Sunday, January 26, 2020

Week-end Wrap – Political Economy – January 26, 2020

Week-end Wrap – Political Economy – January 26, 2020
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Why the New Silk Roads are a ‘threat’ to US bloc
Pepe Escobar [Asia Times, via The Big Picture 1-23-20]
Asia and Europe have been trading goods and ideas since at least 3,500 BC. Historically, the flux may have suffered some occasional bumps – for instance, with the irruption of 5th-century nomad horsemen in the Eurasian plains. But it was essentially steady up to the end of the 15th century. We can essentially describe it as a millennium-old axis – from Greece to Persia, from the Roman empire to China.
A land route with myriad ramifications, through Central Asia, Afghanistan, Iran and Turkey, linking India and China to the Eastern Mediterranean and the Black Sea, ended up coalescing into what we came to know as the Ancient Silk Roads....
Rationalist hegemony in Europe progressively led to an incapacity to understand diversity – or The Other, as in Asia. Real Euro-Asia dialogue – the de facto true engine of history – had been dwindling for most of the past two centuries.
Europe owes its DNA not only to much-hailed Athens and Rome – but to Byzantium as well. But for too long not only the East but also the European East, heir to Byzantium, became incomprehensible, quasi incommunicado with Western Europe, or submerged by pathetic clichés.
The Belt and Road Initiative (BRI), as in the Chinese-led New Silk Roads, are a historical game-changer in infinite ways. Slowly and surely, we are evolving towards the configuration of an economically interlinked group of top Eurasian land powers, from Shanghai to the Ruhr valley, profiting in a coordinated manner from the huge technological know-how of Germany and China and the enormous energy resources of Russia. The Raging 2020s may signify the historical juncture when this bloc surpasses the current, hegemonic Atlanticist bloc.
Now compare it with the prime US strategic objective at all times, for decades: to establish, via myriad forms of divide and rule, that relations between Germany, Russia and China must be the worst possible.
No wonder strategic fear was glaringly visible at the NATO summit in London last month, which called for ratcheting up pressure on Russia-China. Call it the late Zbigniew “Grand Chessboard” Brzezinski’s ultimate, recurrent nightmare....
Moscow and Beijing have come to the conclusion that the  US trans-oceanic strategic ring can only be broken through the actions of a concerted block: BRI, Eurasia Economic Union (EAEU), Shanghai Cooperation Organization (SCO), BRICS+ and the BRICS’ New Development Bank (NDB), the Asia Infrastructure Investment Bank (AIIB).
The Lords and Ladies of Discipline: An Interview with Matt Stoller
 [Naked Capitalism, January 21, 2020]
...Matt Stoller is referring to the contemporary incarnation of mainstream economics, which is neoclassical economics. It is worth remembering that neoclassical economics started being formalized in the late 19th century by thinkers like Leon Walras, Carl Menger, and William Jevons. One of the reasons their ideas took hold was first, that they aspired to establish that economics was a science that could be described in mathematical terms. Second, to do so, they had to assume ergodicity, which in layperson terms means that the system has a propensity to achieve a stable equilibrium. This typically hidden assumption produced results that were very useful in beating back idea promoted by Marx and other pro-labor forces, that modern economies were unjust and needed reforming. The counter-story was that if left alone, as in in the hands of businessmen, they were naturally self-correcting....
Stoller’s insight here brings Thomas Frank’s now standard analysis of the Democrats as the party of America’s smug anti-populist liberal/creative/professional class into an even more exquisite focus. For, as Stoller observes, this class is, increasingly, a disciplinary class, defining itself by both its adherence to and its enforcement of certain articles of faith — certain indisputable narratives — certain collective delusions. And currently chief among these are, first, the delusional narrative that the unprecedentedly evil boogeyman Donald Trump was illegitimately injected into the presidency by the dastardly and all-powerful Russians; second, the delusional narrative that our neo-liberal economic orthodoxy has irrefutably proven that any and all public policies on the scale of what was once achieved during the New Deal are now and forever unworkable and, worse than that, uncool; and, third, the delusional narrative that strategically-placed Intersectionalist Inclusivity bureaucrats are at this very moment reversing many many millennia of nonstop human social injustice by means of pure moral superiority. To dare challenge any of these cherished class narratives is to be smeared with extreme prejudice by the disciplinary class for thoughtcrimes like parroting Russian talking points or waging tacky class warfare or acquiescing to structural racism-misogyny-transphobia. Or for just being a deplorable.
....
“Well,” Stoller said, “I would say that there may be things in the discipline of economics that correspond to reality. There may be useful insights. There may be things that are false. But all of that is incidental. Like it’s not the point. The point of economics is not to describe reality or to uncover truth [italics mine]. To the extent that it does so is incidental to what the real purpose of economics, which is to organize a language for governing.” 
So who exactly, I asked, gets to govern with this language? 
Economics, he responded, becomes the official public language of an aristocracy: “So the discipline of economics today,” he said, “is just dedicated to aristocracy…. 
Aristocrats believe that some people are fit to rule and others are not, and you have to make sure that those who are not fit to rule have no influence over governing decisions. There are a lot of different ways to do that. The way that the discipline of economics does it is that they create a mathematized language into which you can build your political assumptions, and then they imbed that mathematized language into every important governing structure.” 
And what, I asked, is the point of mathematizing this language? 
“The point is to hide the governing decisions from the public,” Stoller responded without missing a beat. As if the method of systemic deceit were obvious. Which I guess in a sense it is.

Climate and environmental crises

U.S. appeals court tosses children’s climate lawsuit (Juliana v. United States)
[Science, via Naked Capitalism 1-20-20]
Judges for the 9th U.S. Circuit Court of Appeals “reluctantly” ruled in favor of the government in the kids’ climate case today, thwarting the young people’s historic legal fight while acknowledging the “increasingly rapid pace” of climate change....

“The central issue before us is whether, even assuming such a broad constitutional right exists, an Article III court can provide the plaintiffs the redress they seek—an order requiring the government to develop a plan to 'phase out fossil fuel emissions and draw down excess atmospheric CO2,'" Hurwitz, an Obama appointee, wrote in an opinion issued this morning.
“Reluctantly, we conclude that such relief is beyond our constitutional power. Rather, the plaintiffs’ impressive case for redress must be presented to the political branches of government.”
The Pesticide Industry’s Playbook for Poisoning the Earth
[The Intercept, via Naked Capitalism 1-19-20]
“Position the industry as an active promoter of bee health, and advance best management practices which emphasize bee safety,” noted an internal planning memo from CropLife America, the lobby group for the largest pesticide companies in America, including Bayer and Syngenta. The ultimate goal of the bee health project, the document noted, was to ensure that member companies maintained market access for neonic products and other systemic pesticides.

The planning memo, helmed in part by Syngenta regulatory official John Abbott, charts a variety of strategies for advancing the pesticide industry’s interests, such as, “Challenge EPA on the size and breadth of the pollinator testing program.” CropLife America officials were also tapped to “proactively shape the conversation in the new media realm with respect to pollinators” and “minimize negative association of crop protection products with effects on pollinators.” The document, dated June 2014, calls for “outreach to university researchers who could be independent validators.” 
The pesticide companies have used a variety of strategies to shift the public discourse.
“America’s Heartland,” a PBS series shown on affiliates throughout the country and underwritten by CropLife America, portrayed the pollinator declines as a mystery. One segment from early 2013 on the crisis made no mention of pesticides, with the host simply declaring that “experts aren’t sure why” bees and butterflies were disappearing.
[Nature, via Naked Capitalism 1-22-20]
‘[Atmospheric chemist Martin Vollmer], who works at the Swiss Federal Laboratories for Materials Science and Technology (EMPA) in Dübendorf, specializes in sniffing out newly emerging trace gases, which make up less than 1% by volume of the planet’s atmosphere…. Behind the scenes, scientists such as Vollmer are keeping watch over the health of the atmosphere — in part to make sure nations are honouring their promises…. For many years, the news coming from these air-monitoring campaigns was good. Concentrations of CFCs and several other dangerous compounds were declining steadily. It was the biggest win in environmental policy the world has ever seen, say researchers… Then, in May 2018, Montzka reported a disturbing blip: levels of one of the most harmful chemicals, trichlorofluoromethane, known as CFC-11, weren’t dropping as fast as expected1, suggesting that companies were producing this compound somewhere, in violation of the protocol. ‘It was the most surprising and shocking thing I’ve seen in my entire career,’ Montzka says. Montzka’s research pointed to eastern Asia, and a follow-up study last May pinpointed the source of a significant fraction of the emissions to two provinces in China.”
“New Analysis Puts Price Tag on Shipping Decarbonization” 
[Maritime Executive, via Naked Capitalism 1-21-20]
“At least $1 trillion of capital investment in land-based and ship-related infrastructure is required to halve international shipping’s greenhouse gas emissions by 2050, according to a new study by UMAS and the Energy Transitions Commission for the Getting to Zero Coalition. Radical change is needed to meet the IMO goal of reducing shipping’s total greenhouse gas emissions by at least 50 percent of 2008 levels by 2050. The transition requires significant infrastructure investments in new fuel production, supply chains and a new or retrofitted fleet. Depending on the production method, the cumulative investment needed between 2030 and 2050 to halve shipping’s emissions amounts to approximately $1-1.4 trillion or an average of $50-70 billion annually for 20 years. If shipping is to fully decarbonize by 2050, this will require further investments of some $400 billion over 20 years, bringing the total to $1.4-1.9 trillion. The biggest share of investments is needed in the land-based infrastructure and production facilities for low carbon fuels, which make up around 87 percent of the total. This includes investments in the production of low carbon fuels and the land-based storage and bunkering infrastructure needed for their supply. Only 13 percent of the investments needed are related to ships.”
“There’s been a huge spike in one of the world’s most potent greenhouse gases” 
[MIT Technology, via Naked Capitalism 1-24-20]
“Levels of a gas that is 12,400 more damaging than carbon dioxide in terms of its planet-heating properties are higher than ever. HFC-23 was believed to have been almost completely eliminated after India and China reported they had reduced emissions to almost zero in 2017. In fact, a year later emissions were at an all-time high of 15,900 tons, equivalent to the annual CO2 output from about 50 coal-fired power plants, according to a paper published today in Nature Communications. Where is it from? HFC-23 is used to manufacture fridges and air conditioners, and is vented to the atmosphere during the production of HCFC-22, another chemical used in cooling systems in developing countries. Researchers at the University of Bristol used gas detection data from five Advanced Global Atmospheric Gases Experiment (AGAGE) stations, captured between 2007 and 2018. The researchers didn’t attempt to identify the source of the emissions, but the Environmental Investigation Agency, an NGO that monitors environmental crimes, said China is likely to have played a major role since it holds 68% of the capacity for the production of HCFC-22.”
Planet Just Had Costliest Decade for Global Natural Disasters: Insurance Industry Report
[Common Dreams, via Naked Capitalism 1-24-20]

Health Care Crisis

In Historic Shift, Second Largest Physicians Group in US Has New Prescription: It’s Medicare for All
[Common Dreams, via Naked Capitalism 1-21-20]
Representing 159,000 doctors of internal medicine nationwide, the ACP is the largest medical specialty society and second-largest physician group in the country overall after the American Medical Association (AMA). The ACP delivered its case in a 43-page position paper—titled “Envisioning a Better U.S. Health Care System for All: Coverage and Cost of Care“—published in the Annals of Internal Medicine on Monday.
Sick of Big Pharma’s pricing, health insurers pledge $55M for cheap generics
[Ars Technica, via Naked Capitalism 1-24-20]

Predatory Finance

The new kings of the bond market 
[Financial Times, via The Big Picture 1-23-20]
The article is behind a paywall, but the summary found on other sites is that ETFs (electronically traded funds) and program trading now dominate the bond markets. This is a repeat of what happened in the stock markets, and the results will be the same: the bond markets' core function of allocating capital to businesses and governments will by increasingly compromised and weakened by the speculation and arbitrage conducted automatically by computerized trading. Economic fundamentals will take a back seat to modeling the behavior of the market herd. 

The Carnage of Establishment Neoliberal Economics

Monopoly Power and the Malfunctioning American Economy 
[Institutional Investor, via The Big Picture 1-22-20]
A review of Matt Stoller's new book, Goliath: The 100-Year War Between Monopoly Power and Democracy.
The book’s unlikely hero, however, is Congressman Wright Patman, the son of an East Texas tenant cotton farmer. The populist Patman’s 46-year career in the House of Representatives, launched on the eve of the Great Depression, mirrors the rise and fall of the New Deal economy. Patman was instrumental in passing the Bonus Bill for World War I veterans; he also led impeachment proceedings against then–Secretary of the Treasury Andrew Mellon. He was, as one eulogizer said, a man who “comforted the afflicted and afflicted the comfortable.”
In 1975 a group of newly elected Democrats known as the “Watergate Babies” deposed the elderly Patman as chairman of the House Financial Services Committee. That Patman’s ouster came neither at the hands of Republicans nor at those of his enemies on Wall Street is a central point in Goliath: In their zeal to end the Vietnam War and enact civil rights legislation, Democratic legislators ceded thought leadership on matters of political economy to a rising technocratic elite. Patman — elderly, white, and Southern — fell victim to the grandfathers of today’s woke capitalists.
A credentialed technocracy soon led the Democratic party astray. Well-intentioned, corporatist liberals undermined the New Deal consensus, allowing Chicago School libertarians to peddle simplistic views of the relationship between the government, the citizen, and the economy. Stoller reserves his sharpest critiques not for Big Business or Wall Street, but rather for educated elites on his own team who, after a century of looking out for small businesses, farmers, and workers, quickly abandoned them for free trade, private equity, and, eventually, Amazon.
Why Manhattan’s Skyscrapers Are Empty: Approximately half of the luxury-condo units that have come onto the market in the past five years are still unsold. 
[The Atlantic, via The Big Picture 1-20-20]
In Manhattan, the homeless shelters are full, and the luxury skyscrapers are vacant.
Such is the tale of two cities within America’s largest metro. Even as 80,000 people sleep in New York City’s shelters or on its streets, Manhattan residents have watched skinny condominium skyscrapers rise across the island. These colossal stalagmites initially transformed not only the city’s skyline but also the real-estate market for new homes. From 2011 to 2019, the average price of a newly listed condo in New York soared from $1.15 million to $3.77 million.
Millennials’ share of the U.S. housing market: Small and shrinking.
[Washington Post, via The Big Picture 1-24-20]
A data point from the Federal Reserve, highlighted recently in a special report on housing by the Economist, underscores the differences between the financial trajectory of millennials and those of earlier generations: When baby boomers hit a median age of 35 in 1990, they owned nearly one-third of American real estate by value.
In 2019, the millennial generation, with a median age of 31, owned just 4 percent.

The great dismantling of America’s national parks is under way: The administration has filled the parks department with anti-public land sycophants
[The Guardian, via The Big Picture 1-19-20]

Uber Wins Dubious Honor Of Being First Big Tech Company To Bully A Small Nation Using Corporate Sovereignty 
[TechDirt, via Naked Capitalism 1-19-20]
Six years ago, when Techdirt first started writing about the investor-state dispute system (ISDS) -- or corporate sovereignty as we prefer to call it -- it was largely unknown outside specialist circles. Since then, more people have woken up to the power of this apparently obscure element of international trade and investment deals. It essentially gives a foreign company the ability to threaten to sue a nation for millions -- even billions -- of dollars if the latter brings in new laws or regulations that might adversely affect an investment. The majority of corporate sovereignty cases have been brought by the extractive industries -- mining and oil. That's not least because many of the laws and regulations they object to concern environmental and health issues, which have come to the fore in recent years. New legislation designed to protect local communities might mean lower profits for investors, who then often threaten to use ISDS if they are not offered compensation for this "loss".
The Silicon Valley Economy Is Here. And It’s a Nightmare
[The New Republic, via Naked Capitalism 1-19-20]

Restoring balance to the economy

California Bill Would Raise Taxes on Corporations With Large CEO-Worker Pay Gaps 
[Truthout, via Naked Capitalism 1-21-20]
The California proposal is similar to legislation introduced in the U.S. Congress last November by Senators Bernie Sanders and Elizabeth Warren, Representatives Barbara Lee and Rashida Tlaib, and 18 other House members.
Under the California bill (SB 37), the wider a company’s gap between CEO and median worker pay, the higher their state corporate tax rate. An estimated 2,000 corporations with annual profits in the state of $10 million or would be subject to the tax, with revenue projected at as much as $4 billion per year.
“Prepared Testimony for the Hearing ‘Antitrust and Economic Opportunity: Competition in Labor Markets'” (PDF)
[Ioana Marinescu, US House of Representatives Committee of the Judiciary, Subcommittee on Antitrust, Commercial and Administrative Law, via Naked Capitalism 1-21-20]
In my testimony, I will make four points:
  1. Employers can suppress wages due to limited competition in the labor market. Simply put, workers cannot easily find alternative jobs in response to wage decreases (Azar, Berry, and Marinescu 2019). This allows an employer to pay a worker less than the marginal revenue product—the amount of value that the worker adds to the employer’s bottom line
  2. The majority (60%) of US labor markets are highly concentrated (Azar et al. 2018), i.e. they have a Herfindahl-Hirschman index (HHI) above the 2,500 high concentration threshold established by the Horizontal Merger Guidelines.
  3. Higher labor market concentration tends to lower wages (Azar, Marinescu, and Steinbaum 2017). For example, hospital mergers decrease wages by increasing labor market concentration (Prager and Schmitt 2018). Workers in concentrated labor markets are underpaid, so there is room to increase the minimum wage without reducing employment (Azar et al. 2019).
  4. Antitrust enforcement in labor markets should be strengthened. There is currently a large antitrust enforcement gap between product and labor markets, with labor antitrust lagging behind (I. E. Marinescu and Posner 2019). Yet, it is straightforward to take into account anticompetitive effects on the labor market in merger reviews (I. Marinescu and Hovenkamp 2018). Legislative action could facilitate antitrust enforcement in the labor market by codifying, clarifying, and in some cases strengthening the antitrust law (I. Marinescu and Posner 2019).

Collapse of Independent News Media

Media Stupidity Is Uniting Left and Right
Matt Taibbi [Rolling Stone, via Naked Capitalism 1-21-20]
Having declared war on Donald Trump and his voters years ago, news outlets are committing to a similar pile-on of Bernie Sanders....
The diagnosis of Trump is that he rode to power appealing to a collection of humanity’s darkest impulses, in particular racism, sexism, and xenophobia. Few other explanations, importantly even negative ones (like that Trump took cynical advantage of both racism and legitimate economic grievances), are accepted.

The explanation for Sanders is naiveté. Neither the politician nor his followers understand how the world works. They want expensive things for free and blame billionaires when their actual gripe is with reality. Oh, and theirs is also a movement for sexists and anti-Semites and people who refuse to accept the unique role of racism in America.

Dating to 2016, we were told the chief commonalities between Trump and Sanders were ambition and strategy. They were “populists” who played on voters’ emotions because they had to, being denied normal avenues to power: connections, donors, endorsements. As a Harvard professor put it in the Washington Post, “both are self-described political outsiders, the most likely actors to use anti-elite language.”
[New Republic, via Naked Capitalism 1-22-20]

Why they hate Bernie’s supporters 
[Carl Beijer, via Naked Capitalism 1-20-20]

 Shaky Joe Biden, Billionaire Bloomberg, and the Global Race to the Bottom
[Black Agenda Report, via Naked Capitalism 1-23-20]
Although probably only 20 House members, and less than a handful of senators, can at this moment be counted on to support Sanders’ full agenda, that cohort would immediately swell if Sanders wins the nomination in Milwaukee -- and will explode if he is elected president in November. Former New York mayor Bloomberg, the most electorally-attuned of the oligarchs, knows this. He understands that Democratic politicians will only remain fully dependable corporate servants if they are provided with an assured source of funds, through reliable structures. Bloomberg’s gambit is to enlist his ruling class fellows in an all-out push to further consolidate their dollar-dominance of the institutional Democratic Party – the only electoral vehicle left to preserve austerity capitalism with a racially “diverse” face. Although Bloomberg cannot expect to win a decisive number of delegates, he is conducting a “demonstration-effect” campaign to fully engage his uber-class fellows in the fight to maintain the corporate nature of the Democratic Party. 
Who Put Trump in the White House? Explaining the Contribution of Voting Blocs to Trump’s Victory∗ 
[William Marble, via Naked Capitalism 1-22-20]


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