Week-end Wrap – Political Economy – March 13, 2022
by Tony Wikrent
Strategic Political Economy
Eric Helleiner ─ The Neomercantilists: A Global Intellectual History
Eric Helleiner interviewed by Mark Blythe [Rhodes Center for International Economics and Finance, Watson Institute for International and Public Affairs, Brown University]
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James Fallows [The Atlantic, December 1993]
Americans persist in thinking that Adam Smith's rules for free trade are the only legitimate ones. But today's fastest-growing economies are using a very different set of rules. Once, we knew them--knew them so well that we played by them, and won. Now we seem to have forgotten….
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. By the time I saw his books in the shop beneath the cherry trees, I had come to think of him as the dog that didn't bark. He illustrated the strange self-selectivity of Anglo-American thinking about economics.
TW: There is a simple answer to why Henry Carey and Friedrich List are unknown in USA today: the economics profession was corrupted. Michael Hudson explains what happened at Wharton to suppress and eventually bury the economic thought of Simon Patten.
From the Archives: ‘How the World Works’
James Fallows, December 26, 2021
The United States knows how to help foster advanced, high-wage, high-employment, globally successful businesses. But it has forgotten how to talk about that process honestly, and instead sinks into familiar political and media slogans.
TW: For Carey and his followers, political economy included a moral dimension, including strong opposition to slavery and to Britain’s opium trade. The aim of political economy was not the allocation of scarce resources, but the building of civilization and the continual improvement of the human condition. As John Quincy Adams explained in “Society and Civilization” [American Whig Review, July 1845]:
Unceasing labor is not suitable to the nature or condition of man. Hours of relaxation and repose are necessary to relieve the labors of every day…. all the powers of the body and all the faculties of the mind of every individual, from the cradle to the grave, should be exercised to the utmost extent of which they are capable, in improving the condition of his kind. The duties of man consist in alternate action and meditation, mutually aiding and relieving each other; and both, directed with undeviating aim, to the progressive improvement of himself and his fellow creatures. Heaven has given him in charge, to promote the happiness and well-being of himself, his wife, his children, his kindred, his neighbors, his fellow citizens, his country, and his kind; and the great problem of legislation is, so to organize the civil government of a community, that this gradation of duties, may be made to harmonize in all its parts—that in the operation of human institutions upon social action, self-love and social may be made the same.
Cory Doctorow [Locus Magazine, via Naked Capitalism Water Cooler 3-9-2022]
“If Facebook is Facebook because Mark Zuckerberg is a once-in-a-millennium genius who did what no other could, then our best hope is to somehow gentle the Zuck, bring him into public service, like a caged ET that government scientists either bribe or torment into working on behalf of the human race. That’s the constitutional monarchy model, the model where we continue to acknowledge the divine right of kings, but bind them to the material plane by draping the king in golden chains of office whose ends are held by an aristocracy that keeps the monarch from getting too frisky. But if Facebook is Facebook because Zuck got lucky, if he just combined cheap capital with regulatory tolerance for buying out the competition and building a legally impregnable walled garden around his users, then we don’t need Zuck or Facebook. There’s plenty more where he came from, and all we need to do is withdraw the privileges that regulatory forbearance granted him. That’s the republic model, where we get rid of the king and govern ourselves.”
The American Empire self-destructs, But Nobody Thought That It Would Happen This Fast
Michael Hudson, March 6, 2022 [Counterpunch, via Mike Norman Economics]
The recent escalation of U.S. sanctions blocking Europe, Asia and other countries from trade and investment with Russia, Iran and China has imposed enormous opportunity costs – the cost of lost opportunities – on U.S. allies. And the recent confiscation of the gold and foreign reserves of Venezuela, Afghanistan and now Russia,[1] along with the targeted grabbing of bank accounts of wealthy foreigners (hoping to win their hearts and minds, enticed by the hope for the return of their sequestered accounts), has ended the idea that dollar holdings – or now also assets in sterling and euro NATO satellites of the dollar – are a safe investment haven when world economic conditions become shaky.
So I am somewhat chagrined as I watch the speed at which this U.S.-centered financialized system has de-dollarized over the span of just a year or two.
Burning Globalist Structures to Save the Globalist ‘Liberal Order’
Alastair Crooke [Strategic Culture Foundation, via Mike Norman Economics 3-6-2022]
[Moon of Alabama, via Mike Norman Economics 3-7-2022]
The End Of The Global Economy As We Know It
[OilPrice, via Mike Norman Economics 3-10-2022]
- Russia’s invasion of Ukraine has resulted in an unprecedented level of economic warfare, with sanctions and the weaponization of trade.
- This economic disruption is very likely to destroy the current global trading system, forcing states to retreat into trading blocks to protect their economies.
- The last time the world’s trading system was destroyed was just over a century ago, and it took nearly 50 years for the world to reestablish a global trade network.
The Geographical Pivot— US Strategy 1991-2022—NOTES FROM THE EDITORS
[Monthly Review April 2022 (Volume 73, Number 11), via Mike Norman Economics 3-10-2022]
In order for the Atlantic Alliance under U.S. leadership to dominate Eurasia, it was first necessary for it to gain primacy over what Brzezinski called “the black hole” left by the Soviet Union’s departure from the world stage. This meant seeking to diminish Russia to the point that it could no longer claim great power status. The key “geopolitical pivot” on which this turned, Brzezinski insisted, was Ukraine. Minus Ukraine, Russia was irrevocably weakened, while a Ukraine that was incorporated as part of NATO would be a dagger at Moscow’s heart. Yet, any attempt to turn Ukraine against Russia, he warned, would be seen as a major security threat, a red line, by Russia itself. This then required the “enlargement of NATO,” extending it all the way to Ukraine, shifting strategic weapons to the East, with the object of eventually gaining control of Ukraine itself. The enactment of this grand strategy would likewise make Europe, notably Germany, more dependent on the United States, undercutting the independence of the European Union (Brzezinski, Grand Chessboard, 41, 87–92, 113, 121–22, 200).
TW: the way out of this old British imperial madness is to return to the civic republican concept of nations cooperating to improve the human condition by focusing on actual national economic development on a global scale:
China Invites The United States To Join The Belt And Road Initiative
[silkroadbriefing, via Mike Norman Economics 3-9-2022]
The epidemic
SARS-CoV-2 is associated with changes in brain structure in UK Biobank
(accepted manuscript) Nature, via Naked Capitalism 3-8-2022]
n = 785, 401 infected. Two brain scans averaging 141 days apart. From the Abstract: “We identified significant longitudinal effects when comparing the two groups, including: (i) greater reduction in grey matter thickness and tissue-contrast in the orbitofrontal cortex and parahippocampal gyrus, (ii) greater changes in markers of tissue damage in regions functionally-connected to the primary olfactory cortex, and (iii) greater reduction in global brain size. The infected participants also showed on average larger cognitive decline between the two timepoints. Importantly, these imaging and cognitive longitudinal effects were still seen after excluding the 15 cases who had been hospitalised.”
[Health Affairs, via Naked Capitalism 3-10-2022]
From February, still germane. From the Abstract: “In this observational study of matched cohorts from 394 US counties between March 21 and October 20, 2020, we estimated the association between county-level public masking mandates and daily COVID-19 case incidence. On average, the daily case incidence per 100,000 people in masked counties compared with unmasked counties declined by 23 percent at four weeks, 33 percent at six weeks, and 16 percent across six weeks postintervention. The beneficial effect varied across regions of different population densities and political leanings. The most concentrated effects of masking mandates were seen in urban counties; the benefit of the mandates was potentially stronger within Republican-leaning counties. Although benefits were not equally distributed in all regions, masking mandates conferred benefit in reducing community case incidence during an early period of the COVID-19 pandemic.”
[Twitter, via Ian Welsh 3-10-2022]
Conservative / Libertarian Drive to Civil War
“How Dark Money Shaped The School Safety Debate”
Walker Bragman, March 8, 2022 [Daily Poster]
But the end of school masking is also in part due to a campaign by right-wing business interests, including the dark money network of oil billionaire Charles Koch, to keep the country open for the sake of maintaining corporate profits. These interests have been meddling in the education debate, first pushing to reopen schools and then fighting in-school safety measures, even as COVID case numbers were rising and children were ending up in hospitals. For nearly two years, these groups have been promoting questionable science and creating wedges between parents, teachers, and administrators in order to get America back to work — even at the risk of the nation’s children….
Enterprises like Koch’s were eager to force a return to the old paradigm. These interests had already begun employing the same think tanks and quasi-academic networks they had pioneered a decade before promoting the anti-government Tea Party movement to fuel and legitimize attacks on pandemic safety measures, so they could force a return to normalcy and boost corporate profits….
The Koch-affiliated right-wing think tank American Enterprise Institute (AEI), meanwhile, published a “blueprint” for reopening schools, citing the need to get parents back to work. The State Policy Network and its affiliates also started pushing for school reopening.
HOW DID THIS MANY DEATHS BECOME NORMAL?
Ed Yong [The Atlantic, March 8, 2022]
TW: Yong never even mentions the role of rich reactionaries, such as Koch. Nor does he mention any desire by some elites to “cull excess population.”
Report on the March 7 Hagerstown MD pro-Covid truckers convoy meeting
[Twitter, via Naked Capitalism Water Cooler 3-7-2022]
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The unknown oligarch fighting for an endless Korean war
[Responsible Statecraft, via Naked Capitalism 3-10-2022]
Follow the money fomenting conflict on the Korean Peninsula, and all roads lead to Annie M.H. Chan.
They're not capitalists - they're a criminal predatory class
How Boris Johnson’s Party Shielded Russian Oligarchs’ Cash
[Daily Poster March 11, 2022]
Bankrolled by the finance sector, UK Conservatives have made their country a safe haven for the globe’s dirtiest money.
Closing Tax Havens Is the True Test of the West’s Resolve
[Project Syndicate, via Naked Capitalism 3-12-2022]
Lambert Strether: So, again, what is the City of London for, if not servicing oligarchs, including Russian ones?
The Rich List: The 21st Annual Ranking of the Highest-Earning Hedge Fund Managers
[Institutional Investor, via The Big Picture 3-11-2022]
Altogether, the 25 highest-earning hedge fund managers earned a combined $26.64 billion last year, the second-highest amount in the history of the Rich List, after only 2020’s record-setting haul. Over the past two years, the members of the Rich List’s First Team have made more than $58 billion combined.
Pam Martens and Russ Martens, March 8, 2022 [Wall Street on Parade]
[Twitter, via Naked Capitalism Water Cooler 3-9-2022]
Predatory Finance
Pam Martens and Russ Martens, March 9, 2022 [Wall Street on Parade]
…Deutsche Bank is heavily interconnected to Wall Street banks via derivatives. According to Deutsche Bank’s most recent annual report, as of December 31, 2020, it held $35.4 trillion in notional derivatives….
In June 2016, The International Monetary Fund (IMF) released a report with a finding that Deutsche Bank posed the greatest threat to global financial stability than any other bank because of its interconnections to Wall Street mega banks and large banks in Europe. (See graph below.) The largest bank in the United States, JPMorgan Chase, was shown as one of the banks with the largest amount of exposure.
Despite that finding by the IMF in 2016, Deutsche Bank has been allowed by regulators in Europe and the U.S. to continue engaging in high-risk Over-the-Counter derivatives. It also has an uncomfortable history of suicides and rogue behavior. See a sampling of its history since 2014 below.
Includes a good list of DB’s crimes.
[Bloomberg, via The Big Picture 3-6-2022]
The fastest-growing landlord in the U.S. Midwest, Monarch Investment and Management Group, used evictions to drive up rents during the pandemic
The carnage of mainstream neoliberal economics
[Twitter, via Naked Capitalism 3-8-2022]
And the financial establishment fights back:
Will Inflation Stay High for Decades? One Influential Economist Says Yes
[Wall Street Journal, via The Big Picture 3-11-2022]
Charles Goodhart sees an era of inexpensive labor giving way to years of worker shortages—and higher prices. Central bankers around the world are listening.
US labour market improves but slack still remains with no wage pressures emerging
Bill Mitchell [via Mike Norman Economics 3-6-2022]
Only 18% Of Americans Say Their Wages Are Keeping Pace With Soaring Inflation
[Zerohedge, via Mike Norman Economics 3-10-2022]
Disrupting mainstream economics
The IMF’s Agreement with Argentina Could Be a Game Changer
Joe Stiglitz and Mark Weisbrot [Project Syndicate, via Naked Capitalism 3-11-2022]
A new draft agreement between Argentina and the International Monetary Fund has eschewed austerity. Pending approval by Argentina’s congress and the IMF board, it will allow the Argentine economy to grow while the government continues its efforts to reduce poverty and gradually bring down inflation. With so many countries facing debt distress from the pandemic, the IMF will need to adopt similar changes to its policies elsewhere.
It is well known that the old model of austerity does not work. Not only does it cause the economy to contract and inflict excessive hardship on the population; it also fails to meet even the narrow objectives of reducing deficits and increasing a country’s capacity to repay creditors.
Programs of this type could include selling hunting and fishing licenses, or bus and subway passes. If a community has municipal broadband, that could be delivered through the Postal Service. If a city has an electric vehicle charging program, they could site it on postal property. Advocates argue that using the post office as a hub for various government-based services could advance a next-generation conception of how the agency can fulfill its mission of binding the nation together.
“Why is it that I can go to a CVS to add money to my Metro card, but not a post office?” asked Porter McConnell, co-founder of the Save the Post Office coalition. “The post office is an agent of the government with more branches than Starbucks and McDonald’s combined.”
But while the state and local partnerships—if actually used—could be powerful, restoring the ability to partner with federal agencies could reach beyond that.
Scott Galloway [via Naked Capitalism 3-12-2022]
College is a lubricant of social mobility, a vaccine against a creeping caste system, and a key that unlocks the American dream. Yet over the past 40 years, it’s become more difficult to access and more expensive, staying more the “same” (i.e., stale) than nearly any offering…. The sector is ripe for disruption. In any other industry, innovators would have moved in long ago. But higher education is different: It’s got iconic brands (Apple and Coca-Cola have nothing on Stanford and MIT), a self-policing “accreditation” system, and an unholy alliance with the financial industry ($1.7 trillion in student loan debt). So things keep getting worse….
In 1940 a 37-year-old had a 92% chance of earning more than their parents did at the same age; a 37-year-old today has a 50% chance. It’s never been more expensive to buy a home. Since 1989, young people’s wealth relative to their income has declined, while older people’s has grown. Put another way, the old are getting richer and the young poorer.Old people don’t want change. They want scarcity and ossification, because it protects what they have. Young people are different — they want churn and growth, so they, too, can go buy a nice house and turn into Nimbyists.
You know who would welcome 50,000 of California’s brightest students and most-accomplished researchers? Fresno. Or Davis. Or Bakersfield. Any town north of Sacramento or east of Los Angeles. Governor Newsom, if you want an unlock, build a campus in Fresno. Build a high-speed rail system from Fresno to the Bay Area and weave the tech industry into a new community….
College towns are victims of their own success, bringing character and culture that benefit residents who register appreciation — and then want to create a scarcity ecosystem that will further buttress their wealth and lifestyle.
The Coder Supply Chain Runs Through Ukraine
[Bloomberg, via The Big Picture 3-8-2022]
Big tech (Apple and Google), big banks (Citi and JPMorgan) and carmakers (Daimler and BMW) all rely on Ukrainian code.
The Russia-Ukraine War has Turned Egypt’s Food Crisis into an Existential Threat to the Economy
[Middle East Institute, via Naked Capitalism 3-8-2022]
Russia’s $720m per day gas windfall – the lopsided economic war
Adam Tooze [Chartbook, via Naked Capitalism 3-8-2022]
How are the Big Sanctions hurting Russia so far?
Noah Smith [Noahpinion, via The Big Picture 3-7-2022]
In the past 15 years, Russians have become used to living a reasonably comfortable life. It’s a nearly-developed consumer society that has become accustomed to deep economic integration with Europe. Now suddenly that is all being yanked away — Russians are being asked to go back to the economic isolation, shortages, and hardship of the 90s, or even of the USSR, almost overnight….
A weak ruble and bank cutoffs make it harder to buy imported components and machines for defense manufacturing. For example, precision-guided weapons, vehicle electronics, and communications equipment all need computer chips (semiconductors) to function. There was already a global chip shortage before the war, and now there are signs that Russian manufacturers are having trouble getting their hands on what they need…. Now, as Alperovitch notes, this isn’t just about the weak ruble or bank cutoffs — it’s also about export controls. He mentions the U.S.’ Foreign Direct Product Rule, but many other chip companies, including South Korea’s Samsung and Taiwan’s vaunted TSMC, are also halting sales to Russia. Protocol did a report on Russian dependence on foreign chips last year, and found that European and U.S. companies sell them a lot of microprocessors, while their memory chip imports come mostly from South Korea and the U.S. That’s all done now….
The website Oryx maintains a meticulously curated list of visually confirmed equipment losses, and the toll so far is pretty stunning — 845 Russian vehicles lost in the first 11 days of combat, including 130 tanks….
In the comments, Mats Marcusson points me to his excellent deep-dive post on Russian industries’ import-dependence…. Marcusson also links to this fascinating and very negative evaluation of Russia’s defense manufacturing sector by Russian researcher Vladislav Inozemtsev.
Information age dystopia
Critical Bugs Expose Hundreds of Thousands of Medical Devices and ATMs
[Wired, via Naked Capitalism 3-9-2022]
I Had Nothing to My Name’: Amazon Delivery Companies Are Being Crushed by Debt
[Vice, via Naked Capitalism 3-8-2022]
What Google Search Isn’t Showing You
[The New Yorker, via Naked Capitalism 3-12-2022]
Deere & Co won’t give out software and data needed for repairs, FTC told
[The Register, via Naked Capitalism 3-8-2022]
[Twitter, via Naked Capitalism Water Cooler 3-10-2022]
Climate and environmental crises
A Climate Wake-Up Call For The Chemical Industry
[DailyPoster, March 7, 2022]
In 2017, the Trump administration sided with industry lobbyists and rescinded safety rules governing thousands of chemical plants across America. Five years later — after multiple chemical plant explosions in the Houston area — government investigators are telling lawmakers that a lack of federal regulation is heightening the risk of chemical disasters during climate change-related extreme weather events at thousands of facilities nationwide.
President Joe Biden’s administration is considering issuing a new rule regulating such facilities — but not until next summer. Chemical companies and industry groups have already sicced their lobbyists on the EPA to stop the new rules, arguing that, despite all evidence to the contrary, their members are well-prepared for disasters and will only be made more vulnerable by new regulations.
Last week, the Government Accountability Office (GAO), a watchdog agency, published a report warning that nearly one-third of commercial and industrial facilities that make, use, handle, or store hazardous chemicals are located in areas vulnerable to natural hazards like flooding, storm surges, and wildfires that are likely to be worsened by climate change.
Stretching California’s Rice Belt
[Modern Farmer, via Naked Capitalism 3-8-2022]
With the region’s main reservoirs—Shasta Lake and Lake Oroville—at historic lows, the Glenn-Colusa Irrigation District had drastically reduced the amount of water they would distribute each day. “It really impacted us badly,” says Krach of the erratic delivery, which resulted in a massive weed infestation, lower yields and a wrench in their October harvest.
For generations, Sacramento Valley farmers have had the assurance of some of California’s oldest and most secure water rights…. According to the Department of Water Resources, the state needs 140 percent of average precipitation to erase existing deficits. With little relief in sight, it’s creating an uneasy future for hundreds of farmers in the heart of California’s rice country and sending ripples to a $5-billion regional economy dependent on the steady production of an important staple.
Rice runs a close second in water usage to alfalfa, California’s thirstiest crop, requiring about five acre-feet per growing season. With more than 500,000 acres of rice fields in California, a normal year could total 2.5 million acre-feet, or almost 55 percent of Shasta Lake’s full capacity. While that figure doesn’t reflect full consumption—more than 40 percent is returned to surface supplies as tailwater or percolates through the soil to recharge groundwater—there’s no doubt that rice farming is a water-intensive proposition.
Creating new economic potential - science and technology
[Twitter, via Naked Capitalism 3-8-2022]
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The (Anti)Federalist Society Infestation of the Courts
The Supreme Court Doesn’t Completely Overturn Majority Rule … for Now
[The American Prospect, March 10, 2022]
On Monday, the Supreme Court decided not to consider, for the moment, an emergency appeal of the North Carolina Supreme Court’s decision to overrule the Republican state legislature’s partisan gerrymandering. (It also decided not to hear an appeal of the Pennsylvania State Supreme Court’s decision on a similar issue.) But at least four justices expressed an openness to revisit that decision after the midterms.
If, or more likely when, SCOTUS takes up the North Carolina case or a similar one, it could well set a precedent preventing anyone, including courts or voter initiatives, from challenging virtually any voter suppression and partisan gerrymandering laws passed by state legislatures. Among other consequences, this would render most of what’s left of the Voting Rights Act of 1965 unconstitutional.
Republican state legislatures could then gerrymander themselves into virtually permanent power, then gerrymander House districts into virtually permanent power, and enact, without challenge, virtually any voter suppression laws they want. It could literally spell the end of our already fragile democracy, and further enable more or less permanent Republican rule, whether they represent a state’s minority or majority….
Republicans appealed to the U.S. Supreme Court for emergency relief before the 2022 election.
Their appeal was largely based on the formerly fringe “independent state legislature doctrine,” which posits that the Elections Clause in Article I of the U.S. Constitution grants state legislatures the sole authority to determine all election rules, superseding any other rights guaranteed in a state constitution, interpreted by state or federal courts, or passed by voter initiative.
TW: The Constitutional guarantee of a republican government for each state, properly interpreted, will then become the only hope of saving American democracy.
Supreme Court Poised To Shift Executive Branch Power To Itself
[Talking Points Memo, via The Big Picture 3-6-2022]
The Court is now stocked with justices hungry to shift the power back in the direction of those nonregulatory interests. In doing so, they’ll really be shifting power to themselves.
How Pro-Business “Law And Economics” Interests Pushed The Courts Right
Walker Bragman [DailyPoster, March 9, 2022]
A newly updated academic preprint details the success of the so-called “law and economics” movement, which seeks to apply free-market principles to legal analysis, and how it used all-expense-paid conferences bankrolled by corporate interests to indoctrinate a generation of judges — particularly in cases involving regulatory agencies, like the EPA.
The data from researchers at Columbia University, ETH Zurich, and the Toulouse Institute for Advanced Studies found a direct correlation between attendance at these seminars by judges and those judges handing down conservative verdicts on an array of topics from environmental regulation, antitrust action, and even criminal justice….
The dark side
Roger Stone tapes: Video shows efforts to overturn 2020 election, seek pardons
[Washington Post, via The Big Picture 3-6-2022]
Stone allowed the filmmakers to document his activities during extended periods over more than two years. In addition to interviews and moments when Stone spoke directly to the camera, they also captured fly-on-the-wall footage of his actions, candid off-camera conversations from a microphone he wore and views of his iPhone screen as he messaged associates on an encrypted app.
The Second Tragedy of Sandy Hook
[Slate, March 7, 2022, via The Big Picture 3-8-2022]
A new book tells the story of the hoaxers who tortured the parents of victims—and the court battle that brought down their ringleader, Alex Jones….
This isn’t a situation with a whole lot of nuance. Any rational person, learning of the torments visited on parents who had already suffered near-unimaginable loss, would be disgusted and appalled. Williamson began covering the story in 2018, when a group of Sandy Hook parents filed suit against the radio host Alex Jones. In her deeply researched and painfully compelling book, Williamson makes the smart choice not to fulminate over the many, florid misdeeds of Jones and his lesser-known collaborators. Instead, she coolly assembles a great wall of evidence and observation, calmly documenting Jones’ myriad lies, and describing his gonzo shenanigans with an often amusing sobriety. Most effectively, she juxtaposes the sincerity of the bereaved parents with the red-faced, ranting Jones, whose broadcasts veer dementedly from hyperventilating proclamations of “TOTAL WAR, PEOPLE!” to pitches for the snake oil supplements whose sales fund his Infowars media empire. If ever a story called for the careful, levelheaded exposition of traditional reportage it’s this one, set against a relentless chorus of yelling. Furthermore, Jones—as he demonstrated last fall in courts in Texas and Connecticut, where he lost defamation lawsuits filed by 10 Sandy Hook families—is perfectly capable of hoisting himself with his own petard.
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