Thursday, September 16, 2010
How to double exports in five years. Step one: Destroy the dollar. Step two: Enact policies that keep wages low. Step three: Repeat!
We're getting a real time look at what policies are necessary to achieve Barak Obama's goal of doubling U.S. exports in 5 years.
Step 1. Destroy the dollar.
Making the dollar weak brings us instant export competitiveness. The only problem is, it reduces our real terms of trade, which is the same as saying it lowers Americans' standard of living relative to the rest of the world.
The Administration is attacking China now and pushing it to raise the value its currency so that ours can go in the toilet. That is their brilliant idea and it's also an idea that is adored by so many mainstream economists. Go figure.
Step 2. Enact policies that keep wages and incomes low.
By keeping incomes low we also achieve comparative advantage. Other nations find it more cost effective to buy our products if we don't pay our workers very much.
How do we keep incomes low? Simple. Give huge tax breaks to corporations that are not likely to be passed along to workers. Don't cut taxes for people; just for businesses. Keep unemployment very high so that people become so desperate they'll take any low paying job they can find. Reduce spending on education so that more people will have to settle for low-paying jobs. Cut social supports so that people become destitute enough to work for practically nothing. Target unions or any organizations that are countervailing forces to businesses.
Step 3. Repeat!
Those three steps toward greater exports for America are now happening. And for us Americans it means we will send more of the fruits of our labor to foreigners and we will have a lower standard of living, but hey, we will have created a few jobs. Yippeee!!!
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20 comments:
What seems to be happening is globalization on the terms of international finance and the multinational corporations that are influencing policy regardless of the party in power.
It seems to me that economists are operating on the basis of too narrow a vision of economics. Micro leads with markets, and macro with national economies, albiet open ones. (For neoliberals, macro is just scaled up micro, ignoring the fallacies of composition). What is needed is a separate branch of economics that deals with the global economy, which has its own unique phenomena owing to internationalization of finance and the monopoly/oligopoly power of multinational corporations. The present understanding of economics is blind to these key influences on not only international economics and therefore politics, but also national economics and politics.
Ravi Batra goes into some of this in The New Golden Age: The Coming Revolution Against Political Corruption and Economic Chaos (Palgrave, 2007).
I think Marx explained long time ago how capitalism works leading to centralization of capital.
The rich have to become smarter than a tumor which by killing the host actually commits suicide. IMO they can use MMT like a get-smarter pill.
fvm, according to Warren Mosler, Art Laffer who was a chief architect of Reaganomics fully understand how the monetary system operates. This is at the basis of Cheney's "Reagan proved that deficits don't matter."
However, Laffer's version is not MMT. MMT is a Post Keynesian macro theory developed in the last twenty years by about thirty economists who have produced a specific literature that characterizes it.
The difference is whether operational principles are going to be used to promote public purpose or to funnel wealth to the top. The same principles work to do both, depending on how they are used.
BTW, Batra is not a Marxian but more aligned with Schumpter, Veblen, Thurlow, and Chomsky. I would include MMT'ers Randy Wray in the US and Bill Mitchell in Australia in this group, too.
Batra sees a transcending of classical capitalism and classical socialism both. For him, the basis challenge is developing demand (incomes) sufficient for purchasing supply at full capacity utilization engendering inflation, and he sees widespread corruption as the obstacle to this. MMT'ers largely agree with this approach, although they might differ with Batra's analysis.
This is the same Ravi Batra that predicted the Great Depression of 1990, true? Not sure I'd rely on his predictive powers...
http://www.amazon.com/Great-Depression-1990-Ravi-Batra/dp/0440201683/ref=sr_1_9?ie=UTF8&s=books&qid=1284664671&sr=8-9
Tom,
What I wanted to express was that these operational principles described by MMT can be used in a way that full employment coexists with price stability and steady rate of profits for capitalists, if the current political will desires so. Capitalists have to realize there is an alternative to their race to the bottom way.
Although Bill Mitchell isn't a Marxist, he respects and recognizes Marx as the first "...to really get to grips with the idea of effective demand –that is, spending backed by cash.", and we know what role the aggregate demand plays in MMT.
Yep. This is the same Ravi Batra. Who even received an Ig Noble Price for selling enough copies of his books to single-handedly prevent worldwide economic collapse in 1990.
The irony of the story. 2008 vindicated Batars theories, that growing inequality results in a financial crash and socio-political upheaval. (Comming soon to your theater.)
That's the thing with these Ig Noble Prices. They work sometimes. I.e. "On human odour, malaria mosquitoes, and Limburger cheese". (2006) These evil mosquitoes can't decide between the smell of your feet and Limburger cheese. Now some Africans simply put a Limburger in the corner and it works.
Our story on Limburger cheese and African malaria mosquitoes
This is the same Ravi Batra that predicted the Great Depression of 1990, true? Not sure I'd rely on his predictive powers...
Batra's Forecasting Record (from Ch 4, The Crash of the Millennium)
I am not actually all that interested in his predictive powers but rather his analysis. It's very difficult calling the timing, but he's painted the big picture pretty well.
rvm, I don't see any problem with "steady profits for the capitalists" as long as there is full employment and prosperity for all based on distributive justice. Under neoliberalism, neo-imperialism, and neocoloniasm this is not the case. But that is not the only way to run an economy based on capitalism. The three big problems we now face are economic rent, monopoly/oligopoly, and corruption (state capture).
I would prefer to see a global system that treats all significant factors of production in a balanced fashion instead of promoting one, as capitalism does with capital and socialism does with labor. I would also like to see economic rent-seeking, monopoly/oligopoly and corruption replaced instead by productive investment, fair markets, and clean government working to promote public purpose and prosperity characterized by distributive justice. This the goal that some progressive politicians and economists are working toward, including some MMT'ers.
Tom,
Per corruption (state capture),
this thing with Elizabeth Warren just shows how deep this goes for me. She was with Obama on Harvard faculty and they go way back, she has devoted her entire carrer to financial consumer advocacy and yet...HE WILL NOT NOMINATE HER???
This is unexplainable unless you consider state capture, there can be no other reason at this point.
These people will stop at nothing!
resp,
Matt, it is not possible to win general elections without big money. The process is completely and entirely corrupt and it is getting worse rather than better. Now, with international finance and multinational corps, this has gone global. Both capitalism and democracy are slipping into corporatism and financialization, with a very small percentage of the world population holding most of the wealth, garnering most of the revenue, and wielding virtually all the power. This is a dire situation.
More thought that backs this post:
http://beyondthehyping.blogspot.com/2010/09/i-guess-our-1929-predessors-were-not.html
Well said Mike.
Matt,
Maybe Robert Reich wouldn't be a bad choice for the position, though his chances of getting the job may be far less. After all, he's a liberal and has spent much of his life studying public policy and trying to shape it in positive ways.
Matt Franko,
Isn't that some good news - President Obama will appoint her as his assistant to oversee the Consumer Financial Protection Agency, kind of unofficial leader of the agency?
http://topics.nytimes.com/top/reference/timestopics/people/w/elizabeth_warren/index.html?scp=1-spot&sq=Elizabeth%20Warren&st=cse
It sounds to me a bit like a conspiracy theory, if there is some kind of organized society of rich and powerful, which routinely conducts its daily business, taking strategic decisions for the government. IMO they aren't that much organized, or am I wrong?
rvm, this is my point in talking to my conspiracy theorist friends. It's not like these folks get together at Bilderberg or Davos to plan the New World Order. However, there are a fairly limited number of influential people in the world and they share rolodexes. Here is a take from Geithner's appointment schedule, for example. These folks also share philosophies, objectives, and m.o.'s. They don't have to "organize" and "plan." This is just business as usual for them. They know where they are going, how to get there, and who and what is in the way.
That's very interesting, Tom. Thank you for the link, and thank you for all links you provide online.
Anyway I can't imagine people holding some of the highest public service offices or positions to support and cater anything else but public purpose. What would they want more - money, power? IMO the only think they are allowed to pursue would be to leave their legacy as someone achieved greatness for as many people as possible.
rvm,
Some people look at it as good news in the way you point out, others look at this as sort of pushing her aside and viewing it as she would have more influence if she actually headed the agency...I fall in the latter...
One of the reasons that was floated for her not getting the agency head was she lacked executive experience..what excecutive experience does the community organizer have himself? this is absurd.
Resp,
Come on, seriously.
"How do we keep incomes low? - Snip - Reduce spending on education so that more people will have to settle for low-paying jobs."
Just where are "they" reducing spending on education? Not in my state! Public education is a bottomless pit demanding more and more money while producing worse and worse results year after year. The education unions protect mediocrity and drive a system that allows their members to retire at 55 with full salary and benefits for life. Nice work if you can get it. It's a failed system, throwing even more money at it is insane. The amount of money in primary and secondary education is staggering - how can you claim with a straight face that we starve our education system?
There are several factors, rvm
1. A lot of people are corrupt. A friend of my father's was a senator in the fifties. As his first term was expiring, he surprised everyone by announcing that he was not running. He told my father privately that Washington was too corrupt for him. And this was at the time of the Eisenhower Administration. One can surmise what it is like now with trillions on the table.
2. Even if people aren't consciously and intentionally corrupt, they fall under the spell of money, power, and Washington celebrity. They get "intellectually and emotionally captured." This doen'st happen only to politicians. It's called "the Beltway disease" and "life in the bubble." It's a culture, and if one stays there very long, one gets caught up in it. Politicians today excuse it because campaigns are so costly to finance. They spend much of their time raising money and carrying out policy that will aid them in this endeavor. That means schmoozing with lobbyists.
3. Some people really do believe in trickle down, that is, if the wealthy and powerful do well, so will the country. They don't think that "the little people" create anything or contribute much. In fact, they are called "the eaters."
How this for destroying the US economy by Bush :
1. Tax cuts for the USA top 3% of country's rich subsidized by selling $700 Billion in Treasuries ( as per Geitner today himself ) to the Chinese where not one Yuan Renmibi was exchanged for the purpose - instead they were allowed to open the Treasury accounts ( as per Mike Norman ) and sell their toxic crap by Walmart --> then 2 million manufacturing jobs went to China from the USA. This generated the Chinese savings glut which even further eroded the USA economy by several means ( as per Paul Krugman ).
2. Tell everyone we are too poor to fund asset creating stimuli such as Super Particle Colliders and NASA thereby reducing the USA's lead in research and thus for it over to China and Europe.
3. Make two wars abroad and make them unfunded.
4. Hire the same goons from four years ago to fix the mess at the top level in the financial sector of government.
Last week Mosler posted on his blog that China, Russia, India and others are selling central bank dollar reserves to buy gold. I was thinking this could boost exports & the US economy as a whole because once the dollar reserves are out of the "vaults" of the central banks, they may actually be spent by private sector to buy goods and services from the United States. Or I am missing something?
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