Week-end Wrap – Political Economy – October 26, 2019

Week-end Wrap – Political Economy – October 26, 2019
by Tony Wikrent
North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

U.S. Military Could Collapse Within 20 Years Due to Climate Change, Report Commissioned By Pentagon Says[Vice, via The Big Picture 10-25-19]

“For the first time, workers are paying a higher tax rate than investors and owners” 

[Washington Post, via Naked Capitalism 10-24-19] 

“Most Americans have to work to earn a living. But the rich are different: They get most of their income not from labor but from what they own — companies, stocks, real estate and the like. These income-generating assets are what economists call capital. And because capital is heavily concentrated among the rich, the U.S. government taxed earnings derived from capital at a higher rate than earnings made through labor for the entirety of the 20th century. But that’s no longer the case, according to economists Emmanuel Saez and Gabriel Zucman of the University of California at Berkeley. In their new book, “The Triumph of Injustice,” they present data showing that in 2018, labor income was taxed at a higher rate than capital income for the first time in modern U.S. history.”

This could be the formal marker for when USA ceased being a republic and became a plutocracy, but I would argue for the Citizens United decision by the Supreme Court instead. 

The CBO Just Handed Us Two Trillion Dollars

[J.W. Mason, via Naked Capitalism 10-25-19]

In their most recent 10-year budget and economic forecast, the CBO made a big change, reducing their long-run forecast of the interest rate on government bonds by almost a full percentage point, from 3.7 to 2.9. (See Table 2.6 here.)

Most directly, the new, lower interest rate reduces expected debt payments over the next decade by $2.2 trillion.

I have no doubt that Trump and the Republicans will use this to push the line that the Trump tax cuts worked to grow the economy and pay for themselves. 

Week-end Wrap – Political Economy – October 19, 2019

Week-end Wrap – Political Economy – October 19, 2019
by Tony Wikrent
North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Economist Mariana Mazzucato has demonstrated that the real driver of innovation isn’t lone geniuses but state investment. 

[Wired, via The Big Picture 10-19-19]

....Mazzucato, an Italian-American economist who had spent decades researching the economics of innovation and the high tech industry, decided to look deeper into the early history of some of the world’s most innovative companies. The development of Google’s search algorithm, for instance, had been supported by a grant from the National Science Foundation, a US public grant-awarding body. Electric car company Tesla initially struggled to secure investment until it received a $465 million (£380 million) loan from the US Department of Energy. In fact, three companies founded by Elon Musk — Tesla, SolarCity and SpaceX — had jointly benefited from nearly $4.9 billion (£3.9bn) in public support of various kinds. Many other well-known US startups had been funded by the Small Business Innovation Research programme, a public venture capital fund. “It wasn’t just early research, it was also applied research, early stage finance, strategic procurement,” she says. “The more I looked, the more I realised: state investment is everywhere.” 

Mazzucato included her findings in a 150-page pamphlet she submitted to UK policy think tank Demos. It was distributed to thousands of policymakers, and received coverage in daily newspapers. “It was obvious that it had touched a nerve,” she says. “The more I thought about it, the more I wanted to go straight to the core of the myths about innovation.” She decided to dissect the product that symbolised Silicon Valley’s engineering prowess: the iPhone. 

Mazzucato traced the provenance of every technology that made the iPhone. The HTTP protocol, of course, had been developed by British scientist Tim Berners-Lee and implemented on the computers at CERN, in Geneva. The internet began as a network of computers called Arpanet, funded by the US Department of Defense (DoD) in the 60s to solve the problem of satellite communication. The DoD was also behind the development of GPS during the 70s, initially to determine the location of military equipment. The hard disk drive, microprocessors, memory chips and LCD display had also been funded by the DoD. Siri was the outcome of a Stanford Research Institute project to develop a virtual assistant for military staff, commissioned by the Defense Advanced Research Projects Agency (DARPA). The touchscreen was the result of graduate research at the University of Delaware, funded by the National Science Foundation and the CIA.

See also my HAWB series: How America Was Built. List of previous posts is at the bottom of this story on NASA aerodynamicist Richard Whitcomb. 

Week-end Wrap – Political Economy – October 12, 2019

Week-end Wrap – Political Economy – October 12, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

The Census Fails to Count 100 Million People as Living in Poverty

Jerri-Lynn Scofield, via Naked Capitalism 10-7-19]

The climate crisis and the failure of economics: Why our economic model fails to explain how we got here on climate.
Jared Bernstein  Oct 11, 2019, via Naked Capitalism 10-11-19]

Historic step forward: Gov. Gavin Newsom signs the Public Banking Act into California law!
[Public Banking Institite 10-5-19]

Victory in California! Gov. Gavin Newsom’s signature has made AB 857 — the grassroots-generated, people-powered Public Banking Act — the law in California. The California Public Banking Alliance has been tireless in educating legislators, drafting language, and generating massive statewide public support. The strong leadership of the bill's co-authors, Assemblymembers Miguel Santiago and David Chiu, generated 19 co-sponsors and support from several committee chairs, clearly demonstrating that the will of the people is behind banks that serve the public interest.... 

California gets it rolling [podcast]
As global climate strikes continue around the world this week, California has passed breakthrough legislation that sanctions municipal public banks to serve as public administration entities, a development with wide repercussions across the country. We talk with a couple of the citizen leaders, Marc Armstrong and Susan Harman, who were pivotal drivers of the effort, and what they think it means for the movement. Then Ellen speaks with an author and former US Treasury economist, Richard C. Cook, about why the extractive domination of private banks over the totality of civic life must be taken down if we wish to have an economy that works for all. Finally, we have another talk with Bank of North Dakota historian Mike Jacobs about why that bank has managed to avoid corruption and remain a robust example of why banks should be owned by the people.

Week-end Wrap – Political Economy – October 5, 2019

Week-end Wrap – Political Economy – October 5, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

How Bill Clinton and American Financiers Armed China
Matt Stoller [BIG, via Naked Capitalism 10-2-19]

A must-read for all the details of the policy follies of the past four decades, and for the quotes from speeches at the time by such elites as Larry Summers.

Chinese power today is a result of a large number of incidents similar to this one, the wholesale transfer of knowhow, technology, and physical stuff from American communities to Chinese ones. And the confused politics of China is a result of the failure of the many policymaking elites who participated in such rancid episodes, and are embarrassed about it. As we peer at an ascendant and dangerous China, it makes sense to look back at how Clinton thought about the world, and why he would engage in such a foolish strategy. 

Broadly speaking, there were two catastrophic decisions Clinton made in 1993 that ended up eroding the long-term American defense posture. The first was to radically break from the post-World War II trading system. This system was organized around free trade of goods and services among democratic nations, along with somewhat restricted financial capital flows. He did this by passing NAFTA, by bailing out Mexico and thus American banks, by creating the World Trade Organization, and by opening up the United States to China as deep commercial partners. 

The Clinton framework gutted the ability of U.S. policymakers to protect industrial power, and empowered Wall Street and foreign officials to force the U.S. to export its industrial base abroad, in particular to China. The radicalism of the choice was in the intertwining of the U.S. industrial base with an autocratic strategic competitor. During the Cold War, we had never relied on the USSR for key inputs, and basically didn’t trade with them. Now, we would deeply integrate our technology and manufacturing with an enemy (and yes, the Chinese leaders saw and currently still see us as enemies). 

The second choice was to reorganize the American defense industrial base, ripping out contracting rules and consolidating power into the hands of a small group of defense giants. In the early 1990s, as part of the ‘reinventing government’ initiative, the Clinton team sought to radically empower private contractors in the government procurement process....  

The empowering of finance friendly giant contractors bent the bureaucracies towards only seeing global capital flows, not the flow of stuff or the ability to produce. This was already how most Clinton administration officials saw the world. They just assumed, wrongly, that stuff moves around the world without friction, and that American corporations operate in a magic fairy tale where practical problems are solved by finance and this thing called ‘the free market.’ In their Goldman, McKinsey and Boston Consulting Group-ified haze of elitist disdain for actually making and doing real things, they didn’t notice or care that the Chinese Communist Party was centralizing production in China. They just assumed that Chinese production was ‘the free market’ at work, instead of a carefully state-sponsored effort by Chinese bureaucrats to build strategic military and economic power.