Home > The Economy > Wallowing Along – On Purpose?

Wallowing Along – On Purpose?

from Peter Radford

I didn’t comment on last week’s miserable GDP report because (a) it was so mediocre, and (b) it was right in line with where I have been saying we would be. In other words there was no real news. We are adrift. Rudderless, leaderless, and out of ideas our elites – political, business, and academic – appear to have talked and argued themselves into a total full stop. The rest of us will have to make do while they indulge themselves in more of their futile and useless hand wringing.

The numbers speak for themselves.

GDP grew at a 1.5% pace last quarter. That’s around half what we would expect in a normal ‘good’ quarter, and nowhere near enough to make much dent in unemployment. Indeed at the current rate it is quite possible that unemployment will tick up slightly later in the year as businesses tighten up for a weak 2013. At this juncture the only reason that unemployment may dip as the year progresses is because more people drop out of the workforce. This is hardly a success. 

The core of our problem remains in personal consumption. It rose at that same 1.5% pace and provides inadequate reason for businesses to hire or invest in the near term. We have a massive and ongoing demand problem the solution to which is clear, but politically infeasible. We need to ramp up government spending and encourage a bout of inflation in the 3% – 4% range. Since we will get neither we are doomed to wallow some more.

I have a had a number of recent conversations during which it is more than clear that the value of stimulus is completely lost on people. On the contrary the alternative of greater austerity seems to ring true to the ears of most. So when we suggest that stimulus is politically infeasible what we are calling into question is the ability of our leadership to frame or shape the debate. The entire policy discussion, such as it is, appears to be taking place within a context that is skewed towards shrinkage and failure rather than expansion and recovery. The ability to end this depression is within our grasp, but a sufficiently strong core of people resist the ideas underlying the solution so that we never have the debate we need.

Couple to that political gridlock the ongoing debasement of true democracy in the US by inflows of money, and the consequent endemically corrupt political process, and we arrive at a state where a few groups can dictate the policy argument and twist it to their short term gain and away from consideration of the benefit of the populace at large. Our economic institutions have shifted from being largely inclusive and productive of broad scale benefit, to being more and more exclusive and productive for a restricted few. This shift has been a paradoxical consequence of the effort to open up the economy and to deregulate it. Paradoxical, that is, to the naive alone. Anyone else would have, as many of us did, protest that opening up our economic institutions exposed them to capture if, at the same time, our political institutions were co-opted by an energetic and well financed minority.

The reason that the Reagan/Clinton/Bush era has seen the steady erosion and eclipse of our middle class is simply attributable to this coincidence of political and economic enclosure. The modern enclosure movement echoes that of pre-industrial Britain. A segment of society sees benefit in the execution of new ideas and techniques and seeks to extract value from them. In order to do this they have to re-arrange society. They need to dispense with prior existing social contracts and establish new ones that give them leeway to effect the value creating change. They need to co-opt the political process in order to write the laws needed. They need to alter inhibiting social norms. They need to entrench themselves so as to extract what they can. And they need to divert the dispossessed into different and more malleable channels of subsistence.

In our case the new technology or set of ideas that undergirds the modern enclosure movement is that of economics. Particularly neoclassical economics. Whether we like it of not modern America is increasingly being re-shaped to conform with the notions of society that form the basis of that theory. Variants of it infest modern business management theory; they underpin the explosion in the share of our economy diverted into finance; they inform the media’s attitude towards policy; they form the basis of common discussion about the economy; and they provide an intellectual backdrop for the dominance of post-Reagan right wing political positions. There has been no effective reaction from the left over the past four decades because its elite too has been captured.

The attack on welfare and social programs makes most sense in the context of a latter day enclosure movement.

The incessant attack on the older social contract by the operatives of modern management and economic thinking has undermined voter’s loyalty to the very institutions that protected them. Government is reviled. It is seen as irredeemably inefficient, whether or not that is true. Unions are seen as obstacles riven through with rules that prevent progress rather than as bastions against exploitation. Rather than reform or improve these institutions we are presented with only one solution: get rid of, or marginalize, them. That way enclosure can proceed. The route to efficiency is presented only in the context of neoclassical dictums. Alternatives are taken off the table.

Our entire elite has become, effectively, part of the enclosure movement. Opponents linger in outposts but are not taken seriously. Indeed quite often they become caricatures of themselves advocating ever more stridently the very actions that brought them defeat. By so doing they ensure their marginal status. They become locked in what society at large – as led by the elite – views as the past. This is why no one takes Marxism seriously even though there remains great value in a Marxist critique of our problems. Likewise Keynesians have found it difficult if not impossible to get their policy solutions enacted. Memories of what efficacy such groups may have is expunged so that enclosure may take hold.

Thus it is that we are having an election in which it is taken as read that we need a ‘long term solution’ to our ‘entitlement problems’. Whether we have such problems is not being discussed. Austerity, which is manifestly a disaster in Britain and Europe, is seen as the only ‘serious’ policy action. That we can solve our debt problem – if it exists – through issuing more debt is greeted with incredulous and knowing smiles by our elite. As if their actions were innocent of harm.

So.

Yes. Our economy is wallowing. But it is a deliberate wallowing. It is the direct result of decades of effort. It is entirely predictable and consequential to the ongoing enclosure of our economy by people energized and validated by economic theories that treat human beings not as people but as machine like units substitutable and uniform and endowed with an Orwellian version of choice. That being a choice that always follows the thought processes of neoclassical economics. Such thought processes is an oxymoronic concept and wreaks of hypocritical irony when articulated by an academic safely entrenched behind the barriers of tenure. Indeed the concept of choice in Rational Choice theory is neither rational nor choice. It is ideological armory for enclosure.

So we wallow.

It is not worth worrying about the economy when it’s performance is subject to political constraints. Our discussion ought not to focus on economic policy but on the enclosure movement and the grab for power now underway. That’s a far bigger fight and one that many people I know don’t have the stomach for because it requires them to recognize the deep flaws and myths that riddle the image of America they hold dear.

So we wallow.

  1. Randel
    August 2, 2012 at 4:32 pm

    Well said. It seems that the Tea Party dicks are bent on getting everyone on board the austerity bus. The smaller government mantra prolongs the recession by continuing uncertainty and pushing more and more middle class earners into the streets. We are way past crazy in this country.

  2. August 2, 2012 at 6:22 pm

    the problem is that your so called “Keynesians” i.e., either New Keynesians or the old neoclassical Synthesis Keynersians have no connection to ( or idea about) Keynes’s General theory analytical framework

    In my book THE KEYNES SOLUTION: THE PATH TO GLOBAL ECONOMIC PROSPERITY [Palgrave, 2009} I quote Samuelson directly saying he did not understand Keynes’s general theory, and in fact he states he found it “unpalatable” and then goes on to state “The way I finally convinced myself was to stop worrying about it [about understanding Keynes’a analysis]. I asked myself why do I refuse a paradigm that enables me to understand the Roosevelt upturn from 1933 to 1937…. I was content to assume there is enough rigidity in relative prices and wages to make the Keynesian alteternative to Walras operatiive”. In other words Samuelson admitted he did not undertstand Keynes and instead assumed that Keynes was presenting the Walrasian general equilibrium analysis but with wage and price rigidity to cause unemployment. [In which case the evil-doers would be labor unions, minimum wage legislation, and monopolies.]

    This despite chapter 19 of THE GENERAL THEORY entitled “Changes in Money Wages” where Keynes explains why, even with flexible wages and prices, there is no automatic medchanism to restore full employment!!

    I had a number of discussions with Samuelson about this chapter and his answer there was he saw no sense reading past the first 15 chapters of the General Theory to understand the cause of unemployment.

    You will be interested in noting that when I had a debate with Milton Friedman that appeared in the JPE in the early 1970s (and which later was reproduced in a book entitled MILTON FRIEDMAN’S MONETARY FRAMEWORK: A DEBATE WITH HIS CRITICS) Milton made the same point when I tried to introduce this Chapter19 and others… namely Milton said that these later chapters of The General Theory had nothing to do with Keynes analytical framework.

    Consequently, evenOld and New Keynesians are wedded to classical theory at least for the long run —and therefore think that deficits can not be allowed to get too big–because there must be the light of balanced budgets, or even debt pay down, at the end of the tunnel. –As Paul Krugman keeps telling readers of his New York Times column.

    Moreover in the global open economic environment with the US running persistent balance of payments deficits and having outsourced many blue collar jobs in manufacturing, etc., Keynesians still believe this is good, in the long run, because of the “law of comparative advantage”. Therefore Keynesians have provided no real policy remedies for either the US balance of payments problem with China oversaving — or to the sovereign debt problem in Euroland. The priniciples for solving these problems are , however, in Keynes’s analytical framework as I discuss in my KEYNES SOLUTION book!

    As I point out in my book THE KEYNES SOLUTION , Keynes wrote comparative advantage was aplicable only for industries engaged in reaping natural resouces (e.g., minerals) or climate effects (e.g., agriculture).

    To explain the limits of comparative advantage to a few industries Keynes wrote “But over an increasingly wide range of industrial processes…. experiience accumulates to prove that modern mass production processes can be performed in most countries and climates with equal efficiency”. Therefore Keynes rejected “outsourcing” (e.g., textile workers jobs in England in the 1920s), and develped a global monetary system and policies to assure full employment in all nations without the outsources and offshoring of jobs and production processes. Such proposals for handling the international system are completely missing from so called “Keynesian” elites heads — and therefore thet are ultimately (at least in the long run) in bed with conventionla mainsteeam thinking.

    No wonder nothing really productive and useful comes out Washington whether there is a democrat or a republican in the White house. No wonder the Tea party wins politically because the other side [liberal Keynesians?] really believes in balanced budget outsourcing, etc.

    what annoys me is that I can not stir up a debate in the profession about Keynes’s liquidity principles and his international solution to global problems. Neither my THE KEYNES SOLUTION book, my 2007 book in the Macmillan series of “Great Thinkers in Economics” entitled JOHN MAYNARD KEYNES, nor my macroeconomic textbook the second edition of POST KEYNESIAN MACROECONOMIC THEORY has ever been reviewed by the Journal of Economic Literature, or any other major economics journal. I fear that the economic elite establixhment –whether they are mainstream classical, rational exoectation people or New Keynesians– prefer to ignore my and Keynes’s argument– for they fear that their lofty position in the profession would be diminished if our students ever got exposed to Keynes’s real General Theory.

    Paul Davidson

  3. Bruce E. Woych
    August 2, 2012 at 7:42 pm

    FORMALISM NEEDS A RE-BOOT! Framing the issues and questions in theory determines the perspective and its rationalized scale conclusions that are possible from within the grid.
    Economics must be purged of its “top down” supply side presuppositions from class structured institutional theory, and we need to re-think the very formula of “market” based rationalization of the social reality. Real time / fact-checked and evidence based economics is not only waiting to be implemented as a critical empiricism, but its epistemology itself is waiting to be mapped out in real time. In the meantime the merger of money and power can not be assessed into a normative economic model for social forces of production, since the process of economic force has now preceded social and political force themselves.
    Monopoly capital serves to monetize power; and power corrupts. The only thing that trickles down from this monetary supply side economy is corruption itself. Desperation lends itself to politics of scale, legitimation tactics and crisis driven control fraud. Absolute power corrupts absolutely.
    In our society democratization has been factionalized and converted into specializations that are departmentalized and compartmentalized political monetarism. The price you pay at the supermarket includes the political cost of someone else’s political interest. Poor or wealthy you must contribute through your purchases to corporate contributions (for issues you may actually not agree). At the same time financing has become the political final word of all outcome…regardless of legislative authority. If political right wingers don’t agree, they pull the financing. If the banksters do not agree with an issue, the power of finance is going to influence not only politicians…but corporate opinions who are seeking favor. The rigging gets tighter!
    PRIVATIZING THE US Government has become the ultimate gaming of the system from what goes under the false heading of private equity (in reality a conglomerate of international sovereign and private interests).
    This represents the finalization of executive capture and the hostile takeover of the United States Domestic Society under the tools of monopoly monetarianism (which is the contemporary version of totalitarianism over the economic factors of survival).
    All other facets derive from rationalizing this neo-institutional corporatism in the service of a cross border sovereign wealth pool of political power. We are just learning now of at least 21 TRILLION DOLLARS hidden OFFSHORE by private interests http://drpinna.com/the-super-r
    What I said above is worth repeating:
    The ONLY thing that trickles down in the neo-con economy is corruption!
    America is burning down for a fire sale. There is only one way to save her!
    LABOR Economics MUST UNITE! The re-framing of issues can not be based upon an appeal to “profit as authority.” The ideology of managerialism can no longer be allowed to openly manipulate price theory as an authentic mode of production, when in fact quantitative monotheism as monetarianism is merely an algorithmic mythology; a grid metric of property rights that render and exploit real production. This exploit of greed and manipulative abuse must be carefully delineated from being called a categorical universal representation of an unqualfied “capitalism” when it reduces assets . Cost effectiveness must be prioritized over profit driven efficiency dogmas that creates a zero sum exclusionary path dependency. Externalizations must be mutually evaluated into the colon cancer of independent greed parading as leadership in a schizophrenic claim to commercial interest over the public good!
    “Please note that a “Fourth Wall” is not synonymous with the more classic “Fifth Column” designation from the World Wars.

    see: http://en.wikipedia.org/wiki/Fourth_wall

    see: http://en.wikipedia.org/wiki/Fifth_column

    and: http://www.britannica.com/EBchecked/topic/206477/fifth-column

    It is the suspended disbelief of our American Culture indoctrinated by an uncritical acceptance of propaganda rhetoric and cold war ritual psychopathology…that permits this culture of predator supremacy to continue and instill its viral controls over our economy and it’s rationalistic “economics” in the name of freedom and liberty.
    No better than aristocratic tyranny that enslaved centuries of Europe, but all relabeled as libertarian market realism. Pure rhetoric to hide ancient exploitations of power; an Old Snake…in New (Neo-Con) Skin.”

  4. Bruce E. Woych
    August 2, 2012 at 8:05 pm

    Check out the discussion in the comment stream and gauge the popular consensus:
    http://baselinescenario.com/2012/08/01/when-did-the-economist-become-comically-stupid/

    When Did The Economist Become Comically Stupid?
    Posted on August 1, 2012 by James Kwak | 31 Comments

    By James Kwak

    I recently got around to looking at my latest issue of The Economist. Here’s the cover:

    If you can’t make it out, that’s a huge Barack Obama, a small Mitt Romney, and the following caption: “Big government or small? America’s great debate.”

  5. Grady Lee Howard (deceased)
    August 26, 2012 at 2:30 am

    Is this enclosure movement concept original to Peter Radford? If so, when did it congeal? I’ like to use it in my scholarship but want to credit it properly. The required chain of custody is really silly considering the present speed of discourse but I fear a great conceptualization might be penalized if I credit it carelessly. Send help to (Edward Lee Howard @) beretco.op@hotmail.com

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