Sunday, January 12, 2020

Week-end Wrap – Political Economy – January 12, 2020

Week-end Wrap – Political Economy – January 12, 2020
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

The End of Economic Growth? Unintended Consequences of a Declining Population (PDF)
Charles I. Jones, [Empty Planet, via Naked Capitalism 1-8-20]
To sustain a constant population requires a total fertility rate slightly greater than 2
in order to compensate for mortality. The graph shows that high income countries
as a whole, as well as the U.S. and China individually, have been substantially below
2 in recent years. According to the U.N.’s World Population Prospects 2019, the total
fertility rate in the most recent data is 1.8 for the United States, 1.7 for China and for
High Income Countries on average, 1.6 for Germany, 1.4 for Japan, and 1.3 for Italy
and Spain. In other words, fertility rates in the rich countries of the world are already
consistent with negative long-run population growth: women are having fewer than
two children throughout much of the developed world.


“Americans’ happiness is correlated with spending on public goods”
[Boing Boing, via Naked Capitalism 1-9-20]
“Baylor University political scientist Patrick Flavin’s forthcoming study in Social Science Research finds that people in states with higher public goods spending (on ‘libraries, parks, highways, natural resources and police protection’) report higher levels of happiness. It’s not clear whether they are happier because they have better services, or whether people who choose to live in places where they don’t have to pay for their neighbors’ kids’ education, parks, etc, are selfish, miserable f*cks.”

The Carnage of Establishment Neoliberal Economics

Afternoon of the Pawnbrokers: Home again in post-crash, subprime Indiana
[The Baffler, via Naked Capitalism 1-9-20]
....the pawnbroker is not much of an appraiser. Mostly he is conditioned by his market: he knows strictly about the goods pawned by certain clients in a given area. Even the pawnbroker’s infamous haggle has little to do with the value of the good in question; it is much more about gauging the client’s intentions. Above all else, the broker needs to decide, on sight or by consulting his ledger, whether the client will return to collect his property. If he does not, the pawnbroker does not get the loan back with that usurious fee; maybe the item will later sell, but that’s not nearly as profitable as if the client redeems it and then somewhere down the road pawns it again. So instead of a storehouse of knowledge about the history of goods, the pawnbroker carries a mental index of the local poor: their problems, complaints, justifications, excuses, and the way they make their money. With this index, he tries to predict a poor person’s rate of redemption.

A pawnbroker’s mental index of the poor is also his burden. It’s a state of misery wherein the technics of usury persistently butt against the vicissitudes of poverty. The truth was, even if most of our clients knew the rules of the game, they were too desperate to play it... Too many times a day, a client would pop up to the desk, addled and for all the world alone, grasping a half-dozen Blu-ray discs, seeking a loan for “gas money to get home.”

....Ten years later, I can hardly see through my rage: rage at the unpunished hubris of those heisters, crapulous with greed, who hijacked the zeppelin of the economy and crashed it into those of us living below, whether we were in a hedge-fund-owned trailer park or a McMansional subdivision or, in my case, a rent-stabilized Brooklyn apartment building. Still, I found the same subprime manipulations, the same moral hazard disguised as honorable lending, carried out by a family of pawnbrokers who professed to hate the bankers most of all. There is no cultural divide between the coastal financial elite and the petty usurers in flyover states; there is only the capitalism of small differences, the scalability of exploitation. The operations are the same.
US Households: Half Spend More Than They Earn
by Barry Ritholtz, January 10, 2020 [Torsten Sløk, Deutsche Bank Securities, via The Big Picture]

“Increasing the minimum wage can reduce suicide rates, study finds” 
[Global News, via Naked Capitalism 1-10-20]
“A study published Tuesday in the Journal of Epidemiology & Community Health examined the link between minimum wage increases and suicide rates among various groups across the U.S., between 1990 and 2015. For every dollar added to the minimum wage, suicide rates among people with a high school education or less dropped by 3.4 to 5.9 per cent, the authors found. The effects were more pronounced during periods of high unemployment.”
What is private equity, and why is it killing everything you love?
[Vox, via The Big Picture 1-7-20]
Even an industry-friendly study out of the University of Chicago found that employment shrinks by 4.4 percent two years after companies are bought by private equity, and worker wages fall by 1.7 percent. The type of company matters as well — employment shrinks by 13 percent when a publicly traded company is bought by private equity, but it increases by the same percentage if the company is already private.
Private Equity: “Dairy Giant Borden Files for Bankruptcy Protection” 
[New York Times, via Naked Capitalism 1-9-20] 
“‘The biggest cause, if you dial it back, is a circumstance where we have debt that is inappropriately sized for the company,’ [Borden’s chief executive, Tony Sarsam] said… After making a number of acquisitions in the late 1980s, the company entered a turbulent period resulting in its 1995 sale, for $2 billion, to the private-equity giant KKR [Kohlberg Kravis and Roberts]. Over the next decade, the company was slowly whittled down, with many of its divisions and brands sold off, Borden said in the filing.”
Lambert Strether adds, "I’m sure KKR made out just fine, though. As they do."
[ProPublica, via Naked Capitalism 1-11-20]

[The Conversation, via Naked Capitalism 1-7-20]

Two Years Later: What Has Trump’s Tax Law Delivered?
[Capital & Main, via Naked Capitalism 1-7-20]

[Atlantic, via The Big Picture 1-9-20]
One study found that college graduates earn nearly twice as much as their peers without a college degree. But what if those earnings are no longer translating into financial security and long-term prosperity? A new study by researchers at the Federal Reserve Bank of St. Louis suggests that might be the case. College still boosts graduates’ earnings, but it does little for their wealth... And, as a general point, the college earnings and wealth premiums—meaning how much more a person with a college diploma makes and owns than an otherwise similar person—are large. But upon close examination, terrifying generational and demographic trends emerge....

The second potential factor involves Wall Street’s financial engineering. Younger folks have come of age during an era of consumer debt, with banks more than happy to load customers up with credit cards, car loans, and so on. Those debts then get subtracted from the value of families’ assets when determining their net worth, helping to explain the Millennials’ crummy wealth accumulation. “The leveraging of college-graduate balance sheets over time is entirely consistent with the progressive weakening of their overall financial positions that we identified—even while the college and postgraduate income premiums remained intact,” the authors write. 
Finally—most obvious, and perhaps most important—is the cost of college and graduate school itself. The price of consumer goods has increased by a factor of four since the late 1970s. College costs have increased by a factor of 14, the study notes.
‘The People With the Least Resources Are Now Shouldering the Greatest Burden’
[FAIR, via Naked Capitalism 1-8-20]

New Year in Los Angeles
[Immigrants as a weapon 1-2-20]
Kinda weird for a Soviet immigrant like me to realize that you fled one failing society only to end up in a society that was also entering an accelerated phase of decline and degradation.... 
Just across the 101, the infamous MacArthur Park looks like a refugee camp that itself had been destroyed in a hurricane. There’s debris and trash and human waste spread around everywhere. Walking on Sunset Boulevard last night, it seemed like five out of four people on were homeless — wandering around in a haze, begging, sleeping on the sidewalks. 
It’s sad and brutal. There are camps everywhere. Under underpasses, onramps, off-ramps, sidewalks, and unclaimed suburban corners....  Everyone here agrees it’s bad and everyone is embarrassed by it. But nothing’s really being done. LA’s been throwing hundreds of millions of dollars at the problem, only to see homelessness grow by something like 15 or 20 percent a year here. Donald Trump’s people have been talking up his plans to resettle California’s homeless into camps far outside of Los Angeles. He wants deal with the issue by criminalizing rockbottom poverty and hiding it. My guess is that his plan will be received warmly here in liberal, anti-Trump California — even if people will be too embarrassed to admit it. Even the “progressive” cities like Berkeley have been out front in waging a legal war to push homelessness out of sight.... 
Looking around, I gotta say that these decades have not been kind to the America Way of Life. In the time that we’ve been here, just about everything’s gotten worse — more billionaires, more pollution and environmental collapse, more inequality, more wage theft, more energy consumption, more garbage production, more wars, more privatization, more school shootings, more poverty, and of course much much more homelessness. With every year the pitch of the decline has gotten steeper and steeper and it feels like we’re now in free fall. There’s systemic failure and stagnation on every level, papered-over with lies and self-deception. Hell, even basic things like recycling turned out to be a failure and a petro-industry consumerist scam. 
It’s strange for a Soviet immigrant like me to realize how rotten everything is around here. My Cold War immigrant story should have been about a bright young man being saved from a grim fate under Soviet authoritarianism, living out his life in a dynamic and prosperous free society. There should have been a classic Hollywood ending. But the script is different under late stage American neoliberalism. Turns out that my family fled one failed society only to once again end up in a society that was just beginning to enter an accelerated phase of stagnation and collapse. We had escaped the tail end of one disaster only to be caught up in the start of an even bigger unfolding catastrophe.

Predatory Finance

Federal Reserve Admits It Pumped More than $6 Trillion to Wall Street in Recent Six Week Period
Pam Martens and Russ Martens, January 6, 2020 [Wall Street On Parade]

Stock Exposure Has Exploded at JPMorgan’s Federally-Insured Bank to $2.4 Trillion
Pam Martens and Russ Martens, January 7, 2020 [Wall Street On Parade]

Should banks expect cyberattacks from Iran? 
[American Banker, via Naked Capitalism 1-9-20]

Restoring balance to the economy

Making Stakeholder Capitalism a Reality
Laura Tyson, Lenny Mendonca [Project Syndicate, via Naked Capitalism 1-8-20]

History of the two-day weekend offers lessons for today’s calls for a four-day week 
[The Conversation, via Naked Capitalism 1-7-20]

‘Say No to Stealing Our Social Security Benefits’ 
[FAIR, via Naked Capitalism 1-7-20]

Economics in the real world

A look inside the factory around which the modern world turns
[The Economy, via Naked Capitalism 1-6-20]
A brief description of the production process at Taiwan Semiconductor Manufacturing Company, with no mention whatsoever that semiconductors and semiconductor manufacturing were invented in the USA by government funded programs in the 1950s and 1960s. 
With up to 90% of the market for the third-party manufacture of advanced chips, tsmc dominates the production of the infrastructure on which the modern world relies by manipulating matter with a precision no other company can match. 
That unique capability makes tsmc important in a way that goes far beyond the commercial. Vital to the advanced industries of both the United States and China, its unmatched capabilities in the realm of the nanoscule have implications at the highest levels of geopolitics....\ 
And then you need the machinery with which to impose the digital expression of that final design—the core—onto the silicon of the wafer. Fab 18 does this with light, as the industry has for decades. But to get that light it requires bus-sized machines built by a Dutch company called asml. 
In each machine a microscopic fleck of molten tin is dropped in front of a laser beam powerful enough to cut metal 50m times a second. The atoms of tin are instantaneously heated to 1mºC, which smashes their outer electrons from their nuclei. Interactions between the newly free electrons and the atomic nuclei pump out what is called “extreme ultraviolet” light with wavelengths of just 13.5nm. 
Mirrors made by Zeiss, a German company, focus that light onto the waiting silicon wafer. Just before it arrives at the wafer the light hits a mask which protects some parts of the wafer and leaves others exposed. The exposed sections are eaten away, leaving the structure of the transistors beneath the masked areas.

Bible Lobbyist: We Can't Print Bibles in America Anymore
Matt Stoller [Big, via Naked Capitalism 1-8-20]
Last week I wrote about how the Trump administration, spurred by Senator Marco Rubio, has begun to organize an industrial policy, which is to say government officials financing specific industries explicitly and directly. There’s a lot to say about industrial policy both positive and negative, and I will be saying a lot more. But today I’m going to make a very simple point about the main political problem in America, and across the West. We don’t value making things, and so increasingly we’ve lost the ability to make things.... I wrote about this last year.

The list of products and commodities companies say they can no longer make in America is long. Nylon products, optical scanners, consumer robotics, electronics, all types of clothing, specialty chemicals…

And the arguments were always the same, which is that we can’t do things in the U.S., and if we try, consumer prices will go up and prevent Americans from getting the [insert important thing] they depend on. The head of the American Bridal & Prom Industry Association said, “we can't make wedding gowns and prom dresses in the United States.” The entire labor force for doing so, and even things like beads for hand-sown adjustments, are now in China. “It’s impossible… We can't even get the materials in this country to make this clothing.” 
As I noted, “from prom dresses to point of sale terminals, the argument from American distributors is pretty much always the same. The ecosystem of production doesn’t exist in the U.S. anymore and it would be too expensive to bring it back.”

...the point here is ... whether we as a society value the ability to produce things. We certainly used to. We could make fantastic airplanes and invent a host of wonderful technologically sophisticated products to improve our lives. And yet today, our book distributors tell us we can’t even print books. There are a lot of reason for that, but the main one is that we have elevated the rights of financiers over the rights of workers, engineers, farmers, artists and businesspeople.
For tech-weary Midwest farmers, 40-year-old tractors now a hot commodity
[Star Tribune, January 5, 2020]
Tractors manufactured in the late 1970s and 1980s are some of the hottest items in farm auctions across the Midwest these days — and it’s not because they’re antiques. Cost-conscious farmers are looking for bargains, and tractors from that era are well-built and totally functional, and aren’t as complicated or expensive to repair as more recent models that run on sophisticated software.... 
The cheaper repairs for an older tractor mean their life cycle can be extended. A new motor or transmission may cost $10,000 to $15,000, and then a tractor could be good for another 10 or 15 years. 
Folland has two Versatile 875s manufactured in the early 1980s in Winnipeg and bought a John Deere 4440 last year with 9,000 hours on it, expecting to get another 5,000 hours out of it before he has to make a major repair. 
“An expensive repair would be $15,000 to $20,000, but you’re still well below the cost of buying a new tractor that’s $150,000 to $250,000. It’s still a fraction of the cost,” Folland said. “That’s why these models are so popular. They’ve stood the test of time, well built, easy to fix, and it’s easy to get parts.” 
He also said the modifications to newer diesel engines on tractors can cause mechanical problems, and the carbon footprint of an older tractor can be mitigated by using biodiesel, which is produced from soybeans grown in Minnesota and extends the life of an engine because it includes better lubricants than conventional diesel fuel.

Climate and environmental crises

Australia’s leaders unmoved on climate action after devastating bushfires
[Reuters, via Naked Capitalism 1-8-20]

An ‘absolutely seminal moment’: climate change opinion shifting in face of fires
Sydney Morning Herald, via Naked Capitalism 1-11-20]
Kevin W on Naked Capitalism: “You only needed half the country to burn down to get people to think about changing their minds.”

Worst Drought in 40 Years Looms Over the Struggling Thai Economy
[Bloomberg, via Naked Capitalism 1-10-20] 
[New England Journal of Medicine, via Naked Capitalism 1-9-20] 
“Climate-change–driven hurricanes tend to inflict two types of environmental injustice. One is that socioeconomically disadvantaged and racial or ethnic minority populations experience disproportionate harm, loss, and life changes. The increased severity of climate-change–related storms portends a worsening impact on marginalized people that can exacerbate preexisting health gaps and social inequities. As Dorian moved over the northwest Bahamas, for instance, the most severe destruction affected thousands dwelling in shantytowns on Great Abaco Island. Many of those affected were undocumented migrants…. [A]fter Hurricane Maria, many rural, disadvantaged Puerto Rican municipalities struggled without electricity for as long as a year. The death toll rose steadily into the thousands, as frail, elderly, and chronically ill people died preventable deaths. Disparities in health, as measured by multiple indicators, were magnified. At a more fundamental level of environmental injustice, the contribution of island-based populations to global carbon emissions is negligible.”
 Going 100% Green Will Pay For Itself in Seven Years, Study Finds
[Bloomberg, via Mike Norman Economics 1-8-20]
A Stanford University professor whose research helped underpin the U.S. Democrats’ Green New Deal says phasing out fossil fuels and running the entire world on clean energy would pay for itself in under seven years. 
It would cost $73 trillion to revamp power grids, transportation, manufacturing and other systems to run on wind, solar and hydro power, including enough storage capacity to keep the lights on overnight, Mark Jacobson said in a study published Friday in the journal One Earth. But that would be offset by annual savings of almost $11 trillion, the report found.

“Seaweed ‘forests’ can help fight climate change” 
[National Geographic, via Naked Capitalism 1-9-20] 
“[A] new study that for the first time quantifies the global capacity of large-scale seaweed farming to offset terrestrial carbon emissions and maps areas of the ocean suitable for macroalgae cultivation…. Farming seaweed in just 3.8 percent of the federal waters off the California coast—that’s 0.065 percent of the global ocean suitable for growing macroalgae—could neutralize emissions from the state’s $50 billion agriculture industry, according to the paper published Thursday in the journal Current Biology.”

Health Care Crisis

“US Healthcare Industry Creating an Endless Shitstorm of Money-Grubbing Bureaucracy and Paperwork, Study Finds” 
[Vice, via Naked Capitalism 1-9-20] 
“Capitalist though [(?)] it may be, the U.S. healthcare industry is a bureaucratic, inefficient and unnecessarily complicated mess, which has created a highly lucrative paper-pushing industry that is unnecessarily costing already-broke Americans hundreds of billions of dollars a year, according to a new study published this week in the Annals of Internal Medicine.

The healthcare industry’s bureaucratic administrative costs set Americans back $812 billion in 2017, or just under $2,500 per person. Another way to think about those numbers:  34 percent of all U.S. costs related to ‘doctor visits, hospitals, long-term care and health insurance’ essentially came from paperwork, according to the analysis, which was performed by researchers at Harvard Medical School, the City University of New York at Hunter College, and the University of Ottawa.”
“Woman Finds A Genius Way To Reduce ER Bills By Itemizing Them And People Are Saying That It Works” 
[Bored Panda, via Naked Capitalism 1-8-20] 
“While those who have insurance are not always made to pay full price, the uninsured people suffer the most. This prompts people to look for a way to reduce their bills. After TikTok user shaunnaburns3 told people to ask hospitals for itemized bills once they are faced with a hefty charge for a trip to the ER, people decided to put that to the test. Luckily, for some people, this tip actually worked and helped save them hundreds of dollars.”
“Congress’ health agenda barrels toward 2020 buzz saw” 
[Politico, via Naked Capitalism 1-8-20] 
“Doctor Patient Unity — a dark money group largely funded by two private equity-backed physician staffing companies — was the most prominent of the outside groups to spend heavily to influence the surprise billing debate, dropping more than $53 million on ads over the last half of 2019 to attack a leading surprise billing fix, according to Advertising Analytics.”

[Twitter below, via Naked Capitalism 1-6-20]


Florent Crivello 🌐@Altimor

Cost of tooth removal with anesthesia in SF: $1k (w/ no insurance)
Cost in Paris: $80 (in certain hospitals)
Round trip SF <> Paris: $300 (Norwegian Air)
Average cost / night in Paris: $100

So, spend $1k in SF, or $580 in France, including a weekend in Paris :)


[Ars Technica, via Naked Capitalism 1-6-20]

Information Age Dystopia

CES Gadget Show: Surveillance is in – and in a big way 
[Portland Press-Herald, via Naked Capitalism 1-8-20]
Disinformation For Hire: How A New Breed Of PR Firms Is Selling Lies Online 
[Buzzfeed, via Naked Capitalism 1-8-20]

Disrupting mainstream politics

Bernie, Donald, and the Promise of Populism
William Greider, September 21, 2015 [The Nation, via Real Economics 9-24-15]
But Goodwyn insisted that ordinary people, though discouraged from active citizenship, have essential knowledge—knowledge they haven’t learned from books or newspapers. Their knowledge is crucial for balanced self-government. Because ordinary Americans, regardless of status or education, know things the authorities did not teach them. They frequently know things that contradict the governing experts, and they learn them before elected representatives do. 
Where do people get this distinctive knowledge? From life itself, as Goodwyn explained. Of course, people are fallible and prone to error, false enthusiasm, and fears. But so are elected politicians. So are the corporate CEOs and investment bankers, including the ones who led the country over a cliff in 2008 and crashed the middle class. 
The popular anger exploding in the run-up to 2016 baffled press and political leaders. They would not have been surprised if they had listened more respectfully to the broad ranks of citizens during the past three decades. Working people knew the “American dream” was falling apart. They knew because it was happening to them. They told their stories in great detail to anyone who would listen (as a young reporter I heard those stories from auto workers, steel workers, machinists, debt-burdened families, and other victims, trying to hang on and losing the struggle). 
With brave exceptions, politicians in both parties turned their backs on the cries of distress. Learned economists assured political leaders that what working people saw happening in their neighborhoods wasn’t the real story. Over time, they predicted, prosperity would reach everyone and people would agree that deindustrialization was a good thing, a necessary evolution in the economy. It didn’t happen, and neither party has come clean on its failure. 
I think that’s where the anger comes from. There is widespread feeling across ideological and partisan divides not only that government failed to ensure economic prosperity and security but also that both political parties denied or ignored what average working stiffs knew and were trying to tell the politicians. Many believe they were betrayed, that the politicians lied. 
Modern government lost its sense of balance and credibility for many reasons, but partly because authorities distanced themselves from the common-sense and popular knowledge of ordinary Americans. This disconnect permeates government and politics, and it’s not always due to corporate greed or corruption. Sometimes, it is due to plain ignorance.
“Sanders’ Proposals Are The Largest Middle Class Tax-Cuts in US History” 
[Medium, via Naked Capitalism 1-7-20] 
“Medicare for All can be phrased as a tax cut that saves the average American family at least $10,000 a year. Not to mention the compound gains that families will enjoy if they no longer need to assist their children with college tuition. And for those of you wondering whether these tax cuts will be completely offset by the tax hikes needed to pay for the programs themselves, fear not. Free college tuition costs less than half a percent of US GDP, that’s a mere $80 Billion a year and is paid for in its entirety by taxing Wall Street day trading and speculation. The working and middle class will pay zero in taxes for making public college tuition free.
None of the Above
Barry Ritholtz, January 7, 2020 [The Big Picture]
The chart nearby shows this on a county-by-county basis. Looking only at vote totals, the final percentages of votes are something like this:
2016 Presidential Elections: Vote Percentages (total)
  • 44.0% Eligible But Did Not Vote
  • 28.6% Clinton
  • 27.4% Trump 
If we look at the election on that basis, the electoral college would look very different:
2016 Presidential Elections: Electoral College, including None of the Above
  • Nobody: 445 Electoral votes
  • Clinton: 72 Electoral votes
  • Trump: 21 Electoral votes


Polarization in Media / Twittersphere
Barry Ritholtz, January 5, 2020 [The Big Picture]
What is most intriguing about this is not the Left/Right divide, but the differentials within the Left and the Right:
The Left is dominated by Center Left, with the Far Left a single digit fringe.
The Right is different, it is dominated by the Far Right, ranging 17% to 50%. The Center Right is far smaller and less influential, ranging from 11% to 14.


Adam Levitin [American Prospect, via Naked Capitalism 1-11-20]

Bonfire of Vanities: How the Left’s Gave Up on it’s Great, Timeless Projects for Political Correctness, Twitter Wars, and Narcissism (and That Cost it a Future) 
[Washington Post, via The Big Picture 1-5-20]
But in truth, the stew of “alternative facts” has been simmering for more than half a century on the right fringe. The GOP had endless opportunities across the decades to banish these theories — about scheming bureaucrats, Jews, the Federal Reserve, the United Nations — and its leaders often saw them as absurd. But they were also useful, helping to rally support from an aggrieved government-hating base. So the party’s mandarins allowed them to fester and grow until they spread from the toxic fringe to the mainstream, which they have finally overtaken. It’s no wonder someone who embraced those ideas would become successful; Trump validates notions that his voters have long believed, ideas that the party refused to condemn and failed to repudiate. 
Trump, then, isn’t what caused these conspiracy theories. He’s what happens when nobody stands in their way.

Iran

A New Middle East “made in Iran” is about to be born 
[Elijah Magnier, via Naked Capitalism January 10, 2020]
Targeting a base with thousands of officers and soldiers from hundreds of kilometres away and deliberately avoiding human casualties shows incredible self-confidence in Iran’s manufacture of their own missiles. Iran has shown the strength and technical ability to bomb the most powerful US base in Iraq with precision missiles and has now twice shown mercy by not killing US servicemen....

The Iranian hit on the Ayn al-Assad military base exposed the weakness of the most sophisticated radar and interception missiles in the US arsenal. President Trump has long bragged about these tools like the “best in the world”. But the US defence system at the Iraqi-US base in al-Anbar (west of Iraq) was incapable of intercepting one of the 13 ballistic missiles launched. The consequences of this single act are devastating both to the US armament industry and to US foreign policy in the Middle East. 
This strike has shown US allies in the region that the hundreds of billions of dollars they have invested in US weapons are an insufficient defence against Iran. These countries now recognize they have no real deterrence against an Iranian attack. This realisation will push the traditional enemies of Iran in the Middle East to bypass their differences and take the road to Tehran to regain good ties with the “Islamic Republic”. It should not be excluded that many countries would be tempted to buy Iranian precision missiles that must be much cheaper than the expensive US manufactured ones.
....The lesson learned from the Iranian bombing is that Iran is ready to bomb and hit back US targets with great accuracy. Therefore, bombing Iran is off the table.
A Guide to Getting Real on Iran
[War on the Rocks, January 10, 2020]
To respond to a crisis, any crisis, whether it be a civil war in Syria or Russia’s invasion of Ukraine, there is a tendency to default to three recent staples of American power: cruise missiles, special operations forces, and economic sanctions. This policy default comes about precisely because these three entail minimal risk to American forces, or because military deployments can be hidden and not directly sanctioned by vote in Congress. Absent being able to stomach true risk — sanctioning the use of force that may get large numbers of Americans killed — the United States confines itself to a carefully scripted set of tools that just aren’t that scary, and politicians can escape blame for any outcome — as recent tensions with Iran have demonstrated. It is a neat trick to pretend to be serious and thoughtful without actually being either.... 
Iran took care to minimize the chance of killing Americans, but still chose to launch the most ballistic missiles at American forces since Saddam Hussein in the two Gulf Wars, lofting on a ballistic trajectory tons of high explosive that fell into the center of a military base in Iraq famous for its American contingent. This was a demonstration of Iran’s stand-off capabilities. It could have been much worse than a demonstration, but it is still an undesired outcome — and requires thinking about how to convince Iran, politically, not to fire them again. Iran will not give up these assets, and has instead indicated that it will use them to coerce the United States and its regional allies if threatened.... 
The Trump administration removed Iran’s assurance that its behavior would be rewarded and resorted to a policy of all sticks and no carrots. This, in turn, has incentivized Iranian escalatory actions to impose a cost on the United States, focused first on its regional allies, and now extended to include strikes on American forces with ballistic missiles. This is the definition of escalation, if one stops and thinks about how things have shifted over the past 612 days since the United States withdrew from the multi-lateral nuclear deal. The U.S. military has been hit with ballistic missiles, troops are in lockdown, and the effort to defeat Islamic State has deteriorated because of it. The National Security Strategy remains unimplemented, as finite assets have had to be sent to a region where there is no great power, only Iran. And, inside the Middle East, the United States has firmly established through action and deed that it will not respond if Iran attacks its partners and will only take limited action if an American is killed. 
The United States does not need more sanctions. It needs a roadmap to remove them, and to stick to that roadmap to engage Iran on comprehensive security talks. These talks would be iterative, painful, and prone to failure, with ups and downs and only incremental progress. They would also break the status quo and require political courage to begin, largely because the likelihood of failure is so high. However, this would place the risk for failure on the civilians who make policy, and not the military personnel who are tasked with carrying it out. As of now, that risk calculus is inverted, with the military being asked to shelter in place for hours on end, without adequate defenses, for a policy choice made during an election campaign. 
There is little hope the Trump administration will make these calculations. It will likely instead default to sanctions and missile threats, not realizing that these tools are not working, and in a few months — when faced with the same deadlock — both sides will have an incentive to escalate again. 
[New Republic, via Naked Capitalism 1-10-20]
Christians United for Israel, and a couple of its allies: Mike Pence and Mike Pompeo, who just happen to hold high positions in the Trump administration. 

Posted by Tony Wikrent at 10:03 AM 0 comments

Thursday, January 9, 2020

The Constitution’s Economic Compromise

The Constitution’s Economic Compromise

There were some big compromises made in framing the U.S. Constitution: the Great Compromise of a Senate with two members from each state; the slave state compromise of counting slaves as 3/5 of a person for purpose of representation; and the compromise on not ending the slave trade immediately.

Ganesh Sitaraman, the Vanderbilt Law professor who is advising Sen. Elizabeth Warren, argues in his 2017 book, The Crisis of the Middle-class Constitution: Why Economic Inequality Threatens Our Republic, that there is also an economic compromise, which cannot be understood within only the context of today's economic issues. This economic compromise, Sitaraman writes
is hidden from view if we think the original charter was constructed to serve the interests of the wealthy elites. It is hidden from view if we think of the founders as high-minded philosophers. And it is also hidden from view if we look for evidence of the compromise only in the secret debates in Philadelphia.
The framers of the Constitution not only needed to design an effective national government, they also had to solve the key economic problem that had destroyed public faith in the Articles of Confederation. The problem was that the national government needed revenue to be able to function, but under the Articles did not have the powers needed to raise revenues. Congress could only ask the states for "requisitions" but efforts by the states to comply had met with ever more serious revolts and insurgencies. Sitaraman points to the requisition of 1785 in particular, and the popular backlash it provoked, as the catalyst for the calling of the Constitutional Convention.
For rebellious ordinary Americans, the issue was not that they were irresponsible, that they thought debts unimportant, or that they did not want to pay. The problem was that they genuinely could not pay given the economic distress of the time, that the government's harsh economic policies were making things worse, and that they didn't think their payments were being put to good use. The tax and debt policies put pressure on the driving force of the economy: the people's work. Debtors were forced to sell their tools and livestock to pay their debts, leaving them unable to "save their estates'' and continue as "useful members of the community," as one New Jersey writer put it in 1785... Farmers became increasingly discouraged; any attempt to extricate themselves from their debt seemed impossible. Worse yet, in the event that they could pay their taxes in gold and silver, it would go to bondholders and creditors, who had made speculative investments at rock-bottom prices. Ordinary people thought it unfair that speculators be rewarded, and they recognized that any payment was unlikely to help the economy because the bondholders and creditors were continually sending gold and silver to Britain in return for manufactured goods.
One effect on public opinion -- overlooked by those who argue that the Constitution was designed to to be anti-democratic -- was that many people began to yearn for the creation of a monarchy to establish an effective government and "save the state from sinking into the lowest abiss of Misery," as one citizen wrote the time. This turn in public opinion toward possible acceptance of monarchy deeply distressed and disturbed most of the men who had actually fought in the Revolutionary War, particularly the officers.

Sitaraman continues:
The compromise that addresses the economic problems of both farmers and merchants, debtors and  creditors, ordinary people and elites, is buried deep in Article I of the Constitution. 
Article I, section 10 of the Constitution prohibits the states from engaging in a number of activities, including two that were of critical economic importance during the 1780s: "impairing the obligation of contracts" (which states did to protect debtors) and "lay[ing] any imposts or duties on imports or exports" (which states did to raise revenues). Article I, section 8 of the Constitution is the other side of prohibiting state imposts: it empowers Congress to create "duties, imposts and excises." Usually these clauses are not read together. Constitutional lawyers analyze the first clause -- the contracts clause -- along with the Constitution's provisions on protecting property. They normally group the impost, or tariff, clauses with the commerce clause. This conventional grouping betrays modern concerns... But thinking about these provisions from the perspective of the economic debates of the 1780s suggests another way to interpret these clauses. The contracts clause prevents states from passing laws that undermine contracts, such as pro-debtor laws that require creditors to take less for their investments.  This provision clearly supports creditors vis-a-vis debtors and is one piece of evidence for the Beardian analysis of the Constitution.... The impost or tariff clauses are a way for the federal government to generate revenue -- something it could not do sufficiently well during the Confederation... If the new Congress had the tariff power, the revenue model for the country would shift significantly. Coastal merchants engaged in international trade and wealthier people who bought imported goods would bear the lion's share of the national government's revenue burden... States could then alleviate the tax burden they had imposed on ordinary people, who were still being crushed by the post-Revolutionary War economic depression. Ordinary people would now have the ability to engage in economic activity without the fear that any money they earned would go to taxes or creditors. 
Taken together, the two provisions were an effort to solve the problems of both the creditor and bondholder elites and the ordinary people who were most heavily hit by the economic crisis. In fact, this is just what happened. Almost immediately after Congress first reached a quorum, in April 1789, James Madison introduced the tariff bill into the House of Representatives. "A national revenue must be obtained,'' Madison said. "[B]ut the system must be such a one, that . . . shall not be oppressive to our constituents." The bill became the second piece of legislation passed by the First Congress. President Washington signed it into law, appropriately, if not poetically, on July 4, 1789.] The new government, one historian has noted, "obtained almost all of its revenue from tariffs levied in the port towns, so farmers almost never had to try to come up with scarce gold and silver to pay federal taxes."  The states followed suit in alleviating the tax burden on their citizens. In Massachusetts and North Carolina, the poll tax was reduced by 90 percent, and in North Carolina land taxes were cut by just under 80 percent. A study of eleven states between 1785 and 1795 shows that on a per capita basis taxes dropped by 75-90 percent, just as the federal import tariff increased.
Now, here is where it gets really interesting, given the political and economic situation we are in, a full half century after Ronald Reagan made the Republican Party obsessed with tax cuts. (Last year, in fact, was the first year in USA history in which billionaires paid a smaller percentage in taxes than average income filers, thanks to Trump's tax cut.) At the beginning of the new government, who ended up picking up the slack, and paying more in taxes ? The rich!

Almost all the new national government's revenue came from tariffs based on imported goods. And who could afford to buy imported goods? The wealthy. As Thomas Jefferson wrote to Thaddeus Kosciusko in April 1811:
"The rich alone use imported articles, and on these alone the whole taxes of the General Government are levied. ... Our revenues liberated by the discharge of the public debt, and its surplus applied to canals, roads, schools, etc., the farmer will see his government supported, his children educated, and the face of his country made a paradise by the contributions of the rich alone, without his being called on to spend a cent from his earnings." 
Sitaraman quotes from some letters of the time to show that Americans understood how the new Constitution had made it possible to shift the tax burden onto those who could bear it.
Writing in The Massachusetts Centinel, "One of the Middle-Interest" discussed how trade and taxes were linked: " [I]t is well known how the trade of Massachusetts is gone to Connecticut, and that for want of a revenue, our own State taxes are increased. The insurrections that disgraced this Commonwealth the last winter, may be all traced up to this source."  He continued, " [T] axes may not have been necessary if we had enjoyed national regulations; and that the same constitution which is to give this authority [taxing power] to Congress, is also to give those commercial powers before mentioned, which will make proper impositions on foreign trade, and derive such revenues by
way of impost and excise, as will greatly diminish direct taxation."  
"A Farmer" in Connecticut explained how the provision would have the effect of redistributing the tax burden toward purchasers of luxury imports: "So long as taxes continue to be laid on us directly, according to the list, we farmers must inevitably sweat under the pressure of them. It is grievous to be borne, but I fear we must bear it until we can agree to throw some part of it upon the merchants, by way of an impost.... The weight of our taxes cannot be shifted from our polls and our farms to foreign luxuries and the unnecessary goods of the merchants without vesting in Congress the power of laying imposts, duties, and excises.
Sitaraman argues that if the tariff clause and the contracts clause prohibiting state imposts are reinterpreted as the great economic compromise of the Constitution, some of the results of the votes on its ratification, which have long puzzled historians, suddenly make sense.
Why was it that some of the most pro-debtor, pro-paper money areas of the country sent pro-ratification delegates to the ratification conventions? For example, in New Hampshire, almost half of the towns that were pro-paper-money during the Confederation era elected pro-Constitution delegates to the ratification convention. The answer is that the economic compromise solved one of their primary fears. Why was it that three of the first five states to ratify the Constitution -- Delaware, New Jersey, and Connecticut -- had almost no debate and scarcely token opposition to the Constitution? The answer is the tariff provisions. None of these states had a major port, and so none could issue state import tariffs on foreign goods to raise meaningful revenues. As a result, they had been forced into imposing more burdensome taxes on their populations. The Constitution let them shift their share of the national government's revenue from direct taxes on their citizens to tariffs paid by those in New York or Philadelphia. By placing greater burdens on urban merchants than on rural farmers, the Constitution's economic compromise established, in effect, a progressive revenue base that could save the equal commonwealth.


Posted by Tony Wikrent at 12:45 AM 0 comments

Sunday, January 5, 2020

Week-end Wrap – Political Economy – January 5, 2020

Week-end Wrap – Political Economy – January 5, 2020
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Why US Leadership Stinks and Drone Assassination Doesn’t Matter (Leadership in Organizations People Believe In)
[Ian Welsh, 4 January 2020]
Leadership isn’t as big a deal as people make it out to be–IF you have a vibrant organization in which people believe. New people step up, and they’re competent enough. Genius leadership is very rare, and a good organization doesn’t need it, though it’s welcome when it exists. As long as the organization knows what it’s supposed to do (kick Americans out of Afghanistan), and everyone’s motivated to do that, leadership doesn’t need to be especially great, but it will be generally competent, because the people in the organization will make it so. 
American leaders are obsessed with leadership because they lead organizations in whose goals no one believes. Or rather, they lead organizations for whom everyone knows the leadership doesn’t believe in its ostensible goals. Schools are led by people who hate teachers and want to privatize schools to make profit. The US is led by men who don’t believe in the Constitution or the Bill of Rights. Police are led by men who think their jobs are to protect the few and beat down the many, not to protect and serve. 
Corporations make fancy mission statements and talk about valuing employees and customers, but they just want to make a buck and will fuck anyone, employee or customer, below the C-suite. They don’t have a “mission” (making money is not a mission, it’s a hunger if it’s all you want to do); they are parasites and they know it.
Making organizations work if they’re filled with people who don’t believe in the organization, or who believe that the “leadership” is only out for themselves and has no mission beyond helping themselves, not even enriching the employees or shareholders, is actually hard. People don’t get inspired by making the C-suite rich. Bureaucrats, knowing they are despised and distrusted by their political counterparts, and knowing that they aren’t allowed to do their ostensible jobs, as with the EPA generally not being allowed to protect the environment, the DOJ not being allowed to prosecute powerful monied crooks, and the FDA being the slave of drug companies and the whims of politically-connected appointees, are hard to move, hard to motivate, making it hard to get to anyone to do anything but the minimum. 
So American leaders, and indeed the leaders of most developed nations, think they’re something special.... American leaders, in specific, and Westerners, in general, think that organizations will fall apart if the very small number of people who can actually lead, stop leading. But that’s because they think that leading the Taliban, say, is like leading an American company or the American government. They think it requires a soulless prevaricator who takes advantage of and abuses virtually everyone and is still able to get people to, reluctantly, do their jobs. 
Functioning organizations aren’t like that. They suck leadership upwards. Virtually everyone is being groomed for leadership and is ready for leadership. They believe in the cause, they know what to do, they’re involved.
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Posted by Tony Wikrent at 9:59 AM 0 comments

Wednesday, January 1, 2020

New hope for a new year

I do not remember the New Deal, even though it’s probably what has had the greatest impact on my political memory. I’m 63 now, so I wasn’t even alive during the First Great Depression and the presidency of Franklin Roosevelt. For me, memory of the New Deal was transmitted by those who had lived it and embodied it: my foremost formative experience of government was John Kennedy beckoning the nation to put men on the moon.

In Chicago, the Democratic Party took pride in getting things done. The construction of O’hare Field was completed while I was a toddler, as well as the Kennedy expressway connecting ORD to the Loop downtown. Construction of a new home for the University of Illinois at Chicago began in 1963; the 244 acre campus opened two years later. Today, UIC is the largest university in the Chicago area, with more than 33,000 students enrolled in 16 colleges. As a kid, I got to watch construction crews working to extend the CTA subway line down the middle of the Kennedy to O’Hare.

John Kennedy said, “The American, by nature, is optimistic. He is experimental, an inventor and a builder, who builds best when called upon to build greatly.”

Unlike conservatives and libertarians, I have always had faith that government can be an active force for good.

But over two thirds of my fellow citizens are younger than I. They have not had the same experiences. They have not, I fear, the same long-term optimism, which I think may have been the greatest achievement of the New Deal.
  • In the world I grew up in
  • interest rates were strictly regulated;
  • the average holding period in the stock market was eight years;
  • there was no retail means for investing in foreign economies;
  • the only futures contracts in existence were based on physical commodities;
  • foreign exchange trading was only for individuals actually traveling overseas; paying the US military and for base leases; and companies importing and exporting; and,
  • the Cayman Islands were basically unknown: there were no tens of billions of dollars of dirty money scrambling around the globe for a place to hide.
In other words, well over 200 million of the 327 million Americans alive today have no idea what a well regulated financial and monetary system looks like.
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Posted by Tony Wikrent at 11:54 PM 0 comments

Sunday, December 29, 2019

Week-end Wrap – Political Economy – December 29, 2019

Week-end Wrap – Political Economy – December 29, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

99 GOOD News Stories You Probably DIDN'T Hear About In 2019
[via The Big Picture 12-23-19]

A giant among us has passed

William Greider – in memoriam – (1936 – 2019)
Tony Wikrent, December 28, 2019 [Real Economics]

William Greider, Journalist Who Focused on Economy, Dies at 83
[New York Times, via Naked Capitalism 12-27-19]
'A Stark Loss for American Journalism': Reporter and Author William Greider Dies at Age 83
[The Nation 12-27-19]

Strategic Political Economy

The Loss of Fair Play
Yves Smith, December 27, 2019 [Naked Capitalism 12-16-19]
This site regularly discusses the rise of neoliberalism and its consequences, such as rising inequality and lower labor bargaining rights. But it’s also important to understand that these changes were not organic but were the result of a well-financed campaign to change the values of judges and society at large to be more business-friendly. But the sacrifice of fair dealing as a bedrock business and social principle has had large costs.
We’ve pointed out how lower trust has increased contracting costs: things that use to be done on a handshake or a simple letter agreement are now elaborately papered up. The fact that job candidates will now engage in ghosting, simply stopping to communicate with a recruiter rather than giving a ritually minimalistic sign off, is a testament to how impersonal hiring is now perceived to be, as well as often-abused workers engaging in some power tit for tat when they can. 
But on a higher level, the idea of fair play was about self-regulation of conduct. Most people want to see themselves as morally upright, even if some have to go through awfully complicated rationalizations to believe that. But when most individuals lived in fairly stable social and business communities, they had reason to be concerned that bad conduct might catch up with them.... 
Another aspect of the decline in the importance of fair dealing is the notion of the obligations of power, that individuals in a position of authority have a duty to those in their sway. 
The abandonment of lofty-sounding principles like being fair has other costs. We’ve written about the concept of obliquity, how in complex systems, it’s not possible to chart a simple path though them because it’s impossible to understand it well enough to begin to do so. John Kay, who has made a study of the issue and eventually wrote a book about it, pointed out as an illustration that studies of similarly-sized companies in the same industry showed that ones that adopted nobler objectives did better in financial terms than ones that focused on maximizing shareholder value.
Imagining a World Without Capitalism
Yanis Varoufakis, December 27, 2019 [Project Syndicate, via Naked Capitalism 12-26-19]

Climate and environmental crises

In Asia Pacific the climate crisis is happening now, not in the future
[CNN, via Naked Capitalism 12-26-19]
“Lawyers are going to court to stop climate change. And it might just work”
[The Correspondent, via Naked Capitalism 12-24-19] 
“[C]ourt cases involving climate change were rare until midway through the 2000s. Since then, dozens of cases have been initiated revolving around climate change, with new cases peaking in 2017. In most cases, the targets are governments, but companies, banks and investors are also being summoned to account for the inadequacy of their climate policy. The legal principles invoked by climate cases are essentially universal in (western) legal systems: the polluter pays; it is forbidden to unnecessarily endanger others; high-risk activities require adequate preventive measures. What’s new is that the law is now being used as a potential tool to break through political deadlock and entrenched interests to tackle climate change.” • See Naked Capitalism on Juliana v. United States.
Cattle have stopped breeding, koalas die of thirst: A vet’s hellish diary of climate change 
[Sidney Morning Herald, via Naked Capitalism 12-26-19]
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Posted by Tony Wikrent at 10:26 AM 2 comments

Saturday, December 28, 2019

William Greider – in memoriam – (1936 – 2019)

William H. Greider
(August 6, 1936 – December 25, 2019)

Just a few days after Paul Volcker and Felix Rohatyn finally relieved this planet of their mortal existence, William H. Greider passed on Christmas. There are, I suppose, some good things to be said about Volcker and Rohatyn, but I don't know what they might be.

However, I do know a lot of good things to write about William Greider. Just a partial list of the books he wrote is enough to realize that a giant who walked among us may be no more, but the shadow he cast will linger for a long while.

Secrets of the Temple, How the Federal Reserve Runs the Country
(Simon and Schuster, New York, NY, 1987)

Who Will Tell the People?: The Betrayal of American Democracy
(Simon & Schuster, New York, NY, 1992)

One World, Ready or Not: The Manic Logic of Global Capitalism
(Simon & Schuster, New York, NY, 1997)

Fortress America: The American Military and the Consequences of Peace
(PublicAffairs, 1998)

The Soul of Capitalism: Opening Paths to a Moral Economy
(Simon & Schuster, New York, NY, 2003)

Come Home, America: The Rise and Fall (And Redeeming Promise) Of Our Country.
(Rodale Books, 2009)

Greider was born in Cincinnati at a time when dominance of that city's economy had shifted from meat packing and the Ohio River steamboat trade to industrial manufacturing. Most notably, the city had emerged as a center of machine tool making: R. K. Le Blond Machine Tool Co.; Lodge and Shipley Machine Tool Co.; G. A. Gray Co.; Cincinnati Shaper Co.; American Tool Works Co.; Cincinnati Planer Co.; Cincinnati Bickford Tool Co. and the company that was then the largest machine tool maker in America: Cincinnati Milling Machine Company, later named Cincinnati Milacron. And like other centers of machine tool production historically -- the Connecticut River valley (called Precision Valley in the first half of the twentieth century), Philadelphia, and Chicago, the ethos of Veblen's producer class ran strong and deep. I have no doubt that this producer class ethos helped shape Greider's life in profound ways, fitting him for the unique and powerful role of a leading critic of de-industrialization and financialization. His study at Princeton University thankfully did not inflict him with trained incapacity.
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Posted by Tony Wikrent at 11:46 PM 3 comments

Sunday, December 22, 2019

Week-end Wrap – Political Economy – December 22, 2019

Week-end Wrap – Political Economy – December 22, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

Canada’s infrastructure was once cheap and effective to build. Now, it’s a titanic transfer from taxpayers to the world’s biggest businesses and investors
[boing boing, via Naked Capitalism 12-16-19]
However, a vital fact that Saxe and virtually everyone else either don’t know or won’t mention is that from 1938 to 1974 Canada and other western countries did in fact get very good infrastructure for very cheap. As documented by journalist Murray Dobbin, during those four decades the Bank of Canada loaned massive amounts of money, virtually interest-free, to all levels of government. This same central-bank function was exercised in the U.S. and the other G7 countries. 
That’s how we got massive projects like the war effort, the Trans-Canada Highway and the St. Lawrence Seaway -- as well as pools, schools, government buildings, roads, subways, etc. – all without significantly increasing government deficits or debts.
Then in 1974 under then-Prime Minister Pierre Trudeau the central bank’s issuance of very-low-interest bonds to fund federal and provincial governments slowed to a trickle. 
That’s because private lenders in Canada and abroad took over that function. The result was a significant slow-down in the building and maintenance of infrastructure. (A Charter of Rights and Freedoms challenge to reverse this went all the way to the Supreme Court; however, in mid-2017 the Supremes declined to hear the case.)
And governments had to pay much higher interest for the money they needed. Canada’s national debt leapt from just over $20 billion in 1971 to more than three-quarters of a trillion today. This is accompanied by very high provincial debts, such as Ontario’s $325 billion (the largest sub-national-level debt in the world). Servicing the debt consumes the biggest single chunk of both provincial and federal budgets.

Why GDP is increasingly problematic as a metric:
[Twitter, via Naked Capitalism 12-16-19]
U.S. economic activity is becoming increasingly concentrated in large cities and by the coasts—and less so in rural counties
  bloom.bg/2POPJXx

Image
6:29 AM · Dec 16, 2019
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Posted by Tony Wikrent at 10:38 AM 0 comments

Tuesday, December 17, 2019

Thoughts on 30 years since the Berlin Wall came down


November 9, 1989, the night the Berlin Wall was breached, I spent the evening with an incredibly interesting woman from Finland. I had met her at a book signing of my impossibly difficult attempt to explain why pollution was a function of design and that the only effective solutions for our over-polluted world would come from the efforts of environmentally responsible designers. She had a job in radio with a voice to match but assured me that she wanted to ask questions for the book review she was writing for a newspaper.

The book signing was in February but we were still an item nine months later. I was hopelessly smitten because not only did she have those physical characteristic that make Nordic women world famous—icy-blue eyes, true ash-blond hair, high cheekbones, and those impossibly-toned legs from a life-time of commuting by bicycle and cross-country skis—but she was also a walking advertisement for Finland's justly admired educational system. She spoke five languages, was astonishingly well-read, and had that remarkable Finnish ability to summarize complex arguments into a few profound and insightful sentences. (The Finns don't like to talk any more than they absolutely have to so coming to the point is a well-practiced cultural skill.)

When I met her, I had just spent almost 8 years researching, writing, and revising my thoughts on elegant technology. I emerged from this extended self-inflicted solitude into the sunlight to be met by someone who had not only read my book but had decided it was a work of historical genius. She offered those opinions in the dulcet tones of a professional radio personality. Her book review occupied two full newspaper pages. And that wouldn't have turned your head?

November found us hanging out in central Florida (long story) so the fall of the Berlin Wall came as a complete surprise (we were distracted). I was so excited I immediately went out to buy a bottle of champagne. On the way to the cash register, I said to myself—events like this are rare, why not buy two bottles?

And so the evening was set—sufficient champagne and interesting live TV. The pictures were mostly of very happy and deliriously drunk young Germans dancing on the wall that had divided their country, while simultaneously proving that hand-held hammers were no match for hardened concrete. And while I worried that the partying kids would hurt themselves, I also concluded that I had never been that happy about anything, ever. I found the sheer joy incredibly infectious.


I had managed to visit DDR (East Germany) for only one day in 1970. The experience was very grim. Just crossing the border at Checkpoint Charlie took an hour and a half—time mostly spent looking at amount of civil engineering that had been employed in order to stop the movement of humans. While I waited, I wondered at least a couple of dozen times whether I really wanted to get inside that wall.

But then I was in. The streets were mostly empty of both traffic and people. There were occasional piles of rubble to remind us that in 1945, Berlin had been one of history's most intense battlefields. It's easy to understand that recovery from such a battle would require serious time and effort...but 25 years? If there were WW II rubble piles in West Berlin, I certainly had not seen them.

And then I saw it. A Trabant. This ugly contraption was supposed to be DDR's "people's car" and it sported such features as a smoky-smelly 2-stroke engine, the build quality of a junior-high shop project, and performance you could measure with an hour-glass. And did I mention UGLY? I was utterly stunned. Less than three weeks earlier, I had spent three hours on an industrial tour of the Porsche works at Stuttgart-Zuffenhausen where they were constructing the world-famous 911s. The distance in industrial sophistication between the 911 and the Trabant could be measured in light-years. I wondered how on earth Germans! could build something so stupid.

Soon, I discovered that the Trabi had been manufactured in Zwickau. This city has a long history in automobile manufacturing beginning with the Horch factory in 1904 followed by Audi in 1909. Digging deeper, I discovered why the ugliness of Trabant was so personally disgusting. It's a long story but I'll try to make it short and sweet.

When I was only four years old, my father moved the family to a small town in Southwest Minnesota. It was largely populated by a tiny Protestant sect called Mennonites. These people had settled the area in the late 1870s and although they had emigrated from Russia, they were German speakers. They had gone to Russia at the invitation of Catherine the Great in the 1760s who needed expert farmers. She had promised them that they could keep their language, schools, and religious practices which included their pacifism. In 1874, the new Czar, Alexander II, reneged on those promises and started drafting Mennonite young men, closing their German-speaking schools, and confiscating their German Bibles. The last outrage included the invasion of German homes looking for those now-outlawed Bibles and arresting the heads of the household if any were found. Time to get out of Dodge. Most fled to North America and settled in places such as Kansas, Minnesota, the Dakotas and Saskatchewan. They brought with them their excellent farming practices, their beliefs, and hard Red Wheat.

Even though my father was a Swedish-Lutheran pastor, he joined the local Ministerial Association and was almost immediately elected its leader. He got on famously with the Mennonites and soon enrolled us children in their local Christian Day School. I attended K-6. We were taught in English but roughly 1/4 of my classmates spoke German at home and many of the rest used some German grammar in their English. My mother, who spoke Swedish at home until she was ten, found their Germanized English quite amusing. Even so, my parents kept sending us to the Mennonite school because they were such strict pacifists—no pledge of allegiance, no war-like hymns like Onward Christian Soldiers, no playground war games, etc. My grandfathers were quite different men but both had refused to cooperate with the draft when USA had entered WW I. Turns out, the Swedes have a strong anti-war tradition too. These descendants of Vikings stopped going to war in 1814 and have not gone since.

As I grew older, I learned a great deal about the traditions of the German speakers in a preserved form. The Mennonites I got to know were not opposed to modern technology as long as it was useful—they had telephones, and tractors, and cars. My father struck up a long-lasting friendship with a Mennonite evangelist who had an airplane—a Cessna 195. One neighbor had a ham radio he built himself that he used to communicate with a missionary brother in Brazil. The preserved-in-amber forms of Mennonite / German culture came in three basic flavors—their love of music, their memory of when their religious practices had led to real physical harm, and their incredible work habits.
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Posted by Jonathan Larson at 2:14 AM 0 comments
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Sunday, December 15, 2019

Week-end Wrap – Political Economy – December 15, 2019

Week-end Wrap – Political Economy – December 15, 2019
by Tony Wikrent
Economics Action Group, North Carolina Democratic Party Progressive Caucus

Strategic Political Economy

The Economy of Evil 
[Historicly, via Naked Capitalism 12-11-19]
Benito Mussolini became Prime Minister in October 1922. Nazis rose to power in 1933 in Germany. Mussolini convened a meeting of his cabinet and immediately decided to privatize all the public enterprises. On December 3, 1922, they passed a law where they promised to reduce the size and function of the government, reform tax laws and also reduce spending. This was followed by mass privatization. He privatized the post office, railroads, telephone companies, and even the state life insurance companies. Afterward, the two firms that had lobbied the hardest: Assicurazioni Generali (AG) and Adriatica di Sicurtà (AS), became a de-facto oligopoly. They became for-profit enterprises. The premiums increased, and poor people had their coverage removed. 
In January 1923, Mussolini eliminated rent-control laws. His reasoning ought to be familiar since that is the same reasoning used in many contemporary editorials against rent control laws. He claimed rent control laws prevent landlords from building new housing. When tenants protested, he eliminated tenants' unions. As a result, rent prices increased wildly in Rome, and many families became homeless. Some went to live in caves. Once more, these policies allowed landlords to increase their profit and holdings while they severely hurt the poor. 
To remove "government waste," Mussolini removed the federal government from remote areas in Italy. This meant that rural farmers, peasants, and workers no longer had the protection of the federal government against abuse from agribusiness. Instead, they were entirely under the mercy of big businesses.

Hitler's economic policy was Mussolini's policy on steroids....  In 1934, Nazis outlined their plan to revitalize the German economy. It involved reprivatization of significant industries: railways, public works project, construction, steel, and banking. On top of that, Hitler guaranteed profits for the private sector, and so, many American industrialists and bankers gleefully flocked to Germany to invest.  
The Nazis had a thorough plan for deregulation. The Nazi's economist, stated," The first thing German business needs is peace and quiet. It must have a feeling of absolute legal security and must know that work and its return are guaranteed. The interferences In a business which occurred at first, perhaps as a result of too much zeal, have become intolerable."
Emmanuel Macron Wants to End France’s Welfare State
[Jacobin, via Naked Capitalism 12-9-19]
....other major mobilizations have failed to bring success, most significantly past battles against pension reforms in 2003 and 2010. But the protracted resistance to neoliberalism really has had a lasting impact — explaining why France’s welfare state has proven much more resilient than those of nearly all other Western countries. To the despair of its domestic elite and of high-ranking bureaucrats in the European Union and OECD, France tops the table for government spending as a share of GDP; at nearly 55 percent, its spending level ranks ahead of all Scandinavian countries and stands about 10 percent higher than Germany and the OECD average.
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Posted by Tony Wikrent at 11:13 AM 0 comments
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