Let’s assume that there is a financial oligarchy which exerts strong political influence due to the vast amounts of money it controls. Let’s further assume that this financial oligarchy has succeeded in having financial markets deregulated and that this has enabled the financial industry to expand their business massively. Then, in some near or far future, their artfully constructed financial edifice breaks down, because it cannot be hidden any more that the accumulated claims cannot be serviced by the real economy That might be due, for example, to millions of people having bought overly expensive houses on credit without having the income necessary to service this debt. This is the kind of situation we are interested in.
If such a situation occurs, the leading figures of that financial oligarchy might recall that there has been a financial crisis in the 1930s of similar origin, and that during and after this crisis, laws were passed which broke the power of the financial oligarchy and taxed their profits steeply. They might remember that it took their forbearers decades to reestablish the favorable state of the late 1920s, with deregulated finance and very low taxes on incomes and estates, even huge ones.
from Peter Radford
Actually it’s McCloskey dissing what she calls leftish economists generally, although poor Piketty and his notorious book provides the moment she seizes to attack us misguided folk. Riven through with fundamental error and hopelessly soft we have all, apparently, misunderstood the great sweep of history.
The lesson from which is that all is swell if we just leave it alone. We need to set aside our petty and foolish concerns about the environment, and a whole host of other nonsense about market imperfections – and, yes, government imperfections too – we need to acknowledge the great wealth that surrounds us, and gorge on the pile of goodies that capitalism has brought us.
Oh, and we all need to shut about poverty. It doesn’t exist. Read more…
from David Ruccio
Back in August, James Surowiecki observed that the lack of an Ebola treatment was disturbing but predictable.
When pharmaceutical companies are deciding where to direct their R. & D. money, they naturally assess the potential market for a drug candidate. That means that they have an incentive to target diseases that affect wealthier people (above all, people in the developed world), who can afford to pay a lot. They have an incentive to make drugs that many people will take. And they have an incentive to make drugs that people will take regularly for a long time—drugs like statins.
This system does a reasonable job of getting Westerners the drugs they want (albeit often at high prices). But it also leads to enormous underinvestment in certain kinds of diseases and certain categories of drugs. Diseases that mostly affect poor people in poor countries aren’t a research priority, because it’s unlikely that those markets will ever provide a decent return. So diseases like malaria and tuberculosis, which together kill two million people a year, have received less attention from pharmaceutical companies than high cholesterol. Then, there’s what the World Health Organization calls “neglected tropical diseases,” such as Chagas disease and dengue; they affect more than a billion people and kill as many as half a million a year. One study found that of the more than fifteen hundred drugs that came to market between 1975 and 2004 just ten were targeted at these maladies. And when a disease’s victims are both poor and not very numerous that’s a double whammy.
Unfortunately, the best solution Surowiecki could offer was to reward companies for creating substantial public-health benefits by offering prizes for new drugs. Read more…
from Peter Radford
One of the central beliefs held by people who advocate a market based worldview is that, somehow, markets are apolitical, they are antiseptic, they are objective. This is nonsense. It is dangerous nonsense.
That markets work according to rules does not make them objective or even impersonal. Rules are human constructs. Ergo markets are simple extensions of base human attitudes and are thus fraught with all the frailties that encumber all human activity.
The sanitization of markets, by which I mean the constant effort to make them appear “natural” or “neutral” and thus “fair”, is an ideological cover that market ideologues desperately, and successfully, propagate. It is a cover to mask the consequences of this supposed naturalness and to give it the imprint of ethical cleanliness. After all if the outcomes of a market are simply those of nature working her course, who are we too argue?
Economists, or at least orthodox economists, are the great cheerleaders of this ruse to get us all to accept our fate. Over the course of the development of economics much work has been put in to the elucidation of the mechanics of markets. There is an overpowering sense of determinism in the result. Start here, crank the machinery, and let the outcomes just flop out. The market is such that any outcome is “correct”, because left untouched market machinery always hones in on the superior outcome. Thus the current distribution of income “must” be the correct one: the market created it and the market is always, unerringly, right. Read more…
from Edward Fullbrook
This appeared on my screen last night.
The Plutonomist Manifesto
- Because democracy is our worst enemy, we must work to convert every democracy in the world to a fake democracy.
- We, The One-percent, achieve these conversions of the system of government through three forms of targeted ownership.
a. Owning mass media, the internet and the Web.
b. Owning all major political parties. We achieve this ownership by making the electoral process extremely expensive, thereby making election dependent on our financial support.
c. Owning economists. In today’s world the economics profession determines what the electorate sees and does not see regarding the economy. Therefore it is imperative that we control it. We achieve this by maintaining remunerative revolving doors, by financing think tanks and university economics departments, by funding Trojan Horse organizations to co-opt non-One-percent economists, and by our Nobel Prize.
- In countries with real democratic traditions, plutonomy revolutions are achievable only by using Trojan Horse Methods (THMs). Subversion rather than violence or open campaigning is our means of conquest.
- The use of THMs means that sometimes we must be seen to give support to our opponents.
- We must be vigilant against leakages (for example, the Citigroup documents) of the existence of our program.
- When approached always give lip-service in support of democracy.
- The middleclass is both our means to success and our ultimate obstacle. It is they, not the poor, who have what we want. Hence the necessity of THMs.
- Ridicule all suggestions of our existence as the work of conspiracy theorists, and label people who support middleclass interests over ours as “leftists”.
- Channel funds to the emerging neo-fascists parties in the US and EU countries because their shenanigans camouflage our redistributions.
- We must work to expand and refine our armoury of redistribution mechanisms.
- The success we have had in the USA and the UK in redistributing middle-class income and wealth to ourselves must now in the next 15 years be duplicated across Western Europe, most especially in France and Germany.
- Our goal of receiving forty percent of income and owning 80 percent of wealth is achievable in most countries of the world my mid-century.
REDISTRIBUTION – REDISTRIBUTION – REDISTRIBUTION
The latest (February) issue of Harpers’ Magazine has an interesting discussion of Europe and the eurozone, “How Germany Reconquered Europe: the Euro and its Discontents.” Some of the big questions of European unity, democracy, and national sovereignty are debated in broad and direct terms not often seen in other analyses:
“The basic lesson of the past ten, twenty years – even of the past hundred years – is that the upper limit, not only of democracy but of political legitimacy, is the nation-state…” (John N. Gray, London School of Economics.)
Then there is the Franco-German relationship, which is central to the eurozone: Read more…
from Mary Mellor
Handbag economics is the common sense of our age. Public sectors are like households, they must live within their means, balance their books, cut their coat according to their cloth. Britain is to face more years of austerity, not because it is in recession, but in pursuit of the handbag ideal.
According to handbag economics there is only one breadwinner in the economy, the private sector. Only the private sector can determine the size of the public household budget. In this gendered analogy, the public-housewife must not ask for more house-keeping, or borrow more, to make ends meet. Most emphatically, the public-housewife must not set up a printing press in the back room to create her own money.
There is a shed, though, at the end of the garden beyond her reach. Read more…
from Mark Weisbrot
The rest of the world must have been fascinated at the spectacle of the U.S. government shutdown and threatened default on our public debt. Here is a country that not only has no public debt problem, but can pay any foreign creditors in its own currency – i.e. money that our central bank creates. Yet even this “exorbitant privilege” – as Barry Eichengreen titled his book about the dollar at the center of the international financial system – was not enough to assure the world that Republicans would not cause disruption by attempting the impossible.
As expected, the Republicans were defeated and got nothing for their efforts other than a record-low approval rating. The New Yorker’s satirist Andy Borowitz summed up their “noble cause” with a fictional quote from Ted Cruz: “The dream of keeping poor people from seeing a doctor must never die.”
The outcome was never much in doubt. The Tea Party and its friends do not control the majority of the Congress, nor could anyone expect House majority leader John Boehner to defy the Chamber of Commerce, the Business Roundtable, and the rest of America’s most powerful business lobbies after they made it clear that they would not stomach even a temporary, technical default on U.S. Treasury obligations. Indeed, it is testimony to the extremists’ base of support within their party – and their own stubbornness – that they made it as far as they did. Read more…
from Dean Baker
Doing policy work in Washington, I tend to be around people who are highly educated and think of themselves as very intelligent. Many of them think of ordinary Americans as being stupid and ill-informed. After all, they understand little about politics and the government; in their view this reflects a lack of intelligence.
It would be great if everyone were smarter (especially the people doing policy work), but the problem of an ill-informed population has at least as much to do with the failures of the highly educated people as the failures of the masses. Nowhere is this more obviously the case than with the federal budget.
Public opinion surveys consistently show the public is terribly confused about the budget. They hugely overestimate relatively small areas of spending, failing to recognize that popular programs like Social Security, Medicare, and Medicaid account for the largest portion of the budget, along with military spending.
For example, a 2011 CNN poll found that the typical person thought foreign aid accounted for 10 percent of the budget. The actual number is less than 1 percent. They thought public broadcasting accounted for 5 percent of the budget. The actual number is 0.012 percent. There were several other items where the typical person overestimated spending levels by a factor of 100 or more. Read more…
from Peter Radford
In this fast moving and ridiculously puerile crisis of ours we are being treated to an equally fast paced run-through of right wing fantasy. As each layer of their beliefs is peeled away and revealed as absurd, another is quickly located to defend, often for only a few hours, the destructive and profoundly anti-American path the Republicans are leading us down.
But: when is a fantasy not a fantasy, but a goal?
I am trying to think of an appropriate way to describe GOP policy at the moment, it clearly isn’t “policy” in any respectable sense of that word. I am not sure what to call the stream of ad hoc tactical adjustments spewing out from Republicans currently, but whatever they are they reveal basic truths we ought to consider carefully.
Today’s hot topic is that the default crisis is not a crisis at all. Apparently it is all made up to scare voters. It is, in other words, yet another in a long line of conspiracies cooked up by the Democrats to divert the honest folk of America from the imminent socialist/Islamist takeover being masterminded in the White House. The extremists are, naturally, our last line of defense against that ghastly prospect.
Well, no, but it sounds that way if you watch Fox News.
But there are now emerging a sizable number of more extreme Republicans arguing that potential US debt default is no big deal. Indeed some are arguing it will be healthy, not just here but worldwide. And, from what I can tell, they actually mean it. I call it the Republican “non-default” strategy.
Their thinking goes this way: Read more…
from Dean Baker
Much of the media, and certainly the Democrats, have been unfair to the Republicans in Congress in characterizing their decision to shut down the government as “outrageous,” “crazy,” or even “terrorism.” It is undoubtedly an extraordinary measure, but sometimes extraordinary measures are warranted.
Suppose we were back in 1968 when the United States had more than 500,000 soldiers in Vietnam and was bombing the country on a daily basis, killing thousands of people every week. How many people would view it as outrageous if Congress had voted to shut down the government until President Johnson agreed to end the war? In fact, most people might view the inconveniences associated with a shutdown, and the real pain endured by government workers, to be justified if it could bring an end to the killings in Vietnam.
The difference between shutting down the government to end an unjust war, or to advance any of the other great causes of recent decades, and what the Republicans are doing now is that the Republicans don’t have a great cause. They are trying to keep people from getting health care. This is the disaster the Republicans hope to prevent by shutting down the government. Read more…
from Peter Radford
The end, that is, of Reaganism.
The Republicans have shut down government because no one is taking their demand that health care reform is abandoned seriously.
In a nutshell the fight is over the part of reform that increases taxes on the top 1% of income earners, reduces subsidies to insurers within the Medicare system, and thus can afford to provide health care to tens of millions of previously uninsured people. That’s it. The Republicans failed to defeat these things during the law’s passage; the law stood up to challenge in the Supreme Court; and subsequently a presidential election was fought, with the winner being the advocate of the law. That’s pretty conclusive. The reform has been constitutionally and electorally approved.
But the extremists now running the Republican party think they can ignore all that. They abhor reform and so have taken to insurgency. Their defense of the wealthy to the detriment of the poor and the sick is open class warfare. It can be construed in no other way. Unless the extremists go through some radical change, their intransigence and defense of the privileged will lap over into a fight over the debt ceiling.
Which is odd, isn’t it? Because the privileged stand to lose the most when our credit worthiness is undermined. They are, after all, the holders of most of our collective wealth.
I see this in historical terms. Read more…
from Peter Radford
You may not be aware of the article that has created quite a storm on the New York Times website. It is about inequality at Harvard Business School and the insidious consequences of the emergence of a “class” system there.
If HBS is now afflicted by class issues and the social disaster of inequality, then we can assume the rest of the country is in worse shape. HBS is, of course, partly responsible for the inequality we now suffer from through its relentless production of clever people with great connections who exploit finance and consulting without adding on offsetting social value.
Disclaimer: I graduated from HBS in 1979. Things seem to have changed enormously since I was there. Sure we had our contingent of super privileged kids, but the bulk of our class seemed to me to be from pretty ordinary backgrounds. The obnoxious oppression of class was largely absent. At least we could ignore the super wealthy and the quasi aristocrats because they were too few to have much impact.
Since then things have changed. Read more…
from Peter Radford
Like many people I am perplexed by claims that federal spending has ‘exploded’ on Obama’s watch. The claim is generally made by someone on the right of center in politics and is stated as if it is a well known fact. So well known that no one can possibly refute it. The conversation is then meant to proceed immediately to what we can do about said ‘explosion’ and how we can restrain the Federal government.
The problem I have is factual.
Here is a chart of Federal spending from way back when:
from Dean Baker
Many people have been asking about the Justice Department’s priorities in the wake of the suicide of computer whiz and political activist Aaron Swartz. As has been widely reported, the Justice Department was pressing charges that carried several decades of prison time against Swartz. He was caught hacking M.I.T.’s computer system in an apparent effort to make large amounts of academic research freely available to the public.
The Justice Department’s determination to commit substantial time and resources to prosecuting Swartz presents a striking contrast to its see-no-evil attitude when it comes to financial fraud by the Wall Street banks. People should recognize that this is not just a rhetorical point. It is clear that the Justice Department opted to not pursue the sort of investigations that could have landed many high-level people at places like Goldman Sachs and Citigroup behind bars. Read more…
from Dean Baker
Treasury Secretary Timothy Geithner’s departure from the Obama Administration invites comparisons with Klemens von Metternich. Metternich was the foreign minister of the Austrian Empire who engineered the restoration of the old order and the suppression of democracy across Europe after the defeat of Napoleon. This was an impressive diplomatic feat given the popular contempt for Europe’s monarchical regimes. In the same vein, protecting Wall Street from the financial and economic havoc they brought upon themselves and the country was an enormous accomplishment.
Just to remind everyone, during his tenure as head of the New York Fed and then Treasury Secretary, most, if not all, of the major Wall Street banks would have collapsed if the government had not intervened to save them. This process began with the collapse of Bear Stearns, which was bought up by J.P. Morgan in a deal involving huge subsidies from the Fed. The collapse of Lehman Brothers, a second major investment bank, started a run on the three remaining investment banks that would have led to the collapse of Merrill Lynch, Morgan Stanley, and Goldman Sachs if the Fed, FDIC, and Treasury did not take extraordinary measures to save them. Read more…
from Peter Radford
No one knows exactly what went on, but this evening’s extraordinary melt down within the House Republican caucus is surely a historical moment.
Here’s the story:
Speaker Boehner has been negotiating a deal to resolve the so-called ‘fiscal cliff’ with President Obama. Set aside whether we think the economy has a debt or budget problem. It certainly has a manufactured fiscal policy problem. The reason the cliff is a rotten thing is that unless it dealt with it will induce a severe contraction in policy staring January 1st. The CBO forecasts a recession if we go over the cliff with GDP dropping by nearly 4.0% in the first quarter. Read more…
from Deniz Kellecioglu
About a year ago, while having coffee with friends in Addis Ababa, I postulated that the Eurozone would break up, probably by May, but certainly by September. Of course, I was not the only one offering such projections. But why did we miss the mark (so far)?
Economically, it does not make much sense to go on with the Euro, especially if we have the general populace at heart. Last Thursday, statistics from Eurostat confirmed that the Eurozone remains in recession. The day before that, millions of people across Europe, but predominantly in the most affected countries Portugal, Spain, Italy and Greece, took to the streets against austerity. As you already know, the unemployment figures are at record heights. Read more…
from Edward Fullbrook
The following two charts from http://www.the-crises.com/ compre the distribution of income in the United States in 2007 and England in the seventeenth century.