The election of Francois Hollande is making me very optimistic for the first time in a long time. I am getting more bullish on France and for Europe in general. (Maybe even for the U.S. too, but that could be a bit of a stretch.)
The reason I am so optimistic is because Hollande has promised to go after the rich and shrink the financial sector while creating millions of new and very needed civil service jobs. I believe it's a formula that can absolutely work.
| The 57-year-old Socialist has openly admitted that he "does not like the rich" and declared that "my real enemy is the world of finance". This means taxing the wealthy by up to 75 per cent, curtailing the activities of Paris as a centre for financial dealing, and ploughing millions into creating more civil service jobs. |
I am fully aware that all you hear is exactly the opposite. Ever since Hollande shot to the top of the polls we've been warned about the dangers of taxing the rich. We've been told that we need the rich because without them we wouldn't have the most productive members of society. Innovation would be stifled and job creation would plummet. A new Dark Ages would result because--let's face it--all the rest of us owe the very air we breathe to the benevolence that trickles down from the wealthy few.
Let me tell you something...don't pay any attention to that crap. It's all just a bunch of propaganda being orchastrated by the rich themselves, who fear losing the cushy public welfare support they've had for the past 30 years.
The fact is, we don't need the rich at all, nor do we need a big financial sector. Tell me, what "wealth" do the rich create? The modern day rich are mostly involved in stock, commodity and real estate speculation and other forms of gambling and rent seeking. The rich are mostly idle, whereas the real wealth is created by workers toiling in factories, on consturction sites, in laboratories and schools and in so many other areas of our economy and society that never get any attention.
A society run by a small group of billionaires who get to play in their own personal "casino economy" while everyone else struggles to get by is a shitty society. Hollande gets it. The people of France get it. Let's hope that real change is on the way in France, not like the "real change" we saw here.
Bottom line is, I am rooting like hell for Hollande to succeed because maybe, just maybe, it will break the back of this brutal, selfish and destructive Reagan/Thatcher/Friedman neoliberal free-market bullshit dogma that has enslaved us for the past 30 years.
26 comments:
Great post, Mike. Reminds of the
John Kenneth Galbraith's point in
The New Industrial State: "The most
rewards flow to the factor of production that is the most scarce." But as You and MMT make clear, there is no need for a scarcity of capital with a fiat currency. Financial circles oppose
government spending because it breaks their monopoly on control of
the factor of capital. Their profits, and kingly lifestyles would be reduced. No wonder FDR called them "economic royalists!"
Love it when you get fired up Mike.
Keep it coming.
What's even more amusing is that if the French start to make headway by confiscating excess savings from rich people, then the rich people in the rest of the world might see accommodation of those excess savings as preferable.
There are only two options - accommodate or confiscate. The French, constrained as they are by the Euro, are about to try the latter.
Go Mike, tell 'em like it is!
If they tax the rich more what happens? The way the euro works does that mean they now have more money to spend on things like jobs? What will the plutocrats do? Maybe they will want the ecb to start some fiscal spending? Where would that leave Angela? Will this spread to Spain, Italy and Portugal? The dominoes may fall. The plutocrats may panic.
I can see where this would work in European countries, being currency users. Still, it sets off another left vs. right thing and another round of oscillation.
Since the US creates it's own currency, we can offset increasing savings via the deficit, dialing that down when savers start to spend. That takes care of one aspect, but leaves the problem of the generation of bubbles (whether via senseless blundering or by design). The question in my mind is, how does one handle that without least amount of political friction?
That should have been "handle that with the least amount of political friction."
One of Peterson's morons weighs in:
http://finance.yahoo.com/blogs/daily-ticker/france-hollande-bluffing-greek-vote-raises-real-concern-142511640.html
"The New Industrial State: "The most
rewards flow to the factor of production that is the most scarce." But as You and MMT make clear, there is no need for a scarcity of capital with a fiat currency. Financial circles oppose government spending because it breaks their monopoly on control of the factor of capital."
Exactly. Capitalism manufactures artificial scarcity of capital in order to make it the factor of production and everything else, including labor, merely an input, whereas in actuality, labor is the factor and everything else an input.
In a fiat system capital costs the currency issuer zero (even if interest rates were high since govt issues the funds to pay the interest). It's a huge scam.
I wouldn't claim victory so fast. He has already soften the discourse in the political campaign.
He can't be as bad as Obama failure, but he could be a bluff. If this happens I see a repeat of the political chaos in Greece to the rest of the eurozone.
Bankers and eurocrats must be proud, how can someone single-handedly create so much chaos is something hard to achieve.
"The fact is, we don't need the rich at all, nor do we need a big financial sector. Tell me, what "wealth" do the rich create? The modern day rich are mostly involved in stock, commodity and real estate speculation and other forms of gambling and rent seeking."
This is borne out by the data. Most of the new dynastic fortunes being built now are based on financialization rather than productive innovation. Moreover, the great fortunes that are being built on productive innovation are in IT which is not very capital intensive in comparison with industrial production. Would this be taking place without the capital markets that make possible the incredible run-ups in equity values making the nominal capitalization completely unbelievable in terms of real value of assets. Look at Apple's cap, for example. It is greater than entire countries.
This results in a distortion of reality, with only a few doing extraordinarily well because of it. When this is coupled with a misunderstanding of the monetary system, then the result wrt public purpose is devastating socially and economically.
Capitalism is failing, when capitalism fails this sort of thigns happen.
Yes I know, "but is no true capitalism" (just like "but that was no true socialism")), but this is what capitalism has always been like, a form of societal arrangement and power structure.
When systems fail various forms of 'violence' are the result, I hope we can keep physical repression and violence to a minimum though.
We need to hope he changes them before they change him ....In Europe we have a lot champagne socialists ..
let him prove himself ..
It seems that all has worked, historically, to centralize power. Lords control the peons, king controls the lords and the flows of wealth are predictable on the whole.
Obviously, that one isn't going to go away overnight. As long as they hoard, little harm is done and it can be replaced by gov't deficit. The financial sector would seem to be the richest source of market distortions. Good place to start with well-designed taxes and regulation?
totally agree with leverage above. i just heard his acceptance speech and he said one of the things he wanted to do was continue reducing the deficit "to get control of the debt."
it seems that Marine le Pen, that right-wing nutjob, is the only one over there talking about getting out of the euro...
Tell it, Mike!
What steams me is that Obama, under the influence of Geithner, seems to be of the opinion that the future of the American economy is to serve as the world's banker and rent collector, and wants to keep the financial sector right where it is.
@Leverage:
I hear you and it's a good point. Bill Black said that he has already chosen several neo-liberal economic advisers. I haven't seen that. For now, I am giving him the benefit of the doubt, but you are very right to say "proceed with caution."
The problem with Hollande is that his is a pragmatist and also believes in "Europe."
He has said he wants to renegotiate the treaty and Merkel preemptively stated today, "No way," even before it got to propose it.
Chances are Holland is going to be another Obama "out of necessity." You know, TINA. Maggie wins again.
Don't know about Hollande. We all have to wait and see. But Mike, this was a great rant! I really enjoyed this one!
Michael Hudson made a comment at the recent MMT conference in Italy, something to the effect he knew many of the Socialist politicians of Europe, and was aware they had been bought off by the CIA. And I would imagine when your options are the right, and personal wealth, or the left, and ending up like Aldo Muro, TINA is correct.
The problem is, without the support of the ECB, France's socialist aspirations are FUCKED. Either they will have to tax the shit out of the country, or they will somehow have to massively reduce their trade deficit.
If they try to run a substantial govt budget deficit they will get 'punished' by the markets and that will be the end of socialism in France, for now.
Without the support of the central bank a nation's options are severely limited.
Unfortunately the ECB has no interest in socialist aspirations. They are obsessed with 'discipline', which for them means handing out a trillion euros in 1% interest loans to banks, whilst sitting back and watching democratic nations BURN.
They (the ECB) are severely sick in mind and spirit.
Yes, the ECB should be seized and closed, national central banks should start assuming all the operations and printing euros to buy sovereign debt if necessary.
There is a precedent of a national CB going riot, Ireland, IMo france has enough political weight to go riot and do what they want, and they will be supported by many nations (Italy, Spain and other smaller nations).
Germany should quit the euro and reinstate the DM. Everybody is happy: paneuropean aspirations of many europeans are not destroyed and we can build up on a more democratic ("socialist") europe, the euro survives, the germans can return to their own currency and punish their workers all they want, the world economy does not explode, democracy does not end in favour of authoritarian regimes, etc.
But neoliberals are very sick people, so they will try everything until they give up.
If the countries return to their original national currencies, there is a good chance the weaker nations could experience a hyperinflationary episode, like Argentina.
Hopefully the whole thing won't collapse. From an outside observer's perspective, it's pretty exciting that the europeans are rebelling against the 'austerity pact'. Here's hoping the gamble pays off.
Vive la Revolution!
Vive la Republique!
Liberte! Egalite! Fraternite!
Marchons! Marchons!
Qu'un sang impur,
Abreuve nos sillons!
The French ROCK.
The MMT economists have already been through this, starting with the inception of the EMU. Fiscal discipline was built in at the insistence of German, too tightly so given the existing national debts that were then assumed in euro. They started by behind the eight ball and the first (inevitable) shock was going to be a problem. And what a shock it turned out to be.
They have only three ways out of this. 1) go forward with a fiscal union, 2) alter the treaty, or 3) continue to punt enough to hold things together enough to avoid both default and political revolt. Of course the other choice that sovereign nations have is to withdraw from the treaty.
Germany seems intent on #3, keeping a tight leash and providing just enough to hold the thing together. I don't see that working. The political situation is becoming volatile, and the bond vigilantes are pressing.
"Germany should quit the euro and reinstate the DM."
Agreed. This would go a long way toward resolving the problem by removing the principle cause of asymmetry that is undermining the currency union. The the remaining countries may be able to work something out. But Germany will never go along with what it would actually take. They should just butt out instead of playing the spoiler.
France can borrow, just like any other currency using entity does, including Germany. The point is, stopping austerity will also stop the collapse in the economy. Growth has a chance to resume. When it does, investors would be happy to buy French bonds. That's what Germany's been doing all along.
The thing is though, French state spending already accounts for over 50% of the economy. Maybe 'more government' is not what France actually needs?
Post a Comment