Solving the problems of production

I came of age during perhaps the ultimate spasm of the Cold War--the USA invasion of Vietnam.  That insane conflict defined much of my youth.  Ostensibly we were fighting against the ultimate evil in Southeast Asia--Communism.  And because I grew to detest everything about that 'war,' there was a short period when I dabbled in the intellectual underpinnings of the 'enemy' by reading Marx.

That didn't last long.  While I came to understand why Marx's pithy critique of capitalism had become so popular around the world, I soon became disenchanted with his historical analysis of economic problems.  At one point, I read that Marx believed that capitalism was superior to feudalism because that was the stage of economic development where the problems of production had been solved.  Solved?  By that point in my life I had worked enough in jobs like construction to know that there had NEVER been a time when the problems of production were solved--those problems had to be addressed every day!

More importantly, solving the problems of production has nothing to do with one's politics and everything to do with the facts on the ground.  Visits to some Marxist states confirmed for me that people who believed that problems of production were something that had been solved in the ancient past tended to produce extremely shoddy goods.  This made my infatuation with Marxism very brief--it would not survive exposure to something as utterly absurd as a Wartburg (an East German car produced in Eisenach.)

But while history demonstrates that capitalism has been much more effective than other political systems at providing consumers with quality goods, it is hardly without problems of its own.  Take the example of Boeing.  Here is a company that produces arguably the finest commercial aircraft ever made--to the point where there are pilots and passengers around the world who will say "Its Boeing, or I'm not going!"  But in February of 2000, the neoliberals who had infiltrated Boeing management provoked a bitter strike with its union of rocket scientists called SPEEA.  Because Boeing cannot produce aircraft without its rocket scientists (SPEEA's rallying cry was "No Nerds, No Birds") it was forced to settle.  The neoliberals were outraged and so set in motion changes that would make Boeing less vulnerable to labor actions.  It moved its corporate headquarters to Chicago and began outsourcing its work in earnest.

So now, Boeing's war on its workers has come back to haunt them.  Neoliberal management has made it very difficult to produce the latest plane.

Notes on the passing of Joe Bageant

A gift of the Internet.  The chance I would have even heard of Joe Bageant without the Internet is zero.  And yet, I got to read a good deal of what the man wrote.  I loved his stuff because he was one of the few literate men to ever appreciate the character, intelligence, and nobility working people bring to their jobs.  Most guys with educations patronize the Producing Classes--and that's only on those rare occasions when they even notice their existence.  Bageant didn't. He may have not been an original, but there are WAY too few like him.

Getting to green

Today we see illustrations of two of my pet themes from Elegant Technology.

1) You really don't have an economy without manufacturing.  Making money by making things is orders of magnitude more difficult than organizing a financial fraud, but over time doing the very difficult very well is by far the most reliable route to generalized prosperity.

Still headed the wrong way

While it is most certainly true that there are a few folks out there that have have profited massively from the current economic strategies, and it is true that there are plenty of brown-nosing twits who seem to believe that their economic futures are best served by working to promote the agendas of that tiny minority, the fact remains that the overwhelming majority of folks, and the planet they live on, continue to crash and burn from these resulting wrongheaded policies.

Economics as Cultural Warfare

One of the pearls of wisdom in the Christian Bible is "By their fruits ye shall know them."

The United States and Britain have been solidly on the path of economic neo-liberalism since the regimes of Margaret Thatcher and Ronald Reagan. (Wikipedia provides a useful definition: "Neoliberalism describes a market-driven approach to economic and social policy based on neoclassical theories of economics that stresses the efficiency of private enterprise, liberalized trade and relatively open markets, and therefore seeks to maximize the role of the private sector in determining the political and economic priorities of the state.")

What have been the actual results - the fruits - of neo-liberal policies over the past forty plus years? Industry in both the U.S. and Britain has been systematically looted by the financial sector; income inequality has grown to be the worst in human history according to some; the working class in both countries has been destroyed, with a male in his thirties today making near ten percent less than a working class male in the 1970s; real rates of illiteracy - if honestly measured - approaching forty percent; the worst financial crash since the First Great Depression; and an inability to simply maintain our physical infrastructure in good working order.

Why Wisconsin was probably not the best place to try the latest wrong-wing attack

I have been only recently been made aware of William Cronon, history professor at University of Wisconsin, Madison.  Ever since I became interested in Robert La Follette and the Progressive movement he started, I just assumed that folks like Cronon existed at Wisconsin because that is exactly the sort of person La Follette wanted working for his beloved university.

La Follette believed that a state university existed to help make the lives of the citizens better whether it was explaining how to produce tastier honey or how to make the organs of democratic government more effective.  Cronon is an example of the sort of teacher / historian La Follette believed a democracy needs to explain the institutions of government during times of upheaval.

So Cronon is the prototypical cultural wise man of Cheeseland--what does he have to say?  Not surprisingly, a lot of good stuff.

The real debts

Amidst all the talk about the seriousness of various national debts, something very important is forgotten.  The debts that seem to concern everyone are pretty trivial.  They barely even exist on paper these days.  In fact one of the big problems facing the banksters is that they failed to do the appropriate paperwork and now find it difficult to foreclose on mortgages.  Money, as we now know it, exists as pure information stored in a computer somewhere.  Creating and canceling debt using such a system involves a few keystrokes.

The debts we are running up with the planet, on the other hand, are very real indeed.  In fact, we are informed that in one year, we burn as much oil as was created in 5.3 million years.  Our lifestyle cannot be sustained for the simple fact that we cannot consume the earth's carbon "capital" as such rates without soon going bankrupt for real.

To compound the problem, we are allowing the banksters and their trivial debts keep us from addressing our real debts.

Empirical Evidence That Proves Conservatism is Destroying America

Here is a link to a DailyKos blog in which the writer took the time to assemble the list of the states that perform worse on a number of measurable social indicators. The ten states with the lowest median household income are almost all solidly Republican / conservative states. The states with the worst health-care systems are almost all solidly Republican / conservative states. The states with the highest divorce rates are almost all solidly Republican / conservative states. The states with the highest rates of teenage pregnancy are almost all solidly Republican / conservative states. The states with the lowest ratios college graduates are almost all solidly Republican / conservative states.

Producers vs Predators--the good guys win one

Those of us who subscribe to the Veblenian notion that the world is best understood by concentrating on the conflicts between the Leisure and Industrial Classes were handed a perfect example in Germany this week when a court ruled that a bank had defrauded an industrial company by selling a designed-to-fail product called a spread-ladder swap.

It is almost certain that the banksters will try to get this ruling overturned for one simple reason--the profits booked by the moneychangers these days are simply not possible if they cannot resort to fraud.  In fact, my personal estimate is that if restricted to useful activities--you know, the ones they would rather talk about when confronted with their sleazy practices, the banking sector would be about 1/10th of its current size.

New pics from Messenger, first spacecraft placed in ORBIT around Mercury

It didn't make much of a splash on the political blogs I usually monitor, but I think this is the sort of news progressives should be stressing as we battle to turn back the raging hordes of wrong-wing ideologues trying to create a New Dark Age.

Continuing shocks to the real economy

The trouble with Finance Capitalism is that the crazy money games these folks dream up cause damage to the real economy.  If this were not so, no one would give a rat's ass how many hookers or how much blow is consumed each month by a hedge fund operator.  One of the things that gets damaged is the ability to properly maintain the infrastructure.  And yet most of the time, the front-line guys seem to hold things together with gum and baling wire in spite of the penny-pinchers who run good investments into the ground.

And now we see how heroic the nuke crews can be.

A bankster prescribing austerity for the rest of us

The arrogance of the moneychangers seems limitless.  Considering the whole industry was a charity case in 2008, one could imagine a bit of humility coming from these bandits.  One would imagine wrong.  It is likely that this rubbish is quite common to today's modern bankster--the sort of stuff that passes for conventional wisdom in all the best country-club locker rooms.

What this clown fails to understand is that society simply cannot afford the huge, overpriced Predator Class as represented by him and his remarks.  One thing is for sure--he obviously does not think open class warfare is possible.

About that other form of Predation

Because the banksters caused crises in 2008 that have made whatever crimes done by the military in the name of "patriotism" seem insignificant by comparison, we may often ignore them.  In fact, I make it a policy here at real economics to ignore the comings and goings of the military-industrial complex (MIC).  The way I figure it, those folks get enough attention as it is.  If the MIC isn't looking manly and heroic enough in the news to heat up the blood and testosterone of the 18-year-old male, they can always buy advertising on sporting events or design state-of-the-art video games.

In fact, I would argue that the last thing the MIC needs to do is advertise on TV.  This insight was provided me at a young age courtesy of Mennonites.  They believed that it was totally natural for young men to want to go to war--it was part of the basic package of "original sin."  They believed the only way you can raise a non-warlike young male is provide him with regular instructions in pacifist teachings.  And even that is often not enough because the warlike animus is so strong.  Just remember, Dwight Eisenhower was raised as a devout Mennonite and he became a five-star general.  Just remember, the Social-Democratic members of the German parliament had made a powerful anti-war political statement just shortly before leaving en mass to join the fighting in 1914.

Or as my mother would say, "There will always be war.  Men LOVE war."  Fortunately history provides an alternate example.  My tribe, the Swedes, have an extremely warlike history.  After all, we were a part of the hordes of the north that struck such terror in the hearts of the rest of Europe that they actually prayed to God for deliverance.  (From the fury of the Northmen deliver us, O Lord!)  The Swedes did enough damage during the Thirty Years' War to affect the boundary between Protestant and Catholic Europe to this day.  Swedes figured out a way to get into wars pretty much continuously from the Viking Age on.

And then in 1818, it stopped.  Sweden stopped making war--she hasn't been in a war since.  What changed?  Sweden had a succession problem and so formed a committee to recruit a new king.  They found a handsome officer in Napoleon's army who agreed to move to Stockholm, learn Swedish, and be the new king.  He had the fine name of Bernadotte and his family still makes up the modern monarchy.

Now I am a devout republican.  I do NOT believe in kings.  But if the Swedish monarchy is responsible for turning perhaps the most warlike society in history into a nation that believes the best way to interact with the rest of the world is to turn them into satisfied customers for the goods produced by their clever and industrious population, then there is a least one example of a monarchy being useful.  Cultures CAN evolve!  And it took a military man who was obviously fed up with the lies that have to be told to sustain a military becoming king of a land populated with folks best described as fierce.

And of course, the peacemakers do have the argument that their way is better because a peaceful environment leads to amazingly sophisticated societies.  It makes for better farmers.  And it makes for MUCH better industries.  It is the basis of "soft" cultural power that military minds can only dream about.  This is true mostly because militarism, like most actions of the Leisure Classes, is a primitive response to the outside world.  As the War Nerd, Gary Brecher, points out so well here, there is very little new in military thinking.

Windpower News Roundup

Here's a roundup from the past few weeks, taken from the American Wind Energy Association's "Smartbrief" news summaries

Geithner Trying to Shield $4 Trillion-a-day Forex Market from Regulation

The story of how the Obama administration favors Wall Street over Main Street is getting to be very, very old, and will, I think, become Obama's biggest obstacle to re-election. As I have argued before, the real underlying problem is that Obama is a true believer in the "neo-liberal" economic policies of free trade and free markets. The foreign exchange markets are one of the foremost examples of what has happened since nation states in the 1970s began to surrender their national sovereignty to market forces. Back in the 1950s and 1960s, ALL foreign exchange trading was directly related to either actual trade in goods and services; personal travel; or U.S. military expenditures and aid overseas. Today, foreign exchange trading is over 100 times larger than these three things. In other words. foreign exchange trading today is 99% pure speculation. A one fifth of one percent tax on all foreign exchange trading, as originally proposed by economist James Tobin in the 1970s, would provide hundreds of billions of dollars in tax revenues.

Blowing a Hole in Dodd-Frank
Treasury Secretary Timothy Geithner is close to a decision to exempt the $4 trillion-a-day foreign-currency market from key provisions of the Dodd-Frank Act requiring greater transparency in the trading of derivatives. In the horse-trading over the final conference version of that legislation last year, both Geithner and financial-industry executives lobbied extensively to give the Treasury secretary the right to create this loophole. As the practical reach of Dodd-Frank is defined by the executive branch, this will be the first major decision to signal whether regulators will act to strengthen or weaken the reforms.

Read more.

Wisconsin is just another strategy of the austerity ghouls

While it has been fascinating to watch as my cheesehead neighbors attempt to stand up to an austerity strategy that has caused riots from Greece to England to Egypt (remember prince Chuck getting his limo attacked in London during the attempt to saddle English students with greater education debt?), it is sad and instructive to watch how uncoordinated, ad hoc, and unplanned these responses have been.

Getting Japan back on its feet

On of the more interesting things about a childhood spent around Mennonites was watching how they reacted to natural disasters.  Here in the midwest we have essentially two kinds of disasters that damage infrastructure--flooding and tornadoes.  Of course there are others such as hail, ice storms, or blizzards but these rarely do damage to structures.  Because flooding is somewhat predictable, the response to flood areas can involve long-term planning including rebuilding away from flood plains.  That leaves tornado damage as the disaster most responsive to outside emergency assistance.  So some Mennonites I knew had organized themselves into emergency response teams that would swoop down on a tornado-damaged town and do amazing amounts of good in a short period of time.

While organizing emergency response for tornado victims started out as an act of Christian virtue for my Mennonite neighbors, the reason folks were happy to see them show up had little to do with their religious beliefs.  No, the reason folks in the surrounding area didn't really feel like recovery was under way after a tornado until the Mennonites showed up was because those folks actually made things better when they arrived.  The Mennonites were good neighbors because they showed up with skills, organization, and a willingness to work.  Dangerous trees got felled, roads were cleared, emergency supplies got delivered--along with the notion that recovery was possible.  Watching this coordinated effort was like watching a demonstration that once in a while, virtue is its own reward.

Watching the Japanese organize the recovery from the Kobe earthquake of 1995 convinced me how much larger and more organized than the efforts of the good neighbors of my childhood needed to be to cope with such a mega disaster.  Damn, these guys are good!

Even so, Japan has a real mess on its hands.  Fortunately they have enormous resources to bring to these catastrophes--most emphatically including skills and organization.

Be careful before making snap judgments on Japan's economy

The crises in Japan simply cannot be overstated.  When the damage inflicted by the 5th worst earthquake in recorded history is only the third-worst disaster in the last month, life is exceedingly difficult for the Japanese.

However, the amount of sheer nonsense being written about the effect on the Japanese economy by these events borders on the insane.  And I would believe some of it except most of this has been written before--and it was wrong then.  For example, Michael Lewis' 1989 Article: "How A Tokyo Earthquake Could Devastate Wall Street & The Global Economy" is making the rounds again.  Much as I like Lewis, this article is pure rubbish.

I personally remember making a bunch of apocalyptic predictions about the global economy following the Kobe earthquake--so I am FAR from guiltless on this.  But being so wrong about Kobe makes me extra careful this time.  Here is what we should remember about Japan.

So you think the country's broke? Think again.

The cover of a recent issue of Barron's magazine was presented in a recent post on Financial Armageddon. Please note the text on the cover at the top right of the globe (above the red arrow):



"The dollar's swoon is drawing more investors to the $4 trillion-a-day foreign exchange market."

$4 trillion-a-day, folks. That's just in the forex market. There's trillions more traded in the stock, bond, futures, options, and derivatives markets every day. One fifth of one percent of $4 trillion is $8 billion. Multiplied by the number of trading days in a year, that's $2 trillion.

Budget deficit? Tobin Tax Initiative. Problem solved.

There's plenty of money out there. The problem is, we don't control it. But, what are governments for?

Not Hard to See: American Workers Get Less and Less

Two sentences and one chart from Financial Armageddon:

In recent years, American workers have received an ever-decreasing share of what our economy produces.

Is it any wonder that many Americans aren't feeling so happy about the so-called recovery (assuming, of course, it's more than just smoke and mirrors)?

It's interesting to project where Ronald Reagan and George Bush were elected: their Presidencies were absolute disasters for American workers.

Liberals vs. Progressives

I have been studiously avoiding the label "Liberal" since my college days when I discovered that some of our finest examples of "Liberalism" could be utter monsters on the subject of Vietnam.  This was Minnesota.  I had a mother who was an über-fan of Hubert Humphrey and considered his civil rights speech to the 1948 Democratic convention (youtube, text) to be a sign that God wanted him to be president of the United States (I am NOT making this up).  She was not pleased when I started to chant "Dump the Hump" when he became the candidate of Richard Daley and police riots at the 1968 Chicago Convention.

During this time, I was introduced to economic thinking when I got hold of Galbraith's New Industrial State in high school.  Galbraith is one of the founders with Humphrey of the Americans for Democratic Action (Youtube channel).  Galbraith got Vietnam right.  Galbraith got Keynesianism right.  Galbraith was a delightful writer.  He helped restore some of the lost shine to Liberalism in my mind that Cold War ethical monsters like Humphrey had done so much to destroy.  But it wasn't enough.  I couldn't call myself a Liberal any more--I had to find another label for my political beliefs.

Fortunately, I didn't have to look far.  I soon discovered that Minnesota had all these "liberals" because we had a long and interesting history of radical and progressive movements that stretched back to the settlement itself.  Ou forebears gave their movements lots of names.  The best-known was the Peoples Party of 1892 who called themselves Populists.  But Robert La Follette over in Wisconsin believed the state university should be the intellectual foundation of good government and in Madison, it was just down the street.  He combined the politics of the Populists with a world-class university and called his movement Progressive.  When I discovered this in early 1980s, it didn't take long for me to decide that I could embrace the label "Progressive" as defined by the founder of the movement.

Now days, there are LOTS of former Liberals who now call themselves Progressives.  Most of it is just a way to escape the negative associations that have grown up around the Liberal label.  I mean, damn few of these Progressives-come-lately have ever heard of La Follette much less understand what he was trying to accomplish.

Moreover, most Liberals turned Progressives still believe there is nothing especially wrong with Liberalism as it came to be practiced in USA--it is just that slander from the Right Wing has destroyed the label beyond repair.  Here they are mostly wrong--relentless Right Wing assaults on Liberalism are a fact, but Liberals did a fine job of trashing the label on their own.

Here Chris Hedges--a serious old-fashioned Liberal--provides us with a pointed come-to-Jesus critique of what went wrong from the inside.  I believe Hedges is profoundly correct in his assessments.