Sunday, February 28, 2021

Week-end Wrap – Political Economy – February 28, 2021

Week-end Wrap – Political Economy – February 28, 2021

by Tony Wikrent

Strategic Political Economy

Austerity and the Rise of the Nazi Party

Gregori Galofré-Vilà, Christopher M. Meissner, Martin McKee, and
David Stuckler
Economic History Association, published online by Cambridge University Press, 11 January 2021

We study the link between fiscal austerity and Nazi electoral success. Voting data from a thousand districts and a hundred cities for four elections between 1930 and 1933 show that areas more affected by austerity (spending cuts and tax increases) had relatively higher vote shares for the Nazi Party. We also find that the localities with relatively high austerity experienced relatively high suffering (measured by mortality rates) and these areas’ electorates were more likely to vote for the Nazi Party. Our findings are robust to a range of specifications including an instrumental variable strategy and a border-pair policy discontinuity design….

In this paper, we investigate the association between the austerity measures implemented by the German government between 1930 and 1932 and voters’ increased support for the Nazi Party. A growing literature studies the interactions between political preferences and fiscal policy with evidence that austerity packages are correlated with rising extremism (Alesina, Favero, and Giavazzi 2019; Bor 2017; Eichengreen 2015, 2018; Fetzer 2019; Ponticelli and Voth 2020)….

We also provide some novel quantitative estimates concerning the channels by which austerity mattered. To do so, we study the relationship between mortality rates and austerity. We find a plausible link, since where public spending on health care dropped more, mortality was higher. These places also saw a relatively large increase in Nazi support at the polls. Finally, looking at archival documents of Nazi propaganda, we document how Nazi leaders invoked austerity to attack Brüning and the Weimar Republic and how Brüning’s tax rises were seen as inefficient and unfair by the German masses. 

Eviction Moratorium Deemed Unconstitutional by Federal Judge in Texas

[Naked Capitalism 2-26-21]

Business Licensing and Constitutional Liberty
Amanda Shanor [The Yale Law Journal 314 (2016)]

….the Constitution is increasingly being invoked as a trump against certain types of economic regulation. My thesis is that the central arguments currently marshaled in favor of extending stringent judicial review to business licensing regulations are untenable. These lines of reasoning have no logical endpoint. Individual rights, on this view, could trump any manner of governmental regulation in favor of free-market ordering.

These business licensing cases raise deep and pressing questions about the purpose and scope of rights and constitutional judicial review more broadly today. Underlying these debates are competing conceptions of constitutional liberty. One view, perhaps the ascendant one, reflects free-market libertarian values, whereas others understand the First and Fourteenth Amendments to reflect ideals such as democratic self-governance, anti-subordination, or civic republicanism. Resolving disputes about the constitutional status of business licensing requires that we grapple with those deeper questions.

Sunday, February 21, 2021

Week-end Wrap – Political Economy – February 21, 2021

Week-end Wrap – Political Economy – February 21, 2021

by Tony Wikrent

Strategic Political Economy

Nietzsche’s Marginal Children: On Friedrich Hayek.

Corey Robin [The Nation, May 7, 2013]

Why have marxists and socialists failed so spectacularly in opposing movement conservatism and neoliberalism?  I think one major factor is an intellectual infatuation with Nietzsche, which blinds them to Nietzsche’s oligarchical pedigree and mindset. This is why I believe we need a revival of the ideas and ideals of civic republicanism, because the issues always come down to republicanism versus oligarchical elites. 

The Nobel Prize–winning economist Friedrich Hayek is the leading theoretician of this movement, formulating the most genuinely political theory of capitalism on the right we’ve ever seen. The theory does not imagine a shift from government to the individual, as is often claimed by conservatives; nor does it imagine a simple shift from the state to the market or from society to the atomized self, as is sometimes claimed by the left. Rather, it recasts our understanding of politics and where it might be found. This may explain why the University of Chicago chose to reissue Hayek’s The Constitution of Liberty two years ago after the fiftieth anniversary of its publication. Like The Road to Serfdom (1944), which a swooning Glenn Beck catapulted to the bestseller list in 2010, The Constitution of Liberty is a text, as its publisher says, of “our present moment.”

But to understand that text and its influence, it’s necessary to turn away from contemporary America to fin de siècle Vienna. The seedbed of Hayek’s arguments is the half-century between the “marginal revolution,” which changed the field of economics in the late nineteenth century, and the collapse of the Habsburg monarchy in 1918. It is by now a commonplace of European cultural history that a dying Austro-Hungarian Empire gave birth to modernism, psychoanalysis and fascism. Yet from the vortex of Vienna came not only Wittgenstein, Freud and Hitler but also Hayek, who was born and educated in the city, and the Austrian school of economics….

Throughout his writing life, Nietzsche was plagued by the vision of workers massing on the public stage—whether in trade unions, socialist parties or communist leagues. Almost immediately upon his arrival in Basel, the First International descended on the city to hold its fourth congress. Nietzsche was petrified. “There is nothing more terrible,” he wrote in The Birth of Tragedy, “than a class of barbaric slaves who have learned to regard their existence as an injustice, and now prepare to avenge, not only themselves, but all generations.” Several years after the International had left Basel, Nietzsche convinced himself that it was slouching toward Bayreuth in order to ruin Wagner’s festival there. And just weeks before he went mad in 1888 and disappeared forever into his own head, he wrote, “The cause of every stupidity today…lies in the existence of a labour question at all. About certain things one does not ask questions.”

Beware Economists Warning Against “Too Much Stimulus” (Again)
Barry Ritholtz, February 18, 2021 [The Big Picture]

If you want to blame a specific school of thought for why the post-financial crisis recovery was so weak, start with the group who opposed a trillion dollar fiscal response to the GFC.

The Anti-Stimulus, Anti-Rescue crew have not learned anything from their prior mistakes. Not everyone who signed onto the full page advertisement taken on in the New York Times on January 9th, 2009 remain n the anti-stimulus camp. But there is a substantial overlap between those on the list below who opposed a more robust response to the GFC and a current group opposed a more robust response to the pandemic…. Here is the CATO Institute’s full page NYT ad from January 9, 2009:

Sunday, February 14, 2021

Week-end Wrap – Political Economy – February 14, 2021

Week-end Wrap – Political Economy – February 14, 2021

by Tony Wikrent

Strategic Political Economy

“How The US Legalized Corruption”

[Indi Samarajiva, via Naked Capitalism Water Cooler 2-8-21]

“Americans have this thing called a fundraiser where you put a pile of bribes on a table, wave a wand of asparagus over it, and it just disappears. Access is still bought, but somehow because people ate food, it’s not corruption anymore. The press will literally report on the food. “In New York last weekend, $100,000 got donors a plate of grilled chicken and asparagus, a posed picture with President Trump in a palatial, 60-foot-long entryway, and a 20-minute group chat with the president. WTF is this? In any other country you wouldn’t report on the chicken, you’d report on the corruption.” (Details of a fund raiser dinner from the Washington Post).

Because this is all legal, Americans ignore how fucking insane it is. It’s just daylight bribery. This is what I mean when I say that America has legalized corruption. It’s not that your system is corrupt. Your system is corruption.

Property, Liberty, and the Rights of the Community: Lessons from Munn v. Illinois
Paul Kens [Buffalo Public Interest Law Journal, Volume 30 (2011)]

Abstract: When considering the extent to which the United States Constitution places a limit on government regulation of business, today's historians and constitutional theorists treat the question as a matter of balancing economic liberty or property rights against government power. Moreover, modem scholars commonly maintain that this balancing formula represents the predominant tradition in constitutional history. Tracing it back to the tenants of Jacksonian democracy that emphasized distrust of government, they imply that constitutional history has developed as a straight line: always with an emphasis on individual liberty and always with a presumption that entrepreneurial liberty should be favored over governments' power to regulate.

This paper will use the 1877 case Munn v. Illinois to demonstrate that prior to the late 1880s the paradigm for determining the constitution's limits on government regulation of business was actually quite different. There is no doubt that the Court has always emphatically recognized the importance of property rights. Nevertheless, during the first century under the Constitution, it treated business regulation as a matter of balancing entrepreneurial liberty against the rights of the community. Furthermore, it consistently held that, because state economic regulations were an expression of popular sovereignty and rights of the community, they should be presumed to be valid.

Munn is significant because in the conventional narrative it is portrayed as a steppingstone in the straight line evolution of constitutional doctrine that emphasizes individual liberty. A closer look at the case and the events surrounding it will demonstrate, however, that the majority in Munn actually based its opinion on the traditional emphasis on rights of the community. It will further demonstrate that for more than a decade after the opinion the Supreme Court steadfastly clung to that traditional view. Even under persistent pressure to change.

Fear of the Few: John Adams and the Power Elite
Luke Mayville [Polity, Volume 47, Number 1, January 2015]

Abstract:The political thought that informed the design of the United States Constitution largely neglected the danger posed by socioeconomic elites. The writings of John Adams, I contend, are exceptional in this regard. Using Adams’s writings as a vantage point, this article exposes two important blind spots in mainstream Founding-era thought and the Constitution it informed. Whereas the likes of Hamilton and Madison insisted that majorities held the clear preponderance of power in republican America, Adams maintained that an elite of wealth, birth, and beauty retained overwhelming power even after the abolition of formal distinctions. And whereas Federalists sought security against the threat of majority tyranny, Adams’s principal fear was of aristocratic tyranny—specifically, the tendency of the elite few to undermine both popular representation and effective government.

Sunday, February 7, 2021

Week-end Wrap – Political Economy – February 7, 2021

Week-end Wrap – Political Economy – February 7, 2021

by Tony Wikrent

Strategic Political Economy

If There’s No Fear of Inflation, Why is GOP Against More Stimulus? – Rana Foroohar and Mark Blyth — Transcript here


​​​​​​​Mark Blyth. ….arguing about deficits is just a footnote on the wider agenda of power for the sake of power. Why do they do this? Because they know that existentially Republicanism has run its course. As Rana just said, there’s only so much you can give to business before they’ve got everything, which is pretty much where we are now. There’s nothing more to give. We need huge amounts of infrastructure repair. We need huge amounts of social investment in the economy and elsewhere. And this is anathema to everything the Republicans have stood for and delivered on for the past 30 years, which is simply more money for me and to hell with the rest of you. So they’re not going to turn this around….

Rana Foroohar. I completely agree with that. And I think it actually brings up something I’m quite worried about, which is the fine line that the Biden administration has to walk right now in executing even part of their Build Back Better, Reward Work Not Wealth strategy, without creating such a bumpy ride from here to there that the Republicans can say, well, look, look what Joe Biden did. Now the markets have crashed... because if you think about what we’re trying to do, if we pull way back, this administration is trying to shift the American economy structurally from being an economy that is based on debt and asset price bubbles to one that is based on income and wage growth. And that’s a laudable goal. But it’s also like turning the Titanic.

….you might actually know when the markets crash that things are getting better in the U.S. economy because certain things have to be done. Raising taxes on companies, the labor share rising, some of the push for union labor that’s coming with the Defense Production Act. All of that is going to dampen profits. It’s going to frighten investors and the hot money is going to run.

Mark Blyth. ….the weird thing is there’s $18 trillion in negative yield and long-term government debt in the world today. Right. The existence of this is a bit like the existence of dark matter. It’s what binds the universe together. And if it exists, it means that all those other stories about hyperinflation, they simply can’t be true…. Because what it means is investors are willing to buy government debt at a loss. And if they’re willing to buy government debt at a loss simply because they want to purchase security, because they’re uncertain about the future, then by definition they cannot be expecting an inflation. Because if they were, they would insist on a higher interest rate, not a negative one….

….So let’s think about some of the models, that constrain us here. And I don’t mean sort of the fancy formal ones. I mean the informal ones in our heads. Most people do not understand that governments are not like households. Most people do not spend their time thinking about the difference between money and high-powered money, bank reserves, and all the rest of the stuff that makes government’s ability to finance itself qualitatively different from households, we’ve definitely love the household analogy… you’ve got to deal with the folk models in people’s heads. And the vast majority of Americans do not think that running up extra 15 trillion dollars in debt just because there’s a virus that’s taking out one in a hundred people is a good idea. And if you do that when it comes to the midterms, you’re going to pay an awful electoral price even if it is the right thing to do. 

Severe Dysfunction in Washington and Wall Street Puts the U.S. at Risk of Capital Flight

Pam Martens and Russ Martens: February 3, 2021 [Wall Street on Parade]

There is recent evidence that the U.S. is already seeing capital flight. According to a January 24 report from the United Nations Conference on Trade and Development, China beat out the U.S. in foreign direct investment inflows last year, receiving $163 billion versus $134 billion for the U.S. That was a radical change from 2019 when the U.S. received $251 billion in foreign direct investment versus $140 billion for China.

Capital flight could accelerate this year if the craziness in Congress and Wall Street continues. Just ask yourself this, would you want to invest in a country that had scenes of a bloody attempted coup of the government featured on the front pages of newspapers around the world? Would you want to risk your savings in a stock market that has ceased to perform its two key functions: a pricing mechanism for the value of companies and efficient allocation of capital to worthy businesses and industries.

Elon Musk Interview: 1-on-1 with Sandy Munro


Elon Musk Discusses Build Quality Problems With Engineer Who Compared Model 3 To ‘A Kia In The ’90s’ 

[Jalopnik, via The Big Picture 2-4-21]

Progressives and leftists using a Marxian type of class analysis have failed to notice that Musk has accomplished something no one else has done in just over a century: achieve mass production of a new automobile in USA. While Musk’s relations with his employees leaves much to be desired, and his political views are anything but progressive, the fact is that Muck is providing a rare example of new technologies being implemented to create an economic phase shift. Those critics who point out that Musk’s companies depend on government support miss the point that government support is exactly what is needed to push the economy in new directions — in this case, ending our dependence on burning fossil fuels.  In their conversation, Musk and Munro discussed a number of topics that illustrate the analytical power of Veblen’s business versus industry paradigm: design of seats for passenger vehicles; wire harnesses; modern road design; and why getting an MBA prevents you from managing an industrial corporation competently. 

What happens when you take a manufacturing expert with decades of automotive engineering experience and put him in a room with a science nerd like Elon Musk? ….He recently sat down with one of Tesla’s biggest build-quality critics, manufacturing expert Sandy Munro, founder of the benchmarking consultancy Munro & Associates. Here’s what Musk had to say about large panel gaps and poorly designed body structures in what has to be one of the most epic technical interviews I’ve seen in a while…. 

Tesla’s CEO then fesses up to his company’s build-related mistakes and dives into why they’ve been happening….  “The organizational structure errors, they manifest themselves in the product,” he begins. “We’ve got probably the best material science team in the world at Tesla. Engineers would ask what’s the best material for this purpose...and they got like 50 different answers. And they’re all true individually, but they were not true collectively,” he admits.

“When you try to join all these dissimilar’ve got gaps that you’ve got to seal, and you’ve got to join these things, and some of them need to be joined with rivets, some of them need to be joined with spot welds, some of them need to be joined with resin or resin and spot welds,” he continues. “Frankly, it looks like a bit of a Frankenstein situation when you look at it all together.” 

….The rest of the interview remains thoroughly nerdy. There’s discussion about cars’ natural frequencies, about how reducing polar moment of inertia by bringing mass toward the car’s center of mass yields better handling. There’s discussion about tolerance stack-up and how that leads Tesla to almost always err toward fewer pieces and Lego-like parts precision.

Munro mentions his company’s BMW i3 findings, lauding the German automaker’s excellent build quality for the carbon-fiber body. Musk replies that one of his major concerns about use of carbon fiber is that it has a vastly different coefficient of thermal expansion than aluminum or steel, and this can cause fitment issues when the vehicle is subjected to certain thermal environments.

Sunday, January 31, 2021

Week-end Wrap – Political Economy – January 31, 2021

 Week-end Wrap – Political Economy – January 31, 2021

by Tony Wikrent

The Impeachment and Trial of a Former President (PDF)

Congressional Research Service, via Naked Capitalism 1-27-21]

Here’s the full list of Biden’s executive actions so far 

[NBC, via Naked Capitalism 1-27-21]

Strategic Political Economy

This is How You Recover From Fascism — and America’s Not Doing Any of It

Umair Haque, January 26, 2021 [Medium, via The Big Picture 1-29-21]

….Fascism always has economic roots. Always. American pundits still don’t want to discuss that, because then they’d have to admit they were wrong about the economy for decades — and they’ll never do that, because then they’ll look like the fools they are.

Think about Germany. How did “it” happens here? Because the Weimar Republic fell into poverty. The average German, expecting a stable and secure life of relative prosperity, instead experiences sudden, sharp, downward mobility. Old racial hatred suddenly resurfaces. The Jews were blamed for the travails of the average good German — they have always been the enemy within. Who else was responsible for all this poverty and despair and ruin — except the hated minorities who had always been poisoning us from the inside?

That’s exactly the story of modern day America, too. The American middle class finally began to implode around 2010, after have a century of stagnating wages, while costs like healthcare and education and food and housing exploded year after year. The average American — the white one — expected the life he or she was promised: a suburban dream of easy, thoughtless prosperity. Instead, what they got was blighted cities, an opioid epidemic, half of all Americans trapped in “low wage service jobs,” trips to the doctor that cost as much as a house. They experienced just what Weimar Germans — sudden, sharp downward mobility. They might have tried to hide it by buying McMansions on credit, but the economic facts tell the true story: the average American by 2015 or so lived in a new underclass, couldn’t raise a tiny amount to pay for an emergency, lived pay check to paycheck, and died in massive debt.

What happened? Americans, like Germans before them, were seduced by old hatreds. And these hatreds weren’t even that old: America was still an apartheid state until 1971. Americans blamed their woes on minorities — Mexicans, Latinos, Blacks, Muslims, anyone not in or from the good and pure white majority. All those minorities were scapegoated as animals and vermin and terrorists and so on. The cheerleader of all this hatred was Donald Trump, who rode it all the way to the Presidency.

How do you solve this problem — that fascism has roots in economic stagnation and implosion? You solve it with a Marshall Plan…. American needs a Marshall Plan to recover from fascism. Last time, it was Europe that needed to totally rebuild. This time, it’s America. A land of decrepit, ruined…everything. Schools that look like fallout shelters, hospitals that have closed down, towns that have no transport links, whole communities that can’t access investment, entire regions without decent jobs. America needs a Marshall Plan to rebuild itself, because economic ruin is always what is at the root of fascism, and therefore, taking away the poverty that breeds and rebreeds ancient hatreds is the single truest vaccine against fascism there has ever been.

Sunday, January 24, 2021

Week-end Wrap – Political Economy – January 24, 2021

 Week-end Wrap – Political Economy – January 24, 2021

by Tony Wikrent

The Biden Transition and the Fight for Real Hope and Change This Time

The Biden Recovery Plan and the Disarray of Economic Theory: The pandemic had one good effect. It sidelined a lot of bad economic thinking.

Robert Kuttner, January 19, 2021 [The American Prospect]

….Among the many bad policy ideas of recent Democratic regimes, both as economic theory and as political strategy, was the conceit that public spending needed to be “paid for.” In other words, new taxes were required to finance all new spending once the Great Recession was over….

On the question of what changed in the economy to create long-term low inflation, and by extension low interest rates, most economists offer two basic answers. The first is that the economy had never fully recovered from the Great Recession when the pandemic depression hit.

The second explanation is the demolition of labor bargaining power and the rise of globalization. And of course the two are connected….

At some point, also, it would be smart to finance some of the public spending with tax reform, for the sake of greater income equality. Simply repealing the Trump tax cuts would provide about $2 trillion that would make the economy less unequal and provide funds for public investments—which would make it still more equal.

Economist Robert Pollin of UMass Amherst, a sometime adviser to Bernie Sanders, proposes that we raise some $300 billion a year from a financial-transactions tax, which could support urgently needed public outlays such as green investment.

With the Treasury paying just 1.837 percent to borrow money for 30 years, it also would make sense for the government to borrow a lot more money with longer maturities. That way, we could lock in very low interest rates….

A related question is whether the government can just keep borrowing as much as it needs, without interest rates rising. In the past century, we’ve had three tests of that proposition. During World War II, the Fed and the Treasury made a deal… In the wake of the financial collapse of 2008, the Fed again bought bonds to the tune of several trillions of dollars… The current borrowing to deal with the COVID depression is occurring in similar circumstances. Simon Johnson, the MIT economist who was formerly chief economist of the IMF, says, “The lack of a recovery is the problem, not the debt.”​​​​​​​  

Here’s An Idea: Put People To Work & Print Money To Pay Them 

[Heisenberger Report , via Naked Capitalism 1-22-21]

The nation’s infrastructure is in disrepair (to put it generously), food banks need staffing, vaccine rollout needs scaling up, testing needs to be expanded, and the health care system needs all the help it can get right now.

The point (in case it’s somehow unclear) is simply the following. There’s no shortage of critical jobs that need doing. There are millions upon millions of jobless Americans. And the US issues the world’s reserve currency.

You don’t need to be a quant to work out this equation. The federal government should just put people to work doing the jobs that desperately need to get done. You don’t have to worry about how to pay them, because you print money.

Hilariously (or not, depending on what you find funny) there are legions of economists and pundits out there who will tell you that isn’t feasible.

And what is their job? What do they do to contribute to society? Do they build bridges when the bridges aren’t sturdy anymore? Do they staff food banks when millions of families are lined up for miles because they’re starving? Do they go and help the government test and trace in an effort to bring an end to the worst public health crisis since the Spanish Flu?

In most cases, the answer is obviously “no.” Instead, they spend their days explaining to everyone else why something like, say, a federal jobs guarantee isn’t a viable proposition.

Sunday, January 17, 2021

Week-end Wrap – Political Economy – January 17, 2021

Week-end Wrap – Political Economy – January 17, 2021

by Tony Wikrent

Liberalism and socialism are ineffective against capitalism

Prop 22 Is Here, and It’s Already Worse Than Expected

Alexander Sammon, January 9, 2021 [The American Prospect]

Just a handful of weeks have passed since California’s Proposition 22, a new labor standard concocted by Silicon Valley venture capitalists to lock rideshare and food delivery drivers out of basic employee wages, benefits, and protections, went into effect. It has arrived with a bang.

Already, companies beyond just the usual digital suspects have embraced the new law, which creates a third category of worker for those toiling in the gig economy, neither full-time employees nor independent contractors. That means no eligibility for state unemployment insurance, no guaranteed state minimum wage, stripped-down worker protections, no overtime pay, no sick leave, no workplace discrimination protection, and no right to collectively bargain.

A large number of historians have explained how capitalism and liberalism go hand in hand: self-interest is the bases of the market pricing mechanism. But they usually shy away from addressing a crucial problem that at an underlying philosophical level, liberals are simply not capable of resisting extreme capitalism and its pathologies. Similarly, socialists, Marxists, and communists are philosophically incapable of resisting conservatism and neoliberlism. Philip Mirowski and Corey Robin have some really excellent articles on this; Mirowski in particular explains why von Mises’ conception of markets as a super calculator of value is philosophically impervious to any and all assaults by the left.

I concluded years ago the only way you make conservatism and neoliberalism vulnerable philosophically is to jettison modernity’s separation of politics from economics, and return to a conception of political economy. And then, ask the simple and obvious question: what are the proper principles and policies of political economy for a republic?

… the duty of a republic [is] to control "the selfishness of mankind ... ; for liberty consists not in the permission to distress fellow citizens, by extorting extravagant advantages from them, in matters of commerce or otherwise." Because it was commonly understood that "the exorbitant wealth of individuals" had a "most baneful influence" on the maintenance of republican governments and "therefore should be carefully guarded against..."  — Gordon Wood, The Creation of the American Republic. pages 63-64.

What does it mean to “Promote the General Welfare”? Certainly it should include focusing on increasing the purchasing power earned by the nation’s workers. This would be “demand side” economics, instead of the supply side of focusing on giving more money to already rich investors and waiting for it to “trickle down” on the masses below. Demand side economics was a major issue in the 1930s through 1950s. Coming out of the First Great Depression was recognition by all except conservatives and rich reactionaries that the underlying cause of the Depression had been the failure to fairly distribute income, and hence buying power: working people simply were not being paid enough for them to purchase all that could be produced.  The most progressive and militant labor unions, led by the Congress of Industrial Organization (CIO), framed this demand side issue as “under-consumption.” The most militant union, the United Auto Workers (UAW) — led by Walter Reuther, probably the greatest union leader in American history — began its November 1945 strike against General Motors by demanding a 30-cent an hour wage under the slogan, “Purchasing Power for Prosperity.” This is firmly in the uniquely American economics tradition of the Doctrine of High Wages, which has been written out of mainstream economics.

Only by reviving the ideas of civic republicanism can we avert liberalism’s inability and unwillingness to oppose the depredations of capitalism.

America Abandoned Its Economic Prophet. The World Embraced Him. 

James Galbraith [Foreign Policy, via Naked Capitalism 1-16-21]

Galbraith’s discussion of the legacy of his father is useful for tearing at the fabric of illusions of today’s failed capitalism. But note that the Galbraithian solution is not to oppose the depredations of capitalism as contrary to the principles of civic republicanism, but to merely build up organized labor as a countervailing power to giant corporations. The rapacious nature of capitalism, embodied so brutally in California’s Proposition 22, is not addressed at all. 

Sunday, January 10, 2021

Week-end Wrap – Political Economy – January 10, 2021

Week-end Wrap – Political Economy – January 10, 2021

by Tony Wikrent

Strategic Political Economy

“In all very numerous assemblies, of whatever characters composed, passion never fails to wrest the sceptre from reason. Had every Athenian citizen been a Socrates; every Athenian assembly would still have been a mob…. The sincere friends of liberty who give themselves up to the extravagancies of this passion are not aware of the injury they do their own cause.” — The Federalist No. 55, [13 February 1788], by James Madison or Alexander Hamilton. Example below:


The American tragedy of our time is that the Republican Party is not republican at all. The Republican Party is, to be honest, anti-republican.

Leftists are ignoring some priceless wisdom by dismissing the republic’s founding as merely one group of rich patricians replacing another group. If we ditched liberalism and returned to (small "r") republicanism we could curb capitalism because any large concentration of wealth would be suspect and have to be broken up, just for being large: 

A free People are kept so by no other Means than an equal Distribution of Property; every Man who has a Share of Property having a proportionable Share of Power; and the first Seeds of Anarchy, which for the most part ends in Tyranny, are produced from hence, that some are ungovernably rich, and many more are miserably poor; that is some are Masters of all Means of Oppression, and others want all the Means of Self-defence. — Cato's Letter No. 3, Thomas Gordon (November 19, 1720)​​​​​​​

“In Wake Of Prop 22, Albertsons Shifting In-House Delivery Jobs To Gig Work” [HuffPo, via Naked Capitalism Water Cooler 1-8-20]

“One of the largest grocery chains in the U.S. has decided to end much of its in-house delivery service, outsourcing the work to third-party companies like DoorDash that rely on independent contractors to drop off food to customers on the cheap. Unions representing workers at Albertsons say the chain’s decision will end up degrading good delivery jobs by putting the work on a “gig” model. Independent contractors tend to bear many of the costs of employment, providing their own vehicles and covering wear and tear, while forgoing traditional work benefits like health coverage and a retirement fund….. While Albertsons did not cite the new California law known as Proposition 22 for the decision, several major California markets will be impacted by the policy change. Prop 22 makes it easier for companies like DoorDash to classify their drivers as independent contractors.” 

Lambert Strether noted the failure of the California liberal Democrat establishment, including Kamala Harris, to fight Prop 22.

Sunday, January 3, 2021

Week-end Wrap – Political Economy – January 3, 2021

Week-end Wrap – Political Economy – January 3, 2021

by Tony Wikrent

How the Police Killed Breonna Taylor 

[New York Times, via Naked Capitalism 12-31-20]

“The Times’s visual investigation team built a 3-D model of the scene and pieced together critical sequences of events to show how poor planning and shoddy police work led to a fatal outcome.”

A stunning visualization of the police raid, including footage of investigation interviews with officers. The ineptitude uncovered is gross and flagrant. Only the most biased and pro-authoritarian can fail to see the incident as a massive over-reaction by police who were on some sort of psychological thrill ride based on being able to actually shoot at a live target. 

The Georgia Senate Race

Perdue’s Time as Dollar General CEO Marked by Charges of Wage Theft, Race and Sex Discrimination

[Capital and Main, via LA Progressive 12-31-2020]

Dollar General, which he ran between 2003 and 2007, rests on a business model of offering low-cost goods at rock-bottom prices while paying workers poorly. The stores, ubiquitous in low-income neighborhoods, are generally understaffed and have become magnets for crime, according to a recent investigation. The corporate dictum that wages remain at 5% of gross sales “placed us at the bottom of a low-paying industry,” Cal Turner Jr., the son of Dollar General’s founder, told ProPublica.

Perdue presided over a more than 30-fold increase in the number of employee lawsuits filed against the company, according to a Capital & Main review of court filings. While he worked at the firm, 2,494 individual employment cases were filed charging the company with gender and racial discrimination, rampant wage theft, failure to provide medical leave and other workplace violations. In the four years leading up to Perdue taking the helm, 76 employment cases were filed in federal court.

In a just society — such as christianists claim to desire — corporate leaders like Purdue would have been curbed, broken, bankrupted and punished by the legal system, not elevated to the highest public offices in the republic. 

Strategic Political Economy

Neoliberal Champion Larry Summers Opens Mouth, Inserts Both Feet

Matt Taibbi, December 28, 2020

Lawrence Summers, the former Treasury Secretary under Bill Clinton, director of the National Economic Council under Barack Obama, president of Harvard, and Chief Economist at the World Bank, wrote a post-Christmas editorial for Bloomberg entitled, “Trump’s $2000 Stimulus Checks are a Big Mistake.” ...The genesis of this Summers article is a perfect tale in microcosm about how America’s intellectual elite manages to lose elections to people like Donald Trump. It’s a two-step error. First, they put people like Summers in charge of economic policies. Then, they let them talk in public….

Of course, these same people often believe in jaw-droppingly enormous levels of public aid. Think of the $20 billion in taxpayer funds that went to rescue currency traders in 1995 (presented in the media as a bailout of “Mexico”), the massive IMF bailouts of Asia and Russia in the late nineties, and especially the multi-trillion-dollar Fed-fueled rescues of the finance sector both after 2008, and now (“We’re not going to run out of ammunition,” explained Fed chief Jerome Powell). Other examples include giving companies like Goldman, Sachs 100 cents on the dollar on debts owed them by AIG in that bailout, or the $3.625 billion private intervention to save one crackpot hedge fund called Long Term Capital Management in 1998.

The operating principle in most of those cases was that financial institutions must not be allowed to take crippling losses, even if those losses were the fault of the companies in question, because such a decision might trigger (pick one or more) “a chain reaction,” “catastrophic losses throughout the system,” “graver economic consequences,” the “spread” of investor “flu,” etc., etc.

The thinking of these experts changes, however, the instant the question shifts to rescuing individuals affected by something like the 2008 crash, or the current pandemic. Suddenly we learn that resources are scarce, and the commitment of public money to rescue mere People With Problems risks “moral hazard.” 

Sunday, December 27, 2020

Week-end Wrap – Political Economy – December 27, 2020

Week-end Wrap – Political Economy – December 27, 2020

by Tony Wikrent

Strategic Political Economy

[Twitter, via Naked Capitalism Water Cooler 12-21-20]



It’s the economy ideology, stupid: 

What a Miserable 2020 Revealed About America

Paul Waldman, December 21, 2020 [The American Prospect]

It exposed an impotent political system, a deadly mythology of rugged individualism, and a Republican Party without shame….

Our individualism is deadly. In no other country were the simple public-health measures necessary to contain the coronavirus so quickly and easily politicized. Trump bears much of the blame, but it didn’t take much for him to convince people that wearing masks is a terrible imposition on their freedom, and that it could be a worthwhile emblem of political identity. So many of us have spent our lives steeping in the ideology of “rugged individualism,” learning that any government edict is inherently repressive and making a personal sacrifice for the good of your neighbors, even a tiny one, makes you weak. No quantity of dead Americans has managed to dissuade so many of us from believing this.

Yep, it’s definitely the ideology, stupid: 

"Neal Katyal and the Depravity of Big LawThe Democratic lawyer's sickening defense of corporate immunity in a Supreme Court case reveals a growing moral rot in the legal community. 

Alex Pareene, December 8, 2020 [The New Republic, via Avedon’s Sideshow]

The United States has a political class that mistakes its professional norms for ethics. Mainstream political journalists mindlessly grant anonymity to professional liars. Elected officials put collegiality and institutional procedure over the needs and interests of their constituents. And as for lawyers, they have refined this tendency into what amounts to a religion of self-justification. [...] It is that mutated creed that explains why Neal Katyal went to the Supreme Court last Tuesday to argue that children enslaved to work on cocoa plantations should not be allowed to sue the corporations that abetted their enslavement.

Katyal is among the most prominent and decorated attorneys in the country. He is a Democrat who has been in and out of government since Bill Clinton’s second term. He returned to his private firm, Hogan Lovells, after serving as acting solicitor general for Barack Obama’s Justice Department. He is omnipresent on television and newspaper op-ed pages as a voice of “The Resistance” to Donald Trump. He is about as close as you could come to the embodiment of Big Law’s connection to the institutional Democratic Party.

And last week he argued that because the corporation that supplied Zyklon B to the Nazis for use in their extermination camps was not indicted at Nuremberg, Nestle and Cargill should not be held liable for their use of child slave labor. In his argument before the court, Katyal espoused a view of corporate immunity so expansive that even the conservative judges seemed skeptical. If you took him at his word, he was effectively asking the Supreme Court to make it impossible for any foreigner to sue any company for any harm done to them, up to and including kidnapping and enslavement….

The point is that the cases Katyal chooses to take, the arguments he chooses to make, even the firm he chooses to work for, all speak to his values. He cannot separate his politics, whatever he thinks they are, and whatever he wants everyone else to think they are, from his decision to defend Nestle against the threat of potential lawsuits from enslaved children. That is a statement about how one believes the world should be organized and on whose behalf the legal system should operate.

Wednesday, December 23, 2020

Ellen Brown - FDR Knew Exactly How to Solve Today’s Unemployment Crisis

by Ellen Brown, December 17, 2020

A self-funding national infrastructure bank modeled on the “American System” of Alexander Hamilton, Abraham Lincoln, and Franklin D. Roosevelt would help solve not one but two of the country’s biggest problems.

Millions of Americans have joined the ranks of the unemployed, and government relief checks and savings are running out; meanwhile, the country still needs trillions of dollars in infrastructure. Putting the unemployed to work on those infrastructure projects seems an obvious solution, especially given that the $600 or $700 stimulus checks Congress is planning on issuing will do little to address the growing crisis. Various plans for solving the infrastructure crisis involving public-private partnerships have been proposed, but they’ll invariably result in private investors reaping the profits while the public bears the costs and liabilities. We have relied for too long on private, often global, capital, while the Chinese run circles around us building infrastructure with credit simply created on the books of their government-owned banks.

Earlier publicly-owned U.S. national banks and U.S. Treasuries pulled off similar feats, using what Sen. Henry Clay, U.S. statesman from 1806 to 1852, named the “American System” – funding national production simply with “sovereign” money and credit. They included the First (1791-1811) and Second (1816-1836) Banks of the United States, President Lincoln’s federal treasury and banking system, and President Franklin Roosevelt’s Reconstruction Finance Corporation (RFC) (1932-1957). Chester Morrill, former Secretary of the Board of Governors of the Federal Reserve, wrote of the RFC:

[I]t became apparent almost immediately, to many Congressmen and Senators, that here was a device which would enable them to provide for activities that they favored for which government funds would be required, but without any apparent increase in appropriations. . . . [T]here need be no more appropriations and its activities could be enlarged indefinitely, as they were, almost to fantastic proportions. [emphasis added]

Even the Federal Reserve with its “quantitative easing” cannot fund infrastructure without driving up federal expenditures or debt, at least without changes to the Federal Reserve Act. The Fed is not allowed to spend money directly into the economy or to lend directly to Congress. It must go through the private banking system and its “primary dealers.” The Fed can create and pay only with “reserves” credited to the reserve accounts of banks. These reserves are a completely separate system from the deposits circulating in the real producer/consumer economy; and those deposits are chiefly created by banks when they make loans. (See the Bank of England’s 2014 quarterly report here.) New liquidity gets into the real economy when banks make loans to local businesses and individuals; and in risky environments like that today, banks are not lending adequately even with massive reserves on their books.

A publicly-owned national infrastructure bank, on the other hand, would be mandated to lend into the real economy; and if the loans were of the “self funding” sort characterizing most infrastructure projects (generating fees to pay off the loans), they would be repaid, canceling out the debt by which the money was created. That is how China built 12,000 miles of high-speed rail in a decade: credit created on the books of government-owned banks was advanced to pay for workers and materials, and the loans were repaid with profits from passenger fees.

Unlike the QE pumped into financial markets, which creates asset bubbles in stocks and housing, this sort of public credit mechanism is not inflationary. Credit money advanced for productive purposes balances the circulating money supply with new goods and services in the real economy. Supply and demand rise together, keeping prices stable. China increased its money supply by nearly 1800% over 24 years (from 1996 to 2020) without driving up price inflation, by increasing GDP in step with the money supply.

HR 6422, The National Infrastructure Bank Act of 2020

A promising new bill for a national infrastructure bank modeled on the RFC and the American System, H.R. 6422, was filed by Rep. Danny Davis, D-Ill., in March. The National Infrastructure Bank of 2020 (NIB) is projected to create $4 trillion or more in bank credit money to rebuild the nation’s rusting bridges, roads, and power grid; relieve traffic congestion; and provide clean air and water, new schools and affordable housing. It will do this while generating up to 25 million union jobs paying union-level wages. The bill projects a net profit to the government of $80 billion per year, which can be used to cover infrastructure needs that are not self-funding (broken pipes, aging sewers, potholes in roads, etc.). The bill also provides for substantial investment in “disadvantage communities,” those defined by persistent poverty.

The NIB is designed to be a true depository bank, giving it the perks of those institutions for leverage and liquidity, including the ability to borrow at the Fed’s discount window without penalty at 0.25% interest (almost interest-free). According to Alphecca Muttardy, a former macroeconomist for the International Monetary Fund and chief economist on the 2020 NIB team, the NIB will create the $4 trillion it lends simply as deposits on its books, as the Bank of England attests all depository banks do. For liquidity to cover withdrawals, the NIB can either borrow from the Fed at 0.25% or issue and sell bonds.

Modeled on its American System predecessors, the NIB will be capitalized with existing federal government debt. According to the summary on the NIB Coalition website:

The NIB would be capitalized by purchasing up to $500 billion in existing Treasury bonds held by the private sector (e.g., in pension and other savings funds), in exchange for an equivalent in shares of preferred [non-voting] stock in the NIB. The exchange would take place via a sales contract with the NIB/Federal Government that guarantees a preferred stock dividend of 2% more than private-holders currently earn on their Treasuries. The contract would form a binding obligation to provide the incremental 2%, or about $10 billion per year, from the Budget. While temporarily appearing as mandatory spending under the Budget, the $10 billion per year would ultimately be returned as a dividend paid to government, from the NIB’s earnings stream.

Since the federal government will be paying the interest on the bonds, the NIB needs to come up with only the 2% dividend to entice investors. The proposal is to make infrastructure loans at a very modest 2%, substantially lower than the rates now available to the state and local governments that create most of the nation’s infrastructure. At a 10% capital requirement, the bonds can capitalize ten times their value in loans. The return will thus be 20% on a 2% dividend outlay from the NIB, for a net return on investment of 18% less operating costs. The U.S. Treasury will also be asked to deposit Treasury bonds with the bank as an “on-call” subscriber.

The American System: Sovereign Money and Credit

U.S. precedents for funding internal improvements with “sovereign credit” – credit issued by the national government rather than borrowed from the private banking system – go back to the American colonists’ paper scrip, colonial Pennsylvania’s “land bank”, and the First U.S. Bank of Alexander Hamilton, the first U.S. Treasury Secretary. Hamilton proposed to achieve the constitutional ideal of “promoting the general welfare” by nurturing the country’s fledgling industries with federal subsidies for roads, canals, and other internal improvements; protective measures such as tariffs; and easy credit provided through a national bank. Production and the money to finance it would all be kept “in house,” without incurring debt to foreign financiers. The national bank would promote a single currency, making trade easier, and would issue loans in the form of “sovereign credit.” ’

Senator Henry Clay called this model the “American System” to distinguish it from the “British System” that left the market to the “invisible hand” of “free trade,” allowing big monopolies to gobble up small entrepreneurs, and foreign bankers and industrialists to exploit the country’s labor and materials. After the charter for the First US Bank expired in 1811, Congress created the Second Bank of the United States in 1816 on the American System model.

In 1836, Pres. Andrew Jackson shut down the Second U.S. Bank due to perceived corruption, leaving the country with no national currency and precipitating a recession. “Wildcat” banks issued their own banknotes – promissory notes allegedly backed by gold. But the banks often lacked the gold necessary to redeem the notes, and the era was beset with bank runs and banking crises.

Abraham Lincoln’s economic advisor was Henry Carey, the son of Matthew Carey, a well-known printer and publisher who had been tutored by Benjamin Franklin and had tutored Henry Clay. Henry Carey proposed creating an independent national currency that was non-exportable, one that would remain at home to do the country’s own work. He advocated a currency founded on “national credit,” something he defined as “a national system based entirely on the credit of the government with the people, not liable to interference from abroad.” It would simply be a paper unit of account that tallied work performed and goods delivered.

On that model, in 1862 Abraham Lincoln issued U.S. Notes or Greenbacks directly from the U.S. Treasury, allowing Lincoln’s government not only to avoid an exorbitant debt to British bankers and win the Civil War, but to fund major economic development, including tying the country together with the transcontinental railroad – an investment that actually turned a profit for the government.

After Lincoln was assassinated in 1865, the Greenback program was discontinued; but Lincoln’s government also passed the National Bank Act of 1863, supplemented by the National Bank Act of 1864. Originally known as the National Currency Act, its stated purpose was to stabilize the banking system by eradicating the problem of notes issued by multiple banks circulating at the same time. A single banker-issued national currency was created through chartered national banks, which could issue notes backed by the U.S. Treasury in a quantity proportional to the bank’s level of capital (cash and federal bonds) deposited with the Comptroller of the Currency.

From Roosevelt’s Reconstruction Finance Corporation (1932-57) to HR 6422

The American president dealing with an economic situation most closely resembling that today, however, was Franklin D. Roosevelt. America’s 32nd president resolved massive unemployment and infrastructure problems by greatly expanding the Reconstruction Finance Corporation (RFC) set up by his predecessor Herbert Hoover. The RFC was a remarkable publicly-owned credit machine that allowed the government to finance the New Deal and World War II without turning to Congress or the taxpayers for appropriations. The RFC was not called an infrastructure bank and was not even a bank, but it served the same basic functions. It was continually enlarged and modified by Pres. Roosevelt to meet the crisis of the times until it became America’s largest corporation and the world’s largest financial organization. Its semi-independent status let it work quickly, allowing New Deal agencies to be financed as the need arose. According to

[T]he RFC—by far the most influential of New Deal agencies—was an institution designed to save capitalism from the ravages of the Great Depression. Through the RFC, Roosevelt and the New Deal handed over $10 billion to tens of thousands of private businesses, keeping them afloat when they would otherwise have gone under ….

A similar arrangement could save local economies from the ravages of the global shutdowns today.

The Banking Acts of 1932 provided the RFC with capital stock of $500 million and the authority to extend credit up to $1.5 billion (subsequently increased several times). The initial capital came from a stock sale to the U.S. Treasury. With those modest resources, from 1932 to 1957 the RFC loaned or invested more than $40 billion. A small part of this came from its initial capitalization. The rest was financed with bonds sold to the Treasury, some of which were then sold to the public. The RFC ended up borrowing a total of $51.3 billion from the Treasury and $3.1 billion from the public.

Thus the Treasury was the lender, not the borrower, in this arrangement. As the self-funding loans were repaid, so were the bonds that were sold to the Treasury, leaving the RFC with a net profit. The RFC was the lender for thousands of infrastructure and small business projects that revitalized the economy, and these loans produced a total net income of over $690 million on the RFC’s “normal” lending functions (omitting such things as extraordinary grants for wartime). The RFC financed roads, bridges, dams, post offices, universities, electrical power, mortgages, farms, and much more–all while generating income for the government.

HR 6422 proposes to mimic this feat. The National Infrastructure Bank of 2020 can rebuild crumbling infrastructure across America, pushing up long-term growth, not only without driving up taxes or the federal debt, but without hyperinflating the money supply or generating financial asset bubbles. The NIB has growing support across the country from labor leaders, elected officials, and grassroots organizations. It can generate real wealth in the form of upgraded infrastructure and increased employment as well as federal and local taxes and GDP, paying for itself several times over without additional outlays from the federal government. With official unemployment at nearly double what it was a year ago and an economic crisis unlike the U.S. has seen in nearly a century, the NIB can trigger the sort of “economic miracle” the country desperately needs.

Sunday, December 20, 2020

Week-end Wrap – Political Economy – December 20, 2020

 Week-end Wrap – Political Economy – December 20, 2020

Strategic Political Economy

America’s Survival Depends on Bankrupting the Republican Party
Thom Hartmann: [via LA Progressive 12-18-2020]

Large parts of the Republican base now join conspiracists in the misguided belief that vaccine manufacturers are participating in mind-control experiments and that public health measures like masks are “un-American,” while we’re being sickened and dying from the highest rates of COVID-19 infection and death in the developed world.

Republicans on the Supreme Court even say the founders of our republic and the framers of the Constitution would never go along with preventing churches and synagogues from holding superspreader events during a pandemic, but, like so many things GOP, it’s a lie.

In 1798, President John Adams signed the first public health care legislation—it was to pay for medical care and hospitalization not just for the Navy but also for civilian sailors. And both he and President George Washington had participated in quarantine events during epidemics in the summers of 1793 and 1798, and both promoted inoculation against smallpox.

From 1790 to 1800, Philadelphia was the nation’s capital. When the yellow fever epidemic of 1793 recurred in 1798, that city’s board of health, with no objections raised by President John Adams or any member of Congress, ordered a block-by-block evacuation of parts of Philadelphia….

Since the election of Ronald Reagan, Republicans have damaged America more in 40 years than our worst enemies could have dreamed of by other means….

They have rigged elections by making it hard to vote, seditiously tried to overturn the 2020 election, promoted racial and religious bigotry and violence, destroyed our public school systems, gutted our unions, and rewritten our tax system to screw the middle class.

Click through to read Hartmann’s proposed six actions that can hasten the GOP’s exit from the stage of world history. 

These Six Steps Can Stop Republican Treason

[Thom Hartmann, December 16, 2020, YouTube]


LA Progressive

[Twitter, via Naked Capitalism Water Cooler 12-15-20]


Marianne Williamson
The more I learn about the current epidemic of white supremacist groups, the clearer it becomes: we’re losing these people as children. Despair among our youth breeds vulnerability to ideological capture by psychotic forces. If our love doesn’t claim them, hate will.
12:50 AM · Dec 15, 2020

“Chris Arnade: Dignity, Poverty, Faith, & Seeking Respect in Back Row America” (podcast)

[The Moral Imagination, via Naked Capitalism Water Cooler 12-16-20]

“In the second half of the conversation we discuss faith, redemption, and atonement, and how the front row’s empiricist, cold, secular rationalism scientific doesn’t do justice to the complexities of human life, suffering, and the desire for meaning, dignity, and respect. Arnade argues that ‘atheism is an intellectual luxury that is wrong’ and that ‘front row’ scientism lacks epistemic humility, and has a false view of science and certainty. Arnade shows that each person, no matter our state, is a subject, and not simply an object to be manipulated or problem to be solved. And that many of our deepest problems cannot be solved by technical means alone, but are philosophical and cultural problems—not of the poor—but of the elite.