by Tony Wikrent
Economics as cultural warfare
Our Ancestors Thought We’d Build an Economic Paradise. Instead We Got 2022
Brad DeLong [Time, via Naked Capitalism 9-11-2022]
Adapted from DeLong’s new book, Slouching Towards Utopia: An Economic History of the Twentieth Century, published by Basic Books….
…the first half of the Big Story of twentieth-century economic history is a triumphant one. Friedrich von Hayek was a genius. He saw clearly that the market economy, when coupled with industrial research labs, modern corporations, and globalization, was the key to unlocking the cage keeping humanity desperately poor. He thus preached the gospel: “The market giveth, the market taketh away: blessed be the name of the market.” We should, he thought, be satisfied with the fact that there was a large-enough pie, count our blessings, and ignore the problems of slicing and tasting it properly.
[TW: DeLong’s positive mention of von Hayek is a clear warning sign. As Corey Robin explained in his May 2013 article, “Nietzsche’s Marginal Children: On Friedrich Hayek,”
But to understand that text and its influence, it’s necessary to turn away from contemporary America to fin de siècle Vienna. The seedbed of Hayek’s arguments is the half-century between the “marginal revolution,” which changed the field of economics in the late nineteenth century, and the collapse of the Habsburg monarchy in 1918. It is by now a commonplace of European cultural history that a dying Austro-Hungarian Empire gave birth to modernism, psychoanalysis and fascism. Yet from the vortex of Vienna came not only Wittgenstein, Freud and Hitler but also Hayek, who was born and educated in the city, and the Austrian school of economics….
Throughout his writing life, Nietzsche was plagued by the vision of workers massing on the public stage—whether in trade unions, socialist parties or communist leagues. Almost immediately upon his arrival in Basel, the First International descended on the city to hold its fourth congress. Nietzsche was petrified. “There is nothing more terrible,” he wrote in The Birth of Tragedy, “than a class of barbaric slaves who have learned to regard their existence as an injustice, and now prepare to avenge, not only themselves, but all generations.” Several years after the International had left Basel, Nietzsche convinced himself that it was slouching toward Bayreuth in order to ruin Wagner’s festival there. And just weeks before he went mad in 1888 and disappeared forever into his own head, he wrote, “The cause of every stupidity today…lies in the existence of a labour question at all. About certain things one does not ask questions.”
[TW continued: Robin’s article stirred up vitriolic responses from conservatives and libertarians—and they completely missed the crucial point that since he was a product of an oligarchical society, von Hayek’s economics was based on oligarchical disdain and hostility for working people and their capacity for self government. As Irish socialist James Connolly wrote in 1910:
A people poisoned by the adulation of royalty can never attain social freedom. The mind accustomed to political kings can easily be reconciled to social kings – capitalist kings of the workshop, the mill, the railway, the ships and the docks.
[TW continued: So it’s no surprise that DeLong is a self-professed “Davos Man… a card-carrying neoliberal, a believer in globalization and free trade.” In his new book, DeLong attributes humanity’s 1870s-1880s escape from the grip of Malthusian scarcity to the rise of “industrial research labs, deployed at scale by modern corporations,” while completely ignoring the dirgistic program of neo-mercantalist nation-building enabled by first Treasury Secretary Alexander Hamilton’s design of the USA economy (including, crucially, the Constitutional mandate that economic activity should “promote the General Welfare” and that the national government is not limited to the powers enumerated in the Constitution, but has implied powers to undertake whatever is needed to fulfill that mandate). Rather than the Marxist model of the means of production determining the political superstructure, what actually happens under Hamilton’s system is government support for new science and technology creates new means of production, forcing and fostering technological phase shifts in the economy. The machine tools and machining techniques developed at the Springfield Armory after the War of 1812, became the basis for the manufacture of interchangeable parts, laying the foundation for industrial assembly lines and mass production. It was the explorations and surveys by the Army Corps of Topographical Engineers that identified and mapped the westward routes followed by the overland pioneers and the railroads. In 1843, Congress directly funded Samuel B. Morris’s development of the telegraph. In the Civil War era, it was US Navy research that applied scientific methodology to steam engine design, creating the science of thermodynamics AND the profession of mechanical engineering. The creation of the Department of Agriculture in May 1862 formalized direct government efforts in fighting agricultural pests and animal diseases, and finding and developing new breeds and strains of plants and animals better suited for conditions of the Great Plains and other areas. The Morrill Land-Grant Act of 1862 created an entire system of state colleges and universities that educated and trained the men and women, without whom DeLong’s “industrial research labs, deployed at scale by modern corporations” would have been crippled and barren.
By discussing only the von Hayek’s conservative / libertarian “free enterprise” aspect of economic development, DeLong is engaging in some very insidious and misleading propaganda to help maintain the historically inaccurate anti-statist myths of neoliberalism. ]
Governance for a Healthy Economy
Dani Rodrik [Project Syndicate, via Naked Capitalism 9-11-2022]
There is near-universal skepticism about governments’ ability to lead and achieve positive change…. Moreover, a longer-standing concern about government is that it has neither sufficient information nor the capabilities necessary to achieve positive structural change in the economy. Give governments too much power, the argument goes, and they will direct resources toward the wrong places and become captive tools of special interests. This argument lies at the heart of neoliberalism, and it will have to be overcome for any successor paradigm – like productivism – to succeed….
Just look around, and you can find failures of public governance almost everywhere – locally, nationally, and globally. But, in fact, as Columbia Law School’s Charles Sabel and David Victor of the University of California, San Diego, show in a new book, effective governance models do exist and have already made a big difference…. Sabel and Victor build their argument on the example of the 1987 Montreal Protocol, which has succeeded in curbing ozone-depleting substances (ODS) to the point where the ozone layer is now on course to full recovery.
The American Welfare State Is Designed Horribly
Ryan Cooper, September 14, 2022 [The American Prospect]
A recent splashy New York Times piece by Jason DeParle, based on a study using data from Columbia University, contained an eye-popping conclusion: American child poverty has fallen by nearly three-fifths over the past quarter-century, from 28 percent in 1993 to 11 percent in 2019. The principal mechanism was expansions of the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC), which provide money to some of the working poor. Sounds pretty good!
Unfortunately, these figures are simply inaccurate. As Matt Bruenig explains at the People’s Policy Project, the study assumes perfect uptake of these credits through a tax simulation, and we know for a fact that this isn’t true. Another study using IRS administrative data found that this assumption overstates the actual anti–child poverty effect of the EITC by 67 percent.…
The EITC in particular exemplifies all the pathologies of America’s default mode of policy. The first is the work requirement: The credit “phases in” starting at your first dollar of labor income, meaning if you don’t work that much, you get very little, and if you don’t work at all, you get nothing. That means for the very poorest people in the country—typically single mothers who only have access to jobs that don’t pay enough for child care—it is no help at all. And contrary to neoliberal notions of poor people being largely able-bodied adults who refuse to look for jobs, about 86 percent of people who don’t work are children, students, the elderly, or disabled—that is, people who either can’t work, or shouldn’t be working.
The second pathology is complexity and concomitant administrative burden. The EITC has a different phase-in schedule depending on whether you are single or married, or whether you have zero, one, two, or three or more children—eight different calculations may be required of applicants. That adds a large bureaucratic headache for both low-income tax filers (who often struggle to fill out complicated forms) and the IRS. That obstacle in turn prevents about 22 percent of eligible people from actually getting the benefit, and fuels a purely parasitic sector of tax prep firms, which about 60 percent of EITC recipients use. As Bruenig points out, the resulting fees eat up something like 13 to 22 percent of the average EITC benefit.