Saturday, June 24, 2017

The only economists who ever created a national economy

A couple months ago, I found online a very useful graphic of the major schools of economic thought. Take a look at it, with this question in mind: Have any of the schools of economic thought shown in the graphic actually resulted in creating a functioning national economy with a large degree of general prosperity and political freedom?

An honest, historically informed answer completely contradicts the libertarian / conservative / neoliberal hero-worship of Adam Smith. The original graphic was posted in April 2014. Four months later, the author posted a revised graphic. Note the major addition in the bottom left corner of the revised graphic: the American School of Alexander Hamilton, Henry C. Carey, and Friedrich List.
It is a very welcome addition, because the American School is the only school of economic thought that has resulted in creating a functioning national economy.

In December 1993, James Fallows rattled the economics profession with an article in The Atlantic, How the World Works:
The more I had heard about List in the preceding five years, from economists in Seoul and Osaka and Tokyo, the more I had wondered why I had virtually never heard of him while studying economics in England and the United States. 
Fallows goes on to describe the historical importance, not of British opium-trade apologist Adam Smith, but of the American School, in guiding the early industrial development of Tokugawa Japan, late imperial China, czarist Russia, Germany, South Korea, and other countries.

In a nutshell, the American School is the only body of economic thought which has actually resulted in national industrial development along with a large degree of general prosperity and political freedom. A partial exception is Marx, but, as Lawrence Goodwyn, the late historian of the American agrarian revolt and populist movement of the late 1800s, pointed out, no system of Marxism has been implemented without the coercive power of a red army behind it.

So why haven’t you ever heard of Henry C. Carey and Friedrich List, two of the most famous economists of the mid-nineteenth-century? They, and the American School, have simply been written out of the economics textbooks. Did you take an economics course in college, and do you still have the textbook around somewhere? Please, look in the index and see how many references there are to Henry Carey. Or to Alexander Hamilton, who, after all, is the person who designed the foundations of the USA economy—which certainly has to rank among the greatest achievements of the past millennium.  Compare what you find with the number of references to Adam Smith, or Milton Friedman.

Monday, June 19, 2017

Summer Sacrilege

Paul Street is rapidly becoming the most interesting contributor to Counterpunch. As the USA stalls out politically over the partisan arguments concerning the legitimacy of the 2016 election, Street is suggesting that reasonable folks rethink the usefulness of all this squabbling. And maybe get back to thinking about the incredibly serious problem of climate change.

So far so good. But the one "blasphemous" thought Street has that I cannot agree with is entitled "Think Capitalogenic, not Anthropogenic Climate Change." Street wants us to believe that the root cause of climate change is, ta da, Capitalism. Well, no. The cause of climate change is too many people burning too many fires. If anything, the "cause" of climate change CAN be ascribed to Industrialization BUT Capitalism and Industrialization are two VERY different things. The confusion between the two pretty well explains why even though socialism can talk a good talk when it comes to environmental problems, it has a dismal track record when it comes to performance.

For example, when I first became concerned about environmental problems, one of the more articulate spokesmen was this guy named Barry Commoner. He had written a book called The Closing Circle. One of his brilliant insights he called the Iron Law of Non-renewable Resources—every barrel of oil (etc.) discovered and extracted only makes the next barrel harder to find and more expensive to recover. Anyone who wants to know why fracking is so expensive need only refer back to this law. But for all his genius, Commoner stumbled because of his willingness to believe that Capitalism and Industrialization were the same thing. He was an avowed Marxist and believed that Socialism would yield far superior results when it came to environmental matters. When the Wall came down and "socialist" industrialization was revealed as the utter catastrophe it was, poor Commoner, for all his genius, was tossed on the ash heap of history. Which is unfortunate, because his Iron Law of Non-renewable Resources is still perfectly valid.

One thing the "left" should keep in mind is that the "capitalism" of stock markets, monetary policy and central banks, and the rest of the activities associated with the movements of money, did NOT cause industrialization in the first place and if the past 40 years are any guide, is the leading cause of de-industrialization. This is MOST unfortunate because for all the rapacious damage that Capitalism has inflicted on industrial activity, it staggers forward in its crippled state because industrialization fills real human needs.

Monday, June 12, 2017

Glass-Steagall, now more than ever

For those of us who have watched in absolute horror as the neoliberals have retested their crackpot theories on a country too ignorant to know better, our response is usually some variation on the theme "we know how to do it better because we have already demonstrated that our ideas are pragmatically superior." Paul Roberts is another throwback to the time when industrial "capitalism" created generalized prosperity and rewarded hard work and innovation rather than the scam of the month.

In some ways, it is almost impossible to imagine that something as honest, basic, and necessary as Glass-Steagall needs to be defended. Yet it was repealed, the banking systems blew up, and the taxpayers were put on the hook to save the perpetrators of deregulatory madness. Of course, the original act was put in place to prevent exactly the problems that showed up in the real estate bubble. In a sane world, Glass-Steagall would have been reinstated in 2008. But NOOOOO! The Predators want their bucket shops because it beats the hell out of honest work. And so the USA staggers from one economic crises to another.

Saturday, June 10, 2017

Dylan's Nobel Lecture in Literature

"The speech is extraordinary and, as one might expect, eloquent. Now that the lecture has been delivered, the Dylan adventure is coming to a close," Sara Danius, the permanent secretary of the Swedish Academy, which awards the prize, wrote in a blog post.

The very idea that the Nobel folks would award their literature prize to a songwriter has been, to put it mildly, controversial. I grew up the child of a Swedish-American mother who spent pretty much all her moral energy in life trying to be respectable. And as the wife of a Lutheran preacher, she had multiple daily opportunities to practice her art. So when I think of an august group like the Nobel Literature committee, I imagine my mother times oh, 100. A group that asks regularly, "What will people think?"

Given the outcome of this little experiment, the Nobel folks will probably retreat to some known safe haven of respectability for a long time to come. Because for the serious fans of respectability, the whole idea has been a fiasco. At first, Dylan didn't even respond to the announcement of a Nobel Prize. The Swedes found this hopelessly rude. The academic writers who would have been thrilled by the honor were quick to point out that the problem was that he wasn't a "real" writer anyway. Finally, Dylan accepted with some polite PR boilerplate but he didn't promise to actually make the awards ceremony. Patti Smith was sent to cover A Hard Rain's Gonna Fall and promptly botched the lyrics. She was immediately forgiven because her rendition was so moving but I am sure the pearl clutchers were left wondering, "what else could go wrong?" Still, Dylan could collect his nearly $1 million prize if he managed to deliver a lecture within 6 months. He just made it. And the speech is remarkable.

Dylan's behavior in all this confusion needs a bit of context. Here's a guy who went to work after only one year of college. He was focused on writing short-form poetry meant to be sung, with the primary singer (himself) hamstrung by a limited range. Many considered his voice laughably unpleasant. He cobbled together a one-man-band kit consisting of a guitar and harmonica and bravely offered his wares to anyone who would listen. His words were so compelling, however, that soon A-list musicians would be covering his work. While all of this is pretty interesting, none of it sounds like the sort of thing that would be found in the CV of a Nobel winner in literature. In fact, I am certain that Dylan suspected it was all a hoax.

So when it came time to write a speech outlining the effects of literature on his work, Dylan looks like he was forced to fall back on material he learned in high school—Moby Dick, the Odyssey, and All Quiet on the Western Front. There are damn few high schools that teach such books anymore and the number of students who actually learn them is probably close to zero. Fortunately, Dylan's father had moved the family to the small mining town of Hibbing Minnesota where he was enrolled in arguably the nicest public high school on the planet. In 1918, the owners of the Hull-Rust-Mahoning mine discovered that downtown Hibbing was sitting on an extremely rich seam of high-grade iron ore. It would have to move. To grease the skids, the town was offered a large cash payment which the mostly immigrant miners decided to spend on a new high school. They would eventually spend over $4 million (an incredible number in the 1920s) on a magnificent structure that still inspires awe. But the high school was to be more than a beautiful building, it was supposed to be a place where even poor children from mining families could get an elite education if they just did their homework. So while Dylan got by on his high school education, what an education it was. (We even know the name of his high school literature teacher, B.J. Rolfzen)

What is noteworthy about Dylan's choices is that in many ways, they are category killers. He says of All Quiet on the Western Front, "After reading it, I never wanted to read another war novel. I never did." This partly explains why the Nobel Committee awarded their prize to a "mere" songwriter—much of what passes for literature these days is irrelevant tripe in the form of academic navel-gazing. Too many categories have been killed long ago. Sometimes I wonder if the same cannot be said for the subject of economics—guys like Veblen and Keynes did some serious category killing in their day. It's hard to point to anyone currently writing who has anything new to add.

The Nobel Prize for Literature is clearly an award Dylan did not need. Even the $million payoff is a rounding error for someone who has sold over 100 million records, and the honor pales next to the dozens of awards for his music. But even though this was probably all just annoying for him, he managed to put together a speech both meaningful and profound. He didn't have to do it but for those of us who appreciate his cultural contributions, I am glad he did.

Monday, June 5, 2017

The European Left sells out the Greeks

Watching the American Left slide into irrelevancy at best and utter insanity at worst is certainly distressing but it is hardly surprising. The signs of extreme forms of neoliberalism were already abundantly apparent in the Democratic Party in the 1970s when Jimmy Carter, a mostly unknown peanut farmer / nuclear engineer became President of the United States with the help of David Rockefeller and the Council on Foreign Relations / Trilateral Commission. Carter's Vice President, Walter Mondale, was such a drooling stooge of the establishment that in his presidential run in 1984, he managed to lose debates to Reagan—a guy who was already visibly suffering from dementia / Alzheimers. Mondale couldn't really debate Reagan because on the big issues of economics and foreign policy, they agreed. Of course Mondale didn't go quite as far as 1988 corpo-dem candidate Michael Dukakis who declared, "This race isn't about ideology, it's about competence."

Of course, the left actually did have a granola version of what they believed on hand for such an occasion. They may have thrown in the towel on economics, by gum, but they still had the culture wars to win and food to complain about. And in these arenas, it is hard to argue against their success. For me, this was personal. My political roots were in the Farmer-Labor Party. Their goal was to get a better economic arrangement for factory workers and small farmers. In my mind, if you gave up the economic arguments, you pretty much lost the reason for having a political party.

Oddly enough, I pretty much expected the USA Left to sell out their economic principles. Watching the European Left sell out is much harder to understand. When I first encountered Europe's Left it was in 1970. I was pretty much welcomed because of my anti-Vietnam War activism but when the subject changed to economics and social policy, I felt pretty much lost. Everyone I met who called themselves a Lefty was FAR more theoretical than I was or will ever be. The way I saw it, people who had invested so much time and energy developing their complex theoretical positions seemed highly unlikely to abandon them. I returned from that summer of passionate debates in youth hostels determined to get my theoretical ducks in a row.

So I read some Trotsky, a bunch of Gramsci, etc. Basically what I discovered was that even though these authors could inspire something that resembled revolutionary ardor, none seemed to address the issues that so dominated my early political consciousness—interest rates and usury laws, the creation of money, the regulation of "natural" monopolies, etc. So as we can see from today's brilliant take-down of the modern "Left" by one really furious Greek, we have reasons aplenty to be furious over what has happened to that poor little country. Even IF the Left could awaken some old revolutionary ardor, they are theoretically ill-equipped to comment on such issues as IMF structural adjustments in the age of electronic money—and the rest of the horrors visited on the world's poor.