Ian Welsh

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

Category: Class Warfare Page 18 of 36

Japanification Revisited

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On January 8, 2016

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The thesis Stirling and I were running from the early 2000’s was that the plan under which America’s elites were operating was Japanification. Run a bubble, and when it bursts refuse to take losses and go into stagnation.

This thesis has proved out repeatedly.

Let’s shine a light on the past. The oldest articles are in the wilds of dead blogs, but there are a few still available.

August 6, 2008:

In Japan, they call it the Bright Depression. Ever since the 1980s bubble burst, the Japanese economy has never been able to rev up its engines and roar again. Slow growth or small contractions have been the rule. It hasn’t been awful. It hasn’t actually been a classic depression. But, somehow, the good times have never come back. Unemployment, never previously a problem, just won’t go away.

….

There is going to be a recovery, it has already started in Asia. Job numbers should start turning around in the spring in the US, though the number of people employed as a percentage of the population will not recover this economic cycle, and probably not for a generation.

However, Japanification doesn’t mean you don’t get some recoveries. You do, then they sputter out. Employment never really recovers, wages stagnate, and things are just generally lousy without plunging the country into an all out depression. So, yes, in that sense the country was “saved’ from a Great Depression, but choosing the worst alternative.

….

The end result of Japanifying, regressive taxation (whether direct or indirect) and  attempting to restart the financial casino will not be pretty. There will not necessarily be any immediate disaster, and some numbers will look good. But the fundamental problems of the economy under Bush have not only not been fixed, they have been made worse and the evidence is being systematically buried. There won’t be another financial crisis immediately, but another one has been made inevitable.

This has all borne out.

June 6th, 2009:

 The strategy is simple enough.

1) Give the banks money.

2) Let them avoid acknowledging as much of their losses as long as possible.

3) Allow them to gouge taxpayers for as much as possible, to dig themselves out of their own hole over a number of years.

The end result of this is going to be Japanification–at best. Not a “lost decade,” as many folks have said, but a semi-permanent wavering between slight job gains and job losses, where a good economy never, ever, comes back. And because the US, unlike Japan, is not a net exporter, it’s questionable how long Japanification can work in the US, in any case.

Fun stuff.

November 12, 2009:

There is going to be a recovery, it has already started in Asia. Job numbers should start turning around in the spring in the US, though the number of people employed as a percentage of the population will not recover this economic cycle, and probably not for a generation.

However, Japanification doesn’t mean you don’t get some recoveries. You do, then they sputter out. Employment never really recovers, wages stagnate, and things are just generally lousy without plunging the country into an all-out depression. So, yes, in that sense, the country was “saved’ from a Great Depression, but by choosing the worst possible alternative.

Called shot. Accurate.

February 20, 2010:

Once more, the percentage of Americans employed will not recover to pre-Great Recession levels for at least a generation, probably longer. This is a deliberate policy choice and everything Obama and Bernanke has done—from refusing to take over banks, to refusing to force lending at reasonable rates, to engaging in an inadequate stimulus, to refusing to make banks recognize their losses, to doing everything they can to encourage slashing Social Security and Medicare, has had the effect of making Japanification more and more likely.

This is just a small selection of posts. I may go through the called shot posts at the time of the stimulus, TARP, and so on, but heck, they just say the same thing.

By papering over the problem, by “extending and pretending,” Bernanke, Geithner, Congress, and Obama (Bush gets a nod, but TARP would not have passed without Obama, it is his child) ensured a generation’s worth of shitty economy for most people.

Yes, if we had chosen not to “extend and pretend,” the hit in 2009 and 2010 would have been worse, BUT the economy today would be far far better. In choosing the method we chose to do the bailouts, we also made the choice to have a shitty economy.  Employment has never recovered, in terms of the percentage of the population, and will not (we’re about to hit a recession), wages are down for much of the population, and all the gains of the last economic cycle have gone to the top three to five percent.

Mind you, there was an historic stock bubble. The rich are even richer than they were in 2007. Obama and Bernanke’s policy has done what it was intended to: It has preserved, and then increased, the wealth of the rich.

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The Best Paid People in Our Societies Are the Worst People

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On January 7, 2016

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In our society, who earns the most?

Basically people in the financial industry. Bankers, for shorthand.

Why? Because they can print money. In fact, they print almost all the money in society.

There is an argument that inequality exists because some people are just so much more productive than others.

This argument is a fantasy. To be sure there are a few “ten times” programmers and inventors who improved society and so on, but, as a group, the people who earn the most money in society are the people who destroy the most value. Bankers, prior to 2008, destroyed more money than they had made for the last decade. This is not in question. They destroyed trillions.

If they had taken their losses, they and almost every rich person in the First World would have been wiped out. Toxic debt was trading at less than ten cents on the dollar before the Fed stepped in and started accepting it as collateral at near par and said that it could be kept on books at “mark to model,” rather than market prices.

The effects of this were real. Real companies went out of business. Real people lost jobs. Real people wound up on the street. Real incomes cratered. Drive around suburban and exurban America. Look at the empty malls. The damage is right there.

Private bankers and financial execs make almost all of the investment decisions in our society. They decide what will be built, what jobs will be created, etc. They are the people who decide if something will happen and they make terrible decisions–even based on their own valuation system.

Based on what society needs, combined with central bankers, they make even worse decisions.

The bull market that started in 1980 and continues today has made a lot of people rich, and built a lot of houses (which were then condemned to keep their prices artificially high).

But there was an opportunity cost.

An opportunity cost is what wasn’t done.

The opportunity cost of the great bull market (that created all the oligarchs) is all the infrastructure work that wasn’t done, and all the avoiding climate change that wasn’t done. Or the fact that NASA was not properly funded, so that we had to wait until now to finally get cheap, reusable rockets.

The cost of this will be the many deaths from climate change, among other things.

That is the cost of bankers salaries, and oligarch’s tax rates, and the great bull market.

These people are not the most productive people in society, they are the most destructive people in society. They make the money they do because they have a positional advantage; they have more power than other people.

Earnings have nothing to do with merit, social usefulness, or productivity. They are a measure only of how much some people were able to grab. In this, they are little different than looting barbarians, replete with the huge death toll, and the raping (all the rapes which occur in the prison-industrial complex), and the pillaging, and so on.

Do not speak of “salary” and “merit” in the same sentence except with scorn. When the CEO doesn’t show up, so what? When the janitor doesn’t show up, though, hey! We find out who really matters.

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Free and Prosperous Societies Occur Only When the Basis of Power Is the People

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On January 5, 2016

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Any apparent exception will end quickly, and is usually a legacy from a time when the people were needed.

Franchise tracks the dominant military arm pretty close to exactly. The Swiss are free because of their fights in Pike formations.  Most of Dark Ages and Medieval Europe’s were not free, because the dominant military arm was cavalry. As the dominant military arm moves to infantry, the franchise and freedom expand.

When a society becomes militarily mass-mobilized, all the men get the vote. When a society is militarily mass-mobilized and it’s industrialized, all the women get the vote because they are needed to run the industry while the men are away fighting.

Militarily mass-mobilized societies require that the citizens be healthy enough to fight. In WWI, the British were aghast at the number of men who were ineligible for the draft because their health was too weak, or they were too short, and so on. They did something about it.

Agricultural societies tend towards the patriarchal, because much of the work requires men’s heavy muscles. Horticultural societies, where women can do the work, tend towards egalitarianism. Likewise, hunter-gatherer societies in climes where gathering provides most of the food, tend towards egalitarianism; the exception here is when the most valued food is gathered by the men. In traditional Eskimo society, for instance, where the men provided essentially all the meat and the women processed it, was not egalitarian.

Humans have three sources of power: military, productive, and (in modern societies) consumptive. Consumers are not useless in our society, but consumption is still the weakest leg of the tripod. The rich are happy to consume more, after all.

The conditions for widespread prosperity have faded. We no longer have mass-mobilized armies, but professional standing armies, and we are moving towards smaller armies with more robots, both autonomous and remote-guided.

Technological progress has made manufacturing far more efficient, and it requires far less people. The rest of the economy, unless it is required for manufacturing, now matters far less. Most service work is not highly valued and does not translate into military power, and extraction labor is a minor part of most economies.

The final source of power for ordinary individuals is simply the threat they pose to elites. As we move away from the mass-mobilized “just need a rifle” military, this fades as well. To the extent it still exists, it is being managed by the time-honored “oppression” method, with new technology allowing for a Panopticon State which would have made Orwell pine for the weak and limited surveillance of Big Brother.

This is not to say the commoners are entirely powerless. The full power of denial of area techniques shown in Iraq, Afghanistan and elsewhere hasn’t been properly appreciated.  These strategies would have worked just fine in the First World. Drones are cheap, and, in principle, could be manufactured by ordinary technicians. These aren’t F-16’s; you can make them in your garage.

Still, mass mobilization warfare is no longer the model, factories are not begging for more workers, there exists no longer any large expanses of land needing to be conquered in the name of colonialism, administered, or farmed.

As for money, banks make it, not people. We may move to a world where we fully appreciate that money is made out of thin air and reclaim control of money for the public, but so far the movement has been in the other direction–printing more and more of it for rich people.

At this point, most people are superfluous. As such there is no reason for elites to allow them freedom, power, or prosperity.

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Why Inequality Is Intrinsically Bad

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On January 3, 2016

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For most of human existence, humans lived in hopelessly egalitarian societies. Hunter-gatherer bands, and even early agricultural communities, were very egalitarian.

If you want to go evolutionary, humans evolved in egalitarian surroundings. We were not chimpanzees, living in terrible authoritarian structures full of fear.

Inequality is interpreted by humans as a THREAT. This causes a chronic fight or flight response, which causes health and performance issues.

This is true even of the people on the top of the hierarchy. Those who have more power or money fear those below them.

The data on this, which is extensive in the book The Spirit Level is unambiguous. Even when people’s needs are met, the more unequal a society, the more unhealthy everyone is and the more unhappy they are.

Those who feel lower on the totem pole also perform worse than they would otherwise would. Remove the feeling of inequality, and they perform better.

This is before we get to the social effects, which are pernicious. Those at the top of the heap distort politics to keep themselves at the top of the heap, and engage in repression.

In middle agricultural societies like Egypt, and even late ones like medieval Europe, you see vast amounts of resources going into ideology, which is to say religion. The Pharoah is a God, he owns everything. Medieval kings (and beyond) have the “Divine Right of Kings”, they are chosen by God. The Indian caste system, and even Confucianism (slightly better because you can lose the mandate of Heaven), are other examples.

What would Egypt have been like if all the resources which went into making Pharoah look like GOD, had gone into general welfare? It was a vastly rich society, which produced floods of crops; the wonder of the ancient world.

All inequality is, in part, the result of an ideological push. When we examine societies transitioning to higher inequality, it always includes the creation of an ideology which justifies it.

This is because all power within a human society (not between societies) is ideological at base. It may be enforced by men with weapons, but if those men stopped believing in the justifying ideology, or, in many cases, if most of the subjects stopped believing in it, the inequality would end. Power over people requires power over their imaginations, over what they think is right, their ideas about the natural order, and so on.

The 1980s were the “Greed is Good” decade. What followed was the most unequal industrialized society in modern history–but the ideology came first.

You must convince humans that large amounts of inequality are justified.

This is patent nonsense in most cases. The bankers, who are the best paid people in our society, destroyed more value than they created in the 2000s, even by their own accounting methods. Compensation has nothing to do with real value, and at this point it is probably negatively correlated. A teacher or nurse produces far more value than almost all bankers. Indeed, so does a janitor or a garbage collector. Not that this is difficult to pull off, as bankers, frankly, produce negative value.

The rich, as a class, are parasites. They arrogate to themselves the right to give permission for others to do things. That being the case, their only existential justification is if more beneficial work occurs because of their “management” than would otherwise. In the history of the world, this has been more rare than not.

Inequality is thus a political and organizational negative. It ensures that more effort goes into unproductive and destructive activities, which are of benefit to very few.

Inequality is unhealthy, makes people unhappy, and distorts politics in terrible ways.

These negatives are intrinsic to inequality. Beyond a relatively low level, there is no such thing as “good” inequality.

More on this in future pieces, including discussing the “incentive effect.”

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CEO Martin Shkreli Arrested for Securities Fraud

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On December 17, 2015

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Shkreli is the pharma CEO who famously raised the price of an AIDS drug over 5,000 percent and bought an one issue Wu-Tang record that no one else will hear if he doesn’t want them to.

Securities arrests don’t happen by accident, and they don’t happen just because someone has committed securities fraud.  There is so much securities fraud that practically anyone involved the markets beyond the retail investor level could be charged with something. Many investigations are ongoing at any given time, and only a few can (or will) be prosecuted–and prosecuting someone as rich as Shkreli is always a political decision.

This is a message:

Rook the proles as much as you want, but don’t scream it to the world. We have a good thing going here, sonny, and we don’t tolerate people who might wreck it.

Despite his cartoon-villain behaviour, Shkreli is far from the worst CEO in America.

Billionaires may do as they please. There is only one rule: “Don’t destroy the game.”

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The First Task for Prosperity Is Ending Artificial Scarcity

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On September 8, 2015

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We have more empty homes than homeless people.

We have more food than necessary to feed everyone in the world.

This is not an era of actual scarcity. It is an era of artificial scarcity.

We either already have, or we have the ability to create, a surplus of every necessity that is needed.

This includes housing, food, and clothing. We still have enough water, globally, if we are wiling to be smart about how we use it, and where there are geographical problems regarding access, the problem of access is easily solved. In general, we need to be a bit flexible in how we grow our food; we need to stop draining aquifers and help those farms that over-use aquifer water to grow crops that use less water, or help those farmers find other livelihoods.

Early research shows that intensive urban agriculture creates between three to ten times the food that traditional agriculture does.

We are also short of security. This is another artificial shortage, though it’s harder to fix. Most countries that have been destroyed recently were destroyed in large part because of outside intervention, whether from Western, Eastern, or Jihadi influence. We are in a cycle of blowback after blowback, with the first step being to stop doing things that will cause devastation.

Education is unequally spread throughout the world, but this is another problem which is solveable: We have the books, which cost cents to reproduce, the telecom networks are almost everywhere, and we can train the teachers. If we wanted to spend more money on teachers and less on finance, we wouldn’t have a problem.

Again, most of this “scarcity” is artificial. It is imposed through a money system where a few people have the right to create money, and everyone else has to access it from them. That money is nothing, more or less in this context, than permission to use society’s resources, whether it’s people’s labor or the results of that labor.

The only real restrictions on our ability to supply what people need are overuse of sinks (like carbon) and overuse of resources, whether renewable or non-renewable, but we either have the necessary technology to move away from that overuse, or we have scientists and engineers who would love to create it for us, but who can’t get the resources/money they need to do so.

But much of this is low hanging fruit; we already have enough food and housing and far more textile capacity than we need.

Dividing up the world as we do between countries is a huge problem in which our resources are wasted where they aren’t needed, while others go without. Colonial powers have drawn ineffective and nonsensical borders, as is the case with most of Africa and the Middle East.

By centralizing the production of various resources (and that includes both ideological and intellectual resources) in a few areas and to a few people, we have pooled necessities in places they aren’t needed and denied them to other people.

These are social problems, with social solutions. The idea that technology will “fix” them is somewhat (though not entirely misguided.) We already have the material means to care for everyone, we do not.  This cannot be laid directly at the feet of technology–we have had this capacity for at least a century or so.

Oh, and the shortage of spare time for so many; with the shortage of work for others? Complete social construction. We are doing too much of the wrong kinds of work, and too little of the right kinds of work, and those choices are also social.

In the end, scarcity of the goods humans need most is almost always, in the modern world, artificial: It’s a social choice.

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Look, Trump’s Policies Are Nativist Populism

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On August 31, 2015

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He supports Social Security.

He wants universal healthcare (something better than Obamacare, which is not universal healthcare).

He believes in a bilateral trade policy rather than “free trade.”

Now Trump wants to increase taxes on the rich, including getting rid of the carried interest exemption, which would hammer hedge fund managers and so on, whom Trump is correct about: They build nothing—in fact, they are a drain on the economy, straight and simple.

This is married to a nasty, anti-immigrant side, of course, and to some equally nasty social positions. However, on economics Trump is proposing some stuff that any progressive should want, and which has been anathema to the Republican party since Reagan. (In 2000, Trump was for some stuff, like eliminating capital gains taxes, a position with which everyone should agree.)

Moreover, he is winning with these proposals, showing that right wing economic populism is still powerful: It was simply not being represented by the Republican party (or the Democratic party, for that matter).

Trump, Sanders, and Corbyn are all showing what is actually possible, if you dare to propose it. Positions which have polled with majorities for decades are not death to politicians. Who knew?

Corbyn and Trump, in particular, have been vilified and ridiculed by the Press, yet both are winning their respective elections.  Ten years ago, such vilification worked. A candidate could propose those policies showing well in the polls, yet still lose the primaries.

Today, this doesn’t work, because people have had it; they know that just because a politician is favored by the press does not mean that politician will help them, and, in fact, will most likely make their lives worse. They know this because the politicians to whom the press and the establishment have granted their approval, for over 40 years, have (with only a few hiccups) have made their lives worse.

Meanwhile, if trend lines continue, Sanders will take the Democratic nomination (though, of course, trend lines may not continue).

This is a realignment moment: People are no longer willing to put up with politics (and economics) as usual. All three men, if they win, will have mandates. They have been running honestly on what the press and establishment consider “radical” policies (the population does not agree, and never has. Americans, in particular, said they were right wing and consistently polled as wanting rich people taxed, along with various other populist policies).

Expect the vilification to continue, and if Sanders continues to make ground, expect the press to turn from largely ignoring him, to attacking him.

Looks like Brits and Americans may finally, after about 30 years, have a chance to vote again for something other than Tweedledee or Tweedledum.

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US Corruption vs. World Corruption

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On July 31, 2015

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One of the most hilarious things to me is Americans whacking other countries for being corrupt.  Russia is a favorite target, but the US abuses virtually every non-Western country for “corruption.”

I’ve pointed out before that this is absurd. There is no more corrupt country in the world than the US. The bank bailouts were pure corruption, performed even though a supermajority of the population was against them, even though the banks had broken the law systematically, and even though the banks were bankrupt due to decisions they knew were corrupt, illegal, and (yes), stupid.

The US election system is flagrantly corrupt, with billions of dollars of direct and indirect donations from the rich. You buy supper with a candidate for thousands of dollars a plate. You buy White House access with much larger donations. Third party PACs spend hundreds of millions.

The bribery in the US is legal. Legal. That does not mean it is not bribery. That does not mean it is not corruption. This system was arranged by the monied classes to ensure that politicians owe them and do not harm them, and that they continue to pass laws and take actions which help them.

The regulatory class is completely owned. There is a revolving door between Wall Street and the Treasury and Federal Reserve, for example, and Wall Street pays far better. When senior officials leave, they get jobs from those whom they regulated, or give speeches for six figures a pop. Politicians are treated the same, receiving lobbying jobs worth six to seven figures, board positions, and so on.

This is all legal, but it is corruption.

Jimmy Carter recently said this, with respect to Citizen’s United:

an oligarchy, with unlimited political bribery

But don’t be deceived, Citizen’s United was just the final capstone: The US was already a completely corrupt, bought, and owned regulatory state before Citizen’s United.  Citizen’s United just made it much easier.

I repeat, in absolute terms, there is no more corrupt country in the world than the US. In relative terms? Who knows, but the US being corrupt matters more than corruption in any other country.  (Though China is coming on strong.) US financial law is essentially extra-territorial: The US is capable of crippling other countries’ economies almost entirely with simple Treasury orders. The US has the world’s largest military and regularly intervenes in other countries with air strikes, assassinations, and general terror.

What is unique about America is not its corruption, many countries are corrupt, it is the sheer hypocrisy the pretense that America is not corrupt, because Americans have made their corruption legal.

Corruption is the inevitable consequence of concentrated wealth.  It always occurs when you have great inequality, it cannot be avoided.

You want corruption back to reasonable levels? You want it illegal again? Take the oligarchs’ wealth away from them and break the great monopolistic and oligopolistic companies or bridle them with uncorrupted regulators who will crawl up their backside and tax the hell out of them.

Nothing else works (and the second solution works for a while). Nothing else has ever worked.  Anyone who tells you otherwise is lying to you.

You want you country back, and your children and yourselves to have a future?

It’s you or them. So far Americans keep choosing them.

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