The horizon is not so far as we can see, but as far as we can imagine

Month: November 2017

Yellen’s Legacy Is Doing Nothing that Mattered

So, Janet Yellen has been replaced as Fed chair.

Her reign was meaningless, she just kept the trends moving as they were, and was essentially no help to ordinary Americans. Yes, she kept interest rates low, but that meant little; all that money flooded into corporate bank accounts.

I don’t want to slam Yellen particularly hard. The person who was in place at the time when a real change could have easily been made was Bernanke, and he decided to bail out rich people and let ordinary people sink. He is responsible, with Bush, Obama, and Geithner, for the continued decline and stagnation of the US economy, and for the damage to much of the world’s economy.

If Bernanke had done nothing but allow banks to go bankrupt and the government to take them over, with appropriate support, we would be in far better shape now, though the couple years after the financial crisis would have been worse.

Yellen? Yellen is a drone. She had no idea what to do, so she froze for years in the headlights.


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When People and Societies Change

Machiavelli famously noted that men do not change.  Whatever they are like, whatever their normal personality and way of doing things, they stick to it. Fabius Maximus, faced with Hannibal, retreated to fortified fastnesses and refused to engage. This was the right thing to do, but when he once again had enough men, he still refused to engage. This is how Scipio Africanus wound up being the general to defeat Hannibal.

Gentle men who abhor violence rarely become violent when violence is necessary; violent men do not become peaceful when the times call for it, and so on.

In our own times, we see that politicians raised under neoliberalism are unwilling and unable to effectively use real Keynesian policies: They can’t “do” stimulus. When they try, they give the money primarily to the rich.

They grew to power by being neoliberals and faced with a new landscape, they cannot change. In France, we saw the main center-left party (really a neoliberal party) implode because it just would just change. Throughout the West, center-left neoliberal parties are dying for just this reason. The world has changed, but the people who run those parties cannot change.

In Britain, Labour may buck this trend, but if so it will only be because of luck: Those who gave Corbyn his chance to be leader say that had they known he would win the leadership, they would never have nominated him.

And Corbyn is a man who did not change, though there was a moment when he could have, when many others did.

People change when young or in the face of extended catastrophe.

This is as true of the large masses of people as it is of individual leaders.

By the time men and women are thirty, and often by their mid 20s, they are set. They have their personality, it has more or less worked for them. There is a world around them, run in a certain way, and they want it to keep running that way because that is the world they know how to navigate.

This is true even if their lives are bad, but stagger on. A bad adaptation to the world is preferable to most people to a radical change in either themselves or their world.

Most people, including most radicals, are innately conservative in the sense that once set, they don’t like to change.

People change or support real change when their lives or their world are truly intolerable, and generally when their lives or worlds are intolerable for a long time–years, often as much as a decade or more.

Or they change when something that is actually catastrophic occurs: The most recognizable caricature being the drunk who has no couches or friends left and wakes up in a ditch. The society, like Germany or Japan after WWII, which has lost everything and is prostrate.

Intolerable means truly intolerable: “Cannot tolerate this, will chew leg off to escape trap.”

This is one reason why I warned that Trump could win: Because there are many people who consider their lives or worlds intolerable. It is why Brexit won.

The unthinkable becomes thinkable when the status quo becomes intolerable.

In politics and economics, this happens when the status quo way of running the world, the ruling ideology (and there is ALWAYS a ruling ideology), fails to deal with an intolerable problem over an extended period.

I remember, in the seventies, the price of chocolate bars and comic books going from 25 cents to a dollar in less than two years. Vroom!

The post-war liberal era was entrenched and successful. It produced the best economy the West had ever seen. Ever. But it could not handle the oil shocks, and those oil shocks turned into stagflation (high inflation and high unemployment at the same time) and enough people who had been committed to post-war Liberalism (New Dealism) flipped over to the new Neoliberal consensus, though it wasn’t called that at the time, to give the election to Reagan.

This is because post-war Liberalism failed–for over a decade–to deal with the oil shocks. People got fed up, could not take it any more, so they went for Reagan.

The so-called Reagan Democrats.

And the most successful economic regime the world had ever seen at giving Europeans and Americans a good life (and which produced better growth in the 3rd world than our current system, putting China aside for good reasons), ended.

As conservatives noted, people picked up the ideas lying on the ground. Those ideas were stupid ideas, like the Laffer curve (the less you tax people the more you will receive in taxes), but they were the ideas available and they are the ideas people picked up.

People changed. Not everyone, but enough people.

The other way people change is just by being young. Neoliberalism, shit that it is, worked for a lot of people. A lot of people got reasonably wealthy off it because it raised asset prices massively, both in the stock market and in housing, and if you were in place or able to take advantage of those things, you got a lot of money doing basically nothing.

This is what old style economists referred to as “unearned income” and rentierism: Money you got for basically just being in the right place at the right time, without adding any real value.

So, even today, a lot of older people are for the status quo economically, because at some point in their life it worked for them.

And young people are not. They flocked to Sanders, they flocked to Corbyn, because that system has never worked for them. They are willing to change (if it can be called that) because they have not yet found a combination of personal strategy and world system that works for them.

On the other hand, youngsters were against Brexit, because their experience of the EU is positive: It lets them move around easily and get jobs anywhere in the EU, and that makes their lives better.

On the other hand, old left-wingers, like Corbyn, witnessed how the EU enshrined neoliberalism. Having been alive for the before-and-after, they tend to be leery of the EU. Their lived experience is that the EU helped destroy the old post-war liberal/socialist state.

The bottom line then is that the vast majority of people can only be brought to beliefs other than those held by their society and peers either when they are young, or after prolonged and catastrophic failure–either of their personal method for living life or of their society’s way of running the world.

We are now at the stage where these two forces are coming together. Our societies have failed to run themselves acceptably since 2008, and the youngs have no attachment to the status quo since it has never, ever worked for them.

Change is thus not only possible, it is now inevitable.

But what sort of change it will be depends on the ideas lying on the ground.

More on that another day.


The results of the work I do, like this article, are free, but food isn’t, so if you value my work, please DONATE or SUBSCRIBE.

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