Sunday, October 9. 2011
Got up this morning and found I hadn't squirreled away any links
during the week: all I had was a bunch of open tabs with promising
bits and pieces. So this was rather quickly thrown together, but a
couple pieces are exceptionally deep.
Nothing yet on the Occupy Wall Street movement (which, by the
way, has a presence here in Wichita). Needless to say, I not only
approve of the protests, I think they are necessary. For one thing,
they provide a forum for public education on issues that had been
quietly swept under the rug after the election in 2008 of Obama
and a Democratic Congress. From early 2009 it's become clear that
Obama was not going to make the case for change in the economic
system, but aside from the occasional carping blogger we've sat
idly and impotently on the sidelines, while the right bankrolled
the sham Tea Party movement. But the protests don't just provide
more balanced information. They provide the sort of emotional
heft needed to get that information taken seriously. One may be
skeptical about whether it will work, but the American political
system is pressure sensitive. Until now, that pressure has only
come from the right and its interest groups, and that has swept
all good intentions before it. Moreover, the economic issue is
one that has tremendous built-up energy behind it. This is not
something that's going to evaporate soon because this is something
that has so many unconscious and subconscious victims waiting for
something to come into focus.
Thomas Geoghegan: What Would Keynes Do?
John Cassidy has a generally useful piece on Keynes in the Oct. 10,
2001 New Yorker (not readily available
online; also see Cassidy's
blog) where he stresses the importance of aggregate demand in
recovering from a recession, and goes to great lengths to illustrate
that Keynes' concern was to salvage capitalism, not to bury it. But
Geoghegan takes a different tack: he argues that the real problem
with the US economy is the longstanding and ever-burgeoning trade
deficit, and finds plenty of support for that in Keynes:
For Keynes, the problem would be not just getting people into stores,
or even getting employers to hire but getting our plutocracy to invest.
It's not just our jobless rate but our huge trade deficit that would
appall him. He'd be aghast to see the United States bogged down in so
much debt to the rest of the world. [ . . . ]
In 1936, when Keynes wrote his classic -- The General Theory of
Employment, Interest and Money -- he was emphatic on this point:
no country, ever, should run up any kind of trade deficit, much less
the trade deficit on steroids we are running. Of course, in 1936 and
for years after, the United States was the biggest creditor country
in the history of the world. So Keynes never worried about our being
a debtor country -- rather, he spent much of his last days begging
the United States to get other countries out of debt. If he came back
and saw the colossal external debt we run now, he would be pushing
for a serious plan to bring it down just as hard as he'd be pushing
a stimulus for full employment. [ . . . ]
Keynes believed that practical leaders would always see the supreme
importance of keeping the country out of external debt -- indeed, he
seemed to see this as the first duty of the state. For Keynes, in his
later years, it was the economic analogue to defending one's country.
Avoiding an external debt was an act of patriotism and national
self-preservation in a sense that even reducing unemployment was not.
It's "fighting for freedom," in Skidelsky's phrase. Keynes would not
believe how Obama, the Tea Party, the Democrats, the Republicans --
our leaders -- pay so little attention to our whopping trade deficit,
as if it had nothing at all to do with our slump.
The right, the Tea Party, the Concord Coalition, Mr. Bowles and
Mr. Simpson, Peter Peterson -- they want to bring down the federal
deficit. The left, our side, generally wants to go deeper into debt
and get to full employment. Then we'll bring down the federal deficit.
Then we'll have full employment and all will be well.
But until we bring down the trade deficit and fix our balance of
payments, there is no way out of debt.
OK, Geoghegan still has
Germany on his mind: the prime example of a high-tech nation which
runs a positive trade balance (even, it seems, at the expense of the
rest of Europe, which it's managed to trap in its Eurozone). But the
main effect of the US trade deficit isn't just to make the nation as
a whole poorer. It's to increase inequality within the nation, and the
effect of that is increased misery for most Americans. The way it works
is simple: we send our dollars abroad, where they are collected by the
elites -- foreign businessmen, multinational corporations, the politicos
they all have to bribe. If we had balanced trade, those dollars would
come back to the US and many of them would trickle down to workers, but
since we don't produce that much others want to buy, the dollars have
to be redeemed elsewhere: buying US bonds is relatively benign, but
mostly they go to run up the price of US assets, one of the main ways
the rich get richer. And as the rich get richer, they become more
powerful and more able to make the rest of our lives miserable --
perhaps you noticed that by now. The big problem with inequality isn't
statistical: it's that you make life at the bottom cheaper, therefore
more disposable. And since those at the bottom don't like such shabby
treatment, the increased hierarchy depends ever more on brutality.
Part of the reason the United States isn't doing better is that, thanks
to the trade deficit, Keynesianism has lost its punch. On the evidence
of The General Theory Keynes would argue that a stimulus has to
be bigger, or work harder, as long as we have this external debt.
Consider a twist on Keynes's famous Aesop-like fable about the Bank
of England. Let's drop the Bank of England and make it all about the
Federal Reserve. As Keynes would put it, rather than do nothing in a
slump, it would be better for the Fed to bury bank notes in bottles
and pay Americans to dig them up. Not only do we goose employment but
there is a multiplier effect.
But Keynes did not say we should put bank notes in bottles and bury
them in China and have Chinese workers dig them up. Why not? Well, it
doesn't do us any good. It does not employ any US workers. And of course,
there would be no "multiplier." The beauty of the stimulus is the
"multiplier" effect. OK, I will oversimplify: if we hire Americans to
dig up the bottles with bank notes, they have cash to spend. In 1936
they might go to spend it at the corner bar. The bar hires more wait
staff. They go out and buy more groceries. Someone buys an extra truck
and truck driver to bring the fructose syrup in from Iowa for our Froot
Loops, and . . . should I stop?
It just goes on and on . . . jobs, jobs, jobs,
multiplying to the Pythagorean heights.
But it's not 1936. It's 2011. Now after digging up the bottles,
Americans will go to Target and Walmart and spend on bags of kitty
litter made by child labor in China. And what's going to happen to
the multiplier when the Obama bucks we spend end up over there? In
Chapter 10 of The General Theory Keynes writes, "In an open
system with foreign trade relations some part of the
multiplier . . . will accrue to the benefit of
employment in foreign countries." Or, as he said, there will be a
bit of "leakage." But that's OK if they buy back from us. If there
is a balance of trade, it's OK. But they aren't buying back from
us. They are buying more from Japan and Germany, so our stimulus
goes out of China and over to those countries.
There are other reasons Keynesianism has lost its punch.
First, by making their own cutbacks, our state governments can nullify
the federal stimulus. In 1936 the states were just toy governments. The
New Dealers hated them. But now they are far bigger public sector
employers than Washington. By virtue of state constitutions requiring
balanced budgets, they have to cut when Keynesian theory would have them
spend. If the stimulus did not stimulate, we can partly blame our fifty
Tea Party constitutions, which require a foolish "austerity" in the
states. In our system of federalism, a Keynesian-type stimulus is half
Second, the rich are so much richer now than they were in our Keynesian
golden age (let's say 1940 to 1975). If Obama gets GDP growth up by 1
percent, most of that goes to the superrich. It's beyond their capacity
to consume it -- i.e., to unleash a multiplier effect. The Financial
Times has a regular supplement called "How to Spend It," but it's
beyond their human strength. There's too much to spend.
A stimulus can wake up an egalitarian country's economy, since everyone
is spending. But a stimulus cannot wake up the economy of a super-plutocracy:
the people at the very top just roll over in bed.
The third part of the article has a number of recommendations about
what to do (especially "what Keynes would do"). All are worth quoting,
but I'll refrain. The key insight is that the rise of the financial
industry coincided with the increase in trade deficits, and that it
made matters worse by luring the rich into speculation instead of
making long-term investments in making things that could be exported.
(It also piqued their taste for the easy gains of usury and larceny.)
So anything that would rein in the banks would be a plus: usury laws,
strict regulation, a transaction tax, eliminating the tax breaks that
allow the Mitt Romneys of the world to buy up companies and pay for
them by sticking them with crippling debt. Then there's this:
The one standard way of being competitive abroad is to cut wages here --
to improve the terms of trade. Keynes hated the idea of cutting wages.
It was the standard remedy of classical theory, and he loved to point
out that cutting demand at home might only prolong a slump. But suppose
the government could dramatically cut nonwage labor costs by assuming
the cost of health insurance? If our government could deliver just one
Keynesian "shock" to make us more competitive, it would be single payer
national healthcare. At least right now, we should expand Medicare
coverage (lower the eligibility age) and adopt a public option, so
that the government can have more bargaining leverage to beat down by
decree the stupefying prices we pay to get well in an ever more
concentrated healthcare sector.
It is horrifying to see even the "tough" new President Obama proposing
to shrink Medicare -- aside from leaving people uncovered, shrinking
coverage means shrinking the government's power to dictate the price
and leaves employers and the rest of us exposed to higher healthcare
costs. If the president wanted to increase the trade deficit, the best
thing he could do would be to cut Medicare coverage and give the
government even less power to hold down the healthcare costs that
make us even less competitive abroad than we are now.
Finally, I think Keynes would hold up on the small stuff -- i.e.,
the cuts in the payroll tax or the proffer of one more investment tax
credit -- for none of that will matter (if it ever matters) until we
get people out of loans. In one way or another, in keeping with the
ancient wisdom of the Bourbons and the Habsburgs divined by Keynes,
we have to take down the scaffolding of this creditor-debtor economy
in which our country is imprisoned.
Andy Kroll: Flat-Lining the Middle Class:
Numbers, numbers, numbers. Here's the executive summary:
In recent months, a blizzard of new data, the hardest of hard numbers,
has laid bare the dilapidated condition of the American economy, and
particularly of the once-mighty American middle class. Each report
sparks a flurry of news stories and pundit chatter, but never much
reflection on what it all means now that we have just enough distance
to look back on the first decade of the twenty-first century and see
how Americans fared in that turbulent period.
And yet the verdict couldn't be more clear-cut. For the American
middle class, long the pride of this country and the envy of the world,
the past 10 years were a bust. A washout. A decade from hell.
Paychecks shrank. Household wealth melted away like so many
sandcastles swept off by the incoming tide. Poverty spiked, swallowing
an ever-greater share of the population, young and old. "This is truly
a lost decade," Harvard University economist Lawrence Katz said of
these last years. "We think of America as a place where every generation
is doing better, but we're looking at a period when the median family
is in worse shape than it was in the late 1990s."
[ . . . ]
In the meantime, the middle class has flat-lined. Life support is
nowhere close to arriving. One lost decade may have ended, but the
next one has likely only begun.
The statistics are all too familiar, but they seem to have little
impact, perhaps because the definition of middle class is so fluid
and its mystique is so tendentious. I wonder if it's possible to
credibly spell out what a middle class standard of living is, what
occupations fit into that definition (at least 50 years ago, when
it was generally agreed that this was a middle class nation), and
how those alignments have changed. For instance, in 1960 my parents
were middle-aged (father was 35, worked in a factory; mother older,
was a homemaker); they owned a house; had net savings; they had
health insurance, a defined-benefits pension; they would be able to
afford to send their three children through college (not that we all
made it; I wound up going about $2000 in debt after transfering to
a fancy private college). One can argue that they were middle class.
If so, how many 35-year-old blue-collar workers with a single-income
and a wife and three kids can say the same today? Certainly, some
occupation group have held pace and can still be considered middle
class, but not blue-collar workers, and probably not huge swathes
of white-collar workers (like teachers). Moreover, others have hung
on by adding a second income and/or accumulating a lot of debt, but
that's not really the same thing. It's an exaggeration to say that
the middle class "has flat-lined" but it's certainly shrunk a lot
and slipped up the income distribution scale to where it's become
an increasingly elusive status. On the other hand, median wage (or
salary) earners are finding less and less separating them from the
poor -- often nothing more than a lost job or underinsured illness,
things that can happen almost as suddenly and unexpectedly as being
picked off by the DC Sniper.
By the way, John Cassidy has a blog post,
Poverty and Income in America: The Four Lost Decades, on this:
If you do the comparison with 1973 it is even worse. The figure for
median earnings of full-time male workers in that year (when O. J.
rushed two thousand yards and Tony Orlando had a chart-topper with
"Tie a Yellow Ribbon Round the Old Oak Tree") was $49,065. Between
now and then, Archie Bunker and Willie Loman have suffered a pay cut
of more than twenty-five dollars a week.
Is it any wonder Americans are not as optimistic as they used to be?
Cassidy points out this that this has been pointed out before,
citing an article he wrote in 1995 ("Who Killed the Middle Class?" --
again, abstract only online).
Jane Mayer: State for Sale:
On the bankrolling of the Republican resurgence in North Carolina,
thanks largely to a conservative moneybags named Arthur Pope, with
a hat tip to the Supreme Court for letting money enjoy free speech.
Yet Pope's triumph in 2010 was sweeping. According to an analysis by the
Institute for Southern Studies, of the twenty-two legislative races
targeted by him, his family, and their organizations, the Republicans
won eighteen, placing both chambers of the General Assembly firmly under
Republican majorities for the first time since 1870. North Carolina's
Democrats in Congress hung on to power, but those in the state legislature,
where Pope had focussed his spending, were routed.
The institute also found that three-quarters of the spending by
independent groups in North Carolina's 2010 state races came from
accounts linked to Pope. The total amount that Pope, his family, and
groups backed by him spent on the twenty-two races was $2.2 million --
not that much, by national standards, but enough to exert crucial
influence within the confines of one state. For example, as Gillespie
had hoped, the REDMAP strategy worked: the Republicans
in North Carolina's General Assembly have redrafted congressional-district
boundaries with an eye toward partisan advantage.
Experts predict that, next fall, the Republicans will likely take
over at least four seats currently held by Democrats in the House of
Representatives, helping the Party expand its majority in Congress.
Meanwhile, the Republican leadership in the North Carolina General
Assembly is raising issues that are sure to galvanize the conservative
vote in the 2012 Presidential race, such as a constitutional ban on
Republican state legislators have also been devising new rules
that, according to critics, are intended to suppress Democratic turnout
in the state, such as limiting early voting and requiring voters to
display government-issued photo I.D.s.
The vote suppression movement has been going on in Republican state
legislatures all over the nation, including here in Kansas where you'd
think it would hardly be necessary. But low voter turnout is essential
to Republican success: when 117 million voted in 2008 the Democrats
won the House by 13 million votes; in in 2010, only 78 million voted
and the Republicans took the House back. (For these numbers, and more,
here.) Of course, unlimited money had something to do with it,
too, and there are other factors. But knowing their platform is not
in the best interests of the overwhelming majority, the Republicans
play every angle they can.
Corey Robin: Revolutionaries of the Right: Subtitled "The Deep Roots
of Conservative Radicalism." Robin has a new book out: The Reactionary
Mind: Conservatism From Edmund Burke to Sarah Palin (2011, Oxford
University Press) -- I grabbed a copy of it, but haven't had time to dig
in yet. His main point is that conservatives today are little different
than conservatives any time in the past, at least as far back as when
Burke was railing against the French Revolution -- this he contrasts with
the efforts of conservative discontents (and their liberal admirers) who
are tempted to argue that today's conservatives are somehow different
from their ancestors. Robin mostly focuses on Burke, who only matters
if you think he matters, but was as bloody-minded about France as Hayek
about the Soviet Union, or the worst contemporary you can imagine against
A commenter points to an essay written in 2004:
Philip E Agre: What Is Conservatism and What Is Wrong With It?.
The intro is spot on:
Liberals in the United States have been losing political debates to
conservatives for a quarter century. In order to start winning again,
liberals must answer two simple questions: what is conservatism, and
what is wrong with it? As it happens, the answers to these questions
are also simple:
Q: What is conservatism?
A: Conservatism is the domination of society by an aristocracy.
Q: What is wrong with conservatism?
A: Conservatism is incompatible with democracy, prosperity, and
civilization in general. It is a destructive system of inequality
and prejudice that is founded on deception and has no place in the
These ideas are not new. Indeed they were common sense until recently.
Nowadays, though, most of the people who call themselves "conservatives"
have little notion of what conservatism even is. They have been deceived
by one of the great public relations campaigns of human history. Only by
analyzing this deception will it become possible to revive democracy in
the United States.
Further down, Agre talks about the conservative claim for freedom:
Conservatism constantly changes, always adapting itself to provide the
minimum amount of freedom that is required to hold together a dominant
coalition in the society. In Burke's day, for example, this meant an
alliance between traditional social authorities and the rising business
class. Although the business class has always defined its agenda in
terms of something it calls "freedom," in reality conservatism from
the 18th century onward has simply implied a shift from one kind of
government intervention in the economy to another, quite different
kind, together with a continuation of medieval models of cultural
This is a central conservative argument: freedom is impossible unless
the common people internalize aristocratic domination. Indeed, many
conservative theorists to the present day have argued that freedom is
not possible at all. Without the internalized domination of conservatism,
it is argued, social order would require the external domination of state
terror. In a sense this argument is correct: historically conservatives
have routinely resorted to terror when internalized domination has not
worked. What is unthinkable by design here is the possibility that people
might organize their lives in a democratic fashion.
Much more worthwhile here. I can't even disagree with his claim that
"Snoop Dogg's music really is garbage," but caution against generalizing
from one data point.
Jonathan Schell: Cruel America:
Starts with the audience applause for Texas Gov. Rick Perry's record
of 235 executions, a phenomenon that Jim Geraghty dubbed "voting to
kill": a big part of the Bush-Cheney election strategy, a platform
that Obama is increasingly well pitched to run on.
At the GOP debate on the 12th, there was another public expression of
enthusiasm for loss of life in Texas. CNN's Wolf Blitzer asked Texas
Congressman Ron Paul, who favors repeal of President Obama's health
plan, what medical response he would recommend if a young man who had
decided not to buy health insurance were to go into a coma.
Paul answered, "That's what freedom is all about: taking your own
risks." He seemed to be saying that if the young man died, that was
There were cheers from the crowd.
Blitzer pressed on: "But Congressman, are you saying that society
should just let him die?" Someone in the audience shouted, "Yeah!"
And the crowd roared in approval.
A characteristic that these exchanges have in common is cruelty.
[ . . . ] There have been many signs recently
that the United States has been traveling down a steepening path of
cruelty. It's hard to say why such a thing is occurring, but it seems
to have to do with a steadily growing faith in force as the solution
to almost any problem, whether at home or abroad. Enthusiasm for
killing is an unmistakable symptom of cruelty. It also appeared
after the killing of Osama bin Laden, which touched off raucous
celebrations around the country. It is one thing to believe in the
unfortunate necessity of killing someone, another to revel in it.
This is especially disturbing when it is not only government
officials but ordinary people who engage in the effusions.
I want to add that cruelty goes hand in hand with brutalization.
The more we engage in war, the more cruel we become, and not just
to the enemy but to ourselves. And this gets reflected in economic
and social policies at home. The essential point of the education
"reform" dubbed "no child left behind" was stigmatize and penalize
failure. Our justice system spares few expenses when it comes to
punishing miscreants, but offers little to help people in need.
We've long been told that we need to end welfare programs so that
people don't become dependent on them. Now we have to shut off
unemployment insurance too. "Tough love," it's called, but being
mostly tough it's easily transformed to hate.
Peter Van Buren: Freedom Isn't Free at the State Department, and
How the American Taxpayer Got Plucked in Iraq:
Former State Department functionary, wrote a recent book on what he
learned from his service in Iraq: We Meant Well: How I Helped Lose
the Battle for the Hearts and Minds of the Iraqi People (2011,