Wednesday, April 16, 2014

Peter Radford — Class Based Economics


Peter Radford nails it.
Buried somewhere in the pile of stuff I have accumulated as I think about inequality are these statistics:
Of all the income generated between 2009 and 2011 in the US 121% went to the top 1% of income earners
The top 1% owns just over half of all investment assets including 64.4% of all bonds
And, the bottom 90% incurs 72.5% of all debt
Think through the consequences of these numbers.
Basically we have an economy where the top 1% reaps all the rewards; where less well off people constantly fall further behind; and where the top folk lend to the bottom folk so that the less well off can keep on consuming and thus boosting the profits of the businesses the top folk own. This is a nice game for the rich as long as it lasts. Here in the US that would be the past forty years or so.
This is really simple.
It explains why our economic policies focus on preserving creditors, bailing out lenders, and keeping the inflation alarms ringing even when there is no inflation. Those policies benefit the top 1%. Those policies are advocated for and set by the people who will benefit from them. That a healthy does of inflation would alleviate the debt burden on those down the income ladder is scoffed at by those in power. Inflation, not unemployment, is the true bogey man of central banks everywhere because it is the bogey man of the wealthy.
This is simple class economics....
Capitalism naturally begets inequality and thus needs to be repressed whenever inequality reaches an unacceptable level. The repressive force is known to us all as democracy, within which the much feared mob asserts itself and forces the redistribution of the gains made by capitalists. In the US this is known as “we the people” refusing to play along with the rigged games played by businesses everywhere and at every time.
Except, of course, we have been duped into just that. Playing along. Thus assuring the destruction of the once much admired American middle class....
Enter Thomas Piketty.
It turns out that the aforementioned middle class was the creation, not of American “exceptionalism”, superior management, access to resources, basic freedoms, superior opportunity, or any other thing, but of a freaky coincidence: the raw power of the super-rich was undermined for a while by the epic struggles and costs associated with fighting lots of global wars. Once the wartime social improvements introduced to mollify returning veterans and to produce sufficient war material were eliminated by the resurgent wealthy, they could revert to the long term onward accumulation of wealth and power by the few. Those golden post-war decades were an aberration needing to be swept away so that the top folk could entrench themselves once more.
Real-World Economics Review Blog
Class Based Economics
Peter Radford, The Radford Free Press

Kick-ass post. Worth reading the whole thing.

Best line.
The awesome ignorance of the sweep of history and the equally stunning preference for isolation from power realities within much of modern economics is a disaster for all those who suffer the consequences of policy advice given out by professors of that economics.



6 comments:

Anonymous said...

Yes, modern economics of all kinds, including much heterodox economics, insists on talking about "demand", "employment", "income" and "growth" in sublime abstraction from all social and institutional realities in which the uninformative aggregate macroeconomic categories are embedded, and dreams that it can can propose policies for managing them that function entirely inside the closed circle of those abstract concepts, and are politically, socially and distributionally neutral.

Matt Franko said...

Dan I dont know if that is fair... setting out to foment change like you seek requires a "step 1"...

Think of a wider reception of the knowledge successfully communicated by MMT as perhaps a "step 1" towards your more egalitarian future society from where we are now...

Right now most (lets face it, practically all) people are suffering under the delusion that we are limited by the "availability" of "money", ie the "we're out of money!" falsehood peddled by the current powers that be in the academe of economics, these libertarian/monetarists or whatever you want to term them... they dominate the discussion lets face it....

Hate to bring this up but this is my take from Roger and his banging on about "options".... people/society has to know what its full set of options are and I dont think they know what all of their options are at this point... they see things as very limited and constrained by "lack of money"...

Its a big failure imo mostly centered around the academe of economics but I would also throw "the church" with its insatiable penchant for "charity" into the mix also..

rsp,

Ryan Harris said...

It's frustrating to read guys like Piketty, he comes close to drawing the conclusion but stops short and instead of saying that deficits created sufficient demand for labor, he retreats into the platitude, it was "a freaky coincidence." or " the wartime social improvements introduced to mollify returning veterans." So much hard work and analysis but so little value added to the debate when the pieces don't quite fit to the puzzle.

Matt Franko said...

Ryan that's what he gets for focusing on stocks and not flows... imo he's at least close to stock-flow inconsistency...

Here's Galbraith: "This, I fear, is a source of terrible confusion. Much of Piketty’s analysis turns on the ratio of capital—as he defines it—to national income: the capital/income ratio."

this is like the Reinhart/Rogoff people looking at "the debt to GDP ratio" in reverse...

rsp

Tom Hickey said...

Whatever. Piketty has shifted the Overton window massively to the left in one stroke and changed the universe of discourse in economics, and the media is picking up on it. With those features, who cares about a few bugs.

Ralph Musgrave said...

Apart from the global wars mentioned above, another factor that delayed increased inequality was communism. That is, while communism was a serious threat, Western plutocrats probably accepted more equality than they’d have liked so as to prevent communism spreading to the West. But now the latter threat has vanished. Hey – we plutocrats can now treat the plebs like dirt.