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.

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 they 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.

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.

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!

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.

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.

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.

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.

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.

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.

LETTER THIRD.

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.