Posts Tagged ‘Economics’

Caveat: rather overlong for me, but I got rolling …

One of the better articles I’ve read about the pandemic is this one by Robert Skidelsky at Project Syndicate (a publication I’ve never heard of before). It reads as only slightly conspiratorial, purporting to reveal the true motivation for lockdowns and social distancing, namely, so-called herd immunity. If that’s the case, it’s basically a silent admission that no cure, vaccine, or inoculation is forthcoming and the spread of the virus can only be managed modestly until it has essentially raced through the population. Of course, the virus cannot be allowed to simply run its course unimpeded, but available impediments are limited. “Flattening the curve,” or distributing the infection and death rates over time, is the only attainable strategy and objective.

Wedding mathematical and biological insights, as well as the law of mass action in chemistry, into an epidemic model may seem obvious now, but it was novel roughly a century ago. We’re also now inclined, if scientifically oriented and informed, to understand the problem and its potential solutions management in terms of engineering rather than medicine (or maybe in terms of triage and palliation). Global response has also made the pandemic into a political issue as governments obfuscate and conceal true motivations behind their handling (bumbling in the U.S.) of the pandemic. Curiously, the article also mentions financial contagion, which is shaping up to be worse in both severity and duration than the viral pandemic itself.

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Here’s a rather strange interaction: destruction budgets and moral license. The former refers to a theoretical or proposed budget for allowable environmental destruction. The latter refers to how doing something good allows rationalization of doing something bad as though one offsets (recognize that word?) the other. A familiar example is a physical workout that justifies a later sugar binge.

So just maybe some (outside executive offices anyway) are coming round to the idea that ongoing destruction of nature ought to be curtailed or better regulated. That’s the thrust of an article in Nature that mentions emissions budgets, which I’ve renamed destruction budgets. The article provides a decent overview of the largest threats, or environmental tipping points, that lead to an uninhabitable Earth. Human activity isn’t only about greenhouse gas emissions, however. Because industrial civilization has essentially had an unlimited destruction budget in the past, we’ve depleted and toxified air, soil, and water at such an alarming rate that we now have a limited number of harvests left and already face fresh water shortages that are only expected to worsen.

Turning to the viral pandemic, large segments of the population kept at home on lockdown triggered a different sort of destruction budget that didn’t exist before it suddenly did: economic destruction, joblessness, and financial ruin. For many Americans already stretched thin financially and psychologically, if the virus doesn’t get you first, then bankruptcy and despair will. Several rounds of bailouts (based on money that doesn’t exist) followed the economic slowdown and are freighted with moral hazard and moral license. Prior bailouts make clear where most of the money goes: deep corporate pockets, banks, and Wall Street. According to this unsophisticated poll, a clear majority do not want banks and financial institutions bailed out. There is even stronger public support for conditions on corporate bailouts, especially those conditions designed to protect employees.

Since we’re in wildly uncharted terrain from only 1.5 months of whatever this new paradigm is, it’s nearly impossible to predict what will occur by summertime or the fall. We’ve blown way past any reasonable destruction budget. In truth, such budgets probably never existed in the first place but were only used as metaphors to make plans no one expects to be binding, much like the toothless 2016 Paris Agreement. Every time we set a hypothetical self-imposed limit, we exceed it. That’s why, to me at least, 350.org is such a cruel joke: the target ceiling was breached decades before the organization was even founded in 2009 and hasn’t slowed its rate of increase since then. In effect, we’ve given ourselves license to disregard any imaginary budgets we might impose on ourselves. The pertinent question was raised by Thomas Massie (KY-Rep.) in the first new bailout bill when he openly challenged the number: “If getting us into $6 trillion more debt doesn’t matter, then why are we not getting $350 trillion more in debt so that we can give a check of $1 million to every person in the country?” How weird is it that both issues cite the number 350?

The old saw goes that acting may be just fine as a creative endeavor, but given the opportunity, most actors really want to direct. A similar remark is often made of orchestral musicians, namely, that most rank-and-file players would really rather conduct. Directing and conducting may not be the central focus of creative work in their respective genres. After all, directors don’t normally appear onscreen and conductors make no sound. Instead, they coordinate the activities of an array of creative folks, putting directors in a unique position to bring about a singular vision in otherwise collaborative work. A further example is the Will to Power (associated with Friedrich Nietzsche and Arthur Schopenhauer) characteristic of those who wish to rule (as distinguished from those who wish to serve) such as regents, dictators, and autocrats. All of this sprang to mind because, despite outward appearance of a free, open society in the U.S., recent history demonstrates that the powers that be have instituted a directed election and directed economy quite at odds with democracy or popular opinion.

The nearest analogy is probably the directed verdict, where a judge removes the verdict from the hands or responsibility of the jury by directing the jury to return a particular verdict. In short, the judge decides the case for the jury, making the jury moot. I have no idea how commonplace directed verdicts are in practice.

Directed Election

Now that progressive candidates have been run out of the Democratic primaries, the U.S. presidential election boils down to which stooge to install (or retain) in November. Even if Biden is eventually swapped out for another Democrat in a brokered nominating convention (highly likely according to many), it’s certain to be someone fully amenable to entrenched corporate/financial interests. Accordingly, the deciders won’t be the folks who dutifully showed up and voted in their state primaries and caucuses but instead party leaders. One could try to argue that as elected representatives of the people, party leaders act on behalf of their constituencies (governing by consent of the people), but some serious straining is needed to arrive at that view. Votes cast in the primaries thus far demonstrate persistent desire for something distinctly other than the status quo, at least in the progressive wing of the Democratic party. Applying the cinematic metaphor of the top paragraph, voters are a cast of thousands millions being directed within a larger political theater toward a predetermined result.

Anyone paying attention knows that voters are rarely given options that aren’t in fact different flavors of the same pro-corporate agenda. Thus, no matter whom we manage to elect in November, the outcome has already been engineered. This is true not only by virtue of the narrow range of candidates able to maneuver successfully through the electoral gauntlet but also because of perennial distortions of the balloting process such as gerrymandering, voter suppression, and election fraud. Claims that both sides (really just one side) indulge in such practices so everything evens out don’t convince me.

Directed Economy

Conservative economists and market fundamentalists never seem to tire of arguments in the abstract that capitalist mechanisms of economics, left alone (unregulated, laissez-faire) to work their magic, deliver optimal outcomes when it comes to social and economic justice. Among the primary mechanisms is price discovery. However, economic practice never even remotely approaches the purity of abstraction because malefactors continuously distort and game economic systems out of self-interest greed. Price discovery is broken and equitable economic activity is made fundamentally fictitious. For example, the market for gemstones is famously inflated by a narrow consortium of sellers having successfully directed consumers to adopt a cultural standard of spending three months’ wages/salary for a wedding band as a demonstration of one’s love and devotion. In the opposite direction, precious metal spot prices are suppressed despite very high demand and nearly nonexistent supply. Current quoted premiums over spot silver price, even though no delivery is contemplated, range from roughly 20% to an absurd 2,000%. Supply and demand curves no longer function to aid in true price discovery (if such a thing ever existed). In a more banal sense, what people are willing to pay for a burger at a fast food joint or a loaf of bread at the grocery may affect the price charged more directly.

Nowhere is it more true that we’ve shifted to a directed economy than with the stock market (i.e., Wall Street vs. Main Street). As with the housing market, a real-world application with which many people have personal experience, if a buyer of a property or asset fails to appear within a certain time frame (longer for housing, shorter for stock, bonds, and other financial instruments), the seller is generally obliged to lower the price until a buyer finally appears. Some housing markets extraordinarily flush with money (e.g., Silicon Valley and Manhattan) trigger wild speculation and inflated prices that drive out all but the wealthiest buyers. Moreover, when the eventual buyer turns out to be a bank, corporation, or government entity willing to overpay for the property or asset using someone else’s money, the market becomes wholly artificial. This has been the case with the stock market for the last twelve years, with cheap money being injected nonstop via bailouts and quantitative easing to keep asset prices inflated. When fundamental instabilities began dragging the stock market down last fall, accelerating precipitous in early spring of this year and resulting in yet another crash (albeit brief), the so-called Plunge Protection Team sprang into action and wished trillions of dollars (taxpayer debt, actually, and over the objections of taxpayers in a classic fool-me-once scenario) into existence to perpetuate the casino economy and keep asset prices inflated for the foreseeable future, which isn’t very long.

The beneficiaries of this largesse are the same as they have always been when tax monies and public debt are concerned: corporations, banks, and the wealthy. Government economic supports are directed to these entities, leaving all others in the lurch. Claims that bailouts to keep large corporate entities and wealthy individuals whole so that the larger economy doesn’t seize up and fail catastrophically are preposterous because the larger economy already has seized up and failed catastrophically while the population is mostly quarantined, throwing many individuals out of work and shuttering many businesses. A reasonable expectation of widespread insolvency and bankruptcy lingers, waiting for the workouts and numbers to mount up.

The power of the purse possessed by the U.S. Congress hasn’t been used to help the citizenry since the New Deal era of FDR. Instead, military budgets and debts expand enormously while entitlements and services to the needy and vulnerable are whittled away. Citizen rebellions are already underway in small measure, mostly aimed at the quarantines. When bankruptcies, evictions, and foreclosures start to swell, watch out. Our leaders’ fundamental mismanagement of human affairs is unlikely to be swallowed quietly.

Caveat: I’m not an economist, nor do I subscribe to most economic analyses. The dismal science is a weird sort of voodoo practiced by self-proclaimed priests and wizards. So more than usual, this blog post is me talking outta my ass.

As we enter a new phase of history where developments come barreling at us with seismic force, the past offers limited guidance what to expect or how to act or react. We are all being sorely tested in myriad ways. Considering how so much of modern civilization depends on money to keep things going, we’re also now testing the limits of fiat currency’s departure from reality before the whole stinkin’ mess collapses. The appearance of cryptocurrencies based on absolutely nothing (unless social consensus and/or obscurantism counts) was easy to ignore, though the opportunity cost is obvious. Public debt and unfunded obligations (e.g., ballooning repayment schedules, entitlements, pensions) have been less easy to ignore, though that proverbial can continues to be kicked down the road indefinitely. But now, this week, we’re greeted with news that the U.S. Congress is readying helicopter money to be showered on everyone to stave off the very collapse some of us consider inevitable. Can’t ignore that. How it will be distributed is unknown (by me, at least), but historical guidance suggests that the least needful will be getting most of it.

The rather precipitous disappearance and reappearance of money (or value) from the U.S. stock market, first in a matter of weeks and then in only days, invites not just disbelief but jaw-dropping incredulity. Unlike the previous crash/recovery when the malefactors and beneficiaries were mostly the same claque of Wall Street goons, this latest crash and preposterous flash recovery (for now) owes its origin to other causes, not that any of the old vulnerabilities were lessened. Most regular citizens a decade ago wanted bad actors — criminals, really — prosecuted and jailed. Didn’t happen, of course, and we have no such scapegoats this time around. Moreover, whatever the extraordinary measures might best be called (bail-outs, bail-ins, etc.), they signal a foundational test of the nature of money.

Modern monetary theory (MMT) would have us believe that sovereign countries like the U.S., especially because the U.S. dollar functions as the world’s reserve currency, can essentially print and spend as much of the stuff as needed. No blowback will result — certainly not the dread specter of hyperinflation. But how confident can anyone be in the theory when its relatively modest prior practice has been immoderated so egregiously? If hyperinflation does indeed follow, which I can’t prophesy, economic priests and wizards ought to be defrocked permanently. Good luck with that, I suppose; rational explanations fare poorly with a public fed a steady diet of false narratives, lies, cons, and swindles leavened with a heavy dose of aspiration and hope, if not outright greed.

A heavily used rhetorical device of mine is to remind folks that there is always a bigger umbrella over the narrow theme of any blog post, and this final paragraph is no different. That covering is the nonmonetary resources that the money economy motivates. Whether a loaf of bread costs 20¢ or $20, the bread is what really sustains us, not whatever make-believe currency we use to facilitate exchange. Sure, the money compels us (for now) to do the things that make the bread or extract the oil or assemble the disparate parts of the widget. But once money becomes worthless or goods become so prohibitively expensive our efforts no longer suffice to sustain us, what then? We have no alternatives or second chances on the horizon, do we? Thus, the anticipated infusion of helicopter money might well be the equivalent of an all-in bet in poker. That’s a pretty big bet with whole population hanging in the balance.

As we prepare to hunker down for the Long Emergency (using Kunstler’s apt term), there has been a veritable stampede for the exits, which takes multiple forms as the U.S. anticipates an exponential rise in the viral epidemic, roughly a week behind Italy’s example. It wouldn’t surprise me to see curfews and/or martial law enacted before long. But then, I’m an avowed doomer and have expected something wild and woolly to transpire for some years now. It was always futile to predict either what or when with any specificity. The number of possible scenarios is simply too great. But the inevitability of some major disruption was (to me at least) quite obvious. Whether the COVID-19 pandemic develops into a megadeath pulse remains to be seen. I cannot predict any better than most.

In the meantime, panic buying of toilet paper (an irrational essential I joked about here) and prophylactics such as surgical masks and alcohol swabs; widespread cancellation of concerts, sports events, school sessions, and church services; press releases by every public-facing corporate entity as to their hygienic response to the virus; crazy fluctuations in the U.S. and international stock markets; and exhortations to stay home if at all possible attest to the seriousness of the threat. The velocity of the stock market crash in particular points to a mad stampede to get out before being crushed. Our collective response seems to me exaggerated, but perhaps it’s necessary to forestall the worst-case scenario or letting things run rampant. It’s possible that quarantines and a major economic slowdown will do more damage than the virus, making the cure worse than the disease. That’s a hypothetical to which we will probably never know the answer with certainty, though the United Kingdom may be running that very experiment. Also, Guy McPherson suggests that a 20% reduction in industrial activity will be enough to trigger an abrupt rise in global average temperature further negatively affecting habitat. However, it’s a Catch-22 precisely because sustained industrial activity is already destroying habitat.

In nature, there are several familiar waves far too powerful to stop or control: earthquakes, tsunamis, and hurricanes. I suppose we should now acknowledge another: pandemic diseases. While it’s sensible to seek to understand what’s happening even as it happens, I can’t help but to wonder whether resistance is futile and letting the wave crash over us is roughly equivalent to before-the-fact mobilization. Pop psychology would have us do something, not nothing, as an antidote to despair, and indeed, abandoning people to their fates has a callous feel to it — the sort of instrumental logic characteristic of tyrants. I’m not recommending it. On the upside, after the initial panic at the sight of the approaching wave, and shortly after the wave hits, we humans demonstrate a remarkable capacity to set aside differences and pull together to offer aid and comfort. We rediscover our common humanity. Maybe Mad Max-style dystopias are just fiction.

The crisis consists precisely in the fact that the old is dying and the new
cannot be born; in this interregnum a great variety of morbid symptoms appear.

Antonio Gramsci

 As a kid, I was confused when during some TV drama I heard the phrase “The king is dead; long live the king!” I was interpreting events too literally: the king had just died, so how could his subjects proclaim for him long life? Only when age awarded me greater sophistication (probably not wisdom, though) did I then realize that the phrase connotes the end of one era and the start of another. Old regent dies; new regent assumes power. We’re in the midst of such as transition from one era to the next, though it isn’t marked clearly by the death of a leader. Indeed, when I launched this blog in 2006, that was what I sensed and said so plainly in the About Brutus link at top, which hasn’t changed since then except to correct my embarrassing typos. I initially thought the transition would be about an emerging style of consciousness. Only slightly later, I fell down the rabbit hole regarding climate change (an anthropogenic, nonlinear, extinction-level process). I still believe my intuitions and/or conclusions on both subjects, but I’ve since realized that consciousness was always a moving target and climate change could unfold slowly enough to allow other fundamental shifts to occur alongside. No promises, though. We could also expire rather suddenly if things go awry quickly and unexpectedly. At this point, however, and in a pique of overconfidence, I’m willing to offer that another big transition has finally come into focus despite its being underway as I write. Let me explain. In his book America: The Farewell Tour (2018), Chris Hedges writes this:

Presently, 42 percent of the U.S. public believes in creationism … [and] nearly a third of the population, 94 million people, consider themselves evangelical. Those who remain in a reality-based universe do not take seriously the huge segment of the public, mostly white and working-class, who because of economic distress have primal yearnings for vengeance, new glory, and moral renewal and are easily seduced by magical thinking … The rational, secular forces, those that speak in the language of fact and reason, are hated and feared, for they seek to pull believers back into “the culture of death” that nearly destroyed them. The magical belief system, as it was for impoverished German workers who flocked to the Nazi Party, is an emotional life raft. It is all the supports them. [pp. 50–51]

That’s where we are now, retreating into magical thinking we supposedly left behind in the wake of the Enlightenment. Call it the Counter-Enlightenment (or Un-Enlightenment). We’re on this track for a variety of reasons but primarily because the bounties of the closing Age of Abundance have been gobbled up by a few plutocrats. Most of the rest of population, formerly living frankly precarious lives (thus, the precariat), have now become decidedly unnecessary (thus, the unnecessariat). The masses know that they have been poorly served by their own social, political, and cultural institutions, which have been systematically hijacked and diverted into service of the obscenely, absurdly rich.

Three developments occurring right now, this week, indicate that we’re not just entering an era of magical thinking (and severely diminishing returns) but that we’ve lost our shit, gone off the deep end, and sought escape valves to release intolerable pressures. It’s the same madness of crowds writ large — something that periodically overtakes whole societies, as noted above by Chris Hedges. Those developments are (1) the U.S. stock market (and those worldwide?) seesawing wildly on every piece of news, (2) deranged political narratives and brazenly corrupt machinations that attempt to, among other things, install select the preferred Democratic presidential candidate to defeat 45, and (3) widespread panic over the Covid-19 virus. Disproportionate response to the virus is already shutting down entire cities and regions even though the growing epidemic so far in the U.S. has killed fewer people than, say, traffic accidents. Which will wreak the worst mayhem is a matter of pointless conjecture since the seriousness of the historical discontinuity will require hindsight to access. Meanwhile, the king is dead. Long live the king!

Didn’t expect to come back to this one so soon, but an alternative meaning behind my title just appeared. Whereas the first post was about cancel culture, this redux is about finding people willing and able to act as mouthpieces for whatever narrative the powers that be wish to foist on the public, as in “Where do they dig up these characters people?”

Wide-ranging opinion is not difficult to obtain in large populations, so although plenty of folks are willing to be paid handsomely to mouth whatever words are provided to them (e.g., public relations hacks, social media managers, promoters, spokespersons, actors, and straight-up shills in advertisements of all sorts), a better approach is simply to find people who honestly believe the chosen narrative so that they can do others’ bidding guilelessly, which is to say, without any need of selling their souls. This idea first came to my attention in an interview (can’t remember the source) given by Noam Chomsky where is chided the interviewer, who had protested that no one was telling him what to say, by observing that if he didn’t already share the desired opinion, he wouldn’t have the job. The interviewer was hired and retained precisely because he was already onboard. Those who depart from the prescribed organizational perspective are simply not hired, or if their opinions evolve away from the party line, they are fired. No need to name names, but many have discovered that journalistic objectivity (or at least a pose of objectivity) and independent thought are not high values in the modern media landscape.

Here’s a good example: 19-year-old climate change denier/skeptic Naomi Seibt is being billed as the anti-Greta Thunberg. No doubt Seibt believes the opinions she will be presenting at the Heartland Institute later this week. All the more authenticity if she does. But it’s a little suspicious, brazen and clumsy even, that another European teenage girl is being raised up to dispel Time Magazine‘s 2019 Person of the Year, Greta Thunberg. Maybe it’s even true, as conspiracists suggest, that Thunberg herself is being used to drive someone else’s agenda. The MSM is certainly using her to drive ratings. These questions are all ways to distract from the main point, which is that we’re driving ourselves to extinction (alongside most of the rest of the living world) by virtue of the way we inhabit the planet and consume its finite resources.

Here’s a second example: a “debate” on the subject of socialism between economists Paul Krugman and Richard Wolff on PBS‘s show Democracy Now!

 

Let me disclose my biases up front. I’ve never liked economists as analysts of culture, sociology, or electoral politics. Krugman in particular has always read like more of an apologist for economic policies that support the dysfunctional status quo, so I pay him little attention. On the other hand, Wolff has engaged his public as a respectable teacher/explainer of the renewed socialist movement of which he is a part, and I give him my attention regularly. In truth, neither of these fellow needed to be “dug up” from obscurity. Both are heavily covered in the media, and they did a good job not attacking each other while making their cases in the debate.

The weird thing was how Krugman is so clearly triggered by the word socialism, even though he acknowledges that the U.S. has many robust examples of socialism already. He was clearly the one designated to object to socialism as an ideology and describes socialism as an electoral kiss of death. Maybe he has too many childhood memories of ducking, covering, and cowering during those Atomic Era air raid drills and so socialism and communism were imprinted on him as evils never to be entertained. At least three generations after him lack those memories, however, and are not traumatized by the prospect of socialism. In fact, that’s what the Democratic primaries are demonstrating: no fear but rather enthusiastic support for the avowed Democratic Socialist on the ballots. Who are the fearful ones? Capitalists. They would be wise to learn sooner than later that the public, as Wolff says plainly, is ready for change. Change is coming for them.

From the end of Paul Street’s They Rule: The 1% vs. Democracy (2014):

Those on the radical left who worry that pursuing a Green New Deal and leading with the environmental issue means giving up on the struggle against the 1% for a democratically transformed “world turned upside down” can rest easy. The green transformation required for human survival will be bright rouge. With its inherent privileging of private profit and exchange value over the common good and social use value, its intrinsic insistence on private management; its inbuilt privileging of the short-term bottom line over the long-term fate of the earth and its many species, with its deep-sunk cost investment in endless quantitative growth and the carbon-addicted way of life and death, and with its attachment to the division of the world into competing nations and empires that are incapable of common action for the global good, capitalism is simply inconsistent with the deep environmental changes required for human survival. “Green capitalism” is an oxymoron. It is naïve to think that the green transformation required for civilization’s survival can take place without an epic confrontation with — and defeat of — the concentrated wealth and power enjoyed by the capitalist elite and its profits system. [p. 197]

An astounding sentence (sandwiched for context) from They Rule: The 1% vs. Democracy (2014) by Paul Street:

The contemporary wealthy do not simply benefit from society; they accumulate fortunes at the expense of it. They profit from mass unemployment’s depressive impact on wages, which cuts their labor costs; regressive tax cuts and loopholes, which increase with wealth while shutting down social services for the poor; the cutting and undermining of environmental regulations, which reduce their business costs while spoiling livable ecology; wars and giant military budgets, which feed the bottom lines of the “defense” corporations they own while killing and crippling millions and stealing money from potential investment in social uplift; a hyper-commercialized mass consumer culture that despoils the environment while reducing human worth to exchange value and destroying peoples’ capacity for critical thought; dealing with corrupt dictators who provide natural resources at cheap prices while depressing wages and crushing democracy in “developing countries”; the closing down of livable wage jobs in the United States and the export of employment to repressive and low-wage peripheries; a health care system that privileges the profits of giant insurance and drug companies over the well-being of ordinary people; exorbitant credit card interest rates that lead to millions of bankruptcies each year; predatory lending practices that spread and perpetuate poverty and foreclosure; agricultural and trade practices that destroy sustainable local and regional food cultivation and distribution practices at home and abroad; the imposition of overly long working hours that keep employee compensation levels down while helping maintain a large number of unemployed workers; exorbitant public business subsidies and taxpayer incentives and bailouts of the rich paid for by the rest; and … the list goes on and on. Corporate and financial profits were restored in the wake of the 2008 financial crisis largely because the working-class majority paid for them, through taxpayer bailouts, slashed social services, layoffs, and reduced wages, hours, and benefits. [p. 89]

From They Rule: The 1% vs. Democracy (2014) by Paul Street, which I’m just starting to read:

The contemporary United States, I find in this volume, is neither a dictatorship nor a democracy. It is something in between or perhaps different altogether: a corporate-managed state-capitalist pseudo-democracy that sells the narrow interests of the wealthy business and financial elite as the public interest, closes off critical and independent thought, and subjects culture, politics, policy, institutions, the environment, daily life, and individual minds to the often hidden and unseen authoritarian dictates of money and profit. It is a corporate and financial plutocracy whose managers generally prefer to rule through outwardly democratic and noncoercive means since leading American corporations and their servants have worked effectively at draining and disabling democracy’s radical and progressive potential by propagandizing, dulling, pacifying, deadening, overextending, overstressing, atomizing, and demobilizing the citizenry. At the same time, American state and capitalist elites remain ready, willing, and able to maintain their power with the help from ever more sinister and sophisticated methods and tools of repression brutality, and coercive control.