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Stiglitz vs. Summers

from David Ruccio

Two giants of mainstream economics—Joseph Stiglitz and Lawrence Summers—have been engaged in an acrimonious, titanic battle in recent weeks. The question is, what’s it all about? And, even more important, what’s at stake in this debate?

At first glance, the intense, even personal back-and-forth between Stiglitz and Summers seems a bit odd. Both economists are firmly in the liberal wing of mainstream economics and politics—as against, for example, Gene Epstein (an Austrian economist, who accuses Stiglitz of regularly siding with left-wing populists like Hugo Chávez) or John Taylor (a committed supply-sider, who has long been suspicious of “demand-side discretionary stimulus packages”). Both Stiglitz and Summers have pointed out the limitations of monetary policy, especially in the midst of deep economic recessions, and have favored relatively large fiscal-policy interventions, a hallmark of mainstream liberal economic policy.

One might be tempted to see it as merely a clash of outsized egos, which of course is not at all rare among mainstream economists. Their exaggerated sense of self-importance and intellectual arrogance are legion. Neither Stiglitz nor Summers has ever been accused of being a shrinking-violet when it comes to debates in the many academic and policy-related positions they’ve held.* And there’s certainly a degree of personal animus behind the current debate. Apparently, Summers [ht: bn] successfully lobbied in 2000 for Stiglitz’s removal from the World Bank, reportedly as a condition of the reappointment of Jim Wolfensohn as President of the World Bank. And, in 2013, Stiglitz came out strongly in favor of Janet Yellen, over Summers, for head of the Federal Reserve.**

That’s certainly part of the story. And the personal attacks and evident animosity from both sides have attracted a great deal attention of onlookers. But I think much more is at stake.  

The current debate began with the critique Stiglitz leveled at the notion of “secular stagnation,” which Summers has championed starting in 2013 as an explanation for the slow recovery of the U.S. economy after the crash of 2007-08. The worry among many mainstream economists has been that, given the severity and duration of the Second Great Depression, capitalism could no longer deliver the goods.*** In particular, Summers invoked the specter of persistently slow growth, which had originally been put forward in the midst of the first Great Depression by Alvin Hansen, created by demography: the decrease in the number of available workers, itself a result of the declines in the rate of population growth and the labor force participation rate. The worry is that, looking forward, there simply won’t be enough workers to sustain the rates of potential economic growth we saw in the years leading up to the most recent crisis of capitalism. In the meantime, Summers, in traditional Keynesian fashion, expressed his support for raising the level of aggregate demand, through public and private spending, even at low real interest rates (which, in his view, were incapable of fulfilling their traditional role of boosting spending).****

Stiglitz for his part has dismissed the idea of secular stagnation, as “an excuse for flawed economic policies” (especially the inadequate stimulus package proposed and enacted by the administration of Barack Obama), and put forward an alternative analysis for capitalism’s slow growth problem: its inability to manage structural transformations of the economy. According to Stiglitz, the shift from manufacturing-led growth to services-led growth characterized the U.S. economy in the years before the most recent crash, analogous to the manner in which the crisis in agriculture “led to a decrease in demand for urban goods and thus to an economy-wide downturn” in the lead-up to the depression of the 1930s. Thus, in his view, World War II brought about a structural transformation in the United States (“as the war effort moved large numbers of people from rural areas to urban centers and retrained them with the skills needed for a manufacturing economy”) but nothing similar was undertaken in the wake of the crash of 2007-08.

The Obama administration made a crucial mistake in 2009 in not pursuing a larger, longer, better-structured, and more flexible fiscal stimulus. Had it done so, the economy’s rebound would have been stronger, and there would have been no talk of secular stagnation.

These are the terms of the theoretical debate, then, between Stiglitz and Summers: a focus on sectoral shifts versus a worry about secular stagnation. The first concerns the way the private forces of American capitalism have been inept in handling structural transformations of the economy, while the second focuses on ways in which “the private economy may not find its way back to full employment following a sharp contraction.”

For my part, both stories have an important role to play in making sense of both economic depressions—the first as well as the second. The problem is, neither Stiglitz nor Summers has presented an analysis of how American capitalism created the conditions for either crash. Stiglitz does not explain how the crisis in agriculture in the 1920s or the move away from manufacturing in recent decades was created by tendencies within existing economic institutions. Similarly, Summers does not conduct an analysis of the changes in U.S. capitalism that, in addition to producing lower growth rates, led to the massive downturn beginning in 2007-08. Their respective approaches are characterized by exogenous event rather than the endogenous changes leading to instability one might look for in a capitalist economy.

Moreover, both Stiglitz and Summers presume that the appropriate stimulus project will fulfill the mainstream macroeconomic utopia characterized by levels of output and a price level that corresponds to full employment and price stability. There is nothing in either of their approaches that recognizes capitalism’s inherent instability or its tendency, even in recovery, of generating one-sided outcomes. For Stiglitz, “the challenge was—and remains—political, not economic: there is nothing that inherently prevents our economy from being run in a way that ensures full employment and shared prosperity.” Similarly, Summers emphasizes the way “fiscal policies and structural measures to support sustained and adequate aggregate demand” can overcome the problems posed by secular stagnation. In other words, both Stiglitz and Summers redirect attention from capitalism’s own tendencies toward instability and uneven recoveries and focus instead on the set of economic policies that in their view are able to create full employment and price stability.

Finally, while Stiglitz and Summers mention en passant the problem of growing inequality, neither takes the problem seriously, at least in terms of analyzing the conditions that led to the crash of 2007-08—or, for that matter, the lopsided nature of the recovery. There’s nothing in the debate (or in their other writings) about how rising inequality across decades, based on stagnant wages and record profits, served to dismantle government regulations on the financial sector (because those who received the profits had both the means and interest to do so) and to propel the tremendous growth (on both the demand and supply sides) of financial activities within the U.S. economy. Nor is there a discussion of how focusing on the recovery of banks, large corporations, and the incomes and wealth of a tiny group at the top was based on a deterioration of the economic and social conditions of everyone else—much less how a larger stimulus package would have produced a substantially different outcome.

The fact is, the debate between Stiglitz and Summers is based on a discussion of terms and a mode of analysis that are firmly inscribed within the liberal wing of mainstream economics. Focusing on the choice between one or the other merely to serves to block, brick by brick, the development of much more germane approaches to analyzing the conditions and consequences of the ways American capitalism has been characterized by fundamental instability and obscene levels of inequality—today as in the past.

 

*Stiglitz is a recipient of the John Bates Clark Medal (1979) and the Nobel Prize in Economics (2001). He served as the Chair of Bill Clinton’s Council of Economic Advisers (1995-1997) and Chief Economist at the World Bank (1997-2000). He is currently a professor of economics at Columbia University (since 2001). Summers is former Vice President of Development Economics and Chief Economist of the World Bank (1991–93), senior U.S. Treasury Department official throughout Clinton’s administration (ultimately Treasury Secretary, 1999–2001), and former director of the National Economic Council for President Obama (2009–2010). He is a former president of Harvard University (2001–2006), where he is currently a professor and director of the Mossavar-Rahmani Center for Business and Government at Harvard’s Kennedy School of Government.

**My choice, for what it’s worth, was Federal Reserve Governor Sarah Raskin.

***As I explained in 2016, contemporary capitalism has a slow-growth problem—”because growth is both a premise and promise of a particularly capitalist way of organizing our economic activities.”

****An archive of Summers’s various blog posts on secular stagnation can be found here.

  1. October 10, 2018 at 2:40 am

    Thank You

    “There is nothing in either of their approaches that recognizes capitalism’s inherent instability or its tendency, even in recovery, of generating one-sided outcomes.

    “Finally, while Stiglitz and Summers mention en passant the problem of growing inequality, neither takes the problem seriously, at least in terms of analyzing the conditions that led to the crash of 2007-08—or, for that matter, the lopsided nature of the recovery.”

  2. October 10, 2018 at 7:58 am

    A good summery of an interesting debate. Heterodox economists who are always criticizing methodological problems of mainstream economics are required to propose a third interpretation / understanding on the actual state of American economy. Similar analysis is also possible for European and Japanese economies which are also stagnating roughly speaking.

    A point of my doubt on David Rucio’s argument is the very place that Garrett Connelly has cited (first citation). I admit that the present capitalism has some “inherent instability or its tendency”, but pointing this is not sufficient. We should also show why capitalism (or national and world-wide economy) normally works sufficiently well. We have to present a theory that can explain both aspects of capitalism (instability and stability). We must explain how and where the economic situation in an aspect changes to the other aspect.

    • Frank Salter
      October 10, 2018 at 2:17 pm

      You are correct in the necessity to explain stability and instability. It is NOT possible to do this is terms of current analysis, both mainstream and heterodox. Only transient analysis will provide a valid explanation of this.

      • October 10, 2018 at 8:20 pm

        I am proposing process analysis in opposition to equilibrium analysis. I cannot imagine well what you mean by transient analysis. Is it analysis that analyzes transient to an equilibrium?

      • Frank Salter
        October 11, 2018 at 10:40 am

        Transients occur when some driving force changes. The mathematics are described by differential equations. The changes occur over time hence the terminology transient. In principle, all other things being equal, equilibrium will be only
        achieved after an infinite period of time but in practice a state indistinguishable from equilibrium will be achieved far sooner. However, in a complex environment, other things will have changed and the state will be altering in time. These are transient changes.

        Equally, transient conditions will be present in any valid “process analysis”. It is how they change in time which is important. This is what I mean by transient analysis.

      • October 11, 2018 at 10:05 pm

        Dear Frank Salter

        Are you thinking that economy approaches to equilibrium (normally very rapidly within “relaxation time”: your “far sooner”)? If external shocks [your other things] comes rather intermittently, this process is almost always at equilibrium, which shifts from time to time. This is quite similar to what J. R. Hicks called shifting equilibrium (Some others called moving equilibrium). My process analysis does not suppose equilibrium state. There is no such imaginary equilibrium state in the real economy. Consequently, there is no transience.

      • Frank Salter
        October 12, 2018 at 9:37 am

        Dear Yoshinori Shiozawa

        So far, there is no reason to believe, that economies have ever achieved any state of equilibrium. Equilibrium is hypothesised or assumed as the device which eliminates the necessity to deal with differential equations. It is not supported by the empirical evidence. Continuing technical progress makes what would be the equilibrium solution change continually. Other real human decisions, which are continually being made, create economic cycles which add further complexity to economic development and growth. I think Hicks misidentified what occurs in reality.

        On your “There is no such imaginary equilibrium state in the real economy. Consequently, there is no transience.”:
        If all technical progress, population growth etc. were to stop then a single equilibrium solution would prevail. Without this, economic growth and development will continue to develop over time — transient behaviour.

    • October 11, 2018 at 10:20 am

      Yoshinori, I am disappointed you seem to have closed your mind to my third, fourth and fifth interpretations of an [Americanised] economy in the paper I sent you some time ago, though that was aimed at an alternative system, not the specific issue of stability and instability. Garrett of course sees the stability in the rich getting richer and the destabilising effect that is having on ordinary people’s lives, which is probably the opposite to what you have in mind.. But in fact I had already dealt with the problem here recently, discussing my Wheatstone Bridge “third interpretation” of an economy (the first being exchange and the second simple monetary circulation). I repeat the first para for convenience:

      “October 10, 2018 at 9:41 am Reply
      Agreed, “Chicago economics is utterly and completely wrong”, but equilibrium as an AIM is not arrant nonsense, and if we are using the world’s resources faster than they can be replaced, nor – terms of rigorous physical principles – is austerity nonsense. The problem lies in the use of the wrong physical principles. IF the economy could be reduced qua Samuelson to a circular flow of money, growth in the flow is non-equilibrium and adding resistance to the flow to reduce it again looks like an easier solution than addressing the cause of the growth. But the economy cannot be reduced to a CIRCULAR flow: it is a flow through a network reducible minimally to parallel circuits in the form of a WHEATSTONE’S BRIDGE, in which non-equilibrium is independent of the driving force but can be brought about by raising or lowering any of its resistances. This changes the DISTRIBUTION of the flow (which is predetermined in a simple circuit) and only trivially its magnitude”.

      “In this circuit, increasing the voltage only increases the voltage across each of the resistors (as in inflation), so to restore equilibrium one has to adjust the resistance [assumed in austerity to be consumption] which has (as Frank puts it) transiently changed its value”.

      Here’s your type of instability in level four terms. The power flows are carrying information that can be detected (and so acted on) at very low power levels, but when the battery runs out the system begins to malfunction.

    • October 17, 2018 at 1:07 am

      Entropy and evolution accelerating geometrically are part of such an analysis. Everything seems fine on a new course after the last instability, even though disturbances to Earth and social health are accelerating. A cusp with unknowable outcome occurs when Earth system friction becomes too large to overcome by austerity plus capitalist ownership of representative democracies choosing short-term financial growth goals.

      I think something like this is going on.

  3. Craig
    October 10, 2018 at 8:44 am

    Excellent point Yoshi. Private Finance Capitalism is unstable because it enforces a virtual monopolistic paradigm of Debt Only for the sole vehicle and form for the distribution of credit/money. Normally this is mistaken as stability because we’ve swallowed the idea of the business cycle and the notion of general equilibrium. Every severe financial crisis has been preceded by a period where Finance, due to the belief that these two factors are “normal” and relatively benign, has taken leave of its moorings and run up unsustainable indebtedness. Keynesians think they can tweak the system into stability with more governmental spending and libertarians and conservatives think they can wring stability out of it by austerity, but neither of these actually does anything to resolve the monopoly paradigm which is at the base of the problem. With AI inevitably reducing aggregate individual incomes, corporate giantism becoming increasingly “necessary” and monetary inequality still considered a norm tweaking and palliatives are not going to bring us back to the relative “stability” of the period before the GFC.

    It requires a new paradigm. One that reflects the heavy handed method of the ancients for dealing with the problem, i.e. debt jubilees and assassinations of those who opposed such, and yet with deeper insight into the digital natures of the pricing, debt based money and accounting systems is more humane, integratively effective and knowledgeable.

    And that new paradigm is Direct and Reciprocal Monetary Gifting.

    • Frank Salter
      October 10, 2018 at 2:22 pm

      The opposite of equilibrium is transient. While debt jubilees are relevant in the present system, correct policies will eliminate economic cycles completely.

    • October 10, 2018 at 8:37 pm

      Dear Craig

      your paradigm is concerned with social and economic policy. I believe there many things to do before talking about policies. Stability/Instability first concerns about understanding what happens in the actual economy.

      • October 11, 2018 at 12:37 am

        Instability is a behavior exhibited by non linear systems. Linear systems achieve steady state behavior which by uniqueness guarantees only one steady solution. The methodology for studying the stability of nonlinear dynamical systems is quite mature. Favorite examples are Euler column buckling and stability of fluid flows as a parameter like Reynolds number is varied. The coupled nonlinear governing equations derived by Steve Keen are like those for modeling predator/prey population dynamics. The problem isn’t lack of tools. The challenge is getting main stream economists to even consider these nonlinear dynamic systems approaches. Astonishingly the status quo is no dynamics, ie no Ordinary Differential Equations, so no coupled ODE, and obviously no nonlinear coupled ODE. Since each of these three levels of analysis requires a significant buy in of years of study, the chance Krugman or Summers or Stiglitz is going to do this is about nil. And ego wise, what is the chance these men would suffer the ignominy of tutelage at Steve Keen’s knee?

      • Craig
        October 11, 2018 at 4:23 am

        Yoshi, Well, I disagree. As I have pointed out here numerous times a paradigm is a single concept that represents and creates an entirely new pattern….whose logically derived policies…simply follow from it. Consequently, discovering that single concept….is everything policy-wise.

        In fact, as I have also pointed out here numerous times the fact that the best heterodox and progressive economists suggest policies based upon and reflective of aspects of grace as in monetary Gifting…and yet do not have but the foggiest notion of the aspects and/or definitions of that philosophical concept… demonstrates why their follow through policy thinking is handicapped and incomplete.

        As Maslow and other trans personal psychologists have pointed out self actualization/personal knowledge of a philosophical concept is normally very difficult if not impossible when one’s level of personal (or in this case economic) reality is consumed by insecurities, conflicting theories/data and doubts.

        And that is why and where the integrative mindset and mental skill sets of wisdom/paradigm perception become so important because mentally they require, combine and habituate “looking through both ends of the telescope”.

        As for what is “actually going on in the economy” I couldn’t agree more. And what could be more focused on the moment to moment goings on in the economy than the codified and classified exchanges of buying and selling recorded by double entry bookkeeping? What could be more informative than the fact that the pricing, debt based money system and double entry bookkeeping are all digital in nature, that is equal amounts of debits and credits sum to zero, as does equal amounts of free and available money and prices and equal amounts of money and debt? And if one wants to have an effective monetary and economic policy then would it not be best (digitally) implemented at the terminal summing point for all costs and so all prices for any item or service in the economy as well as at both the terminal ending point for the entire legitimate economic/productive process and the terminal expression point for all forms of inflation? Such summing, ending and expression points have powerful aggregative, algebraic/arithmetic and problem resolving effects.

      • October 11, 2018 at 5:11 pm

        Peter, I completely agree with you, but where you talk about coupled equations I’d seen the Wheatstone Bridge circuit (to give the configuration an accessible name) decomposing into four separate circuits which with a common power supply are coupled by each circuit sharing a side with another. If we can separate the variables, will we need the complex mathematics?

        With the system operating on personal credit rather than system-wide borrowing the monetary needs of the four circuits – consumption, reproduction, distribution and development – can be treated independently, and reproduction needs determined (in the information age, for each product) by consumption rather than needs for income and profits. New developments likewise, being financed by personal credits, can be motivated by rewards for good work, and mass-produced only when this is beneficial. Non-linearity reduces to “rubber” topology, which still emphasises doing things in the right order.

        Craig, a paradigm is not a single concept. It is rather the embodiment of a system of concepts: an example like Newton’s cosmology in which one can observe the interaction of the variables – here position, change of position in time, rate of change of position in time (acceleration) and the force generating (or as Young put it, controlling) the acceleration (in that case gravity).

        Are you not still thinking monetary system wide rather than person and product wide when you say “And if one wants to have an effective monetary and economic policy then would it not be best (digitally) implemented at the terminal summing point for all costs and so all prices for any item or service in the economy as well as at both the terminal ending point for the entire legitimate economic/productive process and the terminal expression point for all forms of inflation?”

      • Craig
        October 11, 2018 at 7:13 pm

        Dave,

        As I have repeatedly said here it is BOTH a single concept AND an entirely new pattern….created by that single concept and the logical and relevant policy applications of the single concept’s aspects throughout the system/body of knowledge/area of human endeavor that the paradigm applies to.

        A digital policy of a 50% discount for every product and service at the point of final retail sale immediately doubles everyone’s purchasing power. In other words where a person yesterday had to spend $100 to buy $100 worth of goods now they have $100 worth of goods and still have $50 left in their pocket that they can either save or buy their wife a huge bouquet of flowers and a boatload of snickers bars.

        So what’s not to like about that from an individual perspective?

        And of course the rebate of the $50 discount back to the retailer giving the discount makes him/her whole on their overheads and profit margins so they are not harmed in any way by the discounts they give….and of course they’re benefited by the fact that twice as much actually free and available individual incomes now exist…to become someone’s business revenues. It’s all upside for every agent individual and commercial and for the system as a whole.

        Finally, as the policy is implemented at the terminal expression point for all types of inflation, hyperinflations do not occur except under catastrophic circumstances and garden variety inflation is “good” at 2-3% this single policy has miraculously (from an orthodox non-paradigmatic economic perspective) not only painlessly but beneficially integrated price deflation into profit making systems…..because consumption is the terminal ending point of the entire legitimate economic/productive process for any item or service. In other words you get to eat it, drive it, live in it, wipe your butt with it, text with it or surf the internet with it….and no one has the right to make you pay anything more for it (except Finance which [hint, hint] is additional costs post retail sale).

        Direct and Reciprocal Monetary Gifting is Helio-centrism and Agriculture-Homesteading. And hopefully, if we bump two neurons together and acculturate employment and purpose instead of employment only, action and contemplation instead of almost entirely action then the further paradigm shift from science only to both science and wisdom will enable homo sapiens to emerge from its lingering adolescence and fulfill its species designation of wise and discerning man.

      • Craig
        October 11, 2018 at 9:03 pm

        Just wrote this on my blog wisdomicsblog.com which enlightens the spectrum of what lack of integration can result in:

        Kanye and Bannon/Trump Compared

        Kanye West’s oval office rant today dramatizes what lack of mental coherence/integration results in, and also shows what even the well read intellectual erudition without the insight of wisdom looks like in people like Steve Bannon and Donald Trump.

        Kanye’s rant was an incoherent unintegrated throwing together of problems that was confused and confusing. It was however an aglomeration which is what a paradigm/pattern looks like without the core concept that lends it coherence and elevates and transforms it into an actual new paradigm.

        Bannon and Trump’s “fourth turning” beliefs are actually the same thing with a patina of erudition but no real insight or paradigm perception because they confusedly believe that the chaos of bashing ideas together to the point of political and social polarization rather than the wisdom of integrating the truths in opposing perspectives will result in good….instead of more confusion, chaos and (idiotically and probably unconsciously) perhaps an opportunity for demagogues and tyrants to take control and suppress the populace afterward…..in the name of control and “progress”.

        Kanye, Bannon and Trump. Birds of a feather flock together.

  4. Stefanos Skiadas
    October 11, 2018 at 3:24 pm

    @peterblogdanovich

    There are several mistakes in your statements:

    1) Instability is BOTH a phenomenon exhibited by linear and non-linear systems! This is well known and is taught to 1st year engineering students for the last fifty years or so.
    Example: a simple integrator is a Linear, Time Invariant system. Yet is a BIBO (bounded input bounded output) unstable system since a bounded input produces an unbounded output (try putting a constant signal in it and see what comes out…). There are several other notions of stability/instability of systems (eg, asymptotic stability., Liapunov stability etc) they ALL refer to BOTH linear and non-linear systems.

    2) Dynamical systems need not be described by differential equations only; they might as well be described by difference equations in discrete time. This has been done long time ago even in the Economics literature.
    See for instance the book “Monetarey Economics” by Godley and Lavoie where a number of
    I do not agree at all with Keen’s explanation/motivation that ODEs are more flexible in building models compared to discrete-time difference equations (in any case their numericla solvers actually discritize them in order to solve them…)

    • October 12, 2018 at 1:58 am

      Clipping is not an instability, it’s just a saturation effect. My experience is with hydrodynamic stability. In this type problem one starts with a “basic state” which exactly satisfies the line arises governing equations. For example plane Poiselle flow between two spinning cylinders. Analytically, one perturbs this basic state by adding a generalized perturbing function to the basic state with a small coefficient. You plug and chug this expansion by substituting the formal perturbation back into the nonlinear equations of motion keeping terms of leading order in the perturbation coefficient. The result is a linear eigenvalue problem having an Eigenvalue whose sign depends on parameters like the rpm of the cylinders. What comes out is a stability criterion which predicts the parametric values that lead to positive exponential growth of the perturbation that agree pretty well with experiment.
      Stability in electronics is defined more commonly for feedback systems involving phase margins given assorted types of temporal lag as signals propagate around the loop. Here I believe you are right that even though all network elements are linear the system can still become unstable. But here the system is still nonlinear because the topology of feedback produces a loop transfer function that is non linear.
      My point is if you have a linear system and you find a solution to that system and that solution is steady (even if it’s dynamically steady like sinkt) you can stop looking for other solutions by uniqueness, but if you have a nonlinear system and you find one steady solution you don’t know that’s the only solution and you don’t know if that solution is stable. It could be that first solution is unstable and it will evolve toward another solution all of which becomes possible only because of the nonlinearity.

    • Frank Salter
      October 12, 2018 at 9:47 am

      It may be worth adding that analytical solutions to partial differential equations are rarely available. Numerical solutions using difference equations which approximate the differential equations have to be used. With sufficiently small intervals, the numerical solution obtained is indistinguishable from the unobtainable analytical solution.

  5. Yok
    October 11, 2018 at 10:32 pm

    Let people work for themselves. Re-distribute income downward. High inequality leads to an economy built around serving wealth, not themselves. It’s the injustice.

  6. October 15, 2018 at 9:07 pm

    David:

    Are you saying that Stiglitz’s books, specifically on inequality, in the the US and another on global inequality didn’t meet your test of a good presentation, and solutions for the problem?

    How so?

    Meanwhile, here’s my sense of American agriculture in the 1920’s from my own readings, and not from any particular author or “school” of interpretation, other than I’ve repeatedly written that if one wants a good lesson in the glories and troubles of capitalism, the history of American agriculture is a good primer.

    Here’s why: it was an very interesting mixture of mixed and diverse local production, non-specialization for the first frontier farms, but also right out of the colonial gate, specializing in the Tidewater and the South in products for the global economy of the era, based on slavery: tobacco, rice, cotton, sugar…with a heavy trade in salted fish, horses, cattle and timber going to the Caribbean colonies of Europe…the percentage engaged in farming and American deforestation peaked about 1850-1860, and the history of the late 19th century was of vastly increased production – and slowly but steadily declining number of farms…as the world entered the globalization of the late 19th century up to the 1st World War the wheat, wool and cotton of Canada, Eastern Europe, the Ukraine, Argentina and Australia keep pushing commodity prices down – 30 years of deflation – a “Great Deflation” and in the American South, and shockingly elsewhere too, sharecropping and tenant farming reaching surprisingly high percentages of farms – in the 40% range or more.

    Low commodity prices, income going to larger mechanized farms, more and more machinery – and very little electrification certainly suppressed the level of demand in rural areas, relatively and absolutely…as was becoming apparent by the late 1920’s…it was pretty crazy in the New Deal to read about the Right wing press attacking the destruction of over-produced crops – especially cattle and hogs, since there were no organized agencies, “no agency” – public or private to round-up, slaughter, store and distribute the surplus to citizens who had no means to pay for it: a great case of the hypocrisy of the Right and the Libertarian models.

    The New Deal answer of raising commodity prices by controlling – limiting – production never did get to the most needy, the sharecroppers and tenant farmers, as the Socialist left pointed out to FDR, especially Norman Thomas…on the whole the Alphabet Soup of ag programs of the New Deal helped the already dominant ag players, the affluent farmers represented by the Farm Bureaus and the Grange…the programs, although funded and designed nationally were run locally in a fairly democratic process, if you acknowledge that it left the tenant farmers and sharecroppers portrayed by Dorothea Lang and “Let Us Now Praise Famous Men” out of the political “picture.”

    As famous historian Richard Hofstadter has pointed out, American farmers did better when they became a “special interest,” after the New Deal, in the postwar pluralist lobbying world in DC, than they had fared in their most politicized days of the Populist Revolt and the WJB uprising in 1880-1896. I guess that’s one way to address an economic problem: eliminate the mass of producers, survival of only the most efficient and usually the largest. Hard to say that isn’t a characteristic of our times too, in many different areas of production…old and new…

    Increased specialization, huge capital and chemical input thresholds, and vastly declining numbers of farmers, alongside higher output – characterize their situation today, farmers, with a Greek chorus of the ecological left chanting “ruining the soil (washing away, depleted organisms), carbon intensive fertilizing, Gulf Dead zone generating, and species depletion, including old genetic types of “heirloom” crops…other than that…things are fine. I’ll spare everyone a history of the Wendell Berry back to the land revolt, the farm to table uprising…because it is still unclear if it is a serious hobby or a serious economic challenge to the ways of Big Ag, Big Chem and Big Subsidies.

    In Great Britain, the “Moth Snowstorm” and German research has accused European Union ag practices, similar to what I have outlined above, for destroying insect populations – dramatically. So what you say. Read E.O. Wilson for the “forecast” of what that means.

    In so many ways, American agriculture in the 1920’s was an alarm bell ringing but not registering, and I’m not sure its a stable world yet today unless one listens to the Secretary of Agriculture.

    • David F. Ruccio
      October 15, 2018 at 9:48 pm

      Yes, Stiglitz has written quite a bit about inequality, certainly much more than Summers and most other mainstream economists. But he never analyzes rising inequality as a cause of the crash of 2007-08 (or, for that matter, of the first Great Depression). That’s the piece that’s missing from his work and from the Stiglitz-Summers debate.

      • October 16, 2018 at 4:41 pm

        thanks for clarifying David. I need to go back and look more closely at the two works I mentioned to track down the point you made: deploring rising inequality but not assigning it a role on the great economic turmoil since 1987…or better, since 1997-1998, the clearest signs that all was not well.

        I should add that one of the great problems facing the economic left in America today is explaining for the public the dichotomy, incongruity of the good “official” statistics, and the underlying tight rope walking of so many, without savings, capital or decent earnings, even if they have a job, everyone waiting to see what the next downturn, crisis will bring.

    • October 16, 2018 at 1:31 am

      “I guess that’s one way to address an economic problem: eliminate the mass of producers, survival of only the most efficient and usually the largest.”

      You are closing in on this. The word efficient used in modern capitalist agriculture describes a tax subsidized technology that poisons life and mines top soil. Yes non traditional mechanized chemical agriculture supplies superstores with products packaged in a one way flow of plastic paid for by consumers. Even so, many people are rejecting capitalist agriculture as a viable future option. Good for you.

      • October 16, 2018 at 4:58 pm

        Thanks Garrett: I’m not all the way there yet. The dominant opposition to the economic status quo out here in the red-state part of rural Western Maryland, whose fate fits so well, so sadly, with other parts of de-industrialized/resource extraction parts of the old economies in America, is back to the land, farm to table, organic farming, de-centralized energy production and sympatico activities. The irony is that our gubernatorial election between a moderate Republican (relatively speaking, if that’s possible) and a confused Bernie Sander’s backer/Venture Capitalist, Ben Jealous, is turning upon this old, familiar axis of political economy: Larry Hogan, the Republican incumbent, did not raise taxes like the bad O’Malley “tax and spend Dems…” … and Jealous has been painted into this ancient corner of the spectrum, going back to 1978, Proposition 13 revolt in sunny California.

        Thus as much as the green left wants this campaign to be about an environmental big adjustment to meet global warming, the campaign is actually being fought on the intellectual terrain least congenial to them. Jealous has not done a good job of explaining to the cautious people of Maryland just how he will get Sanders progressive policies done in balanced budget Maryland.

        And speaking of household budgets, our local food co-op, just up and running, will be selling a delicious loaf of locally sourced and baked sour dough bread for $7.00 a loaf this week. I was tempted, but used to get something pretty good at Trader Joe’s for $4.00 a loaf back in the DC Metro Area, and the price of a Peperidge Farm “Farmhouse Oatmeal” at Wal-mart was $2.87 – and that’s what I bought…if you get the drift here.

        Some of the good progressive economic ideas out here are missing the scope of population and income demographics that would support their hopeful ideas and enterprises. It’s a broader problem of the economy, one FDR and the New Deal knew they faced in trying to bring the South, especially the rural South, into the mainstream of American economic life…They made progress, but not on race and you know the rest of the story: federal subsidies on oil and gas, ag crops, and the Cold War military bonanza helped build the South and the West.

        So much work to do to reach rural red state America with an better mix than “Trumponomics.”

  7. October 17, 2018 at 1:53 am

    To; gracchibros
    October 16, 2018 at 4:58 pm

    Yes, I understand your bread price calculation as the exact same one a musician friend also explains to me, quite patiently. (I gave up bread over the mental strain associated with bread savings).

    We are definitely considering why austerity squeezes us to what we can afford. Enter the local young family star-eyed with desire for your good health and seven dollar bread for the health of Earth. Plus, they have a baby on the way.

    Is there a calculus that differentiates for us? How much does life really cost? Specifically.

    Econo has lost sight and we need to find ways ahead. They are small, like the savings experienced when washing a vegetarian’s plate with cold water. And the freight saved when using a local luffa sponge to wash the dishes instead of a capitalist dishwasher. Or decomposing plastic sponge particles that mimic plankton upon reaching the sea.

    After actual and induced austerity reduce our demand to some sustainable level and we survive cannibal capitalist panic; Will economics be able to help us dig out from the rubble? I think so, if we pay attention to entropy and learn to surf accelerating evolution.

    I have a fiction about this, it’s future fantasy, A young economist couple and an entropy wave thesis http://www.zerowastenews.org/chapters-web/Pacifica-ch6.html

    Independent green socialist is different than Ben Jealous. He doesn’t wish to recognize that Bernie’s identity was a problem for us ordinary humans when Bernie folded without asking. Yes, we send personalities to carry the message of distributed intelligence. Both Ben and Bernie need to listen better. Cosmic powered biology is gigantic, mortal individuals can see Cosmos. The interesting ones listen to distributed intelligence and also engage with it. Something cool is happening. RWE is part of it. Thank you.

  8. October 18, 2018 at 7:47 am

    The best I can say about both Stiglitz and Summers is they are adventurers attempting to save a decadent and cold-blooded second rate-theory and doing the job poorly.

  9. October 18, 2018 at 5:35 pm

    To David and All:

    Keeping up with this, it triggered my memory of an article by Summers, sometime over the past 6 months or so, where he was asked to address the anger, unhappiness of rural red state working class Americans. I’ll post the link when I find it again…

    In contrast to what I wrote above about the New Deal attempting to address the problems of the American South, so obvious to any attuned observer in the 1930’s that they were the “sick man” of America, racial troubles compounding the poverty all around, with many white tenant and sharecroppers as well (Let us Now Praise Famous Men…) Summers panned a regional approach to aid for our current circumstances, and instead – don’t have it all at my memory’s tip, but the portion I remember was him writing about wage/worker subsidies to be paid to the employers/companies. That struck me as the old Summers…

    I’ve been recommending a universal CCC/WPA “guaranteed jobs program,” nationally funded, locally developed projects, of which there should be no shortage because the needs and neglect are so great, human and to the natural world’s destruction, plus regional public development banks to fund some of it. Heavens knows, as any rural drive through the old small towns and cities would show, there are hundreds of thousands of abandoned buildings, whole streets, neighborhoods, hell, Main Streets which are literally falling down…and much work to be done in either tearing down, boarding up or rehabbing the salvageable ones…

    What is it with Summers and the old Clinton crew that they seem to have an intellectual gag reflect at the very thought of anything that looks like the New Deal, even as we know that a green New Deal isn’t going to look exactly like the old one – I’m talking outlines, and inspiration, not exact models?

    As Martin Wolfe wrote me about a year ago in response to one of my postings and Email blasts on similar themes, what’s wrong with Social Democrachy in Europe…”‘You can’t swim in the same river twice.'” True enough, but the current runs, most of the time in the same general direction, with some channel jumping. And the dead zones, and literally, in America, the bodies, pile up at the mouths when the streams have been polluted by the intellectual detritus of the past 40 years.

    • October 19, 2018 at 11:19 am

      Gracchibros, despite what you may have heard, the problems facing the USA and UK by the end of the 1960s were monumental. These were economic and industrial policy, political direction, infrastructure, education, and a whole range of daily living problems. These were mostly the result of both nations living off their past accomplishments after World War II. Neither nation did much to correct these problems after the war’s end. Thus, they festered and grew worse. New governing strategies were invented, infrastructures and education recreated, and poverty and homelessness attacked around the world. But not in the USA or UK. Assuming what they had was still functioning well and needed no updates both countries spent money and time on stupid wars and pointless political fights. When the situation could no longer be ignored in the 1970s, both nations looked for a savior. Unfortunately, instead they chose a couple of devils to save them. Margaret Thatcher and Ronald Reagan. The “radical” movements backing Thatcher and Reagan had been looking for a way into political power for over 20 years. They took over with a determination to rule the nations and never looked back. The biggest problem these movements faced was that the ordinary Britisher and American cared little for the ways they proposed to reshape both societies. For most these seemed hierarchical, undemocratic, and too far right politically. Thus, began a massive effort to “reeducate” both nations on the rights and wrongs of economics, politics, and everyday living. Considering that only a few blogs and opinion writers raise any objections when Larry Summers, and many others publish such “crap,” I’d conclude the reeducation work has been exceptionally successful. And Summers’ crap isn’t even near the top of the heap. So, here we are; neck deep in crap, so to speak.

      • October 19, 2018 at 3:57 pm

        Hi Ken:

        No argument from me on what you have written; I can praise some of the approaches of the New Deal not being taken up today, but the whole mood in the US and UK coming into the 1970’s was the upsurge of market loving and libertarian ideas, the freeing of bankers and entrepreneurs from the restraints of the Labor Regime and the New Deal. You could get a good idea of what was coming by listening to Goldwater’s acceptance speech at the Cow Palace in 1964.

        In one of my first post college jobs in American retail, a small chain in a big world of malls, I had a couple of exchanges with a British architect-designer who had fled the iron grip of labor rules. He said he was suffocating under them…this would have been just before Thatcher’s rise – in the early 1970’s. He then preceded to clash with the labor unions building the mall. We’re now at the end of the run of Neoliberalism, and the intellectual stew is quite a jumbo of incongruent ideas, isn’t it? I recommend Daniel Roger’s Age of Fracture to help sort them out; I thought the economic chapters were top rate, by an intellectual historian, not an economist.

        I do see signs of hope on the American left, but the enthusiasm is running ahead of the intellectual coherence, which is why I blew the whistle on Ben Jealous in Maryland. It may be possible to explain how one can be a Bernie Sanders socialist (itself a contradiction to his policies which are FDR Second Bill of Rights inspired) and a “venture capitalist,” but he hasn’t come close to giving the speech needed to pull that off, nothing close to Sander’s Georgetown speech, which still left some gaps.

        Michael Lewis wrote a good piece several years ago bemoaning the state of British politics, speaking of someone could between two worlds, and the best part was not a clear path forward, but how grey and stultifying the Labor dominated British Isles had become by the 1970’s. There’s a good piece in the October 13 edition of the NY Review of Books on Michael Young, the “Red Baron,” on the tribulations of meritocracy in the US and Britain…Written by Kwame Anthony Appiah…helps outline some of our troubles between the rising wave of egalitarianism and the meritocracy…close to the heart of the tensions between Sanders and Clinton. Which have not been resolved by any means – other than a temporary alliance built on hatred of Trump. It’s not enough to govern in our age.

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