Ian Welsh

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

Category: Economics Page 23 of 92

Has the Era of Ordinary Americans Thinking They Are “Pre-Rich” Ended?

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On April 2, 2021

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Nice statistic here:

Buried in the new Morning Consult/Politico poll is an eye-popping statistic: Voters by a 2-to-1 margin prefer a $3 trillion infrastructure bill that includes tax hikes on $400K+ and corporations over one that excludes those tax hikes.

For most of my life, tax-cuts were the mantra of the generation and tax-raises were automatically bad. These tax cuts went overwhelmingly to the rich, but Americans, Canadians, and Brits were all for it.

As many observed, it seemed they believed that one day they would be rich, and therefore that high taxes on rich people were bad.

Now, that seems to have changed, and I suspect it’s that Americans have finally got it through their thick heads that no, most of them will never be rich, and moreover the reason they’ll never be rich is because the people who already are, are kneeling on their necks (fortunately, just on their windpipes, not a full blood choke. Well, for most people the rich are only on their windpipes — most.)

This changes things. Certainly many politicians want to do what the rich want done, because the rich will take care of them, their families, their friends, and their mistresses and boy-toys, but there are always some who are more interested in power and winning, and if the rich don’t offer the best path to victory, they’re perfectly happy to stick a shiv in them and display the bleeding body for the masses.

Yup, that’s where we are. The Pandemic, with the rich getting massively richer while the working class died, was evicted, and generally suffered so that the wealthy and upper middle class could sip delivered lattes in their houses while tapping delicately into their computers, having Zoom meetings, and feeling sorry for themselves may well have been the straw that finally broke the back on the delusion of being “pre-rich.”

We aren’t all in this together, and we never were. It’s been class warfare for as long as humans have lived in “civilizations” (and often enough, before). Some people benefit by hurting other people. Since about 79/80, the rich have been clearly winning the class wars, driving their enemies before them, and thrilling to the lamentations of their men and women.

It’s been glorious! The modern rich are the richest rich to have ever existed, richer than in the Gilded Age. Shitting in golden toilets is nothing; these people travel the world in yachts the size of a village or on private jets, between their half dozen mansions or hotels which charge $50K a night, whose entrance you or I would never be allowed to see.

All while overseeing economies which have broken the backs of the poor and middle class and are on track to kill half the world’s species and over a billion humans.

Clarity having arrived at last, it’s time to break the rich even more than the Great Crash, Great Depression, and marginal tax rates of 94 percent did. Slap on the wealth taxes, raise the marginal tax rate on income more than 10x median to 99 percent, tax corporations, disallow share buy backs, kick foreign money out of real-estate markets, tax empty homes, create a wealth tax on anything more than 30x median, and slap an estate tax on anything over the same; your kids don’t get to rule over everyone else because you were rich. (Yes, yes, put in an exemption for actual family (small) farms and actually family (small) businesses.)

Drive the rich to the edge of extinction, into utter despair. Thrill to the lamentations of their men and women.

And don’t feel bad about it, they’ll just have to get by with, say, three or five times the median per year.

What a horror. They might only live three to five times better than most people ever do.

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The Vast Confusion of Implicit Assumptions Like Wages and Productivity

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On March 29, 2021

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Ran across this gem:

Paul Krugman, 1994: “Economic history offers no example of a country that experienced long-term productivity growth without a roughly equal rise in real wages.”

Now, this is one of those phrases which is a bit dubious, even on its own terms. “Long run” is doing a lot of work here.

But I’m not interested in that, it’s the embedded assumptions that matter.

Let’s tackle the word “wages” first.

When peasants were forced off the land through enclosures, and went to to work in factories, their wages increased. (Artisans who lost their jobs to factories had their wages drop, but they were a minority compared to the ex-peasants.)

These peasants went from work that they controlled, that was often only a few hours a day, with more days “off” (minus mandatory farm tasks like feeding and mucking) than modern workers, to jobs that often were 6/1/2 days a week, 12 hours a day, except Sundays, where you only worked six hours.

They lived fewer years, they were sick more often, and maimed far more often. They went from jobs with little to no supervision to closely supervised factory labor that was very de-skilled and boring.

Yes, they had more money — because they had to pay for everything (food, housing, etc.), whereas a peasant created much of their daily necessities together with other peasants and were only partially in the “money economy.”

The point is, that an increase in wages does not automatically mean an increase in wages.

After NAFTA, over a million subsistence farmers were pushed into Mexico’s slums. At the same time, the nutritional value of food in Mexico dropped due to deregulation and mergers allowing a few large companies to dominate the processing and sale of various staple grain products, and those companies decreased the quality of their offerings.

These new slum dwellers were pushed further into the money economy: they had to buy everything they needed. If you looked at the numbers, you would say, “Hey, they have more money, therefore they are better off!”

This process happened over and over again in developing countries. Peasants pushed off farms, and into slums, and it often looked like a net win. Usually, it wasn’t. Even in places where it looked like it was, like China, the results were mixed (the happiness data in China shows that those who moved to cities increased their income, but their happiness dropped). In countries that did not effectively develop, it was just a clear, net welfare drop.

This is similar to Western Europeans having lower salaries than Americans, but being healthier, taller (a good proxy for nutrition), and living longer, with higher happiness rates, fewer overweight people, and less illness.

Meanwhile, Americans pay more for worse healthcare, have to have a car, and live in larger houses with more land, farther from their jobs.

Anyway, all of this is a long way of saying wages and welfare are not the same thing.

Now, let’s talk productivity. The economic definition is the ration between output volume and input volume (labor/capital). Perfectly useful definition.

But what it doesn’t include is interesting. If I’m drawing down an aquifer to make bottled water and, in fact, causing that aquifer to be damaged so it will NEVER recover to the same capacity, ever again, but I’m not forced to book that as a negative input, am I measuring productivity correctly?

If I am polluting the air in a way that will cause climate changes that will kill a billion people and ruin tons of property, but I don’t have to book those foreseeable costs as negative input, am I measuring productivity correctly?

If my production is causing general environmental damage which shows that half the world’s species will go extinct, should that be added to the inputs side in negative terms?

If I’m using up dense energy (hydrocarbons) which took billions of years to create and which I cannot replace, should that be a net negative?

In standard accounting, wear and tear for capital equipment is counted as an expense. But the destruction of the environment, people, and entire species is not.

If I’m cold, and I light my house on fire, for a while I will be very warm. No one would think what I’ve done is wise, however — unless the other option was dying. Lighting an entire neighbourhood on fire to save one life wouldn’t be considered acceptable either.

But, in fact, by burning down the world, we are going to kill a lot more people, animals, and plants than by not burning down the world. All of this has left out more standard issues: all the asthma caused by air pollution, all the cancer caused by various chemicals in our food, water, and air, the crash in human fertility, etc, etc.

If you don’t price in externalities, to use the economic term, then you don’t know the actual productivity numbers.

So, what we’re going to find on recalculating productivity properly is that, at some fairly early point, there were no productivity increases from industrialization, and that productivity has been dropping for generations now.

Wages are very often not a good proxy for welfare. Productivity rarely includes all the negative inputs, and thus, is also inaccurate (and we’ve only touched on the issues with both).

When you have embedded assumptions, and you don’t realize what those assumptions are, or think they don’t really matter, you make terrible mistakes. If you create a decision making system (“do it if it makes a profit”) whose numbers don’t include those hidden costs, you can drive yourself very productively, and efficiently, into a hole from which you’ll never be able to dig yourself out.

It’s not that economists don’t acknowledge this. But in practice, they have acted as if it doesn’t matter.

It does. It matters now, for all the people whose lives were made worse over the last couple centuries, and it matters tomorrow, when the full bill will start to come due.

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Offshoring Critical Industries Is So Harmful It Should Be Treason (Covid Edition)

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On March 25, 2021

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I was impressed how fast the UK and the US were vaccinating their population. How were they doing it, after they had been so incompetent during the rest of the pandemic?

Simple enough. Restrictions on vaccine exports.

Meanwhile:

India delays big exports of AstraZeneca shot, including to COVAX, as infections surge

And then there’s this:

(Spare me the self-serving arguments that breaking the patents wouldn’t have helped because it takes too much time to ramp up production. However long it takes, the sooner  your open up the IP, the faster it happens.)

And we could make it happen faster:

But the global capacity for producing vaccines is about a third of what is needed, says Ellen t’Hoen, an expert in medicines policy and intellectual property law.

….

To make a vaccine you not only need to have the right to produce the actual substance they are composed of (which is protected by patents), you also need to have the knowledge about how to make them because the technology can be complex.

The WHO does not have the authority to sidestep patents – but it is trying to bring countries together to find a way to bolster vaccine supplies.

The discussions include using provisions in international law to get around patents and helping countries to have the technical ability to make them.

Rich countries use IP law to keep poor countries poor, and to kill and impoverish their citizens to make even larger profits.

And, of course, if you’re stupid enough to believe neoliberal bullshit about how your countries will be OK and don’t take steps even though you have manufacturing capacity, (Europe), well, your citizens die. The EU is now restricting imports to the UK. I wonder how many Europeans will die because of not having those 10 million doses?

“I mention specifically the U.K.,” said EU Commission Vice-President Valdis Dombrovskis. Since the end of January, “some 10 million doses have been exported from the EU to the U.K. and zero doses have been exported from U.K. to the EU.”

OK. I have said this for years and years but I’m going to say it again now that it is being illustrated brutally: if you can’t make it yourself, you can’t be sure you’ll have it when you need it, since countries that can make it will tend to prioritize themselves.

You must make and grow everything essential to your country domestically if you can. Any international laws that forbid you from doing so are illegitimate. They may exist; they are not Just. This doesn’t mean completely breaking patent law (though it needs to be much less draconian and a lot less long), it does mean, at the least, writing in mandatory licensing provisions at reasonable prices.

A lot of people are going to die who didn’t need to because neoliberal “free trade” orthodoxy said you didn’t need to be able to both design and make vaccines in your own country: the “market” would supply you.

Eventually.

This isn’t just about behaviour now. It is about behaviour that has been encoded into law and trade practice over decades.

Don’t offshore anything that matters. If your citizens have to pay 5% or 10% more, slap on tariffs.

To not do so, if you think the welfare of your citizens is your duty, is treason.

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The Coming Boom

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On March 23, 2021

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Note that when Covid ends there’s going to be a boom. Biden is actually putting out decent stimulus (3 trillion package incoming), and it seems that elites may, as Policy Tensor  suggests, be getting the idea that fiscal stimulus is necessary and that the Fed shouldn’t strangle any good economy in its cradle. If Tensor is right, and I see some evidence he is, they also have decided to do something (not enough, but something) about climate change, in terms of industrial policy for clean energy and so on.

Since so many small businesses closed, many of those that survived, especially local ones like restaurants and bars and gyms and so on are going to see a huge surge and overcrowding or excess demand. (This is also your best chance to meet a member of your preferred gender and sexual orientation in your lifetime, odds are, if you’re still in the game.)

In Britain the Tories even are raising corporate taxes very slightly (Labour was reluctant to agree.)

So I think Tensor may be right that a chunk of neoliberal orthodoxy is falling away. Fiscal is back, central banks won’t squash it, and the world moves towards large, opposed, trade blocs. Industrial policy is coming back, as well, though it’s not yet clear to what extent.

(America and Britain putting restrictions on exporting vaccines has really taught everyone a lesson that needed to be taught about what happens when you don’t design and make necessary items in your own country.)

What hasn’t changed, yet, is the serious commitment to keep the rich really rich. Two percent is nice, but what is required is 50s style progressive taxes, an end to favoring capital gains over earned income, strict estate taxes and wealth and (in the future) windfall profits taxes. Breakups of monopolies and oligopolies are also required, but there’s some indication that Biden’s team is serious about that.

Biden’s a disaster on foreign affairs, and he’s unwilling to make permanent structural changes like increasing the minimum wage or medicare-for-all, but if he can squeeze his spending thru the Senate, he’s going to flood the system with a lot of money and a fair bit of it in forms that won’t all rush to billionaires before you get to touch it for two or three seconds on its way to someone else.

So be ready for what’s coming. All booms end and I don’t think that the core issues with neoliberalism are repudiated, but it seems likely the US may have a few good years coming.

These years won’t last if real structural changes aren’t made, (I’ll keep an eye on that and write what I see), and maybe not even then (climate change/ecological collapse) but the oncoming boom be your last chance to make some hay. Do it while you can.

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When You’ll Get a More Equal Society

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On March 10, 2021

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So, it seems that the salaries of junior bankers are being cut so that senior bankers can have bigger bonuses. At UBS, the average bonus for senior bankers is $2.1 million.

Niiiiice.

Unless you’re a junior banker. Or a customer.

A given means of production, combined with a resource base, will throw off some amount of surplus. That surplus is divided among the population based entirely on their power. Sometimes that power comes from scarcity, often managed scarcity as in the Medieval Guild system, or un-managed scarcity during the first decades of a technological change (hello, programmers!), but most often it comes out of the barrel of a gun, from the point of a spear, or from the edge of a sword.

In Against the Grain, about the rise of early kingdoms after agriculture, the author points out that in agricultural systems where the farmer produces a single major crop, it is really easy to take away all but the bare minimum for the farmer’s survival; you know how much land, how much rainfall, when the crop is harvested, and where the farmer lives. The farmers mostly can’t run away, and they can’t win a fight against professional warriors, so you can just take their crops. In the Middle Ages, there are accounts of knights fighting peasants who outnumbered the knights a hundred to one and the knights came out not just victorious, but with nothing but minor injuries. The peasants, well, they got massacred.

Our own society is similar. Bankers have, along with various adjacent industries and central banks (somehow given “independence”), a monopoly on creating money (which they create as debt). This monopoly, of course, is enforced by the government, and the government’s enforcement rests on men with guns (and, these days, a few women), plus prisons where they brutalize you. Opening a new bank is very, very hard.

Then, within banks, the seniors take most of the gains, as one would expect.

None of this would work without those men with guns and ugly prisons, though.

There are variations on this, of course. After WWII, when a huge percentage of the male population knew how to fight effectively in groups, why, by coincidence the deal was more even. When those men aged out, why, somehow the deal got worse. (This isn’t the only factor, but it’s a big one.)

Inequality tracks with force being unequal. When a few men are superior to a huge mass of other men, then inequality soars. The feudal knight was genuinely superior to peasants. Greek Hoplites were equal to each other, but ruled over a huge mass of slaves. The same goes for the Roman legionnaires — but notice the Equites (who could afford a horse to bring to the fight) had higher legal status and rights.

Mercenary armies and police, like most armies and police in the world, are wonderful for this. They’re loyal to whomever pays them. Most revolutions happen when there is a financial crisis for a reason.

So, get control of force and use it to control money/means of production, or get control of money/means of production and use it to create force. Obviously it’s really about some of both, but you use whichever one you have more of to get control over the other one. Wall Street bought DC so that it could have control over the police and courts, which is why Obama immunized them from their crimes and bailed them out — including from really raw and obvious crimes like illegally signing a document saying the bank owned someone else’s house. Absolute fraud and straight robbery: That’s what Obama made go away for the financial industry.

Some of those people who had their houses stolen, in a society with less police and military and nasty prisons, might have taken retribution and recompense into their own hands, but in the US, well, no, that’s really not possible. You might get retribution, but then the cops will imprison or kill you, which they didn’t do to the men who stole your house and probably your job, car, and future.

In raw terms, this is the situation in the US and a lot of other countries (certainly in Britain). A small minority has control over force and money, and as they feel more and more secure in their control of those two things, they take more and more of what the society produces.

The 2008/9 Obama and the Fed was a watershed incident. The rich had lost everything. Absolutely everything. It didn’t matter if they had “won” the bet like Goldman Sachs, because if I win a bet with you and you lose all your money, I’m fucked too. The Fed and other central banks bailed them out to the tune of trillions; Obama and other political leaders immunized them from their crimes (and the entire bubble was based on fraud), and our elites then KNEW, without a doubt, that they were in complete control and that they could do anything, and that the violent authorities would bail them out and protect them from their victims.

And that, my friends, is where we are now. There will be no significant downward redistribution until elites either lose control of the violent apparatus, or genuinely think they are about to, or can’t win their side of an oncoming revolution.

Or, of course, until the fact that there is a real economy and environment, and they aren’t just mismanaging it, but effectively burning it down to make money, causes an economic collapse where suddenly money can’t buy the mercenaries’ loyalty any more.

Fun time to be alive.

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Jackson, Mississippi in Third Week Without Water

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On March 4, 2021

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So, another mess. Even before this, much of the water was unsafe and probably lead-poisoned. There are no high-level talks between the State and the city — which is the State capital!

American un-development continues. What is also striking is the complete incapability and unwillingness to handle problems. It’s the third week and the state and the city aren’t in high-level talks? Meanwhile, this news has not gone national: There is no American effort to help Jackson, any more than there was a national effort of any significance to help Flint with its water problems.

This is no longer a society where you can count on the public infrastructure OR on society to help you. Congress is currently cutting Covid aid even more, not just from $2,000 to 1,400 but more and more means testing and based on 2019 incomes, so if you lost your job during the pandemic, you are shit out of luck. (It is also true that people will look back and say Trump gave more money, with a $1,200 check and a $600 one.)

The level of malign indifference displayed by elected officials and senior bureaucrats is mind-boggling. They do nothing to help, but make sure to keep funneling money to the rich people who own them.

You can’t count on the US federal or most state governments. They aren’t interested in the basic duties of governing, like making sure the power and water keep flowing; the dikes are built, the forests are managed, and so on.

That means you have to count on yourself and whatever community you can find or create which is trustworthy.

At the least, build some reserves, but at the most, see what you can do to cut vulnerabilities. I know it’s hard, maybe even mostly impossible if you’re poor, but do what you can. This sort of event is likely to become more common until this political order is replaced, and it’s not clear when that will happen or whether it will be replaced by something better.

After all, California’s PG&E, which had disastrously mismanaged power and also been responsible for some of California’s worst wildfires has paid a heck of a lot of large dividends. To rich people and the politicians they own, it’s doing its job, so they don’t consider any of this a real problem.

Until that attitude changes, probably by changing the politicians, however necessary, you will continue to live in a country where your elites’ depraved indifference to your welfare or even death puts you in danger.

Prepare for it and remember: This state of affairs has actually the norm throughout most of human history. To rulers, people like you and me are cattle, and if the cattle are producing meat and milk, their pain, misery, and death is okay.

It was nice to have a few rulers who weren’t functionally depraved psychopaths for a few decades from FDR on, but for the US and Britain, those times are over.

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Our Society, the Slave Factory

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On March 2, 2021

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Near the start of the pandemic, I wrote a brief guide on how to emotionally handle isolation. A chunk of it was about self-regulation in terms of schedule:

The third issue is emotional self-regulation. Most of us have routines, things we do every day. Get up, coffee, light breakfast, drive to work, work, chat with co-worker, have lunch, work a bit more, goof of on the internet, etc, etc. We’ve figured out routines that keep us mostly in the same set of emotional spaces throughout the day. This is like walking with a cane: You’ve set up mood assists throughout the day, week, and year.

When you lose that routine, you lose those assists.

But the issue of self-regulation, indeed, of self and routine is much larger.

The fact is that between helicopter parenting and school, most people today have never had to learn how to self-regulate meaningfully beyond the self-regulation required of any good slave or servant. Their schedules, from childhood, were all determined for them. Their self was created by other people, and their fundamental choices boil down to reactions for or against it.

Then, when they become adults they have university (a bit more freedom) and on to jobs, where for 40 of the most useful waking hours, a boss tells them what to do.

Most people have thus never learned to truly manage their own time, thoughts, and emotions without schedules and activities imposed by other people. It’s no wonder that some people retire in their sixties and promptly die, with “nothing to do” absent an overseer.

You can’t be your own person, not truly, without unstructured time, and I would argue, alone time. There’s a study that found most people would rather give themselves electric shocks than be alone with nothing to do.

They rely entirely on the environment, an environment controlled and structured by other people, for emotional regulation.

Without work/school/internet/tv/games, etc… they’re lost. I’d say without those things they stop being a self-regulating person, but the point is that most people have never been self-regulating people.

Worse, activities like school and jobs, despite the lies you have been told, and which some believe (especially, oddly, about school) aren’t designed with your interests at heart. School is a slave factory. You may get some knowledge out of it, but the UR lesson is: “Do what you’re told, when you’re told, the way authority wants it done. Ask for permission to even talk or go to the bathroom.”

That’s what children are trained to do for 12 years. Then university trains them some more: At elite universities, they’re trained to have a bit more freedom to meet goals (deadlines are negotiable at Ivy league universities, but not at most State universities), and you’re released into the job market, where those who went to elites have to make some decisions, and those who didn’t are expected to be good little slaves, and sure as hell not to think or feel for themselves.

We have a society that endlessly talks about freedom, but in our daily lives, the vast majority of us are not free and never have been. We have spent almost all our lives with our primarily daily activity is determined by other people, who often also tell us what to think and how we should feel.

Such a people are not, and cannot be, suited to freedom.

Forget all the other criticism, the fundamental problem with capitalism is that it allows only a small percentage of the population to live free lives, and makes the rest into either slaves or (if they don’t have work) so poor that they have no effective freedom because of their poverty.

Our society is a slave factory and until we recognize that and reorganize it so it isn’t, it will produce slaves.

What we call freedom today is simply the ability, sometimes, to choose who our master is.

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The Simplest Explanation For Not Breaking Covid Vaccine Patents

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On February 15, 2021

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The faster we get everyone immunized, throughout the world, the more likely we can stop Covid from going chronic, becoming the new flu (but more deadly, unless/until it mutates to become less fatal, which the untried models say it should.)

However, if Covid is cured, well, you can’t make money off Covid any more, can you?

Chronic Covid, mutating constantly, means more and more vaccines, and more and more and more money for vaccine makers.

Ghastly, and I know that many readers are probably, “that’s absurd”, but consider, does it have both explanatory and predictive power?

Does, “Covid makes the rich, richer so they want it to keep going” have explanatory and predictive power?

Qui Bono? Who benefits? Since the people who run our societies profit from Covid, why would they actually want it over (remember, billionaires have become vastly richer.)

I, too, dislike living in a society where this explanation has stronger predictive power than “our leaders don’t want us to die in large numbers, and become poverty-struck, just so they can get richer,” but that statement, well, look at it closely. If that was true, how would our rulers behave? Not just during Covid, but at other times?

Yeah.

I mean, I’ve been saying this sort of thing for a while, because it’s obviously true, but I’m embarrassed it took me so long to realize it applied to vaccine creators as well, especially since Pharma has a well-known bias towards medicines that are palliatives, not cures. Someone who needs your medicine again and again is much better than someone who needs it only once.

Gotta admire the pure predator instinct in our rulers. They’re the wolves, we’re the sheep and God, do they love mutton.

It’s them or us, and so far, it’s us.

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