Week-end Wrap – Political Economy – April 9, 2023
by Tony Wikrent
Assange: Ithaka, Revisited
Scott Ritter [via Naked Capitalism 4-5-2023] Important.
Strategic Political Economy
Life Expectancy in USA, by zip code
[Twitter, via Naked Capitalism 4-3-2023]
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U.S. share of world wheat production hit record low in 2022
[Investigate Midwest, via Naked Capitalism 4-2-2023]
The carnage of mainstream neoliberal economics
Bill Mitchell [via Naked Capitalism 4-4-2023]
The Republican Plan to Cut the Deficit on the Backs of Struggling Americans
Grace Segers, April 6, 2023 [The New Republic]
The GOP is again pushing for harsher work requirements for Medicaid and SNAP—even though it would barely dent our national debt….
Adding work requirements to the Supplemental Nutrition Assistance Program, or SNAP, and Medicaid would reduce the deficit but would not be nearly enough to balance the federal budget, said Marc Goldwein, the senior vice president and senior policy director for the Committee for a Responsible Federal Budget. “You could eliminate SNAP and Medicaid and you wouldn’t balance the budget, so you’re not going to balance the budget with work requirements,” Goldwein said….
An analysis by the left-leaning Center for Budget and Policy Priorities found that 10 million people would be at risk of losing their SNAP benefits under Johnson’s proposal.
Biden admin slammed for ‘breathtaking’ proposal slashing dairy access for low-income moms, kids
[FOX, via Naked Capitalism 4-6-2023]
[Twitter, via Naked Capitalism 4-3-2023]
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“Youngkin uses national profile to raise big money for Virginia races”
[Times-Dispatch,via Naked Capitalism Water Cooler 4-5-2023]
“Youngkin, the former co-CEO of The Carlyle Group, is parlaying his skills in the high-finance world of corporate hedge funds to raise money for state and national political races, including, potentially, his own. Youngkin has raised $2.75 million this year, as the first-term governor looks to make a big statement in the first quarter of a pivotal election year to determine control of the General Assembly for the final two years of his term. The fundraising also could leave an impression about his viability as a potential candidate for the presidency or vice presidency next year.”
Nigel Lawson’s economic ‘success’ was an oil-fuelled illusion
[openDemocracy, via Naked Capitalism 4-5-2023]
...We’ve had nearly four decades in which the British economy has fallen further and further behind its peers, to the point that the poorest Britons are around 20% poorer than their French counterparts. Again and again, chancellors have tried to repeat Lawson’s trick, only to find the table won’t levitate.
There is a simple reason for this: the whole thing was always an illusion. The ‘Lawson boom’ – the burst of economic growth in the mid-1980s – wasn’t so much delivered by the policies of the chancellor, as by hard-hatted offshore workers drilling in the North Sea….
Just as significantly, the oil boom played a vital role in delivering the Big Bang in the City of London, for which Lawson usually gets both credit and blame, with money flooding in to invest in Britain’s new hydrocarbon glut. Of course, his radical deregulations played a role, too, allowing banking whiz kids to build these new investments into the vast credit-card houses which came tumbling down in 2008. But without the oil, it’s hard to see why that money would have been flowing in in the first place.
As The US Department for Energy said in 1989, “the growth of North Sea oil revenues is the most important fiscal development in the British economy in the 1980s”.
How the revenue from that oil was spent – squandered on under-priced privatisations and tax cuts for the rich, buying Tory election victories rather than investing in long-term prosperity – is the real Lawson legacy we should be talking about.
Protesters storm BlackRock’s Paris office holding red flares and firing smoke bombs
[CNN, via Naked Capitalism 4-7-2023]
Tax Cuts Are Primarily Responsible for the Increasing Debt Ratio
[Center for American Progress, via Naked Capitalism 4-5-2023]
‘Just in time’ F-35 supply chain too risky for next war, general says
[DefenseNews, via Naked Capitalism 4-5-2023]
Global power shift
Iran and Saudi Arabia: a Chinese win-win — Pepe Escobar
[The Cradle, via Mike Norman Economics, April 8, 2023]
“The turning point came on 26 February, 2022, when Washington’s neocons – in a glaring display of their shallow intellects – decided to freeze and/or steal the reserves of the only nation on the planet equipped with all the commodities that really matter, and with the necessary nous to unleash a momentous shift to a monetary system not anchored in fiat money.
“That was the fateful day when the cabal, identified by journalist Seymour Hersh as responsible for blowing up the Nord Stream pipelines, actually blew the whistle for the high-speed de-dollarization train to leave the station, led by Russia, China, and now – welcome on board – Iran and Saudi Arabia.…”
One meaning of de-dollarization is ending the dominance of the USD, the USD as the global reserve currency, and crashing the USD. Many assume that this is the primary meaning but it is not. One might think it is from the amount of talk about on the Internet, but this is not the view of realists, in particular, those directly involved as victims or potential victims of dollar dominance and the choice to weaponize it. They are looking to escape from the hegemon's trap.
For the parties involved in settling trade without using the dollar system, de-dollarization means establishing payment systems that avoid the use of the USD system and therefore the ability of the US to weaponize its currency to force its will on other sovereigns. How this affects the USD is not a major concern of theirs. If it weakens the US, well and good as far as they are concerned, but this is not the objective.
This escape process is now launched, initially with bilateral trade in the currencies of the trading partners. However, this is considered an ad hoc workaround adopted out of necessity. A more permanent system is needed.
Alternatives such as digital currency, and a commodity-based system are under consideration. In addition, discussion is underway about developing a new monetary system suitable for the emerging new multipolar world order.
The people involved in this discussion at the professional level are well aware of previous commodity-based systems, both their pros and cons. No one is considering a return to the gold standard of old. Rather, there is interest in creating a settlement vehicle that is partly constituted of commodities and partly of financial instruments, such as a basket of currencies and commodities. John Maynard Keynes's bancor proposal at Bretton Woods, which lost to the dollar system that was adopted, serves as a precedent, for example, as does the SDR system of the IMF.
At this point the only thing that is certain is that the game has changed drastically with Global South/East actively on board.
The Truth About Russia's Economic Power: Is It Really as Small and Weak as the West Claims?
[Simplicius, The Thinker, via Mike Norman Economics, April 3, 2023]
...As can be seen by the chart below, Russian GDP—according to this source was $2,060—billion in 2014, and like magic by 2016 it was reduced to $1,282 billion. This represents a roughly ~40% decrease in line with the Ruble crash….
But did Russia change overnight in 2015-2016? Was there panic on the streets, disorder and chaos, complete depredation? Disintegration of society? After all, a halving of your GDP almost overnight is of such catastrophic proportions as to be nearly unprecedented in history. Imagine, almost overnight the U.S. GDP going from its current figures to that of its 1960 figures (when it was half of today). What kind of chaos would ensue?
Of course, no such thing occurred in Russia, in fact it was barely noticed. Why? Because, the “Nominal GDP” is a fake, currency manipulated, symbolic number that has no actual basis in reality as pertains to the Russian economy…. All that actually occurred was a fraudulent mathematical calculation changed the numbers by way of Dollar conversion to make it ‘look’ like the Russian economy lost half its value overnight, but actual Russian economic productive power and output did not experience any such effect. It was a smoke and mirrors currency manipulation that, for the most part, existed only in the digital bits and bytes of a computer screen….
let's take a look at annual oil and electricity usage by country. These are important indicators that very closely correlate with a country's economic power for reasons that should be self-evident: the more robust one's economy, the more that country will be utilizing oil and electricity in the daily function and growth of that economic engine….
CHART: electricity production and consumption.
….
In fact, there are many ‘accounting tricks’ the U.S. uses to merely inflate its GDP numbers to the moon by way of hyper-financialization. Not only does the endless Wallstreet/stockmarket digital hocus-pocus of money rotation add trillions of empty fluff—non-productive ‘fake’ GDP which has no real tangible value, and adds nothing to the real economy—but there are a myriad other devious ways the U.S. GDP numbers are pumped up.
This article describes some of them:
Effect of Financialisation on the GDP
“In another vein, the US economy is so highly financialised that nearly half of the stated GDP consists merely of book entries transferring money from one account to another, not in any way comparable to the real production of manufacturing or the provision of real services. Many international economists have made statements to the effect that “When we remove the financialisation aspects from the accounts, the US real GDP is reduced by nearly 50% and the national per-capita income falls to about $15,000.””
Or how about this:
“One clever trick by the US government is something called “imputed rent”, which means that if you own a house the government adds to the GDP the amount you would have had to pay in rent (but didn’t), on the mind-twisting basis that if you didn’t own that house you would have had to pay this rent. This one item alone added about $1.6 trillion, or 15% to the US GDP. Also, GDP is adjusted (downward) for inflation so, as you will see in a moment, the US badly understates its annual inflation rate which automatically inflates its GDP by about another $2.3 trillion, or about 20%. These two items alone mean the US GDP is falsely and artificially inflated by about 35%.”
[Strategic Culture Foundation, March 31, 2023]
The Capital of the Multipolar World: A Moscow Diary
Pepe Escobar, March 30, 2023 [Strategic Culture Foundation, via Jon Larson]
I had the honor to meet some of those who were particularly targeted by the imperial machine of lies. Maria Butina – vilified by the proverbial “spy who came in from the cold” shtick – now a deputy at the Duma. Viktor Bout – which pop culture metastasized into the “Lord of War”, complete with Nic Cage movie: I was speechless when he told me he was reading me in maximum security prison in the USA, via pen drives sent by his friends (he had no internet access). The indefatigable, iron-willed Mira Terada – tortured when she was in a U.S. prison, now heading a foundation protecting children caught in hard times.
I spent much treasured quality time and engaged in invaluable discussions with Alexander Dugin – the crucial Russian of these post-everything times, a man of pure inner beauty, exposed to unimaginable suffering after the terrorist assassination of Darya Dugina, and still able to muster a depth and reach when it comes to drawing connections across the philosophy, history and history of civilizations spectrum that is virtually unmatched in the West.
And then there were the diplomatic, academic and business meetings. From the head of international investor relations of Norilsk Nickel to Rosneft executives, not to mention the EAEU’s Sergey Glazyev himself, side by side with his top economic adviser Dmitry Mityaev, I was given a crash course on the current A to Z of Russian economy – including serious problems to be addressed.
At the Valdai Club, what really mattered were the meetings on the sidelines, much more than the actual panels: that’s when Iranians, Pakistanis, Turks, Syrians, Kurds, Palestinians, Chinese tell you what is really in their hearts and minds….
The initial gut feeling the day I arrived, after a seven-hour walk under snow flurries, was confirmed: this is the capital of the multipolar world. I saw it among the West Asians at the Valdai. I saw it talking to visiting Iranians, Turks and Chinese. I saw it when over 40 African delegations took over the whole area around the Duma – the day Xi arrived in town. I saw it throughout the reception across the Global South to what Xi and Putin are proposing to the overwhelming majority of the planet.
In Moscow you feel no crisis. No effects of sanctions. No unemployment. No homeless people in the streets. Minimal inflation. Import substitution in all areas, especially agriculture, has been a resounding success. Supermarkets have everything – and more – compared to the West. There’s an abundance of first-rate restaurants.
OPEC: Saudis aren’t afraid of US anymore
M.K. Bhadrakumar [India Punchline, via Mike Norman Economics, April 4, 2023]
The shock oil production cuts from May outlined by the OPEC+ on Sunday essentially means that eight key OPEC countries decided to join hands with Russia to reduce oil production, messaging that OPEC and OPEC+ are now back in control of the oil market.
No single oil producing country is acting as the Pied Piper here. The great beauty about it is that Saudi Arabia and seven other major OPEC countries have unexpectedly decided to support Russia’s efforts and unilaterally reduce production.
Mexico Charting Its Own Path Toward Energy Sovereignty
[Eurasia Review, via Naked Capitalism 4-3-2023]
The Internationalization Of India’s Rupee Is An Emerging Financial Trend Worth Monitoring
[Andrew Korybko's Newsletter, via Mike Norman Economics, April 3, 2023]
India aims to consolidate its emerging leadership in the Global South, which explains the priority focus that’s now being given to internationalizing the rupee. Upon making significant progress on this, it’ll then be able to function as an independent pole of economic influence across Afro-Eurasia, taking full advantage of its geostrategic location to accelerate South-South integration processes.
De-dollarization is the top financial trend of this decade, but it concerns much more than just the internationalization of China’s yuan – including its speculatively forthcoming petroyuan variant – and the Alt-Media Community’s unrealistically high hopes about BRICS’ planned reserve currency. One of the emerging aspects worth monitoring is the internationalization of India’s rupee, which is proceeding apace and gradually generating more media attention....
To Help End the Yemen War, All China Had to Do Was Be Reasonable
[Intercept, via Naked Capitalism 4-8-2023]
[Twitter, via Naked Capitalism 4-8-2023]
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Analyst on Tehran’s Nuclear Game: What Iran Wants for a New Deal
[Der Spiegel, via Naked Capitalism 4-8-2023]
Predatory Finance
Pam Martens and Russ Marten, April 3, 2023 [Wall Street on Parade]
[Business Insider, via Naked Capitalism 4-3-2023]
Pam Martens and Russ Marten, April 4, 2023 [Wall Street on Parade]
A frenzy of deregulation killed Silicon Valley Bank
[LA Times, via The Big Picture 4-4-2023]
Late in 2018, two Trump-appointed banking regulators, Federal Reserve Vice Chair Randal Quarles and FDIC Chair Jelena McWilliams, went on a nationwide tour to meet with regional bank examiners. If you’re looking for the roots of the banking crisis that took down Silicon Valley Bank and has rattled the entire financial sector for weeks, that’s as good a place to start as any. The officials’ message to the examiners was: Back off.
Pam Martens and Russ Marten, April 5, 2023 [Wall Street on Parade]
...These persistent doubts about an institution with an $8.8 trillion balance sheet – that is backstopped by the U.S. taxpayer – is very bad for confidence in the U.S. banking system, especially when the Fed pivots from one banking bailout to the next. (What was the size of the Fed’s balance sheet prior to its serial bailouts? On December 26, 2007, the Fed’s balance sheet stood at $929 billion. It has soared by 847 percent in just over 15 years of serial bailouts.)
The Federal Reserve Cannot Investigate Itself
Peter Conti-Brown, April 5, 2023 [The American Prospect]
There are lots of problems with the review the Fed has announced of supervision and regulation in the wake of the Silicon Valley Bank collapse.
Restoring balance to the economy
Federal Reserve Independence Is the Problem
Matt Stoller, April 6, 2023 [The American Prospect]
So why does the Biden administration stay silent about how high finance works in America? There’s no law that says they must, and there’s also no evidence that keeping politicians silent about monetary policy is good for the economy. Indeed, from 1935 to 1950, when the president directly ran monetary policy, inequality collapsed, the economy boomed, and inflation was kept low despite economy-wide mobilization to fight World War II. But since the 1980s, we’ve had a weird 40-year tradition of what is known as “Fed independence,” whereby politicians are supposed to leave the Fed and its destructive economists alone. As far as I can tell, there is no reason for this choice, except that Wall Street likes it when high finance is considered apolitical.
[The Living New Deal]
Marriner Eccles served as Chairman of the Federal Reserve from 1934 to 1948, and continued as a board member until July 1951 [1]. Eccles was a key figure in the expansionary economics of the New Deal. As chair of the Fed he oversaw a loosening of monetary policy & revival of credit and he also advocated for “priming the pump” with increased federal spending, as opposed to being overly concerned with balancing the budget….
Shortly before Franklin Roosevelt was sworn in as president, Eccles advised Congress on a “five-point plan” he had devised to resuscitate the nation’s economy. Eccles advocated that the federal government provide financial aid to the states for the care of their needy citizens; provide funds for public works projects; implement agricultural controls to raise the prices of farm goods; facilitate long-term and low-interest loans for the refinancing of farm mortgages; and cancel certain debts. These ideas foreshadowed many New Deal policies and programs [4].
Eccles was willing to criticize the failures of the American economic system: “It is a national disgrace that such suffering should be permitted in this, the wealthiest country in the world. The present condition is not the fault of the unemployed, but that of our business, financial, and political leadership” [5]. He is also well known for explaining the Great Depression in terms of inequality: “As mass production has to be accompanied by mass consumption, [this], in turn, implies a distribution of wealth…to provide men with buying power equal to the amount of goods and services offered by the nation’s economic machinery. Instead of achieving that kind of distribution, a giant suction pump had by 1929-1930 drawn into a few hands an increasing portion of currently produced wealth….But by taking purchasing power out of the hands of mass consumers, the savers denied to themselves the kind of effective demand for their products that would justify a reinvestment of their capital accumulations in new plants. In consequence, as in a poker game where the chips were concentrated in fewer and fewer hands, the other fellows could stay in the game only by borrowing. When their credit ran out, the game stopped” [6].
They’re not capitalists — they’re predatory criminals
[Yahoo, via Naked Capitalism 4-5-2023]
Turbotax is blitzing Congress for the right to tax YOU
[Pluralistic, via The Big Picture 4-6-2023]
Lobbying by the massively concentrated tax-prep industry – wildly profitable corporate giants like HR Block and Intuit, the parent company of Turbotax, who spent 20 years lobbying congress, spending millions to ensure that Americans would have to pay the Turbotax tax in order to pay their income tax.
Over 60 million Americans have taxes so simple the IRS could do them automatically
[Vox, via The Big Picture 4-6-2023]
“Automatic returns” could vastly simplify tax season for millions of people.
The Rage of the Corporate Lawyer
Matt Stoller [BIG, via Naked Capitalism 4-3-2023]
American Bar Association Antitrust Section lawyers run a lot of antitrust policy. And they are extremely mad at Lina Khan and Jonathan Kanter.
I’ve had a tough time writing this week, because I’m trying to figure out how to describe a somewhat bitter public fight that I had on Wednesday with some of the top antitrust lawyers in America, on a panel at the biggest annual conference on antitrust. I was angry after the panel, and I needed a few days to calm down.
The audience was 300-500 antitrust lawyers, many quite hostile. Collectively these are the people who give advice to the most powerful firms in America on what they can do without violating the laws that prohibit monopolies….
And if corporate lawyers become, as Jackson and Brandeis feared they were, too specialized, and too beholden to big business clients, then they stop seeing the bigger picture, and lose, as Jackson noted, their “respect for the law and the courts.” (That is what has happened. Powerful law firms put in their marketing documents their ability to help clients violate the law.) It is this balance upon which a well-functioning society depends.
[Investigate Midwest, via Naked Capitalism 4-2-2023]
Disrupting mainstream economics
Robert Kuttner, April 7, 2023 [The American Prospect]
You can tell two stories about what has happened to the economics profession in this century. In the first story, academic economics has changed, significantly and for the better. Economists are less imprisoned by the unreal assumptions of models and more committed to real-world inquiry. Those with once-heretical views have been welcomed into the profession.
In the second story, change has come mainly around the edges. The heterodox thinkers doing important work are for the most part not in elite economics departments or top economics journals. Economics is still substantially captive to the use of abstruse models and ever more elaborate equations. And the teaching of economics, especially to undergraduates and first-year grad students, is depressingly familiar.
There is an ideological dimension to this conflict. Standard economics is a handy commercial for political conservatism. If markets are efficient by definition, then any state intervention must make things worse. So the market paradigm becomes a one-size-fits-all cudgel against regulation, progressive taxation, wage regulation, public investment, and the rest of the arsenal to produce a more just society. And if the math is impenetrable to the laity, so much the better….
Milton Friedman added the claim that market freedom is the essence of liberty. By contrast, job security, the ability to get good health care and education irrespective of private means, or freedom from hidden toxic substances, workplace hazards, and ruined environments, are not really freedoms….
When Paul Samuelson first published his famous textbook in 1948, the idea was to tame the more radical ideas of Keynes into an invented “neoclassical synthesis” that would leave most of the standard paradigm intact while admitting that at the level of the whole economy, prolonged disequilibria could occur, needlessly depressing output and requiring government intervention. The surviving orthodoxy was called microeconomics; the awkward fact of prices failing to equilibrate at the level of the whole economy was called macro. But if supply and demand could fail the macro economy, then something was fatally wrong with the entire model.
This new synthesis de-radicalized Keynes, who taught that prices could be “wrong” not just during anomalous depressions at the macro level but throughout the economy in normal times, especially in finance and labor. Keynes’s disciple Joan Robinson, a leading theorist of monopsony, aptly termed the so-called neoclassical synthesis “bastard Keynesianism.” It served the profession’s need to preserve most of its model while making some grudging room for the brilliantly embarrassing insights of Keynes, whose broad humanistic and radical work was neutered into a mechanical formula for taming business cycles.
To confirm Zingales’s view that micro remains retrograde, I read through what is still the leading micro text for undergraduates, now in its tenth edition, written by N. Gregory Mankiw. It is a kind of time capsule of crude Chicago economics, circa 1970. He even repeats the thoroughly debunked canard from a 1975 paper by fellow Chicagoan Sam Peltzman that seat belts cause more auto accidents. Why? Because they give false assurance of safety, and lead drivers to drive more recklessly. It’s a classic case of how Chicagoans go to absurd lengths to contend that government regulation invariably backfires.
A generation of economists grew up doing research whose purpose was to validate the Chicago view. This pseudo-scholarly work had great (and malicious) influence. Judges were acculturated to buy the Bork view. The FTC and the Justice Department under several presidents of both parties essentially ceased blocking abusive mergers, either because they bought the Bork doctrine themselves or because they feared being overruled by Chicago-influenced courts.
When a new generation rediscovered antitrust and the abuses of ever-worsening concentration, much of the pathbreaking work was done by scholars in the law schools, such as Lina Khan, mostly not in elite economics departments….
Many younger economists curious about the real world who do manage to get their Ph.D.s eventually leave economics departments to study questions of political economy in other venues. Perry Mehrling, author of the important new book Money and Empire, taught economics for 30 years at Barnard College, becoming department chair. But there was little sympathy among colleagues for his brand of historical and institutional work. So in 2018, Mehrling took a post at Boston University’s School of Global Studies, a haven for economists doing political economy. Mehrling is also playing a leading role with one of the most important transformational institutions in the effort to reclaim a usable economics, the Institute for New Economic Thinking (INET).
How Models Get the Economy Wrong
Joseph E. Stiglitz, April 7, 2023 [The American Prospect]
Seemingly complex and sophisticated econometric modeling often fails to take into account common sense and observable reality.
Why measuring inflation is surprisingly challenging
Michael Madowitz [Washington Center for Equitable Growth, via Mike Norman Economics, April 5, 2023]
More research is clearly needed to understand the best measures of inflation to inform macro models, especially as the U.S. economy continues to respond to structural changes. There is a need for both an accurate understanding of capacity constraints in the economy, and a consistent measure of changes in inflationary expectations—and these may not be well captured by any one measure, let alone the measures traditionally used. For U.S. policymakers, the challenge is twofold. They need to calm inflationary expectations on the one hand, even if expectations are not based on a full understanding of what may persistently drive future inflation, while also preserving the health of the economy itself on the other. Balancing these needs will also require reexamining old assumptions.
Measuring inflation is hard. Official statistics are very good at measuring inflation, but how to use those measures is more tricky because it is conceptually difficult and context dependent. The COVID pandemic makes the application of go-to inflation measures even more challenging as it created unprecedented shifts in spending across sectors, leading to shifts appearing as increases or decreases in major components of primary inflation measures.
How Policymakers Fight a Losing Battle With Models
Senator Elizabeth Warren, April 4, 2023 [The American Prospect]
If you’re wondering why the U.S. has failed so miserably in developing a workable child care and early-childhood education system, consider the role of economic modeling.
In 2021, when the Congressional Budget Office (CBO) released its much-anticipated score for the cost of the child care provisions in the Build Back Better Act, it produced one headline number: $381.5 billion. This was what CBO estimated as the amount of money the government would lay out for child care.
But that budget score badly missed the mark on the net cost of the program. It did not account for any of the savings predicted by reams of academic research on the long-term economic benefits of child care. Nothing about how kids with high-quality early care do better in school, stay out of trouble, and have higher lifetime earnings. Nothing about the increased tax revenues generated by mamas and daddies who could now work full-time. Nothing about the mountains of data that show that when mothers are held out of the workforce in their early years, their lifetime earnings and even their security in retirement are seriously undercut—something universal child care could reverse. And nothing about the impact of higher wages for child care workers—wages that would mean many of those workers would be paying more taxes and wouldn’t need SNAP, Medicaid, housing supplements, and other help offered to the lowest-paid people in the country. In other words, according to CBO, investing in our children and filling a wheelbarrow with $381.5 billion in cash (a big wheelbarrow) and setting it on fire would have exactly the same impact on our national budget and our nation.
Six Ways Existing Economic Models Are Killing the Economy
Nick Hanauer, April 5, 2023 [The American Prospect]
1. Models assume that public investments will “crowd out” private investment, and are by definition less productive than private investments....
2. Models assume workers’ wages are a direct reflection of their productivity….
3. Models assume that higher taxes on corporations and high-income people reduce growth and investment….
4. Models assume that investing in poor people reduces economic activity, and that immigrants are less productive than domestic American workers….
5. Models work on ten-year budget horizons that force short-term thinking….
6. Models measure GDP and revenue rather than well-being….
Hidden in Plain Sight: The distorting power of macroeconomic policy models
Rakeen Mabud and David Dayen, April 3, 2023 [The American Prospect]
Prisoners of Their Own Device: How Congress underwrites the models that trap American policymaking
Philip Rocco, April 6, 2023 [The American Prospect]
Practically speaking, as the British statistician George Box once noted, “all models are wrong, but some are useful.”
...A model might cease to be a benign source of information, however, if it systematically ignores important dimensions of public problems. For example, economic models produced by the CBO assume, in the face of significant empirical evidence, that federal investments deliver half the rate of return of private investments. Equally important, the budget office admits that it has no basis for estimating the effects of climate change mitigation efforts on future economic realities. Taken together, progressive economists argue, these assumptions stack the deck against public solutions to major problems.
One fundamental flaw, Paul suggests, is CBO’s claim that a dollar of public-sector investment is far less productive than an equivalent level of investment in the private sector. “In fact,” he points out, “the evidence shows that public investment often has a higher economic rate of return than private investment.” The evidence in question is not a cherry-picked set of outliers. It is a widely cited survey of 68 studies published between 1983 and 2008. That review, published by economists Pedro Bom and Jenny Ligthart in the Journal of Economic Surveys, finds that the average rate of return for public investment is 10 percent in the short run and 16 percent in the long run. That is double the rate the CBO model employs. When Bom and Ligthart narrow the inquiry to examine only “core” public investments—in roads, highways, airports, and utilities—they find that the rate of return is higher still.
This is not the only questionable assumption found in CBO’s models. As the Roosevelt Institute’s Emily DiVito and Mike Konczal point out, the models routinely assume that deficit-financed federal investment invariably raises interest rates and results in negative economic growth, “independent of the economic trends we’ve seen in the past 20 years.”
We have an actual real-world study to consult here: the Biden administration’s investments in advanced manufacturing. Since the White House declared its intent to onshore critical components like semiconductors, and incentives were approved by Congress, electronics manufacturing has soared. It’s an example of public investment not crowding out private spending, as CBO often assumes, but crowding it in.…
While CBO’s assumptions are often “wildly out of line with empirical studies,” Paul says, they are still very much in line with what gets taught in graduate macroeconomics courses, which have not yet caught up to the literature. In the midst of this disciplinary chaos, conventional wisdom dies hard—especially inside CBO.
Economists, Paul suggests, need to admit that “we’re not great at forecasting the economic effects of policies.” While he acknowledges that CBO has improved its efforts at transparency in recent years, the budget office “has to do a better job at educating people on the assumptions its models use” and how the models contain a “lot more uncertainty” than CBO reports portray.…
For the entirety of the 2010s, CBO projected long-term interest rates significantly higher than reality, assuming a return to an equilibrium that never happened. This put many policies out of reach, because of the expectation that deficit spending would cost more than it would have. The same problems pop up elsewhere; CBO has an entire section of analysis on its website called “Accuracy of Projections” assessing its failings. This doesn’t stop news outlets from promoting the latest CBO budget analysis with rock-solid sureness.
Climate and environmental crises
Power generation grows at fastest pace in 33 years, fueled by coal
[Business Standard, via Naked Capitalism 4-6-2023]
Information age dystopia
Now Is the Time for a Federal Ban on Facial Recognition Surveillance
Matthew Guariglia [Common Dreams, via Naked Capitalism 4-7-2023]
Study uncovers social cost of using AI in conversations
[PhysOrg, via Naked Capitalism 4-5-2023]
Artificial intelligence: ChatGPT statements can influence users’ moral judgements
[NewsWise, via Naked Capitalism 4-7-2023]
[Nieman Labs, via The Big Picture 4-6-2023]
[Forbes, via Naked Capitalism 4-7-2023]
[Lambert Strether adds: “Best headline, though TechMeme’s rubric is even better: “Tesla staff privately shared video’s from customers’ car cameras from 2019 to 2022 in one-on-one chats, including of a car hitting a child riding a bike.” This is the culture the pushing AI on us….”]
Colorado Intel Agency Monitors Students Protesting Gun Violence
[The Intercept, via Naked Capitalism 4-8-2023]
ICE Is Grabbing Data From Schools and Abortion Clinics
[Wired, via Naked Capitalism 4-8-2023]
Plutocracy
[Business Insider, via Naked Capitalism 4-3-2023]
Obamaworld’s Problem with the Progressive Left
Ross Barkan [via Naked Capitalism 4-5-2023]
Once more, in 2023, those close to Obama are hoping to snuff out a prominent progressive Democrat. This time, it’s not Sanders himself, but the Chicago mayoral candidate he’s rallying for tonight. Both Sanders and Warren are firmly supporting Brandon Johnson, a Cook County commissioner, against Paul Vallas, a centrist Democrat who is very close to Chicago’s business elite and Obama administration alumni. Johnson, who is Black, is the candidate of the teachers’ union, a conventional left-of-center Democrat who wants to bolster the social safety net and raise taxes on affluent residents and financial institutions….
Vallas, the former Chicago schools chief, is not as right-wing as his critics portray him, but he’s happily taken the endorsement of Chicago’s police union, led by a Donald Trump supporter, and accepted financial backing from Kenneth Griffin, one of the Republican Party’s most prolific donors. Vallas is not so much a Republican as he is a neoliberal Democrat. He is, in his views on education and taxation, very much a throwback to the Clinton years, when privatization of public services, tax cuts, and union skepticism were all embraced.
Creating new economic potential - science and technology
The Electron Is Having a (Magnetic) Moment. It’s a Big Deal
[Wired, via The Big Picture 4-4-2023]
A new experiment pulled off the most precise measurement of an electron’s self-generated magnetic field—and the universe’s subatomic model is at stake.
[The Conversation, via Naked Capitalism 4-4-2023]
What’s it like to approach the edge of the Universe?
[Big Think, via The Big Picture 4-4-2023]
With a finite 13.8 billion years having passed since the Big Bang, there’s an edge to what we can see: the cosmic horizon. What’s it like?
What Lit the Lamps That Let Humanity Measure the Universe?
[Wired, via The Big Picture 4-4-2023]
Type Ia supernovas are astronomers’ best tools for measuring cosmic distances. In a first, researchers recreated one on a supercomputer to learn how they form.
Disrupting mainstream politics
Why Do Mainstream Democrats Hate Matt Taibbi?
Thomas Neuburger [God’s Spies, via Naked Capitalism 4-8-2023]
As I wrote elsewhere, in each presidential cycle the voters have only two choices. It’s the Party of the Status Quo…versus the Party of Fake Revolt against the status quo…
If you don’t like the status quo, you have no one to vote for, just people to vote against.
What do you think would happen if Democrats ran a candidate of Real Rebellion, a Bernie Sanders, say, à la 2016, against the candidate of Pretending to Care what happens to suffering voters? Would real rebellion against predatory rule by the rich “trump” fake rebellion financed by the rich?
Of course it would. Sanders would have beaten Trump soundly, had he had the chance, in the 2016 race. All the momentum was his, and he won almost every head-to-head primary contest in states with open, same-day primary voting.
But Democrats, the other party of the rich, won’t take that course. Which leaves them only one pitch. In Taibbi’s language from the start of this piece:
“It’s always “Vote for us or you’re a right-wing insurrectionist Putin-lover,” which is the opposite of persuasive.”
This is the Democrats’ constant closing argument, and the worst they could advance. It makes them, not just wrong, but ugly as well, the “opposite of persuasive.” Yet this is all they have, if they can’t themselves attack the people’s real enemy, and this time actually mean it. Sad for us. Sad for them as well.
The Key Lesson for Democrats in This Week’s Elections
Alex Shephard, April 5, 2023 [The New Republic]
Tuesday’s twin victories of progressive Brandon Johnson in Chicago and liberal Judge Janet Protasiewicz in Wisconsin disprove the argument that Democrats need to embrace centrism.
AOC Sounds The Alarm About Biden 2024—Podcast
[The Lever, April 7, 2023]
On this week’s Lever Time, Alexandria Ocasio-Cortez discusses Biden’s latest moves, the new Clarence Thomas bombshell, the Squad’s political strategies, and more.
The (Anti)Republican Party
The Second January 6 Insurrection
Alex Thomas, April 7, 2023 [The New Republic]
Years after the riot at the Capitol, right-wing figures like Tucker Carlson and Kevin McCarthy are still waging—and winning—the information war on the hearts and minds of the GOP base.
FLASHBACK: When right-wing pundits thought political hush money payments were a crime
[Popular Information, via The Big Picture 4-5-2023]
“The facts are that he broke campaign finance laws and that he lied to cover it up,” Fox News’ Sean Hannity said.
[LA Times, via Naked Capitalism 4-7-2023]
No charges for Texas man who tracked down and executed man who stole his truck
[Boing Boing, via Naked Capitalism 4-4-2023]
[KFF, via Naked Capitalism 4-4-2023]
Civic republicanism
Review of From Slavery to the Cooperative Commonwealth – Labor and Republican Liberty in the Nineteenth Century, by Alex Gourevitch, Cambridge University Press, New York, 2015
Reviewed by Szilárd Tóth
In the conclusion of his book, Alex Gourevitch writes that at the outset of his research, his intention was to provide a Marxist critique of the ‘republican revival’ associated with authors such as John G. A. Pocock, Quentin Skinner, Philip Pettit or others. In the end however, the book turned out to be something fundamentally different. For the findings strongly suggest that the very concept of freedom espoused by Marx also builds on the republican tradition, in other words, that Marx himself could be considered something of a republican too. The claim in itself is quite extraordinary, given Marx’s hostility to some notable figures of the republican tradition such as Cicero or others….
Domination is a state when one’s freedom is dependent on the goodwill of others. It need not require actual interference from the side of these ‘others’, no concrete form of coercion; it also need not manifest in the use of a lash or anything of the sort. Domination is something much more subtle. It only requires one to be at mercy of others, to be in an asymmetric power relation; in other words to depend on certain other’s choices. For the powerful may prefer to interfere, or not to interfere, but that is not the point. The point is that freedom understood as non-domination requires one to have immunity from any arbitrary interference, which means that the powerful need to be barred from interfering no matter what their preferences are. A benevolent master is considered just as dangerous to freedom as an evil one, since he is what he is: a master. He can only cease to exist as a master, once his power is effectively limited, or - to be more precise - controlled by the citizens of the republic. In short: once he no longer has the power to interfere arbitrarily with others. This is at the heart of republican political philosophy. And it seems that the concerns put forward by Marx, such as wage-slavery touch on the very same aspect of freedom. For a wage-slave is unfree not because he is interfered with, but because he is in an asymmetric power relation with his employers.
[AKW: “Wage-slave” is a poor choice of word, because of the historical record of chattel slavery. Especially because American slaveholders and Confederates adopted the term to denigrate northern working men and women, as part of their defense of slavery.]
Therefore, republicans and Marxists do not seem so distant from each other after all. This realization made it difficult for Gourevitch to follow up on his original intentions - namely to provide a Marxist critique of the republican tradition. Instead, he sets out to unfold the radical emancipatory potential within the republican tradition itself. He turns to the writings of nineteenth century labor republicans, most notably to those of the Knights of Labor. These nineteenth century unionists radicalized republican political philosophy by claiming, that freedom understood as non-domination requires the liberation of labor itself from the alienating tendencies of market capitalism. They attempted nothing less, but to transpose the republican program to the domain of private labor relationships: ‘into the mines and factories, not to mention the Louisiana sugar country’. This was no easy task since in order to do so, they first needed to transcend what Gourevitch calls the ‘paradox of slavery and freedom’, a paradox that had haunted the republican tradition for centuries. The paradox - analyzed beautifully in the first chapter of the book - consists of two conflicting propositions. The first one states that republican liberty is a condition that has certain requirements, namely social requirements. It is also not accessible to all, since no society can provide the necessary economic resources for all of its citizens to enjoy non-domination. [AKW: Republican political economy breaks this by rejecting an economics of scarcity and embracing the Doctrine of High Wages]. The reason is plain and simple: the mentioned resources require the slave labor of certain segments of the population. As it happens, slave labor (and even wage-labor for that matter) by definition means that the laborer has no control over his activity. Therefore it is a specific form of un-freedom. In other words, the freedom of the few always presupposes the slavery of others, or in some versions - the slavery of the many. Indeed, it is commonplace that the most notable ‘advocates of liberty in the classical republics were some of the most ardent slave-owners.’ Aristotle for example famously defined slaves as people who lack deliberative reason by nature, or to put it bluntly, who cannot form independent judgements about the common good. [AKW: Imago via Dei rejects this.] They therefore naturally bear the burden of coerced labor, and there is nothing objectionable about this, because the products of their toll wins the freedom of the few deserving. Similarly, Sallust and Cicero, two key figures of the Roman republican tradition, argued that the “only real independence is that of leisured, landed wealth’, and evidently ‘this land would have been worked by slaves’. To sum up, ancient liberty was dependent on the domination of a large segment of the population, which means it was a highly particularistic political ideal. [AKW: Doctrine of High Wages absolutely necessary so everyone has the financial and material means to be a citizen.]
Therefore, republicans and Marxists do not seem so distant from each other after all. This realization made it difficult for Gourevitch to follow up on his original intentions - namely to provide a Marxist critique of the republican tradition. Instead, he sets out to unfold the radical emancipatory potential within the republican tradition itself. He turns to the writings of nineteenth century labor republicans, most notably to those of the Knights of Labor. These nineteenth century unionists radicalized republican political philosophy by claiming, that freedom understood as non-domination requires the liberation of labor itself from the alienating tendencies of market capitalism. They attempted nothing less, but to transpose the republican program to the domain of private labor relationships: ‘into the mines and factories, not to mention the Louisiana sugar country’. This was no easy task since in order to do so, they first needed to transcend what Gourevitch calls the ‘paradox of slavery and freedom’, a paradox that had haunted the republican tradition for centuries. The paradox - analyzed beautifully in the first chapter of the book - consists of two conflicting propositions. The first one states that republican liberty is a condition that has certain requirements, namely social requirements. It is also not accessible to all, since no society can provide the necessary economic resources for all of its citizens to enjoy non-domination. [AKW: Republican political economy breaks this by rejecting an economics of scarcity and embracing the Doctrine of High Wages]. The reason is plain and simple: the mentioned resources require the slave labor of certain segments of the population. As it happens, slave labor (and even wage-labor for that matter) by definition means that the laborer has no control over his activity. Therefore it is a specific form of un-freedom. In other words, the freedom of the few always presupposes the slavery of others, or in some versions - the slavery of the many. Indeed, it is commonplace that the most notable ‘advocates of liberty in the classical republics were some of the most ardent slave-owners.’ Aristotle for example famously defined slaves as people who lack deliberative reason by nature, or to put it bluntly, who cannot form independent judgements about the common good. [AKW: Imago via Dei rejects this.] They therefore naturally bear the burden of coerced labor, and there is nothing objectionable about this, because the products of their toll wins the freedom of the few deserving. Similarly, Sallust and Cicero, two key figures of the Roman republican tradition, argued that the “only real independence is that of leisured, landed wealth’, and evidently ‘this land would have been worked by slaves’. To sum up, ancient liberty was dependent on the domination of a large segment of the population, which means it was a highly particularistic political ideal. [AKW: Doctrine of High Wages absolutely necessary so everyone has the financial and material means to be a citizen.]
The second proposition is the product of moderdernity - claims Gourevitch. It states that any political ideal that cannot be universalizable comes into conflict with the demand of equality, which was indented to become the ‘organizing principle for collective life’. Here lies the essence of the paradox. How could republicanism maintain its positions in modernity, or more precisely, how could it be modernized? The problem pushed republicans to reformulate their positions. According to Gourevitch, two relevant reactions unfolded between late eighteenth and mid nineteenth century America.
One of them could be associated with the southern élites, including figures such as James Henry Hammond who famously rejected universal equality in favor of republican liberty. They intended to hold on to the classical particularistic position of Cicero and Sallust, and effectively spoke against the abolition of slavery. For slavery, be it natural or not, was a ‘necessary convention to uphold the common interest in republican institutions.’
The other reaction, associated with the late Abraham Lincoln and others, took a very different path. They proposed a solution to accommodate republican liberty with the demand of universal equality. This solution - called the ‘agrarian ideal’ by Gourevitch - would envisage a commonwealth of free small scale agricultural producers, each owning a small patch of land that ensured their ability to control their own labor, and where ‘the independence of each citizen is guaranteed through their own, self-developing efforts.’ [AKW: Doctrine of High Wages makes it possible to move beyond “agrarian ideal. Also a “welfare state” is required to ensure ALL citizens have basic material conditions of life (see Michelman, Cheriminsky, Sunstein. ] To meet the most urging demand of equality, the proponents of the agrarian ideal fought for the abolishing of slavery - in this they eventually succeeded. The viability of their proposition rested of course on the delicate balance of land and population. According to Gourevitch, Lincoln believed that the ‘new world’ had plenty of unused land for the settlers and the former slaves as well, so therefore the question of reform was only of a technical kind. In other words, the natural resources were given, they only had to be distributed justly. However, Lincoln’s plan was never put to the test. The reason lies not in the failure of the United States’ government to act, but in the massive social and economic transformation of the second half of the nineteenth century - industrialization. [AKW: This results from the failure to move beyond the (Malthusian) British economics of scarcity, and understand economics as a continuing, non-equlibrium process of developing new human knowledge to expand and increase human labor power over nature.]
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