Week-end Wrap - Political Economy - April 27, 2019

Week-end Wrap - Political Economy - April 27, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Share of wealth held by the bottom 90% by country
[Real World Economics Review Blog, via Mike Norman Economics 4-24-19]

The Great Deformation: Why Income Inequality Has Become Intractable
Yves Smith, April 23, 2019 [Naked Capitalism]

Taylor’s talk last week focused on the drivers of the rise in inequality, which came about via a rise in profit share of GDP, something we first noted in 2005 in a Conference Board Review article. That has enabled the top 1% to pull away from everyone else. Investment as a proportion of GDP has also dropped while consumption has increased. The paper has more detail, but Taylor estimates it would take 40 years to reduce inequality to 1980 levels. He also warns that wealth concentration could increase from 40% held by the top 1% to 60%....

...advocates of workers have failed to take up the task of determining what a reasonable level of profit is. We’ve mentioned before that in the early 2000s, Warren Buffett deemed a profit share of 6% to be unsustainably high. Yet for the past three years, the profit share has been nearly twice this high. 

Oddly, the left and labor supporters have not engaged with the question of what a fair profit might be. Modern cultures have deeply internalized the idea that the result of market forces is somehow virtuous, when markets sit both in a legal system and in a set of societal norms that play a large role in what supply and demand looks like.

[Below via, via Naked Capitalism 4-23-19]

Alice Evans‏ @_alice_evans

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I'm reading @JosephEStiglitz's new book, "People, Power, & Profits". Really appreciate this point about globalisation & wages:

Week-end Wrap - Political Economy - April 20, 2019

Week-end Wrap - Political Economy - April 20, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

I have been looking at the work of Cornell University law professor Robert Hockett, who is serving as an economics adviser to Representative Alexandria Occasio-Cortez. I have been delighted to find that Hockett has been working the same angle I have: applying the classical republicanism that informed the creation of USA, to today's issues of political economy. Hockett's contribution is the development of the concept of what he calls "the producers' republic":

....the United States actually has a distinguished tradition of what I am calling “productive republican” finance. It is a tradition pursuant to which productive assets were deliberately spread broadly among diligent citizens ready to better the lives of themselves, their families, and ultimately their communities through thoughtful, hard work. 

Historically, the tradition is rooted in two complementary sources: first, an implicitly opportunity-egalitarian, “productive yeoman” colonial culture and subsequent national self-image, stemming in large measure from the Civic Republican and Classical Liberal ideological origins of the American republic; and second, an attendant suspicion of large aggregations of financial capital, stemming ultimately not only from the inconsistency of such aggregations with equal opportunity and productive yeomanry themselves, but also from many of the Founders’ and their forebears’ personal experiences, as agronomists, with exploitative absentee London banking concerns across the
Atlantic. 

This past January, Hockett was a participant in a small conference Money as a Democratic Medium, sponsored by Harvard University's Program on the Study of Capitalism, Institute for Global Law and Policy:

Money, governance, and public welfare are intimately connected in the modern world. More particularly, the way political communities make money and allocate credit is an essential element of governance. It critically shapes economic processes – channeling liquidity, fueling productivity, and influencing distribution. At the same time, those decisions about money and credit define key political structures, locating in particular hands the authority to mobilize resources, determining access to funds, and delegating power and privileges to private actors and organizations. 

Recognizing money and credit as public projects exposes issues of democratic purpose and possibility. In a novel focus, this conference makes those issues central. Scholars, policy makers, and students have often assumed that money and credit emerge from private exchange and entrepreneurial activity. Recent work, by contrast, emphasizes that modern currencies depend on collective orchestration. That approach resets the frame.

One of the participants was Jeffrey Sklansky, professor of history at the University of Illinois at Chicago and author of Sovereign of the Market: The Money Question in Early America (University of Chicago Press, 2017). Sklansky gave a brief but excellent overview of the career of Charles Macune, the head of the Southern Farmers' Alliance from 1886 to December 1889 and editor of its periodical, the National Economist, until 1892. Macune developed the Sub-Treasury idea to break the stranglehold the big banks and grain trading firms had on finance and credit for agriculture. There is precious little information available on Macune, and Sklansky has earned my deep respect for what he is doing.

Hockett's presentation is also in this video, as is that of Joseph R. Blasi of the Rutgers School of Management and Labor Relations, "The Citizen's Share: Reducing Inequality in the 21st Century"

This is only one of about a dozen YouTube videos of the Money as a Democratic Medium conference.

In Having a Stake: Evidence and Implications for Broad-based Employee Stock Ownership and
Profit Sharing, Blasi writes about the federally mandated profit sharing the administration of George Washington imposed on the cod fishery to rebuild it, after the British had nearly destroyed it because it trained so many of the officers and sailors in the American navy.

....Jefferson, Washington, and the Congress chose to help the industry get back on its feet by what was essentially a tax cut (in lieu of tariffs paid for supplies coming from outside the U.S.) to the owners and workers of the cod fishery on the condition that the ship owners share the tax credits with all the workers.... they rejected outright subsidies to the wealthy owners who controlled the boats and warehouses on the basis that any government tax credits had to include workers. The law was explicit in its sharing criterion: owners had to share five-eighths of the credit with the crew, and additionally have a signed agreement with the captain and crew for broad-based profit sharing on the entire catch throughout the voyage. The tax credits were administered by the Treasury Department headed by Alexander Hamilton through the port Customs’ Houses. The arrangement helped rejuvenate the industry. Congress continued it for many decades. See The Citizen’s Share: Reducing Inequality in the 21st Century, Joseph R. Blasi, Richard B. Freeman, and Douglas L. Kruse. (New Haven: Yale University Press, 2013), 1-8. See also the Report on the American Fisheries by Secretary of State Jefferson.

Video spotlight: Why is public banking important for social change?

[Public Banling Institute 4-20-19]

Thomas Marois, Senior Lecturer in Development Studies at the University of London and recent guest on It’s Our Money with Ellen Brown, argues that until people regain control of money and credit, we will not be able to stop economic and ecological crises.
“There’s really no option. We can’t simply relegate the question of money and finance and credit … We can’t do anything until we have control of money. And to leave that to the private sector is a strategic mistake because then they control that agenda. They control credit. They control access to credit.”

Sandy Munro does a teardown analysis of Tesla

This YouTube interview of Sandy Monro is interesting to the point of being profound. Some background.

Monroe lives in Michigan and has a bunch of commercial ties to the car business. His specialty is tearing down cars to see how they were built and whether better production practices could make a better car. His company has about 100 employees, because cars are incredibly complex with dozens of systems so he needs a wide assortment of specialists.

The reason Monro has become a sensation is because he tore down an early Tesla Model 3. At first he was pretty critical but as time has gone on he has become convinced that most legacy automakers are now almost hopelessly behind. He has some wonderful stories about how institutional inertia works at a place like Ford Motor. His inside look at Teslas will probably sell well for at least a decade

And then he says some really enlightening things about China and their rapid industrialization plans. His observations may be skewed because he is probably meeting their best and brightest, but even taking a hefty discount for that, the story is still about as compelling a look at China as anything I have seen in a long time—maybe ever.

Greta Thunburg at the EU Parliament

I have a sign that says, "Do NOT question authority! They don't know either."

Now I really am impressed by young Thunberg and what she has accomplished. When you were 16, would anyone have asked you to speak in front of the EU Parliament? Would you have had anything to say worth listening to? Could you have delivered that speech flawlessly in a second language? She is truly amazing and has attracted a global following.

Unfortunately, she believes that the world's leaders are fully capable of fixing the climate problem if only they would put their minds to it. I only hope she will have her coping abilities in high gear when she discovers the worst truth of all—most of the adults—and certainly the adults she will meet at places like Davos, Strasbourg, or Katowice, don't have a freaking clue what to do either. I mean, Greta must be forgiven for believing that a good scolding should set thing right. She is only 16 and that probably is about the only behavioral modification she really understands. But for this problem, it is nowhere nearly enough. Of course, considering what she has already accomplished, she probably has a better chance of understanding this dilemma better than most.

Week-end Wrap - Political Economy - April 13, 2019

Week-end Wrap - Political Economy - April 13, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

“Research is vital to the moral integrity of social movements” 
Rev. Dr. William J. Barber II [Economic Policy Institute, via Naked Capitalism 4-8-19]
A must-read.

One of the quickest ways for a movement to lose its integrity is to be loud and wrong. We’ve seen too many movements that have bumper sticker sayings but no stats and no depth. Researchers help to protect the moral integrity of a movement by providing sound analysis of the facts and issues at hand. Armed with this information, we’re able to pull back the cover and force society to see the hurt and the harm of the decisions that people are making....

...the prophet Isaiah said to those who were rich, powerful and presumed themselves to be morally superior. “Woe unto those who legislate evil and rob the poor of their rights and make women and children their prey.” Isaiah even went as far as saying that religious activity—worship and prayer—was not a cover for their failure to “loose the band of wickedness.” Wickedness in that text is specific to the issue of not paying people what they deserve and trying to cover it over with a lot of religiosity. He goes on to say that the nation will never be able to repair itself until it ends the wickedness of not paying people what they deserve. Because society’s policies had actually insulated destruction, injustice and inequality could never be resolved without a change of policy. 

These statements reflect more than just a difference of opinion concerning the legislation. Rather, such bold and specific statements suggest an analysis of the society which concluded that the legislation was evil in that it was robbing those who were most vulnerable. In other words, Isaiah’s moral authority to criticize policy could be confirmed and validated by research....

The 13 former Confederate states, which only have about 36 percent of this country’s population, decide 178 electoral votes, 26 United States Senate seats and 35 percent of the seats in the United States House of Representatives. That means all it takes to win control of both houses of Congress is 25 Senate seats and 16 percent of U.S. House of Representatives seats available from the other 37 states. 

100 million is the number of people that didn’t vote in the 2016 election. 40 million is the number of poor and low-wealth people in this country. The majority of them are in the South and are the key to the transformation of our politics. 

All of the close elections we witnessed in the 2018 midterms are a sign that we are right at the tipping point. If there’s ever been a time that we ought to go south and shift the political calculus in this nation for the next 20 to 40 years and beyond, it is in fact right now.

How corporate America invented 'Christian America' to fight the New Deal

[churchandstate.org.uk 3-23-16, via Avedon's Sideshow 4-4-19]

The 2016 annual meeting for the Organization of American Historians (OAH) will feature a session focusing upon the provocative book One Nation Under God by Princeton history professor Keven M. Kruse. In One Nation Under God, Kruse argues that the idea of the United States as a Christian nation does not find its origins with the founding of the United States or the writing of the Constitution. Rather, the notion of America as specifically consecrated by God to be a beacon for liberty was the work of corporate and religious figures opposed to New Deal statism and interference with free enterprise. The political conflict found in this concept of Christian libertarianism was modified by President Dwight Eisenhower who advocated a more civic religion of 'one nation under God' to which both liberals and conservatives might subscribe....

Arguing that public religion is a modern invention that has little to do with America’s origins, Kruse maintains that contemporary political discourse needs to better recognize the political ideology being perpetuated by the advocates of America as a Christian nation. Needless to say, Kruse’s arguments will antagonize many on the Christian right, as well as many on the left who have employed Christianity as the means through which to implement principles of equality and opportunity as extolled by Jesus of Nazareth, the working-class carpenter. 

Drawing upon extensive archival research, the first part of Kruse’s book documents the alliance between religious leaders such as Congregationalist minister James W. Fifield Jr. and businessman J. Howard Pew Jr., president of Sun Oil and a major figure with the National Association of Manufacturers. Working out of his affluent Los Angeles community and congregation, Fifield formed a national organization called Spiritual Mobilization that attracted the support of big business while embracing unfettered capitalist traditions threatened by Franklin Roosevelt’s New Deal policies. The fertile ground plowed by Spiritual Mobilization and Fifield prepared the way for the influential prayer breakfasts of Methodist minister Abraham Vereide and the crusades of evangelist Billy Graham.... 

Seeking to mount a conservative movement against the religious establishment, evangelists such as Billy Graham joined forces with the administration of Richard Nixon to promote a religious perspective that would divide rather than unify Americans. Holding White House religious services officiated by leading evangelical ministers and sponsoring events such as the 1970 Fourth of July “Honor America Day,” featuring a religious service at the Lincoln Memorial led by Graham, Nixon attempted to employ religious nationalism as a means through which to brand those opposing his administration or the war in Vietnam as attacks upon American Christian values. Although Kruse includes an epilogue offering an overview of religion and American politics from the 1980s to the Obama Presidency, he assigns Nixon, rather than Ronald Reagan, primary responsibility for using religion to divide rather than bring Americans together.

I want apologies from the Russia-bashers

In 1972, I went to Leningrad. This was the age of Brezhnev—scary, dark, humorless USSR. Just getting off the boat was about all I could muster. To make matters worse, the Israeli Olympic team was taken hostage the morning we were scheduled to go on our very first Intourist guided tour. I spent the morning going from fretful to scared shitless. Once the bus got underway, I began to notice things I thoroughly disapproved of. The trucks were ugly and belched thick black smoke. Consumer goods were an insult to the Instinct of Workmanship. Construction sites were a disaster. But beneath the seediness of 70s Leningrad was an undeniable reality—this was the Imperial Capital of Peter the Great. This is one of the most beautiful cities on earth—a city where over one million died of starvation during the Siege rather than surrender it to the Nazis.

It took most of the day, but I came to the conclusion that if they had better political and economic systems, this would easily be the richest country on earth. Considering USSR had to be built twice (Stalin's industrialization and then post WW II reconstruction) they weren't doing so badly even in 1972. Then came the Harvard boys to teach the Russians neoliberal "capitalism." Caused nearly as much damage as the Nazis.

Here's the mess the son of Leningrad / St. Petersburg Vladimir Putin inherited from Yeltsin in 1999:

    ▪    The country was deeply in debt to the scum like IMF and World Bank?
    ▪    The Harvard boys had created such an economic catastrophe that life expectancy was falling, whole industries lay in ruins, the former Russian middle class was reduced to selling heirlooms in the winter cold, their savings had been wiped out, the best and brightest had emigrated. (For what Jeffrey Sachs inflicted on Russia makes him a walking advertisement for bringing back crucifixions.)
    ▪    The oligarchs who had seized the best Russia had to steal escaped with their loot—mostly to London where they triggered a bubble the real estate speculators love so much.

Add to this list of great headaches, he has had to deal with: NATO encirclement, international slander, the Banderite-fascist coup in Ukraine. Of course he had to move on Crimea. The Red Army lost around a half-million folks trying to defend and then retake Sevastopol during WW II. Crimea is REALLY important for Russia and so he had to remake economic and foreign policy to deal with the fallout of keeping Crimea Russian.

In the meantime, Russian aerospace is back on its feet. The military fights with pride and professionalism. The things Russia has been good at, they are good at again—figure skating, ballet, etc. Putin is still wildly popular. He has rebuilt relationships with China. He has opened elite schools so Russian education is again world-class. Russia became the world's leading exporter of grains last year—all GMO-free.

The list is nearly endless. And why not. He has at least 40 IQ points on any politician we have in USA and was given one of those elite educations that the commies could do so well. He is so fluent in German he holds press conferences in Germany in German. He holds 3 hour press conferences for the international media without notes. He has done something that anyone examining the wreckage of 1999 would not have predicted—he has restored pride in a people who not long ago were just drinking themselves to death.

What I find so amazing is his willingness to brush off some of the most ridiculous slanders and provocations. I was raised around pacifists so am pretty conversant with the dilemmas and contradictions of this practice. I would give Putin a solid B+. Turns out it is pretty easy to be a pacifist when armed with nukes ;-) Or maybe it really is the Orthodox church. I don't know much about those folk beyond the fact they have incredibly ornate churches and their male glee clubs have amazing basses. Reportedly Putin's mother was very devout and baptized him as a baby. Whatever. It's just that under Putin, most of the damage those barbaric Bolsheviks inflicted on this element of Russian culture has been repaired or rebuilt—reportedly over 40,000 churches have been rehabbed since the end of Bolshevism.

I have not been thrilled by the mindless Russia-bashing we have had to endure these last 2.5 years. Most of it unbelievable lies. And while I detest the liars who have reintroduced the unholy practice of red-baiting, I am even more distressed by the endless stream of self-identified "progressives" who bought into the Russiagate hoax. Robert LaFollette was a real Progressive—was the party's presidential candidate in 1924. He tried to keep USA out of the insanity of WW I thereby ruining his career as a Senator. So no, anyone who was cheerleading a restart of the Cold War and McCarthyism is most certainly NOT a progressive.

Week-end Wrap - Political Economy - April 6, 2019

Week-end Wrap - Political Economy - April 6, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Draining The Swamp In North Carolina Yields The Head Of The State Republican Party, The Party's Top Donor And 3 Others, Including A Far Right Member Of Congress

About a decade ago, mostly back in 2006 and 2008, we used to write a lot about a North Carolina multimillionaire congressman named Robin Hayes. The district he represented, NC-08, is now mostly NC-09, the one where a Trumpist candidate was caught rigging the ballots last year, causing the election to be voided.... Hayes was a freak. One of the reasons he lost so badly to Kissel in 2008 was because he accused then candidate Barack Obama of "inciting class warfare" and claiming that "liberals hate real Americans that work and accomplish and achieve and believe in God." That brought him a lot of attention and he not only denied that he ever said it, he also accused the media reporting his remarks "irresponsible journalism." Unfortunately for Rep. Hayes, someone made a tape. When that was released Hayes simple denied that he denied the statement. Kissel beat him by ten points. 

Instead of just letting him quietly slip away into obscurity, the North Carolina elected him chairman of the state party, a two year term. They elected him again in 2016. Today Hayes was in court, having been indicted by a federal grand jury on a variety of charges for funneling bribe money to the re-election campaign of North Carolina Insurance commissioner Mike Causey.

It was actually wealthy entrepreneur and Republican Party mega-donor Greg Lindberg who was being investigated when the FBI stumbled upon Hayes. Lindberg would write $40 checks to the DCCC on the same day he wrote $500,000 checks to the Republican Party of North Carolina. He's contributed million of dollars to the GOP in recent years and was the state party's biggest single donor and is the money-bags behind the state's crooked Lt. Govenor, Dan Forest, who is running for governor next year.

Strategic Political Economy

Taibbi: On Russiagate and Our Refusal to Face Why Trump Won

Matt Taibbi [Rolling Stone, via Naked Capitalism 3-31-19]
This is long, for Taibbi, but an absolute must-read.

The 2016 campaign season brought to the surface awesome levels of political discontent. After the election, instead of wondering where that anger came from, most of the press quickly pivoted to a new tale about a Russian plot to attack our Democracy. This conveyed the impression that the election season we’d just lived through had been an aberration, thrown off the rails by an extraordinary espionage conspiracy between Trump and a cabal of evil foreigners. 

This narrative contradicted everything I’d seen traveling across America in my two years of covering the campaign. The overwhelming theme of that race, long before anyone even thought about Russia, was voter rage at the entire political system. 

The anger wasn’t just on the Republican side, where Trump humiliated the Republicans’ chosen $150 million contender, Jeb Bush (who got three delegates, or $50 million per delegate). It was also evident on the Democratic side, where a self-proclaimed “Democratic Socialist” with little money and close to no institutional support became a surprise contender.

How the Media Got it Wrong on Trump and Russia 

[The National Interest, via Naked Capitalism 3-31-19] 

The headline erases the intelligence community from the story. The article does not.

Veblen's idea of business versus industry

I had wanted to reply to comments in the thread of Economics as Cultural Warfare: The Case of Adam Smith, over at Ian Welsh's blog, where bruce wilder makes an important correction to my view of Smith: "Smith’s central argument rather famously is that the division of labor is the primary source of wealth!" Which of course is perfectly true, given that one of Smith's most famous passages is that describing the impressive productivity of the machines Smith found in a pin making factory. 

But my design is to utter annihilate any respect for Adam Smith by showing he is little more than an apologist for the imperial looting, immiseration, and devastation the British empire exacted on its colonial subject populations. In my world view, there is nothing about any apologist for the British empire that is worth salvaging. Was it possible that here was an anomaly for which I would have to bend my rules?

As I pondered this over the past week, I realized that tossing Smith's division of labor argument into the trash bin of history is more easily accomplished by referencing the arguments made by Thorstein Veblen regarding the differences between business and industry. I was not very surprised to find that I could find nothing on the internet about Veblen's argument that was worth linking to. Veblen has always been  persona non grata in the mainstream economics profession -- which means that he probably has gored one or more of the profession's sacred cows. Which of course makes Veblen all the more attractive in our day, when the intellectual rot among economic academicians has reached an overpowering level of stench. Modern Monetary Theory may have some weaknesses and faults, but I would rather have it blowing through the academy to dispel as much of the bad air as it can, than leaving the brain dead body to continue rotting and fouling the air.

Researching my attack on Smith, I had taken off my bookshelf Joseph Dorfman's The Economic Mind in American Civilization. I now opened Dorfman's book again to see what he had written about Veblen. I was surprised but delighted to find the best summary I had yet read of Veblen's ideas. In case readers don't know it, Dorfman wrote a book in 1935 entitled Thorstein Veblen and His America. And what readers certainly do not know is that the descendants of Veblen loathed the book, and spent years trying to persuade, then force, Dorfman to change the book, mostly the parts in which he described Veblen's personal traits and peccadilloes, including the controversies Veblen stirred up at every university that ever hired him. Veblen’s  descendants were unsuccessful. The source for this is Jon Larson, who worked with Veblen’s descendants in the restoration of the Veblen farm.

Despite this sad history, Dorfman's explanation of Veblen's ideas on the differences between business and industry are extremely useful today. I hope to see in comments someone expressing their "eureka" moment -- yes, let us bury Adam Smith once and for all, and never hear of him again.