Saturday, January 23, 2016

Bruce Wilder 12.01.15 at 9:46 pm

Part of the fiscal underpinning of a fiat currency is being able to collect taxes. The short answer to what to optimally tax is Henry George: tax economic rents, which are, after all, arguably the secure portion of incomes dependent on the rule of law.

Back in the bad old days (irony intended) 1947-71, the U.S. collected a corporate income tax that was in large part a tax on economic rent. It was an implicit constraint on rentiers and, along with local property taxes, allowed the government to earn a return on those public investments that contributed to general economic growth. It also contributed to the honesty of corporate financial reporting and the stabilization of corporate finance (since the corporate income tax was refundable against subsequent losses).

Of course, the corporate income tax is in tatters, notoriously avoided by many of the most profitable companies. We are regularly told that efficiency demands more consumption taxes. Like the poor and the middle classes are not screwed enough already. When financial fraud creates mountains of bad debt, that bad debt must be converted into full faith and credit obligations of the government, funded by consumption taxes. But, the economic rents that show up in the corporate profits or the incomes of hedge fund managers or the capital gains of billionaires — those are untouchable. State-funded education must be privatized, the funds channelled thru Charter Schools and Higher Education, which was once heavily subsidized by the States is now financed by debt loaded onto the students — well that half of the student population whose parents cannot afford to pay (welcome to the class system 3.0)

We have secular stagnation, because secular stagnation is policy. Technology is not a devil that made us do it, nor did Technology and Globalization do it to us with the supreme indifference of Trends. This was something chosen for us by our Masters.

The value of money depends now on doubling down on predatory and parasitic taxes. It is the monetary equivalent of, Soylent Green is People.

Bruce Wilder 11.30.15 at 6:45 pm

JQ: a consensus of the political class. But if you take an issue like privatisation, it hardly ever commanded majority support anywhere.

dsquared: People didn’t like privatisation per se – who doesn’t want to keep assets? But they preferred it to the alternatives, which would have involved higher taxes. Pro-privatisation parties consistently won elections.

The dog that didn’t bark plays a big part in the political dynamics. Neoliberalism, as an ideology or rhetorical engine of the political class is an epiphenomenon of the collapse or corruption of institutions and organizations, representing and mobilizing mass interests.
Charles Peter’s Neoliberalism: A Manifesto is a root document of an important thread in American neoliberalism, and it is also a pretty clear statement of the desire to abandon what seemed in 1983 to be a tired stalemate of politics cleaved across class lines. The economic reforms of the late 1970s and 1980s — deregulation and trade liberalization were possible because the liberal professional classes were ready to abandon labor unions as racists and Reagan Republicans, but also because those organizations were in manifest decline as the general decline in social affiliation in American society and culture took hold. A vicious cycle took hold: deregulation and trade liberalization, along with a general decline in mainstream religious and other social affiliations destroyed the institutions that gave the liberal classes an economic base, as Chris Hedges lamented in The Death of the Liberal Class.

The expansion of the financial sector, at least in the U.S., was accompanied by a deeply corrupting homogenization, as giant bank holding companies assembled themselves and subsectors, which had previously pursued conflicting political agendas in Washington and State Capitals, as well as competing economic strategies in the marketplace, were subsumed. That’s a huge and underappreciated fact: both politically and economically, neoliberal policy permitted a loss of diversity that undermined the politics and economics both.

Projecting that “they” (voters) didn’t “like” some (proffered?) alternative of public ownership and finance, supported by sufficient and effective taxation, slides over the problem of political organization and mobilization. There is No Alternative (TINA) is the central challenge presented by neoliberalism, as political parties of the Left have repeatedly failed to find ways to mobilize mass support to sustain any alternative vital critique and program.

It does seem to me that attributing too much to the overawing strength or evil of the Finance Sector misses the abject weakness of any potential political mass movement, whether of the populist or neo fascist Right or liberal or socialist Left.

Even comparatively feeble efforts show how little it takes, I think. The successes of Elizabeth Warren are a remarkable demonstration, in a way, of how little it takes to push back. (That’s not a criticism of Warren, who does her homework and is amazingly professional and incisive — I’m just saying, she’s not atop a well-disciplined mass movement with real political muscle; she’s just good at the job she’s taken on, and that’s enough sometimes to have effect. Because the corruption she goes after has a guilty conscience and is not atop a mass movement either, and fears any potential mass movement for good reason will eventually want heads on pikes.)

There is No Alternative is a racket and a ratchet downward, ever downward. But, it isn’t backed with great political power, so much as it is backed by the absence of political power among the mass of people, who are no longer readily mobilized or even informed. And, also it represents a narrow homogenization of interests, so not much political conflict surfaces for politicians to manage: a politician cannot make himself independent without conflict — the only job available in this environment is spokesmodel. Most people are not well-informed politically — even the news junkies, who might seem superficially well-informed about politics have little capacity to think critically. They just react like Pavlov’s dogs and, for all practical purposes, if they vote at all, they might as well be voting at random. (A friend in China explained to me recently, that China tells itself that it is a democracy, and the voters are presented with a ballot in municipal elections, but no one knows even half the names on the ballot. I told him it sounds like voting in Los Angeles. I wasn’t joking.)

It takes a lot of political organization and mobilization, including education and some careful thinking about programs and policies, before a polity can make genuinely “hard” choices (to use ironically, the fatuous neoliberal rhetoric for doing something stupid, cruel and corrupt). I mean to accept short-term pain for long-term gain, but also to accept the short-term pain necessary to impose costs and accountability on elites and to dismantle existing systems.

Genuinely reforming the financial sector would be an act of altruistic punishment. It would be costly in the short-term even for those wielding the knives and tying the hanging rope. In the U.S., it would mean shrinking substantially employment in some of the highest income sectors of the economy — not just in finance, itself, but in the corporate C-suites and big sectors of the economy, like health care, where insurance has jacked up prices and incomes, drawing in excess resources.

Absent a partial collapse of society, directly affecting elites, it is hard to imagine organizing or motivating a politics of altruistic punishment. The U.S. can just barely manage to mobilize some outrage, by invoking the hot button of race, but that’s wearing thin surprisingly fast, I think and easily side-tracked into purely symbolic b.s., at least among the youngest political activists.

I don’t object to pointing out that the Clintons are political opportunists, or that Tony Blair was a political opportunist for that matter. That their moral sense is deranged seems like a valid point. But, the thing about opportunists is that they are not handicapped by convictions; if there were a reliable and loyal political movement available to lead, they would happily lead it, I think. It would have to be a remarkably resilient movement, before any sane politician would tackle shrinking the UK financial sector, because the immediate economic feedback is likely to be severely negative for any effective measures taken in advance of some self-created crisis or collapse. Ditto in the U.S.

dsquared 11.30.15 at 8:21 am

I can’t tell if you are arguing with John or agreeing with him. Is this agreement with his d) [the political capture explanation]?

Well, it is and it isn’t. I think we’re in violent agreement about what actually happened, but my view would be that it’s a real misreading of history to tell a story about the financial sector having all the class consciousness and political agency and everyone else being bent to their whims.

Margaret Thatcher wasn’t a banker. Nor was Ronald Reagan. The Clinton White House did have a lot of people in it who had come through the financial sector revolving door, but it also had Brad DeLong, and it really wasn’t because of bankers that NAFTA got passed. In general, the debt bubble had two component causes – a) stagnant real wages and b) borrowing to maintain consumption. My argument would be that a) was a general policy goal of more or less the whole political system, including a lot of nominally social-democratic parties, and b) is just the logical consequence of a) in a world in which fiscal policy isn’t used and the balanced budget multiplier isn’t a tool of policy – the demonisation of state spending and taxation also having been a consensus policy during the period.

So it was a consequence of the ideology of the times – if you have policies of reduced government investment, combined with low real wage growth, then you have, de facto, a policy either of falling living standards or one of increasing debt levels and therefore a growing financial sector. But it’s a real stretch (albeit one that some people on this thread, in my opinion unconvincingly, are prepared to make) to claim that the whole growth of “neoliberalism”, “economic rationalism”, “Thatcherism” and all the other names for this policy mix, was foisted on the population even by the industrial sector as a whole, let alone by a particular industry with in it. This revolution was brought to you by ideologues and economists.
dsquared 11.30.15 at 8:24 am

(and further to 43, these policies won elections. If the median of public opinion wanted to have a set of policies which didn’t result in financial sector growth, they could have voted for Michael Foot or Walter Mondale. After about 1990 I agree it became more difficult to find candidates who didn’t support this consensus, but that’s because it was a consensus. Again, you can tell stories about Clinton and Blair being corrupted by finance capital but IMO it’s a lot more plausible to believe what they themselves kept saying – that they were tired of losing elections and were compromising with public opinion on this low wage, low tax, high debt policy mix in order to get some of their other agenda through.)
dsquared 11.30.15 at 2:22 pm

I am not sure I really agree – if you look at someone like Blair, Cameron or indeed Turnbull, then their actual career has been “lifelong political influence peddler”. This sometimes takes them through banks, but only because at various points, banks have been better payers than other professional services firms – when you see a politician like Hillary Clinton who spent her Arkansas career as a lawyer and a consigliere to the Walton family, you don’t conclude that this shows the outsized influence of either the legal profession or big box retail over the government.

In fact, Blair at least was not particularly close to the financial sector in the 1990s when it might have made a difference. Notoriously, New Labour was very heavily staffed up and co-opted by consultancies (particularly PA Associates) and Big Four accountancy firms (particularly PWC). These guys got their payback in very large amounts. Later towards the end of the boom, everyone wanted to be friends with the financial sector, but why wouldn’t they? The sector looked like it was a massive success story, and its continued growth was essential to the policy model.

I think you’re hugely underestimating the extent to which the Washington Consensus was a consensus. It really was. And it was a consensus around a set of policies which (as nobody except Wynne Godley seemed to realise) implied a structurally growing financing sector and structurally increasing leverage. The banks were obviously very keen on this, because it was good for them, and so they assuredly invested money and influence in promoting it. But this is like a theory of why we have so many wars which blames them on arms manufacturers – they’re part of the story but if that’s your whole explanation you’re missing the big picture.
dsquared 11.30.15 at 4:44 pm

Dsqaured assumes the only alternative to debt-fueled growth and a metastasizing financial sector is secular stagnation. That’s what they would have you believe.

No that’s not true. Every single time I explained this I was very careful to point out that debt-financed demand management was made necessary by the lack of willingness to carry out government investment. It kind of irritates me when people ignore important points like this.


I fear he might be right.

Bruce Wilder 12.03.15 at 9:31 pm

Bloix: If you don’t vote for the Democrat, you’re casting half a vote for the fascist. You’re not sending a message, you’re not teaching a lesson, you’re helping to put people into power who get pleasure out of punching people like you in the face.

As far as I can tell, the Democrat in the case of Clinton as in the case of Obama is, also, “the fascist”, that is to say, an authoritarian who will represent the interests of powerful business corporations and the superwealthy pretty much exclusively. Obama got in with large majorities for his Party in Congress and continued the policies of the Bush Administration in regard to the financial and economic crisis, the surveillance state, foreign policy, Iraq and Afghanistan. He couldn’t find anyone to prosecute in the largest financial crisis in 70 years or in a lawless surveillance state guilty of torture and other war crimes, . . . except whistleblowers.

I could go on and on, and I’m sure you would have all kinds of nonsensical, pre-programmed replies. And, that’s by design — not my design or your design, but it’s a design, and it is tied to being convinced that whatever else, you absolutely, positively have to vote for the Democrat or the sky will fall.

You say, this is the political minimum: whatever else you think or do, you have to vote for the Democrat. And, I say that, if you do that reflexively — commit yourself to voting for the Democrat without critical reflection, without discretion — you have pretty much excluded or neutered everything else. Psychologically, cognitive dissonance means that your partisanship will distort your views. And, in game theory terms, your candidate owns you.

I readily admit that my position has little enough to recommend it. I have no political power. I cannot create a viable political strategy. I am a follower, a numerically insignificant voter. All I can do is make myself available for a better politics, by keeping my critical awareness unclouded by a futile, manipulated partisanship. I can step out of the herd, when I see it headed for what I regard as the wrong pen. It is depressing to realize that democracy has been eclipsed by a bought-and-paid-for, made-for-the-internet-and-tv politics of spokesmodel politicians spouting focus-grouped slogans with the aim of stampeding cattle and sheep, who aren’t paying much attention and wandering aimlessly on their own, but that’s the truth.

I can have the sad truth or the angry, desperate illusion; I choose the sad truth, and with it, awareness of my own powerlessness in this destructive, degenerative era. I don’t even get to feel superior — it’s a raw deal even by the low standards of narcissistic news junkie spectator sport politics.

I voted for Obama in 2008, was disappointed in the policy results (and in the partisan leadership as well — the 2010 midterms were catastrophic for the Democrats and Obama’s leadership played an important part, if you are interested at all in the Inside Baseball of politics), and (living in a solidly blue state admittedly) voted for the Green (who seemed like a pretty intelligent, reasoned, sincerely caring person not incidentally) in 2012.

I would argue that my move was the potentially powerful one for a highly dissatisfied leftish voter in my circumstances; a couple of million could have done that, and Obama would still carry the State, but a signal of dissent from the Left and of political potential would have been sent. Voting for the Neoliberal-in-Chief, at the margin, was a declaration of powerlessness that I didn’t make, but 98+% of arguably Democratic-leaning voters making it to the polls in California followed your sage advice. And, what did it get them? They put the fascist back in, without registering any note of dissatisfaction with his conduct. If you really are satisfied with Obama, that’s your right, I suppose, but you don’t get to insist that I have to act as if I am satisfied by the same abysmally low standards you are.

I guess some people thought 2012 was a knife-edge election, and it was “close” but, according to analyst-observers like Nate Silver, never really much in doubt despite the apparently small popular vote margin. Romney was a gaffe-prone candidate unpopular within his own Party; a tax-dodging, vampire capitalist from a cult religion, he had readily exploited vulnerabilities, which the Obama campaign very skillfully manipulated with professionally admirable precision to produce a minimal margin of victory. Why did he want a minimal margin? To protect his ability to continue to deliver on his neoliberal agenda for his backers in the finance sector and among the wealthy, I think, he preferred not to make any but the absolutely most minimal populist appeals.

I fully expect 2016, Clinton v [Republican Clown], will be a repeat of 2012. Clinton is a clumsier, more graceless candidate than Obama, and this scam has been run many times already. Being a Clinton, from the 1990s, may well mean that her political stance will be read by the Media, or even played by her, as Third Way triangulation rather than as Obama’s neoliberal shell game redux.

Against a Republican Clown, nominated for his (it will be a “he” — of that we can be certain, I think) unelectability, Clinton can try to win any campaign contest by calibrated populism squarely aimed at the Republican’s vulnerabilities (his corruption, for example, or his tender concern for billionaires), but unlike Obama and unlike the Big Dog, Mrs. Clinton is not a perfect conduit for populist appeals, positive or negative. Her arrogance shows.

The Democratic Party will be transformed by the 2016 election and Clinton’s candidacy. The Democratic Party has been resisting a generational transition, despite the youthful Obama’s advent, and Clinton and Bernie remind us of that. The Dems will have new leaders at the top in Congress in 2017, after what has been a long delay. Populism has been so thoroughly deprecated during Obama’s years, it won’t be available as a credible option after Clinton, it won’t make sense anymore as part of the default Democratic Party identity. She is truly the last of the breed, as the OP put it, but that attaches to the whole of the Democratic Party identity as a party of the People, which Obama has been cashing out in retail sales thru his whole Administration. It is a statement about the Party, I suspect, as well as the candidate.

Clinton will almost certainly be a one-term President left holding the bag in whatever crises are visited upon the country, and the Democratic Party, excluded from the Congress and most of the State governorships, as well as those parts of conservative Democratic Administrations like Defense and the Surveillance State apparatus, commonly reserved to Republicans, may well wither and die. All because Bloix insisted that job 1 was voting for the Democratic Presidential candidate.

The sky will fall, after a brief pause, while we hear a message from the sponsors.


Rich Pulasky refutes the Archdruid thus:

Rich Puchalsky 12.26.15 at 5:04 pm

Well, I started out upthread looking at The Archdruid Report as one of the best examples of doomerism out there, and here’s his latest specifically on the Paris Agreements. I think it’s worth looking at this one in a bit more detail.

Firstly, a lot of it puts me in mind about the old joke where someone says that “we need to learn how to die” (meaning that we need to learn how to accept individual death) and someone else retorts that actually 100% of the past population has managed to figure out how to die without any practice. It was always possible, from the beginning of contemporary concern about global warming, that we were doomed and that we already could essentially do nothing about it. That’s just physics. If we’re doomed, then we are, and so what’s the point in making plans? The plans made by doomers generally seem to me to involve thinking that they know how society is going to re-primitivise and how to prepare for this individually to a much greater extent than I think that they can actually know.

Secondly, if you take the rhetoric about methane releases, ice sheet collapses and so on seriously — in other words, if it’s true that in actual reality we’re at the high end of the range of possible climate sensitivities — then it was always too late to do anything. The article’s last paragraph includes “By the time COP-21’s attendees convened in Paris, it was probably already too late to keep global climate change from spinning completely out of control.” And, if you take the assumptions of the article as being true, then yes. Anthropogenic global climate change became something that the world had a chance of really responding to in, let’s say, 1980. The 1980s were the decade of Hansen’s testimony, the Green Party in West Germany causing some action to be taken, etc. Let’s say that resistance by fossil fuel interests delayed action for a full two decades, so that now in 2015 we’re at where we should have been in 1995. If climate sensitivity is really that high, I question whether those two decades mean much. The speed of global response, even had the politics been ideal, seems like a limiting factor. So not only can we really not do anything now, we really couldn’t have ever done anything.

But all of this assumes that we know more science than we actually do. The Archdruid writes: “Lurid scenarios of civilizational collapse and mass dieoff appeared in book after lavishly marketed book. Of late, though, that entire theme seems to have dropped out of the collective imagination of the activist community, to be replaced by strident claims that everything will be just fine […]” Well, there’s a market for lurid scenarios within a certain range, and yes, those get lavishly marketed. Activists don’t get lavishly marketed, and the lurid-scenario market gets a lot less popular as we actually get closer to having those lurid scenarios come true. I’ll believe that we actually know that they’re coming true when the IPCC says so. Suggestions that the IPCC is going to conceal the oncoming doom from us I regard as about equivalent to the suggestion that world scientists are in a conspiracy to concoct global warming as a plot for world socialism. There are complaints that the IPCC is always 5 years out of date, but if we’re doomed 5 years isn’t going to matter.

Thirdly, there are the complete “does not make sense” moments. Like this one: “[…] neither nuclear power nor grid-scale renewable power are economically viable in the real world. The evidence for this is as simple as it is conclusive: no nation anywhere on the planet has managed either one without vast and continuing government subsidies.” …but every form of grid-scale power has happened with vast and continuing government subsidies. Just because fossil fuel interests have successfully concealed their subsidies a bit better doesn’t mean they don’t exist. Grid-scale power is inevitably a function of government, and what “vast government subsidies” means is that essentially governments pay for it. Which means that our societies can pay for it. This is where right-wingerism is uncritically adopted where it becomes convenient.

I’ve been an environmental activist since some time in the 1970s, and I’ve seen a whole lot of doomerism since the 1970s. The people who predicted doom within the next few years have, of course, been universally wrong during that time — and have discredited environmental activism to the extent that anyone listened to and remembered them. The people who predicted doom within the next few decades have been kind of untestable. But there’s a Pascal’s Wager quality to the whole thing. If we’re doomed, how is ultimately futile activism going to hurt? And if we’re not doomed, saying that we’re doomed before we really are is sure going to hurt a whole lot.


More Bruce WIlder

Bruce Wilder 12.22.15 at 5:00 pm

engels @ 194

neo- means new, as Cranky observes. It is a common mistake to identify neoliberalism with conservative libertarianism, the more self-conscious heirs of “classical liberalism” (Milton Friedman liked to call himself a classical liberal. )

The neoliberals, though, were the successors of the New Deal liberals, those not-quite-social-democrats. The neoliberals were the next generation, who gave up in the simmering class war, that was the core of New Deal politics. That is Charles Peters’ theme: he declared himself tired of the stalemate in class warfare that characterized New Deal politics. Some were the successors to the “liberal Republicans”, a conservative wolves-in-sheeps-clothing faction that dissolved at that time. Brad Delong, with his supreme sense of historical context, has called himself an Eisenhower Republican. Some, like Clinton and Carter and Gore, occupied the space previously occupied by Southern populists, but without the racism. Clinton and Gore continued to use the rhetoric of “fighting” for the common man.

The Washington Consensus version of international neoliberalism occupies a similar position, in that it emerged as the competition with communism ended.

Rich is right to identify neoliberalism with the managerial class. It is the politics of dismantling the New Deal, from the perspective of those in charge of taking it apart while avoiding collapse and smoothing over crisis. Having unilaterally surrendered in class war, their job is keeping class war from breaking out again under one-sided assault from above, while continuing a very profitable program of controlled demolition and the construction of a new structure to manage and herd a growing precariat.

Their relation with the conservative libertarians is an interesting one to me, in part because it is so closely tied to the social structure of mainstream economics. To understand it, you need to understand that conservative libertarianism, as an ideology and economic philosophy, is not real, not organic — at least not in our era. It is a mask to wear in public for the most aggressive plutocrats. For pundits and intellectuals apologizing for plutocracy, it is a well-paid gig. Conservative libertarianism, backed by the elaborate but easily mastered structure of Econ 101, is nothing if not an impressive rhetorical engine, capable of turning out an endless flood of glib, content-free opinions.

For the neoliberals, it provides a useful foil, a way of arguing one’s own views in-contrast-to, that makes neoliberalism seem far less conservative and pro-plutocratic than it is. The back and forth creates the illusion of a debate and critical examination of ideas. And, most usefully, the conversation between neoliberals and the paid shills of libertarian conservatism can be treated as the serious adult conversation, that the children should not interrupt, so any answer given to real critics can be dismissive and condescending, the better to marginalize other points of view.

Paul Krugman rails against the strawmen of “freshwater” economics to burnish his own credentials as a political liberal of the old school (something he is not), then turns around and picks out certain economists for rituals of respect, policymakers like Bernanke or Blanchard, or allies like Simon Wren-Lewis of Oxford. Once in a while, some one further afield will be dismissed or his ideas presented as an impenetrable puzzle. But, mostly he stays within a narrow range of respected interlocutors, and within that range, criticism is very muted. Krugman did not appear to even understand how his own publicly expressed views differed from Bernanke’s, so Bernanke’s reactionary politics remained unexplored. Bernanke remained a trustworthy technocrat in Krugman’s telling.

Neoliberalism uses libertarian conservatism, but does not share its ideas. It does not favor laissez faire per se, as the classical liberals supposedly did. They always want a program, and a complex one that needs lots of credentialled administration is thought best. Oh, and tons of policy analysis, too. The neoliberals are the practical people, who supply a bailout, while libertarians express hostility toward the victims and the bailout simultaneously. Thus, our political stasis is maintained thru the time of the cholera.

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