January 31, 2009
"O Winter! bar thine adamantine doors:
The north is thine; there hast thou built thy dark
Deep-founded habitation. Shake not thy roofs,
Nor bend thy pillars with thine iron car."
He hears me not, but o'er the yawning deep
Rides heavy; his storms are unchain'd, sheathed
In ribbed steel; I dare not lift mine eyes,
For he hath rear'd his sceptre o'er the world.
Lo! now the direful monster, whose skin clings
To his strong bones, strides o'er the groaning rocks:
He withers all in silence, and in his hand
Unclothes the earth, and freezes up frail life.
He takes his seat upon the cliffs, -- the mariner
Cries in vain. Poor little wretch, that deal'st
With storms! -- till heaven smiles, and the monster
Is driv'n yelling to his caves beneath mount Hecla.
January 30, 2009
The theme at Goat Rope these days is the failure of "conservative" economic policy, but you'll also find links and comments about current events. The series started Monday.
If you've ever looked back at economic history, you'll notice that capitalism has the endearing tendency to blow up or melt down every decade or so, a tendency that can be seen as far back as the early 1800s. As the economy became more centralized in the first half of the 1900s, these crises threatened social stability and possibly the survival of capitalism itself.
One thing that has kept the US economy from tanking as deeply as it did during the Great Depression of the 1930s (up to now anyway) has been a degree of government regulation, tax and fiscal policies and the social safety net.
Those reforms, associated in the US with the New Deal, were often hated by those who most benefited from them, i.e. right wing business interests. It was pretty ironic, since those who had the most to gain from a stable capitalist system were the capitalists themselves.
And for several decades, those forces, along with an ideological noise machine, have fought mightily to dismantle some of the structure that held things together. It seems about as rational to me as sawing off the branch you're sitting on.
As I watched this happen over the last few decades, I honestly wondered what they were thinking. Did they believe the economic system had somehow become bubble- or crisis-proof? If they actually did succeed in dismantling all the worker and family friendly gains of the past, how did they think people would react to it? Did they have a plan to contain the popular outrage that would follow sooner or later? If they succeeded in undermining the economic status (and purchasing power) of the middle and working class, did they think the very wealthy alone could keep the economy going?
And most of all, did they really believe this stuff?
It kind of reminds me of someone who stuck their tongue in an electric socket and got shocked really badly, but wanted to try it just one more time...
ARE WE THERE YET on the stimulus? Maybe not.
HEALTH CARE. Krugman says the time is now.
ON THE BRIGHT SIDE, the US Senate voted to expand health care to around 4 million children. The House previously passed a similar bill.
STATE OF THE UNIONS. Union membership increased slightly in 2008 according to the Bureau of Labor Statistics. There are other interesting trends as well.
MORE FUN WITH THE SUPREMES. Massey Energy sees nothing wrong with a state supreme court justice elected with its CEO's money hearing its cases. Now that's a shocker.
And, while we're at it, here's the latest on the Aracoma mine fire case, which killed two miners in 2006.
GOAT ROPE ADVISORY LEVEL: ELEVATED
January 29, 2009
The theme here lately is the failure of "conservative" economic policies, which is one of those topics where figuring out where to start is harder than figuring out what to say. The reader will also find links and comments about current events below.
One main feature of the failed economics of the past is a cult like worship of "markets," which are endowed with some kind of supernatural intelligence by true believers. In the real world, there are all kinds of ways markets can fail, as even the most mainstream economics textbook will say. Here are a few:
*Imperfect competition. Adam Smith famously said in The Wealth of Nations that
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.
But one big difference between Smith's day and our own is the eclipse of small independent butchers, brewers and bakers and the rise of giant corporations which often dominate markets and distort prices. Some forms of imperfect competition are monopolies or oligopolies (domination of an economic sector by a few businesses).
*Externalities. In an ideal market situation, which generally only exists inside the heads of true believers, prices "tell the truth," so to speak, about the costs of the products. Often however, there are social costs passed on to the public or to individuals which don't show up on any corporation's bottom line. Climate change is a classic example, but so are the numerous cases of people and communities damaged by sickness, pollution, etc. as the result of economic activity. The tendency is to socialize the costs while keeping the profits private.
*Information asymmetries. Market transactions can also go awry when one party has more or better information than another and is thus able to take advantage of the situation. Imagine, hypothetically, that some people made big bucks (for a while) selling mortgage based derivatives and other such "financial instruments" to people who got burned in the process. Golly, good thing that never happens...
Another problem with markets is that they don't do a good job of providing for public goods like roads, bridges, schools, fire and police protection, etc.
I won't even go into crony capitalism, i.e. the use of political influence to win profits and advantages for big businesses. Imagine, for example drug company lobbyists writing a prescription drug benefit bill or credit card companies writing bankruptcy legislation. Good thing that never happens, either...
All of this isn't to say that markets are evil and should be banned. It's just to point out that there are lots of ways they can mess up and melt down, which is why there is also a need for a degree of regulation. The market=God idea is one that is long overdue for a decent burial.
HOW'S THE WEATHER? El Cabrero and the gang at Goat Rope Farm were without phone, water, electricity and email since Tuesday. Here's hoping the Gentle Reader made it through the storm. I'm scheduling this post early in case the power is gone tomorrow. If anything really bad happens between now and then, please accept our condolences. If anything really good happens, please accept our congratulations.
STIMULUS PASSES. The US House passed the stimulus package yesterday along party lines.
A BETTER BAILOUT is discussed here by Nobel Prize winner Joseph Stiglitz.
SPORTS AND SUCH are the subjects of the Rev. Jim Lewis' latest edition of Notes from under the Fig Tree.
ANTIWHAT? Here's a list of five world leaders accused of being the Antichrist. (Personal note: those who picked #5 might have been onto something. )
BIRD BRAINS outlasted the dinosaurs.
GOAT ROPE ADVISORY LEVEL: ELEVATED
January 28, 2009
The philosopher of science Thomas Kuhn hit a home run in 1962 when he published The Structure of Scientific Revolutions. Part of his theory was that in any given period, people make us of dominant models or paradigms to explain the world.
When problems grow with the older paradigm, some innovators develop alternate paradigms to better account for observations. From time to time, the new model triumphs and the old paradigm is put on the shelf--often after a bitter fights and with some people still clinging to the old.
In American economic history, we've seen three paradigms rise and fall (and maybe rise again). One was the classic idea of lassez faire or unregulated capitalism, in which there was little government interference with the economy--although, as I argued in yesterday's post, in reality the government often intervened on behalf of the wealthy.
It wasn't that bad a model in an age of small, independent producers and a truly competitive economy. But as economic power centralized and as economic crises became more and more serious--and even threatened the survival of capitalism itself--another paradigm emerged.
The new model is associated with the great English economist John Maynard Keynes and it recognized that sometimes markets could totally melt down. Keynes advocated a role for regulation, public investments, and transfer payments to promote economic stability and a rising standard of living for all.
This model was dominant from the New Deal era to the Reagan era and it enjoyed considerable success until the oil-related stagflation of the late 1970s. Meanwhile, there were those who were hostile to the Keynesian paradigm from the beginning, even though it may have saved capitalism from an even more serious crisis in the 1930s.
A coalition of right wing politicians and "free market" economists mounted a political and economic assault, promoting a model that is sometimes called "neo-classical." It called for deregulation, tax cuts, reduction or elimination of the social safety net, etc. and has been the dominant model from around 1980 until the latest economic meltdown.
For the life of me, though, I'm amazed that it lasted this long or took so long to crash. At this moment that paradigm is pretty much dead and it's not clear whether the next one will be a revived and updated Keynesianism or something else. Our situation is like that of the old Chinese curse: "May you live in interesting times."
SPEAKING OF KEYNES, here's New Republic writer John B. Judis on the continuing relevance of his ideas.
DEAD ENDERS. Opponents of a the American Recovery and Reinvestment Act, the economic stimulus package developed by the House and supported by President Obama, are pulling out the stops and plugging the failed policies of the past.
COUNTRY MATTERS. Here's an interview with writer Wendell Berry on rural life, community and such.
HERE WE GO AGAIN. WV Supreme Court Justice Brent Benjamin is planning on hearing another case involving Massey Energy. Benjamin, then a political unknown, was elected in 2004 after Massey CEO Don Blankenship spent over $3 million to elect him. The US Supreme Court has agreed to hear a case that questions the propriety of Benjamin participating in cases involving Massey.
SPEAKING OF WHICH, some Mingo County residents are going to sue Massey for polluting their water with coal sludge.
GOAT ROPE ADVISORY LEVEL: ELEVATED
January 27, 2009
The theme at Goat Rope these days is the bankruptcy of "conservative" economic theory, which is pretty clear these days. But before getting there, I think it's a good idea to clear up some misconceptions.
One such is the idea that progressives want to use the government to redistribute wealth, while those who call themselves conservative believe in leaving it to "the market."
As the economist Dean Baker has pointed out over and over again, the reality is that both use the government to redistribute wealth. The main difference is that the former use it to distribute wealth upward and the latter prefer to use it to benefit those with low or moderate incomes--and this has been true for well over a century.
As Baker points out in his free web book The Conservative Nanny State (linked above), there are any number of ways that state power has been used to spread the wealth upward. These include:
*chartering corporations. These were not present from the day of creation. In fact, corporations are legal entities recognized by governments which protect investors from legal liabilities and enjoy the same legal rights as persons. If a sole proprietor or partnership incurs serious debts or liabilities, the owners are responsible for the whole thing. Corporations protect investors by limiting what they can lose if things go south.
*issuing patents, which give some businesses an artificial monopoly for a period of time as a reward for innovation. I'm not debating the value of the idea, just pointing out that in a really free market system, people would be free to make knock offs of inventions and sell them for less than those who came up with them.
*using state power to break strikes and thwart labor organizing.
*using tax policy to impose relatively heavier burdens on labor than on investment income.
The list could go on and on but you get the idea.
STIMULATE US. If your congressperson is sitting on the fence about the American Renewal and Reinvestment Act, which would help those hardest hit by the recession and help get things moving again, this would be a good time to give them a nudge.
RESTORING THE BALANCE. Here's Robert Reich on the role unions can play in rebuilding the middle class--but we'll need the Employee Free Choice Act to get there.
MILITARY MARRIAGES are often another casualty of war.
SCIENCE IS BACK, which is probably a good thing.
URGENT SPITTING COBRA UPDATE here.
GOAT ROPE ADVISORY LEVEL: ELEVATED
January 26, 2009
Master Kung. Image courtesy of wikipedia.
Last week, I was asked to give a talk to a graduate class on the failure of conservative economic policy. I was up for the occasion, but it seems to me that recent years haven't been very kind to the word "conservative."
When the ancient Chinese sage Confucius (aka Kǒng Fūzǐ or K'ung-fu-tzu) was asked what he would do first on acquiring a position of political influence, he said he would begin with "the rectification of names."
Then as now, public life had a shortage of honest speech and a surplus of BS. He believed that a great deal of harm was done when things weren't called by their true names.
I think George Orwell was thinking along the same lines in his great essay "Politics and the English Language."
If any word needs some serious rectification, it is "conservatism," which these days has come to mean some combination of the support of plutocratic policies and the politics of cultural jihad.
That's too bad, because conservatism in the best sense of the word implies a dislike of waste, a respect for the past, a cautious approach to change and and a rejection of Utopian schemes--none of which has a whole lot to do with the recent fare.
PUBLIC INVESTMENTS are more effective ways of stimulating the economy than another round of tax cuts, argues Lawrence Mishel of the Economic Policy Institute.
MORE ON THAT TRACK. Paul Krugman takes on tax cutters and obstructionists that are aiming to sabotage the recovery package here.
A STRUGGLE FOR THE SOUL of capitalism is the subject of this item by Benjamin Barber. El Cabrero isn't sure it has one.
RESISTANCE TO FORECLOSURES, a staple of the 1930s, may be growing again.
CLIMATE CHANGE is killing American trees.
GOAT ROPE ADVISORY LEVEL: ELEVATED