Ian Welsh

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

When Labour Opposes Rapid Technological Change

So, I recently saw this:

our obsession with jobs might trap us – everything could look like healthcare, still using fax machines when email and text exists.

“sorry I know this is possible via AI but we have our manual spreadsheet guy, following regulation 1284”

Leaving aside the word “AI”, because it’s not clear how expansive the use case for current AI really is, there’s a point here and it’s an important one.

He’s exactly right about our obsession with jobs, but I’d state it a different way:

It’s our obsession with distributing resources through money gained by jobs. A pre-requisite of speedy technological adaptation is people knowing they won’t be hurt by it.

Recently we had the longshoreman’s strike. The issue that caused the strike is machines replacing workers. Longshoreman jobs are some of the few blue collar labor jobs that pay well. If the longshoremen lose them, most will never get a job again that pays as well.

But the issue isn’t the job. It’s the money. And the money is just a proxy for resources: housing, food, heat, cold, transport, medical, entertainment and so on. No money and your life is shit, and probably short. Not much money means misery in most cases.

Labor; which is to say the proletariat, people who have to sell their labor to survive, embrace technological change when it benefits them, when it doesn’t hurt them, or when they have no choice.

During the industrial revolution people were forced off the land thru enclosure. They worked in factories 12 hours a day, for 6 1/2 days a week because they had no choice.

After WWII in America, people flooded off the farms into the cities and suburbs because jobs that provided a better standard of living for less work were abundant.

(This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.)

This lesson goes far beyond workers. No one wants change that hurts them. One of the main factors stalling industrialization in most countries was that most land couldn’t be bought: it was controlled by nobles or the Crown and they didn’t sell land if they could help it. The land was the basis of their wealth and power. Until they either perceived otherwise or they lacked the power to keep their land, they wouldn’t sell. (The game Victoria III, while not a very good game, is great for modeling this. Play Japan or Dai Viet and you will FEEL this: sheer hate of reactionary landowners holding you back.)

There was also the issue of money: for most of the Dark Ages and Middle Ages you couldn’t borrow large amounts of money, in part because the Church was against lending at interest and the Church was powerful. (There were other reasons, Economists include them in their hand waving of “primitive accumulation of capital” which is why sociologists, anthropologists and historians have written most of the important literature in the area.)

If you want change, whether technological or social, you either have to get people to be OK with it (for it, or not mind) or you need to remove their power to resist.

It is that simple.

 

The Loss Of American Leadership Competence Viewed From WWII

This is an elevated comment, from Stewart M.

By StewartM

What strikes me is our loss of leadership competency, from the extremely competent people who managed us through the depression and through WWII to the clowns of today.

I’ve been involved in Youtube exchanges where some idiot creates a video claiming how we “saved” the USSR in WWII via Lend-Lease. First, that is that factually untrue. The USSR saved itself; Lend-Lease was such a trickle in 1941-1942 that it had essentially NO effect on the Battle of Moscow in December 1941, and very little impact on the Battle of Stalingrad in the fall-winter of 1942. Stalingrad at the very least marks the point where “the USSR will survive and not lose” so Lend-Lease didn’t “save” the USSR. Lend-Lease did help the USSR, but the bulk of it (60 %) came in the last 10 months of WWII well after the USSR had turned the tide and driving back the Wehrmacht out of the USSR. The most important part of Lend-Lease help wasn’t the weapons we sent, nor the locomotives, nor the steel, nor the petrol, nor even the trucks (the most common ‘fact’ brought up). It was the food we sent–in 1942 42 % of the USSR’s arable land was occupied, and the USSR instituted a rationing program where soldiers, workers in essential industries, and children got first priority on food. If you weren’t one of those, you didn’t get much, and hunger contributed mightily to the USSR’s civilian death rate in the war. The FDR administration promised the USSR 10 % of US food production to help, but could only manage to deliver 3 %.

But my point in mentioning Lend-Lease is that such Youtubes miss the main reason why we did what we did in aiding the USSR. It wasn’t some act of friendship or mercy, we weren’t just ‘being nice’; we did it OUT OF ENLIGHTENED SELF-INTEREST. George Marshall and the US military leadership were not sure we could win WWII without Soviet help; at the very least if the USSR went down to defeat and Hitler obtained access to the USSR’s resources it would prolong both the length and sacrifice of the US and UK. The military problem the US faced was war both in Europe and the Pacific, with far-flung bases and long supply lines that “ate” up manpower and required a powerful Navy and Air arm to protect. We thus couldn’t raise an army of hundreds of divisions and supply it overseas, to do the work that the Soviets were providing the West by grinding up the Wehrmacht. Keeping the Soviets in the war was quite vital; ergo Lend-Lease.

In short, Marshall and his ilk had a clear and correct notion of what the US could do, and what it couldn’t do. The manpower restrictions on ground forces meant “no land war in Asia” which meant we wouldn’t field armies in China. Instead, we focused on a ground force manpower-minimizing “island hopping” strategy where we only took relatively few key islands and just left Japanese ground forces in elsewhere stranded and cut-off from supply. The bulk of the ground forces we did raise were going be used to defeat Hitler, whom Marshall correctly identified as the biggest threat to the US, given Germany’s technological skills and industrial base.

This kind of calculation is what we’ve lost. In WWII, we knew we were powerful, in some ways relative to the world more powerful then than now, but we knew we couldn’t do everything and that we shouldn’t even try. But after WWII, inside the US spread the notion (largely spread by conservatives and the anti-communists) that we had really ‘done it all’ and won the war without much of anyone’s help. Why did we cave to Stalin at Yalta? Why didn’t we let Patton drive the Soviets out of Eastern Europe? We had the bomb after all! (cue in Henry Stimson rhetorically patting his coat pocket). WE WERE OMNIPOTENT!

The first generation who acted on this belief, a belief definitely not shared by those who planned and executed WWII, was the “Greatest Generation” who had fought it as common soldiers when they assumed leadership—JFK through Reagan/Bush I. It led to Vietnam and to interventions everywhere, because we could and should impose our will upon the world. It was exacerbated when (as you say) financial means of scoring economies replaced measures of actual industrial capacity and output, from Clinton to today. What gets me is that the US’s leadership is more arrogant and more convinced of its supremacy despite the fact by all objective measures, whatever power the US actually has is far less relative to the rest of the world than the US during WWII during Marshall’s and FDR’s time. Yet Marshall and FDR knew we weren’t omnipotent and couldn’t ‘do it all’. And I fear nothing less than a massive comeuppance will change their attitudes.

(This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.)

No Gods, No Demons, No Superpowers

The era of the superpower is over. The new missile and drone technologies have made naval dominance impossible and ended the ability to devastate relatively advanced nations without them being able to shoot back. There is no power in the world that has the capabilities and might of the old USSR and the USA from 1945 to 2010 or so.

We have three great powers: China, the US and Russia.

There are regional powers: Brazil and Iran and the EU and Turkey and Japan and even India, which punches way below its population numbers.

But even a backwards, bombed to hell country like Yemen can defy America’s hold on the seas.

(This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.)

The EU is particularly amusing, in that they could have been one of the great powers, but over and over again chose austerity, contraction and vassalage to America. The ship is sailing out of port, it’s theoretically possible they could turn it around, but politically impossible. Their day: indeed, their centuries, are done. Pathetic.

This is going to be a fair different and more constrained world. There will be more wars and revolutions. Great Powers will actually have to seriously compete for the allegiance of important minor powers, though China’s been doing this for a couple decades now, offering huge benefits compared to the US.

Russia’s getting in on the game. Where China offers development, Russia offers to fix your military problems for you, or at least make them manageable and to sell you oil and grain cheap.

America and its allies offer your elites membership in the club, in exchange for impoverishing or otherwise screwing over your own population. If you don’t do what they say, they lecture the hell out of you and try to sanction you into an early grave, if they don’t launch a coup or use you as a cat’s paw in a war.

If America wants to compete, it’s going to have to start offering some deals that don’t suck.

Nations will be more free to act as they choose than they have been in, literally, centuries. Since they were forced into unnatural shapes and relations by the great powers and superpowers, this will lead to significant changes, especially in places where ridiculous borders were drawn which ignored geography and ethnicity. (This is most true in Africa, but not only there.)

But the most important thing is simply that the age of the military colossus is over. China is the new industrial colossus, but climate change and environmental collapse is likely to spike that before they reach their full growth.

Welcome to the post-European Age.

Seven Days Till The US Federal Election

And Trump is very slightly ahead in the polls.

As is usually the case in modern American elections, much that is important isn’t at stake in this election: most notably whether or not the genocide in Palestine will continue. Both candidates and both parties are under the thumb of the Israeli lobby. Nor is an end to the terminal decline of the American Empire on the ballot, though Trump pretends it is.

That isn’t to say the election doesn’t matter, but it’s a choice between two terrible candidates. Trump is clearly senile and mercurial is the kindest word one can use to describe him. Harris is not that bright, and appears to fall into the Bush Jr. category: something happened to damage her. Plenty of rumors of alcohol problems, though I don’t know if they’re valid.

Both candidates are moral and ethical monsters, whose ambition and vanity are such that they would kill or impoverish any number of people to achieve their personal goals. (No, don’t even. This isn’t in question.)

I can’t be bothered to endorse either of them. This is a case of “would you prefer Satan or Beelzebub?” Unless you’re in a swing state I’d strongly urge you to vote third party or spoil your ballot. Even in a swing state you should seriously consider it.

About sixty percent of Americans think that the two-party system is broken, but they won’t vote for a third party because they think it’s a wasted vote, and this collective action problem makes continued decline inevitable.

(This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.)

Domestically it’s clear that Harris, who says she wouldn’t have done a single thing differently than Biden, is the candidate of status quo decline. Things will keep getting worse in about the same way. Trump will shake things up, primarily because of who he will appoint to government and their plans of taking over the bureaucracy.

Democrats aren’t serious about abortion rights, but Trump will make the situation even worse. His economic policies will be disastrous in different ways than Harris’s: tariffs aren’t a bad idea, but without industrial policy and policies designed to end rent-seeking and funnel resources into industry they won’t don’t do much but cause different types of pain. His appointments to the supreme court will be awful, though that ship has sailed and until Democrats are willing to court pack it seems unlikely there will be any near-term change.

This election was Harris’s to win, but she didn’t want it enough to distance herself strategically from Biden. It wouldn’t have taken much, I’d bet that just some serious talk about taming the inflation which ordinary people feel but economists insist doesn’t exist would have done it. Or she could have come out against genocide, and courted the left instead of the right by campaigning with Liz Cheney, et al.

But at the end of the day, people like Harris would rather the right win than do anything seriously left-wing like “not mass murder”, which is now so far from the central axis of American politics that it amounts to extremism, and is treated by universities, the political class and the justice system as the hand maiden to terrorism.

In such a decaying Empire, the truth is there are few good, viable, choices left. Pick your arch-demon or vote for someone who at least isn’t into mass murder but won’t win.

Middle East War: The Israeli Ground Forces Still Can’t Deliver

Israel has three great assets:

  • Its air force;
  • Its spies;
  • America.

What it doesn’t have is a good army:

After nearly five weeks of intense fighting, Israeli soldiers have managed to enter several border villages, advancing a maximum of just under two kilometres in some areas. However, they have been unable to establish overnight positions. These forces have resorted to widespread destruction, levelling homes and mosques along the border to create “scorched earth” zones. This tactic, however, exposes Israeli tanks, making them vulnerable and preventing adequate concealment as they cautiously advance through Lebanese villages. Consequently, Israeli casualties have surged

Or, to put it another way, Netanyahu’s mouth has written checks that Israel’s ground forces can’t cash. So Israel is back to wanton destruction, mostly by air.

I’ve said for years that Hezbollah’s army is one of the best in the world, man for man, and so far it seems that judgment is vindicated.

Israeli forces are currently only engaging Hezbollah’s “spoiling attacks” within the “engagement area”. They are yet to penetrate the “main battle area,” where Hezbollah’s primary defences and “striking forces” are positioned. Hezbollah’s strategy integrates conventional and guerrilla warfare tactics, employing adaptable defences above and below ground. It focuses on attrition strategy, using mobile defence tactics to harass and weaken enemy forces before drawing them into decisive engagements. These tactics include tactical retreats that expose enemy flanks, allowing Hezbollah to strike at Israel’s advancing spearhead, systematically disrupting momentum and inflicting heavy losses.

Meanwhile Israel’s attack on Iran does not appear to have done great damage and Hamas ordered Northern Israeli villages being used as invastion staging points to evacuate, and has started hitting them with missiles and drones, leading to another couple hundred thousand Israeli internal refugees.

(This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.)

But the weak suffer what they must, and Northern Gaza has spent October under complete embargo of food and water. The Israeli genocide of Palestinians continues, and the clear intention is to occupy North Gaza permanently once its residents are displaced or dead.

Indeed the Israeli way of war is now clearly “genocide uber alles” with Israel’s air attacks in Lebanon prioritizing civilian buildings, with multiple attacks on hospitals, at least one attack on an orphanage and repeated warnings that they will strike first responders who try to save lives.

Israel is attempting to break the will of civilian populations through terror. Israel’s war doctrine is mass terror, ethnic cleansing and genocide, with attacks meant to maximize civilian casualties both during and after the attack. The fewer hospitals, doctors and so on, the more people who will die or be permanently maimed.

This is a war of the cowardly against civilians, which makes sense: Israel’s occupation has left its military specialized in brutalizing civilians. It had great difficulty against Hamas, a rag tag militia with missiles and other weapons built in basements. Against Hezbollah’s ground forces: seasoned, well equipped and dug in, it has been unimpressive.

The problem for Israel is simple enough: terror from the air doesn’t win wars and doesn’t break moral. Instead it makes people more determined to resist, not less.

If Israel, after its assassinations and attacks on warehouses had declared victory, it would still look strong. But engaging with Hezbollah on the ground has proven a serious mistake.

Israel is a great example of “those who are abused become abusers.” Israel might as well be Nazi Germany when it comes to both ideology (national ethnic supremacy) and actions: genocide of a despised ethnic/religious group.

It is a sad thing to see, both for their victims and for themselves. They have become monsters, and with polls indicating over 90% support for the way the war is fought, it’s clear that this has infected the mass of the Israeli citizenry.

When Israel is finally defeated, likely in a future war, it will need to completely de-Zionised, in a way Germany was never properly de-Nazified.

This entire war is sad and stupid and based on the fundamental injustice of taking other people’s land and homes. It is pursued thru terror, mass murder, genocide and ethnic cleansing and war crimes are so routine they happen every day as a matter of policy.

Every nation who supports Israel in this is stained by Israel’s crimes. We all know genocide is happening, and our countries have supported it, made it possible and opposed all efforts to end it.

To riff on Jefferson, we had best hope that there is no just God.

Week-end Wrap – Political Economy – October 27 2024

by Tony Wikrent

 

Strategic Political Economy

The Right Believes It Has the Supreme Court Votes to Overturn Labor Law

[In These Times, via Naked Capitalism Water Cooler 10-22-2024]

 “The foundational 1935 labor law protecting workers is unconstitutional, according to major corporations and right-wing zealots who believe they have enough votes on the Supreme Court to overturn it. In the latest sign that anti-union forces will doggedly press the matter, a federal judge for the Northern District of Texas enjoined the National Labor Relations Board (NLRB) from processing any allegations of employer violations of workers’ rights. The National Review hailed the decision as ​’A Welcome Blow to the NLRB.’ This is after Elon Musk’s SpaceX won a similar injunction against the NLRB before the Western District of Texas in July. Both cases will work their way up to the Fifth Circuit Court, which has served as an expressway to steer anti-regulatory legal appeals to the Supreme Court ever since Trump packed it with right-wing ideologues. ‘I don’t think a lot of labor folks are focused on this right now,’ says Stephen Lerner, a fellow at Georgetown University’s Kalmanovitz Initiative for Labor and the Working Poor. … ‘This is the culmination of a 50-year anti-union agenda.’… But, in trying to repeal all the rights and protections workers gained during the New Deal, including the limited protections that workers currently enjoy for organizing and engaging in collective bargaining, killing the 1935 National Labor Relations Act (also known as the Wagner Act) would also mean the lifting of a host of restrictions on unions’ ability to carry out solidarity activism and effective economic sanctions. Are unions prepared for a return to ​’the law of the jungle?’”

MASTER PLAN Bonus: How Democrats Lost The Courts

[The Lever, October 22, 2024]

In this exclusive Master Plan bonus episode, David Sirota interviews former Senate Leader Tom Daschle, who led Democrats’ fight against George W. Bush’s plan to pack the federal courts with conservative judges — and paid the ultimate political price.

Daschle’s success stalling Republicans’ judicial picks in the Senate made him a prime target of the master planners — so they had him ousted from Congress and filled his South Dakota Senate seat with their own corporate candidate.

Sirota and Daschle discuss the Federalist Society’s influence in transforming the judicial nomination process into an ideological purity test. They also weigh in on the last major campaign finance legislation — the McCain-Feingold Act of 2002 — and whether similar reforms could even be possible in post-Citizens United America.

 

MASTER PLAN Bonus: The Federalist Society’s “Pipeline For Power”

[The Lever, October 22, 2024]

DAVID SIROTA: …To understand the roots of the Federalist Society, we spoke with Lisa Graves. She worked in the Department of Justice and on the Senate Judiciary committee and is now the founder of True North Research, a dark money watchdog organization. We heard from Graves briefly in Episode 7, but wanted to share the extended interview she did with producer Laura Krantz. Their conversation began with an overview of the four men who have been integral to the success of the Federalist Society: Ed Meese, C. Boyden Gray, Jay Sekulow, and Leonard Leo.

LISA GRAVES: Ed Meese was there near the beginning of the Federalist Society when it was created in 1981 as I mentioned, and Meese had served as Attorney General under Ronald Reagan. And he is certainly considered one of the fathers, or, you know, godfathers, in essence, of The Federalist Society from that period, and has been active in it throughout this, you know, these past 40 years, in a variety of ways. C. Boyden Gray, the highest role that he had in government was as White House Counsel for George Herbert Walker Bush. He helped select Clarence Thomas for the Supreme Court to replace the great civil rights leader, Thurgood Marshall — he was someone who had an active opposition to civil rights or, you know, core civil rights laws.

Thomas had served in the Reagan administration in the EEOC in a way that many people in civil rights community consider to be destructive, not supportive of that institution. And C. Boyden Gray had a had a key role in that as White House Counsel, but he also had a role in the selection of David Souter to go to the U.S. Supreme Court, and that is the nomination and confirmation of a judge who, you know, is considered to be a Republican or having Republican roots, but he was not sufficiently doctrinaire.

When George W. Bush became president, C. Boyden Gray was not White House Counsel during that period, but he was operating on the outside, and he was seemingly determined to help make sure that, you know, ideologues were put on the bench. And so from the outside of the administration, he launched a thing called the Committee for Justice, CFJ, which was an attack machine to attack the Democrats for opposing any of these Bush nominees who were at the circuit court level, largely drawn from the ranks of The Federalist Society….

… in many ways, this so-called movement that The Federalist Society has been at the helm of was in part in reaction to Brown v. Board of Education, and whether they were going to try to justify it or not, along with opposition to the Roe v. Wade decision, which was built on a really important case called Griswold v. Connecticut, which recognized a right to autonomy in reproductive decisions that states could not limit, for example, women from accessing contraception. And so there’s a whole host of decisions by the court in the 20th century, including decisions affirming major public policies like social security and programs to, you know, protect labor rights and more, and the Federalist Society and Leo and these men have you know worked for years to try to undo those precedents by, in part, by this appointment process of personnel being policy….

LISA GRAVES: The Powell Memo expressly targets the courts as a lever of power… Lewis Powell [was] a lawyer for the tobacco industry, he had been instrumental in trying to prevent the federal government from regulating tobacco, despite the fact that the tobacco industry knew full well that its products caused cancer… He also had been a lawyer advising the city of Richmond, as it was contending with Brown v. Board of Education. And though he wasn’t the most outspoken of the white segregationists at that time, he helped put forward policies to pave the way for white kids to attend, you know, private institutions in order to not be subject to racial integration.

And in Powell’s memo, of the things he wrote was that businesses needed to play a more active role in influencing Congress, in influencing universities and influencing the courts. And he singled out the courts as a particularly important lever of power. And then just 10 years later, The Federalist Society was created. A number of institutions or entities were created in the aftermath of the Powell Memo — the Pacific Legal Foundation, the Heritage Foundation, ALEC, the American Legislative Exchange Council … there was a concerted effort over the next 10 years to implement the Powell Memo through creating these entities … and infusing them with cash from sort of proto-billionaires … to advance an alternate vision for our constitution….

… one of the things that happened was that Leonard Leo became actively involved in trying to destroy the role of the American Bar Association in evaluating potential judicial nominees for the federal bench….

…the Bush administration basically outsourced the pre-selection process to the Federalist Society to Leonard Leo, and they were involved. I know for a fact that they were involved in 2001 in contacting potential circuit court nominees and asking them how they voted. Did they vote for George W. Bush or not? As a precondition, for the Federalist Society recommending them for circuit judgeship….

Quick Takes: US Naval Decline, ASML’s Fall & More

Some topics deserve a mention but not a full article and that’s what quick takes are for.

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This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.

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I’ve written about US ship building problems before, but it’s not just about that, the Navy is retiring ships faster than they are being built. (And yes, China is building them way faster than it is retiring them.)

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Seems that the extra surveillance for the Paris Olympics will become permanent. Surveillance state, HO!

Offered without comment:

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There’s a meme going around that when Norway increased taxes on the rich it lost tax income because so many rich people fled. Turns out that was not the case.

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Add to, “what a mystery!” and “Who would have expected!”

The analysis revealed that the mortality rate of Americans ages 1 to 19 rose by 11% between 2019 and 2020 and an additional 8% between 2020 and 2021.

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The new BYD Seagull EV costs $9,700 American, though that price is only really available to Chinese, they kick it up a lot even for countries without tariffs.

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ASML, which creates advanced lithography machines, has 49% of its sales in China. Due to sanctions, it expects that number to drop to 20% of sales. Share prices crashed 16% in a single day.

ASML’s CEO previously indicated he expect China to learn how to make lithography machines and that ASML and the West would eventually lose essentially the entire market. What he didn’t say is that once China can make these machines, they’ll then take the entire non-Western market too. Truly sanctions stupidity.

Austerity, Demand and Reindustrialization

This blog is for understanding the present, making educated guesses at the future, and telling truths, usually unpleasant ones. There aren’t a lot of places like this left on the Web. Every year I fundraise to keep it going. If you’d like to help, and can afford to, please Subscribe or Donate.

So, it’s clear from the response to my last post that some readers aren’t familiar with the effects of austerity on balance of payments and vice-versa. Balance of payments is, oversimplified, how much money is going in and out of a country.

When money goes into a domestic economy, if it is used to buy something that is imported, that effects balance of payments negatively.

If you’re selling more than you buy, which can mean services as well as good, then that helps balance of payments. It also includes financial games: so if people are sending money to the London financial center, well, that improves BoP. London’s the world’s second largest financial center, after New York.

Now here’s the thing. Britain doesn’t grow enough food to feed its population. It doesn’t have a lot of industry left. North Sea oil is depleting, to the point that Britain became a net importer of oil in 2013. (Take a look at that chart.)

When the government spends money it isn’t magically siloed from causing import demand. The government cut back on heating subsidies, for example, and limited child support payments to two children. Without that money, oil and other demand is not as high as it would be otherwise.

Indeed, nothing is really siloed. If the government spends, almost always some of that money is going to go overseas and spike imports.

Britain controls its own printing press. It can print as many pounds as it wants, but it can’t make people in other countries take the money. The more they print, the less the pound will be worth, and the more inflation there will be because the dropping pound will increase prices of imported goods.

The pound is not the world trading currency any more. It hasn’t been since WWII. It can’t print pounds the way the US can print dollars and expect everyone to just take them.

Austerity is, in many ways, cruel and stupid, but if Britain (or Canada, or Australia, or even Europe) is to print money without it causing serious economic issues and to actually reindustrialize, it has to be done intelligently, along with serious industrial and domestic economic policy. (Currently tons is printed, but siloed to the rich, which keeps general demand from exploding but destroys markets’ ability to function properly.)

Now the thing is that Britain is a high cost of living economy: food and housing are expensive. Very expensive. Workers need to be paid well to survive, and that makes Britain un-competitive against lower cost (or higher productivity) countries.

If you wanted to make Britain competitive again, you’d have to crash housing and rent, to start. You can imagine how politically fraught that is: people who have high net worth due to real estate aren’t going to like it.

Then there’s the issue of the City, the financial center. Financial center profits are HIGH. That’s a problem, because people would rather put money into finance than into industry or farming or whatever since returns are better. Finance cannibalizes the rest of the economy. So you have to weaken the city and silo it, and probably tax it a lot. That’s hard to do, because the City has a lot of power, and there’s a real issue because it does, actually, bring a lot of money in to Britain, it’s just that money doesn’t get spread around.

When you industrialize, or re-industrialize, you have to make sure that money in the domestic market buys domestic goods, doesn’t buy a lot of foreign goods, and is used primarily on industrialization: capital goods, primarily. It’s unpleasant, it means a lot of goods (imported goods) aren’t available or are very expensive. Your new industry, ideally, either serves the domestic market, or is good for export, or both.

Austerity doesn’t exist just because governments are run by stupid psychopaths (though that’s part of it), it exists because of very real constraints caused by a need to send more money out of the country than is coming in to the country. In the seventies the UK was in so much trouble it had to actually go to the IMF for help, and join the EU so Europe would help it bail out.

Now, again, there are ways around this, but they require taking on powerful interests and hurting a big chunk of the population, especially in the short to medium term (about twenty years or so.) It means, as much as possible, making do with what you can produce yourself, and when you can’t, going cheap. No foreign fresh fruit imports, except the cheapest (hope you like bananas.) Cheap phones and appliances. Etc…

It also means ending all sorts of stupid financial games: no more Private Equity. No stock buybacks. No huge stock option grants. You want money reinvested. Currency controls so money doesn’t flood out. Possibly a dual currency.

All of this is painful. But if you don’t do it, decline inevitably continues and eventually you’re back to being a third world country.

Austerity is a pressure bandage on a wound that still won’t stop bleeding. It slows down the decline, but it doesn’t heal the wound.

Update: Just for kicks, here’s Germany’s BOP:

And China:

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