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Little has changed today when Obama is hailed as a leading opponent of the Iraq invasion because it was a "strategic blunder," words that one could also have read in Pravda by the mid-1980s. The imperial mentality is very deeply rooted.
It is sad to say, but not false, that within the dominant spectrum the liberal imperialists are "the good guys." A likely alternative is revealed by the most recent polls. Almost half of voters say that the average Tea Party member is closer to their views than President Obama, whom fewer prefer. There's an interesting breakdown. Eighty-seven percent of those in the so-called "Political Class" say their views are closer to Obama's. Sixty-three percent of what are called "Mainstream Americans" say their views are closer to the Tea Party. On virtually all issues, Republicans are trusted by the electorate more than Democrats, in many cases by double digits. Other evidence suggests that these polls are recording distrust rather than trust. The level of anger and fear in the country is like nothing I can recall in my lifetime. And since the Democrats are in power, the revulsion over the current social-economic-political world attaches to them.
Unfortunately, these attitudes are understandable. For over 30 years, real incomes for the majority of the population have stagnated or declined, social indicators have steadily deteriorated since the mid-1970s after closely tracking growth in earlier years, work hours and insecurity have increased along with debt. Wealth has accumulated, but into very few pockets, leading to probably record inequality. These are, in large part, consequences of the financialization of the economy since the 1970s and the corresponding hollowing out of domestic production. What people see before their eyes is that the bankers who are primarily responsible for the current crisis and who were saved from bankruptcy by the public are now reveling in record profits and huge bonuses, while official unemployment stays at about 10 percent and in manufacturing is at depression levels, one in six, with good jobs unlikely to return. People rightly want answers and they are not getting them, except from voices that tell tales that have some internal coherence, but only if you suspend disbelief and enter into their world of irrationality and deceit. Ridiculing Tea Party shenanigans is a serious error, I think. It would be far more appropriate to understand what lies behind them and to ask ourselves why justly angry people are being mobilized by the extreme right and not by forces like those that did so in my childhood, in the days of formation of the CIO and other constructive activism.
To take just one illustration of the operation of really existing market democracy, Obama's primary constituency was financial institutions, which have gained such dominance in the economy that their share of corporate profits rose from a few percent in the '70s to almost on-third today. They preferred Obama to McCain and largely bought the election for him. They expected to be rewarded and were. But a few months ago, responding to rising public anger, Obama began to criticize the "greedy bankers" who had been rescued by the public and even proposed some measures to constrain them. Punishment for his deviation was swift. The major banks announced prominently that they would shift funding to Republicans if Obama persisted with his offensive rhetoric.
Obama heard the message. Within days, he informed the business press that bankers are fine "guys." He singled out for special praise the chairs of two leading beneficiaries of public largess, JP Morgan Chase and Goldman Sachs and assured the business world that, "I, like most of the American people, don't begrudge people success or wealth" - such as the bonuses and profits that are infuriating the public. "That's part of the free market system," Obama continued, not inaccurately, as the concept "free market" is interpreted in state capitalist doctrine.
This should not be a great surprise. That incorrigible radical Adam Smith, speaking of England, observed that the principal architects of power were the owners of the society, in his day the merchants and manufacturers, and they made sure that policy would attend scrupulously to their interests, however "grievous" the impact on the people of England, and, worse, the victims of "the savage injustice of the Europeans" abroad. British crimes in India were a primary concern of an old-fashioned conservative with moral values, a category that a Diogenes might search for today.
A modern and more sophisticated version of Smith's maxim is political economist Thomas Ferguson's "investment theory of politics," which takes elections to be occasions when groups of investors coalesce to invest to control the state by selecting the architects of policies who will serve their interests. It turns out to be a very good predictor of policy over long periods. That should hardly be surprising. Concentrations of economic power will naturally seek to extend their sway over any political process. It happens to be extreme in the US, as I mentioned.
There is much fevered discussion these days about whether, or when, the US is going to lose its dominant position in global affairs to China and India, the rising world powers. There is an element of truth to these laments. But apart from misconceptions about debt, deficits and the actual state of China and India, the discussions are based on a serious misconception of the nature of power and its exercise. In scholarship and public discourse, it is common to take the actors in international affairs to be states that pursue some mysterious goal called "the national interest," divorced from the internal distribution of power. Adam Smith had a sharper eye and his radical truism provides a useful corrective. Bearing it in mind, we can see that there is indeed a global shift of power, though not the one that occupies center stage: a further shift from the global work force to transnational capital, sharply escalating during the neoliberal years. The cost is substantial, including working people in the US, starving peasants in India and millions of protesting workers in China, where labor share in national income is declining even more rapidly than in most of the world.
Political economist Martin Hart-Landsberg observes that China does play a leading role in the real global shift of power, having become largely an assembly plant for a regional production system. Japan, Taiwan, and other advanced Asian economies export parts and components to China and provide most of the sophisticated technology. Chinese labor assembles it and exports it. To illustrate, a Sloan Foundation study estimated that for a $150 iPod exported from China, about 3 percent of value added is by China, but it is counted as a Chinese export. Much concern has been aroused by the growing US trade deficit with China, but less noticed is the fact that the trade deficit with Japan and rest of Asia has sharply declined as the new regional production system takes shape. A Wall Street Journal report concluded that if value added were properly calculated, the real US-China trade deficit would decline by as much as 30 percent, while the US trade deficit with Japan would rise by 25 percent. US manufacturers are following the same course, providing parts and components for China to assemble and export, mostly back to the US. For the financial institutions, retail giants, ownership and management of manufacturing industries and sectors closely related to this nexus of power, all of this is heavenly. Not for American workers, but as Smith pointed out, their fate is not the concern of the "principal architects of policy."
It's true that there is nothing fundamentally new in the process of deindustrialization. Owners and managers naturally seek the lowest labor costs; efforts to do otherwise, famously by Henry Ford, were struck down by the courts, so now it is a legal obligation. One means is shifting production. In earlier days, the shift was mostly internal, especially to the southern states, where labor could be more harshly repressed. Major corporations, like the US steel corporation of the sainted philanthropist Andrew Carnegie, could also profit from the new slave-labor force created by the criminalization of black life after the end of Reconstruction in 1877, a core component of the American industrial revolution, continuing until World War II. It is being reproduced in part during the recent neoliberal period, with the drug war used as a pretext to drive the superfluous population, mostly black, back to the prisons, also providing a new supply of prison labor in state or private prisons, much of it in violation of international labor conventions. For many African-Americans, since they were exported to the colonies, life has scarcely escaped the bonds of slavery, or sometimes worse. More recently the shift is mostly abroad.
Returning to the charges against "greedy bankers," in fairness, we should concede that they have a valid defense. Their task is to maximize profit and market share; in fact, that's their legal obligation. If they don't do it, they'll be replaced by someone who will. These are institutional facts, as are the inherent market inefficiencies that require them to ignore systemic risk: the likelihood that transactions they enter into will harm the economy generally. They know full well that these policies are likely to tank the economy, but these externalities, as they are called, are not their business, and cannot be, not because they are bad people, but for institutional reasons. It is also unfair to accuse them of "irrational exuberance," to borrow Alan Greenspan's brief recognition of reality during the artificial tech boom of the late '90s. Their exuberance and risk taking was quite rational, in the knowledge that when it all collapses, they can flee to the shelter of the nanny state, clutching their copies of Hayek, Friedman and Rand. The government insurance policy is one of many perverse incentives that magnify the inherent market inefficiencies.
In brief, ignoring systemic risk is an inherent institutional property and perverse incentives are an application of Smith's maxim. Again, no great insight.
After the latest disaster occurred, it has been agreed by leading economists that an "emerging consensus" has developed "on the need for macroprudential supervision" of financial markets, that is, "paying attention to the stability of the financial system as a whole and not just its individual parts" (Barry Eichengreen, one of the most respected analysts and historians of the financial system). Two prominent international economists add that, "There is growing recognition that our financial system is running a doomsday cycle. Whenever it fails, we rely on lax money and fiscal policies to bail it out. This response teaches the financial sector: take large gambles to get paid handsomely and don't worry about the costs - they will be paid by taxpayers through bailouts and other devices and the financial system "is thus resurrected to gamble again - and to fail again." The system is a "doom loop," in the words of the official of the Bank of England responsible for financial stability.
Basically the same logic applies elsewhere. A year ago, the business world recognized that the insurance companies and big Pharma, in sharp defiance of the public will, had succeeded in destroying the possibility of serious health reform - a very serious matter, not only for the people who suffer from the dysfunctional health system, but even on narrow economic grounds. About half of the deficit that we are instructed to deplore is attributable to unprecedented military expenditures, rising under Obama, and most of the rest to the increasing costs of the virtually unregulated privatized health care system, unique in the industrial world, also unique in its gifts to drug companies - opposed by a mere 85 percent of the population. Last August, Business Week had a cover story celebrating the victory of the health insurance industries. Of course, no victory is enough, so they persisted in the struggle, gaining more, also against the will of the large majority of the public, another interesting story I'll have to put aside.
...
Little has changed today when Obama is hailed as a leading opponent of the Iraq invasion because it was a "strategic blunder," words that one could also have read in Pravda by the mid-1980s. The imperial mentality is very deeply rooted.
It is sad to say, but not false, that within the dominant spectrum the liberal imperialists are "the good guys." A likely alternative is revealed by the most recent polls. Almost half of voters say that the average Tea Party member is closer to their views than President Obama, whom fewer prefer. There's an interesting breakdown. Eighty-seven percent of those in the so-called "Political Class" say their views are closer to Obama's. Sixty-three percent of what are called "Mainstream Americans" say their views are closer to the Tea Party. On virtually all issues, Republicans are trusted by the electorate more than Democrats, in many cases by double digits. Other evidence suggests that these polls are recording distrust rather than trust. The level of anger and fear in the country is like nothing I can recall in my lifetime. And since the Democrats are in power, the revulsion over the current social-economic-political world attaches to them.
Unfortunately, these attitudes are understandable. For over 30 years, real incomes for the majority of the population have stagnated or declined, social indicators have steadily deteriorated since the mid-1970s after closely tracking growth in earlier years, work hours and insecurity have increased along with debt. Wealth has accumulated, but into very few pockets, leading to probably record inequality. These are, in large part, consequences of the financialization of the economy since the 1970s and the corresponding hollowing out of domestic production. What people see before their eyes is that the bankers who are primarily responsible for the current crisis and who were saved from bankruptcy by the public are now reveling in record profits and huge bonuses, while official unemployment stays at about 10 percent and in manufacturing is at depression levels, one in six, with good jobs unlikely to return. People rightly want answers and they are not getting them, except from voices that tell tales that have some internal coherence, but only if you suspend disbelief and enter into their world of irrationality and deceit. Ridiculing Tea Party shenanigans is a serious error, I think. It would be far more appropriate to understand what lies behind them and to ask ourselves why justly angry people are being mobilized by the extreme right and not by forces like those that did so in my childhood, in the days of formation of the CIO and other constructive activism.
To take just one illustration of the operation of really existing market democracy, Obama's primary constituency was financial institutions, which have gained such dominance in the economy that their share of corporate profits rose from a few percent in the '70s to almost on-third today. They preferred Obama to McCain and largely bought the election for him. They expected to be rewarded and were. But a few months ago, responding to rising public anger, Obama began to criticize the "greedy bankers" who had been rescued by the public and even proposed some measures to constrain them. Punishment for his deviation was swift. The major banks announced prominently that they would shift funding to Republicans if Obama persisted with his offensive rhetoric.
Obama heard the message. Within days, he informed the business press that bankers are fine "guys." He singled out for special praise the chairs of two leading beneficiaries of public largess, JP Morgan Chase and Goldman Sachs and assured the business world that, "I, like most of the American people, don't begrudge people success or wealth" - such as the bonuses and profits that are infuriating the public. "That's part of the free market system," Obama continued, not inaccurately, as the concept "free market" is interpreted in state capitalist doctrine.
This should not be a great surprise. That incorrigible radical Adam Smith, speaking of England, observed that the principal architects of power were the owners of the society, in his day the merchants and manufacturers, and they made sure that policy would attend scrupulously to their interests, however "grievous" the impact on the people of England, and, worse, the victims of "the savage injustice of the Europeans" abroad. British crimes in India were a primary concern of an old-fashioned conservative with moral values, a category that a Diogenes might search for today.
A modern and more sophisticated version of Smith's maxim is political economist Thomas Ferguson's "investment theory of politics," which takes elections to be occasions when groups of investors coalesce to invest to control the state by selecting the architects of policies who will serve their interests. It turns out to be a very good predictor of policy over long periods. That should hardly be surprising. Concentrations of economic power will naturally seek to extend their sway over any political process. It happens to be extreme in the US, as I mentioned.
There is much fevered discussion these days about whether, or when, the US is going to lose its dominant position in global affairs to China and India, the rising world powers. There is an element of truth to these laments. But apart from misconceptions about debt, deficits and the actual state of China and India, the discussions are based on a serious misconception of the nature of power and its exercise. In scholarship and public discourse, it is common to take the actors in international affairs to be states that pursue some mysterious goal called "the national interest," divorced from the internal distribution of power. Adam Smith had a sharper eye and his radical truism provides a useful corrective. Bearing it in mind, we can see that there is indeed a global shift of power, though not the one that occupies center stage: a further shift from the global work force to transnational capital, sharply escalating during the neoliberal years. The cost is substantial, including working people in the US, starving peasants in India and millions of protesting workers in China, where labor share in national income is declining even more rapidly than in most of the world.
Political economist Martin Hart-Landsberg observes that China does play a leading role in the real global shift of power, having become largely an assembly plant for a regional production system. Japan, Taiwan, and other advanced Asian economies export parts and components to China and provide most of the sophisticated technology. Chinese labor assembles it and exports it. To illustrate, a Sloan Foundation study estimated that for a $150 iPod exported from China, about 3 percent of value added is by China, but it is counted as a Chinese export. Much concern has been aroused by the growing US trade deficit with China, but less noticed is the fact that the trade deficit with Japan and rest of Asia has sharply declined as the new regional production system takes shape. A Wall Street Journal report concluded that if value added were properly calculated, the real US-China trade deficit would decline by as much as 30 percent, while the US trade deficit with Japan would rise by 25 percent. US manufacturers are following the same course, providing parts and components for China to assemble and export, mostly back to the US. For the financial institutions, retail giants, ownership and management of manufacturing industries and sectors closely related to this nexus of power, all of this is heavenly. Not for American workers, but as Smith pointed out, their fate is not the concern of the "principal architects of policy."
It's true that there is nothing fundamentally new in the process of deindustrialization. Owners and managers naturally seek the lowest labor costs; efforts to do otherwise, famously by Henry Ford, were struck down by the courts, so now it is a legal obligation. One means is shifting production. In earlier days, the shift was mostly internal, especially to the southern states, where labor could be more harshly repressed. Major corporations, like the US steel corporation of the sainted philanthropist Andrew Carnegie, could also profit from the new slave-labor force created by the criminalization of black life after the end of Reconstruction in 1877, a core component of the American industrial revolution, continuing until World War II. It is being reproduced in part during the recent neoliberal period, with the drug war used as a pretext to drive the superfluous population, mostly black, back to the prisons, also providing a new supply of prison labor in state or private prisons, much of it in violation of international labor conventions. For many African-Americans, since they were exported to the colonies, life has scarcely escaped the bonds of slavery, or sometimes worse. More recently the shift is mostly abroad.
Returning to the charges against "greedy bankers," in fairness, we should concede that they have a valid defense. Their task is to maximize profit and market share; in fact, that's their legal obligation. If they don't do it, they'll be replaced by someone who will. These are institutional facts, as are the inherent market inefficiencies that require them to ignore systemic risk: the likelihood that transactions they enter into will harm the economy generally. They know full well that these policies are likely to tank the economy, but these externalities, as they are called, are not their business, and cannot be, not because they are bad people, but for institutional reasons. It is also unfair to accuse them of "irrational exuberance," to borrow Alan Greenspan's brief recognition of reality during the artificial tech boom of the late '90s. Their exuberance and risk taking was quite rational, in the knowledge that when it all collapses, they can flee to the shelter of the nanny state, clutching their copies of Hayek, Friedman and Rand. The government insurance policy is one of many perverse incentives that magnify the inherent market inefficiencies.
In brief, ignoring systemic risk is an inherent institutional property and perverse incentives are an application of Smith's maxim. Again, no great insight.
After the latest disaster occurred, it has been agreed by leading economists that an "emerging consensus" has developed "on the need for macroprudential supervision" of financial markets, that is, "paying attention to the stability of the financial system as a whole and not just its individual parts" (Barry Eichengreen, one of the most respected analysts and historians of the financial system). Two prominent international economists add that, "There is growing recognition that our financial system is running a doomsday cycle. Whenever it fails, we rely on lax money and fiscal policies to bail it out. This response teaches the financial sector: take large gambles to get paid handsomely and don't worry about the costs - they will be paid by taxpayers through bailouts and other devices and the financial system "is thus resurrected to gamble again - and to fail again." The system is a "doom loop," in the words of the official of the Bank of England responsible for financial stability.
Basically the same logic applies elsewhere. A year ago, the business world recognized that the insurance companies and big Pharma, in sharp defiance of the public will, had succeeded in destroying the possibility of serious health reform - a very serious matter, not only for the people who suffer from the dysfunctional health system, but even on narrow economic grounds. About half of the deficit that we are instructed to deplore is attributable to unprecedented military expenditures, rising under Obama, and most of the rest to the increasing costs of the virtually unregulated privatized health care system, unique in the industrial world, also unique in its gifts to drug companies - opposed by a mere 85 percent of the population. Last August, Business Week had a cover story celebrating the victory of the health insurance industries. Of course, no victory is enough, so they persisted in the struggle, gaining more, also against the will of the large majority of the public, another interesting story I'll have to put aside.
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