It’s the Political Economy, Stupid!
by Peter Dorman Re posted from Econospeak
It’s the Political Economy, Stupid!
Sometimes living in the world of ideas makes it harder to understand the real one. If you happen to be an economist, and the time is now, that is true in spades. Take Paul Krugman, for instance. After bemoaning the terrible policy choices of the last two years, he writes, “I’m still trying to make sense of this global intellectual failure.” It’s as if the core problem is that political leaders didn’t learn their macroeconomics well enough.
But Keynes was wrong about the power of “academic scribblers”. Idea-smiths provide language, narratives and tools for those in control, but the broad contours of policy depend on who the controllers happen to be. We are not living through an epoch of intellectual failure, but one in which there is no available mechanism to oust a political-economic elite whose interests have become incompatible with ours.
This is not some sudden development, much less a coup d’etat as is sometimes claimed. No, the accretion of power by the rentiers has been systematic, structural and the outcome of a decades-long process. It is deeply rooted in modern capitalist economies due to the transformation of corporations into tradable, recombinant portfolios of assets, increasing concentration of and returns to ownership, and the failure of regulation to keep pace with technology and transnational scale. Those who sit at the pinnacle of wealth for the most part no longer think about production, nor do they worry very much about who the ultimate consumers will be; they take financial positions and demand policies that will see to it that these positions are profitable.
The rapid and robust global restoration of profits post-2008 was not an accident. Public funds were used to bail out exposed creditors and shore up asset values, while the crisis was used to suppress wages and postpone meaningful regulatory reform. Indeed, I can predict with some confidence that many of the profits, particularly in the financial sector, that have been reported in official filings and blessed by the accounting firms will later be found to be illusory—but not before those who have claims on the revenues have cashed in to their own personal advantage. The institutions will be decimated, but those who owned, lent to or bet on them will be rich. This is not a failure, at least not for them.
You could make a case that, collectively, the interests of the financially endowed ultimately require a rescue of the real, nonfinancial global economy. Surely, when we take our painful plunge into the second dip of the Great Recession, their wealth will be at risk. But the ability to see it at a system level presupposes either a system-level organization of the class or the existence of individual interests that are transparently systemic. Neither appears to be the case today. From what we (you and me) can see from our vantage point, the ruling demands are to make sure my bonds are serviced, my counterparties pony up, the markets I invest in stay liquid, and expenditures for public welfare (i.e. the losers and chiselers) are slashed.
The first principle of political economy is that the scope of democracy depends on the range of views and interests (typically tightly linked) of the owning and controlling class. Genuine public debate and decision-making extends only to those issues on which the elites are divided. In what country today is there a significant division among political-economic elites over core economic questions? How would our situation be different if Obama, Cameron, Merkel, Sarkozy et al. had been on the losing side of their elections?
So, the current mess is not the result of a failure by intellectuals—although clearer, less ideologically-driven thinking by economists would certainly be a good thing and might make a small dent at the margin. As long as there are even a few economists who proclaim the virtues of austerity and deregulation, however, their views will dominate. They haven’t won a battle of ideas; they are simply the ones who have been handed the microphone.
The real problem is political, and it is profound. Unless we can unseat the class that sees the world only through its portfolios, they may well take us all the way down. Unfortunately, no one seems to have a clue how such a revolution can be engineered in a modern, complex, transnational economy.
thank you for Peter Dorman. I thought no one else had noticed.
i will risk going a bit further: “the left” seems to accept the same “macroeconomics” as the right. they just want to tax the winners so us losers don’t have to take responsibility for ourselves.
the reference to Mitt Romney’s famous foot in mouth is deliberate.
the fault, dear Brutus, is not in us workers, but in our “intellectual” spokespersons.
I know cut-and-paste isn’t popular — but I’m a starving worker who needs to get it said — and I’m 70 years old now and not up to producing bubbling new commentary every day (if I ever was :-]) — to wit:
MY COMMENT TO: “Who will Save Us from Inequality” by Carola Binder at:
http://carolabinder.blogspot.com/2014/03/who-will-save-us-from-inequality.html
There is only one mechanically plausible way to rebalance the US labor market (and, because it means massive re-unionization, also reform the US political forum): a post-WWII, industrialist invented (that’s right; not Marxist) setup called centralized bargaining — legally mandated.
Under centralized bargaining (A.K.A., sector wide labor agreements) all employees working at similar occupations (e.g., retail clerk) in the same geographic locale (where applicable — airlines would presumably take in the whole country) negotiate one common contract with all employers.
Wal-Mart recently closed 88 big-boxes in Germany where it could not undercut based on lower pay and benefits.
Where to start: supermarket and airline employees would kill for centralized bargaining. A few years ago Northwest Airlines squeezed a billion dollars of givebacks out of flight crews — to be followed a year later by a billion dollars of bonuses for 1,000 executives.
Where it stops: not with you — your are a female human. You are able to judge the saleability of a new direction strictly on merits of argument — and not be totally mesmerized by the big world outside that always looks too big, much too big, to seriously change. You are an individual gatherer, instinctively.
Human males — with their (our) pack hunter outlook — always and immediately check with the world outside and almost always assume nothing can be done (maybe this is so only if we have no immediate personal stake — which academics don’t have in reforming the labor market). Have see this issue after issue over and over for decades.
* * * * * *
Realistic way out: just guessing: the $15 an hour minimum wage is sweeping the west coast — and I am spamming the inarguable basics to every journalist and legislature whose address I can track down …
… spammed 14,000 of simpler arguments about same all over country last year (took three months) so when it comes their way they will at least have the basics.
I figure that when the $15 minimum wage comes in to everybody’s benefit in the west, it shouldn’t take long to go in the east — meantime it will be time to start pushing centralized bargaining — once the possibility of real change reaches into the male pea brain (midbrain, limbic system).
I reading Piketty’s magnum opus — when I am finished (month or two) I will be ready to do a real zinger on the labor market overall.
Different versions of centralized bargaining can be found in continental Europe, French Canada, Argentina, Indonesia.
Final thoughts (one example) on the human male problem:
Show a human female that a $15 minimum wage will only raise overall prices 3.5% ($560 billion added to $16 trillion) and common sense takes care of the rest. Males need one more number (before they no longer obsess on the big pack outside): that the 45% of the workforce getting a raise wont be laid off — wont be told: “we don’t need your output anymore” — over a small price increase.
[ADDENTUM: The Teamsters Union has a version of its own: the “National Master Agreement” — or else Teamster truck drivers and warehouse workers would be as poor as regional (half the) airline pilots. I was a member of local 804 — Ron Carey, local president (later national president) — just a warehouse worker pushing and shoving furniture (didn’t get my driver’s license till years later; New Yorker). Last I heard, some years back, 804 raised its defined retirement benefit (all securities kept under ownership of the union) from $3300 to $3600 a month.]
When Santander Bank became a presence in the US I had a thought that sector wide agreement proces might have a beginning. Bank tellers make quite low wages overall..
Comments are good as well.
http://angrybearblog.strategydemo.com/2010/08/where-are-unions.html
Somebody at the old blog post noted that the German bank would be in at a disadvantage if it were unionized and its competitors were not. Of course, that is where centralized bargaining just hits the spot.
Wish Nancy Ortiz were still around here.
“We are not living through an epoch of intellectual failure, but one in which there is no available mechanism to oust a political-economic elite whose interests have become incompatible with ours.” P.D.
This is certainly true and lamentable, but it is nothing new. It has been recognized repeatedly throughout the history of man, and we have seen it brought up in several upheavals during the last several hundred years. Peter’s statement, above, has the ring of a remark that might just as easily been spoken by Robespierre or Lenin. It has nothing to do with the left or right of one’s political/economic ideology. It is simply a statement of the avaricious nature of too many of our fellow citizens. The French used to say, all for one and one for all. Lately in all parts of the world it seems to be, all for me and less for all, others that is. Another cliche that seems to fit too well, “it’s deja vu all over again.”
Some examples of human cooperation:
All agreements are subject to revision. Nothing we agree to today is guaranteed tomorrow. What’s good for me is good for you, but what’s good for you is less important. You know it’s true when I say it. What ever you may think is equitable is subject to debate. Etc.
When I was a child I would occasionally go to the zoo in Prospect Park in Brooklyn with either some friends or a school class. There was an enclosed building with very large cages housing monkeys, wherein they could swing around from perch to perch. On one interior wall of that “monkey house” there was a small sign just above eye level, maybe 6′ from the floor, at the top edge of a full length mirror (of polished metal). It read, The Most Dangerous Animal In the World. I’m still looking for evidence of that sign’s invalidity.
“…Idea-smiths provide language, narratives and tools for those in control, but the broad contours of policy depend on who the controllers happen to be…”
And there are plenty of contrasting ideas and social myths handy for those times when the controllers need to turn the steering wheel one way or another. Witness the mobilization leading up to WWII, which cultivated a culture of sacrifice of self, family and goods towards the war effort. That the cause was a good one and the effort necessary doesn’t mean that he same steering mechanism couldn’t be used for other purposes.
The thirty years after about 1970 turned that huge cultural machine around, cultivating selfishness, helplessness, contempt for fellow Americans and for objective truths and thought, for the purpose of looting the prosperous middle class while persuading them that it was each other they had to blame for their increasing impoverishment. (“That union guy wants part of your cookie.”)
Noni
Denis, Nancy Ortiz hasn’t gone anywhere any more than I have. Less frequency of comment doesn’t necessarily equate to less presence.
NO is a family friend and a couple of us talk to her regularly. If you want something passed on just notify me. Or Dale for that matter. But odds are she is paying attention, certainly to Soc Sec threads.