Browsing the archives for the economy category.


There Is No Invisible Hand

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big picture stuff, economy

This cartoon sums a lot up for me. I remember back in the 1980s when I was living in New Jersey and looking for a decent, affordable apartment for me and two little kids. Nobody was building affordable apartments. There was much building of McMansions, yes, but there there was a shortage of decent lower-rent apartments. And every day I passed a huge, newly built industrial/office complex that was completely empty. Months went past; it remained empty. There just wasn’t that much demand for office space, I guess, or else the builders miscalculated what people would be willing to pay in rent. And I understand there’s a glut of McMansions in the New Jersey real estate market these days.

See also “The Old Suburban Office Park Is the New American Ghost Town.”

Now, proponents of Free Market capitalism will probably argue that the Free Market was not at fault; it was bankers, or the Federal Reserve, or something else that caused investment in the wrong thing. But this assumes that the Free Market is a thing that exists out in the ether somewhere entirely separate from banks and financial policy, separate from land and labor, separate from money and infrastructure.

This was published about a year ago, and I’m sorry I didn’t notice it before.

Polanyi’s core thesis is that there is no such thing as a free market; there never has been, nor can there ever be. Indeed he calls the very idea of an economy independent of government and political institutions a “stark utopia”—utopian because it is unrealizable, and the effort to bring it into being is doomed to fail and will inevitably produce dystopian consequences. While markets are necessary for any functioning economy, Polanyi argues that the attempt to create a market society is fundamentally threatening to human society and the common good.  In the first instance the market is simply one of many different social institutions; the second represents the effort to subject not just real commodities (computers and widgets) to market principles but virtually all of what makes social life possible, including clean air and water, education, health care, personal, legal, and social security, and the right to earn a livelihood. When these public goods and social necessities (what Polanyi calls “fictitious commodities”) are treated as if they are commodities produced for sale on the market, rather than protected rights, our social world is endangered and major crises will ensue.

Free market doctrine aims to liberate the economy from government “interference”, but Polanyi challenges the very idea that markets and governments are separate and autonomous entities. Government action is not some kind of “interference” in the autonomous sphere of economic activity; there simply is no economy without government rules and institutions. It is not just that society depends on roads, schools, a justice system, and other public goods that only government can provide. It is that all of the key inputs into the economy—land, labor, and money—are only created and sustained through continuous government action. The employment system, the arrangements for buying and selling real estate, and the supplies of money and credit are organized and maintained through the exercise of government’s rules, regulations, and powers.

The article goes on to argue that what we all call “deregulation” is really “re-regulation.” “Government continues to regulate, but instead of acting to protect workers, consumers, and citizens, it devised new policies aimed to help giant corporate and financial institutions maximize their returns through revised anti-trust laws, seemingly bottomless bank bailouts, and increased impediments to unionization.”

Our “socialist” mayor, Bill de Blasio, has made the creation of decent low-income housing in NYC a priority, bless him. The city needs this desperately. The “free market” doesn’t provide low income housing here. NYC is a place in which, if you build it, rich people will come and pay ridiculous amounts of money for it. But that means the “free market” only caters to them. There are new high-rise apartment buildings going up all over the place in Brooklyn; rent for a basic one-bedroom unit averages about $2,800 a month, I understand.

The people who have made free market capitalism their religion are certain that as long as government doesn’t interfere, the Holy Free Market (blessed be It) will naturally provide whatever anyone needs. But in truth the Free Market doesn’t give a hoo-haw about what people need. The Free Market will dedicate infinite resources to filling even the frivolous desires of the wealthy; everyone else is just out of luck, sometimes even for life’s necessities.

The Free Market also is wasteful and destructive, depleting resources for short-term profit without thought to the future; using up materials and resources for buildings that sit empty and consumer products that end up in landfills after only two or three years of use. The Free Market refuses to maintain infrastructure, will not safely dispose of hazardous waste unless forced to, and will not clean up the ecosystems it destroys. The Free Market would rather kill coal miners than invest in safety precautions.

Because, you see, there is no “Free Market”; there is no benevolent “invisible hand” that turns individual self-interest into common good. There are just people scrambling to make as much money as they can, and as long as a portion of those people don’t care who they hurt in the process, the results often will not be benevolent at all.

Henry Ferrell — the same guy who wrote the article quoted above — today has a post at Washington Monthly about Very Serious People. He’s talking here about foreign policy, but it applies to economic policy as well.

  1. Everyone has a mix of beliefs, some of which are right, and some wrong.
  2. Everyone co-exists in a social system that tends to value, heavily reinforce and widely disseminate some people’s beliefs while disparaging, heavily discounting, and tending to limit the circulation of certain other people’s beliefs. This bias is not random, but instead reflects and reinforces existing power structures and asymmetries.
  3. People whose beliefs are reinforced and widely circulated so that they are socially and politically influential, even when they are manifestly wrong, are Very Serious People. The system provides them with no incentives to admit error or perhaps to understand that they have erred, even when their mistakes have devastating consequences.

We’ve been fed this fantasy about “free markets” lo these many years, and the fantasy won’t die because the VSPs believe it. But from where I sit that fantasy is not just destroying lives; it’s destroying the planet.

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The Growing Anti-Capitalist Movement

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economy

Maybe it’s just me, but I’m seeing more open grumbling about capitalism than I used to. There was a time one could not say that, maybe, capitalism really doesn’t work in the long run without being shouted down. But now I see people grumbling about capitalism almost every day. Even the Pope is running around saying that the unfettered pursuit of money is the “dung of the devil.”

The problem, of course, is that capitalism doesn’t work for the masses unless you regulate the hell out of it, which the high priests of capitalism will not accept. Ironically, the past 30 years of deregulation (while celebrating the triumph of capitalism over communism) have done a bang-up job demonstrating that Karl Marx was right about one thing, at least — capitalism carries the seeds of its own destruction.

I don’t have to persuade you “regulars” why this is true, but those of you who wandered in late can read A Wealthy Capitalist on Why Money Doesn’t Trickle DownCapitalism Simply Isn’t Working and Here Are the Reasons Why, and More Compelling Evidence That Free Market Capitalism Doesn’t Work Without Government Regulation.

If the true believers of capitalism had the sense God gave cucumbers they’d be at least considering re-instating some of the old safeguards, such as the Glass-Steagall Act, to save capitalism from complete collapse someday. But they won’t. It’s against their religion. See this commentary from a blogger whom I doubt it all that wealthy —

[Sen. Bernie] Sanders moronically said to John Harwood on CNBC, “What I think is obscene [is] when you have the top one tenth of one percent owning almost as much as the bottom 90.”

That’s capitalism.  That’s our history.  That’s why  we are not Vietnam or Cambodia.  We are not the old USSR or Tiananmen Square in China.  We are successful because success is not legislated, but achieved.

And I’m sure this guy genuinely and fervently believes that allowing the nation’s wealth and resources to be hoarded by people who really don’t work for it, whom we did not elect, cannot control, and possibly wouldn’t even like much if we met them makes America strong, and he will continue to believe that as long as he is able to cling to a middle-class lifestyle. But if the nursing home dumps him on the street some day because Medicaid has been scrapped to pay for more tax cuts for the rich, he may be in for a shock.

As the current system works for fewer and fewer of us, I’m seeing more people, younger people especially, say out loud that capitalism doesn’t work. It’s not really a movement yet, but if current trends continue I think it will be in three to five years or so.

I’m seeing suggestions that government should encourage profit sharing and more stock ownership among employees. I see the Birkenstock crowd is big on something called the “sharing economy,” which I take it means you can rent out your stuff when you’re not using it. But it seems to me these are band-aids, not cures.

On the other hand, economic adviser Jeremy Rifkin says that capitalism is about to experience  “the most exquisite of deaths.”

“We are seeing the final triumph of capitalism followed by its exit off the world stage and the entrance of the collaborative commons,” Rifkin predicts.

This is not socialism but an entirely new economic model. That sounds exciting, but what the hell is it? I’ve read the piece and cannot make sense of it. But maybe some of you will.

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A Global Disaster

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economy, Europe

Paul Krugman is calling the European summit agreement on Greece “the sacking of Athens.” He said, gloomily, “So we have learned that the euro is a Roach Motel — once you go in, you can never get out. And once inside you are at the mercy of those who can pull your financing and crash your banking system unless you toe the line.”

See also Krugman’s blog posts “Faithocrats,” “The Pause of 2014,” “An Unsustainable Position,” and “History Lessons for Euro Debtors,” which together make about as good a primer on the Greek situation that there is. See also Ivan Krastev, “A Greek Farce.”

The immediate impact of the Greek agreement is calmer markets, defeated Greeks and skeptical Germans. So should Europe celebrate? Do European leaders expect Greece to be transformed by the accord as Central Europe was transformed in the 1990s? Is it possible that the whole referendum episode — a resounding public “no” followed by Mr. Tsipras’s climb-down with the creditors — could serve not to humiliate Greek voters but instead to re-educate them?

While many in Brussels are hoping that the Greeks have learned, it is more than likely that the new reform package agreed to on Monday will result in further radicalization of certain segments of the European left and the spread of apathy in Greece.

Mr. Tsipras’s leftist populism failed to win Greece a better deal. Instead, the real political winner is most likely to be not the moderate center but the anti-European right. And while European leaders can congratulate themselves on keeping the Union going, the price that Europe will pay for saving Greece economically and losing it politically is the transformation of the Union from a project sustained by hopes and aspirations into one surviving on shared fears and confusion.

Krugman says in “Faithocrats,”

But let me note, as I have before, that what Europe calls technocrats aren’t people who know how the world works; they’re people who subscribe to the approved fantasies, and never change their minds no matter how badly wrong things go. Despite the overwhelming evidence that austerity has exactly the dire effects basic textbook macro says it will, they cling to belief in the confidence fairy. Despite a striking lack of evidence that “structural reform” delivers much of a growth boost, especially in an economy suffering from a huge output gap, they continue to present structural reform — mainly in the form of disempowering workers — as a sovereign remedy for all ills. Despite a clear record of past failure, they continue to push for asset sales as a supposed answer to debt overhang.

In short, what Europe usually means by a “technocrat” is a Very Serious Person, someone distinguished by his faith in received orthodoxy no matter the evidence.

Structural reform in the form of disempowering workers sounds pretty much like what the Republicans want to impose on us, here.  Faith-ocratism will be our doom.

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Greece: Don’t Back Down

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economy, Europe

While most of the world is cluck-clucking about how Greece needs to play by the rules and do what it’s told, a whole lot of economists are saying something else entirely.

Thomas Piketty et al.:

The never-ending austerity that Europe is force-feeding the Greek people is simply not working. Now Greece has loudly said no more.

As most of the world knew it would, the financial demands made by Europe have crushed the Greek economy, led to mass unemployment, a collapse of the banking system, made the external debt crisis far worse, with the debt problem escalating to an unpayable 175 percent of GDP. The economy now lies broken with tax receipts nose-diving, output and employment depressed, and businesses starved of capital.

The humanitarian impact has been colossal—40 percent of children now live in poverty, infant mortality is sky-rocketing and youth unemployment is close to 50 percent. Corruption, tax evasion and bad accounting by previous Greek governments helped create the debt problem. The Greeks have complied with much of German Chancellor Angela Merkel’s call for austerity—cut salaries, cut government spending, slashed pensions, privatized and deregulated, and raised taxes. But in recent years the series of so-called adjustment programs inflicted on the likes of Greece has served only to make a Great Depression the likes of which have been unseen in Europe since 1929-1933. The medicine prescribed by the German Finance Ministry and Brussels has bled the patient, not cured the disease.

Paul Krugman:

It’s now clear, or should be clear, that the Greek program was doomed to failure without major debt relief; no matter how hard the Greeks tried, austerity would shrink GDP faster than it reduced debt relative to the baseline, so that the debt situation was bound to worsen even as the attempt to balance the budget imposed vast suffering.

And there was no good, or even non-terrible, answer given Greece’s membership in the euro.

But there’s a broader lesson from Greece that is relevant to all of us — and it’s not the usual one about mending our free-spending ways lest we become Greece, Greece I tell you. What we learn, instead, is that fiscal austerity plus hard money is a deeply toxic mix. The fiscal austerity depresses the economy, and pushes it toward deflation; if it’s accompanied by hard money (in Greece’s case the euro, but a fixed exchange rate, a gold standard, or any kind of obsessive fear of inflation would do the trick), the result is not just a depression and deflation, but quite likely a failure even to reduce the debt ratio.

Joseph Stiglitz:

I don’t believe Europe’s leaders were seeking to punish Greece. They were just using bad models — evidenced by the enormous gap between what they thought would happen and what did happen. Europe and the International Monetary Fund predicted a fairly quick turnaround. The reality was deepening recession.

And it wasn’t because Greece didn’t do what it was supposed to; it was because it did. On the all-important macroeconomic front, Greece had the biggest and fastest fiscal consolidation among the advanced European economies in the aftermath of the global financial crisis, ruthlessly cutting back expenditures and raising new revenues. …

…The ball is now in the court of European leaders. The question is, will they stick with a policy that has proved a disaster? Or will they combine a desire to preserve the euro with good economic policies and a respect of democracy? Can they reform the reform package sufficiently?

This is the moment to stand up against unthinking austerity. Four years ago, as the first signs of the failure of this policy emerged, Europe’s leaders recognized that what was needed was a growth strategy. They promised Greece that. They didn’t deliver. There was just more of the same.

(Weirdly, but typically, the lesson Stephen Moore of Fox News draws from the Greece example is that socialism has failed. WTF?)

Exactly what’s to be done to turn the Greek economy around is hard to say, but Piketty et al. lay out a broad outline:

Right now, the Greek government is being asked to put a gun to its head and pull the trigger. Sadly, the bullet will not only kill off Greece’s future in Europe. The collateral damage will kill the Eurozone as a beacon of hope, democracy and prosperity, and could lead to far-reaching economic consequences across the world.

In the 1950s, Europe was founded on the forgiveness of past debts, notably Germany’s, which generated a massive contribution to post-war economic growth and peace. Today we need to restructure and reduce Greek debt, give the economy breathing room to recover, and allow Greece to pay off a reduced burden of debt over a long period of time. Now is the time for a humane rethink of the punitive and failed program of austerity of recent years and to agree to a major reduction of Greece’s debts in conjunction with much needed reforms in Greece.

To Chancellor Merkel our message is clear; we urge you to take this vital action of leadership for Greece and Germany, and also for the world. History will remember you for your actions this week. We expect and count on you to provide the bold and generous steps towards Greece that will serve Europe for generations to come.

We’ll see if they can put aside the Austerity Mystique and do what really needs to be done.

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Time for Hunger Games

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economy

Paul Krugman tries to explain that not all Americans have trust funds.

We seem to be hearing less these days about cutting Social Security, and we’re even seeing some attention paid to proposals for benefit increases given the erosion of private pensions. But my sense is that Washington still has no clue about the realities of life for those not yet elderly. Which is where that Federal Reserve study comes in.

We learn, for example, that 3 in 10 nonelderly Americans said they had no retirement savings or pension, and that the same fraction reported going without some kind of medical care in the past year because they couldn’t afford it. Almost a quarter reported that they or a family member had experienced financial hardship in the past year.

And something that even startled me: 47 percent said that they would not have the resources to meet an unexpected expense of $400 — $400! They would have to sell something or borrow to meet that need, if they could meet it at all.

 His point is that most of our policy maker are utterly oblivious to the realities of life for these Americans. But maybe they can learn from reality television

On Wednesday, CBS debuted “The Briefcase,” a show in which, as Reality Blurred’s Andy Dehnart explains, “two poor families get $101,000 and have to decide whether to keep it or give it to a needy family, not knowing that family is making the same decision.” He notes it is produced by “Biggest Loser” creator Dave Broome’s 25/7 Productions and Sony, so you know that there’s some experience exploiting desperate people built in to the thing….

… In Vulture, Margaret Lyons does a ferociously great job explaining exactly why the show’s “altruism pornography” is so repulsive, starting with the fact that “In the 2014 fiscal year, Les Moonves, president and CEO of CBS Corp, earned over $54 million…. There’s something really perverse about Les Moonves earning money based on the emotional and financial anguish of poor people, by making a game-theory spectacle of human suffering that he could end, himself, personally, if he wanted to.”

At least they don’t have to kill each other. Yet.

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The Seattle Restaurant Crisis

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economy

You may not have heard of the Seattle Restaurant Crisis, unless you are a regular consumer of rightie media. In which case you would know that restaurants in Seattle are going the way of video stores, or dinosaurs, or something, because the minimum wage was raised to $15 an hour.

Except that isn’t happening. The Sky Valley Chronicle reported,

The blogosphere has once again proved itself to a be fertile source of false news that projects outward as fact at the speed of light.

A March 17th report by the Seattle Times says it found a blogosphere-spread rumor masquerading as fact that recent Seattle restaurant closures may have been linked to the city’s new $15 minimum wage, was false.

The report says an article that made its way into Seattle Magazine (called “Why Are So Many Seattle Restaurants Closing Lately?”) suggested that the city’s newly approved $15-an-hour minimum wage (to be phased in over years) was a factor in some recent Seattle restaurant closures.

That article then caught on fire and was touted as factual in the conservative blogosphere, with the Washington Policy Center (which calls itself a “think tank”) asserting that “Seattle’s $15 wage law a factor in restaurant closings.”

From there the not-real-news flashed over into a veritable forest fire of condemnation in the conservative media with the conservative American Enterprise Institute claiming that,“Seattle’s new minimum wage law takes effect April 1 but is already leading to restaurant closings and job losses.”

That was followed by elderly conservative radio talker Rush Limbaugh, not exactly known in most journalistic circles for being a hotbed of factual, non-biased material jumping on the bandwagon followed by the New York Post running an article called called “Jobless in Seattle.”

Then Forbes chimed right in with,“We Are Seeing The Effects Of Seattle’s $15 An Hour Minimum Wage.”

To Forbes’s credit, it also published a story by Rick Ungar that pooh-poohed the whole thing.

But that was last month. This month Think Progress followed up and confirmed that (a) Seattle restaurants are opening and closing and the same rate they opened and closed for years; and (b) those that closed did not cite the minimum wage hike as a factor.

High-profile writers confidently proclaimed that Seattle’s once-proud restaurant scene was in retreat and that the wage hike was already chilling business activity and killing jobs, based on one anecdotal report. None of that was true. When the Seattle Times asked them about the story, the restaurant owners in questionlaughed off the claim that their decisions were motivated by the wage law. But even that direct testimony didn’t stop the media wave all the way. The conservative National Federation of Independent Business ran a post parroting the disproven restaurant closures claim days after the Times debunked the anecdote underlying the narrative.

Now, there’s even harder evidence that the right was wrong. The Big Picture pulled the numbers on how many restaurant permits have been issued by the city each month going back to the start of 2012. The chart shows plenty of ups and downs – what data scientists call “noise” – but the 12-month average for permits is almost perfectly steady…

A couple of restaurants had added a 2 percent “Seattle Ordinance Wage Equity Surcharge,” but canceled this when customers objected.

However, the facts hardly matter, and you can be sure that the wingnuts will continue to tell themselves that every restaurant in Seattle has closed or is about to, and ha ha those stupid libtards are stupid.  You know the tune, I’m sure.

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Explaining Away Competence

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economy

A Krugman blog post got me thinking —

Everyone in the Republican Party knows that Reagan presided over an economy that has never been equaled, before or since. When I was on TV with Rand Paul, he confidently declared

When is the last time in our country we created millions of jobs? It was under Ronald Reagan …

Of course, it’s not true …

Krugman goes on to say there was better job growth during the Clinton years, and President Obama hasn’t done that badly, either. But it isn’t just Republicans who somehow think only Republicans understand the economy. Polls going way back show that The Average Voter thinks that Republicans are better on the economy (and defense, and taxes) than Democrats.

And why do so many people think that, when it demonstrably isn’t true (and it isn’t)? IMO because Republicans declare it to be so, loudly and often, and Dems don’t stand up to them about it.

Last year some Princeton economists came out with a study that showed a rather startling gap between Dem and GOP administrations in how the economy performed, going back to World War II.

“The U.S. economy not only grows faster, according to real GDP and other measures, during Democratic versus Republican presidencies, it also produces more jobs, lowers the unemployment rate, generates higher corporate profits and investment, and turns in higher stock market returns. Indeed, it outperforms under almost all standard macroeconomic metrics.”

As I said, this came out last year, and I don’t recall seeing it at the time. But the differences are not minor. There’s a bar graph at the link above showing substantial differences in economic growth between D and R administrations. But the two articles I found about this, one by Chris Matthews (the one linked above) and the other by Robert Samuelson, both go to great lengths to not give Dems credit for being better on the economy. Samuelson is particularly brilliant —

If Republican presidents were saddled with most recessions, their growth and job creation records would naturally be worse. And that’s what the Blinder-Watson study shows. Since the late 1940s, the economy has spent about 12 years in recession. But 10 of those 12 years occurred under Republican presidents; only two occurred under Democrats. On average, the economy spent slightly more than a year in recession for each Republican term and only three months for each Democratic term.

If only Republicans hadn’t been saddled with those damn recessions!

To be fair, Samuelson explains that Dems focus on job growth while Republicans focus on reducing inflation. But inflation hasn’t been a problem since the 1980s. What’s their excuse since?

Economic policies pleasurable in the present can be disastrous for the future — for example, the inflationary policies of the 1960s. Similarly, the policies that fed the economic booms of the 1990s and the early 2000s spawned overconfidence that fostered the financial crisis.

The financial crisis was caused by the Clinton boom, in other words. It’s always the Dems’ fault.

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Stock Buybacks Are Strangling America

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economy

Stuff worth pondering in an article by Nick Hanauer, “Stock Buybacks Are Killing the American Economy.”

As economic power has shifted from workers to owners over the past 40 years, corporate profit’s take of the U.S. economy has doubled—from an average of 6 percent of GDP during America’s post-war economic heyday to more than 12 percent today. Yet despite this extra $1 trillion a year in corporate profits, job growth remains anemic, wages are flat, and our nation can no longer seem to afford even its most basic needs. A $3.6 trillion budget shortfall has left many roads, bridges, dams, and other public infrastructure in disrepair. Federal spending on economically crucial research and development has plummeted 40%, from 1.25 percent of GDP in 1977 to only 0.75 percent today. Adjusted for inflation, public university tuition—once mostly covered by the states—has more than doubled over the past 30 years, burying recent graduates under $1.2 trillion in student debt. Many public schools and our police and fire departments are dangerously underfunded.

Where did all this money go?

The answer is as simple as it is surprising: Much of it went to stock buybacks—more than $6.9 trillion of them since 2004, according to data compiled by Mustafa Erdem Sakinç of The Academic-Industry Research Network. Over the past decade, the companies that make up the S&P 500 have spent an astounding 54 percent of profits on stock buybacks. Last year alone, U.S. corporations spent about $700 billion, or roughly 4 percent of GDP, to prop up their share prices by repurchasing their own stock.

The more I learn about stuff going on, the more I think we should give up trying to live in the 1 percent’s world and just go build ourselves cottages on the prairie somewhere. We takers, we undeserving poor, should be the ones who “go Galt.”

In the past, this money flowed through the broader economy in the form of higher wages or increased investments in plants and equipment. But today, these buybacks drain trillions of dollars of windfall profits out of the real economy and into a paper-asset bubble, inflating share prices while producing nothing of tangible value.

As with many other things, the rules that used to discourage this practice were changed during the Reagan Administration, and the finance guys get more and more brazen about it all the time.

But … but … but … Free Markets (Blessed Be They)! Most of the commenters seem to think Hanauer is some airhead socialist who doesn’t understand how real he-men run an economy.

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A New Irish Uprising

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economy, Europe

I’m always heartened when I hear about Celts acting up. So I read “The Irish Rebellion Over Water” by Fintan O’Toole with some interest. Background: the Irish economy crashed because a handful of greedy bankers had been playing Ireland like a slot machine, and they lost. And the Irish have been paying for the bankers’ sins with a gawdawful austerity program that conservatives have praised as the model all nations must follow.

According to conservatives, the Irish Recovery is the wonder of Europe. According to Fintan O’Toole — and Paul Krugman — it’s a fraud. O’Toole writes,

There is a deep sense of injustice at being turned into one of the most indebted nations on earth in order to rescue international bondholders who gambled on rogue Irish banks. There is the way the pain has been inflicted most deeply on the poorest people — the last four government budgets have been regressive, hitting those on the lowest incomes hardest. There is the bitterness of yet again having to export the country’s greatest asset: its talented, highly educated young people.

Above all, there’s the gap between the Irish story and the Irish experience. The story is upbeat — austerity works. The experience is rather different. The impressive G.D.P. figures are at least partly unreal, boosted by the accounting practices of Irish-based multinationals.

Unemployment remains very high, and the figures would be much worse if people were not emigrating. Household debt in Ireland is still the second highest in Europe relative to disposable incomes, which have not improved.

 O’Toole wrote earlier this year:

But Ireland has two economies: a global one dominated by American high-tech companies, and a domestic one in which most Irish workers have to make their living. The first is indeed booming. Not least because of those low corporate taxes, large global corporations find Dublin convivial for reasons other than its pubs and night life. …

… But home is where the heartache is: in the domestic economy outside the gated community of high-tech multinationals. Outside Dublin, property prices are still falling. Wages for most workers have dropped sharply. Unemployment remains very high at 12.8 percent — and that figure would be higher if not for emigration. There’s always been a simple way to measure how well Ireland is doing: Go to the ports and airports after the Christmas vacation and count the young people waving goodbye to their parents as they head off to the United States, Canada, Australia or Britain, where they have gone to find work and opportunity.

In wingnut lore, Ireland is the Official Proof That Keynes Was Wrong.  Spending cuts, not government intervention and investment, would get the economy growing again, and they’ve got numbers to prove it. They’ve always got numbers to prove whatever they want to believe; righties are brilliant in that regard. But these numbers are statistical illusions. Yes, Ireland has seen an increase in exports, but Krugman explains that “most — most!– of the export rise has come from pharma, which is very intensive in foreign-owned capital, and does very little for Irish incomes and employment.” And, as O’Toole says, the drop in unemployment is mostly because of emigration — educated young people especially are leaving Ireland in droves.

The Irish have thus far been fairly accepting of their government’s policies. But now they are rebelling over water. O’Toole:

In a recent Irish Times poll, 33 percent of people said they would refuse to pay the charges for domestic water when they become due in the spring (and less than half of those polled said they intended to pay). This is in spite of the government’s having already made huge concessions in the face of an earlier wave of protests by reducing the average effective charge to just 160 euros (about $200) a year per household, making Irish domestic water the cheapest in Europe. Compared with many of the other tax increases endured over six years, this seems too small a measure to have such large consequences.

But, O’Toole says, for the Irish this was a deprivation too far. Water? In western Ireland it typically rains 225 days of the year. Water falls from the sky in Ireland, copiously. And having lived with center-right governments for many years, polls show the electorate is turning Left.  Éireann go Brách.

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When Stupid Is an End In Itself

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economy, Obama Administration, Wingnuts Being Wingnuts

Of all the many signs the U.S. is no longer a great nation — big, still wealthy, powerful, conspicuous, yes, but not great — the fact that we can no longer organize ourselves to so much as fix the flippin’ bridges, never mind build new ones, stands out. Much of the nation’s greatness, and weatlh, came from doing big, splashy things — the transcontinental railroad; the Panama Canal, the Hoover Dam, the moon landing.  Some of these things were done primarily by government, and some by public and private partnership. For example, while the transcontinental railroad was built by private companies, those companies depended on government land grants and loans, and the route itself was laid out by government surveyors. If Washington hadn’t pushed it, it never would have been done.

Paul Krugman writes that infrastructure investment is precisely what the country needs, economically and otherwise. It would both boost the economy by getting more dollars into peoples’ pockets and, y’know, fix the bridges before they fall down. But because of current prevailing political ideology, no, we can’t.

And it’s all about ideology, an overwhelming hostility to government spending of any kind. This hostility began as an attack on social programs, especially those that aid the poor, but over time it has broadened into opposition to any kind of spending, no matter how necessary and no matter what the state of the economy.

We’ve reach point at which stupid is an end in itself.

You can get a sense of this ideology at work in some of the documents produced by House Republicans under the leadership of Paul Ryan, the chairman of the Budget Committee. For example, a 2011 manifesto titled “Spend Less, Owe Less, Grow the Economy” called for sharp spending cuts even in the face of high unemployment, and dismissed as “Keynesian” the notion that “decreasing government outlays for infrastructure lessens government investment.” (I thought that was just arithmetic, but what do I know?)

Here’s a crucial point —

Never mind that the economic models underlying such assertions have failed dramatically in practice, that the people who say such things have been predicting runaway inflation and soaring interest rates year after year and keep being wrong; these aren’t the kind of people who reconsider their views in the light of evidence. Never mind the obvious point that the private sector doesn’t and won’t supply most kinds of infrastructure, from local roads to sewer systems; such distinctions have been lost amid the chants of private sector good, government bad.

If you look closely at most of the prominent Republicans in Washington, one of the striking things about them is that their bios often reveal them to be the creatures they claim to hate — lifelong political / government apparatchiks.  Although they pride themselves on being friends to business, most of them have worked most of their lives in government and politics. I’m sure there must be some exceptions, but most have never actually run a company or so much as managed an assembly line. Paul Ryan is a good example; according to bios I have read, his only non-political private sector employment was a summer job for Oscar Meyer, during which he got to drive the weinermobile.

I can never tell how much they believe their own crap, but basically we’re dealing with people who are long on ideological theory and short on experience. Unfortunately, you can say the same thing for most of our Captains of Industry, most of whom have no idea how the products they are selling actually get made.

It’s like a perfect storm of derp. The people in charge of things, public and private, have no idea how stuff gets done and no idea what stuff needs to get done. And the country is at their capricious and greedy mercy.

And it hardly matters that the states that have put the “Spend Less, Owe Less, Grow the Economy” mantra into practice have had disastrous results. See, for example, “The Great Kansas Tea Party Disaster” by Mark Binelli:

“That word, “experiment,” has come to haunt Brownback as the data rolls in. The governor promised his “pro-growth tax policy” would act “like a shot of adrenaline in the heart of the Kansas economy,” but, instead, state revenues plummeted by nearly $700 million in a single fiscal year, both Moody’s and Standard & Poor’s downgraded the state’s credit rating, and job growth sagged behind all four of Kansas’ neighbors. Brownback wound up nixing a planned sales-tax cut to make up for some of the shortfall, but not before he’d enacted what his opponents call the largest cuts in education spending in the history of Kansas.

“Brownback hardly stands alone among the class of Republican governors who managed to get themselves elected four years ago as part of the anti-Obama Tea Party wave by peddling musty supply-side fallacies. In Ohio, Gov. John Kasich – whose press releases claim he’s wrought an “Ohio Miracle” – has presided over a shrinking economy, this past July being the 21st consecutive month in which the state’s job growth has lagged behind the national average. In Wisconsin, Gov. Scott Walker, whose union-busting inadvertently helped kick off the Occupy movement, cut taxes by roughly $2 billion – yet his promise to create 250,000 new private-sector jobs during his first term has fallen about 150,000 jobs short, and forecasters expect the state to face a $1.8 billion budgetary shortfall by mid-2017. A recent analysis by the Detroit Free Press, meanwhile, laid out how the tax policies of Gov. Rick Snyder, a wealthy entrepreneur who campaigned in Michigan as a nerdy technocrat, have resulted in businesses paying less ($1.7 billion less per year, to be exact), individuals paying more ($900 million per year) and – here’s the kicker – job growth slowing every year since Snyder’s cuts have been enacted.”

It will not matter that teabag economics crash and burn in the real world, because stupid has become an end in itself. Not taxing and not spending is an end in itself; that it sinks budgets and costs jobs does not matter.

And when the bridges begin to buckle, some Reince Priebus clone will trot out and say those bridges were built by Democrats and the fact that they finally collapsed after decades of neglect proves government doesn’t work.

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