Fantasy Economics

Michael Lind’s “Can liberalism save capitalism from conservatism?” is a must read. It’s so spot on it made me want to give Lind a standing ovation as I read it.

And it also sorta kinda goes with the last post, which points out that guys like Rand Paul, who thump their chests and declare they are going to take an axe to the federal budget, often have no clue what government does. In addition, in Paul’s case, he has no personal experience working within a large organization to provide a product or service, yet he deems himself qualified to go to Washington and decide which civil service jobs are necessary and which are not.

Lind’s point is that movement conservatives and libertarians fancy themselves to be friends of business and tough-minded economists just because they are conservatives and libertarians. It’s like the rightie bloggers who believe they must have an inherent understanding of war and the military just because they are conservative and not liberals, who of course are born with their “understanding war” gene missing.

But in fact, right-wing ideas about business and the economy combine anachronistic models from the 19th century with crackpot ideology. They have no clue, in other words, what the economy and business really need to grow and thrive in the 21st century.

But our national mythology informs everyone that conservatives are pro-business and liberals are anti-business, and this myth runs so deeply that business owners reflexively believe conservatives are their friends even when conservative policies are choking their businesses to death. “It is as though a shopkeeper shaken down by a gangster were persuaded by the gangster’s argument: ‘We private sector businessmen must stick together against those meddling cops,'” Lind writes.

And Lind brings out one of my own long-time arguments, which is that the corporatists’ favored policies of driving down wages to save cost also drives down demand for their products because the wage-starved consumer cannot afford them.

Every business may want to pay workers the lowest possible wages. But workers are also consumers. What is more, the non-rich spend more of their income than the rich (in Keynesian terms, they have a higher “propensity to consume.”) This means that driving down the wages of workers, however it may benefit particular employers in particular industries in the short term, ultimately starves the economy of demand in the long run.

The economies most likely to sustain themselves and survive as democracies into the 22nd century are those with strong unions and a commitment to providing a strong safety net, including national taxpayer-funded health care, unemployment benefits, education benefits that are not loans, etc. In other words, the United States is unlikely to make that cut.

The road the U.S. is on now will either lead to utter chaos or a fascist-style takeover by corporatists and the mega-wealthy. And, ironically, this is being made possible by people marching around pretending to be liberty-loving patriots who want to save the constitution.

21 thoughts on “Fantasy Economics

  1. You are so right on target that it hurts. It’s so painful to see that many of this country’s leaders can’t see past their own beliefs to the reality of consequences and the future of this nation.

  2. Good post.

    I’m reminded so very often that Henry Ford realized that if he paid his workers more money, they in turn would be able to buy the cars they made and he made more money.

    As to demand: I would like to buy a new reclining chair, an office chair for my desk area, a TV, a microwave, a mattress, a refrigerator, curtains and miscellaneous other items for the house. Many of these things are 20 or more years old and barely working. But as long as I’m unemployed, I can’t do that. Not to mention that clothes get old, worn and need replacing too. Again, things I can not now buy. The US prosperity of the 1950s came from the huge numbers of working people who could buy things. Without those huge numbers of people buying things, the economy doesn’t run very well.

    • As to demand, I have a wobbly toaster oven with three legs (but it works) and the digital display on my microwave has been screwed up since the big power outage in 2003 (but the microwave still works), and I don’t even want to talk about my 1997 Nissan (which still runs, knock on wood). I want to replace the battered coffee table in the living room. And my bathroom and kitchen need some tile work, and I’d dearly love to replace the overhead light fixture in my bedroom with one with a ceiling fan.

      Not gonna happen unless I win the lottery, I fear.

      Update — Hey, I realized I haven’t talked about the technology stuff I’d love to have, like an iPhone and a Fitness Wii and a bigger TV and a real sound system and a Kindle (although I see the price is reduced) and an SLR digital camera. Those things are so beyond acquiring I’ve pushed them off the wish list.

  3. As far as fantasies go I find that the closer to a possible reality you construct your fantasy the more intense it’s going to be. That’s why I abandoned my rock star fantasy where women are tossing their panties and hotel keys at me*. Now I find contentment( partially due to age) with patriotic themed fantasies. Being a defender of the Constitution and a guardian of liberty is a very satisfying fantasy for me in my golden years. Aside from that, I have a veritable storehouse of patriotic sayings committed to memory which helps facilitate a good patriotic fantasy…” give ’em Watts, boys”

    * My me as Tom Jones fantasy…What’s new pussycat?

  4. I have a horribly bad ankle, cuased by flat feet – and a bad brain that insisted on playing sports when I was younger, desite doctors warnings – and as a result, a bad and arthritic back and hips. My teeth hurt, one of my front ones is soon to come out, and another of my bridges is in about the same state as the one in Minnesota a few years ago.
    So, all I want is a decent, not even high-paying, job with medical and dental benefits. Then I can get to worrying about some other stuff, which I can use.

    As far as the afticle, at some point, you’d think that all of these Galtian business geniouses might realize that they really do need us. It’s tough to get rich and stay rich when no one can afford to buy any of your shit, you stupid rich assholes. Unfortunately, none of today’s business leaders has the foresight of Henry Ford, they’re more like the Ford Edsel. Oh, but we needn’t worry about them at all. It is now, after all, a global economy, and they don’t need the American consumer as much as before.

  5. The road the U.S. is on now will either lead to utter chaos or a fascist-style takeover by corporatists and the mega-wealthy.

    We still can create a detour. Keep faith that committed idealists sometimes are successful, and continue to tilt at those windmills.

  6. Just to illustrate the economic indifference in the workplace.

    My wife works for one of the major banks in a bottom rung capacity. The stress levels on her job have been raised on employees to a pitch near comparable to those of a work detail at Dachau. They are constantly raising goals for sales(now called solutions), they have eliminated all overtime so that the employees work load is compressed to achieve more work in less time, they have taken back holidays and reduced the employer contribution for health insurance. On top of that, the Patriot Act has created a policy were any deviation from the rules whether it’s an honest oversight or not will result in immediate termination.

    Recently a women who worked with my wife and was long term employee with an exemplary record of performance, dedication and service was terminated because she didn’t notice the expiration date on a drivers license when she accepted it for identification purposes( check cashing only). An honest mistake.. My point is to show what an absolute pressure cooker these employees are put into by an environment of zero tolerance for error, and being over worked and under paid.

    With that in mind consider a recent event where the regional bank management decided to reward the troops at the bottom echelons for a job well done with a personal caricatured bobble head of themselves( the managers). I don’t know what bobble heads are going for these days but to have someone design and manufacture hundreds of personalized bobble heads has to cost at least over $10,000. Why not a $10.00 or even a $5.00 gift certificate for the local supermarket? It’s kind of cute in a sick sort of way except you can eat a bobble head or pay your mortgage with a bobble head. It just shows that there is a disconnect with reality somewhere in the work place.

  7. You got it maha – Robert Reich has been pointing out your point for years. Since it’s so common-sensical, why don’t the supra-wealthy get it, get what Ford (thanks Purple Girl) got 100 years ago.

    Wasn’t it Scarlet O’Hara who said, “I’ll think about that tomorrow.” There are about 180 million Scarlets out here – rich, poor, and everyone in between. The middle-income and poor among us maxing out credit cards, buying houses they can’t afford to pay for…go bankrupt. The employer who doesn’t pay his workers enough to buy the products the employer’s making will also go bankrupt – it’ll just take him longer.

  8. What Lind says is true, BUT whatever operating ideology comes out on top must take into account the fact that – until the oil runs out – labor is global, and (to my knowledge) no one has yet found a way to significantly halt the race to the bottom, that this implies.

    The road the U.S. is on now will either lead to utter chaos or a fascist-style takeover by corporatists and the mega-wealthy.

    It’s already happened. We’re very clearly on the latter path, with a dash of the former. The class war is over. The rich won. Look at the “choices” we have in elections, and look at the outcomes that occur even when the “good guys” get in. As the wingnuts like to taunt, “how’s that hopey changey thing going for ya?”

    The flip side of labor being global is that anyone can launch an internet based business, and reach a global market – something that was difficult if not impossible only a couple decades ago. The dominant theme of technology in the last few decades is to empower individuals, to make them global players (for good and for bad), and this usually comes at the expense of groups that formerly contained them, such as nation-states or labor unions.

    It’s important to understand the ways technology is reconfiguring the possibilities for a society (and for individuals), and to either get on the right side of this trajectory, or to find a way that it won’t kill you.

    I see this technological empowerment plus the enormous debt overhang (in other words the Great Recession) combining to create a kind of neo-feudalism, particularly in the USA, which has always emphasized the rights of the individual – including corporate individuals – over the rights of the group.

    The economies most likely to sustain themselves and survive as democracies into the 22nd century are those with strong unions and a commitment to providing a strong safety net, including national taxpayer-funded health care, unemployment benefits, education benefits that are not loans, etc. In other words, the United States is unlikely to make that cut.

    The people in power in the US have no real use for democracy. We have a “managed democracy” or at times a “ceremonial democracy”. But it better not get in the way of making the rich richer. The plutocracy won.

  9. Swami,
    They decided to ‘reward the troops at the bottom echelons for a job well done with a personal caricatured bobble head of themselves (the managers)?’
    How vain.
    How stupid! I’m from NY. If they gave me one of those instead of cash, I’d want to see how much it would cost them to replace the gas tank after I put the head of the bobble-head doll down there, and how much to replace the rear window after I did my best Nolan Ryan impression hurling it through there (the front window is frequently covered for cracks by car insurance, so I’d shatter the rear one instead).
    “No! No cash for the peasants! Give them a small statue as a remembrance of MY greatness!!!”
    Actually, on further thought, I’d probably want to make them use their medical coverage to the fullest by having to go to a Procologist. Of course, I’d risk that some of them might actually enjoy it before it had to be taken out via an expensive operation.

  10. Michael Lind hit it. Perfect 10. I have the picture of a pie that keeps getting smalller while the major players console themselves they are all getting bigger slices – but they won’t admit they are getting LESS pie – even with a bigger slice because the pie is smaller. And the crowd of folks who gets none – gets bigger and bigger.

    I’m waiting for Obama to say –

    ‘If you are a single mom or single dad who relies on food stamps – you need to register to vote. If you value the treasure of our national parks – you need to register to vote. If you think the environment is important and worth preserving – you need to register to vote. If you will need assistance to see your kids go to college – you need to register to vote. If you are unemployed through no fault of your own and you want your unemployment assistance – register to vote. If you are a worker who thinks workplace safety is important – you need to register to vote.

    The department of education is at risk – the EPA is at risk – OSHA is at risk – College tuition assistance is at risk. The National Parks are at risk. Because different factions of the ‘small government’ crowd favor cutting back or eliminating these and other programs that you need, deserve and expect. And there’s a reason they are pushing so hard for small government – so their friends in the top 2% won’t have to pay their fair share of taxes. We can make government more efficient – but changes need to be made with a scalpel – not a chainsaw – and we must NOT amputate the most needy members of America from aid to preserve the wealth of the few.”

  11. gulag ….I quess the purpose was to build esprit de corps with a little self effacing humor..Like we’re one big happy family..all the while they are squeezing the employees like a bunch of grapes to extract every ounce of labor out of there beings. But that’s the way corporate America is. We’ve got 30 million people out of work and production is up and profits are up while the American worker is losing ground. The only way to interpret that fact is to know that corporate America is wringing that tit for all it is worth.

  12. FWIW, is there some inherent contradiction in declaring a corporation (which can be owned) to be a person in a country where it is illegal to own another person?

    Or is the corporate ownership of legislators considered to have set a precedent that permits ownership of “persons”?

  13. When it comes to money I got three things I consider:

    1- Never been in Wal-Mart, never will, spend less, live worse.

    2- I only buy union made cars (GM, Ford, Chrysler)

    3- I vote every two tears, I always vote liberal and pro-union.

    I hope you folks see some day, that the republicants are out to kill. In days like these it is easy to get down. It will take liberal folk like us to make a difference. I believe in good, and good will always lean liberal. If only we could get rid of Ed Shultz (what a fucking moron).

  14. “We’ve got 30 million people out of work and production is up and profits are up while the American worker is losing ground. The only way to interpret that fact is to know that corporate America is wringing that tit for all it is worth”

    Correction Swami, I believe the accurate pronunciation would be: sucking that Tit! Lets not lose track. Any word on the missile launch?

  15. Missile launch? I live on this coast, listen to local news (sometimes) and as far as I know no one has called in who saw the ‘trail.’ And, most of us are big sunset watchers – especially dramatic when a thick layer of LA smog sits on the horizon, which it did that night. Anybody check the ‘camera’ that recorded it???

  16. I assume I am EPU’d but… I was viewing the many insightful comments on this and some of the subsequent posts. I decided not to show my relative ignorance or risk being repetitive. Michael Lind’s article is succinct and bold. So, it is refreshing and clear. Maybe I am falling victim to confirmation bias, but I found his observations to be practical and well thought out.

    I called it to mind this morning while walking my beautiful Blue Tick Hound, Marley. This line stood out. “The Libertarians believe they can privatize everything without chaos and the Communists believe they can socialize everything without tyranny.” I recalled commenting previously on a similar observation that Communism and Libertarianism represnted extremes where blended systems e.g. Sweden, represented a practical middle ground. But, I question whether the Libertarians can privatize everything without tyranny, despite their rhetoric, so richly seasoned with buzzwords like “freedom” and “liberty”. First note that these concepts are largely applied to both individuals and corporations in regard to their unrestricted exercise of power, particularly economic power. Excessive economic power and heroic materialism are virtues which clearly evidence the ability and the right to rule those who are poor and powerless. The Robber Barons, the Ken Lay’s and the Koch brothers are all exemplars of self-evident goodness,. The Ghandi’s, Mother Theresa’s, Madam Curie’s and the Buddha’s? Not so much. St. Francis would not fare so well either.

    But, as a practical matter, look at the eruption of eliminationist rhetoric coming from the Right these days,. Look at the teabaggers carrying assault rifles and claiming it was part of public discourse. Look at the “second amendment solutions” and the “if ballots can’t, bullets can” thuggery. Look at the attempts to make progressive ideas into thought crimes and assure me that they are more prone to chaos than tyranny.

    AAAHHH! I feel better now.

    Swami, I kind of like “wringing” that tit, speaking as one who has done a great deal of milking by hand. It captures the inherent violence of extracting labor, whereas “sucking” can be rather friendly. No offense intended Uncledad.

  17. Could someone please explain the last para of the Lind article?

    If capitalism ever comes to an end in the U.S., it will not be extinguished by the center-left, or for that matter by the radical left. It will be suffocated by demagogic tribunes of the people who will preserve the incomes and economic security of the majority by forms of economic regimentation that, unlike liberal policies, are not compatible with a market economy and a high degree of freedom for private enterprise, and which might well kill off long-term economic growth. Should that day ever come, American business will learn too late that the real choice all along was not between Ronald Reagan and Franklin Roosevelt, but between Franklin Roosevelt and Huey Long.

    • Could someone please explain the last para of the Lind article?

      The last paragraph of the Lind article is very well explained in the preceding paragraphs of the Lind article. If there is any one particular sentence or phrase you don’t understand, I’ll try to help you out with it.

  18. Thanks. I figured it out. That long, convoluted sentence in the middle (It will be …) was giving me fits:
    policies that “will preserve the incomes & economic security of the majority” will “kill off long-term economic growth”. That’s poorly worded, IMHO.

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