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Money Is Power and Billionaires Can Subvert Democracy

2017 November 27

Money is the ability to tell other people how to spend their time: what to make, what to do. It is that simple.

The Washington Post has a story about how the Gates Foundation pushed the Common Core curriculum. The details are there, but the bottom line is that once they decided to do it, it happened fast:

The result was astounding: Within just two years of the 2008 Seattle meeting, 45 states and the District of Columbia had fully adopted the Common Core State Standards.

This wasn’t done “democratically,” it was done with money, which bought officials.

The biggest problem with vast wealth isn’t that it directly makes other people poor, it is that it makes rich people disproportionately powerful. They have so much money that they can buy the state.

When they do so, they usually do so in their self-interest. Sometimes, as with the Gates’s in this case, they do so out of a desire to good.

But their idea of good may not be the same other people’s idea of good. They have vastly more weight than ordinary people, and in an unequal society, they can buy people.

It is that simple.

One way vast inequality corrupts is that it makes some people powerful enough to overthrow democracy; in general (as with Citizen’s United), and in particular cases.

Most rich people are not good people. It is well established now, in the academic literature, that rich people have an empathy deficit, that they give less as a percentage of their wealth and income, and that (to put it unscientifically) they tend to become assholes. They don’t need to care what other people think, or about others’ welfare.

And even when they do try to do good, well, they don’t need to go through normal democratic processes; they just buy the results.

Nor are they effective. There is a weird myth that “the private sector” is why solar power is cheap now. That’s effectively a lie. Solar power is cheap now because countries subsidized the markets for years (Germany in particular), and because China pushed it as a policy as well.

The Internet exists because of the public sector. Also, for decades, the US government bought the vast majority of all low-to-high-end computers. If they had not, you would not have cheap, modern electronics. Anyone who says otherwise is either a liar or doesn’t know the actual history.

Money is power. When the government relies on rich individuals and corporations to do what should be done by government, it takes longer and produces less welfare than it should, and it leads to the capture of the government by the rich.

A 90 percent top marginal tax rate and punitive capital and estate taxes aren’t necessary because “government needs the money,” they are necessary so that the rich don’t become so rich they buy the State.

And that includes the ones who try to do some good, like Gates.

(More on rich states vs. rich individuals soon.)


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Was All-Powerful Russia Responsible for Brexit, Trump, and Catalonia?

2017 November 26
by Ian Welsh
Vladimir Putin Official Portrait

Dark Lord Vladimir Putin

I am given to understand that, in addition to causing Trump to win the US election, Russia is responsible for Brexit, and for the Catalonian independence vote.

Russia, with a GDP of less than half that of California, has, in other words, the most effective election tampering program, in the form of internet trolls and fake news, the world has ever known (or at least since back in the 50s, when the CIA was pretty good at this stuff, and willing to overthrow the government of any country that voted the wrong way).

Is this credible?

Or is Russia being used as a scapegoat for election results neo-liberal elites don’t like?

This isn’t to say Russia may not have tried to influence elections. Sure as hell, the US spends a ton of money influencing foreign elections, but is Russia “the reason”?

It seems unlikely to me, and to whatever extent it might be true, it would only be true in the sense that truly close election results have a thousand parents. If it’s close, any number of things made up the margin.

But I think it’s largely bullshit. That it is an attempt to evade responsibility by domestic elites for screwing things up, or in the case of political opponents like Clinton’s Democrats, for running terrible electoral campaigns (or both).

Trump was possible because a lot of people are very unhappy. Brexit was possible because a lot of people are very unhappy. Catalonia was possible because a lot of Catalonians are unhappy with how Spain treats them.

Or, if you wish, two out of three are driven by racism, or regional anger, or…your choice of reason. They were possible because there were already serious problems.

Something like Trump or Brexit or an independence referendum doesn’t happen primarily because of foreign interference, it happens because a lot of people are unhappy with the status quo. In such circumstances, perhaps foreign interference might make the difference, but it wouldn’t do shit unless it was already razor close.

Look home, not abroad, for why people are willing to vote for actions which elites consider unthinkable.

The primary reason for it is always, always, elite mismanagement of some sort or another.

 

Trump’s Policy on NAFTA Is Mostly Correct

2017 November 22
tags:
by Ian Welsh

Yeah, I know, Trump is wrong on everything.

But I agree with Thomas Walkom on NAFTA. The bottom line is that what Trump wants is what the left should want, and if it doesn’t, it isn’t the economic left.

And Trudeau’s pretty face and lovely abs don’t change that.

Trump wants to:

  • Raise the minimum North American content in autos from 62.5 to 85 per cent.
  • Have 50 percent of autos which qualify for NAFTA free movement be manufactured in the US.
  • Remove Chapter 11, which allows companies to sue NAFTA governments. (This has been horribly abused to stop environmental regulations)
  • A five-year sunset clause.

And Trudeau has said that if Chapter 19 doesn’t stay in, he’ll walk from NAFTA.(Chapter 19 allows us to take the US to court to see if domestic laws are applied. We’ve won such rulings and the US has just changed the law, as with softwood lumber.)

Frankly the changes that Trump wants to NAFTA are mostly good. The sunset clause simply means the deal must keep working, and it is far better than clauses which make it hard to leave deals.

Of course these changes aren’t all great, but they would lead to more jobs in all three countries, and I can’t see why that’s a bad thing. The bottom line is that countries not only have a right to say that access to their markets should benefit their citizens, they have a duty to do so.


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DOJ Suing to Stop the AT&T/Time Warner Merger

2017 November 21
by Ian Welsh

Perhaps Trump is doing this for petty reasons, but this is a good thing. Media is absurdly over-concentrated already, and should not be more so.

The only thing that would better would be a law straight up forbidding media companies to grow beyond a certain size, and forcefully breaking the firms back down to that size.

Of course, Trump’s administration doesn’t want that. The FCC is removing restrictions on ownership controls in local markets, for example.

Nonetheless, this is a good news, and we can hope that in time it will be seen to be the start of a new wave of anti-trust cases and law. The US, and the world, needs few things more desperately.

Assassination Works Only Under Two Circumstances

2017 November 19

For years, decades even, the US has had a policy of assassination. Americans believe that if you kill the leaders, you kill an organization.

This is delusional. It only works when it almost isn’t necessary. How many times has the US killed the #2 man of the Taliban? Did killing Osama stop Al-Qaeda? Assassinating Yamamoto in WWII was not just meaningless, it was a bad idea (he wasn’t a great admiral, but he did oppose war with both the US and China.)

Assassination ONLY works when the organization is unhealthy OR when much of it doesn’t agree with the current leader but is following them anyway.

In a healthy organization, someone else just steps up and leads, and they’re about as good as whoever was there before. It’s not that leadership doesn’t matter, it’s that healthy organizations create lots of people who are capable of leading. Very few leaders are actually genius leaders; most of what looks like genius is leading a good organization, and know-how. Sometimes, someone is the first person to really figure out how to lead an organization, but if they’re good, they train successors, or people learn from watching them.

The second time it works is if there is a genuine disagreement in organization. Perhaps some are willing to make peace, and some aren’t, and if you kill a few of the key leaders who don’t want to make peace, you can get peace.

The problem with all this, however, is that it’s often hard to tell who is actually a genius leader and which people actually believe in the organization. A lower ranking leader, gunning for the first spot, is often not public about disagreeing with #1, and if he is, may be lying to get followers. It’s just hard to tell. As for genius: It’s rare, and people are good at faking it–until crunch time. Who was America’s last genius general put in real command? I am not aware of one from the last 20 years (Petraeus certainly wasn’t.)

Hannibals, Caesars, and Subotais are truly, genuinely, rare. Genius political leaders are truly rare as well. And genius politicians often are terrible leaders (not the same thing). You may want them in charge.

But the bottom line is simple: A good organization produces a surfeit of good leaders who agree with the organization’s mission. Decapitation only works on unhealthy organizations.

Managers in the US (the US doesn’t have many leaders) lead unhealthy organizations rife with disillusionment, designed to promote time serving managers who don’t take risks, who actively work to harm the rank and file of the organization, and who believe in nothing but themselves.

Such managers find it difficult to get anything done. They have to use fear, coercion, and lies to get the rank and file to follow orders, because their orders are usually both evil and against the rank and file’s self interest.

They know that managing organizations is difficult from their own experience, and they think that all organizations are like that.

But organizations like the Taliban or Hezbollah (not to conflate, I don’t regard Hezbollah as equivalent in many ways) actually believe in what they are doing. People join because they believe in the mission. Even large drug cartels have a belief in a mission and a winnowing of fools and poltroons that often (though not as often as belief organizations) allows them to replace leadership.

When real leadership meets real mission, people fall over themselves to join. They want to belong. They believe. They will work for virtually nothing. They will beg to be part of something bigger than them.

Most Americans have NEVER experienced this. They cannot understand it at a gut level. It is alien to them.

Assassination works only when organizations are unhealthy, and run by managers, not leaders, or during the early stages of a charismatic cult. (A healthy charismatic cult, like the early disciples of Jesus, will quickly create enough leaders to survive a decapitation strike.)


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Five Hundred Million Dollar Negative Yield Bond Issued

2017 November 17

No, central banks aren’t screwing the economy up with their purchases:

Veolia (Paris:VIE) has issued a 500 million three-year EUR bond (maturity November 2020) with a negative yield of -0.026 percent, which is a first for a BBB issuer.

To be clear: Central banks didn’t buy those bonds, investors did. But central bank purchases of government debt are a large part of what is causing this issue.

The ECB (European Central Bank) has been buying SEVEN times the issuance of government bonds. Seven times. Seven times.

They are straight up financing governments (which, done right, could be a good thing, but isn’t in this context).

The problem in the world today is the same as it was 15 years ago, before the financial collapse: There is too much money chasing not enough returns. Because there isn’t enough real growth, so money moves into bubbles and fraud, and destroying companies through leveraged buyouts and so on. This also means that, if there isn’t enough fraud or predation going on, it sits and stagnates and does nothing worthwhile.

What the developed world actually needs is stuff to invest in: high marginal tax rates (higher on capital gains than on earned income), distributive policies to the bulk of the population to create wide-spread demand, and moderate inflation of about five percent a year to motivate people to actually invest in new businesses, as opposed to financial speculation.

The problem with this solution set is that it must also include effective regulation, otherwise it can have environmentally devastating effects; for instance, because solar is not fully online, the above solution set could lead to oil price spikes.

Those problems, however, are not why people are ignoring the suggestion solution set. These solutions are not being implemented because current leadership does not believe in high taxes, wide distribution, or regulation. They are neoliberals, and 40  years of neoliberal disasters cannot convince them to engage in anything other than neoliberalism– because neoliberalism has made them and their friends very, very rich.

But the game is coming to an end. Normally, they want to tax the middle class and poor people, sparing the rich. But now, they are now starting to tax the rich through the back door of negative interest rates. Meanwhile, the poor and middle class, especially the young ones, are losing patience and are willing to go either straight-up socialist or straight-up fascist (see: the Polish 50K rally).

This is going to get a lot uglier before it gets better.

There will be three choices for countries: Fascism, left-wing populism, or dystopic surveillance/police states.

Choose.


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The “Missing” Inflation Shows Up as Hyper-inflation

2017 November 16
by Ian Welsh

In things that rich people buy.

Ever since the financial crisis, there has been a lot of screaming about inflation. Screaming that it should show up, with all the money being created by central banks and, privately, and isn’t.

But it is.

A painting of Christ by the Renaissance master Leonardo da Vinci sold for a record $450 million at auction on Wednesday, smashing previous records for artworks sold at auction or privately.

New York, London, and Vancouver real estate, along with a number of other cities (China’s printing more money than anyone else), is also where it showing up.

And it’s showing up for ordinary people, not as hyper-inflation, but as high inflation of some things. Whatever the figures show, anyone who buys food knows that food prices have been going up faster than normal wages for quite some time.

But mostly it is showing up at the top end, in things that rich people bid up. $450 million is damn near half a billion, the ability to blow that amount of money on a single painting is absolutely crazy, no matter who the painting is by. It could not have happened even 20 years ago, and did not happen even ten years ago.

The rich are floating on an ocean of money, and they have nothing to spend it on that really matters, so it’s going to third homes, real estate, speculation and conspicuous luxury consumption (which is what that painting is).

As an aside, one of the ways to deal with off-shore tax haven money is for the major economies to not allow it back into their countries without high taxation. It’s great that you have a few billion in an offshore haven, but you can’t spend it there. If you want to bring it back or use it as collateral then just make them pay taxes on it. 90 percent is a good rate.

What, they won’t bring it home at that tax level? Then fuck’em. You can’t buy anything that matters in most tax havens, and no one wants to live there. Let it rot, uselessly, there.

 


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.

Lewinsky Is Not Why Clinton Should Have Resigned

2017 November 15

I don’t usually write about subjects I disagree with Matt Yglesias on, but this piece on how Bill Clinton should have resigned over Lewinsky is sickening.

It’s not that Clinton’s actions with Lewinsky weren’t awful, it is the moral and ethical vacuum required to think that’s the issue over which he should have resigned.

Clinton gutted welfare. I guarantee that killed a lot of people and hurt way more. Clinton pushed the three strikes laws hard, which hit black communities brutally, locking people up for years for a third strike for things like stealing a bicycle. Bill Clinton engaged in punitive sanctions against Iraq which hit basic medicine, killing and hurting a lot of people. Bill Clinton pushed for the repeal of Glass-Steagall, and signed it; this was one of the causes of the 2008 financial collapse and, thus, killed and hurt a lot people.

What happened to Lewinsky was sad, gross, and wrong. But it came nowhere near the harm Clinton did with other actions.

This inability to think at scale haunts us when dealing with powerful people. What matters most is by far and away what they do as policy. One intern and a cigar is a tragedy, to paraphrase Stalin, but thousands of deaths and people locked up for decades is a statistic.

Oh, there are arguments against this: That killing and impoverishing people is the role of the US president, but that screwing around with interns isn’t, basically.

I…guess?

I actually can see the case. Some things are over the lines. Rape, for example. Or torture. But war causes both, and Bush, Jr. served out his terms, as did Obama. Heck, by some accounts Bush, rather closely supervised some of the torture in Guantanamo and enjoyed doing so.

The bottom line is that we choose our leaders in part because they are functional sociopaths–able to do great evil and sleep at night. We shouldn’t choose them that way, but for a variety of reasons, we do.

But to be concerned about one abuse of position (which was consensual, however) and not about all the vast harm Clinton did to people even more powerless than Lewinsky, to say that’s where you draw the line rather than at, say, welfare reform—I don’t know, it sticks in my craw.

About the only good argument is that people who abuse power in that manner shouldn’t be allowed near power. I agree. But by the time Lewinsky occurred, Clinton had already shown he was willing to hurt the weak and poor at scale.

It’s the statistics that matter. The individual cases only can warn you about the statistics that might follow, and they aren’t always so accurately predictive. (FDR had an affair with his principal secretary. It didn’t make him a bad President and if he’d stepped down it would have been disastrous.)

I wonder if we evolved killer apes are capable of running large civilizations in anything close to an effective and beneficial fashion. The evidence coming in is looking grim.


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.