Monday, September 26, 2016

Moneylenders and their illusory social utility (update)

One of the more popular posts recently was Tony' epic takedown of those who believe that money-lending is an unalloyed good.  That this is not true should be blindingly obvious to anyone who can count.  Tony made sure everyone could understand.

The biggest problem, by far, is the excessive size of the financial sector.  The society simply cannot support such a huge parasitic / Predatory population.

Of course, since the real economy needs nowhere near such a large financial sector, there is almost no way for them to generate enough income from legitimate business to keep the doors open—much less provide for the pay scales the banksters seem to think is their due.  So not surprisingly, eventually all of them resort to fraud. Bernie Sanders made the claim “the business model of Wall Street is fraud.” That was the statement Tony was defending, after all. In fact, as William Black argues below starting at the 17:30 mark, fraud has become the organizing principle of banking—without it, most large banks are unprofitable.

A Travesty of Financial History: Bank Lobbyists will Applaud


Debt mounts up faster than the means to pay. Yet there is widespread lack of awareness regarding what this debt dynamic implies. From Mesopotamia in the third millennium BC to the modern world, the way in which society has dealt with the buildup of debt has been the main force transforming political relations.

Financial textbook writers tell happy-face fables that depict loans only as being productive and helping debtors, not as threatening social stability. Government intervention to promote economic growth and solvency by writing down debts and protecting debtors at creditors’ expense is accused of causing an economic crisis (defined as bankers and bondholders not making as much money as they thought they would). Creditor lobbyists are not eager to save indebted consumers, businesses and governments from bankruptcy and foreclosure. The result is a biased body of analysis, which some extremists project back throughout history.

The most recent such travesty is William Goetzmann’s Money Changes Everything: How Finance Made Civilization Possible, widely praised in the financial press for its celebration of finance through the ages. A Professor of Finance and Management at the Yale School of Management, he credits “monetization of the Athenian economy” – the takeoff of debt – as playing “a central role in the transition to … democracy” (p. 17), and assures his readers that finance is inherently democratic, not oligarchic: “The golden age of Athens owes as much to financial litigation as it does to Socrates” (p. 1). That litigation consisted mainly of creditors foreclosing on the property of debtors.

Goetzmann makes no mention of how Solon freed Athenians from debt bondage with his seisachtheia (“shaking off of burdens”) in 594. Also airbrushed out of history is the subsequent buildup of financial oligarchies throughout the Mediterranean. Cities of the Achaean League called on Rome for military intervention to prevent Sparta’s kings Agis, Cleomenes and Nabis from cancelling debts late in the third century BC.

Violence has often turned public policy in favor of debtors, despite what philosophers and indeed most people believed to be fair, just and stable. Rome’s own Social War opened with the murder of supporters of the pro-debtor Gracchi brothers in 133 BC. By the time Augustus was crowned emperor in 29 BC, the die was cast. Creditor elites ended up stifling prosperity, reducing at least 15 percent (formerly estimated as a quarter) of the Empire’s population to bondage. The Roman legal principle placing creditor rights above the property rights of debtors has been bequeathed to the modern world.

The Bronze Age was not yet ripe for oligarchies to break anywhere near as free of palace control as occurred in classical Greece and Rome. But to Goetzmann the creditor takeover is the essence of progress, despite the economic polarization and Dark Age it brought on for the 99 Percent.

Misrepresenting why individuals ran into debt in ancient economies

Ignoring the abundant documentation, the author misrepresents why early economies ran up personal debt. He falls into the modernist trap of depicting all debt as resulting from borrowers taking out loans, eager to invest the proceeds profitably. He does not recognize debts as accruing in the form of unpaid taxes or fees. Yet this was the case with most Mesopotamian debts, which is where he starts his narrative. Personal debts subject to royal Clean Slate edicts did not result from money lending, but accrued as obligations owed to the palace and its collectors – for example, to providers of temple or palace services such as boatmen, “ale women” and so forth.[1] These payments were to be made at harvest time. But sometimes the harvests failed, as a result of drought, flooding or war.

Taking it as an article of faith that debt always benefits the “borrower,” Goetzmann does not recognize any need to write down debts under such conditions. His blind spot regarding the problems that arose when crop failure or military hostilities prevented cultivators from paying their debts leads him to single out a royal edict from Rim-Sin of Larsa (1822-1763) that allegedly caused the quite modern-sounding “great crash of 1788.”

The idea that Clean Slate edicts were a “crash”

Mesopotamian rulers are documented as protecting their citizenry from foreclosing creditors by cancelling debts since at least as early as Enmetena of Lagash c. 2400 BC. By the Old Babylonian epoch (2000-1800 BC) it was customary for nearly every Near Eastern ruler to cancel personal debts upon taking the throne, and again as economic or military conditions required – e.g., if a flood or other natural disaster or military disturbance prevented harvest debts from being paid on a widespread basis. Goetzmann treats this normal practice of protecting debtors from losing their liberty (and hence their ability to serve in the army and provide corvĂ©e labor on public building projects) as if it were an isolated example, not the rule – and as if it caused a crisis, not prevented it.

Rim-Sin is reported to have cancelled debts on three occasions.[2] But only agrarian debts for consumption or public fees were subject to such Clean Slate edicts. Like other rulers of his epoch, Rim-Sin evidently recognized that if he permitted usury and debt bondage to persist, much of the population would lose its land and be unable to provide labor services or fight in the army. He needed “warriors from abroad, from the surrounding deserts, who had to be attracted by agreeable conditions.” That may have been the proximate cause of Rim-Sin’s moves to break the influence of powerful creditors “and to favor his soldiers, for example, by means of the loan of fields, upon which taxes were levied when the soldiers were not on active service.”[3] The economy was saved, not the creditors (mainly collectors or officials in the palace bureaucracy).

As for commercial “silver” loans and investments in trade ventures, they were not affected by these royal decrees. And even in this commercial sphere, economies hardly could have worked (nor can they survive today) without leeway to bring debts in line with the ability to pay. In the case of long-distance trade, financial “silent partners” typically consigned goods or lent money to travelling merchants in exchange for receiving double the value of their original advance after five years. But if a ship were lost or its cargo taken by pirates, or if a caravan were robbed, the merchant was not liable to pay. This debt forgiveness under extenuating circumstances remained a common legal feature from the Laws of Hammurabi down through Roman law.

After misrepresenting Rim-Sin’s edict as “eliminating all debt by royal decree,” he speculates: “Perhaps he himself or those close to him had gotten into debt” (pp. 57f.) But Goetzmann’s reading reverses the actual situation. Bronze Age palaces were society’s major creditors, not debtors! The agrarian “barley debts” that Rim-Sin cancelled were not those that he owed, but those that the population owed to his palace.

Abundant historical documentation exists that could have saved Goetzmann from his embarrassing insistence that finance and money itself arose as individualistic arrangements by private-sector creditors with no role for government, and that it always is best to pay all debts, without regard for the social and economic consequences. When Hammurabi lay dying in 1749 BC, his son Samsuiluna wrote a letter saying that he found the land so burdened by debt that he remitted arrears owed by many types of royal tenants. To revive their economic position he “restored order (misharum) in the land,” directing that tablets recording non-commercial debts be broken so as to cancel the agrarian debts that had accumulated since the last such misharum act thirteen years earlier (in Hammurabi’s 30th year, 1762). “In the land, nobody shall move against the ‘house’ of the soldier, the fisher, and other subjects.”[4]

Goetzmann does acknowledge that, “perhaps it was a political move to restore popularity with his subjects.” But more than just popularity was involved. Rim-Sin needed their support for his looming fight with Hammurabi, who soon conquered Larsa in 1763. Goetzmann believes that Rim-Sin’s debt cancellation was a disaster – as if it ended a golden age. Writing that Larsa lost power as if “the crash of 1788” was to blame, he seems not to understand that the victor, Hammurabi, proclaimed four debt cancellations to protect his own citizen army during his reign.

Goetzmann cites as his source the respected assyriologist Marc Van De Mieroop of Columbia University. As it happens, he and I co-edited a well-known colloquium in 2000 on debt cancellations in the ancient Near East (see fn 1). Leading assyriologists and Egyptologists traced over a thousand years of royal Clean Slates cancelling agrarian debts owed to the palace, its collectors and other creditors. David Graeber’s bestseller, Debt: The First 5,000 Years (2011) summarizes this volume’s findings for the popular audience. This research would have saved Goetzmann from imagining that Larsa’s debts were owed by rulers to merchants. His aversion to such findings has the effect of wiping his narrative clean of logic that would show any logic for endorsing regulation or cancellation of debt.

Goetzmann does cite the first historical example of compound interest: the Stele of the Vultures boundary stone erected on the irrigated buffer territory between Lagash and Umma citing the reparations that Umma had accrued to Lagash c. 2440 BC. But he does not note that this debt had grown far too large ever to be paid – and hence became a cause of future war. That is the problem with compound interest (and too large reparations debt demands). The rate of interest outruns the debtor’s capacity to pay.

The starting point of financial theory should be recognition of this tendency of debts to be unpayable – that is, unpayable without a massive property transfer, economic polarization and impoverishment. However, today’s vested financial interests do not want to see a reasoned discussion of the repertory and consequences of policy responses to this problem through the ages. The guiding motto is: “If the eye offends thee, pluck it out.” In order to insist that all debts must be paid, the thousands of years of Bronze Age Mesopotamian examples and those of Graeco-Roman antiquity must be censored, because the policy lesson is that bad debts should be written down or annulled.

Asserting that in the abstract, finance “is not intrinsically good or bad,” Goetzmann is unwilling to draw the seemingly obvious conclusion that what determines whether its effects are good or bad depends on whether debts are cancelled when they grow beyond much of the population to pay. To have kept Mesopotamia’s personal debts on the books (or more accurately, on the clay tablets) would have reduced debtors to bondage and led to loss of the land rights that gave them their status as citizens.

It is not hard to see the modern ay relevance. Keeping bad bank loans on the books in 2008 saved bankers and bondholders from taking a loss, but left austerity in its wake by passing the financial losses onto the economy at large.

The false assumption that all loans are “productive” and readily payable

Goetzmann’s misreading of antiquity (on which he grounds his bombastic big assumptions about the long sweep of financial history) follows from his narrow view of debt only in terms of personal bargains between creditors and borrowers – to share in a supposedly mutual gain. In reality, the tendency was for debtors to lose their liberty and land to foreclosing creditors – who put their usurious gains into more land acquisition instead of investing in means of production to expand economies.[5]

It has been to avoid repeating this impoverishing debt dynamic that the past few centuries have seen more humanitarian treatment of debtors. But the past century’s “Austrian” and kindred individualistic “free market” financial theories have created a junk archaeology that depicts monetary and fiscal reform as being against nature and leading to a crash – such as Goetzmann’s fantasy of “the crash of 1788” – instead of avoiding financial distress by restoring economic balance and equity.

Goetzmann’s obsolete theory of money as a commodity, not a fiscal institution

Georg Friedrich Knapp’s State Theory of Money (1905), defines money as what governments accept in payment of taxes or fees. This theory also is called Chartalism. It is confirmed by the assyriological research noted above: Mesopotamian mercantile debts typically were denominated in silver, while personal debts were denominated in grain, above all to the temples and palaces.[6] Their acceptability to these large institutions led the economy at large to accept its valuation.

To defend his “free market” ideology, Goetzmann ignores the character of money as debt, headed by debts owed to governments for taxes or other payments. It is as if we are talking about barter, with money being just a commodity, given value by “markets” with no apparent linkage to government to denominate and pay tax debts. He repeats the century-old threefold view of money as a means of exchange, a measure of value and store of value.

For starters, according to this view, metal was a handy medium of exchange, presumably to barter. A buyer simply pulled out a coin or broke off a piece of metal to pay for food, wool or whatever product was wanted.

Problems quickly arise with this scenario. Who produced the silver? How was counterfeiting avoided? The Bible and Babylonian “wisdom literature” are rife with condemnations of crooked merchants using false weights and measures – a light weight for lending money or buying commodities, and a heavy weight for measuring out repayment of debts.

To avoid such problems, metallic money had to be public in order to be used as a means of payment. Babylonian contracts typically called for settlement in silver of 5/6 or some similar specified purity. From third millennium Sumer down through Greece to Rome (the Temple of Juno Moneta), temples produced the monetary metals and coins. Their role as minters dovetailed with that of overseeing honest weights and measures to prevent fraud.

Money’s second function cited in modern textbooks (which Goetzmann repeats) is to serve as a unit of account, a common measure of value against which other commodities (and labor) are priced. The paradigmatic historical example would seem to be the parity between a Babylonian shekel-weight of silver and a “liter” of barley, fixed by royal edict in for a thousand years, mainly to determine how debts could be paid. Such money was a price schedule of how a specialized economy could make payments, apparently evolving as part of the accounting system that enabled the large institutions to allocate food and raw materials to their labor force, to evaluate output consigned to (or bought from) traders, keep their administrative accounts and denominate debts owed to them. (Later, when Rome developed coinage, its nominal value was maintained even while adulterating its purity.)

But this debt dimension is missing from Goetzmann’s survey.

Goetzmann’s failure to understand that “finance” has something to do with debt

Goetzmann’s desire to credit finance for almost everything good and positive in civilization leads him to attribute the origin of writing to finance. This distorts the researches of the archaeologist whom he credits as acting as his informant, Denise Schmandt-Besserat. Her research started half a century ago at Harvard’s Peabody Museum on Neolithic and Early Bronze Age ceramics. It seems that when traders (chieftains or individuals) sent animals, wool or textiles over a distance for trade from about the 9th millennium to the 4th millennium BC, they would indicate each item with a small animal- or geometric-shaped baked clay token, and wrap it in a clay envelope. The recipient of such deliveries would compare what was received with the itemized set of tokens.

In time, Schmandt-Besserat proposed, impressions of these tokens were imprinted on the clay envelope, to indicate the contents. (Many such envelopes have survived). Such tokens were accounting devices. In time, according to the plausible theory, the design of the impression evolved into cuneiform writing.[7]

The vast majority of cuneiform tablets are accounting records, debt notes and temple and palace accounts, e.g., to distribute rations to the temple labor force and track the delivery and allocation of wool, grain and other raw materials. Prices for silver, grain and a few other basic commodities were administered to create an accounting system to co-measure and allocate resources as well as to denominate payments to themselves. But such fiscal accounting practice is not finance. It is an economic and administrative use of writing, but finance involves debt, not just trade or account-keeping. Goetzmann’s narrative suggests that “finance” exists without a debt dimension.

This basically public institutional setting for writing, accounting, money and archaic interest rates is precisely what the anti-government and pro-creditor Austrian and Chicago Schools of “free market” financial relations oppose. Their censorial view defends the privatization of money as a “market creation,” and hence today’s bank monopoly on credit creation as opposed to government creation of money (They claim that this would be hyperinflationary and lead economies on the road to Zimbabwe – as if bank credit has not fueled a vast asset-price inflation bubble that burst in the 2008 crash.) And as noted above, they also insist that all debts must be paid, even at the cost of impoverishing the economy – as the world has seen most recently in Greece.

Some years ago, a German assyriologist told me why so many members of that discipline choose to publish in German or French instead of in English. The reason is that so many Americans (and also Englishmen) take documentation out of context to force into “crazy” theories. To protect itself from such intervention, the assyriological discipline is isolated from other academic departments. An unfortunate byproduct is that cuneiform studies are rapidly shrinking throughout Europe.

No doubt a contributing factor is that the practices of Bronze Age Mesopotamia and its neighbors controvert the most basic assumptions of today’s free market orthodoxy, above all its denigration of public enterprise and opposition to government money creation (leaving this as a private bank monopoly), and its refusal to acknowledge logic justifying debt writedowns. Goetzmann has used the exclusion of early economic history from the academic curriculum, and hence from popular discussion, as an opportunity to substitute unrealistic pro-creditor assumptions for the reality that he seems to find too abhorrent to inform his readers about. more

Wednesday, September 21, 2016

Volkswagen the best?

When Volkswagen was caught cheating on its emissions tests in USA, the vilification was widespread, not to mention expensive.  At the time, I was sure that VW was not the only one cheating.  What I didn't predict was that VW was building the cleanest diesels being sold.  Well, according to the Europeans, that is exactly the case.  Which doesn't surprise me at all.  Nor does it surprise me that Fiat and Suzuki are the worst.

Monday, September 19, 2016

Does Trump have a chance of winning?

That Donald Trump believes windmills are ugly is enough to eliminate him from serious consideration in my mind. Especially considering the ugly structures he has put up. And that's just the beginning.  Even so, he has a decent chance of actually winning this election.  He is running against a woman who has carried a LOT of water for the neoliberal / neocon establishment and most people are FURIOUS at that crowd these days.  So even though he has never held any elected office, makes a political "gaffe" per hour, holds positions that are, at best, partially thought out, and is getting beat up by the cultural elites on a 24/7 basis, he still stands a reasonable chance of winning.

Not surprisingly, two of my favorite writers on political matters have weighed in on this paradox. Pepe Escobar actually believes that there is an establishment faction that doesn't believe that globalization has been good for the country.  And that this group is secretly greasing the skids for Trump.  Now I am sure that there are groups that are uncomfortable with the idea that China now makes parts for the defense industry, and other reasons for economic nationalism, but they have had precious few victories since 1973.  The neoliberals have been on a serious roll so if there is a secret wing of the establishment supporting Trump's economic nationalism, they have been deep underground for the better part of two generations. Losing.  But this essay is by Escobar so it is an interesting idea.

Raimondo concentrates on the reasons to believe the global elites are in a full-blown panic.  It is not just Trump, it's Brexit, Marie LePen, and AfD winning more votes than Angela Merkel in her home district in Germany.  I am not so sure the elites have all that much to worry about.  Yes the proles are angry enough to dust off the guillotine but their problem is that they have no alternative plans.  The fact that there are folks actually talking seriously about Marx again only proves there isn't much out there yet to summon the troops to arms (or whatever.)

Monday, September 12, 2016

Tales of conversion—electric cars

Germany has set a goal to have 1-1.5 million electric cars on the road by 2020.  DW sets out to discover just how realistic such a goal is.
  • Part One: DW crew of two leaves Berlin in a VW electric car. Discovers the problems of using recharging stations.  Meets up with a convention of hard-core electric-car enthusiasts in Leipzig.
  • Part Two: Getting around 100 km per charge, the crew make a four-stop drive to Munich where they swap their ride for a BMW i3.  BMW has sold 25,000 of these—20,000 in USA.  33 kWh configuration starting at $44k.
  • Part Three: The possibility is explored that progress towards an electric fleet may hinge on outside actors.  The DW crew visits a promising but flawed effort by the technology students in Munich, a conversion shop swapping electric drivetrains for original IC power-plants, and perhaps amusingly, a shop that electrifies old Citroen 2CVs (last produced in 1990) for around 16,000 Euros.
  • Part Four: Stuttgart has a shared fleet of 500 electric Smart cars.  The experience is sampled before a visit to the Bosch battery works.  90% of lithium batteries are already made in Asia.  Bosch isn't going to change much—a typical German auto supplier tied to long-cycle development times.  Daimler has promised to convert their entire line to optional electric.  Actually, they don't have much hardware yet.
  • Part Five: The electric Mercedes b-type proves amazingly frustrating.  Short range combined with crazy recharge times made this leg an ordeal.
  • Part Six: The DW crew discovers the recharging problems are being caused by the undersized cable provided by the Benz PR department.  One final car swap brings another VW—an electric Golf.
  • Discussion of why German efforts at e-mobility are so lame.
Watching this series of short video clips was great fun but it highlights all sorts of problems associated with any serious effort to convert the transportation system to electric power.
  • The German automobile industry is not taking the problem seriously.  When your company has been building Bahn-Burners for over 100 years, it requires a huge intellectual leap to start building e-cars.  It shows.  With the possible exception of the BMW i3, all the e-cars provided by the big producers were battery powered conversions of their current IC lines (i.e. the VW e-Golf.) None had a ground up design.
  • The charging infrastructure is completely disorganized—to use all 6500 charging stations in Germany requires over 250 different smart cards.  Electric cars are considered urban runabouts—intercity travel has barely registered on anyone's radar.
  • The Germans still consider electric cars a low-grade torture device—certainly the trip by the DW crew qualifies as an ordeal.  Cars are a big expense—no one wants theirs to make them miserable.
On the other hand, Tesla...

If it were not for Elon Musk and Tesla, those pathetic German efforts would probably seem like progress.  But they don't because Tesla is:
  • Building imaginative and superbly engineered cars that were designed from the ground up to be electric cars.  Before Tesla, no one knew that electric cars could have all sorts of meaningful advantages.  Now anyone interested knows what they are.
  • Not building hairshirt cars.  The S and X models can be configured to have supercar performance.  And when not driven at license-losing speeds, this available energy translates into respectable range. 
  • Building its own recharging infrastructure.
Like all true Producer Class superstars, Musk is a man of vision.  He clearly sees a possible future where his efforts actually result in a better world.  Below are his comments on the occasion of the opening of phase one of his giga-battery factory.  What is so charming about his remarks is that he has discovered that the facilities to make spectacular products are more difficult to design and execute than the products themselves.  He understands the rationale for vertical integration on the molecular level.  At one point (13:00) he actually babbles about his love for manufacturing.  It's very cute!

If you have watched part five above and cowered with our intrepid DW crew as they toddle along at 80 kph in the right lane of the autobahn in order to conserve battery range, you might enjoy this Tesla's blast down an unrestricted stretch of autobahn in Northern Germany.  As the driver touches 250 kph he is heard to say, "please don't blow a tire—I love my wife."

Just remember, 250 kph is 155 mph.  This is faster than I have ever driven.  Because of Musk, we know that electric cars are the future.  We also know that any meaningful effort to change the atmospheric CO2 levels will only be accomplished with the efforts of such Producer Class superstars.

Monday, September 5, 2016

Business Insider lowballs the costs to fight climate change

That a serious program for combatting climate change will cost at LEAST $100 trillion is a bedrock principle around here.  Even so, I always look at anyone who is willing to put a number on such a project—even if it hopelessly underestimates the magnitude of the problem.

Rafi Letzter is one of the new young writers for Business Insider—I have never noticed anything by this person before.  And the writing and perspective is pretty damn good—climate change is already well under way and we as a nation have signed on to coming up with a solution.  So now the question is, what will this cost.  And the person chosen to provide this cost estimate is a business economist from Columbia.

Geoffrey Heal has a very impressive academic CV—18 books and 200 academic articles.  He is a member of Columbia's Earth Institute—the very same place where Jeffrey Sachs hangs his hat.  But keep in mind we are talking about an econ professor at an institution at least as reactionary as Stanford or the University of Chicago.  So we expect some routine errors to be baked into his assumptions including:
  • It is possible to take the total energy consumption and figure out how much it would cost to build that capacity with windmills and solar cells.  Of course, this is insane because while it (almost) applies to applications like stationary power plants, it doesn't apply to aircraft, agricultural machinery, or ships at sea.  The costs of electrifying the whole infrastructure seems to have been left out of his thinking.
  • Corruption! Any project this big will attract the Leisure Class charlatans in their masses.  We are not only talking contracting graft here—we are also talking about the soft core corruption of the endless bureaucracies of the pretty regulators.  Remember, over 90% of Superfund money went for office rents, etc. and less than 10% was spent on remediation.
  • Privatized!  Heal cannot imagine any big building project being anything but a private venture.  A big WPA project was not even considered.  I cannot even imagine something this complex without massive public investment.
  • There is a virtue in trying to save the climate on the cheap.  Well, Heal, since operating the public spaces on the cheap is what has led to the problem in the first place, suggesting that this could be done for something between $1-5 trillion shows how little you think of a livable planet.
The very next day, Letzter posts another article pointing out the problems with Heal's analysis (also included below).  I will probably read Letzter again.  Heal, probably not.

Friday, September 2, 2016

Historical context for the economics of this blog

Possibly the most stupid, embarrassing, social faux pas I have ever made came when I was in Finland trying to promote a book.  I was introduced by an earnest grad student who claimed I was most like the American Sociologist C. Wright Mills.  Now I happen to be a big fan of Mills.  I am pretty sure that I read no book at the university that was more interesting and important as his Power Elite.  I have read more interesting books since but at 21, Mills hit me like a lightening bolt.  So being compared to Mills was enough to trigger a major humility mode.  I'm surprised I didn't try to dig my toe into the floor.  "Oh no no," I actually heard myself say aloud, "I am not like Mills at all."

The kid who introduced me looked baffled.  As well he should have been.  After all, by merely reading my book he had deduced the Mills comparison.  He had no idea the role the Power Elite had had on my very survival as a student.  In fact, he should have been given an A+ for insight.  Besides, he was merely trying to locate me in the intellectual universe and this reference was a LONG way from misleading.

One of the more interesting intellectual exercises that fascinate the Veblen scholars is the question, "Where DID he get his ideas?"  He didn't learn much from his (very reactionary) economics professors like John Bates Clark and in fact spent the rest of his life refuting their beliefs.   His Ph.D. was on Kant.  So there isn't much there.  The attempts to link Veblen to Marx border on ridiculous.  So we are left with the obvious possibility that Veblen was a genuine original.  Of course, we cannot discount the fact that his original exposure to economics was the struggle by his family and neighbors organizing an economy at the very edge of civilization using the tools that could be hauled in a small wagon.

Veblen would become impatient with "scholars" who did nothing but categorize schools of thought.  One of his more withering criticisms was to call some intellectual pursuit "mere taxonomy."  Of course the people who do organize intellectual pursuits into roots and branches perform a useful service (if done well) but merely naming something explains almost nothing about the thing being named.

With those disclaimers, I must admit I found the following explanation for the various schools of economic thought very interesting.  It was produced by a group (or person) who wrote: SOCIAL DEMOCRACY FOR THE 21ST CENTURY: AN ALTERNATIVE TO THE MODERN LEFT

I have highlighted where I find myself.  This may be mere taxonomy but it is damn good!

Monday, August 29, 2016

Humans have caused climate change for at least 180 years

As part of my video project, I have created a graph that compares the big changes triggered by the ingenuity of the Industrial Revolution and the increase in atmospheric CO2.  This graph will be animated and the central focus surrounds the first mathematical description of the relationship between CO2 and changes in climate first postulated by Svante Arhennius in 1896.  If we date the start of the Industrial Revolution at 1750, the changes had been happening for 146 years before a Nobel winning chemist noticed them.  Interestingly, those 146 years had only increased atmospheric CO2 by about 20 ppm.  That is roughly the same amount as the increase since 2004.  No wonder it required a world-class chemist to figure it out back then.

The CO2 levels are indicated by the yellow line with the light blue fill underneath.  Click to enlarge.

As research methods and instrumentation have gotten better, it now seems pretty obvious that the climate started to change almost as soon as humans got serious about burning coal.  Which makes perfect sense when you think about it.  After all, coal is a form of carbon that had been put into long-term storage before humans discovered all the useful things that could be done with those dirty rocks.

Monday, August 22, 2016

Climate change and air conditioning

Perhaps the least surprising news about economic "development" and climate change is that soon after a family in China (or similar) gets a TV, thoughts turn to the one device that helps them cope with their increasingly hot and miserable lives—air conditioning.  And it doesn't take long for people to view their artificially cooled lives as a necessity ranking right up there with a roof that keeps out the rain.

While it IS possible to build very comfortable structures that don't require tons of cooling, the easiest and most reliable way is to plunk down the money for that humming compressor that spits out cool air.  Those who try it tend to really like it,  Suddenly, miserable places are transformed into the Sun Belt.

The problem is that air conditioning is a notorious energy hog.  And when the electricity to run these things come from burning coal, massive cooling leads to hotter climates.  Of course, it doesn't have to be that way.  Cooling loads tend to be highest whenever the sun shines brightest.  Bingo.  Solar-powered cooling is physically possible so in theory, this should become one of the next big marketing opportunities.  We will see if that happens because right now, the boom in air conditioning is being supplied with technologies that assume electricity from a reliable power grid.

Monday, August 15, 2016

Is Russia really going to throw Neoliberalism overboard?

Those of us who hail from the heterodox economic traditions keep wondering in some amazement at the persistence of neoliberal thought.  I mean, how much evidence of failure will it take to discredit these people?  We have had major meltdowns and corruption on a scale so vast that it boggles the mind in just the last 25 years and yet the persistence of belief marches on.  It's not that I have not had experience with this sort of behavior before.  My mother once got a letter from a 95-year-old friend who was very sick.  In spite of his age and health, he closed with a paragraph stating that he was still convinced that the Lord Jesus Christ was coming back during his lifetime to take him home to heaven.  He had believed that he would be Raptured since he was a teenager—why stop now?  He died in less than two weeks.

This is what I think of when I read that some neoliberal believes that high interest rates are good for the economy or that privatizing a public good leads to greater prosperity.  Makes a belief in the Rapture look positively enlightened by comparison.  In the case of Russia, we find the toxic waste of neoliberalism crippling an economy already under stress from organized economic sanctions and a dramatic fall in the price for oil—Russia's big deal export.  Russia's economy should logically be on a wartime footing given the external threat.  And yes, there have been some remarkably successful war economies organized in traditionally capitalist havens (see USA 1941-45).  If you look at these successful war economies, they look almost nothing like neoliberalism.  So why has V. Putin chosen to keep the Yeltsin-era neoliberals around to mismanage his economy when almost anything else would make his country stronger and more able to cope with external threats?  Good. Damn. Question.

It turns out Mr. Putin has been asking this very question.  And he looks like he is about to throw some neoliberals overboard.  If he thinks the western press has been hostile, wait until his tries ridding himself of the official economic religion.  Insane Tyrant will be the kindest description by the folks at the Guardian.

Of course, this conversion to a more rational economics may still be wishful thinking.  The writers below who argue that Russia is going to try something else, Engdahl, Hudson, and Roberts, are known critics of the neoliberal madness.  They want someone (with a reasonable chance of success) to try the heterodox methods.  There is a lot of pride on the line here.  I know how that feels.  It has been nearly 30 years now since I first reassembled the most successful ideas of the USA Progressives from 1873-1973—the effort that led to Elegant Technology.  With every bump and crash that demonstrates once again how neoliberalism tends towards Gilded Age Neofeudalism I ask myself—will anyone with the necessary clout ever stand up to this crazy thinking?  It's only the survival of the species that's at stake, after all.

Monday, August 8, 2016

Ellen Brown on Green Party economics

Ellen Brown probably knows more about the history of the various monetary debates that have swept USA since before it was a nation than anyone I can think of.  So we can reasonably assume that she has some grasp of just how difficult it is to mount a meaningful assault on the conventional "wisdom" of the "sound money" crowd.  The fiat currency folks have all the good arguments on their side and have been supported by such luminaries as Franklin, Peter Cooper, and Edison.  Yet even today, someone like Hillary Clinton is at least as big a monetary reactionary as William McKinley.  I honestly have no idea why the sound money crowd never seems to go away no matter how many economic disasters can be laid at their door.  But my best guess is that the simplicity of their argument must connect with the public's inner moron.

And so our dear Ellen keeps on trucking.  Like most people of her worldview, she seems to think that some day people will tire of the non-stop disaster that is neoliberalism and want an alternative.  And by gawd, she has found several.  So today she dissects the economic arguments of Jill Stein, the head of the Green Party ticket, and finds quite a lot to recommend it.

Saturday, August 6, 2016

You simply must see this—Assange on the state of USA elections

Julian Assange special: Do Wikileaks have the email that will put Hillary Clinton in prison? (E376)6 Aug, 2016

Afshin Rattansi goes underground with Julian Assange. We talk to the founder of Wikileaks about how the recent DNC leaks have no connection to Russia. Plus what are Hillary Clinton's connections to Islamic State, Saudi Arabia and Russia?

It must be odd to be Julian Assange.  He is trapped in the Ecuadorean embassy which is far from the worst place to sit out official persecution—think Martin Luther in the Wittenberg Castle.  Except that Assange is hooked into the global intelligence in ways that Luther couldn't even imagine.  And because of his ability to view documents that are meant to be hidden, he is arguably the most informed human to have ever lived.

Not surprisingly, since his mission in life seems to be exposing liars, his focus tends to be on the Leisure / Predator classes—because that is where liars tend to congregate.  From a Producer POV, for once I am not insulted by being ignored.  After all, a passionate devotion to honesty is the top drawer of the Producer toolset.  So GO Julian!

Wednesday, August 3, 2016

Environmental records shattered

Well, the scientists have once again delivered the very bad news—climate change is now definitely underway and these crazy-hot summers are the new normal.  People are getting very frightened and are becoming very impatient that the brains that can measure this change are not proposing genuine strategies for how to cope.  And time is running out.

I have been beavering away at producing my version of a serious strategy but it is a ton of work and I have the ambition of a 67-year-old man who sometimes gets beaten down by the magnitude of the problem.  On the other hand, getting back up to speed with Adobe After Effects has been fun.  I am pretty sure the last time I used it it was version 4.x and now it's up to 13.8.  So because it's Adobe, every button has been moved (gaaah).  The good news is that it is much more versatile.

I want to use every tool I can find to make things VERY clear.  After all, climate change is easily the biggest problem that has ever faced the human species.  However, the methods to solve this massive problem are well within the range of human possibilities.  The goal is to convey these two messages as understandably as possible.

And so I am actually working on an extremely positive story.  I only hope I have the energy to finish this monster.

Monday, August 1, 2016

Essays on the Democratic National Convention

As a young political junkie, I used to watch the political conventions with an almost religious fervor.  I stayed up to watch Barry Goldwater deliver his "extremism in the defense of liberty is no vice, moderation in the pursuit of justice is no virtue" speech from the Cow Palace in 1964.  I watched George McGovern deliver his "Come Home America" acceptance speech delivered at 3:00 am in 1972.  I sputtered in helpless rage as the Chicago police rioted in 1968 essentially beating anyone they could reach.  But as political conventions became more scripted, they became a whole lot less interesting.  This year I made a conscious effort to not watch these circuses.  I am just too old to survive such intense lying.

Of course, this doesn't mean I wasn't curious about the proceedings.  So I watched Colbert's coverage and read dispatches on sites I trusted.  And if these reports are to be believed—and there is no reason not to—these gatherings were even worse than I had imagined they would be.  Here are three of the best dispatches from the front.

First up we have an angry and heartfelt blast from Margot Kidder who was raised outside the bubble of "American Exceptionalism."  Swaggering arrogance is never welcome but when it comes dressed in the garb of the best the MIC has to offer, it becomes positively revolting and there is probably no way Ms. Kidder could be talked down from her righteous rage—even by someone like me who detests "exceptionalism" as much as she does.  So I'll just say, "You Go Girl."

Next we find Jeffrey St. Claire pointing out some of the absurdities of the Democratic Convention. (He even quotes Hunter Thompson.) It's quite a list and he still probably missed a few.  The problem the Democrats have is they claim to represent the interests of the average Joe—the same average Joe who hasn't had a raise since 1973—while in fact they have become an arm of global predatory lending.  Then there is the problem of promoting an "It Takes a Village" concern for humanity while at the same time promoting a belligerent militarism that would make Dr. Strangelove cringe.

Finally we get a report about the Wikileaks disclosure of the shenanigans practiced at the DNC against Bernie Sanders. Writer Patrick Lawrence marvels at the speed which this story of political corruption became a story about the evils of Putin and Russian intelligence.  Now I have NO idea if this is Putin's handiwork—Lord knows he has plenty of reasons to loathe Hillary Clinton.  But those of us who believe in fair elections must celebrate whoever posted the evidence that the Democratic nominating process was rigged.  My guess is that this point will be lost because after all, fair elections are not nearly so profitable and amusing as a new Cold War will be.

Sunday, July 24, 2016

The Historical Context of Mercantilism, Republicanism, Liberalism and Neoliberalism

After the financial crash of 2007-2008 caused an economic collapse, and after it became clear that the Bush and Obama administrations were unwilling to actually investigate, prosecute and incarcerate financial and banking executives for the crimes committed, many politically active people in USA and other countries began to dig deep into the philosophy of political economy that had allowed the financial industry to occupy such an overwhelming position of dominance over the rest of the economy.

The philosophical wreckage they have been excavating has generally come to be called "neoliberalism." It is a word which confuses many people, because it serves as a name for a set of economic beliefs and policies which are more easily recognized as being associated with political conservatism and libertarianism: the opening of the Wikipedia entry on "neoliberalism" is accurate enough on these economic beliefs and policies, which "include extensive economic liberalization policies such as privatization, fiscal austerity, deregulation, free trade, and reductions in government spending in order to enhance the role of the private sector in the economy." Generally, neoliberals believe that markets with untrammeled pricing mechanisms are a much fairer and more efficient means of allocating society's resources than any level of government oversight and intervention.

Neoliberals themselves actively seek to add to the confusion by denying they have a shared, coherent philosophy. A good, recent example—and from someone who is a self-professed "liberal" not a conservative—was this comment on DailyKos this past week: “Neoliberalism is not actually a thing.” It is exactly what neo-liberals themselves say. It is a smokescreen, intended to confuse and stymie inquiry. Philip Mirowski, a historian of economic thought at Notre Dame, and co-editor of one of the best expositions of neo-liberalism (The Road from Mont Pelerin: The Making of the Neoliberal Thought Collective, Harvard University Press, 2009; now available in paperback), took on this deception earlier this year in a paper entitled, The Political Movement that Dared not Speak its own Name.

Mirowski’s response to the severe reaction of neoliberals to his paper was posted to Naked Capitalism in April 2016: Philip Mirowski: This is Water, or Is It the Neoliberal Thought Collective?
I do not recommend anyone go read the above links right now, unless you are already familiar with the debate over neoliberalism and are prepared for some hefty intellectual lifting. For those people unfamiliar with the term “neoliberalism” and seeking to understand how it differs from liberalism, I recommend this excellent review of another book, including many of the comments in the thread, on
Naked Capitalism in March 2015: Comments on David Harvey’s “A Brief History of Neoliberalism”.

These are all excellent discussions and expositions of neoliberalism. Also excellent is the work of Corey Robin. See, for example, When Neoliberalism Was Young: A Lookback on Clintonism before Clinton, from April 2016, and Robin's response to critics. Robin puts his finger on a diseased main artery in our political discourse today, when he writes neoliberals, even those, such as Barack Obama and the Clintons, who refuse to call themselves neoliberals,
would recoil in horror at the policies and programs of mid-century liberals like Walter Reuther or John Kenneth Galbraith or even Arthur Schlesinger, who claimed that “class conflict is essential if freedom is to be preserved, because it is the only barrier against class domination.”
My own conclusion thus far is that much confusion will persist until neoliberalism is understood in the historical context of USA political economy, along with three other terms crucial to understanding this history:





Friday, July 22, 2016

Karl Polanyi and the Coming U.S. Election

I first noticed Bill Neal's writing many, many years ago. He always has some startling insights or turns of phrases that make his articles a welcome respite from the torrent of half-baked hash that now passes for news reporting and commentary. Neal's article is especially important now, because since Hillary Clinton has clinched the Democratic nomination, there has been what appears to me to be a concerted effort to drown out any discussion of neo-liberalism. Neal is especially good at identifying and highlighting the social and cultural implications of neo-liberalism.

Karl Polanyi and the Coming U.S. Election

by William R. Neal

It’s hard not to notice, during the American Presidential election drama, that despite all the debates and speeches, and multiple candidates, the terms “Neoliberalism” and “austerity” have yet to be employed, much less explained, these being the two necessary words to describe the dominant economic “regime” of the past 35 years. And this despite the fact that most observers recognize that a “populist revolt” driven by economic unhappiness is underway via the campaigns of Donald Trump and Bernie Sanders. With Trump, of course, we are getting much more, the uglier side of American populism: racism, xenophobia and misogyny, at least; the culture wars at a higher pitch.

Yet when Trump commented on the violence which canceled his Chicago rally on the evening of March 11th, he stated that the underlying driver of his supporters’ anger is economic distress, not the ugly cultural prejudices. The diagnoses for the root cause of this anger thus lie at the heart of the proposed solutions. For students of the Great Depression, this will sound very familiar. That is because, despite many diversions and sub-currents, we are really arguing about a renewed New Deal versus an ever more purified laissez-faire, the nineteenth century term for keeping government out of markets – once those markets had been constructed. “Interventions,” however, as we will see, are still required, because no one, left or right, can live with the brutalities of the workings of “free markets” except as they exist in the fantasyland of the American Right.

Americans have never been known to be systematic thinkers about policy matters, least of all in an election year, but still, it is a remarkable thing not to be able to name in public forums the ideas which have ruled the economics profession for decades now and therefore the policy options of elected officials who turn to economists for guidance. Barry Goldwater, renowned, if not done in, for his candor, had no difficulty naming the system he opposed in his acceptance speech in San Francisco, 1964, or in his ghostwritten book, the Conscience of a Conservative: it was liberalism in all its forms, but especially its interventions into private markets - Keynesianism. For Goldwater, that included federal Civil Rights legislation and even Social Security.

Therefore, some clarification is called for when deploying these two terms, or the Market Fundamentalism/Market Utopianism others have chosen, myself included, to more polemically describe the dominant economic orthodoxy of our time.

By Neoliberalism it is meant the revival of “classical economics” which first arose in the late 18th and early 19th centuries in England, with the founders’ famous names living on into our own time: Smith, Ricardo, Townsend, Malthus, Mill and Bentham and a few others. Early economic writers tended to reach into the world of biology, of Nature, for their metaphors and analogies, and these excursions had two main tendencies: to cite nature’s cooperative features, or alternatively, its tooth and claw brutalities, which was Malthus’ grim legacy, one which we have not fully shaken to this day. Continuing this tradition, classical economics later flirted seriously with Social Darwinism (see the influence of William Graham Sumner in the U.S. and Herbert Spencer in England), almost becoming engaged to it, and then underwent the “micro” revolution of marginal costs in the late 19th century as the profession strained for its “scientific” laurels.

David Harvey, the prolific, polymath Marxist writer, links the term Neoliberal to the later Victorian economists – Alfred Marshall, William Jevons and Leon Walras - who succeeded their earlier classical colleagues from the first decades of the 19th century. But the realities of the past 30 years in America leads one back to the primal cruelties described by Karl Polanyi in those early industrial days, in his masterpiece The Great Transformation, and the religious intensity of the first classicals, not the later Victorian ones, those who worked in an era when life for workers was supposed to have gotten much better, although the London of those better days still horrified savvy American observers like Jane Addams of the Settlement House movement.

Neoliberalism was later greatly influenced by the conservative work - the defense of markets against governmental interventions - of Friedrich von Hayek and Ludwig von Mises (The preference here is to keep the “von” in the names: it makes them sound more sinister…) in the 1920’s and 1930’s, and Milton Friedman in the 1970’s, thinking which eventually eclipsed the Keynesian “revolution” of the 1930’s, and its demand-labor focused “macro” policies and accompanying federal fiscal interventions. Friedman’s great debates with John Kenneth Galbraith in the 1970’s usefully date the decline of Keynesianism for the general public, and the rise of “supply-side” economics: keeping entrepreneurs happy (and hopefully, inventive) through tax breaks without end. Many of us recall the linking of justice in-the-law with justice in-the- economy, courtesy of the old Smith Barney television advertisements from the 1980’s, starring John Houseman from the movie The Paper Chase: these noble stock brokers “make money the old fashioned way, they earn it.” Decided British accent too, he had.

Monday, July 18, 2016

Talk about soft power!

One of the frustrations of looking at climate change from the perspective of the installed infrastructure, is realizing that compared to the problems of actually constructing the solar-powered society, figuring out how to pay for it is reduced to a few important monetary experts deciding which existing buttons to push.  All they must do is change their minds.

Today we look at a report by Bill Engdahl on just how hard it is to change economic minds in Russia.  Keep in mind that Russia's conversion back to "western-style-capitalism" happened at a most inopportune time.  Had that decision been taken in say, 1953, it would have likely had a much happier outcome.  In those days, the USA economists running around advising governments were mostly products of the New Deal / WWII.  They had pretty clear ideas of how to organize large-scale projects, put people to work, reduce income inequality, etc.  The guys who went to advise the "fallen" USSR after 1989 were, all of them, doctrinaire neoliberals.  The outcome was a disaster.  Life expectancies fell and the economy shrank more than the USA during the great depression.  Worst of all, Russia got into hock with the IMF / World Bank which insured they got regular doses of bad neoliberal advice.

One would think that after such a near-death experience, Russia would have thrown neoliberalism in all its forms on the trash-heap of history.  She would have plenty of justification for doing just that.  Yet as Engdahl reports, doctrinaire neoliberals hold important spots in the management of the Russian economy.  What is even more depressing is that these people have been rewarded with enough spifs over the last 25 years so that the idea that their crackpot theories are damaging their own economy is literally unthinkable.  Imagine  yourself a Russian economist.  You know that Marxism was an ongoing catastrophe so the alternative had to be tried.   So here come the experts from Harvard trying to explain how to build a better economy.  Little do you know that the economics they are peddling was, not so long ago, so discredited that George H.W.Bush called it "voodoo."  And then Margaret Thatcher explained that There Is No Alternative.  So the One True Faith is a set of ideas so ridiculously stupid and historically discredited that only a Harvard / Stanford / U Chicago indoctrination will induce an otherwise sentient being into accepting their validity.

I sincerely hope that the Russians figure it out.  This is an important nation with seemingly boundless potential.  In addition, the solar age will not happen without their enthusiastic participation.

Thursday, July 14, 2016

Wall Street's Fraud and Illusion of Social Utility

On April 5 2016, someone posted a story on DailyKos assailing Senator Sanders’ claim that “the business model of Wall Street is fraud.” I was shocked to see the story had enough support to elevate it to the DK recommended list, despite these provably false statements: say that the “business model of Wall Street” is fraud “to a significant degree” is completely irresponsible.  Do you know what else is part of their business model?  Helping enterprises raise capital in order to innovate and grow and provide goods and services to the economy.
On reflection, I realized that there are a lot of new people reading DailyKos who are—how to put this politely?—not completely aware of certain facts. Once or twice a year, Kos proudly notes how many more people are reading this site—which is great and certainly something to be proud of. But, it obviously means that we need to begin a new cycle of educating people about economics, banking, finance, Wall Street, and so on. The facts clearly show that Wall Street is NOT a net benefit to society, but a major reason why the United States continues to suffer poor economic performance for the bottom ninety percent of Americans.

Monday, July 11, 2016

Economic warmongering

As someone who was aware enough to be scared shitless by the Cold War, I find it distressing, to say the least, that there are those who think getting into another face off with Russia and China is somehow a good idea.  The Cuban Missile Crises was not fun for someone in eighth grade.  I was ecstatic when the Wall came down because I mistakenly believed we were finally going to see an end to this madness.  I had forgotten that the forces of institutional memory meant that people who had jobs in government or academe making up shameless lies about the USSR, had almost no other skills when the Warsaw Pact was dissolved.  So now they propose to make war in all its various forms against Putin's Russia.

Supposedly Putin's great international crime was the annexation of Crimea.  Considering that USSR lost approximately 500, 000 in the various pitched battles with the Nazis in WW II over Crimea, the idea that the West was going to get Crimea on the cheap by staging a coup in the Ukraine is insane.  This is a beloved piece of real estate to the Russians ever since Catherine the Great got it away from the Ottoman Empire.  Russia's Navy is headquartered in Sevastopol.  Russia's rich built vacation cottages there.  Think a combination of San Diego and Palm Springs paid for with a lot of blood.  The Crimeans, most of them ethnic Russians, took one look at the chaos and corruption in the Ukraine and overwhelmingly voted to rejoin Russia.  They couldn't believe their good fortune.

And so we see NATO last week make more menacing moves on the borders of Russia.  Of course, anyone who would actually risk a land war with Russia has to explain why they think they know more about fighting in Russia than Hitler and Napoleon.  So the whole standoff comes down to threats of a nuclear exchange—Mutually Assured Destruction (MAD)—and these days, one might suspect that Russia's missiles are better cared for than our own.  So that's out. That leaves economics as the weapon of last resort.  And while the smug financial Masters of the Universe may assume they have the upper hand in such a conflict, neoliberalism is looking shaky these days, payment systems can be replicated, and new trade connections made.  I am certain there are many Russians who will argue that economics sanctions have been a good thing because it forced them brush up on their legendary self-reliance.  And institutional memory means that the growing relationship with China is walking down some familiar hallways.

Monday, July 4, 2016

The British people have forfeited the confidence of their government

The Saker is not a big fan of the USA empire.  Anyone who has carefully followed the crimes of humanity carried out in the name of said empire eventually reaches a stage where even the tiniest stumble of the global ruling class is cause for at least a little celebration.  So there is a small amount of celebration mixed here with a stern warning of what how the Empire will react to a rejection from one of the founding members, and arguably the main inventor and designer of that Empire.  Brexit made a lot of very rich people very angry—not least because a lot of them lost a large pile of money.  Brexit was a peasants' revolt and like such revolts in the past, the big hammer is about to drop.  The slander against the peasants has already started.

While I am not so certain that the ruling classes are beyond redemption or as unwilling to accept a new set of operating instructions as The Saker.  In fact, I grew up in a country that had accepted Keynesianism as an alternate instruction set to the neoliberal swill that dominates economics today.  It was what made the economy so much better for the average worker that even today, that is what made the old days "good" in the minds of so many—especially the Brexit supporters in the English Midlands.

But the Saker is probably right for one simple reason—the English economy today, such as it is, is mostly the banksters in London doing things that are criminal or should be.  Hoping a criminal will go straight is usually misplaced because going straight is so much more difficult and risky than making money by stealing.  Criminals usually win because they will stop at nothing.  Crushing a peasants' revolt is a small price to pay to keep that gravy train rolling.

Monday, June 27, 2016

Will Brexit spread?

The Full Monty, a film set in Sheffield England is a sad but whimsical account of how six unemployed steelworkers attempt to scare up some money by becoming strippers.  While taking off one's clothes is considerably easier than making steel, organizing an act that will actually pay is difficult enough and at the end of the movie when the steelworker-strippers are lustily cheered by a house full of drunken women, there is a sense of accomplishment that passes for a happy ending.

Of course, this happy ending is all fiction.  The real story of Sheffield is far more miserable.  This city had been the heart and soul of English steelmaking since they started making knives in the 14th century.  In the 1740s, Benjamin Huntsman perfected a superior method for making crucible steel and by the 1850s, Henry Bessemer had moved to town with his vastly improved steel process.  Steel was now a mass-produced product and by 1900, Sheffield's population had grown to 491,000.  In 1973, the UK joined the EU.  In the 1980s, Margaret Thatcher "rationalized" Sheffield out of the steel business in an EU-wide restructuring of the industry.   Sheffield was probably targeted because of its long association with trade unionism. 120,000 people lost their jobs.  Sheffield lost its reason to exist.  And even if six of those ex-workers had managed a one-night payoff for going The Full Monty, that still leaves them suffering through an existential nightmare for over 30 years.

A.R. Heathcotes & Co - Steelworks

So guess what?  The people of Sheffield voted to leave the EU.  The vote was closer than in the surrounding countryside because Sheffield itself has become something of center for immigrant settlement.  But the folks who remembered what happened to their city and lives were still enough to carry the day.

The EU is failing for one simple reason. It is based on a ridiculously stupid idea—neoliberalism.  That idea set has been around since forever and can be directly implicated in such disasters as the Panic of 1873 and the Great Depression.  You can fill libraries with solid evidence why these crackpot ideas don't work.  Well, they do work for a tiny few who can afford to buy the economic conversation.  Explain to me how someone in Sheffield whose life is as disaster can EVER relate to people who spout meaningless neoliberal platitudes that were so carefully drilled into their heads as part of their "elite" educations.

What EU doesn't understand is that most people, if given a chance, would gladly throw their smug butts into a dungeon, but will at least vote to get them out of their lives.  Because while most detest the arrogance of our precious "elites," what really infuriates people is that they are so utterly incompetent at building a Europe that actually works for its citizens.

Some pretty good stuff is being written about Brexit.  The ruling class usually gets its way.  And goodness knows, they have a good chance of getting their way this time.  But for a brief moment, they have caught a glimpse of what a world looks like where they don't pick the outcome even after buying up the economics profession, the newspapers, and damn near all the politicians.  It's getting harder to bullshit people.  This is a story worth writing about.
  • The first article today asks a most obvious question, "why does the so-called left defend the EU?"
  • Alexander Mercouris speculates on the spread of Brexit, The US, the EU and the Spectre of Brexit
  • Finally, Michael Hudson snickers about the vast fortunes lost by folks betting the wrong way on Brexit.

Friday, June 24, 2016

Brexit, oh my

As someone who has long held the EU with suspicion, if not outright contempt, I suppose I should be celebrating that the Brits have voted to leave that poisoned organization.  But mostly, I feel fear and resignation because these votes rarely change anything.  The EU has a long history of forcing countries to keep voting until they get it "right."  Worse, the EU's fatal flaw is that it is essentially a neoliberal project and merely getting rid of it won't change much because the UK is awash in committed, home-grown neoliberals—including many in the leadership of the Brexit campaign.  In fact, outside of the campus of the University of Chicago, it would be hard to imagine anyplace where neoliberalism is more widespread and more pure than the Sceptered Isle.  In any case, the mechanics of actually leaving the EU are so convoluted that it will require an absolute minimum of two years to accomplish the task.

If the EU was in fact NOT a neoliberal project, it would probably be the glowing achievement envisioned by it founders.  But it isn't.  So the great task in front of those who are horrified by what the EU has become is to come up with a replacement for neoliberalism, not trash the organizational structure of the offices in Brussels.  Keynes explained the problem best.
“Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back”