Ian Welsh

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

Week-end Wrap – Political Economy – May 19 2024

Week-end Wrap – Political Economy – May 19 2024

by Tony Wikrent

 

Strategic Political Economy

You Can’t Run Industrial Policy OR A War Economy Under Neoliberalism 

Ian Welsh, May 13, 2024

…Neoliberalism is about unearned profits. This is seen most clearly in the stock market and in real estate…. But this isn’t just true of housing and stock prices, it’s true of almost everything. Profit margins have soared during the neoliberal era. Our companies don’t compete on price or quality, they try to create oligpolies or monopolies so that they can charge more without having to provide significantly more value. The way they took advantage of Covid to raise prices far faster than their costs were rising is instructive.

Simply put, neoliberalism is about unearned money: about capital gains; PE plays where you buy a company with debt, load it with the debt and then dump it; monopolies and oligopolies and getting government to juice asset prices or pay you far more than you deserve for shoddy goods (see mil-industrial complex.)…

For about six years, I’ve heard constant complaints from Chinese that it was no longer possible to buy a home. Their housing market, like ours, was being bought up by investors, pricing out young people.

What was the Chinese response? They crashed their housing market and the government has stepped in….

We can’t compete with this. It’s impossible. Not because it’s impossible in theory, but because we don’t believe in doing such things and to pursue such policies we would have to hurt rich people, a lot, and they own Congress and the Presidency and our politicians in other countries.

China has repeatedly shown that if a policy is good for the majority, but hurts the rich, they’ll do it anyway. We’ve repeatedly shown the opposite.

And you can’t run industrial policy or a war economy if you want fake profits based on not actually producing good new goods at cheap prices. It can’t be done. If an entire society is based around “give me money for the least possible effort”, you’re cooked….

The West is toast. We can’t compete. It’s that simple. To compete we will have to change significantly, and while putting up tariffs isn’t actually a bad idea, it’s not enough alone. Without changing our fundamental governing and economic policies and ideology so that to get rich and stay rich you have to actually make good cheap new products in a way that improves the majority’s lives, we will never be able to compete.

When Your Rulers Ignore Voters But Are Terrified Of Protesters, That Tells You Something 

Caitlin Johnstone [Caitlin’s Newsletter, via Naked Capitalism 05-13-2024]

It’s hard to understand the tyranny of a system that relies on propaganda and manipulation as opposed to overt totalitarianism, in the same way it can be harder to recognize a psychologically abusive relationship than a physically abusive one.

 

Oligarchy

US Oligarchs Started One Civil War — and They Could Do It Again

Thom Hartmann, May 17, 2024 [CommonDreams]

The ideology of the Republican Party and the stranglehold of powerful corporations of our political system overall has transformed America from a democracy into a late-stage oligarchy, and the point of no return is now visible….

Billionaires and civil war? A billionaire-funded Supreme Court Justice flew the American flag upside down outside his house after January 6th in apparent support of Donald Trump‘s attempt to overthrow our government.

Americans for Tax Fairnessreports that 50 billionaire families have, at this early stage, already injected almost a billion dollars into our political system — the overwhelming majority of it going to Republicans and in support of Donald Trump — in an effort to maintain enough control of our political system that their taxes won’t go up. And that total is just what’s reported: it doesn’t count the billions in unknowable dark money that’s sloshing around the system thanks to Citizens United….

The clear result of five corrupt Republicans on the 1978 and 2010 Supreme Courts legalizing political bribery of politicians (and Supreme Court justices) by both corporations and the morbidly rich is that America is now well past the halfway mark of a fatal-to-democracy slide into oligarchy and the strongman autocracy typically associated with it. And the conflict that can follow that….

What we are watching is the final stage of the 40-year neoliberal transition of our nation from a forward-looking and still-evolving democratic republic into a white supremacist ethnostate ruled by a small group of fascist oligarchs.

Some years ago, Trump economic adviser Stephen Moore (before he was Trump’s advisor) was a guest on my radio/TV program. I asked him, “Which is more important, democracy or capitalism?“

Without hesitation, Moore answered, “Capitalism.” He went on to imply this was how the Founders wanted things….

[TW: I hope that regular readers, familiar with my dogged insistence on the need to revive civic republicanism as a philosophy of government, know how completely wrong Moore is. ]

 

Global power shift

The Dragon-Bear-Hug Signals Unprecedented Expansion of Ties 

[Simplicius the Thinker(s), via Naked Capitalism 05-18-2024]

…Firstly, Putin brought virtually every major figure of the Russian government with him, most notably new Defense Minister Belousov—though Shoigu remained significantly at his side… That’s in addition to Lavrov, Peskov, Shoigu, Belousov, and others.

That is a full house, and represents major deals being formed. The Ukrainian officer agrees:

Such a list of decision-makers from the financial and economic sectors suggests that this delegation is not ordinary but rather an ambitious and serious effort to deepen economic and financial cooperation with China….

…Russia and China are truly shaping up to lead the world together through the adolescence of this century, reshaping the international order into one based on real principles rather than the fraudulently imagined crony “rules based order” trap of the dying Anglo-American Empire….

…Putin is prioritizing the health of the country’s overall economy. In short: Belousov’s job is to make sure that the long-term economic repercussions of the military conflict do not adversely affect the general economy and civilian life.

He emphasizes this point by bringing up the next big ‘bombshell’: Russia’s combined defense and security spending is already approaching 9% of GDP, while that of the Soviet Union’s in the 1980s was north of 13%….

[French economist Jacques Sapiron on new Russian Defense Minister Andrei Belousov:] “

…He joined the presidential administration at the end of 2000 when Putin was elected, and quickly became one of his advisors on the economy and innovation, putting all his skills (Economics and Math) to work in his new role….  He understood (and understands) perfectly that Russia’s survival depended on its economy AND its ability to develop an innovation regime that involved an entire ecosystem as well as a financing system….

‘His appointment to the Ministry of Defense is of considerable importance. It marks the transformation of this ministry into a production, design, research and innovation agency for the armed forces.

“The impact on military-industrial companies will be considerable. They will see their activities streamlined, and above all they will have to be attentive to the link between the short term and the long term through innovation processes.

“This also means that a number of companies from techno-parks and start-ups will be integrated into this process to drive innovation. It is likely that Russia will set up an equivalent of DARPA to ensure civil/military contact….

“…his appointment indicates that the Russian government is looking far beyond the current hostilities, and expects a period of 10 to 20 years of “cold” confrontation with NATO countries.”

The Kharkov offensive and the replacement of Shoigu as Defense Minister 

Gilbert Doctorow [via Naked Capitalism 05-14-2024]

…there have been rumors of corruption in high places at the Ministry and the sudden arrest of Shoigu’s most senior assistant Ivanov a week ago was the tip-off that changes would be coming in the cabinet reshuffle following Putin’s inauguration for his latest term of office. A make-over is all the more timely now that the Defense budget has ballooned out to over $118 billion, representing more than a third of the total state budget.  What is needed at the top is an effective business manager and all indications are that this is precisely what Belousov will be.

But the wider ramifications are that Belousov will be a major force for using state subsidized credits to nullify the detrimental impact of the sky-high 16% prime rate put in place by the austerity minded neo-Liberal director of the Bank of Russia Elvira Nabiullina and Finance Minister Siluanov.  Russia’s outstanding industrial performance in 2023 was due largely to the largess enabling preferential interest rates to certain manufacturers, which had been called for by Nabiullina’s enemies on talk shows like Evening with Vladimir Solovyov. For better or worse, the military industrial complex will be a driver of the Russian economy, guiding strategic investments and achieving what the old Soviet planning apparatus strived to do but never could….

I have spoken about foreign suppliers of fresh produce like Iran and Turkey at this off-season moment. But it must be said that what the Russian consumer sees on the shelves and buys is overwhelmingly made in Russia, which is as it should be in the world’s largest exporter of foodstuffs.  What is locally grown, of course, also includes vegetables.  Iceberg lettuce may be imported but rucola, young beet leaves, leaf lettuce in plastic pots, cherry tomatoes – all of this comes from greenhouses on the outskirts of all major Russian urban centers.  And most of the tinned and frozen food items in the stores are also Russia-sourced.

What is striking in the 7 months since my last visit is how the local food offerings have expanded both horizontally by nomenclature and vertically by quality. By this I mean not only new and exotic foods, but simple traditional staples that were gone from the stores for many decades….

Moreover, it is similar nonsense to believe that these supermarkets would fill their shelves with products just for show value to impress foreign visitors or local shoppers. The products are there because the demand for them is there, and the demand is there because people have money in their pockets to spend.

A month or so ago, President Putin remarked that during 2023 the rise in take home pay and pensions corrected for inflation was over 5%. At a minimum, the sharp increase in retail store offerings confirms a significant rise in spending power, in particular among the lower strata of the population.

Neither you nor I am naïve, and surely the ongoing war is a contributory factor in growing prosperity. If the FT believes that the new Defense Minister will ensure that Russia has both guns and butter, I qualify this by saying that Russia already is in this ‘sweet spot.’  The military supply factories are all operating on a three-shift basis.  Unemployment is at an all-time historic low.

Recruits to the military pocket 6,000 euros at sign-up, if we take into account both the fixed sum from the federal government and the variable regional government contributions. After that, they receive 2,000 euros a month when in the war zone, which amounts to four times or more normal civilian salaries.  And those warriors who destroy a Leopard tank or similar NATO equipment are immediately paid 10,000 euros or more each from the government plus large premiums from patriotic minded companies and businessmen. All of these separate elements add a lot to purchasing power of the general population.

[Turkish Minute, via Naked Capitalism 05-16-2024]
Conor Gallagher, 05/15/2024 [Naked Capitalism]

…The number of issues between Ankara and the West over the past few decades are almost too numerous to count. Here’s just a brief list:

  • Sanctions and more sanctions. The US sanctions Turkish individuals and companies for “aiding Russia,” for “aiding Iran,” and the US is already threatening to slap on more sanctions over Turkish firms’ exports to Russia. A quick search on the US Treasury’s Office of Foreign Assets Control site turns up a whopping 232 sanctioned Turkish individuals or entities.  This is not a great look when Türkiye is going through its worst economic crisis in two decades.
  • Türkiye was snubbed by the EU.
  • Since the 1990s, Ankara asked NATO multiple times to deploy early warning systems and Patriot missiles to Türkiye, but it never came to pass. In 2017 Russia sold Türkiye its S-400 missile defense systems, which are arguably superior to anything the West has. In response the US expelled Türkiye from its F-35 program and sanctioned the country’s defense industry organization and its leaders.
  • Possible US involvement in failed 2016 coup attempt.
  • US proxy forces in Ukraine have reportedly tried to sabotage pipelines between Russia and Türkiye over the past year.
  • Western support of Kurds to the point there exists the possibility of Turkish soldiers coming face to face in the field with American soldiers, who are supporting the YPG in Syria.
  • The US abandoned its largely neutral stance on Türkiye’s relationship with both Greece and Cyprus. Washington is ramping up military aid to Greece, turning a port near the Turkish border into a naval base, and sending weaponry to Cyprus after ending a decades-old ban on arms sales.

This has all taken place despite Türkiye’s status as the second most important member of NATO just based on its geographic position, which includes controlling access to the Black Sea.

In Red Sea, US Navy paying the price of shipbuilding failures 

[Responsible Statescraft, via Naked Capitalism 05-14-2024]

…The Navy is struggling to meet some of its operational requirements in part because it simply doesn’t have all the ships it expected. The current threat to navigation in the Red Sea is precisely the scenario for which the Navy invested so much time and resources building the Littoral Combat Ships. The LCS program was sold to the American people as a “networked, agile, stealthy surface combatant capable of defeating anti-access and asymmetric threats in the littorals.”

The Houthi rebels launching missiles and drones from shore and hijacking commercial shipping in the confined waters of the Red Sea meets the textbook definition of an asymmetric threat in a littoral region. Yet the “little crappy ships,” as they have come to be known, are nowhere to be seen inside the Red Sea. Rather, the Navy has to keep a carrier strike group composed of Ticonderoga-class guided missile cruisers and Arleigh Burke-class destroyers on station longer than anticipated in an attempt to keep an important maritime choke point open.

The Littoral Combat Ship is one of two major shipbuilding failures from the past 20 years. The other is the Zumwalt-class destroyer….

U.S. Air Force Loses Second B-2 Bomber After Accident: Fleet Down to Just 19 Aircraft 

[Military Watch Magazine, via Naked Capitalism 05-12-2024]

Washington no longer rules out US weapons being used to strike Russian soil 

[LeMonde, via Naked Capitalism 05-18-2024]

China Builds World’s First Dedicated Drone Carrier 

[Naval News, via Naked Capitalism 05-16-2024]

 

Gaza / Palestine / Israel

‘Most Thorough Legal Analysis’ Yet Concludes Israel Committing Genocide in Gaza

Jessica Corbett, May 15, 2024 [CommonDreams]

The University Network for Human Rights on Wednesday released and sent to United Nations offices a 105-page report that it called “the most thorough legal analysis” yet to find “Israel is committing genocide” against Palestinians in the Gaza Strip.

The network partnered with the International Human Rights Clinic at Boston University School of Law, the International Human Rights Clinic at Cornell Law School, the Center for Human Rights at the University of Pretoria, and the Lowenstein Human Rights Project at Yale Law School for the analysis, which draws from “a diverse range of credible sources” and the territory’s history.

“After reviewing the facts established by independent human rights monitors, journalists, and United Nations agencies, we conclude that Israel’s actions in and regarding Gaza since October 7, 2023, violate the Genocide Convention,” the report states. “Israel has committed genocidal acts of killing, causing serious harm to, and inflicting conditions of life calculated to bring about the physical destruction of Palestinians in Gaza, a protected group that forms a substantial part of the Palestinian people.”

Is Israel Committing Genocide? 

Aryeh Neier [The New York Review, June 6, 2024 issue]

[TW: my inbox contained numerous links to this essay. Correspondents think it important because of who Neier is: one of the world’s leading human rights activists who happens to be Jewish. Most of Neier’s essay is a history of the development of human rights organizations and campaigns.]

I have been engaged for six decades in the human rights movement, which has endeavored to restore peace by enforcing International Humanitarian Law…. Like most of my colleagues in the international human rights movement, I use the term “genocide” sparingly. During my fifteen-year tenure at Human Rights Watch (HRW), which I cofounded in 1978, I applied the term to only one of the many great crimes that we monitored: Saddam Hussein’s slaughter of the Iraqi Kurds in 1988….

…In late December, when South Africa brought to the ICJ its accusation that Israel was committing genocide in Gaza, I did not join some of my colleagues in the international human rights movement in their support of the charge…. I thought then, and continue to believe, that Israel had a right to retaliate against Hamas for the murderous rampage it carried out on October 7. I also thought that Israel’s retaliation could include an attempt to incapacitate Hamas so that it could not launch such an attack again….

And yet, even believing this, I am now persuaded that Israel is engaged in genocide against Palestinians in Gaza. What has changed my mind is its sustained policy of obstructing the movement of humanitarian assistance into the territory.

As early as October 9 top Israeli officials declared that they intended to block the delivery of food, water, and electricity, which is essential for purifying water and cooking. Defense Minister Yoav Gallant’s words have become infamous: “I have ordered a complete siege on the Gaza Strip. There will be no electricity, no food, no fuel, everything is closed. We are fighting human animals and we act accordingly.” The statement conveyed the view that has seemed to guide Israel’s approach throughout the conflict: that Gazans are collectively complicit for Hamas’s crimes on October 7.

Since then Israel has restricted the number of vehicles allowed to enter Gaza, reduced the number of entry points, and conducted time-consuming and onerous inspections; destroyed farms and greenhouses; limited the delivery of fuel needed for the transport of food and water within the enclave; killed more than two hundred Palestinian aid workers, many of them employees of the United Nations Relief and Works Agency (UNRWA), the principal aid provider in the blockaded territory before October 7; and persuaded many donors, including the United States, to stop funding UNRWA by claiming that a dozen of the agency’s 13,000 employees in Gaza were involved in the October 7 attack or have other connections to Hamas. (An investigation by former French foreign minister Catherine Colonna, released on April 22, concluded that Israel had provided no evidence to support its allegations and that UNRWA is “irreplaceable and indispensable.”) The air strikes on April 1 that destroyed all three vehicles in a World Central Kitchen convoy, killing six international aid workers and a Palestinian driver and translator, seemed a continuation of these policies. Israel’s explanation that this was the result of a “misidentification” has aroused skepticism. As a result, other humanitarian groups may be deterred from providing aid.

The cumulative effect of these measures is that many Palestinians—especially young children—are starving….

Does Biden Understand Netanyahu’s Aims in Gaza?

Isaac Chotiner, May 13, 2024 [The New Yorker]

[TW: This is a good overview of the US foreign policy establishment’s views on the conflicts in the Middle East, not just the current tragedy between Israel and Palestine. I think what members of that establishment do not accept is the huge role played by religious zealotry in both USA and Israel, which is why I included the links at the end Chotiner’s interview of Ross. Even though Ross mentions the existence of that religious zealotry, I do not think Ross believes it is large a driving force as it is.]

I recently spoke by phone with the ambassador Dennis Ross, a former State Department official who served as President Bill Clinton’s special envoy to the Middle East. Ross—who is currently a fellow at the Washington Institute for Near East Policy—was intimately involved in the Camp David negotiations during the Clinton Administration, and has written several books, including “The Missing Peace.” (Ross and I spoke before Biden’s CNN interview, but after the decision to delay the bombs had already leaked.) During our conversation, which has been edited for length and clarity, we discussed what Benjamin Netanyahu’s war aims really are, why the Biden Administration is so set on a deal between Saudi Arabia and Israel, and how the Israeli public sees the humanitarian situation in Gaza.

What do you think about the Biden Administration’s policy regarding Israel and Gaza almost eight months into the war?

I think the basic approach has been right. You had to be supportive of Israel, given what Hamas did, and given what Hamas is. Hamas has basically built three hundred miles of tunnels underground, and built an underground structure that has come at the expense of developing Gaza on the surface. It had no interest in giving Palestinians any sense of possibility or hope. Everything was governed by preparing and continuing to try to do all it could to destroy Israel.…

…this is an Israeli government that has an extreme right-wing faction. It basically has Messianic nationalists in it, and you have Netanyahu, who’s been trying to manage those within that government on the one hand, and on the other hand trying to adopt a position that preserves the relationship with Biden.

You also have to look at the context in which Israel was operating. The idea of providing humanitarian assistance into Gaza was profoundly unpopular, and not just with the right wing in Israel, because hostages are being held, and no access is given to them….

…I’m still not in favor of withholding military assistance, because Israel’s the only country in the region facing countries that are threatening its existence, and those countries are not going to go away, and they’re not going to stop….

I want to ask you about the Saudi normalization deal, which is a big part of your piece… Are they going to normalize with the region or keep taking over the West Bank? And the idea would be normalization with more of the Arab world in exchange for Israel helping the Palestinians establish a pathway to a state. This just seems like a fantasy to me. Why do you disagree?

Well, one, because the Saudis haven’t walked away from the idea of doing the deal. Clearly, the Biden Administration has not walked away from doing the deal. I was just in Saudi Arabia a week ago. It’s very clear to me that they would still like to do the deal. I do think the price on the Palestinian issue has gone up since October 7th. Even pre-October 7th, I think they wanted to have something on the Palestinian issue to demonstrate that they got something for Palestinians that others didn’t get. That need in their eyes has gone up since October 7th, not down. And mostly because the imagery coming out of Gaza—which is played over and over again on Arab satellite TV, and not just Al Jazeera—has affected the psychology within Saudi Arabia and elsewhere in the region.

They want something more. They want something that is more likely to produce a Palestinian state than anything we’ve seen previously. As I said when I was in Saudi Arabia, you don’t want a Palestinian state that’s led by Hamas. You don’t want a Palestinian state that’s going to be part of the Iranian “axis of resistance.” You don’t want a Palestinian state that has no real institutions and is a failed state….

The approach now has to look at what the realities in the region are. Iran fired more than three hundred cruise missiles and drones in Israel. Iran has activated all of its proxies against the Israelis. The Iranian strategy toward Israel isn’t to drop a nuclear bomb on it. It’s to make it unlivable. So it is in Israel’s interest to actually be part of a coalition.

What we saw on April 14th was that the concept of a regional coalition wasn’t just an abstraction. For the first time in Israel’s history, there were actually countries who contributed to intercepting what was being launched against Israel….

Look, does this Israeli government want a pathway toward a Palestinian state? No way, all right? This Israeli government wants effectively one state, but it’s run by Israel. Hamas wants one state that has no place for Israelis….

Israel has a larger strategic possibility here. It shouldn’t lose sight of that. And the reason we were thinking about that was because you had this unusual circumstance where, for the first time in Israel’s history, there was a major contribution by others directly defending them. That’s not happened before. And so that represented a new development.

[TW: I have always believed that much of the strong USA commitment to Israel is a type of moral response to the Holocaust; perhaps even a guilt assuaging moral response. I have never found persuasive the “left” argument that the USA commitment to Israel is because of big power colonialism, ie, Israel is the US’s unsinkable aircraft carrier in the ME. Actual US military force basing is much more in Arab countries than Israel.

[More importantly, I think the “left” argument actually obscures the highly significant role of religious zealotry – in both USA and Israel. Recall that Israeli prime minister Yitzhak Rabin — a military hero for commanding Israel’s victory in the 1967 Six-Day War. — was assassinated after extreme orthodox rabbis in both USA and Israel declared Rabin din rodef for signing the Oslo Accords and agreeing to give back land in the West Bank in exchange for Palestinian acceptance of Israel’s right to exist.

[Read the linked to Wikipedia entry on rodef — it’s very disturbing:

In recent years, a number of rabbis[who?] have allegedly suggested that various public figures could qualify as rodfim, arguably encouraging one to kill.[citation needed] Perhaps most notoriously, former Israeli Prime Minister Yitzhak Rabin was branded a rodef by some for the Oslo Accord,[4] an agreement for which he was assassinated in 1995. The assassin, Yigal Amir, subsequently justified his actions partly on the basis of din rodef, under the assumption that making concessions to the Palestinian Authority would endanger Jewish lives….

In 2009, Jewish historian Geoffrey Alderman engaged in another controversy when he argued that, according to Jewish religious law, every Palestinian in Gaza who voted for Hamas was a legitimate target. He articulated his position in a debate with rabbi David J. Goldberg in The Guardian’s commentary section.[10] He argues that according to the Halakha, “it is entirely legitimate to kill a rodef – that is to say, one who endangers the life of another – and this is true, incidentally, even if the rodef has not yet actually taken another life”.

Furthermore, he argues that

It seems clear to me from a common-sense reading of this passage [Babylonian Talmud, Tractate Sanhedrin, folio 73a] that the concept of a rodef encompasses those who advocate or incite the murder of Jews. Every Gazan citizen who voted for Hamas must – surely – come within this category, because Hamas as a movement is explicitly committed to the destruction, not simply of Israel, but of the Jewish people.

[In Craig Unger’s 2007 book, The Fall of the House of Bush: The Untold Story of How a Band of True Believers Seized the Executive Branch, Started the Iraq War, and Still Imperils America’s Future (New York: Scribner), Unger details the VERY close ties between USA neoconservatives and the Netanyahu faction in Israel, based entirely on an ideological / theological interpretation of Israel ‘s existence and end times prophecy. See especially pages 149 ff.]

[X-Twitter, via Naked Capitalism 05-16-2024]

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United by Faith: Dr. Falwell, Liberty University, and the Evangelizing Spirit Connecting America to Israel

Dr. Kobby Barda [Haifa University nexus.haifa.ac.il, 16 January 2024]

House Democrats Fume Over Unprecedented Israeli Rebuke Of Lawmakers 

[Huffington Post, via Naked Capitalism 05-16-2024]

 Yasmin El-Rifae, May 12, 2024 [The New York Review]
[TW: El-Rifae is co-producer of the Palestine Festival of Literature., and writes for Cairo’s independent Mada Masr newspaper. She provides an excellent short history of relations between Egyptians and Palestinians, with a stark contrast between the Egyptian government and officials, who are fully committed to the USA-backed concordant between Egypt and Israel, and the Egyptian people, who see the concordant as a sell-out, and remain militant in their support for Palestinians. ]

…Built around an oasis between Gaza and Sinai, Rafah is an ancient city that was recently split into two sides: one Egyptian, one Palestinian. The border between the two, like most borders in the region, is colonial in origin: it was drawn in 1906 by the British to divide occupied Egypt from Ottoman Palestine. Since then, the area has seen hardly any periods of lasting stability. After the Nakba, refugees from southern Palestine fled to Gaza, which Egypt administered until 1967, when Israel annexed it along with Sinai, the West Bank, East Jerusalem, and the Golan Heights. Most of the 300,000 people displaced during the war that year went to Jordan and Lebanon; around 13,000 went to Egypt. (Around 75,000 Palestinians already lived in Egyptian cities like Cairo and Alexandria before the Nakba.)

Palestinian refugees in Egypt were not given citizenship rights, a policy that the government justified under the pretext of resisting their permanent displacement. In the 1970s, under President Anwar Sadat, they were banned from attending public schools and working in the public sector. The 1978 Camp David accords and the subsequent peace treaty with Israel set Egypt up as the world’s second largest recipient of US military aid, second only to Israel. That treaty also eventually returned Sinai to Egypt, with strict limits on its military presence in the area.

In the early 1980s, when an Egyptian–Israeli border wall was built in Rafah, it roughly followed the colonial line, separating families in the process; parts of Sinai’s Bedouin population are of Palestinian origin. The Rafah crossing has since been tightly controlled, with periods of total closure after 2007, when Hamas won elections and took control of the territory, in response to which Israel began a blockade on Gaza as a form of collective punishment. Cairo’s increasingly open business dealings with Israel, and its collaboration with Israel in the blockade, have long been a flashpoint of public anger in Egypt, flaring up especially at times of Israeli aggression.

By 2013, when President Abdel Fattah el-Sisi came to power in a military coup against the elected Muslim Brotherhood government, an Islamist insurgency against security forces had begun in the Sinai. Egypt accused Hamas of providing fighters and weapons through the tunnel system underneath the border to groups such as the ISIS-affiliated Sinai Province. Hamas denied the accusation and suppressed ISIS activity within Gaza. As for the tunnels, residents and journalists said they were mostly used to bring goods and people into Gaza, especially during the blockade, when Israel let only a bare minimum of official aid into the territory. But none of that mattered. In 2014 the Egyptian military started to raze the entire Egyptian side of the city of Rafah on the pretext of fighting terrorism, destroying more than three thousand buildings, displacing thousands of people, and ruining valuable agricultural land. It filled the tunnels with sewage, then saltwater….

It is in their economic actions that Egyptians make their solidarity with Palestine most evident: they have boycotted products that have anything to do with Israel or the US. Last October an Israeli McDonald’s franchise sent free meals to the Israeli Defense Forces. The chain’s earnings in the region fell dramatically in the aftermath, to the point where, this April, it announced it would repurchase all of its franchises in Israel. Cairo’s Starbucks branches have been notably empty for months, and local alternatives to Coca Cola products are especially popular at social gatherings.
Howie Klein, May 413 2024  [downwithtyranny.com]
[Lindsey Graham]: Why did we drop two bombs— nuclear bombs— on Hiroshima and Nagasaki? To end a war that we couldn’t afford to lose. You don’t understand apparently what Israel is facing. They’re facing three groups. Iran, who has received $80 billion in aid. When Trump left office they were exporting 300 barrels of oil a day. Now they’re at 1.3 million a day. They’ve been enriched by Biden. They’re taking that money to kill all the Jews. So when we were faced with destruction as a nation after Pearl Harbor, fighting the Germans and the Japanese, we decided to end the war by bombing Hiroshima and Nagasaki with nuclear weapons. That was the right decision. Give Israel the bombs they need to end the war they can’t afford to lose and work with them to minimize casualties.

[X-Twitter, via Naked Capitalism 05-14-2024]

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The carnage of mainstream neoliberal economics

Your Margin and Your Life 

Steve Keen, via Naked Capitalism 05-15-2024]

Chapter 12 from my forthcoming book Rebuilding Economics from the Top Down

Even I was shocked when I first plotted the data in Figure 56. While the private debt to GDP ratio grew by roughly 40% over the decade of the 1920s, the margin debt component of private debt grew far more quickly, from 1% of GDP in 1918 to 8.5% in 1929. Then it crashed, even more rapidly than it had risen, collapsing to half a percent of GDP in 1931. From then it was quiescent for decades, until a blip during the 1987 stock market bubble and crash, followed by its dramatic rise in the days of the “Greenspan Put”,74F to which the ’87 Crash gave birth.

In ‘Abandonment of Public Education,’ Louisiana to Allow Tax Dollars to Pay for Private Schools

Julia Conley, May 18, 2024 [CommonDreams]

GOP Farm Bill Decried as Pro-Corporate, Anti-Family ‘Waste of Everyone’s Time’

Jessica Corbett, May 17, 2024 [CommonDreams]

Are the Republicans Sneakily Trying to Cut Food Stamps?

Grace Segers, May 17, 2024 [The New Republic]

The House GOP’s farm bill would change how SNAP benefits are evaluated, and Democrats are furious.

 

Predatory finance

Delinquencies on Office Property Loans at Banks Are at 8 Percent While Office Loans the Banks Sold to Investors Show 31 Percent in Trouble 

Pam Martens and Russ Martens, May 13, 2024 [Wall Street on Parade]

 

Restoring balance to the economy  

Mercedes-Benz workers in Alabama vote against unionizing in blow to big UAW push 

[CNN, via Naked Capitalism 05-18-2024]

Monopoly Round-Up: Apple Spanked in Antitrust Suit 

Matt Stoller [BIG, via Naked Capitalism 05-13-2024]

AIRLINE LOBBYISTS FINALLY LOST

David Sirota, May 16, 2024 [The Lever]

Matt Stoller provides a must-read review of how airline lobbyists were just defeated in Congress — and it happened with the help of The Lever. He writes: “Lobbyists got language into an underlying bill that would require passengers to request a refund, the goal being to undercut the convenience of the automatic refund rule… But journalists Katya Schwenk and Freddy Brewster at The Lever reported on the bad language, and then Sen. Elizabeth Warren tweeted out the problem.” And then lawmakers of both parties actually fixed it.

 

Information age dystopia / surveillance state

I Don’t Want To Spend My One Wild And Precious Life Dealing With Google’s AI Search

[Aftermath, via Naked Capitalism Water Cooler 05-16-2024]

“Google’s AI search has arrived, uninvited, to my browser, and I cannot make it leave. It isn’t just that it serves me crap whenever I enter a question into my search bar, but that I have to wait for all the crap I don’t want in the first place. Let me tell you a story from my day: I was paying invoices, and I wanted to doublecheck that the number of episodes of our podcast, Aftermath Hours, squared with what our producers had billed for. I typed “Aftermath hours spotify” into my browser window, which–depending when I’ve last cleared my history–either autofills the URL for the podcast on Spotify or takes me to Google search results, where our Spotify page is the top result. But now, when I get Google, I have to wait through a nearly three-second pause before AI information about the podcast appears at the top of the page, followed by a link to Spotify and other results. While I appreciate that, in this instance, the AI-generated information about the podcast is correct, this information is not what I’m looking for, and I have to wait three seconds for it to show up just so I can ignore it. These three seconds are wrecking me. I’m not one of those lifehacking types who wants to optimize every bit of their day, but that three second wait is just enough friction that I notice it every time. It’s a small annoyance in the moment, but over the course of a day’s queries–any writer or editor can tell you that the number of weird searches you do adds up–that friction starts to build into a drag. I feel like I’m losing chunks of my one and only life waiting for bullshit I didn’t ask for and don’t want to load onto my screen so I can scroll past it. That’s something I already deal with when visiting the ad-laden websites Google search brings up; I don’t need a preview! It makes the already unpleasant experience of Google search even worse than it already is. Before some stray AI evangelist leaps into the comments to promise the tech will get better, I want to be clear that even if it were instantaneous, I still wouldn’t want it. I didn’t ask for results from the plagiarism machine!”

In DC, a new wave of AI lobbyists gains the upper hand 

[Politico, via Naked Capitalism 05-13-2024]

 

Collapse of independent news media

HOW THE UK SECURITY SERVICES NEUTRALISED THE COUNTRY’S LEADING LIBERAL NEWSPAPER 

[Declassified UK, via Naked Capitalism 05-14-2024]

From PropOrNot to New Lines: How Washington is Weaponizing Media 

Alan MaCleod [MintPress, via Naked Capitalism 05-14-2024]

Cable News Refused to Report Trump’s Bombshell Quid Pro Quo Offer to Big Oil Execs

Olivia Rosane, May 15, 2024 [CommonDreams]

Major cable news networks Fox News Channel, CNN, ABC, CBS, and NBC all failed to cover former President Donald Trump’s promise to Big Oil executives that he would reverse President Joe Biden’s climate regulations if they donated $1 billion to his campaign, according to an analysis published by Media Matters for America late Tuesday.

When the news first broke, Philadelphia Inquirer columnist Will Bunch wrote, “You won’t read a more important story today.” Yet, in the four days after the story broke, it only received 48 minutes of cable airtime—all on MSNBC….

11,000% Return: Trump’s $1 Billion Offer Could Yield $110 Billion Windfall for Big Oil

Jon Queally , May 16, 2024 [CommonDreams]

The Real Entitlement Crisis: Good Reporting Is in Short Supply

Maz Moran, May 16, 2024 [The American Prospect]

The preferred journals of the power elite peddle the myth of pending Social Security catastrophe, which is catastrophically wrong.…

Money is made up. Health care and poverty are not.

The core insight of Modern Monetary Theory is just asking a very empirical question—“Where does money come from?”—finding the answer, and then thinking through the implications of that. Even if one is not persuaded by MMT, good old Keynesian economics (and common sense) shows that the federal government creates and legitimates the currency. Ergo, if the only thing holding the federal government back is that it doesn’t have enough of the special pieces of cotton which it fabricates for itself out of thin air and calls “money” … well, that seems like a solvable problem, no?

That’s not to say that the solution to everything is “just print more money.” MMT itself is very clear that the limiting factor is real resources: If there’s too much cash circulating, and not enough stuff to buy with it, prices rise. But this points to what journalists should be asking if they consider themselves to be economic empiricists, unbridled by political dogmas, and they are actually concerned about the country’s ability to provide health care and a high standard of living to every American: Do we have enough doctors? Enough medicines and medical devices? What about enough housing, food, transportation, public spaces? The national government can find or create the money, but it can’t create real resources by signing a bill.

The ruling class hates the welfare state. They are going to lie to you about it constantly….

[TW: This is a good place — after this simple summary of MMT — to include a link to Matt Taibbi’s May 18, 2024 critique of MMT, Magic Monetary Theory Goes Primetime: “Modern Monetary Theory was interesting back when it was dismissed as a fringe curiosity, but more like terrifying now that it’s being taken seriously.” Taibbi is a good writer. No, Taibbi is a great writer. Which is why it is so painful to see Taibbi assume positions that can most politely be called “obstructionist.”]

How Oil Companies Manipulate Journalists 

[Nation, via Naked Capitalism 05-18-2024]

 

Climate and environmental crises

2023 Temperatures Were Warmest We’ve Seen For At Least 2,000 Years 

[ars technica, via Naked Capitalism 05-15-2024]

4 Takeaways From Our Homeowners Insurance Investigation 

[New York Times, via Naked Capitalism 05-16-2024]

“Across the country, more intense heat, storms and fires are causing the home insurance market to start to buckle.”

The USDA’s gardening zones shifted. This map shows you what’s changed in vivid detail 

[NPR, via Naked Capitalism 05-16-2024]

Pennsylvania wastewater could meet 40% of US’ lithium needs: Study 

[Interesting Engineering, via Naked Capitalism 05-12-2024] Wastewater from fracking.

Biodiversity loss is biggest driver of infectious disease outbreaks, says study 

[The Guardian, via Naked Capitalism 05-12-2024]

 

Democrats’ political malpractice

THE LASTING LEGACY OF THE FINANCIAL CRISIS

David Sirota, May 9, 2024 [The Lever]

…Another new Federal Reserve report illustrates how the financial crisis — and then the Obama administration’s refusal to help homeowners protect themselves from financial predators — ripped away the American dream from an entire generation.

See graphs.

In Defense of Punching Left. The problem with ‘Solidarity.’ 

Jonathan Chait, New York Magazine, via Naked Capitalism 05-12-2024]

“Don’t punch left” is the core tenet of Solidarity, a new book by Astra Taylor and Leah Hunt-Hendrix. In a laudatory interview with the Washington Post, Hunt-Hendrix said the book was aimed not only at progressives in general but also specifically at liberals who criticize the left, naming me and newsletter author Matthew Yglesias as “falling into the right’s divide-and-conquer strategy.”

Solidarity provides the lengthiest and most serious case I’ve seen for why liberals should withhold criticism of the left. And since the basis of my refusal to take this advice is no longer self-evident to all my readers and colleagues, and appears increasingly deviant to some, their book provides a useful occasion for me to lay out my reasons why liberals should feel free to express criticisms of the left….

The authors of Solidarity both come out of the more left-wing edge of the movement. Hunt-Hendrix, an heir to the Hunt oil fortune, has decided to give a large share of it to groups like the Sunrise Movement and Black Lives Matter and has become an influential figure in the movement. A flattering New Yorker profile last year depicted her at the center of a network of progressive intellectuals, elected officials and activists, all of whom place a high value on her donations but an even higher value on her counsel….

The main reason Taylor and Hunt-Hendrix believe liberals should pipe down is that they have no apparent sense of what liberals believe. Take their description of the Democratic Party’s factional differences: “Democrats are torn between a growing progressive flank pushing to redistribute wealth, tackle climate change, and further racial and gender justice and a corporate wing clinging to the increasingly unequal and failing status quo.” It would surprise any liberal to learn we have no desire to redistribute wealth, tackle climate change, or advance social justice and care only about corporations and the status quo….

[TW: Sigh. With friends like these who needs enemies? I was sorely tempted to leave out this Chait essay. But I think it’s important to know what liberal thought leaders are thinking. I’ve been involved in the Democratic Party for a couple decades, and I have yet to meet a “liberal” with a firmly grounded suspicion and hostility to the power of the rich and corporations. The liberals I have met are reflexively protective of institutions and the status quo. Just the one fact that Hunt-Hendrix is an heir to the Hunt oil fortune sets off alarm bells for me. As one commenter on X posted, “Punch up, not left.”]

[X-Twitter, via Naked Capitalism 05-15-2024]

.

FDR’s Second Bill Of Rights Is What Electoral Politics Should Be About, Not Who The Greater Evil Is

Howie Klein, May 18, 2024  [downwithtyranny.com]

 

Conservative / Libertarian / (anti)Republican Drive to Civil War

MAGA Rage at Trump’s Trial Just Got Darker and More Dangerous

Greg Sargent, May 17, 2024 [The New Republic]

Republicans aren’t just showing “loyalty to Trump.” They’re saying that Trump is more important than the rule of law.

Yes, That’s Right: American Fascism

Michael Tomasky, May 16, 2024 [The New Republic]

Why waste time debating the extent of Trump’s fascism when we ought to be fighting it instead?

[Introduction to New Republic series on What American Fascism Would Look Like ]

The Liberal Fantasy Is Just That: On the military in a fascist America

Rosa Brooks, May 16, 2024 [The New Republic]

…controlling the military is a major part of Trump’s vision for his second term. While he has expressed only contempt for military personnel naïve enough to believe in selfless service, referring to those who had lost their lives as “losers” and “suckers,” Trump is fond of military pomp and circumstance, and fonder still of power. He has signaled his desire to use the U.S. military to suppress domestic protest and aid in mass roundups, detentions, and deportations of undocumented immigrants, whom he views as “animals.” He reportedly hopes to use missiles and military troops against cartels inside Mexico and has, at times, openly flirted with the idea of using nuclear weapons against North Korea and Iran.

While few of these ideas are likely to garner support from military leaders, no one should count on the military to “save” us from Trump’s efforts to refashion the United States in his own dark, chaotic image… Disappointed during his first term by the failure of those he called “my generals” to offer him blind obedience and adulation, Trump has vowed to make the military knuckle under in a second term.

For the most part, he will have the legal tools to do so. He can request the retirement of flag and general officers who show signs of independence, for instance, and dismiss those who don’t take the hint. And he can make fealty to his agenda a condition of advancement for senior officers. This is already a core plank in the Heritage Foundation’s blueprint for a second Trump presidency, which is widely viewed as having Trump’s stamp of approval….

The End of Civic Compassion: On education in a fascist America

Jason Stanley, May 16, 2024 [The New Republic]

The (anti)Federalist Society Infestation of the Courts

Alito Family’s Upside-Down Flag After Jan. 6 Sparks Call for Justice’s Recusal

Julia Conley, May 17, 2024 [CommonDreams]

Knights-Errant: The Roberts Court and Erroneous Fact-Finding (PDF)

Senator Sheldon Whitehouse [Ohio State Law Journal, via Naked Capitalism 05-18-2024]

“These cases, the false fact-finding undergirding them, the persistence of the erroneous facts, and the policy consequences of the uncorrected errors, together create a new predicament requiring attention by academia, lower courts, and the other branches. This Article proposes theories and actions that wo

This Week on ‘Ask the Supremes’: Do Menendez and Cuellar Have Congressional Immunity?

Harold Meyerson, May 16, 2024 [The American Prospect]

Far Right Billionaires Are Waging a War to Capture State Courts 

[Truthout, via Naked Capitalism 05-18-2024]

The Fifth Circuit Is In For A Beatdown

Kate Riga, May 18, 2024 [Talking Points Memo]

Thursday’s Supreme Court decision validating the constitutional soundness of the Consumer Financial Protection Bureau not only reversed the Fifth Circuit, but did so via one of the appellate court’s brothers-in-ideological-arms, Clarence Thomas.

The argument against the CFPB, targeting its funding structure, was weak enough that only Justices Samuel Alito and Neil Gorsuch had the appetite to embrace it….

While there will inevitably be columns written by people making a lot more money than I am about how this rash of cases represents some great, cloak-swathed pivot to the center, it just doesn’t. The Supreme Court repeatedly overturning the Fifth Circuit is much more about the extremity of the latter than the reasonableness of the former…. don’t let anyone tell you it’s because the Court is getting better — the Fifth is just getting worse.

The CFPB Ruling Strikes a Blow for Governing

David Dayen, May 17, 2024 [The American Prospect]

…The CFPB’s legal odyssey exposed the radical Fifth Circuit and the financial ghouls who brought the case as wildly out of step with the laws and beliefs of the country. The Supreme Court’s 7-2 ruling punctures the credibility of a circuit court that has become the de facto decision-maker for so much of our financial and economic lives, because business interests opportunistically file their cases within that jurisdiction to ensure that their case will come before the ideologues who sit there. Even those rock-ribbed conservatives on the Supreme Court find the Fifth Circuit to be legally deficient, and each bonkers theory that circuit puts forward makes them even more suspect….

If you get your views on politics from certain corners of the internet, you’d have probably concluded that the CFPB was a dead agency from the moment it was established nearly 14 years ago. Nobody in such a corrupt country would allow something that only tried to prevent consumer rip-offs to exist. These are not only the thoughts of political nihilists but Wall Street itself. It’s what they try to implant into the heads of every policymaker, telling them that their impulses to help people will be fought, challenged, and ultimately shredded.

That shouldn’t dull public servants into complacency. There’s work to do in America, and the public—particularly the voting public—won’t tolerate stories about how policy actions are too complicated and too prone to failure to make the attempt. The Day One Agenda series we did five years ago was predicated on the idea that there are real options for governing if those in power decide to take them. We were told John Roberts would strike them all down. He has done so a couple of times, and may yet do so again. But shrinking from action because one rogue branch might not allow Congress or the president to act would be an abdication of the office. And if you take enough shots on goal, you eventually get important ones through….

 

Open Thread

Use to discuss topics unrelated to recent posts.

Israel’s Ground Forces Are Even Worse Than I Believed

Long time readers will know I’ve considered the Israeli army to be garbage, in terms of quality, for a long time—certainly since their last invasion of Lebanon, where Hezbollah cleaned their clock for them.

But this last invasion of Gaza has been absolutely humiliating. Hamas has forced Israel to retreat after losing at least one straight up battle. We’re not taking “guerilla hit and run” we’re talking losing a battle when you have air and artillery supremacy.

Generally speaking, they’re getting themselves ripped up: they can’t take and hold ground. They can’t clear out Hamas. Every time Hamas forces them to retreat, Hamas takes over administration again.

Meanwhile Iran and Hezbollah have proved that their anti-missile defenses are insufficient. The entire north has been denuded of civilians, and everyone knows that threats to invade Lebanon are baseless and delusional: they can’t even beat Hamas, and Hezbollah is far stronger. If they invade, they’ll be crushed.

It isn’t just that no one thinks that Israel has the best army in the world any more, no one with sense believes their army is even competent. It’s garbage. They can’t take losses, they don’t even infantry screen tanks properly (or, often, at all), they’re scared of clearing Hamas tunnels because of the casualties. It’s so pathetic it’d almost be sad, if they weren’t the ground troops for a genocidal power whose evil is so comic-book level it rivals the Star Wars empire.

Now Hamas obviously isn’t as strong as it would like to be: it can’t reopen Rafah, for example. But that’s the point, Hamas is a militia. Many of their weapons are literally home-made, where the Israelis are using the best American equipment and the Israelis still can’t win.

That’s one reason why Israel has to commit a genocide—they can’t win on the field, so all they can do is try to make sure as many people die of hunger, thirst and bombs as possible. Ethnic cleansing is off the table. Egypt isn’t scared of them any more, so they aren’t going to allow Israel to to push Palestinians into Egypt. They were considering it before, but not any more.

We’re in a race between Israel’s genocide and the Resistance’s pressure on Israel—Hezbollah’s clearing of the north. Yemen’s naval blockade and Hamas’s bloody war against Israeli ground forces. Israel’s losing the military part of this and being absolutely hammered economically, with a huge internal refugee problem, but as long as they can keep food and water out of Gaza, they stand a chance of completing their genocide.

America, if it’s serious about bringing in aid through the northern pier they’ve built, might, ironically, seal Israel’s defeat. (Update: yeah, maybe not. Turns out Israel inspects the aid and decides if it is to continue on.)

No matter what happens, however, Israel is screwed beyond belief. The only thing they have left that anyone in the region is seriously scared of is their nukes. Israeli regional military dominance is SHATTERED.

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Using Comparative & Absolute Advantage To Explain China’s Rise

Economists spend a lot of time talking about comparative advantage: France has just the right climate and land to make great wine, for example. In the Industrial Revolution England had good quality coal in just the right place. Germany has a lot of good industrial workers and craftsmen.

Most comparative advantage, however, is cost advantage. If it’s cheaper and you can produce it for less, it’s hard to compete against you.

Absolute advantage is different. Absolute advantage is when you are the only one who sells something other people want or need. For most of the 20th century if you wanted commercial airplanes you could only get them from the US or Europe or Canada (until Canada’s aviation industry was mostly destroyed in the 50s under threat from the President of the US.) Cars were available from the West and the USSR, then from Japan and Korea. Most advanced medicines were made only by the West, though India came on strong for a lot of generics towards the end of the century.

Absolute advantage is far superior to comparative advantage: you can charge much more.

This is the second article on the West’s situation via China. If you haven, read the first “You can’t run industrial policy or a war economy under neoliberalism.”

Absolute advantage can be created. The rise of England didn’t start with the Industrial Revolution, it started when England banned exports of wool to the Netherlands. Be clear, English weavers sucked in comparison, but it didn’t matter. England produced most of the wool, and if you wanted woolens, you had no choice but to buy them England, inferior thought they were at the start, or do without.

This sort of policy used to be fairly standard. When I was young Canada would not export raw logs or raw salmon, for example, but by the 80s we had begun to do so. African nations have recently started insisting on doing primary processing in country: refine the ore or hydrocarbons, tin the fish, and so on. It’s not the same as advanced manufacturing, but it captures more of the value. If you have a resource there is more demand than supply for, you can insist. Perhaps tinning or smoking fish in the US or Mexico saved ten cents a can, but so what, before fish farming there was never enough salmon.

The problem with absolute advantage, though, is it makes you lazy. When you’re competing on comparative advantage, you have to drive down costs or increase quality, or ideally both. People don’t have to buy your goods, so they have to be better or cheaper.

Now the problem is that for about two centuries the West has had absolute advantage. For most intents and purposes everything we made had absolute advantage outside the West. We had better weapons, machines, clothes, medicines, transport. Everything.

Japan was the first non-Western nation to catch up, but an island nation without significant resources, it couldn’t compete and was conquered and made into a satrapy. South Korea was given the same treatment, and allowed to industrialize, as was Taiwan.

I was a young adult when Japan roared in the 80s, but Japan was never a serious threat, simply because it didn’t have enough population. It was never going to unseat the US or Europe, only claim its place in the (still) Western system.

China is a different matter. The reason China is eating the West’s lunch is that it has overcome most of our absolute advantage and is now competing with us on comparative advantage: Chinese goods are cheaper and in some cases, like EVs, Chinese goods are better. This often isn’t a small difference: you can buy an EV in China for 14K, and it’s a decent car.

Further, China has a massive domestic market. Oh, incomes are still not as high in the West, but the population makes up for it, and Chinese industries mostly aren’t oligopolies or monopolies. In 2019 there were over 500 EV companies. As of 2023 there were still about a hundred. The competition was fierce. There is nothing like it in the west, where car companies are essentially an oligopoly, and don’t truly compete on either price or quality.

China moved up the technological chain. They actually practice competitive market capitalism much more than we do: their markets are closer to “free” than any western country’s. They have effective subsidies due to the exchange rate and direct government intervention, of course, but that’s not the key issue any more (though it was for a long time), it’s that they are genuinely better at manufacturing than we are, and more responsive to what buyers actually want.

Many nations in the West used to have competitive internal markets, with a myriad of companies competing, but under neoliberalism, and to be fair to a certain extent under Bretton Woods liberalism, they were replaced by oligopolies. The problem with real competition is that you might lose. Fake competition is far safer, and offers far better returns for the ownership and executive classes.

Until, of course, you run into companies which are used to real competition, and they eat your lunch and you scream to the government for tariffs and trade war.

Mind you tariffs aren’t a bad idea, but if they are to work, Western companies must actually become competitive again and they don’t want to do that, it’s too much like work. Nor, as I’ve noted before, is it easy for them to do. Internal rent in the West is very high, and thus so is the cost of living. If they’re involved in a trade war, they have to sell to their own citizens, but the only way they know to reduce prices is to crush wages and if they do that, well, the internal market isn’t what it needs to be. (This is what FDR and Keynes realized, which is why New Deal and post-war capitalism emphasized having wages rising faster than inflation. It created a robust market.)

Offshoring anything another country doesn’t already know how to make is stupid, because when you offshore the locals learn how to make what you offshore and eventually they make it themselves for themselves and compete with you. “Friendshoring” can’t work, it can only crate new competitors with lower costs.

The days of the West’s absolute advantage are over. We threw it away for a few decades of high profits funneled to elites, and now we must learn to compete on comparative advantage again, something we mostly don’t have and aren’t used to being necessary.

It’s the bed we made and we have to lie in.

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You Can’t Run Industrial Policy OR A War Economy Under Neoliberalism

Washington spent 7.5 billion dollars on charging stations. The result?

Seven stations.

China has subsidized charging station as well. I can’t find reliable figures, though one source says around 10 billion dollars. How many charging stations does China have? Over seven million, 2.2 million of which are public units. The US has 186,200.

Meanwhile Tesla has abandoned its charging station subsidiary, selling it off and had plenty of complaints, while they owned it, of stations being out of service. Bottom line Chinese EVs sell for about eleven to twelve thousand dollars, though when sent to the West the companies charge multiples of that and take the profits, so if you want a cheap EV you’ll have to figure out how to buy in China and import it yourself, which most Western countries make very difficult.

What’s amusing is that the US is planning on a 100% tariff on Chinese EVs—but even so, they’d still be cheaper and sell at a profit for Chinese EV makers. (As a practical matter, it’s very hard to get Chinese EVs in America.)

A western journalist specializing in EVs went to China recently and drove their cars. The article is long and worth reading, but the summary is that they’re better cars on top of being far cheaper. And this is an American journalist who went in expecting otherwise.

So, let’s fish and cut bait: as the title said, you can’t run industrial policy or a war economy under neoliberalism. It’s impossible. Russia easily and massively increased its production of weapons and ammunition during the Ukrainian war. The West? Hardly at all.

Washington spends 7.5 billion for 7 charging stations. This isn’t just incompetence, this is corruption. Yes, China and Russia have corruption. Lots of it. It is nothing compared to American and European corruption, not even on the same scale. In China, especially, most corruption is “honest corruption” — you can take a slice, but you have to actually deliver. If X number of homes or charging stations are to be produced, you’ve got to produce them.

This is a feature of neoliberalism. Neoliberalism is about unearned profits. This is seen most clearly in the stock market and in real estate. During the post-war period the stock market traded sideways. The indices basically didn’t go up at all. Under neoliberalism they went up inexorably. What is odd about this is that during the post-war period GDP growth was higher, so stock prices haven’t been rising since 1980 because of better economic performance, but rather because it’s government policy run mostly thru the Federal Reserve.

But this isn’t just true of housing and stock prices, it’s true of almost everything. Profit margins have soared during the neoliberal era. Our companies don’t compete on price or quality, they try to create oligpolies or monopolies so that they can charge more without having to provide significantly more value. The way they took advantage of Covid to raise prices far faster than their costs were rising is instructive.

Simply put, neoliberalism is about unearned money: about capital gains; PE plays where you buy a company with debt, load it with the debt and then dump it; monopolies and oligopolies and getting government to juice asset prices or pay you far more than you deserve for shoddy goods (see mil-industrial complex.)

There are, of course, partial exceptions, but even in those tend to be partial. Apple produced some real new products, but they also seek to receive monopoly prices for them. Almost all of the internet, built as a commons, has been turned into walled gardens and the small producers marginalized even as their product was stolen. AI is little more than an IP theft machine against small producers—writers and artists.

But let’s move back to “can’t run industrial policy.” Neoliberalism was very explicitly against tariffs and for free capital flows. Money flowed to the highest returns, no matter from which country. Capital goods and expertise were exported. China until very recently was a low-cost producer, so the West engaged in labor arbitrage and sent the manufacturing floor there. Take Apple, for example. They designed the iPhones and iPads and so on, but they were almost entirely produced in China, because it was cheaper.

Problems is that the best way for engineers to learn is on the manufacturing floor. So as the West sent most of its manufacturing to China, the Chinese learned. After all, they were the ones actually making the goods.

And now Huawei’s phones are out-competing Apple and Samsung. They’ve created their own OS. Their chips aren’t quite as good yet, but they’re moving fast.

As I’ve said repeatedly, wherever the world’s manufacturing floor is, is where innovation will inevitably move. There is a delay. It was about forty years when America overtook the UK. In the China/US case it seems to have been about twenty years. Which is to say, it’s already happened.

Now it’s important to note that this is no longer just about the manufacturing floor. The West’s costs are genuinely higher than China’s even now that China is no longer a low-cost labor market.  This is a feature of neoliberalism: we deliberately produced high housing and rent costs. In America, high health care costs are a deliberate matter of government policy. High living and real-estate costs mean American firms couldn’t compete with Chinese even if they wanted to and still had the capability, not even with subsidies, of which there are far more than people believe.

For about six years, I’ve heard constant complaints from Chinese that it was no longer possible to buy a home. Their housing market, like ours, was being bought up by investors, pricing out young people.

What was the Chinese response? They crashed their housing market and the government has stepped in. (From the Economist. Since it’s behind a paywall, I’m using a tweet with a screenshot):

We can’t compete with this. It’s impossible. Not because it’s impossible in theory, but because we don’t believe in doing such things and to pursue such policies we would have to hurt rich people, a lot, and they own Congress and the Presidency and our politicians in other countries.

China has repeatedly shown that if a policy is good for the majority, but hurts the rich, they’ll do it anyway. We’ve repeatedly shown the opposite.

And you can’t run industrial policy or a war economy if you want fake profits based on not actually producing good new goods at cheap prices. It can’t be done. If an entire society is based around “give me money for the least possible effort”, you’re cooked

China’s government, while not without serious flaws, works, and ours doesn’t, and that’s because China has refused to let private interests take over the government.

China is a capitalist country, there is no question about it. But the sort of capitalism they practice is the type we practiced in the 50s and 60s. You can get rich, but you have to actually produce and incomes are expected to rise faster than the cost of goods. Ordinary people’s lives are expected to get better. So much so that one Chinese I know said that many of the problems of China were essentially those of a paperclip optimizer which was intended to reduce poverty.

The West is toast. We can’t compete. It’s that simple. To compete we will have to change significantly, and while putting up tariffs isn’t actually a bad idea, it’s not enough alone. Without changing our fundamental governing and economic policies and ideology so that to get rich and stay rich you have to actually make good cheap new products in a way that improves the majority’s lives, we will never be able to compete.

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Week-end Wrap – Political Economy – May 12 2024

by Tony Wikrent

 

Strategic Political Economy

‘Sad What We Are Doing’: Global CO2 Increase Sets New All-Time Record

Olivia Rosane, May 10, 2024 [CommonDreams]

The average monthly concentration of carbon dioxide in the atmosphere jumped by a record 4.7 parts per million between March 2023 and March 2024, according to new data from NOAA’s Mauna Loa Observatory in Hawaii.

The spike, reported by the University of California, San Diego’s Scripps Institution of Oceanography on Wednesday, reveals “the increasing pace of CO2 addition to the atmosphere by human activities,” the university said.

How Good, Kind, Caring People Became The Bad Guys 

Jessica Wildfire [OK Doomer, via Naked Capitalism 05-05-2024]

…When you complain, people judge you. It doesn’t matter what you’re complaining about. It doesn’t matter what you’re protesting or whistle-blowing. It doesn’t matter if your life is at stake. It doesn’t matter if thousands of lives are at stake. It doesn’t matter if the fate of humanity is at stake. Someone’s first instinct is to suspect you. It’s to accuse you of lying. It’s to label you a troublemaker.

They hear negative words coming out of your mouth. They associate those negative things with you, because you’re the person saying them. That’s how our primate brains operate. It takes a lot of self-awareness to overcome that, and many people lack it….

The New Anti-Antisemitism 

Rick Perlstein, May 8, 2024 [The American Prospect]

The response to college protests against the war on Gaza exemplifies the darkness of the Trumpocene….

THE PROVOCATIONS FOR THESE ASSAULTS are so much milder now than they were in the 1960s that an administrator then who could peer 55 years into the future would probably smirk. Students peacefully chanting slogans on a single, specific issue, backed by easily realizable demands? Pshaw….

But to repeat: What is happening now, I believe, might be far more dangerous….

Concerns for the “safety” of Jewish students has become a rhetorical commonplace in elite discussions of campus politics these days: “Jewish students of all political beliefs,” Theo Baker, son of New York Times superstar Peter Baker, tells us in The Atlantic in “The War at Stanford,” “have been given good reason to fear for their safety. They’ve been followed, harassed, and called derogatory racial epithets.”

It makes me feel like I’m losing my mind. You know who has good reason to fear for their safety? People, many of them Jews, getting pummeled by cops and fascists. People getting high-powered rifles aimed at them from rooftops by agents of the state who surely have been told by the people giving them orders to be ready to shoot because of all the “dangerous” things that are going on amid those protesters’ tents.

Sure, offensive things have happened to protesters. And that’s awful. But when I told some Chicago neighbors about all the Judaism going on down in Hyde Park, they were frankly shocked to hear it: They watch Morning Joe, from which they got the impression that Jew-hate was the overwhelming leitmotif of this whole protest thing.

It suggests one of those Talmudic puzzlements, or perhaps the setup for a dad joke: How many Jews have to pray peacefully in a pro-peace encampment (or alternatively, to cite a scene witnessed outside the 116th Street gate of Columbia University, how many black-hatted ultra-Orthodox Jews have to chant, “Anti-Zionism is not antisemitism”) for them to stop being an antisemitic mob?

 

Global power shift

The liberal international order is slowly coming apart 

[The Economist, via Naked Capitalism 05-10-2024]

[TW: I include only because The Economist is a notorious mouthpiece for the Anglo-American elites and their neoliberal policies.]

The In-Flight Magazine for Corporate Jets 

Luke Goldstein, April 2, 2024 [The American Prospect]

The Economist has channeled the concerns of elites for decades. It sees the Biden administration as a threat.

Open Thread

Use to discuss topics unrelated to recent posts.

What Happens To Israel If They Accomplish Their Genocide

So, all aid except some totally inadequate air-dropped supplies have now been cut off from Gaza and Rafah, the last refuge is being bombed and invaded.

As I pointed out October 8th, the real danger isn’t the bombs and drones and so on—it’s famine and plague and lack of water. The official numbers of dead in Gaza are hardly going up, because State capacity (the numbers come from Gaza’s government) is trashed. The numbers were always massive understatements, because many bodies are buried in the ruins, but now they’re vastly too low.

The best way to kill people, absent nukes, is pretty much always hunger. Deaths are going to SOAR in Gaza and once it really gets rolling, it’s entirely feasible for Israel to kill a million+ people.

This has always clearly been the Israeli goal: wipe the Palestinians in Gaza out.

But what happens to Israel if it happens? They may think it makes them safer, but does it?

A lot of people make horrific predictions of what will happen if Israel ever stops being an ethnostate, but it doesn’t have to be horrific: there were no mass deaths in South Africa after apartheid, for example.

But if Israel completes its genocide and is eventually conquered, well, Israelis are going to be at great risk of retaliation. Even if it’s not official policy, a lot of troops are going to take revenge. And a completed genocide will make Israel a pariah for a couple generations: even Muslim leaders with no morals (most of them) won’t be able to be on good terms with Israel—their people will rise up if they do.

Israel’s being foolish. It’s always been foolish: a modern day crusader state. That didn’t end well last time, and it’s not likely to end will this time, but Israel keeps making themselves completely abominable, even as their patron, the US, goes into steep imperial decline. Ten years from now, the US isn’t going to be able to protect Israel even as much as it did this time.

“Not just evil, but a mistake”, as the saying goes.

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