F Financial Sector Induced Systemic Instability of Economy

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Financial Sector Induced Systemic Instability of Economy

While I believe in usefulness of capital markets, it is clear that they are double edge sword and that banks "in a long run" tend to behave like sociopathic individuals. Mr. Capone may have something to say about danger of banks :-).That means that  growth of financial sector represents a direct threat to the stability of the society. Positive feedback loops creates one financial crisis after another with the increasing magnitude leading up to a collapse of financial system like happened in 1927 and 2008.

News Casino Capitalism Recommended Links  Stability is destabilizing: The idea of Minsky moment Corruption of Regulators Quiet coup
Neoliberalism as a New Form of Corporatism Principal-agent problem Numbers racket Criminal negligence in financial regulation Corruption of FED Invisible Hand Hypothesis
The “Too Big To Fail” Problem In Goldman Sachs we trust Citi - The bank that couldn’t shoot straight JPMorgan AIG collapse Lehman
Free Markets Newspeak as Opium for regulators Derivatives Lobby Corrupts Congress Lobbying and the Financial Crisis Control Fraud
(crisis of corporate governance)
Stock Market with buybacks as a Ponzi scheme Derivatives
Small government smoke screen Financial Bonuses as Money Laundering Corporatist Corruption: Systemic Fraud under Clinton-Bush-Obama Regime Corporatism   Financial obesity
Webliography of heterodox economists HFT Aleynikov vs. Goldman Sachs Casino Capitalism Dictionary Financial Humor Etc
  "Minsky's financial instability hypothesis depends critically on what amounts to a sociological insight. People change their minds about taking risks. They don't make a one-time rational judgment about debt use and stock market exposure and stick to it. Instead, they change their minds over time. And history is quite clear about how they change their minds. The longer the good times endure, the more people begin to see wisdom in risky strategies."

The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our Economic Future, by Robert Barbera

The flaw with Capitalism is that it creates its own positive feedback loop, snowballing to the point where the accumulation of wealth and power hurts people — eventually even those at the top of the food chain. ”

Uncle Billy Cunctator
In comment to Economic Donkeys

 
  Banks are a clear case of market failure and their employees at the senior level have basically become the biggest bank robbers of all time. As for basing pay on current revenues and not profits over extended periods of time, then that is a clear case of market failure !  
  The banksters have been able to sell the “talent” myth to justify their outsized pay because they are the only ones able to deliver the type of GDP growth the U.S. economy needs in the short term, even if that kills the U.S. economy in the long term. You’ll be gone, I’ll be gone.  
  Unfortunately, many countries go broke pursuing war, if not financially, then morally (are the two different? – this post suggests otherwise).

I occurs to me that the U.S. is also in that flock; interventions justified by grand cause built on fallacy, the alpha and omega of failure. Is the financial apparatchik (or Nomenklatura, a term I like which, as many from the Soviet era, succinctly describes aspects of our situation today) fated also to the trash heap, despite the best efforts of the Man of the hour, Ben Bernanke?

 

Introduction

While I believe in usefulness of capital markets, it is clear that they are double edge sword and that banks "in a long run" tend to behave like sociopathic individuals. Mr. Capone may have something to say about danger of banks :-).That means that growth of financial sector represents a direct threat to the stability of the society (Keynesianism and the Great Recession )

Without adult supervision, as it were, a financial sector that was already inherently unstable went wild. When the subprime assets were found to be toxic since they were based on mortgages on which borrowers had defaulted, highly indebted or leveraged banks that had bought these now valueless securities had little equity to repay their creditors or depositors who now came after them. This quickly led to their bankruptcy, as in the case of Lehman Brothers, or to their being bailed out by government, as was the case with most of the biggest banks. The finance sector froze up, resulting in a recession—a big one—in the real economy.

Neoliberal revolution, or, as Simon Johnson called it after "quite coup" (Atlantic), brought political power to the financial oligarchy deposed after the New Deal. Deregulation naturally followed, with especially big role played by corrupt Clinton administration.  Positive feedback loops creates one financial crisis after another with the increasing magnitude. "Saving and loans" crisis followed by dot-com crisis of  2000, which in turn followed by the collapse of financial system in 2008, which looks somewhat similar to what happened in 1927.  No prominent financial honcho, who was instrumental in creating "subprime crisis" was jailed.  Most remained filthy rich.

Unless the society puts severe limits on their actions like was done during New Deal,  financial firms successfully subvert the regulation mechanisms and take the society hostage.  But periodic purges with relocation of the most active promoters of "freedom for banks" (aka free market fundamentalism) under the smoke screen of "free market" promotion does not solve the problem of positive feedback loops that banks create by mere existence. That's difficult to do while neoliberal ideology and related neoclassical economy dominates the society thinking (via brainwashing), with universities playing especially negative role -- most of economics departments are captured by neoliberals who censor any heretics. So year after year brainwashing students enter the society without understanding real dangers that neoliberalism brought for them.  Including lack of meaningful employment opportunities.

Of course, most of high level officers of leading finance institutions which caused the crisis of 2008-2009 as a psychological type are as close to  gangsters as one can get. But there is something in their actions that does not depend on individual traits (although many of them definitely can be classified as psychopaths), and is more related to their social position.  This situation is somewhat similar to Bolsheviks coup d'état of 1917 which resulted in capturing Russia by this ideological sect.  And in this sense quite coupe of 1980 is also irreversible in the same sense as Bolsheviks revolution was irreversible:  the "occupation" of the country by a fanatical sect lasts until the population rejects the ideology with its (now apparent) utopian claims.

Bolshevism which lasted 75 years, spend in such zombie state the last two decades (if we assume 1991 as the year of death of Bolshevism, its ideology was dead much earlier -- the grave flaws in it were visible from late 60th, if not after the WWII).  But only  when their ideology was destroyed both by inability to raise the standard of living of the population and by the growing neoliberal ideology as an alternative (and a new, more powerful then Marxism high-demand cult) Bolsheviks started to lose the grip on their power in the country. As a result Bolsheviks lost the power only in 1991, or more correctly switched camps and privatized the country. If not inaptness of their last General Secretary, they probably could last more. In any case after the ideology collapsed, the USSR disintegrated (or more correctly turn by national elites, each of which wanted their peace of the pie).

The sad truth is that the mere growth of financial sector creates additional positive feedback loops and increases structural instability within both the financial sector itself and the society at large. Dynamic systems with strong positive feedback loops not compensated by negative feedback loops are unstable. As a result banks and other financial institution periodically generate a deep, devastating crisis. This is the meaning of famous Hyman Minsky phrase "stability is destabilizing".

In other words, financial apparatchiks (or Financial Nomenklatura, a term from the Soviet era, which succinctly describes aspects of our situation today) drive the country off the cliff because they do not have any countervailing forces, by the strength of their political influence and unsaturable greed. Although the following analogy in weaker then analogy with dynamic systems with positive feedback loops, outsized financial sector can be viewed in  biological terms as cancer.

Cancer, known medically as a malignant neoplasm, is a broad group of diseases involving unregulated cell growth. In cancer, cells divide and grow uncontrollably, forming malignant tumors, and invading nearby parts of the body. The cancer may also spread to more distant parts of the body through the lymphatic system or bloodstream. Not all tumors are cancerous; benign tumors do not invade neighboring tissues and do not spread throughout the body. There are over 200 different known cancers that affect humans.[1]

Like certain types of cancer they depend of weakening "tumor suppressor genes"  (via "Quiet coup" mechanism of acquiring dominant political power) which allow then to engage in uncontrolled growth, destroying healthy cells (and first of all local manufacturing).   

The other suspicion is the unchecked financialization always goes too far and the last N percent of financial activity absorbs much more resources (especially intellectual resources) and creates more potential instability than its additional efficiency-benefits (often zero or negative) can justify. It is hard to imagine that a Hedge Fund Operator of the Year does anything that is even remotely socially useful to justify his enormous (and lightly taxed) compensation. It is pure wealth redistribution up based on political domination of financial oligarchy.  Significant vulnerabilities  within the shadow banking system and derivatives are plain vanilla socially destructive. Yet they persist due to inevitable political power grab by financial oligarchy  (Quiet coup).

Again, I would like to stress that this problem of the oversized financial sector which produces one devastating crisis after another   is closely related to the problem of a positive feedback loops. And the society in which banks are given free hand inevitably degrades into "socialism for banks"  or "casino capitalism" -- a type of neoliberalism with huge inequality and huge criminality of top banking officers.  

Whether we can do without private banks is unclear, but there is sound evidence that unlike growth of manufacturing, private financial sector growth is dangerous for the society health and perverts society goals.  Like cult groups the financial world does a terrific job of "shunning" the principled individuals and suppressing dissent (by capturing and cultivating neoliberal stooges in all major university departments and press),  so self-destructing tendencies after they arise can't be stopped within the framework of neoliberalism. In a way financial firm is like sociopath inevitable produces its  trail of victims (and sociopaths might be useful in battles exactly due to the qualities such as ability to remain cool in dangerous situation, that make them dangerous in the normal course of events).

This tendency of society with unregulated or lightly regulated financial sector toward self-destruction was first formulated as "Minsky instability hypothesis" -- and outstanding intellectual achievement of American economic Hyman Minsky (September 23, 1919 – October 24, 1996). Who BTW was pretty much underappreciated (if not suppressed) during his lifetime because his views were different from  orthodox (and false) neoclassic economic theory which dominates US universities, Like flat Earth theory was enforce by Catholic church before, it is fiercely enforced by an army of well paid neoliberal economics, those Jesuits of modern era. Who prosecute heretics who question flat Earth theory even more efficiently then their medieval counterparts; the only difference is that they do not burn the literally, only figuratively ;-)

Minsky financial instability hypothesis

Former Washington University in St. Louis economics professor Hyman P. Minsky had predicted the Great Recession decades before it happened.  Hyman Minsky was a real student of the Great Depression, while Bernanke who widely is viewed as a scholar who studied the Great Depression, in reality was a charlatan, who just tried to explain the Great Depression from the positions of neo-classical economy. That's a big difference.

Minsky instability hypothesis ("stability is destabilizing" under capitalism) that emerged from his analysis of the Great Depression was based on intellectual heritage of three great thinkers in economics (my presentation is partially based on an outstanding lecture by Steve Keen Lecture 6 on Minsky, Financial Instability, the Great Depression & the Global Financial Crisis). We can talk about three source of influence, there authors writing of which touched the same subject from similar positions and were the base of Hyman Minsky great advance in understanding of mechanics of development of financial crisis under capitalism and the critical role of financial system in it (neoclassical economics ignores the existence of financial system in its analysis): 

  1. Karl Marx influence
  2. Irving Fisher influence
  3. Joseph Schumpeter influence

Karl Marx influence

Minsky didn't follow the conventional version of Marxism  . And it was dangerous for him to do so due to McCarthysm. Even mentioning of Marx might lead to strakism fromthe academy those years.  McCarthy and his followers in academy did not understand the difference between Marx great analysis of capitalism and his utopian vision of the future. Impliedly this witch hunt helped to establish hegemony of neoclassical economy in economic departments in the USA.

While Minsky did not cited Marx in his writings and did use Marx's Labor Theory of Value his thinking was definitely influenced by Marx’s critique of  finance. We now know that he read and admired the Capital. And that not accidental due to the fact that his parents were Mensheviks -- a suppressed after Bolshevik revolution more moderate wing of Russian Social Democratic Party that rejected the idea of launching the socialist revolution in Russia --  in their opinion Russia needed first to became a capitalist country and get rid of remnants of feudalism. They escaped from Soviet Russia when Mensheviks started to be prosecuted by Bolsheviks.

And probably the main influence on Minsky was not Marx's discussion  of finance in Volume I of Capital with a "commodity" model of money, but critical remarks scattered in   Volumes II & III (which were not edited by Marx by compiled posthumously by Engels), where he was really critical of big banks as well as Marx's earlier works (Grundrisse, Theories of Surplus Value) where Marx was scathing about finance:

"A high rate of interest can also indicate, as it did in 1857, that the country is undermined by the roving cavaliers of credit who can afford to pay a high interest because they pay it out of other people's pocket* (whereby, however, they help to determine the rate of interest  for all) and meanwhile they live in grand style on anticipated profits. 

Irving Fisher influence

The second source on which Minsky based his insights was Irving Fisher. Irving Fisher’s reputation destroyed by wrong predictions on stock market prices. In aftermath, developed theory to explain the crash and published it in his book  "The Debt Deflation Theory of Great Depressions". His main points are:

According to Fisher two key disequilibrium forces that push economic into the next economic crisis are debt and subsequent deflation

Joseph Schumpeter influence

Joseph Schumpeter was Joseph Schumpeter has more positive view of capitalism than the other two. He authored the theory of creative destruction as a path by which capitalism achieves higher and higher productivity. He capitalism as necessarily unstable, but for him this was a positive feature -- instability of capitalism the source of its creativity. His view of capitalism was highly dynamic and somewhat resembles the view of Marx (who also thought that capitalism destroys all previous order and create a new one):

Unlike Marx, who thought that the periodic crisis of overproduction  is the source of instability (as well as  gradual absolute impoverishment of workers), Minsky assumed that the key source of that instability of capitalist system is connected with the cycles of business borrowing and fractional bank lending, when "good times" lead to excessive borrowing leading to high leverage and overproduction and thus to eventual debt crisis (The Alternative To Neoliberalism ):

Minsky on capitalism:

The idea of Minsky moment is related to the fact that the fractional reserve banking periodically causes credit collapse when the leveraged credit expansion goes into reverse. And mainstream economists do not want to talk about the fact that increasing confidence breeds increased leverage. So financial stability breeds instability and subsequent financial crisis. All actions to guarantee a market rise, ultimately guarantee it's destruction because greed will always take advantage of a "sure thing" and push it beyond reasonable boundaries.  In other words, marker players are no rational and assume that it would be foolish not to maximize leverage in a market which is going up. So the fractional reserve banking mechanisms ultimately and ironically lead to over lending and guarantee the subsequent crisis and the market's destruction. Stability breed instability.

That means that fractional reserve banking based economic system with private players (aka capitalism) is inherently unstable. And first of all because  fractional reserve banking is debt based. In order to have growth it must create debt. Eventually the pyramid of debt crushes and crisis hit. When the credit expansion fuels asset price bubbles, the dangers for the financial sector and the real economy are substantial because this way the credit boom bubble is inflated which eventually burst. The damage done to the economy by the bursting of credit boom bubbles is significant and long lasting.

Blissex said...

«When credit growth fuels asset price bubbles, the dangers for the financial sector and the real economy are much more substantial.»

So M Minsky 50 years ago and M Pettis 15 years ago (in his "The volatility machine") had it right? Who could have imagined! :-)

«In the past decades, central banks typically have taken a hands-off approach to asset price bubbles and credit booms.»

If only! They have been feeding credit-based asset price bubbles by at the same time weakening regulations to push up allowed capital-leverage ratios, and boosting the quantity of credit as high as possible, but specifically most for leveraged speculation on assets, by allowing vast-overvaluations on those assets.

Central banks have worked hard in most Anglo-American countries to redistribute income and wealth from "inflationary" worker incomes to "non-inflationary" rentier incomes via hyper-subsidizing with endless cheap credit the excesses of financial speculation in driving up asset prices.

Not very hands-off at all.

Steve Keen is probably the most well know researcher who tried to creates model of capitalist economy based on Minsky work (  http://www.debtdeflation.com/blogs/manifesto/ )

John Kay in his January 5 2010 FT column very aptly explained the systemic instability of financial sector hypothesis: 

The credit crunch of 2007-08 was the third phase of a larger and longer financial crisis. The first phase was the emerging market defaults of the 1990s. The second was the new economy boom and bust at the turn of the century. The third was the collapse of markets for structured debt products, which had grown so rapidly in the five years up to 2007.

The manifestation of the problem in each phase was different – first emerging markets, then stock markets, then debt. But the mechanics were essentially the same. Financial institutions identified a genuine economic change – the assimilation of some poor countries into the global economy, the opportunities offered to business by new information technology, and the development of opportunities to manage risk and maturity mismatch more effectively through markets. Competition to sell products led to wild exaggeration of the pace and scope of these trends. The resulting herd enthusiasm led to mispricing – particularly in asset markets, which yielded large, and largely illusory, profits, of which a substantial fraction was paid to employees.

Eventually, at the end of each phase, reality impinged. The activities that once seemed so profitable – funding the financial systems of emerging economies, promoting start-up internet businesses, trading in structured debt products – turned out, in fact, to have been a source of losses. Lenders had to make write-offs, most of the new economy stocks proved valueless and many structured products became unmarketable. Governments, and particularly the US government, reacted on each occasion by pumping money into the financial system in the hope of staving off wider collapse, with some degree of success. At the end of each phase, regulators and financial institutions declared that lessons had been learnt. While measures were implemented which, if they had been introduced five years earlier, might have prevented the most recent crisis from taking the particular form it did, these responses addressed the particular problem that had just occurred, rather than the underlying generic problems of skewed incentives and dysfunctional institutional structures.

The public support of markets provided on each occasion the fuel needed to stoke the next crisis. Each boom and bust is larger than the last. Since the alleviating action is also larger, the pattern is one of cycles of increasing amplitude.

I do not know what the epicenter of the next crisis will be, except that it is unlikely to involve structured debt products. I do know that unless human nature changes or there is fundamental change in the structure of the financial services industry – equally improbable – there will be another manifestation once again based on naive extrapolation and collective magical thinking. The recent crisis taxed to the full – the word tax is used deliberately – the resources of world governments and their citizens. Even if there is will to respond to the next crisis, the capacity to do so may not be there.

The citizens of that most placid of countries, Iceland, now backed by their president, have found a characteristically polite and restrained way of disputing an obligation to stump up large sums of cash to pay for the arrogance and greed of other people. They are right. We should listen to them before the same message is conveyed in much more violent form, in another place and at another time. But it seems unlikely that we will.

We made a mistake in the closing decades of the 20th century. We removed restrictions that had imposed functional separation on financial institutions. This led to businesses riddled with conflicts of interest and culture, controlled by warring groups of their own senior employees. The scale of resources such businesses commanded enabled them to wield influence to create a – for them – virtuous circle of growing economic and political power. That mistake will not be easily remedied, and that is why I view the new decade with great apprehension. In the name of free markets, we created a monster that threatens to destroy the very free markets we extol.

While Hyman Minsky was the first clearly formulate the financial instability hypothesis, Keynes also understood this dynamic pretty well. He postulated that a world with a large financial sector and an excessive emphasis on the production of investment products creates instability both in terms of output and prices. In other words it automatically tends to generate credit and asset bubbles.  The key driver is the fact that financial professionals generally risk other people’s money and due to this fact have asymmetrical incentives:

This asymmetry is not a new observation of this systemic problem. Andrew Jackson noted it in much more polemic way long ago:

“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out.”

This asymmetrical incentives ensure that the financial system is structurally biased toward taking on more risk than what should be taken. In other words it naturally tend to slide to the casino model, the with omnipresent reckless gambling as the primary and the most profitable mode of operation while an opportunities last.  The only way to counter this is to throw sand into the wheels of financial mechanism:  enforce strict regulations, limit money supplies and periodically jail too enthusiastic bankers. The latter is as important or even more important as the other two because bankers tend to abuse "limited liability" status like no other sector.

Asset inflation over the past 10 years and the subsequent catastrophe incurred is a way classic behavior of dynamic system with strong positive feedback loop.  Such behavior does not depends of personalities of bankers or policymakers, but is an immanent property of this class of dynamic systems. And the main driving force here was deregulation. So its important that new regulation has safety feature which make removal of it more complicated and requiring bigger majority like is the case with constitutional issues.

Another fact was the fact that due to perverted incentives, accounting in the banks was fraudulent from the very beginning and it was fraudulent on purpose.  Essentially accounting in banks automatically become as bad as law enforcement permits. This is a classic case of control fraud and from prevention standpoint is make sense to establish huge penalties for auditors, which might hurt healthy institutions but help to ensure that the most fraudulent institution lose these bank charter before affecting the whole system.  With the anti-regulatory zeal of Bush II administration the level of auditing became too superficial, almost non-existent. I remember perverted dances with Sarbanes–Oxley when it was clear from the very beginning that the real goal is not to strengthen accounting but to earn fees and to create as much profitable red tape as possible, in perfect Soviet bureaucracy style.

Deregulation also increases systemic risk by influencing the real goals of financial organizations. At some point of deregulation process the goal of higher remuneration for the top brass becomes self-sustainable trend  and replaces all other goals of the financial organization. This is the essence of  Martin Taylor’s, the former chief executive of Barclays,  article FT.com - Innumerate bankers were ripe for a reckoning in the Financial Times (Dec 15, 2009), which is worth reading in its entirety:

City people have always been paid well relative to others, but megabonuses are quite new. From my own experience, in the mid-1990s no more than four or five employees of Barclays’ then investment bank were paid more than £1m, and no one got near £2m. Around the turn of the millennium across the market things began to take off, and accelerated rapidly – after a pause in 2001-03 – so that exceptionally high remuneration, not just individually, but in total, was paid out between 2004 and 2007.

Observers of financial services saw unbelievable prosperity and apparently immense value added. Yet two years later the whole industry was bankrupt. A simple reason underlies this: any industry that pays out in cash colossal accounting profits that are largely imaginary will go bust quickly. Not only has the industry – and by extension societies that depend on it – been spending money that is no longer there, it has been giving away money that it only imagined it had in the first place. Worse, it seems to want to do it all again.

What were the sources of this imaginary wealth?

In the last two of these the bank was not receiving any income, merely “booking revenues”. How could they pay this non-existent wealth out in cash to their employees? Because they had no measure of cash flow to tell them they were idiots, and because everyone else was doing it. Paying out 50 per cent of revenues to staff had become the rule, even when the “revenues” did not actually consist of money.

In the next phase instability is amplified by the way governments and central banks respond to crises caused by credit bubble: the state has powerful means to end a recession, but the policies it uses give rise to the next phase of instability, the next bubble…. When money is virtually free – or, at least, at 0.5 per cent – traders feel stupid if they don’t leverage up to the hilt. Thus previous bubble and crash become a dress rehearsal for the next.

Resulting self-sustaining "boom-bust" cycle is very close how electronic systems with positive feedback loop behave and   cannot be explained by neo-classical macroeconomic models. Like with electronic devices the financial institution in this mode are unable to provide the services that are needed.

As Minsky noted long ago (sited from Stephen Mihm  Why capitalism fails Boston Globe):

Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse.

...our whole financial system contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”

Minsky’s vision might have been dark, but he was not a fatalist; he believed it was possible to craft policies that could blunt the collateral damage caused by financial crises. But with a growing number of economists eager to declare the recession over, and the crisis itself apparently behind us, these policies may prove as discomforting as the theories that prompted them in the first place. Indeed, as economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready to reckon with the full implications of what he saw.

And he understood the roots of the current credit bubble much better that neoclassical economists like Bernanke: 
As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers - what [Minsky] called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further.

As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit.

Minsky’s financial instability hypothesis suggests that when optimism is high and ample funds are available for investment, investors tend to migrate from the safe hedge end of the Minsky spectrum to the risky speculative and Ponzi end. Indeed, in the current crisis, investors tried to raise returns by increasing leverage and switching to financing via short-term—sometimes overnight— borrowing (Too late to learn?):

In the church of Friedman, inflation was the ol' devil tempting the good folk; the 1980s seemed to prove that, let loose, it would cause untold havoc on the populace. But, as Barbera notes:

The last five major global cyclical events were the early 1990s recession - largely occasioned by the US Savings & Loan crisis, the collapse of Japan Inc after the stock market crash of 1990, the Asian crisis of the mid-1990s, the fabulous technology boom/bust cycle at the turn of the millennium, and the unprecedented rise and then collapse for US residential real estate in 2007-2008. All five episodes delivered recessions, either global or regional. In no case was there a significant prior acceleration of wages and general prices. In each case, an investment boom and an associated asset market ran to improbable heights and then collapsed. From 1945 to 1985, there was no recession caused by the instability of investment prompted by financial speculation - and since 1985 there has been no recession that has not been caused by these factors.
Thus, meet the devil in Minsky's paradise - "an investment boom and an associated asset market [that] ran to improbable heights and then collapsed".

According the Barbera, "Minsky's financial instability hypothesis depends critically on what amounts to a sociological insight. People change their minds about taking risks. They don't make a one-time rational judgment about debt use and stock market exposure and stick to it. Instead, they change their minds over time. And history is quite clear about how they change their minds. The longer the good times endure, the more people begin to see wisdom in risky strategies."

Current economy state can be called following Paul McCulley a "stable disequilibrium" very similar to a state  a sand pile.  All this pile of  stocks, debt instruments, derivatives, credit default swaps and God know corresponds to a  pile of sand that is on the verse of losing stability. Each financial player works hard to maximize their own personal outcome but the "invisible hand" effect in adding sand to the pile that is increasing systemic instability. According to Minsky, the longer such situation continues the more likely and violent an "avalanche".

The late Hunt Taylor wrote, in 2006:

"Let us start with what we know. First, these markets look nothing like anything I've ever encountered before. Their stunning complexity, the staggering number of tradable instruments and their interconnectedness, the light-speed at which information moves, the degree to which the movement of one instrument triggers nonlinear reactions along chains of related derivatives, and the requisite level of mathematics necessary to price them speak to the reality that we are now sailing in uncharted waters.

"... I've had 30-plus years of learning experiences in markets, all of which tell me that technology and telecommunications will not do away with human greed and ignorance. I think we will drive the car faster and faster until something bad happens. And I think it will come, like a comet, from that part of the night sky where we least expect it."

This is a gold age for bankers as Simon Johnson wrote in New Republic (The Next Financial Crisis ):

Banking was once a dangerous profession. In Britain, for instance, bankers faced “unlimited liability”--that is, if you ran a bank, and the bank couldn’t repay depositors or other creditors, those people had the right to confiscate all your personal assets and income until you repaid. It wasn’t until the second half of the nineteenth century that Britain established limited liability for bank owners. From that point on, British bankers no longer assumed much financial risk themselves.

In the United States, there was great experimentation with banking during the 1800s, but those involved in the enterprise typically made a substantial commitment of their own capital. For example, there was a well-established tradition of “double liability,” in which stockholders were responsible for twice the original value of their shares in a bank. This encouraged stockholders to carefully monitor bank executives and employees. And, in turn, it placed a lot of pressure on those who managed banks. If they fared poorly, they typically faced personal and professional ruin. The idea that a bank executive would retain wealth and social status in the event of a self-induced calamity would have struck everyone--including bank executives themselves--as ludicrous.

Enter, in the early part of the twentieth century, the Federal Reserve. The Fed was founded in 1913, but discussion about whether to create a central bank had swirled for years. “No one can carefully study the experience of the other great commercial nations,” argued Republican Senator Nelson Aldrich in an influential 1909 speech, “without being convinced that disastrous results of recurring financial crises have been successfully prevented by a proper organization of capital and by the adoption of wise methods of banking and of currency”--in other words, a central bank. In November 1910, Aldrich and a small group of top financiers met on an isolated island off the coast of Georgia. There, they hammered out a draft plan to create a strong central bank that would be owned by banks themselves.

What these bankers essentially wanted was a bailout mechanism for the aftermath of speculative crashes -- something more durable than J.P. Morgan, who saved the day in the Panic of 1907 but couldn’t be counted on to live forever. While they sought informal government backing and substantial government financial support for their new venture, the bankers also wanted it to remain free of government interference, oversight, or control.

Another destabilizing fact is so called myth of invisible hand which is closely related to the myth about market self-regulation. The misunderstood argument of Adam Smith [1776], the founder of modern economics, that free markets led to efficient outcomes, “as if by an invisible hand” has played a central role in these debates: it suggested that we could, by and large, rely on markets without government intervention. About "invisible hand" deification, see The Invisible Hand, Trumped by Darwin - NYTimes.com.

The concept of Minsky moment

The moment in the financial system when the quantity of debt turns into quality and produces yet another financial crisis is called Minsky moment. In other words the “Minsky moment” is the time when an unsustainable financial boom turns into uncontrollable collapse of financial markets (aka financial crash). The existence of Minsky moments is one of the most important counterargument against financial market self-regulation.  It also expose free market fundamentalists such as "former Maestro" Greenspan as charlatans. Greenspan actually implicitly admitted that he is and that it was he, who was the "machinist"  who helped to bring the USA economic train off the rails in 2008 via deregulation  and dismantling the New Deal installed safeguards. 

Here how it is explained by Stephen Mihm in Boston Globe in 2009 in the after math of 2008 financial crisis:

“Minsky” was shorthand for Hyman Minsky, an American macroeconomist who died over a decade ago.  He predicted almost exactly the kind of meltdown that recently hammered the global economy. He believed in capitalism, but also believed it had almost a genetic weakness. Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse.

In other words, the one person who foresaw the crisis also believed that our whole financial system contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”

Minsky believed it was possible to craft policies that could blunt the collateral damage caused by financial crises. As economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready to reckon with the full implications of what he saw.

Minsky theory was not well received due to powerful orthodoxy, born in the years after World War II, known as the neoclassical synthesis. The older belief in a self-regulating, self-stabilizing free market had selectively absorbed a few insights from John Maynard Keynes, the great economist of the 1930s who wrote extensively of the ways that capitalism might fail to maintain full employment. Most economists still believed that free-market capitalism was a fundamentally stable basis for an economy, though thanks to Keynes, some now acknowledged that government might under certain circumstances play a role in keeping the economy - and employment - on an even keel.

Economists like Paul Samuelson became the public face of the new establishment; he and others at a handful of top universities became deeply influential in Washington. In theory, Minsky could have been an academic star in this new establishment: Like Samuelson, he earned his doctorate in economics at Harvard University, where he studied with legendary Austrian economist Joseph Schumpeter, as well as future Nobel laureate Wassily Leontief.

But Minsky was cut from different cloth than many of the other big names. The descendent of immigrants from Minsk, in modern-day Belarus, Minsky was a red-diaper baby, the son of Menshevik socialists. While most economists spent the 1950s and 1960s toiling over mathematical models, Minsky pursued research on poverty, hardly the hottest subfield of economics. With long, wild, white hair, Minsky was closer to the counterculture than to mainstream economics. He was, recalls the economist L. Randall Wray, a former student, a “character.”

So while his colleagues from graduate school went on to win Nobel prizes and rise to the top of academia, Minsky languished. He drifted from Brown to Berkeley and eventually to Washington University. Indeed, many economists weren’t even aware of his work. One assessment of Minsky published in 1997 simply noted that his “work has not had a major influence in the macroeconomic discussions of the last thirty years.”

Yet he was busy. In addition to poverty, Minsky began to delve into the field of finance, which despite its seeming importance had no place in the theories formulated by Samuelson and others. He also began to ask a simple, if disturbing question: “Can ‘it’ happen again?” - where “it” was, like Harry Potter’s nemesis Voldemort, the thing that could not be named: the Great Depression.

In his writings, Minsky looked to his intellectual hero, Keynes, arguably the greatest economist of the 20th century. But where most economists drew a single, simplistic lesson from Keynes - that government could step in and micromanage the economy, smooth out the business cycle, and keep things on an even keel - Minsky had no interest in what he and a handful of other dissident economists came to call “bastard Keynesianism.”

Instead, Minsky drew his own, far darker, lessons from Keynes’s landmark writings, which dealt not only with the problem of unemployment, but with money and banking. Although Keynes had never stated this explicitly, Minsky argued that Keynes’s collective work amounted to a powerful argument that capitalism was by its very nature unstable and prone to collapse. Far from trending toward some magical state of equilibrium, capitalism would inevitably do the opposite. It would lurch over a cliff.

This insight bore the stamp of his advisor Joseph Schumpeter, the noted Austrian economist now famous for documenting capitalism’s ceaseless process of “creative destruction.” But Minsky spent more time thinking about destruction than creation. In doing so, he formulated an intriguing theory: not only was capitalism prone to collapse, he argued, it was precisely its periods of economic stability that would set the stage for monumental crises.

Minsky called his idea the “Financial Instability Hypothesis.” In the wake of a depression, he noted, financial institutions are extraordinarily conservative, as are businesses. With the borrowers and the lenders who fuel the economy all steering clear of high-risk deals, things go smoothly: loans are almost always paid on time, businesses generally succeed, and everyone does well. That success, however, inevitably encourages borrowers and lenders to take on more risk in the reasonable hope of making more money. As Minsky observed, “Success breeds a disregard of the possibility of failure.”

As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers - what he called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further. As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit.

Once that kind of economy had developed, any panic could wreck the market. The failure of a single firm, for example, or the revelation of a staggering fraud could trigger fear and a sudden, economy-wide attempt to shed debt. This watershed moment - what was later dubbed the “Minsky moment” - would create an environment deeply inhospitable to all borrowers. The speculators and Ponzi borrowers would collapse first, as they lost access to the credit they needed to survive. Even the more stable players might find themselves unable to pay their debt without selling off assets; their forced sales would send asset prices spiraling downward, and inevitably, the entire rickety financial edifice would start to collapse. Businesses would falter, and the crisis would spill over to the “real” economy that depended on the now-collapsing financial system.

From the 1960s onward, Minsky elaborated on this hypothesis. At the time he believed that this shift was already underway: postwar stability, financial innovation, and the receding memory of the Great Depression were gradually setting the stage for a crisis of epic proportions. Most of what he had to say fell on deaf ears. The 1960s were an era of solid growth, and although the economic stagnation of the 1970s was a blow to mainstream neo-Keynesian economics, it did not send policymakers scurrying to Minsky. Instead, a new free market fundamentalism took root: government was the problem, not the solution.

Moreover, the new dogma coincided with a remarkable era of stability. The period from the late 1980s onward has been dubbed the “Great Moderation,” a time of shallow recessions and great resilience among most major industrial economies. Things had never been more stable. The likelihood that “it” could happen again now seemed laughable.

Yet throughout this period, the financial system - not the economy, but finance as an industry - was growing by leaps and bounds. Minsky spent the last years of his life, in the early 1990s, warning of the dangers of securitization and other forms of financial innovation, but few economists listened. Nor did they pay attention to consumers’ and companies’ growing dependence on debt, and the growing use of leverage within the financial system.

By the end of the 20th century, the financial system that Minsky had warned about had materialized, complete with speculative borrowers, Ponzi borrowers, and precious few of the conservative borrowers who were the bedrock of a truly stable economy. Over decades, we really had forgotten the meaning of risk. When storied financial firms started to fall, sending shockwaves through the “real” economy, his predictions started to look a lot like a road map.

“This wasn’t a Minsky moment,” explains Randall Wray. “It was a Minsky half-century.”

Minsky is now all the rage. A year ago, an influential Financial Times columnist confided to readers that rereading Minsky’s 1986 “masterpiece” - “Stabilizing an Unstable Economy” - “helped clear my mind on this crisis.” Others joined the chorus. Earlier this year, two economic heavyweights - Paul Krugman and Brad DeLong - both tipped their hats to him in public forums. Indeed, the Nobel Prize-winning Krugman titled one of the Robbins lectures at the London School of Economics “The Night They Re-read Minsky.”

Today most economists, it’s safe to say, are probably reading Minsky for the first time, trying to fit his unconventional insights into the theoretical scaffolding of their profession. If Minsky were alive today, he would no doubt applaud this belated acknowledgment, even if it has come at a terrible cost. As he once wryly observed, “There is nothing wrong with macroeconomics that another depression [won’t] cure.”

But does Minsky’s work offer us any practical help? If capitalism is inherently self-destructive and unstable - never mind that it produces inequality and unemployment, as Keynes had observed - now what?

After spending his life warning of the perils of the complacency that comes with stability - and having it fall on deaf ears - Minsky was understandably pessimistic about the ability to short-circuit the tragic cycle of boom and bust. But he did believe that much could be done to ameliorate the damage.

To prevent the Minsky moment from becoming a national calamity, part of his solution (which was shared with other economists) was to have the Federal Reserve - what he liked to call the “Big Bank” - step into the breach and act as a lender of last resort to firms under siege. By throwing lines of liquidity to foundering firms, the Federal Reserve could break the cycle and stabilize the financial system. It failed to do so during the Great Depression, when it stood by and let a banking crisis spiral out of control. This time, under the leadership of Ben Bernanke - like Minsky, a scholar of the Depression - it took a very different approach, becoming a lender of last resort to everything from hedge funds to investment banks to money market funds.

Minsky’s other solution, however, was considerably more radical and less palatable politically. The preferred mainstream tactic for pulling the economy out of a crisis was - and is - based on the Keynesian notion of “priming the pump” by sending money that will employ lots of high-skilled, unionized labor - by building a new high-speed train line, for example.

Minsky, however, argued for a “bubble-up” approach, sending money to the poor and unskilled first. The government - or what he liked to call “Big Government” - should become the “employer of last resort,” he said, offering a job to anyone who wanted one at a set minimum wage. It would be paid to workers who would supply child care, clean streets, and provide services that would give taxpayers a visible return on their dollars. In being available to everyone, it would be even more ambitious than the New Deal, sharply reducing the welfare rolls by guaranteeing a job for anyone who was able to work. Such a program would not only help the poor and unskilled, he believed, but would put a floor beneath everyone else’s wages too, preventing salaries of more skilled workers from falling too precipitously, and sending benefits up the socioeconomic ladder.

While economists may be acknowledging some of Minsky’s points on financial instability, it’s safe to say that even liberal policymakers are still a long way from thinking about such an expanded role for the American government. If nothing else, an expensive full-employment program would veer far too close to socialism for the comfort of politicians. For his part, Wray thinks that the critics are apt to misunderstand Minsky. “He saw these ideas as perfectly consistent with capitalism,” says Wray. “They would make capitalism better.”

But not perfect. Indeed, if there’s anything to be drawn from Minsky’s collected work, it’s that perfection, like stability and equilibrium, are mirages. Minsky did not share his profession’s quaint belief that everything could be reduced to a tidy model, or a pat theory. His was a kind of existential economics: capitalism, like life itself, is difficult, even tragic. “There is no simple answer to the problems of our capitalism,” wrote Minsky. “There is no solution that can be transformed into a catchy phrase and carried on banners.”

It’s a sentiment that may limit the extent to which Minsky becomes part of any new orthodoxy. But that’s probably how he would have preferred it, believes liberal economist James Galbraith. “I think he would resist being domesticated,” says Galbraith. “He spent his career in professional isolation.”

Stephen Mihm is a history professor at the University of Georgia and author of “A Nation of Counterfeiters” (Harvard, 2007). © Copyright 2009 Globe Newspaper Company.

 

Some important albeit random (and overlapping) points about instability of financial system

The first thing to understand is that attempt to weaken positive feedback looks via regulation, approach that can be called  “regulation as a Swiss knife” does not work without law enforcement and criminal liability for bankers, as there is an obvious problem of corruption of regulators. In this sense the mechanism of purges might be the only one that realistically can work.

In other words it’s unclear who and how can prevents the capture of regulators as financial sector by definition has means to undermine any such efforts. One way this influence work is via lobbing for appointment of pro-financial sector people in key positions. If such "finance-sector-selected" Fed chairman does not like part of Fed mandate related to regulation it can simply ignore it as long as he is sure that he will be reappointed. That happened with Greenspan.  After such process started it became irreversible and only after a significant, dramatic shock to the system any meaningful changes can be instituted and as soon as the lessons are forgotten work on undermining them resumes.

In essence, the Fed is a political organization and Fed Chairman is as close to a real vice-president of the USA as one can get.  As such Fed Chairman serves the elite which rules that country, whether you call them financial oligarchy or some other name. Actually Fed Chairman is the most powerful unelected official in the USA. If you compare this position to the role of the Chairman of the Politburo  in the USSR you’ll might find some interesting similarities.

In other words it is impossible to prevent appointment of another Greenspan by another Reagan without changes in political power balance.  And the transition to banana republic that follows such appointment is irreversible even if the next administration water boards former Fed Chairman to help him to write his memoirs.  That means that you need to far-reaching reform of political system to be able to regulate financial industry and you need to understand that the measures adopted need vigilant protection as soon as the current crisis is a distant history.

Additional reading

Several other source of financial instability were pointed out by others:

There are some outstanding lectures and presentation on YouTube on this topic. Among them:

See an expended list at Webliography of heterodox economists

Dr. Nikolai Bezroukov


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[May 23, 2017] The recent news as for Rich Seth murder might take Trump probe in a somewhat different direction and put additional pressure of neoliberal, Pelosi-Clinton part of the party leadership

Notable quotes:
"... the recent news as for Rich Seth murder might take Trump probe in a somewhat different direction and put additional pressure of neoliberal, Pelosi-Clinton part of the party leadership. If half of what was recently reported is true, Clapper-Brennan "Intelligence assessment" looks more and more like Warren Commission report. ..."
"... ... Then, Newt Gingrich, on Fox News, says: " (Rich) was assassinated at 4 in the morning after having giving Wikileaks something like 53,000 emails and 17,000 attachments. Nobody's investigating that. And what does that tell you about what is going on?" ..."
May 23, 2017 | economistsview.typepad.com
RGC -> Fred C. Dobbs, May 23, 2017 at 08:27 AM
If Trump goes, Pence becomes president.

Pence is worse than Trump. And he is more likely to get two terms.

In the meantime, nothing gets fixed.

Anyone who wants single-payer, better jobs, etc. should focus on the 2018 elections and work for people who can oust people like Nancy Pelosi in the primaries and Republicans in the general.

libezkova, May 23, 2017 at 08:52 AM

"Pence is worse than Trump. And he is more likely to get two terms.In the meantime, nothing gets fixed."

True. Also the recent news as for Rich Seth murder might take Trump probe in a somewhat different direction and put additional pressure of neoliberal, Pelosi-Clinton part of the party leadership. If half of what was recently reported is true, Clapper-Brennan "Intelligence assessment" looks more and more like Warren Commission report.

http://dianawest.net/Home/tabid/36/EntryId/3559/A-Seth-Rich-Chronology-Part-1.aspx

Also at

http://www.unz.com/mwhitney/seth-rich-craig-murray-and-the-sinister-stewards-of-the-national-security-state/#comment-1880788

... Then, Newt Gingrich, on Fox News, says: " (Rich) was assassinated at 4 in the morning after having giving Wikileaks something like 53,000 emails and 17,000 attachments. Nobody's investigating that. And what does that tell you about what is going on?"

Well, we know that Kim's chances of attracting Congressional interest was just about nil, but then Sean Hannity invited Dotcom to discuss his evidence in the Seth Rich case on his shows.

Stay tuned. Public invitation Kim Dotcom to be a guest on radio and TV. #GameChanger Buckle up destroy Trump media. Sheep that u all are!!! https://t.co/3qLwXCGl6z

- Sean Hannity (@seanhannity) May 20, 2017

Most recently, he tweeted:

Complete panic has set in at the highest levels of the Democratic Party. Any bets when the kitchen sink is dumped on my head?? https://t.co/Zt2gIX4zyq
- Sean Hannity (@seanhannity) May 22, 2017

[May 22, 2017] Medical insurance coverage is measure of social security for nearly everyone amd as such is close to Four Freedoms that were articulated by FDR

Notable quotes:
"... Being able to access care is an important freedom as well ..."
"... Trump as candidate promised no cuts to Medicaid. But then he had to get the Paul Ryan seal of approval so it is a massive cut that will leave 10 million people uninsured: ..."
"... Republicans have been using free lunch economic theory to make increasingly bigger promises leading to Trump promising universal health care with no taxes or mandates that will give everyone many more choices on getting far more health care with it costing much less. Trump won by being more extreme and explicit in the free lunch promises the Republican started making with Reagan. ..."
"... It's just standard Reaganomics... the same propaganda (trickle-down & rising tides) & standard tax cuts for the rich based on supply side b.s. ..."
May 22, 2017 | economistsview.typepad.com

Sanjait, May 22, 2017 at 11:36 AM

This is an important concept that has been fought for but hasn't been well articulated by Dems since Four Freedoms.

ACA is an example. It provides insurance coverage for many and a measure of security for nearly everyone. It reduces the risk of living as an American, nominally limiting the "freedom" to benuninsurednor buy crappy insurance in exchange for giving everyone enhanced ability to access preventative and major medical care, even if low income or stricken with a pre-ex medical condition.

Being able to access care is an important freedom as well .

Dems really face planted politically trying to sell this notion, but now that it is under threat of being taken away, Americans suddenly realized they like it and think it is right that people should have this access.

pgl - , May 22, 2017 at 11:50 AM
Exactly. I wonder if the folks have this captured in their little freedom indices.
ilsm - , May 22, 2017 at 03:32 PM
my freedom index has nothing to do with hospital insurance, or NCA. DNC (as good as Cato's) freedom index very far right of Thoreau!
DrDick , May 22, 2017 at 03:32 PM
For conservatives, freedom means the freedom of the rich and corporations from taxes and restrictions on their actions and nothing else.
pgl , May 22, 2017 at 11:53 AM
Trump as candidate promised no cuts to Medicaid. But then he had to get the Paul Ryan seal of approval so it is a massive cut that will leave 10 million people uninsured:

https://www.washingtonpost.com/business/economy/trump-to-propose-big-cuts-to-safety-net-in-new-budget-this-week/2017/05/21/62c01f44-3e34-11e7-adba-394ee67a7582_story.html?utm_term=.01d130c2f913

More tax cuts for the rich! That is their entire agenda.

mulp - , May 22, 2017 at 12:44 PM
Progressives see conservatives as winning by hijacking the Republican Party and being more and more radical, making Congress totally incapable of doing anything and increasingly popular, and getting Trump elected with a minority of the vote to an environment where he can accomplish even less that very moderate Obama and a Democratic majority, and they want Democrats to become more like Republicans:

able to win power, but unable to deliver on anything.

Republicans have been using free lunch economic theory to make increasingly bigger promises leading to Trump promising universal health care with no taxes or mandates that will give everyone many more choices on getting far more health care with it costing much less. Trump won by being more extreme and explicit in the free lunch promises the Republican started making with Reagan.

Progressives want a Bernie elected making big free lunch promises.

It's not about delivering, but about winning.

TANSTAAFL

Longtooth , May 22, 2017 at 03:38 PM
It's just standard Reaganomics... the same propaganda (trickle-down & rising tides) & standard tax cuts for the rich based on supply side b.s.

[May 22, 2017] Making Russia a scapegoat for political tension connected with the crumbling of the neoliberal society due to austerity, inequality and impoverishment of the lower 80% of population

Notable quotes:
"... "Corporate media and the intelligence community are united in making the Russia Federation the scapegoat for the crumbling of the West that is due to austerity, inequality and impoverishment. If a world war breaks out, that is it." ..."
"... Donald Trump used alt-right messaging to get into the White House but he and his third-rate staff haven't the slightest clue of what gave rise to the deplorables in the first place and how to address the root [causes of] despair of the western working class. ..."
May 22, 2017 | economistsview.typepad.com

libezkova, May 22, 2017 at 03:58 PM

A comment from MoA contains an insightful observation

"Corporate media and the intelligence community are united in making the Russia Federation the scapegoat for the crumbling of the West that is due to austerity, inequality and impoverishment. If a world war breaks out, that is it."

http://www.moonofalabama.org/2017/05/the-special-council-investigation-will-be-bad-for-trump.html#c6a00d8341c640e53ef01b7c8f9d50c970b

VietnamVet | May 18, 2017 9:19:08 PM | 75

This is tragic. Corporate media and the intelligence community are united in making the Russia Federation the scapegoat for the crumbling of the West that is due to austerity, inequality and impoverishment.

If a world war breaks out, that is it. Donald Trump used alt-right messaging to get into the White House but he and his third-rate staff haven't the slightest clue of what gave rise to the deplorables in the first place and how to address the root [causes of] despair of the western working class.

They will blunder about in lost befuddlement until they vanish.

[May 21, 2017] Neoliberal Democrats seek to create the same tribablist/identity voting block on the left that the republicans have on the right

Notable quotes:
"... Neoliberal Democrats seek to create the same tribablist/identity voting block on the left that the republicans have on the right. The is why people like sanjait get totally spastic when progressives criticize the party. ..."
"... Problem I have with the corporatist democrats is they're trading away the working class gains of the new deal in order to appease the centrist Republicans. Meanwhile the Centrist Republicans are breaking towards the fascist right wing of the party. ..."
"... Corporatism and financialization are the cornerstones of wealth consolidation and political capture on the one hand and reduced competition, wages, and innovation on the other hand. ..."
May 21, 2017 | economistsview.typepad.com

Gibbon1 - , May 19, 2017 at 04:59 PM

The current Democratic Party was handed two golden opportunities and blew both of them. Obama blew the 2008 financial crisis. And Hillary Clinton blew the 2016 election.

If you have a tool and the tool it broken you try to fix it. One doesn't pretend there is nothing wrong. The difference between neoliberal democrats and progressives is they differ on what's wrong.

Neoliberal Democrats seek to create the same tribablist/identity voting block on the left that the republicans have on the right. The is why people like sanjait get totally spastic when progressives criticize the party.

Progressives seek to create an aggressive party that represents the interests of working class and petite bourgeoisie. That is why you see progressives get spastic when the corporate democrats push appeasement policies.

Gibbon1 - , May 20, 2017 at 12:38 PM
Problem I have with the corporatist democrats is they're trading away the working class gains of the new deal in order to appease the centrist Republicans. Meanwhile the Centrist Republicans are breaking towards the fascist right wing of the party.

So not only are working class people losing their gains, but those gains are being traded away for nothing.

RC AKA Darryl, Ron - , May 20, 2017 at 02:27 PM
My problem is that and more. We should have been headed in the opposite direction these last fifty years.

Public daycare and universal pre-K would have been a good idea in the sixties.

Now they are so long overdue that it is pathetic.

Corporatism and financialization are the cornerstones of wealth consolidation and political capture on the one hand and reduced competition, wages, and innovation on the other hand.

[May 21, 2017] Now we have a government dominated by Banking and Distribution, think Goldman Sacks and Walmart

Notable quotes:
"... Over the last thirty years the power of the Manufacturing and Infrastructure concerns has fallen dramatically. So now we have a government dominated by Banking and Distribution, think Goldman Sacks and Walmart. ..."
"... According to former CIA director Richard Helms, when Allen Dulles was tasked in 1946 to "draft proposals for the shape and organization of what was to become the Central Intelligence Agency," he recruited an advisory group of six men made up almost exclusively of Wall Street investment bankers and lawyers. ..."
"... Dulles himself was an attorney at the prominent Wall Street law firm, Sullivan and Cromwell. Two years later, Dulles became the chairman of a three-man committee which reviewed the young agency's performance. ..."
"... So we see that from the beginning the CIA was an exclusive Wall Street club. Allen Dulles himself became the first civilian Director of Central Intelligence in early 1953. ..."
"... The current Democratic Party was handed two golden opportunities and blew both of them. Obama blew the 2008 financial crisis. And Hillary Clinton blew the 2016 election. ..."
"... Neoliberal Democrats seek to create the same tribablist/identity voting block on the left that the republicans have on the right. The is why people like sanjait get totally spastic when progressives criticize the party. ..."
May 21, 2017 | economistsview.typepad.com

Gibbon1 , May 19, 2017 at 04:24 PM

Among the rich I think there were three groups based on where their wealth and interests laid.

Banking/Insurance industry.
Distribution/logistics.
Manufacturing and Infrastructure.

Over the last thirty years the power of the Manufacturing and Infrastructure concerns has fallen dramatically. So now we have a government dominated by Banking and Distribution, think Goldman Sacks and Walmart.

libezkova - , May 20, 2017 at 09:03 PM
"Over the last thirty years the power of the Manufacturing and Infrastructure concerns has fallen dramatically. So now we have a government dominated by Banking and Distribution, think Goldman Sacks and Walmart."

This trend does not apply to Military-industrial complex (MIC). MIC probably should be listed separately. Formally it is a part of manufacturing and infrastructure, but in reality it is closely aligned with Banking and insurance.

CIA which is the cornerstone of the military industrial complex to a certain extent is an enforcement arm for financial corporations.

Allen Dulles came the law firm that secured interests of Wall Street in foreign countries, see http://www.informationclearinghouse.info/article30605.htm )

According to former CIA director Richard Helms, when Allen Dulles was tasked in 1946 to "draft proposals for the shape and organization of what was to become the Central Intelligence Agency," he recruited an advisory group of six men made up almost exclusively of Wall Street investment bankers and lawyers.

Dulles himself was an attorney at the prominent Wall Street law firm, Sullivan and Cromwell. Two years later, Dulles became the chairman of a three-man committee which reviewed the young agency's performance.

The other two members of the committee were also New York lawyers. For nearly a year, the committee met in the offices of J.H. Whitney, a Wall Street investment firm.

According to Peter Dale Scott, over the next twenty years, all seven deputy directors of the agency were drawn from the Wall Street financial aristocracy; and six were listed in the New York social register.

So we see that from the beginning the CIA was an exclusive Wall Street club. Allen Dulles himself became the first civilian Director of Central Intelligence in early 1953.

The prevalent myth that the CIA exists to provide intelligence information to the president was the promotional vehicle used to persuade President Harry Truman to sign the 1947 National Security Act, the legislation which created the CIA.iv

But the rationale about serving the president was never more than a partial and very imperfect truth...

Gibbon1 - , May 19, 2017 at 04:59 PM
The current Democratic Party was handed two golden opportunities and blew both of them. Obama blew the 2008 financial crisis. And Hillary Clinton blew the 2016 election.

If you have a tool and the tool it broken you try to fix it. One doesn't pretend there is nothing wrong.

The difference between neoliberal democrats and progressives is they differ on what's wrong.

Neoliberal Democrats seek to create the same tribablist/identity voting block on the left that the republicans have on the right. The is why people like sanjait get totally spastic when progressives criticize the party.

Progressives seek to create an aggressive party that represents the interests of working class and petite bourgeoisie. That is why you see progressives get spastic when the corporate democrats push appeasement policies.

[May 21, 2017] CIA is the cornerstone of the military industrial complex and, to a certain extent, an enforcement arm for financial corporations

May 21, 2017 | economistsview.typepad.com

DrDick, May 19, 2017 at 04:23 PM

The same as every other Republican since Eisenhower, lie to them.
Gibbon1, May 19, 2017 at 04:24 PM
Among the rich I think there were three groups based on where their wealth and interests laid.

Banking/Insurance industry.
Distribution/logistics.
Manufacturing and Infrastructure.

Over the last thirty years the power of the Manufacturing and Infrastructure concerns has fallen dramatically. So now we have a government dominated by Banking and Distribution, think Goldman Sacks and Walmart.

libezkova, May 20, 2017 at 09:03 PM
"Over the last thirty years the power of the Manufacturing and Infrastructure concerns has fallen dramatically. So now we have a government dominated by Banking and Distribution, think Goldman Sacks and Walmart."

This trend does not apply to Military-industrial complex (MIC). MIC probably should be listed separately. Formally it is a part of manufacturing and infrastructure, but in reality it is closely aligned with Banking and insurance.

CIA which is the cornerstone of the military industrial complex to a certain extent is an enforcement arm for financial corporations.

Allen Dulles came the law firm that secured interests of Wall Street in foreign countries, see http://www.informationclearinghouse.info/article30605.htm )

According to former CIA director Richard Helms, when Allen Dulles was tasked in 1946 to "draft proposals for the shape and organization of what was to become the Central Intelligence Agency," he recruited an advisory group of six men made up almost exclusively of Wall Street investment bankers and lawyers.

Dulles himself was an attorney at the prominent Wall Street law firm, Sullivan and Cromwell. Two years later, Dulles became the chairman of a three-man committee which reviewed the young agency's performance.

The other two members of the committee were also New York lawyers.i For nearly a year, the committee met in the offices of J.H. Whitney, a Wall Street investment firm.ii

According to Peter Dale Scott, over the next twenty years, all seven deputy directors of the agency were drawn from the Wall Street financial aristocracy; and six were listed in the New York social register.iii

So we see that from the beginning the CIA was an exclusive Wall Street club. Allen Dulles himself became the first civilian Director of Central Intelligence in early 1953.

The prevalent myth that the CIA exists to provide intelligence information to the president was the promotional vehicle used to persuade President Harry Truman to sign the 1947 National Security Act, the legislation which created the CIA.iv

But the rationale about serving the president was never more than a partial and very imperfect truth...

[May 21, 2017] The Connection Between Finance and Politics Has Been Under-Researched for Years

May 21, 2017 | economistsview.typepad.com

likezkova, May 20, 2017 at 11:22 AM

A very interesting and important article: The Connection Between Finance and Politics Has Been Under-Researched for Years (https://promarket.org/connection-finance-politics2/ )

That was my point for a long time. Inability to challenge the underlying assumptions of the neoclassical economics and current neoliberal polices (such as Washington consensus) sooner of later backfire both in economics and politics, because politics and economics are intrinsically connected.

to the extent that "pure economics" is a pseudo-science (with bunch of complex mathematical masturbations, much like geocentric theory of movement of planets; which actually did predicted certain movements of plants accurately. using overcomplicated math stuff -- epicycles)

But political posturing often prevent such a reevaluation, even when people understand that something is wrong with the current state of economics.

Much like that fact that the USA pretentions of the world hegemony make deviations from pre-existing policies a sign of "weakness". But is a dialectical way, the obsessive desire to project strength is a serious weakness in itself ;-)

And it looks like this inability and lack of desire to challenge the fundamental assumptions is a very serious problem not only with the US elite, but with the American society as a whole.

http://www.imdb.com/title/tt0104257/quotes

Col. Jessep: [from the witness stand] *You want answers?*

Kaffee: *I want the truth!*

Col. Jessup: [from the witness stand] *You can't handle the truth!*

Emong other things it led to the economic policies that on "being disastrous" scale are probably close the policies that led to Iraq war (remember neocons boasting before this war that we will be greeted with flowers and the cost will be minimal and democracy will flourish in Iraq). The results of outsourcing of manufacturing is very similar to the real result obtains due to the Iraq war.

So there is an important question that the article missed. Can the American elite face the truth?

That answer is: "No". That's why neoclassical economics while discredited as a theory remain dominant as a civil religion of neoliberalism, indoctrination into which is a prerequisite to obtaining an academic degree, and students are indoctrinated into this this bunch of mathiness each year. Compare with Steve Keen "Debunking economics" ( https://www.amazon.com/Debunking-Economics-Revised-Expanded-Dethroned/dp/1848139926 ). Much like Marxism was obligatory in the USSR and can't graduate without passing exams on Marxist political economy.

But, truth be told, neoclassical economics has a strong political undercurrent because historically it emerged (like neoliberalism in late 30th early 40th) as an alternative to Marxism. And to certain extent it did has its value while Marxism and Marxist theory of value were not discredited (that means up to late 40th, early 60th).

Another point is that the US neoliberal elite demonstrated willingness and ability to engage in self-defeating behavior because they do not want to look weak or challenge the postulated of neoliberalism. That's the same behavior the Politburo was engaged in the USSR.

I would shy from using the term "decline od neoliberalism" because it has a flavor of "doom and gloom" (and haw we can speak about decline if a realistic alternative does not exist?), but neoliberalism really faces the crisis of confidence. Neoliberal myths such a "Greed is good", "Casino capitalism is virtuous", "Entrepreneurship is the ultimate value and the source of material reward", "free market", "free trade", "labor market", "poor are guilty of their own fate because they lack responsibility", "rising stock market tide lifts all boats", etc are dispelled.

Promises of "prosperity for all" are not delivered (at least to the lower 80% of population.)

Basically the same situation that existed with Brezhnev socialism in the USSR with the communist ideology stating with 70th.

Instead of the USSR alcoholism epidemic we have opioids and meth epidemic with the same or similar social roots.

Add to this several wars (or more correctly occupations of the countries) going on and resources wasted on those (mostly unwinnable) wars (with the recent myth that "counterinsurgency" tactics will bring the USA the success in Afghanistan -- David Petraeus' myth -- http://www.truth-out.org/news/item/12997-how-petraeus-created-the-myth-of-his-success, https://www.scribd.com/document/67519776/Puncturing-the-Counterinsurgency-Myth-Britain-and-Irregular-Warfare-in-the-Past-Present-and-Future ) which also nobody in the establishment has the courage of challenging and you get the picture. It's not pretty.

That worldview had derived from this conviction that American power implies commitment to global hegemony, and this commitment expressed the nation's enduring devotion to its founding ideals of freedom and democracy.

That also means that election of Trump will not result in proper actions that can change the course of "battleship America" and can rectify the current difficulties. Much like the election of Barack Obama before him.

[May 21, 2017] Note how quickly the price of oil fell, when the objective was to economically harm revenues of the gas station masquerading as a nation

Notable quotes:
"... Note how quickly the price of oil fell, when the objective was to economically harm revenues of the "gas station masquerading as a nation" (as McCain called his enemy), Russia. They wouldn't do that to benefit ordinary Americans, though they could have, long ago. ..."
"... And how quickly they were ready to export our own domestic oil surplus, and ordered laws be passed to do it, rather than have it accrue to the Americans to whom it really belongs. ..."
"... No, those "American Interests" are not the same as the interests of the millions of American people. ..."
"... Believe it or not, the CEOs of Exxon-Mobil, Shell or any other multinational hyper corporation don't consider what our opinions are, in the least, unless it creates a PR nightmare, in which case lawyers and liars are dispatched to distract ..."
May 21, 2017 | www.theamericanconservative.com

Fran Macadam, May 8, 2017 at 6:31 pm

"'Nor are these US interests that are of such geopolitical importance to politicians, congruent with the interests of hundreds of millions the actual American people.

"Unless those people want 'cheap' oil ?"

Note how quickly the price of oil fell, when the objective was to economically harm revenues of the "gas station masquerading as a nation" (as McCain called his enemy), Russia. They wouldn't do that to benefit ordinary Americans, though they could have, long ago.

And how quickly they were ready to export our own domestic oil surplus, and ordered laws be passed to do it, rather than have it accrue to the Americans to whom it really belongs.

No, those "American Interests" are not the same as the interests of the millions of American people.

Believe it or not, the CEOs of Exxon-Mobil, Shell or any other multinational hyper corporation don't consider what our opinions are, in the least, unless it creates a PR nightmare, in which case lawyers and liars are dispatched to distract.

[May 21, 2017] This week US bombed militia in Syria linked to Iran, Trump got a medal for providing air support for al Qaeda from their contributors.

Notable quotes:
"... In Riyadh, Mr. Trump is viewed as a refreshing change from President Barack Obama, who was viewed with disdain in the wake of the Iranian nuclear deal that Mr. Obama brokered in 2015. ... ..."
May 21, 2017 | economistsview.typepad.com

Fred C. Dobbs, May 20, 2017 at 09:46 AM

Trump Gets a Gold Medal as Welcome From Saudi King https://nyti.ms/2rCfpc5
NYT - MICHAEL D. SHEAR and PETER BAKER - MAY 20, 2017

... .. ...

Flanked by Saudi military personnel standing at attention and alternating Saudi and American flags, Mr. Trump and the king exchanged a brief handshake and a few pleasantries as trumpets blared, cannons boomed and seven Saudi jets streaked through the sky, streaming red, white and blue smoke.

"Very happy to see you," the king said. "It's a great honor," Mr. Trump replied, before he was offered a bouquet of flowers from Saudi girls.

The two leaders posed for photos while seated in the Royal Hall at the airport's terminal before getting into a motorcade to head to a series of meetings. Aides said Mr. Trump had spent most of the flight from Washington, which took 12 hours and 20 minutes, meeting with staff, reading newspapers and working on his speech. He got very little sleep, they said.

In Riyadh, Mr. Trump is viewed as a refreshing change from President Barack Obama, who was viewed with disdain in the wake of the Iranian nuclear deal that Mr. Obama brokered in 2015. ...

Related:

With Harleys and Hamburgers, Saudis Salute US on Trump's Visit https://nyti.ms/2qF569M
NYT - BEN HUBBARD - MAY 20, 2017

(cycle parade video at link)

RIYADH, Saudi Arabia - There was neither beer, nor tattoos nor women at the biker rally in Saudi Arabia's capital on Friday night. But among the hundreds of men riding on roaring Harley Davidsons and sporting leather vests, there was overwhelming excitement about the incoming visitor: President Trump. ...

Saudi Arabia prepared an enormous reception for Mr. Trump, who landed in the capital, Riyadh, on Saturday morning on the first foreign trip of his presidency. Billboards with his face next to that of King Salman, the Saudi monarch, adorned highways around the capital, miles of which were lined with Saudi and American flags.

The Saudis planned such an opulent greeting for Mr. Trump to emphasize the depth of their commitment to the United States and to persuade him to deepen the partnership to fight terrorism, confront Iran and enhance economic ties. ...

ilsm, May 20, 2017 at 12:46 PM
This week US bombed militia in Syria linked to Iran, Trump got a "medal" for providing air support for al Qaeda from their contributors.

[May 21, 2017] Taibbi on Hillary

Notable quotes:
"... Hillary not only voted for the Iraq War, but offered a succession of ridiculous excuses for her vote. Remember, this was one of the easiest calls ever. A child could see that the Bush administration's fairy tales about WMDs and Iraqi drones spraying poison over the capital (where were they going to launch from, Martha's Vineyard?) were just that, fairy tales. ..."
"... Yet Hillary voted for the invasion for the same reason many other mainstream Democrats did: They didn't want to be tagged as McGovernite peaceniks. The new Democratic Party refused to be seen as being too antiwar, even at the cost of supporting a wrong one. ..."
"... But that's faulty thinking. My worry is that Democrats like Hillary have been saying, "The Republicans are worse!" for so long that they've begun to believe it excuses everything. It makes me nervous to see Hillary supporters like law professor Stephen Vladeck arguing in the New York Times that the real problem wasn't anything Hillary did, but that the Espionage Act isn't "practical." ..."
"... Young people don't see the Sanders-Clinton race as a choice between idealism and incremental progress. The choice they see is between an honest politician, and one who is so profoundly a part of the problem that she can't even see it anymore. ..."
"... "new Democratic Party" is lined up with the neocons. ..."
"... Bill put Strobe Talbot and Mrs Kagan in senior positions in 1993! Hillary voted comfortably with Paul Wolfowitz ands her internal neocon. While Obama used his peace prize speech to tell the world he would decide who should run sovereign nations. 26000 bombs in 7 diverse countries in one year when the US is not in any declared war. ..."
"... "new Democratic Party" is neocon foreign policy and $500B for the pentagon each year not counting the bombing costs. "new Democratic Party" also armed ISIS until they "went off the ranch" and broke the promise they made to the US' spooks 'not to shoot at people US liked.' ..."
May 20, 2017 | economistsview.typepad.com

Christopher H. , May 20, 2017 at 10:39 AM

You linked to Matt Taibbi's on Roger Ailes.

Here's Taibbi on Hillary. Make sure you read all of it.

http://www.rollingstone.com/politics/news/why-young-people-are-right-about-hillary-clinton-20160325

Why Young People Are Right About Hillary Clinton
Listening to the youth vote doesn't always lead to disaster

By Matt Taibbi
March 25, 2016

... ... ...

.. the millions of young voters that are rejecting Hillary's campaign this year are making a carefully reasoned, even reluctant calculation about the limits of the insider politics both she and her husband have represented.

For young voters, the foundational issues of our age have been the Iraq invasion, the financial crisis, free trade, mass incarceration, domestic surveillance, police brutality, debt and income inequality, among others.

And to one degree or another, the modern Democratic Party, often including Hillary Clinton personally, has been on the wrong side of virtually all of these issues.

Hillary not only voted for the Iraq War, but offered a succession of ridiculous excuses for her vote. Remember, this was one of the easiest calls ever. A child could see that the Bush administration's fairy tales about WMDs and Iraqi drones spraying poison over the capital (where were they going to launch from, Martha's Vineyard?) were just that, fairy tales.

Yet Hillary voted for the invasion for the same reason many other mainstream Democrats did: They didn't want to be tagged as McGovernite peaceniks. The new Democratic Party refused to be seen as being too antiwar, even at the cost of supporting a wrong one.

It was a classic "we can't be too pure" moment. Hillary gambled that Democrats would understand that she'd outraged conscience and common sense for the sake of the Democrats' electoral viability going forward. As a mock-Hillary in a 2007 Saturday Night Live episode put it, "Democrats know me . They know my support for the Iraq War has always been insincere."

This pattern, of modern Democrats bending so far back to preserve what they believe is their claim on the middle that they end up plainly in the wrong, has continually repeated itself.

Take the mass incarceration phenomenon. This was pioneered in Mario Cuomo's New York and furthered under Bill Clinton's presidency, which authorized more than $16 billion for new prisons and more police in a crime bill.

As The New Jim Crow author Michelle Alexander noted, America when Bill Clinton left office had the world's highest incarceration rate, with a prison admission rate for black drug inmates that was 23 times 1983 levels. Hillary stumped for that crime bill, adding the Reaganesque observation that inner-city criminals were "super-predators" who needed to be "brought to heel."

You can go on down the line of all these issues. Trade? From NAFTA to the TPP, Hillary and her party cohorts have consistently supported these anti-union free trade agreements, until it became politically inexpedient. Debt? Hillary infamously voted for regressive bankruptcy reform just a few years after privately meeting with Elizabeth Warren and agreeing that such industry-driven efforts to choke off debt relief needed to be stopped.

Then of course there is the matter of the great gobs of money Hillary has taken to give speeches to Goldman Sachs and God knows whom else. Her answer about that - "That's what they offered" - gets right to the heart of what young people find so repugnant about this brand of politics.

One can talk about having the strength to get things done, given the political reality of the times. But one also can become too easily convinced of certain political realities, particularly when they're paying you hundreds of thousands of dollars an hour.

Is Hillary really doing the most good that she can do, fighting for the best deal that's there to get for ordinary people?

Or is she just doing something that satisfies her own definition of that, while taking tens of millions of dollars from some of the world's biggest jerks?

I doubt even Hillary Clinton could answer that question. She has been playing the inside game for so long, she seems to have become lost in it. She behaves like a person who often doesn't know what the truth is, but instead merely reaches for what is the best answer in that moment, not realizing the difference.

This is why her shifting explanations and flippant attitude about the email scandal are almost more unnerving than the ostensible offense. She seems confident that just because her detractors are politically motivated, as they always have been, that they must be wrong, as they often were.

But that's faulty thinking. My worry is that Democrats like Hillary have been saying, "The Republicans are worse!" for so long that they've begun to believe it excuses everything. It makes me nervous to see Hillary supporters like law professor Stephen Vladeck arguing in the New York Times that the real problem wasn't anything Hillary did, but that the Espionage Act isn't "practical."

If you're willing to extend the "purity" argument to the Espionage Act, it's only a matter of time before you get in real trouble. And even if it doesn't happen this summer, Democrats may soon wish they'd picked the frumpy senator from Vermont who probably checks his restaurant bills to make sure he hasn't been undercharged.

But in the age of Trump, winning is the only thing that matters, right? In that case, there's plenty of evidence suggesting Sanders would perform better against a reality TV free-coverage machine like Trump than would Hillary Clinton. This would largely be due to the passion and energy of young voters.

Young people don't see the Sanders-Clinton race as a choice between idealism and incremental progress. The choice they see is between an honest politician, and one who is so profoundly a part of the problem that she can't even see it anymore.

They've seen in the last decades that politicians who promise they can deliver change while also taking the money, mostly just end up taking the money.

And they're voting for Sanders because his idea of an entirely voter-funded electoral "revolution" that bars corporate money is, no matter what its objective chances of success, the only practical road left to break what they perceive to be an inexorable pattern of corruption.

Young people aren't dreaming. They're thinking. And we should listen to them.

ilsm - , May 20, 2017 at 12:42 PM
"new Democratic Party" is lined up with the neocons.

Bill put Strobe Talbot and Mrs Kagan in senior positions in 1993! Hillary voted comfortably with Paul Wolfowitz ands her internal neocon. While Obama used his peace prize speech to tell the world he would decide who should run sovereign nations. 26000 bombs in 7 diverse countries in one year when the US is not in any declared war.

"new Democratic Party" is neocon foreign policy and $500B for the pentagon each year not counting the bombing costs. "new Democratic Party" also armed ISIS until they "went off the ranch" and broke the promise they made to the US' spooks 'not to shoot at people US liked.'

Sadly, Bernie would be no George McGovern!

[May 20, 2017] Outsourcing higher wage work is more profitable than outsourcing lower wage work

Notable quotes:
"... Baker correctly diagnoses the impact of boomers aging, but there is another effect - "knowledge work" and "high skill manufacturing" is more easily outsourced/offshored than work requiring a physical presence. ..."
"... That's what happened with American IT. ..."
May 20, 2017 | economistsview.typepad.com
cm, May 20, 2017 at 04:51 PM
Baker correctly diagnoses the impact of boomers aging, but there is another effect - "knowledge work" and "high skill manufacturing" is more easily outsourced/offshored than work requiring a physical presence.

Also outsourcing "higher wage" work is more profitable than outsourcing "lower wage" work - with lower wages also labor cost as a proportion of total cost tends to be lower (not always).

And outsourcing and geographically relocating work creates other overhead costs that are not much related to the wages of the local work replaced - and those overheads are larger in relation to lower wages than in relation to higher wages.

libezkova -> cm... May 20, 2017 at 08:34 PM

"Also outsourcing "higher wage" work is more profitable than outsourcing "lower wage" work"

That's what happened with American IT.

[May 20, 2017] Demand, Secular Stagnation and the Vanishing Middle-Class

Notable quotes:
"... The anger and despair crystalized into a 'groundswell of discontent' among those left behind, which likely helped to propel Donald Trump into the White House on the promise of 'making America great again'. ..."
"... That's my feeling too about one of the key factor that propelled Trump -- "the anger and despair". For some, voting for Trump was a showing middle finger to Washington establishment. ..."
"... Thus, the battle lines between neoliberal and a "social contract" approach to employment are clearly cut. So far Wall Street, the City, and other worldwide "epicenters for free-market discipline," are winning the battle. According to "free market discipline" dogma, if you are hired at below living wave (as in Wall Mart or other retail chain) it's your own fault. Very convenient theory. The fact that it produce strong desire to shoot or hang all neoliberal economists notwithstanding ;-) ..."
May 20, 2017 | economistsview.typepad.com
Christopher H., May 20, 2017 at 10:36 AM
From INET in today's links.

https://www.ineteconomics.org/perspectives/blog/the-new-normal

The New Normal

By Servaas Storm

MAY 19, 2017

Demand, Secular Stagnation and the Vanishing Middle-Class

The Great Financial Crisis of 2008 deeply scarred the U.S. economy, bringing nine dire years of economic stagnation, high and rising inequalities in income and wealth, steep levels of indebtedness, and mounting uncertainty about jobs and incomes

. Big parts of the U.S. were hit by elevated rates of depression, drug addiction and 'deaths of despair' (Case and Deaton 2017), as 'good jobs' (often in factories and including pension benefits and health care coverage) leading to careers, were destroyed and replaced by insecure, freelance, or precarious 'gigs'. All this is evidence that the U.S. is becoming a dual economy-two countries, each with vastly different resources, expectations and potentials, as America's middle class vanishes (Temin 2015, 2017).

The anger and despair crystalized into a 'groundswell of discontent' among those left behind, which likely helped to propel Donald Trump into the White House on the promise of 'making America great again'.

likezkova, May 20, 2017 at 12:35 PM

"The anger and despair crystalized into a 'groundswell of discontent' among those left behind, which likely helped to propel Donald Trump into the White House on the promise of 'making America great again'."

That's my feeling too about one of the key factor that propelled Trump -- "the anger and despair". For some, voting for Trump was a showing middle finger to Washington establishment. When jobs are gone, people are essentially put against the wall. Neoliberal politicians, be it "DemoRats", or "Repugs" do not care, as under neoliberalism this is a domain of "individual responsibility". The neoliberal stance is that you need to increase your value in the "job market" so that you will be eventually hired on better conditions. Very convenient theory for capital owners.

Thus, the battle lines between neoliberal and a "social contract" approach to employment are clearly cut. So far Wall Street, the City, and other worldwide "epicenters for free-market discipline," are winning the battle. According to "free market discipline" dogma, if you are hired at below living wave (as in Wall Mart or other retail chain) it's your own fault. Very convenient theory. The fact that it produce strong desire to shoot or hang all neoliberal economists notwithstanding ;-)

Academic prostitution is not that different and probably less noble that a regular one.

[May 19, 2017] The Great Realignment and the New class

May 19, 2017 | economistsview.typepad.com

point , May 19, 2017 at 04:12 PM

Paul says: May 19, 2017 at 04:12 PM

"...Republicans ... went all in behind Trump..."

Well, maybe for those with selective memories. There was plenty of consternation among Repubs about lining up behind the guy.

libezkova , May 19, 2017 at 04:41 PM
Here is part of an insightful comment by William Meyer in which he made an important point about "great realignment" of the "New Class" (aka "the USA nomenklatura") with capital owners which happened in 70th.

http://crookedtimber.org/2016/11/13/on-the-alleged-failure-of-liberal-progressivism/#comment-698333

William Meyer 11.13.16 at 9:40 pm 4

My observation is that the New Class (professionals, lobbyists, financiers, teachers, engineers, etc.) have ruled the country in recent decades. For much of the twentieth century this class was in some tension with corporations, and used their skills at influencing government policy to help develop and protect the welfare state, since they needed the working class as a counterweight to the natural influence of corporate money and power. However, somewhere around 1970 I think this tension collapsed, since corporate managers and professionals realized that they shared the same education, background and interests.

Vive la meritocracy. This "peace treaty" between former rivals allowed the whole newly enlarged New Class to swing to the right, since they really didn't particularly need the working class politically anymore. And since it is the hallmark of this class to seek prestige, power and money while transferring risk away from themselves, the middle class and blue collar community has been the natural recipient. Free trade (well, for non-professionals, anyway), neoliberalism, ruthless private equity job cutting, etc., etc. all followed very naturally. The re-alignment of the Democratic Party towards the right was a natural part of this evolution.

I think the 90% or so of the community who are not included in this class are confused and bewildered and of course rather angry about it. They also sense that organized politics in this country – being chiefly the province of the New Class – has left them with little leverage to change any of this. Watching the bailouts and lack of prosecutions during the GFC made them dimly realize that the New Class has very strong internal solidarity – and since somebody has to pay for these little mistakes, everyone outside that class is "fair game."

So in that sense–to the extent that you define liberal as the ideology of the New Class (neoliberal, financial-capitalistic, big corporate-friendly but opposed to non-meritocratic biases like racism, sexism, etc.) is "liberalism", I think it is reasonable to say that it has bred resistance and anger among the "losers." As far as having "failed", well, we'll see: the New Class still controls almost all the levers of power. It has many strategies for channeling lower-class anger and I think under Trump we'll see those rolled out.

Let me be clear, I'm not saying Donald Trump is leading an insurgency against the New Class – but I think he tapped into something like one and is riding it for all he can, while not really having the slightest idea what he's doing.
Perhaps some evolution in "the means of production" or in how governments are influenced will ultimately develop to divide or downgrade the New Class, and break its lock on the corridors of power, but I don't see it on the horizon just yet. If anyone else does, I'd love to hear more about it.

[May 19, 2017] Trump is just a one acute symptom of the underling crisis of the neoliberal social system, that we experience. So his removal will not solve the crisis.

Notable quotes:
"... When Trump becomes president by running against the nation's neoliberal elite of both parties, it was a strong, undeniable signal that the neoliberal elite has a problem -- it lost the trust of the majority American people and is viewed now, especially Wall Street financial sharks, as an "occupying force". ..."
"... That means that we have the crisis of the elite governance or, as Marxists used to call it "a revolutionary situation" -- the situation in which the elite can't govern "as usual" and common people (let's say the bottom 80% of the USA population) do not want to live "as usual". Political Zugzwang. The anger is boiling and has became a material force in the most recent elections. ..."
"... The elites also ran American foreign policy, as they have throughout U.S. history. Over the past 25 years they got their country bogged down in persistent wars with hardly any stated purpose and in many instances no end in sight-Iraq, Afghanistan, Syria, Yemen, Libya. Many elites want further U.S. military action in Ukraine, against Iran, and to thwart China's rise in Asia. Aside from the risk of growing geopolitical blowback against America, the price tag is immense, contributing to the country's ongoing economic woes. ..."
"... Thus did this economic turn of events reflect the financialization of the U.S. economy-more and more rewards for moving money around and taking a cut and fewer and fewer rewards for building a business and creating jobs. ..."
"... ...Now comes the counterrevolution. The elites figure that if they can just get rid of Trump, the country can return to what they consider normalcy -- the status quo ante, before the Trumpian challenge to their status as rulers of America. That's why there is so much talk about impeachment even in the absence of any evidence thus far of "high crimes and misdemeanors." That's why the firing of James Comey as FBI director raises the analogy of Nixon's "Saturday Night Massacre." ..."
"... That's why the demonization of Russia has reached a fevered pitch, in hopes that even minor infractions on the part of the president can be raised to levels of menace and threat. ..."
"... There is no way out for America at this point. Steady as she goes could prove highly problematic. A push to remove him could prove worse. Perhaps a solution will present itself. But, even if it does, it will rectify, with great societal disquiet and animosity, merely the Trump crisis. The crisis of the elites will continue, all the more intractable and ominous. ..."
May 19, 2017 | economistsview.typepad.com

libezkova, May 19, 2017 at 10:44 AM

Trump is just a one acute symptom of the underling crisis of the neoliberal social system, that we experience. So his removal will not solve the crisis.

And unless some kind of New Deal Capitalism is restored there is no alternative to the neoliberalism on the horizon.

But the question is: Can the New Deal Capitalism with its "worker aristocracy" strata and the role of organized labor as a weak but still countervailing force to corporate power be restored ? I think not.

With the level of financialization achieved, the water is under the bridge. The financial toothpaste can't be squeezed back into the tube. That's what makes the current crisis more acute: none of the parties has any viable solution to the crisis, not the will to attempt to implement some radical changes.

When Trump becomes president by running against the nation's neoliberal elite of both parties, it was a strong, undeniable signal that the neoliberal elite has a problem -- it lost the trust of the majority American people and is viewed now, especially Wall Street financial sharks, as an "occupying force".

That means that we have the crisis of the elite governance or, as Marxists used to call it "a revolutionary situation" -- the situation in which the elite can't govern "as usual" and common people (let's say the bottom 80% of the USA population) do not want to live "as usual". Political Zugzwang. The anger is boiling and has became a material force in the most recent elections.

I think Robert W. Merry analysis of the situation is pretty insightful. In his article in the American Conservative ( http://www.theamericanconservative.com/articles/removing-trump-wont-solve-americas-crisis/) he made the following observations:

At least Republican elites resisted the emergence of Trump for as long as they could. Some even attacked him vociferously. But, unlike in the Democratic Party, the Republican candidate who most effectively captured the underlying sentiment of GOP voters ended up with the nomination. The Republican elites had to give way. Why? Because Republican voters fundamentally favor vulgar, ill-mannered, tawdry politicians? No, because the elite-generated society of America had become so bad in their view that they turned to the man who most clamorously rebelled against it.

... ... ...

The elites also ran American foreign policy, as they have throughout U.S. history. Over the past 25 years they got their country bogged down in persistent wars with hardly any stated purpose and in many instances no end in sight-Iraq, Afghanistan, Syria, Yemen, Libya. Many elites want further U.S. military action in Ukraine, against Iran, and to thwart China's rise in Asia. Aside from the risk of growing geopolitical blowback against America, the price tag is immense, contributing to the country's ongoing economic woes.

... ... ...

Then there is the spectacle of the country's financial elites goosing liquidity massively after the Great Recession to benefit themselves while slamming ordinary Americans with a resulting decline in Main Street capitalism. The unprecedented low interest rates over many years, accompanied by massive bond buying called "quantitative easing," proved a boon for Wall Street banks and corporate America while working families lost income from their money market funds and savings accounts. The result, says economic consultant David M. Smick, author of The Great Equalizer , was "the greatest transfer of middle-class and elderly wealth to elite financial interests in the history of mankind." Notice that these post-recession transactions were mostly financial transactions, divorced from the traditional American passion for building things, innovating, and taking risks-the kinds of activities that spur entrepreneurial zest, generate new enterprises, and create jobs. Thus did this economic turn of events reflect the financialization of the U.S. economy-more and more rewards for moving money around and taking a cut and fewer and fewer rewards for building a business and creating jobs.

...Now comes the counterrevolution. The elites figure that if they can just get rid of Trump, the country can return to what they consider normalcy -- the status quo ante, before the Trumpian challenge to their status as rulers of America. That's why there is so much talk about impeachment even in the absence of any evidence thus far of "high crimes and misdemeanors." That's why the firing of James Comey as FBI director raises the analogy of Nixon's "Saturday Night Massacre."

That's why the demonization of Russia has reached a fevered pitch, in hopes that even minor infractions on the part of the president can be raised to levels of menace and threat.

... ... ...

There is no way out for America at this point. Steady as she goes could prove highly problematic. A push to remove him could prove worse. Perhaps a solution will present itself. But, even if it does, it will rectify, with great societal disquiet and animosity, merely the Trump crisis. The crisis of the elites will continue, all the more intractable and ominous.

IMHO Trump betrayal of his voters under the pressure from DemoRats ("the dominant neoliberal wing of Democratic Party", aka "Clinton's wing") makes the situation even worse. a real Gordian knot. Or, in chess terminology, a Zugzwang.

[May 19, 2017] Demorats and boiling anger of lower 80 percent of the US population

economistsview.typepad.com

libezkova - , May 17, 2017 at 07:10 PM

May 19, 2017 | economistsview.typepad.com
"Democrats have spent the last generation opposing cuts to the tax rates on the rich "

Did Bill Clinton opposed tax cut for the rich? While being in the pocket of Wall Street.

Pretty brave assertion that has no connection to reality...

EMichael - , May 17, 2017 at 08:42 PM
He raised taxes on them you Russian troll.
libezkova - , May 18, 2017 at 07:25 PM
He raised income taxes for the top 1.5% and dramatically lowered capital gain tax. As rich get bulk of their income from capital gains and bonds he lowered taxes for rich. Is this so difficult to understand ?

As for "Russian troll" label, that only demonstrates your level brainwashing and detachment from reality. Clinical case of a politically correct neocon. People like you, as well as "Washington swamp", underestimate how angry people outside, let's say, top 20% are -- angry enough to elect Trump.

This boiling anger is now an important factor in the USA politics. That's why the US neocons feels do insecure and resort to dirty tricks to depose Trump. They want the full, 100% political power back.

Even the fact that Trump conceded the most important of his election promises is not enough for them. Carthago delenda est -- Trump must go -- is the mentality. But if it comes to the impeachment, "demorats" (aka neoliberal democrats) might see really interesting things, when it happens. It might well be that this time neocons/neolibs might really feel people wrath. I might be wrong as psychopaths are unable to experience emotions, only to fake them.

We are definitely living in interesting times.

[May 19, 2017] The instrumental and transformation view of the benefits of imperialism is reflected in comments I once read by Charles deGaulle who, as I recall saw the massacre of the Gauls by Julius Caesar, and the integration of the Gauls into the Roman polity as an essential step towards the emergence of a modern Europe

Notable quotes:
"... An alternative and modern view is that imperialism and colonialism are unreservedly adverse for the "natives' in that it deprives them of the freedom to shape their own futures. So many of us from the old colonies would not agree that imperialism the best thing that happened to us. But this debate continues. ..."
"... He who pays the piper calls the tune. ..."
"... What you are saying, sociologically, is that the Roman military conquests spread enabling technology. Well, it certainly is hard to suggest a counter-intuitive, except Jesus Christ. ..."
May 19, 2017 | economistsview.typepad.com

JA, May 18, 2017 at 08:02 PM

The instrumental and transformation view of the benefits of imperialism is reflected in comments I once read by Charles deGaulle who, as I recall saw the massacre of the Gauls by Julius Caesar, and the integration of the Gauls into the Roman polity as an essential step towards the emergence of a modern Europe. [I wish I could find the reference].

An alternative and modern view is that imperialism and colonialism are unreservedly adverse for the "natives' in that it deprives them of the freedom to shape their own futures. So many of us from the old colonies would not agree that imperialism the best thing that happened to us. But this debate continues.

XXX, May 18, 2017 at 08:29 PM

He who pays the piper calls the tune.

I suspect that your citation is reasonably accurate, historically. What you are saying, sociologically, is that the Roman military conquests spread enabling technology. Well, it certainly is hard to suggest a counter-intuitive, except Jesus Christ.

[May 19, 2017] Is neo-imprealism about which Branko Milanovic talks just neoliberal neocolonialism?

Notable quotes:
"... Installing compliant regime using the forces of internal "fifth column" of neoliberalism (which, is some cases, consists predominantly of former communists like happened in the USSR and China ;-). Actually, a step from communism to neoliberalism for Communist elite ("nomenklatura") was easy as neoliberalism is "Trotskyism for the rich." If necessary/possible it removes democratically elected governments from the power by claiming that election are falsified and the government is authoritarian (unlike the puppets they want to install). ..."
"... After puppets came to power they mandate austerity, burden the country with debt most of which is stolen and repatriated to the West. The only new idea that neoliberals introduced in the old scenario of colonization is that the crisis for financial and political takeover can be manufactured and instead of psychical occupation of the colony you can use "comprador" regime and rule the country indirectly via financial mechanisms. This is the essence of Washington consensus. ..."
May 18, 2017 | economistsview.typepad.com

Is "neo-imperialism" the only path to development? [ in the current circumstances]

libezkova, May 18, 2017 at 08:55 PM

Yes, in a sense, "the rise of Asia" was a side effect of global neoliberal revolution. So the key here not imperialism per ce, but neoliberalism. Unfortunately it is missing from "questions to be asked" list and that diminished the value of the article.

"(whence the origins of this transformation? the role of the nation-state and imperialism? the role of the bourgeois-led independence movements?)"

Neo-imperialism (or, more correctly, neocolonialism) is intrinsically connected with neoliberalism and, by extension, with "casino capitalism" -- oversized role of financial sector under neoliberalism as the rent extraction mechanism (via "debt slavery"). It uses instead of old-fashion occupation of the country, political and financial takeover the countries in crisis.

Installing compliant regime using the forces of internal "fifth column" of neoliberalism (which, is some cases, consists predominantly of former communists like happened in the USSR and China ;-). Actually, a step from communism to neoliberalism for Communist elite ("nomenklatura") was easy as neoliberalism is "Trotskyism for the rich." If necessary/possible it removes democratically elected governments from the power by claiming that election are falsified and the government is authoritarian (unlike the puppets they want to install).

After puppets came to power they mandate austerity, burden the country with debt most of which is stolen and repatriated to the West. The only new idea that neoliberals introduced in the old scenario of colonization is that the crisis for financial and political takeover can be manufactured and instead of psychical occupation of the colony you can use "comprador" regime and rule the country indirectly via financial mechanisms. This is the essence of Washington consensus.

That make neocolonialism more sustainable as the illusion of sovereignty is preserved. For example for all practical purposes Greece is now a colony. But armed struggle against occupation forces will not happen as there is no physical occupation forces in the country. They are all virtual ;-)

"Regime change" favorable to neoliberal globalization is what the idea of "color revolution" is about. It can occur even in the country that already has a brutal neocolonial neoliberal administration. Like was the case with Yanukovich regime in Ukraine. That means that we can't separate neocolonialism and neoliberal globalization. They are two sides of the same coin.

Also the development is not equivalent to the growth of GDP, even if we use purchase parity method of calculation of GDP. Standard of living of population and the growth of GDP can be detached under neoliberalism. Thay are not the same thing.

Simultaneously, like under classic imperialism, the population of the "host" county (the imperial power) suffers too, because it carries the increasing burden of maintaining and expanding of the empire. The current situation in the USA is clear example of this trend.

We also clearly see the attempts to lower the level of income to subsistence level in the USA (Wal-Mart), so this part of Marxism still have some validity. It looks like neoliberalism is not that interested in maintaining "worker aristocracy" in the "host" country. It might be replaced by upper strata of "guard labor" and "national security parasites".

Industrialization of China was an interesting historical event -- the result to three very improbable events.

1. Voluntarily conversion of China leadership of Communist Party to neoliberalism ( Deng Xiaoping theory "It doesn't matter whether a cat is white or black, as long as it catches mice." )

2. The USA successful attempt to play China against the USSR and Warsaw block.

3. The neoliberal revolution in the USA itself, which removed the idea of sharing profits with working class (New Deal Capitalism), and opened the path to outsourcing first manufacturing and then services to the low wage countries, making China a very lucrative target for the transfer of manufacturing and wage arbitrage. Timewise it corresponded with retirement of the managerial class which fought in WWII and replacement of this generation with more technocratic and more "neoliberally brainwashed" boomers.

Another interesting nuance is that out of "Asian tigers", only China can be viewed as nominally sovereign nation.

Other countries are to various degrees vassals of the USA. And that puts strict limits to their growth. Actually Trump election might be a signal to those nations: "know you place".

The idea that "Thus the seeds of the idea that imperialism may undermine class struggle in developed countries were sown and that had far reaching consequences." presuppose the working class, in classic Marxist tradition, has "revolutionary potential", the energy and the desire to overthrow the existing order.

This part of Marxism proved to be false. It was the social-democratic parties which were key to mobilizing workers.

This idea of the tremendous importance of the party for the modern society and that one party rule can stimulate economic development was actually inherited from Marxism by national socialism. Mussolini was a former prominent Italian social-democrat.

The "iron rule of oligarchy" also severely undermined the Marxist idea of "socialist state" and the possibility of the rule of working class (and democracy as a political system -- Göring: Oh, that is all well and good, but, voice or no voice, the people can always be brought to the bidding of the leaders. That is easy).

It is rumored that close to his death and seeing the emergence of "nomenklatura" as a new ruling class in the Soviet Russia Lenin exclaimed "My God, what we have done !".

[May 19, 2017] The suppliers of the intelligence that Trump told the Ruskies, want to control the US Intelligence Community.

Mr. Bill - , May 18, 2017 at 06:56 PM

May 19, 2017 | economistsview.typepad.com
Joe Lieberman surfacing from the lowest portal of the swamp, is not good news. The suppliers of the intelligence that Trump told the Ruskies, want to control the US Intelligence Community.

How many nuclear weapons do they have and where are they pointed ? Anyone allowed to ask ?

[May 17, 2017] Demonization of Russia that neoliberal DemoRats enjoy is not a policy. This is an attempt to create an alibi for Hillary fiasco

May 17, 2017 | economistsview.typepad.com

pgl , May 17, 2017 at 11:28 AM

Paul Ryan shows zero interest in investigating whether Trump obstructed justice or is in bed with the Russian government. Why? He needs to get these massive tax cuts for the 1% and take away from the "moochers" first.
libezkova, May 17, 2017 at 07:12 PM
" in bed with the Russian government."

Are you a closet neocon ?

libezkova, May 17, 2017 at 07:37 PM
Demonization of Russia that people like PGL enjoy is not a policy. This is an attempt to create an alibi for Hillary fiasco.

And as any witch hunt this is an obstacle to thinking rationally, of having a rational discourse about proper role of Russia in enhancing American national security.

Which of cause is impossible with imperial pretension of Washington neocons.

In any case Clinton's attempt to colonize Russia failed and after Yugoslavia war the USA neocons are responsible for the deteriorating relations.

Taking into account complexity of modern weapon systems and the fact the USA has just 30 min and Russia 10-15 min for reacting to any emerging threat of rocket attack, my impression is that Washington is full of psychopaths, who enjoy walking on the blade edge. Kind of self-selection.

Public is so successfully brainwashed that even mentioning the fact that Putin probably does not vivisect kittens provokes a strong negative reaction.

Invoking Goodwin law there were already a country with the population brainwashed to the same extent.

See Professor Stephen F. Cohen comments at

http://www.huffingtonpost.com/dan-kovalik/rethinking-russia-a-conve_b_7744498.html

[May 16, 2017] Mohamed El-Erian: We get signals that the system is under enormous stress

Notable quotes:
"... "The minute you to start talking about the inequality of opportunity, you fuel the politics of anger. The politics of anger have a tendency to produce improbable results. The major risk is that we don't know how much we've strained the underlying system. But what we do know is we are getting signals that suggest it's under enormous stress, which means the probability of either a policy mistake or market accident goes up." ..."
"... Third, pockets of extreme indebtedness must be addressed, a lesson he learned working with the IMF in Latin America in the 1980s. "When you have a debt overhang, it's like a black cloud," he argues. "It sucks oxygen out of the system. You cannot grow of it: whether it's Greece or student loans in the US, you need to deal with debt overhangs." The process of debt forgiveness is hard, he concedes, because some people are unfairly rewarded – "but the alternatives are worse." ..."
May 16, 2017 | www.theguardian.com

Leading economist and investor believes world leaders, and global capitalism, have reached fork in road between equality and chaos

This is the nub of El-Erian's analysis of why the developed world is approaching a fork in the road. The inequality generated by the current low-growth climate has three elements: inequality of wealth, income and opportunity. The last of the three – manifested in high youth unemployment in many eurozone countries, for example – is the most explosive element.

"The minute you to start talking about the inequality of opportunity, you fuel the politics of anger. The politics of anger have a tendency to produce improbable results. The major risk is that we don't know how much we've strained the underlying system. But what we do know is we are getting signals that suggest it's under enormous stress, which means the probability of either a policy mistake or market accident goes up."

... ... ...

How do we take the high, benign road? El-Erian has a four-point plan.

First, "we need to get back to investing in things that promote economic growth, infrastructure, a more pro-growth tax system for the US, serious labour retooling ... If you're in Europe, youth employment is an issue you've really got to think about very seriously."

Second, countries that can afford to do so must "exploit the fiscal space," meaning borrowing to invest or cutting taxes. He puts the US and Germany unambiguously in that category "and to a certain extent the UK".

Third, pockets of extreme indebtedness must be addressed, a lesson he learned working with the IMF in Latin America in the 1980s. "When you have a debt overhang, it's like a black cloud," he argues. "It sucks oxygen out of the system. You cannot grow of it: whether it's Greece or student loans in the US, you need to deal with debt overhangs." The process of debt forgiveness is hard, he concedes, because some people are unfairly rewarded – "but the alternatives are worse."

Fourth, regional and global governance needs repair. He compares the eurozone to a stool with one-and-a-half legs instead of four. The complete leg is monetary union, the half is banking union. The missing legs are fiscal integration, meaning a common budget, and political harmonisation. No wonder the eurozone is unstable, he says: "You can do three legs, you can't do one and half."

To return to El-Erian's core T-junction analogy, none of the required manoeuvres sound easy. "You don't need a big bang," he replies. "If you want to take the good turn you have to see some progress on some of these elements. If you don't, then we take the other turn." He ascribes equal probabilities – "it's a political judgment."

What's an investor to do? El-Erian says his own approach, which he admits is hard for the average person to copy, is framed like a bar-bell. At one end, he's invested in high-risk startups where you don't need all to succeed. At the other, he's in cash and cash-like investments. In the middle, he'll invest in public markets only tactically.

The bottom line: "I'm risk off."

[May 15, 2017] The Great Ponzi Scheme of the Global Economy by Michael Hudson

May 15, 2017 | www.counterpunch.org
March 25, 2016 CHRIS HEDGES: We're going to be discussing a great Ponzi scheme that not only defines not only the U.S. but the global economy, how we got there and where we're going. And with me to discuss this issue is the economist Michael Hudson, author of Killing the Host: How Financial Parasites and Debt Destroy the Global Economy . A professor of economics who worked for many years on Wall Street, where you don't succeed if you don't grasp Marx's dictum that capitalism is about exploitation. And he is also, I should mention, the godson of Leon Trotsky.

I want to open this discussion by reading a passage from your book, which I admire very much, which I think gets to the core of what you discuss. You write,

"Adam Smith long ago remarked that profits often are highest in nations going fastest to ruin. There are many ways to create economic suicide on a national level. The major way through history has been through indebting the economy. Debt always expands to reach a point where it cannot be paid by a large swathe of the economy. This is the point where austerity is imposed and ownership of wealth polarizes between the One Percent and the 99 Percent. Today is not the first time this has occurred in history. But it is the first time that running into debt has occurred deliberately." Applauded. "As if most debtors can get rich by borrowing, not reduced to a condition of debt peonage."

So let's start with the classical economists, who certainly understood this. They were reacting of course to feudalism. And what happened to the study of economics so that it became gamed by ideologues?

HUDSON: The essence of classical economics was to reform industrial capitalism, to streamline it, and to free the European economies from the legacy of feudalism. The legacy of feudalism was landlords extracting land-rent, and living as a class that took income without producing anything. Also, banks that were not funding industry. The leading industrialists from James Watt, with his steam engine, to the railroads

HEDGES: From your book you make the point that banks almost never funded industry.

HUDSON: That's the point: They never have. By the time you got to Marx later in the 19th century, you had a discussion, largely in Germany, over how to make banks do something they did not do under feudalism. Right now we're having the economic surplus being drained not by the landlords but also by banks and bondholders.

Adam Smith was very much against colonialism because that lead to wars, and wars led to public debt. He said the solution to prevent this financial class of bondholders burdening the economy by imposing more and more taxes on consumer goods every time they went to war was to finance wars on a pay-as-you-go basis. Instead of borrowing, you'd tax the people. Then, he thought, if everybody felt the burden of war in the form of paying taxes, they'd be against it. Well, it took all of the 19th century to fight for democracy and to extend the vote so that instead of landlords controlling Parliament and its law-making and tax system through the House of Lords, you'd extend the vote to labor, to women and everybody. The theory was that society as a whole would vote in its self-interest. It would vote for the 99 Percent, not for the One Percent.

By the time Marx wrote in the 1870s, he could see what was happening in Germany. German banks were trying to make money in conjunction with the government, by lending to heavy industry, largely to the military-industrial complex.

HEDGES: This was Bismarck's kind of social – I don't know what we'd call it. It was a form of capitalist socialism

HUDSON: They called it State Capitalism. There was a long discussion by Engels, saying, wait a minute. We're for Socialism. State Capitalism isn't what we mean by socialism. There are two kinds of state-oriented–.

HEDGES: I'm going to interject that there was a kind of brilliance behind Bismarck's policy because he created state pensions, he provided health benefits, and he directed banking toward industry, toward the industrialization of Germany which, as you point out, was very different in Britain and the United States.

HUDSON: German banking was so successful that by the time World War I broke out, there were discussions in English economic journals worrying that Germany and the Axis powers were going to win because their banks were more suited to fund industry. Without industry you can't have really a military. But British banks only lent for foreign trade and for speculation. Their stock market was a hit-and-run operation. They wanted quick in-and-out profits, while German banks didn't insist that their clients pay as much in dividends. German banks owned stocks as well as bonds, and there was much more of a mutual partnership.

That's what most of the 19 th century imagined was going to happen – that the world was on the way to socializing banking. And toward moving capitalism beyond the feudal level, getting rid of the landlord class, getting rid of the rent, getting rid of interest. It was going to be labor and capital, profits and wages, with profits being reinvested in more capital. You'd have an expansion of technology. By the early twentieth century most futurists imagined that we'd be living in a leisure economy by now.

HEDGES: Including Karl Marx.

HUDSON: That's right. A ten-hour workweek. To Marx, socialism was to be an outgrowth of the reformed state of capitalism, as seemed likely at the time – if labor organized in its self-interest.

HEDGES: Isn't what happened in large part because of the defeat of Germany in World War I? But also, because we took the understanding of economists like Adam Smith and maybe Keynes. I don't know who you would blame for this, whether Ricardo or others, but we created a fictitious economic theory to praise a rentier or rent-derived, interest-derived capitalism that countered productive forces within the economy. Perhaps you can address that.

HUDSON: Here's what happened. Marx traumatized classical economics by taking the concepts of Adam Smith and John Stuart Mill and others, and pushing them to their logical conclusion. 2KillingTheHost_Cover_rule Progressive capitalist advocates – Ricardian socialists such as John Stuart Mill – wanted to tax away the land or nationalize it. Marx wanted governments to take over heavy industry and build infrastructure to provide low-cost and ultimately free basic services. This was traumatizing the landlord class and the One Percent. And they fought back. They wanted to make everything part of "the market," which functioned on credit supplied by them and paid rent to them.

None of the classical economists imagined how the feudal interests – these great vested interests that had all the land and money – actually would fight back and succeed. They thought that the future was going to belong to capital and labor. But by the late 19 th century, certainly in America, people like John Bates Clark came out with a completely different theory, rejecting the classical economics of Adam Smith, the Physiocrats and John Stuart Mill.

HEDGES: Physiocrats are, you've tried to explain, the enlightened French economists.

HUDSON: The common denominator among all these classical economists was the distinction between earned income and unearned income. Unearned income was rent and interest. Earned incomes were wages and profits. But John Bates Clark came and said that there's no such thing as unearned income. He said that the landlord actually earns his rent by taking the effort to provide a house and land to renters, while banks provide credit to earn their interest. Every kind of income is thus "earned," and everybody earns their income. So everybody who accumulates wealth, by definition, according to his formulas, get rich by adding to what is now called Gross Domestic Product (GDP).

HEDGES: One of the points you make in Killing the Host which I liked was that in almost all cases, those who had the capacity to make money parasitically off interest and rent had either – if you go back to the origins – looted and seized the land by force, or inherited it.

HUDSON: That's correct. In other words, their income is unearned. The result of this anti-classical revolution you had just before World War I was that today, almost all the economic growth in the last decade has gone to the One Percent. It's gone to Wall Street, to real estate

HEDGES: But you blame this on what you call Junk Economics.

HUDSON: Junk Economics is the anti-classical reaction.

HEDGES: Explain a little bit how, in essence, it's a fictitious form of measuring the economy.

HUDSON: Well, some time ago I went to a bank, a block away from here – a Chase Manhattan bank – and I took out money from the teller. As I turned around and took a few steps, there were two pickpockets. One pushed me over and the other grabbed the money and ran out. The guard stood there and saw it. So I asked for the money back. I said, look, I was robbed in your bank, right inside. And they said, "Well, we don't arm our guards because if they shot someone, the thief could sue us and we don't want that." They gave me an equivalent amount of money back.

Well, imagine if you count all this crime, all the money that's taken, as an addition to GDP. Because now the crook has provided the service of not stabbing me. Or suppose somebody's held up at an ATM machine and the robber says, "Your money or your life." You say, "Okay, here's my money." The crook has given you the choice of your life. In a way that's how the Gross National Product accounts are put up. It's not so different from how Wall Street extracts money from the economy. Then also you have landlords extracting

HEDGES: Let's go back. They're extracting money from the economy by debt peonage. By raising

HUDSON: By not playing a productive role, basically.

HEDGES: Right. So it's credit card interest, mortgage interest, car loans, student loans. That's how they make their funds.

HUDSON: That's right. Money is not a factor of production. But in order to have access to credit, in order to get money, in order to get an education, you have to pay the banks. At New York University here, for instance, they have Citibank. I think Citibank people were on the board of directors at NYU. You get the students, when they come here, to start at the local bank. And once you are in a bank and have monthly funds taken out of your account for electric utilities, or whatever, it's very cumbersome to change.

So basically you have what the classical economists called the rentier class. The class that lives on economic rents. Landlords, monopolists charging more, and the banks. If you have a pharmaceutical company that raises the price of a drug from $12 a shot to $200 all of a sudden, their profits go up. Their increased price for the drug is counted in the national income accounts as if the economy is producing more. So all this presumed economic growth that has all been taken by the One Percent in the last ten years, and people say the economy is growing. But the economy isn't growing

HEDGES: Because it's not reinvested.

HUDSON: That's right. It's not production, it's not consumption. The wealth of the One Percent is obtained essentially by lending money to the 99 Percent and then charging interest on it, and recycling this interest at an exponentially growing rate.

HEDGES: And why is it important, as I think you point out in your book, that economic theory counts this rentier income as productive income? Explain why that's important.

HUDSON: If you're a rentier , you want to say that you earned your income by

HEDGES: We're talking about Goldman Sachs, by the way.

HUDSON: Yes, Goldman Sachs. The head of Goldman Sachs came out and said that Goldman Sachs workers are the most productive in the world. That's why they're paid what they are. The concept of productivity in America is income divided by labor. So if you're Goldman Sachs and you pay yourself $20 million a year in salary and bonuses, you're considered to have added $20 million to GDP, and that's enormously productive. So we're talking in a tautology. We're talking with circular reasoning here.

So the issue is whether Goldman Sachs, Wall Street and predatory pharmaceutical firms, actually add "product" or whether they're just exploiting other people. That's why I used the word parasitism in my book's title. People think of a parasite as simply taking money, taking blood out of a host or taking money out of the economy. But in nature it's much more complicated. The parasite can't simply come in and take something. First of all, it needs to numb the host. It has an enzyme so that the host doesn't realize the parasite's there. And then the parasites have another enzyme that takes over the host's brain. It makes the host imagine that the parasite is part of its own body, actually part of itself and hence to be protected.

That's basically what Wall Street has done. It depicts itself as part of the economy. Not as a wrapping around it, not as external to it, but actually the part that's helping the body grow, and that actually is responsible for most of the growth. But in fact it's the parasite that is taking over the growth.

The result is an inversion of classical economics. It turns Adam Smith upside down. It says what the classical economists said was unproductive – parasitism – actually is the real economy. And that the parasites are labor and industry that get in the way of what the parasite wants – which is to reproduce itself, not help the host, that is, labor and capital.

HEDGES: And then the classical economists like Adam Smith were quite clear that unless that rentier income, you know, the money made by things like hedge funds, was heavily taxed and put back into the economy, the economy would ultimately go into a kind of tailspin. And I think the example of that, which you point out in your book, is what's happened in terms of large corporations with stock dividends and buybacks. And maybe you can explain that.

HUDSON: There's an idea in superficial textbooks and the public media that if companies make a large profit, they make it by being productive. And with

HEDGES: Which is still in textbooks, isn't it?

HUDSON: Yes. And also that if a stock price goes up, you're just capitalizing the profits – and the stock price reflects the productive role of the company. But that's not what's been happening in the last ten years. Just in the last two years, 92 percent of corporate profits in America have been spent either on buying back their own stock, or paid out as dividends to raise the price of the stock.

HEDGES: Explain why they do this.

HUDSON: About 15 years ago at Harvard, Professor Jensen said that the way to ensure that corporations are run most efficiently is to make the managers increase the price of the stock. So if you give the managers stock options, and you pay them not according to how much they're producing or making the company bigger, or expanding production, but the price of the stock, then you'll have the corporation run efficiently, financial style.

So the corporate managers find there are two ways that they can increase the price of the stock. The first thing is to cut back long-term investment, and use the money instead to buy back their own stock. But when you buy your own stock, that means you're not putting the money into capital formation. You're not building new factories. You're not hiring more labor. You can actually increase the stock price by firing labor.

HEDGES: That strategy only works temporarily.

HUDSON: Temporarily. By using the income from past investments just to buy back stock, fire the labor force if you can, and work it more intensively. Pay it out as dividends. That basically is the corporate raider's model. You use the money to pay off the junk bond holders at high interest. And of course, this gets the company in trouble after a while, because there is no new investment.

So markets shrink. You then go to the labor unions and say, gee, this company's near bankruptcy, and we don't want to have to fire you. The way that you can keep your job is if we downgrade your pensions. Instead of giving you what we promised, the defined benefit pension, we'll turn it into a defined contribution plan. You know what you pay every month, but you don't know what's going to come out. Or, you wipe out the pension fund, push it on to the government's Pension Benefit Guarantee Corporation, and use the money that you were going to pay for pensions to pay stock dividends. By then the whole economy is turning down. It's hollowed out. It shrinks and collapses. But by that time the managers will have left the company. They will have taken their bonuses and salaries and run.

HEDGES: I want to read this quote from your book, written by David Harvey, in A Brief History of Neoliberalism , and have you comment on it.

"The main substantive achievement of neoliberalism has been to redistribute rather than to generate wealth and income. [By] 'accumulation by dispossession' I mean the commodification and privatization of land, and the forceful expulsion of peasant populations; conversion of various forms of property rights (common collective state, etc.) into exclusive private property rights; suppression of rights to the commons; colonial, neocolonial, and the imperial processes of appropriation of assets (including natural resources); and usury, the national debt and, most devastating at all, the use of the credit system as a radical means of accumulation by dispossession. To this list of mechanisms, we may now add a raft of techniques such as the extraction of rents from patents, and intellectual property rights (such as the diminution or erasure of various forms of common property rights, such as state pensions, paid vacations, and access to education, health care) one through a generation or more of class struggle. The proposal to privatize all state pension rights, pioneered in Chile under the dictatorship is, for example, one of the cherished objectives of the Republicans in the US."

This explains the denouement. The final end result you speak about in your book is, in essence, allowing what you call the rentier or the speculative class to cannibalize the entire society until it collapses.

HUDSON: A property right is not a factor of production. Look at what happened in Chicago, the city where I grew up. Chicago didn't want to raise taxes on real estate, especially on its expensive commercial real estate. So its budget ran a deficit. They needed money to pay the bondholders, so they sold off the parking rights to have meters – you know, along the curbs. The result is that they sold to Goldman Sachs 75 years of the right to put up parking meters. So now the cost of living and doing business in Chicago is raised by having to pay the parking meters. If Chicago is going to have a parade and block off traffic, it has to pay Goldman Sachs what the firm would have made if the streets wouldn't have been closed off for a parade. All of a sudden it's much more expensive to live in Chicago because of this.

But this added expense of having to pay parking rights to Goldman Sachs – to pay out interest to its bondholders – is counted as an increase in GDP, because you've created more product simply by charging more. If you sell off a road, a government or local road, and you put up a toll booth and make it into a toll road, all of a sudden GDP goes up.

If you go to war abroad, and you spend more money on the military-industrial complex, all this is counted as increased production. None of this is really part of the production system of the capital and labor building more factories and producing more things that people need to live and do business. All of this is overhead. But there's no distinction between wealth and overhead.

Failing to draw that distinction means that the host doesn't realize that there is a parasite there. The host economy, the industrial economy, doesn't realize what the industrialists realized in the 19 th century: If you want to be an efficient economy and be low-priced and under-sell competitors, you have to cut your prices by having the public sector provide roads freely. Medical care freely. Education freely.

If you charge for all of these, you get to the point that the U.S. economy is in today. What if American factory workers were to get all of their consumer goods for nothing. All their food, transportation, clothing, furniture, everything for nothing. They still couldn't compete with Asians or other producers, because they have to pay up to 43% of their income for rent or mortgage interest, 10% or more of their income for student loans, credit card debt. 15% of their paycheck is automatic withholding to pay Social Security, to cut taxes on the rich or to pay for medical care.

So Americans built into the economy all this overhead. There's no distinction between growth and overhead. It's all made America so high-priced that we're priced out of the market, regardless of what trade policy we have.

HEDGES: We should add that under this predatory form of economics, you game the system. So you privatize pension funds, you force them into the stock market, an overinflated stock market. But because of the way companies go public, it's the hedge fund managers who profit. And it's those citizens whose retirement savings are tied to the stock market who lose. Maybe we can just conclude by talking about how the system is fixed, not only in terms of burdening the citizen with debt peonage, but by forcing them into the market to fleece them again.

HUDSON: Well, we talk about an innovation economy as if that makes money. Suppose you have an innovation and a company goes public. They go to Goldman Sachs and other Wall Street investment banks to underwrite the stock to issue it at $40 a share. What's considered a successful float is when, immediately, Goldman and the others will go to their insiders and tell them to buy this stock and make a quick killing. A "successful" flotation doubles the price in one day, so that at the end of the day the stock's selling for $80.

HEDGES: They have the option to buy it before anyone else, knowing that by the end of the day it'll be inflated, and then they sell it off.

HUDSON: That's exactly right.

HEDGES: So the pension funds come in and buy it at an inflated price, and then it goes back down.

HUDSON: It may go back down, or it may be that the company just was shortchanged from the very beginning. The important thing is that the Wall Street underwriting firm, and the speculators it rounds up, get more in a single day than all the years it took to put the company together. The company gets $40. And the banks and their crony speculators also get $40.

So basically you have the financial sector ending up with much more of the gains. The name of the game if you're on Wall Street isn't profits. It's capital gains. And that's something that wasn't even part of classical economics. They didn't anticipate that the price of assets would go up for any other reason than earning more money and capitalizing on income. But what you have had in the last 50 years – really since World War II – has been asset-price inflation. Most middle-class families have gotten the wealth that they've got since 1945 not really by saving what they've earned by working, but by the price of their house going up. They've benefited by the price of the house. And they think that that's made them rich and the whole economy rich.

The reason the price of housing has gone up is that a house is worth whatever a bank is going to lend against it. If banks made easier and easier credit, lower down payments, then you're going to have a financial bubble. And now, you have real estate having gone up as high as it can. I don't think it can take more than 43% of somebody's income to buy it. But now, imagine if you're joining the labor force. You're not going to be able to buy a house at today's prices, putting down a little bit of your money, and then somehow end up getting rich just on the house investment. All of this money you pay the bank is now going to be subtracted from the amount of money that you have available to spend on goods and services.

So we've turned the post-war economy that made America prosperous and rich inside out. Somehow most people believed they could get rich by going into debt to borrow assets that were going to rise in price. But you can't get rich, ultimately, by going into debt. In the end the creditors always win. That's why every society since Sumer and Babylonia have had to either cancel the debts, or you come to a society like Rome that didn't cancel the debts, and then you have a dark age. Everything collapses.

[May 08, 2017] Can we rescue the individuals with no exchange choices by allowing them to buy into MediCare

Notable quotes:
"... We have more good cop/bad cop. We are supposed to forget that the DNC democrats gave us deregulation, killed Glass-Steagall, refused to prosecute banksters, gave us a hokey republican health insurance plan, tried to give us TPP, continued more ME wars, screw with Russia, etc. ..."
May 08, 2017 | economistsview.typepad.com
paine , May 08, 2017 at 05:47 AM
Pk instead of keening away over
her lead role in the latest

FED borg folly

Trumpcare is a nasty

paine -> EMichael... , May 08, 2017 at 06:47 AM
A simple side swipe at trumpcare
to wield against yellen and the fed borg

Now is the moment to

RC AKA Darryl, Ron -> paine... , May 08, 2017 at 06:47 AM
The Fed Borg has not done anything unexpected whether we are basing that on Krugman's expectations or the expectations that you and I shared of her way back when she lead the Fed to liftoff. Now, we might have had different hopes and maybe even Krugman as well had different hopes, but none of us ever expected anything different than what the Fed actually did from then to now. We all know that we have a bankers' Fed and not a people's Fed.

OTOH, Krugman had very different expectations about the 2016 POTUS election than what actually happened in November. Krugman is just dealing with his disappointment in the best way that he can. It at least creates the illusion that he is making a difference and perception is at least 90% of reality for intellectual elites.

RGC , May 08, 2017 at 06:06 AM
"This is an act of deliberate betrayal":

PK knows whereof he speaks.

We have more good cop/bad cop. We are supposed to forget that the DNC democrats gave us deregulation, killed Glass-Steagall, refused to prosecute banksters, gave us a hokey republican health insurance plan, tried to give us TPP, continued more ME wars, screw with Russia, etc.

The bad cop tells us he is going to have some guys beat us up and then he has some guys beat us up. The good cop tells us he is going to take care of us and then he has some guys beat us up.

How long do people fall for that game?

RGC -> RGC... , May 08, 2017 at 06:24 AM
Pelosi Refuses to Back Single Payer, Despite GOP Deathmongering Suddenly Taking Center Stage

"No, I don't," Rep. Nancy Pelosi (D-Calif.) promptly said, when asked by a reporter if she thinks single payer should be in Democrats' 2018 party platform.

"I was carrying single payer signs probably around before you born, so I understand that aspiration," the House Minority Leader told Vice's Evan McMorris-Santoro. She then claimed that "the comfort level with a broader base of the American people is not there yet," with single payer.

"So I say to people: if you want it, do it in your states. States are laboratories," the Dem leader added. "States are a good place to start," she also said.

Pelosi's assertions about single payer's popularity, however, are called into question by public polling.

http://rinf.com/alt-news/newswire/pelosi-refuses-to-back-single-payer-despite-gop-deathmongering-suddenly-taking-center-stage/

RGC -> RGC... , May 08, 2017 at 06:35 AM
Nancy Pelosi Feels the Bern, Faces Pro-Sanders Primary Challenger

House Minority Leader is 'really out of touch'

http://observer.com/2017/04/nancy-pelosi-pro-sanders-primary-challenger-stephen-jaffe/

DeDude -> pgl... , May 08, 2017 at 09:14 AM
Yes and you can cherry pick pools (that have deliberate or unintended flaws) such that you can get one answer or the other. So you have to get consistency of pooling on an issue before you even consider trusting them. The good news is that Pelosi does not write the Democratic platform, the delegates do. If a majority of democratic party actives believe we are ready to include a national health care plan in the platform, then it will become the dems policy and I will support them. If they refuse to get it in there then we are not ready and I will support that position.
paine -> RGC... , May 08, 2017 at 06:49 AM
Rescue the exchanges
with a pub op

That is all dems should push

DeDude -> paine... , May 08, 2017 at 09:19 AM
Or we could rescue the individuals with no exchange choices at all - by allowing them to buy into MediCare. That way we would not need to "build" a public option (that could be attacked). We could also claim to have given the private sector the opportunity - and only let the government step in when private sector solutions fail. Most importantly the GOP would suddenly start doing everything they could to help the exchanges rather than trying to sabotage them.
paine -> DeDude... , May 08, 2017 at 12:45 PM
Excellent
libezkova -> DeDude... , May 08, 2017 at 07:10 PM
The costs are not going away in your solution.

I understand that we spend much more on bombing brown people, but still uncontrolled expansion of Medicare is somewhat problematic solution.

Simple question to you -- treatment of opiates epidemics victims -- who should pay for their treatment and multiple conditions they already have? Normally private insurers avoid those people as a plague.

Alaska model ( compensating private insurers for most complex and expensive cases -- outliers in costs) also can work. On state level more in known about those people and some measures can be legislated to cut the costs of most egregious cases connected with neoliberalism as a very cruel social system.

For example, homeless people are periodically taken to the hospital and then released to the streets to get in to hospital again and again until they die; some have dangerous for public infections (such a tuberculosis).

RGC -> RGC... , May 08, 2017 at 06:51 AM
Three More Join HR 676 Single Payer Bill in House

Three more members of the House of Representatives have signed on as co-sponsors of HR 676, the single payer bill in the House.

Carolyn Maloney (New York), Adriano Espaillat (New York) and Nanette Barragan (California) - signed onto HR 676 yesterday, bringing the total number of co-sponsors to 72.

https://www.singlepayeraction.org/2017/03/23/three-more-join-hr-676-single-payer-bill-in-house/

JohnH -> pgl... , May 08, 2017 at 08:57 AM
Who's talking about giving up? The Washington Generals always made it a good show against the Harlem Globetrotters...and lost by design...kind of like corrupt, sclerotic Democrats...

[May 08, 2017] Before calling this an act of deliberate betrayal think about bad cop/good cop ploy. DNC democrats gave us deregulation, killed GlassSteagall, refused to prosecute banksters, gave us a hokey republican health insurance plan, tried to give us TPP, continued more ME wars, screw with Russia

Notable quotes:
"... The wreckage that you see every day as you tour this part of the country is the utterly predictable fruit of the Democratic party's neoliberal turn. Every time our liberal leaders signed off on some lousy trade deal, figuring that working-class people had "nowhere else to go," they were making what happened last November a little more likely. ..."
"... What we need is for the Democratic party and its media enablers to alter course. It's not enough to hear people's voices and feel their pain; the party actually needs to change. They need to understand that the enlightened Davos ideology they have embraced over the years has done material harm to millions of their own former constituents. The Democrats need to offer something different next time. And then they need to deliver. ..."
"... Andrew Bacevich offers 24 things that the media and their very knowledgeable talking heads could be talking about instead of obsessing about Trump 24/7: ..."
"... Our courtier press is worse than useless. The days of Walter Cronkite are but a distant memory. ..."
May 08, 2017 | economistsview.typepad.com

JohnH -> pgl... , May 08, 2017 at 07:35 AM

Vinyl records are back in vogue...apparently broken records are back, too, as Krugman reminds us in virtually every one of his columns these days.

What Krugman could be writing about: "Another thing that is inexcusable from Democrats: surprise at the economic disasters that have befallen the midwestern cities and states that they used to represent.

The wreckage that you see every day as you tour this part of the country is the utterly predictable fruit of the Democratic party's neoliberal turn. Every time our liberal leaders signed off on some lousy trade deal, figuring that working-class people had "nowhere else to go," they were making what happened last November a little more likely.

Every time our liberal leaders deregulated banks and then turned around and told working-class people that their misfortunes were all attributable to their poor education was a lot of student loans and the right sort of college degree ... every time they did this they made the disaster a little more inevitable.

Pretending to rediscover the exotic, newly red states of the Midwest, in the manner of the New York Times, is not the answer to this problem. Listening to the voices of the good people of Ohio, Wisconsin, and Michigan is not really the answer, either. Cursing those bad people for the stupid way they voted is an even lousier idea.

What we need is for the Democratic party and its media enablers to alter course. It's not enough to hear people's voices and feel their pain; the party actually needs to change. They need to understand that the enlightened Davos ideology they have embraced over the years has done material harm to millions of their own former constituents. The Democrats need to offer something different next time. And then they need to deliver. "

https://www.theguardian.com/us-news/2017/may/07/obama-biography-stirs-controversy-with-tales-of-politics-sex-and-a-rising-star

JohnH -> pgl... , May 08, 2017 at 08:22 AM
Six ways the New York Times could make is op-ed page more representative...starting with space for supporters for the most popular politician in America: Bernie Sanders.
https://theintercept.com/2017/05/08/six-ways-the-new-york-times-could-genuinely-make-its-op-ed-page-more-representative-of-america/

Andrew Bacevich offers 24 things that the media and their very knowledgeable talking heads could be talking about instead of obsessing about Trump 24/7:
https://theintercept.com/2017/05/08/six-ways-the-new-york-times-could-genuinely-make-its-op-ed-page-more-representative-of-america/

Krugman is a broken record...

mulp -> JohnH...

, May 08, 2017 at 08:22 AM

"Andrew Bacevich offers 24 things that the media and their very knowledgeable talking heads could be talking about instead of obsessing about Trump 24/7:"

"But hiring another prominent writer whose ideology hems close to that of the nation's elites - in this case, fossil fuel corporations who are polluting the world and advocates of Western military might - is hardly adding intellectual diversity to the pages of the Times."

So, the liberal elites are the Appalachian coal miners?

Trump won because he appealed to the NY Times elites?

"It could change that by hiring some of his prominent backers: philosopher Cornel West, Jacobin editor Bhaskar Sunkara, civil rights scholar Michelle Alexander, labor organizer Jonathan Tasini, and former Nevada Assemblywoman and organizer Lucy Flores could all make strong additions."

These people are effective because they have convinced voters to elect socialists across the
US, just like Bernie, easily defeating the right-wingers the NY Times has attacked, like Cruz, Perry, Trump, et al?

"The Times could fix this by hiring some of the more thoughtful Trump backers, or at least writers who have documented his appeal. For instance, there is Dilbert creator Scott Adams, who admires Trump's powers of persuasion and correctly predicted that he would be elected."

So, if one admires the Chinese leadership for their economic policies of spreading the wealth by creating hundreds of millions of jobs paying high wages (for China) paid for with high taxes and high prices (for China), does that mean you want to live under Chinese rule?

I admire the Chinese authoritarians for embracing Keynes and FDR and Galbraith, something you give lip service to, but actually oppose in policy.

You are just as free lunch as Cato and Heritage and AEI and the Kochs, just picking different winners from unsustainable explosion of debt.

BTW, I like Bacevich, except he argues that Obama had as much power as the Chinese authoritarians, and the Congress, the people, the Constitution are irrelevant.

He argued that Obama had the power to ignore all the laws passed by Congress, and had the power to ignore all the voters, because Obama's problem was failing to do what the small number of elites wanted, elites who can't get any one elected in even the liberal elite enclaves.

"The Times could break real ground by hiring talented millennial writers like the Washington Post's Elizabeth Bruenig or Demos's Sean McElwee. The Times could also go even younger, including the voices of Americans who are rarely heard: high-schoolers."

Hmm, so WaPo is now in touch with the masses?

What about NPR and PBS which has programs to train and give recording equipment to to kids so they can do reporting, and then get their stories aired? Are public broadcasting really dominating youth markets?

As a liberal, I automatically seek to falsify claims by anyone regardless of policy position.

I'm a Keynesian in the Galbraith mode, but I will criticize Keynesian arguments just like conservative figured out how to do, but in reducio absurdim to illustrate the weak argument by the Keynesian and logical fallacy of the conservative critique.

"They could hire, for instance, leading climatologist James Hansen or environmental lawyer Erin Brockovich."

Again, to people who utterly failed to get anyone elected, local, State, or Federal, to get anything done.

Hansen has been a disaster in that he helped speed Trump into the White House by being a Don Quinto talking at oil pipelines, by inspiring tens of thousands of young people to drive gas guzzlers to anti oil pipeline protests.

Hey, Hansen and Bernie promise the free lunch of no oil and gas wells and pipelines, but plenty of cheap gasoline for cars and trucks and SUVs and cheap heating for homes.

Soul Super Bad -> anne... , May 08, 2017 at 07:04 AM

The hidden persuaders exposed by Vance Packard!

We got to get our Proud Nation back into gear; got to put the brakes on special interest; got to issue SNAP Card to each citizen; got to stop

gaming the system ! !

anne -> anne... , May 08, 2017 at 09:54 AM
Proper context:

https://ebooks.adelaide.edu.au/o/orwell/george/o79n/chapter1.1.html

1949

Nineteen Eighty-four
By George Orwell

The Ministry of Truth-Minitrue, in Newspeak [Newspeak was the official language of Oceania. For an account of its structure and etymology see Appendix. * ]-was startlingly different from any other object in sight. It was an enormous pyramidal structure of glittering white concrete, soaring up, terrace after terrace, 300 metres into the air. From where Winston Smith stood it was just possible to read, picked out on its white face in elegant lettering, the three slogans of the Party:

WAR IS PEACE

* https://ebooks.adelaide.edu.au/o/orwell/george/o79n/appendix.html

The Ministry of Truth contained, it was said, three thousand rooms above ground level, and corresponding ramifications below. Scattered about London there were just three other buildings of similar appearance and size. So completely did they dwarf the surrounding architecture that from the roof of Victory Mansions you could see all four of them simultaneously. They were the homes of the four Ministries between which the entire apparatus of government was divided. The Ministry of Truth, which concerned itself with news, entertainment, education, and the fine arts. The Ministry of Peace, which concerned itself with war. The Ministry of Love, which maintained law and order. And the Ministry of Plenty, which was responsible for economic affairs. Their names, in Newspeak: Minitrue, Minipax, Miniluv, and Miniplenty....

anne , May 08, 2017 at 06:12 AM
https://ebooks.adelaide.edu.au/o/orwell/george/o79n/chapter1.1.html

1949

Nineteen Eighty-four
By George Orwell

The Ministry of Truth - Minitrue, in Newspeak [Newspeak was the official language of Oceania. For an account of its structure and etymology see Appendix. * ]- was startlingly different from any other object in sight. It was an enormous pyramidal structure of glittering white concrete, soaring up, terrace after terrace, 300 metres into the air. From where Winston stood it was just possible to read, picked out on its white face in elegant lettering, the three slogans of the Party:

WAR IS PEACE

* https://ebooks.adelaide.edu.au/o/orwell/george/o79n/appendix.html

pgl -> DrDick... , May 08, 2017 at 07:52 AM
The problem is that they get away with this lying. Reporters - hello?!
DrDick -> pgl... , May 08, 2017 at 08:46 AM
Our courtier press is worse than useless. The days of Walter Cronkite are but a distant memory.

[May 08, 2017] The Thousand Day Reich The Double Movement

Notable quotes:
"... The Great Transformation ..."
"... Polanyi believed that fascism had little to do with the outcomes of World War I, and depended for success more on the sympathies of the powerful than on any true mass movement. ..."
"... More broadly, fascism, like socialism, was rooted in a market society that refused to function' (p.239). The more market crisis, the better fascism prospered, since it purportedly offered a way to re-embed markets within social structures, albeit at the cost of human freedom. ..."
"... Mark Blyth's book, Great Transformations ..."
"... they create their own disciplining apparatuses that subordinate national economies to international markets. Traditional social protections haven't been gutted, but they have been greatly weakened. ..."
"... As Piketty and others have documented, the benefits of globalization have flowed, to a vastly disproportionate extent, to those who were already rich. ..."
"... Unions have been crippled, often quite deliberately. Traditional labor markets have been hollowed out, leaving working class people exposed to uncertain and often miserable futures. Just like the nineteenth and early twentieth century paupers and workers that Polanyi discusses, modern workers and members of the lower middle class find themselves exposed to an unrestrained market, that seems intent on ripping out the social bulwarks that used to protect them. ..."
"... Review of International Political Economy ..."
"... The problem, they argue, building on Kalecki's thought and generalizing it, is that each regime contains the seeds of its own destruction. More precisely, each regime encourages actors within it to behave in ways that gradually make the regime politically unworkable. ..."
"... Blyth and Matthijs argue that this is indeed what happened, giving rise to neoliberalism. The neoliberal regime identified the key problem of the previous regime, inflation, as its major policy target. And indeed, advanced industrialized democracies have had relatively low inflation over the last thirty years. However, pursuit of this policy goal has its own problems. Neoliberalism too contains the seeds of its own demise, even if they are different seeds, and it is a different demise. ..."
"... If the previous era was a debtor's paradise, where inflation made it cheaper to pay back debts, Blyth and Matthijs identify the current order as a creditor's paradise where the real value of debt is maintained (on the struggle between creditors and debtors, see also James Buchan's wonderful and neglected book on money, Frozen Desire ..."
"... Lots of mentions of "society" there, and none of the nation-state, which is interesting, since one of the forms that disembedding has taken since the 1970s is "globalization", a process whereby the economy has ceased to be a national economy but "society" has largely remained within borders. ..."
"... Interesting to characterize these movements as a debtors revolt given that trump allegedly owes a lot of money to some dubious creditors. ..."
"... Whereas all groups made great educative gains in the 1900/1970 period (with first universal primary and secondary education, then the massification of undergraduate education), only the top 15% to 25% went on to pass this threshold (at least for several decades). ..."
"... I think members of this latter group, who typically do not own significant amounts of capital yet are hardly accurately described as workers, can legitimately be counted on the side of the winners, even when not capitalists themselves. And indeed, the normal constituent voter of left-of-center mainstream parties in advanced democracies (as well as the normal candidate, in fact) has been a non-capitalists member of this group, making the "supine response" of these parties to the inherent problems of the neoliberal regime almost natural: elected representatives of these parties and their core voters profited, and still profit, from this regime (in the increasingly present context of climate disruption, it is not unconceivable that this group-aka as us-would experience a net reduction of its level of economic prosperity in the event of an egalitarian redistribution more attuned to ecological needs). ..."
"... Blyth and Matthijs do need for reasons of self-preservation to shy away from calling neoliberalism one Big Lie, though it does take away a bit from the clarity of their exposition that they must refrain from doing so, for the moment. ..."
"... A regime as explanator implicitly rejects the core idea of the neoliberal regime - a general market equilibrium, complete with a not quite invisible hand of monetary policy, as the stabilizing mechanism for the growth path of the economy. ..."
"... A regime, as a common alignment of many things, many trends if you will, is compatible with a vision of an economy which is fundamentally driven by disequilibrium dynamics, an economy which for fundamental reasons of uncertainty, accumulation and depletion, in which the distribution of risk reflexively drives the distribution of income and economic behavior. A regime explanation says that periods of apparent stability are the result of a kind of gyroscopic stability imparted by forward motion that aligns and coordinates, in much the way that pedaling a bicycle makes the bicycle smoothly stable as long as it is in forward motion. ..."
"... The implied essence of the regime as explanator is that capitalism is inherently dynamic and unstable - really that uncertainty ..."
"... I crossed this bridge myself in 2008. Trump's supporters are principally concerned with creating opportunities for their kids, not improving their own immediate circumstances, which are just fine for the most part. ..."
May 06, 2017 | crookedtimber.org

by Henry on May 1, 2017 This is the second in a series of projected posts that try to look at the Trump administration and right wing populism through the lens of different books (the first – on civil society – is here ). The last post was mostly riffing on Ernest Gellner. Today, it's another middle-European exile intellectual – Karl Polanyi.

Karl Polanyi's key book, The Great Transformation has enjoyed a big revival in the last decade. This Dissent article by Patrick Iber and Mike Konczal provides a great summary. Their article – from last year – was intended primarily to frame a discussion of differences between Hillary Clinton and Bernie Sanders. However, as Iber and Konczal suggest in passing, Polanyi would not have been surprised by Trump. Why not? In part, because Polanyi offers a macro-level account of the changing relationship between society and economy, and how efforts to free the economy from the embrace of social relations become self-undermining.

In Polanyi's argument, the economy is 'socially embedded.' This means that economic transactions and relationships aren't separate from society – they are part of it. Efforts to free the market from society and make it self-regulating are not only utopian, but are likely to have disastrous consequences. For Polanyi, the liberal market societies that sprung up in countries such as Britain in the eighteenth and nineteenth centuries, and spread across the world, are not rooted in some natural propensity to 'truck, barter and exchange one thing for another.' Instead, they are an unnatural extrusion – the result of a doomed effort to separate out the market from the society that constitutes it, turning nature and social relations like labour into artificial commodities to be bought, sold and exchanged.

This is rooted in Polanyi's understanding of economic history, which discusses other ways in which the economy has worked (an aside: a substantial portion of the work of the Nobel prize winning economist Doug North can be read as an extended effort to prove Polanyi wrong ). It also leads to his famous (among social scientists) argument about the 'double movement.' Polanyi argues that efforts to disembed markets from their social supports leads to a backlash from 'Society,' which looks to re-embed market relations within a social context.

This effort to re-embed social relations can take both benign and malign forms. Polanyi was a social democrat. He wanted to roughly map out a set of social protections that could restrain the harmful effects of markets, effectively re-embedding them within a set of social protections. Yet his book was first published in 1944, and he was equally concerned with the malign ways in which Society might re-embed markets. He saw the economic crises of the 1930s as a product of disembedded markets and the gold standard. This led to direct political confrontations between workers – immiserated by lower wages and capitalists who had "built industry into a fortress from which to lord the country" (p.235). Economic and political paralysis provided ideal conditions for fascism to succeed: "Fear would grip the people, and leadership be thrust upon those who offered an easy way out at whatever ultimate price" (p. 236).

Polanyi believed that fascism had little to do with the outcomes of World War I, and depended for success more on the sympathies of the powerful than on any true mass movement. At least as important as an actual fascist movement "were the spread of irrationalist philosophies, racialist esthetics, anticapitalist demagogy, heterodox currency views, criticism of the party system, widespread disparagement of the 'regime' or whatever was the name given to the existing democratic set-up" (p.238). More broadly, fascism, like socialism, was rooted in a market society that refused to function' (p.239). The more market crisis, the better fascism prospered, since it purportedly offered a way to re-embed markets within social structures, albeit at the cost of human freedom.

Thus, for Polanyi, the key challenge was to re-embed markets in society in a healthy rather than pernicious fashion. This would involve social protections and the restoration of the primacy of society over the economic system, so that "the market system would no longer be self-regulating" (p. 251). Governments would cooperate more, while retaining the freedom to organize their national life as they wanted, rather than being strangled by the need to maintain an artificial currency standard. The valuable aspects of liberal society – specifically, the civil liberties, private enterprise and wage system which sprung up from nineteenth century liberalism – would have to be maintained through persistent efforts to ensure that every move to strengthen society be accompanied by a move to strengthen individual freedom.

Polanyi's arguments provided many post World War II social democrats with a set of intellectual tools to understand and justify the world that was being created. They suggested that European social democracy, rather than being a way station on the path to true revolution, was an end-state, and arguably a more attractive end-state than exemplars of post-revolutionary society such as the USSR and China. In domestic politics, national governments instituted the welfare state and other social protections. In international politics, scholars such as John Ruggie argued in the 1980s that the post World War II economic order provided a kind of 'embedded liberalism' of the kind recommended by Polanyi.

They also provide, potentially a diagnosis of what has gone wrong since the 1980s. Embedded liberalism is dead, and neo-liberalism has triumphed in its place. Mark Blyth's book, Great Transformations , is an explicit updating of Polanyi. It documents how intellectuals and business leaders brought through an intellectual, social and economic transformation, deliberately intended to undermine embedding institutions, and reinstitute market freedoms in their place. The world of the last twenty years has seen an extraordinary transformation. International markets do not any more have an equivalent of the gold standard (although the euro served quite well in its place in the European Union), yet they create their own disciplining apparatuses that subordinate national economies to international markets. Traditional social protections haven't been gutted, but they have been greatly weakened.

As Piketty and others have documented, the benefits of globalization have flowed, to a vastly disproportionate extent, to those who were already rich.

Unions have been crippled, often quite deliberately. Traditional labor markets have been hollowed out, leaving working class people exposed to uncertain and often miserable futures. Just like the nineteenth and early twentieth century paupers and workers that Polanyi discusses, modern workers and members of the lower middle class find themselves exposed to an unrestrained market, that seems intent on ripping out the social bulwarks that used to protect them.

Hence, a straightforward Polanyian account of Trump and right wing populism would explain it as a backlash to the renewed efforts of market liberals (or neoliberals in market parlance) to free the economy from the social restraints that make it bearable for human beings. It would argue that we are again seeing a 'double movement,' as right wing populist politicians take advantage of popular anger to restore a social and moral order which may look appalling to liberal eyes, but which reinstitutes (or, at least, claims to reinstitute) much desired social protections.

Fred Block and Peggy Somers provided such an account a couple of years ago, where they foresaw the threat of resurgent right wing populism. Their analysis is worth quoting in extenso

Polanyi argued that the devastating effects on society's most vulnerable brought on by market crises (such as the Great Depression in the 1930s) tends to generate counter movements as people struggle to defend their livelihoods, their neighborhoods, and their cultures from the destructive forces of marketization. The play of these opposing dynamics is the double movement, and it always involves the effort to remobilize political power to tame the apparent over-extension of market forces. The great danger Polanyi alerts us to, however, is that mobilizing politics to protect against markets run wild is just as likely to be reactionary and conservative, as it is to be progressive and democratic. Whereas the American New Deal was Polanyi's example of a democratic counter movement, fascism was the classic instance of a reactionary counter-movement; it provided protection to some while utterly destroying democratic institutions.

This helps us to understand the tea party as a response to the uncertainties and disruptions that free market globalization has brought to many white Americans, particularly in the South and Midwest. When people demonstrate against Obamacare with signs saying "Keep Your Government Hands off My Medicare," they are trying to protect their own health care benefits from changes that they see as threatening what they have. When they express deep hostility to immigrants and immigration reform, they are responding to a perceived threat to their own resources-now considerably diminished from outsourcing and deindustrialization. Polanyi teaches us that in the face of market failures and instabilities we must be relentlessly vigilant to the threats to democracy that are often not immediately apparent in the political mobilizations of the double movement.

We just saw in the European elections that right-wing, seemingly fringe parties, came in first in France and the U.K. This is a response to the continuing austerity policies of the European Community that have kept unemployment rates high and blocked national efforts to stimulate stronger growth. It might still be largely a protest vote-a signal to the major parties that they need to abandon austerity, create jobs, and reverse the cuts in public spending. But unless there are some serious initiatives at the European Community and the global level to chart a new course, we can expect that the threat from the nationalist and xenophobic right will only grow stronger.

The best evidence for this perspective comes from the rhetoric of Trump and other right wing populists. Trump's rhetoric differs from traditional Republicanism in that it isn't as viscerally hostile to social protections (at least social protections that Trump supporters don't associate with African Americans and immigrants). He welds together a detestation for foreigners with anger towards a perceived cosmopolitan elite, and a promise to protect ordinary Americans from both. Irrationalist philosophies . Racialist esthetics . Anticapitalist demagogy . Heterodox currency views . Criticism of the party system . Widespread disparagement of the 'regime.' Und so weiter .

Orban and Kaczynski, pari passu, offer much the same blend. So, for that matter, does Theresa Mayin a watered down form. They may or may not deliver on their rhetoric (Trump's anti-Wall Street fervor, for example, has miraculously disappeared after his election), but each bases their appeal on it.

There are different flavors of Polanyian thought. Iber and Konczal represent a left-leaning social democratic flavor, that is in line with the Sanders wing of the Democratic party, and look to build bridges with those further to the left. Other Polanyians like Sheri Berman are more attracted to a moderate version, which builds more directly on the European example, and are skeptical of anti-system versions of leftism. Polanyian arguments involve compromise between a left critique of markets and a more centrist defense of liberalism. Different writers strike the compromise in different places.

This also has implications for how one analyses Trump and other populists. For example, Berman argues that the dangers of right wing populism depends to a very great extent on the strength of existing liberal institutions and practices, and the willingness of others to oppose Trump (just as traditional fascism depended for its success on the willingness of 'establishment' conservatives to strike a deal).

Polanyi's arguments about great transformations differ from civil society oriented approaches like Gellner's in some important ways. Gellner is, in the end, on the side of the cosmopolitans – he prefers a detached and ironic liberalism to more traditionalist versions of identity, and believes that it is crucially linked to the thought system that has given rise to science and the partial mastery of nature (even if he prefers to maintain a quasi-ironic stance towards that thought system too). Civic nationalism, for Gellner, is the homage that virtue pays towards vice – an identity politics homeopathically diluted so as to make it stronger in some ways (people remain oriented to the general interest of a larger collective), but weaker in others (they are also capable of maintaining and moving between other forms of identification). Polanyi, in contrast, values community attachment and accompanying 'thick' notions of society as good things in their own right. While he also sees great virtue in some aspects of liberalism, he seeks always to prevent it from overwhelming society, both because of the devastation that it wreaks itself, and the corresponding devastation that may be wreaked by Society taking its revenge.

This makes Polanyi attractive to two, somewhat different, strains of modern argument on the left. The first – closer to the center – is a strand of communitarianism, which similarly looks to reconcile the values of liberalism and community order. The second is a more strongly left leaning social democratism, which is indirectly influenced by Marx and friendly to Marxian thought, but which looks to find a different set of intellectual ancestors than those of the Marxist tradition.

The weakness of traditional Polanyian thought is twofold. First, modern conditions are not the same as those identified by Polanyi in the 1930s. There isn't a stalemate between the workers and the capitalists (the capitalists seemed mostly to have won). Second, the mechanisms that Polanyi identifies are notably vague. To argue that 'Society' strikes back against the 'Market' is to identify an already indistinct relationship between two indistinctly defined abstracts. There is arguably something very important in there, somewhere. However, without further specificity, it is hard to make concrete arguments about what is going to happen when, let alone to build on these arguments towards successful action.

One possible way forward is offered in a new paper ( non-paywalled until the end of May at Review of International Political Economy ) by Blyth and Matthias Matthijs. As noted before, Blyth's first book riffed explicitly on Polanyi, while drawing out a separate set of arguments about the relationship between ideas and institutions, and how this explained the senescence of embedded liberalism as well as its birth. This paper, in contrast, is not a development of Polanyi's arguments so much as an effort to do what Polanyi did in the 1940s. Blyth and Matthijs use current events to come to a systemic understanding of changes in the world economy, changes in domestic economies, and how they are related to each other.

They argue, more or less, that the international economic order tends at any one moment in time to have a specific 'regime' – a set of 'policy targets' or expected goals that actors within the system, look to achieve, and the institutions within which these targets are embedded. The problem, they argue, building on Kalecki's thought and generalizing it, is that each regime contains the seeds of its own destruction. More precisely, each regime encourages actors within it to behave in ways that gradually make the regime politically unworkable.

Thus, after World War II, the regime of Western countries was oriented towards the policy target of achieving full employment. This, however, as Kalecki argued, meant that the median wage kept on rising, advantaging skilled workers, and disadvantaging business, which found it hard to 'discipline' labour, or maintain productivity. In turn then, private investment fell, and unemployment rose at the same time as inflation rose too – the so-called 'stagflation' of the 1970s. Kalecki predicted, rightly, that this would lead business and capitalists to start pushing actively for a more 'orthodox' set of policies which would move away from trying to maintain full employment, and towards cutting deficits instead.

Blyth and Matthijs argue that this is indeed what happened, giving rise to neoliberalism. The neoliberal regime identified the key problem of the previous regime, inflation, as its major policy target. And indeed, advanced industrialized democracies have had relatively low inflation over the last thirty years. However, pursuit of this policy goal has its own problems. Neoliberalism too contains the seeds of its own demise, even if they are different seeds, and it is a different demise.

If the previous era was a debtor's paradise, where inflation made it cheaper to pay back debts, Blyth and Matthijs identify the current order as a creditor's paradise where the real value of debt is maintained (on the struggle between creditors and debtors, see also James Buchan's wonderful and neglected book on money, Frozen Desire ). Thus, the current regime is pursuing a "policy of price stability in an environment of wage stagnation and rising debt levels driven by the [regime] itself" (p. 22). Stagnant wages and low job security led people to borrow money to retain their ability to consume, helping lead to the financial crisis. The policy responses to this crisis – which have boosted returns to asset holders, while imposing austerity on others – have not eased the systemic problems of the new regime, but rather worsened them.

This (combined with the supine response of the center left to these problems) is what is leading to the new populism that is threatening to overwhelm the existing system – the "anti-creditor pro-debtor political coalitions that have been systematically eating away at mainstream center-left and center-right party vote shares since the crisis." The political success of Trump, and politicians like him, is the consequence of endogenous breakdown within the regime.

Blyth and Matthijs's account differs from Polanyi's in some very important ways. The key dynamic is not 'Society' striking back at the 'Market.' Instead, it is a more specific set of actors, whose interests are largely determined by the situation that they find themselves in, and how that situation changes as the dynamics of a given regime become self-undermining (in the sense that they erode the underlying foundations of the regime) at the same time as they are self-reinforcing (in the sense that the core actors try to keep the system going through increasingly desperate measures. It also is, as they note, exploratory rather than dispositive. What it does is to usefully show how Polanyi's basic intuitions – that the neo-liberal project of market creation is inherently self-undermining – can be applied to a far more specific set of actors, and specific set of mechanisms entraining those actors, than described in Polanyi's own work.

(Updated to include many small fixes and a couple of clarifications. Updated again to include Block and Somers quote which really should have been there in the first place).

Brad DeLong 05.01.17 at 4:16 pm ( 1 )

Looks like you are going to write my paper about how Gellner, Polanyi, Keynes, and Tocqueville are the master social-theory keys to understanding the 21st century before I do

May I recommend "Highway to Hitler"? http://www.nber.org/papers/w20150

Yours,

Brad DeLong

Ronan(rf) 05.01.17 at 4:58 pm ( 2 )
Afaict a lot of the research would say that what we're seeing is primarily a reaction to cultural change, and although that can't be completely divorced from market driven socio economic changes (for example occupational/class shifts) a lot is just simply demographics (a reaction to immigration, decline in status for once dominant ethnic groups etc)

What could polanyi say about that, if the changes people were reacting to were mainly demographic rather than socio economic ?

bruce wilder 05.01.17 at 5:16 pm ( 4 )
Very interesting essay. I will offer only a reaction to a couple of small points.

after World War II, the regime of Western countries was oriented towards the policy target of achieving full employment. This, . . . meant that the median wage kept on rising, advantaging skilled workers, and disadvantaging business, which found it hard to 'discipline' labour, or maintain productivity. In turn then, private investment fell, and unemployment rose at the same time as inflation rose too – the so-called 'stagflation' of the 1970s.

A couple of things are questionable in this narrative account and that may be telling to larger arguments. What is "advantaging skilled workers" doing in this narrative? Really, it was "skilled" workers who were advantaged? What skills? "Skills" are one of those things people introduce to economic arguments willy nilly when they want to invoke moral factors but avoid mentioning political power. It's hand-waving of the worst sort.

The auto and steel workers scored because they were organized and because the economic rents enjoyed by their oligopolistic employers were vulnerable. "Discipline" was a real enough problem - quality in car production was notorious. But, the "unskilled" nature of production labor was also conspicuous - the jobs were extremely boring. And, management wasn't sure whose side they were on; that management employees would get the same union benefits that they conceded to hourly labor was surely a factor in the generous terms of the 1969 labor agreements.

"private investment fell" Not actually true. Returns on investment fell, even as rates of investment continued to rise - that was the problem of the late 1960s and 1970s. There's a paradox here, in the relationship of invested capital to wages and it has to do with diminishing returns. That was then, and today, we are experiencing the mirror image problem: rates of return are now very high, but rates of investment are quite low - in fact, a large part of the apparent increase in the share of national income going to "capital" over the last generation is attributable to net disinvestment, cashing out of accumulated capital stock, tangible and intangible, and diversion of flows from social reproduction of that capital stock. In the 1960s, the U.S. was building the interstate highway system and great state university systems; now infrastructure is conspicuously shabby and college is a trapdoor into debt peonage.

I am thinking it might be worthwhile to throw in a bit of Frank Capra and It's a Wonderful Life to show what Polanyi is pointing at. What are the economics of that movie fantasy? And, the alternative of Potterville? Savings and loans on the one hand, and casinos on the other, among other things. And, now we have as President, someone who profited pushing casino gambling as a key to economic development.

bob mcmanus 05.01.17 at 5:25 pm ( 5 )
Gellner, Polanyi, Keynes, and Tocqueville are the master social-theory keys

Really?

I'm reading Henry's pieces, largely without comment, looking to see which way the winds are blowing. Okay, maybe the Marxians lost and are over, and the Continental Theorists aren't welcome, but the Social Constructionists? Michael Mann, Giddens, Baumann, Randall Collins, Bellah, Sassen not political theory enough maybe. And then the cyberkids, post-90s thinkers:Fuchs, Castells, Hayles, Kittler, Manovich, Couldry, Bakardjieva, Kosseleck media studies, cultural studies nothing to do with political economy. Nor the feminists, critical race theorists, or post-colonialists or queer theorists. (Not that I have read them all, but I want to, I should)

Gellner, Polanyi, Keynes, and Tocqueville. Right.

Chris Bertram 05.01.17 at 6:49 pm ( 6 )
Lots of mentions of "society" there, and none of the nation-state, which is interesting, since one of the forms that disembedding has taken since the 1970s is "globalization", a process whereby the economy has ceased to be a national economy but "society" has largely remained within borders.
engels 05.01.17 at 7:09 pm
we are again seeing a 'double movement,' as right wing populist politicians take advantage of popular anger to restore a social and moral order which may look appalling to liberal eyes, but which reinstitutes (or, at least, claims to reinstitute) much desired social protections

This sounds a bit like: 'we are about to see the end of human mortality because Sergey Brin is going to live forever (or at least claims he will)'.

Stephen 05.01.17 at 7:42 pm ( 8 )
Henry: "Polanyi believed that fascism had little to do with the outcomes of World War I".

Life is short, I have many other things to do, I confess I've not read Polanyi. But could you enlighten me: does he explain why Fascism did well in states badly defeated in WWI (Germany, Austria, Hungary) or disappointed (Italy, Romania), but not in states more or less victorious (France, Belgium, UK, USA, Canada, Australia) or happily neutral (Sweden, Norway, Denmark, Netherlands, Switzerland)?

Also: "Blyth and Matthjis identify the current order as a creditor's paradise where the real value of debt is maintained". As far as I can see, negative real interest rates are becoming more and more common. Some mistake here?

JimV 05.01.17 at 8:24 pm ( 9 )
There were skilled workers outside of the automobile assembly lines.

Ships, turbines, generators and other complex machinery were not built using assembly lines. Skilled workers in those fields included welders, grinders, machinists, crane operators, riveters, pattern-makers, foundry workers, electricians and drafters. GE had an Apprentice Program to teach high-school graduates these skilled trades, in the 1950's, 60's, and 70's.

At a design meeting in the 1970's, Dr. W, the Manager of Aerodynamic Development Engineering at GE Large Steam Turbine once told us, "The key to aerodynamic efficiency in a turbine blade is continuity of the second-derivative." To which the Rotor Design Engineering Technical leader replied, "Someday let me introduce you to the large Polish guy who grinds the second derivative." (Who probably made as much as Dr. W, with overtime to get things shipped in December instead of January to meet year-end billing.)

Not so much anymore, of course.

nastywoman 05.01.17 at 8:49 pm ( 10 )
– and I always thought that contemporary 'Populists' just pick -(without a lot of 'thought') – whatever (currently) is popular to get elected?
– and that's why so much 'Social-Democratic-Policy' is in the programs of Europeans Populists – but so little in the thoughts of a Von Clownstick.
And that the only 'things' Populists in the US and in Europe share – is 'braindead nationalism' – very 'narrow minds' – and pretending to be -(courtesy – Oxford Dictionary) –
'A member or adherent of a political party seeking to represent the interests of ordinary people'?

And I never thought there is any thought behind the willy-nilly-ways Von Clownstick picked his friends – from US Republicans to Crazy Right-Wingers – Russians – if helpful – or even the Blond from Wikileaks – und so weiter

And there is this old German Fairy Tale -I think from Wilhelm Hauff – where a 'citizen' who hates the establishment in the town he lives – dresses up an Ape in very fancy clothes and presents him as 'a gentlemen' – and how 'visionary' was that – and did you guys ever enter a Trump Hotel? I mean – the way the dude picks his Interior Design – that's so 'Nouveau Rich Russian' – that we should ask for his birth certificate?

bob mcmanus 05.01.17 at 9:41 pm ( 11 )
I expected to like the Mark Blyth and very much did, thanks for the link. Blyth seems to be good, much better than I, at communicating the useful ideas to the audience that needs to hear them.

Bertram: whereby the economy has ceased to be a national economy but "society" has largely remained within borders.

Blyth and co-writer at the end talk about a return to "neo-nationalism" without being clear how it differs from nationalism. My early impressions of the current reaction is that globalization, cosmopolitanism and uhh diversity have progressed much further than say 1900-1925 (how much is left of agricultural and rural sectors, or even mass manufacturing) and are embedded more deeply and broadly in national populations, up to 20 to 30 percent. Not yet enough to be hegemonic in adverse conditions.

So reactionary nationalism will mostly fail, as we are seeing, in strong economic changes. We will remain neoliberal. It will I think fail on social or cultural changes, except in areas where the state makes a difference. it will roll back state programs, including immigration, minority protections, cultural support etc. But culture will continue to globalize and diversify as a media and social project.

PS: Blyth does the now std periodization, 1945-75 as the Keynesian Fordist era, 1975-2008 as the neoliberal retrenchment (?). But stuff like the National Endowment for the Arts, Food Stamps, Great Society and Civil Rights Programs endured and prospered throughout the latter period. Could we possibly reassess those as more neoliberal than Fordist, and therewith expand our understanding of neoliberalism?

engels 05.01.17 at 10:11 pm ( 12 )
I think JimV and Bruce are both right. Skilled worker can be a meaningful concept hut nowadays it seems to be commonly used as a kind of virtus dormitiva explanation for the higher wages paid to people higher up the corporate food chain and a fig-leaf for various kinds of rent, connections, cultural capital, etc
Russell Arben Fox 05.02.17 at 12:03 am ( 13 )
A wonderful review-essay, Henry; I'll be thinking about some of the things you say here for a while. My only comment is that when you say

This makes Polanyi attractive to two, somewhat different, strains of modern argument on the left. The first – closer to the center – is a strand of communitarianism, which similarly looks to reconcile the values of liberalism and community order. The second is a more strongly left leaning social democratism, which is indirectly influenced by Marx and friendly to Marxian thought, but which looks to find a different set of intellectual ancestors than those of the Marxist tradition.

I think you might be making a slight category error, in that you're looking at different elements of the left that ground themselves in slightly differing disciplinary perspectives, but which are very much a part of the same whole. The theorists who call themselves "communitarians" and those who call themselves "social democrats" do not necessarily overlap, but that's because they're looking at different sets of conceptual questions: at the collective nature of humankind's social epistemology and moral evaluation, in the former, and at the collective nature of political legitimacy and public goods, in the latter. The Marxist tradition has things to contribute to both, I think.

John Quiggin 05.02.17 at 12:41 am

Pro-debtor politics is always in competition with social democracy. In the US, for example, there is a strong negative correlation at the state level between redistributive taxation and debtor-friendly bankruptcy laws. Trump, a repeated bankrupt and tax dodger, embodies this perfectly.

alfredlordbleep 05.02.17 at 2:05 am ( 15 )
Thus, Polanyi believed that fascism had little to do with the outcomes of World War I, and depended for success more on the sympathies of the powerful than on any true mass movement.

Orwell specifically offered this [emphasis added] which admittedly doesn't go as far as the Polanyi attribution:

Mein Kampf by Adolf Hitler
reviewed by George Orwell

. . . It is a sign of the speed at which events are moving that Hurst and Blackett's unexpurgated edition of Mein Kampf, published only a year ago, is edited from a pro-Hitler angle. The obvious intention of the translator's preface and notes is to tone down the book's ferocity and present Hitler in as kindly a light as possible. For at that date (early 1939) Hitler was still respectable. He had crushed the German labour movement, and for that the property-owning classes were willing to forgive him almost anything.

john c. halasz 05.02.17 at 2:38 am ( 16 )
I'm a bit puzzled by JQ @12. "Financial assets" are at bottom debt, i.e. claims held by creditors against underlying production incomes, wages and profits. One might argue that there are all sorts pf property and equity claims count as much (though that's increasingly untrue with stock buy-backs, PE buy-outs, etc.), but "wealth" is held primarily in the form of "financial assets" and those assets are increasingly inflated in "value" by debt leveraging, officially supported by CBs among other agencies; while drawing off production incomes from the rest of the economy, they are based on speculation, M-M' without any intermediating C, IOW fictitious capital. Public debt, while stigmatized by neo-liberal austerity advocates, nonetheless supplies key collateral for the financial system and its leveraging strategies and instruments, while substituting for taxation. So just how would progressive income taxation be the opposite of bankruptcy, i.e. debt reduction and restructuring, when increasing potions of basic earned income are consumed in debt servicing, while large shares of income are siphoned off by inflated financial "assets"? Doesn't that just indicate the weakness of traditional social democratic thinking and the economic models that supported it, which largely missed the debt dynamics that culminated in the current continuing crisis? Now if you wanted to talk of taxation of financial "wealth" and the blocking off of financial flows to tax havens and the substitution of public investment for private extractions, in the face of public deficit fear-mongering, then you might get at the required debt-restructuring and head toward a real program of income redistribution and economic revival oriented toward alternative ends. But it's hard to see how one could do that while maintaining a "cosmopolitan" outlook that ignores states and their citizen publics.
Brett 05.02.17 at 6:15 am ( 19 )
I don't quite understand the "discipline" argument. Productivity growth rates were higher in the Postwar Period than in the decades before, despite far stronger and more militant unions. Why would such be easier to discipline than before?

It feels more like declining productivity was caused by something else, and that plus inflation increasingly cratered returns on investment (especially since this was back when the stock market was still boring in the US).

phenomenal cat 05.02.17 at 7:10 am ( 20 )
halasz, it would be helpful, for me anyway, if you could further unpack your reasoning starting with "so just how would progressive taxation " and especially the bit about the weakness of "social democratic thinking" that follows.

I think I'm following based on the last couple of sentences, but something more explicit would be nice. Insofar that I am, this may be the cul de sac in which the political economy of globalization/neoliberalism will founder with its inability/unwillingness to reverse direction.

If there can be no limits or boundaries to the flows of "cosmopolitan" capital and wealth (or its concentration) within and across various configurations of the state (or other kinds of communities) the outcome will be increasing constrictions on the power and sovereignty of states and communities. This much is already clear. What is less clear, though outlines are taking shape, is the full extent of social reaction to this state of affairs. The de riguer right wing and/or "populist" reactionary reaction among some publics is plainly visible but will go no further than exacerbating existent problems or further devolving states' atrophied capacity to act on behalf of the public. The political wildcard is on the leftward spectrum of reaction where actors are finally waking up en masse to the realities of a sociocultural compromise with liberalism and to the plain fact that neoliberal governance as financialized corporate globalism is willing to compromise on exactly nothing. The problem, as you seem to be indicating, is the left spectrum remains enthralled to models that appear to have been checkmated. As of yet the left has yet to produce any novel solutions that confront actually existing concentrations of power and not those of 75 – 100 years ago.

Given current state of affairs, mass or public reaction may well push toward more or less complete withdrawal of "participation," general refusal, and legitimacy collapse across political and economic institutions. Bartelby the Scrivener as world history.

Faustusnotes 05.02.17 at 9:16 am ( 21 )
Interesting to characterize these movements as a debtors revolt given that trump allegedly owes a lot of money to some dubious creditors.
MFB 05.02.17 at 12:57 pm

Interesting point, faustusnotes, but perhaps you are making the mistake of a) thinking that Trump believes what he says and b) thinking that Trump voters know what they're doing.

In reality, there is obviously an enormous amount of debt generated by the need to promote easy credit in order to keep consumption high while keeping wages low. This was bound to piss people off sooner or later. There is also an enormous amount of underemployment and unemployment driven by a reluctance to invest in anything which doesn't offer an enormous return on investment.

It seems likely that what is happening at the moment is simply a revulsion against the circumstances in which people find themselves, combined with absolute ignorance (and massive misinformation) about the source and cause of those circumstances. Hence, all over the world, people are making extremely unwise choices of leaders and then getting immensely pissed off when those leaders don't do what they imagine the leaders have promised to do, and going off and voting for even less wise choices in consequence.

The long-term effects of this are not promising.

Z 05.02.17 at 1:36 pm ( 23 )
Commenting on such a deep yet wide-ranging post almost feels like cheapening. Here goes nevertheless

there isn't a stalemate between the workers and the capitalists (the capitalists seemed mostly to have won)

and

This (combined with the supine response of the center left to these problems) is what is leading to the new populism

attracted my attention.

In addition to the reaction of the business community described in Blyth & Matthjis, a designed economical response if I understood correctly their thesis, isn't it also the case that the educative trajectories of the various groups in advanced societies started to diverge (and more properly sociological change)? Whereas all groups made great educative gains in the 1900/1970 period (with first universal primary and secondary education, then the massification of undergraduate education), only the top 15% to 25% went on to pass this threshold (at least for several decades).

I think members of this latter group, who typically do not own significant amounts of capital yet are hardly accurately described as workers, can legitimately be counted on the side of the winners, even when not capitalists themselves. And indeed, the normal constituent voter of left-of-center mainstream parties in advanced democracies (as well as the normal candidate, in fact) has been a non-capitalists member of this group, making the "supine response" of these parties to the inherent problems of the neoliberal regime almost natural: elected representatives of these parties and their core voters profited, and still profit, from this regime (in the increasingly present context of climate disruption, it is not unconceivable that this group-aka as us-would experience a net reduction of its level of economic prosperity in the event of an egalitarian redistribution more attuned to ecological needs).

Hence also the preference for irrationalism and intellectual heterodoxy amongst the political adversaries of this group.

Ronan(rf) 05.02.17 at 7:05 pm ( 24

Further to (2) above

https://www.adamtooze.com/2017/03/01/explaining-brexit-trump-search-method/

"Inglehart, is a die hard modernization theorist. So he would insist on long-term connections between economic development, affluence and liberal postmaterial values. But this is a very different kind of socio-economic determinism than the one usually invoked to explain the current surge of radical right politics. And it would seem to me that the Polanyians should concede some major modifications to their crisis model. How exactly one might modify the Polanyian model, I will need to write a separate post.

The trigger of immigration, after all, can easily be squared with a basic Polanyian position. It is the model of cultural development, or lack of it, that is the problem. Why do some people react to globalization protectively and not others and does this reduce to sectional economic interests and exposures to competitive pressure?
" the aforementioned 'other post'

https://www.adamtooze.com/2017/03/02/notes-global-condition-mapping-debate-around-left-behind-white-working-class/

bruce wilder 05.02.17 at 7:24 pm ( 26 )
engels @ 12: I think JimV and Bruce are both right.

Indeed. JimV experienced and is describing aspects and manifestations of what I abstractly labeled, "disinvestment" - the dismantling and burning off of accumulated often intangible social capital to fund upward income redistribution.

Brett @ 19: I don't quite understand the "discipline" argument. . . . It feels more like declining productivity was caused by something else, and that plus inflation increasingly cratered returns on investment (especially since this was back when the stock market was still boring in the US).

Blyth and Matthijs are arguing a "regime" as explanator, which is to say that it isn't any one thing, but the common alignment of many things, that matters. And, they are explicitly insisting on - or at least emphasizing - a top-down, macro dictates micro, everything-becomes-endogenous approach in constructing the identification of how the regime both explains and orders dynamic development.

The conventional Chicago School mainstream neoclassical economics that underpins the neoliberal explanation of the neoliberal regime (1980-2008+) says that we live in a market economy, a decentralized system of markets loosely coordinated by more-or-less competitive market prices, drawn toward manifest stability most of the time by the strange attractor of a near-by general equilibrium cum Solow growth path, to which to the U.S. economy (it is always the U.S. economy which is the implicit model for macroeconomic speculation) always returns after exogenous shocks have knocked it down temporarily. This market economy stabilized by general equilibrium in price is imagined to be rather like the one Hayek imagined for his essay on the Use of Knowledge in Society, a better-than-socialist-planning emergent utopian economy, which is less-than-perfect only because wages and prices are too "sticky". Wages are sticky downward, you see, and that is particularly unfortunate in blocking the path of necessary adjustments toward a utopia of ever cheaper labor - workers are inexplicably stupid about not-accepting lower wages when that would be to their advantage in restoring equilibrium full-employment. (Do I have to mention that I am being sarcastic?)

Neoliberalism's explanation of the neoliberal regime helped to create the neoliberal regime. And, Blyth and Matthijs are self-consciously aware that they must find a way out of that explanatory structure, which is why, for example, they feature a recasting of the Lucas Critique, which was an important foundation stone in erecting the intellectual superstructure of the neoliberal regime way back when. The previous regime's "Keynesian" (or New Deal or ordo-liberal) intellectual superstructure was subverted pretty completely over a long period of time, its main threads thoroughly marginalized, so it is hard to get a clear view without calling the whole of mainstream economics a giant cabal of fools and liars.

Blyth and Matthijs do need for reasons of self-preservation to shy away from calling neoliberalism one Big Lie, though it does take away a bit from the clarity of their exposition that they must refrain from doing so, for the moment.

A regime as explanator implicitly rejects the core idea of the neoliberal regime - a general market equilibrium, complete with a not quite invisible hand of monetary policy, as the stabilizing mechanism for the growth path of the economy.

A regime, as a common alignment of many things, many trends if you will, is compatible with a vision of an economy which is fundamentally driven by disequilibrium dynamics, an economy which for fundamental reasons of uncertainty, accumulation and depletion, in which the distribution of risk reflexively drives the distribution of income and economic behavior. A regime explanation says that periods of apparent stability are the result of a kind of gyroscopic stability imparted by forward motion that aligns and coordinates, in much the way that pedaling a bicycle makes the bicycle smoothly stable as long as it is in forward motion.

So, a regime explanation says that the post-war period of economic growth and expansion was the consequence of getting a lot of things aligned and then launching the bicycle on its course down a smooth slope. Not one thing alone, but many things, repeating and repeating in pattern like the spinning of a bicycle's wheels: trivial things many of them, like the auto industry's annual introduction of new models or negotiating new labor contracts. And, not by the emergent magic of the market alone, but by deliberate institution building and management.

So, if you were to go back and seek an explanation for the steady increase of productivity and wages over the nearly thirty years from 1946 to 1973, using a regime to organize your thinking would allow an identification of many underlying factors - increasing use of petroleum, increasing use of process manufacturing techniques and increasing scale of production under those techniques, increasing scope and reach of the money economy, increasing scale of global trade and exchange. What allows for the appearance of stability in what is a highly dynamic period is getting all of that moving forward in a way that lets people coordinate their expectations and behavior: the overarching regime that imparts stability to dynamic change. Risks are low despite epic rates of change and people act confidently, increasingly assured that the recent past is a good guide to a reliable and therefore beneficent future.

The implied essence of the regime as explanator is that capitalism is inherently dynamic and unstable - really that uncertainty (that we don't know a lot more than we do know or can expect to learn and we never know exactly what we do not know) dominates economic organization; rational expectations is b.s. in a world driven to founder on disappointed expectations). All the factors that might explain some apparently linear trend, like say productivity growth, over some seemingly stable period are in fact arcing thru a cycle, self-subverting if you like but also not unlike an arrow shot up into the sky that must come down somewhere.

Labor discipline is no different from any other factor trend: it was arcing across the 1940s to the 1970s just like the expansion of petroleum and electricity, or the expansion of world trade within the framework of Bretton Woods. The bicycle of the world economy centered on the U.S. hit a wall and the rider fell off in the 1970s stagflation. Talk about over-determined! Bretton Woods broke; the vestigial gold exchange standard broke, the petroleum economy hit a ceiling and broke, the Fordist manufacturing economy broke, the U.S. agricultural economy built on subsidized control of production broke.

Or, if you prefer, not-broke so much as simply passed an inflection point on an inevitable arc, and a new institutional regime was required to organize and structure the economy, to put the bicycle back up and into forward motion to restore the sense of stable movement. Blyth and Matthijs are proposing that the neoliberal regime put into place around 1980 can be understood as organized around a monetary policy of disinflation leading to deflation: that was the essential stabilizing element around which everything else aligned. I think they might be being too clever by half, self-consciously trying to lead a neoliberal establishment away from its self-regarding orthodoxy by playing on its narcissism and its self-love for the Great Moderation.

A remarkable thing about the 1930s is how reluctant liberals were to take the opportunity presented by the New Economy of electricity and gasoline and mass production. The means to greatly expand production and increase human welfare were ready to hand and people were stumbling over reactionary resistance and their own certainty that there was magic in the hair-shirt of austerity and the gold standard. (The non-liberal left in the 1930s was fomenting revolution in a way that seemed mostly to add to the palsy of liberalism. Then there was Stalin, who certainly transformed Russia in an ugly hurry.)

We liberals and leftists, today, do not have such great opportunities, but we seem to want to imagine that we do. Elon Musk is our hero. Post-scarcity is our leftish vision for an overpopulated world on the eve of what is almost certain to be a toboggan ride toward a collapse of ecologies and probably civilization itself.

Z 05.02.17 at 7:56 pm ( 27 )
Sorry for the double post, I'm slowly grappling with the ideas.

I think in the end what I meant to say is that Polanyi's Great Transformation can be conceptualized as a struggle between Society and Markets in the context of a convergence of social groups within a given society (convergence driven by rising educative level, the correlative universal participation in the political sphere and perhaps the massive destruction of capital in the two world wars and the Great Depression) while the current Great Transformation of the neoliberal and post-neoliberal regime can be likewise conceptualized as a struggle between Society and Markets but this time in the context of a divergence of social groups (driven by diverging educative achievements, the correlative diverging modes of participation in the political sphere and perhaps the lack of massive destruction of capital by cataclysmic events).

An interesting aside, also touched upon by Chris, is that even though Polanyi's Great Transformation happened in a converging context within the national system, it was remarkable in its diversity internationally (New Deal in the US, Front Populaire in France, Nazism in Germany ). It is unclear to me to whether the current Transformation is happening in a diverging or converging context internationally. On the one hand, comparable nation-states are currently clearly engaged in diverging socio-economic trajectories (if only in terms of demographic evolution) and supposedly homologous political forces actually do diverge quite a bit (there is not so much in common politically between the US under Trump, the UK under May and Germany under Merkel for instance, even though they supposedly all represent the mainstream rightwing party of their respective national systems). On the other hand, the governing élite is very cosmopolitan and socially homogeneous and actual political reactions to the current economic system tend to be quite similar, perhaps.

JRLRC 05.02.17 at 9:50 pm ( 28
So, disembedded markets are or tend to be bad for (the) people, who eventually realize that in a very imperfect fashion. Fascism has required the costs of disembedded markets. Deregulated markets are disembedded markets. Neoliberalism leads or contributes to fascism. And those who co-built and opened the door for the fascists can close it behind them both

In the trumpian case, I do see both fascism and neoliberalism (continuity of; Obamacare excepted). There is a fascist perspective within the administration, with its nationalist-populist components, not just authoritarian, but it coexists with neoliberal bullshit and policy, such as the usual tax breaks for the usual suspects. Neoliberal fascism?
Is there room (and time) for neoliberal fascism as a national regime properly understood?
Very useful text, Henry.

kidneystones 05.03.17 at 1:03 am ( 30 )
There's a great deal to admire and enjoy in this essay. So much so that I won't bother to comment on the many useful and informative elements. The piece is well-grounded, well-argued, and clearly the product of Henry's solid scholarship. The problems appear, predictably I'm afraid, in Henry's characterization of the tea party and of Trump supporters.

Few, in any, social scientists of Henry's political disposition appear to have spent much time digesting tea party arguments first hand, or those of Trump. Immigration can be a magnet and code argument for xenophobes and racists. I'd suggest, however, that many tea party people see/saw themselves as pro-immigration. Every call for the wall by Trump was followed a call for legal immigration through a great, beautiful gate. At the local level, immigration presents both opportunities for new experiences and revitalizing old fears. The industry and optimism of immigrants (generally) is a slap in the face to those who've learned their very existence is regarded by the powers that be (including elites on both coasts) as an impediment to progress and efficiency. The 'left' certainly displays no interest, or sympathy, for coal miners in West Virginia, for example, despite efforts by Obama and HRC to draw attention to their plight, a plight clearly of concern to Henry and many here.

Yet, submission on cultural issues such as abortion and trans-gender rights seems to be the price demanded by rank-and-file 'liberals' as a condition of re-humanizing this group of fellow citizens. That rank ignorance and bigotry are rife in some of these same communities should not and cannot be a factor in forming economic alliances with these folks, not least because right-leaning populists are far more motivated and committed to change than those on the left. (Henry's earlier critique on the motivations of the new Labour members is worth recalling)

I crossed this bridge myself in 2008. Trump's supporters are principally concerned with creating opportunities for their kids, not improving their own immediate circumstances, which are just fine for the most part. This vision of the world is not one in which most of the people in the picture are a different color, creed, or culture. Most people would like to think (I believe) that their own kids can raise families of their own in circumstances somewhat better than their own – without being forced to learn a new language, or adapt customs foreign to their own way of life.

I'll close by restating that culture is at least as important as cash – that's the conclusion of Arlie Hochschild. Liberals need to set aside their own prejudices and disdain for those who vote for Trump and Brexit if liberals have any hope of winning their trust. Both this essay and others like it suggest that task may be easier said than done.

Maynard Handley 05.04.17 at 2:45 am ( 31 )
Let me suggest that the real problem here is the wrong level of analysis. What the essay presents is a series of models for how the world works - the Polanyi model was relevant then but broke down, the Blyth and Matthijs model now describes today. Instead let me suggest that the problem is meta: Modernism (growing since the Enlightenment) is an insistence that the messiness of reality can be captured by models. This is not just an insistence on rationality, it is an insistence that the axioms that feed into that rationality are fairly few and can be fairly easily grasped.

And what I see over "recent" history is occasional angry rebellions against the feeling of living in a society that is created by these rigid rules - an unhappiness stemming from both constant (always apparently, frequently actually) stupid constraints AND also a constant need to have to make and deal with choices even when you don't care about the choices. (Not just choices of "what peanut butter to buy" but choices of the "I don't know how to be a man anymore" or "how come what we used to say thirty years ago is suddenly so taboo?" form.)

So we have, for example, Nazism (and Japan) as a reaction to this. (I'm not about the more backward parts of Europe, and I think Russia, like China was something different.) Then we have 1968 and The Greening of America. Then we have the Iranian Revolution. Then we the Tea Party in America and Al Qaeda in the Arabic world.

I'm not denying that political entrepreneurs hijack the zeitgeist to suit their ends; nor am I claiming that every spasm of recent world history was a reaction to the world created by Modernism; but I am saying that the events I listed had this reaction as their ultimate cause. Which means, IMHO, that you can't satisfy the unhappiness simply with a political program because the unhappiness is not of political origin, even though that's a particularly graphic manifestation.

In other words, the sorts of texts that *I* think are relevant to understanding are things like Bendict Anderson, _Seeing like a State_, the point being not a trivial libertarian "states are stupid and they suck" but rather "Modernist models of the world try to impose legibility on situations that are fundamentally complex, and this enforced legibility will frequently lead to backlash and disaster, whether it's ignorantly designed "scientific forestry in Germany, or attempts to redesign agriculture in the USSR, or the assumption that risk can be so well modeled and distributed that it can be nullified as we saw in 2007".

Or Iain McGilchrist, _The Master and his Emissary_, talking about two alternative ways in which the brain works (holistic vs analytic, filled with fascinating anecdotes about the consequences of various types of brain traumas), and how the West (and I'd say much of Asia) appears to be in thrall to the analytic, to the extent that it can no longer see or even understand that the map is not the territory.

[May 08, 2017] Thoughts on Mirowski and Neoliberalism from a Polanyian Perspective by Kari Polanyi Levitt and Mario Seccareccia

May 05, 2017 | www.ineteconomics.org

May 2016 | Economic History | History of Economic Thought | Institutions, Policy & Politics

Commentary By

Download paper


Karl Polanyi demonstrated that Classical Liberalism and current Neoliberalism were organized political movements, but their successes sparked political backlashes against laissez-faire economics - a dialectic that continues to shape politics to this day. Laissez faire was planned, explained Karl Polanyi in The Great Transformation: The origins of the market system go back to the intentional project of institutional transformation initiated in England in the 19th century, establishing a free labor market, free trade and the gold standard. Institutions such as the unions, the industrial cartels and the Welfare State instead emerged subsequently as spontaneous counter-reactions to laissez faire. Kari Polanyi Levitt and Mario Seccareccia show, with a new periodization, how this dialectic interaction, or 'double movement' can still guide the understanding of today's Neoliberalism.

This is a response to "The Political Movement that Dared not Speak its own Name: The Neoliberal Thought Collective Under Erasure" by Philip E. Mirowski

[May 08, 2017] Karl Polanyi for President by Patrick Iber and Mike Konczal

Recommended !
May 04, 2017 | www.dissentmagazine.org

Peter K: May 04, 2017 at 01:29 PM

https://www.dissentmagazine.org/online_articles/karl-polanyi-explainer-great-transformation-bernie-sanders

Karl Polanyi for President

Patrick Iber and Mike Konczal ▪ May 23, 2016

...

Is Bernie Sanders the only "Polanyian" Democrat?

Not at all. Democrats have taken up Polanyian arguments in response to many of the market-fundamentalist notions that the Tea Party has helped to circulate in recent years. The most notable example might be President Obama and Elizabeth Warren's "you didn't build that" faux-controversy from 2011 and 2012. Warren, who first made the argument, was speaking out against the idea that calling for higher taxes on the rich constitutes class warfare, saying:

There is nobody in this country who got rich on his own-nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory -- and hire someone to protect against this -- because of the work the rest of us did.

This is a fundamentally Polanyian point about the embeddedness of markets in society, and the always unnatural nature of income distribution. Polanyian arguments arise pretty naturally as rebuttals to certain libertarian notions of how economies should work, which may be one reason that certain Democrats sometimes sound like Polanyi.

But Polanyi also helps explains some of the tensions within the Democratic Party. One of the divides within the Democratic primary between Bernie Sanders and Hillary Clinton has been between a social-democratic and a "progressive" but market-friendly vision of addressing social problems. Take, for example, health care. Sanders proposes a single-payer system in which the government pays and health care directly, and he frames it explicitly in the language of rights: "healthcare is a human right and should be guaranteed to all Americans regardless of wealth or income."

Clinton, meanwhile, describes affordable health care as a right. Clinton also wants higher education to remain a market commodity, because she says that if the government paid, it would needlessly be giving a free ride to the children of the wealthy and the upper-middle class. Clinton's reasoning appeals to ideas of market efficiency, while Sanders, in stating that "Education should be a right, not a privilege," appeals to ideas of community beyond markets.

Sanders here offers a straightforward defense of decommodification -- the idea that some things do not belong in the marketplace-that is at odds with the kind of politics that the leadership of the Democratic Party has offered more or less since Carter and the narrow policy "wonk" focus that tends to dominate coverage.

Whether or not Sanders has read Polanyi-similar language about economic and social rights was also present in FDR's New Deal, which Sanders argues is the basis of his brand of socialism-Polanyi's particular definition of socialism sounds like one Sanders would share:

Socialism is, essentially, the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society. It is the solution natural to industrial workers who see no reason why production should not be regulated directly and why markets should be more than a useful but subordinate trait in a free society. From the point of view of the community as a whole, socialism is merely the continuation of that endeavor to make society a distinctively human relationship of persons.

Sanders's particular notion of a political revolution-in which people use democracy to change the rules governing our national political economy-is very Polanyian. Polanyi's socialism has a certain modern appeal when the more traditionally Marxist idea of having the state seize the means of production has been abandoned even by most who identify as socialists. Instead, Polanyi's relevance for today lies in his arguments that markets need to be subjected to democratic control, that human beings resist being transformed fully into commodities, and a fully realized market society is both impossible, undesirable, and at odds with genuine liberty and freedom.

Sanders's campaign has shown that a political platform favoring decommodification and a retreat from the extremes of society's subordination to markets has deep appeal. The future of the party does not belong to Bernie Sanders himself, but the Karl Polanyi Democrats are here to stay.

Peter K. -> Peter K.... Thursday, May 04, 2017 at 01:30 PM

I thought it was odd that DeLong linked to this:

http://crookedtimber.org/2017/05/01/the-thousand-day-reich-the-double-movement/

The Thousand Day Reich: The Double Movement

by HENRY on MAY 1, 2017

This is the second in a series of projected posts that try to look at the Trump administration and right wing populism through the lens of different books (the first – on civil society – is here). The last post was mostly riffing on Ernest Gellner. Today, it's another middle-European exile intellectual – Karl Polanyi.

...

[May 08, 2017] How Alaska fixed Obamacare

Notable quotes:
"... That's when Wing-Heier and other Alaska officials had an idea. The state already had a tax on insurance plans (not just health but also life and property insurance). Usually the money goes to a general Alaska budget fund, but the state decided to divert $55 million of the tax revenue into a reinsurance program. ..."
"... The new reinsurance program convinced Premera to only raise rates 7 percent in 2017. Alaska suddenly went from having one of the highest rate increases in the nation to one of the lowest. ..."
"... This didn't just save customers money. The federal government subsidizes premium costs for 86 percent of Alaska's Obamacare enrollees. With cheaper premiums, the federal government didn't have to spend as much money. The cost of these subsidies fell by $56 million when Alaska created the reinsurance fund. ..."
"... If the waiver does go through - and Wing-Heier says she is "confident" the Trump administration will approve it - Alaska expects that Obamacare rates might actually do something unheard of in 2018: They might decrease. The state estimates that an additional 1,650 people will join the marketplace due to the lower premiums. ..."
Apr 17, 2017 | economistsview.typepad.com
im1dc , April 16, 2017 at 09:39 AM
"How Alaska fixed Obamacare"

A potential model that could save and expand Obamacare that the Trump Administration apparently agrees with

http://www.msn.com/en-us/news/us/how-alaska-fixed-obamacare/ar-BBzNr7p

"How Alaska fixed Obamacare"

by Sarah Kliff...Vox.com...4-16-2017...4 hrs ago

"Last year, Alaska's Obamacare marketplaces seemed on the verge of implosion. Premiums for individual health insurance plans were set to rise 42 percent. State officials worried that they were on the verge of a "death spiral," where only the sickest people buy coverage and cause rates to skyrocket year after year.

So the state tried something new and different - and it worked. Lori Wing-Heier, Alaska's insurance commissioner, put together a plan that had the state pay back insurers for especially high medical claims submitted to Obamacare plans. This lowered premiums for everyone. In the end, the premium increase was a mere 7 percent.

"We knew we were facing a death spiral," says Wing-Heier. "We knew even though it was a federal law, we had to do something."

Now other states are interested in trying Alaska's idea, especially because Wing-Heier is working with the Trump administration to have the federal government, not the state, cover those costs.

There are rampant concerns about the future of Obamacare right now. We don't know whether its marketplaces will remain stable in 2018 or, as the president has predicted, explode as premiums rise and insurers drop out. But Alaska's experiment is a reminder that the future of Obamacare isn't entirely up to Republicans in Washington. The work happening 3,000 miles away in Alaska shows that states have the ability to fix Obamacare too - and that the Trump administration might even support those policies.

How Alaska prevented an Obamacare horror story - and is trying to make the federal government pay for it

Premiums in the individual market went up a lot last year. The national average was a 25 percent hike. Alaska was bracing for an even higher 42 percent increase from its one remaining Obamacare insurer, Premera Blue Cross.

That's when Wing-Heier and other Alaska officials had an idea. The state already had a tax on insurance plans (not just health but also life and property insurance). Usually the money goes to a general Alaska budget fund, but the state decided to divert $55 million of the tax revenue into a reinsurance program.

This would give Obamacare insurers - at this point, just Premera - extra money if they had some especially large medical claims. Reinsurance essentially backstops insurers' losses; it guarantees they won't be on the hook for the bills of a handful of exceptionally sick patients.

The new reinsurance program convinced Premera to only raise rates 7 percent in 2017. Alaska suddenly went from having one of the highest rate increases in the nation to one of the lowest.

This didn't just save customers money. The federal government subsidizes premium costs for 86 percent of Alaska's Obamacare enrollees. With cheaper premiums, the federal government didn't have to spend as much money. The cost of these subsidies fell by $56 million when Alaska created the reinsurance fund.

This got Wing-Heier thinking: Why shouldn't we get that money back?

"Why shouldn't the money come back to us to fund the reinsurance program?" she recalls thinking. "It was that simple."

Alaska applied for a waiver in late December, asking the federal government to refund its spending. The state got conditional approval in mid-January from former Health and Human Services Secretary Sylvia Mathews Burwell. Current HHS Secretary Tom Price has spoken favorably of the Alaska approach too.

In a letter last month to governors, he described their idea as an example for other states to follow. It was, he said, an "opportunity for states to lower premiums for consumers, improve market stability, and increase consumer choice."

Alaska officials say the Trump administration has so far been easy to work with, helping them make sure the application looks right and moves quickly toward review.

If the waiver does go through - and Wing-Heier says she is "confident" the Trump administration will approve it - Alaska expects that Obamacare rates might actually do something unheard of in 2018: They might decrease. The state estimates that an additional 1,650 people will join the marketplace due to the lower premiums.

Other states want to get that same kind of funding too

Alaska's marketplace is far from perfect. The state only has one insurance plan selling coverage on its Obamacare marketplace, and doesn't project any more to join in 2018. Premiums are high in Alaska; the state is large and rural, which means it can be expensive to get patients to a hospital or a specialty doctor. A midlevel plan on the Obamacare marketplace there cost, on average, $904 in 2017.

But even with those problems, Wing-Heier says, it's still a whole lot better than where the state would have been without this policy change.

"Do I think it's a perfect solution? No, but it works for us," she says. "It's working in the right direction. It did what it was intended. It brought stability to our market, and the waiver is going to bring funding to us."

Alaska's approach has inspired other states. Minnesota is looking into building a reinsurance fund. At the insurance conference I went to last weekend, regulators from New York were asking lots of questions about Alaska's approach.

It's easy to see why this is appealing to other states, given the combination of additional federal money and lower Obamacare premiums. Most interesting, though, is that Alaska's approach is something the Trump and Obama administrations apparently agree on. There aren't many examples of that right now - so the ones that exist are certainly worth watching."

EMichael -> im1dc... , April 16, 2017 at 10:09 AM
Strange for Kliff not to mention in her piece the effects of the GOP destruction of the risk corridor program on premiums, amount of insurance companies participating, and co-ops.

Alaska's actions are why the risk corridor program was in the ACA.

"The risk corridors were intended to help some insurance companies if they ended up with too many new sick people on their rolls and too little cash from premiums to cover their medical bills in the first three years under the health law. But because of Mr. Rubio's efforts, the administration says it will pay only 13 percent of what insurance companies were expecting to receive this year. The payments were supposed to help insurers cope with the risks they assumed when they decided to participate in the law's new insurance marketplaces.

Mr. Rubio's talking point is bumper-sticker ready. The payments, he says, are "a taxpayer-funded bailout for insurance companies." But without them, insurers say, many consumers will face higher premiums and may have to scramble for other coverage. Already, some insurers have shut down over the unexpected shortfall.

"Risk corridors have become a political football," said Dawn H. Bonder, the president and chief executive of Health Republic of Oregon, an insurance co-op that announced in October it would close its doors after learning that it would receive only $995,000 of the $7.9 million it had expected from the government. "We were stable, had a growing membership and could have been successful if we had received those payments. We relied on the payments in pricing our plans, but the government reneged on its promise. I am disgusted."

Blue Cross and Blue Shield executives have warned the administration and Congress that eliminating the federal payments could have a devastating impact on insurance markets.

Twelve of the 23 nonprofit insurance cooperatives created under the law have failed, disrupting coverage for more than 700,000 people, and co-op executives like Ms. Bonder have angrily cited the sharp reduction in federal payments as a factor in their demise."

https://www.nytimes.com/2015/12/10/us/politics/marco-rubio-obamacare-affordable-care-act.html?_r=0

trump is continuing the attack.

im1dc -> EMichael... , April 16, 2017 at 11:18 AM
Not so strange imo b/c Rubio's undermining of the Obamacare subsidies happened years ago and the Alaska Obamacare subsidies are today and forward looking not back looking.
EMichael -> im1dc... , April 16, 2017 at 11:42 AM
To a point, but what happened this year in Alaska would not have happened if the risk corridors were not unfunded.

Moving forward, once the insurance companies had a realistic basis for the respective markets, they would stabilize. That was the plan at the very beginning.

Everyone knew that new markets would be incredibly risky for insurance companies. But that given a couple of years, they would figure out the price levels. They also knew that the first year or two would be really rough, as people who had gone without insurance put off healthcare for decades.

According to the CBO (who has been pretty accurate throughout) premiums are stabilizing. If Rubio and the GOP's attack had not happened, Alaska would not have to have done this.

Course, no one can figure out what other attacks will happen, but if they stopped with the risk corridors Alaska will have no need to do such in the future.

I will not bet that the GOP will not make it even worse, so they can just say the ACA collapsed upon itself.

im1dc -> EMichael... , April 16, 2017 at 06:06 PM
Agreed but the point is that the Obamacare Risk Corridors did not work as hoped but this Alaska workaround appears to be working in its place.

I am sure you and I don't care how we get there as long as we get there, saving Obamacare for 30,000,000 Americans.

I don't trust Trump or the Conservative Tea Baggers in Congress either. If they can they will pull defeat from the jaws of victory and call themselves saviors.

They are not nice or caring or smart, just ideologues without a clue to what they are doing.

cm -> im1dc... , April 16, 2017 at 07:05 PM
TLDR: The fedgov pays a significant part of this reinsurance scheme. (According to the article funds that come out of "saved" premium subsidies? - not clear.)

But one can argue this is how it is supposed to work. It doesn't really matter at what "level" the subsidizing happens.

im1dc -> cm... , April 17, 2017 at 04:42 AM
Agreed.

[May 08, 2017] There are three general types of universal health care systems: socialized medicine, single-payer, all payer

Apr 21, 2017 | economistsview.typepad.com
RGC , April 20, 2017 at 05:00 AM
Different Universal Health Care Systems
17 Apr 2017

Jon Walker

There are three general types of universal health care systems. Each system, which other industrialized democracies rely upon, has its quirks.

Socialized medicine
Examples: United Kingdom, Norway, and Denmark
Closest American analogy: Veterans Health Administration


Single-payer
Example: Canada
Closest American analogy: Medicare


All-payer
Examples: Belgium, Japan, Germany, Switzerland
Closest American analogy: Federal Employer Health Benefits, ACA exchanges
.....................
https://shadowproof.com/2017/04/17/road-single-payer-understanding-different-universal-health-care-systems/

Fred C. Dobbs -> RGC... , April 20, 2017 at 05:25 AM
FWIW,

Should there be 'bare counties' (no insurance
plans offered) under ObamaCare in the coming
year it *might* be possible that a Medicaid
Buy-in plan would be offered.

NYT: Katherine Hempstead, who studies health insurance markets at the Robert Wood Johnson Foundation, was more confident than former Obama administration officials that a motivated executive branch could devise new policies to help people in bare counties, such as letting them buy a Medicaid plan, or including them in the state employee benefit pool. "I do think there will be solutions," she said. ...

Bare Market: What Happens if Places Have No
Obamacare Insurers? https://nyti.ms/2pxTTEY
via @UpshotNYT - Margot Sanger-Katz - APRIL 18

RGC -> Fred C. Dobbs... , April 20, 2017 at 05:40 AM
How about a Medicare plan, instead of Medicaid?
Fred C. Dobbs -> RGC... , April 20, 2017 at 06:05 AM
Personally, I'm guessing that
the latter is more likely, but
not much more so, than the former.
paine -> RGC... , April 20, 2017 at 06:17 AM
Yes the public option
at least in counties under provided
By corporate insurers

[May 07, 2017] Prime-Age Employment Rate Hits New High for Recovery

May 07, 2017 | economistsview.typepad.com
point , May 07, 2017 at 05:34 AM
Perhaps this report raises the possibility that this low pressure low growth economy may actually lead to a new high in the prime working age cohort, still with little wage growth.
libezkova -> point... , May 07, 2017 at 01:33 PM
Boomers are retiring and that increases employment in prime age (25-54) cohort. So to take only prime age is a little bit disingenuous. This effect needs to be taken into consideration.

Those who were born before 1950 were probably the most numerous. They all will be over 67 at the end of the year.

[May 07, 2017] Elections In France

Le Pen was similar to Trump in her desire to improve the relations with Russia and generally more realistic view of recent events. she is not a USA stooge. That probably a partial reason why she lost. Macron is somewhat like French Obama a shadow figure who is a marionette of forces behind him, not a actual politician.
Notable quotes:
"... the 'abstain in disgust' demographic has been over-hyped from the day after results were announced. ..."
"... the abstain thing was overhyped for one and only reason, put the "shame" on the the left so that'll cut their chances for the June Legsilatives election (the one that counts contrary to the sunday joke). ..."
"... It's the only reason all major tv/radio/newspapers spent the last 2 weeks vociferating against Melenchon & his voters as "irresponsible" while 90% of those insulted will NOT vote for Le Pen. That would be total nonsense if the thing those media were fighting was Le Pen... ..."
"... Problem is with the media and the establishment EU globalists, all dissenting and opposite views will be quashed even further under the 'fighting terrorism' guise. People will be smeared, fined, arrested, jailed, whatever it takes for them to maintain a grip on power. ..."
"... Yes the russian-hating-blaming-millionare Macron will win no doubt, the election is more or less fixed after the propaganda campaing for him everywhere in the west. The same Macron and MSM are already cooking up disinformation about russian hackers, theese people are insane, and its also a sign of what policy he will carry out. ..."
"... Long term though? Next election Le Pen or whoever rule her party will win. It will also cause more extremism because the elite under Macron wont deal with regular people and their problems but with the elite. ..."
"... to be fair though, those emails leaks seem totally dull. I browsed what I could, it's just generic staff chat, campaign bills to pay, bills to make, yadda yadda Whoever got the mail passwords few months ago must have waited for something juicy to land and since nothing really interesting came up, they're just posting the whole stock as is. Won't make the slightest difference on sunday. ..."
"... Exactly. I wouldnt be surprised if its Macron team itself that leaked this dull, uninportant stuff to show that "russians have interfered". ..."
"... Macron won 1st step with the intense fear campaign spammed on our heads during 6 months. I know plenty reasonable people who voted Macron while they hardly can stand his program, because they were told hundreds times he was the "best choice" to beat Le Pen. ..."
"... That's so absurd Macron got the most votes last sunday AND at the same time got the LOWEST "adhesion" (adherence ? not sure in english) rate of all 11 candidates, basically nearly half of "his" voters put the bulletin with his name for reasons that have nothing to do with him. ..."
"... they're both pro-Zionist. Just another shell game of an election whilst the media does its assigned job of shouting loudly about some supposed vast gulf existing between the 2 candidates. Having said that, if I was French there's just no way I could vote for a slimy Rothschild banking reptile like Macron. At least Le Pen appears to be an actual human. ..."
"... Without Trump's 100 first days, le Pen would probably have done better, possibly even taken it. The French have been given full flood propaganda that Marine le Pen is the equivalent of Donald Trump. She is not. There are some similarities, but le Pen is more nuanced than Trump, far more experienced in politics, and would be at least somewhat more consistent with her campaign promises. ..."
"... That said, she is not the economic "populist" many imagine and many more hope for. Her actual platform would be remarkably like that of Obama or Hillary; neoliberal. ..."
"... she might make improvements in, and the emphasis should be on "might", one of them is avoiding participation in every war that the US starts up in the Middle East as well as all the Putin bashing that is de rigeur for US allies ..."
"... long term outcome of globalists verses nationalists? the globalists are going to win, and full on slavery will continue to ensue.. the younger generations will not see the comforts and lifestyle their parents enjoyed - far from it in fact.. freedoms will be clamped down, alternative views will be made illegal and stuff like that.. after that, there is a small chance people will possibly wake up, but i wouldn't count on it.. ..."
"... " the epic fight of globalists versus nationalists" No. It is the epic fight of corporatists versus nationalists. ..."
"... Corporations are trying to assert themselves as bigger, better and more powerful than states. Time to remind corporatists that they exist only at the will and control of a state. By allowing a corporation to establish themselves, the state should be their front, Potemkin village or not. ..."
"... A strand in F politics / commentators etc. brands him as a candidat fabriqué , a candidat du système a sort of cut-out ersatz pol, created and boosted by the financial elites, Mega Corps., banking - as he worked for Rotschild, etc. The MSM, particularly magazines... ensuring his win with 24/24 favorable coverage. Sure, he is young, good-looking, etc. ..."
"... Some gays support Macron as rumors about him being gay with his older wife as a 'mommy type cover' indulging in an affair with some sultry media guy. ..."
"... Macron is an opportunist taking advantage of the break-down of trad. F politics - death of the Socialist party, divisions on the right, oppos parties no clout, Sarkozy despised, Hollande then more so.. to present a quasi 'evangelical' solution as a last ditch effort against decline, sinking GDP per capita, > as 'collaborationist' with the US-EU-NATO - etc. He is most likely quite, or semi-sincere, in his desire to fix it all. A 'maverick' who is yet 'hyper conventional' - a very conventional profile! ..."
"... You're right about Trump I think. Even if the 100 day benchmark is arbitrary it's something that's paid a lot of attention. It's been very unsettling for a lot of Americans. Other countries have been watching closely. They watched as Trump front loaded his cabinet with bankers and generals. They wondered whatever happened to nonintervention and draining the swamp. They wondered if the demonization of certain religious and ethnic groups was the harbinger of a brave new world that wasn't all that brave or all that new. His attack on all things environmental, while weather events become worse year by year, strictly to accommodate big business is another problem. So is the new health bill that gives the coup de grâce to any idea that he's the champion of the common man. ..."
"... In any case the French election will go a long way to determining if the new philosophy of undoing all the constructs since WW11 is what the people want. it's starting to look like it isn't. The losers are sure to cry that big finance and the press skewered the vote but it might just be that the French are happy the way things are. ..."
"... Macron will be to France what Obama has been to the US. Just like Obama's presidency made possible Trump's victory four years later, Macron's presidency will make possible a Front National victory in five years. ..."
"... The Chancellors of the French universities have asked their students to vote Macron. (Link in French) Not a single Chancellor has asked students to vote Le Pen. The same can be said of the French press. The media barrage in favor of Macron has been so one-sided, some Frenchmen call their country jokingly "East Corea" ..."
"... I find it difficult to hear people praising Le Pen who won't have to live under her presidency. Let me remind you that Europe had more than its share of nationalist wars, and the last thing the continent needs are governments adding fuel to the fire of existing tensions. Macron is a puppet, but in the end he'll do what's necessary to stabilize things. Le Pen might well blow things up and lead to civil war. ..."
"... I am not a supporter of Le Pen and hell no, not supporter of a "French Trump" Macron, Yes, it is Macron in my opinion that is French Trump, a Flaccid Clown of Global Oligarchy while Le Pen is slightly reversed Sanders as far as elements of political platform that matter for ordinary people in France and the US. ..."
"... Brilliant move by Marine Le Pen was to campaign on her own more centrist platform and not be obliged to follow strictly FN platform as a FN leader would have to follow. ..."
"... In fact as Macron was first who shed his discrediting Socialist label as hated Hollande minister, now Le Pen shed her FN right-wing and neo-fascist label to commence entirely new campaign as true French populist and nationalist. ..."
"... She already told French that they have a clear choice between neoliberal oligarchic rule of globalists under a thieving investment banker or French people rule under populist leader liken to de Gaulle. ..."
"... Does she have a chance against unified block of French MSM media and Globalist media worldwide, against slander, lies and fake news, against 95% of largest French press being against her? Not likely, especial that as it was documented CIA has capabilities and used them to manipulate french elections already in the past. But it is more complicated than that and Marine Le Pen is not Trump. ..."
"... The Macron campaign identified the first tweet referring to the documents as coming from the Twitter account of Nathan Damigo , a far-right activist and convicted felon based in northern California. Damigo is known on social media for punching a female anti-fascist in the face at a Berkeley protest. ..."
"... Originated online in California, just before the 2.5 hour debate between Le Pen and Macron. ..."
"... Melenchon is the one to listen to to understand the situation in France. While he didn't make it into round two, he has a good chance of a large parliamentary victory in the round of elections after the presidential one. He's been locked out of the English-language press in the U.S. and Britain (he falls outside their narrow spectrum of acceptable political views) so you have to read the French press (I use Google Translate) or watch his youtube (with subcaptions) channel: https://www.youtube.com/watch?v=wsGkA4TXqyw ..."
"... In order to combat mass immigration, which is mainly internal to developing countries, the causes of migration must be tackled: the impossibility of any development in the countries of departure, due to debts and Structural adjustment policies imposed by the International Monetary Fund (IMF) or the World Bank, the plundering of resources by multinationals and free trade. ..."
"... Outside the fact most media pre-prepare their headlines for such occasions when time does not allow for late information to be disseminated by normal publishing procedures, the Dewey / Truman was marked by the media believing their own propaganda to the extent they became divorced from reality. This recently has shown its tracks in the Clinton / Trump campaign with 'interesting result' - the Russians did it! ..."
"... Macron has no effective political party in the French parliament, the fictional party he was supported by has no parliamentary standing and is unlikely to obtain standing. ..."
"... she has said that she won't allow French citizens to have Israeli passports ..."
"... Those Francophone African countries that are part of the West African and Central African Franc currency zones were among the most enthusiastic backers of Colonel Muammar Gaddhafi's pan-African "gold dinar" economic market. No wonder Nicolas Sarkozy signed onto the US no-fly zone over Libya idiocy tout de suite in 2011. ..."
"... The relative lack of power of France made me wonder the real reason why they led the NATO attack on Libya. Was it the financial dealings between Sarkozy and Gaddhafi like some sites say or were they really prodded by the US to lead the way of the overall game plan? ..."
"... Macron's dirty secrets according to The Duran: http://theduran.com/breaking-macron-emails-lead-to-allegations-of-drug-use-homosexual-adventurism-and-rothschild-money/ ..."
"... Le Pen voters, who decry globalisation, foreignors, terrorists, muslims, etc. / the remnants of the left (socialist - Trotskyist - add anarchist - ..), who voted Mélenchon or not at all / those who are 'foreign' - outcasts in any case - and thus can't rally to Le Pen or to anyone.. and just keep their heads down. ..."
"... The divide-to-rule strategy has worked perfectly on these workers. In two factories I know of, the 3 different groups don't speak to each other, except as routine politeness / ugly jokes small skirmish etc., as they are all in the same boat, subject to the same oppressive rules, etc. though some contacts/friendships cross these lines. ..."
"... Listening to NPR spreading their propaganda about French elections made me want to vomit. Are the majority of western folks really as stupid as they seem to be? Judging by the crap people post on Facebook I'd say yes. The more "educated" a person is the more likely they are to believe the lies. ..."
"... As for the farce in France... I think Brandon Smith at Alt-Market.com has a good grasp of what the elite are trying to do. He has a series of articles postulating what he believes is the long game of the bankers and other wealthy feces, mostly using Trump as the example of how nationalist/conservatives are being set-up for a big fall. Interesting point of view that I find rather rational considering all the craziness taking place. ..."
"... Good short summmary: The Truth About Macron https://www.youtube.com/watch?v=D6H0cjIN4gw ..."
"... n America, American Voters in the USA elections, are allowed to elect by majority vote, either of two persons(for each position); but the between candidate platforms, boil down to the same side of two identical coins. Those elected are paid a salary to operate the USA for the benefit of, and "according to" the "allowed policy" established by