Post-Peak Liberal

Some Quick Job Stuff

2012-02-04T05:01:32Z

There's a good piece by Catherine Rampell in the NYT Economics blog (economic.blogs.nytimes.com), with some enlightening stats. Even with today's positive jobs report, there are some long-term trends that are discomforting. As Rampell notes:

"The economy has been growing now for 10 straight quarters. It has even made up the ground lost from the recession, and the United States now churns out more goods and services than it did before the downturn began in 2007. But that output is being produced with six million fewer workers, despite population growth.

As a result, the share of income produced in the country that is flowing to workers’ bank accounts has been steadily shrinking.

Of every dollar of income earned in the United States in the third quarter of 2011 — the latest period for which data is available — just 44 cents went to workers’ wages and salaries. That is the smallest share since the government began keeping track in 1947, according to the Commerce Department, and it continues a trend that predates the Great Recession. The average share of national income going to wages and salaries over the last 50 years has been about 57.6 cents on the dollar."

So what does that mean? It means that economic growth has decoupled from benefits to actual workers. Corporate profits are at an all time high, but the slice for actual workers has been declinining steadily, glacially, unavoidably, no matter how much activism gets thrown out for education, job retraining, re-unionization, living wages, and the like.

In the political realm, this makes our clamoring after whichever party promises more jobs, jobs, jobs seem naive and desperate. If economic growth has not produced equitable results for the last four decades, why would we expect it to do anything different in the future? Corporate 'success' has not needed decent wages for quite some time. This is the engine of today's massive and lopsided allocation of wealth. More growth will just bring more f the same.

If economic growth and corporate success has come uncoupled from everyday citizens and livelihoods, it's time for us to abandon the idea that growth can be the political promised land. Growth cannot be surrogate for human well-being any longer, and we can't keep pretending that awesomely-paid work is just around the corner. This is the twilight of careerism, and we better get used to the new landscape.

Some Economic Straight Dope

2012-01-28T17:44:42Z

While regular mortals have been fiddling around with Christmas, New Year's, and playoff football ..... and while GOP primary voters have been doing everything possible to avoid Willard Romney's advice (via Jimmy Kimmel) to 'Mitt or Get Off the Pot' .... and while the country enjoys a totally natural, non-man-made, petroleum-blame-free, utterly benign and cyclical winter of little snow or even cold (what my good friend Michael Rainho calls the "horribalmy")..... a couple of really important pieces have been released on the state of the American economy.

First, the cover story from the latest issue of Atlantic Monthly is a compelling piece on manufacturing called "Making It in America," by Adam Davidson (not sure if this is a fluke today, but direct links to this story and to The Atlantic in general are really kloogey, and keep crashing my browser -- so you might be well-served to buy a good old-fashioned [gasp] paper copy, or, god forbid, hit one of our four remaining public libraries). Davidson has a two-pronged approach, embedding the struggles of a typical 'unskilled' laborer in an auto parts factory in South Carolina within a larger narrative about the general drift of the manufacturing sector in America. The personal story of laborer Maddie Parker is by now familiar, filled with that low-intensity but pervasive and unshakable sense of uncertainty, anxiety, dread, and dead-end hopelessness that stalks our citizenry. She had to abandon higher education goals because of the demands of a youthful motherhood. And once she was off the knowledge-track of employment opportunity, the relentless pounding of stagnant low-wage labor, which seems to gobble up all the time and energy of the working poor, locked Maddie out of any type of job security or mobility, seemingly forever. Her precariousness is now simple: as long as the cost of a machine that could perform her function stays above what Maddie makes in two years (the company's standard time for equipment to earn back investment capital), she has a job. If the cost of that machine comes down below her 2-year salary, she's out. Great way to live.

Even more alarming, however, is the general backdrop of American manufacturing that Davidson lays out. As campaigning for Fall 2012 heats up, we will be exposed to all kinds of rhetoric about how we need to beef up American manufacturing again. We need to rescue and recover all of those awesome, high-paying jobs that got shipped off to China or Indonesia or Malaysia, so that people can have solid, middle-class lives again. "We've got to start making things again! We gotta stop pushing money and other abstract things around! That's not what America is all about. We're doers!" That's the gist of popular sentiment in many corners, from the right and the left.

The Atlantic article highlights the emptiness, or at least the short-sightedness, of this sentiment. Sure, we've lost a lot of manufacturing jobs to overseas entities, but American manufacturing is actually quite robust, in one sense. As Davidson notes:

"Depending on which stats you believe, the United States is either the No. 1 or No. 2 manufacturer in the world (China may have surpassed us in the past year or two). Whatever the country's current rank, its manufacturing output continues to grow strongly; in the past decade alone, output from American factories, adjusted for inflation, has risen by a third."

So what's the problem, then? Why all of the political podium-pounding and hand-wringing about how we don't make stuff any more? Why all the lectures on how we need to roll up our sleeves and do some manly-man work again, and stop with all the credit default swaps and leveraged buyouts and all that? Manufacturing seems to be going like gangbusters. So what gives?

What gives is that long-term trends in technology and corporate organizational structure have rendered labor a decreasingly important part of the overall picture of production. Davidson again:

"Yet the success of American manufacturers has come at a cost. Factories have replaced millions of workers with machines. Even if you know the rough outline of this story, looking at the Bureau of Labor Statistics data is still shocking. A historical chart of US manufacturing employment shows steady growth from the end of the Depression until the early 1980s, when the number of jobs drops a little. Then things stay largely flat until about 1999. After that, the numbers simply collapse. In the 10 years ending in 2009, factories shed workers so fast that they erased almost all the gains of the previous 70 years; roughly one out of every three manufacturing jobs -- about 6 million in total -- disappeared. About as many people work in manufacturing now as did at the end of the Depression, even though the American population is more than twice as large today."

This is essentially what is known as "technological unemployment" ( see my earlier pieces on technological unemployment and the future of work). Many economists, including people like Paul Krugman, minimize the impact of technological and other forms of systemic unemployment, preferring to see ebbs and flows of joblessness as a result of cyclical changes in consumption, debt, inflation, and the like. Other liberal commentators like to stress that technological explanations for unemployment are smoke-screens; they're just another way to white-wash the very specific political and economic policies that the powerful have used to crush unions and other organizations that strive for fairness in the workplace.

Now, I don't mean to dismiss all of the devious shit that has gone down with politicians turning their backs on the working class. Of course our mainstream national parties have sold their souls to big money and left regular workers hung out to dry. But which really comes first, government decision-making or the evolution of the business world? What allowed politicians to flip their allegiance over from the masses to the corporate elite? Did the political policies come first, and only then were companies able to globalize their supply-chains and automate their factories, rendering workers less powerful? Or did long-developing trends in computerization, information technology, corporate governance, and financial evolution create the conditions for degradation of labor-input and the acceleration of top-down control of capital?

My bet is the latter. Powerful undercurrents have created an entirely new algorithm in the US (and indeed everywhere). It is no longer necessary for large swaths of people to get paid decent wages in order for businesses to thrive. You can still have national economic growth while the majority of us have stagnant or declining incomes. Labor is just not as valuable in the overall picture of churning out lots of stuff.

To highlight this a bit more, let's turn to the other great piece from the last few weeks: Philip Pilkington's "Fear & Loathing in the Financial Markets: What Happens to the Economy When the Oil Bubble Bursts," at the superb website of Yves Smith, Naked Capitalism.

First, Pilkington notes that corporate profits have rebounded quite nicely since the housing bubble collapse. In the chart below, you can see the dip in 2008 when the recession hit, but notice the quick comeback.

Next, Pilkington explains this by showing how the fortunes of labor have become uncoupled from corporate profits. This is why we can be two years into a 'recovery,' with economic growth humming along steadily, if a bit subdued, while the situation of regular families remains dire. Again, to highlight my point from above, notice the long-term decline in the value of labor:

So keeping in mind this picture, with work's value steadily declining while corporate profits are way up (largely because of that smaller labor slice), let's look at manufacturing as it relates to other segments of the economy. Here is another chart that Pilkinton puts up, to show that the post-recession return to corporate profitibility is not all that it seems. In fact, it was the financial sector that again drove almost the entire comeback:

Non-financial profits are certainly still rather healthy, but they are nowhere near the robustness of the financial sectors. One final graph that Pilkington uses shows the overall shares of corporate profits broken into three segments: manufacturing, services, and FIRE (finance, insurance and real estate).

The things to notice here are the long-term decline of manufacturing profits as a share of overall business activity, as well as the relatively stagnant and now-slumping service sectors, as opposed to the surging financial areas. Some will say, going back to the first point of this post, "See, that's exactly the problem! That shows that we're not making enough stuff any more, and we're f'ing around too much with money-shuffling, property-flipping, and insurance bundling!" But when you see long-term trends like this, it seems all-but useless to swim against the current and try to reverse them. The fact that finance has become such a huge piece of the overall economy is not a moral failing or a political sin. It is simply a result of the constituent parts of the overall economy being reshuffled by powerful undercurrents in technology, corporate evolution, legal trends, etc. If highly-paid labor is not really necessary to keep a huge economy growing, as we are seeing right now, then the sector that handles all of that excess profit is naturally going to emerge as the most dynamic. Power flows to where the wealth is, and that wealth is definitely NOT flowing to segments of our economy that have high labor-costs.

Against this backdrop, it is futile to pretend that a return to a healthy middle-class society is possible. No matter how much we pump into education, job programs, re-training, and the like, the relentless trends of de-skilling and technological unemployment will stay ahead of our best efforts. As soon as we manage to get a bunch of new workers trained up for some exciting new green-tech jobs, another software program or mechanized process will sweep them down the income fun-slide again. We are seeing this already today, as income stagnation is creeping up the educational ladder. Sure, college grads still do much better than high-school drop-outs, but historically, even advanced degrees are not holding their value in relation to the rising costs of living. Today's college grads are already the economic equivalent of yesterday's high-school grads, only with a lot more loan debt. And it will get worse.

And really, this is okay, if we can chage our frame of reference. If our baseline for normality is that every person must have a successful career, that every couple must have their own house, that every kid has to go to college, that every individual must engage in maximal personal consumption, then the future is going to be very disappointing. We will never catch up to reality's icy pace of change, and our unrealistic hopes for a way of life that has past will torture our psyches and our politics. Shedding an ideology is perhaps the most difficult of all social tasks, but it will be absolutely necessary to preserve any kind of civilization on the downslope of centralized industrialism. If we want to hold onto the things that really matter (like human dignity, companionship, intellectual adaptivity, and the like), we need to adjust our expectations to a different kind of normality, one that recognizes the twilight of our current arrangements, especially as regards to labor, production, consumption, and habitation. The future belongs to the flexible, the open, the adaptive, and most of all, the combined. The collapse of labor-value is an extraordinary opportunity to restructure our lives along different lines. Overall consumption can be reduced, which is good for the environment. Work can be shared and working hours reduced purposely, which is good for mental health. Resources can be collectively managed at the group level, which is good for stability and self-reliance. And collective living units could exercise more control over the political and economic landscapes, as the power of combination frees people from the cruel winds of centralized authority. A new normal is possible. It's out there.

Post-Peak 2012 -- What's In Store (we hope)?

2012-01-01T02:17:36Z

Well, another year has come and gone -- another year of wheel-spinning and entropic inertia. We've had the killing of bin Laden, the slow cratering of the Pan-European economy, the political brinkmanship around the federal debt, and the nauseating crunch of the Romney machine-treads over a parade of GOP pretenders. All in all, aside from the last troops being pulled out of Iraq, there wasn't much to trumpet about in 2011. Unemployment, underemployment, and the general erosion of the value of labor, even skilled labor, are the main planks of the platform on which almost everything has been playing out over the last few years. Inequality, tepid consumer demand, and general economic stagnation can all be traced back to the epic changes in the worth of work, changes that have been decades in the making.

No matter how many band-aids we slap on the system -- fiscal stimulus, tax holidays, education reform, or creative business structures -- the brute fact is that the main strands of American business-as-usual just don't fit together any more. The interlocking ratios between labor, knowledge, money, politics, and power are now completely different than even just a decade ago. Relentless consolidation of control into the hands of the few, in both the political and economic arenas, have torn the old social contracts and compacts to shreds. In country after country, purely-business interests have captured every last space in which citizens used to have some autonomous freedom of movement. Banksters, bond-holders, lobbyists, corporate raiders, and other uber-'successful' types now rain scorn and scold down upon regular workers, and indeed entire countries, for not doing enough to prop up the very system of organized looting that has fucked them over for the last 40 years. We can pretend all we want that our salvation lies just one election, one unemployment report, or one corporate-earnings statement away. But the long-term, deeply-entrenched, systemic trends are just impossible to deny: stagnating wages (even for college graduates), declining labor-force participation, higher concentrations of wealth at the very top, inadequate retirement savings, unchecked health-care costs, environmental degradation, cultural disintegration, and a general, free-floating social anomie.

Against that rosy backdrop, what might be in store for 2012? What are my predictions for the upcoming year? Well, predictions are notoriously difficult, as millenarians throughout the centuries can attest to. So instead, I'll float out an amalgam of things that I except to see and things that I would like to see. That way, if they don't happen, I can just say, "Oh, that particular one was just a hoped-for thing, not an actual prediction." Pretty sweet, right? OK, let's get to it.

Mitt for a King -- Willard Romney (I like to call people what their Mama named 'em) will eventually squash all challengers. This is not exactly earth-shattering news. It seems to be the general MSM consensus now anyway, but it still needs comment here. I don't really buy the trope that the current batch of GOP contenders is so lackluster that people are just going to 'settle' for Romney as the least-worst. After all, conservatives have everything they could hope for in a batch of candidates: there's a corporate slickster (Romney), a self-proclaimed legislative powerhouse (Gingrich), a moderate internationalist (Hunstman), a cultural warrior (Santorum), a consistent true-believer libertarian (Paul), a Bushey, great-hair governor (Perry), a spunky Hillary-esque scrapper (Bachmann), and until a few weeks ago, a successful black CEO (9-9-9-inches Cain). There are plenty of able people in there (at least in the conservative worldview, especially in comparison to Obama's qualifications at the time of his election), so I'm not sure where the serial flirtations of the GOP faithful come from. Maybe everyone is still in thrall to an unrealistic Reagan ideal. Or similarly, maybe they are so used to TV and movie heroes that the faults and foibles of actual mortals have become unpalatable. Or perhaps there are just too many incoherent threads in the GOP tapestry, and they are not weaving together smoothly this time around.For the last 20 years or so, grassroots conservatives have been played for suckers by every opportunistic, bombastic, narcissistic, and hypocritical snake-oil salesman to come down the pike; and this perennial exploitation is starting to take its toll. The conservative now seems to want:small government (in tax matters) but big government (in military and morality); hands-off government (in money matters) but hands-on government (reviving school prayer and banning abortion); no government programs for deadbeats ('welfare') but government programs for others (Medicare and Social Security); an end to the Fed's easy 'fiat' money but also a sophisticated modern economy (which can't be run on gold). In essence, conservatism has become a schizophrenic mish-mash of backward-looking nostalgia and forward-looking capitalist boosterism, without a sense that the implementation of the latter is the main impetus behind the former. But enough on that. Mitt will emerge from this maelstrom as your Republican candidate for President.
European Dissolution -- I am certainly not an expert in finance or international economics, but from everything I read, Europe is at an impasse. As it is currently constructed, the Eurozone severely limits what individual countries can accomplish. Not being able to turn on the printing presses in their own currencies, the struggling countries cannot inflate their way to better trade balances and reduced debt. Instead, the only way out is austerity, which is proving, unsurprisingly, to be contractionary. Much like China, Germany, the plowhorse of Europe, cannot accept that its own internal debt must rise in order for peripheral debt to decrease. So the 'producers' continue to lecture the 'leeches' about their profligate ways, a motif that is arising everywhere in the developed world as the powerful seek to vacuum up even more of the bodily fluids of the powerless. Unless the European central bank models itself after the Fed, and starts buying individual Eurozone countries' debt (essentially 'printing money'), then there will be no way out for Europe. The whole region will either limp along with anemic growth, having to control increasing public outrage in the streets, or a few of the 'deadbeat' countries will just say 'fuck it' to the whole damn thing, default, and go about repairing their internal economies via national currency inflation. My bet is the latter.
American Inertia -- despite the radical promise of the Occupy Wall Street movement, the United States will continue to limp along without doing anything of actual import, because the increasingly-useless mainstream media will be obsessed with Election 2012. This will give politicians enough cover to diddle around and make empty speeches and grandiose promises, just long enough to bridge their way to the autumn electoral fetish-fest. I just can't foresee anything that will actually change people's frame of reference for approaching economic, social, and ecological problems. The total capture of public discourse by business imperatives renders any alternative view of social arrangements stillborn. There is no conceivable way for anyone to find a popular platform from which to launch ideas that criticize economic growth, maximized consumption, individual careerism, and technological progress. There is no space -- no atmosphere whatsoever for philosophical, ecological, or moral challenges to the socioeconomic status quo. There is only one language of power now, and it preaches that The Profitable is The Good. The American identity is so closely tied to this Gospel of Wealth that it will ultimately prove to be our undoing. A civilization built only on the ideals of the businessman is doomed to consume itself. 2012 in the US will thus be another year of overstuffed sleepwalking, as we medicate our psyches with drugs and gorge our bodies with frito-filled tacos. Official unemployment will likely hover around 8% through the end of the year, but declining workforce participation and general underemployment will hide a much starker reality. Economic growth will probably surge to 2.5 or 3%, which will make investors and CEOs happy -- but just as the last three decades have shown, that growth will not accrue to the bottom line of regular citizens. Inequalities in income and wealth will grow more pronounced, and wages for all but the most highly-skilled will sag. So.....more of the same in the good ol' US of A.
Romney Wins -- against the general backdrop of American sluggishness, Willard will win in November. Obama is indeed a gifted orator and campaigner, and he will have a huge monetary advantage. But he has just not done enough to help make sense of the continued economic sluggishness, and the litmus test of "are you better-off than you were four years ago?" will not favor the incumbent. It will be close though. Killing bin Laden and getting the troops out of Iraq will draw a lot of independents and lefties back into the fold. But I just think that the Obama shtick will have worn too thin by next fall to bring him reelection. He has tried to be too many things to too many people. Perhaps the best symbol of this is keeping Timothy Geithner on while booting Elizabeth Warren to the sidelines. Obama talked tough about greedy bankers on camera, but he made sure that the people pulling his policy levers would never actually challenge the hegemony of corporate and financial interests. And of course, his justice department has not called any of the crooks who cooked our economy to account, except for one scapegoat dude, I think, who got a couple years in Club Fed. Yes, Obama will have tons of money, and he will probably come off pretty good in the debates. But I think Romney's game is too good this time around. He will get his own share of campaign cash, once the primaries are over, and he'll be off to the races. He could really solidify things by picking a dynamic VP and a solid cabinet, and then it will be lights out. [A personal note on this: as an avowed lefty-type, albeit of a decentralizing stripe, I reflexively fear another Republican presidency. But the last 3 years of Obama have been highly frustrating. I am becoming more convinced of Jesus' words in Revelation 3:16: "So, because you are lukewarm, and nether hot nor cold, I will spit you out of my mouth." Perhaps the best thing, in the long run, is to give the GOP total control for a couple years. And instead of fighting the opposition tooth and nail, as the Republicans have done recently, the Dems should just acknowledge the conservative mandate, and actually call on Romney and a GOP Congress to put their loftiest ideals into practice. Give them no excuse and no quarter -- just lay down and let them have their way. My guess is that Romney will try to keep things centrist and reasonable, but Boehner and Rand Paul and Paul Ryan will yank the country towards an Ayn Randian dystopia. And then we can all see, once and for all, that eliminating the regulatory state will not result in a magical shangri-la of flourishing entrepreneurs and sleekly beautiful Ubermenschen. Maybe a realistic liberal plan for the future has to be sewn in the burnt soil of conservative collapse. Maybe...]
The End of Device Fetishism -- OK, this one probably falls squarely in the I HOPE category, but I've just had enough of the rapid, serial upgrading of phones, tablets, computers, TVs, and all that other electronic claptrap. I know this seems to put me in the luddite, old curmudgeon camp, but that's not really my point. I actually view the obsession with gadgets as the ultimate symbol of our cultural bankruptcy. It is one thing to welcome liberating technology, like the cell phone and the computer. But it is something else entirely to engage in restless adolescent lust after the latest devices on a regular basis. This 'device fetishism' has so many deleterious effects that it is impossible to do them justice here. But here are a couple examples. Device obsession squashes the social. No matter how many group video games you play with your 'gaming community,' the sheer physical fact is that people are cocooned in their own private simulacrum, oblivious to interpersonal and natural surroundings. People plugged into their iPods are not engaging in conversation, or hearing the ambient noises that are flowing and burbling all around them. Reading books and articles on a smartphone or tablet might seem like you're getting the exact same content as exists in paper books, magazines, and newspapers, but the different physical formats actually change the style of learning for the reader. The size and shape of a physical object like a book allow for a quick sense of the overall context of information, whereas the digital format erases almost all trace of breaks, segmentation, and separation. The sameness of appearance in digital formats tends to make everything seem like part of one overall stream of 'information,' having a uniform quality. Ideas, aphorisms, poems, essays, journalism, scientific studies -- these all become 'content' in the device-driven world. The scathing majesty of a Nietzsche aphorism looks exactly the same as the boilerplate John Grisham twist, or the ridiculous tweet of some jackass b-movie actor. The endless pursuit of upgraded devices is also, obviously, utterly unsustainable to a populace that is seeing its wages eroded and its debt levels swell. And finally, the manic replacement of G3 with G4, of LCD with plasma, of iPod XXX with iPod YYY is a completely adolescent fixation. Jealous, grasping, lusting peer-orientation does serve a cohesive social function, in a limited evolutionary sense. After children make the psychic break with their parents and begin to assume their own individual identities, the mimicry of peers in the teen years serves to provide actual social substance to the emerging person, as well as creating a social cement that will ensure the survival of the community (group selection is actually going through a bit of a revival in evolutionary biology circles right now). By the end of adolescence, however, the hyper-competitiveness and intense peer-orientation is supposed to give way to a new sense of autonomy, self-assuredness, and maturity. The grasping after external objects to signal one's worth or one's membership in the in-group is supposed to fall away, to be replaced by a new focus on higher questions of meaning, relationship, and community. For more on this relationship between consumption and the adolescent adult, see here). Needless to say, the device is killing us, in a larger sense -- a subject to which I will return in the coming weeks.
Collective will be the new Cool -- Again, kind of a pipe dream, but I'm totally convinced that it's gonna happen sooner or later, either by choice or necessity (choice would be better). As mentioned 9 gajillion times before in this blog, the ratios amongst work, production, and reward will render the One-Person-One Job/One-Family-One- Dwelling social form unsustainable, and people will have to form more collective home bases from which to approach the wider economy and society. We're already seeing this now by default, as high school and college graduates have to stay with or move back in with their parents, in significant numbers. And as more and more baby boomers retire with insufficient funds, and if Social Security gets shaved down due to fiscal contraction (which seems fairly likely), expect seniors to move back in with their adult children in substantial waves. And culturally, we actually do demonstrate our deep longing for community, from workplace sitcoms to reality shows to the rise of hiphop 'crew culture.' In 2012, some brave voices will tie all of these loose communal strands together, and back them up with some solid evidence for the advantages of decentralized, localized economics -- and the result will be a new Community Chic.

OK, that's enough for now. Have a great New Year everyone, and here's to the fresh possibilities that each annual turn of the calendar brings. 2012 certainly promises to be much more exciting than the wet blanket year we just finished.

Oh yeah, and the Bruins repeat as Stanley Cup champions.

We Are All Each Other's Lottery

2011-12-07T01:38:27Z

It is impossible to prefigure the salvation of the world in the same language by which the world has been dismembered and defaced.

--- Wendell Berry

I don't know if most people feel the same, but it seems to me like a lot of things are winding down. As I described many moons ago, the equations that make up the American Algorithm are just not fitting together any more. Things we learned growing up, adages about labor and education and family, don't pass the sniff test any more. Hard work doesn't necessarily pay off. Playing by the rules may not ensure even modest success. Even more importantly, violations of long-standing modicums of decent and responsible behavior, especially in business and finance, not only go unpunished, they actually and vastly increase one's chances of entering the controlling elite.

More specifically, the advanced form of capitalism in which we operate has become undeniably cannibalistic. Labor, whether skilled or unskilled, has been degraded. Even though we live in complex societies and economies, systems that require all manner of service and maintenance, it is becoming increasingly difficult to make a comfortable living unless one possesses a narrower and narrower range of coveted, high-tech skills. Though we are all physical beings, living in actual corporeal space, surrounded by concrete environments and objects that need creation and tending, we have decided that only ethereal and abstract professions like financial derivative management and computer network programming are deserving of major reward. We wouldn't dream of telling our children that farming, tinkering, garbage-hauling, cobbling, or ditch-digging are worthy pursuits, even though these activities will always be around, and will always need to be performed by someone.

No matter what kind of bargain our 'advanced' societies make with capitalism (the welfare states of Europe, the turbo free-markets of America, or the directed production of China), the relentless forces of various technologies and their evolutionary, financial offshoots are pounding away at any type of lifestyle that might bring personal dignity and ecological stability. In short, nowhere are economic forces actually serving the people. It's vice-versa. Even in the rapidly expanding economies of China and India, the middle classes are not actually swelling. The same forces that propel wealth and power to a small minority in the Western world are starting to work their diabolical magic on Eastern societies as well.

All around us is evidence that the whole damned thing is shot. Europe is a shambles, with countries and cultures that are thousands of years old being held hostage by the iron-grip of, gulp, bond markets. How is it that countries with millions of people and thousands of domestic industries can be declared too naughty to participate in the global game of borrowing, spending, and consuming? How can huge swaths of geography and demography be put in a financial 'time-out' and told to clean up their profligate ways, or else? How is it that bond vigilantes can plunge millions into an austerity, when almost none of the problems can be traced to regular people, workers, and citizens? Well, it happens because the universal Hoover that is consumer capitalism has already sucked out all of the excess value created by the labors of the many, and parked that cash in the Caymen Islands or Icelandic default swaps or Indonesian bonds, or some other god-forsaken place where it can do no good for the people that actually created that value in the first place.

And we certainly don't need to belabor the situation in the US. Epic unemployment, persistent stagnation, swollen stock markets alongside tepid labor markets, the surging coffers of the 1%. We all know how fucked up everything is here.

But aside from the Occupy Wall Street crowd, there really hasn't been much uproar. Much like the boilerplate criticism of OWS (which is actually both fair and unfair, depending on how you look at it), this is probably the result of no one really knowing what to do. "What's are the OWS's demands? What do they want?", everyone keeps asking. As if anyone really knows what the hell would fix everything (or anything).

We're all waiting around for something to kick in. We're waiting for low interest rates to spur lending and investment and hiring. Or we're waiting for school reform to take root and start creating the next generation of competitive American workers (because by God, we may be the most individualistic, screw the deadbeats, get-a-job-you-hippie culture in the world, but when it comes to global economic competition, we're suddenly all in it together to make us better than those brown and yellow devils who are out-competing us, fur fuck's sake). Or we're waiting for the government to give us a real jobs plan, with real training for the green industries of the future. Or we're waiting for the GOP to take power, so that we can finally shrink down the government, turning loose the furies of economic creativity and dynamism. Woop woop!!

No matter what form it takes, we're all waiting for something to happen, something that will save us from the excesses and failures of the system itself. This is a sure sign that we are ideologically exhausted, spinning our wheels and hoping against hope that the identical workings of the same system will somehow produce different results. Needless to say, this is supremely irrational. We are essentially hoping to hit the lottery.

The lottery is actually a good metaphor for our current state of affairs. As I'm sure we're all aware, the lottery is the ultimate regressive tax. Poor people are the disproportionate consumers of lottery products, sapping much of the earning power of the lower classes as a whole. The state has already gotten a lot of these people's money through the various 'sin' taxes: alcohol, cigarettes, etc. Then what's left of their meager paychecks gets scanned back into the government ledgers one grease-soaked Keno ticket at a time. And the scratch tickets?! Dear god, what an amazing advance in the technology of lottery looting. Throw some pretty pictures of baseball diamonds, Christmas trees, or corn fields on those tickets, and straight-up money-squandering is magically transmogrified into a 'game.' And games are good, right? Fantastic. Never mind that the odds of someone winning a substantial sum in the lottery, even just breaking even for years of ticket purchasing, are ridiculously small. As long as there is even the slightest chance that I might win, then by all means, let it ride!!

That's what our waiting around for external socioeconomic salvation is like: the lottery. We keep hoping that the same tired arguments that have been used for decades to rationalize the wholesale looting of America and the global push for reckless growth will suddenly, somehow, flip their functions around and do the opposite of what they have been doing all along. Stale platitudes from the right and the left are being relentlessly retread: trickle-down economics, educational 'reform,' public (quasi-public, at best, in its Obamacare form) health care, economic stimulus, quantitative easing, 'entitlement' reform. All these things are just fancy ways of saying, "Yes, yes -- we know that the economic fruits of the last 40 years of grassroots hard work and progress have been filched away to inflate private portfolios around the globe. And yes, we all know that those fruits can never be gotten back. But it's too late to cry about that now, so here's another way for you to change your behavior and your expectations, so that corporations and banks can begrudgingly agree to participate in the domestic economy again."

Well lucky us! How fortunate we are that the titans of business and government are working to discover new ways for us to receive less compensation for our hard work and overarching anxiety. They're the job creators, right?

In lieu of this ridiculousness, many are simply going with the regular, old-fashioned dreams of the actual lottery. All we really want is to hit the big one, quit work, and start traveling around the world. We want to check out of all the day-to-day bullshit and just get away from it all.

This is lottery porn, the self-titillation that comes with dreaming the wish-lists of unlimited wealth. And being a semi-regular purchaser of lottery tickets myself, I have to say that I almost never dream of things that I want to buy. My thoughts almost invariably leap to travel and escape, to beaches and leisure and cocktails. Now, I'm sure other people are different, and actually do plan out their Ferraris and 150-inch TVs and South Beach mansions and whatnot. But I would bet that an equal number just dream of the freedom that would come with winning, the freedom from an oppressive work life and degraded public life. For many, the lottery is just a ticket out of a way of life that is stultifying, undignified, and inhumane.

Well, we're not all going to hit the lottery. We're not all going to get that golden ticket out of our current predicament. And even those that may hit it big and 'escape' will still have to live in the midst of a collapsing culture and civilization, as the glacial power of our current arrangements ground all of their compatriots' lives into dust. We will not all hit the mother-lode.

But we are, in fact, all each other's winning lottery ticket. We have the power to provide each other all of the security and comfort that would come with a gajlillion dollar payout -- and actually much more. After all, what is it that we all really want? As Wendell Berry asked, "What are people for?" I'm convinced that most people have relatively modest desires. We want to have security, shelter, dignity, and self-reliance. We want to live in humane environments and communities, with real power to shape the contours of our existence. We want dignified work, some of it complex, but most of it simple. And perhaps most of all, we want to be around people that we like and love, living in convivial and robust settings.

That winning lottery ticket is available to all of us, which is why I tend to be bit more optimistic than some other Peak and Post-Peak commentators. I think that there is real potential for rapid change towards a more collective social form, one that will replace the One Person/One Job-One Family/One Dwelling structure that we have now (see the American Algorithm link above to read more about our current social structure). A more collective social form would be the biggest lottery hit of all time, because it would provide security, stability, and true freedom not just for a lucky few, but for millions.

Here are some of my postings on what that way of life might look like.

Corporations as People (and Vice Versa)

2011-11-07T21:31:37Z

Corporate personhood has emerged as one of the more contentious issues of our ongoing economic malaise. In 2010, the Supreme Court’s Citizens United decision fully cranked open the spigots of corporate campaign cash, making political pay-for-play proudly and unabashedly explicit. In August of this year, the normally smooth and weathervanish Mitt Romney ran afoul of the haybale set at the Iowa State Fair when he informed an angry interlocutor that “Corporations are people, my friend.” And of course, the Occupy Wall Street movement is currently pushing the corporate personhood issue front and center, as it becomes undeniably obvious that the normal operation of big business is one of the primary mechanisms for the upward shunting of wealth and power to the infamous 1%.

But the identification of corporations as people has a much longer history in America. Some conflict can be traced to beginnings of our republic, when Hamilton and Jefferson clashed over the desirability of centralized public, private, and banking entities. There was also the festering resentment of the American colonists over the monopolistic and rapacious behavior of various crown corporations. The chests dumped at the Boston Tea Party, remember, belonged to the loathed East India Company, an early form of the corporation called a joint-stock company. But the true landmark events in defining business entities as people came in the form of Supreme Court rulings. Long before Citizens United, the Dartmouth College vs. Woodward decision in 1819 established that, for legal purposes, corporations are artificial persons afforded the same protections as natural citizens. The main issue in Dartmouth was the recognition of corporate charters as private contracts subject to the Contract Clause in Article One of the Constitution. Later, in 1886, the Santa Clara vs. Southern Pacific Railroad decision further locked in the idea of the corporate person by granting equal protection under the 14^th Amendment, a section of the Constitution originally designed to protect freed slaves.

Since Santa Clara, the matter of corporate personhood has been essentially settled in the eyes of the courts. Certainly, subsequent rulings have allowed private business entities to be regulated by state and federal governments, but this has not eroded their status as individuals vis-à-vis the Constitution. The only real surprise is that it took 120 years between Santa Clara and Citizens United to officially codify the corporation’s dominance over our politics via the legal mechanism of cash as free speech.

With this long legal history, the battle to de-personify corporations is a losing proposition. Taking into consideration existing case law and the death-grip that big business has on our federal political system, the only real solution would be a Constitutional Amendment that explicitly limits protections to natural persons. Needless to say, people shouldn’t hold their breath waiting for this to happen. A much more promising avenue would be for people to become more like corporations. Just as business entities have piggybacked onto legal protections originally designed to help flesh-and-blood citizens, we American mortals should co-opt the strategies and structures that corporations have used to such great effect. We should turn the corporate tools of scale, specialization, centralized purchasing, and limited redundancy to our own domestic advantage. And along the way, we could perhaps find ways to grab legal shelters designed for corporations and bend them to our own benefit.

What would this mean for people to become more like corporations, and why would anyone want to do that? After all, one of the main pleasures of domestic life is that it is not like the workplace. The family is a “haven in a heartless world,” in Christopher Lasch’s memorable phrase. But the point here is not to harness the spirit of the corporation, which is single-minded pursuit of profit, but rather its collective form, which use combination, cooperation, and coordination to maximize efficiency. The simple fact is that the individual and the nuclear family are no longer adequate home-bases from which regular people can approach the wider economy. The old algorithms of work, wage, and household are no longer functional, and no amount of new debt, stimulus, or austerity is going to recreate the fleeting conditions of decades past. In the last 40 years, major trends in technology, globalization, finance and corporate structure have driven the real value of labor way down. Wages and salaries for virtually all sectors have stagnated or declined, except for a very small sliver of technical fields. And even those spheres will probably soon see the same eroding effects, as technology and globalized labor supplies eat into their temporary advantages.

We can talk all we want about job retraining, beefed-up technical education in our schools, or the new Green Economy with its fantastic new careers. But the brute economic fact is that economic growth no longer requires a large percentage of highly-skilled, highly-paid workers. Globalized and technology-based economies can churn out tons of stuff without having millions and millions of engineers and web designers raking in sweet salaries. This declining value of labor input is what helps push all of the surplus value up the chain to the tiny majority that controls larger and larger swaths of our total economy.

Like the long history of corporate personhood, it will not do us any good to swim against these long-term trends. Labor unions are not going to suddenly make a comeback and jack up everyone’s paychecks. Nor are we going to magically transform our gargantuan workforce into an army of bio-engineers and open-source programmers. And the Occupy Wall Street movement, noble as the intention might be, is not going to set off a powderkeg of political discontent that ends up forcing massive redistribution of wealth or FRD-style federal spending.

But what is doable is the formation of small domestic groups or co-ops, larger home-bases from which people can approach the economic and political spheres. Inside these domestic corporations, people can share revenue, combine and centralize their purchasing, specialize their labor participation, and group their investments. They could also pull members out of the outside workforce altogether, bringing functions like child care and eldercare in-house. Lighter forms of these domestic corporations might look something like co-housing, while more committed versions would involve outright cohabitation. The overall saving in housing costs would obviously be maximized in cohabitation models.

Now of course, collective living in domestic corporations would cut directly against the American grain of individualism and nuclear family predominance. But as permanent as our current arrangements might seem, they are really just the temporary flowerings of a style of capitalism that strives to maximize excessive, redundant and, frankly, unnecessary consumption. And there is ample evidence, from exploding legal and illegal drug use, to pervasive personality disorders, to chronic American obesity, that our current lifestyle is profoundly unsatisfying and unsettling.

The social support structures of the past are all but gone. Labor unions, small town economies, fraternal organizations, and traditional churches have all been eroded by the relentless march of turbo-capitalism and the hyper-individualized consumption patterns left in its wake. It is clear that beleaguered and exhausted citizens and workers need some sort of new platform from which they can intelligently and efficiently engage the workplace, the marketplace, and the political sphere. In a word, people just need some space – space to breathe, move, experiment and innovate. If we try to go it alone, as individuals, couples or families, we will never get that socioeconomic space opened up, and our levels of anxiety and depression will continue to mount. But if we can leverage the collective tools of the corporation to our own personal advantage as flesh and blood people, then new vistas of opportunity could open up for a more fully human economy and society.

Recovery, Collapse, or Transition?

2011-11-05T23:03:07Z

For most of us, the Ark of Economic Collapse has been pried open. We stand, like Dr. Jones, strapped to a pole with our eyes closed, waiting for the shrieking wraiths of destruction to finish their cleansing task, after which we can resume our heroic stroll into the sunset of the American Dream. The evildoers who will reap the whirlwind of this economic rightsizing are various, depending on your political leanings. Conservatives envision the unwinding of New Deal, entitlement-fattened arrogance and dependence, while liberals dream of righteous comeuppance for an exploitative and rapacious 1%. But in all scenarios dreamed of by pol and pundit alike, we will somehow overcome this latest challenge, albeit an epic one, to eventually reach the far shores of recovery and growth -- as we always have.

But there are subterranean, relentless, algorithmic trends out there, and they point to a future that is very different from the recent past. 'Recovery' is no longer a feasible option, considering the weight of these macro-trends. Our difficult but unavoidable choice now is between transition and collapse, either a gradual adjustment to a new reality or an abrupt cliff-dive into misery. Denial of the epochal changes afoot will continue to produce surging levels of anxiety, anger, frustration, and delusion. As we flail around for the magical path to recovery, we will continue to point fingers at the malevolent Others who block our way, and political power will swing pendulously between Right and Left as plan after plan runs aground on the unyielding shoals of unpleasant reality.

Paradoxically though, if we can shake off the mirage of recovery, and the shibboleth of Growth which underlies it, then we can let go of the bulky baggage that comes with what Jim Kunstler calls "the psychology of previous investment." We can release the terror and uncertainty that comes with obsessing over a way of life that is not coming back, and we can get on with the business of transitioning to the next chapter of the American Experiment. To update FDR with much less grace: the only thing we have to fear is the fear of not returning to something that is unrecoverable.

So what would opting for transition instead of recovery look like? What kind of future should we be preparing for? Well, the first characteristic of the emerging lifestyle is collective living. As the Great Recession drags on and on, and the new 'normal' becomes 1-in-10 of us without enough formal work, the old dreams of careerism and nuclear family self-reliance will fade away. As covered many times before in this blog, the old algorithm of One-Person/One Job and One-Family/One-Dwelling will not hold. The upward shunting of wealth and power that comes with mature capitalism is shredding the quaint ideals of gainful employment and virtuous vocation. The current wake behind our economic system is kicking out waves of protest (Occupy Wall Street) and depression, as expensive educations flounder on the shoals of cyclical and systemic unemployment. Graduates are being forced to live collectively anyway, because they have to move back in with their parents.

Similarly, the elderly and retired are also taking a beating. The conventional expectation of comfortable (if not luxurious) golden years is being blown to bits by collapsed housing equity and dried up pensions. Retirement living facilities are proving elusive and overly expensive, with straight-up poverty or moving back with adult children the main realistic options.

In essence, with careerism, upward mobility, and comfortable retirement all being squeezed out as viable future scenarios, people need to start organizing into what could be called domestic corporations, or domestic co-ops. The language might seem offputting and misleading at first. After all, aren't we just talking about communes or co-housing? Well, yes and no. Communes, co-housing, and other forms of 'intentional community,' in the parlance of the movement, are usually formed around shared ideals and goals. You can see this style on exhibit with the Occupy Wall Streeters, and their talk of consensus, team-building, motions, points of order, etc. This might seem enticing and noble, because it's so egalitarian and empowering and all that. But the immanent collapse of the whole ball of wax really necessitates something much more ruthless, single-minded, and ultimately pessimistic. We're not going to be able to alter the trajectory of capitalist civilization with any kind of democratic activism. That ship has sailed. The goal of collective living now needs to be the construction of oases of survival, as the rest of the system slides down the slope of the Long Emergency.

Transition means getting ready for scarcity and devolution. It means creating small groups and equipping them for survival, mobility, flexibility, and innovation, which are all hallmarks of corporations.

Admittedly, this is a sloppy post. Next time, we'll look at corporations a bit more closely.

Politics as Laundry

2011-09-28T14:43:41Z

With the dreary, dripping passage of time, the evidence is piling up that we're stuck in a gruesome economic straitjacket. The disenchantment with the Obama administration is running broad and deep, and even the staunchest stalwarts are struggling to keep the tattered hope-bunting attached to the beleaguered President's agenda.

Indeed, after months of everyone saying, "it's all about jobs, jobs, jobs," the public seems to be turning to November 2012 with relish. After all, if you want to do something about jobs-jobs-jobs (and why is there only 3 'jobs'? Don't these tough times call for at least 5 or 6 'jobs,'?), you actually have to take some action, like spend money or actually push through more tax cuts for those oh-so-weary wealthy. But campaigning and stumping is much easier than making difficult choices. Puttin' the leg up on that ol' haybale and talkin' about the greatness of Amurrica is a lot more pleasant than number-crunching with staffers on benefit cuts for veterans and hungry toddlers.

Public confidence in the federal government is at disturbingly-low levels, and yet we still can't wait to get back into that old familiar business of fiery speeches, overstuffed debates, daily tracking polls, and those infernal, touch-screen electoral-college maps. We can't get our elected officials to actually do anything of substance for us, but we're still eager to battle over the next batch of people who won't help us.

What's going on here? Why are we turning with such masochistic delight to a process that won't actually bring anything to fruition until January 2013, a full 15 months from now? Sure, sure -- we all know the script on pay-for-play politics. Fundraising is a year-round job; campaigns are through-the-roof expensive; the conflict-hungry media feeds the horse-race motif -- yadda yadda. But aren't we all complicit in this, by our tacit acceptance of campaign bullshit as the only acceptable form of political discourse? Sure, it feels good to blame those scoundrels and crooks in Washington for all of our socioeconomic ills. Everyone's an independent or an outsider now. But this faux-detachment allows the pure insider looting of our civilization to roll on with crushing efficiency. When we obsess on the electoral process itself to the detriment of an honest evaluation of reality, we're writing ourselves into the kabuki playbill that has become our national politics.

A bit more on this. The business of campaigning and fundraising has been tweaked, honed, upgraded, tightened, and commercialized to an unbelievably-high level. The overall effect is a double transformation of the federal governing structure, from simple to complex to simple again. First, the simple. The basic reality is straightforward: concentrated wealth consolidates and increases itself by purchasing the government. This is not a difficult concept. It happens everywhere in the history of civilizations: wealth purchases power, filtered through a layer of legitimizing cultural authority, either a state or a church, or a fusion of the two.

In a large modern economy like the United States, this simple purchase of power by the wealthy has to be transformed into a bewildering set of bureaucratic processes, in order to actually operate. Corporate entities and the business world in general are extremely complex, so old-fashioned bribe and grift will not (always) work. Tax structures need to be crafted and continually refined, to follow the changing needs of business. Government contracts need to be created, justified, inflated, and then spread out across as many geographical districts as possible, to keep political representatives on board. Legal structures have to be tilted to favor the right kinds of property. Electoral laws need to be crafted in such a way that gerrymandering and pay-for-play are kneaded into more palatable layers of action (PACs, bundling, etc.). Chairmanships in Congress are sold openly to the biggest fundraisers, but are then sanitized by national political committees and other organizations. R&D can be expensive and inefficient for private companies to facilitate, so much of it is farmed out to the government and then later transferred back to the private sphere, when it comes time to reap the profits.

All of this complexity is, frankly, boring. We know that this shit goes on, but there's now so much of it that we're all suffering from scandal fatigue. But we can't forget that this tedious, bureaucratic detail is one of the main mechanisms by which concentrated wealth accelerates its accumulation of the largest slice of the pie. Yes, of course corporations get a lot of their cash from actually being good at producing something of value. But the really big Playas use the federal government to enhance their standing by tilting the playing field to their advantage. How else would an industry like finance, which serves an important business function but is not itself inherently productive, come to comprise almost a third of our national economy? This was accomplished through purchase of government facilities and functions; i.e., deregulation and bailouts.

The second step in the double transformation of politics is to turn the complexities mentioned above back into a simple message for the people. This is where we get the creation of political theater and the apotheosis of ideology. This is the magical stage where message masters, speech crafters, and power pollsters roll out their explanations for, and solutions to, the widespread corruption that we all know is lurking on the banks of the Potomac. For Republicans, the theme is simple: Government bad, business good. This wasn't always their tack. Eisenhower-types and other old-guard establishment pachyderms used to see government as a necessary support-structure for respectable American society. They didn't call for far-flung government expansion, but the possibility of noble government existed -- it just needed vigilance. But as the last four decades cratered the prospects of those of us who are not fortunate enough to be in the job-creating 1% (remember that median household income is basically what is was in the mid-70s for most families, and that's with extra breadwinners in the mix), it became increasingly necessary for our main political parties to explain what went wrong (see this piece on theodicy, with a couple links to other relevant posts). So the GOP shifted to a culture war, anti-elite strategy, equating Big Gub'mint with pointy-headed, liberal, PC, baby-killing Somdomites of all stripes. The badness of government was just one part of an overall civilizational collapse perpetrated by leftists. The only solution was to sweep out the nefarious social engineers, shrink down the government, and put in some honest, John Galatians folks to rescue the federal government from itself.

Great tactic -- very successful at raising a lot of cash and winning elections. Sure, the GOP may lose a few, like the Obama year, 2008. But continued recession guarantees that the theodicy motif will always be important, and the story that the Republicans tell is very compelling. Of course, it's utterly divorced from political reality. But that's beside the point, when we remember that our two main political parties are essentially functioning as cultural money launderers, transforming the raw purchase of power described above into simple just-so stories for the unwashed masses.

As covered many times before in this blog, the Democrats also have a theodicy narrative by which they launder the money-into-power process. The Dems' story is a bit more connected to reality, and it has preserved the lofty notion that government can be a force for good. But with the decline of old-guard labor Democrats and the ascension of the triangulating Clintonistas, the Blue Mule fairy-tale has become a huge horse-pill of status quo garbage. So with the Dems, we're always within a fingertip's grasp of 'recovery,' if we can just get that stimulus pump-prime going. Government is good, but by golly, business is also good. A great society goes hand-in-hand with an expanding economy, awesome green jobs, innovative and competitive education, and healthy dollops of social justice. If those obstructionist Republicans would just stop f'in around and chip in with some concessions on taxing the rich, then we could get all of our social insurance programs back on track and reignite 90s-era growth.

Again, nice story, but still healthily divorced from the raw disparities in wealth and power. But just as with the GOP, that's not really the point. The national Democratic narrative is a laundering facility, a nice explanation for why decades of economic growth and pro-business policies have accrued to almost nothing for regular people.

OK, that's enough on that for now. You get the idea. But let's just consider one last thing. Even beyond the laundry facilities described above, I think that deep down, we all know that part of the whole political dance is the depressing fact that rationalizations for failure are already baked into the pie. For example, let's say that Mitt Romney sweeps into office next year, and brings with him veto-proof supermajorities in Congress. The GOP then puts in their full plan: repeal Obamacare, roll back regulation, cut the corporate tax rate, cut the tax rate for the wealthy, scale back the social insurance programs (Social Security, Medicare, Medicaid, Food Stamps), and other large cuts to discretionary spending (except the military, which always has a blank check). Will we really have an awesome economic rejuvenation? Almost certainly not. Deregulation and other pro-business policies have been on the books for decades, and we've had economic growth all along. Has all that growth resulted in trickle-down awesomeness for regular folks? Not at all. People who are unemployed and broke and overleveraged and foreclosed are not going to suddenly become credit-worthy entrepreneurs. Banks are not going to suddenly say, "Hey, now that we have so much confidence in this fantastic GOP tax and regulatory structure, let's start opening the coffers and loaning money to millions of people with negative net worth." It's just not going to happen. Massive inequalities in wealth and power are not going to be redressed by increasing the ability of the biggest players to make even more money. It just defies credulity. But I think we all know that the rationalizations for this failure are already worked out ahead of time. Obama will be blamed, just like Dubya was blamed, and that will provide enough cover and time to get to the -- gulp -- next election cycle, and the dance will start all over again.

Should the unlikely happen and the Dems preserve some semblance of power -- well, we've already seen that script. The Republicans are (rightly) blamed for obstruction. But remember, Obama had a Senate supermajority in his first couple years, and he still didn't push through anything that big business would consider even remotely unpalatable. I can't see a re-elected Obama being bold enough to stray far from the laundromat.

Whither a Way Out?

2011-08-28T23:11:33Z

Hurricane (now Tropical Storm) Irene has put a drenching final touch on the surreal summer of 2011. With debt-ceiling games of chicken, stock market rollercoasterism, European insolvency (or is it illiquidity?), and general economic malaise buffeting us over the last few months, the familiar script of a natural phenomenon like Irene is almost welcome. At least with a problem like a hurricane, we know roughly what to do and how to react. We stock up on supplies, get our chores out of the way, and hope that the power stays on long enough to get through a good chunk of our Netflix queue. When the disastrous images start to roll in from the storm's landing points, we furrow our brows and call the relatives to make sure everything is okay. And then, more often than not, when the storm does not live up to the hype, we breathe a sigh of relief for the divine mercy. Or we chuckle that, once again, we got duped into panicking over another relative non-event. Damn that sensationalistic media!

Now, I'm not making light of the damage and suffering that hurricanes and other natural disasters can cause. I'm simply noting the familiarity of the script and the ensuing human responses.

When looking at the basic crappiness of our economic situation, however, similar comforting rituals are proving impossible to maintain. Oh sure, that doesn't stop our pundits and politicians from trotting them out. But it is becoming more and more difficult to find any type of familiar ideological mooring to which to cling, and it feels as if something truly awful is lurking around the next corner.

We are essentially painted into an operational corner, because of long trends in our economy, our politics, and our thinking. Here are the basic facts that are squelching meaningful discourse and action:

Due to many factors (technological innovation, globalization, labor-power decline, labor-value decline, financial evolution, etc.), wealth and power are more concentrated than at any time since the Gilded Age. I know this an oft-repeated trope, but it is the crucial starting point for any analysis of our predicament. And I'm not even making a value judgment here (yet). I'm simply stating the obvious. The very top of the pyramid has almost unfathomably-more power and resources that the rest of us. And it's getting worse (or better, if you're in that top slice). The erosion of net worth is creeping relentlessly up the educational and vocational ladder, with larger swaths of the middle class dropping into the gaping maw of debt, default, and depression.
Concentrated power has to be expressed somewhere other than the marketplace, if only to convince itself of its own inevitability. So the government and culture complexes have attached themselves to the swollen teats of the corporate/financial world, sanitizing the raw transfer of wealth from the bottom to the top with some fizzing streams of pop economics, junk philosophy, and consumption boosterism. Don't be deceived by the perennial pretendings of the right (and now the mainstream 'left') that somehow the 'government' is a separate entity from the 'private' business sphere. One look at the revolving door between corporate boardrooms, K-street lobby shops, and government agencies gives lie to that bit of campaign conceit. It makes for good stump shtick, but it has no relation to reality. Similarly, the idea that 'the media' and other culture outlets are independent entities challenging the more wholesome, boring, conservative business world is laughable. Keep in mind that the large media companies that give us news, magazines, movies, and TV shows are as intrinsically profit-motivated as any oil or pharmaceutical company.
With Big Business, Big Government, and Big Culture melded into one huge econo-ideological complex, the channels of politics and social change are extremely narrow. Consolidated power has honed the electoral and policy processes into a finely-edged blade. Winner-take-all elections, unlimited campaign finance, district gerrymandering, closed presidential debate structures, constitutional constraints that inflate low-population-state influence --- these and other factors almost insure that no ideas outside the pro-corporate mainstream ever get a hearing. No third party can ever get traction, no matter how many people define themselves as 'independent.' Substantive policies that offend large campaign donors can't even get off the ground (think single-payer healthcare, which almost every other industrial country uses to keep costs way below ours; or mandatory, blanket mortgage refinancing, which would quickly eliminate the massive debt overhang that is strangling growth, but which would also, of course, necessitate huge shifts from debtors to creditors).

There are other long-term trends to consider (international trade, military waste, etc.), but you get the idea. The question for this post is: Considering the breadth of our current predicament, but also the straight-jacketed nature of our political process, what can we actually expect in regards to a way out? Will anything of substance actually happen to get us through this dark time?

Here is what I think we can expect, based on how certain things shake out over the next year or so. There are a few different ways we can go, not many more. None of them are very pleasant.

First, if the European monetary union disintegrates, all bets are off. The core countries like Germany and France will probably stagger back towards relative national health, but the overall failure of the experiment will reduce investor confidence for years to come. The peripheral countries, contrary to popular expectation, will also turn out okay, albeit with a much lower standard of living. With control of their own currencies again, they will be able to inflate/devalue their way to some sustainable level of health -- it just won't be very luxurious.

From what I understand (which is certainly not much in the international finance arena), a European collapse will be a blessing and curse for the US. More investor capital would probably start flowing to America, as the number of global safe bets is reduced. But the prospect of long-term reductions in European demand, coupled with exhausted demand in the US, would also sharply reduce the possibility of global economic 'recovery.' Robust growth would probably push way out into mid-century (at least that's what the experts will say), and the Japanification of the world would be at hand -- i.e., stagnation. It probably wouldn't matter which party comes to power in the US, if global stagnation and European shrinkage take hold. The Dems and the GOP would probably just flip-flop from one election to the next, as the blame-game that is our electoral process winds out in all its inept glory. Elsewhere, I called this "Musical Chair Politics."

One other possibility, if Europe manages to hold together and limp along (or, god forbid, they turn 180 degrees from austerity to stimulus -- something I doubt will happen), is that things get so bad in the US that the people will start demanding government spending to create jobs. Now considering the current stance of the White House (in capitulation to the nonsensical right) that the government is like one big household that has to cut up its credit cards and live within its means, the idea that more stimulus will get approved seems outrageous. And in fact, I don't think it's too likely myself. But what happens if a few mega-shocks happen in rapid succession? Say that Bank of America and Chase become insolvent in quick order, and that the government refuses to bail them out. The stock market swoons for real this time, and large companies begin to drastically slash their workforces. Money start gushing out of the US to safer places, and businesses of all sorts and sizes start to fold, as financing and demand slow to a drip-drop. Say that by February 2012, unemployment has surged to 13%, mortgage foreclosures spike again, and retirement savings take another 25% hit from stock market contraction. Will people really continue to insist that the government cut spending even more? Will they decide that it's okay to wait around for a Republican government to take the reins in January 2013? Or might people finally demand that the government go into FDR spending mode? I think it is in the realm of the possible. And the long-term outcome might even be positive, if (and this is the biggest 'if' in recent history) the federal jobs programs are intelligently constructed for sustainable, low-impact vocations. But unless some Washington brain-boxes have this emergency plan under construction right now, what are the odds that a highly-pressurized Congress and White House will come up with something good? Recent events do not bode well for a positive outcome, even with the public breathing down the government's neck. More likely, massive federal stimulus will be opportunist, piece-meal, porkish, and backward-looking. The goal will be to get as many people back up to maximum consumption as possible, instead of something targeted to the redesigning of our communities and workplaces to create a more sane, sustainable lifestyle. Poorly-planned new stimulus would not be ideal, but it would be a little less unpleasant than the next option....

.... which is, straight-up austerity and the dismantling of the American welfare state. This is a more likely outcome, especially if Obama is a one-term prez, and Republicans sweep into majorities next year. Come election time in 2012, unemployment will probably still be in the 8-10% range, which will definitely be enough to unseat the Dems. The Blame Bush thing will have worn thin, and Obama and the Blue Dogs will pay the price for thinking that business will stick by them if they just stick by business. They will learn the hard way that campaign cash will flow to whichever party looks more likely to win. When there's blood in the water, corporate donors will not hitch up their britches and make sacrifices for the good of their Democratic buddies. They will continue to push for tax reductions and more favorable treatment -- no matter that these same tactics have already brought the country to the brink of collapse.

In this scenario, the ascendant Tea Partiers will make uncomfortable bedfellows with the GOP establishment, and we could be in for some interesting civil wars on the right. Certainly, it will never get to the point where Ron Paul gets his wish, with small government principles actually being applied to the bloated military and corporate pork. On that front, the Bible-thumpers and the Golwaterites are in sync. But we could get to an interesting place where a President Bachmann or Perry has enough Tea Party support in Congress to force through a repeal of Obamacare, a gutting of Social Security, and a dismantling of existing government health programs (would the VA even be spared?). Corporate and other taxes on the wealthy could get slashed to minuscule proportions, which really would start to shrink government down to bathtub-drowning size. What would be the actual result of such a program? Would businesses suddenly bring all of their foreign operations back to the US, to take advantage of the 'competitive' tax structure? Would the decreased regulation spawn an eruption of small business activity, a la John Galt's hideaway in the Rocky Mountains? Would over-dependent Americans, who at first staggered around rubbing their eyes due to the government-support matrix cable being unplugged, finally start seeing the truth in the world around them, and become self-sufficient adults?

Well, I doubt things would go like that, because the underlying mythology is hyper-nostalgic and simply untenable. We don't live in a Currier and Ives print or a Thomas Kinkade painting. Millions of unemployed and underemployed people are not going to suddenly start coopering and blacksmithing. Nor are they going to magically become credit-worthy, talented, independent entrepreneurs. The stuff of industrial production is much more mundane and pedestrian than the bootstrap idylls spun by Tea Party orators. One of the main reasons for our massive public spending is that we have yet to come to terms with the obsolescence of human labor and skill, vis-a-vis industrial capitalism. Not that skill and labor won't be important after capitalism, whatever that might be. But these conservatives who dream of a minimized government seem to think that centralized corporate exploitation will also magically end, and every free man will become a business titan. Unfortunately, without a welfare state tempering the worst of it, the brutal upward shift of power and wealth will increase, not disappear. John Galt's valley will be one huge Home Depot, with Johnny himself a team leader in the lumber department.

As regular readers of this column know, I would imagine that no matter which of the above scenarios play out, there will be no 'way out,' no 'recovery.' We're looking The Long Emergency square in the face, and no amount of stimulus or austerity will bring back the easy, hyper-consumptive social form. And that, actually, is a good thing. Provided that we can avoid massive social turmoil and violence, and that we don't turn to monstrous right or left wing regimes for rescue, we can actually look forward to a lower-intensity, more human lifestyle. We just need to find the right bridge to get there.

What's the Big Idea?

2011-07-30T19:23:09Z

Granted, Eugene Robinson beat me to the punch this week, calling for liberals to craft a Big Idea that can compete with the conservative bumper sticker of "GUB'MINT BAD!" But to be fair to myself (I'm all about self-referential fairness, you know), I was banging this drum three years ago when I detailed the need for a New Narrative to transcend the partial and faulty stories told by both liberals and conservatives.

Robinson asserts, in his column and then on Morning Joe this week, that Republicans are winning the day on the debt ceiling debate because their message is consistent, simple, and powerful: taxes and government spending are bad, and should thus always and everywhere be reduced. This trope resonates with people, especially in a recession, because who really likes paying taxes? And when you see the clowns from both sides of the aisle mucking up this debt ceiling issue, who wouldn't agree that Big Gub'mint needs to be ushered gingerly to that Norquistian bathtub, post haste?

But as usual when liberals move from diagnosis to prescription, Robinson falls flat. What should the progressive response be to the big conservative idea? "I'd suggest something pithier: jobs, jobs, jobs. People may dislike paying taxes, but they dislike unemployment more."

Yeah, that's great. So brave.

Here's how that shtick plays out. Liberals say 'jobs, jobs, jobs,' and then move on to propose what? More stimulus of course, this time with robust jobs programs: direct government hiring, perhaps a new WPA, funding for retraining of the unemployed, infrastructure spending, investment in education, etc..

And what will the conservative response be? No f'in way!

That's the whole point of this current deadlock. Behind the simple conservative idea of cutting spending is a more sophisticated economic idea (wrong, but still noodle-engaging) that a bloated public sector 'crowds out' private investment and stifles growth. Liberals aren't going to get more spending for the triple-jobs thing (jobs, jobs, jobs) when Republicans are using the very failure of Obama's first stimulus package as a major plank of their 2012 campaigns. More federal spending is a non-starter.

And it's not just the Republicans anyway. The Democrats are reaping the whirlwind of the Blue Dog, DLC motif. Clintonistas of all stripes made a devil's bargain for campaign cash, and they are now stuck with the corrupt system they helped erect. When Democrats walked away from the underdog and the downtrodden, throwing their hats in with Big Finance, Big Pharma, Big TelCom, and other big-balled corporate entities, they locked themselves into a relentlessly algorithmic, boa constrictor of a lie: the idea that economic growth and business profitability are equivalent to social health. Once you equate dollars with civic virtue, relying on the sultans of profit to bankroll your political livelihood, you end up where we are right now: having national discussions in the deadly arena of debt ceilings, quantitative easing, curve-bending, and other nauseating financial arcana. Larry Summers and Cicero are light years apart.

Unfortunately, the ship has probably long since sailed on getting anything except business-boosterism from our national leaders. There are a few radical stalwarts, to be sure: the Sanderses and the Kuciniches and whatnot. And there are plenty of great liberal ideas out there on how to return government to the peeps: public financing of elections, instant-runoff voting, term limits, rolling back corporate personhood, etc. But there's virtually zero chance that these will gain any traction at the federal level. The pro-corporate substrate is too entrenched, and serious people in serious suits have too many ways of convincing us that what's good for Walmart and Exxon-Mobil is good for America.

So a pithy slogan of "jobs, jobs, jobs" is about as anemic as you can get for a future liberal revival. The perpetual growth thing is sunsetting. A new progressive Big Idea will need to come from the wilderness, from the barely-trodden paths of Peak Oil, decentralism, re-localization, and human ecology. The name of the game now is how to manage contraction. We're going to need to learn how to deal with the winding down of all of our complex systems, a phase that Jim Kunstler calls The Long Emergency.

Realistic pessimism like this does not mesh well with the stagecraft and soul-sucking bullshit of national American politics. So don't expect a Big Idea like this to be birthed from the White House Press Room or the Senate floor. The next big liberal ideal will likely emerge from the smoldering embers of our collapsed crap-culture.

Ironically, if the Tea Party set gets its way in the current debt debate, and then on into 2012, and the government really starts to shrink down, the door could actually be open for liberals to grab the ball and run with a full-scale plan for sane contraction, and perhaps for a transition to a different type of society altogether. We can hope.

...Such a Lonely Word

2011-07-09T16:30:07Z

Honesty. We want it from our leaders. We need it to have any kind of idea what the hell is happening. We deserve it as citizens of a democratic republic. But as Mr. Joel wrote, "everyone is so untrue."

Who would have ever thought that a summer could be defined by something as arcane as a vote on a debt limit? But it's happening. Republicans are essentially holding the country hostage, demanding that the rich keep their tax cuts, and that social insurance programs that help the poor and elderly get slashed (I refuse to use the stupid word 'entitlement,' as the term itself cedes the argument). Oh yeah, and the defense budget gets a double-digit increase, so no austerity for that crew.

Hovering above this ridiculous Washington puppet show are the portentous thunderheads of unemployment, economic contraction, and general ecological wind-down. The June numbers were just released, and the official rate is back up to 9.2%. Job creation is anemic, consumer spending is crippled, and businesses are sitting on piles of cash, unwilling to invest in growth amidst declining demand. The Fed sits off to the side, wringing its hands and furrowing its brow. QE2 is over, and suddenly inflation is the economic stalking beast. Never mind that wage growth, a crucial part of any inflationary spiral, seems about as likely as the Harry Potter finale finishing up with the ghost of Rodney Dangerfield poking his head in from the side and saying, "Hey everybody! We're all gonna get laid!"

Going back to the debt ceiling dust-up, let's at least give Republicans their due on something. When they say 'no tax increases and no new spending,' they mean it. Sure, Boehner may eventually have to torpedo his own future by giving in a little bit to Obama, but he's certainly playing a hell of a game if chicken. But there's also a very good chance that Boehner, Mitch McConnell, and Eric Cantor are true believers to the end. They may actually expect the super-rich (now magically transformed into 'Job Creators') to suddenly open their gargantuan wallets and start hiring people out of the goodness of their hearts, even though no one has any money left to buy any more crap.

But I would actually bet that the GOP has something different in mind. They may give lip service to the idea that austerity in a time of deep recession will somehow spur economic growth, even though economists of every ideological stripe say that this is just not so. But more probably, they actually welcome a painful economic contraction, as that is the only real medicine for a country bloated on Big Gub'mit, easy credit, and reckless spending. Let's remember that the main story line of Atlas Shrugged, the urtext of many ascendant Republicans, is that a corrupt economy crumbles into chaos while a noble, virtuous, industrious elite repairs off to a secluded shangri-la to rebuild society from the ground up, one feed store and blacksmith shop at a time. At some point, we need to acknowledge that a consistent conservatism may see suffering, poverty, and death as the unavoidable consequences of weaning people off of the government teat. After all, programs like Social Security, Medicare, and Food Stamps actually keep people alive. If the elderly suddenly have less money and less health care, it's not like they will dust off their resumes and go back to work at the Dairy Queen to make ends meet. People will just end up eating more poorly and living in more squalid surroundings, which will send many to earlier graves.

I'm not using scare tactics here, really I'm not. I'm just saying that more of the money in social insurance programs goes towards direct purchase of life-sustaining commodities than if that same money were to be returned to wealthy taxpayers or invested in some business venture somewhere. You take that away, and there's simply going to be less health overall, and thus less life. And again, I think that this has to be the stance of a consistent conservative philosophy. You want to shrink down government until you can drown it in a bathtub? Fine -- but be honest with people that this will cause unpleasant but necessary pain for many, and for a long time. It's national castor oil, but ultimately it will prove good for us. That's just the honesty I want from the GOP. I don't agree with their assessment of things, but they can at least get some balls and tell the truth, and not hide behind the ridiculous idea that brutal austerity in a lite-depression will magically produce entrepreneurial flowers as far as the eye can see.

Now the Dems, who are peddling just as much bullshit as the Republicans. President Obama is not a dick -- I'll stay away from that moniker. But he's proving to be as untalented at courageous governing as he is talented at campaigning. In my mind, his play-every-angle shtick has played itself out. He can't be all things to all people. And I'm not sure if he's more interested in his legacy or with fixing the horrific conditions that are laying waste to his country. There just doesn't seem to be any urgency in his presentation. There is a lot of seriousness, but no desperation. Urgency and desperation are absolutely necessary for him to connect with the terrified public, and I just don't think he can fake it.

Aside from Obama, the Democratic party is adrift. Aside from stalwarts like Kucinich, Sanders, and Frank, the rest of the blue donkeys/dogs are pro-growth, pro-business, pro-Wall Street, etc. Democrats are simply not conversant with some of the most important liberal issues of the day: Peak Oil, economic contraction, and ecological collapse. Again, they talk a good game about Green Jobs, Green This and Green That -- but this is just a thin overlay, sitting on top of a stupendously conservative base ideology. They still subscribe to quaint ideas like full employment, economic growth, and maximum consumption. They expect housing values to 'recover' and everyone to go back to business as usual. All we need is some more stimulus, or a jobs program, or whatever. And actually, in the recent debt ceiling debate, Dems are moving closer and closer to the austerity-minded conservatives anyway, making the fake comparison of the government to a household, and how we all need to tighten our belts, etc. Again, no semblance of truth in these ramblings. It's just more of the same: political gamesmanship and relentless spin, more geared to raising money and winning elections.

So we're left with a summer of untruths, and with the slim hope that some cut-and-paste compromise will keep the bond vigilantes at bay for another couple years, while the country swirls slowly down the drain.

Of Austrians & Austerians

2011-05-28T18:07:03Z

It's Memorial Day weekend, 2011, and while most of the country just wants to shake off depressing news and hit the beach for a few months, skirmishes over debt ceilings, Medicare dismantling, and 'budget maturity' are still swirling around Washington and its mainstream media antechambers. Maybe it's just me, but lately I am drawn to the clash between Keynesian growth models and Austrian/austerian theories. I am certainly not a professional economist, or even a skilled novice, so I'll strive to not butcher things too badly.

In professional economic circles, from what I can gather, Austrian economics, after enjoying a heyday in the middle of the 20th century, has fallen out of mainstream economic discourse. Generally, the critics maintain that the Austrian school (Carl Menger, Ludwig von Mises, and Friedrich Hayek being the most famous figures) does not have a rigorous foundation with which to make predictions and test results. Austrian theorists tend to avoid the complex statistical models of the mainstream schools, preferring a quasi-philosophical approach that is more explicitly partisan with regard to human nature and political policy. And while most economists recognize that the Austrians have made some important contributions in areas like business cycles, monetary theory, and market pricing, the consensus is that the mainstream schools are much more relevant to the specific problems of the modern scene.

But still, some peculiarities of the moment are keeping Austrian ideas alive, perhaps beyond the level that they deserve -- but still, it's worth taking a look. Ron Paul, especially, is an avowed fan of the Austrian school, and he consistently draws heavy support from conservative ground troops, especially the Tea Party set. And of course, the austerity approaches to the current Great Recession are only going to gather momentum, as the job market contracts and the tax base for large centralized federal structures shrivels. Everything seems to be narrowing down to a Stimulus vs. Downsizing contest, and the outcome is not simply for wonks.

Okay, so what is this Austrian stuff all about? Again, I am not an economist, so please pardon any errors, and don't hesitate to email me at jeremy@postpeakliberal.com if I mess up too badly. My intention is to give a fair and concise summary of some of the main Austrian ideas; and as with much conservative thought, I find myself sympathetic to the overall approach, if not the policy particulars.

Fiat Currency -- generally, Austrian disciples are in favor of a return to the gold standard (or any other 'hard' physical store of value). While this GoldBug stance at first seems like an example of how quaint and out of touch the Austrians are with modern conditions (how can you create a multi-tranche collateralized debt instrument with a bunch of yellow metal?), this is largely the point. When governments can simply create money out of thin air, which is called 'fiat currency,' then the overall drift is for the currency itself to become 'devalued,' and thus inflationary. Which brings us to....
Inflation -- Austrians hold that mainstream economists purposely misrepresent what inflation is. The popular view is that inflation is the increase in prices of goods, services, and wages. But for the Austrian school, increased prices are actually the result of inflation, which should really be defined as the increase in the money supply itself. This seems like a strange point, but I think I get it. By only looking at prices when talking about inflation, and by then defining a normal or acceptable rate of price increase, we're presupposing that the money supply should always grow in the background to facilitate the entire system's momentum towards more stuff. But if fiat currency was replaced by a hard standard like gold, prices would adjust to the overall set supply of the base commodity, which might increase, decrease, or stay the same, depending on the specific circumstances surrounding people moving the actual substance in and out of the physical territory. In other words, the gold standard would not presuppose growth as the natural background state of determining economic value itself (more on this later). I think of it as a kind of goldfish thing. A fish will only grow to the size of the tank it is in, and no further (this may actually be an urban legend, but you get the idea). Unless you want a big fish just for the sake of having a big fish, there is no intrinsic virtue in continually buying bigger tanks. The smaller tank, and economy, may actually be just as optimal with regards to allocation of resources and the condition of individual lives.
Deficit Spending -- related to fiat currencies, and the view of a natural rate of inflation which erodes the value of money, Austrians view central government deficit-spending as a vehicle for confiscating wealth from individuals. Because the bias is towards growth at all costs, modern governments are continually growing their tax-and-spend apparatus, which necessitates creating more money out of thin air to fund the budget shortfalls. The ensuing deficits thus erode the value of money itself, which penalizes those who have already earned their wealth when the currency was worth more. Again, the key here is that the centralized state, via a central bank like the Fed, is actually pursuing inflation as a matter of policy by expanding the money supply, while pretending that inflation is something mysterious and outside-the-system to which it is just responding.
The Business Cycle -- aside from inflation, the devaluing of currency, and the confiscation of wealth via deficit spending, the Austrian school is known for its heterodox view on the business cycle. Unlike mainstream theories, which see the causes of boom and bust in production traits, technological shocks, or demand variables based on full or less-than-full employment, the Austrians view business cycles as credit bubbles created by the central government. In this view, when the central bank keeps interest rates artificially low for too long, then too much credit is created, which necessitates the creation of more money (remember that with fiat currencies, money is created by beng lent into existence). The subsequent credit glut results in asset bubbles, as investors prowl around the landscape looking for something to do with their cash. These credit-swelled malinvestments eventually come crashing down, as things overheat and the artificially-high prices come back to earth. This explanation looks particularly prescient in the recent housing collapse.

That's all we have time for, for now -- but it's a good enough start. You get the idea. These main concepts all fit into the overall Austrian worldview, which is that the free market is the best arbiter of value and allocator of resources. Centralized federal planning interferes with free individuals acting in their own interests via the marketplace. Fans of Austrian economics thus tend to embrace Libertarian politics and the shrinking of the state. Ron Paul is impressively consistent is his call for dismantling all aspects of the bloated imperial federal government, including the military.

If the Great Recession continues for regular working people (remember that the recession officially ended a few quarters ago, as businesses started growing again, sans increased payrolls), the Austrian/austerian argument will gain traction. The Keynesian idea that in times of sluggish demand and federal deficits, the government actually needs to spend a lot more on stimulus to pick up the slack, just seems wrong (even though it's probably correct). The false metaphor between government spending and a household (you can't spend more than you take in, right?) is just too easy and seductive, especially in our perennial election-season political landscape. It's much easier to convince people that the responsible thing for politicians to do is cut spending, as opposed to hiking taxes.

I don't think that austerity and spending cuts will work, in the sense that conservatives want them to. Shrinking government will not result in the private sphere rushing in to fill up all the available space. Businesses are actually awash in cash right now, and corporate profits have been surging for the last three quarters. As Krugman and other Keynesian suggest, we really are in a low-demand liquidity trap. Companies that are already doing well with trimmed payrolls are not going to sink huge sums into new projects and products when the demand forecast is so bleak. They will play it safe and put their profits into dividends and super-safe investments like treasuries. Why take huge gambles?

But one final point about the Austrians and growth, something which I think enhances their relevance. The point is that growth for growth's sake is not a worthy goal. Consider this quote:

"The grand-scale interventions that are performed by monetary and fiscal policy in the name of growth and stability disrupt and misguide the plans for the individual, and they distort the decisions at the business level. The application of macroeconomic growth models has caused havoc when economic leaders naively adopted the interventionist creed and believe that it just takes the handling of a few economic policy instruments – like easy money or government expenditures -- to achieve the blissful state of economic plenty." (Anthony P Mueller, "What's Wrong with Economic Growth?", http://mises.org/daily/1877)

I read this to mean that the economy exists to serve deeper human needs, like freedom, fulfillment, self-reliance, and dignity. To make everything in a society serve the endgame of growth flips this equation on its head, and people become the economy's servants ('road to serfdom'). In this sense, the Austrians, who specifically deny that everything can be captured via mathematical models, hearken back to an older conception of economics as a part of social philosophy. Economists are thus less scientists and more public philosophers, with important things to say about what an economy is actually for. And I think that is a worthy idea.

Where I diverge from the Austrians is in their conception of human nature itself. Reading through some contemporary Austrians' stuff (I get the daily blog from mises.org), you get a sense of the kind of junk libertarian philosophy that, to me, represents a hopelessly outdated understanding of human motivation and human nature. A lot of this thinking comes out of the Robert Nozick social contract tradition, which hearkens back to Hobbes and even Aristotle. I have never found these theories to be particularly useful, as they have been rendered completely obsolete by actual discoveries in anthropology, archeology, and human ecology. In short, we are social primates whose brains and hearts still belong to the Pleistocene, and all social and political thought needs to proceed from those foundations. I know that this is not a particularly popular view, and will almost certainly prove impossible to integrate into contemporary politics. But without this understanding, all programs are destined for the dustbin anyway, and we will eventually taste nature's revenge for our lost self-knowledge. We'll be left to work out new modes of being throughout the Long Emergency.

John Galt's Time?

2011-04-17T22:33:00Z

The Republic continues to hang by a few tenuous threads. As the corporate-based economy continues its insulated 'recovery,' the rest of us muddle through with depressed wages, cratered home values, uncertain career paths, and general free-floating national nausea. In a telling sign of the gulf that exists between the controllers of business and their salaried minions, the most recent Deloitte CFO Survey indicated that corporate chieftains are optimistic about the future, but do not plan on adding significant employee headcounts until revenue gains of 20% are realized.

What does this mean? It means that the incredible upward concentration of wealth has afforded big business a lot of breathing room to weather hard times. Let's remember that the economy has trebled since 1980, but regular households are in the exact same spot as they were in that first year of the Reagan ascendancy. The loot has moved upwards, Gilded Age style, and for a while, the cloud lords allowed the unwashed to purchase a piece of the dream via extra household breadwinners, maxed-out plastic, and cartoon-valued McMansions.

But that overleveraged fantasy is now toast, and large companies have reeled in that portion of the red carpet that used to roll out of the luxury boxes into the slob-strewn mezzanine. Big Bid'ness doesn't need to prop up domestic employment or demand any further than is absolutely necessary to turn a healthy profit. And in today's world of globalized production, large labor surpluses, and tax-haven stashing of cash, the masters of the productive universe are plenty satisfied with the way things are now. And let's not forget that high-flying Wall Street finance, the prime mover of the recent collapse, has emerged virtually unscathed and pure of heart, occupying around 30% of the economic landscape while actually contrubuting less than 10% to overall national productive value.

Ironically, as I covered in my last post, the blame for the Great Recession has now been slight-of-handed off of free-wheeling, unregulated finance, and onto the very central government that prevented full-scale collapse. In this revisionist interpretation, the quick recovery of large corporations is ample evidence of the general health of the business world vis-a-vis Big Gub'Mint. In reality, of course, the horrid federal government pulled the 'business community's' nuts out of the thresher with bailouts, buyouts, trillions in discount-window money, and every other manner of subsidy and tax incentive. The toxic waste and future risk created by the reckless private sphere were sucked up into the federal maw, and then laid at the feet of the American taxpayer, rotting and diseased.

This is the background against which Paul Ryan and President Obama are now playing chicken with their alternate budget proposals. Each side engages in Kabuki finance, pretending that their 10 or 12 or 30-year plans are really something more that just annual placeholder shots in the dark. I've always had a hard time understanding why our national politicians are continually putting forth these long-range scenarios, when it is obvious that every Congress and Administration starts from scratch with a new vision anyway. So what's the point? It is as if every President and Congressional leader has to create the temporary illusion that they are more than just a rented lackey for the permanent Washington power structure. They need to delude themselves that they are more long-lasting than the armies of lobbyists and thinktankers who swarm the Hill decade after decade. So lofty prognostications are made about America in 2050, and about how awesome it will be in that future decade, if we can just enact the benificent budget under consideration. It's all bullshit.

So now we're in one of those narrative dead ends, where each party is squirming around in the same ideological cocoon, selling us the tired shtick that their opponents are so obviously wrong about everything. We've got Paul Ryan and other Republicans pounding the lectern with their 'seriousness,' promising everyone that this time, finally, they will be the ones to succeed in shrinking government, cutting spending, and returning Ayn Randian producers back to their lofty perch. Memo to these GOP true believers: the 'producers' already control everything, and they get plenty of juicy pulp out of the 'parasites' with the current status quo.

On the 'other side,' Obama and the pseudoliberals promise that their seriousness is the real McCoy. See how 'the economy' is already getting better? That must mean that the adult policies of the current administration are working their magic, even if the bulk of us workers are mired in a perennial state of lagging indicator-ness.

Nothing good will come out of the current budget battles. Sure, we'll probably get some 11th hour compromise, and each side will be able to posture as the mature ones who softened their hard stances to save Grannie Pureheart from losing her prescription for restless brain syndrome. The conflict will provide a built-in excuse for straying from ideological purity, as well as a rallying cry for raising lots of lucre for the next round of electoral horseraces.

What is also likely, however, is that we'll get a significant rightward movement in the makeup of the federal budget. It will probably not actually shrink very much, because that is not really anyone's goal. But the money will slosh away from social insurance (stupidly and Orwellianly mislabeled 'entitlements') and more toward straight-up pork for defense contractors, pharmaceutical companies, and Wall Street necromancers. After all, if the John Galts of the world are to be convinced to stay and save us puny, parasitical wage-slaves, we'll have to shovel as much cash as we can into their awesomely-righteous endeavors.

Give Us Austerity (and Give Us Dearth)

2011-03-28T20:56:00Z

First out of the gate, check out this fantastic piece in the Nation, "Beyond Austerity." The author, William Mitchell, does a really nice job of traversing the broad range of issues involved with government austerity policies: fiat currencies, inflation, credit crunches, the fallacy of 'crowding out,' and more. I haven't seen the Fiscal Stimulus vs. Neoliberal Monetarism clash described better than this.

Let's go over Mitchell's main points, and then we'll move on to some of our own observations.

First, the current recession was caused by out of control private debt (bundled CDOs and the like) and the erosion of government oversight of the freewheeling banking industry (deregulation). In this light, the US government had to step in to rescue the financial sector from its own excesses. But the austerians are using this opportunity to morph a free-market problem into a sovereign debt problem, as if the public sector was the arsonist and not the fireman.
The stimulus vs. austerity clash actually goes back to the late 60s and early 70s, when the New Deal consensus fell apart, and Neoliberals began to attack the idea that the federal government could act as a deficit-spending safety valve, periodically filling in gaps in free market investing and hiring.
Unemployment was thus reimagined as an individual instead of a social problem, one of laziness instead of a situation where capitalists were just not providing enough opportunity for job growth. This pushing of the cause of unemployment onto the shoulders of individuals was given concrete policy pillars via union busting, wage suppression, and public benefit cuts -- all to force the supposedly-lazy back into the application lines.
As the popularity of federal stimulus waned, the road was paved for monetarism, the notion that the only proper role of government vis-a-vis the economy is to control the money supply, and thus interest rates and inflation. Fiscal policy (spending) was portrayed as the crude, inflexible, government attempt to mirror the much more efficient allocations of the free market. Get government out of the way, and the market will 'crowd in' and allocate spending, hiring, and investing in the proper way, raising all tides and boats.
Unfortunately, lo and behold, even though the economy did continue to grow robustly (and probably would have anyway), the labor-busting nature of Neoliberalism resulted in almost all of the fruits of that growth moving to the top. And where the money is, the power soon follows. The enriched owners of capital bought themselves a government, and the Neoliberal consensus was locked into place.
The problem, though, was that stagnant lower and middle classes cannot continue to drive robust growth with flat wages. Maximum consumption is needed to fuel profits and dividends. Thus.....private debt. The financial sector proceeded to craft all kinds of vehicles for usurious household debt: easy car loans, subprime mortgages, 25% interest credit cards, payday loans, etc. Financial companies reaped a huge windfall of fees and interest, which was then plowed into even more exotic debt instruments, like Collatoralized Debt Obligations and Credit Default Swaps. We know what became of all that.
Now, post-collapse, all of this seems to be forgotten. The utter failure of the deregulated free-market is now portrayed as a government spending problem. So we endlessly hear that the federal budget is like a household budget. We can't spend beyond our means indefinitely, so drastic downsizing is needed. We all need to make sacrifices, to create a more realistic fiscal future.
However, a national government that issues its own currency by fiat (as opposed to a fixed standard like gold) cannot go broke. The household analogy is completely false. As Mitchell describes it, "The government is not a big household. It can consistently spend more than its revenue because it creates currency. Whereas households have to save (spend less than they earn) to spend more in the future, governments can purchase whatever they like whenever there are goods and services for sale in the currency they issue. Budget surpluses provide no greater capacity to governments to meet future needs, nor do budget deficits erode that capacity. Governments always have the capacity to spend in their own currencies."
Really then, governments do not need to issue debt to foreign entities at all. They could simply continue to create more economic activity by issuing more currency. Governments only float sovereign debt offerings to appease the Neoliberal cry for limiting federal stimulus itself. It's really an unnecessary loop that could be eliminated by recognizing the benign nature of fiat currency creation.
The only danger in simply creating new currency for federal stimulus is inflation and hyperinflation, which conservatives like Ron Paul are endlessly squawking about. But as Mitchell nails it, "The reality is this: if the economy is operating at full capacity—which means it cannot produce any more new products—then attempts by the government to expand spending will cause inflation. But up to that point, governments can run deficits forever without causing inflation. By supporting spending in an economy not at capacity, deficits induce more production rather than higher prices, since companies will be happy to supply the growing demand."

Mitchell then goes on to describe how perennial deficit spending has not created inflation in the US, nor even in places like Japan, which have run larger deficits for years and years. Interest rates on federal bonds have remained low, indicating no private panic at deficit levels. Also, the idea that slashing government spending will result in massive private investment is manifestly untrue. Companies will not invest in capacity unless they anticipate increased demand, which they won't see because of massive un- and underemployment, and continued household distress (foreclosures, household bankruptcies, etc). Certainly, there are major problems with the format of US federal deficits, specifically our unsustainable military spending and our out-of-control health care costs. Those things do need to be addressed with massive and bold overhauls, including spending cuts and centralized control of medical payments.

In any case, check out Mitchell's column. There's a lot more in there, and I certainly don't do it justice. The main takeaway for the layperson is that we are, as Paul Krugman repeatedly maintains, in a liquidity trap, a downward spiral of reduced demand and thus investment, which puts us on the same track that led to the Great Depression. While certainly not as severe as the 30s, the overall contours are the same. The lack of household demand is reinforced by the stagnant job market, and companies will just not invest in new capacity when the ability of regular consumers to take on more debt-financed consumption is so low. In today's world, global companies will simply move their investment capital to other areas of the globe, where returns are safer and larger (and especially when there are very few tax penalties for offshoring declared profits). In this scenario, the federal government must step in and fill the demand gap, by creating more currency via public works and jobs programs. Without more and massive stimulus, we'll stay mired in sluggishness forever.

In a very mainstream sense, the Mitchell-Krugman argument is unassailable. Austerity programs in Germany and Britain are faring horribly, as the free market has not crowded in to take up the investment slack. And investors continue to park money in the US, as we are seen as still having massive capacity for production and consumption. Everyone's just kind of waiting for something to spark increased activity again, whether it's the recovery of real estate values as excess inventory is finally gobbled up, or a couple good quarters of hiring stats -- or whatever.

But the reality is that nothing significant can really happen structurally unless the mechanisms that have allowed the hyper-concentration of wealth over the last four decades are smashed. All of the private debt that was pushed onto households has to go somewhere. People are never going to get back in the black as long as they have underwater mortgages, 25% credit card balances, next-to-nothing in their retirement accounts, and household incomes that have been flat for years despite longer working hours, longer commutes, and additional breadwinners.

I only see three possible outcomes:

Our major parties and our leaders will continue to pretend that we're just an election or two away from turning the corner, if only the other side's faulty ideology is defeated, freeing up our brilliant program for spawning growth and American awesomeness. But because the narratives of both sides are faulty, and because the entire political process is compromised by the one-sided influence of big money, the promised salvation will not come, and we will slowly sink into the sands of The Long Emergency. This situation will not be good, as all manner of extremism will be on the table as conditions deteriorate. We would be staring a Mad Max-type situation in the face, waltzing back in time to territorial medievalism.
Our major parties (or maybe just one) will have an ideological breakthrough, due to relentless popular pressure, and set off on a bold path of class warfare and massive wealth distribution. We're talking about a national debt jubilee here, with the government forcing the financial sector to write down or write off trillions of dollars in mortgage and other private debt. Then, an uber-progressive tax structure would have to be enacted, to prevent corporations and HNW (high net worth) individuals from simply reconsolidating their power all over again. And then the government would have to engage in major deficit spending, creating all kinds of jobs to rebuild our deteriorating infrastructure and create a brand new infrastructure for green energy, etc. Finally, business and real estate laws would need to be totally rewritten, so that it becomes much easier for regular people to organize collectively, raise capital, start businesses, weather hard times, and get logistical support from private and public sources. It's hard to imagine any of this happening, as our federal government has been populated for so long with big business water-carriers. I just can't see a radical program for downward movement of power happening in the current climate.
A much more desirable and doable option does exist, I think. It is logistically tough, but much less so than the options above. And ideologically, it is almost impossible to imagine. But if we can get past the mental hurdles of our current mores and stereotypes, it does promise the best overall solution to our current state. What is it? Of course, as regular readers of this blog know, it is the creation of an entirely-new social form, a new collective or tribal style of living that hearkens back to our genetic heritage yet promises the only truly sustainable path forward.