Ian Welsh

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

Category: The Twilight of Neoliberalism

Will Capitalism and Democracy Survive?

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On September 28, 2017

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Image by TW Collins

Systems of governance, and both capitalism and democracy are such systems, can run cycles of success, failure, and renewal for a long time. Consider Imperial Confucian China, with dynasties failing, sometimes with interregnums, then new dynasties arising. Dynasties would tend to be vigorous to start, corrupt and sclerotic at the end.

Or the Dark Ages and Medieval Europe, with forms of feudalism and monarchy surviving crises over many centuries.

Let’s consider the dynamic in a bit of detail.

A system survives when it gives power to those who support it AND are capable of continuing it.

This seems obvious, but it’s a little more tricky than it seems.

(Speaking of money, I am fundraising to determine how much I’ll write this year. If you value my writing, and want more of it, please consider donating.)

Take capitalism: Capitalism runs through greed. It gives power to those who do whatever it takes to make the most money The more money you have, the more power you have. Money is the ability to decide what other people do, not just the ones you hire directly, but through purchasing power. Apple decides what Foxconn does, and heck of a lot of other people it doesn’t hire directly.

Capitalism’s prime directive is: “Do whatever makes the most money.” Whoever does that successfully also receives the most power.

In a capitalist society, people who do not respond to capitalism’s prime direct, do whatever makes the most money, do not get power. Since they have no power, they cannot challenge capitalism.

The catch here is part two of the prime directive, “and are capable of continuing it.”

Capitalism must also run the actual real economy, which consists of people and things: houses, food, sewer systems, airports, and so on.

If capitalism fails to run that system effectively, that has real effects which having more money cannot manage.

You see this in the hyperinflation of Weimar Germany. You see this in the Great Depression. You see this now, in America, where parts of the population are seeing absolute declines in life expectancy.

In Capitalism, there is supposed to be a transmission between the real economy and how much money powerful people have: you should get your vast wealth by giving people what they want, and that should be good for the economy, and if it isn’t, you should go bankrupt.

People who pursue money but cannot actually manage the real economy should lose that money, and therefore their power.

This happened in the Great Depression. The rich took their losses, and lost their power (though not all of them).  Those who remained were the smarter or luckier–more capable.

Still, the magnitude of the disaster was such that capitalism was in some danger. As many have observed, FDR rescued capitalism.

What happened in 2008 is that a large portion of capitalists lost all their money (and more than all their money). If the capitalist transmission system had been allowed to work, there would not have been a single solvent major bank or brokerage in the United States.

They had fucked up.

BUT, they had also bought the politicians and regulators, and thus, were bailed out.

The real economy, which is not GDP, then shifted into a lower state of activity.

This process has been going on for a long time now, since 1980 really. The rich have been getting richer and worse at managing the actual economy.

What should have happened in 2008 was that the rich took their losses and power moved to democratically-elected officials, as it did in the 30s. But democratically-elected officials, handed said power on a platter, refused to take it. (Yes, the Fed, but the Fed can be brought to heel any time either Congress of the President chooses to.)

Democracy, thus, also failed.

A system must give power to those who want to continue it. It must also run the actual society well enough to avoid being overthrown.

Democracy failed in 2008, but it has not failed, completely–yet. In Britain, we see the rise of Corbyn, who wants to take back vast swathes of the economy from private business; for instance, things like the train system, where private owners have made train travel cost more but less reliable.

In the US, the Democratic Party is moving towards single payer health care, because the private industry has failed to run health care effectively and efficiently for the majority of the population.

These are healthy movements. Capitalism has failed to do what it is supposed to do: Run the economy properly. They said, in the 70s and 80s, “We’re better than the public. Privatize and de-regulate, and we’ll do a great job.”

Instead, we’ve experienced a progressive decline, which has been leading to catastrophe.

If democracy succeeds in removing from the private sector what it cannot run effectively, and in removing the power from the wealthy whom have proven they cannot manage–as with Corbyn’s maximum salary proposal (though more comprehensive anti-trust actions are needed), then democracy will survive.

If democracy cannot manage what capitalism cannot, then democracy, too, is on the line. It will have failed to run society effectively, and will be seen to have failed.

Either democracy tames capitalism, or democracy and capitalism may both die.

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Why There Is More Reason to Hope Today than in Decades

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On July 12, 2017

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Somewhere between the late 80s and the early 90s, with Clinton’s election, hope died.

The post-war era had serious issues, but the post-war era–as the civil rights movement and 70s feminism showed–was handling those issues. It was moving in the right direction. Until it didn’t, until it couldn’t handle the cascade of problems from the rise of oil prices.

In Britain, Thatcher got into power; America got Reagan. They were opposed by people who preferred to try and fix the older world, and those people lost. So there came the third way, which said: “If you can’t beat them, join them!” Clinton, Blair, and all the various folks like them wanted to do Thacherism and Reaganism but with less cruelty.

That couldn’t, and wouldn’t, work. Clinton set the stage for large chunks of the financial crisis: He gutted welfare, set up truly cruel standards for incarceration which gutted poor black communities especially, and hurt everyone else who was poor, even if less.

Blair, his British counterpart, was onside with Iraq, and blah, blah, blah.

None of them did anything about climate change worth speaking of. Their solution to pollution in the developed world was to ship the most polluting industries to developing countries, mostly notably China, and pollution there is as bad as it ever was in the first world.

Meanwhile, as we all know, they pursued a raft of policies whose effect was to funnel money to the rich, gutting the middle class over time (though the middle class benefited at first) and impoverishing many. This created oligarchical power structures throughout the west, abetted by technocrats insulated from control by elected politicians.

The point here is that the trends were mostly bad. Those few good trends, such as improvements in parts of the developing world were not a result of neoliberalism (China used mercantile policies to industrialize), and in fact, as Ha Joon shows in Bad Samaritans, growth in the developing world was slower in the neoliberal era than in the post-war era.

We have been driving ourselves towards, not disaster, but catastrophe, and not one catastrophe, but many.

So, people thought I was pessimistic. I wasn’t. I never was. I was realistic. Because it’s government and corporate policy, it’s the policy of all of our elites, to do things which would have forseeable bad consequences. That’s been policy and they’ve been very determined to stick with it.

So, there has been no room for what some people mistake as optimism. Hope. The only hope was that at some point this would change. As long as we kept electing people like Clinton or Obama, there could be no hope because those in power haven’t wanted to change the way the world is run. They don’t intend to do anything which would avoid catastrophe.

That is just how it’s been.

So now everyone is running around like chickens with their heads cut off, and I’m the calm one.

Because there is now reason for hope. Large masses of people are now willing to vote for politicians who want to do the right thing. It is too late to avoid much of the consequences of what we have done. It is simply too late. We have methane release in the arctic, we have a great species die-off, and it’s too late.

But it is not too late to mitigate. As the first rule of holes states, “When you find yourself in a hole, first, stop digging.”

We haven’t even done that yet, really. There’s a small amount as solar becomes cheaper than coal, something which should have happened 20 years ago through government intervention, but it’s too late.

However, with Sanders and Corbyn’s near successes, with the fact that so many would consider voting for them, with Melenchon in France coming so close, there is now reason to hope that we finally have an electorate willing to consider actual change to do the necessary things.

This was not true in the past. People like Sanders and Corbyn were not taken seriously as national candidates. The idea was laughable.

So this is hope; a bright, shining, slender thing.

We have it now. And yet people are running around like the sky is falling. The only reason they are doing so is that most of them didn’t understand that the decisions which caused all the problems we’re having today were taken and reaffirmed for decades. If you knew where they were going (and it wasn’t hard to), you just had to look and not flinch. If you were able to do this, nothing that is happening today, nothing, is surprising–in general terms.

The only thing that is interesting is that a large number of people, and especially young people, are turning away from doing the wrong thing, and showing openness to change. This creates a crossroads: They may choose something worse, or something better. I think they’ll take something better when offered; we saw that with Corbyn, and polls now show he’d win an election held today.

Of course, they’ll also take something worse if it means change from the status quo. We’ve seen that.

But they are willing to Change, and that means there is Hope.

So, the sky is creaking, but that’s already been predetermined and running around screaming about in affected surprise is pathetic.

Meanwhile, we may be able to begin reducing the worst of what is to come, rather than continually trying to make it worse.

And that, my friends, is reason for hope.

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.

A Time of Hope

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On June 12, 2017

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I have been writing a long time. For most of that time, people said I was “pessimistic” and I replied that what they saw as pessimism was realism.

What I foretold, in broad strokes, has come to pass. Climate change is past the point of no return, the housing bubble burst, austerity was a disaster, and it emboldened the far right.

When I first started writing, I tried to push the Democrats to go left, to try to mobilize people who don’t vote to vote by offering them policies that worked for them. I advised them to engage in intensive outreach, because I, as many others, noted that people who don’t vote are a lot more left-wing than people who do vote. People don’t vote because they feel disenfranchised; none of the major parties represent them.

After the election of Donald Trump, I had an interview with Jay Ackroyd, and he said that as long as he’d known me, I’d been more pessimistic than others, but now I was optimistic, and what gives?

Simple, the trends had turned.

Sanders happened and he did better than any self-avowed socialist in the US in my lifetime. He came very close to winning the nomination, despite the Democratic party fixing it against him.

Corbyn happened, in that he won the leadership of the Labour party and then fought off an attempted coup.

The trends had changed.

The time of neoliberalism was clearly ending, which I had noted repeatedly. That meant that we were moving into a time of change. Now, I had expected, following Stirling Newberry, that this period of decline in neoliberalism would first hit in 2020/24, but these are the pre-shocks.

That doesn’t mean we’re out of danger. It is not guaranteed that the left wins in every country, as it did not in the 30s. The far right and the populist left both have an opportunity in this era: The old verities are dead, and people are looking for a different way to run societies. They can go authoritarian, indeed totalitarian, or they can go populist left and no, there really aren’t any other options, though far right and populist left have variations: all types of populist left aren’t the same and shouldn’t be seen as the same.

But neoliberalism was a shit ideology: Its project was impoverishing millions to make as many billionaires as possible. Ignore the bullshit about the third world; during the post-war era, the third world was improving faster than during the neo-liberal era, but without cramming down first world middle and working classes.

Neoliberalism, with its market worship, was completely incapable of dealing with climate change. Proper government intervention to goose markets would have had us where we are today with renewables (cheaper than coal) 20 years ago– which is what we needed, and would have moved up the timeline for electric cars as well as the essentially, wholly undone project of energy-neutral and carbon-neutral building, while not allowing the oceans to be destroyed.

Markets work best when government intervenes in the correct ways. Neoliberalism intervened, in essence, only to reduce regulation and push money towards rich people: This did not make markets more competitive, it made them more prone to monopoly and oligopoly. (This is not even close to being in question, it shows up in all the data. Anyone arguing otherwise is a liar or a fool.)

So, neoliberalism failed to deal with climate change or ecological collapse and, by vastly increasing inequality and failing to regulate markets, caused both political and economic instability. Asset prices should not rise faster than median wages over long periods. If they do so, something is wrong. That most economists and policy makers could not recognize this shows their corruption and foolishness, as well as the uselessness of mainstream economics to understand its own subject matter.

I am, therefore, not optimistic, but realistic: I say that we are moving out of an era where problems could only be solved if they made someone a billionaire and are moving to an era where we will be able to start actually fixing problems that matter.

This is a high-risk period, and I, as have many, have tried to reform neoliberalism, to fix problems without having to enter an era of war and revolution, to fix them before it was too late (as it is now for catastrophic climate change).

That didn’t work. So be it. This is where we are.

But unlike in 2009, with the co-opted and corrupt Barack Obama taking the throne and throwing away the last chance to avoid the worst of what is now baked-in, we now have some real reasons to hope along with all the baked-in catastrophes we’ve had handed to us.

Oh, yes, Trump.

Yeah, he’s bad, and he’ll be bad for a lot of people, but I am not worried when it comes to the big picture because he’s incompetent. I never thought he’d be Hitler and the idea that he will launch a successful coup is now completely risible: He is far too incompetent. He’s supposed to launch a coup and he hasn’t even filled over 90 percent of all senior administrative posts at the Pentagon?

Get a grip.

In fact, as I thought at the time (and at that time I thought he was more competent than he’s proved to be), Trump may well be an innoculation against someone worse. Someone competent, running on actual right-wing populism, say, Bannon with charisma, could well have turned America into a fascist state for two generations.

Trump? No. And his failure provides a clear warning of the danger and may discredit those policies. (It is amusing that liberals are obsessed with getting rid of him. Pence will be far worse, because he will be competent and agrees with every bad part of Trump’s platform and none of the good parts (which, granted, aren’t happening anyway).)

Chin up. We failed to reform the system, and now we are in an era of great instability. Lots of countries are still being staggeringly stupid, like France electing Macron to destroy their entire labor code and impoverish themselves, when Melenchon was available.

But the left–the populist left–is rising. We saw it with Sanders, and we are seeing it with Corbyn, who may actually be the first world leader of the new era and the new era’s ideology–just as Thatcher was the first great neoliberal leader (even if she was not called that at the time).

It will be ugly. There will be wars and revolutions. There will be periods where the old order does horrible things (Macron, Merkel’s destruction of Greece and impoverishment of the South) and where the new order of the right does terrible things.

But it is now, also, possible to do many of the right things, like re-nationalizing natural monopolies, ending the student loan bubble and the exploitation of the young, repairing universal healthcare in the UK, creating it in the US, and so on.

There are no guarantees. We got lucky in the 30s, though it may not seem like it. Imagine if, instead of FDR, the US had wound up with some fascist? Many Americans at the time thought it possible.

Still, we now have the chance to be lucky, which was simply not possible when we were societies under neoliberalism. Under neoliberalism, some individuals could get lucky and obscenely rich, but generally the whole population could not benefit.

Now we can. And that is reason for hope. So hope. Don’t be optimistic, just be realistic about the opportunities as well as the dangers opening up.

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.

Trump Is the Next Stage of the Disease

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On December 22, 2016

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One of the more common mistakes regarding Trump is to see him as something that came out of the blue; unheralded and strange.

Trump is a kleptocrat. The US is a kleptocracy. It “formally” became a kleptocracy when the Supreme Court ruled in Citizen’s United that money was speech. (It is ironic that Trump won with less money, but it doesn’t change this fact.)

America was pragmatically a kleptocracy in 2009, when Obama entered office and continued his predecessor’s policy of bailing out bankers, taking houses away from little people and not prosecuting bankers for clear crimes.

Punish the people without money; let the people with money walk.

Trump is a walkimg emoluments violation: He should be impeached month two of his term for his refusal to sell his company.

But he won’t be (though he may eventually be impeached if Republicans decide they’d rather have Pence as President, and that they don’t think Trump’s followers will personally visit their houses to discuss the issue).

Kleptocracies are run for the benefit of the rich. It is that simple. A monarchical kleptocracy like Putin runs, and like Trump seems interested in running, makes sure the peasants get something, which means it may feel slightly better than what came before it. (Putin is very, very popular and was so even before the recent wars for the simple reason that Yeltsin was far, far worse.)

But they are still kleptocracies. Trump’s first order of business is tax cuts, mostly for the rich. There is a report that his team has asked for information on funding of environmental groups, and Trump plans on shutting down NASA’s climate change group.

These things get in the way of making money; and because environmentalism was pushed during a period in which the economy was, for too many people, a negative sum game, it is also unpopular with his base.

But these things are extensions of the already-existing Republican party orthodoxy. Tax cuts and fuck-environmentalism is where Trump stands in solid agreement with the kleptocracy that already ran the country. These things are not what make Trump interesting, or unique, they are what make him simply another stage of the disease.

Understand that what we had in 2016 was a crisis point. There were three options. Clinton was for the status quo kleptocracy. More or less the same, with a bit more help for those hurting the most, like students.

Trump was for monarchical kleptocracy, minus globalism: add tariffs and one-to-one trade deals to the mix, change up the foreign policy, make sure some more people get jobs, while gutting worker rights in general.

Sanders was an opportunity to actually change some of the key domestic policies away from kleptocracy: While not ideal, he was clearly a change from the status quo in a kinder direction, and he came fairly close to winning the Democratic primary, despite an active conspiracy by the DNC to stop him (no, no, it meets the actual definition of conspiracy).

Of those three options, Americans chose Trump: a new stage of the kleptocratic disease. Double down on transfers to the rich, but let’s give more scraps to the poor and fuck over some foreigners to get those scraps while burning up the world even faster. (Obama was not good on the environment; he was bad, but Trump will be much, much worse.)

I am not panicking, or running around screaming. I regarded something like Trump as nearly inevitable, with a small, but real, chance to avoid him by embracing the populist left (in this case, championed by Sanders).

In fact, Trump is not as bad as what I expected. His victory, a squeaker, may wind up precluding Trump 2.0, that is, the guy who would run next time, having learned from Trump what was possible, but far more disciplined, focused, and ideological than Trump.

Trump has the support of some powerful ideologues (most notably Bannon), and he has a world view, inchoate as it is, but he’s a very flawed man. Despite being very good at getting what he wants, it is undeniable that he lacks discipline, focus, and a broad base of understanding. Nor does he self-identify as being ideologically driven. Bannon may want to be the Lenin of the right, Trump does not.

More to the point, because the actions of US elites (and the world’s), along with the repeated votes of US voters, kept pushing America down this path, for decades, I regard running around screaming as pathetic. It’s like running full speed at an oncoming train for five minutes, with plenty of opportunities to veer off, then complaining when you get hit.

Many Americans, and the vast majority of their elites, affirmatively chose, repeatedly, to take actions and institute policies which were most likely to lead to Trump. Those who opposed those policies lost, and a huge chunk of the population sat on the sidelines doing nothing.

There were many, many opportunities to turn away from this path; the largest was to NOT bail out bankers in 2009.

In 2009, I wrote the US off. I knew that Obama had affirmatively made the choice to save oligarchy from itself (quite different from FDR saving capitalism, but not oligarchy). I knew then that something like Trump was the most likely outcome, but I expected worse than Trump, so far, seems to be.

So running around screaming is ridiculous. This was a choice, made affirmatively, repeatedly. If Trump had lost to Clinton, Trump 2.0 would have tried in 2020 and almost certainly won. The US is a kleptocracy, and eventually the disease would move to the next stage, if not reversed.

What I seek to do now, with regards to Trump, is two things. The first is simply to understand him and his movement. We’re going to be living in his America; it’s his world, for some time, so we’d best figure it out.

The second is to poke people who didn’t and still don’t get it, because until enough people do, we will keep losing to kleptocrats (whose number includes both Clintons) and people like Trump.

These two things are meant to support realistic assessment of Trump, the US, and the world so that effective action can be taken.

I have a friend who, as a result of Trump, is leaving the US with his two children. He has carefully looked at Trump, made his assessment of the US’s future and chosen a course of action. That is effective.

Make your assessment, take your action. Stop the hysterics. I strongly recommend that many people, who are most worked up, take two weeks off the internet, except for unavoidable work related tasks. Calm down, think, and decide what you need to do for yourself and your dependents. Heck, depending on who you are, you might even be one of the winners from Trump (they will exist).

Then decide what you’re going to do. Understand the consequences of your actions. Make your assessment. If you really think Trump = Hitler you should be getting the fuck out or preparing to fight, and I do mean fight. If you don’t, what do you think he is?

Get real.

In the meantime, I will continue to keep an eye on Trump and his team and try to provide analysis without hysterics or panic. Fear may be appropriate (it is for some people, for sure), panic is not.

But it will be vastly harder to fix this if people keep pretending it wasn’t affirmatively chosen, and not just by people who voted for Trump this time, but by everyone who supported the previous status quo, starting around 1980. Kleptocracy is neoliberalism’s child, its logical end-result, and Trump is just a new stage in kleptocracy, and yes, many people worked hard for this including most people who voted against Trump.

Understanding how and why you got here is necessary to get out of here–not in one piece (it’s too late for that), but without losing any body parts you’ll really miss (always choose to lose a leg–the prosthetics are great).

Trump: Just another stage in the disease of kleptocracy, made inevitable by neoliberalism and affirmatively chosen by modern “liberal” hero, Barack Obama.

Own it.

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.

The Course of Empire by Thomas Cole

The Lies at the Heart of Our Dying Order

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On December 16, 2016

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One should understand why people have lost trust in experts, the media, and politicians.

It is not difficult, it is the same reason people lost faith in Soviet Communism: Promises were made that turned out to be lies, those promises were not kept.

Soviet Communism was supposed to lead to a cornucopia and a withering away of the state. Instead it lead to a police state and a huge drought of consumer goods, and often enough, even food. Communism failed to meet its core promises.

The world order we live in was born in 1979 or 1980, with Thatcher and Reagan. It made a few core promises:

  • If the rich have more money, they will create more jobs.
  • Lower taxes will lead to more prosperity.
  • Increases in housing and stock market prices will increase prosperity for everyone.
  • Trade deals and globalization will make everyone better off.

The above core promises all turned out to be lies. It’s that simple. For the last 40-odd years, most of the population experienced either stagnation or decline.

Understand clearly: By 1979, people had lost faith in the post-WWII order. They were willing to try something new.
That “new” order has now betrayed too many people, and it is falling. It will continue to fail. We are in the twilight of neoliberalism (a longer article on that topic is forthcoming).

This is the reason why people are going for “fake news.” This is why people are willing to listen to demagogues. This is why people don’t trust the press–and why should they? The press has lied to them repeatedly, it is the original fake news. This is why people don’t listen when hundreds of economists say Brexit is bad–why should they? Most economists missed the housing bubble.

Neoliberalism has discredited everyone who bought in to it. Who didn’t buy into it? Well, the hard left and what people are now calling the “alt-right.”

So people are turning in those directions, though more to the right. Because people are ideologically and identity driven, and most are not intellectuals, what they look for are signifiers that someone is not like the people who screwed them, who lied to them for 40 years.

Trump does not talk like those people. Farrage does not talk like those people. On the left, Corbyn does not talk like those people and, to a large extent, neither did Sanders.

And so, people are turning to people who don’t parse like the “typical” elite. Many of those people are also selling them a bill of goods (Trump, to a large extent), or are nasty pieces of work (Trump, Alt-Right). To a lot of people, however, that doesn’t matter: They can’t take the pain any more. They are assured a long decline and they will take a flyer on anyone who might shake things up.

Lying is bad policy. It may get you what you want in the short run, or even the medium run, but it destroys the very basis of your power and legitimacy. Lying is what neoliberal politicians, journalists (yes, yes they are neoliberal), and their experts have done to themselves and they destroyed both their own power and legitimacy and that of the order they supported. No one with sense trusts them: If you trust these people, you have no sense, it is definitional. I always laugh when some idiot says, “But 90 percent of economists think X is bad.”
FAIL. They also missed the housing bubble. They lied or were “mistaken” about trade deals. Their opinion means nothing.

All this screaming about fake news is something I will take seriously when the New York Times, who helped sell the Iraq war based on “fake news,” is listed as fake.
The current order has very little credibility left, and they are losing more and more. Look at all the poll failures: Somehow, the polls almost always get it wrong against insurgents, not for them.
No, neoliberalism is dying, and its defenders are discredited, and both things deserve to be the case. That does not mean its death-throes will be pleasant (they won’t be) or that what replaces it will be better, just that it has run its course.

Those who supported it took their rewards: The top tier got filthy, stinking rich, their courtiers received good jobs and money, even as both disappeared for their victims. They will have to be satisfied with that, because posterity will be absolutely scathing to them, as it is to the generation leading up to World War I.
Lie repeatedly, fail to keep your promises, and things like Trump and Brexit will be the result. It is that simple.

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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