Sunday, July 24, 2016

The Historical Context of Mercantilism, Republicanism, Liberalism and Neoliberalism

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

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

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

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

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





Friday, July 22, 2016

Karl Polanyi and the Coming U.S. Election

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

Karl Polanyi and the Coming U.S. Election

by William R. Neal

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

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

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

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

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

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

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

Monday, July 18, 2016

Talk about soft power!

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

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

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

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

Thursday, July 14, 2016

Wall Street's Fraud and Illusion of Social Utility

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

Monday, July 11, 2016

Economic warmongering

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

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

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

Monday, July 4, 2016

The British people have forfeited the confidence of their government

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

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

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