U.S. billionaires profit from 10 months of pandemic

Weekend Read – Stocks are up. Wages are down. What does it mean?

from Blair Fix

If you listen carefully, you can hear Jeff Bezos getting richer. There’s the sound again. Another billion in Bezos’ coffers.

Let’s put some numbers to this sound of money. Since 2017, Bezos’ net worth has grown by about $4 million per hour — roughly 500,000 times the US minimum wage.¹ This accumulation of wealth would be absurd during normal times. Today, as many workers lose their jobs to a brutal pandemic, it’s obscene.

While Bezos is the pinnacle of capitalist excess, his wealth is part of a larger story. Over the last 40 years, stock prices have surged while wages have stagnated. What does this trend mean?

In this post, I take a deep dive into the stock market. I’ll first tell you what the stock market is not. It’s not an indicator of ‘productive capacity’. Nor is it ‘fictitious capital’. So what is it?

The stock market, argue Jonathan Nitzan and Shimshon Bichler, is how capitalists quantify their power. To understand what Nitzan and Bichler are talking about, we’ll unmask the ritual that defines our social order — the ritual of capitalization. Read on to take the red pill and lift the veil of capitalist ideology.

What do stock prices mean?

When it comes to the stock market, many people believe they have original insight. Often, however, they’re parroting old ideas. Noting this tendency, economist John Maynard Keynes wrote:

More top-heavy than any other OECD country

Source 

The “trickle down” assumption

from Ted Trainer and current RWER issue

The basic justification for conventional development is that although it mostly enriches the rich, in time “…wealth will trickle down to benefit all.” There is indeed a tendency for this to happen, but there are several reasons for rejecting this strategy.

Little trickles down

In the global economy the amount of benefit that trickles down is evident in the fact that one-fifth of the world’s people now receive about 70 times the amount of income the poorest one-fifth get, and according to a number of studies such as by Hickel (2017) the ratio is getting worse. Edward and Summer (2013) report that between 1990 and 2010 global consumption increased by $10 – $15 trillion, but 1% of people received 15% of it. The gain for each of them was 637 times as much as the gain for the poorest 53% of the world’s people.

The strongest justification for the trickle down strategy is the claim that poverty has been greatly reduced. The conditions large numbers experience have indeed improved greatly, but the situation is complex and the overall effects are debated.  The reduction in global poverty rates seems to have been due mostly to achievements in China (Hickel, 2017). Edward and Summer (2013) find that if Chinese figures are omitted then there has been little if any improvement in global inequality and poverty rates in recent decades.

World map of COVID-19 deaths per capita by country

Source: https://en.wikipedia.org/wiki/COVID-19_pandemic_by_country_and_territory

China’s dash for technological leadership

from C. P. Chandrasekhar and Jayati Ghosh

For quite some time, China was seen as a ‘threat’ by virtue of being a global manufacturing hub, embedding knowledge in production and riding on its cheap labour force and large volumes of foreign investment, to win a disproportionate share of global markets. But more recent declarations from official Western sources focus on the threat stemming either from China’s illegal appropriation or theft of intellectual property, or knowledge for production to move up the value chain, or from China’s misuse of technology (allegedly illustrated by Huawei) for espionage aimed at advancing its increasingly aggressive security interests.

These allegations are founded on one undeniable aspect of China’s manufacturing eco-system: its control by the Chinese state, despite the substantial increase in private ownership of manufacturing equity. But what is inadequately emphasized in this discourse is that, using power centralized in the State, China is managing what was seen in market systems as impossible without “rivalry”—the planned acceleration of research and development, invention and innovation that advances both market and political objectives.

World map of the Gini coefficients by country.

Source: https://en.wikipedia.org/wiki/List_of_countries_by_income_equality

Financialisation and bureaucracy have perverted higher education

from Steve Keen and RWER current issue

Steve: Yes, the financialisation of higher education has gone hand in hand with the growth of bureaucracy. More than all of the money raised from student loans has gone into the black hole of administration, so despite the increase in funding, there is less money going to education now than when universities were fully funded by the state. This has also perverted the educational process, for both administrators and students. Whereas administrators used to support the learning and research process, now they direct the fund-raising process; whereas students used to come for an education, they now come for vocational training. Stuck in the middle, academics are harried by performance targets and measurement metrics from above and “I’ve paid for my degree, so give it to me” pressures from below.

When I started as an academic in 1987, my workload was huge (developing a new course from scratch each of my first 3 years, teaching 12 hours a week of classes, plus marking and 6 hours of consultation, plus doing my Masters full-time), but I was spending the bulk of my time doing interesting stuff under my own direction, and small class sizes let me really interact with the students. Now, academics’ time is dominated by performance monitoring and form filling, while classes are unmanageably large, at least in the low-ranked universities where heterodox economists can get a job. It’s counterproductive, soul-destroying, and certainly in the UK, low-paid. I’m glad to be out of the system.

For students, it has meant

Weekend Read – The puzzle of western social science

from Asad Zaman

1         GENERALIZATIONS FROM EUROPEAN HISTORICAL EXPERIENCE?

Introduction: Briefly, we can state the puzzle as: “Why does Social Science claim to be UNIVERSAL, when it is based on analysis of European historical experience?”. Many authors have recognized this problem, which manifests itself in many ways. For example, Timothy Mitchell (2002) writes: “The possibility of social science is based upon taking certain historical experiences of the West as the template for a universal knowledge.” Many other authors have recognized that Western Social Sciences is founded on European historical experience, and requires radical reconstruction. Our goal in this note is mainly to articulate this puzzle. Some suggestions on possible solutions are sketched in the concluding remarks.

Restatement of the Puzzle: Social Science is study of human experience. CAN we generalize from the European experience to universal laws about mankind? Can the tragic European experience of brutal religious warfare between Protestants and Catholics be generalized to all humanity and all religions? Does it hold for the Amish, Buddhists, Confucians? What were the patterns of war and peace within the Islamic Civilization, The Chinese, African, and South American Empires? Without any study or discussion, can we assume that lessons from European experiences will be valid for these societies?

The sociopathic crisis

from Ken Zimmerman (formerly a comment)

Clearly sociopathic actions, right? “In a sociopathic society, sociopathic individual behavior is so pervasive and socially accepted that perpetrators don’t think of themselves as doing anything wrong. When cyclist champion Lance Armstrong first acknowledged in a 2013 interview with Oprah Winfrey that he had been doping—using performance-enhancing drugs—and lying about it for years, she asked him if he believed he was cheating.
Oprah: Did you feel you were cheating?
Armstrong: No. At the time, no. I viewed it as a level playing field. I looked up the definition of “cheat.” The definition of cheat is to gain an advantage over a rival or foe. I didn’t do that. I viewed it as a level playing field.”

Armstrong believed the rules of the game were such that all his rivals were doing the same as him or attempting to do so. Thus, he was not cheating. He was just following the same rules as his rivals. That world Armstrong is describing is a sociopathic one. ‘Win at all costs. No concern for who is hurt, the integrity of the contest, or the future of the society.’

The signs of a sociopathic society are all round us. The US, with a long history of sociopathic institutions and practices, is now evolving toward a full-blown sociopathic society.

The biophysical resource limits of the planet

from Ted Trainer and current RWER issue

It is remarkable that the development literature has given so little attention to the “limits to growth” analysis of the global predicament. No other set of considerations has such profound implications for development in rich and poor worlds. Over the last fifty years there has accumulated an extensive and overwhelmingly convincing case that global resource consumption and ecological impacts are far beyond sustainable levels. This rules out any possibility of all the world’s people rising to the present material “living standards” presently enjoyed by the one-fifth who live in rich countries, let alone to the levels of consumption growth would lead them to (TSW, 2019).

The magnitude of the overshoot needs to be stressed.  The World Wildlife Fund’s Footprint index (WWF, 2019) shows that to provide one Australian with the amount of food, water, energy and settlement area now used, about 7 ha of productive land are required. Therefore if the possibly 10 billion people expected to be on earth by 2050 were to live as Australians live now around 70 billion ha would be required. However there are only about 8 billion ha of productive land available on the planet.  This indicates that Australians are consuming natural resources at close to 10 times the rate all people in the world could rise to.

Other measures indicate worse multiples.

The sentiment behind eugenics thrives in human capital theory

from Blair Fix and current RWER issue

A key problem with eugenics is that it neglects the social nature of human traits. It assumes that productivity is an innate trait of the individual, and that breeding for this trait would lead to a better society. It is a seductive idea that is deeply flawed. In all likelihood, selectively breeding people for productivity would, like chickens, lead to a psychopathic strain of human.

The rise of human capital theory

After the horrors of the Holocaust, eugenics fell into disrepute. As a result, few people today dare argue that we should selectively breed humans for productivity. Still, the sentiment behind eugenics (that some people are far more productive than others) lingers on in mainstream academia. It survives – even thrives – in human capital theory.

The ground work for human capital theory was laid just as eugenics fell out of favor. In the 1950s, economists at the University of Chicago tackled the question of individual income.[1] Why do some people earn more than others? The explanation that these economists settled on was that income resulted from productivity. So a CEO who earns hundreds of times more than a janitor does so for a simple reason: the CEO contributes far more to society.

A modest proposal for generating useful analyses of economies

from Geoff Davies and current issue of RWER

I propose that economists leave philosophy alone for a while and instead try analysing some actual economic observations.

I have observed much discussion among heterodox economists about what science comprises, whether one could do “scientific” economics, and what ontology, epistemology, etc., etc., might be involved. If, for example, economies are historically contingent, how could one hope to do a rigorous analysis. I have also observed much concern about the complications of people and societies and the resulting alleged need for elaborate statistical analyses to extract an object of interest, followed by the construction of an elaborate mathematical model that includes many nuances of human behaviour.

I think the challenge is not nearly so daunting. An economic analysis does not have to emulate the precision of (some) laboratory physics to be useful. It does not have to yield a literal prediction. If one steps out of the equilibrium mindset of the neoclassical mainstream one can find obvious phenomena crying out for explanation, a financial market crash for example.

It is not a great mystery how one might try to do some scientific economic analysis. Many kinds of scientist do science all the time, mostly without worrying about the philosophical nuances of precisely what kind of process they are engaged in.

“Externalities”

from Duncan Austin and current issue of RWER

The key issue is not that economics is not a valuable way of thinking – it clearly is – but rather that the discipline lost sight of its boundaries and unwittingly propagated an exaggerated sense of its scope. Ironically, it achieved this by fatefully downplaying the significance of one of its own discoveries made a century ago. Given the profound influence of economics within modern culture, this oversight cannot be dismissed as mere academic error, for it has potentially existential real-world consequences.

In 1920, Arthur Pigou, a Cambridge economist, conceived the idea of externalities to describe how market transactions may create unintended harms or benefits for which no monetary compensation or reward occurs. Market exchanges effectively generate ripple effects for human value that go beyond what is captured by the originating transaction. These ripple effects may be positive – I benefit, too, from you being vaccinated – or negative – think of pollution or congestion. However, there is an important asymmetry. Positive externalities take the form of “free goodies”, whereas certain negative externalities constitute systemic risks that may be catastrophic to “trip” or breach. While you generally cannot have too much of a positive externality – a “free good thing” – too much of certain unwanted harms may induce systemic failure.

Externalities exist because markets have an incomplete grasp of what humans value. Markets work off prices and not everything has – or can have – a price. As such, marketed values – or prices – exist amidst a broader “value field” of things that humans care about and which have an influence on our wellbeing.

Pigou’s proposition was an inconvenient truth for economics. It suggested that there are real limits to what conventional economics might say about matters of human value and, hence, to how far markets might serve human wellbeing. The inconvenience of his idea may be why Pigou is not better known – seemingly more tolerated, than celebrated.

http://www.paecon.net/PAEReview/issue95/Austin95.pdf

issue no. 95 – Real World Economics Review

download whole issue Is a capitalist steady-state economy possible? Is it better in socialism? Theodore P. Lianos The “ideal market” as a normative figure of thought Tanja von Egan-Krieger The rise of human capital theory Blair Fix How downward redistribution makes America richer Steve Roth The moral dilemma and asymmetric economic impact of COVID-19 Constantine E. Passaris Pigou and the dropped stitch of economics Duncan Austin Third world development: Simpler way critique of conventional theory and practice Ted Trainer The American Gordian Knot and Alexander the Great is not in sight John Komlos Unbridgeable: why political economists cannot accept capital as power Shimshon Bichler and Jonathan Nitzan A modest proposal for generating useful analyses of economies: a brief note Geoff Davies On the relevance of the Church-Turing Thesis for theoretical economics Ron Wallace From finance to climate crisis: An interview with Steve Keen Steve Keen and Jamie Morgan please support this open access journal

US stimulus: Setting a new agenda?

from C. P. Chandrasekhar

With President Joe Biden having put through Congress and signed a $1.9 trillion American Rescue Plan, the world is set to experience one of the biggest fiscal boosts of recent times, larger than that resorted to in response to the 2008 Global Financial Crisis. Together with the $900 billion short term stimulus announced by the earlier administration end-December 2020, the level of pandemic induced Federal spending in the US is estimated at 13 per cent of GDP this year. Coming after the $2 trillion of fiscal spending last year, under the CARES Act, this is indeed a gigantic vote for big government in response to the pandemic.

The money would immediately unleash spending, with the key components of the package being a sum of $1,400 being paid to each individual earning up to $75,000 per year, continued payment of federal jobless benefits of $300 a week till early September, increased tax credits for children, and money to accelerate vaccination, reopen schools (with ventilation and sanitation) and provide financial assistance to state and local governments. Besides supporting the unemployed and the middle class, the bill is likely to prove a boon for businesses, especially in the service sector, that expects to see activity resume as the vaccination drive covers a rising proportion of the adult population.

The decision to persist with the stimulus, which is likely to take the fiscal deficit close to the record levels touched during World War II, marks a move away from the fiscal conservatism and dependence on monetary policy instruments characteristic of the neoliberal era that began with Reagan.

Weekend Read – Flawed foundations of social sciences

from Asad Zaman

While the car is functioning well, one does not usually open up the engine. But when the car breaks down, it becomes necessary to open it up to see what is wrong. This is the situation today, as the failure of econometric models manifested itself in the global financial crisis, as well as many other occasions. The tragedy is that these same failed models continue to be used today; no serious alternatives have been developed. The reason for this is that the methodology used to develop these models is inherently flawed, and incapable of producing knowledge. It is necessary to understand the engine – the philosophy of science underlying statistics and econometrics – to see why this is so. A capsule summary outline of why it is necessary to discuss philosophy of science is given below:

Why are most textbooks still proprietary?

from Blair Fix

Today a rant about textbooks. Every year governments spend billions of dollars on public education, teaching students knowledge that was itself created by publicly funded research. Yet each year, university students must pay anew for this information by purchasing high-priced textbooks.

It needn’t be this way.

Most university textbooks are written by tenured (or tenure-track) professors. These are people who are paid by the public to generate and disseminate knowledge. Professors are expected to write academic articles for free. Why not add textbooks to the list?

With a stroke of the pen, universities could make writing open-access textbooks a part of tenure-track expectations. And if there are costs associated with creating textbooks, fine. We can have grants that cover these costs. It will cost money, yes. But the benefit of liberating information will be enormous.

The roaring revival of political economy

from Hardy Hanappi and Real-World Economics Review

For human societies, contrary to other species, the direction of their development is always co-determined by the way that their members produce a shared interpretation of their environment in order to achieve a common goal[1]. How to find a commonly shared view of our global society has become increasingly difficult in the decades since 1945. One reason certainly is the development of the global production system itself, which rapidly became so sophisticated and interwoven that even the most powerful global actors only can see a very small part of it. In most respects economic dynamics – those depending on different, semi-institutionalised market mechanisms – became intertwined with political dynamics – those where profit was to be made by simple exertion of power, or the threat to use it. The concept of political economy currently experiences a roaring revival. A second reason for our age of alienation is the surprisingly fast evolution of our global communication infrastructure.

Take a tour of CO2 since 800,000 years ago

Take a tour of CO2 since 800 thousand years ago. pic.twitter.com/PJonTpxrQI

— Kris Karnauskas (@OceansClimateCU) December 4, 2019