Relevant and even prescient commentary on news, politics and the economy.

The Great Recession captured in 1 minute of comedy

Just watch this.  It is 1 minute long.

Could it be anymore surreal?

HOW MANY TIMES DO WE HAVE TO DO THIS? HOW MANY FREAKIN’ TIMES DO WE HAVE TO LEARN THE LESSON?

Obviously, the lesson has not been relearned since at least sometime before 1992.  If it had been relearned, we would not be here still proposing solutions that sound just like, almost word for word like the 1920’s.  (start reading at 1920) I mean, it’s not like people haven’t been sounding the horn on what the results would be from the proposed solutions in 1992.   Nope, it’s the same proposals as in 1992, which will produce more of the same.

 

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An Editorial on Robert Bork and his Legacy

On Wednesday, December 19, 2012 Robert Heron Bork died at age 85I did not mourn.

Bork first became infamous in 1973 for his role in the “Saturday night massacre” when as Solicitor General, the number three position in the Justice Department, he carried out, under President Nixon’s orders, the firing of Watergate Special Prosecutor Archibald Cox.  Bork inherited this task when both Attorney General Elliot Richardson and Deputy Attorney General William Ruckelshaus resigned in protest.  This much is well known.  What sometimes gets left out of the discussion, though, is that due to the manner in which Cox’s position was created and defined, he could not be removed except for cause.  Doing a good job of tracking down evidence relevant to the case he was pursuing does not qualify as cause.  This was a defining moment in Bork’s career, in which he conveniently chose power over principle.

Most recently he was the senior judicial adviser to Mitt Romney’s unsuccessful presidential campaign, but he is best known for being rejected as a Supreme Court justice when nominated for that position in 1987 by Ronald Reagan.  After his nomination was defeated by a 58-42 vote in the Senate, his name was verberized into a neologism that was [and occasionally still is] used almost exclusively in the passive voice.

To be “borked,” as his supporters would have it, is to be subjected to unfair criticisms based on distortions of your words, actions, and beliefs.  But his radically reactionary views on equal protection and sex discrimination were typical of his extreme and perverse positions. The mere fact that he was able to speak out in favor of a poll tax speaks volumes.  In reality, the borking of Bork consisted of subjecting him to valid criticism based on the precise meanings of his words, actions and beliefs.  Jeffrey Toobin explains.

Bork was “borked” simply by being confronted with his own views—which would have undone many of the great constitutional landmarks in recent American history. As Senator Edward Kennedy put it in a famous speech on the Senate floor, “Robert Bork’s America is a land in which women would be forced into back-alley abortions, blacks would sit at segregated lunch counters, rogue police could break down citizens’ doors in midnight raids, schoolchildren could not be taught about evolution, [and] writers and artists would be censored at the whim of government.”

Was Kennedy too harsh? He was not—as Bork himself demonstrated in the series of intemperate books he wrote after losing the Supreme Court fight and quitting the bench, in 1987. The titles alone were revealing: ”The Tempting of America,” “Slouching Towards Gomorrah: Modern Liberalism and American Decline,” and “Coercing Virtue: The Worldwide Rule of Judges.” One of his last books may have summed up his views best. Thanks in part to decisions of the Supreme Court—decisions that, for the most part, Bork abhorred—the United States became a more tolerant and inclusive place, with greater freedom of expression and freedom from discrimination than any society in history. Bork called the book, accurately, “A Country I Do Not Recognize.”

Indeed, Bork’s words and actions were consistently anti-gay, anti-female, anti-minority, always favoring government intrusion over citizen’s rights, businesses over people, big business over small, and corporations over government.  His supporters would argue that these conclusions are based on principled positions, and that the outcomes, however repugnant to idealists, are therefore legitimate.  I argue instead that policies that consistently result in the contraction rather than the expansion of basic human rights, and that continually disadvantage definable target groups are corrupt at their core, and that the negative results are inherent and predictable.

After his defeat, Robert Bork gradually faded away from the public consciousness.  I can tell you, in the intervening 25 years, I gave him virtually no thought at all.

But Bork had enormous, possibly even dominant influence on the modern interpretation of anti-trust law, perhaps single-handedly redefining the scope and purpose of anti-trust legislation.  Basically, Bork was pro-efficiency and anti-anti-trust.  He had swallowed whole the bait-bucket of Chicago-economic-school ideas of market efficiency, and built the entire framework of his pro-trust belief system on that invalid foundation.

It seems fair to say that it is in some part because of Bork’s influence that we now have trans-national mega-corporations with huge oligopolies and near-monopolies.  These corporations have no inherent loyalty to anyone nor anything.  In my view, the oligarchs that run them do not even have a general sense of loyalty to stock-holders, let alone the broader universe of stake-holders, who mainly exist to be exploited.

Efficiency, in and of itself is a good thing.  But it cannot be achieved in a vacuum – frequently there are externalities that are largely negative.  For one thing, the efficiencies are mainly internalized and do not necessarily represent a more broadly efficient society.  Second, as a market gets concentrated, competition decreases and the pressure to improve, or even maintain status-quo efficiency slowly erodes.  This ultimately leads to a situation where big, lumbering and inefficient but extremely powerful entities control the economic and political landscape.  Yes, Big Oil, Big Pharma, Big Insurance, Big Finance, I am looking at you.

Perhaps worse, though, is the power asymmetry that results from size and influence.  Suppliers, customers, and the public at large are overwhelmed by the sheer might of these institutions, leading to even greater concentrations of power and wealth.

The end game is some version of economic collapse.  It happened in the 1930’s, and – due largely to neoclassical Chicago-style economic thinking that has over the last 40 years willfully unlearned the lessons of that time – it happened again in 2008.

Most of the time, evil doesn’t manifest as some cackling cartoon villain, mad-man on a murderous rampage, or even an unjust war waged on false pretenses.  It results instead, in a far more banal but far-reaching way, from the highly refined ideas of men like Robert Bork who value abstract concepts such as efficiency over the effects the programs they institute have on the lives of real human beings.

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The Brute Economics of Slavery

Preramble: I posted this on my blog exactly a year ago today, in slightly different form.  Dan linked to it once, from here, just a few weeks before I started writing for Angry Bear.  Recent comments got me thinking about it again. 

 In thinking about the economics of slavery, I’m considering slavery and serfdom to be economic near-equivalents. Of course, I recognize that there are qualitative differences between chattel-slavery and serfdom:

–  In slavery, the master owns the person of the slave; in serfdom the master owns the labor output of the serf, either as a stated labor quantity, a stated output quantity, or some combination.

–  Serfs enjoy some measure of freedom, and can accumulate personal wealth, after the rents are paid; slaves do not and cannot.  (The point, though is to keep rents so high that accumulation is prohibitively unlikely.)

–  It might be easier to gradually and incrementally impose serfdom on an existing population. First generation slaves need to be captured, conquered, or in some other way removed from – and deprived of – their native state. Thus, serfdom is imposed on the indigenous population, slaves are more typically imported.

–  The individual slave is a depreciating asset.  But, as a population, slaves are self-renewing, since, unlike Shakers, they reproduce.   Serfs are factor inputs rather than assets.  (On the other hand, the master also owes the serf protection, and sustenance in times of famine.  In that sense, the serf resembles an asset that requires maintenance.)

These are significant differences, to be sure, but mostly from a sociological or political perspective.  In terms of the brute economics, they are somewhere between second order and trivial.

The necessary conditions for reducing a population to serfdom are as follows.

– A large wealth and power disparity between the haves and the have-nots.

– Perhaps more significantly, the ownership of virtually all assets by an elite class, with severely limited opportunities for the general population to own or accumulate assets.

– A poorly educated population with limited skill sets.

– Severely impaired individual mobility, due to an impossible debt and/or tax burden and legal restrictions.

– Government of the masters, by the masters, for the masters, with little or no sense of worth or justice for the serfs.  This enforces and reinforces the previous point.

– A social and/or religious system that recognizes the inherent meritocracy of the master class.

– A population that is scared or coerced into ceding their freedom to the masters in exchange for security.

– The political will to deprive people of their fundamental human dignity.

Via Krugman, we find Delong’s repost of a short treatise on slavery and serfdom by Evrey Domar.

Domar points out additional requirements, and a mechanism for serfdom to develop.

– Low population density: Labor scarcity favors slavery/serfdom, since the cost of freeman labor will be high.  I’ll admit I didn’t get this until is was stated the other way around.  Population growth favors freeman labor since the competition for jobs drives wages down.  (Note the implicit denial of the “Lump of labor fallacy” canard.)

– A large class of what Domar calls “servitors” who owe allegiance, taxes, and military support to a higher authority.  They are the equivalent of medieval vassals of a liege lord, who extract from the local peasant population not only their own means of existence, but that of their liege, as well.   This is the beginning of, and most literal sense of “rent-seeking.”  The process is that, starting with a free population, by taxation or other forms of indebtedness, the freedom of the common people is eroded.  Those whom Domar calls “servitors” I call leaches.

– Explicit Government complicity in restricting mobility, via legal structures. Besides limiting the population’s mobility in a gross sense, it also eliminates the possibility of competition among different servitors.

In this way, serfdom developed in depopulated* Western Europe during or after the late Roman Empire, and in Eastern Europe many centuries later – in fact, long after serfdom has disappeared in the West.  In each case, the critical enabling factor was low population density, resulting in a critical shortage of labor.

Basically, it comes down to an economic evaluation of costs and returns.   But these are not easy to determine with any precision in the abstract, and probably not in the actual event, either, unless the increment is quite large.  The slave, and even the serf, needs maintenance in a way that the free laborer does not.  The serf can be compelled to work past his willingness in way that the free man cannot.  On the other hand, the free man might have higher willingness and unit productivity.  The wild card here is what the free man can demand as wages, and that depends on the competition for available jobs.  The bottom line is that serfdom will dominate whenever the profit (revenues less costs) of keeping a serf is greater than that of hiring a free laborer.

Of course, all of this was long ago – pre-industrial revolution in fact, and centered on a low-technology agrarian system.  What message does it have for us today?   Here, Krugman wonders** why, after the the plagues of the mid-14th century, serfdom wasn’t reestablished in Western Europe, since the population was greatly depleted.  Domar has no clear answer, and Delong won’t hazard a guess. I will — but it’s only a guess.  Perhaps society had moved on, and the culture was no longer accepting of serfdom as a social institution.  Serfdom had faded away from lack of interest and due to population growth many decades before the plague epidemics occurred around 1350.  There were sufficient numbers of artisans, craftsmen, guilds, merchants, and bankers, such that tying people back to the soil might not have been easy, or even desirable.   The growth of towns might have played a part.  Another social factor is that in late Eastern European serfdom, the servitor’s status was determined by the number of serfs he controlled.  I don’t think that was ever the case in the West.  Sometimes social factors trump economics.

Also, as Barbara Tuchman points out in A Distant Mirror (Ch 11, frex.), though the population decreased due to the plague, total wealth in coins and material possessions did not, and they were largely in the hands of the elite.  It could be that with this wealth maintained, the brute economic drive for serfdom was absent, or severely attenuated, despite the labor shortage.

Krugman also wonders: “And an even bigger question: why hasn’t indentured servitude made a comeback in the modern era? Yes, I know, human rights and all that – but if it was profitable to have indentured servants in the modern world, I’m sure that Richard Scaife’s think tanks would have no trouble finding justifications, and assorted Christian groups would explain why it’s God’s will.”  

Well, that was in 2003, when Scaife was well known and the Koch brothers weren’t. This statement also gets a lot of ridicule in comments at Delong’s Domar post. But, there were certainly many Christian apologists for slavery, and you can see today that tea-baggers and the Christian Right do not exactly align themselves on the side of human rights vs the brute force of the elite.

So Krugman’s question remains, hanging over us like the sword of Damocles.  Here is the way I see it. First off, you need to be skeptical about translating a socio-economic phenomenon from a different place and time to the here-and-now.  Our population is not sparse nor badly educated (yet), and we do not have a pre-industrial agrarian economy.  But these differences effect the possibilities and modes of implementation.  They don’t effect the ongoing defects of human nature that Krugman obliquely alludes to.  These are greed, ego, and the lust for power, and you can see them manifesting themselves right here in the U.S. today in the struggle between labor and the minions of the wealthy elite.

When I think about serfdom, I also think about more modern analogs – sharecroppers, coal miners who owed their soul to the company sto’e, child laborers in early industrialized England, indentured servants, the exploitation of illegal immigrants, and the union busting practices that have been highly successful here since 1980.

In evaluating the conditions that favor and disfavor serfdom as such, something is missing from the analysis.  That is that somewhere along whatever spectrum of conditions makes serfdom more or less economically favorable to the elite, there is a point (or region) of indifference.  If working people are reduced to the point where the economics are no less favorable to the elite than serfdom, then actually going through the formality of making them serfs simply isn’t worth the effort, and doesn’t make any economic difference.

What do we have today?

– The largest wealth disparity since before the great depression – at every stratum of society, growing larger every day.

– An all out assault by the moneyed elite on the wealth and status of working people.   Union busting is one of the tools.

– Deliberate undermining of public education.

– Segments of the population tied to the land by under-water mortgages or the inability to unload a property.

– Popular social movements with religious backing that favor the interests of the elite over the interests of the people.

– Constant fear-mongering as a pretext for inducing people to give up their basic rights.

– A moneyed elite that effectively owns government.

Krugman’s apparent underlying assumption, which I share, is that – for the servitors at least, and possibly for the serfs as well – serfdom is a strategy of least resistance, and therefore the default social order, whenever the conditions for it are right.

One of the things that can make conditions not right for serfdom is regulated entrepreneurial capitalism – inventiveness, innovation, industry, and real competition.  Capitalism generates wealth, increases wages, opportunities and the standard of living, and reinforces concepts of freedom, liberty, and fair practices.  Effective regulation assures that fair practices are maintained, keeps the playing field even, and increases the likelihood that reward is in some way proportional to a combination of skill and effort.  Capitalism is expansionist by nature, serfdom is static.

Unfortunately, over time, capitalism transmogrified into Corporatism.

Corporatism, for all its acquisitiveness, is a very different phenomenon.  Ownership is remote.  Assets are used in large part for executive bonuses, dividends, and mergers and acquisitions.  Though the track record of M&A in meeting stated goals is dismal, the real net effect is monopolization – corporatists hate competition.  Corporatism seeks always and everywhere to decrease wages, and is utterly indifferent to the living standards, freedom, and opportunities of anyone outside the elite.  Ethics and fairness are non-existent.  Rewards are in proportion to rapacity.  In other words, Corporatism is the new feudalism.

This is why I say that the goal of the Republican party, as servitors to Scaife, the Koch’s and their ilk, is to take us back to the 12th century – or whatever it’s 21st Century near-equivalent might be.  I’ve stated that trans-national corporations with no loyalty to anyone or anything constitute the real road to serfdom, in contradistinction to what Hayek said.   That is a bit inaccurate, though. Once wage scales are reduced to the par value of slave maintenance, it doesn’t matter what the correct technical description of our condition is, and the elite won’t care.

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* Antonine Plague of 165-180, Cyprian Plague of 250-270, Justinian Plague of 541-2
** The link to the Surowiecki article that Krugman mentions is broken.  It can be found here.

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Man Bites Dog

Newt Gingrich tells the truth.

“the individual mandate was originally developed by the Heritage Foundation and others, as a way to block Hillarycare.”

Firebaggers argue that the PPACA is conservative, because it is similar to a Heritage Foundation proposal. They neglect to note that the proposal was made in bad faith. The point was to complicate the debate by making it Clintoncare vs Obamacare vs no reform. That way the result was no reform, even though most US adults wanted some reform.

This is not speculation. The Heritage/Romney/Obama approach was also the Chafee proposal. [John] Chafee (R-R.I.) proposed something like the PPACA in 1993. Senate minority leader R. Dole cosponsored the bill. In 1994 Dole voted against a bill whcih he had cosponsored proving that his advocacy of an individual mandate was made in bad faith and aiming only at complicating the debate.

Similarly when Ted Kennedy was advocating single payer/Medicare for all, Nixon proposed a reform similar to that proposed by the Clintons.

Yes Obama, all Democratic Senators, two independent Senators, and a majority in the House voted for a plan similar to one proposed by The Heritage Foundation. Everyone who works at The Heritage Foundation (except maybe a janitor who hates the jerks after whom he cleans up) recognized this as a huge defeat. Jane Hamsher hasn’t wised up.

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Ten Years Gone

NYTBR, 11 September 2011

Ten years ago today, nineteen people, including fifteen Saudis–using funding from the House of Saud and led by a distinguished member of that House–used airplanes to attack the U.S., destroying the World Trade Towers, damaging the Pentagon, and being prevented from attacking the White House only by the heroic efforts of passengers on board the fourth plane and a suicide mission by an unarmed U.S. fighter jet.

Fortunately, there was quick action from President Bush and his Administration. They detained all fourteen of Osama bin Laden’s relatives in the United States, interrogating each. This was followed by the execution of surgical strikes within Afghanistan, where Osama bin Laden himself was hiding. By the time Special Forces troops captured him in the caves near Tora Bora, in part due to intelligence gained from his relatives, domestic uprisings and U.N. support led to the overthrow of the Taliban government.

There were rumors there would be war with Saudi Arabia. But he Administration enacted high-level discussions (using, allegedly, some still-classified data as incentives) that were quickly followed by regime change in Saudi Arabia. That country’s new leaders provided compensation for costs and victims, as well as intelligence on previously unknown Pakistani participation.

On the domestic front, Rudolph Giuliani–who had moved the NYC Emergency Response headquarters from the safety of the basement of One Police Plaza to the 25th floor of a building that had been attacked eight years before, and who declared spending money on upgrading communications equipment for firefighters a waste–was barely saved from a Lynch mob of New Yorkers. He is rumored to have moved to Arizona, having been shunned by the President and the news media.

So now, ten years later, we find some American authors writing alternative histories about that time. The most recent, and one of the most absurd, is Philip Roth’s Becoming Who We Are, in which the Bush Administration assists the Bin Laden family in flying out of the United States (even before domestic commercial flights resume), becomes even closer to the Saudi leadership (there is a scene in the novel of Bush holding hands with the Saudi King while posing for photographs), and declares war on Iraq.

Even more problematic, Roth imagines Giuliani being touted as a hero, while the Bush Administration tortures prisoners, committing what most readers will correctly view as war crimes.

Perhaps saddest of all, Roth postulates an uprising of “Christian Conservatives” who vociferously and repeatedly applaud both of the murder of hundreds of thousands of innocent civilians and wanton torture of prisoners—and who, in this novel, are largely credited with re-electing President Bush despite those revelations and an economy driven to stagnation by war—cheering the mere suggestion that an execution, even of someone who is clearly innocent, will occur. After Roth’s frequent but appropriate mention of “blood libel” in The Plot Against America, one probably ought not be surprised that some “Christian” characters of this novel would act in such a manner, but it is a daunting leap of faith nonetheless. (That Roth’s narrator is aware enough to note that it is not the “Christians,” but rather those in the highest income brackets who are—for the first time in United States history—not taxed to pay for a war who make the difference in the 2004 election arguably is even more damning of his portrayal.)

Roth has had a long and noble career, and his recent forays into alternative history–most notably his portrayal of leading isolationist Charles Lindbergh [link added] in the aforementioned novel–have been based in a deep knowledge of the way those personages acted publicly and privately.  That he would undermine that with an absurdist piece in which the President of the United States squanders opportunities and weakens his own country by starting multiple wars is unfortunate at best. We can only hope Mr. Roth’s next work recovers the historical veracity for which he is known, rather than this deranged flight of fancy.

Becoming Who We Are, by Philip Roth, Houghton Mifflin, 432 pages, $27.

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Fleem, Super Fleem, and Fleem Plus

by Mike Kimel

Assume a world similar to ours, but with a major difference. At some point in the 1920s, an inventor came up with a product called Fleem. Fleem has interesting properties, and when applied liberally in a house, gives even the meanest hovel a more homey feel. A healthy market for Fleem develops in the 1920s. John D. Rockefeller, having attributed the presence of Fleem to ridding his granddaughter of impure thoughts, instructs his son to create an organization (“Standard Fleem”) dedicated to making Fleem more widely available.



Over time, the process of Fleem manufacture improved, and prices came down. A number of companies that jump into the market, and by 1968 the Rockefeller Foundation IPOs Standard Fleem on the NYSE. To demonstrate Standard Fleem’s independence, the Rockefeller Foundation retains precise zero percent of the ownership of the newly public Standard Fleem Inc. The Rockefeller Foundation does, however, continue funding research on Fleem, just as it does on various crops, diseases and techniques for ridding young ladies of impure thoughts.

The market for Fleem is healthy and robust. Eventually a new form of Fleem is invented by a reclusive manufacturer of wooden airplanes in Las Vegas. The new product is christened with the remarkably original name of Super Fleem. A few years later, the Rockefeller Foundation develops a new variant of Fleem additive it calls Fleem Plus. Some homeowners prefer it, some don’t. You can’t argue with taste. The Rockefeller Foundation licenses Fleem Plus to any manufacturer that wants it, subject to one caveat: any product with Fleem Plus in it must be sold at favorable rates to minority groups that historically were kept from buying Fleem products.

By this time, the market has segmented. But for our purposes, there are four products out there: Original Fleem, Original Fleem with the Fleem Plus Additive, Super Fleem, and Super Fleem with the Fleem Plus Additive. Eventually it is discovered that prolonged exposure to Super Fleem kills adults whose favorite color is red. It also kills ferrets.

Unfortunately, without precise records, it is hard to tell whether a building had Super Fleem applied to it. The housing market collapses, taking much of the economy with it. Some years later, someone crunches the numbers and finds that most Super Fleem was sold without the Fleem Plus additive.

Questions:

1. Discuss the culpability of the Rockefeller Foundation for the economic mess in this alternate world.

2. Discuss the culpability of the Rockefeller Foundation for the economic mess in this alternate world, bearing in mind that in our world Fannie Mae was IPO’d in 1968.

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Time to Change Those Tags? or Economists Catching Up, Round Two

Brad DeLong, not generally a Leading Indicator in such matters, follows Mark Thoma yesterday in looking into the abyss and seeing the outline of a train around the “light”:

Henceforth, I will call the current unpleasantness not “The Great Recession,” but rather “The Little Depression.”

This still strikes me as optimism, but I’m stil on what do you call 1873-1896 (much more similar to the current situation) when “The Great Depression” only lasted about 17 years?

(Aside: Round One of Economists Catching Up was here.)

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