Why are democracies around the world failing to curb rising inequality? What explains the ascent of populist parties and politicians? In a recent paper, French economist Thomas Piketty argues not only that inequality and populism are linked – but that both can be explained by dramatic shifts in the traditional two-party system that favour different elites....
- The rise of the “Brahmin Left”
- The persistence of the “Merchant Right
- Where does this leave poor and less educated voters? ...
When we published our latest book – Reclaiming the State: A Progressive Vision of Sovereignty for a Post-Neoliberal World – last September, Thomas Fazi and I approached the UK Guardian to see if they would publish an Op Ed by us summarising the main arguments presented in the book. We received no response. Pluto tell us that the book is one of their better sellers since it was published. And it is not as if the topic is irrelevant in the Guardian’s assessment. That is clear from the fact that on April 5, 2018, they published one of their ‘long read’ articles by Rana Dasgupta – The demise of the nation state – which is a direct refutation of the ideas advanced in our book. This ‘long read’ also falls into the same traps and analytical errors that we point out has besotted the Left side of politics since the 1970s. The article is clearly part of the Guardian’s agenda to appear progressive but, in fact, be anything of the sort. As I have noted previously, the Guardian seems content to publish a torrent of anti-Brexit articles and criticisms of Jeremy Corbyn rather than provide any semblance of balance.In the US, we call them "limousine liberals" and "latté liberals." They pretend to be progressives on the side of the people, but their real mission is to support the power elite in their push for transnational corporate totalitarianism in the name of "liberalism" and "Western values." The fact is that they are fascists. Fascism is aligned with capital being the chief political factor. In a representative democracy, this occurs through corruption of the political process and state capture. Is the Guardian in the category of promoting this?
I am travelling a lot today and using my spare time to catch up on things. I have two major end-of-February deadlines impending for publishers – my book with Thomas Fazi, which will be published by Pluto Press and launched in London in late September (more details soon); and our new Modern Monetary Theory (MMT) textbook (with Randy Wray and Martin Watts) which will be published by Macmillan later in 2017. Both manuscripts have to be delivered by the end of this month. So busy busy. Today’s blog is thus a little different and considerably shorter than usual. It loses nothing in its brevity. The main text is from a friend of mine (who wishes for professional reasons to remain anonymous) but succinctly captures the anger and angst that many progressive thinkers are feeling about how things are turning out. The culmination of several decades of neo-liberalism has been an eroding of material well-being for workers, a massive financial then economic crisis, which the world is still enduring, and, then Donald Trump as President of the United States. And the progressive political voices have been largely complicit in all of this. Sure enough, they sprout about child care, gay rights, inequality, and all the rest of it, but at the core, they have embraced the neo-liberal economic lies and gone along with or even initiated and overseen fiscal austerity, privatisation, welfare cuts, deregulation – it is just, we are told, they do all that in a more moderate and fairer manner. They don’t stop for a second to think that they also have become captive to capital. Something big has to happen to stop all this. History tells us that it will. And the longer the progressive political voices remain complicit, the probability that that ‘something’ will be violent, increases.…I agree with Bill's last sentence. Anyone with minimal familiarity with history can read the tea leaves. The screws are coming loose before the wheels fall off.
Debate rages in particular on the question of whether Trump’s victory was driven by economic factors. Like Duncan Weldon, I think Torsten Bell gets it about right – economics is an essential part of the story even if the complete picture is more complex.
Neoliberalism is a word I usually try to avoid. It’s often used by people on the left as an easy catch-all to avoid engaging with difficult issues. Broadly speaking, however, it provides a short-hand for the policy status quo over the last thirty years or so: free movement of goods, labour and capital, fiscal conservatism, rules-based monetary policy, deregulated finance and a preference for supply-side measures in the labour market.
Some will argue this consensus has nothing to with the rise of far-right populism. I disagree. Both economics and economic policy have led us to this point.
But to what extent has academic economics provided the basis for neoliberal policy? The question had been in my mind even before the Trump and Brexit votes.
A few months back, Duncan Weldon posed the question, ‘whatever happened to deficit bias?’ In my view, the responses at the time missed the mark. More recently, Ann Pettifor and Simon Wren Lewis have been discussing the relationship between ideology, economics and fiscal austerity.…This is a good analysis of Keynesianism versus Monetarism. Its is the most comprehensive, clear and concise account of which I am aware.
As Akerlof and Shiller say, millions of people are phished for phools. There's a sucker born every minute. Hundreds of thousands of people like her were conned when Osborne lied:
Where is the fairness, we ask, for the shift-worker, leaving home in the dark hours of the early morning, who looks up at the closed blinds of their next door neighbour sleeping off a life on benefits?
The take-away for the left:When we say we're all in this together, we speak for that worker.
Some laboratory experiments (pdf) by Philip J. Grossman and Mana Komai have shown how strong such within-class envy can be. They show that some of the poor are willing to attack other poor people even at their own expense. They conclude:Many cognitive biases are in the genes. This doesn't mean that they cannot be overcome. Only that the tendency lies with the can artists who exploits them. PR and marketing and advertising types have realized this at least since the publication of Propaganda and Crystallizing Public Opinion by Edward L. Bernays. Tidbit: Bernays was by two branches of his family tree the nephew of psychoanalysis pioneer Sigmund Freud. His mother was Sigmund's sister Anna and his father was Ely Bernays, brother of Freud's wife Martha Bernays. (Wikipedia)We find strong evidence of within class envy: the rich targeting the rich and the poor targeting the poor...Within the poor community, the target of envy is usually a poorer subject whose wealth is close to the attacker; the attacker may possibly be trying to preserve his/her relative ranking.I say all this for a reason. It's tempting for lefties to believe that people vote Tory because of "neoliberal" ideology and the right-wing media. But there might be more to it than this. Even without such propaganda, there are cognitive biases at work which undermine class solidarity. I fear some on the left underestimate this fact because of the same cognitive bias which contributed to that woman voting Tory - wishful thinking.
In Part 1 of this two-part blog I laid out a general analytical framework for considering fiscal rules that might allow governments to borrow for infrastructure as long as all current expenditure is at least matched by taxation and other current receipts. This is more or less the rule that the British ‘Charter of Budget Responsibility’ imposes and the approach that the new (previously called radical left) British Labour Party leadership aspires to obey. I use previously called ‘radical left’ advisedly because as the days pass the utterances of the economic leadership make it difficult to differentiate between Labour and the Tories. The main difference appears to be the worn out “we will tax the rich and the crafty tax dodgers to balance the budget”. A nonsensical stance for a progressive political force and verges on Game Over syndrome. John McDonnell’s presentation to the National Labour Conference yesterday was a further walk into obscurity. By claiming they are not “deficit deniers” and will close the deficit as a priority they have walked right through the Tory framing door. Not lingered on the doorstep and then sought more salubrious premises. But they are right inside – trapped into the same mantra – yes, they will cut the deficit but it will be a fairer cutting. The rich will pay. And pigs might fly.Bill Mitchell – billy blog
Part 1 – British Labour Party is mad to sign up to the ‘Charter of Budget Responsibility’.…
Hidden amongst the weeds of the Dodd-Frank legislation was a provision authorizing the Securities and Exchange Commission to order publicly traded companies to publish the ratio of CEO to median worker pay.
That rule was finally voted on this week. That is five years after the legislation was passed.
The delay in enforcing the rule was caused, at least in part, by the massive push back by big companies. Presumably they were embarrassed by the ludicrous differential that has opened up in that ratio.…
…throughout these past five years business has managed to install a number of amendments to the rule that will make the ratio appear less outrageous than the original rule would have: they can exclude foreign workers, they can choose the ‘sample’ of employees upon which the calculation is made, they can exclude a percentage of part-time workers, and so on.…
If anything, the Greek people are the ones who have learned they can’t trust the governments in power in the rest of Europe to do anything other than extract an enormous tribute—in the form of “extensive mental waterboarding” and continued austerity measures—in order to come up with the necessary funds to restore the banking system and give the country some breathing room.As a have said many times in the comments, "loss of trust" means that Greece must "regain trust" by foregoing sovereign rule that marginalizes the "leftist" government,
Severe austerity and hard [to get] money is the toxic brew pols like Paul Ryan want to bring home.AlterNet
It is against this background that the Greeks elected in January 2015 the Syriza government committed to reverse these policies. A period of negotiations followed. But these were not proper negotiations. The huge gap between the two parties in power resources and ideology made the talks brutally asymmetrical. I have called these ‘negotiations’ a European coup, an attempt at ‘regime change’ using banks and not tanks. The economic stakes for the lenders are relatively small - the Greek economy is only 2% of European GDP - and does not justify the risk of a breakdown in relations. The precautionary principle of risk theory, inscribed in the European DNA, demands that the unpredictable effects of Grexit on the European and world economy should be avoided. If the collapse of Lehman Brothers created such a huge crisis, even the consideration of Grexit is more dangerousOpen Democracy
The perceived threat of a Syriza success and of a haircut of the Greek debt, repeatedly declared unviable by the IMF, is political not economic. The European elites fear a contagion throughout Southern Europe of the anti-austerity stance of the Greek people and government. The result in the Spanish local elections, the Scottish anti-austerity vote and the Sinn Féin opinion poll results indicate that the people hit by austerity have started stirring. The Syriza government is leading the attack on the ‘there is no alternative’ neoliberal mantra. Even a limited success would show that the only fight that cannot be won is a fight not joined.
The fear of political contagion is the only credible interpretation of the actions of Europeans and the IMF. The aim is clear. Either overthrow the government, if it does not accept the onerous conditions imposed on it, or humiliate it so much as to make it impossible to keep party and government together. There are many signs of this attempted ‘regime change’. Every time the Greek government presented to the European leaders a political proposal solving the long-term problem of debt sustainability, it was asked to go to the technocrats and cost it. When the Greeks returned with a detailed costing, the lenders would challenge the political framework behind it....
The report does not even say the obvious, which is that fiscal policy will therefore act as a significant drag on growth over the next few years. How much of a drag? The OBR estimate that past fiscal consolidation has reduced GDP by around 2%. We could therefore infer from this paragraph that future consolidation will tend to reduce future GDP by a similar amount. But this assumes that the Bank agrees with the OBR’s assessment about the past, and the Bank says nothing on this....
So why the silence on the impact of fiscal policy? I guess it is deemed politically sensitive to talk about such things. But silence is not a neutral position in the current political context. Silence suggests that the demand impact of fiscal policy is somehow unimportant, or perhaps particularly uncertain: both of which the Bank knows are untrue. This is not about monetary policy makers trying to avoid treading on the toes of fiscal policy makers. It is about monetary policy makers supporting a political position which chooses to be economical with the truth about the impact of fiscal policy. The Bank being coy is the Bank colluding with those who are being economical with the truth.Mainly Macro
There was an interesting article in the UK Guardian last weekend (March 29, 2015) – Why falling inflation is a false pretext for keeping wages low – which examined wage trends in the UK and the validity of the argument that “Falling inflation now provides employers with a pretext for keeping wage settlements low". Employer groups never support wage increases and are continually trying to suppress real wages growth below productivity growth so that they can enjoy a greater share of national income. As part of my research to discover the nature of the ideological shift accompanying the emergence of Monetarism as the dominant policy paradigm I have been examining wage distributions. This is part of a book I will complete next year (fingers crossed) on the demise of the political left. In this blog we examine the shifting relationship between labour productivity growth and real wages growth since 1960. The results are illuminating and open up a broad research front about which I will write more as time passes.As usual, Bill puts his finger on the fundamental issue. The chief issue in a surplus economy is distribution of the surplus. The major parties vying for a share are "capital" (owners and those who control the firm) and "labor" (workers aka "the help"). So the tussle is between capital share and labor share with respect to distributing the surplus resulting from productivity.
There were regional elections in the autonomous community of Andalusia (Spain) over the weekend which saw the Spanish Socialist Workers’ Party (PSOE) hold onto power. The results showed that the left-wing political party – Podemos – which received nearly 8 per cent of the Spanish vote (5 seats) at the European Parliament elections in May 2014, was third in the Anadulusian election, gaining 15 of the 109 seats. The parallels with Syriza in Greece are now routinely being made. I am forming the view, however, that unless things change rather dramatically in Greece, Syriza may actually end up only undermining progressive agendas in Europe as they self-destruct under the iron fist of the Troika (I do not use the terms “the institutions” or the “Brussels Group”). This is of great interest to me at present because I am sketching out a 2016 book project at present with a co-author, which broadly focuses on the demise of the left and social democratic movements in the World, although we might pare the scope down with more discussion to concentrate on Europe. Of particular interest is the morbid inferiority of the French left relative to the Germans in the Post World War II period and the way in which American Monetarism has infiltrated and built on that inferiority. Much of the design of the monetary union can be understood through that sort of lens. So a broad canvas right now but that is always the case. Of immediate interest, though, is the possibility that Syriza will set progressive causes back rather than become the spearhead for a sweeping change in Europe and the end of this destructive era of neo-liberalism.There is no viable left anywhere at present because the left has no viable vision for governing based on a practical economic plan. So they fall back on the unworkable liberal model rather than appear "illiberal." There are other ways to structure economic liberalism rather than on the neoliberal model, but the so far the left has either fallen back on a discredited socialistic model or failed to elaborate a credible liberal alternative.
Paul Krugman notes Governor Walker’s advisers on economics at a recent meeting are Larry Kudlow, Stephen Moore and Arthur Laffer. These folks make appearances in the Econbrowser archives.…
I am ever thankful for the likes of Kudlow, Moore, Laffer and their like, even as they drag down the level of economic discourse. They just provide too many examples of how not to conduct serious analysis.Econbrowser
