Month: March 2015

Since Monday we’ve raised $1,397 in one-time donations, and $305 in recurring donations. Multiplying the recurring by 3, we’re at 2,312, about three-quarters of the way to the first goal of $3,000 and 2 articles a week. And we’re about a third of the way to the second tier, of 5 articles a week.

I am vastly appreciative of everyone who has donated. We did well last year, but I’m always unsure about such things.

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If you haven’t read them, I have also put up a new article on the influence of geography on society, as well as an article on why the world is trending towards negative real interest rates on bonds.

How We Can Change Our Destiny As A Society

By Ian Welsh

On March 5, 2015

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I have written in the past of how the nature of everyday life creates the character of commoners and elites. What we do, the habits we lay down, is our character.

Now our everyday life is created by our technology, where we live (geography), and our culture—how we choose to use our technology and interact with our environment.

A Russian in one of Lee Blessing’s plays once said “History is Geography Over Time.” This is a near pure form of 19th century romantic nationalism.

Assume that humans are basically the same. Go to different countries, or even different locales within a large country. Notice that they are different from other people in ways which are similar—southerners have characteristics in common, bedouin have characteristics in common, Italians have characteristics in common, but within Italy where they come from also changes their character.

This is a common-sense observation, and before the modern era it was even more true: people were very different depending on where they lived.

Why?

Well, the simplest explanation is geography: to live in the tropics is to live a different type of life than to live in cold climes. To live a rain forest is a different type of life than to live in a desert.

This is a hard argument for rich moderns to entirely understand: with our air conditioning and heating: with food delivered from all over the world to our supermarkets; with our travel being almost entirely inside mobile boxes; with almost everyone now wearing western style clothes; with every office looking more or less alike and everyone using the same few word-processing programs;, we can drop half the world away and feel somewhat at home in many of the essentials. A certain type of life has been exported to as much of the world as can afford it, and most of the rest of the world, familiar with western media, aspires to that life.

But it was not always thus. To live in Bengal was to live a vastly different life than to live in London. Heck, to live in northern Scotland was to live vastly different from living in London. To live in the country vastly different from living in a city, but to live in Canton was massively different than in Tenochtitlán (one of the largest cities of its day.) Being a rice farmer in southern China was much different from being an Iroqois farmer in the Great Lakes area.

What you did, each day, was very different. Much of this difference was based on the simple requirements of making a living from that type of land. Much of the rest was the difference in technology: the tools you had available to work with. Some would include social organization in that toolkit, but let’s spin that off to culture.

Culture: the catch-all for the rest of it. But how does culture arise? Given the same pre-modern technology, and dropped on the Pacific Northwest or into Great Plains or into the Russian Taiga, you will live differently. Start off with people with the exact same culture, give it a few generations and you will be different people, because you will have grown up doing different things. And your technology will have changed, because what works best in each of those place is different.

Those differing lives become character, character is reified into culture, and soon you have tradition.

(And all this is before discussing the role of geography on such things as warfare, access to key resources like iron and copper, the role of geography in encouraging or discouraging diseases, natural trade routes, the difference between ocean and land transport, and so on.)

So, Geography is a big deal. It’s a big deal even today: Saudi Arabia cannot be understood without understanding its geography, including the (happy?) coincidence of vast oil reserves. Canada’s population clusters along the southern border, with spars out into areas with resources worth exploiting. Siberia is vast—and underpopulated, for good reasons based on its soil, climate and resources.

(I am fundraising to determine how much I’ll write this year. If you value my writing, and want more of it, please consider donating.)

But it’s also true because of the way cultural drift works: culture is not a completely dependent variable. Drop different people with different cultures into the same approximate geography and they will develop differently: there will be clear similarities (intensive rice agriculture in multiple SE Asian societies), yet the cultures will not be identical.

So, even in the modern world, with our ability to denature the environment, there are geographical effects: but there are also the more than residual effects of culture developed in the pre-modern era. These all swirl about to create our daily lives, and that forms the character of the commons, that point about which, despite our individuality, we coalesce. That mass-character determines how we react to the events of our lives: to how active or passive we are, what we’ll fight for, and how we’ll fight. Change is constrained and channeled by character, by who we are.

Character is destiny, both personally and en-masse.

Does that means some warped form of Panglossianism? Our character is our destiny, and we cannot escape our destiny because our character is formed by forces beyond our control (usually when we are children, and under the control of others similarly formed)?

I would suggest this is not the case. Oh, it’s hard to change character and destiny, but it can be done, especially for the future. We need to decide what destiny we prefer, what character is required and work to change our every day lives to create that character.

This is possible. Huge swathes of the population despise their own characters: guilt and regret and self-contempt are part of humanity as much as smug self-regard. We look on these things ill, but a better way to look on them is as fuel for change: if we do not like who we are, we can change. And we can change as societies. If we don’t want to live in vastly unequal societies, we can change that: it has been done before. If we want to live in a way that doesn’t destroy the environment, we can do that. And if want to live in actually free societies (i.e. not police and surveillance states), we can do that as well.

Within the matrix of what is made possible by technology and geography are vast social universes. What is required to seize them is not despair at how we are conditioned by our lives, but an understanding that that conditioning can work for us as much as against us.

A negative interest rate world? Why?

By Ian Welsh

On March 4, 2015

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Umair Haque writes:

Why are we approaching the new normal of a negative interest rate world? Simple. There’s nowhere good left to put all the money.

Umair is referring to all the countries who are now offering bonds with negative real interest rates. You get back less money than you put into the bond. People are buying these because they have nowhere better to put their money.

Now this isn’t entirely accurate. There are still some better places to put money, but there aren’t enough of them. And there is a ton of money out there chasing returns.

Why there is too much money chasing returns is important, however, so I’m going to tease apart some of the reasons.

Central Bank Policy

Look, the ECB is buying bonds. The BOJ is buying bonds. The US was doing so. This is demand. It pushes the yield of bonds down.

China is printing piles of money, Japan is printing it, etc… That money isn’t staying in those economies, it is hunting through the world for returns or even just security. Federal Reserve policy has put a floor under losses from various securities by accepting that at near par, and Fed policy of free money has underwritten an epic bull market in securities.

No cleanup of the banking or shadow banking systems.

Most money is created by private actors. Banks, shadow banks (brokerages, etc…) There is no effective oversight of these organizations, still (you’d think after 2007, but you’d be wrong.) In fact, not only is there not enough oversight, but in most cases they’ve been effectively encourages to create more money. We have another derivatives bubble underway, we have housing bubbles in multiple countries (e.g. Canada and the UK), and while the US doesn’t have one, parts of the US, like Manhattan, do.

Oligopolistic profits.

US broadband profits are almost 100%-annualized. Every app store takes a 30% cut (a level which would have been shut down by regulators of the post-war liberal period.) Copyright law makes it difficult to impossible to create generic alternatives to common items. These have all led to very high profit levels, and those profits have largely been plowed back into stock buy backs (most corporate borrow is matched by stock buy backs). But much of the economy is not available to be bought on the stock market, many large investors can’t invest on the stock market by law (they have to invest in high-grade bonds), and much of those profits are now priced into stock prices anyway.

(I am fundraising to determine how much I’ll write this year. If you value my writing, and want more of it, please consider donating.)

Inequality

In the United States more than all the gains of the last “recovery” have gone to the top 10% (really the top 3% or so.) There has limited broad based demand for new goods. Luxury goods, investment art, and London and Manhattan real-estate do not scale. Without widespread demand, opportunities for new businesses, with new employers, are limited.

Barriers to Entry

Much of this came under oligoplistic profits. Draconic “intellectual property” laws make it difficult to compete, bringing prices down and increasing volumes while freeing up money for people to spend on other things. 30% cuts from app stores and other virtual marketplaces make many businesses simply unprofitable—first they must make 30% for Apple or whoever, then they get to make a profit for themselves. But if you aren’t on those virtual marketplaces (and there is usually one which controls most of the business) you will not make enough sales to be viable. This sort of “you make no money without us, so we’ll take all the profits” behavior is little different from what the railroads did to farmers in the late nineteenth and early 20th centuries.

And while there’s tons of credit for big business and people who are already rich, a new business trying to get funding faces huge barriers to getting money. It’s boutique investment, it requires a lot of time, and most investors would rather just buy bonds, structured securities, or play the stock market. Money may be cheap, but not for you.

Supply Bottlenecks

In a larger sense the issue is that we still haven’t dealt with supply bottlenecks like oil. Get a roaring economy going again, oil will spike to $150/barrel and the economy will crash. The solar roll-out is underway, along with the wind one, but it hasn’t (yet) changed that reality. The same is true of many other commodities. If we want distributed growth in a world with constrained commodities, well, we can’t have it. We have to remove or avoid those bottlenecks. This requires deliberate government policy, but we have dodged the issue since the 70s (solar should have been where it is today 15 years ago, but Reagan chose an oil play, not a solar play, and chose to crush wages to crush demand.)

The absolute obsession with inflation is really about wage inflation, and the obsession with wage inflation is about widespread consumer demand causing commodity inflation. We’re moving towards a deflationary world (for ordinary people, there is vast inflation in goods and services the rich consume), but our policy makers are still in asuterity “crush employment and wages” mode.

No Future Till The Current Rich Can Monetize It

We could have had a lot of what we have today many years ago. But the rich control the politicians, and the politicians won’t allow it to occur. There was great squealing for years about subsidies for solar, and corruption in how they were given out, but they were always a rounding error compared to subsidies for oil, let along the military-industrial complex, big agriculture, pharma, health insurance, and so on. All of those industries were powerful enough to strangle subsidies to competitors (solar, generic drugs, whatever) and strong enough to insist on new laws which strangled startups and competition (every copyright extension is nothing but an anti-competitive measure intended to keep profits coming to incumbents.)

Bottom Line

We have too much money chasing too few returns because we’ve spent 40 odd years making sure that ordinary people get less and less money; the rich get more; and that oligopolies are nurtured and protected. The rich control government, and they intend to make sure that all the money goes to them. Unfortunately, in a mass market economy, that means the economy becomes lousier and lousier. This doesn’t matter to the rich because they are comparatively better off. Better a Czar amidst serfs than the CEO of General Motors in 1955.

The Right Thing to Do: Homeless edition

By Ian Welsh

On March 3, 2015

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So, Utah decided to just give the homeless places to live. The results are what anyone with sense, or who has followed the topic would expect:

Utah’s Housing First program cost between $10,000 and $12,000 per person, about half of the $20,000 it cost to treat and care for homeless people on the street.

Imagine that.

The right thing to do is almost always cheaper and gives better results, at least if the welfare of people is your concern.

If people are poor, give them money. If people don’t have a house, get them a house. If people are sick, get them health care.

The fact is, though, that you have to want to do the right thing. People tend to get down on the Church of Latter Day Saints, but for all their issues, I’ve always had a soft spot for them because I’ve heard many stories like this:

The church donated all of this,” Bate says. “Before we opened up, volunteers from the local Mormon ward came over and assembled all the furniture. It was overwhelming. For the first several years we were open, the LDS church made weekly food deliveries—everything from meat to butter and cheese. It wasn’t just dried beans—it was good stuff.” (The Utah Food Bank now makes weekly deliveries.)

I ask him if this is why the programs work so well in Utah—because of church donations.

“If the LDS church was not into it, the money would be missed, for sure,” he says, “but it’s church leadership that’s immensely important. If the word gets out that the church is behind something, it removes a lot of barriers.”…

….

“Why do you think they do it?” I ask(my emphasis)

“Oh,” he says, “I think they believe all that stuff in the New Testament about helping the poor. That’s kind of crazy for a religion, I know, but I think they take it quite seriously.”

A major driver of the social welfare movement in the United States was the social gospel. The ending of sweatshops, the huge work programs of the 30s, the provision of Medicare and Social Security was driven in large part by Christian crusaders who believed that what they did to the poor, they did to Jesus.

You have to want to do the right thing.

This is just as true when dealing with matters like inequality. FDR and the politicians of the 50s ran marginal tax rates for high earners at 90% or so because they, and the American people, genuinely believed that no one should have that much money. They believed that it was earned by the efforts of other people: a rich person is someone who gets rich on other people’s work, with very rare exceptions, and even they get rich because of the society they are in. (For a complete explanation of that, something most people refuse to understand, read “It’s Not Your Money.”)

Ethics and mores; belief, is why people do things. It doesn’t exactly come before material circumstances (the two influence each other, with material circumstances, including technology, determining a range of possibilities), but within what is possible, belief in what we should do determines what we actually do.

In the world today we have the resources not just to feed everyone, but to give them a decent life, with education, entertainment, and housing that is warm in the winter and at least not unbearable in the summer. We can cloth everyone well. We have had the ability to do this for at least a hundred years or so, in theory, we’ve had it in practice since the recovery from World War II.

To do so, however, we must believe that we should, and we must be willing to act on that belief. There will be sacrifices (a lot fewer billionaires, a lot less McMansions), but in the end even most of those who complain would be objectively better off, because inequality is robustly associated with worse health and less happiness, even for those who are the richest. The top .01%, if they were still the top .01% but had far less money and power, would be happier and healthier in such a world.

As such, the battleground of belief; of ideology, is as important as that of technology. It is belief, mediated by power and turned into behaviour, which determines what actually happens in this world.

Donation Drive: Set the Schedule for 2015

By Ian Welsh

On March 2, 2015

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The simplest economic principle is this: people do more of what they’re rewarded for. Right now, I can no longer justify writing at this frequency and level for free.

Over the past year I’ve written on ideology, inequality,and austerity. I’ve discussed fundamental questions like what an economy is, the value of human life and the rage of political betrayal. And I’ve covered the effects of current events like the Ukrainian crisis, the rise of ISIS and much more.

As with last year, I need to determine how much actual demand there is for these articles, and how much time I should spend writing them, so I’m asking you to donate if you find them valuable (and you can afford to; please never donate if you’re having trouble paying for food, housing or healthcare).

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I’ll fund-raise for two weeks at least. At the end, I’ll add up the subscriptions, divide the one-time donations by three, and use the amount to determine how much I write for the next three months, or more, if we do very well.

$0-$999 —I’ll write when the whim strikes. In the past that has meant that sometimes weeks have gone by between articles, and months between significant pieces.

$1000-$1999 I’ll average two significant pieces a week for three months: articles on important issues like how we came to this, how the world actually works, and how we can change the world for the better.

$2000-$2999 Five articles a week, minimum, for three months, barring unforseen circumstances like illness, accident, or unplanned travel.

$3000+ As the previous level, but I’ll do it for five months.

$More If we do very well, I’ll keep adding months.

I’ve maintained these paces for years in the past, at BOPnews, The Agonist, and Firedoglake, while also being managing editor of the second two.

For individuals, I’ll mention two other donation levels. If you subscribe, when your monthly donations reach this level, they’ll apply:

$100 – Give me the ok, and I’ll dedicate an article to you, or to your designee, within reason (aka. no, no matter how much you give, I’m not dedicating an article to neo-Nazis or Goldman Sachs).

$500 – Email me and I’ll write an article on a subject we determine. I won’t write on anything, I have to have something useful to say, and you don’t get to determine what I write about a subject, but I’ll work with you. (This isn’t the same as commissioning a piece, if you want to do that, email me).

If you value what I write, and can afford to, please DONATE or SUBSCRIBE.

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

Month: March 2015

Fundraising Update: Three-quarters of the way to 2 Significant Articles a week

How We Can Change Our Destiny As A Society

A negative interest rate world? Why?

The Right Thing to Do: Homeless edition

Donation Drive: Set the Schedule for 2015