by Tony Wikrent
Strategic Political Economy
Process knowledge is crucial to economic development
Henry Farrell, Sep 02, 2025 [Programmable Mutter, via The Big Picture, September 12, 2025]
… I’m fascinated by process knowledge and manufacturing because I spent a chunk of the late 1990s talking to manufacturers in Bologna and Baden-Wurttemberg for my Ph.D. dissertation.
I was carrying out research in the twilight of a long period of interest in so-called “industrial districts,” small localized regions with lots of small firms engaged in a particular sector of the economy. Paul Krugman’s Geography and Trade (maybe my favorite of his books) talks about some of the economic theory behind this form of concentrated production: economic sociologists and economic geographers had their own arguments. Economists, sociologists and geographers all emphasized the crucial importance of local diffuse knowledge about how to do things in making these economies successful. Such knowledge was in part the product of market interactions, but it wasn’t itself a commodity that could be bought and sold. It was more often tacit: a sense of how to do things, and who best to talk to, which could not easily be articulated. The sociologists were particularly interested in the informal institutions, norms and social practices that held this together. They identified different patterns of local institutional development, which the Communist party in Emilia-Romagna and Tuscany, and the Christian Democrats in the Veneto and Marche, had built on to foster vibrant local economies….
I spent a lot of time on workshop floors, listening to small-scale founders talking about their lives. I’ll never forget a particular conversation with a manufacturer of teabag-packing machines** about the technical ingenuity required to figure out how to reliably staple on the threads attached to some fancy tea bags, which allow you to pull the teabag out without either scalding your fingers or rummaging around for a spoon. The machinery for accomplishing this apparently simple task was quite complex and fantastical: it was a surprisingly difficult engineering problem….
A lack of appreciation for physical process knowledge helps explain why America is in trouble. Breakneck criticizes the first Trump and Biden administration’s belief that they could strangle China through export controls, riling up Chinese companies to “break free of American restrictions.” However, Dan’s criticisms go way further. It isn’t just that America focuses so much of its “entrepreneurial dynamism” on stuff that doesn’t necessarily do much good, and may plausibly do significant harm to American society: crypto, the metaverse and perhaps AI. It’s that for decades, American policy makers sat back as manufacturing moved overseas, not understanding what the long term consequences for process knowledge might be….
[TW: Regular readers will recall the number of times that Ian has written about the folly of free trade and that technological advances will more likely occur where the manufacturing is physically located. Or, As I wrote in The Obama administration as “managed democracy” (May, 2010):
…as an industrial enterprise grows and matures, its trained and skilled employees make the surrounding community a pool of technical talent that is highly conducive to the creation of other industrial enterprises that use the same or similar skills. That’s why certain towns and cities become known as centers for specific industrial products. Sheffield in England was known for its highly specialized alloy irons and steels. Delft in Holland is known world-wide for its blue pottery. The Hocking River valley in southern Ohio became known in the 1800s as a center of brick manufacture. The Connecticut River valley was known for almost a century as “Precision Valley” because it was a center of designing and making high-precision metal-working machine tools. Detroit became known for making automobiles. Today, almost every high-speed, high-volume printing press in the world comes from Heidelberg, Germany. The southern part of the San Francisco Bay area became known as Silicon Valley.
How much is it worth to have a locale or city renowned for the technical excellence of its local enterprises and workers? What value can be assigned to having a few hundred wizened old men around who can train entire generations of new, highly-skilled workers? Or who have a few different ideas than their boss, and decide to start up their own company?
Exactly these kind of links are traced out by David R. Meyer, a professor of Sociology and Urban Studies at Brown University, in his 2006 book, Networked Machinists: High-Technology Industries in Antebellum America. This is important because it details how the USA machine tool industry developed – and the USA machine tool industry is the foundation of the modern industrial mass production economy.
The Silicon Valley Consensus & the “AI Economy”
Edward Ongweso Jr. [via Naked Capitalism 09-11-2025]
The “AI economy” is less a story of productivity or innovation, then an attempt to graft a new political-economic order—let’s call it the Silicon Valley Consensus—that is ostensibly concerned with building our stillborn God. A coalition of hyperscalers, venture capitalists, fossil fuel firms, conservatives, and reactionaries are engaged in a frenzy of overbuilding, overvaluing, and overinvesting in compute infrastructure. Their goal is not to realize AGI or radically improve life for humanity, but to reallocate capital such that it enriches themselves, transmutes their wealth into even more political power that imposes constraints on countervailing political forces, and liberates capitalism from its recent defects (e.g. democracy), consolidating benefits to its architectures regardless of the actual social utility of the technologies they pursue….
Building out generative AI’s compute infrastructure and energy supply is an incredibly capital-intensive enterprise (McKinsey expects $7 trillion will be spent by 2030)….
2. The primary capital source for this infrastructure buildout isn’t external debt, but internal cash flows—primarily at hyperscalers—that dominate our stock market. Their profitability is so extreme that they can put “oodles of oodles of money” towards such an ambitious project without touching risky financing options, even if revenues and profits have yet to materialize….
[X-Twitter, via Naked Capitalism 09-11-2025]
AI-Capex is the everything cycle, now Just under 50% of GDP growth is attributable to AI Capex
Of empires and famines
Alex Krainer, Sep 07, 2025
… But the true nature of the Western empire has been carefully concealed from us behind the glossy façade of the Western “civilization.” Today’s empire is a reincarnation of the undead British Empire, whose DNA it still carries. The more we learn about this empire, the uglier it looks. As an example, it seems that many, if not most of the famines recorded in history weren’t natural disasters nor consequences of wars but results of deliberate policy aimed at subjugating populations and forcing them to accept colonial control and slavery.
This may seem like an exaggeration, but British statesman and Prime Minister Benjamin Disraeli explicitly said as much himself. He explained that the objective of the British Empire was to
“Gain and hold territories that possess the largest supplies of the basic raw materials. Establish naval bases around the world to control the sea and commerce lanes. Blockade and starve into submission any nation or group of nations that opposes this empire control program.” (Knuth, E.C. “Empire of the City,” 1946, p. 57)
There’s much evidence that the Empire really did use starvation as a weapon of war against disobedient groups and nations and that they did so relatively frequently. Take the example of India: during the 120 years between 1757 and 1878 when she was under direct British rule, India experienced 31 serious famines (Mike Davis, “Late Victorian Holocausts, El Nino Famines and the Making of the Third World” – London: Verso, 2002).
Even in absence of outright famines, much of India’s population lived in chronic food insecurity. While this was concealed from the British public, Britain’s ruling establishment was well aware of it.
Economic historian Robert C Allen found that, during the 19th century, famines became more frequent and more deadly as extreme poverty increased from 23% in 1810 to more than 50% in the mid-20th century. The period from 1880 to 1920, the height of Britain’s imperial power, was particularly devastating for India. By the 1910s, life expectancy collapsed to 21.9 years….
In April 1974, Henry Kissinger, then Nixon’s Secretary of State and National Security Adviser sent out a classified memo to select cabinet officials. The title of the memo was, “Implications of Worldwide Population Growth for US Security and Overseas Interests,” and it was commissioned on the recommendation of John D. Rockefeller III and came to be called, more famously, NSSM 200, for National Security Study Memorandum 200.
In it, Kissinger addressed the difficulty of controlling resource rich areas of the world against the social pressures borne of growing world populations and went on to suggest the kinds of coercive measures the US should consider. He bluntly stated that food aid should be considered as “an instrument of national power,” and that the US should ration food aid to “help people who can’t or won’t control their population growth.”
The NSSM 200 made depopulation in foreign developing countries an explicit, if secret, national security priority of the United States for the first time. In that, the policy of the British Empire was simply grafted onto the US foreign policy. If anything changed between Disraeli and Kissinger, it’s the slick framing of policy goals: “rationing food” to “help people” is the sanitized version of “starving them into submission.” But the language amounted to recommending genocide, at least as defined under the UN Convention of 1948.
An Eruption of Assassinations — The current peak in the number of assassinations has exceeded that of the 1960s
Peter Turchin, Sep 13, 2025 [Cliodynamica]
According to my US Political Violence Database (USPVDB), the five years from 2020 to 2024 saw seven assassinations. This is higher than the previous peak during the 1960s, although only half as large as that of the late 1860s:
GRAPH.
….It’s important to note, that by themselves political assassination and terrorism don’t overthrow the established elites (at least, I can’t think of any examples). An assassination of the state ruler may serve as a triggering event for a revolution or an onset of civil war, but it still requires a well-organized and committed counter-elite party. The failure of Alexander Ulyanov and ultimate success of his younger brother illustrate this principle perfectly.
The significance in the rising frequency of such instability “micro-events” is that they signal that something is deeply broken within the social system in which they happen. I tried to draw attention to the rising frequency of shooting rampages back in 2008 (you can read about it in my 2012 blog post, Canaries in a Coal Mine). A canary dropping dead in a miner’s cage is not the cause of the explosion to come, but rather an advance warning.
Similarly, the increasing incidence of assassinations and terrorism tells us that we aren’t out of the woods yet, by a long stretch.
Trumpillnomics / Felonomics
Data shows energy bills soaring as state and federal Republicans cut price-savings programs
Richard Eberwein, 9/04/25 [WCPT 820 Radio, via Clean Power Roundup]
Energy bills have been steadily increasing since President Donald Trump took office in January, partially thanks to state and national Republicans ousting Biden-era clean energy policies and prioritizing nonrenewable energy sources.
According to data from the Energy Information Administration (EIA), residential electricity bills have increased by nearly 10% nationally since Trump’s inauguration on Jan. 20, despite his campaign pledge to slash electric bill prices….
Trump’s One Big Beautiful Bill, which was signed into law on July 4, is also expected to increase energy costs for consumers even more. A report from Climate Power published last month found that 64,000 jobs have already been lost or stalled since Trump took office, with 56% of them located in congressional districts represented by Republicans. The report also says the cuts to clean energy have reduced the total energy supply, which have contributed to the higher bills experienced by consumers….
US Interior Secretary: ‘No Future for Offshore Wind Under This Administration’
Adrijana Buljan, September 12, 2025 [offshorewind.biz, via Clean Power Roundup]
Trump administration axes $679M in offshore wind infrastructure funding
[esgdive.com, via Clean Power Roundup]
The U.S. Department of Transportation is withdrawing or terminating $679 million in funding for 12 port and infrastructure upgrades that would support offshore wind projects, it announced Friday.
2025 farm income projections paint grim picture for farmers trying to break even
[WHO13, via Naked Capitalism 09-11-2025]
Coffee Prices Post Largest Annual Jump Since 1997
[CNN, via Naked Capitalism 09-13-2025]
Treasury bonds aren’t the safe haven they’ve been in the past — and taxpayers will pay a price
[Market Watch, via Naked Capitalism 09-07-2025]
Homeless organizations note uptick in homeless families living in cars
[Spectrum News 13, via Naked Capitalism 09-07-2025]
More Trump Administration Circular Firing Squad with Investor-Spooking ICE Raid on Hyundai-LG Plant
Yves Smith, September 9, 2025 [Naked Capitalism]
…And keep in mind that despite the concern, which may be justified, about mistreatment of Koreans doing construction work at the plant, some (we don’t know how many) were skilled workers necessary to get the equipment installed and shake the operations down. Although it is an entirely different type of production, my father was one of the most seasoned managers/executives in the paper mill industry in running startups and major expansions. They were not easy. A successful startup would take two years and burn 20% of the capital cost. An unsuccessful one would hemorrhage cash pretty much forever. And all of these startups required bringing in experts from the vendors to help with design, installation, and training….
South Korea in Deadlock Over $350 Billion Investment Fund
[Bloomberg, via Naked Capitalism 09-09-2025]
Trump’s economic disaster
Richard Murphy, September 13 2025 [Funding the Future]
In this video, I explain why Trump’s economic policies are a disaster — and why the UK should take note as the far-right tries to copy them….
This man is an outright disaster.
Far-right politics is an outright disaster.
We’ve always known that, but now we can see the evidence. And it’s critical that we do see a note and talk about that evidence, because the threat from the far-right is real elsewhere, including here in the UK.
The far-right has no known answer to any known problem.
Its hatred of migrants solves nothing. We are living in an interdependent world, and to pretend otherwise is just absurd.
To pretend that we can live in glorious economic isolation is just absurd.
To pretend that we can run an economy on the basis of giving tax cuts to the rich, and increasing, in effect, taxes on everybody else by imposing tariffs is absurd because the net result is a lack of spending power….
Trump steals $400b from American workers
Cory Doctorow, September 09, 2025 [Pluralistic]
Trump’s stolen a lot of workers’ wages over the years, but this week, he has become history’s greatest thief of wages, having directed his FTC to stop enforcing its ban on noncompete “agreements,” a move that will cost American workers $400 billion over the next ten years:
https://prospect.org/labor/2025-09-09-trump-lets-bosses-grab-400-billion-worker-pay-noncompete-agreements/
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