Tuesday, April 26, 2016

George Monbiot on neoliberalism

Sometimes, I throw around the term neoliberalism as if everyone knows what it means.  Part of this is due to an allergy I have towards folks who like to reduce their debates to definitions.  I was on the debate team in high school and whenever the debate degenerated into some meaningless hairsplitting over definitions, I just wanted to quit.  I always thought that debate was a process that was supposed to yield better answers and definition debates never did that.  Worse, hairsplitting is something Protestant clergy pride themselves on and as a preacher's kid, I pretty much had my fill of this sort of posturing by 12.

The fundamental problems of debates over definitions are several:
1) because we can never really know exactly what is going on in someone's head, we don't even know if they are expressing their position accurately;
2) even the most devout hairsplitters have to acknowledge that there is probably widespread agreement on the basics so there is already enough agreement on terms to continue debating more essential issues; and
3) debates over definitions is a loser tactic—its what you do when you know your position is weak—a tactic designed to deliberately waste time.
Having said this, I do appreciate when someone with the writing chops of George Monbiot decides to define and explain some of the more serious problems associated with the practices of neoliberalism.  And the following effort is especially clear.  I approve of folks who include outcomes in a discussion of theory.  I have discovered in life that this is a highly useful practice.  Turns out it matters almost not at all what people claim to believe as religious or similar practice because at the end of the day, the only important issue is, "Are they good neighbors?"  This makes it easy because neoliberals are nightmare neighbors.

Neoliberalism – the ideology at the root of all our problems

Financial meltdown, environmental disaster and even the rise of Donald Trump – neoliberalism has played its part in them all. Why has the left failed to come up with an alternative?

George Monbiot, 15 April 2016

Imagine if the people of the Soviet Union had never heard of communism. The ideology that dominates our lives has, for most of us, no name. Mention it in conversation and you’ll be rewarded with a shrug. Even if your listeners have heard the term before, they will struggle to define it. Neoliberalism: do you know what it is?

Its anonymity is both a symptom and cause of its power. It has played a major role in a remarkable variety of crises: the financial meltdown of 2007‑8, the offshoring of wealth and power, of which the Panama Papers offer us merely a glimpse, the slow collapse of public health and education, resurgent child poverty, the epidemic of loneliness, the collapse of ecosystems, the rise of Donald Trump. But we respond to these crises as if they emerge in isolation, apparently unaware that they have all been either catalysed or exacerbated by the same coherent philosophy; a philosophy that has – or had – a name. What greater power can there be than to operate namelessly?

Inequality is recast as virtuous. The market ensures that everyone gets what they deserve.

So pervasive has neoliberalism become that we seldom even recognise it as an ideology. We appear to accept the proposition that this utopian, millenarian faith describes a neutral force; a kind of biological law, like Darwin’s theory of evolution. But the philosophy arose as a conscious attempt to reshape human life and shift the locus of power.

Neoliberalism sees competition as the defining characteristic of human relations. It redefines citizens as consumers, whose democratic choices are best exercised by buying and selling, a process that rewards merit and punishes inefficiency. It maintains that “the market” delivers benefits that could never be achieved by planning.

Attempts to limit competition are treated as inimical to liberty. Tax and regulation should be minimised, public services should be privatised. The organisation of labour and collective bargaining by trade unions are portrayed as market distortions that impede the formation of a natural hierarchy of winners and losers. Inequality is recast as virtuous: a reward for utility and a generator of wealth, which trickles down to enrich everyone. Efforts to create a more equal society are both counterproductive and morally corrosive. The market ensures that everyone gets what they deserve.

We internalise and reproduce its creeds. The rich persuade themselves that they acquired their wealth through merit, ignoring the advantages – such as education, inheritance and class – that may have helped to secure it. The poor begin to blame themselves for their failures, even when they can do little to change their circumstances.

Never mind structural unemployment: if you don’t have a job it’s because you are unenterprising. Never mind the impossible costs of housing: if your credit card is maxed out, you’re feckless and improvident. Never mind that your children no longer have a school playing field: if they get fat, it’s your fault. In a world governed by competition, those who fall behind become defined and self-defined as losers.

Among the results, as Paul Verhaeghe documents in his book What About Me? are epidemics of self-harm, eating disorders, depression, loneliness, performance anxiety and social phobia. Perhaps it’s unsurprising that Britain, in which neoliberal ideology has been most rigorously applied, is the loneliness capital of Europe. We are all neoliberals now.


The term neoliberalism was coined at a meeting in Paris in 1938. Among the delegates were two men who came to define the ideology, Ludwig von Mises and Friedrich Hayek. Both exiles from Austria, they saw social democracy, exemplified by Franklin Roosevelt’s New Deal and the gradual development of Britain’s welfare state, as manifestations of a collectivism that occupied the same spectrum as nazism and communism.

In The Road to Serfdom, published in 1944, Hayek argued that government planning, by crushing individualism, would lead inexorably to totalitarian control. Like Mises’s book Bureaucracy, The Road to Serfdom was widely read. It came to the attention of some very wealthy people, who saw in the philosophy an opportunity to free themselves from regulation and tax. When, in 1947, Hayek founded the first organisation that would spread the doctrine of neoliberalism – the Mont Pelerin Society – it was supported financially by millionaires and their foundations.

With their help, he began to create what Daniel Stedman Jones describes in Masters of the Universe as “a kind of neoliberal international”: a transatlantic network of academics, businessmen, journalists and activists. The movement’s rich backers funded a series of thinktanks which would refine and promote the ideology. Among them were the American Enterprise Institute, the Heritage Foundation, the Cato Institute, the Institute of Economic Affairs, the Centre for Policy Studies and the Adam Smith Institute. They also financed academic positions and departments, particularly at the universities of Chicago and Virginia.

As it evolved, neoliberalism became more strident. Hayek’s view that governments should regulate competition to prevent monopolies from forming gave way – among American apostles such as Milton Friedman – to the belief that monopoly power could be seen as a reward for efficiency.

Something else happened during this transition: the movement lost its name. In 1951, Friedman was happy to describe himself as a neoliberal. But soon after that, the term began to disappear. Stranger still, even as the ideology became crisper and the movement more coherent, the lost name was not replaced by any common alternative.

At first, despite its lavish funding, neoliberalism remained at the margins. The postwar consensus was almost universal: John Maynard Keynes’s economic prescriptions were widely applied, full employment and the relief of poverty were common goals in the US and much of western Europe, top rates of tax were high and governments sought social outcomes without embarrassment, developing new public services and safety nets.

But in the 1970s, when Keynesian policies began to fall apart and economic crises struck on both sides of the Atlantic, neoliberal ideas began to enter the mainstream. As Friedman remarked, “when the time came that you had to change ... there was an alternative ready there to be picked up”. With the help of sympathetic journalists and political advisers, elements of neoliberalism, especially its prescriptions for monetary policy, were adopted by Jimmy Carter’s administration in the US and Jim Callaghan’s government in Britain.

It may seem strange that a doctrine promising choice should have been promoted with the slogan 'there is no alternative'

After Margaret Thatcher and Ronald Reagan took power, the rest of the package soon followed: massive tax cuts for the rich, the crushing of trade unions, deregulation, privatisation, outsourcing and competition in public services. Through the IMF, the World Bank, the Maastricht treaty and the World Trade Organisation, neoliberal policies were imposed – often without democratic consent – on much of the world. Most remarkable was its adoption among parties that once belonged to the left: Labour and the Democrats, for example. As Stedman Jones notes, “it is hard to think of another utopia to have been as fully realised.”


It may seem strange that a doctrine promising choice and freedom should have been promoted with the slogan “there is no alternative”. But, as Hayek remarked on a visit to Pinochet’s Chile – one of the first nations in which the programme was comprehensively applied – “my personal preference leans toward a liberal dictatorship rather than toward a democratic government devoid of liberalism”. The freedom that neoliberalism offers, which sounds so beguiling when expressed in general terms, turns out to mean freedom for the pike, not for the minnows.

Freedom from trade unions and collective bargaining means the freedom to suppress wages. Freedom from regulation means the freedom to poison rivers, endanger workers, charge iniquitous rates of interest and design exotic financial instruments. Freedom from tax means freedom from the distribution of wealth that lifts people out of poverty.

As Naomi Klein documents in The Shock Doctrine, neoliberal theorists advocated the use of crises to impose unpopular policies while people were distracted: for example, in the aftermath of Pinochet’s coup, the Iraq war and Hurricane Katrina, which Friedman described as “an opportunity to radically reform the educational system” in New Orleans.

Where neoliberal policies cannot be imposed domestically, they are imposed internationally, through trade treaties incorporating “investor-state dispute settlement”: offshore tribunals in which corporations can press for the removal of social and environmental protections. When parliaments have voted to restrict sales of cigarettes, protect water supplies from mining companies, freeze energy bills or prevent pharmaceutical firms from ripping off the state, corporations have sued, often successfully. Democracy is reduced to theatre.

Neoliberalism was not conceived as a self-serving racket, but it rapidly became one

Another paradox of neoliberalism is that universal competition relies upon universal quantification and comparison. The result is that workers, job-seekers and public services of every kind are subject to a pettifogging, stifling regime of assessment and monitoring, designed to identify the winners and punish the losers. The doctrine that Von Mises proposed would free us from the bureaucratic nightmare of central planning has instead created one.

Neoliberalism was not conceived as a self-serving racket, but it rapidly became one. Economic growth has been markedly slower in the neoliberal era (since 1980 in Britain and the US) than it was in the preceding decades; but not for the very rich. Inequality in the distribution of both income and wealth, after 60 years of decline, rose rapidly in this era, due to the smashing of trade unions, tax reductions, rising rents, privatisation and deregulation.

The privatisation or marketisation of public services such as energy, water, trains, health, education, roads and prisons has enabled corporations to set up tollbooths in front of essential assets and charge rent, either to citizens or to government, for their use. Rent is another term for unearned income. When you pay an inflated price for a train ticket, only part of the fare compensates the operators for the money they spend on fuel, wages, rolling stock and other outlays. The rest reflects the fact that they have you over a barrel.

In Mexico, Carlos Slim was granted control of almost all phone services and soon became the world’s richest man. Photograph: Henry Romero/Reuters

Those who own and run the UK’s privatised or semi-privatised services make stupendous fortunes by investing little and charging much. In Russia and India, oligarchs acquired state assets through firesales. In Mexico, Carlos Slim was granted control of almost all landline and mobile phone services and soon became the world’s richest man.

Financialisation, as Andrew Sayer notes in Why We Can’t Afford the Rich, has had a similar impact. “Like rent,” he argues, “interest is ... unearned income that accrues without any effort”. As the poor become poorer and the rich become richer, the rich acquire increasing control over another crucial asset: money. Interest payments, overwhelmingly, are a transfer of money from the poor to the rich. As property prices and the withdrawal of state funding load people with debt (think of the switch from student grants to student loans), the banks and their executives clean up.

Sayer argues that the past four decades have been characterised by a transfer of wealth not only from the poor to the rich, but within the ranks of the wealthy: from those who make their money by producing new goods or services to those who make their money by controlling existing assets and harvesting rent, interest or capital gains. Earned income has been supplanted by unearned income.

Neoliberal policies are everywhere beset by market failures. Not only are the banks too big to fail, but so are the corporations now charged with delivering public services. As Tony Judt pointed out in Ill Fares the Land, Hayek forgot that vital national services cannot be allowed to collapse, which means that competition cannot run its course. Business takes the profits, the state keeps the risk.

The greater the failure, the more extreme the ideology becomes. Governments use neoliberal crises as both excuse and opportunity to cut taxes, privatise remaining public services, rip holes in the social safety net, deregulate corporations and re-regulate citizens. The self-hating state now sinks its teeth into every organ of the public sector.

Perhaps the most dangerous impact of neoliberalism is not the economic crises it has caused, but the political crisis. As the domain of the state is reduced, our ability to change the course of our lives through voting also contracts. Instead, neoliberal theory asserts, people can exercise choice through spending. But some have more to spend than others: in the great consumer or shareholder democracy, votes are not equally distributed. The result is a disempowerment of the poor and middle. As parties of the right and former left adopt similar neoliberal policies, disempowerment turns to disenfranchisement. Large numbers of people have been shed from politics.

Chris Hedges remarks that “fascist movements build their base not from the politically active but the politically inactive, the ‘losers’ who feel, often correctly, they have no voice or role to play in the political establishment”. When political debate no longer speaks to us, people become responsive instead to slogans, symbols and sensation. To the admirers of Trump, for example, facts and arguments appear irrelevant.

Judt explained that when the thick mesh of interactions between people and the state has been reduced to nothing but authority and obedience, the only remaining force that binds us is state power. The totalitarianism Hayek feared is more likely to emerge when governments, having lost the moral authority that arises from the delivery of public services, are reduced to “cajoling, threatening and ultimately coercing people to obey them”.


Like communism, neoliberalism is the God that failed. But the zombie doctrine staggers on, and one of the reasons is its anonymity. Or rather, a cluster of anonymities.

The invisible doctrine of the invisible hand is promoted by invisible backers. Slowly, very slowly, we have begun to discover the names of a few of them. We find that the Institute of Economic Affairs, which has argued forcefully in the media against the further regulation of the tobacco industry, has been secretly funded by British American Tobacco since 1963. We discover that Charles and David Koch, two of the richest men in the world, founded the institute that set up the Tea Party movement. We find that Charles Koch, in establishing one of his thinktanks, noted that “in order to avoid undesirable criticism, how the organisation is controlled and directed should not be widely advertised”.

The nouveau riche were once disparaged by those who had inherited their money. Today, the relationship has been reversed

The words used by neoliberalism often conceal more than they elucidate. “The market” sounds like a natural system that might bear upon us equally, like gravity or atmospheric pressure. But it is fraught with power relations. What “the market wants” tends to mean what corporations and their bosses want. “Investment”, as Sayer notes, means two quite different things. One is the funding of productive and socially useful activities, the other is the purchase of existing assets to milk them for rent, interest, dividends and capital gains. Using the same word for different activities “camouflages the sources of wealth”, leading us to confuse wealth extraction with wealth creation.

A century ago, the nouveau riche were disparaged by those who had inherited their money. Entrepreneurs sought social acceptance by passing themselves off as rentiers. Today, the relationship has been reversed: the rentiers and inheritors style themselves entre preneurs. They claim to have earned their unearned income.

These anonymities and confusions mesh with the namelessness and placelessness of modern capitalism: the franchise model which ensures that workers do not know for whom they toil; the companies registered through a network of offshore secrecy regimes so complex that even the police cannot discover the beneficial owners; the tax arrangements that bamboozle governments; the financial products no one understands.

The anonymity of neoliberalism is fiercely guarded. Those who are influenced by Hayek, Mises and Friedman tend to reject the term, maintaining – with some justice – that it is used today only pejoratively. But they offer us no substitute. Some describe themselves as classical liberals or libertarians, but these descriptions are both misleading and curiously self-effacing, as they suggest that there is nothing novel about The Road to Serfdom, Bureaucracy or Friedman’s classic work, Capitalism and Freedom.


For all that, there is something admirable about the neoliberal project, at least in its early stages. It was a distinctive, innovative philosophy promoted by a coherent network of thinkers and activists with a clear plan of action. It was patient and persistent. The Road to Serfdom became the path to power.

The left has produced no new framework of economic thought for 80 years. This is why the zombie walks

Neoliberalism’s triumph also reflects the failure of the left. When laissez-faire economics led to catastrophe in 1929, Keynes devised a comprehensive economic theory to replace it. When Keynesian demand management hit the buffers in the 70s, there was an alternative ready. But when neoliberalism fell apart in 2008 there was ... nothing. This is why the zombie walks. The left and centre have produced no new general framework of economic thought for 80 years.

Every invocation of Lord Keynes is an admission of failure. To propose Keynesian solutions to the crises of the 21st century is to ignore three obvious problems. It is hard to mobilise people around old ideas; the flaws exposed in the 70s have not gone away; and, most importantly, they have nothing to say about our gravest predicament: the environmental crisis. Keynesianism works by stimulating consumer demand to promote economic growth. Consumer demand and economic growth are the motors of environmental destruction.

What the history of both Keynesianism and neoliberalism show is that it’s not enough to oppose a broken system. A coherent alternative has to be proposed. For Labour, the Democrats and the wider left, the central task should be to develop an economic Apollo programme, a conscious attempt to design a new system, tailored to the demands of the 21st century.   more

Monday, April 25, 2016

Iceland proposes to take back the power to create money

Michael Lewis likes to recount the story about how the charlatans, who were turning Iceland's very conservative banks into the go-go ponzi schemes that wildly exceeded needs of that island's tiny economy, would flatter the natives by reassuring them that had a very special talent for such enterprises because they knew how to "manage risk."

Well, actually this story was partly true.  Iceland's largest industry, by far, is fishing the cold and dangerous waters of the North Atlantic.  Anyone who can do that knows that on a regular basis, they have to manage situations that would turn most of us white with fear.  Compared to riding out North Atlantic storms, the "risks" of money management are utterly trivial.  So when those crooked banks went belly-up, the natives pretty much decided that the banksters actually didn't know much at all about risk and treated them as the liars and failures they were.  Iceland sent a surprising number of them to jail.  In fact, Iceland may have jailed more crooked bankers for their schemes in the early 21st century than all the rest of the world combined.

So now that those risk-managing fisherfolk have discovered what a bunch of lightweights bankers really are, they have decided to take control of their money supply.  As the essay below indicates, taking on the international banking establishment at that level can be very hazardous to one's health.  But I seriously doubt the Icelanders will be intimidated—they have been laughing at real risks their whole life.  In USA, the only state that ever managed to set up a publicly controlled state bank is North Dakota.  Not surprisingly, North Dakota, like Iceland, has a serious percentage of Viking inhabitants.  And like for the Icelanders, surviving North Dakota winters is sometimes just as frightening as a North Atlantic storm.

Wednesday, April 20, 2016

Panama and money laundering

The recent revelations about the use of Panama as a tax haven have largely slipped under the radar.  I think I could put people to sleep at great distances by merely bringing up the topic.  But these revelations are very important because they expose a world where banking and organized crime meet to party.  Someone needs to explain why this is important and how it works.  So here is Michael Hudson on a 17 minute video.  I have also posted the transcript below.

Hudson bemoans the incredible entrenched power represented by these financial institutions and how difficult they will be to dislodge.  And there is nothing to make one believe he isn't absolutely correct.  Unfortunately, the powers they have are for looting and pillaging and we are in dire need of the power to build and remake.  So instead of trying to dislodge these casinos, perhaps is is simply more prudent to create alternative institutions.

Monday, April 18, 2016

Big Oil's coverup

According to the latest document dump, the oil industry had an excellent understanding of climate change and their role in the process as early as the 1940s.  Considering that most of us who believe we are ultra-informed didn't really understand the issues until James Hansen's remarkable testimony before the Senate in 1988, this news is stunning.  In fact, many didn't grasp the importance of climate change before Al Gore's movie An Inconvenient Truth in 2006.

Those who instinctively believe the oil industry is irredeemably evil are having a field day with this new information.  Many are comparing this proof of a coverup to the long process of denial by the tobacco industry.  Of course, that is a mighty stretch.  Anyone who stops using tobacco immediately starts to save money and get healthier.  Stopping the use of petroleum products is not nearly so easy or beneficial.  In fact, cutting out fossil fuel usage without a serious program of social and industrial redesign would lead to mass starvation and other forms of social collapse.

Yes, it is fun to point fingers at the people who supply us with the fuels we need to survive.  We can wonder why they didn't warn us when we had more time to figure out a meaningful solution to the climate change dilemmas.  But the answer to that question has an obvious answer—the oil companies didn't have a meaningful answer either.  And before we tout the power and resources of the carbon extraction industries, we should remember that it is now 28 years since Hansen (should have) awakened the people of goodwill to the problems of climate change and almost nothing has been done.  In fact, except for the efforts at solarizing the economy we like to highlight on this blog, 28 years of wheel-spinning has only seen the climate become much more dangerous.

The video at the end of this post is mind-boggling.  The sight of the oil industry citing Arrhenius' 1903 studies of the link between carbon consumption and climate change is breathtaking.  Must watch!

Friday, April 15, 2016

TBTF Banks Still being Allowed to Cut Deals to Avoid Prosecution

Former Obama Attorney General Eric Holder refused to prosecute the largest banksters because, he said, doing so might ignite another huge crisis in the financial system. Now its clear that Obama's new Attorney General, Loretta Lynch, is continuing Holder's policy: this past week, no less than Goldman Sachs was allowed to a $5 billion plea bargain rather than facing a real court of justice for its role in deceiving investors and causing the 2008 financial crisis.

$5 billion may sound like a lot of money, but as various experts are pointing out, it is really not that much. First of all, the actual amount of cash extracted from Goldman Sachs will probably only be around $3 billion. Second, much of that $3 billion will probably be accounted as an expense as thus deducted from what Goldman Sachs pays in taxes, meaning that part of the agreement is actually being paid by USA taxpayers, not Goldman Sachs. Third, even the full $5 billion is a small amount when compared to Goldman Sachs's $32.9 billion in profits on $102.5 billion in revenues the past three years. David Dayen notes in a posting at The New Republic, that the settlement is for deceit in about 530 mortgage-backed securitizations between 2005 and 2007. Each securitization probably averaged  $1 billion in size, and it would be a stretch to assume that Goldman Sachs did not make well over $2 billion on them.   

Finally, as Allie Conti notes in a posting at Vice, the Government Accountability Office (GAO) has estimated that the fraud committed by Goldman Sachs and other banks cost American homeowners $9.1 trillion on paper, while the resulting Great Recession cost the economy $22 trillion. so, Goldman Sachs caused trillions of dollars in damages, but is going to cough up mere billions - less than one percent - for its misdeeds.

Monday, April 11, 2016

Time is running out for a conversion to sustainable technologies

Trying to digest the remarkable news that 350,000+ people have plunked down a grand to get on a list to buy a car that won't be made for two years, and that they stood in a line to do it, I found myself watching a video of Elon Musk announcing his $135,000 Model X SUV.  It is pretty easy to see why this guy gets that many to part with their money to just buy a place in line.  Musk talks with the sort of ease and confidence of someone who has had a string of successes and knows what he is doing.  In the world of the Producer Classes, this is the prime requirement of a leader.

This, friends, is probably the most interesting subject of all.  History has shown that political revolutions are usually murderous failures.  The main reason is that one subgroup of the Leisure Classes is likely to be very much like the bums they replace.  The Roman Senators of 46 a.d. were probably a lot like USA Senators in 2016—vain, greedy, and clueless.  They are essentially conservative—they don't want things to change because mostly, they want more of the same.  The Producer Classes, on the other hand, want to change things very much and in the last 300 years, they have succeeded magnificently.  Whether the subject is communication, transportation, food production, or energy production and utilization, the methods and objects created by Producers are dramatically better than a few centuries ago.   As I like to say, aero engineers are not in the habit of wondering exactly what their "founding fathers" like Wilbur Wright thought about airplane construction.

So yes, Musk is a Producer and yes, Producers actually CAN change the world.  In fact, they are about the only ones who can.  And over the years, there have been some strategies for change that have worked a lot better than others.  Musk has chosen one of the best and he is executing it extremely well.  The basic plan is this:
  • The first products will be very expensive to make.  Therefore, you must get high prices for something no one has ever purchased before.
  • The best way to get high prices for a new product is to get premiums for soft features.  The most obvious is aesthetics but appeals to the human as a social animal who wants to be a responsible members of the larger group will also work quite well with something like an electric car.
  • Once you have figured out how to make something must-have with the trendsetters, the next step is to leverage this accomplishment by mass-producing a much more affordable version.
This strategy doesn't always work but it certainly has for Musk.  People now wonder if he can make so many cars.  Well, he does own the former NUMMI plant in Fremont California that at one time made 500,000 Toyota Corollas and Geo Prisms a year.  Some of the folks who made that operation work are probably still in the neighborhood.  He's already built his battery giga factory and it will soon start ramping up production.  Musk is a man on a mission.  And yet, these things take time.  It's one thing to say you want to have 30% of the passenger fleet electrified by 2025, but in the world of Producers, nine years in the future is next week.  Not only will Musk and Tesla have to sell 500,000 a year—all the other car makers will have to sell that many too.

Considering that with the possible exception of Musk, no one really knows how to sell these things so selling a half million cars is a TALL order.  Yes it will be easier once Musk has shown the way but it is still a LOT harder than it looks.  Musk builds brilliant cars.  He takes great joy in making something ridiculously interesting—not to mention crazy-fast.  People like buying products from someone who is out there trying to build something that is, as Steve Jobs would put it, insanely great.  And when electric cars become mainstream, the "revolutionary" who made it happen will be this Producer who first made them cool.

The follow is an article that highlights the massive problems of converting out of coal-fired electrical generation.  This is an industry that moves MUCH more slowly than the automobile business.  We should have been getting on with the conversion at LEAST a decade ago and yet we are still building brand new coal-fired plants.  Talk about not getting it.

Sunday, April 10, 2016

Commerce, Christianity and Civilization Vs. British Free Trade: Henry Carey on the British Forcing Opium on China

A week ago, I posted an excerpt from Commerce, Christianity, and Civilization, Versus British Free Trade. Letters in Reply to the London Times, by Henry C. Carey. Philadelphia, Collins, 1876. Though Carey today is rarely mentioned in economics textbooks, he was the leading USA economist of the mid-nineteenth century, a staunch protectionist who was probably the single greatest proponent of what was then called the American School of Political Economy.

If I may repeat part of what I posted last week: American protectionism was much more than simply a rejection of the concept of comparative advantage. Michael Hudson explains in the Preface to his 2010 book America’s Protectionist Takeoff: The Neglected American School of Political Economy:
The protectionist doctrine that shaped America's industry and agriculture... went beyond the narrow boundaries of today's economics discipline by deeming public policy and technology central to economic theorizing, not "exogenous." Analyzing what was needed to increase productivity, the American School emphasized that wages and prices had to be high enough to sustain rising living and educational standards for labor, and investment in rising energy mobilization by capital."
But the American School even went beyond that. Carey and other American School economists always kept in view the ultimate goal of economic policies: the establishment and enhancement of civilization. And unlike the competing British School of Adams, Ricardo, and Mill, a central element of the American School was morality. Note the heavy tone of scorn and sarcasm Carey uses in his fifth letter to the editors of the Times of London, as he reviews the British opium trade and its disastrous consequences for China.

Friday, April 8, 2016

No more steel-making in UK?

In my last post, I covered the possibility that China could build an infrastructure of energy renewables for $50 trillion.  This elicited a comment from the ever-perceptive Mike who wrote:
Note the complete absence of European and American companies—

"Beijing’s network will be the world’s biggest infrastructure project, if given the green light. The State Grid has already signed a memorandum of understanding with the Russian energy grid Rosseti, Korea’s Electric Power and SoftBank Group of Japan."

—because this is what the denial of the future does, it makes us losers in participating in the future economic boom that began with the oil embargo in the 70s, wherein American participation ended when Reagan removed the solar panels off the White House and persists to this day with distracting discussions of political will.
As someone who grew up in the 1950s and 60s, I find it difficult to remember that I now live in a country that has lost the ability to even make its own shoes.  So for those younger than me who have only been exposed to USA the incompetent, let me remind you that this was once a nation where almost nothing was impossible.  There was once a time when we could swagger with accomplishment and not appear ridiculous.

The loser mentality that provided the "rationale" for deindustrialization mostly came from the Brits.  Remember those Wall Street geeks who wore their Adam Smith ties and preached the "virtues" of "free trade"?  I am so proud of Tony who keeps trying to educate the rest of us on the difference between the American System of economics and the classical forms that come from the UK.  And now we see that that they are even going to lose their ability to make steel from ore.  It is encouraging to see there are still Brits for whom this matters, but mostly I hear them as voices in the wilderness.  As someone who has spent most of his life crying about the loss of USA's industrial muscle from the wilderness, I know how frustrating it can be.

(Update)  Apparently there have been a few emergency levers pulled and it looks like what remains of UK's steel industry may gain a short-term reprieve.  Isn't sentimentality great!  This won't fix the problems caused by two generations of under-investment, but hey, it gives the Indian owners something to play with.

Monday, April 4, 2016

China's $50 trillion renewable energy plan

So now we have a hard number on what it would cost to build a global solar infrastructure—the Chinese are telling the world they will do it for $50 trillion.  Since the Chinese tend to be the low-cost bidders for this sort of enterprise, we can probably assume this is about as low an estimate as we are likely to see.  My friendly amendment would be that they are only talking about stationary uses for energy (home heating, lighting domestic hat water, etc.).  It would be damn surprising if someone has calculated the costs of replacing fossil fuels for ocean shipping or anything that flies.  So let's double that figure and we have our unofficial blog slogan—serious discussions about cures for climate change start at $100 trillion.  And since any productive enterprise these days must also support the various corruptions of the Predator / Parasites, we may have to double that to $200 trillion.

This is unlikely to be the final word on any serious conversion to renewables, but it's an interesting start.

Sunday, April 3, 2016

Commerce, Christianity, and Civilization Vs. British Free Trade: Henry Carey's replies to the London Times, February 1876

In January 1876, an editor of The Times of London penned an attack on the protectionist policies of the United States, which Commissioners in Canada were considering adopting for their country. The policy of free trade, the editor wrote, is "the cardinal doctrine of English political economy, which is held in this country as an unquestionable scientific truth, to question which must indicate ignorance or imbecility." Opposition to free trade and a protectionist policy, he wrote, "could not be honestly held by an intelligent person."

The Times editor excoriated by name Henry C. Carey, the leading USA economist of the time, a staunch protectionist who had written the economic policy planks of the 1860 Republican Party platform on which Abraham Lincoln ran for President. But American protectionism was much more than simply a rejection the concept of comparative advantage. Michael Hudson explains in the Preface to his 2010 book America’s Protectionist Takeoff: The Neglected American School of Political Economy:
The protectionist doctrine that shaped America's industry and agriculture... went beyond the narrow boundaries of today's economics discipline by deeming public policy and technology central to economic theorizing, not "exogenous." Analyzing what was needed to increase productivity, the American School emphasized that wages and prices had to be high enough to sustain rising living and educational standards for labor, and investment in rising energy mobilization by capital."
But the American School even went beyond that. Carey and other American School economists always kept in view the ultimate goal of economic policies: the establishment and enhancement of civilization.

In the Conclusion to his 1851 book, The Harmony of Interests: Agricultural, Manufacturing & Commercial, Carey wrote that the British system of free trade "looks to pauperism, ignorance, depopulation, and barbarism," while the American School aims "to increasing wealth, comfort, intelligence, combination of action, and civilization."
Such is the true MISSION of the people of these United States. To them has been granted a privilege never before granted to man, that of the exercise of the right of perfect self-government; but, as rights and duties are inseparable, with the grant of the former came the obligation to perform the latter. Happily their performance is pleasant and profitable, and involves no sacrifice. To raise the value of labour throughout the world, we need only to raise the value of our own. To raise the value of land throughout the world, it is needed only that we adopt measures that shall raise the value of our own. To diffuse intelligence and to promote the cause of morality throughout the world, we are required only to pursue the course that shall diffuse education throughout our own land, and shall enable every man more readily to acquire property, and with it respect for the rights of property. To improve the political condition of man throughout the world, it is needed that we ourselves should remain at peace, avoid taxation for the maintenance of fleets and armies, and become rich and prosperous. To raise the condition of women throughout the world, it is required of us only that we pursue that course that enables men to remain at home and marry, that they may surround themselves with happy children and grand-children. To substitute true Christianity for the detestable system known as the Malthusian, it is needed that we prove to the world that it is population that makes the food come from the rich soils, and that food tends to increase more rapidly than population, vindicating the policy of God to man.... (pp.228-29) 
In his letters to The Times of London, Carey reviewed in detail the results of free trade policies in Britain, with the results of protectionist policies in France (an excerpt of this comparison is below). He then reviews the results of British free trade policies in China and India, detailing the ruin those unfortunate countries had been driven into by the so-called "Christian" traders of Britain. The fifth letter, in particular, throbs with Carey's moral outrage as he describes how Britain deliberately set about poisoning the people of China with opium. At a later date, we will provide a large extract from that letter.

For now, here is a smaller excerpt from the much tamer third letter, dated Feb. 18, 1876, comparing the economic policies of Britain, France, and the United States.

Excerpt from Commerce, Christianity, and Civilization, Versus British Free Trade. Letters in Reply to the London Times, by Henry C. Carey. Philadelphia, Collins, 1876.

In the sixty years that have passed since the close of the great war, France has, as I believe, never once attempted to interfere in our affairs; nor, so far as I can recollect, have the French people sought in any manner to influence our legislation. She and they have been content to allow us to determine for ourselves our commercial arrangements, confident that, whatsoever might be their form, French skill and taste would so far triumph over such obstacles as might be raised as to enable France to participate in supplying the great market the Union now presents. 

Widely different from this, British interference has been persistent throughout this whole period, increasing in its force as the danger to British interests became more clearly obvious. On one  occasion, some five and twenty years since, your then minister  had the bad taste, if not even the impertinence, to send to our Department a lecture on the folly of protection, accompanied by a strong remonstrance against increase in the duties on British iron. Of the course that has been since pursued some idea may be formed after a study of the exhibit, made in a document herewith of the discreditable proceedings of the Canadian Commissioner in reference to that, so-called, Reciprocity Treaty whose adoption he then was urging; these things having been done under the eye, and, as we have every reason to believe, with the sanction of the minister under whose roof the commissioner was then residing.  The corruption then and there practiced may be taken as the type of the whole British action in this country; agents being sent out  to lecture on the advantages of free trade; journalistic correspondents being purchased; Cobden Club publications being gratuitously distributed; and our domestic affairs being in every possible manner interfered with; with simply the effect of proving that there reigns abroad great fear that the Union may speedily achieve an industrial independence and thus emancipate itself from the system described more than a century since by Joshua Gee when assuring  his countrymen that more than three-fourths of the products of these colonies were absorbed by British traders, and that the share allowed  to the colonists scarcely sufficed to purchase clothing for their families and themselves.

Turn now, Mr. Editor, to your own journal of the 25th alt., and  re-read the inquiry there made as to "what possible outlet we can  have for our produce in the event of such an important purchaser  being lost to us permanently;" following this up by study of your  answer to the effect, that "the high tariff so long maintained by  the United States has at length brought her producing powers up  to her requirements," and that, therefore, "we cannot but great!" fear that the crisis of depression is by no means past, and it is not  improbable that the list of works that have to.be closed for want  of orders will be augmented, and many more workmen be thrown  out of employment before the year is out." Turn next to your  report of the Address of the President of the Sheffield Chamber of  Commerce, and find him admitting that although "they had argued  during the term of the free trade agitation that protected industries  failed, that the quality deteriorated, and the enterprising manufacturers began to stagnate, that did not seem to apply to American  manufacturers;" the general result at which the speaker had arrived  being precisely that which you yourself had just before suggested,  to wit, that the American market had been lost, and had been so  because of a protective tariff such as you have now denounced.

Thursday, March 31, 2016

HAWB 1800s - The Doctrine of High Wages - How America Was Built

The United States was established as a republic, at a point in world history when all other systems of government were monarchies, oligarchies, or some other form of despotism. What, then, are the proper precepts of political economy that a republic should use to organize and structure its economy?

In Securing the Fruits of Labor: The American Concept of Wealth Distribution, 1765-1900,
(Louisiana State University Press, 1998), Oklahoma State University history professor James L. Huston writes:
The republicanism that American leaders came to advocate held sacred the ideals of individual liberty, the equality of the citizens before the law, distrust of governmental power and of political demagogues, simplicity and frugality in the behaviors of the people, and public exhibition of virtue--the willingness of citizens to sacrifice their individual self-interest to obtain the common good. An important economic corollary of republicanism established primarily by Englishman James Harrington (1611-77) during the Puritan Commonwealth was widely acknowledged by American revolutionaries: to endure, a republic had to possess an equal or nearly equal distribution of land wealth among its citizens.
As the United States began to industrialize and urbanize, increasing number of citizens no longer lived and worked on the land, let alone owned land. The great failure of Thomas Jefferson and his Democratic-Republican Party (which later became the Democratic Party) was their inability to conceive of a way in which workers and the propertyless could be just a virtuous as agrarians and pastoralists, and also be accorded a full voice in public affairs. Instead, they sought to stymie and retard the progress of industrialization in the hope of prolonging their idyll of a republic dominated and ruled by agriculturalists.

The problems of that approach should be obvious. To lift propertyless workers to the exalted station of citizens of the republic, while preserving the republican notion of an equitable distribution of wealth, a theory of wage income began to develop which certain American economists came to call, by the last quarter of the nineteenth century, the Doctrine of High Wages:

Tuesday, March 29, 2016

Tesla's raw materials

Those of us who are fans of green technologies must be on guard against sloppy thinking.  It is FAR too easy to ignore the fact that even while making a concerted effort to transition towards energy renewables—easily job one in any plan to save the planet from ourselves—a great deal of the old technologies and their ghastly environmental problems will be necessary to build a better future.

The following illustrates the massive environmental costs necessary to build a Tesla Model S.  Start with the simple problem caused by making something that weighs in at 4647 pounds (2108 kg.).  Assuming fabrication losses of at least 50%, that means this beast requires something on the order of 3.5 tons of raw materials and goodness knows how much energy it takes to process.  Then, because an electric car requires a radically different material set, very little of these material will come from recycling old cars.

So while the Tesla S is a hugely important car, it is obvious cars like this will play a minuscule role in replacing the monster fleets of fuel burners already on the road (250+ million in USA alone).  The new transportation systems would do well to incorporate recycled materials into their designs—something that was obviously NOT done with the model S.

I found the illustration below incredibly interesting—sometimes in the rather insignificant details.  For example, the Tesla doesn't use nearly as many rare earths as one might expect for an all-electric vehicle.  In fact, the only application seems to be for the cabin's electronics.  Apparently you can make a high-performance electric car without rare earth materials but not premium sound system speakers.

Sunday, March 27, 2016

Killing the Host-How Financial Parasites and Debt Destroy the Global Economy, by Michael Hudson

Chris Hedges interview of Michael Hudson, author of Killing the Host—How Financial Parasites and Debt Destroy the Global Economy.

Michael Hudson is one of the best economists in the world. Not just because he is one of the few who actually knows about what used to be known as the American School of political economy, but he has also worked on Wall Street, and somehow came away with his soul intact. If you never read anything else on economics, you must at least read Hudson’s 1993 The Lost Tradition of Biblical Debt Cancellations (87 page pdf file). 

Chris Hedges is a former New York Times correspondent who covered almost every region of the world at one time or another. In November 1989, Hedges was in East Germany, meeting with the leaders of the opposition to Communist rule, the night before the Wall came down. According to Robert Shetterly’s Americans Who Tell the Truth website,
In 2002, [Hedges] was part of a team of reporters for The New York Times who won a Pulitzer Prize for the paper’s coverage of global terrorism. That same year he won an Amnesty International Global Award for Human Rights Journalism.
In 2003, shortly after the war in Iraq began, Hedges was asked to give the commencement address at Rockford College in Rockford, Illinois. He told the graduating class “…we are embarking on an occupation that, if history is any guide, will be as damaging to our souls as it will be to our prestige, power and security.” ... As he spoke, several hundred members of the audience began jeering and booing. His microphone was cut twice.  Two young men rushed the stage to try to prevent him from speaking and Hedges had to cut short his address.  He was escorted off campus by security officials before the diplomas were awarded. This event made national news and he became a lightning rod not only for right wing pundits and commentators, but also mainstream newspapers. The Wall Street Journal ran an editorial which denounced his anti-war stance and the The New York Times issued a formal reprimand, forbidding Hedges to speak about the war.  The reprimand condemned his remarks as undermining the paper’s impartiality. Hedges resigned shortly thereafter….
Hedges has since emerged as one of the most prominent and most unrelenting critics of the American imperialist / corporatist state. Among the many books he has written is The Death of the Liberal Class (2010).

Michael Hudson and Chris Hedges: The Real World Cost of Turning Classical Economics Upside Down

Friday, March 25, 2016

Greider on how Trump could beat Clinton

In 1997, Bill Greider penned what is arguably the finest critique of the whole "free trade" argument.  He called it One World, Ready or Not: The Manic Logic of Global Capitalism. By the time it was published, NAFTA was already four years in the rear-view mirror.  So relying on old-fashioned shoe-leather reporting, he told stories of what was happening to the victims of globalization.  This is a story that virtually no one else was telling in the growing euphoria of the ideological "success" of "free trade"—especially among among the "New Democrats" who were so infatuated with their new Wall Street buddies.

So it is with a bit of wonderment that we see the two most interesting folks running for president are getting traction from finally revisiting the central feature of neoliberalism—liberalized trade rules.  One is a self-described democratic socialist from laid back and sometimes hippie Vermont while the other is a loud and brash real estate player.  They seem to have nothing in common apart from their New York roots and their pronunciation of the word huge—yuuuge.  Yet Greider sees how their combined critique of those disastrous "free trade" deals could begin to rewrite the political narrative.

Greider is arguably the best writer / political prognosticator of his generation.  (He is certainly my favorite.)  So he may right about this.

Tuesday, March 22, 2016

Intel founder Andy Grove passes at age 79

Here is the story from the San Jose Mercury News, the newspaper of record for Silicon Valley. And here is the story from Wired magazine's website.

Rather than replicate their biography of Grove, I would rather point readers to an article Grove wrote in July 2010,  How America Can Create Jobs, in which he ripped into outsourcing and free trade, and asked a fundamental question: "what kind of a society are we going to have if it consists of highly paid people doing high-value-added work—and masses of unemployed?" (below)

It should also be noted that Grove was an immigrant from Hungary. Both the fact that Grove was an immigrant, and that he repudiated free trade, should be rubbed in the faces of Republicans, conservatives, and neo-liberals until they squeal.

A highly entertaining read, which ably contrasts the producer class ethos in conflict with predator class pecuniary culture, set in the context of the birth of the semiconductor industry, is The Tinkerings of Robert Noyce: How the Sun Rose on the Silicon Valley, by Tom Wolfe, in Esquire, December 1983.

Monday, March 21, 2016

Making sense of the Trump phenomenon

Watching the Republican establishment running in circles over their worries about the spectacle that is Donald Trump has literally triggered a spasm of schadenfreude.  The Democrats are predicting the collapse of his campaign and a cakewalk for their candidate—presumably Hillary Clinton.  The Stop Trump movement is pulling out all the stops—including physical disruption of campaign events.

Most interestingly, none of the attacks on Trump seem to have inflicted any damage to his growing political support.  Considering that Howard Dean's presidential ambitions were derailed by repeatedly running his joyous victory shout, one might predict that the barrage of professionally-produced negative ads run against Trump in Florida should have blown him out of the water.  Instead, his polling numbers went up with each new ad drop and he won the Florida primary going away.

Since the professional political pundits seem to have no real explanation for such loyalty beyond their slander of racism, we should probably jump in here with a good round of institutional analysis.
  1. Producers vs Predators.  Once upon a time, the Republican party was a party of Producers.  My mother's side of the family were essentially social democrats with one exception—some of her cousins ran a machine shop in Minneapolis and they were loyal, lifetime Republicans.  My guess is that this strain still exists even after more than 40 years of banksters setting the Republican agenda.  Romney was a bankster and the Producer Republicans hated him.  Trump has stuck his neck out to build something—risking his personal fortune along the way. So even though few write political commentaries about Producers vs Predators, Trump's following seems to have an instinctive feel for these matters.
  2. Producer-politicians are usually pretty clumsy politically.  They usually run afoul of some sort of political correctness.  But as Trump has discovered, his following is not impressed by the arguments of political correctness.
  3. The enforcers of political correctness are merely a slice of the Leisure Class who want to rule by manners.  This method is extremely effective for separating the insiders from the rabble.  And so the Trump-bashers take great joy in pointing out that many of those voting for him are poor and poorly educated.  The Producers would point out that one can lack formal educational credentials and still be highly skilled.  They would also point out that before the massive de-industrialization of USA, they were NOT poor either.
Producers in politics do not have a great track record.  The two engineers who became president—Carter and Hoover—were not especially effective.  Guys like Henry Ford and Ross Perot didn't even win anything.  Hard to get around the fact that politics is a Leisure Class occupation.

Thomas Frank in his article below has discovered that the buffoonishness which is associated with the Trump campaign is mostly a distraction from his very serious arguments attacking the various "free trade" deals that mostly gave away USA industrialization in the name of short-term profits for some really stupid and cynical banksters.  Being a good Democrat, Frank spends a bunch of time reassuring us that he is still politically correct even though he has discovered perfectly logical reasons for why Trump has attracted such a loyal following.

One more thing.  The banksters and their flacks may be able to snuff out the political movements of Trump and Sanders, but until the Producer Classes are properly rewarded for their contribution to the economy and everyone who wants to work has a decent job, the problems they represent will not go away.

Monday, March 14, 2016

Undoing neoliberalism in Russia

When Russia under Gorbachev and then Yeltsin decided to "modernize" their economy, the guys who rushed in to "help" were the neoliberals.  Not surprisingly, their prescriptions mostly centered around massive de-industrialization.  That was the prescription for places like USA and UK, after all, so why not Russia where their industrial infrastructure was in an even more sorry state?  It was difficult to find any Russian industry with a world-class output, went the reasoning, so why not just shut it down and live off the income of the petroleum extraction business?

When the economic sanctions that followed Russia's annexation of Crimea in the spring of 2014 began to bite, Russia discovered that they were importing a lot of goods they had once made for themselves.  So the decision was made to start reversing the process of deindustrialization through import substitution.  This was the primary strategy of economic development in the years after WW II for much of the world.  Japan was the most successful at their planned strategy of import substitution but it worked almost everywhere it was rigorously tried.  The economic "liberals" hated it then and they most certainly hated it in 2014.

So Russia is in the very early stages of their new import substitution strategy and not surprisingly, it has produced mixed results.  Re-industrialization is almost infinitely more difficult than de-industrialization so these things take time.  Worse, Russia has a severe neoliberal hangover from the days when such was the only acceptable worldview.  The most obvious example is the crazy lady running the central bank who believes that usury is the cure for inflation—even inflation caused by externally imposed sanctions.  So the prime rate is still at 11%—a rate mathematically guaranteed to severely hamper or destroy any industrial activity.  That any import substitution is happening at all is mostly a testament to the courage and tenacity of the Russian people.

The neoliberals from places like The Economist have already deemed Russia's strategy for import substitution an utter failure.  No great shock here because such people think that Russia is literally defying the laws of their god.  On the other hand, Hellevig below thinks the project is working out well.

Thursday, March 10, 2016

HAWB 1800s - It was NOT free trade - How America Was Built

During the past two weeks there have been a number of internet postings attempting to understand and explain the popularity of Donald Trump. The most insightful have been by scholars and writers who are willing to look beyond the issue of racism to see the underlying decay of the USA economy. On the Guardian's website March 7, 2015, Thomas Frank, author of What's the Matter with Kansas? How Conservatives Won the Heart of America (2004), The Wrecking Crew: How Conservatives Rule (2008), Pity the Billionaire: The Hard-Times Swindle and the Unlikely Comeback of the Right (2011), and most recently, Listen, Liberal: How the Party of the People Learned to Love Inequality (2016), pointed out that Trump actually does not talk that much about racism. Not compared to what he talks about the most: trade.
It seems to obsess him: the destructive free-trade deals our leaders have made, the many companies that have moved their production facilities to other lands, the phone calls he will make to those companies’ CEOs in order to threaten them with steep tariffs unless they move back to the US.
The fact that working Americans in flyover country are supporting Trump as a way of rejecting economic neo-liberalism and free trade, is even beginning to sink in among conservatives and Republican elites. First Things editor R.R. Reno wrote on March 4, that Trump's appeal has forced Reno to question
very powerful conservative dogma: Our economic problems will be solved by an ever-greater market freedom. This means lower taxes for the rich, those pushing the economy forward. It also means continuing the liberalization of global markets with free trade agreements, as well as de-regulation and the end of government supports for businesses (for example, the Import-Export Bank, subsidies for green power, and other market-distorting initiatives.) In rejecting this dogma, Trump is unique among Republican primary candidates.  
....globalization and ever-freer markets [are] something I’ve long thought is our best option as a nation. I half-recognized the real costs to ordinary people, but I affirmed the homeopathic dogma that still more economic freedom is the best remedy.... In each instance Trump’s successes at the polls have forced me to acknowledge a degree of blindness.
Here, the obvious observation: Those who forget history are doomed to repeat it. Or, history may not repeat, but it rhymes. Whatever. My purpose here is to explain, once again, that "free trade" has never helped a country develop economically. Every country that ever successfully industrialized has used protectionism - i.e., protected its domestic producers and workers from foreign predation.

Monday, March 7, 2016

Remembering Olof Palme

The first book I ever read that I deemed "serious" was Markings by Dag Hammarskjöld—the UN Secretary-General from 1953 until his death / murder.  His airplane had crashed under suspicious circumstances in 1961.  Markings was published in 1963.  I read it in 1965.  I was 16.

I am almost certain I would have never heard about Markings had not my father returned from some Swedish-Lutheran liturgical get-together with tales of the buzz the book had caused in the church colleges.  I am pretty certain my father did not read it.  My mother may have.  The copy I read belonged to my mother's cousin.

Hammarskjöld is an old Viking name—as compared to a peasant name like Larson.  The family has been loyally keeping the Swedish royals out of trouble for several centuries—his father served as Swedish Prime Minister during World War I and was considered a world-class expert in international law.  Dag grew up in Uppsala—Sweden's premiere university town.  He was a smart young man who had every possible educational door opened for him.  The result was spectacular as Hammarskjöld grew into a thoughtful, wise man with profound insights into the human condition.  I reread Markings a few years back and found parts that were still breath-taking.

But even reading Markings did not prepare me for my first exposure to Olaf Palme's Sweden in 1970.  Except for his well publicized criticisms of the USA invasion of Vietnam, I actually knew very little about him at all.  But as I toured that country humming with world-class industry and no slums, I started to get clues of just what it required to become the leader of the Social Democrats of Sweden.  It turned out that Palme was another of those hyper-educated, thoughtful, and brilliant public servants that Sweden could cough up on a regular basis in those days.  Not only did he make great decisions about the operation of his country, he had a sound theoretical basis for his ideas.  The result was that Palme's Sweden became arguably the most imitated and admired country on earth.

Unfortunately, his belief in the intrinsic goodness of human nature did him in.  On a cold February night, Palme and his wife went to the movies unescorted by guards.  He hated the whole security business and ditched it regularly.  It made him an easy target for an assassin.  The crime has never been solved and the list of bad guys with bad motives is long.  But whoever they were, they really took out the right guy.  The Left in Europe has really never recovered.  Sweden has lost much of its unusual character.

Saturday, March 5, 2016

Why Conservatives Can't Govern

With all the attention being given The Donald, I think it is worth remembering that it doesn't really matter who it is, the plain fact is that conservatives are unable to govern. Back in July 2006, Boston College professor Alan Wolfe entertainingly explained why in The Washington Monthly:
Conservatives cannot govern well for the same reason that vegetarians cannot prepare a world-class boeuf bourguignon: If you believe that what you are called upon to do is wrong, you are not likely to do it very well.
The only part I disagree with is where Wolfe writes that Alexander Hamilton was "perhaps America's greatest conservative." Just four paragraphs before, Wolfe approvingly paraphrased Louis Hartz's argument in the 1950s that the United States was born a liberal state. Since few others had as great a hand in forming the USA than Hamilton, the contradiction should be obvious. Was Hamilton somehow a great conservative who helped establish a liberal state? This confusion is sadly typical of most Americans today, who seem not to understand that Hamilton completely demolished and rejected the economic philosophy of Adam Smith.  In fact, as I recently posted, Hamilton championed an economic policy that was most decidedly not conservative: active government intervention in the economy to promote innovation. Contrast this to the constant insistence of conservatives and Republicans that it is government regulation which is stifling innovation. As I am attempting to show in my HAWB series - How America Was Built - almost every single transformative technology in the history of the USA economy has been promoted and funded by government before that technology achieved commercial success.

Monday, February 29, 2016


In her desperate attempt to escape the labels of "war criminal" and "Wall Street sellout," Hillary Clinton likes to trot out her longtime support for micro-lending.  The story of Muhammad Yunus and the Grameen Bank is pretty well known because it has been featured favorably in the big USA press like CBS.  In their telling, this bank has empowered women to free up their entrepreneurial passions and has brought prosperity to the rural poor of Bangladesh.  Yunus and his bank were even awarded the Nobel Peace Prize in 2006 for the achievement of putting a small smiley-face on neoliberalism.

Under the happy talk of micro-lending, unfortunately, we are still talking about a scheme to drive the poor into debt (as if they don't already have enough problems.)  And while I am certain that the Grameen Bank's rates are better than the rural loan sharks will offer, we are still talking about 20% in 2016.  Considering the prices for commodities are falling which removes income from rural economies, interest rates should be less than 1% (unless the goal is only to enslave people.)  Usury is a vicious business—there are sound reasons why Christianity considered it a sin worse than murder for its first 1500 years.  Happy talk can change the subject but it cannot change the facts—20% loans cannot be repaid with honest enterprise.

Bill Clinton actually took it as a compliment when folks would compare him to Grover Cleveland.  Cleveland was a tool of Wall Street too so the comparison is pretty good.  And for services rendered, the most Predatory of the finance capitalists have made him goofy rich since he left the White House.  Hillary has done all right for herself shilling for the likes of Goldman Sachs so perhaps she aspires to become Grover Cleveland squared.

Thomas Frank over at Harpers has written a fine piece dissecting the latest outburst of Radical Chic.  It is hard to imagine what it must be like to be so rich and out of touch that 20% micro-lending seems like a good idea.  Hillary Clinton, meet Melinda Gates.  You two have SO much in common.