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State of play at year end

from Peter Radford

Is it just me?

Or is the realm of punditry in a state of confusion?

There seems to be an emerging consensus that something big is happening.  It’s just that we don’t quite know what.  The problem is that the template we are all applying is frayed if not shattered.  Consequently we are searching for the safety of explanations but finding that our questions do not elicit comfortable answers.  This is not a place we like to inhabit.  What are we to do?

Let’s speculate.

Stagflation?  Growth seems to have slowed dramatically over the last decade if not longer.  There’s talk of malaise.  There’s talk of a post-growth economy.  Some folks even applaud the idea that the days of vertiginous growth are behind us.  Now, we are told, we can focus on the environment and pivot to a less material way of life.  We can manage with less stuff after all.  How many homes, cars, and trinkets do we really need?

Lots.  Lots say the pro-growth crowd.  Just look at the cornucopia we call contemporary America.  It is stashed full of goodies.  Our poor ancestors would be green with envy at all the gadgets, the health care, the cozy homes, and the relative lack of physical exertion needed to provide it all.  Why would we not want more?

Ah.  Some others say.  We might be knee deep in goodies overall, but there appears to a problem with the distribution of those goodies.  Too many end up in too few hands.  That’s not good.  It eats away at social cohesion.  It isn’t, as the elitists inevitably say, that the poor are envious.  Not at all.  It’s that the concentration of goodies leaks into a concentration of power.  And the elitists use that power to preserve what they have.  They reject the very nostrums of the liberalism they espouse.  They abhor competition.  And they absolutely don’t want to partake of anything social.  Except for the exotic parties and trips they enjoy.  They prefer their society over our society.

Inflation?  The curse is back.  Some of us thought it was transitory.  But we didn’t define what we meant.  We did not mean, as the denizens of Wall Street suggest in error, that the transition would take a few weeks or even months.  We simply didn’t know.  What we did mean, however, was that transitory implied that the curse was not permanent and ought not be treated as such.  There was no need to impoverish workers by hammering them and their wage demands.  There are other things we could do.  How about controlling prices whilst the folks who screwed up their supply chains get themselves sorted out?  After all their shareholders benefited from those tenuous supply chains.  Why not make them pay for fixing them?  Why smash workers who had nothing to do with the decisions?

Because monetary policy is one dimensional.  And we need to protect the creditor class from the debasement of their assets.  You know, the assets that appreciated in value during the long run of ultra low interest rates.  Asset inflation is, apparently, a positive thing.  Wage inflation not so much.  That bias is hidden in the words we use.  Do we talk of wage appreciation?  No.  Of course not.  But we do talk of asset appreciation.  Maybe that’s because we appreciate assets more than wages.

This bias means we just keep politics out of monetary policy.  No. No.  There are no politics in monetary policy.  Or so we are told.  It sits beyond the greedy grasp of the democratic mob.  It is protected within the technocratic walls of the central banks.  Independent central banks.  Unaccountable central banks.  Unaccountable that is, to the mob.  Phew.  Wall Street can breath easily.  The mob is being punished for its wage demands and having the temerity to criticize the wise heads who know what’s good for the economy.  Extra unemployment.  That’s good for the economy.  Apparently.

Except those wise heads are now all a-muddle.


Having constructed an economy to their liking the wise heads are now rumbling in discontent.  Their creation isn’t behaving.

And the natives are restless.  It’s that mob again.  This time, though, the mob is not alone.  The wheels came off the rigged game back in 2008.  So we had to double down on the rigging.  Efforts to squeeze more from the workforce were re-doubled.  Those longer and less predictable work hours, fewer benefits, cuts to the safety net, the outsourcing of jobs, cuts to training, and all the siphoning off of profit to shareholders has produced … well not much.  We’ve run the place dry.  We are aground.

Aground because the middle class has been stripped bare.  Where once there were deep waters there are now only shallows.

And in such waters ugly rocks protrude.  We begrudge the poor.  After all we know they are poor because they don’t work hard.  Nor do they try to improve themselves.  They mooch.  They want entitlements.  Freebies.  We can’t afford that.  So we cut it back.  Good.

But the middle class?  Isn’t that the engine of consumption?  Why are they complaining?  Haven’t we showered them with stuff through the years?  What’s wrong?

Health care costs.  Education costs.  The threat of unemployment.  Housing costs.  Long commutes.  Cluttered suburbs.  Financial insecurity.  Reduced health and longevity.  Poor retirement prospects.  The list of complaints is long.  Perhaps worst of all is the sense of disillusionment.  The opportunity is gone.  Mobility isn’t what it used to be.  The kids will not be as well off as the parents were.  That’s not supposed to happen.

The ossification necessary to preserve the goodies for the elite has stopped the conveyor belt at last.  The mob is left looking up at a distant elite that has little to no empathy for the mess below.  A new Gilded Age is upon us.

And no one seems to understand how this happened.

Didn’t the pundits realize that sending our capital and intellectual property to China in order to exploit low wages was, in effect, reducing wages here?  What is difficult about that?  Did they not realize that globalization implied the reduction of investment here?  Did they not see that reduced government investment in speculative research would cut off the supply of ideas for the private sector to profit from?  Or that lower taxes means eroding infrastructure?  Did they not realize that the transition to a service economy inevitably means lower productivity — unless we invest, which we didn’t? Did they not realize that concentration within industries opened the door to poor service and higher prices? Didn’t they realize that cutting investment in training and education would produce a workforce less capable?  Or that cutting research to favor short term profit is self-destructive?

When we privilege asset holders, and shareholders in particular, over all else — all else — then the place will inevitably get a bit threadbare.

And threadbare isn’t a healthy place to be.  It certainly isn’t good for growth.

So: stagflation.

The part that flummoxes me most is that the pundits and their clientele amongst the elite didn’t see this coming.  They didn’t read the statistics.  I wonder what they really thought about decades of flat wages?  Good for profits is what they thought.  A what’s good for profit is good for America.  It’s worse than this: they hired people in their captive think tanks to provide them with comfortable articles saying that stagnant wages were an illusion.  No, the elite was told, stories of poor wage growth and rising inequality were untrue.  Relax.  Go back to your second or third house and feel good.  Block out those complaints.  They are the lazy words of the envious.

No.  I am wrong.  The part that flummoxes me most is the lack of alternatives.  The punditry class has run out of ideas.  They simply recycle the same stuff more intensively in the hope that, somehow, the world will revert back to one in which those safe, tried and true ideas work once more.  They yearn for the Reagan years.  The good old days.  When the market was — in their minds — truly free.

When the facts defy your theory there is always a temptation to ignore those facts.  Creating a new theory is such hard work.  Besides a new theory might threaten the status quo.  There are too many reputations and livelihoods at stake.  So we repeat the old stories in the hope that the facts change.  It’s the more comfortable thing to do.  It’s what elites have always done.  Especially once the energy that brought them to their power and prestige has dissipated.  Now they are the lazy class.  Bereft of ideas.  Fearful of change.  Stuck.  But wealthy.

Meanwhile, let’s impoverish a few more workers.  Keep them in line.  That’ll do the trick.  Won’t it?

  1. December 30, 2022 at 11:09 pm

    No, it’s not just you, Peter Radford,

    You are very close in writing breadth and skill to create fiction. From there you needn’t explain exactly how you reached a new and better reality. Just describe it and how it works. Let others into your alternate qualitative reality and ask them to describe it, too. When enough people have contributed to a more fun and healthy alternate way of life it will begin to seem plausible to even more people. At some point a critical mass will see plausibility and at that very moment reality will change instantly.

    Go for it.

  2. Pat Fowler
    December 31, 2022 at 11:44 pm

    Great summary. I’m sure that soon you will be writing a summary telling us how we get the power back to change it.

  3. rsm
    January 1, 2023 at 8:36 am

    《How about controlling prices》

    《The punditry class has run out of ideas.》

    How about the idea that unwanted inflation is a power play, easily and nonviolently met with full indexation?

    Is it too heterodox to point out that the amount of capital in the world exceeds real output by at least a factor of ten, because virtual assets are worth more than real things like land (i.e, Mortgage-backed Securities have daily trade volumes that dwarf actual real estate transactions such as GDP tries to count)?

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