Ian Welsh

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

Tag: Policy

Ideology Precedes Policy Which Determines Outcomes

By

On March 23, 2017

Comments

Ok, so…

The results are rather worse than that, actually, and anyone who reads this blog regularly is aware that, for example, working class white male wages peaked in 1968, in real terms. It’s not as if every other demographic has gotten off, either. Slowly the scourge has worked its way thru the demographic and socioeconomic classes, till practically everyone but the top 5% or so is being hit to some extent or another, even if they haven’t lost lifespan—yet.

Marcy Wheeler asks:

Which got me wondering: to the extent this is driven by a failure in ideology — by the failure of the American dream — which comes first, the failed ideology or the rising mortality rates?

…

. But as we try to figure it out, we ought to be focusing at least as much on how to roll out life and meaning that can sustain Americans again as we are on blaming Putin for our recent failures to do that.

Ideology tells tells you how the world works, what to do, how to do it and why you’re doing it. For example, NeoLiberal ideology has an axiom that “jobs are created by those who have money.”  On the face of it, this seems obvious: nobody without the ability to pay you has ever given you a job, I’d bet.

The corollary of this is “the more money that rich people have, the more jobs there will be”. So, under Neoliberal ideology, you funnel money to the rich and corporations and they create jobs.

Doesn’t actually work, mind you, but that’s what the ideology says.

The ideology also says “money is earned by people because they fill the needs indicated by the market, which represent what people and society want.”

Which means “if you have a lot of money, you deserve to have it because you got it filling other people’s needs”.  It also then follows that people with a lot of money are the sort of people who are good at providing what other people want, so therefore they should have more money so they can provide even more.

Poor people, by this ideology, do not deserve to have much money, because if they were doing something that other people wanted a lot of they’d have a lot of money.

Etc, etc…

Ideology tells people what policies to pursue. Those policies then create results.  With different ideologies, you get very different results.  FDR’s New Deal and the Keynesian consensus after WWII had as its thesis “the more money ordinary people have, the more they will buy, creating demand for products, which will create more jobs.” It also had “money in the hands of rich people doesn’t create demand and does create political problems which damage markets, therefore we should keep them from having too much money.”

The result of those propositions was the best economy in American (and European history), with growth rates higher in the middle and lower classes than in the upper and the rich classes (rich is not upper class, it is beyond.)

Ideology Determines Policy.

Policy Determines Outcomes.

(One might ask “what determines ideology”. Part of the answer will be in the upcoming “Creation of Inequality booklet” I’m about three-quarters finished.)

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.

Stopping Deflation? Dead Easy. So Why Isn’t It Being Done?

By

On March 27, 2016

Comments

As with many problems we face today, this is a solved problem.

About half of the New Deal can be summed up as “wage and price supports.” The post-war economic paradigm in the West was also about making sure prices and wages rose.

Avoiding deflation, by the way, is mostly about ordinary people’s income. If you don’t want deflation, make sure ordinary people are getting more money, faster than inflation and that they’re spending it.

Oh, there’s a bunch of other stuff, most of which comes down to: “Don’t let any oligopolies or monopolies form without subjecting their prices to close control.” That means both “not too high” and “not too low.” Think classic regulated utilities.

“You will charge enough to pay your employees well, keep the infrastructure in good shape, and make five percent a year. No more, no less.”

(Five percent is an example, other (lowish) numbers can be used.)

We have, or are flirting with, deflation right now because we refuse to give ordinary people money in a way which makes them think they can afford to spend it.

We allow inflation in the worst possible areas, like housing and rental prices in cities with jobs, and luxury goods, but that’s pretty much it.

If you let fixed costs have inflation above income increases, then everything else is going to have to suffer deflation, because it is discretionary. Gotta eat and have a warm place to sleep, first.

If a government wanted to end inflation, it could be done easily enough.

First, you go back to progressive taxation on corporations and rich people, without loopholes, based on, “If you earn the money in our country you pay tax on it here.” Yes, there will be attempts at dodging (especially by multinationals); yes, there are ways to deal with them.

Then you spend the money in a way that produces local jobs and creates a tight market.

Here’s your dead simple idea: Every building in your country must be at least energy neutral, and all the energy infrastructure must be made “smart” so this can be done properly.

Financially, your central bank says, “We will accept “energy savings bonds at 98 percent,” thus creating a market for it.  Your government offers the loans. Your mortgage guarantee authority says, “We won’t guarantee any mortgage for a building which is not, at least, energy neutral.”

If you can grow some big ones, larger industrial countries must even slap a tariff on things like solar panels, so the manufacturing is done at home. The actual refitting of buildings, of course, can’t be offshored.

Lots and lots of jobs. A tight market. Raises for people in the building trades. A boom.

There are plenty of other ideas like this, because there are plenty of other things that need to be done.

The direction must be long term. It would take a long time to refit all of America’s building stock. Companies can invest in that, because they know it will still be going on in ten years. Likely longer.

Now, for this stuff to work, you must understand that high, progressive taxation is necessary. All that money will end up in a corporation or rich person’s pocket eventually. The government then takes it back and recirculates it. (Yes, MMT people, we could just print the money and forget the wealth effect, but that’s a terrible idea because oligarchies are terrible societies in which to lie.)

You should also go hard on monopolies and oligopolies (start with the app stores, which charge 30 percent–but that’s another article).

The point is simple enough: there’s a lot of stuff we should be doing, and doing that stuff would end deflation if we were serious about it. It would also make the economy a lot better for ordinary people.

This has been another episode of “how to do policy.” I remind readers that good policy is easy, and that I don’t write about it often because the problem is not good policy ideas, or how to fix our problems (we know how to fix most of them), but that our current political-economic organization does not want to implement policy that helps the majority of people if doing so will upset current concentrations of money and power.

Some sectors can die, yes (coal now, oil in the next 15 years), but the structure cannot change.

So, if you’re British, figure out how to get Corbyn elected in the face of the endless propaganda against him. If you’re in the US, Bernie is your (current) best bet. In general, figure out how to overthrow your current systems, which includes the people running them, and how to do it in such a way that there isn’t a counter coup. (This is a larger question than just electing a leader, as the UK’s Labor Party and media are currently at pains to teach Britons.)

We’ve blown the incremental change chance. Revolution will now be necessary. In some countries, it will be largely peaceful. In others, it will be stopped and stagnation will continue until destruction.

And in still others, it will be the guillotine.

Those who make peaceful rev…well, you know the rest.

If you enjoyed this article, and want me to write more, please DONATE or SUBSCRIBE.

Good Policy Rule #1: Don’t Reinvent the Wheel

By

On April 15, 2009

Comments

Good policy is pretty easy to create, and it’s also easy to recognize, but very few people know how to do either, because we so rarely see good policy in the real world. Almost every policy which comes out of Washington, and most other capitals, is sold as doing one thing, but is actually written and designed to serve the interests of those players which have bought various politicians. So, as a result you wind up with “stimulus” bills which don’t include food stamps and unemployment benefits or you wind up with tax “reform” which makes the tax code more complicated and gives most of the tax cuts to the rich. In fact, it’s very rare that any major bill either does what it’s supposed to (No Child Left Behind, for example, has almost certainly done more harm to American education than good) or if it does, that it does it in a way that is efficient and effective. Medicare drug benefits, which were designed to make drug and insurance companies money, not to deliver cheap drugs to Americans, are an excellent example.

Each post in this series will discuss one rule for judging or creating policy. We’ll start with the simplest rule of all:

Don’t Reinvent the Wheel

Sometimes another country, or a state or city, has already solved the problem, or has solved a large chunk of it. The prototypical example of this is health care. Every other modern (and some 3rd world) country in the world has universal, usually single payor, healthcare. Most of those systems produce as good or better results than the US on almost all metrics.

And these countries pay, total, about two-thirds of what Americans pay per person, for health care that covers everyone. A side effect is that GM and Ford price in $1,500 of insurance costs into every car, while Toyota avoids that expense, and continues to eat Detroit’s lunch. Meanwhile, 50% of all bankruptcies in America are caused by health care costs. There is virtually no downside to universal healthcare, even for the very rich (the very rich will always have private clinics. They did even in the USSR.) Every health expert who isn’t paid not to know this, knows that universal care is cheaper, and better.

We know it works, because it has worked in every 1st world nation which has tried it. The reason the US does not have universal healthcare, ironically, is the huge amount of money that could be saved—5.3% of the US’s total GDP. That’s a heck of a lot of money, and a lot of people are getting very rich off of it. And those who make a killing use the money to buy lobbyists and politicians and make sure that 50 million Americans don’t have insurance, another 20 million or so are underinsured, that 50% of all bankruptcies are caused by health expenses, and that US healthcare metrics continue to lag other first world countries. They stop real reform because the pain and suffering and financial devastation of all those millions of Americans is earning them a lot of money. Making a “killing” isn’t exactly a metaphor when it comes to US healthcare.

So we know one big, simple way to fix US healthcare and it doesn’t require reinventing the wheel, but simply learning from what others have done.

But healthcare isn’t the only place where this works—one could, for example, look to how other countries handle, say, drug use, and learn some lessons. Or look to their prisons. Or figure out how much smaller countries than the US are able to have effective militaries without spending 50% of the world’s military budget.

This is simple stuff, the basic rule is familiar to anyone who’s ever wanted to learn how to do something and gone to find out how other people do it, looking in particular at the people who are best, then copying what they do and making minor adaptations to your own situation. When I want to learn how to cook something I’ve never cooked, I look it up. When I want to buy a new car, I look up reviews. When I want to build something, I find out how others who have built something similar did it.

So the first rule of making, and recognizing, good policy is just common sense. Learn from others.

Don’t reinvent the wheel.

(Originally published June 17, 2008, at FDL.  Never did write the others in the series, may take it up.)

Powered by WordPress & Theme by Anders Norén