Archive for December, 2009
Wednesday, December 16th, 2009
The Supply-Side Bailout
Reader Julian Dawson (love that name!) asks:
We know that the US Fed and Treasury pledged approximately 23.7 trillion dollars to save the FIRE sector of the US economy. How much of that was actually transferred to FIRE sector corporations in the last two years?
I’m working on posting a more substantial answer to that excellent question. A post from Paul Krugman today, however, included a graph that speaks volumes about the nature of the Bush/Obama Great Giveaway.
Now, this “bailout” has been premised on the core gospel of capitalism, which is the claim that economic crisis can only be caused by an under-supply of capital, and therefore the answer to each and every crisis is to provide more money to those who are already rich, on the theory that they are the “entrepreneurs” who would always make the investments society needs, if only they could lay hands on enough cash.
This claim, of course, is heart of the doctrine known as “supply-side economics.” It might also be known as late-imperial overclass dogma #1. It might also be known as the latest embodiment of what Adam Smith — yes, THAT Adam Smith — saw as “the vile maxim of the masters of mankind — all for ourselves and nothing for other people.”
Supply-side economics is the inverse of Keynesian, demand-side economics and the Baran/Sweezy emphasis on corporate capitalism’s tendency to over-accumulate, not under-accumulate, capital. In this school of thought, the key problem is that, in the age of corporate capitalism, “entrepreneurs” tend to have too much, not too little, money on their hands. Because they over-exploit the masses, they wind up somewhat too rich and find themselves having increasing trouble locating new investment opportunities, which always require a population of prospective new buyers. So, instead of investing in new jobs and production, they start stashing increasing amounts of investable capital in Wall Street gambits, or simply sit on it.
Now, one way to test whether a real world economic crisis stemmed from supply-side or demand side problems would be to give away a mega-shitload of money to “entrepreneurs,” and watch to see what happens to the new money. If their problem were supply-side, the entrepreneurs would be just itching to lay hands on the new capital and, once they did so, they would instantly start making huge new investments, thereby creating an economic boom. Conversely, if the main problem were on the demand-side, giving a new mega-shitload of money to the already-rich would lead them to hoard the new money, since they would have nowhere to invest it, thanks to the lack of popular purchasing power out in the wider economy.
Suffice to say, this strikes me as a test that’s about as easy to read as anything could possibly be. As Business Week reported in its November 5, 2009 issue, “[a]n oversupply of money is what pushed commercial real estate over the edge.” It’s also what pushed the whole economy over the edge.
To wit, Krugman’s graph, which shows what’s happened to the banks’ share of TARP and TANF:
This trillion dollars in hoarded capital is going absolutely nowhere but in circles, since nobody can think of ways to make a profit investing it in new production. The masses are maxed out and under water, so the entrepreneurs keep their cash parked. Getting small interest payments from the Fed — as part of, you guessed it, a Great Giveaway program known as the Emergency Economic Stabilization Act of 2008 — looks far better to our “entrepreneurial” class than just about anything they can find in the real economy.
Tuesday, December 15th, 2009
“Green Car” Facts
Two items of news from the ongoing overclass effort to perpetuate cars-first transportation:
Plug-In Hybrid Vehicle Costs Likely to Remain High, Benefits Modest for Decades
Ethanol-powered vehicles generate more ozone than gas-powered ones
Tuesday, December 15th, 2009
Wolff/Resnick v. Baran/Sweezy
Reader Justin asked about the work of Richard Wolff and Stephen Resnick, who make some arguments that “run directly counter to the arguments about monopoly that you have advanced in your book. So my question is, what do you make of Resnick and Wolff’s thesis?”
As Justin notes, Wolff and Resnick argue that:
Monopoly power, when achieved, does not necessarily contribute to an expanding economy, nor to a stagnating one. Our value examples show the many ways that monopolies can and do contribute to a variety of different economic conditions: more competition and less competition; more and less technical innovation; inflationary spirals; depressed real wages and consumption spending; unevenly developing depart¬ments; simultaneously falling real wage and rising subsumed class incomes; and so on.
By way of background, Wolff and Resnick are living economics professors. Baran and Sweezy are deceased economists and authors of Monopoly Capital: An Essay on the American Economic and Social Order, which I judge to have been the single most powerful (though extremely outdated in a few spots) work of social science in the 20th century.
Before saying a few things about this comparison, I would mention that Richard Wolff is close to Monthly Review, the magazine founded by Paul M. Sweezy in 1949, so the conflict here isn’t huge.
Nonetheless, Wolff and Resnick do claim to be correcting and improving upon Monopoly Capital.
I don’t buy it.
First of all, Wolff and Resnick begin by making a false distinction. “Monopoly power, when achieved, does not necessarily contribute to an expanding economy, nor to a stagnating one,” they write, implying that Baran and Sweezy thought that monopoly power does have automatic and necessary results. That, of course, is untrue. Baran and Sweezy repeatedly argue in Monopoly Capital that monopoly capitalism tends toward economic stagnation. But they also explain in detail how various things like military spending, the expansion of “the sales effort” (i.e., marketing), and new, epoch-making inventions can and do arise and lead to boom periods. In other words, Baran and Sweezy don’t disagree with Wolff and Resnick’s observation that monopoly power can lead to a variety of contingent outcomes.
None of that, of course, means that the tendency toward economic stagnation isn’t real. It’s quite real, as we know all too well at the present moment. It just isn’t automatic. So, Wolff and Resnick’s first premise is an error, and that’s usually a rather poor way to start a supposedly new and important social science analysis.
To my eye, Wolff and Resnick also do something that Baran and Sweezy rejected: Wolff and Resnick think that “Marxian value theory,” if perfected, could explain how the whole world works via a series of mathematical “economic” equations.
Baran and Sweezy held no such illusions. They saw what Marx said about the theory of economic value as an important and realistic way of tracking relationships between workers and business owners. But they took what Marx said about value as neither a means of calculating the whole of reality nor even the last word on the topic of economic categories. In fact, one of their prime arguments was that the triumph of corporate capitalism rendered much of what Marx had done with value formulas (most of which lies in the unfinished second and third volumes of Das Kapital) outdated. Wolff and Resnick, in contrast, seem to take “what Marx said” about value theory as somehow the innermost core of Marxism.
What is and isn’t essential to Marxism is, of course, a topic we could study for months. Suffice it for now to say that I find Baran and Sweezy’s emphasis on power and history and institutional structures rather than Marx’s cryptic (and unpublished-by-Marx) value formulas to be not only far more effective as a framework for understanding how the world works, but also far closer than Wolff and Resnick’s jumbled neo-orthodoxy to the essential core of Marx’s way of thinking.
And certainly neither Wolff nor Resnick, nor the both of them together, have ever produced a piece of work that comes within a country mile of matching the realism and revelatory power of Monopoly Capital.
By the way, if you’re interested, I think Chapter 8 of this book provides the single best explanation of what’s central and what’s peripheral in the work of Karl Marx.
I also don’t think Baran and Sweezy are perfect, either. For one thing, I believe they adopted the concept of “monopoly capitalism” out of an irrational desire to boost Lenin, who used the term, as a social theorist. But Baran and Sweezy then have to turn around and devote pages of their book to explaining that “monopoly” (rule by one) isn’t really the norm of the corporate capitalist order. Oligopoly, rule by a few, is.
Personally, I much prefer the term “corporate capitalism” to “monopoly capitalism.” It’s more descriptive of the core of the problem, requires no special pleading, and is quickly understood by people who encounter it. And I also see no point in trying to keep V.I. Lenin at the core of what the left is trying to do. Fuck that guy, in fact. He probably wasn’t as bad as Stalin, but neither was he anything like a democrat. He also loved and imposed Taylorism.
If we’ve learned anything from the failure of Socialism 1.0, it is that democracy is neither a toy nor a mere bourgeois trick. In fact, its extension and improvement is the whole idea of Socialism 2.0. If we are to have any chance at using that to save our sacred, sorry asses from onrushing capitalist eco-tastrophe, we can’t afford any more “vanguard” jive and Stalinist dead-ends. As Gandhi and MLK showed, the means are not separable from the ends.
Monday, December 14th, 2009
A TCT Non-News Update
And on Monday night, Democratic senators emerged from a tense 90-minute closed-door session and suggested that they were on the verge of bowing to Mr. Lieberman’s main demands: that they scrap a plan to let people buy into Medicare beginning at age 55, and scotch even a fallback version of a new government-run health insurance plan, or public option.
ROFLMAO x a million. Bye, bye, liberalism.
Monday, December 14th, 2009
Forbidden Fruit: Domestic Reconstruction
In their 1966 classic, Monopoly Capital: An Essay on the American Economic and Social Order, economists Paul A. Baran and Paul M. Sweezy explained how corporate capitalism restrains public spending even as it grows increasingly dependent on it. The problem, Baran and Sweezy noted, is that, from the perspective of the investing class, only certain forms of government spending are tolerable. The sorting mechanism, argued Baran and Sweezy, is “the stability and cohesiveness of the country’s class structure.” And, thanks to their very usefulness and economy:
[M]ost governmental activities designed to satisfy collective needs involve either competition with private interests or injury to the class position and privileges of the oligarchy, and…for these reasons opoosition is quickly aroused and rapidly reinforced.
Whenever a possible avenue for public spending threatens established investor interests, Baran and Sweezy predicted that “roadblocks” would “be encountered long before socially rational and desirable goals have been attained.”
What kinds of spending, meanwhile, could make it past the roadblocks and become actual, relatively unchecked government projects? The answer, according to Baran and Sweezy, is spending that “neither creates nor involves competition with private enterprise,” either economically (in terms of sales) or ideologically (by undermining the system’s core dogmas).
One of the prime forms of public spending that does pass the corporate capitalist roadblock, Baran and Sweezy observed, is military spending. On the economic/sales side:
There are no private military establishments with a vested interest in keeping the government out of their preserves; and the military plays the role of an ideal customer for private business, spending billions of dollars annually on terms that are most favorable to the sellers. Since a large part of the required capital has no alternative use, its cost is commonly included in the price of the end product.
Meanwhile, on the ideological side, business interests don’t at all dislike military spending’s ideological impetus:
[M]ilitarization fosters all the reactionary and irrational forces in society, and inhibits or kills everything progressive and humane. Blind respect is engendered for authority; attitudes of docility and conformity are taught and enforced; dissent is treated as unpatriotic or even treasonable. In such an atmosphere, the oligarchy feels that its moral authority and material position are secure.
So, why do I mention this classic, largely (and extremely foolishly) forgotten social-science prediction? The answer is this recent blog comment by Stephen M. Walt (yes, THAT Stephen M. Walt), who writes:
I was struck by Louis Uchitelle’s article in the Sunday NY Times on the dearth of big public works projects here in the United States. “For the first time in memory, the nation has no outsize public works project under way,” he says, and then reports that:
Some economists argue that the continual construction of new megaprojects adds a quarter of a percentage point or more, on average, to the gross domestic product over the long term. Again, cause and effect aren’t clear, but the strongest periods of economic growth in America have generally coincided with big outlays for new public works and the transformations they bring once completed.”
One might add that we aren’t spending enough to maintain our existing public infrastructure, and state and local governments across the country are facing deep budget deficits (and in some cases, a very real risk of bankruptcy).
But it’s not as though the United States hasn’t started some big public works projects over the past decade or so; it just hasn’t been doing them here at home. We’ve spent billions constructing military bases in Iraq and Afghanistan, for example, and another billion or more on a giant embassy in Baghdad and another one in Pakistan. Needless to say, those “public works” projects are a drain on the U.S. economy rather than a source of additional productivity.
As I’ve said before, Americans have come to believe that spending government revenues on U.S. citizens here at home is usually a bad thing and should be viewed with suspicion, but spending billions on vast social engineering projects overseas is the hallmark of patriotism and should never be questioned. This position makes no sense, but it is hard to think of a prominent U.S. leader who is making an explicit case for doing somewhat less abroad so that we can afford to build a better future here at home.
It is indeed hard to think of a prominent leader who is making a case for screamingly obvious public works projects here at home. That’s because, promise of “change” notwithstanding, THERE ARE NONE.
For the exact reasons Baran and Sweezy named over 40 years ago, major, screamingly obvious public works projects are doubly forbidden here in “the land of the free.” Despite their huge economic and ecological benefits, things like building a genuinely modern railroad infrastructure and reconstructing our cities and towns to emphasize cycling and walking are both bad for private business sales and ideologically dangerous.
Modern, comfortable, reliable trains and walkable, sociable towns would not only kill the car business, but would require comparatively little upkeep, once finished.
Meanwhile, what might the public conclude if it had blatant evidence that 23.7 trillion dollars could do something rather more helpful than restoring Wall Street bonuses and refueling Detroit marketing machines?
Friday, December 11th, 2009
Death by Car
I am starting another blog devoted to the topic of the book I’m trying to finish. That topic is the homicidal perpetuation of cars-first transportation by our corporate overclass.
Take a look at the initial post, if you so desire.
Also, the questions and comments are great. I’m preparing some posts to address the topics you raised.
Thanks!
