the low- to mid-$40s range, allowing it to boost
2017 production by more than 10 percent, chief financial official John Hart said last week. Then
there is rival Whiting Petroleum which may have stopped fracking new wells, but added it would "consider
completing some of these wells" if oil reached $40 to $45 a barrel, Chairman and CEO Jim Volker told
analysts. Then there was EOG Chairman Bill Thomas who did not say what price would spur EOG to boost
output this year, but said it had a "premium inventory" of 3,200 well locations that can yield returns
of 30 percent or more with oil at $40, and so on, and so on.
The reason for the plunging breakeven price? The same one we suggested on February 3: surging,
rapid efficiency improvement which "have turned U.S. shale, initially seen by rivals as a marginal,
high cost sector, into a major player - and a thorn in the side of big OPEC producers."
To be sure, while many had expected low oil prices to curb output, virtually nobody had predicted
that even a modest jump in oil (when we wrote our article on February 29 oil was at $33, just $7
from the $40 threshold) would lead to a major portion of US shale going back on line. The threat
of a shale rebound is "putting a cap on oil prices," said John Kilduff, partner at Again Capital
LLC. "If there's some bullish outlook for demand or the economy, they will try to get ahead of the
curve and increase production even sooner."
However, the cap was not big enough, because late last week driven by the relentless short squeeze
and the sliding dollar, WTI soared well over $40 hitting a fresh 2016 high.
And, as warned, with oil surging above the critical $40 new "floor" price, as
Reuters
put it moments ago , " a dreaded scenario for U.S. oil bulls might just be becoming a
reality."
What exactly is this scenario?
According to Reuters, some U.S. shale oil producers, including Oasis Petroleum and Pioneer
Natural Resources Co, are activating drilled but uncompleted wells (DUCs) in a reversal in strategy
that threatens to bring more crude to a saturated market and dampen any sustained rebound in prices.
When oil prices started their long slide in mid-2014, many producers kept drilling wells, but
halted expensive fracking work that brings them online, waiting for prices to bounce back.
But now, with crude futures hovering near multi-year lows and many doubting recent modest gains
that brought oil prices near $40 a barrel can hold, the backlog of DUCs is already shrinking in some
areas. In key shale areas such as Eagle Ford or Wolfcamp and Bone Spring in Texas such backlog has
fallen by as much as a third over the past six months, according to data compiled by Alex Beeker,
a researcher at Wood Mackenzie.
"If the number of DUCs brought online is surprising to the upside, that means U.S. production
won't decline as quickly as people expect," said Michael Wittner, global head of oil research
at Societe Generale. " More output is bearish."
In the Wolfcamp, Bone Spring and Eagle Ford, the combined backlog of excessive wells remains around
600, Beeker estimates. About 660 wells could be the equivalent of between 100,000 and 300,000 barrels
per day of potential new supply, according to Ed Longanecker, president of Texas Independent Producers
and Royalty Owners Association (TIPRO)
And with its usual 2-4 month delay, the market is finally starting to realize just this.
As expected, Reuters writes that for now, most of the wells are activated in Texas, where proximity
to refiners allows producers to sell their crude closer to benchmark prices, and by well-hedged companies
that have locked in higher prices.
Still, the pace of fracking of the uncompleted wells may quicken if cash-strapped producers
facing debt repayments can no longer afford to store their oil in the ground.
While the potential additional supply is a fraction of total U.S. production of around 9 million
bpd, the fresh flow would reinforce concerns about a growing global glut just as Iran ramps up
output and inventories in domestic storage tanks from the Gulf to Cushing, Oklahoma, test new
highs on a weekly basis.
But back to the DUCs, which are a new development for many of the algos which have been trading
oil on nothing but momentum:
Wood Mackenzie reckons that the backlog of excess DUCs will decline over the next two years,
and return to normal levels by the end of 2017. It is expected to fall 35 percent from current
levels in the Bakken and 85 percent in the Eagle Ford by the end of 2016. With service costs down,
now is a good time to bring a well online if a company has hedged its production and covered its
costs, said Jonathan Garrett, an analyst with Wood Mackenzie. The U.S. crude breakeven for such
wells is one-third lower than for new ones, according to Wood Mackenzie.
Typically, average DUC inventory is around 550 in the Wolfcamp/Bone Spring formations and around
300 in the Eagle Ford, Beeker estimates. Rival Oasis is also focusing on drawing down its backlog
this year, executives said during the company's last earnings call.
In each of those formations, the excess has fallen by about 150-175 over the past six months,
bringing the surplus to around 300 wells in each. " We're just going to be continuously
completing the wells there (in the Permian) with our fleets and so you will not see any DUCs in
Midland basin," Pioneer Chief Operating Officer, Tim Dove, told a recent earnings conference.
And then the story verges off to something else we have warned about, namely soaring hedging as
oil has rebounded, allowing producers to lock in profits even in case oil should once again resume
sliding from this price. Both Pioneer and rival Oasis have locked in future sales at prices well
above current levels. Oasis has 70 percent of its oil production for 2016 hedged above $50 a barrel
and roughly 20 percent of its 2017 production hedged at about $47 a barrel. Similarly, Pioneer has
locked in a minimum price for 85 percent of this year's production.
To be sure, not everyone will be able to ramp up production: in North Dakota, the second-largest
oil-producing state where producers like Whiting Petroleum Corp sell their oil at steep discounts,
it might not be economic Reuters calculates. There, the number of DUCs climbed above 1,000 in September
before falling to 945 in December, according to the latest data from the state's energy regulator.
Bakken producer Continental Resources Inc which made waves when it unwound its hedges in late
2014, has said it would continue to defer completions until prices rise. Bakken discounts were
just too steep, said Garrison Allen, a research associate at Raymond James. "It doesn't make sense
to do anything up there."
But not everyone is needed to ramp up production: even if shale output rises by just a few hundred
thousand barrels in the short term, that will be enough to push the US storage situation, already
at critical point, into beyond operation capacity levels, and lead to dumping of oil in the open
market, resulting in the next major leg lower in oil prices, which in turn will spillover into energy
stocks and the broader market, and force central banks to consider what until recently was merely
a joke, namely monetizing crude in the open market. After all, at this point when central banks have
lost all credibility, why not?
Rapid swings in supply/demand and prices is actually one of the predictions of what would happen
when we hit peak (or long plateau if you prefer). World peak oil was expected somewhere between
2008 and 2020 by the majority of estimates. Remember, peak oil isn't about running out of crude
. It's about falling extraction rates in the face of higher costs to extract. Tar sands and shale,
for example, is very expensive oil as evidenced by the drop off of the industry in Canada and
North Dakota when prices fell below $50 . Once the easy oil peaks, and capital no longer is able
to respond to the rapid feast and famine , THEN you'll start to notice the reality that was always
there with peak oil.... $5 gas, gas lines, etc. It will be the Jimmy Carter days all over again.
If amount of the energy needed to extract and process a unit of gas/oil is greater or equal
to the amount of energy from a unit of gas/oil, then oil/gas stays in the ground irresspective
of the volume.
REUTERS is the establishment propaganda mouthpiece. production may be increasing, but i DOUBT
its gonna hurt the price. they just want you to think that.
The bull market just celebrated its seventh anniversary. But the gains in recent years – as
well as its recent sputter – may be explained by just one thing: monetary policy.
The factors behind that and previous bubbles can be illuminated using simple visual analysis of a
chart.
The S&P 500 (^GSPC) doubled in value from November 2008 to October 2014, coinciding with the
Federal Reserve Bank's "quantitative easing" asset purchasing program. After three rounds of
"QE," where the Fed poured billions of dollars into the bond market monthly, the Fed's balance
sheet went from $2.1 trillion to $4.5 trillion.
This isn't just a spurious correlation, according to economist Brian Barnier, principal at
ValueBridge Advisors and founder of FedDashboard.com. What's more, he says previous bull runs in
the market lasting several years can also be explained by single factors each time.
Barnier first compiled data on the total value of publicly-traded U.S. stocks since 1950. He then
divided it by another economic factor, graphing the ratio for each one. If the chart showed
horizontal lines stretching over long periods of time, that meant both the numerator (stock
values) and the denominator (the other factor) were moving at the same rate.
"That's the beauty of the visual analysis," he said. "All we have to do is find straight, stable
lines and we know we've got something good."
... ... ...
As the financial crisis reached a fevered pitch in 2008, the Federal Reserve took to flooding
the financial market with dollars by buying up bonds. Simultaneously, interest rates fell
dramatically, as bond yields move in the opposite direction of bond prices. Barnier sees the Fed
as responsible for over 93% of the market from the start of QE until today. During the first half
of 2013, the Fed caused the entire market's growth, he said.
Since the Fed stopped buying bonds in late 2014, the S&P 500 has been batted around in a 16%
range and is more or less where it was when the QE came to a close. Investors need to anticipate
the next driver, said Barnier.
Demand for U.S. shares among companies and individuals is diverging at a rate that may be without
precedent, another sign of how crucial buybacks are in propping up the bull market as it enters its
eighth year.
Standard & Poor's 500 Index constituents are poised to repurchase as much as $165
billion of stock this quarter, approaching a record reached in 2007. The buying contrasts with rampant
selling by clients of mutual and exchange-traded funds, who after pulling $40 billion since January
are on pace for one of the biggest quarterly withdrawals ever.
I'm always interested in the stuff you have to hunt around to find reported. Someone on a web
board earlier mentioned a pipeline bombed in Nigeria. Didn't see it anywhere, very sporadically
reported, apparently 300kbpd there, in reading that I found the pipeline from Kurdistan to Turkey
has been out for three weeks, apparently up to 600kbpd there.
If it was something about the glut, bloomberg would be all over it. This, zip. I used to wonder
about conspiracies, but I started following a few bloomberg reporters late last year and they
are some of the laziest SOBs I'd ever encountered. The amount of copy/paste and rehash the prevailing
sentiment without checking a few facts was astonishing. Talk about slobs, it really was about
getting all the current keywords and search descriptions into the article and particularly the
first paragraph and not much else.
Thanks. My feelings, exactly. But at the same time, what to expect from them? Is not Bloomberg
to a certain extent a GS propaganda arm ? May we need to lower our expectations.
Some grains of truth with additional effort still can be extracted from the piles of lies and
lazy, incompetent reporting (aka rehashing somebody else talking points).
Funny, but this is a kind of "Back in the USSR" situation. Our feelings are probably 1:1
correspond to the feelings of Soviet citizens about the USSR government economic reporting
:-).
7) Finally, the graphic below
from Rystad energy shows how it sees shale costs showing substantial improvements, and across
various shale plays. It projects that wellhead breakeven prices have dropped by more than 40%
between 2013 and 2015:
According to DoubleLine's Jeff Gundlach, this is his favorite chart - backing his perspective that
equity markets have "2% upside and 20% downside) from here .
This article has all signs "a am short on oil" bias. As such this can serve as an
example of fine art of disinformation. Previously the same deso as now about Kuwait was
promoted about Azerbaijan. i could well be that Zerohedge traders are hurt by this "short
covering" oil rally. They never disclose their positions.
Notable quotes:
"... According to Reuters, Kuwait's oil minister said on Tuesday that his country's participation in an output freeze would require all major oil producers, including Iran, to be on board. ..."
"... Kuwait's announcement followed a report by Goldman overnight in which, as we reported, Jeff Currie said that the "commodity rally is not sustainable" and it is time to sell crude. "While these dynamics (rising prices) could run further, they simply are not sustainable in the current environment," the analysts wrote. "Energy needs lower prices to maintain financial stress to finish the rebalancing process; otherwise, an oil price rally will prove self-defeating, as it did last spring." ..."
"... China's February vehicle sales, a key driver for gasoline demand, were down 3.7 percent year on year, data from the country's Passenger Car Association showed. ..."
Back in late February, when crude prices had just hit a 13 year low, one catalyst unleashed a
furious short-covering rally: a WSJ report which cited a delayed SkyNews interview with the UAE energy
minister, according to which OPEC would freeze, if not cut production. Since then we learned, courtesy
of the Saudi oil minister Al-Naimi himself, that the Saudis will never reduce output, however, in
a utterly meaningless gesture, Saudi Arabia and Russia agreed to "freeze" production at levels which
are already at maximum capacity and under one condition: that all other OPEC members join the freeze,
with the possible exception of Iran which may be allowed to produce until it hits its pre-embargo
export levels.
Of course, even the said "freeze" is nothing but a stalling tactic employed by an OPEC member
(Saudi Arabia), to give the impression that OPEC still exists as a production-throttling cartel when
OPEC ceased to exist in that capacity in November 2014. Everything since then has been one surreal
redux of "Weekend at Bernies" where everyone pretends not to notice the corpse in the room.
However, while many had pretended to at least play along with the charade, today a core OPEC member
effectively broke ranks when Kuwait said it would only agree to an output freeze if all major producers
take part including Iran.
According to Reuters, Kuwait's oil minister said on Tuesday that his country's participation in
an output freeze would require all major oil producers, including Iran, to be on board.
"I'll go full power if there's no agreement. Every barrel I produce I'll sell," Anas al-Saleh
told reporters in Kuwait City. And since Iran has made it very, very clear that it will not join
the production freeze at its current mothballed output, and will need at least 9-12 months before
it regains its pre-embargo capacity levels, one can forget about a production freeze well into 2017,
if not forever, since by then at least one if not more OPEC members will be bankrupt (they know who
they are: they are the source of those "ALL CAPS" flashing read headlines every day).
Putting Kuwait's production in context, Kuwait - the small Gulf state Saddam invaded 25 years
ago - is currently producing 3 million barrels of oil per day. Incidentally, this is precisely how
much the oil market is oversupplied each and every day, and why in addition to PADD1, 2 and 3 being
almost full, and excess oil now being stored in ships, pipelines and trains, and re-exported to Europe,
quite soon empty swimming pools will be full with the "black gold" as the algos continue to refuse
to pay any attention to the constantly deteriorating fundamentals.
Kuwait's announcement followed a report by Goldman overnight in which, as we reported, Jeff Currie
said that the "commodity rally is not sustainable" and it is time to sell crude. "While these dynamics (rising prices) could run further, they simply are not sustainable in the
current environment," the analysts wrote. "Energy needs lower prices to maintain financial stress
to finish the rebalancing process; otherwise, an oil price rally will prove self-defeating, as it
did last spring."
Perhaps, but not just yet: in addition to China's abysmal exports, we also learned that in February
its crude imports soared 19.1% to 31.80 million tons, or about 8 million barrels per day, an all-time
high, suggesting China - like the US - is filling every available container including its SPR at
a time when prices are relatively low even if organic demand continues to deteriorate.
As Reuters writes, "despite strong oil demand, questions about the sustainability of growing consumption
weighed on markets after China's overall exports tumbled by a quarter in February."
China's February vehicle sales, a key driver for gasoline demand, were down 3.7 percent year
on year, data from the country's Passenger Car Association showed. "This is really a poor start
for trade this year," said Zhang Yongjun, senior economist at the China Centre for International
Economic Exchanges.
However, judging by the latest bounce in crude in the last hour of trading, the only thing that
still matters is who the daily "short squeeze" will rip higher. By the looks of things, at least
one major trader already got the tap on the shoulder.
"... In an interview with Reuters, Ross said oil should recover to $50 a barrel by the end of the year, potentially aided by eventual supply cuts from leading producers among the Organization of the Petroleum Exporting Countries (OPEC). ..."
"... Instead, they would keep pumping and allow prices to fall. While they did not anticipate the longest and deepest oil price rout since the mid-1980s, the effort has at last begun to curb the rise of rival higher-cost producers such as U.S. shale drillers, another sign that prices may have found a bottom. ..."
"... In his note to clients, Ross also pointed to the recent agreement between major OPEC members and leading non-OPEC producer Russia to "freeze" production at January levels as a factor boosting market sentiment after a brutal period when the only safe trade seemed to be sell. ..."
"... Officials from less influential members such as Venezuela or Angola have occasionally referenced specific prices, generally in the vicinity of $70 to $80, ..."
Major OPEC producers are privately starting to talk about a new oil price equilibrium of $50 a
barrel, adding to signs that the market's long, deep rout is officially over, says one of the
industry's leading prognosticators.
Gary Ross, the founder, executive chairman and chief oil soothsayer at New York-based consultancy
PIRA, told clients 2-1/2 weeks ago that he reckoned the "lows are in" for crude, which was then
about $30 a barrel. U.S. futures <CLc1> have rallied since then to close at nearly $36 on Friday,
with a handful of analysts also cautiously calling a bottom.
In an interview with Reuters, Ross said oil should recover to $50 a barrel by the end of the
year, potentially aided by eventual supply cuts from leading producers among the Organization of
the Petroleum Exporting Countries (OPEC).
"They want $50 oil, this is going to become the new anchor for global oil prices," said Ross, one
of the industry's most respected forecasters for his bold price predictions and decades-long
history of consulting with OPEC members.
"While it may not be an official target price, you'll hear them saying it. They're trying to give
the market an anchor."
If Saudi Arabia and other powerful Gulf OPEC members begin invoking $50 as "fair price for
producers and consumers" - a once-favored phrase that has been absent for several years - it may
could signal the end of an unusual and extended period in which the group abandoned efforts to
manage the market.
After years of signaling satisfaction with prices hovering at around $100 a barrel, top
exporter Saudi Arabia in late 2014 led OPEC in its most dramatic policy shift in decades. No
longer would the world's top oil exporter, or its OPEC allies, agree to cut their own production
to support such high prices, which they feared would erode their share of the world market.
Instead, they would keep pumping and allow prices to fall. While they did not anticipate the
longest and deepest oil price rout since the mid-1980s, the effort has at last begun to curb the
rise of rival higher-cost producers such as U.S. shale drillers, another sign that prices may
have found a bottom.
In his note to clients, Ross also pointed to the recent agreement between major OPEC members
and leading non-OPEC producer Russia to "freeze" production at January levels as a factor
boosting market sentiment after a brutal period when the only safe trade seemed to be sell.
The pact will do little to curb immediate oversupply, especially with Iran exports still swelling
after the end of sanctions. Still, working together on "verbal intervention" was a positive start
that "could lead to eventual cuts" after a period in which Saudi Arabia and Russia made little
effort toward any kind of cooperation, he said.
"Russian production is going down anyway, why not agree to a freeze and then cuts?" Ross told
Reuters.
The $50 figure was in line with analysts' consensus for 2017 U.S. prices, according to the last
Reuters poll, although much higher than the $38 a barrel median for this year.
Ross, whose forecasts are not normally made public, was among the few analysts to anticipate
OPEC's decision to let prices fall in 2014.
While he was wrong-footed in the first part of last year, when crude's rebound to around $60 a
barrel proved temporary, he joined others such as Goldman Sachs in taking a much more bearish
view in more recent months, predicting in December that U.S. crude would drop below $30 a barrel
in February.
Ever since the market detached from the $100 a barrel figure that anchored it from 2010 to 2014,
analysts, traders and executives have struggled to pinpoint where it might ultimately settle,
agreeing only that it would be a period of extraordinary volatility in the absence of any overt
OPEC guidance.
Officials from less influential members such as Venezuela or Angola have occasionally
referenced specific prices, generally in the vicinity of $70 to $80, but the bigger Gulf
producers have largely avoided any public mention of a new reference point, leaving the market
adrift.
One way to tell that a bear market move has run its course, or is getting
close at least, is when front page stories on major news outlets declare that
all hope is lost, and none of the experts think things will get better for a
long time, if ever.
Well, forever is a very long time, and even if it weren't, the bell has tolled,
since Bloomberg, on Feb. 12,
declared the following: The Oil Industry Got Together and Agreed
Things May Never Get Better.
"Thousands of industry participants gathered in London for their annual
get-together, only to find a world awash in crude and hardly a life jacket
in sight."
The head of commodity research at mighty Goldman even said: "I wouldn't
be surprised if this market goes into the teens."
Whether or not Jan. 20 was the bottom for Brent (an ominous day being exactly
one year from the next Presidential inauguration), closing under $30, is yet
to be determined. But if nothing else, the extreme pessimism on offer at the
London gathering make it likely that a rally, if not a turning of the tide,
is in order. And, if that is the case, now that the oil price seems to be a
symptom rather than a cause of global growth, or lack thereof, there is reason
to believe that the S&P is also due for a rally.
The following dynamic
Bloomberg
graphic shows the utter collapse in U.S. drilling rigs. The most recent
figure for rigs is getting close to the record low set in 1999, when Brent was
trading in the teens.
...The IEA predicts that China will need to import another 2.6 million barrels
per day five years from now.
Legendary billionaire investor Jim Rogers is certain that the U.S.
economy will be in recession in the next 12 months. During an interview on BloombergTV, he explained
why he had covered his position in the Japanese yen, saying that the nation is "printing
a lot" of the currency .
Rogers also warned that there is a "100 percent" probability
of a recession in the U.S. within a year, and with debt levels very high across the nation,
this is a grave concern.
The latest reading of St.Louis Fed's recession probability is higher than all but 3 months
(in the last 50 years) when a recession did not immediately proceed.
'a retirement plan ultimately depends on the future
earning power of the economy'
That's why all modern pension plans hold some equities.
An individual's cost to own one diversified equity fund and one diversified bond fund is about 0.1%
per year. Whereas the expected benefit (compared to SocSec's all Treasury portfolio) is about 3.0% annually.
The seminal research pointing to an equity premium was done in the U.S. in the early 1960s, resulting
in Nobel prizes for several participants. A half century on, their work has had zero effect on the politically
petrified SocSec system - 20% funded, headed for zero in 2033.
Seminal research - Fisher/Lorie paper of 1964, establishing the equity premium and founding
CRSP which serves as the database for nearly all U.S. equities research:
Nobel Prizes 1990 - Harry Markowitz, Merton Miller, William Sharpe - for Modern Portfolio Theory,
which implies in conjunction with the equity premium that the optimal risk-reward portfolio should
include equities:
Zero effect:
"Since the beginning of the Social Security program [in 1935], all securities
held by the trust funds have been issued by the Federal Government."
Headed for zero:
"The dollar level of the theoretical combined trust fund reserves declines
beginning in 2020 until reserves become depleted in 2034."
- SocSec Trustees Report 2015,
page 3.
Can you spell "secular stagnation" ? And can you explain to us
what returns are expected for stocks in the "secular stagnation"
regime in comparison with bonds?
And what will you do if S&P500 drops to 660 like it did in 2008.
And stays at this level for a couple of years like oil prices recently
did.
LTCM was founded in 1994 by John W. Meriwether, the former
vice-chairman and head of bond trading at Salomon Brothers. Members
of LTCM's board of directors included Myron S. Scholes and Robert
C. Merton, who shared the 1997 Nobel Memorial Prize in Economic
Sciences for a "new method to determine the value of derivatives".[3]
Barriers to productivity growth
: "The limits to productivity growth
are set only by the limits to human inventiveness"
says
John Kay. This understates the problem. There are other limits.
I'd mention two which I think are under-rated.
One is competition. Of course, this tends to increase productivity in many
ways. But it has a downside. The fear of competition from future new technologies
can
inhibit
investment today: no firm will spend £10m on robots if they
fear a rival will buy better ones for £5m soon afterwards. ...
The second is that, as Brynjolfsson and MacAfee
say
, "significant organizational innovation is required to capture
the full benefit of…technologies."
For example, Paul David has
described (pdf)
how the introduction of electricity into American factories
did not immediately raise productivity much, simply because it merely replaced
steam engines. It was only when bosses realized that electric motors allowed
factories to be reorganized – dispensing with the need for machines to be
close to a central power source – that productivity soared, as workflow
improved and new cheaper buildings could be used. This took many years.
It's not just organizational change that's needed, though..., I suspect
that if IT is to have (further?) productivity-enhancing effects, they require
socio-organizational change. ...
However, there are always obstacles to the social and organizational change
necessary for technical change to lead to productivity gains. These might
be cognitive – such as the Frankenstein
syndrome
or "not invented
here
" mentality. Or they can be material. Socio-technical change is
a process of creative destruction, the losers from which kick up a stink;
think of taxi-drivers protesting against Uber.
Worse still, these losers aren't always politically weak Ludditites. They
can be well-connected bosses of incumbent firms, or managers seeking to
maintain their power base. ...
The big question facing us is, therefore: do we have the right set of institutions
to foster the socio-organizational change that beget productivity growth?
These require a mix of healthy markets, to maximize ecological diversity;
a financial system which backs risky new-comers;
property
rights which incentivise innovation; and state intervention
that facilitates all these whilst not being captured by Luddites. If our
politics weren't so imbecilic, this question would be getting a lot more
attention than it is.
"Millions of children are living in families still struggling to make ends meet
in our low-growth, low-wage economy":
Nearly half of American children living near poverty line, Eurekalert!
: Nearly half of children in the United States live dangerously close
to the poverty line, according to new research from the National Center
for Children in Poverty (NCCP) at Columbia University's Mailman School of
Public Health. Basic Facts about Low-Income Children, the center's annual
series of profiles on child poverty in America, illustrates the severity
of economic instability and poverty conditions faced by more than 31 million
children throughout the United States. Using the latest data from the American
Community Survey, NCCP researchers found that while the total number of
children in the U.S. has remained about the same since 2008, more children
today are likely to live in families barely able to afford their most basic
needs.
"These data challenge the prevailing beliefs that many still hold about
what poverty looks like and which children in this country are most likely
to be at risk," said Renée Wilson-Simmons, DrPH, NCCP director. "The fact
is, despite the significant gains we've made in expanding nutrition and
health insurance programs to reach the children most in need, millions of
children are living in families still struggling to make ends meet in our
low-growth, low-wage economy."
According to NCCP researchers, the number of poor children in the U.S. grew
by 18 percent from 2008 to 2014 (the latest available data), and the number
of children living in low-income households grew by 10 percent. ...
It looks like the the US oil refiners like a bargain when they see one.
http://www.eia.gov/petroleum/supply/weekly/pdf/highlights.pdf
"U.S. crude oil imports averaged 8.3 million barrels per day last week,
up by 1.2 million barrels per day from the previous week. Over the last
four weeks, crude oil imports averaged 7.6 million barrels per day"
They don't seem to worried about the so called glut of US oil production with an increase
of oil imports like that?
That was always one of the funniest things about this "Oil Glut". The US stocks though they
were in the upper range, were certainly not overfull. Now I know the US is not the world, but
they do use 25% of the words oil, and do put out some of the best number on a timely manner, and
therefore a good guide to what is going on in the market, but maybe there were keeping their powder
dry, and are now racing to fill their boots, while the 50% discount sign is still on display.
What Kiernan fails to understand is that peak oil does not happen overnight. We have hit
the peak of conventional low cost oil production and demand exceeding that conventional oil production
has pushed prices up to a level where higher cost oil is now possible to develop.
If we had an option, we wouldn't be spending money to produce shale oil, because it is high
cost. But at the current level of demand we need shale production. That is why the drop in oil
prices is not going to be permanent. The price of oil needs to be at a level that allows shale
production to continue.
"... I think the "shale revolution" may never really recover from the price collapse. Investors will think twice before putting any money there again. Unless the oil price goes alot higher than 100 $/barrel and stays there for a while. ..."
"... Hard to how a business can keep running on negative cash flow, falling price of its only commodity, and interest rates continuing to rise, if a lender can be found, that is? ..."
"... "What is clear is that the world has become addicted to central bank stimulus. Bank of America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc of the free-floating equities on global bourses. Half of all government bonds in the world yield less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another. ..."
Current oil price collapse is exposing many false claims about shale profitability.
Oil price will recover, but investors will forever become more cautious.
Drilling pace in shale oil mainly determined by credit availability and cost. With investors
being more cautious, drilling activity will become less aggressive .
I think the "shale revolution" may never really recover from the price collapse. Investors
will think twice before putting any money there again. Unless the oil price goes alot higher than
100 $/barrel and stays there for a while.
Down in the comments, I thought this was very interesting,
"A quick check indicates that both Whiting and EOG, two of the better shale plays, continue
to show negative free cash flow"
Hard to how a business can keep running on negative cash flow, falling price of its only
commodity, and interest rates continuing to rise, if a lender can be found, that is?
"What is clear is that the world has become addicted to central bank stimulus. Bank of
America said 56pc of global GDP is currently supported by zero interest rates, and so are 83pc
of the free-floating equities on global bourses. Half of all government bonds in the world yield
less that 1pc. Roughly 1.4bn people are experiencing negative rates in one form or another.
These are astonishing figures, evidence of a 1930s-style depression, albeit one that is still
contained. Nobody knows what will happen as the Fed tries to break out of the stimulus trap, including
Fed officials themselves."
"... The momentum of the shale boom can be seen in the large overhang of drilled but uncompleted wells (DUCs) sitting out in the field today, looming over the market and weighing on any potential oil price recovery… ..."
Raymond James analysts shared a similar viewpoint, noting a certain dynamic
on the oilservice industry. "Lower returns and crimped cash flow lead operators
to slow activity and conserve cash in any way possible," the note said. "Since
many of the land rigs had longer-term contracts and the frack crews didn't,
the quickest way to conserve cash is to drill but not complete."
But wells are obviously being completed. In fact more wells are being completed
than being drilled but we obviously don't know just how many. And…
DUCs to Prolong Shale Boom Hangover
Many prognosticators of oil and gas markets have found themselves on the
wrong side of U.S. production calls throughout the shale era after failing to
understand and model the risks associated with operational momentum. Increases
in well productivity brought higher potential returns, and every company in
the oil patch scrambled to gain the assets, people, and infrastructure to grow
production (and hopefully cash) in the future. As supply growth outpaced demand,
prices sank, but production hasn't responded with an equal intensity. Why doesn't
production respond accordingly? The same reason you can't turn around an aircraft
carrier on a dime, momentum.
The momentum of the shale boom can be seen in the large overhang of drilled
but uncompleted wells (DUCs) sitting out in the field today, looming over the
market and weighing on any potential oil price recovery…
Until the number of DUCs returns to levels more aligned with historical working
inventory levels (3-6 months of drilling), we expect their threat to loom large
over the market and have a dampening effect on any near-term price recovery.
But their longer term impact could loom just as large. If producers steer too
much capital away from drilling, and instead harvest DUCs to maintain production
and cash flow in 2016, the human capital behind the rig fleet could be lost
to other industries, making service cost inflation all but guaranteed when U.S.
supply growth is again needed. It looks like this hangover will be felt for
years to come.
Conclusion
The decline in the oil rig count cannot, in the near term, be directly linked
to a decline in oil production due to so many DUCs. But eventually it must.
Steep declines in oil production must eventually follow steep declines in the
rig count. And as we see a drop in production we will see a corresponding rise
in prices. This, in turn, will cause an increase in well completions, knocking
the price back down again.
So don't expect any quick recovery of either oil prices or production. Yes,
it looks like the hangover will be felt for years to come. And in the meantime
peak oil will be in the rear view mirror. But no one will notice for years to
come.
"... This ship has some big holes in it and is taking on water; what else is the captain going to say to it's passengers? Abandon ship? Some folks are getting ahead of themselves; EOG had a plus 40 dollar hedge and lost money last quarter. Now it says it can make money at 30. If anybody thinks EOG has been "saving" its good locations for high grading, or super high grading, whatever they want to call it, that is ridiculous. Oil companies don't drill the worse stuff first and save the best for last. I drive thru the guts of EOG's operations all the time; they have been hammering that stuff down there for years. There are stinkin' shale wells everywhere. Look at a TRRC GIS map for Karnes County. ..."
"... Shale oil that declines at the rate of 73% the first 3 years of production cannot compete with the rest of the world's conventional fields. Haven't we just learned that? ..."
"... The horse is gone and over the hill; closing the barn door now by slashing CAPEX costs is a day late. And several hundred billion dollars short. And when these shale companies have to come off the drilling hamster wheel, and those steep declines on exiting wells really kick in, hold on to your knickers, boys. ..."
These guys are getting desperate. I think because no shale oil company can qualify for additional
lending based on the 65% yardstick of PV10, it is back to trying to raise money again by promoting
stock to grandmas and grandpas. I think there is evidence this might even be working?
EOG stated it could reduce costs, maintain production (essentially) and even deleverage. Right.
It's important to recognize that this latest round of rhetoric, and bluster, fails to address the
issue of existing debt. I think these shale guys want a do over.
I like EOG and hope they succeed, but at a development pace that is conducive to price stability,
not production spikes. Oil price volatility will be the death of the American oil industry and it
is up to companies like EOG to control production spikes and help keep oil prices stable. EOG led
the way in LTO oversupply and that is the primary reason we are in a nine line bind now, all of us;
LTO oversupply. I don't believe a vowel of what the shale oil industry says anymore and so myself
and several much smarter friends try and stick to the numbers, and not the hype. EOG states it is
going to slow development and not bleed as much cash in 2016. That's a necessity, not a plan. My
smart buddy up hole thinks they are still going to gush cash this year (and by the way, his numbers
do not even include G&A or interest expense!). EOG has been drilling in the lower EF and geo steering
in 10 ft. windows for years. It's sweet spots are pretty well delineated. Go to Cheapside, Texas
(now called Richside) here: http://wwwgisp.rrc.state.tx.us/GISViewer2/
and decide how much saturation drilling it can still do. It is already drilling wells 18H and higher
on their 1000 plus/minus acre units. Again, we don't "save" our best locations for last in the oil
industry so we can drill them when oil prices decline 70%, I assure you. CAPEX costs can't come down
too much more, I don't think. OPEX costs have come down very little.
Mega frac's cost mega bucks. They make for bigger IP's so shale companies can create bigger EUR's
to make themselves look healthier than they are and to meet lender covenants. Higher IP's appear
to be resulting in steeper declines and not much more UR, not enough to pay for the mega frac's.
The funky EUR stuff is going to come out, big time, pretty quick.
These shale guys are NOT making money and the interest meter on their massive debt never stops.
The PV10 value of their reserves are now vastly insufficient to be able to still borrow money; many
of the best shale companies barely have assets equal to total debt. They owe lots of money and by
2018 that is all come to head, big time.
This ship has some big holes in it and is taking on water; what else is the captain going to say
to it's passengers? Abandon ship? Some folks are getting ahead of themselves; EOG had a plus 40 dollar
hedge and lost money last quarter. Now it says it can make money at 30. If anybody thinks EOG has
been "saving" its good locations for high grading, or super high grading, whatever they want to call
it, that is ridiculous. Oil companies don't drill the worse stuff first and save the best for last.
I drive thru the guts of EOG's operations all the time; they have been hammering that stuff down
there for years. There are stinkin' shale wells everywhere. Look at a TRRC GIS map for Karnes County.
Shale oil that declines at the rate of 73% the first 3 years of production cannot compete with
the rest of the world's conventional fields. Haven't we just learned that?
The horse is gone and over the hill; closing the barn door now by slashing CAPEX costs is a day
late. And several hundred billion dollars short. And when these shale companies have to come off
the drilling hamster wheel, and those steep declines on exiting wells really kick in, hold on to
your knickers, boys.
I read that CLR will return to activity if prices reach $45. At least that is the headline.
Assuming 200K gross barrels of oil from a CLR Bakken well in 60 months, 160K net with 20% royalty,
with a $7 discount to WTI, per CLR recent 10K, such a well will only gross $6 million dollars
in 60 months.
So after 60 months CLR will still be over $1 million short of reaching the cost of the well,
BEFORE, considering 10% severance tax, OPEX, G & A and interest. Also, none of the land acquisition,
permitting , seismic, etc is considered.
Why do the MSM ignore this. It seems so elementary to me.
Bakken LTO needs $80 WTI, minimum, to be a good investment. Just do my 5th grade math. Don't
need any exotic presentations to figure this out.
SS,
Don't pay attention to headline. They are just part of deception game. Shale production is adjusting,
US on shore is adjusting. Today I have briefly scanned that Russian paper is stating that Russian
big oil have a meeting today where among the topics are "freeze" (previously discussed with Saudis,
Qataris) and even some possible cuts. Pieces are coming together although it looks like at snail
pace from the perspective of someone like you that is caught in this bullshit politics. But it
is coming.
Ves, Don't pay attention to headline. They are just part of
deception game.
This is not typical business as usual and
a regular level of MSM deception with corrupt jornos bought by
powerful interests. This is something more then that. The level
of cheerleading of low oil prices is really deafening.
Elementary logic is ignored in most such articles. Which makes
them pure propaganda. which looks a lot like war propaganda to
me. Guided by the same principles:
1. Obscure one's economic interests;
2. Appear humanitarian in work and motivations;
3. Obscure history;
4. Demonize the enemy; and
5. Monopolize the flow of information.
and
These principles are abstracted from Jowett & O'Donnell.
•Avoid abstract ideas – appeal to the emotions.
•Constantly repeat just a few ideas. Use stereotyped phrases.
•Give only one side of the argument.
•Continuously criticize your opponents.
•Pick out one special "enemy" for special vilification.
Pieces are coming together although it looks like at snail
pace from the perspective of someone like you that is caught in
this bullshit politics. But it is coming.
I also hope so. But it looks like there are powerful forces
behind the current drop. And they will not give up easily.
Bakken LTO needs $80 WTI, minimum, to be a good investment. Just do my 5th grade math. Don't
need any exotic presentations to figure this out.
Exactly!
Bakken oil production is more like mining coal than it is drilling for oil ("Red Queen effect").
All company operating in this areas have crushing debt levels. Obtaining revolving credit line
when prices are below $80 might become very difficult as Bakken has the highest marginal cost
of production. So this slump will last longer for Bakken then for other plays.
Also "carpet bombing" drilling is new and might have some additional effects that we now can't
predict. I would give three years on restoring investor confidence.
Last week
we reported that in what has been Saudi Arabia's biggest victory to date
in its war against U.S. oil and gas producers, both Whiting Petroleum, which
is North Dakota's largest oil producer, and Continental Resources would indefinitely
suspend fracking operations for the foreseeable future. The reason was simple:
oil prices are too low to make incremental drilling and pumping profitable,
and instead most shale companies are now entering hibernation, limiting cash
outlays in the form of dividends and capex spending, in hopes of weathering
the crude oil storm, which has already gone on far longer than even the most
pessimistic mainstream pundits expected it would.
Which, of course, is the right response: as the saying goes the cure for
low oil prices is low oil prices, and as more shale companies halt drilling,
exploring and production, the 3 mmb/d oversupplied oil market will slowly return
to equilibrium.
There is logically a flipside to that as well: as those companies which have
recently mothballed operations either voluntarily or because they had to when
they went bankrupt when oil was at $30, return to market the previously oversupplied
market condition will promptly return as well, thereby pressuring oil lower
yet again.
The question is at what "breakeven" price does it make sense for US shale
companies to return. As
Reuters reports , less than a year ago major shale firms were saying
they needed oil above $60 a barrel to produce more ; however in just
one year this number has changed and quite drastically at that.
We hinted at this three weeks ago in an article which many readers had a
hostile reaction to: specifically we warned of "
Another Leg Lower In Oil Coming After Many Producers Found To Have Far Lower
Breakevens ." As we reported then, "what many thought would be the "breaking"
price point for virtually every shale play has just been lowered, and quite
dramatically at that. It also means that algos and traders who had reflexively
bought any dip below $30 on expectations this is close to the "sweet spot" and
where the Saudis would relent, will have to drop their support levels by as
much as a third."
Today
Reuters confirms that this assessment was stpo on with a report that some
shale companies say they will settle for far less in deciding whether to crank
up output after the worst oil price crash in a generation.
Among the companies which are prepared to flip the on switch at a moment's
notice are Continental Resources led by billionaire wildcatter Harold Hamm,
which said it is prepared to increase capital spending if U.S. crude
reaches the low- to mid-$40s range, allowing it to boost 2017 production by
more than 10 percent, chief financial official John Hart said last week
.
Then there is rival Whiting Petroleum which may have stopped fracking new
wells, added it but would " consider completing some of these wells"
if oil reached $40 to $45 a barrel, Chairman and CEO Jim Volker told analysts.
Less than a year ago, when the company was still in spending mode, Volker said
it might deploy more rigs if U.S. crude hit $70 ."
EOG Chairman Bill Thomas did not say what price would spur EOG to boost output
this year, but said it had a "premium inventory" of 3,200 well locations
that can yield returns of 30 percent or more with oil at $40.
Apache Corp , forecasts its output will drop by as much as 11 percent this
year, but said it would probably manage to match 2015 North American
production if oil averaged $45 this year.
The reason for the plunging breakeven price? The same one we suggested on
February 3: surging, rapid efficiency improvement which "have turned U.S. shale,
initially seen by rivals as a marginal, high cost sector, into a major player
- and a thorn in the side of big OPEC producers."
To be sure, while many had expected low oil prices to curb output, virtually
nobody had predicted that even a modest jump in oil ($40 is just $7 from here)
would lead to a major portion of US shale going back on line.
The threat of a shale rebound is "putting a cap on oil prices," said John
Kilduff, partner at Again Capital LLC. " If there's some bullish outlook
for demand or the economy, they will try to get ahead of the curve and increase
production even sooner."
Which in turn will force the Saudis to immediately retaliate, breach all
amusing "production freezes", and double down their efforts to crush shale.
In fact, some producers have already began hedging future production, with
prices for 2017 oil trading at near $45 a barrel, which could put a floor under
any future production cuts.
Another risk factor for all those hoping the modest rebound in oil will persist
is the record backlog of wells that have already been drilled but wait to get
fractured to keep oil trapped in shale rocks flowing. There were 945 such wells
in North Dakota compared to 585 in mid-2014, when prices peaked, according to
the latest available data from the Department of Mineral Resources. Their numbers
are growing as firms like Whiting keep drilling, but hold off with fracking.
Reuters' summary:
Their latest comments highlight the industry's remarkable resilience,
but also serve as a warning to rivals and traders: a retreat in
U.S. oil production that would help ease global oversupply and let prices
recover may prove shorter than some may have expected.
Our
observation three weeks ago was practically identical : since Saudi Arabia
had expected that its FX reserve outflow would last only temporarily using $40-50
breakevens, it will have to sell many more US reserves (either TSYs or stocks)
to fund the cash shortfall which will persist for far longer until oil catches
down to the lowest cost US producers.
What this means is that for the Saudis to declare victory they will have
to unleash a sharp downward oil spike that lasts long to put as many marginal
producers out of business as possible.
As we said: "In short: the oil price war is about to enter its far more vicious,
and far more lethal phase, and while it is unclear who ultimately wins, whether
it is Shale or the Saudis, the loser is clear: anyone who bought into bets of
an imminent oil bounce."
But the real punchline has nothing to do with breakeven prices and efficiency
and everything to do with balance sheets, because if and when the mass default
wave finally hits and hundreds of U.S. corporations undergo debt-for-equity
exchanges in which the bondholders end up with the equity keys, then the all-in
production costs (AIPCs) will be drastically cut even lower as there will be
no interest expense left to cover with operational cash flow proceeds.
As such, the stunning outcome may well be one in which U.S. shale turns Saudi's
"marginal producer" war on its head, and unleashes a massive oversupply spike,
one which slowly at first then very fast, leads to the Saudi exhaustion of its
FX reserves, until it is Saudi Arabia which itself is pushed out of the low-cost
production bracket and is instead forced to deal with far less palatable outcomes
such as social insurrection and revolution, as its already precarious welfare
state fights for survival in a world in which government oil revenues have trickled
to a halt.
What happens to the price of oil then is unclear, but what will need to happen
before we get to that point is very clear: oil will have to trade far, far lower
from its current price.
And even if it doesn't, we now have the oil price ceiling bogey: any time
a barrel of crude approaches $40, watch as the "marginal" producers do just
that, and resume production on very short notice.
Once a well is dug, they just keep pumping it. It costs money to shut
it down, better off to keep running until you can't breakeven at the daily
cost level which my guess is somewhere in the single digits for oil companies.
These "costs of production" also don't factor in that all of the O&G suppliers
cut their prices as oil prices decline so while it may have cost "$50" to
pump oil 2 years ago the cost is much lower because all the equipment suppliers
are struggling and cutting prices as well.
All through 2015 we've heard about how the storage was going to be gone
"soon". The reality if you look into it is that no one really knows how
much storage is available. Seems really stupid, I know, but no one ever
kept track of it in any single or consolidated database so everything is
run off of "estimates" and we all know how reliable those are. My guess
is that storage is likely a lot higher than these estimates make it because
there was so much money flowing in oil during the run up years that people
probably built a ton of it. It was covered on ZH once that no one knows
what the actual global (or even US) storage capacity is I think in like
2014 but then the stories converted over to just that we are running out.
We're still running on rumor from the Saudi's. I don't think it will
matter in a few months when the economic numbers can no longer be 'adjusted'
into a smiley face......
Investors are so starved for yield that even at $20 oil most of these
companies will be able to either issue equity and/or issue debt to rollover
any upcoming debt repayment obligations. Until the market freeze up this
party will keep going.
Goldman helps with both the selling of equities and debt. More selling
is good for Goldmen. Brakeing the companies in the process and rewarding
themselves, dont forget the bankruptcy management teams.
Wow, thank god. This is great news. Since the financial media cheerleaders
are always accurate and correct once this baby gets back above $40 I can
get out there again peddling High Yield Shale Bonds yielding a massive 4.99%
at par. The assumptions built in are quite reaosnable oil just needs to
hold above $40 in 2016 and then rocket above $100 in 2017 holding at least
at that level for twenty years to cap total capital losses at only 30%.
I'm really anticipating strong interest in these debt instruments.
Filling up of oil storage early in the cycle is an indicator of oversupply.
But in the current late cycle of low oil prices [1.5 yrs already] it is a useless indicator of
future oil price movement, oil demand or supply. It just indicates the level of contango that
exists in oil futures market. See
Gaurav
comment on Mar 06, 2016
Notable quotes:
"... One interesting take from Art Berman presentation is that he ignores "Great condensate Con" (and grossly overplays Cushing "storage glut" MSM meme). He also thinks that without OPEC cut $30 oil price range will last for the whole 2016 ..."
"... And why are we still importing oil: lack of sufficient domestic AVAILABILITY…not production. The vast majority of oil going into Cushing IS NOT do to a lack of buyers as the import numbers indicate. It's largely do to speculators hoping to take advantage of f increases in future oil prices. The net effect is that these speculation OIL BUYERS are competing with the refiners for domestic production. ..."
"... And now compare the 88 mm bbl capacity to the PADD 3 (essentially Texas and LA. where the bulk of the refineries are) capacity of 260 mm bbls. Between the speculator purchases and the smaller number of refineries combined with the large volume of Canadian imports seeing Cushing filling up is no surprise. ..."
"... So again compare the 88 mm bbl capacity at Cushing to the total storage capacity at US refineries: 179 mm bbls. No: the volume of oil held at refineries is not part of the total TANK FARM capacity. So how much is the Cushing storage capacity compared to tank farms + refinery storage: 13%. ..."
Here is a short excerpt from this article, in which Berman basically argues that the price
of oil is controlled by the level of storage at Cushing. I agree at least to the extent than the
price correlates closely with storage at Cushing.
For oil prices to increase, Cushing inventories must fall. That means that both U.S.
tight oil production, chiefly from the Bakken play, and Canadian light oil production brought
by pipeline to Cushing must decline.
Bakken production was consistent in 2015 at about 1.2 million barrels per day. Canadian
oil imports to the U.S. decreased from April through July 2015 and may have contributed to
the fall in Cushing inventories that lead to a $15 per barrel increase in WTI prices. At the
same time, decreased production from the Eagle Ford and Permian basin tight oil plays would
free up storage in the Gulf Coast that might allow more oil to flow out of Cushing.
One interesting take from Art Berman presentation is that he ignores "Great condensate Con"
(and grossly overplays Cushing "storage glut" MSM meme). He also thinks that without OPEC cut
$30 oil price range will last for the whole 2016:
• Energy markets have been characterized by low oil prices and over-supply since mid-2014.
• Supply deficit before Jan 2014, supply surplus after
• Prices fell from 2011-2013 average of $111 per barrel to average of $52 in 2015.
• Without an OPEC cut, 2016 prices will probably be in the $30 per barrel range.
… … …
U.S. crude oil produc4on has declined about 570,000 bopd since the peak in April 2014,
about 60,000 bopd per month.
• EIA forecast is for a total decline of 1.4 mmbpd by September 2016 ( ~100,000 bopd per month)
before increasing again based on $43 per barrel WTI by year-end 2016 and $58 by year-end 2017.
• Price deck has WTI at $43 per barrel by December 2016 & $58 by December 2017.
• Forecast suggests that the oil market is sufficiently in balance now for prices to increase
but that production will not respond to price signals until later in 2016-very optimistic.
… … …
Little chance that oil prices will increase beyond the head-fakes and sentiment-driven price
cycles of 2015 and early 2016 until U.S. crude oil storage begins to decrease.
• Oil stocks are currently 152 million barrels above the 5-year average and 128 million barrels
above the 5-year maximum.
… … …
• Cushing and Gulf Coast storage make up almost 70% of U.S. working storage.
• These areas are currently at 84% of capacity. Cushing at 89%.
• As long as storage volumes remain above 80% of capacity, oil prices will be crushed.
• Until U.S. oil production declines substantially, storage will remain near capacity.
This article is a little on the long side, for those of us who are into sound bites, but folks
with more patience will find it illuminating, and maybe even find a little something in it to
improve their personal morale, if they are feeling really down about the future.
Here is a short excerpt from this article, in which Berman basically argues that the price
of oil is controlled by the level of storage at Cushing. I agree at least to the extent than
the price correlates closely with storage at Cushing.
… … …
That's what happens when good people get into bad company due to lack of employment opportunities
caused by shale oil price crush :-)
And to add to some of the good points made: Cushing contains only 20% of total US oil storage
capacity. Notice they don't mention the fill level of that total: last time I looked it was
about 65%. That means 35% of the 450+ MILLION BBL CAPACITY is still empty.
And why are we still importing oil: lack of sufficient domestic AVAILABILITY…not production.
The vast majority of oil going into Cushing IS NOT do to a lack of buyers as the import numbers
indicate. It's largely do to speculators hoping to take advantage of f increases in future
oil prices. The net effect is that these speculation OIL BUYERS are competing with the refiners
for domestic production.
Which, again, explains why we still import a huge volume of oil despite the constant and
foolish use of the word "glut". IOW if we are still importing oil how can there be a glut of
domestic oil: the US lacks sufficient oil production to satisfy the demand from the refineries
AND speculators.
rockman on Sat, 27th Feb 2016 9:39 am
A few more FACTS to offset the "OMG Cushing is filling up" hysteria. First, Cushing is in
PADD 2 as they point out. But it isn't the only tank farm in that midwest district: it only
holds 60% of that total capacity.
And now compare the 88 mm bbl capacity to the PADD 3 (essentially Texas and LA. where the
bulk of the refineries are) capacity of 260 mm bbls. Between the speculator purchases and the
smaller number of refineries combined with the large volume of Canadian imports seeing Cushing
filling up is no surprise.
And we're just talking about tank farm storage.
So again compare the 88 mm bbl capacity at Cushing to the total storage capacity at US refineries:
179 mm bbls. No: the volume of oil held at refineries is not part of the total TANK FARM capacity.
So how much is the Cushing storage capacity compared to tank farms + refinery storage: 13%.
Nice mocking of US energy independence propaganda.
Notable quotes:
"... Had Texas maintained production at 400,000,000 barrels per year, the price would have stabilized to a higher low. A 700,000,000 barrel per year drop in production would be steep. ..."
"... 400,000,000 barrels per year at 75 usd per barrel is 30,000,000,000 dollars. ..."
"... 1.161,024,209 times 25 dollars per barrel is 29,025,600,000 dollars. ..."
"... Just too much oil production in Texas by two times. Texas at a 1.3 million barrel per day production level might bring back 75 dollar oil. ..."
Texas goes from 399,315,095 barrels in one year of production in 2009 all
the way to 1,161,024,209 barrels in 2015.
Looks close to a tripling of production from 2009 to 2015. Gotta go for
the gusto.
Must be contributing to the 'glut', in other words, 'we have to refine
this oil into all of the diesel fuel we can and get it shipped to Europe
as fast as we can, that's where the money is'. Gotta follow the money, that's
where the money is. It's a no brainer.
Or some such verbiage.
Or, refinery 'glut'. The gasoline can be sold at a bargain price, those
crazy Europeans buy diesel at any price, they could care less about that
gasoline. har
Europeans pay through the nose for diesel fuel only to subsidize low
gasoline prices for US consumers! double har, so har again.
Had Texas maintained production at 400,000,000 barrels per year,
the price would have stabilized to a higher low. A 700,000,000 barrel per
year drop in production would be steep.
400,000,000 barrels per year at 75 usd per barrel is 30,000,000,000
dollars.
1.161,024,209 times 25 dollars per barrel is 29,025,600,000 dollars.
Just too much oil production in Texas by two times. Texas at a 1.3
million barrel per day production level might bring back 75 dollar oil.
For leading U.S. shale oil producers, $40 is the new $70.
Less than a year ago major shale firms were saying they needed oil above
$60 a barrel to produce more; now some say they will settle for far less
in deciding whether to crank up output after the worst oil price crash in
a generation.
Their latest comments highlight the industry's remarkable resilience, but
also serve as a warning to rivals and traders: a retreat in U.S. oil production
that would help ease global oversupply and let prices recover may prove
shorter than some may have expected.
Continental Resources is prepared to increase capital spending if U.S.
crude reaches the low- to mid-$40s range, allowing it to boost 2017 production
by more than 10 percent, chief financial official John Hart said last week.
Rival Whiting Petroleum, the biggest producer in North Dakota's Bakken
formation, will stop fracking new wells by the end of March, but would "consider
completing some of these wells" if oil reached $40 to $45 a barrel, Chairman
and CEO Jim Volker told analysts. Less than a year ago, when the company
was still in spending mode, Volker said it might deploy more rigs if U.S.
crude hit $70.
While the comments were couched with caution, they serve as a reminder
of how a dramatic decline in costs and rapid efficiency gains have turned
U.S. shale, initially seen by rivals as a marginal, high cost sector, into
a major player – and a thorn in the side of big OPEC producers.
Nimble shale drillers are now helping mitigate the nearly 70-percent slide
crude price rout by cutting back output, but may also limit any rally by
quickly turning up the spigots once prices start recovering from current
levels just above $30.
The threat of a shale rebound is "putting a cap on oil prices," said
John Kilduff, partner at Again Capital LLC. "If there's some bullish outlook
for demand or the economy, they will try to get ahead of the curve and increase
production even sooner."
Some producers have already began hedging future production, with prices
for 2017 oil trading at near $45 a barrel, which could put a floor under
any future production cuts.
While the worst oil downturn since the 1980s sounds the death knell for
scores of debt-laden shale producers, it has also hastened the decline in
costs of hydraulic fracturing and improvements of the still-developing technology.
For example, Hess Corp., which pumps one of every 15 barrels of North Dakota
crude, cut the cost of a new Bakken oil well by 28 percent last year.
What once helped fatten margins is now key to survival in what Saudi
Oil Minister Ali al-Naimi described last week as the "harsh" reality of
a global market in which the Organization of Oil Exporting Countries is
no longer willing to curb its supplies to bolster prices.
While Deloitte auditing and consulting warns that a third of U.S. oil
producers may face bankruptcy, leading shale producers say their ambitions
go beyond just outrunning domestic rivals.
"It's no longer enough to be the low cost producer in U.S. horizontal shale,"
Bill Thomas, chairman of EOG Resources Inc, said on Friday. "EOG's goal
is to be competitive, low-cost oil producer in the global market."
Thomas did not say what price would spur EOG to boost output this year,
but said it had a "premium inventory" of 3,200 well locations that can yield
returns of 30 percent or more with oil at $40.
Apache Corp, forecasts its output will drop by as much as 11 percent
this year, but said it would probably manage to match 2015 North American
production if oil averaged $45 this year.
One reason shale producers can be so fleet-footed is the record backlog
of wells that have already been drilled but wait to get fractured to keep
oil trapped in shale rocks flowing.
There were 945 such wells in North Dakota, birthplace of the U.S. shale
boom in December, compared to 585 in mid-2014, when prices peaked, according
to the latest available data from the Department of Mineral Resources. Their
numbers are growing as firms like Whiting keep drilling, but hold off with
fracking.
Some warn that fracking the uncompleted wells can offer only a short-term
supply boost and a sustained increase would require costly drilling of new
wells and therefore higher prices.
"It's going to take a move up to $55 before we see anyone plan new production,"
says Carl Larry, director of business development for oil and gas at Frost
& Sullivan.
To be sure, it is far from certain whether oil prices will even reach
$40 any time soon. Morgan Stanley and ANZ expect average prices in the low
$30s for the full year.
Some analysts also warn resuming drilling quickly may prove hard after firms
laid off thousands of workers and idled more than three-quarters of their
rigs since late 2014.
In fact, John Hess, chief executive of Hess Corp last week took issue with
labeling U.S. shale oil as a "swing producer." Hess told Reuters in an interview
that U.S. shale firms should be rather considered as "short-cycle" producers,
which might need up to a year to stop or restart production.
And even scarred veterans of past boom-bust oil cycles are not sure what
will happen once prices start to recover – during the last big upswing a
decade ago, shale oil did not even exist.
"We are a little concerned that this time there is one dynamic we've never
had previously," said Darrell Hollek, vice president of U.S. onshore at
Anadarko Petroleum Corp.
--------------
Some analysts also believe that drilling/completion activity in the U.S.
will rebound in the second half of the year, as oil prices reach $40-45.
See, for example, US rig count forecast by Raymond James (chart below).
BTW, their energy analyst expect WTI to reach $50 by the end of 2016.
AlexS. This talk is pure desparate talk, and nothing more.
A group of us have been analyzing the Statements of Future Cash Flows
in the 10K's recently released by some of the large shale players, including
EOG, CLR, WLL, PXD and CHK.
The assumptions made in the reduction of future production costs
are questionable. Here are the revisions from 12/31/14 to 12/31/15 for
these companies:
EOG
2014 $51.533 billion
2015 $32.061 billion
CLR
2014 $25.799 billion
2015 $10.869 billion
WLL
2014 $20.772 billion
2015 $12.344 billion
PXD
2014 $18.223 billion
2015 $11.475 billion
CHK
2014 $17.036 billion
2015 $7.391 billion
The only thing I have been unable to determine is whether any drilling
and completion costs are included by these companies in "future production
costs"
I would note all break out "future development costs" and all have
greatly reduced numbers from 2014 to 2015, which makes sense given large
budget cuts.
In any event, it is worth noting the future estimates of these companies
in the 10K and how radically they have changed from 12/31/14 to 12/31/15.
Further, it is noteworthy that if current oil and gas prices are
plugged into the 12/31/15 future cash inflows, there is little positive
to negative future net cash flows.
In summary, the claims are not backed up by the company SEC filings,
IMO. Also, the large long term debt incurred in prior years cannot be
ignored either, IMO.
Here is a repost of CLR's snake oil sale press release and calculations
for PDP reserve adds for CLR and what that implies about EUR's in the
Bakken. If correct, breakevens for the Bakken is much higher than $55.
Sorry, 850K. From CLR's Q4 press release:
"Given its plans to defer most Bakken completions in 2016, Continental
expects to increase its Bakken DUC inventory to approximately 195 gross
operated DUCs at year-end 2016. The year-end 2016 DUC inventory represents
a high-graded inventory with an average EUR per well of approximately
850,000 Boe. At year-end 2015, the Company's Bakken DUC inventory was
approximately 135 gross operated DUCs."
From an analyst named Frank, who posts on Yahoo. His calcs look right
to me.
"Look at the 10-k reserve and production data – proved developed
only of course.
In the Bakken
They added 180 net wells in 2015
They produced 38 mm BO and 47 mmcf ng or 46 mm boe
Reserves declined 15.5 mm BO and ng reserves increased by 16.2 mmcf
or 2.7 boe
Therefore reserves declined by 13 mm boe
So adds from new wells was 46-13 = 33 boe from 180 wells. That is 185k
boe per well. A little shy of 800k."
EUR is total expected production from a well during its lyfe cycle,
not annual production, especially as these wells were producing less
than a year in 2015.
I know. The EUR sabove are calculated from the change of PDP reserves
adjusted by a year's production, divided by wells completed. That should
give you the amount of reserves added per completed well.
That's a pretty typical education sharks tactics. This was (and still is) an epidemic that
started in late 90th with the peak around 2007 (coincided with the subprime mortgages peak). May be
slightly longer. Not all students were innocent in this case. Most knew what they are buying. That includes
some Obama staffers and several Department of homeland security employees.
Diploma mills under Bush II were really like yet another sub-prime mortgage boom. Trump was a very
small fish in this business but probably the desire to milk his name prevailed over caution. the
most notorious hunted for people who can get government grant and then loaded them with additional debt
up to the neck. Now Trump is in the spotlight and will pay the damages althouth it is unlcear
to me if the students were engaged in "career enhancing" move or were defrauded. One strong point in
defense of Trump is that his university offered no degree. That can get him off the hook.
The most significant shift in higher education over the past two decades has been the emergence
of for-profit colleges and universities. These online and storefront institutions lure students with
promises of fast degrees and "guaranteed" job placement, but what they deliver is often something quite
different. In this provocative history of for-profit higher education, historian and educational researcher
A. J. Angulo tells the remarkable and often sordid story of these "diploma mills," which target low-income
and nontraditional students while scooping up a disproportionate amount of federal student aid.
Tapping into a little-known history with big implications, Angulo takes readers on a lively journey
that begins with the apprenticeship system of colonial America and ends with today's politically savvy
$35 billion multinational for-profit industry. He traces the transformation of nineteenth-century reading
and writing schools into "commercial" and "business" colleges, explores the early twentieth century's
move toward professionalization and progressivism, and explains why the GI Bill prompted a surge of
new for-profit institutions. He also shows how well-founded concerns about profit-seeking in higher
education have evolved over the centuries and argues that financial gaming and maneuvering by these
institutions threatens to destabilize the entire federal student aid program.
This is the first sweeping narrative history to explain why for-profits have mattered to students,
taxpayers, lawmakers, and the many others who have viewed higher education as part of the American dream.
Diploma Mills speaks to today's concerns by shedding light on unmistakable conflicts of interest
long associated with this scandal-plagued class of colleges and universities.
Notable quotes:
"... I would think that Trump gave all of those students a lesson that they should never forget, a fool and his money are soon parted. Who pays 36 grand to go to an unacredited school, to learn what they could get for free at the local library? ..."
"... "The receptivity of the masses is very limited, their intelligence is small, but their power of forgetting is enormous. In consequence of these facts, all effective propaganda must be limited to a very few points and must harp on these in slogans until the last member of the public understands what you want him to understand by your slogan." ..."
"... "There is a cult of ignorance in the United States. and there always has been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured through the false notion that democracy means that 'my ignorance is just as good as your knowledge. ..."
Republican presidential front-runner Donald Trump is playing defense on at least one issue these
days: his role in a now-defunct real estate seminar business called Trump University.
At a rally in Arkansas on Saturday, Trump took a break from his stump speech to downplay a class-action
civil lawsuit pending against the business, which was founded by Trump and offered students instruction
on real estate investments.
"It's a small deal, very small," Trump said of the suit, which could force him to take the stand
this summer.
Trump specifically railed against the judge in the case, and at one point noted the judge's Hispanic
ethnicity.
Trump claimed the case should have been thrown out years ago, "but because it was me and because
there's a hostility toward me by the judge - tremendous hostility - beyond belief." He then noted,
as an aside: "I believe he happens to be Spanish, which is fine. He's Hispanic - which is fine."
A message left for the judge, U.S. District Judge Gonzalo Curiel, was not immediately returned.
Curiel is a judge in the Southern District of California and based in San Diego.
New York Attorney General Eric Schneiderman, whose office has filed a separate civil $40 million
complaint against Trump University in state court, accused Trump of "racial demagoguery." Schneiderman
sued Trump University in 2013 alleging it committed fraud and fleeced 5,000 people out of millions
of dollars.
"I will not engage in a debate about ongoing litigation," Schneiderman said in a statement issued
after Trump made his comments. "But there is no place in this process for racial demagoguery directed
at respected members of the judiciary."
Schneiderman noted that New York's state Supreme Court ruled that Trump University operated illegally
in New York as an unlicensed educational institution.
Trump University emerged as a campaign issue at Thursday's GOP debate, raised by Florida Sen.
Marco Rubio.
"There are people who borrowed $36,000 to go to Trump University, and they're suing now - $36,000
to go to a university that's a fake school," Rubio said. "And you know what they got? They got to
take a picture with a cardboard cutout of Donald Trump."
Texas Sen. Ted Cruz jumped in, adding: "It's a fraud case. ... I want you to think about, if this
man is the nominee, having the Republican nominee on the stand in court, being cross-examined about
whether he committed fraud."
Schneiderman's suit alleges that Trump University falsely promoted itself as an educational institution
even after the state education department warned it to stop. The complaint accuses Trump of falsely
promising that Trump University students would receive intense training from experts hand-picked
by Trump himself.
During breaks in the seminars, Schneiderman's complaint alleges, participants were urged to call
their credit card companies and ask to increase their credit limits. Once the credit lines were secured,
Trump University staff tried to persuade students to pay for additional services.
Separate from Schneiderman's complaint, Trump University students have sued. According to the
California class-action complaint in front of Curiel, a one-year apprenticeship that Trump University
students were promised ended after students paid for a three-day seminar. Attendees who were promised
a personal photo with Trump received only the chance to take a photo with a cardboard cutout. And
many instructors were bankrupt real estate investors.
Trump, at the rally, dismissed the cases as the work of "a sleazebag law firm" and suggested that
Schneiderman's intervention was politically motivated.
"I could've settled this suit numerous times. Could settle it now. But I don't like settling suits,"
Trump said.
Chris
I would think that Trump gave all of those students a lesson that they should never
forget, a fool and his money are soon parted. Who pays 36 grand to go to an unacredited
school, to learn what they could get for free at the local library?
Do you really need someone to say, For next week, read chapters 5-9" ? And now that you
have your lesson in "real life" go forth and prosper. And you should quicky recoup your
tuition because you will run into people that lack you knowledge.
Commenter
The broad masses of a population are more amenable to the appeal of rhetoric than to any
other force.- Adolf Hitler
I'm a bit of a P. T. Barnum. I make stars out of everyone. - Trump
There's a sucker born every minute. - P.T. Barnum
Commenter
"The receptivity of the masses is very limited, their intelligence is small, but their
power of forgetting is enormous. In consequence of these facts, all effective propaganda must
be limited to a very few points and must harp on these in slogans until the last member of the
public understands what you want him to understand by your slogan." Adolf dead, enter the
Trump. Make American great again!
Margy
"There is a cult of ignorance in the United States. and there always has been. The
strain of anti-intellectualism has been a constant thread winding its way through our
political and cultural life, nurtured through the false notion that democracy means that 'my
ignorance is just as good as your knowledge." - Isaac Asimov
J
Trump university proved there is a sucker born every minute.
Joe
Trump univ sounds like it was a school that taught real estate investing as an off shoot of
trumps tv show. Nothing said it was an accredited degree college. No real estate license
school is and they all have 3 day courses to learn real estate then you have to take a state
test to get your license. You can go to a regular school that costs $100 or spend $36k at
trump univ. it's the same class. It all sounds like a PR stunt .
factChecker
Cheating thousands of people, just trying to better themselves, out of millions of $ might
be unimportant to Trump. That is the problem. He has no conscience.
Big Al
Ignorance is investing your money in a non certified educational institution because it is
pitched by a so called "celebrity". If you do something foolish, dumb or stupid own up to it
and use it as a learning experience. Don't expect others to pay for your mistakes.
Break even cost remain slightly north of 60 dollars per bbl
Notable quotes:
"... We have decided to that we too need to reduce our future production costs by 60%. The electric cooperative said no problem. So did the chemical company, our workers comp carrier, liability insurance carrier. The steel manufacturers did too, so our tubing and rods dropped 60%. The down hole and injection pump service providers were ok with that. Hey Clueless, even our accountant said, "No problem! Since you need to compete with OPEC and Russia, we are knocking 60% off our bill! Now go beat those Saudi's and Russians in this oil price war! Show em who is boss!" ..."
I wonder what ShallowS thinks of EOG's new strategy? That is, to choose their very best of
the best projects, cut costs to the bone and hope that they can make a profit.
Good analogies are hard to come by, but I will throw one out. In 2009, at the depths of
the housing collapse, what if the CEO of Toll Brothers proposed: "We are going to select our
very best lots – the Crown Jewels in our inventory.
Then we are going to build some of our more modest houses on them, cutting costs to the
bone. We hope that we can then sell them for at least break even." Personally, if I owned the
stock, I would have sold immediately.
Clueless. You know what I think. And I do really like your Toll Brothers example.
What I think is more impressive than their current meme on $30 oil is how they cut their
estimate of future production costs from $52 billion at the end of 2014 to $32 billion at the
end of 2015, without a major proved reserve reduction.
But hey, Continental cut theirs from $26 billion to $11 billion. So no big deal.
We have decided to that we too need to reduce our future production costs by 60%. The electric
cooperative said no problem. So did the chemical company, our workers comp carrier, liability
insurance carrier. The steel manufacturers did too, so our tubing and rods dropped 60%. The
down hole and injection pump service providers were ok with that.
Hey Clueless, even our accountant said, "No problem! Since you need to compete with OPEC
and Russia, we are knocking 60% off our bill! Now go beat those Saudi's and Russians in this
oil price war! Show em who is boss!"
Seriously, we have seen some cost reductions, but nothing remotely near 40-60%. And, of
course, although we pay the most to the electric coop of anyone, they just don't seem too keen
on lowering rates for us.
That's a pretty typical education sharks tactics. This was (and still is) an epidemic that
started in late 90th with the peak around 2007 (coincided with the subprime mortgages peak). May be
slightly longer. Not all students were innocent in this case. Most knew what they are buying. That includes
some Obama staffers and several Department of homeland security employees.
Diploma mills under Bush II were really like yet another sub-prime mortgage boom. Trump was a very
small fish in this business but probably the desire to milk his name prevailed over caution. the
most notorious hunted for people who can get government grant and then loaded them with additional debt
up to the neck. Now Trump is in the spotlight and will pay the damages althouth it is unlcear
to me if the students were engaged in "career enhancing" move or were defrauded. One strong point in
defense of Trump is that his university offered no degree. That can get him off the hook.
The most significant shift in higher education over the past two decades has been the emergence
of for-profit colleges and universities. These online and storefront institutions lure students with
promises of fast degrees and "guaranteed" job placement, but what they deliver is often something quite
different. In this provocative history of for-profit higher education, historian and educational researcher
A. J. Angulo tells the remarkable and often sordid story of these "diploma mills," which target low-income
and nontraditional students while scooping up a disproportionate amount of federal student aid.
Tapping into a little-known history with big implications, Angulo takes readers on a lively journey
that begins with the apprenticeship system of colonial America and ends with today's politically savvy
$35 billion multinational for-profit industry. He traces the transformation of nineteenth-century reading
and writing schools into "commercial" and "business" colleges, explores the early twentieth century's
move toward professionalization and progressivism, and explains why the GI Bill prompted a surge of
new for-profit institutions. He also shows how well-founded concerns about profit-seeking in higher
education have evolved over the centuries and argues that financial gaming and maneuvering by these
institutions threatens to destabilize the entire federal student aid program.
This is the first sweeping narrative history to explain why for-profits have mattered to students,
taxpayers, lawmakers, and the many others who have viewed higher education as part of the American dream.
Diploma Mills speaks to today's concerns by shedding light on unmistakable conflicts of interest
long associated with this scandal-plagued class of colleges and universities.
Notable quotes:
"... I would think that Trump gave all of those students a lesson that they should never forget, a fool and his money are soon parted. Who pays 36 grand to go to an unacredited school, to learn what they could get for free at the local library? ..."
"... "The receptivity of the masses is very limited, their intelligence is small, but their power of forgetting is enormous. In consequence of these facts, all effective propaganda must be limited to a very few points and must harp on these in slogans until the last member of the public understands what you want him to understand by your slogan." ..."
"... "There is a cult of ignorance in the United States. and there always has been. The strain of anti-intellectualism has been a constant thread winding its way through our political and cultural life, nurtured through the false notion that democracy means that 'my ignorance is just as good as your knowledge. ..."
Republican presidential front-runner Donald Trump is playing defense on at least one issue these
days: his role in a now-defunct real estate seminar business called Trump University.
At a rally in Arkansas on Saturday, Trump took a break from his stump speech to downplay a class-action
civil lawsuit pending against the business, which was founded by Trump and offered students instruction
on real estate investments.
"It's a small deal, very small," Trump said of the suit, which could force him to take the stand
this summer.
Trump specifically railed against the judge in the case, and at one point noted the judge's Hispanic
ethnicity.
Trump claimed the case should have been thrown out years ago, "but because it was me and because
there's a hostility toward me by the judge - tremendous hostility - beyond belief." He then noted,
as an aside: "I believe he happens to be Spanish, which is fine. He's Hispanic - which is fine."
A message left for the judge, U.S. District Judge Gonzalo Curiel, was not immediately returned.
Curiel is a judge in the Southern District of California and based in San Diego.
New York Attorney General Eric Schneiderman, whose office has filed a separate civil $40 million
complaint against Trump University in state court, accused Trump of "racial demagoguery." Schneiderman
sued Trump University in 2013 alleging it committed fraud and fleeced 5,000 people out of millions
of dollars.
"I will not engage in a debate about ongoing litigation," Schneiderman said in a statement issued
after Trump made his comments. "But there is no place in this process for racial demagoguery directed
at respected members of the judiciary."
Schneiderman noted that New York's state Supreme Court ruled that Trump University operated illegally
in New York as an unlicensed educational institution.
Trump University emerged as a campaign issue at Thursday's GOP debate, raised by Florida Sen.
Marco Rubio.
"There are people who borrowed $36,000 to go to Trump University, and they're suing now - $36,000
to go to a university that's a fake school," Rubio said. "And you know what they got? They got to
take a picture with a cardboard cutout of Donald Trump."
Texas Sen. Ted Cruz jumped in, adding: "It's a fraud case. ... I want you to think about, if this
man is the nominee, having the Republican nominee on the stand in court, being cross-examined about
whether he committed fraud."
Schneiderman's suit alleges that Trump University falsely promoted itself as an educational institution
even after the state education department warned it to stop. The complaint accuses Trump of falsely
promising that Trump University students would receive intense training from experts hand-picked
by Trump himself.
During breaks in the seminars, Schneiderman's complaint alleges, participants were urged to call
their credit card companies and ask to increase their credit limits. Once the credit lines were secured,
Trump University staff tried to persuade students to pay for additional services.
Separate from Schneiderman's complaint, Trump University students have sued. According to the
California class-action complaint in front of Curiel, a one-year apprenticeship that Trump University
students were promised ended after students paid for a three-day seminar. Attendees who were promised
a personal photo with Trump received only the chance to take a photo with a cardboard cutout. And
many instructors were bankrupt real estate investors.
Trump, at the rally, dismissed the cases as the work of "a sleazebag law firm" and suggested that
Schneiderman's intervention was politically motivated.
"I could've settled this suit numerous times. Could settle it now. But I don't like settling suits,"
Trump said.
Chris
I would think that Trump gave all of those students a lesson that they should never
forget, a fool and his money are soon parted. Who pays 36 grand to go to an unacredited
school, to learn what they could get for free at the local library?
Do you really need someone to say, For next week, read chapters 5-9" ? And now that you
have your lesson in "real life" go forth and prosper. And you should quicky recoup your
tuition because you will run into people that lack you knowledge.
Commenter
The broad masses of a population are more amenable to the appeal of rhetoric than to any
other force.- Adolf Hitler
I'm a bit of a P. T. Barnum. I make stars out of everyone. - Trump
There's a sucker born every minute. - P.T. Barnum
Commenter
"The receptivity of the masses is very limited, their intelligence is small, but their
power of forgetting is enormous. In consequence of these facts, all effective propaganda must
be limited to a very few points and must harp on these in slogans until the last member of the
public understands what you want him to understand by your slogan." Adolf dead, enter the
Trump. Make American great again!
Margy
"There is a cult of ignorance in the United States. and there always has been. The
strain of anti-intellectualism has been a constant thread winding its way through our
political and cultural life, nurtured through the false notion that democracy means that 'my
ignorance is just as good as your knowledge." - Isaac Asimov
J
Trump university proved there is a sucker born every minute.
Joe
Trump univ sounds like it was a school that taught real estate investing as an off shoot of
trumps tv show. Nothing said it was an accredited degree college. No real estate license
school is and they all have 3 day courses to learn real estate then you have to take a state
test to get your license. You can go to a regular school that costs $100 or spend $36k at
trump univ. it's the same class. It all sounds like a PR stunt .
factChecker
Cheating thousands of people, just trying to better themselves, out of millions of $ might
be unimportant to Trump. That is the problem. He has no conscience.
Big Al
Ignorance is investing your money in a non certified educational institution because it is
pitched by a so called "celebrity". If you do something foolish, dumb or stupid own up to it
and use it as a learning experience. Don't expect others to pay for your mistakes.
...on Saturday, billionaire Warren Buffett used his
annual letter to Berkshire Hathaway
Inc. shareholders to say, in effect, relax.
The country may have challenges, but the doom-and-gloom
predictions are "dead wrong," Buffett wrote.
Instead, "babies being born in America today are the luckiest crop in history," he wrote.
... ... ...
Buffett's annual letter to Berkshire investors is so closely followed because he so often makes
the right calls about the economy. And in this year's letter, he makes it clear that he considers
the "negative drumbeat" about America to be very misleading.
"... And to add to some of the good points made: Cushing contains only 20% of total US oil storage capacity. Notice they don't mention the fill level of that total: last time I looked it was about 65%. That means 35% of the 450+ MILLION BBL CAPACITY is still empty. ..."
"... The vast majority of oil going into Cushing IS NOT do to a lack of buyers as the import numbers indicate. It's largely do to speculators hoping to take advantage of f increases in future oil prices. The net effect is that these speculation OIL BUYERS are competing with the refiners for domestic production. ..."
"... IOW if we are still importing oil how can there be a glut of domestic oil: the US lacks sufficient oil production to satisfy the demand from the refineries AND speculators. ..."
"... A few more FACTS to offset the "OMG Cushing is filling up" hysteria. First, Cushing is in PADD 2 as they point out. But it isn't the only tank farm in that midwest district: it only holds 60% of that total capacity. ..."
"... OMG: almost 13% of the capacity of storing oil in the US is getting close to being full…what are we going to do??? ..."
"... Maybe they'll just build more storage: since 2011 about 25 million bbl of new storage was added to Cushing and 57 mm bbls added in the Gulf Coast. IOW Cushing would have been completely filled years ago had not SPECULATING INVESTORS not paid for new storage. ..."
"... Agreed, the Cushing stuff is overplayed. It's the tail, not the dog anyways. ..."
"... From all evidences Cushing is flooded with light oils and condensate, waiting for more heavy oils to be blended with, or more orders from the plastics manufacturers. ..."
"... That is probably true because very light crude is only minimally useful to the refineries: ..."
"... It produces almost none of the more profitable end products, like diesel. It also only has a minimal impact on the economy because its energy content is much lower. ..."
"... Its lower energy content also impacts crude prices. The price of oil depends on the strength of the economy, and the strength of the economy depends on oil's ability to power it. Lower energy content oil does less powering, which results in less demand. ..."
"... The specific gravity of a fuel oil is a reflection of its heating value. The heating value is determined primarily by the carbon/hydrogen ratio; as the carbon/hydrogen ratio increases, the specific gravity will increase and the heating value will decrease. Section 3, Figure 3 will give some idea of the effect of the carbon/hydrogen ratio and the various hydrocarbon components on the heating value. The heating value is also decreased by the presence of sulfur. ..."
And to add to some of the good points made: Cushing contains only 20% of total US oil storage
capacity. Notice they don't mention the fill level of that total: last time I looked it was about
65%. That means 35% of the 450+ MILLION BBL CAPACITY is still empty.
And why are we still importing oil: lack of sufficient domestic AVAILABILITY…not production.
The vast majority of oil going into Cushing IS NOT do to a lack of buyers as the import numbers
indicate. It's largely do to speculators hoping to take advantage of f increases in future oil
prices. The net effect is that these speculation OIL BUYERS are competing with the refiners for
domestic production.
Which, again, explains why we still import a huge volume of oil despite the constant and foolish
use of the word "glut". IOW if we are still importing oil how can there be a glut of domestic
oil: the US lacks sufficient oil production to satisfy the demand from the refineries AND speculators.
rockman on Sat, 27th Feb 2016 9:39 am
A few more FACTS to offset the "OMG Cushing is filling up" hysteria. First, Cushing is
in PADD 2 as they point out. But it isn't the only tank farm in that midwest district: it only
holds 60% of that total capacity.
And now compare the 88 mm bbl capacity to the PADD 3 (essentially Texas and LA. where the bulk
of the refineries are) capacity of 260 mm bbls. Between the speculator purchases and the smaller
number of refineries combined with the large volume of Canadian imports seeing Cushing filling
up is no surprise.
And we're just talking about tank farm storage. So again compare the 88 mm bbl capacity at
Cushing to the total storage capacity at US refineries: 179 mm bbls. No: the volume of oil held
at refineries is not part of the total TANK FARM capacity. So how much is the Cushing storage
capacity compared to tank farms + refinery storage: 13%.
OMG: almost 13% of the capacity of storing oil in the US is getting close to being full…what
are we going to do???
Maybe they'll just build more storage: since 2011 about 25 million bbl of new storage was
added to Cushing and 57 mm bbls added in the Gulf Coast. IOW Cushing would have been completely
filled years ago had not SPECULATING INVESTORS not paid for new storage.
Nony on Sat, 27th Feb 2016 12:41 pm
Agreed, the Cushing stuff is overplayed. It's the tail, not the dog anyways.
Oil us up several dollars over the last couple weeks (26 to 33). And the contango has shrunk
(prompt/spot up more than 1 year out). Both of these are factors that argue we are not in a storage
crisis, that the glut is easing.
Note: 33 is still WAY less than 100. And the long term strip has dropped significantly also
So we have had a radical change in the market since JUL2014. But current indications (even just
the contango itself) argue that future oil prices will be higher than current, rather than lower.
Of course there is a probability spread of outcomes and the US EIA STEO price funnel diagram
shows that prices could be higher or lower over next few years. So future price drops are still
reasonably possible (above 5% likelihood), although not likely (below 50% chance).
farmlad on Sat, 27th Feb 2016 2:02 pm
From all evidences Cushing is flooded with light oils and condensate, waiting for more
heavy oils to be blended with, or more orders from the plastics manufacturers.
Apneaman on Sat, 27th Feb 2016 4:02 pm
Short sellers hitting energy at near-crisis levels
It produces almost none of the more profitable end products, like diesel. It also only
has a minimal impact on the economy because its energy content is much lower.
Its lower energy content also impacts crude prices. The price of oil depends on the strength
of the economy, and the strength of the economy depends on oil's ability to power it. Lower energy
content oil does less powering, which results in less demand.
IFuckYouOver on Sat, 27th Feb 2016 4:59 pm
Short of a chemical analysis of what is in there, we cannot interpret these data properly
The specific gravity of a fuel oil is a reflection of its heating value. The heating value
is determined primarily by the carbon/hydrogen ratio; as the carbon/hydrogen ratio increases,
the specific gravity will increase and the heating value will decrease. Section 3, Figure 3 will
give some idea of the effect of the carbon/hydrogen ratio and the various hydrocarbon components
on the heating value. The heating value is also decreased by the presence of sulfur.
The heat contained in a fuel, or its heating value (BTU/lb), is primarily affected by
changes in a specific (or API) gravity and its sulfur content in percent by weight.
As the gravity of the oil increases, the ratio of carbon to hydrogen increases, as well as
the sulfur content. The result is that there is less hydrogen with its high heating value available
per pound, and a consequent decrease in heat released during combustion. From a performance viewpoint,
this change in heat content is indicated by an increased brake specific fuel rate in pounds per
brake horsepower-hour and, to a very slight degree, by a decrease in overall engine efficiency,
as more fuel with a lower heat content must be burned for a fixed power output.
"... Despite all the talk of technology, etc, the real measure of any business is an accurate measure of its future cash flows, and then application of an appropriate discount rate to those future cash flows, minus the debt. ..."
"... EOG reported long term debt of $6.654 billion. Production fell from 2014 to 2015. Go to shale profile.com and look at their Bakken and Niobrara production drops. Soon Enno will have the Eagle Ford shale up, we can look at that to. ..."
"... In my opinion, EOG released this presser because at current oil and gas prices, their assets have no value, absent even more cuts to production and development costs, which to me seem improbable. Even more cuts probably don't get them to the ability to pay back debt, especially as the above cash flow calculations DO NOT include general and administrative expenses, nor debt interest expense. ..."
"... I really hope readers will take the time to read this post. EOG is about the best shale company out there IMO. Yet, their assets cannot produce future net cash flows over their expected lives, in aggregate, at current oil and gas prices, without even further cost cutting. Even another 25% of cost cuts doesn't get them close to servicing debt. ..."
"... Also, for the oil traders out there, knowing that EOG is likely a more effective cost producer out there than over half of worldwide production, why don't you explain to me the current futures strip? ..."
For EOG, $40 is becoming the new $70. This morning, the company discussed a new strategy
to make unconventional oil development in US plays like the Eagle Ford and the Permian Basin
competitive on a global scale at current oil prices. Specifically, EOG has identified a decade
of premium unconventional oil drilling inventory that will generate double digit returns at
$30 oil.
Backed into a corner by lower cost producers in a global price war, EOG essentially just
yelled a battle cry at OPEC on behalf of US shale, implying they will make unconventional oil
just as cost effective as OPEC barrels.
EOG Resources is light years ahead of its peers in shale science and acreage quality, and
its ambitions may not be repeatable industry-wide, although others will certainly try. EOG
is to shale what Saudi is to OPEC - uniquely advantaged relative to other peers/members.
Friday morning, EOG Resources CEO Bill Thomas launched a new "premium location" concept,
which is essentially next level high-grading (focusing on the core of the core). Thomas's plan
aspires to make shale work in the new oil price paradigm, and competitive in the new world
oil market.
I have not had time to read it all, but have fun. I am sure the comments will be worth a read.
Toolpush. I read that on Oilpro. It is a head scratcher, as I thought I read Bill Thomas had earlier
said they need $80 oil to have a good business. He is EOG's CEO.
Despite all the talk of
technology, etc, the real measure of any business is an accurate measure of its future cash flows,
and then application of an appropriate discount rate to those future cash flows, minus the debt.
EOG, like all other oil and gas producers, is required to disclose estimates of future cash
flows in their annual 10K reports. They employ an independent engineering firm for this purpose.
Here is what they disclosed effective 12/31/14
Future cash inflows:$146.950 billion.
Future production costs:$51.633 billion
Future development costs$20.495 billion
Future income taxes: $20.495 billion
Future net cash flows:$51.636 billion
Future net cash flows discounted to PV10:$27.923 billion
Here is what they disclosed effective 12/31/15
Future cash inflows:$68.720 billion
Future production costs:$32.061 billion
Future development costs:$15.786 billion
Future income taxes $4.616 billion
Future net cash flows $16.258 billion
Future net cash flows discounted to PV10: $9.621 billion
Now, here is what happens to EOG reported numbers as of 12/31/15 if we drop their cash inflows
by another 1/3, which is where prices are today:
Future cash inflows:$45.814 billion
Future production costs:$32.061 billion
Future development costs:$15.786 billion
Future net cash flows:-$2.032 billion.
EOG reported long term debt of $6.654 billion. Production fell from 2014 to 2015. Go to
shale profile.com and look at their Bakken and Niobrara production drops. Soon Enno will have
the Eagle Ford shale up, we can look at that to.
In my opinion, EOG released this presser because at current oil and gas prices, their assets
have no value, absent even more cuts to production and development costs, which to me seem improbable.
Even more cuts probably don't get them to the ability to pay back debt, especially as the above
cash flow calculations DO NOT include general and administrative expenses, nor debt interest expense.
I really hope readers will take the time to read this post. EOG is about the best shale
company out there IMO. Yet, their assets cannot produce future net cash flows over their expected
lives, in aggregate, at current oil and gas prices, without even further cost cutting. Even another
25% of cost cuts doesn't get them close to servicing debt.
I ask anyone to tell me what I am missing. If there are any business media out there, please
look this over and then report on it. Look at other major independents such as ConocoPhillips,
Anadarko, Marathon, Chesapeake, Occidental, etc. I am sure that, with the possible exception of
OXY, they are worse.
Also, for the oil traders out there, knowing that EOG is likely a more effective cost producer
out there than over half of worldwide production, why don't you explain to me the current futures
strip?
"... But if the alternative is to try and elect leaders from the centre who will do nothing to confront these great issues, and will instead cut spending, accept stagnation and wait for the next financial crisis, is it any wonder that many people would rather take their chance with someone different? ... ..."
"... Rather than celebrating the enthusiasm and interest of the many young people that have recently joined (even if they regard some of their aspirations as naive), and who will be vital in future election campaigns, this overtly anti-Corbyn group seem to regard them as a threat. ... ..."
We have not met, but I have talked to your former colleague Gordon a few times and I did some
academic work on his 5 tests for Euro entry. I saw a
report that you were mystified by the popularity of Jeremy Corbyn and Bernie Sanders. I have
an
article today in The Independent that might help you understand your puzzle.
I know you find it strange that people that appear to you like those your predecessor Neil
Kinnock did battle with over the future of the Labour Party in the 1980s are now running the party.
It must also seem strange that in the US where socialism once seemed to be regarded as a perversion,
large numbers should be supporting a socialist candidate. You suggest some explanations, but you
do not mention the power of finance, inequality and the senselessness of austerity. You say that
these new leaders will not be electable. But if the alternative is to try and elect leaders
from the centre who will do nothing to confront these great issues, and will instead cut spending,
accept stagnation and wait for the next financial crisis, is it any wonder that many people would
rather take their chance with someone different? ...
There are many Labour MPs and left leaning journalists who seem to share your puzzlement, and
have decided that they have to fight again the battles of the 1980s by doing everything to undermine
their new Labour leadership. ...
Rather than celebrating the enthusiasm and interest of the many
young people that have recently joined (even if they regard some of their aspirations as naive),
and who will be vital in future election campaigns, this overtly anti-Corbyn group seem to regard
them as a threat. ...
Please tell them to stop. I fear they need someone they respect like you to point out the foolishness
of their actions.
"The balance sheets of shale producers are in disrepair," said Mr Hess"
and
"Opec launched a price war against US shale and other high-cost producers, including Canadian
oil sands and Brazilian deep-water oilfields, in November 2014 by not reducing output despite
a global oversupply. Since then, oil prices have plunged by more than half, hitting a 12-year
low of about $26 on February 11.
In a rare admission that the policy hasn't worked out as planned, Mr El-Badri said that Opec
didn't expect oil prices to drop this much when it decided to keep pumping near flat-out.
Opec's strategy began to shift last week, when the oil ministers of Saudi Arabia and Russia
agreed to freeze their output at the January level, provided other oil-rich countries joined.
Mr El-Badri said the new policy will be evaluated in three to four months before deciding whether
to take other steps.
"This is the first step to see what we can achieve," he said. "If this is successful, we will
take other steps in the future." He refused to explain what steps Opec could take."
Opec launched a price war against US shale and other high-cost producers, including Canadian
oil sands and Brazilian deep-water oilfields, in November 2014 by not reducing output despite
a global oversupply. Since then, oil prices have plunged by more than half, hitting a 12-year
low of about $26 on February 11.
This para is in the article, but is apparently not a quote of anyone but the reporter. It's
not attributed in the article.
The rest is much like it. Exact quotes scarce. Interpretation-without-portfolio not scarce.
Not surprising. It's IHS/CERA week. They pour it onto the reporters.
With US shale balancing of the verge of financial collapse this is a pure propaganda. This time
it is the US shale companies that are the weakest link and they will not last 2016 is oil prices stay
low. Wells can be reopened but shale well deteriorate so fast that it does not make much
sense. And you need money for drilling new wells. Who will finance this new shale boom after so many
players were burnt ?
Notable quotes:
"... Kuwait's struggles in the 1980s are instructive for anyone wondering whether producing countries can tinker their way out of trouble now. In the face of weak prices in the early years of the decade the OPEC production group introduced output cuts in an attempt to mop up oversupply. Kuwait slashed production from nearly 2 million barrels per day to about 600,000 bpd. The top producer Saudi Arabia made even costlier cuts. ..."
When Sheikh Ali Khalifa al-Sabah of Kuwait thinks about today's plunging oil prices, his mind drifts
back to the mid-1980s, when he was forced to sell some of his country's crude for as little as $5
a barrel.
As Kuwait's oil minister at the time, Sheikh Ali had to sell a cargo or two at that price
just to keep up cash flow to a country that depended upon oil revenues. "It wasn't because I wanted
to; it was because it was the market price," he recalls.
"We really had no alternative."
For oil industry players active during the 1980s bust, the current drop in prices carries echoes
of those desperate days. Interviews with some of those involved in that period reveal that while
there is little consensus on how long prices will stay depressed, experience suggests the current
market glut will not evaporate soon.
Representatives from all aspects of the energy industry will be mulling current low oil prices
and the supply glut this week during the IHS CERAWeek gathering in Houston.
Kuwait's struggles in the 1980s are instructive for anyone wondering whether producing countries
can tinker their way out of trouble now. In the face of weak prices in the early years of the decade
the OPEC production group introduced output cuts in an attempt to mop up oversupply. Kuwait slashed
production from nearly 2 million barrels per day to about 600,000 bpd. The top producer Saudi Arabia
made even costlier cuts.
Three factors dashed the plan: fellow OPEC members cheated on their own cuts; global thirst for
oil had dried up after price spikes in the 1970s pushed consumers to buy efficient cars; and new
supplies, particularly from non-OPEC Mexico, Norway, and Alaska threatened to squash gains from any
cuts.
By late 1986, Saudi Arabia and other OPEC members opened the taps again to regain market share,
and prices did not recover for 20 years.
The memory leaves Sheikh Ali, now 71, feeling grim about a price recovery this
time.
"Tomorrow if the price of oil goes down to $20 I would not be surprised," he said. "You don't
take excess oil away very quickly. It was true in the 1980s, now it's even worse."
... ... ...
Sheikh Ali estimated it will take seven to 10 years to emerge from the current slump. "The
idea that U.S. companies are going to collapse and therefore their production is going to zero is
daydreaming," he said. "Even the wells that have closed can easily re-open."
Saudi Arabia may no longer be the swing producer of global markets, but the United States is
now the world's "spring producer," Sheikh Ali said. Shale stands to put a long term damper on
global markets, because when oil prices rise even a little, North Dakota and Texas output can pop
back to market far easier than expensive deepwater or Alaskan production did decades ago, he
said.
Technology innovations keep pushing the cost of shale production lower. And the return of Iran's
oil exports after the lifting of sanctions also threatens to moderate prices.
The only problem with US exports is that the USA is net importer of oil. The USA definitely can
export condensate, as it does not has processing facilities for it, but that's about it. As for
"A prolonged period of low gas and oil prices will put heavy pressure on Russia" the USA shale producers
will go belly up first. Probably this year.
The same is true for natural gas. The USA remains a net exporter and shale production is dwindling
down quickly. Individual shipments does not change this picture.
Notable quotes:
"... The U.S. remains a net importer, but its demand for foreign oil has fallen by 32 percent since peaking in 2005. West Texas Intermediate crude traded at $33.34 a barrel at 8:51 a.m. on the New York Mercantile Exchange Tuesday, down 33 percent from a year earlier. ..."
"... "A prolonged period of low gas and oil prices will put heavy pressure on Russia in its relations with the West and of course low energy prices put tremendous strain on all exporters of hydrocarbons worldwide, on their government budgets," said Ted Michael, an analyst at Genscape Inc., an energy-market data and intelligence firm. ..."
"... Trafigura Group Pte Ltd. also sold West Texas Intermediate oil to a refinery in Israel, Ben Luckock, global head of crude oil at the commodity trader, said on Monday by e-mail. The 700,000-barrel cargo of U.S. benchmark crude will be delivered in March. ..."
"... Bloomberg has an article up by somebody saying that it is a "game changer" now that the US can ship oil all over the world to compete with OPEC. I would guess that the guy has never read anything by Jeffrey Brown. I think that he thinks that we are an Export Land in the model. ..."
"... There is so much ignorance out there that it is going to be a rude awakening when it happens. All these guys advising investors to sell everything related to fossil fuels because they are not making any money, but they think that they will make huge profits at $50 bbl. Except that when it does get to $50, it will plunge again because the huge flood of oil that will hit the market. What a joke. ..."
"... I think Bloomberg is mixing the export of condensate which is overproduced in the USA and does not fit the refineries tune up with the export of oil which might be a more challenging idea. ..."
"... It is unclear whether this is a "real" WTI or "artificial" WTI that the US refineries do not want. I think it is the latter. ..."
For the
Saudis and their OPEC cohorts, who collectively control 40 percent of the globe's oil supply, the
specter of U.S. crude landing at European and Asian refineries further weakens their grip on world
petroleum prices at a time they are already suffering from lower prices and stiffened competition.
With Russia also seeing its influence over European energy buyers lessened, the two crude superpowers
last week tentatively agreed to freeze oil output at near-record levels, the first such coordination
in a decade and a half.
... ... ...
Beyond corporations, the Dec. 18 lifting of the export ban by Congress and President Barack Obama
created geopolitical winners and losers, too. The U.S., awash in shale oil, has gained while powerful
exporters like Russia and Saudi Arabia, for whom oil represents not just profits but also power,
find themselves on the downswing.
The U.S. remains a net importer, but its demand for foreign oil has fallen by 32 percent since
peaking in 2005. West Texas Intermediate crude traded at $33.34 a barrel at 8:51 a.m. on the New
York Mercantile Exchange Tuesday, down 33 percent from a year earlier.
... ... ...
"A prolonged period of low gas and oil prices will put heavy pressure on Russia in its relations
with the West and of course low energy prices put tremendous strain on all exporters of hydrocarbons
worldwide, on their government budgets," said Ted Michael, an analyst at Genscape Inc., an energy-market
data and intelligence firm.
... ... ...
The Theo T was joined shortly after its trailblazing journey by a second ship out of Houston destined
for the Netherlands. How many tankers have sailed since won't be known until comprehensive data on
January's shipments is released by the U.S. Census Bureau in the coming weeks.
Trafigura Group Pte Ltd. also sold West Texas Intermediate oil to a refinery in Israel, Ben Luckock,
global head of crude oil at the commodity trader, said on Monday by e-mail. The 700,000-barrel cargo
of U.S. benchmark crude will be delivered in March.
What's already clear is that even with crude losing about 70 percent of its value since the middle
of 2014 amid a worldwide production glut and a slowdown in Chinese demand growth, buyers are happy
for the chance to diversify their sources of supply.
... ... ...
U.S. companies, led by Cheniere, have been spending billions of dollars on LNG export complexes where
the fuel is cooled to minus 256 degrees Fahrenheit (minus 160 Celsius) to shrink it to 1/600th its
volume so it can be shipped aboard ocean-going tankers. As a result, an international gas market
is emerging akin to the long-established one for the more readily transportable crude oil.
LNG
Exports
Houston-based Cheniere plans to begin LNG exports within weeks, after missing a January target
because of faulty wiring. The first tanker that will carry LNG from Cheniere's Sabine Pass terminal
in Louisiana has arrived. Asia Vision has moored at Sabine Pass, according to ship-tracking data
compiled by Bloomberg.
U.S. LNG cargoes, in combination with a bevy of new gas projects in Australia, will probably add
15 billion cubic feet of daily supply to global markets in the next few years, Genscape's Michael
said. That would be a 43 percent addition to the 35 billion currently bought and sold internationally.
Bloomberg has an
article up by somebody saying that it is a "game changer" now that the US can ship oil all
over the world to compete with OPEC. I would guess that the guy has never read anything by Jeffrey
Brown. I think that he thinks that we are an Export Land in the model. How can they not know
that, in effect, except for quality differences, we are just exporting oil that we imported from
Canada or some other place.
There is so much ignorance out there that it is going to be
a rude awakening when it happens. All these guys advising investors to sell everything related
to fossil fuels because they are not making any money, but they think that they will make huge
profits at $50 bbl. Except that when it does get to $50, it will plunge again because the huge
flood of oil that will hit the market. What a joke.
I think Bloomberg is mixing the export of condensate which is overproduced in the USA and does
not fit the refineries tune up with the export of oil which might be a more challenging idea.
Beyond corporations, the Dec. 18 lifting of the export ban by Congress and President Barack
Obama created geopolitical winners and losers, too. The U.S., awash in shale oil, has gained
while powerful exporters like Russia and Saudi Arabia, for whom oil represents not just profits
but also power, find themselves on the downswing.
The U.S. remains a net importer, but its demand for foreign oil has fallen by 32 percent
since peaking in 2005. West Texas Intermediate crude traded at $33.34 a barrel at 8:51 a.m.
on the New York Mercantile Exchange Tuesday, down 33 percent from a year earlier.
… … …
Trafigura Group Pte Ltd. also sold West Texas Intermediate oil to a refinery in Israel, Ben
Luckock, global head of crude oil at the commodity trader, said on Monday by e-mail. The 700,000-barrel
cargo of U.S. benchmark crude will be delivered in March.
What's already clear is that even with crude losing about 70 percent of its value since
the middle of 2014 amid a worldwide production glut and a slowdown in Chinese demand growth,
buyers are happy for the chance to diversify their sources of supply.
It is unclear whether this is a "real" WTI or "artificial" WTI that the US refineries do not
want. I think it is the latter.
Print Length: 416 pages
Publisher: W. W. Norton & Company; 1 edition (April 11, 2016)
Publication Date: April 1, 2016
Sold by: Amazon Digital Services LLC
A complete biography of Marion King Hubbert, one of the twentieth century's most influential
energy experts, who was dubbed the "father of peak oil."
In 1956, geophysicist and Shell Oil researcher Marion King Hubbert forecast that American oil
production would peak surprisingly soon and decline steadily thereafter. Hubbert's prediction
outraged the architects of the U.S. oil industry at the time, but it was largely correct. Even
amid a twenty-first century shale boom, Hubbert's logic remains a source of debate and
controversy.
In a richly researched narrative that surveys Hubbert's papers and correspondence for the
first time, award-winning journalist Mason Inman rescues the history of a man who shocked the
scientific community with his brilliance, eccentricity, and controversy. The Oracle of Oil shows
Hubbert as a man of his era: a time of great intellectual ferment and discovery tinged by dark
undercurrents of intellectual witch hunts.
In its portrait of a man whose prescient ideas about sustainability still resonate today, The
Oracle of Oil looks to the past to find a guiding philosophy for our energy future.
About the Author
Mason Inman is an award-winning journalist who focuses on energy and climate issues. He has
written for National Geographic News, Science, Nature, and The Economist. He lives in Oakland,
California.
Zero hedge is a really crooked site when it comes to oil.
I had an account banned
there for continually pointing out the inconsistencies of their narrative on production and supply.
You'll notice they'll only use graphs when there's been an uptick in production. All the time last
year when production was falling they never once used a graph.
When production was still increasing they always used a combined rig count/production graph, the
moment production started to fall they pulled the production line from the graph. The moment production
plateaued and slightly increased, the production line reappeared.
There's some skilled propagandists there because most of the commenters lap it up, I doubt many
of them would realise production actually fell in the US in 2015, they probably still think it's
increasing. None of them would realise Saudi production has fallen either.
"... My comment: Anyway, Russia and Saudi Arabia were not expected to increase oil production this year ..."
"... Yes, but the markets don't know that Russia and Saudi Arabia cannot increase output. With this agreement they are trying to sustain oil prices or even increase them, one of the few things Saudi Arabia and Russia can agree on. ..."
"... As you can see this fake narrative of 1-2 Mb/d of "glut" is still in place. If this is not taking the price down I do not know what is. In this "fog of war" we should not blindly believe Western agencies reporting. It is even unclear what this agreement is about. ..."
"... In any case please understand the Western game to talk down oil prices down until recently included Saudis. Now they are out of this game. ..."
"... The fact output from Saudi Arabia and Russia – the world's two top producers and exporters – is near record highs also makes an agreement tricky since Iran is producing at least 1 million barrels per day below its capacity and pre-sanctions levels. ..."
"... Within the next 3 months all these trends will reverse. Seasonal demand will rise while production declines rise, and Iran's production stabilizes eliminating the new production bidding war. ..."
"... Why the hell do some people always believe that the media or agencies that track and sell data are always lying? ..."
"... A good point. Really, why some people distrust Western MSM and agencies ? Can it be for the same reasons they distrust bankers, IMF and World Bank ? ..."
"... If Congress and government are owned by banks according to senator Durbin ( "And the banks - hard to believe in a time when we're facing a banking crisis that many of the banks created - are still the most powerful lobby on Capitol Hill. And they frankly own the place." ) why do you think government agencies and major MSM are different ? ..."
"... The key point is that whenever possible we should try to compare different sources of data. That's the only way to reveal the real picture as none of us can verify the data provided by agencies and MSM. ..."
"... Plato has Socrates describe a gathering of people who have lived chained to the wall of a cave all of their lives, facing a blank wall. The people watch shadows projected on the wall from things passing in front of a fire behind them… The shadows are as close as the prisoners get to viewing reality. ..."
"... Still we can for major oil-related data to estimate the error margin and the direction of bias. Like I tried to estimate error margin for EIA data. Much depends whether you assume it to be 1% or 10%. If, for example, you think about particular source as 100% reliable that's fine, but 100% rating should be rare in this world and should never be awarded uncritically. Actually your posts for me are close. ..."
"... So non-US media, discussion forums that attract professionals like your blog, posts of professionals who try to present unbiased views like your posts, Jeffrey Brown posts, Art Berman posts (to name a few) and remnants of media still loyal to oil industry (your example of The Oil and Gas Journal ), not to Wall Street traders interests (Bloomberg) are especially important islands of sanity in this distorted, crazy, financial speculation dominated world. ..."
"... Did you ever hear about the "Great Condensate Con" hypothesis? This is an alternative to the "oil glut" hypothesis and I think it is more plausible. ..."
Nations agree to maintain output at Jan. 11 level, Naimi says
Ministers from Qatar, Venezuela also agreed to freeze"
Saudi Arabia and Russia, the world's two largest crude producers,
agreed to freeze output after talks in Qatar.
Freezing output at January levels will be "adequate" and the nation
still wants to meet the demand of its customers, Saudi Oil Minister
Ali Al-Naimi said in Doha after talks with Russian Energy Minster Alexander
Novak. Qatar and Venezuela also agreed to participated in the freeze,
Al-Naimi said.
"A freeze would not create an immediate U-turn but it creates a better
foundation for the price recovery in the second half," Olivier Jakob,
head of oil consultants Petromatrix GmBh, said in a note to clients
before the meeting concluded.
According the International Energy Agency, Saudi Arabia produced
10.2 million barrels a day in January, below the most recent peak of
10.5 million barrels a day set in June 2015. Russia produced nearly
10.9 million barrels a day in the same month, a post-Soviet record,
according to official data.
Qatar will lead monitoring of output freeze agreement, the nation's
Energy Minister Mohammad bin Saleh al-Sada said at a press briefing.
My comment: Anyway, Russia and Saudi Arabia were not expected to
increase oil production this year
Yes, but the markets don't know that Russia and Saudi Arabia cannot
increase output. With this agreement they are trying to sustain oil prices
or even increase them, one of the few things Saudi Arabia and Russia can
agree on.
"Yes, and they are successfully "talking up" oil prices over the
past 2 or 3 weeks"
What do you mean by "talking up"? Funny, but you sound like ZeroHedge.
The current prices are unsustainable and will go up talking or no talking.
Now the effect will be amplified by a short squeeze.
Those presstitutes from Reuters already proudly reported that Azerbaijan
will not join. As if it matters.
Look at the example of the current Western propaganda drivel:
Reuters reported that the meeting had echoes of a 2001 encounter
between OPEC and non-OPEC producers when Saudi Arabia pushed through
a global deal to curb output in which Russia agreed to participate.
But Moscow never properly followed through on its pledge to curb exports.
After 19 months of declines in oil prices, analyst are cautious,
however, of another short-lived bump higher based on jawboning from
producers. This is despite the fact that the impetus to agree on price-boosting
production cuts has been heightened by budgetary pain in both Russia
and Saudi Arabia.
"The noise around potential production cuts is hugely elevated;
if we don't see a cohesive response in a month or so, the speculators
will no doubt start to ramp up short positions again," IG's
chief market strategist, Chris Weston, said in a note.
And Phillips Futures cautioned, "if they allow prices move
up in the immediate term, prices would likely be remaining lower
for longer. This is because producers of oil at higher breakevens
could hedge off their exposure, resulting in strong production moving
forward. Thus, would mean that it would still be in the best interest
for oil producers, especially those who could still get by to continue
and wait it out, no matter how painful it may be."
The Tuesday price spike also masked complications in the oil industry
that have clouded the market.
One major issue is how much oil producers were actually pumping out,
UBS Wealth Management's commodities and FX strategist Wayne Gordon told
CNBC's "Street Signs."
"Some people believe that Saudi Arabia et al have been over-reporting
production and exports just so that when they go to the OPEC meeting
they can say 'Oh yeah, we cut around here and here'," he said.
The world was still swimming in 1-2 million extra barrels of oil
a day, he added.
UBS forecasts oil in the $20-$40-a-barrel range this year.
Also in focus is the fallout and snowball effect of the oil crash,
with banks now faced with decisions on what of their commodities assets
to write down, at a time when lenders are already under pressure from
the Bank of Japan's move into negative interest rates.
"On the Japanese banks side, clearly they've had to take a lot of
impairments…(over) commodities assets in the last five years… [then]
as you go into negative rates, all you're really doing is forcing banks
to take loans or lend money to higher risk propositions," Gordon warned.
As you can see this fake narrative of 1-2 Mb/d of "glut" is still
in place. If this is not taking the price down I do not know what is. In
this "fog of war" we should not blindly believe Western agencies reporting.
It is even unclear what this agreement is about.
In view of this event it looks like the recent visit of Qatar minister
to Moscow was crucial. I expect Iraq joining this agreement immediately.
In any case please understand the Western game to talk down oil prices
down until recently included Saudis. Now they are out of this game.
But Reuters still tries to play Iran card.
The fact output from Saudi Arabia and Russia – the world's two
top producers and exporters – is near record highs also makes an agreement
tricky since Iran is producing at least 1 million barrels per day below
its capacity and pre-sanctions levels.
In this "fog of war" we should not blindly believe Western agencies reporting.
It is even unclear what this agreement is about.
I can understand some political bias in what national oil companies are
reporting, or in some cases what government agencies themselves are reporting.
But I just flat do not believe that agencies like Platts, and other such
sources, are deliberately lying about what they believe a nation's oil production
really is. What reason would they have to lie? Fog of war? Shit, they are
not at war with anyone.
I do not believe that the news agencies, and agencies that track oil
production, around the world are engaged in some kind of giant conspiracy
to deceive the world into believing that either more or less oil is being
produced than it really is.
Why the hell do some people always believe that the media or agencies
that track and sell data are always lying? They don't have a dog in that
fight. Their first priority is to find out and accurately report what is
actually happening. It is in their interest to tell the truth, as near as
they can determine what the truth actually is. Because if they are caught
lying it could severely damage their reputation and deeply hurt their company
profits in the long run.
I don't believe they have an agenda, but follow normal human behavior in
following the crowd. The media coverage seems to be very one-sided at the
moment and at times poorly researched. It appears though as if the game
of the moment is to talk to "oil-price down". Headlines and world-events
that would have caused an immediate oil-spike in the last years is suddenly
seen as good opportunity to short oil. As a person working in the oil industry
this is extremely frustrating at times.
There is no spin or bias in the fact that refined product inventories
are at record highs leading to large discounts to remove winter blend
gasoline stocks.
There is no spin or bias in the fact that inventories are at record
highs. This data is tracked from multiple independent sources AND in
several different ways. There are data analytic companies that have
used satellite data to estimate storage tank usage by means of the shadow
they cast. Even this unique and statistically accurate way of measuring
changes in storage agrees that storage is well above historical highs.
There is no spin or bias in the fact that oversupply and price competition
between major producers has led the UAE to offer India free oil so long
as it stores it.
There is no spin or bias in the fact that oversupply is causing
bidding wars between major producers forcing the Saudis and others to
continuously lower prices to keep contracts.
It is glaringly obvious, from every single angle, that the world is oversupplied
at the moment. Current production declines aren't yet having an impact because
this time of year is a period of seasonally low demand. Add in Iran's need
to win contracts, and you get a temporary bidding war where every exporter
is desperately lowering prices to keep contracts. Once it gets really bad
you get things like the UAE deal with India.
Within the next 3 months all these trends will reverse. Seasonal
demand will rise while production declines rise, and Iran's production stabilizes
eliminating the new production bidding war.
Just because the market will re-balance strongly in 2016 does not mean
that it is currently in the process of re-balancing. Due to the confluence
of Iran competing for contracts, record high storage, and the seasonal lull
in demand canceling out any nascent production declines we're in the most
acute phase of oversupply relative to demand.
It doesn't matter where the market will be in 3 months. Oil produced
today needs to be bought by SOMEONE NOW. This is causing a massive bidding
war because there aren't enough buyers now that Iran entered and needed
to win contracts immediately.
No, it absolutely cannot be the same reason. Banks deal in money, news
agencies deal in news. Banks have a vested interest in secrecy, news
agencies have a vested interest in telling everything they know.
News agencies desperately want a reputation for telling the truth. Banks
desperately want a reputation for making money for their clients, investors
and stockholders. These people don't give a damn if banks lie or not as
long as they make money. Money is the only thing they care about.
Likbez, the fact that you see the same motives behind what news agencies
report and what banks do, tells me you really don't understand either.
If Congress and government are owned by banks according to senator
Durbin ( "And the banks - hard to believe in a time when we're facing a
banking crisis that many of the banks created - are still the most powerful
lobby on Capitol Hill. And they frankly own the place." ) why do you think
government agencies and major MSM are different ?
Oh for God's sake! Platts can create a banking crisis? Petroleum Intelligence
Weekly has a lobby? The Oil and Gas Journal has the same agenda as CitiBank?
The Oil and Gas Journal has the same agenda as CitiBank?
Thank you for attacking my viewpoint. That actually clarified my thinking.
Looks like our viewpoints are not that different. In my view we can (and
should) mentally rate each source information as for objectivity and bias
(for example your blog and posts vs ZeroHedge ).
The sources of information that have bias of opposite sign in comparison
with MSM are especially valuable. Even in MSM comment sections are much
more valuable then the articles published. Right now for me the most valuable
sources of information that help to reveal the bias are sources that question
the mainstream hypothesis of oil glut (and related spin about Saudis desire
to preserve market share), as well as those who were critical of shale oil
boom and are questioning EIA, IEA and friends statistics. Your mileage may
vary.
The key point is that whenever possible we should try to compare
different sources of data. That's the only way to reveal the real picture
as none of us can verify the data provided by agencies and MSM.
This is a classic situation called "Plato cave" "https://en.wikipedia.org/wiki/Allegory_of_the_Cave"
Plato has Socrates describe a gathering of people who have lived
chained to the wall of a cave all of their lives, facing a blank wall.
The people watch shadows projected on the wall from things passing in
front of a fire behind them… The shadows are as close as the prisoners
get to viewing reality.
Still we can for major oil-related data to estimate the error margin
and the direction of bias. Like I tried to estimate error margin for EIA
data. Much depends whether you assume it to be 1% or 10%. If, for example,
you think about particular source as 100% reliable that's fine, but 100%
rating should be rare in this world and should never be awarded uncritically.
Actually your posts for me are close.
So non-US media, discussion forums that attract professionals like
your blog, posts of professionals who try to present unbiased views like
your posts, Jeffrey Brown posts, Art Berman posts (to name a few) and remnants
of media still loyal to oil industry (your example of The Oil and Gas
Journal ), not to Wall Street traders interests (Bloomberg) are especially
important islands of sanity in this distorted, crazy, financial speculation
dominated world.
"sources that question the mainstream hypothesis of oil glut "
No one serious source (IEA, EIA, OPEC, Platts, Woodmac, Rystad, IHS,
energy ministries of exporting countries, oil companies, large oil traders,
etc.) questions the oversupply in the global oil market.
Right now for me the most valuable sources of information that help
to reveal the bias are sources that question the mainstream hypothesis
of oil glut
I think this is hilarious. The sources that you believe are those who
think there is no oil glut at all. The sources that believe the price of
oil has been driven from over $100 a barrel to $30 a barrel by…. some kind
of giant conspiracy.
Yeah right! Rolling in the floor laughing my ass off.
Perhaps you believe Watcher's theory. That it was all because some exporter,
Saudi I think, just kept selling at a slightly lower price until after many
months they had gotten the price down to thirty bucks a barrel.
Did you ever hear about "Great Condensate Con" hypothesis? This is
an alternative to "oil glut" hypothesis and I think it is more plausible.
Well no, it is not. While the Great Condensate Con is very real, it is
not an alternative to the oil glut. The oil glut simply deals with supply
and demand. If the supply of oil is greater than the demand for oil then
the price falls. It is as simple as that.
The increase in production by Iran and Saudi Arabia, that began in March
of 2015, was not condensate, it was crude oil. Much of the increase before
that date was condensate. But the decline in demand had nothing to do with
the Great Condensate Con. It was a decline in demand due to very high prices
and a definite decline in the world economy.
Bottom line, there is a definite oversupply of crude oil in the world
today. That is the reason we are seeing oil in the range of $30 a barrel,
and not any kind of conspiracy by anyone.
Hey! I am a peak oil advocate. I would love to say that there is a shortage
of oil in the world today as a result of crude oil peaking. But the very
obvious facts do not allow me to make such a claim. There is a glut of
oil today. That cannot be denied.
For Christ's sake, don't try to spin reality into some kind of conspiracy.
Accept reality as it is and go from there.
I have said all along that peak oil will be a time when more oil is produced
than any time in history of the world or ever will be produced in the future
of the world. And such a time will be far more likely to be perceived
as a time of an oil glut than as a time of an oil scarcity.
As usual I agree with Ron in terms of broad outlines. News agencies and
organizations as a whole or a group are more interested in the truth than
in spinning the truth, or ignoring it.
But there is no doubt at all in my mind that a lot of news organizations
spin the truth for some particular reason, emphasizing the news in such
a way as to support an agenda OTHER than getting the truth out.
WHY?
Because in this day and time, the OWNERSHIP of news organizations is
in the hands of people who have HUGE stakes in spinning the news to suit
themselves, in a lot of cases.
Business interests have bought control of news organizations as much
for the power gained thereby, as for legitimate investment purposes.
AND the organizations themselves, after a while, tend to become hotbeds
of partisan employment.
It's not that the truth doesn't matter, in terms of getting caught out
wholly in the wrong, but rather that the truth is judged expendable in terms
of certain events and issues, or at least , just something to be IGNORED.
I have no problem AT ALL with FOX NEWS when it comes to reporting earthquakes,
airplane crashes, and day to day local news. But I would be laughed out
of this forum if I said that Fox does a great job of reporting on environmental
issues. Fox does not, of course.
OTOH, FOX has actually started reporting in an even handed manner, at
least some of the time, about electrified personal automobiles.
I listen to NPR almost exclusively, whenever I turn on a radio, or else
a folk and bluegrass music station, if NPR is playing organ music.
But so far as I am personally concerned, I cannot ever REMEMBER hearing
anybody on NPR on a regular basis who sounds like a R partisan.
OTOH, I am confident I can identify the political orientation of everybody
talking on NPR, with ninety nine percent accuracy, just by reading an hour
or less of randomly selected black and white transcript of what they have
to say, word for word.
The OVERWHELMING majority are conventional stereotypical liberals, with
a few token conservative voices popping up once in a long while.
Tone of voice and choice of words can convey the message , quite as effectively
as the actual words spoken.
Note that I continue to listen to NPR.
I might listen to some other outfits, but there isn't any other programming
WORTH listening to. There is no comparable right wing radio. So called talk
radio is all about the lowest common denominator, and that denominator is
ignorance.
So if you want to hear anything that is based on knowledge and reason,
coming from the conservative pov, you are reduced to a few magazines, for
all intents and purposes.
Mac, of course news agencies like Fox News spin political news. Neither
they, nor any other news agencies would need to lie about Azerbaijan's oil
production numbers. Or China's oil production numbers. Or… well, I hope
you understand that.
To accuse Fox, or Platts, or whomever, of lying about
some Asian countries oil production, just smacks of stupid conspiracy theories.
Here we talk about peak oil and measure every uptick and downtick in production. On the other
hand oil is so abundant that they are now giving it away for free. India will get free oil from
UAE in return for offering storage.
If there was a single event that galvanized conservative donors to
try to wrest control of higher education in America, it might have been the uprising at Cornell
University on April 20, 1969. That afternoon, during parents' weekend at the Ithaca...
[Feb 15, 2016] Looks like ZH is short on oil for some ti
As Russia's oil minister meets his Saudi Arabian counterpart in
Doha on Tuesday, the world's second-largest crude producer faces numerous
obstacles in cooperating on such a deal even if Putin decides it's in
the national interest. Reducing the flow of crude might damage Russia's
fields and pipelines, require expensive new storage tanks or simply
take too long.
In Siberia, Russia's main oil province, winter temperatures can
go below minus 40 degrees Celsius (minus 40 Fahrenheit). That's a challenge
for anyone thinking of turning off the taps.
The oil and gas that flows from wells always contains water, so
once pumping stops, pipes may freeze, Mikhail Pshenitsyn, who has worked
for more than 10 years in the Russian oil industry, said by e-mail.
The problem goes away in summer, but there's still the risk of a long-term
reduction in output because a halted reservoir can become polluted with
salts and residues, he said. Production from a shut-in well might never
be restored in full, Maxim Nechaev, director for Russia at consulting
firm IHS Inc., said by phone.
Blink. Someone from IHS says oil wells can be permanently damaged?
Might want to go thru the article. It's loaded with frown inducers.
Why would anyone "produce oil" aka extract it from the ground if they
don't have an order for it. There is verbage about Russia pumping it to
store it. Hell, it's already stored. Underground. Russia isn't going to
get tax revenue from oil flow that isn't sold. The sales revs are what pay
the taxes.
People are so desperate to sprint to the oversupply narrative that they
don't think it through.
Watcher,
That part of the text that was quoted from ZH is totally wrong (like most
of the MSM garbage) in way that it looks at the tomorrow's meeting. Russia
is not negotiating any cuts at all with SA in Doha or vice versa. The whole
meeting is about a possible attempt of negotiation only of oil production
freeze of additional production in retrospect of Iran return to the oil
market.
KSA has 'cut' production in 6 out of the last seven months. Cut might not
be the right word though as I suspect it was not a choice. It was thrust
upon them by geology. KSA will IMO face month after month of decreasing
production. They managed a production surge for a short while but that's
all they had in them. They've shot their bolt. Iran probably has some good
increases coming but that's about it, and not all of that Iranian increase
will be exported.
The increase in Saudi oil production
in the summer season was due to peak demand from the domestic power generation
for air conditioning.
As demand moderated in the past several months, KSA slightly reduced output
levels, while crude exports have actually increased.
KSA oil production and exports in 2015 – Jan. 2016
sources: JODI, OPEC
Do you believe that the slightly reduced production level of the last
6 of 7 months was optional? I tend not to. I feel they are producing every
single barrel that they possibly can. They've got the peddle to that floor.
No holding back.
Looks like some negotiations are happening behind closed doors between
Saudis and Russians (probably discussion over Iran return to the world oil
market) despite thick smoke of disinformation from Bloomberg presstitutes.
With French, Italian and Greek deals (and Spain deal in pipeline) it
might well be that accommodation of Iran is already started in full force.
The question is whether they are able to produce additional volumes of oil
above 0.3 Mb/d that is expected (and actually already contracted) and if
yes, when.
Iraq and a couple Persian Gulf monarchies are on board for the cuts.
Saudis need to pander to growing Wahhabi sentiments of its population. So
they probably are not in order to "punish" Iran and Russia. Also hardliners
are now in power. But as money evaporate from their coffers even hardliners
might soften their position. Eventually.
Still here is Bloomberg disinformation in full glory:
As Russia's oil minister meets his Saudi Arabian counterpart in Doha
on Tuesday, the world's second-largest crude producer faces numerous
obstacles in cooperating on such a deal even if Putin decides it's in
the national interest. Reducing the flow of crude might damage Russia's
fields and pipelines, require expensive new storage tanks or simply
take too long.
So far Russia's top oil official have offered mixed signals. Energy
Minister Alexander Novak has said he could consider reductions if other
producers joined in. Igor Sechin, chief executive officer of the
country's largest oil company Rosneft OJSC and a close Putin ally, said
last week in London that coordination would be difficult because no
major producer seems willing to pare output.
BTW looks like Bloomberg intentionally distorted the position of Sechin.
IMHO he is onboard about a one time cut around 1 Mb/d if it is implemented
as a proportional cut by all major oil producers. As Russians most probably
have a reasonably good intelligence about Persian Gulf countries they should
understand the situation with new projects and natural decline of wells
in Gulf which now will drive the world oil production dynamics.
"… the strategy of the prince Mohammed Bin Salman is to push Iran
to the fault in causing the tensions that can go up to a risk of open
warfare that would force the west to choose Saudi Arabia against Iran
…"
"… The Prince Mohammed bin Salman is now the most powerful man in
Saudi Arabia. It has exclusive access to his father, King Salman, and
effectivly he can rule the coutries inread of him. He is head of his
office, which means that nobody can contact or be received by the King
without going through the son …"
"… Saudi Arabia is extremely disturbed by the detente with Iran on
the international scene. We are witnessing more or less a reversal of
alliances, and of countries images in the eyes of the West. A short
time ago, Iran was demonized in the West. Today, it is accepted as a
normal partner. Iran, therefore, benefits from a relatively favorable
treatment, while at the same time when the Arab monarchies, particularly
Saudi Arabia, are seen as retrograde, unable to provide for reforms
and creating the flow of Islamic radicals… The nature of Hezbollah,
interference military and terrorists of Iran is currently forgotten.
…"
"… I think it will be very difficult to see any reapprochement with
Iran in the coming months as Saudi Arabia has two hardliners in the
young rising generation of leaders. The heir and the vice-inherit the
Kingdom share the same radical line toward Iran. …"
"… Moreover, Saudi Arabia pays very dear to his strategy of crushing
oil prices, which makes it less able to buy social peace than before.
Therefore, there is an internal demand of radicalism, because the discontent
rumbles in the parts of the Saudi population fueled by the effects of
the falling oil prices. …"
"… If one wanted to summaries, we could say that to buy a peace with
Islamist Wahhabi radicals, it is necessary to kill shia… besides, the
Saudis have a genuine complex of encirclement by the Shiite states.
They try to counter it by creating an opposite ark of Sunni radicals.
…"
"… even if this does not lead to open warfare, the tension between
Saudi Arabia and Iran is sustainable, if only because this new generation
of Saudis leaders is more combative. They differ from the former kings
who belonged to a generation that was distinguished rather by its search
for a compromise and some consensus. This is absolutely not the case
for those two heirs of the throne. …"
"... Theres another aspect of the connection between secular stagnation and inequality that bears emphasis. Experience suggests that in an economy where there are more workers seeking jobs than there are jobs seeking workers, the power is on the employer side, and workers do much less well. A tight economy, where employers are seeking workers, shifts the balance of power toward workers and leads to higher pay and better benefits. That, in turn, leads to more spending being injected into the economy, which supports further economic growth. ..."
"... But I also believe there are many areas in which its possible to reform policy to promote both economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting demand at times when there is slack in the use of resources. ..."
"... Right, in a democracy, the elected leaders must view the voters as idiots and execute to the total opposite of the expressed policies of the candidates who won. ..."
"... Paul Krugman and Larry Summers both have very good columns this morning noting the economys continuing weakness and warning against excessive rate hikes by the Fed. While I fully agree with their assessment of the state of the economy and the dangers of Fed rate hikes, I think they are overly pessimistic about the Feds scope for action if the economy weakens. ..."
"... While the Fed did adopt unorthodox monetary policy in this recession in the form of quantitative easing, the buying of long-term debt, it has another tool at its disposal that it chose not to use. Specifically, instead of just targeting the overnight interest rate (now zero), the Fed could have targeted a longer term interest rate. ..."
"... For example, it could set a target of 1.0 percent as the interest rate for the 5-year Treasury note, committing itself to buy more notes to push up the price, and push down the interest rate to keep it at 1.0 percent. It could even do the same with 10-year Treasury notes. ..."
"... This is an idea that Joe Gagnon at the Peterson Institute for International Economics put forward at the depth of the recession, but for some reason there was little interest in policy circles. The only obvious risk of going the interest rate targeting route is that it could be inflationary if it led to too rapid an expansion, but excessively high inflation will not be our problem if the economy were to again weaken. Furthermore, if it turned out that targeting was prompting too much growth, the Fed could quickly reverse course and let the interest rate rise back to the market level. ..."
"... Amazing how unconventional monetary is always the go-to option. Pessimism about the effectiveness of the Feds policy options is well warranted. You only need to look at the results of the last seven years. ..."
... When I went to graduate school in the 1970s, the prevailing view among economists, captured
by Art Okun's book "Equality Versus Efficiency: The Big Tradeoff," was that equality and efficiency
were both desirable, but they were likely to trade off-that more progressive taxation would achieve
more equality but would inevitably in some way distort economic choices and, so, reduce efficiency,
for example.
I believe there are still many areas in which one does have to trade off equality versus efficiency.
But I also believe there are many areas in which it's possible to reform policy to promote both
economic efficiency and equality. One such area is policy to mitigate secular stagnation by promoting
demand at times when there is slack in the use of resources.
Recall that I defined secular stagnation as having at its essence an excess of savings over
investment, desired saving over desired investment. There are many reasons for that. Some of them
have to do, for example, with reduced investment demand because so much more capital can be purchased
with fewer dollars. I think of the fact that my iPad has more computing power than a Cray supercomputer
did when Bill Clinton came into office in 1993.
One aspect of that excess in saving over investments is that rising inequality has operated
to reduce spending. We are fairly confident that what economists call the "marginal propensity
to consume" of those with high incomes is less than the marginal propensity to consume of those
with middle incomes.
And so the combination of rising inequality in the distribution of income across income levels
and a shift in inequality toward the higher profit share slows economic growth. In normal times,
such a change might be offset by easier monetary policy. But in the current environment, where
interest rates are very close to the zero lower bound, the capacity for that kind of offset is
greatly attenuated.
There's another aspect of the connection between secular stagnation and inequality that bears
emphasis. Experience suggests that in an economy where there are more workers seeking jobs than
there are jobs seeking workers, the power is on the employer side, and workers do much less well.
A tight economy, where employers are seeking workers, shifts the balance of power toward workers
and leads to higher pay and better benefits. That, in turn, leads to more spending being injected
into the economy, which supports further economic growth.
And so, as Keynes recognized when he wrote to FDR in the late 1930s urging the importance of
wage increases, measures that strengthen workers' capacity to earn income by increasing spending
power can promote both equality and strengthen the economic performance of the country. ...
pgl :
Excellent interview with this as a key sentence:
"But I also believe there are many areas in which it's possible to reform policy to
promote both economic efficiency and equality. One such area is policy to mitigate secular
stagnation by promoting demand at times when there is slack in the use of resources."
Summers makes two arguments with respect to promoting aggregate demand:
(1) his case for more infrastructure investment; and
(2) his defense of the expansionary monetary measures taken by the FED from 2008 until recently.
He does note that Obama started talking about "belt tightening" after Summers left the White
House and to Summers regret.
Right, in a democracy, the elected leaders must view the voters as idiots and execute to the
total opposite of the expressed policies of the candidates who won.
Or do you think the voters were calling for massive explosions of debt and massive increases
in jobs forced by government policies to force exploding labor costs which would necessarily result
in exploding consumer prices when they voted Democrats out and Republicans in?
Perhaps you think Bernie Sanders got far more leftist laws passed by being a radical leftist
socialist in Congress able to lead a revolution in Congress to redistribute wealth?
The Republican Party is divided by Obama highly divisive politeral tactics which played Republicans
against Republicans, doing a far better job dealing with Republicans than Clinton's "triangulation"
which implemented massive austerity tempered by government dictates that were highly profitable
to crony capitalists in the computer industry. Bush-Cheney served a different set of crony capitalists
leading to an implosion in the tech sector dragging down pretty much everything good for the American
people. Obama has since created incentives with rewards to both sets of crony capitalists, that
has now imploded for the Bush-Cheney crony capitalists (fossil fuels) but still reward the Elon
Musk, Bezos, google, hollywood, Ellison, Apple sector.
Neither Clinton nor Obama were allowed to help the bottom 50% of workers because voters demanded
austerity by voting for Republican control of Congress in 1994, 1996, 1998, 2000, 2002, 2004,
2010, 2012, 2014, and if Sanders is the Democratic nominee in 2016, then Republican control of
Congress in 2016, 2018, and probably 2020 and 2022. And only a Republican president will end the
austerity, but it will lead to slower growth, high unemployment, likely severe recession, but
wars. Just like the end of austerity of Bush-Cheney.
WTF this has to do with what Summers wrote??? Never mind. So much babbling, so little time.
JohnH :
"One aspect of that excess in saving over investments is that rising inequality has operated
to reduce spending. We are fairly confident that what economists call the "marginal propensity
to consume" of those with high incomes is less than the marginal propensity to consume of those
with middle incomes.
And so the combination of rising inequality in the distribution of income across income
levels and a shift in inequality toward the higher profit share slows economic growth."
Hate to say this, but Summers is making a lot of sense.
The way to address the problem of slow economic growth is to tax the wealthy, who have a low
propensity to consume, and use the funds for government programs (infrastructure, education, healthcare)
and redistribution to the poor...exactly as I have been arguing.
JohnH said in reply to JohnH...
pgl should take up his fight with Larry Summers, not me.
But Summers is fairly confident...as pgl just can't accept that a) increasing inequality reduces
consumption and economic growth and that b) addressing inequality by taxing high incomes and wealth
would lead to increased consumption and economic growth if it was spent on social programs and
redistribution to those with a high propensity to consume (the poor).
It appears the we now have two pgls here--one that support high top tax brackets and another
who opposes taxing the wealthy.
Or maybe we just have a single, very confused dude!
BenIsNotYoda -> JohnH...
pgl's solution is - give them a rate cut. always. grandmother is ill - give her a rate cut
pgl said in reply to JohnH...
You do know BINY is cheating on you. Good luck getting back with granny.
BenIsNotYoda -> JohnH...
he is not happy because his cheap stocks are getting cheaper.
JohnH said in reply to BenIsNotYoda...
I already called him on demanding QE4, which he advocated as soon as stocks went into correction
territory back in August.
It was the same lousy economy. But as soon as stocks started to correct, and pgl's portfolio
was getting hurt, he jumped right into action!
lower middle class -> pgl...
I'm trying to avoid being confused.
We hold the folowing as true, correct?
MPC is less than one.
"Income" refers to "disposable income"
As wealth and income rise, consumption also rises.
Falls in income do not lead to reductions in consumption because people reduce savings to stabilize
consumption. (the poor get poorer by consuming wealth; wealth inequality accelerates?)
Increases in income do not lead to increases in consumption because people add to savings to
stabilize consumption.
(high income people increase wealth faster the low income people while consumption increases;
wealth inequality decelerates?)
JohnH said in reply to lower middle class...
General propensity to consume depends on income. Wealthy people tend to save a good chunk of their
incomes...and become wealthier. Most people save a very small part of their incomes (middle class)
or nothing at all (poor). Obviously there are exceptions to this generalization, as pgl is quick
to point out with his tearful evocations of the plight of the 'hand to mouth' rich. But the general
pattern is as I have described.
Marginal propensity to spend is a little more complicated, and a lot depends on whether the
additional money is seen as a windfall or not. For people who do not generally save much, windfalls
may be saved for a while or go to pay off debt, or be spend on durable goods or just spent.
Peter K. :
"In normal times, such a change might be offset by easier monetary policy. But in the current
environment, where interest rates are very close to the zero lower bound, the capacity for that
kind of offset is greatly attenuated."
Larry Summers agrees with the obnoxious trolls like JohnH and BINY. Monetary policy doesn't
help.
I agree with Dean Baker and Bernie Sanders. (This is not to say fiscal policy doesn't work
better. Funny how the trolls always toss out red herrings.)
Paul Krugman, Larry Summers, and the Fed's Unused Ammunition by Dean Baker
Paul Krugman and Larry Summers both have very good columns this morning noting the economy's
continuing weakness and warning against excessive rate hikes by the Fed. While I fully agree with
their assessment of the state of the economy and the dangers of Fed rate hikes, I think they are
overly pessimistic about the Fed's scope for action if the economy weakens.
While the Fed did adopt unorthodox monetary policy in this recession in the form of quantitative
easing, the buying of long-term debt, it has another tool at its disposal that it chose not to
use. Specifically, instead of just targeting the overnight interest rate (now zero), the Fed could
have targeted a longer term interest rate.
For example, it could set a target of 1.0 percent as the interest rate for the 5-year Treasury
note, committing itself to buy more notes to push up the price, and push down the interest rate
to keep it at 1.0 percent. It could even do the same with 10-year Treasury notes.
This is an idea that Joe Gagnon at the Peterson Institute for International Economics put
forward at the depth of the recession, but for some reason there was little interest in policy
circles. The only obvious risk of going the interest rate targeting route is that it could be
inflationary if it led to too rapid an expansion, but excessively high inflation will not be our
problem if the economy were to again weaken. Furthermore, if it turned out that targeting was
prompting too much growth, the Fed could quickly reverse course and let the interest rate rise
back to the market level.
Of course, it would be best if we could count on fiscal policy to play a role in getting us
back to full employment (lowering supply through reduced workweeks and work years should also
be on the agenda), but the Fed does have more ammunition buried away in the basement and we should
be pressing them to use it if the need arises.
Paine said in reply to Peter K....
Excellent
Despite a finessed genuflex to inflation
JohnH said in reply to Peter K....
"Larry Summers agrees with the obnoxious trolls like JohnH and BINY. Monetary policy doesn't help."
Amazing, isn't it?
Agreed: "Of course, it would be best if we could count on fiscal policy to play a role in getting
us back to full employment." And the best course is higher taxes on the wealthy, who have more
than what they know with to do with.
Taxes on the wealthy directly tackles inequality, increased debt doesn't.
JohnH said in reply to Peter K....
Amazing how unconventional monetary is always the go-to option. Pessimism about the effectiveness
of the Fed's policy options is well warranted. You only need to look at the results of the last
seven years.
So why not advocate unconventional fiscal policy...which at this point would include taxing
the wealthy to fund stimulus? Why constantly flog the debt option, which does nothing to directly
tackle inequality?
pgl said in reply to JohnH...
You need to shut up and go read that Ando-Modigliani paper on consumption. Once again you got
everything exactly backwards. But then you are the dumbest troll ever.
JohnH said in reply to BenIsNotYoda...
pgl was against tax increases on the wealthy... before he was for tax increases on the wealthy...before
he was against tax increases on the wealthy...
but he has always been for lots more debt...
PPaine :
" one persons rent may be another persons incentive "
That relies on a muddled use of the term rent
Which by construction
Means
non supply regulating revenue or income
But still a point lies under that mud dimness of articulation
Separating rents from incentives ain't easy
But in the last analysis
Very often it's very doable
Take my specialty
Ground rent
There are clever ways to tease out the rent
On the specific point of the artilce, this strikes me as a similar theory to Minsky's "stability
breeds instability" theory. Also I seem to recall Prof. Thoma posted an article showing that the
tightness or looseness of credit conditions were a good long leading indicator of conditions about
2 years later.
As an expansion goes on, both businesses and consumers take increasing risks, having been previously
rewarded for risks taken. Thus they leave less and less of a margin of safety. This makes it easier
for any given shock to overcome that margin, causing both businesses and consumers to retrench.
Thus a recession begins.
I'm not sure about businesses, but consumers have been playing it safe throughout most of this
recovery, with the personal savings rate increasing over the last few years. So, relatively speaking,
for now consumers have a decent margin of safety.
Ben Groves -> New Deal democrat...
Right, but the personal savings rate fell well out of line in the 00's and actually contracted
in 2007-8. More like restocking than playing it safe.
likbez -> New Deal democrat...
In addition gas prices are still low.
likbez -> New Deal democrat...
On the specific point of the article, this strikes me as a similar theory to Minsky's "stability
breeds instability" theory.
And that is deeply true. Minsky (actually this is Hegel) was and still is right.
Hyman Minsky simply stressed that people's response to stability in financial markets always
engenders instability as it encourages more risky behavior. Such behavior is not necessarily irrational,
as there are profits to be earned and bonuses to collect as long as the good times last.
In fact, the cycle may extend as long as credit flows and people are hungry for risk. Yet according
to Minsky's casino capitalism credit cycle always heads inexorably toward a bust.
At some point risk and reward became out of whack and people start reposition their portfolios
defensively, increasing cash allocations. At this point house of cards folds.
It is certainly appropriate to question the condition and
longevity of this 'recovery,' which was never experienced by
most Americans, whose incomes are mired back where they were
two decades ago.
Can we infer by all this that liberal
economists are finally becoming reflective about the Fed's
failure to ignite growth? Old nostrums die hard.
Unfortunately, all this obsession with miniscule rate
changes has obscured the need for the Fed and politicians to
make significant changes, so that the benefits of low rates
are felt throughout society, not just by Wall Street, the
wealthy, and affluent homeowners with mortgages.
And, instead of constantly arguing against austerity, why
not aggressively tout high taxes on the wealthy to pay for
stimulus, which would generate economic growth and address
inequality in one fell swoop!
JohnH said in reply to djb...
djb is obsessed with "the rate."
Why not get obsessed with the fact that the Fed could not
stimulate new rental housing, despite historically low
mortgage rates? As a result of the housing shortage, rents
are skyrocketing, sucking up incomes, already hit hard by the
unending recession. Result: less money available for
consumption, more money into the pockets of real estate
moguls.
Why not obsess about real credit card rates, which are
higher than they were in 2007? Result: less money available
for consumption, more money to VISA and its share holders.
But no, 'liberal' economists obsess only about "the rate,"
which affects almost nobody but Wall Street banks, their
wealthy clientele, and affluent mortgagees.
Let's face it, the Fed has failed in part because low
rates and their effects failed to trickle down much. But
'liberal' economists could care less about this. All they
care about is "the rate!"
If 'liberal' economists cared half as much about why low
rates are not diffusing throughout the economy as they care
about "the rate" for Wall Street, then we could believe that
they care about the general welfare, not the interests of the
1%.
Almost all technology stocks are getting hammered yet again on Monday.
Salesforce.com (CRM) was down 6%
while Facebook (FB)
and Microsoft (MSFT)
had lost 3%, for example, in morning trading.
And while many see it as a continuation of
Friday's rout sparked by LinkedIn's (LNKD)
weak outlook for the rest of the year, the damage has been piling up for weeks. Investors are
fleeing almost all tech names over concerns about the slowing global economy in general and a
reassessment of the potential growth of online and "cloud" markets more specifically.
LinkedIn, pummeled by an unprecedented 44% one-day loss Friday, was one of the few tech stocks
rising on Monday, as bargain hunters pushed its shares up 3% in early trading. Still, the shares
have lost more than half of their value since the end of 2015.
The widespread tech crash is all the more surprising because almost everyone thought there
was no bubble in the tech sector. Last year's market for initial public offerings of tech
companies was the slowest since 2009 (and performed poorly throughout the year), slightly more
seasoned public tech companies appeared to have already crashed last spring and most of the big
tech companies, such as Apple (AAPL),
IBM (IBM) and Cisco Systems (CSCO),
trailed the market and appeared undervalued by historical measures. Only the so-called FANG
stocks -- Facebook, Amazon (AMZN),
Netflix (NFLX) and Google's
Alphabet (GOOGL) -- did well,
with an average return of 83% each in 2015.
But, it turns out, there was still plenty more downside risk to go around. LinkedIn is still off
by more than 40% since it reported earnings after the market closed on Feb 4. Although fourth
quarter adjusted earnings per share of 94 cents and revenue of $862 million beat the average Wall
Street analyst estimate, the professional social networking company said it would earn only 55
cents on revenue of $820 million in the next quarter. And for the full year of 2016, revenue of
$3.6 billion to $3.65 billion was less than the $3.9 billion
Wall Street had been expecting.
Such a modest disappointment has sparked a massive reassessment of the potential for many
Internet stocks. With investors in a panicky mood, the carnage has spread across much of the tech
sector but stocks with online business strategies similar to LinkedIn's have been hit especially
hard. Workday (WDAY), which
provides online software for human resources, was down 7% midmorning on Monday and 37% for the
year. Twitter (TWTR) lost 4%
and was down 35% for the year. And Adobe Systems (ADBE)
was off 5% on Monday and 20% for the year. A
daily index compiled by venture capital firm Bessemer Venture Partners of 47 publicly traded
cloud software stocks lost 17% just on Friday.
And those famous FANG stocks? They're all down in 2016, as well. After its 3% Monday drop,
Facebook was still best of the bunch, showing a modest 4% loss for the year. Amazon was also down
3% on Monday but carries a crushing 28% loss for the year. Netflix was a rare gainer, up 1%, but
still off 27% for the year. And Google was down 1% on Monday and 11% for the year.
Just over two weeks ago, JPM's Marko Kolanovic, whose unprecedented ability to predict short-term
market moves is starting to seem a little bizarre,
warned that the next "significant risk for the S&P500" was the bursting of the "macro momentum
bubble." Specifically, he said that there is an emerging negative feedback loop that is "becoming
a significant risk for the S&P 500" adding that "as some assets are near the top and others near
the bottom of their historical ranges, we are obviously not experiencing an asset bubble
of all risky assets, but rather a bubble in relative performance: we call it a Macro-Momentum bubble
."
In retrospect, following tremendous valuation repricings of several tech stocks, last week's LinkedIn
devastation being the most notable, he was once again right. And over the weekend, he did what he
has every right to do: take another well-deserved victory lap.
This is what he said in his February Market Commentary: " Tech Bubble Burst ?"
In our 2016 outlook and recent reports, we identified a macro momentum bubble that developed over
the past years. We explained its drivers (central banks, passive assets/momentum strategies, etc.)
and called for value to outperform momentum assets. We also highlighted the risk of a bear
market and recommended increasing exposure to gold and cash as well as increasing exposure to nondollar
assets relative to the S&P 500 (EM Equities, Commodities, Value Stocks, etc.). Our view
was that a likely catalyst would be the Fed converging toward ECB/BOJ (rather than proceed with planned
~12 rate hikes by end of 2018). In line with these published forecasts, the best performing assets
YTD have been Gold (+9%) and VIX (+20%) while S&P 500 and DXY are down (-7%, and -2%, respectively).
Momentum stocks are down more than 10% with an acceleration of the selloff in last
days. Emerging Market and Energy stocks are starting to outperform the S&P 500 (MSCI Latin America
by +5% and Energy by +1% vs. S&P 500 YTD). This specific pattern of asset moves is consistent
with a Value-Momentum convergence. We think the outperformance of value assets over momentum assets
is likely to continue .
Investors often ask us how significant are distortions and risks in equity sectors that are related
to a "macro momentum bubble." Specifically, the question is that of valuations in the Technology
sector, i.e., "is there a Tech bubble"? Before we share our views, let's first review how passive
investing and momentum strategies may have impacted performance of various equity sectors.
Imagine a world in which most of the assets are passively managed and investors are focused on
liquidity and short-term risk/reward. Companies that increased in size recently would keep on increasing,
and those that got smaller would see further outflows. Past winners would also be considered low-risk
holdings compared to past losers. The most successful managers would be those that replace fundamental
valuation with a simple rule: buy what went up yesterday and sell what went down. Passive funds would
do the same. It is hard to imagine this makes economic sense long term, but it is close to what equity
markets experienced over the past several years. In 2013, the Sharpe ratio of the S&P 500 was ~2.7.
Assuming a normal distribution of active asset returns, one could (incorrectly) conclude that being
just an average (passive) investor one will outperform ~95% of all active investors. In 2014 and
2015, various momentum strategies delivered Sharpe ratios >2. The winning strategy was not just to
go with the crowd, but to do what the crowd did yesterday. This type of trend following does
not only apply to extrapolating price trends, but also extrapolating trends in fundamental stock
data such as growth and earnings. Beyond a certain point, passive investing and trend following are
bound to result in distorted equity valuations and misallocation of capital.
While some parts of the Technology sector certainly have reasonable and even low valuations (see
our US equity strategy outlook), segments of the Tech sector disproportionally benefited
from momentum investing as well as investing based on extrapolation of past growth rates
. For instance, a popular group of stocks held by investors is known by the abbreviation "FANG" (Facebook,
Amazon, Netflix, Google). We use these stocks as an illustration for a broader group of similar stocks
that have the highest rankings according to momentum and growth metrics (and surprisingly in some
cases even low volatility metrics). Given that traditional value metrics look expensive when applied
to this group, one can compare these momentum/growth companies on a new set of metrics. For instance,
one can look at the ratio of current price to earnings that the company delivered over all of its
lifetime (instead of just the past year). Another metric could be a ratio of CEO or founder's net
worth to total company earnings delivered during its lifetime (see below):
Aggregating all FANG earnings since these companies were listed, one arrives at a ratio of current
price to all earnings since inception of ~16x. This can be contrasted to a ratio of price to last
years' earnings for all other S&P 500 companies also at ~16x. We think this is extraordinary given
that FANGs are neither small nor new companies. In fact, these are some of the largest companies
in the S&P 500 and among the largest holdings of US retirees. Given that the three largest FANG stocks
are now twice more valuable than the entire US S&P small-cap universe (600 companies), a legitimate
question to ask would be " is such a high allocation by long-term investors to these stocks
prudent?" Statistically, over a long period of time smaller companies outperform mega-caps ~75% of
times. Note also that the current size ratio of mega-cap stocks to small-cap stocks is at
highest level since the tech bubble of 2000. Furthermore, such allocation is also questionable
from a risk angle . For example, the idiosyncratic risk of holding three stocks in one sector
is certainly much higher than the risk of owning, e.g., ~1,000 medium- or small-cap companies diversified
across all sectors and industries.
Investors in high-growth stocks expect innovations to drive growth and sustain high valuation.
They may even put their hopes in moonshot projects such as cars built by electronics makers,
car makers building spaceships, or internet companies building drones. While many of these
could result in important technological breakthroughs, they may also be signs of excess and destruction
of shareholders' capital in the future. Recent examples of capital impairment in the tech sector
are illustrated here and here, and more peculiar examples of past excess can be found here and here.
In addition to extrapolated and often optimistic growth forecasts, some of the tech sub-industries
have high idiosyncratic risks that are likely underappreciated by the market. Standard valuations
models incorporate revenue, growth, and profit forecasts but often do not discount for the lifecycle
risk of a business. To illustrate: while we are still traveling in aircraft designed over 40 years
ago, social network users' preferences have changed drastically over the past decade (e.g., Friendster
and Myspace). A shorter lifecycle is related to low barriers to entry and rapid changes in what is
deemed fashionable by young generations (e.g., one cannot build a jetliner in a dorm room, and they
don't go out of fashion as apps do).
In summary, we think that the biases of momentum investing and passive indexation have
resulted in valuation distortions across assets as well as equity segments including Technology
. Over the past years this trend has picked winning assets, sectors, and stocks often with
less regard to fundamental valuation and more regard to momentum and extrapolated growth. We believe
that 2016 may result in a reversion of this trend that will give an opportunity to active
and value investors to outperform passive indices and momentum investors . Even
if this rebalancing comes as a result of market volatility and broader equity declines, long term
it will benefit capital markets and the efficient allocation of capital .
* * *
Only problem is that this capital reallocation will means countless momentum chasers 'smart money
managers' will be out of a job in very short notice.
Then again, judging by some initial reactions, even formerly steadfast believers in the FANGs
are starting to bail: moments ago CNBC reported that Mark Cuban announced that he purchased options
to sell against his entire stake in Netflix, to wit: "For those of following my stock moves,
I just bought puts against my entire Netflix position. "
Cuban posted comments on Cyber Dust social media platform on Friday. Result: NFLX already down
-4%, with FB and other tech momos hot on its heels.
In his
latest quarterly outlook, Grantham, cofounder and chief investment officer at GMO, outlines his
views on the markets and the economy.
And in somewhat of a contrast to his
recent commentary, sees the oil crash as a big tailwind for the economy and doesn't think the
stock market, though it is expensive and
potentially heading into a bear market, is going to crash.
"Looking to 2016, we can agree that uncertainties are above average," Grantham writes.
"But I think the global economy and the U.S. in particular will do better than the
bears believe it will because they appear to underestimate the slow-burning but huge positive
of much-reduced resource prices in the U.S. and the availability of capacity both in labor and
machinery."
Grantham adds (emphasis ours):
As always, though, prudent investors should ignore historical niceties like these and invest according
to GMO's rather depressing 7-year forecast. The U.S. equity market, although not in bubble territory,
is very overpriced (+50% to 60%) and the outlook for fixed income is dismal.
At current asset prices no pension fund requirements can be met. Thus, we should welcome
a major market break that will leave us with more reasonable investment growth potential for the
longer term, but I suspect that we will have to wait patiently for such a major decline.
The ability of the market to hurt eager bears some more is probably not exhausted. I still
believe that, with the help of the Fed and its allies, the U.S. market will rally once again to become
a fully-fledged bubble before it breaks. That is, after all, the logical outcome of a Fed
policy that stimulates and overestimates some more until, finally, some strut in the complicated
economic structure snaps. Good luck in 2016.
OK, so maybe not bullish, per se, but Grantham is definitely sounding the alarm on not
sounding the alarm on a stock market bubble and resulting crash.
Stocks
Over the last 18 months, stocks are basically flat in what has been by far the most difficult
period for investors since the financial crisis.
And this period has really been defined by three things: a crash in oil prices, a continued and
relentless slowing of the Chinese economy, and a change in Federal Reserve policy.
On top of all this is the decline in profit margins,
which Grantham has called the "most mean-reverting series in finance," implying that the long
period of elevated margins we've seen from American corporations is most certainly going to come
an end. And soon.
Profit margins are near record highs, and Grantham expects them to fall.
In Grantham's view the Fed holding off on raising rates all the way until December 2015 staved
off what could have been a really disastrous year for stocks given the weakness in oil prices and
anxiety over China's economy.
And continued assistance from the Fed is likely to send stocks higher, or at least stabilize them
somewhat.
The question, then, is whether this sends stocks into a "blow-off-top" where, as Grantham outlines,
you'd expect to see a two-standard-deviation event with stocks rocketing higher and the S&P 500 heading
to 2,300 before the big crash.
"I must admit to feeling nervous for this year's equity outlook in the U.S," Grantham writes.
"But I am not entirely convinced. Sure, we can have a regular bear market. That is always the case.
But the BIG ONE? I doubt it."
Oil
In addition to not being (overly) concerned with the prospects of a new stock market crash, Grantham
also thinks we're about to see the good side of the oil crash that has been a long-awaited part of
the US economic narrative in the last year.
"The largest hits from the major oil company responses are behind us, although at $30/barrel (and
maybe less) there will be some further retrenchment," Grantham writes.
The oil crash, charted.
He adds: "And now comes the matching response from us, the consumers. Everything we buy has cheaper
input costs. The major item of gasoline purchases is a steady jolt of encouragement. Heating bills
are also much lower. Could there be a better financial input than this to the group that has been
hurting for 30 years - the median wage earner? Not easily."
This is good!
Everything, it seems, is getting cheaper, and according to the latest data out of the BLS released
Friday, our paychecks are getting bigger as average hourly wages grew 2.5% over last year in January,
roughly matching the largest increase of the current economic cycle (December's gains were revised
higher to show annual growth of 2.7%.)
But Grantham goes a step beyond the standard, "Low oil means more spending for consumers" line
of thinking (which is why he's one our favorite market thinkers to track).
Grantham further argues that increasing commodity prices, as much as anything else, have been
and will be factors ahead of recessions.
Because while 2008 was all about the crash in housing and the stress at major banks, the rapid
rise in oil prices and other commodities stressed consumers as much as anything else, in Grantham's
view.
And just as this rise was overlooked eight years ago, the crash in prices and the delayed - but
positive - feedback to consumers and the economy has been forgotten by the market.
But the benefits are coming. Now.
"Market opinion now, though, impressed with the early negatives that it should have expected and
because the offsetting stimulus effect is delayed and weakened initially by some understandable increases
in savings, is doing the opposite," Grantham writes.
"[The market] is underrating what will very likely become an important economic tailwind for the
next several quarters. Reflecting current opinion, Luke Kawa, a writer for Bloomberg reviewing the
oil situation claims, 'One of the biggest surprises in economics has been how the world responded
to a period of lower energy prices.' Well, the economic world is easily surprised."
An interesting, but not a deep, discussion about the possibility of uprising against the
neoliberal elite in the current circumstances...
Notable quotes:
"... Is it time for pitchforks to restore the natural orders of fear yet? ..."
"... With the collapse of the Soviet Union and the spread of global capitalism, today's
elites have lost the sense of fear that inspired a healthy respect for the masses among their
predecessors . Now they can despise them as losers, as the aristocracy of ancien régime
France despised the peasants who would soon be burning their châteaux. Surely today's
elites are going to learn how to fear before we see any reversal of the recent concentration of
wealth and power. ..."
The following reader comment,
posted originally in the FT is a must read, both for the world's lower and endangered middle
classes but especially the members of the 1% elite because what may be coming next could be very
unpleasant for them.
From the time of the French Revolution until the collapse of communism, what successive
generations of elites had in common was a sense of fear of what the aggrieved masses might do
. In the first half of the 19th century they worried about a new Jacobin Terror, then
they worried about socialist revolution on the model of the Paris Commune of 1871. One reason
for the first world war was a growing sense of complacency among European elites. Afterwards they
had plenty to worry about in the form of international communism, which remained a bogey until
the 1980s.
With the collapse of the Soviet Union and the spread of global capitalism, today's
elites have lost the sense of fear that inspired a healthy respect for the masses among their
predecessors . Now they can despise them as losers, as the aristocracy of ancien régime
France despised the peasants who would soon be burning their châteaux. Surely today's
elites are going to learn how to fear before we see any reversal of the recent concentration of
wealth and power.
Is it time for pitchforks to restore the natural orders of fear yet?
And most people wouldn't have the faintest idea of where to buy, or more probably rent, a pitchfork
anyhow. As for torches? What, are you crazy? Those things are dangerous and would void our
insurance policy.
And a roasting spit and rope to tie em by the ankle to the cherry trees lining the national
mall, Musollini style. Urinals hanging from cherry trees. Only in America.
One does wonder how inbreds surrounded by expensive advisors so easily lost any shred of fight-o-flight
survival skills. Guess the extra bling allows them to dream false dreams.
The ones who think they are 'top dog' are about to find out the hard way, there is something
much bigger at work...
"6. The people, under our guidance, have annihilated the aristocracy, who were their one and
only defense and foster-mother for the sake of their own advantage which is inseparably bound
up with the well-being of the people. Nowadays, with the destruction of the aristocracy,
the people have fallen into the grips of merciless money-grinding scoundrels who have
laid a pitiless and cruel yoke upon the necks of the workers.
7. We appear on the scene as alleged saviours of the worker from this oppression
when we propose to him to enter the ranks of our fighting forces - socialists, anarchists, communists
- to whom we always give support in accordance with an alleged brotherly rule (of the solidarity
of all humanity) of our social masonry. The aristocracy, which enjoyed by law the labor of the
workers, was interested in seeing that the workers were well fed, healthy, and strong. We are
interested in just the opposite - in the diminution, the killing out of the goyim. Our power is
in the chronic shortness of food and physical weakness of the worker because by all that this
implies he is made the slave of our will, and he will not find in his own authorities either strength
or energy to set against our will. Hunger creates the right of capital to rule the worker more
surely than it was given to the aristocracy by the legal authority of kings.
8. By want and the envy and hatred which it engenders we shall move the mobs and with
their hands we shall wipe out all those who hinder us on our way."
The thing is that there are going to be a LOT of folks who thought
they were elites. Instead they will be thrown under the bus of the approaching hoards to
slow them down while the real elites make sure no one escapes that shouldn't be.
They no longer fear the masses as they control the cops and the narrative. What will really
work and is almost unstoppable is the ghost in the machine. Seemingly random acts of sabotage,
just think if the internet went down for even 2 or 3 days. Who would it hurt most, average folk
or ? I have a dream...
Lol those guys are so blackwater.... It is illegal to have a standing "army" on 'murrican soil.
Private for hire jagoffs arent. And no, it wasnt the national guard.
The internet doesnt forget or forgive transgressions. Sins of the father shall be paid for by
their sons. "Where are you going to run, where are you going to hide; no where because there is no where left
to run to." - Body snatchers
I think you are correct so far as you take your argument. Yes, they will START on their own
neighborhoods. The depth of the fall can be graphed against how far they will go afterwards.
It is our son's and daughter's who protect the elitist assholes. We know where they built their
bugouts and landing strips. We built them. We know where the air vents are for their underground
bunkers. We built them. We know where the diesel tanks are to power their generators and you can't
hide solar panels. No, we know where there going and how to get to them. Soon!!
Now you know why the hawaiian's, when they sent a worker down the side of a cliff to bury the
chiefs bones in that space reserved for the Ali'i, they "accidently" let go of the rope while
he was climbing back up...oopppps, sorry bout 'dat brah.
No, the proles do little of substance. But, the time is reached when even their paid off guard
dogs will be tired of the insanity that destroys their own extended families. (The psychopaths
can't help but push it to the extremes. That is their egotistical nature. Theyve been indulged
since they were infants.) When that day of reckoning comes, the criminals will be very afraid.
The EU 'leadership' bringing in massive outside foreign populations to destroy the existing
culture and nation-state is a potential match for the fuse of anger. We see police carrying out
orders, but what do they really think ? How bad will they let it get ? Even the Red Army troops
refused to go along with it all when the grandmas scolded them for taking part in rolling the
tanks toward their own people. And those troops said "Nyet, no more of this." And the USSR was
no more.
I used to love the old sims of feudal japan where you could set your tax rate at whatever you
wanted but the higher you set it the more likely you would get a peasant revolt.
What's going on is precisely this:.....
They have learned how to set the tax rate at whatever percentage won't cause utter chaos and
then absolve themselves from said taxes through loopholes AND THEN add on top stealth taxes in
the form of currency debasement AND THEN on top of all this they've built a ponzi scheme debt
based fiasco that is entirely unsustainable.
I gotta hand it to them they have managed so far to avoid the ire of the peasant class, however
methinks that once this shit show rolls into town and starts playing nightly as in reality comes
a callin then these same folks are going to need to hide off planet.
Seriously I'd advise them to look into space travel.
The elites today were related to the elites of yesterdays revolutions. They have learned and are keeping track of everything and with the advent of big data and lots
of computing power, they know how much time they have before SHTF. They have quants assessing risk daily, and not just market risk..geopolitical and other stuff.
They dont fear us because they know they can keep ramping up poisoning of our food and other
stupid social media gimmicks.
If all else fails, the jackboots will come out in full force.
They've been testing and training these detention methods for close to 100 years. From the
gulags of Russia to the West Bank / Gaza strip today of Israel.....its being tried and trued.
The past nine months have set record monthly background checks. I believe we as a "group"
know and feel our existence is in danger, and are responding accordingly.
Certainly a patriot CANNOT do it through the ballot box,
Iowa: Days before the Iowa caucuses in 2012, Ron Paul held a
commanding lead in the
polls and all the momentum, with every other candidate having peaked from favorable
media coverage and then collapsed under the ensuing scrutiny. Establishment Republicans, like
Iowa's Representative Steve King (R), attempted to sabotage Paul's campaign by
spreading rumors
he would lose to Obama if nominated. . . Iowa Governor Terry Barnstad
told Politico
, "[If Paul wins] people are going to look at who comes in second and who comes in third.
If Romney comes in a strong second, it definitely helps him going into New Hampshire".
The message from the Iowa Governor to voters of his state was: a vote for Ron Paul was a wasted
vote.
The RNC and their minions would have prevented a Ron Paul presidential nomination, by any means
necessary - up to and including a terrible, just terrible, plane crash. All those lives lost....
They DID prevent the nomination by any means necessary...and did so, short of crashing a plane.
The underhanded shit they pulled in '12 sealed their fate.
In that case, the Libertarian Party needs to go "full Zio-mode": Take no BS and no
prisoners.
Problem is, they are too "individualistic" (divided, heterogenous), and too 'Christian' (raised
in "Religion of Serfs") to create another American or French Revolution, or bring about real change.
Note that in the American Revolution, its Founders realized that the influence of Clerics needed
to be curtailed, and so they invented the "Seperation of Church and State". The French, OTOH,
called a spade a spade, and got rid of the Church completely.
Amerika: Where kids are taught by their parents to believe in the Tooth Fairy, Easter Bunny
and Santa Claus -- all the while they believe in "Santa for Grownups", i.e. Winged Nordic Humans
(Angels) and a Sky God.
I have ZERO faith that Libertarians will do anyting, other than talk, blog, hold meetings,
conventions, have weekend warrior games, or buy any number of Doomsday Products and Services.
IOW.. they'll do anything and everything, but March or Protest en mass. They won't even do TV
program, much less do a leveraged buyout of a TV channel.
Like I said: "Too individualistic, to truly matter to TPTB". I WISH it were not to,
but I'm just calling it as I see it. Alas. If I'm wrong, I'll jump for joy and click my heels.
Faber: Can't see another bull market in my lifetime
Jacob Pramuk | @jacobpramuk
Wednesday, 27 Jan 2016 | 10:12 AM ET
CNBC.com
The world according to Faber</p> <p>Marc Faber, The Gloom, Boom & Doom report, joins Fast
Money to give his take on the current market conditions.
Emerging market stocks will outperform U.S. equities when another bull market comes, noted bear
Marc Faber contended Tuesday. But Faber sees one problem - he believes markets will not enjoy another
bull run in his lifetime.
Still, the Gloom, Boom & Doom Report publisher sees a potential recovery for some emerging market
economies, particularly Russia and Brazil, which have endured a recent slowdown.
"There are some that are extremely depressed that could have large rebound potential," Faber said
during a Tuesday evening panel discussion at the ETF.com Inside ETFs conference in Hollywood, Florida.
Stock prices have broadly fallen worldwide this year, with lower commodities prices and fears of
a global slowdown contributing to investor concerns. Economies dependent on natural resources have
been hit particularly hard. Brazil and Russia, once stars of the emerging world, have been damaged
by oil as well as political issues.
While Faber has made a name on pessimism, he contended that bright spots for potential growth still
exist in emerging markets. He pointed to Cambodia and Vietnam, among other Asian economies.
Mark Yusko, chief executive officer of Morgan Creek Capital Management LLC.
Guy who called $30 oil year ago has more bad news
"I wouldn't take an across-the-board negative view about emerging economies," Faber said.
Another investor on the panel Tuesday stressed that market watchers should not package all emerging
economies into one basket. Marten Hoekstra, CEO of Emerging Global Advisors, is particularly optimistic
about growth prospects for India, the world's second-most populous country.
His funds have attempted to benefit from consumer demand there through consumer discretionary and
staple stocks, as well as health care, telecom and utilities companies. While Emerging Global's India
Consumer ETF (INCO) has fallen this year, Hoekstra touted its prospects for long-term investors as
consumer spending power grows in India.
Bill McNabb, chairman, president and CEO of Vanguard Group
Vanguard CEO: Expect less from stocks for a decade
He stressed that the Indian economy does not rely on oil or natural resources, which reduces its
downside risk if the commodities crunch persists.
"If you're generally negative on oil, you're probably bullish on India," Hoekstra said.
Mark Yusko, founder and CEO of Morgan Creek Capital Management, said during his annual "bold predictions"
talk on Monday that India had attracted his attention and would perform better than most emerging
economies.
Despite Hoekstra's optimism, widely followed commodities commentator Dennis Gartman, who was also
on the panel Tuesday, said that he had no immediate plans to invest in emerging market economies.
"It is the continued reliance upon commodity prices that causes me a great deal of concern," he said.
Gartman contended that corruption in some emerging market governments reduces the safety of investing
in those locales.
"... By Perry Mehrling, a professor of economics at Barnard College. Originally published at his website . ..."
"... Yes, the money creation process has been a big lie for a long time. In any case the Bank of England came clean a couple of years ago and admitted that standard story of money creation was false. They even acknowledge that it is not properly explained in most money and banking textbooks, which is a staggering admission. ..."
"... Paul Krugman wrote a column a couple of months ago where he claimed that banks take in savings from depositors and lend them out to borrowers which tells you either: 1) he doesnt know how banking works or 2) he is part of the conspiracy to keep the public in the dark. ..."
"... The truth right from the mouth of the worldss oldest central bank. http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q102.pdf ..."
"... Yeah, I saw that. It is amazing that a supposedly foremost Princeton Nobel winning economist apparently doesnt understand where money comes from… ..."
"... There is evidence that Krugman seems to have great difficulty admitting he was wrong. ..."
"... And what he writes makes me think he doesnt know how banking works. I find it difficult to believe he is part of any conspiracy. But I may be wrong. ..."
"... My take is that the fractional reserve and intermediation models are just ways of obfuscating the way banking actually works and the credit creation model is the accurate one. I have some advice for anyone who is struggling with the concepts which is as follows: always merge all the banks in the banking system into one bank in your mind. Assuming multiple banks as the author above does is irrelevant to the analysis and only serves to add confusion. ..."
"... I enjoyed the article very much. And it does seem to me that money creation is made to seem very, very, complex. Now maybe Im just too stupid, but it always strikes me that when people simply describe something, they either really dont know, or they are trying to bamboozle you… ..."
By Perry Mehrling, a professor of economics at Barnard College. Originally published
at
his website .
In his recent paper, "A Lost Century
in Economics: Three Theories of banking and the conclusive evidence" , Richard Werner argues
that the old "credit creation theory" of money is true (empirically "accurate"), while both the newer
"fractional reserve theory" and the presently dominant "debt intermediation theory" are false. For
him, this matters mainly because the false theories are guiding current bank regulation and development
policy, leading down a blind alley.
But it matters also simply because we need correct understanding of how the economy actually works,
"we" meaning not just economists but also the general public. "Today, the vast majority of the public
is not aware that the money supply is created by banks, that banks do not lend money, and that each
bank creates new money."
Why is the public ignorant of the truth? Much of Werner's paper is devoted to an account of how
the correct theory was pushed out of the conversation, first in the 1930s by the fractional reserve
theory, and then after WWII by the debt intermediation theory. One culprit was a shift toward deductive
and away from inductive methods. Another culprit, he suggests, was the self-interested "information
management" by central banks, i.e. direct suppression of truth in their own publications. And in
this suppression, he further suggests, Keynesian academics were at the very least complicit: "attempts
were made to obfuscate, as if authors were at times wilfully trying to confuse their audience and
lead them away from the important insight that each individual bank creates new money when it extends
credit."
In this history, Werner gives special attention to Keynes himself since Keynes seems to have held
each of the three theories in succession throughout his life. Keynes' own intellectual trajectory
thus foreshadows the subsequent evolution of monetary thought, and so probably is partly responsible
for leading successive generations astray. Just so, one apparent legacy of Keynes is that the Bank
of England is currently holding all three theories at the same time! "Since each theory implies very
different approaches to banking policy, monetary policy and bank regulation, the Bank of England's
credibility is at stake." BoE credibility is thus a third reason that all of this matters.
But is it really true, as Werner claims, that these three theories are "mutually exclusive"?
He is at considerable pains to show that they are mutually exclusive, by using a succession of
stylized balance sheet examples. The credit creation theory says that banks make loans by creating
deposits, essentially expanding their balance sheets on both sides by the same amount. (The borrower
of course also expands his own balance sheet, the loan being his liability and the deposits being
his asset. In my own "money view", I call this a swap of IOUs.) In this way, money (bank deposits)
is created that was not there before.
By contrast, the debt intermediation view says that banks make loans by lending reserves that
they are already holding, essentially swapping one asset for another, these reserves having previously
been obtained by someone's deposit. The balance sheet expands when the deposit is made, not when
the loan is made. Banks merely intermediate between savers and borrowers, and do not create money.
In between these two views, the fractional reserve view says that individual banks make loans
by lending reserves, but that the banking system as a whole can and does create money, up to a multiple
of reserve holdings. The banking system does create money, but only after and as a consequence of
the central bank increasing reserves–this is the famous "money multiplier".
So the difference between the theories seems clear, and it also seems like that difference should
be testable empirically simply by watching actual bank balance sheets and seeing what happens when
a loan is made. Does the balance sheet expand or does it not? With the cooperation of an actual bank,
Werner books a dummy loan and finds that the balance sheet of the bank does in fact expand. This
he takes to be scientific proof that the credit creation theory is correct and the others are false.
Not so fast. Let's look a bit closer.
Let me begin by admitting my sympathy for Werner (as I have already hinted by mentioning my own
"money view" as a version of the credit creation view). In fact, Werner's heroes–H.D. McLeod and
Joseph Schumpeter–are my own heroes as well, and I suspect that graduate school exposure to these
authors sent him off on his own intellectual journey just as it did me. Even more, thirty years after
that initial exposure, I find Werner's (co-authored) money and banking textbook
"Where Does Money
Come From?" one of the best introductions to the subject. Last fall I assigned Chapters 2 and
4 in the first two weeks of "Economics of Money and Banking" which I teach at Barnard College, Columbia
University. I'm sympathetic.
But I don't think these three theories are quite as mutually exclusive as he makes them out to
be.
Let us suppose, with Werner, that Citibank makes a mortgage loan to me of $200,000, simply by
swapping IOUs. I then transfer my new asset (the new Citibank deposit) to you, and you transfer your
house to me. As my payment clears, you have a new deposit in your own bank (let's say Chase, to make
it interesting), Citibank has a "due to" at the clearinghouse, and Chase has a "due from". Again,
to make it interesting, let's suppose that Citibank has no reserves, so it enters the interbank market
to borrow some, from Chase. At the end of the day, what we see is that the Citibank balance sheet
is still expanded, so is Chase's, and so is mine. Only your balance sheet stays the same size, since
you have swapped one asset (your house) for another (money). That's the payments perspective.
What about the funding perspective? If we follow the balance sheets through, it is clear that
your money holding is the ultimate source of funds for my borrowing. (You lend to Chase, which lends
to Citi, which lends to me.) In this sense, we can think of both Chase and Citibank as intermediaries,
channeling funds from one place in the economy to another. But, in this example, there is no saving
and there is no investment. The sale of the house adds nothing to GDP, it is just a transfer of ownership.
The expansion of the banking system has facilitated that transfer of ownership by creating a liability
(the deposit) that you apparently prefer to your house, at the same time acquiring an equivalent
asset of its own (the loan). Citibank collects the spread between the mortgage rate and the interbank
rate; Chase collects the spread between the interbank rate and the deposit rate.
But all of that is only what happens right at the moment of payment. What happens afterwards depends
on the further adjustment of all of these balance sheets. One way this could all work out is that
Citibank packages my mortgage with others to create a mortgage backed security, and that you spend
your Chase deposit to acquire a mortgage backed security (perhaps indirectly through a mutual fund
that stands in the middle). In this scenario, the newly created money is newly destroyed, the balance
sheets of both Citi and Chase contract back to their original size, and the end result is that you
are funding my loan directly. But again, no saving and no investment, just a change in your asset
allocation, away from money toward fixed income investment.
Obviously this final scenario is a limiting case on one side. The limiting case on the other side
is that you (or whoever you transfer your money to) are willing to hold the newly created money balances
as an asset, so you continue to fund my loan indirectly. Now when Citibank securitizes and sells,
it is able to repay its interbank liability to Chase, and for simplicity let's say that Chase uses
that payment to acquire a different money market asset. One way this could all work out is that a
shadow bank–money market funding of capital market lending–acquires the security and uses it as collateral
for wholesale money market borrowing from Chase. Again, no saving and no investment, but the new
money stays in circulation and is not destroyed.
These are the limiting cases, and obviously anything in between is also possible, depending on
the portfolio decisions of Citibank, Chase, and you. But in all the cases, the debt intermediation
view of banking is perfectly consistent with the credit creation view of banking. One focuses on
the ultimate funding, while the other focuses on the initial payment.
That said, I have to agree with Werner that the credit creation process is all too commonly left
out of the story–most modern courses never even mention the payments system–and it is a real (and
important) question how this came to be so. It is a further real (and important) question why the
intellectual memory of how the process actually works was left to marginalized sections of academia–Werner
mentions specifically the Austrians and post-Keynesians. I'm not so sure that it was a central bank
plot, though I do think that the shift in academic fashion toward studying equilibrium of a system
of simultaneous equations played a role in obscuring the kind of dynamic balance sheet interactions
that are the essence of the story.
What I would emphasize however is not the negative but the positive. The fact of the matter is
that today the credit creation view is out of the shadows, and no longer the exclusive property
of the marginalized . In evidence of this, I would direct your attention to the two Bank
of England papers that Werner himself cites:
here and
here . But I would add to that also the most recent report coming out of the Group of 30
"Fundamentals
of Central Banking, Lessons from the Crisis" . On page 3 you will find the following:
"In a barter economy, there can rarely be investment without prior saving. However, in a world
where a private bank's liabilities are widely accepted as a medium of exchange, banks can and do
create both credit and money. They do this by making loans, or purchasing some other asset, and simply
writing up both sides of their balance sheet."
That's the truth that Werner wants central banks to admit, and now it appears that they have admitted
it. The next question is what difference it makes, and that's a question for next time. Already it
should be clear that progress toward answering that question will require us to be more careful about
issues of payment versus funding.
P.S. BTW, the title of this post [at Merhling's site, which is "Great and mighty things which
thou knowest not" [?]] is taken from Jeremiah 33:3 which Werner references in a footnote to his title:
"should grains of wisdom be found in this article, the author wishes to attribute them to the source
of all wisdom." Werner is apparently listening to powers higher than just McLeod and Schumpeter!
I think another aspect that should be considered is the preservation of surplus money through
government debt.
For example, Volcker is credited with curing inflation through higher interest rates, but that
slowed the economy as well and so reduced the need for money. It wasn't until Reagan had increased
the deficit to 200 billion in 82 that inflation seemed to come under control enough that they
could lower rates.
Now one way to create higher rates is for the Fed to sell debt it bought to create the money
in the first place. So what is the difference between the Fed selling debt it is holding and the
Treasury issuing fresh debt, other than the Fed destroys its money and the Treasury spends it
on public works, thus Keynsian pump priming.
So who buys this debt, but those wealthy enough to have surplus money. Which suggests that
if there is a surplus of money in the system, causing inflation, the easiest place to remove it
is from those with a surplus of money.
Now money really does function as an enormous, glorified voucher system and what is more destructive
of such a system, than enormous amounts of surplus vouchers?
So given that those with lots of such excess vouchers consequently have leverage over the rest
of the system, what way to better preserve this wealth, than to have the public borrow it back
and pay interest, even if much of what it gets spent on doesn't produce sufficient income to pay
that interest, if not actually lost?
Eventually though even the public can't afford to keep this up, so what is the alternative?
Now most people save for predictable reasons, from raising children, housing, healthcare, to
retirement and funerals. So what if the government, i.e., the public, were to threaten to tax
excess money back out of the system, rather than just borrow it? Necessarily people would quickly
find means to invest into these future needs directly, rather than trying to save up notational
value. The problem is that we don't know exactly what we will need for what, which would mean
we would have to invest into community and public projects, rather than save for our own specific
needs.
While this might seem onerous, consider that we currently live in a highly atomized society,
that is largely mediated by that failing financial mechanism. So if we had to start functioning
as a more holistic group, with more organic interactions and public spaces and commons, people
might have to come out of their shells a little more and deal with lots of other social and personal
issues, which might not be a bad thing.
Basically we treat money as both medium of exchange and store of value, but these are different
functions, as a medium is dynamic and a store is static. For instance, in the body, blood is the
medium and fat is the store. Try storing fat in the arteries and you get clogged arteries, poor
circulation and high blood pressure to compensate, which is analogous to our financial issues,
with a clogged banking system, poor circulation to the rest of the economy and quantitive easing
to compensate.
While the brain might need more blood than the feet, it does neither any good for the feet
to rot and die from lack of circulation, nor does it do the brain any good to have excess blood.
Similarly we need a stronger social structure and a leaner, more efficient economic medium, in
which the excess is stored as the muscle of a stronger society and a healthier environment, rather
than just treating them as stores of wealth to be monetized and siphoned away.
Yes, the money creation process has been a big lie for a long time. In any case the Bank of England came clean a couple of years ago and admitted that standard
story of money creation was false. They even acknowledge that it is not properly explained in
most money and banking textbooks, which is a staggering admission.
Paul Krugman wrote a column a couple of months ago where he claimed that banks take in savings
from depositors and lend them out to borrowers which tells you either: 1) he doesn't' know how
banking works or 2) he is part of the conspiracy to keep the public in the dark.
In the mainstream world money is just a "veil" that obscures your view of how the divine markets
work. They deliberately leave it out because it just confuses things…
No wonder no one in that world saw the GFC coming, they still all claim whocuddaknowed?
There is evidence that Krugman seems to have great difficulty admitting he was wrong. He even
contends that using IS-LM is a good too for introducing students to the macroeconomy, even when
they must unlearn it when they delve deeper in to the workings of the macroeconomy, and this is
after Hicks himself rejected it as being an inaccurate depiction of the macroeconomy later in
his life. I can't say what Krugman is thinking, but then I don't have to. I can go just by what
he writes. And what he writes makes me think he doesn't know how banking works. I find it difficult
to believe he is part of any conspiracy. But I may be wrong.
Yes it's hard to believe that Krugman might not know how money/banking works but he is a very
ideological guy. I happen to be sympathetic to many of his ideological views but any one who is
intensely ideological is rarely a critical and independent minded thinker. Ideology is way of
simplifying complex things and making your self more comfortable, and doesn't lead to knowledge.
I am no expert on money and banking but I have read ten books on the subject over the last four
years and numerous papers. I am pretty sure I understand it now. I think this guy Werner is right.
It seems probable that there was an orchestrated campaign to obfuscate how banking and money creation
work and one can imagine why that might have happened. Banking is quite literally a pyramid scheme
under even the most conservative circumstances! Such a system can work and makes sense if it is
prudently managed, regulated and limited in scope.
My take is that the fractional reserve and intermediation models are just ways of obfuscating
the way banking actually works and the credit creation model is the accurate one. I have some
advice for anyone who is struggling with the concepts which is as follows: always merge all the
banks in the banking system into one bank in your mind. Assuming multiple banks as the author
above does is irrelevant to the analysis and only serves to add confusion.
I enjoyed the article very much. And it does seem to me that money creation is made to seem
very, very, complex. Now maybe I'm just too stupid, but it always strikes me that when people
simply describe something, they either really don't know, or they are trying to bamboozle you…
I think the article would have been more enlightening though if the example had been for a
house that was TO BE BUILT.
Using that as an example, it seems to me that money is LOANED into existence – the person who
wants the home loan has a good reputation, but the whole point of the loan is that they don't
have nearly enough money to buy the house.
The carpenters and other workers don't get paid until they have done work (they loan their
work to their employer), i.e., produced a house (or some portion of it). The money in the loan
becomes real because a house that didn't exist now exists. There is more stuff in the world, and
there is more money. And I think it explains something important – not any loan is useful. A house
worth 100K that is sold for 1000K but than is foreclosed upon – somebody has to take a real loss
– either the person who got the home loan, and to the extent that they can't pay the loan back,
a builder or the bank takes the loss (if the foreclosed value is less than the original loan value)
So, is that correct?
Again, thanks for the article and I am looking forward to the next one!
Pick any year post WWII (because the data is readily accessible).
Compare the levels of federal spending and credit expansion.
Federal spending created more money every year except for the years 1998 thru 2007, where it
was about even, and for 2006 and 2007 credit expansion was some 50% higher.
Then we got the mother of all credit crises.
Over that post WWII period federal spending created ~$78T while credit created ~$46T.
The common refrain is that federal taxes subtract from federal spending so it ends up being
less.
Except in what universe do income taxes accrue only against income resulting from federal spending?
It's nonsense and should be derided as such. It's an accounting convenience that does not reflect
what is actually happening.
It may make sense for National Accounting (and to keep banksters in the drivers seat) but it
makes zero sense in a rational analysis of a real-world system. That is the only way banks could
be touted as the source of most of our money.
Despite an otherwise sound argument this article perpetuates the myth.
The banksters apparently have a hold on everyone, including the so-called 'good guys'.
Some justification based on the level of bank reserves or some other convoluted argument in
5,4,3,2,1 …
Very interesting and I'm looking forward to your next installment.
I'm especially interested in the transfer of reserves from Chase to Citi and as you further
point out 'Chase possibly using its reserves to acquire a different money market asset. One way
this could all work out is that a shadow bank–money market funding of capital market lending–acquires
the security and uses it as collateral for wholesale money market borrowing from Chase.'
This seems to be a transmission mechanism for asset appreciation as Eric Tymoigne is getting
into is his excellent series:
"post 7 will start the private-bank posts) on monetary policy and the QE -asset price channel
will be explained. But here is a short answer:
No bank's don't use cash to buy assets. If they deal with non-bank agents they just credit bank
accounts, if banks deal with a fed account holder they debit their reserve balances to make payments.
The link works through interest rate, arbitrage, search for yield, and the fact that QE reduces
the quantity of securities available in the market."
"the issue is how they would transfer the funds to make the purchase? They could buy securities
if they find a fed account holder willing to sell them securities: Treasury is one, GSE is another
one. Non-financial institutions no."
All they do is talk about how the parts of the machine move - which is itself an amazing problem
of conceptual collinearity - but not the phenomenon of the machine itself.
More and more you just say "Why not go to Youtube and check out a Rhianna video, rather than
read another one of these essays."
Eventually maybe they'll get it. But when they study economics their whole adult life - and
nothing else - it makes it hard. It's not like they're dumb or that they lack mental ability.
In fact, they're all intelligent individuals who are quite capable in most areas of thinking.
It's just that the conceptual language they need to use in order to perceive the phenomenon itself
is a language they do not know. And so they look at reality and they try to make sense of it using
the language they do know, and because words themselves and the ideas in the words catalyze perception,
their limited language is not fully adequate, and they don't see or know that. What can you do?
Everybody has to see it for themselves.
At any rate, you'd think by now it wouldn't be so hard. But most people aren't interested in
this sort of thing so progress is really slow. Most people just go right to Youtube.
Adenosine triphosphate. The example several years ago in the comments, by a biologist, that
it would be an extinction event for a colony of amoeba if a few of them decided to short amoeba
futures and just hoard all the adenosine triphosphate – the one chemical every amoeba must have
to transfer energy. Wish it had been an analogy to symbolic ADP which had usurped the real stuff
and was being hoarded to make sure it maintained its value.
You assured me susan was a bona ride adjunct professor of theosophical studies at the University
of Magonia. I want, nay, I demand my tuition fee, which apparently I had to pay in advance because
otherwise 42 other Chinese applicants would be in line for my place, back.
Dunno why they have all these theories. It's simple. The Fed lowers interest rates, the mark
to market value of bank assets go up, which greatly improves cap ratios, then banks don't need
liabilities anymore. They just can make endogenous money and give it out to borrowers' banks.(it's
all done electronically and fast so no one notices) All the Big Guy econ types know that.
All the rest of it is just details banks go thru just for show. Plus they can securitize and
sell any assets they think may drop in value. They're smart people.
Now, the other thing all the Big Guy econ dudes always say is once us little folk figure it
out, something wonderful is supposed to happen. Maybe I missed it, but what thing is that???
Let us suppose, with Werner, that Citibank makes a mortgage loan to me of $200,000, simply
by swapping IOUs. I then transfer my new asset (the new Citibank deposit) to you, and you transfer
your house to me. As my payment clears, you have a new deposit in your own bank (let's say Chase,
to make it interesting), Citibank has a "due to" at the clearinghouse, and Chase has a "due from".
Again, to make it interesting, let's suppose that Citibank has no reserves, so it enters the interbank
market to borrow some, from Chase. At the end of the day, what we see is that the Citibank balance
sheet is still expanded, so is Chase's, and so is mine. Only your balance sheet stays the same
size, since you have swapped one asset (your house) for another (money). That's the payments perspective.
Is the house owned free and clear? If not, the exchange eliminates that original liability/asset
on someone else's balance sheet so everything is now at a net zero as far as new money circulating
in the economy. Banks did not create anything new. They only exchanged one Asset/Liability
for another Asset/Liability. Even if the house was paid off 20 years ago, there is no new money
created from this transaction. The only way "new money" is created would be through interest
paid on Treasuries, and direct deficit spending by federal government.
As the commenters on the post at Prof. Mehrling's site have observed, his argument is logically
flawed. He concludes: "But in all the cases, the debt intermediation view of banking is perfectly
consistent with the credit creation view of banking."
The intermediation view of banking "says that banks make loans by lending reserves that they
are already holding," as he explains at the beginning of his piece. In his example, the deposit
that is created by the banking system funds the loan. Of course, in both case intermediation takes
place but the nature of the intermediation is not comparable.
In the first case, banks have no special status in the economy. After all any of us who has
a balance of $100 can lend out that balance of $100. In the second case, the only reason the bank
can make the loan is because of a social norm in which the public trusts the banking system and
is willing to keep its money in banks. This fact has always been a fundamental component of the
credit creation theory of money - it is founded on the public's trust in the banking system. This
trust allows banks to expand the money supply - at the potential expense of the public.
While I have great respect for Prof. Mehrling, it is far from clear that he has a good understanding
of the credit creation view of money.
When I looked into the data about 5 years ago, it appeared that only a few large banks were
actually operating on a credit-creation basis. Most banks (meaning your local, independent banks
and credit unions) appeared to be operating on an intermediation model. Deposits are always the
cheapest way to fund a loan, and for small banks, that looks like pretty much the only way they
do it – iirc, loans were 60-80% of deposits in most banks. However, at JPM, BofA, etc, their loans
were well over 100% of their deposits…like waaaay over. So it looked to me like just a few big
players were driving endogenous money creation, while most banks actually were doing, essentially,
what fractional-reserve theory says they do.
That's my understanding, but I don't claim to be an expert.
Banks no longer keep their loans on balance sheet, so a simple static analysis of their balance
sheet doesn't tell us much about how much credit creation they are doing. To study the degree
to which banks create money you have to look at the role they play in the shadow banking system
as well.
Too some degree… my concerns about the shadow sector vastly out weigh the traditional sector
e.g. has the traditional sector become [increasingly] just a front house op to generate velocity
for the shadow sector, and the latter just needs a – store of – when the economy gets a black
eye.
Therein lies the rub e.g. some fixate on one component of a veritable galaxy of operational
scope, so at this juncture on can surmise that new universes of credit are created and inserted
into the multiverse to survive on their own [inhabitants luck of the draw]. Maybe theoretical
physics would be a better methodology of describing credit activity's at this juncture than thermodynamics,
ideology, or socio-economic-political optics…
There's a confusion here. Suppose a bank with reserves R and corresponding deposits X, in addition
to other balance-sheet items, has
R X.
at the top of its balance sheet. It makes loan L, which creates new deposit D to obtain balance
sheet
L D *
R X.
The borrower/deposit-holder transfers her deposit to another bank, so the original bank's balance
sheet drops down to
L X,
while the new bank gains this on its balance sheet:
R D.
So the sequence is (1) create new deposit D and (2) transfer the deposit to the new bank. This
is the money-creation model in action. It is correct.
When we imagine that reserves are being loaned instead, we are actually skipping the balance
sheet marked * above. Comparing the balance sheet before and after the skipped one, we come to
believe that reserves have been turned into a loan. This is incorrect. The newly created deposit
is simply in a different bank. To see what is really going on, we have to consider the loan and
transfer separately.
Can anyone tell me where that $100 came from? Or the $200,000 to buy that archetypical house?
We got lots of "blind philosophers feeling their part of the elephant and pronouncing its essence"
but where does "wealth" originate, as opposed to money and "assets?"
"In the first case, banks have no special status in the economy. After all any of us who has
a balance of $100 can lend out that balance of $100"
yes you can lend it out, but the bank is 1) at the top of collectors line 2) has backing from
the FDIC. When you loan 100$ to someone, you dont have that money anymore. When you lend 100$
to the bank, you still have that money, and about 10 other people have it as well.
I'm sure it must be obvious to brighter and more subtle folks than me, but where does that
$100 that's referenced here come from?
I have an antique wood-bodied block plane (the woodworking kind) made by my great-grandfather
( except for the perfect cast iron blade and two nails). He used tools he made or bought to carve
the body and chisel out the throat and make the wedge. I was offered $100 for it recently. Where
does the wealth or value that my ancestor's plane, now mine by inheritance and survival, come
from? Or all the other $100s that make up " the economy" that the MorgulBankers are conjuring
derivatives out of?
. . .I was offered $100 for it recently. Where does the wealth or value that my ancestor's
plane, now mine by inheritance and survival, come from?
From your ancestor's labor in creating the plane and an ongoing demand from people interested
in acquiring the plane.
Where the $100 offer comes from is the perceived value of the plane compared to other planes
on offer, such as for example the Chinese made crap in Home Depot.
Since it sounds like you didn't sell it for $100, you value it at a higher price. Wondrous
market eh.
What is truly amazing about this is that in year 2016 there is still massive confusion and
ambiguity about how money and banking work. How can that be? Bizarre!
A. Easily: "the false theories are guiding current bank regulation and development policy,
leading down a blind alley." If correct understanding would lead to a correct regulation, then
those whose interests would no be served by correct regulation will obfuscate correct understanding.
Baby yoga for kids living in the forest, who never go outside alone; the highest real mortality
rate in the US; and the prototype for Family Law feeding Obamacare in the big city – does it get
any dumber than that?
The psychologists are just smart enough to get the majority killed. The markets are an exercise
in control, a game, and nothing more, until Little Johnny jumps off Science Building and shorts
the insanity all together. Did you see that last impulse, transferring wealth to the Soros clan,
now demanding another bailout?
The assumption of emotion-based decisions, lest one be a robot, is ludicrous, but that is the
basis of empire marketing. The majority short-circuits itself, with the false assumptions presented
by empire media broad band, the frequency it chooses to occupy, to mirror itself, and obsessive-compulsive
behavior begets itself. The brain stem is a geared Archimedes Screw.
Because the body is grounded to earth, the dc side of the brain is self-obsessed, and LSD offsets
the signal into the noise of the clutch, is no reason to hand your life over to a psychologist
printing money. Because the predicitive subconscious exists in a feedback loop with adaptation
doesn't mean that everyone is sick, stuck on an empire frequency, and mentally ill if they don't
seek diagnosis. Money is not reality, except for those who choose it.
Wall Street sells mortgages with increasing duration, Madison Avenue produces crap for compliance
at increasing cost, and the majority indentures future generations with bonds, until they can't.
Global finance simply liquidates natural resources and moves, in planetary rotation. Relative
to unincorporated farming, the land is largely fallow, but the participants have TV, cardboard
and gadgets, dependent upon empire for a battery.
Net, populations vacillate between denial and depression, with growing impulses of anger, in
a market for psychologists who see others as a reflection of themselves. Married people raising
independent children cannot afford to be quite so stupid. And without such children, the economy
can only implode, reflecting the psychologists' own self-obsession.
Do you remember that story about the natives not seeing Christopher's ship, until the shaman
pointed it out, when the natives were slaughtered by war, disease and poverty?
Females can breed on equal rights for a thousand years, with males providing the technology,
but they will just end up a thousand years behind the curve. Women are bred to think in linear
time, and men to think in frequency, because that is what children need. One is the counterweight
and the other is the cab.
The majority, focused on self, rides the counterweight to floors on one side, all dead ends,
and is jealous of children exiting on the other side. The choice at the crossroad is always the
same, investment or consumption. The majority is not experiencing falling living standards and
increasing income inequality because some banker provided the money, an excuse, for multicultural
unicorn dreaming.
Retired people generally prefer a Fred and Wilma economy, city kids generally prefer a rat
race, and once separated for the purpose, the police are generally dispatched to slice and dice
families into sausage to feed the former, by authorities always pleading ignorance, majority vote.
Once you see those cops, promoting gang awareness, it's time to go. At empire cycle begin, you
have plenty of time; now you have none.
When I began writing this, I had no idea where the focus would be, but I do have a pattern
database and a linear time translator, such as it is. My wife can tell you the weather 25 years,
3 months and 10 days ago. Choose a wife that enjoys living in the moment, and a husband that enjoys
an independent frequency, compliments capable of trust in an untrustworthy world.
My mind is a steel trap, my wife's is Disneyland, and we live in the feminist capital of the
world, as you might suspect with an ac mind. Your perspective is your own, if you choose to have
one, and we all go through phases, climbing and descending the ladder of consciousness. I am simply
sharing, after decades of listening and saying not a damn word, in the empire, on the eve of WWIII.
From the perspective of legacy, which has no clue what is in those libraries, the Internet
was designed to extend linear thinking, to nowhere. From the perspective of labor, the Internet
was designed to demonstrate the fallacy of limiting yourself to linear thinking. Contrary to popular
mythology, choice is not about the color of your tennis shoes made in China.
If it's not anonymous cash, it cannot store value, because independent children are reared
beyond empire's grasp, the physical manifestation of intellectual self-obsession, which Sweden
is now learning, way to late, a slave to Germany, and Austria in particular. Knowing what needs
to be done and doing it are two different things. The psychologists in New Hampshire produce drug
addiction, their solution is drug rehab, and Iowa is supposed to be nuts.
You didn't think Keynes sprang from nothing did you?
Thanks. The wife likes to keep track of water. She's like a human testing machine. Best water
I had was up at bay of fungi, big moose. That document on Ford's car made of hemp and plastic
was pretty cool, before he was told he would be making cars out of steel, finance.
Always thought I would end up in Australia, but like the doctor thing, the critters have to
destroy everything they touch.
"Contradictions, of which money is merely the palpable manifestation, are then to
be transcended by means of all kinds of artificial monetary
manipulations. It is no less clear that many revolutionary
operations with money can be carried out, in so far as an attack on
it appears only to rectify it while leaving everything else
unchanged. We then beat the sack on the donkey's back, while
aiming at the donkey. But so long as the donkey does not feel the
blows, one actually beats only the sack, not the donkey;
contrariwise, if he does feel the blows, we are beating him and not
the sack."
At the end of the day, what ultimately needs to be impacted is not the pieces of paper.
All we can ever do with those is hand people claims against future production.
And when the theory of "managing" an economy stops at the control of aggregate numbers as its
only allowable tool to influence the process, it can never accomplish the objective of avoiding
major crises.
"... It has become a machine for transferring income, wealth, ownership, and power to the very top. This is not the new normal. This is financial corruption and the erosion of systemic integrity. Are there any markets that have not been shown to have been systematically manipulated, for years? This is just institutionalized looting. ..."
"Give a small number of people the power to enrich themselves beyond everyone's wildest dreams,
a philosophical rationale to explain all the damage they're causing, and they will not stop until
they've run the world economy off a cliff."
Philipp Meyer
"Wall Street is not being made a scapegoat for this crisis: they really did this."
Michael Lewis
"My daughter asked me when she came home from school, "What's the financial crisis?" and I
said, it's something that happens every five to seven years."
Jamie Dimon
"The greatest tragedy would be to accept the refrain that no one could have seen this coming,
and thus nothing could have been done. If we accept this notion, it will happen again."
Financial Crisis Inquiry Commission (2009–2011)
The US has been in a cycle of bubbles, busts, and crashes since at least 1995, and more likely since
Alan Greenspan became the Chairman of the Federal Reserve in August, 1987.
The cycle is the same,
only the depth and duration seems to change in a continuing 'wash and rinse' of the public money
and the real economy.
It has become a machine for transferring income, wealth, ownership, and power to the very
top. This is not 'the new normal.' This is financial corruption and the erosion of systemic
integrity. Are there any markets that have not been shown to have been systematically manipulated,
for years? This is just institutionalized looting.
"... The case for additional public investment is as strong in the UK (and Germany ) as it is in the US. Yet since 2010 it appeared the government thought otherwise. ..."
"... However since the election George Osborne seems to have had a change of heart. ... ..."
The economic case for investing when the cost of borrowing is so cheap (particularly when the
government can issue 30 year fixed interest debt) is overwhelming. I had guessed the majority
would be pretty large just by personal observation. Economists who are not known for their anti-austerity
views, like
Ken Rogoff, tend to support additional public investment.
Thanks to a
piece by Mark Thoma I now have some evidence. His article is actually about ideological bias
in economics, and is well worth reading on that account, but it uses results from the ChicagoBooth
survey of leading US economists. I have used this survey's results on the impact of fiscal policy
before, but they have
asked a similar question about public investment. It is
"Because the US has underspent on new projects, maintenance, or both, the federal government
has an opportunity to increase average incomes by spending more on roads, railways, bridges
and airports."
Not one of the nearly 50 economists surveyed disagreed with this statement. What was interesting
was that the economists were under no illusions that the political process in the US would be
such that some bad projects would be undertaken as a result (see the follow-up question). Despite
this, they still thought increasing investment would raise incomes.
The case for additional public investment is as strong in the UK (and
Germany)
as it is in the US. Yet since 2010 it appeared the government thought otherwise. ...
However since the election George Osborne seems to have had a change of heart. ...
"... A structural problem may arise when the liquidity demanded by the ETF exceeds the liquidity availability of some of the underlying holdings ..."
"... Basically, if an investor wants to sell an index fund as the market declines, the managers of the fund might have trouble selling some of the stocks in the fund. ..."
"... But there are some steps investors could take to manage the risks posed by an index fund-dominated market. In addition to investing some of their stock portfolios in actively managed funds, McCarthy suggests investors take a hard look at how diversified they are. ..."
"... First, he said, an investor could make sure he or she isnt double-exposed to the same stocks. ..."
"... Sometimes its better to be vaguely right than exactly wrong ..."
As volatility in the stock market grows, a handful of experts are raising an alarm about the rise
of index ETFs and mutual funds, which has never accounted for this much of the market before.
They warn that the unprecedented amount of index ETFs trading in the market - index ETFs accounted
for nearly 30 percent of the trading in the U.S. equities market last summer - could magnify, or
even cause, flash crashes.
In turn, that may put individual investors, who are increasingly invested in index funds, more
at risk. And many may not realize how exposed they are to the risks of a relatively small group of
stocks held in the major indexes, said experts.
Tim McCarthy, a former president of San Francisco-based Charles Schwab and Japan's Nikko Asset
Management, has been a longtime proponent of index investing. But he now advises that investors diversify
their investment styles as well as their asset classes.
He suggested investors move 25 percent to 50 percent of their equity portfolios into actively
managed absolute return funds, preferably those with a 10-year track record and a relatively small
amount of assets of between $1 billion to $2 billion. (Research has shown over the years that active
managers stand their best chance of success before their assets under management grows too high.)
As always, he said, investors should look for low fees.
A stock bubble in index funds
He said he has grown increasingly uneasy about the risks based on the hypergrowth of index funds,
and the price difference between stocks outside and inside index funds.
From 2007 through 2014, index domestic equity mutual funds and ETFs received $1 trillion in net
new cash and reinvested dividends, according to the Washington, D.C.-based Investment Company Institute.
In contrast, actively managed domestic equity mutual funds experienced a net outflow of $659 billion,
including reinvested dividends, from 2007 to 2014.
Meanwhile, the price of the underlying equities in index funds is rising, though no one is sure
exactly why. Research by S&P Capital IQ, as of Dec. 31, found stocks that were in the Russell 2000
were trading at a 50 percent premium to stocks that were not, up from 12 percent in 2006. The statistics
are based on median price-to-book ratio.
That kind of price difference is seen by some as a kind of canary in the coal mine, indicating
that there is a bubble in the stocks of companies held in index funds - and that their prices could
come down further and faster than other stocks in a downturn. In turn, that could put pressure on
the share prices of the index mutual funds and ETFs themselves.
"It's complicated, but it could be a very big problem," said David Pope, managing director of
quantamental research at S&P Capital IQ. He and colleague Frank Zhao studied the liquidity in the
market for the S&P 500 last summer and identified the 10 stocks that had the biggest difference in
liquidity at that time, compared with the index. They included ExxonMobil, Berkshire Hathaway, Johnson
& Johnson, Microsoft, General Electric, Wells Fargo, Procter & Gamble, JPMorgan Chase, Pfizer and
PepsiCo.
"A structural problem may arise when the liquidity demanded by the ETF exceeds the liquidity
availability of some of the underlying holdings," they wrote.
Basically, if an investor wants to sell an index fund as the market declines, the managers
of the fund might have trouble selling some of the stocks in the fund. An active manager could
choose to sell any stock in her fund and thus potentially navigate a downturn better. But an index
fund manager has to sell exactly the shares held in the index in the same proportion as demanded
by the index. If the fund manager doesn't find a buyer for, say, shares of ExxonMobil, the price
of ExxonMobil will fall until a buyer is found.
Assessing the risks
While market theorists have always recognized this as a potential problem for index investing,
no one has been sure exactly how it would play out or when problems might arise. As long as there
are enough buyers and sellers actively setting prices and trading, index funds and stocks should
pose no extra risk. It's just that no one is sure exactly how many is enough.
Indeed, not everyone thinks McCarthy is right, and others point to different risks as bigger causes
for concern, including the unknown impact of the way that high-frequency traders place orders.
"So we have two new factors when it comes to a potential market situation," said John Rekenthaler,
vice president of research for Chicago-based Morningstar. "There are always new factors. Most of
the time, new factors don't play out according to expectations."
He pointed out that two decades ago, people worried about what the impact of 401(k)s would be
in the market and whether non-professional investors would be apt to sell more quickly in a downturn.
The opposite turned out to be the case.
Even if the risk posed by index investing is rising, the growth in index funds doesn't necessarily
pose a huge system risk, pointed out Sean Collins, senior director of industry and financial analysis
for the Washington, D.C.-based Investment Company Institute. "The share of assets going into index
funds is rising. Does that necessarily cause markets to be dysfunctional? The answer is no," he said.
He pointed out how much more diversity there is now in index investing. Much of the money flowing
into index funds has been going into markets in which there hasn't been much indexing before, including
emerging markets equities and bond markets.
McCarthy said investors would be wise to look at their portfolios with the emerging risk of index
funds in mind. There's not much an individual investor can do to guard against the risks posed by
high-frequency trading, short of bowing out of the market entirely.
What investors should do
But there are some steps investors could take to manage the risks posed by an index fund-dominated
market. In addition to investing some of their stock portfolios in actively managed funds, McCarthy
suggests investors take a hard look at how diversified they are.
First, he said, an investor could make sure he or she isn't double-exposed to the same stocks.
He cited the case of a friend of his, a doctor, who had invested in blue-chip stocks, some mutual
funds and in an S&P 500 fund that turned out to hold - guess what - many of the same blue chips and
tech stocks. In the downturn in 2000–2001, he lost 50 percent of his portfolio.
Every market is different, McCarthy said. But in part because of the flow of money into index
funds, the U.S. equities market has become more dominated by a handful of big technology stocks.
That's something that index fund investors, like his doctor friend, may not easily recognize now.
As someone who has managed the back end of trading systems, McCarthy said he is increasingly uneasy
about the level of index investing and has begun to give speeches about the potential dangers of
a market in which a growing number of managers are hamstrung by the requirement that they match their
indexes.
But he knows that he's at the leading edge of people talking about it -- and that many think he
is warning too hard and too fast. "This is unfamiliar territory for me," he acknowledged. "But index
investing has so much power, and it's derivative-priced.
"Sometimes it's better to be vaguely right than exactly wrong," he said.
- By Elizabeth MacBride, special to CNBC.com
Read More › Most absurd ETF trade of all - paying 100 basis pts for it
If you're an oil funded Sovereign Wealth Fund and oil is flowing money into
you, you gotta put that money to work somewhere and that's likely stock
markets. Up bias on them. If oil revs stop being big and govt spending exceeds
govt revenue then the SWF will be tapped (along with borrowing to fund that
deficit). Neither would extract money from the system (the system being uber
macro) so it's not reverse QE.
But . . . it is a down bias on equities. Now THAT can be reverse QE via HFT
momentum. Money disappears when equity prices fall.
When successful investors warn of a global market crash, we should all be nervous
Profits are so thin that the slightest pothole could cause a crash.
By
Felix Martin
Print HTML
This year's January sales seem to have extended to the world's stock markets. A week in to
2016, you could buy the FTSE for 6 per cent less than on New Year's Eve. It is the worst start
to the year in at least two decades.
What is behind these New Year blues? As ever, when it comes to the markets, there is an
embarrassment of plausible culprits and a cacophony of self-styled experts willing to tell you
what they are. This time, however, you can also turn to someone whose hard-earned credibility
is not in doubt.
Martin Taylor is probably the best-known investor you have never heard of. A legend among the
trading cognoscenti, he has returned over 20 per cent a year to his investors for more than
two decades. On 4 January, he announced that he was closing his Nevsky Fund, arguing that we
are heading for a combination of catastrophes that even the most skilful investor will be
unable to avoid. His assessment makes fascinating reading. The root of the challenge that
Taylor sees facing the world economy is simple. In December 2015, the US Federal Reserve
raised its policy rate from near zero for the first time since December 2008. It is likely to
be the start of a cycle. The direct effect is that the cost of borrowing dollars is rising.
The indirect effect is that the dollar is strengthening on the foreign exchanges. After seven
years in the bargain basement, the greenback is becoming expensive again.
Interest-rate hikes are always a shock to the system but they have happened numerous times
before over the past few decades: so why should they be such a problem now? The answer is
that, this time, the situation is different in three crucial respects. First, interest rates
have been stuck at unusually low levels for an unusually long period of time. (In Britain, the
Bank of England's rate has been 0.5 per cent since 2009.) Borrowers throughout the economy
have got used to easy money; a generation of homeowners and investors has never seen anything
else. After more than seven years of cheap debt, the shock of the old will be all the worse.
Second, a terrible irony is at work in the corporate sector. Companies have responded to the
lacklustre recovery from the global financial crisis with Protestant virtue, cutting costs and
sweating assets, to make do now in the hope of better times ahead. Yet the perverse result is
that even those companies that have not gorged themselves on free money are ill-prepared for
the end of the cheap dollar era. Profit margins are so thin and balance sheets so stretched
that the slightest pothole may cause a crash.
If we are lucky, that possibility will not materialise. Taylor's third fear already has. In
today's financially globalised world, the US dollar is the currency not just of America but of
half the countries on the map. Borrowing in US dollars by companies in emerging markets stood
at a staggering $4trn as of June 2015. Rising US interest rates will put the squeeze on them,
too.
By far the most important participant in this global dollar economy is China. Its companies
have borrowed over $1trn. Now, just when the Chinese economy is slowing, its debts are
becoming more onerous as the dollar becomes more expensive.
If that all adds up to a dismal outlook for the world economy, Taylor's verdict on the state
of the financial markets is perhaps even more worrying. Whereas many of us find William
Goldman's verdict on the movie business – "Nobody knows anything" – remarkably apt when it
comes to economic predictions, few would bet against an assessment of the financial markets
from a man with Taylor's experience.
The successful co-ordination of modern capitalist economies rests on three critical supports.
The first is reliable data – about company performance and macroeconomic activity – on which
people can base their decisions. The second is the transparency and logical coherence of the
frameworks used by powerful non-market actors: central bankers, politicians and regulators.
The third is well-functioning stock, bond and currency markets, which generate prices that
provide true signals to investors, businesses and governments.
Today, Taylor argues, all three supports seem ramshackle. China is the world's second-largest
economy and the decisive market for most emerging economies, yet its own leaders deride its
macroeconomic statistics as unreliable. The old theories of monetary policy were discredited
by the crash and nothing has yet replaced them, and so no one fully understands what central
bankers are doing. The financial markets, meanwhile, are dominated by computer-driven trading.
They have become a postmodern parody of themselves, in which prices are determined not by
economic fundamentals but by the behaviour of other prices.
With an economic and financial-market outlook such as this, the New Year hangover for stocks
hardly comes as a surprise. Yet there is a germ of optimism amid this well-founded gloom. In
Taylor's analysis, there is barely a mention of any of the structural economic challenges that
have been exercising policymakers recently: the secular stagnation, the slowdown in
productivity, the threat of technological unemployment, and so on. The problems that he
foresees are, almost without exception, financial.
If this diagnosis is correct (and, in large part, I think it is), it is a reason for hope. We
are not condemned to crisis or stagnation by epochal forces outside our control. It is the
financial system – rules and institutions of our making – that has gone awry. The hardware of
the global economy is in reasonable shape. It is only the software that has become corrupt. As
such, it can be debugged. The alternative is a crash.
"... I would use $17 billion as outstandings for energy loans. And for securities, I would use, call it, $2.5 billion which is the sum of AFS securities and non-marketable securities. ..."
"... We're focused on the whole thing. Half of those customers - half of those balances represent E&P companies, upstream companies. A quarter of them represent oilfield services companies, and a quarter of them represent pipelines and storage and other midstream activity. And it excludes what I would describe as investment grade sort of diversified larger cap companies where we don't view the credit exposure as quite the same. ..."
"... <Q - Mike L. Mayo> ..."
"... To summarize: $17 billion in oil and energy exposure, which has a $1.2 billion, or 7%, loss reserve assigned to it already, and which is made up "mostly" of junk bonds. ..."
First: how big is Wells' loan loss allowance for energy:
We've considered the challenges within the energy sector and our allowance
process throughout 2015 and approximately $1.2 billion of the allowance
was allocated to our oil and gas portfolio. It's important to note that
the entire allowance is available to absorb credit losses inherent in the
total loan portfolio.
Then, from the Q&A, how much is Wells' total loan exposure, its fixed income
and equity exposure toward energy:
I would use $17 billion as outstandings for energy loans. And for
securities, I would use, call it, $2.5 billion which is the sum of AFS securities
and non-marketable securities.
In other words, a 7% loan loss reserve toward energy, perhaps the highest
on all of Wall Street.
Then, here is the breakdown by services:
We're focused on the whole thing. Half of those customers - half
of those balances represent E&P companies, upstream companies. A quarter
of them represent oilfield services companies, and a quarter of them represent
pipelines and storage and other midstream activity. And it excludes what
I would describe as investment grade sort of diversified larger cap companies
where we don't view the credit exposure as quite the same.
But the punchline in the problem category was the following exchange with
Mike Mayo:
<Q - Mike L. Mayo>: What percent of the $17 billion is not investment
grade?
<A - John R. Shrewsberry>: I would say most of it. Most of it.
<Q - Mike L. Mayo>: So most of the $17 billion is non-investment
grade.
<A - John R. Shrewsberry>: Correct.
To summarize: $17 billion in oil and energy exposure, which has a $1.2
billion, or 7%, loss reserve assigned to it already, and which is made up "mostly"
of junk bonds.
"... Tempted by big returns, shale companies have borrowed more than $200 billion in bonds and loans, from Wall Street and London, to cover development and projects that may not even come to fruition. Oil producers' debt since 2010 has increased more than 55 percent, and revenues have slowed, rising only 36 percent from September 2014, compared to 2010, according to the Wall Street Journal. ..."
"... On Sunday, the first shale company filed for bankruptcy. WBH Energy LP, a private Texas-based drilling group, filed for bankruptcy after saying that their lender was no longer willing to advance money. The company estimates their debt between $10-50 million. There are hundreds more in the US alone. ..."
"... Analysts believe North American shale needs to sell at $60-100 per barrel to break even on the billions of debt accrued by the energy companies. Indebted companies, fearing bankruptcy, may therefore be forced to keep selling oil, even at a loss. ..."
"... Energy companies that can afford it will cut production, but this will prove more difficult for smaller companies with larger debt hanging over their balance sheets. ..."
"... "It begins in one place like fracking in North Dakota or Texas, but it very quickly engulfs the rest of the world. In that way, its very similar to what happened in 2008… when billions of dollars were lent to people to buy homes they couldn't pay off," economist Richard Wolff told RT. ..."
"... The industry expanded rapidly, as the method proved capable of extracting oil and gas faster and easier than before, albeit with a certain environmental cost. Fracking can increase seismic activity, as well as penetrate water systems. Many states in the US have followed European nations in banning the oil extraction method. ..."
Plummeting Brent oil prices are putting pressure on North American shale,
which has sunk hundreds of billions of dollars into investment, and could soon
come crashing down.
Tempted by big returns, shale companies have borrowed more than $200
billion in bonds and loans, from Wall Street and London, to cover development
and projects that may not even come to fruition. Oil producers' debt since 2010
has increased more than 55 percent, and revenues have slowed, rising only 36
percent from September 2014, compared to 2010, according to the Wall Street
Journal.
Fracking, the process of hydraulic fracturing and horizontal drilling on
land is much more expensive than the average water-based oilrig. However, over
the past years, it has become relatively cheap and fast. Energy companies, eager
to get in on the riches of the American oil boom, have been borrowing money
faster than they have been earning it.
On Sunday, the first shale company filed for bankruptcy. WBH Energy LP,
a private Texas-based drilling group, filed for bankruptcy after saying that
their lender was no longer willing to advance money. The company estimates their
debt between $10-50 million. There are hundreds more in the US alone.
Analysts believe North American shale needs to sell at $60-100 per barrel
to break even on the billions of debt accrued by the energy companies. Indebted
companies, fearing bankruptcy, may therefore be forced to keep selling oil,
even at a loss.
One way to avoid going bust is to merge, which is what many companies already
have on the negotiation bloc.
"We've already seen Baker Hughes and Halliburton agree to merger, and
these were two titans that used to compete head to head," Ed Hirs, managing
director independent oil and gas company Hillhouse Resources, told RT. "They've
decided they can't survive separately, they need to combine," Hirs said.
The Texas-based driller believes that lower prices and major mergers will
hinder progress in the industry.
"We will see a loss of tech. innovation and a loss of competition in the
oil service business," Hirs said.
Energy companies that can afford it will cut production, but this will
prove more difficult for smaller companies with larger debt hanging over their
balance sheets.
Oil prices lost more than 50 percent in 2014, and have already dropped 10
percent in 2015. Futures dramatically dipped when the Organization of Petroleum
Exporting Countries decided not to curb production at their November meeting.
Some experts believe the decision not to cut production, which would have
alleviated oil prices, was a direct strategic move by the cartel to reduce the
profitability of North American oil fields, from Alberta to Oklahoma. In the
past five years, the US has moved from being one of the world's biggest oil
customers to the largest producer, even overtaking Saudi Arabia.
Bubble burst?
This 'bubble' of debt could come crashing down on oil companies, as the housing
bubble did on the sub-prime mortgage industry in 2008, which sparked a crisis
in global financial markets.
"It begins in one place like fracking in North Dakota or Texas, but it
very quickly engulfs the rest of the world. In that way, its very similar to
what happened in 2008… when billions of dollars were lent to people to buy homes
they couldn't pay off," economist Richard Wolff told RT.
The industry expanded rapidly, as the method proved capable of extracting
oil and gas faster and easier than before, albeit with a certain environmental
cost. Fracking can increase seismic activity, as well as penetrate water systems.
Many states in the US have
followed
European nations in banning the oil extraction method.
"... Maybe we should not believe the market commentaries. Maybe it was neither oil nor China. Maybe what we are seeing is a delayed reaction to the slowdown in the world economy, a slowdown that has now gone on for a few years. While there has been no significant news in the last two weeks, maybe markets are only realizing that growth in emerging markets will be lower for a long time, that growth in advanced economies will be unexciting. Maybe… ..."
"... I think the explanation is largely elsewhere. I believe that to a large extent, herding is at play. If other investors sell, it must be because they know something you do not know. Thus, you should sell, and you do, and so down go stock prices. Why now? Perhaps because we have entered a period of higher uncertainty. ... ..."
"... Skidelsky, always good, at New Statesman. http://www.newstatesman.com/politics/economy/2016/01/optimism-error ..."
"... So like in subprime bubble investment banks were happy to give money to anybody with breath , again. There are also other connection to subprime bubble here, but of course on much lesser scale. In any case it was a kind of subprime oil . ..."
"... Collapse of oil prices not only revealed who is swimming naked (all shale patch players), but also that the US financial sector forgot nothing and learned nothing from 2008 crash and is as reckless as before, in not more. It also negatively affects conventional oil in the US and elsewhere. ..."
"... Also stock markets now are under additional pressure because sovereign wealth funds are selling their holdings to cover the deficits. And all of them were heavily invested in the USA stock market. This is essentially QE in reverse. ..."
"... I think Blanchard is too dismissive of the possibility of a significant downturn in China. ..."
"... Its not just the effect of their declining purchases of global goods to date that has people concerned. Its what the pace of decline says about their economic prospects in the near term, and how all those stories of leveraged investments in real estate and businesses in China portent possible disaster in a downturn. In other words, there is reasonable fear it will get a lot worse. ..."
Take the China explanation. A collapse of growth in China would indeed be a world changing event.
But there is just no evidence of such a collapse. ...
Take the oil price explanation. It is even more puzzling. Traditionally, it was taken for granted
that a decrease in the price of oil was good news for oil importing countries such as the United
States. Consumers, with more money to spend, would increase consumption, and increase output.
Energy using firms, with lower cost of production, would increase investment. We learned in the
last year that, in the short run, the adverse effect on investment on energy producing firms could
come quickly and temporarily slow down the effect, but this surely does not undo the general conclusion.
Yet the headlines are now about low oil prices leading to low stock prices. I can think of two
potential explanations, neither of them convincing.
First, that very low prices lead to such serious problems for oil producers that this will
end up affecting the United States and dominating the scene. I have no doubt that some countries
and some companies will indeed be in serious trouble; indeed, some already are. I can also think
of ways in which low oil prices also change the geopolitics of the Middle East, with uncertain
effects on oil prices. I find it difficult to think that these will dominate the direct real income
effects for US consumers.
Second, that the low prices reflect a yet unmeasured decrease in world growth, much larger
than is apparent in other hard data, and that the price of oil, like the celebrated canary in
the coal mine, is telling us something about the state of the world economy that other data do
not. There is no historical evidence that the price of oil plays such a role. But suppose, for
the sake of argument, that, indeed, the low price told us that China is really slowing down. (The
fact that non-oil commodity prices, for which China plays a bigger role than for oil, have decreased
much less than oil does not support this interpretation.) Then, we would be back to the previous
conundrum. It is hard to see how this could have such an effect on the US economy and in turn
on the US stock market. Another variation on the theme, which has been raised in some columns,
is that the low oil price reflects a slowdown in the United States far beyond what the other current
data are telling us. There is zero evidence that this is the case.
Maybe we should not believe the market commentaries. Maybe it was neither oil nor China.
Maybe what we are seeing is a delayed reaction to the slowdown in the world economy, a slowdown
that has now gone on for a few years. While there has been no significant news in the last two
weeks, maybe markets are only realizing that growth in emerging markets will be lower for a long
time, that growth in advanced economies will be unexciting. Maybe…
I think the explanation is largely elsewhere. I believe that to a large extent, herding is
at play. If other investors sell, it must be because they know something you do not know. Thus,
you should sell, and you do, and so down go stock prices. Why now? Perhaps because we have entered
a period of higher uncertainty. ...
So how much should we worry? This is where economics ... gives the dreaded two-handed answer.
If it becomes clear within a few days or a few weeks that fundamentals are in fact not so bad,
stock prices will recover... If, however, the stock market slump lasts longer or gets worse, it
can become self-fulfilling. Low stock prices lasting for long lead to lower consumption, lower
demand, and, potentially, to a recession. The ability of the Fed, fresh out of the zero lower
bound, to counteract a slowdown in demand remains limited.
One has to hope for the first scenario, but worry about the second.
marcus nunes :
Olivier gives us an interesting and thoughtful discussion of different explanations. I loved
his close:
"So how much should we worry? This is where economics stops giving an answer. Or, more
specifically, where it gives the dreaded two-handed answer. If it becomes clear within a
few days or a few weeks that fundamentals are in fact not so bad, stock prices will recover,
just as they did last summer, and this will be seen as a hiccup. If, however, the stock
market slump lasts longer or gets worse, it can become self-fulfilling. Low stock prices
lasting for long lead to lower consumption, lower demand, and, potentially, to a recession.
The ability of the Fed, fresh out of the zero lower bound, to counteract a slowdown in demand
remains limited. One has to hope for the first scenario, but worry about the second."
In the first scenario - he is saying the fundamentals suggest a recovery of stock prices.
And so many people who don't get financial economics claimed the market was over priced simply
because P/E ratios are above "historical averages". Of course these clowns have no clue what
Olivier means by the fundamentals.
anne :
Supposing that the work of Robert Shiller is still meaningful, stock market prices have been
very high. Stock market prices have been high enough that if historical pattern holds there
is reason to expect either a sustained period of little gain or significantly declining prices.
Of course, I know that interest rates have been historically low. I also know that returns
from corporate revenue have been increasingly going to leading executives and shareholders
rather than to ordinary workers. I even know that careful analysts like Brad DeLong * think
stock prices were long relatively low, though why has never been clear to me other than an
unfortunate historical fear of holding stocks.
Nonetheless, Shiller's data are disturbing because the reasons for high stock prices are
evidently not well understood.
* I will have to look for the DeLong analysis
Sanjait -> anne...
Consider the basic cash flow models of how stocks get priced. The fundamental model is that
a stock is worth the discounted value of its future cash flows.
With this in mind, realize that stock PEs are *suppposed* to be higher ceteris paribus when
interest rates are low. The discounting rate on a stock moves with prevailing treasury bond
rates.
Different analysts might have different earnings forecasts and choose different discount
rates to fill the model, but to a rough approximation, the low prevailing interest rates explain
almost all of the spread between current PEs and historical ones.
"Traditionally, it was taken for granted that a decrease in the price of oil was good news
for oil importing countries such as the United States."
He completely missed "shale oil" boom in the USA.
Essentially it was something like conversion of junk bonds into oil, as profitability of
those players was questionable even when oil was above $100 per barrel. In other words that
was a very expensive oil that was often sold at discount. It was all EBITDA reporting world
in which new money for shale companies were very low cost and abundant. No questions asked
loans.
So like in subprime bubble investment banks were happy to give money to "anybody with
breath", again. There are also other connection to subprime bubble here, but of course on much
lesser scale. In any case it was a kind of "subprime oil".
Collapse of oil prices not only revealed who is swimming naked (all shale patch players),
but also that the US financial sector "forgot nothing and learned nothing" from 2008 crash
and is as reckless as before, in not more. It also negatively affects conventional oil in the
US and elsewhere.
Now there are something between $200 and $500 billion of oil related junk debt on the books
on banks. And chances for them to be repaid are slim unless oil recovers to previous, above
$100 levels. Of cause banks can also take equity in case of bankruptcies but assets were re-evaluated
sharply down. So it's again "mark to fantasy" loans situation.
Also stock markets now are under additional pressure because sovereign wealth funds are
selling their holdings to cover the deficits. And all of them were heavily invested in the
USA stock market. This is essentially QE in reverse.
Some US banks can suffer a shock too. Mostly regional banks. But, for example, Well Fargo
has exposure around 17 billion. Some other banks (GS?, Chase?) were also greedy. Around 20%
of investment banks revenue were coming from energy. This will change. The total is not life
threatening but still pretty able to cause a chain reaction. And if economy slows down and
price of oil remains low (say below $50) than not only all shale companies are going to be
bankrupt as they have only a limited time to "extend and pretend". There will be a chain reaction
to real estate, transportation, municipal bonds, etc. Mostly limited to particular states,
of cause.
For example shale oil bust will affect real estate markets in at least five states.
=== Start of quote ===
JPMorgan Chase (JPM) CEO Jamie Dimon, in a call with analysts this week, acknowledged there
may be "slight negatives" for the bank related to commercial and real estate trouble in Dallas,
Denver and Houston.
So it looks like the situation is quite different from what Olivier assumed. IMHO if oil
stays low for this year it can became pretty dangerous.
Sanjait :
I think Blanchard is too dismissive of the possibility of a significant downturn in China.
It's not just the effect of their declining purchases of global goods to date that has
people concerned. It's what the pace of decline says about their economic prospects in the
near term, and how all those stories of leveraged investments in real estate and businesses
in China portent possible disaster in a downturn. In other words, there is reasonable fear
it will get a lot worse.
Notice that global markets have been following China down. That points us to where the source
of the negative surprises are coming from.
I did hear on the radio last week that there appears an economic war is being played out between
Saudi Arabia and Iran. Truth of this I don't know.
But, what does concern the world at these prices are major trading companies may go bust.
On derivatives and oil futures somewhere someone is carrying huge losses.
And, concerning the world economy derivatives are a markets of 70 or more trillions dollars
, enormous markets, as Warren Buffet once said derivatives are financial weapons of mass destruction.
Somewhere in the world financial system huge losses on derivatives are sitting.
World Politicians shied away from the tough decisions under the guise of quantitative easing.
QE appears to have caused greater missallocation of resources.
2008 financial crisis is reemerging from its dormant position. 2008 was just push further down
the road.
Social Cohesion in Britain needs this time to really all be in this together.
" On derivatives and oil futures somewhere someone is carrying huge losses. "
The Big Lie - "zero sum game".
If that is true - play Monopoly in your own time with your own money.
That "zero sum game" pays billions in profits - so where does the money come from ?
Would love to know that myself.
This is a much too specific question for an economist - like asking for the winner of the 2-30
at Kempton.
Perspective is always a good thing -
This is what happens when central banks across the world inflate the biggest bubbles the world
has ever seen by keeping interest rates at near zero percent for 7 years. Let's make one thing
clear - China is not the only culprit for the latest fears over the global economy, to say that
many western economies such as the US or the UK have recovered or are on the road to recovery
would be disingenuous to say the least.
We have been scraping along at the lowest rate of so-called "recovery" (debt-fueled with ZIRP)
after a recession despite these interest rates - what would it have been like if rates were increased
a couple of years ago? One can only guess, but it would be fair to estimate that we would be back
in a recession.
So, here we are again, back at the latter stages of the next cycle in the boom-bust oscillations
of our global economy - and "is this time different"? Yes, but only by the measure that this time
there is little that central banks can do to mitigate or even slow the financial crisis. The 2008
crisis never really ended, this year we will undoubtedly see that the real part of that crisis
is about to unfold - capitalism should be allowed to take place this time, and if that means huge
corporations filing then so be it.
"if that means huge corporations filing then so be it."
I agree - but they are Ok, in fact loaded with cash.
"May 8, 2015 At the end of last year, U.S. non-financial companies held a staggering $1.73
trillion in cash, up 4% from the $1.67 trillion on hand at the end of 2013, found Moody's."
http://www.forbes.com/forbes/welcome
/
So much of the debt has been loaded on sovereigns - what will they do - file for bankruptcy
?
OPEC should not allow members to sell oil at a financial loss. Oil is trading below its intrinsic
value and there are serious imbalances in the market. Member countries that sell oil below market
value lose money in two ways. They add supply to a depressed market and they lose money on the
transaction itself. It would make much more sense for OPEC to target minimum profitability as
their primary goal for all members rather than trying to use their market position to eliminate
producers in the United States.
Since most of the large energy companies in the United States
are publicly traded, it would be better for OPEC members to use their profits to purchase equity
in these companies rather than trying to make them unprofitable. I propose that OPEC target a
specific and stable price long term and then to adjust that price for inflation. For instance,
if it is determined that all members can profit at 70 dollar oil, then they should lower production
when the price is below that and increase it when it is above that. Member countries then use
a percentage of their profits to increase their reserves with share purchases of other non-opec
producers, thus increasing reserves long term.
Saudi Arabia has again badly miscalculated.
By pumping vast amount of Oil, KSA thought it could sink America, Russia and Iran oil companies
and Economies
Well it seems KSA is going broke! I am celebrating...
Current Saudi finance minster is Ibrahim Abdulaziz Al-Assaf
"After leaving academia, Ibrahim moved to Washington, DC where he represented Saudi Arabia
at the International Monetary Fund (IMF) and the World Bank
...
In addition to being finance minister, Ibrahim is a member of the board of directors of Saudi
Aramco (since 1996), the state-owned national oil company,
... https://en.wikipedia.org/wiki/Ibrahim_Abdulaziz_Al-Assaf
Is this history repeating itself?...but in China.
1998 Russian financial crisis.....Their stock market collapsed followed by a run on the ruble
which was devalued.
Most Russians suffered as their pensions, wages etc were severely devalued.
Same could be happening today in both China and Russia...
Financial war....Dinosaurs versus dinosaurs.
How to wreck a country....Trash it's markets and currency.
It's the law of the jungle.....The strongest survive.
However Russia and China will not take it lying down....Scary times indeed.
It seems that the Chinese market is under the greatest pressure...only to be propped up by
the government pumping money into it. (printing money)...result will be their currency devalues
and everybody in China suffers.
It has happened many times to many countries before...e.g. Germany, Argentina, Brazil, Russia
etc....
Two quick points.
First, OPEC has increased flow to destabilise Russian & Iranian profits. However, this situation
demonstrates that the price of oil should never have been much higher.
Second, China has a better approach to wealth re-distribution than OPEC nations and all advanced
economies. If a genuine desire to increase economic activity were expressed then wealth sitting
in secret accounts and held by the top 10% would be taxed & spread to the true wheel of economy:
ordinary people with poor purchasing power.
When the debt merchants, the money alchemists and voracious volatility vultures start panicking
(Hey, it's all relative. Don't worry, THEY'LL be fine) and looking for 'safe havens' (anything
deemed to have an intrinsic value, but still not gold as, 'we're not bloody savages, y'know...yet'),
when prices, particularly the golden goose commodities that kept them in (debt fertilised) speculative
clover in their (hopefully fitful) sleep, start to reflect genuine economic reality, then you
know it's probably squeaky bum time for the hapless cannon fodder that didn't cause this train
wreck, reaped little of its rewards, but nevertheless will bear the brunt of its consequences
yet again.
High rate temporary debt junk bonds are already failing. Those issued on the small oil drillers.
But it is a relatively small part of the junk bond market itself nevertheless financial institutions
overall.
Small companies are due to fail and will. the larger ones will pick up the pieces at rock bottom
prices and things will go on.
The numbers anywhere in developed economies don't support recession. China by the worst guesses
is still par on GDP. By most takes between 4 and 7 increasing GDP. With the looming effects of
el nino on India I would not say it could enter a recession in the next 6 months but that would
be a isolated event. The US no where close. People are taking the low oil prices as a read on
the economy. It is not this time global consumption is going up not down. It is a supply glut.
I live near KSA, and I see first-hand how corrupt and morally bankrupt the whole thing is. I also
see how incredibly subsidised EVERYTHING is. The people of these countries are little more than
spoiled children, with no incentive to work properly or even understand the businesses they are
in. Russia has a much more diverse economy, in KSA it is almost entirely oil. The rest of it is
industries that rely on oil money - such as the construction sector.
Offering an IPO on KSA's oil will expose the total incompetence and corruption behind the company,
I don't know how they hope to hide it all. So, you're right, all is far from well. I will be packing
my bags at the first sign of revolution, which I predict will be in 3-5 years. I don't think people
yet realise how bad things are going to get once KSA implodes and Iran and ISIS seek to take advantage.
It's going to be ugly, and I must admit, I'm a little scared.
the reason you have a collapsing global economy is because the idiots created one through a battery
of Free Trade Agreements that were aimed at over -riding local sovereignty and democracy and accessing
scab labour on an international scale
It didn't work did it - by dismantling local industry and exporting manufacture to countries
like China the middle class in the West made itself redundant
Welcome to the great unwashed guys - you are one of us now and with less skills to survive
- I don't think your economic and managerial skills will impress anyone
You did it all to yourselves ...Get in the queue for the welfare you denied others - and reflect:
"So the last shall be first, and the first last: for many be called, but few chosen."
People are confusing the stock market with the economy. The economy is ho humming along. The market
is artificially inflated in value by above stated factors. Not by a whole bunch but enough to
make a sell off of minor sort a probable.
Earnings will once again be real and not a thing of less stock per earning share.,
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I wish I could upvote this twice. It's not like e.g the dot.com crash, where a bunch of hopeless
money-losing pipe dreams fell apart. Facebook, Apple et al actually make a profit and have a niche,
it's just that with so many other investments offering desultory returns, the stock market has
been pumped up by desperate speculators.
I am not sure why people think the Saudis are in trouble.
Most of the shale is becoming uneconomical to recover if you believe the forward curve. $50
oil for 5+ years, they will need closer to $100 to go back to the capped wells. The frackers are
just taking the first 30% of the cheapest oil to produce (1st 18 months), capping and moving on.
They are churning through oil reserves at 3 times the rate to do it.
They can still do it until they get to debt repayment. Anyone thinking the industry got ultra
efficient over night is optimistic feller.
The reality is shale gas is not the primary concern. They want rid of artic, deep water and
tar sands. My guess is the Saudis would be more than happy to let the US be the swing producer
as shale is far more flexible. Shale was the trigger not the problem.
I'd be quite happy to see the whole stock market free fall. The current inequity and greed deserves
it's reward. Money for nothing investors and free loader corporations that don't pay their share
of taxation will be the ones who go down. A new system is required to break away from the old
established power and energy companies that have led us to the brink of devastating our planet.
The capitalists are the victims of themselves. Fortunately for them, they own the wealthiest states
on the planet. And therefore, can always expect welfare, social assistance and
bail-outs whenever they burst another bubble. Socialism for the rich.
We are a stupid species to put up with this casino scam. If you disagree with the ponzy scheme,
start by supporting Sanders in the U.S. and Corbyn in the U.K. At least it's a modest beginning
to opposing these criminals.
China stock piling oil is a good idea, may help explain recent capital outflows , of which
the article does not explain the opaque /nebulous financial details of these movements. It maybe
China shuffling pieces on a board.
"The country's global trade surplus widened by 21% to $60bn in December. Over the whole
year it was $594bn. The country's trade surplus in December with the European Union, its biggest
trading partner, increased 36.8% to $15.6bn. The surplus with the US contracted 6% to $19.4bn."
No doubt the figures need to treated like all PRC figures.
That said it is undeniable that China had another huge trade surplus.
Yet despite this they manage to cheat on their exchange rate and devalue the Yuan.
The Currency/Trade Wars are in full swing..
By then then most of the oil residues, waste and plastic products will reside in the Worlds Seas
and Oceans. I've not seen much movement to remove the plastic gyres floating around the Southern
Pacific Ocean. Land waste management has serious flaws as well. The only 'waste management ' in
the UK that is booming is all the junk that motorists chuck out of their cars when mobile - they
must think that plastic bags hanging from tree branches 'adds' to natures wonders. In a resturant
car park the other day were 2 used babies nappies left in a parking bay - some people are scum
and these couldn't have been poor.
Incredible how low the West in cahoots with Saudi Arabia will stoop, and all in an attempt to
crush Russia economically and politically. And the media continues the deceptive narrative about
troubles everywhere, brought on by 'competition' among oil producers, except pointing to the true
and only reason behind the low oil price. The public in general swallows the 'explanations' forgetting
that the ball started rolling downhill immediately after the USA twisted Germany's and other western
European countries to impose sanctions on Russia in retaliation for it's welcoming Crimea back
to the Motherland. In the name of this geopolitical game, the good people of USA, Canada and other
countries whose significant part of income derives from natural resources and related products,
are loosing their jobs by the thousands. All is well and according to the plan, as long as Russia
suffers more than the West, and will be the first to bite the dust. The world economy will then
be turned around to everyone's relief.
Seems the FED's recent interest rate rise was premature. If another 2008 does happen calls to
abolish it will grow ever louder, especially since economic chaos will smooth Trump's path to
the White House, and Trump has made FED abolition one of his campaign pledges. After repeated
failures catastrophes under Greenspan, Bernanke and now Yellen it seems the FED is surplus to
requirements.,
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What will they do after abolishing the Fed? Will they have a single national currency or allow
each bank (or any other entity) to issue its own currency and let these different currencies compete
with each other?
If they continue to have a single national currency, who will issue it and set the monetary
policy? Another Central Bank or the government? If it is going to be another Central Bank what
exactly is the point of abolishing the Fed? Why not change the law to allow the government to
remove the Fed's board of governors and appoint those they think are more competent than Janet
Yellen and other governors, since abolishing the Fed will anyway require the repeal of the law
establishing it i.e. it too needs Congressional approval. If the government is going to be issuing
the currency and set the monetary policy, in what way would it be superior to the Fed doing the
same?
If they allow any entity to issue its own currency, what currency will the taxes be denominated
in?
Well the predictions were for four rate hikes in the year. Now perhaps we see two. The one already
and another. Things get better and it is up to four. The dow only dropped three hundred or so
and the S and P is above its support level, which is about 1857 to my dim recollection.
So till we exceed that support to the downside, really things are not bad. A wash out was probably
a necessary thing.
I think people are overdoing this thing. The media seems to be hyping the decline which may
account for all the sell side prognostications.
Earning are just beginning. If I see indications that earming are the mover behind the sell off
I would have concern. Alcoa all things considered was not that bad. Certainly not as bad as the
tape today. OIl by my guess is the real mover as the new lows have people spooked.
I am not to worried it can flip up or down but it really is only a small part of the market nowadays
not what it was in yesteryear.
So I repeat this is overdone, that is my opinion. Those calling gloom and doom on this action,
no offense but this little resembles any major sell off of a lasting duration spiral down. What
is the mover….low oil prices? The rest of the market benefits from low oil prices.
Sentiment can drive things lower but really only for so long. Chinas last numbers reported
were better than expected. Me being cynical and seeing the talking heads talking things down anticipate
it is the big money movers trying to create some action on the short side. How long they keep
this up is a guess. But it requires someone to keep pressure on to move it down. Without new bad
news on China, what is the precipitive factor….nothing new here.
Unfair market system, Complete waste of time, energy and resources. Destroy all the stock markets
along with corporations and Banks. It is time we stop playing this ridiculous economic game and
start concentrating on the real issues that we are facing. Poverty, Conflicts in the middle east,
environmental degradation, climate change, and many more. What is the root cause of all of these
problems? Yes it the socioeconomic system capitalism with its flawed monetary system owned by
the corporations and the Banks that does not care about the well being of planet or nature and
the well being of all human beings but only care about their own wealth, power, fame, egos. Such
idiots!!!!! stop playing their game and move to a new fair game called RBE and other similar systems.
It is very stupid of us to base our economy on something as unstable and selfish as the Stock
Market, as well as something as unstable as governments, democratic and otherwise. It is about
time we became as intelligent and clever as all these whizz kids who invent amazing technology
and make amazing discoveries. It is about time we became whizz kids at organising an intelligent
and reliable economy. For us.
Why do banks charge an interest on loans? If the function of money is to get the economy started
and running, then the work done and the profits made should be a sufficient reward. Banks could
actually give money away on a non-return basis, so long as the money goes to people who will spend
it, this spending lending to more spending.
Perhaps the private owners of the current private currencies want more than a sound economy,
perhaps they want power, and want to exercise this power just to know for real that they have
it? Perhaps they are not fully-fledged human being animals but suffer some form of genetic or
social affliction that makes them behave in dangerous anti-social ways? Perhaps they don´t give
a fig about other human being animals - other than those who serve their biological wants and
needs? Perhaps shareholders are afflicted in the same way?
Perhaps we could form our bank to issue our non-returnable money, and even decide what work
is worthwhile and is done and what work is not worthwhile and so will not be done?
Millions of years ago, so we are told, some fish came out of the sea and survived. What I am
suggesting is a work and economy evolution of a similar scale. Current economic theory has us
all drowning in the quagmire of self-interest-driven chaos, self-styled as a "social science".
Perhaps we could come out into fresh air and create a diversity of human activity on a par with
the diversity of living things on land and in the air that came from those first brave fish that
ventured beyond known limits?
Columbus did not go over the edge of the world but discovered a whole New World.
Perhaps we need to go beyond even the "thinking outside the box" box?
Who funds international terrorism try the oil rich countries in the Middle East so let's assume
the Yanks have got smart for once and are flooding oil market to bring down these economys .
The end game is destabilise them then pick up their oil industries for a song and influence just
who makes Middle Eastern policys by economic means .
Bit of a dream but hey nothing falls down in price to this extent without a hidden reason given
its a fossil fuel that should be rising to maintain supplies for the long term .
The economy is like a super tanker and these results are still the effect of the ripples of the
economic crash almost a decade ago. The result of lower oil prices will be that ordinary people
will start to realise they have more disposable income than they did a year ago and start spending
that money on more shit they don't need and the economy will swing back with a vengeance.
Well surely all those neoliberal economists can't be wrong....it must be the fault of that evil
Mr corbyn and his army of trotskyists.....HA HA we are on the slippery slide to another global
crash folks ...
Sigh....the stock market....virtual money and speculation...Worst thing ever created causing insane
chain effects in economies. Although....why were economies booming before when Oil price was low?
Cause sure oil companies profits go down, but every other business that uses the oil increases
their profit. Isn't this also a good reason to start doing something about being so oil dependant?
Once in a lifetime chance for the USA to escape from the strangle whole of the Saudi oil grip.
Fracking gives them a chance to break with the Saudi s or even break them for good.
Failure doesn't t bear thinking about, and we all know where Obama s sympathies lie - but in modern
America who cares.. the battle is between the giant bureaucracies, not the democratic froth on
top of the cake.
Always remember America in you hour of destiny there were Americans long before there was the
USA . And will be long after it is gone. And for the love of God .. COLUMBUS did not discover
America. Which ironically is named after a Welch sheep farmer.?
Americo FrontHoovesintheWellies was his full name. Knew a thing or two about sex and sheep.,
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Most US oil comes from Canada and Mexico, a very small percentage from Saudi Arabia. But they
have enormous financial influence through bonds, obviously, and buying media and politicians.
Also Israel and Saudi Arabia have been working together under the table for some time, as was
obvious during the Gulf War, and now in their efforts to begin a war against Iran. Fracking has
never been any threat to the Saudis--the cost is too high. Their present lowering of oil prices
is directed against Russia, surely in cahoots with the US.
Oil and US share prices tumble over fears for global economy.
The economists have been telling us that there is little danger for the US economy to be pushed
into recession by a slow-down in the Chinese economy - referred to here as "global economy". More
importantly, in election years the US Markets have never been good indicators of the US economy,
anyway.
The real reasons for the US market plunge are the trades conducted on behalf of the Wall Street
tycoons and the Saudi Royal Family. Both are doing their best to push the markets down, because
they are deeply worried of having another Democrat in the White House, come January 2017.
The Wall Street tycoons are apprehensive about getting dragged into courts for their financial
mischiefs during the last decade. The Saudis are concerned that the US leaning further toward
Iran, which will encourage their internal oppositions to demand reforms, which could include getting
rid of the Royal Family. So, both the Saudis and the Wall Street tycoons have a common cause.
They will "keep at it", until they can be sure that the next US president will be a Republican.
"National debts, i.e., the alienation of the state – whether despotic, constitutional or republican
– marked with its stamp the capitalistic era. The only part of the so-called national wealth that
actually enters into the collective possessions of modern peoples is their national debt. Hence,
as a necessary consequence, the modern doctrine that a nation becomes the richer the more deeply
it is in debt. Public credit becomes the credo of capital. And with the rise of national debt-making,
want of faith in the national debt takes the place of the blasphemy against the Holy Ghost, which
may not be forgiven.
The public debt becomes one of the most powerful levers of primitive accumulation. As with
the stroke of an enchanter's wand, it endows barren money with the power of breeding and thus
turns it into capital, without the necessity of its exposing itself to the troubles and risks
inseparable from its employment in industry or even in usury. The state creditors actually give
nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on
functioning in their hands just as so much hard cash would. But further, apart from the class
of lazy annuitants thus created, and from the improvised wealth of the financiers, middlemen between
the government and the nation – as also apart from the tax-farmers, merchants, private manufacturers,
to whom a good part of every national loan renders the service of a capital fallen from heaven
– the national debt has given rise to joint-stock companies, to dealings in negotiable effects
of all kinds, and to agiotage, in a word to stock-exchange gambling and the modern bankocracy."
"... America threatened Russia some time ago about meddling in the affairs of
Syria ..."
"... The US is really going for broke on crashing the oil price ..."
"... All of this to try to contain Russias military rearmament made possible
by sky high oil prices ..."
"... Has the west finally gotten wise to the Saudi money that flows into extremist
groups? Would seem so. West seems to be doing everything it can to contain the Saudis.
eems to be doing everything it can to contain the Saudis. ..."
"... Yes because of millions of refuges that Arab countries caused by supporting
ISIS it is completely natural for west to go after Saudi Arabia and its allies sponsor
of ISIS. So they got what they deserved. Today I also read that the markets in Saudi
Arabia, Qatar and Emirates collapsed and I think this a beginning of an end for
them. ..."
"... The Iranians deciding that their revolution has matured sufficiently for
them to plainly state we dont wish death on anybody, our religion is about peace,
and to demonstrate our sincerity well urge our people to stop such rhetoric would
contribute to Irans rehabilitation as a more or less normal member of the global
community of nations. ..."
"... This has to be the beginning of the end for the Saudis and Qataris and
their utter crapulence, all at the expense of the rest of the World. OPEC has no
answer for this and is completely impotent to do anything about it. The cartel is
busted. ..."
"... And so it seems with oil. There has to be a base production cost which
doesnt vary and I doubt that the Saudis or Iranians are selling it at under that
cost - they both need a modest profit - so, one wonders, if they can make that modest
profit at $30 a barrel, think how much they were making at $100 ..."
"... The U.S and Iranians are using each other against their own allies. U.S
is using Iran to put pressure on Saudi so that they keep producing more oil to bankrupt
Russia, despite it destroying Saudi economy. Iran is using USA as a counterbalance
to Russia because as much as they want Russias help, they dont want Russia to become
too strong in the region. ..."
"... In my view Iran was never quite the bad guy that the western governments
portrayed it to be. We certainly have differences. But if you compare Iran and Saudi
Arabia there is no contest - Iran is far less a bogeyman. ..."
The funny thing is that the sanctions have probably helped Iran as it had
to survive with less. Iran now gets access to it's foreign banking about
50billion net and can start exporting again.
Saudi is burning through its reserve cash and it's populace are used
to getting things for free, will they survive low oil revenues like Iran
or is the House of Said on the brink of annihilation? Talk about shooting
yourself in the foot!
It's amazing how detrimental oil has been to the middle east. If only
they could have gone down a similar path to Norway....
Seeing Iran to go into economical slow down was a depressing sight. OPEC
definitely took a huge share of IRAN'S oil fortune and that time can not
come back. PART of it was Iran's fault agreed, but since Iran's sanctions
are lifted you cant blame it.
It's just taking a share of what it has lost in years. This will indeed
afftect gulf region and other oil exporting countries but HEY BACK TO REALITY!!!
Indeed its bad time since oil is already record low thanks to Fracking.
This time is like dubstep for environmentalists who are dancing on oil price
beats. No one is actually explaining the actual picture behind the scene
as hundred of thousands of jobs are being slashed. Its like a death sentence
for oil workers like me. 1 year since graduation as a petroleum engineer
still no job worried to pay debts and there are countles like me. In short
low oil prices won't make things better but worse.
"The French-listed aircraft maker Airbus also looks set for a significant
boost from the sanctions ending"
It is the first time, a British newspaper says "French aircraft maker Airbus".
Yes Airbus is principaly a French company and not a European one contrary
to what British newspaper often say.
Indeed...the magic answer is interesting to say the least. America threatened
Russia some time ago about meddling in the affairs of Syria and other
cooperative business tactics. This manipulation is more about the benefits
beneath mainstream media...plus, it is an election year...of course, oil
is welcome and plentiful...somehow...it always is election time...though
the added incentive does make Russia cringe a bit...these United States
knew the only way to allow Russia to feel pinched was this way...so her
and her cohorts have combined efforts to achieve their goals. Hmmm...
Hammond is such a prostitute with his comments. They have been sucking up
to Saudi/Qatar and UAE for decades, but now they are all on the slippery
slope, he says 'dump them all and start courting Iran'. The man has no shame
whatsoever.
The US is really going for broke on crashing the oil price:-
1 Deal with Iran (to increase supply)
2 Saudis pumping as much as they can (favour to US who turn a blind eye
or help their regional aspirations by financing ISIS and AQ)(note the price
was going nowhere until Ukraine/Crimea appeared then suddenly it started
going down whilst Saudi currency actually appreciated)
3 Letting the US export oil (more supply)
4 Letting Turkey take oil from ISIS (more supply)
All of this to try to contain Russia's military rearmament made possible
by sky high oil prices.
May the terrorist funding by Saudi and Qatar comes to halt by cheap oil
prices. They had made the decision to make it cheap but it is not Iran's
decision to make it expensive again. Which believe me Iran doesn't like
to do so especially that through the sanction years Saudis, Qatar, Emirates
played a nasty role in OPEC by getting rid of production sluts(it was to
do by limiting each member to a certain production level but as Iran was
sanctioned they thought it is the best way to hurt Iran's share of OPEC
by getting rid of it) now this is the only reason they cannot increase the
oil price as well as they cannot control Iran's production . Iran will produce
even more and has a fresh supply of Cash and its economy is more robust
to be only based on Oil so what I want to tell the Saudis, Qatari, Emirates
and their allies is to fuck off . Because through these years you were sponsors
of ISIS, Cause hundreds of thousands of death tolls and millions of refuges
in the world that you have not taken a single refugee and the whole EU and
North Americas must pay for it now. YOU GOT WHAT YOU DESERVED ARABS. Hope
Iran become friend with Israel too and teach Arabs another lesson.
Recent events with Saudi princes assaulting maids in the US (then claiming
'diplomatic immunity' and skipping the country before charges could be laid
against them) could also be a factor, as it has woken people up as to what
the Saudis are really like.
The highway between Bahrain and Saudi/UAE is like the M25 at weekends,
with Wahhabi hypocrites rushing to Bahrain to get pissed and laid. It's
been like that for decades. They claim to be pious and expect their subjects,
contractors and ex-pats working out there to do as they say, not as they
do.
Saudi Arabia is therefore finished as a regional power. Economy crippled
by low oil prices. Iran meanwhile has had to endure an embargo for a decade,
resulting in a tougher economy that is far more diverse.
Has the west finally gotten wise to the Saudi money that flows into
extremist groups? Would seem so. West seems to be doing everything it can
to contain the Saudi's. eems to be doing everything it can to contain the
Saudi's.
Yes because of millions of refuges that Arab countries caused by supporting
ISIS it is completely natural for west to go after Saudi Arabia and its
allies sponsor of ISIS. So they got what they deserved. Today I also read
that the markets in Saudi Arabia, Qatar and Emirates collapsed and I think
this a beginning of an end for them.
It really brings David Cameron and the Tories' sucking up to the Saudis
into clear perspective, doesn't it, as their credit rating for buying arms
will be taking a nosedive. Watch BAE Systems shares start to wobble this
coming week.
It also leaves the Royal family in somewhat of a quandry, as who is Price
Charles going to sword dance with now?
Iran adding to the current supply glut in oil was an inevitable consequence
of the deal. Still, the timing is particularly bad, with the crash in commodities
feeding a gloomy mood in stock markets around the world.
A deflationary spiral for the global economy is now a little more likely,
with excess capacity in a range of manufactured goods, from steel to I-Phones,
in addition to the glut in oil and other commodities.
But, that glut is not Iran's fault. The prisoner exchange was good to
see.
Next I'd like to see a symbolic move by Iran: move on from the "Death
to America" (and Britain, and Israel) rhetoric. Islam needs some public
relations help. The Iranians deciding that their revolution has "matured"
sufficiently for them to plainly state "we don't wish death on anybody,
our religion is about peace, and to demonstrate our sincerity we'll urge
our people to stop such rhetoric" would contribute to Iran's rehabilitation
as a more or less "normal" member of the global community of nations.
This has to be the beginning of the end for the Saudis and Qataris and
their utter crapulence, all at the expense of the rest of the World. OPEC
has no answer for this and is completely impotent to do anything about it.
The cartel is busted.
I guess that nobody likes the Wahhabi hypocrites any more.
I suppose it all depends on how much Iranian oil is pumped into the system
as a proportion of the total, but then what is the 'right' price for oil
anyway?
It reminds me of a supermarket conundrum - 'What's the price of a packet
of Pringles?'. This comes from the notion that in one supermarket they're
£1 each or two for £1.50, in another they're £1.25 but one a 'buy one get
one free' deal, in another they're £1 each but buy two and get one free...
and so on. But not only this - all of these deals change weekly.
So you begin to wonder, given that a packet of Pringles costs the same
to make whatever price they're sold at - and the manufacturer wants to make
a modest profit - why can you never determine the true price?
And so it seems with oil. There has to be a base production cost
which doesn't vary and I doubt that the Saudis or Iranians are selling it
at under that cost - they both need a modest profit - so, one wonders, if
they can make that modest profit at $30 a barrel, think how much they were
making at $100
Apparently, according to reuters, Saudi Arabia paid Somalia a $50 million
bribe to break diplomatic relations with Iran. Iranians, themselves, would
have paid the Somalian government more to beak off diplomatic relations.
But hey, why complain? It's free! Cheers 'Salman the Barbarian'!
Saudi Arabia, Israel, Bahrain, Sudan, Somalia, United States, The Comoros
and Djibouti all do not have diplomatic relations with Iran. UAE recalled
its embassador in sympathy with Sheikh Salman the Barbarian. Iran needed
UAE before as it was used as a port for importing into Iran(a sanction busting
avenue) but since sanctions are lifted, middlemen are no longer required
which means UAE will lose an annual income of $11 billion and Iran will
gain. Very sad!
I hope that The Comoros and Djibouti will soon reestablish relations
because it is hurting Iran's economy.
'The UK has played a central role, and I hope British businesses seize the
opportunities available to them through the phased lifting of sanctions
on Iran. ' said Philip Hammond.
His department was instrumental in sanctions against Iran while other
countries, particularly Germany and France, were lukewarm. Which countries
will now benefit? Answers on a postcode, marked 'Clue', to Philip Hammond.
Iran is closer to a development [nations] like Turkey than to Saudi Arabia.
Saudis have always been unable to do anything else than watch oil go out
of pipelines into tankers, they have no agriculture, no industry.
Iranians
want to industrialize like Turkey, but that doesn't mean democracy and personal
freedom. Development gives more means of control and repression to autocrats
too, like we have seen in Russia, Turkey, continental China. Not all countries
are able to move to democracy like Taiwan and South Korea
It is hard to understand why the Guardian labels low oil as an actual woe
for the World. It mainly hurts countries like Russia and Saudi Arabia, while
in the West we all benefit from cheap fuel.
Doubt it. The news was already in the market and has been for some time.
No surprize.
Even if does go further south, it would be temporary and besides the
wahhabi regimes of Arabia are the ones who will suffer the most. Either
way, good news for Iran.
The U.S and Iranians are using each other against their own allies.
U.S is using Iran to put pressure on Saudi so that they keep producing more
oil to bankrupt Russia, despite it destroying Saudi 'economy'. Iran is using
USA as a counterbalance to Russia because as much as they want Russia's
help, they don't want Russia to become too strong in the region.
The (seemingly) more likely scenario is to make the excuse for war against
Iran this year.... "We really tried with these guys but now we have to 'regime-change'
them". That will result in a MASSIVE war.
A less likely scenario is that USA (at a shot to nothing) thinking they
might actually replace saudi oil-fields propping up the $ with IRanian ones.
And Iran (at a shot to nothing) thinking they might take the U.S out of
Israel's pocket. As unlikely as either of these scenarios are, all bets
are off this year. Both those latter plays could push Israel and Russia
closer together, resulting in a MASSIVE war which the U.S would lose.
Either way, a MASSIVE war is coming and this development is more significant
than people think.
In my view Iran was never quite the bad guy that the western governments
portrayed it to be. We certainly have differences. But if you compare Iran
and Saudi Arabia there is no contest - Iran is far less a bogeyman.
It is always worth remembering that nearly all the September 11 hijackers
were Saudis, none were Iranian. ISIS was funded and armed by Saudi Arabia,
not by Iran. You can draw a direct line from Saudi Arabia through the carnage
in Iraq and Syria directly to the terrorist attacks in Paris.
Whenever the west talks about 'Iran being a state sponsor of terrorism'
they mean one thing and one thing only: Hezbollah.
Disclosure: I have a low opinion of Saudi Arabia so my comments are biased.
Whether the losses deepen or an oversold rebound materializes depends mainly on two things:
Crude oil prices stabilizing (despite the lifting of Iranian oil sanctions) and the Fed delaying
further rate hikes (until market confidence has been restored).
The economic data certainly supports a dovish turn by the Fed. Headline retail sales dropped
0.1 percent, with 2015's performance by consumers the weakest since 2009. Industrial production
fell a larger-than-expected 0.4 percent in December. U.S. freight volumes are falling for the
first time in three years. Wal-Mart (WMT) is firing 16,000 workers and closing 269 stores
globally.
"... It was easy for many years, says Bill Barker, portfolio manager at Motley Fool Asset Management, whose three mutual funds control about $600 million. That was not an accurate display of what happens in the market all the time. ..."
"... Over the past 12 months, an investor in an S P 500 index fund has lost nearly 5 percent, including dividends. But over five years, they're up a total of 60 percent, and over 10 years, they're up 79 percent. ..."
"... From 2012 until last summer, investors basked in a market where the Standard Poor's 500 rarely had a bad day. The widely followed index fell more than 1 percent less often than Los Angeles has rainy days, about 8 percent of the time. During that span, the S P 500 also completely avoided a correction, which is what traders call a sustained drop of 10 percent. ..."
"... What makes the volatility even more painful to endure is that many analysts are forecasting stock returns to be lower this year and in the coming years than in the recent past. So investors are facing the prospect of higher risk without much higher reward. ..."
The vicious drops feel even more unsettling because they're such a departure from the placid
and strong returns that investors had been enjoying for years. Like vacationers returning from a
warm beach to a slushy commute to work, the shock of change is making something already painful
even more so.
Now investors just need to get used to it, analysts say. "It was easy for many years," says
Bill Barker, portfolio manager at Motley Fool Asset Management, whose three mutual funds control
about $600 million. "That was not an accurate display of what happens in the market all the
time."
The painful return of big price swings serves as a reminder that investing in stocks can be
harrowing, especially if investors focus on the day-to-day moves.
That's not to say investors can't still win over the long term. Over the past 12 months, an
investor in an S&P 500 index fund has lost nearly 5 percent, including dividends. But over five
years, they're up a total of 60 percent, and over 10 years, they're up 79 percent.
It's just that analysts expect the volatility to continue. The remarkably calm stretch from late
2011 through last summer was an anomaly.
From 2012 until last summer, investors basked in a market where the Standard & Poor's 500
rarely had a bad day. The widely followed index fell more than 1 percent less often than Los
Angeles has rainy days, about 8 percent of the time. During that span, the S&P 500 also
completely avoided a "correction," which is what traders call a sustained drop of 10 percent.
... ... ...
What makes the volatility even more painful to endure is that many analysts are
forecasting stock returns to be lower this year and in the coming years than in the recent past.
So investors are facing the prospect of higher risk without much higher reward.
"... His conclusion: Global equity markets are suffering so far in 2016 because the Fed's primary policy has shifted from protecting asset prices to protecting the exchange value of the dollar. Buy USDs and Treasuries ..."
"... Yeah, I think you cant have your equities implode and expect the world to still clamor for your currency and government bonds. The categories are linked by confidence in the U.S. economy. ..."
Jan 15, 2016 | Zero Hedge
His conclusion: "Global equity markets are suffering so far in 2016 because the Fed's primary
policy has shifted from protecting asset prices to protecting the exchange value of the dollar. Buy
USDs and Treasuries"
If he is right, watch out below, especially if hints such as this one by San Fran Fed president
John Williams, who famously admitted several days ago the Fed was wrong about the "benefits" from
crashing out, are an indicator of broader Fed thinking:
WILLIAMS DOESN'T SEE SIGNS ASSET VALUES DEPRESSED, BELOW NORMAL
It all depends upon how a handful of banks are positioned.
F the rest of the country and world.
NoDebt
"We disagree. The Fed no longer works implicitly for equity investors (i.e., "the Fed
Put"); it is primarily working for the U.S. banking system by stabilizing and increasing its
deposit base, and for the state by providing an incentive across the world to invest in Treasury
debt. By raising rates, it increases the exchange value of the U.S. dollar."
Even if the assumptions are correct, just look where the BOJ ended up seeking precisely those
same goals.
herkomilchen
Yeah, I think you can't have your equities implode and expect the world to still clamor for
your currency and government bonds. The categories are linked by confidence in the U.S. economy.
"The Fed will try anything," warns Art Cashin, calmly explaining that markets "are in 'deep
concern' mode," currently and if the S&P hits 1857, "there might be another whole new round of
selling." The Fed's solution, Cashin stoically explains to a dumbstruck CNBC anchor, that "it
doesn't matter that it hasn't worked in the past," The Fed will unleash moar QE to save the
world.
The venerable Art Cashin unleashes some rather uncomfortable truths and no one dares disagree
with him...
In his e-mail, Gross said that zero-percent interest rates and quantitative easing created
leverage that fueled a wealth effect and propped up markets in a way that now seems
unsustainable.
His conclusion: "The wealth effect is created by leverage based on QE's and 0% rates."
"... It should never be forgotten that the conservative orthodoxy -- of low taxes on the wealthiest, deregulation of finance, small govt deficits, and the need for inequality to spur individual initiative -- was also economics departments orthodoxy for decades. Economists put their imprimatur on this whole mess, with VERY few exceptions. ..."
"... 70% of the population STILL believes that federal deficits are a big problem, and also believes that this is standard economic orthodoxy. Until the crash, most people were ready to accept some degree of privatization of Social Security, and Martin Feldstein pushed on this repeatedly with no counterargument from the economics departments. The Clinton economic team was instrumental in pushing financial deregulation, upon the supposed orthodoxy that it is good for the economy. Even the worst nonsense in Friedmans Capitalism and Freedom and Free to Choose barely saw any push-back from other economists in the op-ed pages. ..."
"... Reaganomics was approved by most economists either through mood affiliation or intellectual incompetence. That 70% currently includes college graduates who took economics classes and traders on Wall Street. ..."
"... Nonsense. Polls of profession economists opinions abound. Reaganomics/neoliberalism has predominated in economics until recently. On a few big issues (notably, on whether the size of federal deficits as % of GDP should be reduced) the split remained even. ..."
It should never be forgotten that the "conservative orthodoxy" -- of low taxes on the wealthiest,
deregulation of finance, small gov't deficits, and the need for inequality to spur individual
initiative -- was also "economics departments orthodoxy" for decades. Economists put their imprimatur
on this whole mess, with VERY few exceptions.
It's been a first-rate intellectual scandal, perpetrated by some of the biggest names in the
economics racket, and with most of the lesser lights tagging along, for fear of ostracism.
And most of them STILL don't have a clear view of what the real problems are.
70% of the population STILL believes that federal deficits are a big problem, and also believes
that this is standard economic orthodoxy. Until the crash, most people were ready to accept some
degree of privatization of Social Security, and Martin Feldstein pushed on this repeatedly with
no counterargument from the economics departments. The Clinton economic team was instrumental
in pushing financial deregulation, upon the supposed orthodoxy that it is good for the economy.
Even the worst nonsense in Friedman's "Capitalism and Freedom" and "Free to Choose" barely saw
any push-back from other economists in the op-ed pages.
"Conservative orthodoxy" can be laid squarely at the feet of the economics departments, up
until the crash. If the ones who are supposed to know better, don't make a concerted effort to
refute the tons of nonsense spouted in the name of economics, then they should resign their tenure.
It most certainly WAS taken as the orthodoxy. Reaganomics was approved by most economists
either through mood affiliation or intellectual incompetence. That 70% currently includes college
graduates who took economics classes and traders on Wall Street.
"Reaganomics was approved by most economists either through mood affiliation or intellectual incompetence."
Not even remotely true. Criticized by liberal economists. Blasted by the conservative economists
who refused to work for the Reagan White House. Even blasted by a young Greg Mankiw but that is
before he drank the Bush Kool Aid.
Lee - your claim here is just wrong. And the more you defend it, the worse it gets.
Nonsense. Polls of profession economists' opinions abound. Reaganomics/neoliberalism has predominated
in economics until recently. On a few big issues (notably, on whether the size of federal deficits
as % of GDP should be reduced) the split remained even.
(1992 -- responses from 464 US economists):
"A large federal budget deficit has an adverse
effect on the economy" 78.7% agree (includes 'agree with provisos').
"The money supply is a more important target that interest rates for monetary policy" 56.7%
agree.
"As the USSR moves toward a market economy. a rapid and total reform (i.e., "going cold turkey")
would result in a better outcome than a slow transition" 57.6% agree.
"A minimum wage increases unemployment among young and unskilled workers" 78.9% agree.
"An economy in short-run equilibrium at a real GNP below potential GNP has a self-correcting
mechanism that will eventually return it to potential GNP" 50.8% agree.
"Changes in aggregate demand affect real GNP in the short run but not in the long run" 52.8%
agree.
"Lower marginal income tax rates reduce leisure and increase work effort" 55.4% agree. (Alston
et al., "is there a global economic consensus?" AEA Papers and Proceedings, 1992)
"... Yes. The ratio of population to jobs needs to change dramatically. Bust out of the old cycle where the ratio thru out the cycle remains bad. Yes even at the peak of employment -- We need a far higher sustained rate of spending on domestically produced goods and services ..."
"... One problem with MMTers is they talk about very common ideas, like deficit financed spending, and pretend like they just invented something radically new, while completely failing to acknowledge or address the rest of the conversation that others have been having for years. ..."
"... Oh no! Whatever you do, cried Brer Rabbit, Dont throw me into the briar patch! ..."
"... ...So long as business interests dominate the political process, it will be hard to reverse the trend toward increasing inequality. ..."
"... Mark and most of his ilk support an open door for corporations to import smart, hard working and desperate workers from around the world...impact of that at the margins for wages(along with many other things) have been a disaster for the bottom 80% over the past 30 years. ..."
Three Ways to Help the Working Class : ... In graduate school, I was once told that "people
don't have marginal products, jobs do." What does this mean? ...
I wish I would have connected the last part to the Supreme Court case on public unions.
RGC :
"If you took 100 dogs and you buried 95 bones in a field and you told the dogs their job was to
go out and find a bone, what's the very best case scenario? The best you can possibly hope for
is that 95 dogs come back with bones. Five dogs can't get bones. More likely, some dogs will get
lucky; they'll stumble across a few extras. Some may have better skills; they'll find three or
four. So, the number of dogs that come back without bones may be ten or fifteen.
(c. 9:38) "The conventional economist would gather the dogs together, the ones that had no
bones, and train them to sniff out bones more effectively. Then they would send those hundred
dogs back out into the field and tell them to go come back with a bone. And, again, the best you
can get is 95 dogs with bones. What's wrong is that there aren't enough bones. There's nothing
wrong with the dogs. The bones are the jobs. There's nothing wrong with the unemployed. There
simply aren't enough jobs.
- Stephanie Kelton at the Summit on Modern Money Theory in Rimini, Italy. She is Creator and
Editor of New Economic Perspectives. Her research expertise is in Federal Reserve operations,
fiscal policy, social security, healthcare, international finance, and employment policy.
PPaine -> RGC...
Yes. The ratio of population to jobs needs to change dramatically. Bust out of the old cycle where the ratio thru out the cycle remains bad. Yes even at the peak
of employment -- We need a far higher sustained rate of spending on domestically produced goods and services
sanjait -> RGC...
The very conventional new Keynesian response to a shortfall in demand is expansionary demand management
policies.
One problem with MMTers is they talk about very common ideas, like deficit financed spending,
and pretend like they just invented something radically new, while completely failing to acknowledge
or address the rest of the conversation that others have been having for years.
RGC -> sanjait...
It's cute the way you make obviously ignorant assertions with such apparent confidence.
PPaine -> RGC...
Don't be too harsh. He very often makes good points. Why he's so hard on MMTers escapes me
Has he read kalecki Lerner and Vickrey ?
The young James Meade
The young Lawrence Klein
Lawrence R. Klein, Economic Theorist
By GLENN RIFKIN
Lawrence R. Klein, who predicted America's economic boom after World War II and was awarded
the 1980 Nobel in economic science for developing statistical models that are used to analyze
and predict global economic trends, died on Sunday at his home in Gladwyne, Pa. He was 93.
His daughter Hannah Klein confirmed the death.
As World War II was ending, Professor Klein, widely regarded as a brilliant theorist, disputed
the conventional wisdom that the postwar period would drive the American economy back into a long
depression.
Using his econometric models based on mathematical equations, he predicted correctly that the
pent-up demand for consumer goods and housing after the war, coupled with the purchasing power
of the returning soldiers, would result not in economic crisis but in a surge in spending and
a flourishing economy.
Though he often testified before federal bodies and served as an economic adviser to Jimmy
Carter during his 1976 presidential campaign, Professor Klein chose to remain in academia - he
taught economics at the University of Pennsylvania for 33 years - and rejected an offer to join
the Carter administration.
"I am just an academic giving advice," he told People magazine in 1976. "If you are a technician
and are asked for help, it is a social obligation of citizenship to give it."
Professor Klein's use of vast survey data to build statistical economic models for the United
States and several other countries has been adopted by economists around the world. "Few, if any,
research workers in the empirical field of economic science have had so many successors and such
a large impact as Lawrence Klein," the Nobel committee wrote in awarding him the Nobel Memorial
Prize in Economic Science....
anne -> PPaine ...
Where is a reference? Repeated name-dropping, with no references is widly inconsiderate. Since
you use the names repeatedly, why not just have a set of references to put down?
MAP: A Market Anti-Inflation Plan
By David Colander and Abba Lerner
Preface
This is a small book about a big topic. This is not the usual book on inflation, simplified-
or oversimplified- to make accepted doctrines intelligible to the layman. It presents a new plan-
MAP (Market Anti-inflation Plan)- that makes it possible to succeed in curing our inflation. The
ideas in it are not easily absorbed. They form a radical new framework- a new way of looking at
inflation, and indeed at all macroeconomics, which is at the same time only a synthesis of many
divergent old trains of thought. As Albert Einstein said, "Ideas should be expressed as simply
as possible, but not more so." We think we have made the book intelligible to nonspecialists,
even though its ideas are challenging for all readers, and perhaps even more so for advanced economists.
We approach inflation as an economic problem, but we make allowances for political realities
in designing MAP. Although we believe MAP should be adopted in some form, the book is not written
from an advocatory position. We try to consider all arguments, both pro and con, and do not attempt
to minimize potential difficulties.
The methodology is realytic - an unusual word that indicates a contrast with analytic. This
means that we are primarily concerned with solving real problems. We believe that the book also
contributes importantly to extending theoretical understanding, but it does this only where necessary
to solve the problem at hand. *
Supreme Court Seems Poised to Deal Unions a Major Setback
By ADAM LIPTAK
WASHINGTON - The Supreme Court seemed poised on Monday to deliver a severe blow to organized
labor.
In a closely watched case brought by 10 California teachers, the court's conservative majority
seemed ready to say that forcing public workers to support unions they have declined to join violates
the First Amendment.
A ruling in the teachers' favor would affect millions of government workers and culminate a
political and legal campaign by a group of prominent conservative foundations aimed at weakening
public-sector unions. Those unions stand to lose fees from both workers who object to the positions
the unions take and those who simply choose not to join while benefiting from the unions' efforts
on their behalf.
Under California law, public employees who choose not to join unions must pay a "fair share
service fee," also known as an "agency fee," typically equivalent to members' dues. The fees,
the law says, are meant to pay for collective bargaining activities, including "the cost of lobbying
activities." More than 20 states have similar laws.
Government workers who are not members of unions have long been able to obtain refunds for
the political activities of unions like campaign spending. Monday's case, Friedrichs v. California
Teachers Association, No. 14-915, asks whether such workers must continue to pay for any union
activities, including negotiating for better wages and benefits. A majority of the justices seemed
inclined to say no.
Collective bargaining, Justice Anthony M. Kennedy said, is inherently political when the government
is the employer. "Many critical points are matters of public concern," he said, mentioning issues
like tenure, merit pay, promotions and classroom size.
The best hope for a victory for the unions had rested with Justice Antonin Scalia, who has
written and said things sympathetic to their position. But he was consistently hostile on Monday.
"The problem is that everything that is collectively bargained with the government is within
the political sphere, almost by definition," he said.
The court's four liberal members were on the defensive, asking whether there was good reason
to overturn a 1977 decision by the court that allowed the fees....
Mandatory Union Fees Getting Hard Look by Supreme Court
By ADAM LIPTAK
The justices have already voiced skepticism about making people give money to public unions.
They may now be ready to rule that it's unconstitutional.
PPaine -> anne...
The unins have no choice but to attack on all fronts
Public sector insulation from savage attacks ended long ago
This is just a after dinner beltch by the union eaters
Peter K. :
One way to increase worker bargaining power is to employ aggressive macro (fiscal, monetary, currency/trade)
policy so that labor markets are tight and businesses are fighting over workers.
In the late 90s, labor shared in productivity gains as unemployment fell below 4 percent. This
ended with the tech stock bubble which morphed into the housing bubble.
As DeLong recently wrote:
"What we need now is 1) debt relief to unwind the overhang and 2) much tighter financial regulation
to prevent the growth of new fragilities. And if those prove inconsistent with full recovery,
then we need massive government spending on infrastructure and other investments financed by money
printing until full employment is reattained."
It could be that achieving aggressive macro policy is as difficult politically as making the
environment more favorable towards unions.
If we look at the post-war social democratic years, both helped raise living standards. Also
the financial system was much smaller and much more regulated.
"Oh no! Whatever you do," cried Brer Rabbit, "Don't throw me into the briar patch!"
pgl :
Point #2: "We also need to do a better job of providing the educational resources people need
to reach their full potential."
I can see conservative economists echoing this but what specifically do they want policy to
do to make this happen? More Pell Grants No - they want to cut that kind of support. Now Greg
Mankiw will tell you that you will get a great education if you manage to get into Harvard and
pay $300 for his textbook!
If getting a Harvard PhD for every worker means that the California farm worker cutting broccoli
and lettuce, or changing bed pans for the bedridden in nursing homes, gets paid $120,000 per year,
then I'm all for eliminating poverty by education.
My guess is education is not the path to eliminating poverty.
If you think education is the solution, explain why it takes a college degree to pay farm workers,
home care workers, child care workers, cleaning people who scrub toilet, middle class wages, instead
of simply paying them middle class wages right now.
RC AKA Darryl, Ron :
"...So long as business interests dominate the political process, it will be hard to reverse the
trend toward increasing inequality."
[Actually it is the interest of management and the capital owning class that are dominating
the political process. Businesses would do just fine if wages were higher, rent seeking - not
so much.]
An illustrated interview with former Greek finance minister Yanis Varoufakis.
g :
Mark and most of his ilk support an open door for corporations to import smart, hard working and
desperate workers from around the world...impact of that at the margins for wages(along with many
other things) have been a disaster for the bottom 80% over the past 30 years.
PPaine -> Paine...
Even the great dani rodick and joe Stigilitz could push tis harder
But they are one worlders
An honorable club but...
Perhaps we need bordered areas to heal themselves first with national policies of true full employment
and balance trade forex
That's right ... You cannot make the retail clerk any more productive. That's talking about the
people I care about: bus drivers (taxi drivers -- me :-]), home carers, janitors, etc. But, you
can make the economy they inhabit more productive -- and then the economy can pay them more (not
less every year!): why barbers in France get paid more than barbers in Poland (classic example).
US per capita income in 1968, $15,000. In 2016, $30,000.
Minimum wage nearly $4 an hour below what it was in 1968 (adjusted). Ditto for the price of
US labor across the mid-to-lower board.
US mid-to-low labor price so extraordinarily low that half (HALF! -- 100,000!) of Chicago's
gang age, minority males would rather join a street gang. Then there's my gang, Chicago's old
(mostly retired) American born taxi drivers. Wouldn't get us into that job today for $500, if
lucky, for 60 grueling hours.
http://www.cbsnews.com/news/gang-wars-at-the-root-of-chicagos-high-murder-rate/
The core American trouble isn't wages not keeping up with productivity per se (though that
parallels); the core labor sickness is wages not even remotely approaching what the consumer (not
the boss) might be very willing to pay.
We do not need to attract businesses that provide good jobs -- the jobs cannot be good if the
pay is miserly. High wage opportunities don't happen -- they are made (ask Jimmy Hoffa).
Educational resources are not needed to help retail clerks reach their full potential. Good
pay for retail clerks is needed to help Detroit's schools reach their full potential. Nationwide:
poverty area schools don't work because students (and teachers!) don't feel it worth making the
effort -- given the job market doesn't promise anything remunerative enough to strive for when
it's time for them to go to work.
http://www.amazon.com/gp/product/B00332EXDM/ref=dp-kindle-redirect?ie=UTF8&btkr=1
"I believe this is mainly due to differences in bargaining power." Which is mainly due to absurdly
unenforceable labor laws in this country which -- uniquely in all markets -- allows one side in
the labor market to bully the other side out of being able to meaningfully bargain. Simple enough
solution: make union busting a felony (like every other kind of market warping -- try to take
a movie in the movies and telling them you were only kidding).
The labor laws enabling collective bargaining have long been in place; the need for collective
barraging presumably settled. So when are progressive states going to begin -- one state at a
time; forget Congress -- to make these laws enforceable? Federal preemption means individual states
cannot subtract from national law, but states may add. In Maryland for one, Democrats have a 33-17
edge in the State Senate and a 91-50 edge in the House. WA, OR, CA, IL, NY, anybody listening?
IS ANYBODY, ANYWHERE LISTENING?! Retail clerks (and their hungry families) desperately want
to know.
Step 1. Cut wages to increase profits
Step 2. Produce more and price it twice as high
Step 3. Demand government allow workers to borrow at high interest rates to buy twice as much
as before their wages were cut in half
Step 4. Blame government, and especially Obama when the math does not work out.
If you want faster gdp growth, you must pay workers, who are after all 99% of the consumers,
more and increase their pay faster.
Economies are zero sum.
It is possible to time shift, say by exporting more than imported and taking the difference
and saving it by buying debt, or stored labor, in other countries, but at some point, the process
is reversed. For the US, savings has flowed into the US blocking exports and increasing imports.
At some point, that will need to reverse. Someone will need to work more and consume less. That
will need to be the 1% because for decades, most US workers have worked more and consumed less,
unless they got to borrow and consume so they will need to work more and consume less.
Unless there is a massive redistribution of wealth, either war, or bankruptcy. Trying to tax
wealth to redistribute will only destroy the wealth. After all, 99% of the wealth in the US was
not built by labor, but inflated into existence by pump and dump asset churn or by high rents
inflating decaying scarce assets in price.
I think that comprehensive financial planners now do a lot of the work that
family attorneys did in generations past. This is partly because the sort of
person who goes to law school now is much more intellectual -- and thus often a
little more introverted and socially inept–than in years past. Watergate caused
that, I believe. All of a sudden everybody was interested in the mechanism of
the law. Fifty years ago a right-of-way agreement from the local utility was
three sentences. Now it's five pages single spaced, in some English derived
technical gibberish.
Anyway, you really need the professional when somebody dies. That
professional is far more likely to be the financial planner than the lawyer
these days, in part because the financial planner is paid by assets under
management, rather than hundreds of dollars per hour, so the financial planner
would be paid anyway. I think it is rare to see attorneys designated as
executors of estates these days. They charge six percent by statute, and that's
too much for many people's blood. God forbid that one should be appointed to
manage a trust with multiple beneficiaries. They'll stretch it out thirty
years.
here is an important article for you. While the whole article is astonishing I'll post just
one small passage. If someone can not figure out who the real (not perceived) enemy than s/he
is lost cause.
"We do have two different tax systems, one for normal wage-earners and another for those
who can afford sophisticated tax advice," said Victor Fleischer, a law professor at the University
of San Diego who studies the intersection of tax policy and inequality. "At the very top of the
income distribution, the effective rate of tax goes down, contrary to the principles of a progressive
income tax system."
The
paper
-by Dongya Koh of the University of Arkansas, Raul Santaeulalia-Llopis of the Washington
University in St. Louis, and Yu Zheng of the City University of Hong Kong-takes advantage of newly
updated GDP data from the U.S. Bureau of Economic Analysis. While the Bureau is constantly releasing
new data on economic growth, it also revises previous data. Sometimes those revisions show an increase
in total U.S. economic output, and sometimes the revisions show a change in the composition of that
output. It's the latter kind of revision that's important in this case.
In 2013, the Bureau of Economic Analysis updated its treatment of a variety of issues, including
how it treats research and development spending. The BEA previously treated R&D spending as a business
expense but, as the BEA realized, it makes more sense to think of spending that could potentially
boost a firm's output as a capital investment. As the authors of the paper show, counting investments
in intellectual property as, well, investment significantly increases the amount of investment showing
up in the data. According to their calculations, intellectual property products have increased from
8 percent of U.S. investment in 1947 to 26 percent in 2013.
Accounting for this kind of capital investment means that the decline in the U.S. labor share
starts much earlier than previously thought. According to the paper, the decline starts in 1947,
which would mean the labor share was declining throughout the period it was famously stated to be
constant. But not only does the decline start earlier than previously thought-it's also much larger.
It's actually twice as large. And the increase in intellectual property products explains the entirety
of the decline.
Earlier this year, for example, Hillary Clinton made headlines when, in response to a question
about her personal fortune, she claimed her family was "dead broke" when they left the White
House. That statement followed New York Gov. Andrew Cuomo's top aide casting those making
$500,000 a year as merely upper middle class.
According to IRS data, 99 percent of American households make less than $388,000 a year, and 95
percent make less than $167,000 a year. The true middle in terms of income - that is, the cutoff
to be in the top 50 percent of earners - is roughly $35,000 a year.
While Lew claims his private-sector compensation was not "in the stratosphere," the data suggest
otherwise.
According to New York University records, Lew was usually paid between $700,000 and $800,000 a
year as the school's vice president, while also receiving a $440,000 mortgage subsidy. Lew also
earned $300,000 a year from Citigroup, with a "guaranteed incentive and retention award of not
less than $1 million," according to an employment agreement obtained by Businessweek.
"... Sure the myth of meritocracy and American exceptionalism is all over public education, however, Im not sure this is the fault of teachers themselves. Public curriculum is now mostly controlled from without, and teachers are largely constrained as to what they can teach, when they can teach it, and how. The constant battery of tests really limits the freedom teachers have in offering a variety of materials, because if those kids dont produce exactly what the test maker is looking for, it could be their job on the line. You cant teach bell hooks, if you dont have a teaching job to begin with. ..."
"... Too true! I keep returning to Paul Goodmans classic screed, Compulsory Miseducation . 1964. Crapification has been with us a long time. We are now harvesting its rotten fruits. ..."
"... I only wish American teachers had anywhere near as much agency as you think they do! Are you aware who controls the curriculum, and how politicized this is? While I taught in the nations largest public school system, it was under mayoral control. His education chancellors were mostly non-educators (a lawyer, and, most briefly and notoriously, a publisher), and hired private contractors and spent millions of public money on charters. ..."
"... The curriculum has been hijacked by the Common Core, which dictates which materials can be covered, and how it can be covered. ..."
today's Republicans and defending teachers(and firefighters and police) to the very last stand.
Yes, public education is one of the foundations of our country, and should never be 'privatized'(um,
stolen) to a political bidder. But also, teachers(and f's and p's) generally make outstanding
salaries, paid for by property taxes, and have their retirement funded, and are allowed to strike
to add more whenever they like. Oh, then they can retire after 20-30 years and still receive significant
pension benefits.
The 'everyone pays' for the select few is a problem in this country, and is never discussed
in any media that I see.
Teachers' personal money is the most common source of funding for classroom projects. On average,
teachers spent a total of $398 on school supplies in 2009-2010 and an additional $538 on educational
materials." The total expended that year by the nation's 3.7 million teachers? A whopping $3.5
billion.
And it's not just teachers. According to the Summer 2012 issue of NEA Today, the newsmagazine
of the National Education Association, 66 percent of education support professionals – a category
that includes bus drivers, custodians, lunchroom staff, secretaries, security guards and skilled
trades people – dig into their pockets to help kids in need. Their expenditures? An average of
$216 per employee per year."
http://www.truth-out.org/news/item/12504-public-school-teachers-spend-billions-of-their-own-money-on-student-needs
(sigh) too often i hear people complain about property taxes & schools…now dayz i suggest we
all stop paying the tax and enjoy the short life span the bored & uneducated kids will rein on
us!
I have a general antipathy towards teachers; no matter how well intentioned they are, ultimately
they're still responsible for indoctrinating the world-view and cultural myths required for children
to become good corporate state consumers/employees. No matter how progressive and enlightened
the curriculum, nor how lavish the facilities and small the class sizes, Howard Zinn won't be
taught.
I won't say that all education is bad–but compared to what passes for education now in America,
I believe that our students and society would be better off if we had no education at all, since
what we have now is leading society and humanity off a cliff. Therefore the only real problem
I have with breaking up teachers unions and closing schools is that they'll probably be replaced
with something even more corporate and soul-destroying.
I think you're blaming the wrong people for this.
Sure the myth of meritocracy and American
exceptionalism is all over public education, however, I'm not sure this is the fault of teachers
themselves. Public curriculum is now mostly controlled from without, and teachers are largely
constrained as to what they can teach, when they can teach it, and how. The constant battery of
tests really limits the freedom teachers have in offering a variety of materials, because if those
kids don't produce exactly what the test maker is looking for, it could be their job on the line.
You can't teach bell hooks, if you don't have a teaching job to begin with.
teachers are largely constrained as to what they can teach
Well that's exactly my point. Teachers are ultimately servants to the corporate state. They
have little to no free will themselves. They will train their students to be model employees and
insatiable consumers–who love America because patriotism, or they will be fired.
I'm not blaming them for their lot. Teaching is certainly a crappy, and unappreciated job in
this society–and there is something admirable about someone who chooses to wear such a hair shirt,
even if there is no point to it. I'm saying that the whole apparatus of public education in America
should be radically redone, and until it's redone this whole institutional (public and private)
education debacle should be suspended immediately. The cultural/social monoculture it's creating
is a genuine danger to humanity.
Too true! I keep returning to Paul Goodman's classic screed,
Compulsory Miseducation
. 1964. Crapification has been with us a long time. We are now harvesting its rotten fruits.
All the Trump supporters (and let us not forget, e.g., Spiro Agnew, superhero vanquisher
of the nattering nabobs, and
his
minions), all those B and C and D and F students who now
can vote away the pensions of the teachers who gave the voters those grades. .
Jgordon, your comment begs a lot of questions. I'll try to address them. As a former New York
City teacher, I'd like to share my views.
I only wish American teachers had anywhere near as much agency as you think they do! Are
you aware who controls the curriculum, and how politicized this is? While I taught in the nation's
largest public school system, it was under mayoral control. His education chancellors were mostly
non-educators (a lawyer, and, most briefly and notoriously, a publisher), and hired private contractors
and spent millions of public money on charters.
Since you mentioned it, what about what is taught, and who controls that?
The curriculum
has been hijacked by the Common Core, which dictates which materials can be covered, and how it
can be covered.
This was developed by many non-educators who don't have a clue about how
children and adolescents learn, and this is reflected by the abysmally low test scores, even in
regions where there were no problems before. Even before the Common Core, you have the New York
States Regents exams, which trivializes history, making it impossible to teach properly, unless
you want to risk your job (remember, low test scores, bad ratings).
Furthermore, you mention that teachers don't teach Howard Zinn. Well, I'm shocked at how many
enlightened, left-leaning teachers I met in the States, considering the huge propaganda campaign
waged against progressive thinking, that most certainly did not end with the McCarthy era in the
1950's! So you're working in a nation which has actively tried to target, and even destroy, the
careers of people left-leaning or sympathetic to "enemies of the State." I always felt like I
was one unpopular move away from becoming a New York Post headline, for daring to challenge the
mainstream perception of Hugo Chavez and for discussing why many consider Bush a war criminal.
I have had to deal with complaints from principals and parents. I soldiered on for years, but
after awhile, your health suffers.
Also, keep in mind that history teachers in New York must somehow manage to teach a ridiculously
overloaded curriculum. They cannot choose to stop everything and really teach in a more meaningful
way, because they are judged by their students' test scores. They mustn't anger their administrators
and superintendents, who are scared of politicians and parents. I would love to have had more
freedom to teach the way I wanted to, most of the time. To cover a worthwhile secondary source
like Zinn means having the time and resources to do that. Also, it means that you will be supported
by your administrators and parents. This is extremely difficult, even in a state like New York,
which is not nearly as open-minded as it claims to be.
Covering historians like Zinn would also be easier if we had some control over our classroom
materials. Who do chooses and writes the textbooks? Many textbook authors must please Texas, the
largest state. This does not exactly encourage, shall we say, the most progressive thinking. Teachers
often have to fight to just get their photocopies done, and straight lecturing is forbidden. So
they have to rely on the texts their buildings provide them. Teachers also get a bit paranoid,
since anything - ANYTHING can get them smeared in papers like the New York Post and the The New
York Daily News. So I agree that Zinn's views should be a part of the curriculum, but much of
TPTB aren't exactly on my side.
You also need to understand that if the US doesn't produce mostly progressive economists, university
presidents, politicians, lawyers and citizens…why would teachers be so different? The US, with
a mainstream press that promotes Hillary Clinton as the ideal presidential candidate, is not exactly
a hotbed of innovative thinking. Teachers aren't magical people, despite what Hollywood tells
us, which features teachers that can somehow transform poor, hungry students into academic stars,
fueled by charisma, sugary snacks, and iron will alone.
Thank you for bearing with me this far (if you that's the case). I know so many talented teachers
in New York who seemed to work themselves so hard, so it kind of kills me to read these kinds
of blanket statements. Forget Hollywood's hackneyed portrayal of teachers. For me, the real miracle
is that after all of the hatred, union-busting, conservative propaganda, deprofessionalisation,
…the real miracle is that there still are some fantastic teachers in the field.
"... Sometimes … demand is restricted by the fact that nobody has any money in their pocket. ..."
"... the only takeaway is that most economists are nothing more than rancid witch doctors doing
backflips to skirt the basic explanation that aggregate demand has been deliberately sabotaged. ..."
"... Modern neoliberal economics is just an ideology not a science. It exists to justify the current
distribution of wealth with pseudoscientific nonsense written in abstruse mathematical language. Milton
Friedman was to economics what T.D. Lysenko was to Soviet biology. Pseudoscience in service to the ruling
class. ..."
"... [Economists are] clueless about the real world because their fat paycheck magically appears
in their bank account, while producing nothing. ..."
By Ashoka Mody, Professor of Economics at Princeton. Originally published at
Project
Syndicate
For starters, world trade is growing at an anemic annual rate of 2%, compared to 8% from 2003
to 2007. Whereas trade growth during those heady years far exceeded that of world GDP, which averaged
4.5%, lately, trade and GDP growth rates have been about the same. Even if GDP growth outstrips growth
in trade this year, it will likely amount to no more than 2.7%.
The question is why. According to Christina and David Romer of the University of California, Berkeley,
the aftershocks of modern financial crises – that is, since World War II –
fade after 2-3 years . The Harvard economists
Carmen Reinhart
and Kenneth
Rogoff say that it takes
five years
for a country to dig itself out of a financial crisis. And, indeed, the financial dislocations
of 2007-2008 have largely receded. So what accounts for the sluggish economic recovery?
One
popular explanation lies in the fuzzy notion of "secular stagnation": long-term depressed demand
for goods and services is undermining incentives to invest and hire. But demand would remain weak
only if people lacked confidence in the future. The only logical explanation for this enduring lack
of confidence, as Northwestern University's Robert Gordon has
painstakingly documented
and argued , is slow productivity growth.
Before the crisis – and especially from 2003 to 2007 – slow productivity growth was being obscured
by an illusory sense of prosperity in much of the world. In some countries – notably, the United
States, Spain, and Ireland – rising real-estate prices, speculative construction, and financial risk-taking
were mutually reinforcing. At the same time, countries were amplifying one another's growth through
trade.
Central to the global boom was China, the rising giant that flooded the world with cheap exports,
putting a lid on global inflation. Equally important, China imported a huge volume of commodities,
thereby bolstering many African and Latin American economies, and purchased German cars and machines,
enabling Europe's largest economy to keep its regional supply chains humming.
This dynamic reversed around March 2008, when the US rescued its fifth-largest investment bank,
Bear Sterns, from collapse. With the eurozone banks also deeply implicated in the subprime mortgage
mess and desperately short of US dollars, America and much of Europe began a remorseless slide into
recession. Whereas in the boom years, world trade had spread the bounty, it was now spreading the
malaise. As each country's GDP growth slowed, so did its imports, causing its trading partners' growth
to slow as well.
The US economy began to emerge from its recession in the second half of 2009, thanks largely to
aggressive monetary policy and steps to stabilize the financial system. Eurozone policymakers, by
contrast, rejected
monetary stimulus and implemented
fiscal
austerity measures , while ignoring the deepening distress of their banks. The eurozone thus
pushed the world into a second global recession.
Just when that recession seemed to have run its course, emerging economies began to unravel. For
years, observers had been touting the governance and growth-enhancing reforms that these countries'
leaders had supposedly introduced. In October 2012, the IMF
celebrated
emerging economies' "resilience." As if on cue, that facade began to crumble, revealing an inconvenient
truth: factors like high commodity prices and massive capital inflows had been concealing serious
economic weaknesses, while legitimizing a culture of
garish inequality and rampant corruption .
These problems are now being compounded by the growth slowdown in China, the fulcrum of global
trade. And the worst is yet to come. China's huge industrial overcapacity and property glut needs
to be wound down; the hubris driving its global acquisitions must be reined in; and its corruption
networks have to be dismantled.
In short, the factors that dragged down the global economy in 2015 will persist – and in some
cases even intensify – in the new year. Emerging economies will remain weak. The eurozone, having
enjoyed a temporary reprieve from austerity, will be constrained by listless global trade. Rising
interest rates on corporate bonds portend
slower growth in
the US. China's collapsing asset values could trigger financial turbulence. And policymakers are
adrift, with little political leverage to stem these trends.
The IMF should stop forecasting renewed growth and issue a warning that the global economy will
remain weak and vulnerable unless world leaders act energetically to spur innovation and growth.
Such an effort is long overdue.
ArkansasAngie , January 6, 2016 at 6:17 am
"But demand would remain weak only if people lacked confidence in the future"
Sometimes … demand is restricted by the fact that nobody has any money in their pocket.
James Levy, January 6, 2016 at 6:45 am
Is he kidding:
The only logical explanation for this enduring lack of confidence, as Northwestern University's
Robert Gordon has painstakingly documented and argued, is slow productivity growth.
Real wages for a hefty percentage of the population haven't risen since 1971. Most people are
treading water or losing ground. Over 90% of the modest gains since the 2008 crash have gone to
1% or less of the population. But the problem is productivity! And this guy has a tenured job
at Princeton. Standards for employment there must include smug self-assurance, ideological blinders,
and the inability to assimilate any facts not cogent to people richer than you are.
Jim Haygood, January 6, 2016 at 11:37 am
If Princeton's most illustrious alumnus can finally make some serious loot in the private sector,
soon the author will be toiling at the Bernanke School of Economics.
Skippy, January 6, 2016 at 8:18 am
Productivity is the cocaine of the labour pool, like the old cocaine ad of the 80s in Calif
[during the epidemic].
White square room about 6M X 6M, top shelf sale executive sort doing laps like a con and the
verse goes like…. I do cocaine because I'm more productive… so I make more money… so I can do
more cocaine… over and over and with each litany increases his speed until a blur….
Skippy…. the end is a wrung out wretch sitting on the step of some low socioeconomic apt talking
about losing, wife, kids, job, everything…. w burnt out dopamine receptors as a lullaby till morte'
efschumacher, January 6, 2016 at 8:50 am
Here in the US:it's not like there's a shortage of work to be done to fix the massively inappropriate
national infrastructure – to make it human sustainable – I mean for the 'little people'. There
is of course the perennial lack of congressional vision and long term planning. There lies a huge
root of the problem.
RabidGandhi, January 6, 2016 at 9:12 am
Is this meant as a good cop/bad cop contrast piece with the Ann Pettifor post?
Here, I gave up any hope of Mody being at all earnest when he cited Rogoff and Reinhart (!!!).
Then the rest of the article completely self-destructs: weak productivity and insufficient innovation
are the issue?
When combined with yesterday's NYT article on inequality, the only takeaway is that most
economists are nothing more than rancid witch doctors doing backflips to skirt the basic explanation
that aggregate demand has been deliberately sabotaged.
Stephen Gardner, January 6, 2016 at 9:33 am
Modern neoliberal economics is just an ideology not a science. It exists to justify the
current distribution of wealth with pseudoscientific nonsense written in abstruse mathematical
language. Milton Friedman was to economics what T.D. Lysenko was to Soviet biology. Pseudoscience
in service to the ruling class.
cnchal, January 6, 2016 at 9:43 am
. . . the only takeaway is that most economists are nothing more than rancid witch doctors
doing backflips to skirt the basic explanation that aggregate demand has been deliberately sabotaged.
They are the useless eaters. [Economists are] clueless about the real world because their
fat paycheck magically appears in their bank account, while producing nothing.
Here is Mody
The US economy began to emerge from its recession in the second half of 2009, thanks
largely to aggressive monetary policy and steps to stabilize the financial system.
Totally clueless.
susan the other, January 6, 2016 at 2:02 pm
"Lack of confidence" – let me count the ways. This is a phrase to match every vacuous denial
of human economic chaos ever pontificated. Yuck.
The S&P 500, ended the year down 0.73 percent after three straight years of double
digit gains.
Notable quotes:
"... Alain Bokobza, head of global asset allocation at Societe Generale, told CNBC last week that he was expecting the S P 500 to absorb the Fed rate hikes this year and finish the year flat at around 2,050 points. ..."
Citi strategists led Robert Buckland highlighted the potential for weaker earnings per share
(EPS) momentum in the U.S., in a note released on Tuesday. EPS is an important metric used by
analysts and is used an indicator of a company's profitability.
"Fading EPS momentum and rising Fed funds mean that, after six consecutive years of
outperformance, we cut the U.S. to underweight," Citi said in the note.
... ... ...
David Kostin, chief U.S. equity strategist at Goldman Sachs, told CNBC in December that stock
markets could be mostly flat in 2016. Meanwhile,
Alain Bokobza, head of global asset
allocation at Societe Generale, told CNBC last week that he was expecting the S&P 500 to absorb
the Fed rate hikes this year and finish the year flat at around 2,050 points.
By many, many historically predictive valuation meassures, stocks are overvalued to the tune
of 75%-100%.
In the past, when stocks have been this overvalued, they have often "corrected" by crashing
(1929, 1987, 2000, 2007, for example) . They have also sometimes corrected by moving sideways and
down for a long, long time (1901-1920, 1966-1982, for example).
... ... ...
Stocks are wildly overvalued on historically predictive measures
According to several historically valid measures, stocks are now more expensive than they have
been at any time in the past 130 years, with the exception of 1929 and 2000 (and we know what
happened in those years).
For example, the chart below is from Yale professor Robert Shiller. It shows the cyclically
adjusted price-earnings ratio of the S&P 500 for the past 130 years.
As you can see, the current PE ratio of at least 26 is miles above the long-term average of 15.
In fact, it is higher than at any point in the 20th century, with the exception of the months
that preceded the two biggest stock-market crashes.
"... The US empire is one of Multi-National corporations and International Trade Deals. ..."
"... Im intrigued by that assertion, especially if this comes from a more libertarian perspective and an author who actually mentions NATO. Of course corporate welfare in various forms is a key part of what is happening, but the core issue is a literal military empire, not some vague commercial facsimile of one. ..."
"... The direct imperial threats include economic warfare, as displayed by the IMF and ECB. As demonstrated in Greece, Ukraine, and before Greece Ireland. ..."
"... By 1978, US inflation had risen to 9% while inflation in the rest of the world slowed dramatically by comparison. Both the Carter administration and the Fed did everything in their power to control dollar devaluation, but it was clear by this time that without the assistance from foreign governments the dollar would not be able to survive . … Over the course of the next six years the dollar experienced a meteoric rise in value. ..."
The US empire is one of Multi-National corporations and International Trade Deals.
I'm intrigued by that assertion, especially if this comes from a more libertarian perspective
and an author who actually mentions NATO. Of course corporate welfare in various forms is a key
part of what is happening, but the core issue is a literal military empire, not some vague commercial
facsimile of one.
One of the most successful Big Lies in our domestic political discourse
is to blame convenient corporate villains instead of the public officials who are responsible
for decision-making and implementation.
This isn't the 1980s anymore. The global financial system (post Bretton Woods) collapsed somewhere
there in the 1990s. Today, things are held together by direct imperial threats, not corporate
board rooms.
It is not dollar hegemony that rules the world, but the global financial system which
gives the dollar its place of privilege.
Syllogism? What came first the chicken or the egg?
Where to begin – one could suggest the author read Chapter 1 of Wray's MMT and rewrite considering
sector balances and fiat currencies, and present the different line of argument which would arise.
"By 1978, US inflation had risen to 9% while inflation in the rest of the world slowed
dramatically by comparison. Both the Carter administration and the Fed did everything in their
power to control dollar devaluation, but it was clear by this time that without the assistance
from foreign governments
the dollar would not be able to survive
." … "Over the
course of the next six years the dollar experienced a meteoric rise in value."
Maybe not central to the main argument but I found this claim (in bold) implausible.
"... I am always struck by the difference between the oligarchs of today and those (a very small group) who ran the uk in the late 17 and 18 century. Proud, brutal but they taxed themselves as necessary to build effective institutions and instruments in the service of common goals ..."
"... in this culture we recognize the Midas touch as a positive good, rather than the curse the Greeks knew it to be. ..."
"... My feeling has always been that taxes are the price you pay to live in a civilized society. Conservatives are obviously opposed to that. ..."
"... An even more commercially successful writer, J. K. Rowling, has expressed similar enlightened views. There ought to be a hall of fame for such folks. ..."
"... To become a hedge fund billionaire you can have no heart and you can have no soul. You must be a ruthless predatory bastard with no concern for morality or justice. So it is not surprising that the question of whether you owe something to others doesnt really register with hedge fund billionaires. ..."
Irving Berlin on taxes
: The New York Times
reports
on how some of the US's richest men are dodging taxes. Compare this to the
response
of Irving Berlin
when his lawyer offered him a tax shelter:
I want to pay taxes. I love this country.
He even wrote a
song
expressing this
sentiment. He said: "I owe all my success to my adopted country." ...
He embodied -- knowingly so -- a
point
made by Herbert Simon, that we westerners owe our fortunes not so much to our own efforts but
to the good luck of living in societies which enable us to prosper - which have peace, the rule
of law and material and intellectual resources ...
Now, songwriting is pretty much as individualistic an activity as one can find; But even songwriters
require a conducive environment such as musical traditions on which to draw and a marketplace
for their work. Berlin knew this: 1930s Siberia had no equivalent of Tin Pan Alley or Hollywood.
If even songwriters owe their wealth to social capital, how much more true is this of hedge fund
managers. They would be nothing without wealthy investors or large liquid financial markets: how
many billionaire fund managers are there in Burkina Faso?
Which poses the question: why, then, don't hedge fund managers have the same attitude to paying
tax as Irving Berlin? It could be that they are more motivated ... by personal greed. But there
might be another reason..., they believe their wealth is the product of their own "talent" and
so they are entitled to it... Others of us prefer to call it an example of one of the disfiguring
diseases of our time - narcissism.
Perhaps there's another explanation, though. Maybe hedge fund billionaires are greater geniuses
than Irving Berlin who have contributed more to human happiness. But how likely is this?
"The New York Times reports on how some of the US's richest men are dodging taxes."
But Jay Bird
just today declared corporations ARE paying their taxes. Really? There is no such thing as Base Erosion
and Profit Shifting?
pgl -> Jay...
You need to get a life. Start with laying off the booze.
Roland:
I am always struck by the difference between the oligarchs of today and those (a very small group)
who ran the uk in the late 17 and 18 century. Proud, brutal but they taxed themselves as necessary
to build effective institutions and instruments in the service of common goals
EMichael:
Berlin realized that he did not build that.
Robert Marshall:
What is more likely is that songwriting and billionairing require very different character traits
to reach the top. I wish I knew what it took to be a songwriter, but to be a billionaire, you have
to think the right way to go about life is to try to get as much as you can for as little as you
have to give up, and not even that if you can get out of it. And yet
in this culture we recognize
"the Midas touch" as a positive good, rather than the curse the Greeks knew it to be.
SomeCallMeTim:
Is it unseemly to infer that maybe these MOTUs hear the same dogwhistle symphony they fund? Or are
they above that sort of thing, and just 'have a business to run'?
DrDick:
My feeling has always been that taxes are the price you pay to live in a civilized society. Conservatives
are obviously opposed to that.
Jay -> DrDick...
You take the mortgage interest deduction?
Tax dodger!
DrDick -> Jay...
I rent.
DrDick -> DrDick...
And I take essentially nothing except the personal deduction.
Why is everyone so concerned with diagnosis? We know that great piles of money in few hands leads
to no good, and that is enough. Tax it away. Then let the formerly rich use their newly-freed time
writing poems describing the beauty of skimming from other people's cash flows.
DeDude:
To become a hedge fund billionaire you can have no heart and you can have no soul. You must be a
ruthless predatory bastard with no concern for morality or justice. So it is not surprising that
the question of whether you "owe" something to others doesn't really register with hedge fund billionaires.
"... [The financial crisis is worse than thought …] ..."
"... – Yes Prime Minister, A Real Partnership ..."
"... Economists: purveyors of fictions upon which the superstructure of organized robbery is raised. ..."
"... "Market Failure" is the name that economists who believe that the market cannot ever fail use when the market fails. ..."
"... "Economists put decimal points in their forecasts to show that they have a sense of humour" ..."
"... "Did you ever think that making a speech on economics is a lot like pissing down your leg? It seems hot to you, but it never does to anyone else." ..."
A6: None. They're all waiting for the unseen hand of the market to correct the lighting disequilibrium.
tony, December 30, 2015 at 6:12 am
Q: What do you call an economist that makes a prediction?
A: Wrong.
ben, December 30, 2015 at 3:28 pm
Two economists are walking on the street. They notice a pile of horseshit, and the older
one says to the younger one: "I'll pay you twenty thousand if you eat that." The younger one
ponders for a moment, then agrees and eats it. They walk a bit more and run into another pile
of horse feces. So the younger one tells the elder: "I'll pay you twenty thousand if you eat
that!". The older economist considers the offer and starts eating. After a while the younger
economists stops and asks: "What was the point of this? We both ate a pile shit and neither of
us got richer." The older one answers: "What are you talking about? We both produced and
received twenty thousand worth in income and services."
GDP. Great deposits of poo.
Clive, December 31, 2015 at 5:41 am
"This economy is really terrible."
"How bad is the economy?"
"The economy is so bad, this year oysters are making fake pearls…"
"The economy is so bad, organised crime just laid off 10 judges…"
(and so on)
Paul Jonker-Hoffrén, December 30, 2015 at 7:27 am
"Knock Knock!"
"Who's there?"
"It's Return to Growth!"
Two years later…
"Knock Knock!"
"Who's there?"
"It's Return to Growth!"
And ad finitum…
Clive, December 30, 2015 at 6:21 am
"Knock Knock"
"Who's there?"
"Janet Yellen"
"Well there's no need to shout, I heard you knocking"
Joaquin Closet, December 30, 2015 at 7:42 am
The number of economists is the only thing that contradicts the Law of Supply and Demand.
craazyboy, December 30, 2015 at 9:00 am
Q: How many economists does it take to change a light bulb?
A: Three. A micro-economist to hold the ladder, a macro-economist to rotate the room, and a
university economist to develop the math model and forecast how long it will take.
Ulysses, December 30, 2015 at 9:56 am
A mathematician, an accountant and an economist apply for the same job at an oil company.
The interviewer calls in the mathematician and asks "What do two plus two equal?" The
mathematician replies "Four." The interviewer asks "Four, exactly?" The mathematician looks at
the interviewer hard and says "Yes, four, exactly."
Then the interviewer calls in the accountant and asks the same question "What do two plus two
equal?" The accountant says "On average, four – give or take ten percent, but on average,
four."
Then the interviewer calls in the economist and poses the same question "What do two plus two
equal?" The economist gets up, locks the door, closes the shade, sits down next to the
interviewer and says, "What do you want it to equal"?
Paul Tioxon, December 30, 2015 at 10:02 am
What do you call a cruise ship sinking with 500 PhD economists chained below deck?
A good start.
allan, December 30, 2015 at 10:03 am
Frederic Mishkin.
Yves Smith, December 30, 2015 at 4:32 pm
Oh, that is good!
Paul
An economist is someone who will tell you tomorrow why what they predicted yesterday didn't happen
today.
An economist, a physicist, and an engineer are stranded on an island with a can of food, and no
opener.
The engineer says, "Let's smash the can open with a rock and eat". The physicist replies, "Naw, that's going to splatter the food all over the place. Let's light a
fire, the expanding gases will force the can to pop open and presto: warm food!" The economist says, "Bad idea: the can will explode and the food will be all over the place. Now…
let's assume we have a can opener…."
Blue Meme
A physician, an engineer, and an economist were discussing who among them belonged to the oldest
profession. The physician said, "Remember, on the sixth day God took a rib from Adam and fashioned
Eve, making him the first surgeon. Therefore, medicine is the oldest profession."
The engineer replied, "But, before that, God created the heavens and earth from chaos, thus he
was the first engineer. Therefore, engineering is an older profession than medicine."
Then, the economist spoke up. "Yes," he said, "But who do you think created the chaos?"
aj
The First Law of Economists: For every economist, there exists an equal and opposite economist. The Second Law of Economists: They're both wrong.
fresno dan
Pareto's law of optimal economic theory: an economic theory has reached an optimal state when no other economist can make it wronger
pat b
The Third Law of Economists : The two economists theories don't add up.
twonine
"Economics is extremely useful as a form of employment for economists." ― John Kenneth Galbraith
gordon
JKG has some excellent one-liners. My favourite:
"The trouble with competition is that in the end somebody wins."
Joe Hill
"Again, since I'm not an economist I really have no idea what the wrong solution is."
~ @RudyHavenstein
Ramanan
[The financial crisis is worse than thought …]
James Hacker: Bernard, Humphrey should have seen this coming and warned me.
Bernard Woolley: I don't think Sir Humphrey understands economics, Prime Minister;
he did read Classics, you know.
James Hacker: What about Sir Frank? He's head of the Treasury!
Bernard Woolley: Well I'm afraid he's at an even greater disadvantage in understanding
economics: he's an economist.
Economists: purveyors of fictions upon which the superstructure of organized robbery is raised. (apologies to Ambrose Bierce)
Synoia
Q: What do you call an Economist who tells the truth?
A: Unemployed.
Ivy
If you laid all the economists end to end,
it would probably be a good thing.
They still wouldn't reach a conclusion.
ben
A farmer and two bankers are shipwrecked on an island. Two weeks later help finally arrives. The
bankers greet their rescuer who remarks how well they look.
BankerA: "we realised the potential of the natural resources on this island were tremendous".
BankerB: "I created some fiat money, we divided it up. I lent BankerA ten times my share for a
coconut farm startup, he invested ten times his share in an accountancy startup."
Rescuer: "well that's amazing, only where is it all, I don't see any produce – how did you actually
survive?"
BankerA: "We each used our debt to invest in futures given the fertile land it was clear the land
could generate wealth once labour was applied. We both realised significant paper profits. Oh and
we ate the farmer"
--
Bankers live off our backs.
Nortino
What did the supply curve say to the demand curve?
If you shift a little to the right, I'll give you some more of what you want.
_________
Why did the economist cross the road?
Because his models predicted he would.
TG
"Market Failure" is the name that economists who believe that the market cannot ever fail use
when the market fails.
Synoia
Hmm, it seems you should take your own advice to heart. :-)
What is a person called who claims to predict the future and has a history of 100% failure
in predictions?
a) A Charlatan b) An Economist c) A prophet
afreeman
In the same vein: econ entropy: money invented from hot air evaporates, what do you expect?
How many economists does it take to screw in a lightbulb?
Only one, but the lightbulb has to be hanging from the ceiling. Because economists can only screw
things up.
Minnie Mouse
It takes one economist to change a light bulb and take the entire power grid down.
James McFadden
"Did you ever think that making a speech on economics is a lot like pissing down your leg?
It seems hot to you, but it never does to anyone else." Lyndon Johnson
The Last but not LeastTechnology is dominated by
two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt.
Ph.D
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no cost-of-living
adjustment to benefits had led some seniors to "distrust" government data, like the CPI-W?
Again, this hypothesis would be a lot better to test with a time series of data, comparing years
with benefit increases and without. But feeling shortchanged by the data may be understandable
shallow sand ,
