Ian Welsh

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

Category: Development Economics Page 2 of 4

China’s Economic “Miracle” Was Normal

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On November 1, 2021

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Over the last few weeks I’ve been reading books by some of the smarter members of the international elite. One thing they all seem to agree on is how amazing and unprecedented China’s economic rise was.

It wasn’t.

China industrialized and modernized the way almost all nations have:

  1. Through mercantalist policies. In China’s case, keeping the value of the currency low, taking advantage of low wages, and starting with the oldest parts of industrial value chains.
  2. By exporting to large external economies which let them: the US and Europe.
  3. By grabbing as much intellectual property as possible.

This is how America did it in the 19th century. This is how Japan did it twice (Meiji, post WWII, Taiwan and South Korea did it. This is how virtually everyone did it.

Americans got greedy and stupid, from a geopolitical point of view. They believed the nonsense “End of History” bullshit about how capitalism and democracy are intertwined and capitalism inevitably leads to democracy and they were salivating over the profits they could make in China. So they traded and they let China into the WTO.

Contrary to the idea that democracy and industrialization/modernization are intertwined; Japan and Germany did most of it under authoritarian governments and with massive government direction. Even post-WWII, Japan was a one-party state, not a real democracy. Germany’s industrialization was based on Prussia’s command economy, and the great companies were practically state organs even if they were nominally civilian.

Japan didn’t become a nominal democracy because “capitalism” it became one because it lost WWII. The Kaiser had a parliament, but still a great deal of power and he didn’t step down voluntarily, he lost power because the Germans lost WWI.

But the emphasis on authoritarianism misses what is actually interesting and almost unique about China: it has the most decentralized government spending of any major country, with over 70% of spending decisions made below the Federal government. As a rule, the center made and makes goals and guidelines, but leaves it up to regional and municipal governments to figure out how to achieve them. China has a dynamic government, and there is a lot of competition between governments, as much as between firms.

It is also easier and cheaper to start a new business in most of China (free in Beijing to incorporate) than it is in most of America or Europe.

Meanwhile, the great danger to capitalism is capitalists being too successful, and buying the system, and then getting rid of necessary oversight and regulation. China has largely avoided that (though real-estate wealth is still a problem) and Xi Jingping has cracked down repeatedly those he considers bad actors. In one recent example he forced delivery app companies to treat their employees much better (better than in America). In another he got rid of the College prep industry almost entirely, which a lot of western observers thought was bad, but the industry was a pure “Red Queen’s Race” situation, because it existed everyone had to do it, and as with all such college prep industries it favored those with money over those without. Xi was entirely right to end it.

Democracy used to serve this purpose in the West. Almost everything FDR did, economically, was to stop capitalism from destroying itself.

Further, all evidence I have seen indicates that contrary to what I thought in the past, the Chinese Communist Party (CCP) goes out of its way to recruit smart, competent people and has thus, so far, been able to avoid the generational nepotism and degradation cycle.

To bring this back to Western elites, a lot of the mistakes come from drinking their own Kool-aid. While virtually no country larger than a city state has ever modernized without mercantalist policies, the orthodox economic position of the West for decades was laissez-faire, and that’s what the World Bank and IMF made most countries do. Those policies are vastly destructive and don’t work IF you want a country to modernize, but if you really want it to become a helpless satellite state they work well. (Bad Samaritans, by Ha-Joon Chang covers this well.)

“Free” trade is not what America did, Germany did, France did, Japan did or even England did to industrialize, and it’s not what China did.

What it is truly unique about China’s industrialization is its size: it’s a subcontinental power with a huge population. Japan was never really a threat to the US, for all the screaming in the 80s, because of its population size and limited geographic extent. China is by some measures already a larger economy, and the only thing might stop it from becoming the world’s greatest power and eclipsing the United States is that climate change will  hit it hard somewhat earlier than it will hit the US, as best I can tell.

So, what matters about China is just that it’s not Western, and poised to become the first Eastern hegemonic power in about 200 years. Of course the US doesn’t like that, and of course Europe (still an American satrapy) is uneasy.

This could have been avoided easily enough, though it probably shouldn’t have been, simply by refusing to cooperate with Chinese mercantalist policies and certainly, if the US didn’t want a rival who would probably eclipse it, letting China into the WTO was insanity. (This was clear at the time, and many people objected.)

The other issue is that the West no longer has a veto on who gets to industrialize. For various reasons Japan, South Korea and Taiwan couldn’t serve as the necessary markets for mercantalist expansion, but China can and that’s what they’re offering many other nations the West never let develop. The European/US monopoly is broken.

The lesson is not to believe your own lies and bullshit. Fukuyama was obviously full of shit about “The End of History” and developed world suggested “development” policies in the last half of the 20th century were meant to stop nations from developing, which was their record, and anyone with  sense who spent a few hours examining the policies of countries which actually industrialized, could know it.

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The Advantage of Permission & The Fall Of Oligarchies

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On September 28, 2021

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One of the main advantages of capitalism is “permission.” It gives more people permission to do things than oligarchical or state capitalism. This was, actually, a lot of what Adam Smith was complaining about in “The Wealth of Nations”: that state monopolies and controls were limiting who could effectively participate in the economy: you might have a great idea, but you couldn’t do anything with it.

Capitalism, as a Western system, also has other features, of course, including wide-scale theft of capital from the majority of the population, of which the enclosure of the commons was one part (the commons were property rights). Society becomes divided into those who have capital, and those who don’t, who are compelled by Marx’s “whip of hunger” to work for wages. (Thus wage-slavery, a term coined in the 19th century when this process was happening in America.)

Still, the explosion of businesses of all sizes is much of what drove the success of capitalism: the ability to DO things, and not be stuck in old forms.

This is also at the heart of much of the success of China. What Westerners don’t realize is that, despite all the cries of totalitarianism, the Chinese government is one of the most decentralized in the world: over 70% of spending decisions are made below the national level: this makes it the most decentralized national government in the developed world.

China’s central leaders make decisions and laws, to be sure, but much of how that is implemented in any locale is up to the local party, and definitely not micro-managed.

If China had tried to micro-manage everything, they would never have succeeded in becoming the World’s largest economy, or lifted so many people out of poverty. Instead they would have succumbed to the same diseases that did in the USSR. (Which had its own successes, but stalled out for a variety of reasons.)

Some years ago, in an old book I can’t find, I read an introduction where the author, who had lived thru WWII, noted that the idea that fascism was the superior form of government had been proved to be absolute nonsense: when the Allies turned their economy around and pointed it at war production and mobilization it produced miracles precisely because decision making wasn’t bottle-necked at the top. A dictator and his few trusted cronies can be decisive, but their unwillingness to extend trust down the chain cripples them.

This requires social consensus and trust, however. America and Britain and Canada and Australia had to be behind the war at a population level: but they were, and while guidance was needed and often correction, it is precisely that many people could make decisions which made the war effort possible and helped crush the Nazis.

The problem we have now in the West is dual-barreled; we both have improper direction from the top and bottlenecking. New enterprises can start, and do, but if they are successful they can’t run: they are bought up or sold out. This is a result of the structure of financing these days: founders generally don’t control the majority of their company’s voting stock, and are forced to sell or go public by investors (most often, sell.)

Money itself is bottle-necked: there’s tons of it pooling at the top, but there are radically fewer banks than ever before, and access to money has to go thru the already rich. The old middle and even upper (not rich, but upper classes) are relatively poorer: the famous “check from Dad” investment is available to fewer and fewer.

Regulatory hurdles are massive. Everyone knows, for example, how to make insulin, and you’d think someone would get into the business and undercut producers. Insulin costs about $4 to make, and sells for over $300. In economics this looks like the sort of situation that would automatically lead to competition.

It doesn’t. For one, getting permission to produce is hard and expensive. For the second, if you did manage to, it would be costly to setup the initial factory and supply chain, and that means the current producers would simply step in and undercut the new entrant till they went out of business (people would buy the cheapest), then push prices back up once they had driven the challenger out of business.

The second bit is also a regulatory issue. A properly functioning government wouldn’t allow undercutting: but then a properly functioning government would not allow the sort of predatory pricing and abuse of oligopoly power.

There are only three insulin producers in the US: they are obviously in collusion (which older anti-trust law would have said is clear given how their prices are all so high and uniform, and thus it did not require proof of meetings and so on to set prices.)

And this is the next problem: if there were a hundred pharma producers in the US, one of them would break ranks. But when there are so few, they don’t: collusion is easy. You don’t even have to get together,  you just have to follow the price increases and be willing to commit mass murder. Since it is a requirement of membership in modern capitalist elites in the West to be so-willing, of course no one in charge of Pharma in the US isn’t willing to mass murder to get richer, as Covid has also proved.

This inability to really do new things or even old things (insulin ain’t new) unless they benefit and are controlled by incumbents is rife throughout Western societies: it is by design. Even international trade law is designed to ensure this: tariffs and subsidies are how companies that don’t already lead an industry used to develop, but we’ve made that basically illegal, leaving only “pay your workers dirt cheap wages and we’ll let you in, if you cut us in on those delicious exploitation profits.”

This is what China did, at first: they cut Western and American elites in on the profits. But they also were very aggressive about obtaining the manufacturing knowledge (called “intellectual property” in the West”) for themselves. The price of the profits was that you had to give up your secrets. This was the deal, I was told this decades ago by people familiar with business in China and offshoring, but there’s a lot of pretense now that Western elites didn’t know it. They sold their countries good manufacturing jobs and middle classes down the river for Chinese gold.

I don’t blame the Chinese for this: I’d have done the same in their shoes, because industrializing by the “rules” hasn’t ever worked unless one was willing to be subordinate (Japan, Korea, Taiwan, etc…)

The Chinese sized up Western, and especially American weaknesses shrewdly and took advantage of them. American elites did get most of the profits they had been promised, they just didn’t get to own the Chinese economy, which is what they really wanted.

China is, thus, the great exception: the one who made it out. Almost everywhere else, however, what has happened is that a few companies in each industry have come to predominate. Their production facilities are scattered, but at the same time bottlenecked, with parts production in various locations final assembly in others, so that if any part of the chain is taken out the entire chain can experience shortages.

They are protected by vast “barriers to entry”. They can undercut at will, and regulators won’t stop them. The structure of starting new businesses means upstarts have to sell out, and often to their competitors, as one can see by watching internet giants gobbling up strong competitors like YouTube, Instagram, WhatsApp and so on. Law is against them, up to and including international law.

And so a few companies, controlled by a very small elite compared to the population, control most of the developed world economy. Where there might have been dozens or hundreds of viable large firms, now most sectors are controlled by a few conglomerates. These conglomerates then own national politicians, and those politicians write the laws to suit them. (A perusal of major extension of copyright law in the USA, with the original expiration dates on copyright on Mickey Mouse will be educational.)

Oligarchy is always stupid and unproductive. The great oligarchs are made out to be heroes, but almost all of them exist by making more activities impossible than they make possible: they do their best to allow nothing to succeed unless they will profit from it, as app stores, with their 30% rates, show at the most retail level.

All things human end. All oligarchical ages end, just as do all democratic ages, aristocratic ages and so on. The question is when and how? The ideal is to use what remains of the machines of effective democracy and government to end this oligarchical age. China has recently cracked down on billionaires and tech exploitation of workers (for example, they made abuse of app delivery workers illegal). They did so because the CCP understands its interests: it doesn’t want opposing power centers, and because the CCP wants the Chinese economy to work for everyone because they don’t want serious dissent.

The need for survival concentrates the CCP’s minds. Whatever one thinks of them, they can, as Matt Stoller points out, still govern.

Our elites, on the other hand, are pigs at the trough. There is nothing they will not do to become richer, and they have no eye for the longer run, only for power and money and now.

This has worked well for them for so long they do not believe it will ever end.

It will. It will either end because the populace ends it (led by a chunk of fallen elite or elite who decides to betray the other elites) or because the necessary conditions for its success crumble. This can be an end to geopolitical supremacy (which Western elites are scared of, which is why the onrushing Cold War with China) or collapse of the environmental conditions and resources necessary to continue this mode of production, which is something our elites are not scared of (no, they aren’t scared of climate change.)

Unfortunately, at this time, it seems most likely that this configuration will end because of environmental and societal collapse.

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A Great Idea About Capitalism That Was Wrong

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On July 27, 2021

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So, back in the 80s, when I was young, green and wet behind the years, one of the great thinkers about how to help poor people was a guy named Hernando DeSoto. (Great name, aces on parents!)

DeSoto, who was mostly concerned with Latin and South America had one big idea: the reason that poor people were fucked is they didn’t have clear ownership of what they actually owned: slum dwellers didn’t own their houses or the land they sat on, peasants often didn’t own their land either, and informal bus companies and the like operated without licenses or any rights to their routes.

Because they had no clear title, they couldn’t borrow against their actual property, couldn’t sell it and move, or in general use it as an asset.

This DeSoto said (and at the time, I believed, and so did many governments and NGOs and so on) was one of the reasons they stayed poor, not only couldn’t they access capital: they couldn’t even use the capital they already really owned.

The solution was to give them that clear title, which would allow a million new businesses to bloom, and so on.

Because we live in a far more cynical age (and because I gave it away in the title!) you know this didn’t work out. What happened instead, though it took a couple decades to become obvious, is that once they had title, they could lose it: sell it, have the government take it away, go into debt (which most poor people do) and have it seized in payment of debt, etc…

If you’ve ever been real poor (in the informal economy, unbanked, no assets) you know that perhaps the only good thing about it is the ability tell collection agents (generally the scum of the Earth) to go fuck themselves. “Take me to court, I have nothing you can seize!)

DeSoto managed to remove that one sliver a silver lining, so that slum dwellers could even lose their tin shacks.

Ah, capitalism! Truly the most glorious system ever developed to concentrate wealth and power in a few hands while pretending that it’s all voluntary. At least when feudal nobles or MOngols conquered you and took everything you didn’t have to pretend it was your free choice, or something.

Realism aside (I was going to say snark, but this is just how the system is meant to work) this is what happens when we are indoctrinated into thinking that capitalism is a system designed uplift everyone, and it just happens to require concentration of wealth. It’s also what happens when we assume that the uplift actually powered by industrialization happened because of capitalism instead.

It’s hard to disentangle these two because capitalism was in power when industrialization happened and the great challenge against it (state centralized “communism”) lost (largely because it had the inferior geostrategic position, I’d suggest.) So we mix the two.

But they aren’t the same, and capitalism, to the extent it has virtues, works best when it is kept under strict control and a lot of things are kept out of the market.

I assume DeSoto was sincere (though who knows), but because he bought the myth, and sold his myth so well, he wound up hurting exactly the people he wanted to help.

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Neoliberalism in India and Covid Deaths

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On May 18, 2021

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I’ve had my eye on India ever since I found out that calories per capita had dropped in India over the last 30 years.

That’s not what happens when things are going well, unless a huge number of people have moved to sedentary jobs, which they had not.

Neoliberalism is about production and supply trains. They’re very complicated, and the parts for a finished good may be made in a dozen countries and shipped to a plant which does the final assembly. The IP holder often skims ten to 30 percent profit off of this.

Most countries currently industrialized didn not industrialize under neoliberalism. They ran protectionist trade policies and exported their way to mature economies. That was generally allowed because they were a military ally or satrapy. Japan was first Britain’s ally, then for the US. Taiwan and South Korea were American satrapies, etc.

China used a hybrid model. They got themselves into the supply chains by offering high profits to Westerners, generally through simple wage arbitrage (“our workers cost less”). They put heavy pressure on people who took those profits to give them their technological secrets (IP) in exchange. And for much of the early period, they also ran a protectionist policy, keeping their currency low against the US dollar. They turned neoliberalization into mercantalism, and because less than five countries have EVER industrialized under any system but mercantalism, they succeeded.

They were able to do this because they made it very worth the while for greedy Western elites to ship jobs to them; they made a lot of Western elites rich. They knew exactly the deal they were offering.

India was socialist for a long time. They felt it didn’t work, so they decided to try neoliberalism.

But, they ran into the fact that it made more sense to offshore to China, and they didn’t do neoliberalism smart — they didn’t control their currency properly or find another way to turn neoliberalism into mercantalism. China kept large parts of their economy state-controlled, and used those companies actively. Yes, state-controlled companies were less efficient, but they gave the State power, and they provided ways of spreading welfare to people that the private companies weren’t taking care of. Not immiserating too many people meant making sure that Chinese citizens saw the new industrial and trade policies as good for them.

India, on the other hand, got in mostly on service jobs. “We speak English, so we can do service center stuff,” and a fair bit of IT outsourcing and offshoring.

But they neoliberalized as if they were already a first world nation; they sold off public enterprise and gutted state control over the economy as if there were a huge surplus created by decades of good growth which could be cannibalized to create a rich class.

India did create a small new middle class and rich, yes, but they did so without creating widespread prosperity.

Because of the way human psychology works (we have a strategy, it has not worked, we must do it harder because we are always right until we are overthrown), when the old elites couldn’t really make this work, a toxic mix of neoliberalism and Hindu Nativism took control of the country, with the face of Modi.

Modi’s a right-wing nationalist, verging-on-fascist (some would take out the word “verging”). But he’s also a neoliberal’s neoliberal. Practically, his first act was to de-monitize: removing large bills from circulation and forcing poor people to use electronic money. This was sold as crushing corruption, but what it did was make sure that the government and financial elites could grab more money from more transactions, while crushing the informal economy most Indians live in.

Recently, he’s passed a law which allows farms to be bought more easily. And so they will be (farmers, not being idiots, have opposed this law).

So Modi’s run the same play you can see in right-wing parties around the world: He’s offered nativism and feel-good, right-wing identity politics (Hindus are the best, Muslims are scum, get rid of them, no Hindu girl should marry a Muslim, etc.), and then run policies which will, over time, hurt the poor and create more rich.

But these general policies were running long before Modi.

One of those policies that has now been brought to light by Covid is that the public health care sector was gutted under neoliberal governments, so that private healthcare could make more money. So now, when it’s needed, there isn’t enough public (or private) care around.

This is how neoliberalism works: It looks for a public good and then it gets rid of it. This can be a regulation which, if removed, allows profit (making it hard to buy farms means they can’t be bought up and turned into large cash farms; cutting pollution rules means someone makes more money, etc.) or it can be by making public services shitty, or selling them off to the private sector, or other variations.

Again, in a developed country with a large prosperity cushion like the US, France, or Canada, you can do this for a while, and it doesn’t look so bad.

If, on the other hand, you do this to a country which had never hit developed status in the first place, well, people eat less calories, and when a pandemic happens, hospitals turns away patients in droves.

Neoliberalism doesn’t work when trying develop or industrialize countries, unless you game it so it turns into protectionist trade. China did that, India didn’t, and Indians are now paying the price.

Neoliberalism is designed to create rich elites while crushing ordinary people. In India’s case, it also created a small middle class (because that’s rich, really, in India, as anyone who’s spent much time there knows. Middle class means you have servants, for example. It’s not middle class like in The US or Europe.)

Neoliberalism is not designed to help anyone but the rich, except temporarily. Some asset holders will win (say, if you owned a house in 1980 in the US and didn’t sell until retirement, then moved somewhere cheap.)

But no other groups win for any length of time, because neoliberalism is the policy of looting, of pumping asset prices and of crushing wages. That’s the policy regime. It does what it’s meant to: It creates a rich class and, for a while, it keeps enough people supporting it who won’t win the end (unless they die soon enough) by giving them large, unearned asset price increases that are much greater than inflation.

India needs a new strategy. The overwhelming of its medical infrastructure is exactly the result of the neoliberal policies it has followed for decades. Modi is only the latest and worst, not the first.

I wish the Indians well. They have a very challenging few decades ahead of them, perhaps the most challenging of any non-African large country in the world. I hope they get their act together, ASAP, or a lot more Indians than Covid is killing will die, and die ugly, as climate change, ecological collapse, and water shortages hit.

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Offshoring Critical Industries Is So Harmful It Should Be Treason (Covid Edition)

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On March 25, 2021

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I was impressed how fast the UK and the US were vaccinating their population. How were they doing it, after they had been so incompetent during the rest of the pandemic?

Simple enough. Restrictions on vaccine exports.

Meanwhile:

India delays big exports of AstraZeneca shot, including to COVAX, as infections surge

And then there’s this:

(Spare me the self-serving arguments that breaking the patents wouldn’t have helped because it takes too much time to ramp up production. However long it takes, the sooner  your open up the IP, the faster it happens.)

And we could make it happen faster:

But the global capacity for producing vaccines is about a third of what is needed, says Ellen t’Hoen, an expert in medicines policy and intellectual property law.

….

To make a vaccine you not only need to have the right to produce the actual substance they are composed of (which is protected by patents), you also need to have the knowledge about how to make them because the technology can be complex.

The WHO does not have the authority to sidestep patents – but it is trying to bring countries together to find a way to bolster vaccine supplies.

The discussions include using provisions in international law to get around patents and helping countries to have the technical ability to make them.

Rich countries use IP law to keep poor countries poor, and to kill and impoverish their citizens to make even larger profits.

And, of course, if you’re stupid enough to believe neoliberal bullshit about how your countries will be OK and don’t take steps even though you have manufacturing capacity, (Europe), well, your citizens die. The EU is now restricting imports to the UK. I wonder how many Europeans will die because of not having those 10 million doses?

“I mention specifically the U.K.,” said EU Commission Vice-President Valdis Dombrovskis. Since the end of January, “some 10 million doses have been exported from the EU to the U.K. and zero doses have been exported from U.K. to the EU.”

OK. I have said this for years and years but I’m going to say it again now that it is being illustrated brutally: if you can’t make it yourself, you can’t be sure you’ll have it when you need it, since countries that can make it will tend to prioritize themselves.

You must make and grow everything essential to your country domestically if you can. Any international laws that forbid you from doing so are illegitimate. They may exist; they are not Just. This doesn’t mean completely breaking patent law (though it needs to be much less draconian and a lot less long), it does mean, at the least, writing in mandatory licensing provisions at reasonable prices.

A lot of people are going to die who didn’t need to because neoliberal “free trade” orthodoxy said you didn’t need to be able to both design and make vaccines in your own country: the “market” would supply you.

Eventually.

This isn’t just about behaviour now. It is about behaviour that has been encoded into law and trade practice over decades.

Don’t offshore anything that matters. If your citizens have to pay 5% or 10% more, slap on tariffs.

To not do so, if you think the welfare of your citizens is your duty, is treason.

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America Is About to Feel Like a Third World Nation

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On August 7, 2020

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I spent a good chunk of my childhood in third world countries. Most of that chunk was spent in Bangladesh, which was then arguably the poorest country in the world, but I visited or lived in Malaysia, Singapore, Indonesia, Nepal and India, among others.

There’s a feel to the third world one becomes familiar with: beggars, infrastructure that doesn’t really work, people doing terrible menial jobs. There’s the huge disparity between the wealthy and everyone else, or even those who have managed to attach themselves in a semi-dignified way to the wealthy.

Cruelty is routine and unremarked. Indian police officers routinely beat people as punishment (similar to their American counterparts). Servants are treated terribly, and in fact the locals routinely treated the servants far worse than foreigners. This has hardly changed, Vivekenanda, in the 19th century, noted that Americans treated their servants far better than Indians did.

The US is about to make a double digit percentage of its population homeless. Something like 20 to 30 percent — or more — of American small businesses have or are soob to shut down by the end of the pandemic. The jobs won’t all come back and those that do will pay worse and feature worse treatment than the ones before (which were mostly not well-paid and featured routine meanness).

We’re talking about 30 million to 60 million homeless.

These are staggering numbers.

The United States will feel third world. Oh, parts already did, when I landed in Miami airport the first time I immediately thought “third world.” Relatively prosperous third world, but third world.

Those places will be worse–and Florida (as I predicted near the beginning of the crisis) has handled the pandemic noticeably badly.

Of course, for many, little will change. They’ll keep their jobs, they’ll be fine. I recently witnessed a discussion of infosec jobs, talking about how for a person with a degree and a couple certifications, $120,000 was a lowball. There will still be good jobs, and you’ll still be able to lose everything in a few months if you become seriously ill.

But when those people who are hanging on go out in the streets, they’ll see, even more than now, the fate that awaits them if they slip.

So much of American meanness, and the culture is mean in the details of its daily life, comes from this fear. Because it is so easy to slip into the underclass, even if one “does everything right,” Americans are scared, even terrified, all the time. They suppress it with massive amounts of drugs (most of them legal), and most deny it, but the fear drives the cruelty.

In the Great Depression, people became less cruel, not more. They saw that the idea of meritocracy was absolute bullshit: The richest people in society had fucked up, good people wound up in poverty, and merit had nothing to do with who had how much.

I hope this is what will happen in the US this time. I fear, instead, it will lead to even more cruelty. Instead of saying, “We should make sure everyone is taken care of” and instituting universal health care, good wages, and a non-punitive welfare system (whether through a universal income or some other way), Americans will instead become even more cruel out of fear of losing their place.

The US is “undeveloping.” It is moving away from being a developed nation to being an undeveloped nation.

This process has been going on for a loooooong time. At least 40 years (1980), and arguably since about ’68 or so. The frustration, as an analyst, was that the trend was obvious but it took so long. There is, as Keynes said, a lot of ruin in a nation.

Change is slow, very slow, until it is fast. People who live in the slow period, of long decline, don’t really believe in collapse, they assume that things will get worse in a steady line.

But, in fact, there are long periods where everything changes slowly, then periods like earthquakes. 2008 was an earthquake (and collapse nearly inevitable by bailing out the rich). This is also an earthquake. Amercians will FEEL different afterwards, even if Covid goes away 100 percent, which it may not, because Americans refuse to do what is necessary. American media keeps having articles about how Covid will never go away. Well, except for quarantining visitors, it will for many countries. But not for the US, or Brazil, or India. Third world countries all.

Nor should we get too down on third world countries. The US is third world and experiencing the complete corruption of its ruling and governing classes, with the collapse of its administrative ability. When your post office can’t even deliver mail, you’re a failing state; this is such a basic part of being a government that it’s part of the Constitution, written in the 18th century, but because the post office isn’t a kleptocratic institution, the American political class is destroying it.

Most third world nations, indeed, are handling Covid better than The US.

Nonetheless the process is underway. The US is already governed like a third world nation, it just has a lot of legacy infrastructure and institutions to destroy to get the full experience.

So, expect that this is one of the times that matters. Expect that the US will be different after this. Expect that it will feel different. Understand that your personal position has become much more perilous. You must reduce your vulnerability and/or attach yourself to a corrupt money stream in a way which makes you indispensable. Being valuable is not enough, it needs to hurt important people if you you go down. If it doesn’t, the second the numbers say you go, you’re off, and any individual who can be replaced will be if you get on the wrong side of someone more powerful.

There’s lots of good paying jobs, yes, but almost all of them can be done by someone else. It doesn’t have to be you.

Bear all this in mind as you plan your future in the new third world United States.

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It’s Not OK to Think Everything Is OK or Getting Better and Better

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On November 13, 2019

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Globe on FireI’ve discussed the “better-than-ever world” argument before. I find it questionable, for a number of reasons and if that interests you, read the linked article and the articles to which it links.

What I’ve been paying attention to lately is WHO likes and buys into this argument.

They fall into two groups: the first are techies, the second are neoliberals.

We’ll start with neoliberals first. Neoliberals want to claim that everything’s going great so they don’t have to make serious changes. If even the poorest are getting better off rapidly (50K a week, I saw as a recent claim, for improvements in “dire poverty”), then all that is required to the current system are tweaks: It’s working.

More importantly for the neoliberals, if the world is better than ever, the people who have the most don’t have to give anything up–not money, or power, or the way they do things. What they’re doing is basically working, their being rich and powerful isn’t hurting the poor; in fact, it’s lifting the poor up!

So statistics have to show that poor people are getting better off, and if a few show that the poor in parts of the first world aren’t (like certain groups in the US having decreased life expectancy), well that cost has been far outstripped by all the people lifted out of poverty elsewhere and why care more about Americans than people objectively worse off in other countries?

The world order is basically fine. No need to do more than “bend the curve,” as Obama famously said.

Techies have some of the same reasons, especially those who are doing well, like the ones who run Silicon Valley, or who are very well paid. The world is fine, no need to change what’s working.

But there’s something deeper to it for the techies. While neoliberals want to defend neoliberal capitalism–which is why they get offended when one points out that China used mercantalist capitalism to lift people out of poverty. Almost all poverty gains, no matter how you slice the numbers, have been made in China and China DID NOT do what economic orthodoxy says you’re supposed to do.

Techies don’t care about that. Instead they want to defend their legacy and current actions. Forget capitalism, communism, fascism, and all that guff: Really, virtually all the gains of the last 250 years come down to using hydrocarbons to power various engines.

Technological progress is the actual driver of what’s happened. Modern techies identify with the engineers and scientists of the past, especially now that programmers like to call themselves engineers.

Likewise, the computer/internet/telecom revolution which has been driving new industries (I wouldn’t quite say “growth”) since the mid 70s or so is their child, their project. They either worked on it or are still working on it. The world must be doing well because they created it or are creating it, or are maintaining the technology it runs on, the technology that is really responsible for supposed welfare gains.

They believe they are good people, who do good work, and therefore the results of their work must be good.

We all want to believe that the order for which we are responsible, the work we do, and the economics that works to our benefit, is justified, because we want to believe we are good people.

Neoliberals, elites, and techies feel they have created this world. Therefore, this world must be a good one.

Techies also want to think that technology can solve everything, because it’s what they’re good at. And hey, it does demonstrably work. It’s just not clear that it can do everything, or do everything soon enough, since we all will, well, die.

Anyway, the larger point of this is simple: We argue over these things because they are about legitimacy and people’s self-esteems and self-images.

Of course those (like myself) who oppose the current neoliberal order want these figures to be BS. We want to be able to argue that change is urgent, and needed, and that the existing order has failed.

It’s good to understand that, no matter what side you’re on. What do you WANT to believe. Then see if you’re still justified.

Of course, I think I am. This doesn’t mean there’s been no progress, there has. I just think the numbers are wildly over-inflated outside of China, and the progress is unsustainable due to climate change and the impending environmental collapse. I can live like a king if I have a ten million dollar credit card limit, but if I can’t pay it back, eventually that ends.

Also I grew up in the development community. My father worked for the UN’s Food and Agriculture Organization (FAO) in Bangladesh, and had worked before in various other developing countries. I spent time in India, and so on. I listened to development workers talk about what worked and (mostly) what didn’t. There are more cynical (or rather, realistic) groups in the world, but not many.

So there’s always been an off-smell to these numbers to me. I know what works for development (mercantalist policies with the cooperation of the current hegemonic powers, and virtually nothing else, unless you’re a city state) and what doesn’t (anything orthodox development economists tell you to do).

I know who’s been allowed to actually bootstrap up and industrialize (American allies and China–because they bribed American leaders), and who hasn’t (almost everyone else).

And I know something else: If you’re forced off your land into a slum, you make more money, but you’re worse off. The economic and Western obsession with $$$$ as a measure of quality of life is unwise. Even calories (though better) are not great, because for example, when NAFTAs tortilla manufacturers were bought out after NAFTA, their nutritional content plummeted.

So it all smells off, to me.

But even if it didn’t, even if it was all true–that the world was “never better,” radical change is needed because climate change and ecological collapse are on their way, with the leading edge already causing problems. We can’t even keep industrializing the way we have been. If every developing country was allowed to industrialize properly, and we gave them what they needed to do it, we’d just bury ourselves deeper.

The fundamental WAY we have run our economies, both in terms of any type of capitalism (and communism back when, but they’ve been gone for 30 years now, so grow up) and in terms of technology is fucked. Fucked. It cannot continue or we risk civilization collapse. Worse case scenarios are great die-offs which take us down too. Good case scenarios are one or two billion deaths.

No matter what, we are past the point where we aren’t going to be able to change the environment in a way that prevents the climate from being fundamentally warmer and different from the environment and climate which has existed for the entirety of human civilization.

That’s not an economic or technological system which is more or less OK, or producing more or less good results even IF the triumphalists were right about everything.

It requires change, and radical change, if we are to avoid, not disaster (we’ve already had those), but multiple catastrophes of civilization-shaking levels.

It’s not OK to think everything is OK.

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A Few Words About Argentina

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On August 13, 2019

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Okay, so Argentina elected a neoliberal president. He went to deep austerity, removed capital controls, and sought an IMF bailout.

Now it looks like a socialist may win and markets are freaking out, because he may default on some of the debt and re-institute capital controls.

Argentina’s problems have a long history, but it’s worth remembering this: Before WWII, it was a first world country, with a standard of living about equal to Canada’s.

Argentina partially defaulted in 2001. We should remember that that default was caused by following the conservative policy of pegging the Peso to the dollar, which any moron should have known would eventually backfire.

It is also worth remembering that, when Argentina defaulted in 2001, it wasn’t actually allowed to. American courts wouldn’t let Argentina pay the creditors who allowed their debt to be reduced unless they also paid those debtors who didn’t take the deal.

We live in a stupid, perverse world where people don’t understand that there has to be a balance between debtors and creditors. Creditors are making a bet, and if they lend to the wrong entity, and that entity eventually can’t pay back the debt, they should have to eat their losses. Don’t lend to people who can’t pay you back. Everyone knew that Argentina was going to have debt problems, every time, but they took the chance because they wanted high returns.

But the central financial system, the NY and London courts, and the IMF act as debt collectors for people who want the upside of high payments from distressed borrowers without the downside of possibly losing the money.

Worse, they act as enforcers for bad actors, who won’t cut deals, and expect to litigate.

Debtors may lose some money, but leg-breaking countries for rich debtors kills and impoverishes poor people.

Now, none of this is to say Argentina hasn’t made mistakes. Flipping back and forth between neoliberals and socialists is stupid. Pick one, and suck it up. Electing Macri was stupid, but then being outraged when he does what a neoliberal technocrat would do (i.e., austerity and sucking up to the IMF) is equally stupid.

Pick a governing philosophy and elect governments that adhere to that philosophy until the leading parties all follow it (like when Labour became neoliberal under Blair, cementing Thatcher’s victory).

Right now, Argentina is getting the worst of both worlds.

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.

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