Ian Welsh

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

Week-end Wrap – Political Economy – December 29, 2024

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On December 29, 2024

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By Tony Wikrent

 

Strategic Political Economy

A Newly Declassified Memo Sheds Light on America’s Post-Cold War Mistakes 

[Slate, via Naked Capitalism 12-27-2024]

…The newly discovered memo, written in March 1994 by Wayne Merry, chief of the U.S. Embassy’s [in Moscow] internal politics division at the time, didn’t make the same impact as Kennan’s for two reasons. First, Merry did not go public. Second, unlike Kennan’s memo, Merry’s was at odds with U.S. policy and was ignored, then buried, and its author was blackballed, by the policymakers at the time. In fact, it was buried so deeply that it was declassified just last week as the result of a lawsuit filed under the Freedom of Information Act by the National Security Archive, a private research firm at George Washington University.

Looking at it today, more than 30 years after the fact, it’s a remarkably prescient document that should prompt several lessons about how to run foreign policy.

Merry’s memo, titled “Whose Russia Is It Anyway: Toward a Policy of Benign Respect,” was written as Russian President Boris Yeltsin’s experiment with democracy and free-market economics was in heightened turmoil. The party of his prime minister, Yegor Gaidar, the architect of his economics policy, had recently lost an election—the result of popular discontent with the policy’s extreme inflation and displacement. Yeltsin mobilized tanks in downtown Moscow to put down an attempted putsch—launched for a variety of motives—in Russia’s Parliament. Yet, to the frustration of specialists in the U.S. Embassy, including Merry, many senior officials back in Washington saw Yeltsin as a still-strong figure and his “shock therapy” economics—which they had been pushing, along with a bevy of academic advisers, many of them from Harvard—as a success.

Merry stressed the urgent need for a course correction:

Democratic forces in Russia are in serious trouble. We are not helping with a misguided over-emphasis on market economics. There is no reason to believe the Russian economy is capable of rapid market reform. There is reason to fear that an intrusive Western effort to alter the economy against the wishes of the Russian people can exhaust the already-diminishing reservoir of goodwill toward America, assist anti-democratic forces, and help recreate an adversarial relationship between Russia and the West.

The West, Merry continued, should focus more on helping Russia develop “workable democratic institutions” and a “non-aggressive external policy.” U.S. interests “are directly tied to the fate of Russian democracy but not to the choices that democracy may make about the distribution of its own wealth” or “the organization of its means of production and finance.”….

 

With Help From NAFTA 2.0, US Strikes Brutal Blow Against Mexican Food Sovereignty, Health and Global Biodiversity

Nick Corbishley, December 24, 2024 [Naked Capitalism]

…Mexico has lost the dispute settlement panel brought by the US and Canada over its attempt to ban imports of genetically modified corn for direct human consumption. On Friday (December 20), the arbitration panel ruled in favour of the United States, asserting that Mexico’s 2023 decree banning the use of genetically modified (GM) white corn for human consumption violated the terms of the trade agreement.

It wasn’t even a close run thing: the panel’s three judges agreed with the US on all seven counts in the case. The panel has given Mexico 45 days to realign its policies with the ruling. Failure to do so could result in stiff penalties, including sanctions.

As we’ve noted before, this case may be an important battle for Big Ag lobbies and biotech companies but it is an existential one for Mexico, for whom corn is the cornerstone not only of its cuisine and diet but also its culture….

 

Support for Luigi Mangione Reflects Working Class Weariness of Top-Down Violence

Megan Thiele Strong, December 28, 2024 [Common Dreams]

Some fear the positive regard of Mangione is indicative of a shift into a new era where violence is glorified and humanity is lost. As a sociology professor who teaches Poverty, Wealth, and Privilege, I disagree. This failure of subsets of the public to broadly denounce the actions of Mangione does not herald a cultural shift in appreciation of violence….

Second, the working classes are weary from surviving an unnecessarily violent and unjust society. We live amid staggering class, race, and gender-based stratification and life and death stakes everyday. The ruling class profits from our blood, sweat, and tears. And yet, when one of the elite passes, they want us to give them more. They ask us to give them our love. Yet, they remain calloused to our pain and ignore our pleas for fairness.

We all deserve the same sanctity of life given to wealthy insiders. However, when it comes to many of our social systems, such as healthcare, respect and care are not institutionalized; instead, harm is normalized. We see “out-sized returns” to private equity investors….

Our healthcare system is not pro-health. The World Health Organization (WHO) names universal healthcare as a worldwide goal. The United States has not complied. Most Americans are insured through private companies. Many Americans struggle to pay for healthcare, they postpone receiving care, and are in medical debt. The healthcare system has practices, such as using AI to deny a high number of healthcare claims, which put profits over people. There is something deeply inhumane and harmful about this disregard for health in a healthcare system. It may not be illegal, but it is savage.

The elite and their apologists ask, “How could they not be appalled by Thompson’s murder?” Instead we, as a community, might ask, how are the elite and their apologists not appalled by a harm-rich system that normalizes the idea that humans are only as valuable as their economic worth? Decades ago, Larry Summers, currently on the board of directors of OpenAI, famously wrote that people who produce less are more expendable. This classist ideology pervades our healthcare system….

 

Global power shift

The Plan To Carve Up the World Is Underway

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The Fall Of Europe

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On December 27, 2024

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Even before election, Trump is roaring. Screams of taking over the Panama Canal, Canada and Greenland. Promises of tariffs on, essentially, everyone. Lots of domestic threats about immigrants and going after Democratic politicians. At the same time his proxies, like Musk, muse on slashing Social Security and Medicare.

Europe’s in particularly tentative position: threats of tariffs and forcing Europe to spend more of its money on defense, by which Trump means “buying more US weapons.”

Western Europe has been an American satrapy since WWII. The Americans invaded and never left, and have had the Euros under the economic thumb the entire time. When necessary they have overthrown governments and they have every politician of note under surveillance.

Eastern Europe fell under the thumb after the collapse of the USSR and were, mostly, happy to do so.

For a long time this was a pretty good deal. Europe was a “garden”. GDP per capita might have officially been lower, but life was better than in the US. Europeans lived longer, were healthier and had all the social welfare that Americans didn’t have.

In most cases they had better food, too.

As for Eastern Europe, the EU massively subsidized it post Warsaw Pact and countries like Poland, often aggressively in disagreement with Brussels, couldn’t survive without the EU’s subsidies.

The EU wasn’t some lovely place devoid of conflict, however. In particular Germany used the Euro to de-industrialize most of the other European nations. The Euro was cheaper than the German mark would have been and almost everyone else’s currencies were more expensive that their pre-Euro currencies. Italy, in particular, which had been an industrial powerhouse, took it on the chin.

Meanwhile, on the other side of the world, China rose. America sent China its industry and a lot of its tech. This is an old tale, so let’s just say it was a combination American elite greed and Chinese ability to plan long term and take advantage of that greed. At the same time, Europe was falling behind technologically: the fast movers in science and tech were the Japanese, Koreans, Taiwanese, Americans and, later, the Chinese, who now lead in about 80% of fields.

Europe wasn’t even in the technological game: they had legacy tech, mostly, with a few exceptions. This was especially true of Germany, with big advantages in steel, automobiles and industrial chemicals.

German industry was, as a rule, pretty heavy and it used a lot of energy. It got that energy, increasingly, from Russia. Cheap.

Then came twin blows: the Russian energy was no longer available cheap (though the Euros still buy plenty thru cut-outs like India) and China caught up and even surpassed Germany, especially in automobiles.

And so, as just on example (auto jobs are also being slashed):

As European industry (German industry) collapses, it either goes away entirely, or in many cases moves to America, where energy costs are lower.

America is cannibalizing Europe and Trump seeks to cannibalize the rest of America’s allies. The tariffs and threats are an attempt to move as much industry and as many jobs back to America as possible.

Meanwhile Europe has serious internal divisions. The right is rising, fast, in multiple nations. Though not as dramatic, so is the left. (The real left.) The center-right and center-left parties are in disarray. Eastern Europe with exceptions like Hungary, is rabidly anti-Russia, but Western Europe, and especially Germany, objectively needs Russia if it wants to retain its industry.

Poland now has a significantly larger army than Germany and better equipped. Poles… Poles do not like Germans or Germany. Hate is not too small a word. They take German and French money, but they hate Germany. Russia isn’t a threat to Germany. But if I were a German politicians or general I’d been looking at Poland with fear and wanting to re-arm.

My best guess is that the European, EU project is not long for the world. Multiple rising parties are anti-EU. The Euro has been bad for most European countries, and has been run to benefit Germany. Freedom of movement has led to intakes of immigrants which have lead to massive anti-immigrant backlashes. These backlashes are often cloaked in racism, but the bottom line is that Europe is in decline and people already there don’t want to share if it looks like sharing is bad for them.

Now Trump is pushing policies which are clearly anti-European and unlike Biden who was mostly sub-voce about it (except when opposing Nord Stream) Trump is in the Euros face.

If the EU wants to survive, it’s going to have to change into a real, non-vassal government. More like, the project will shatter. Next week we’ll talk more about this, in particular what they can and should do.

The great European garden is full of weeds and looks likely near its end. Can it be saved, or can any individual countries save their bit of the garden?

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Merry Christmas

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On December 25, 2024

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Hope you’re having a good one. If not, hope it isn’t too awful.

Use as an open thread for nice things if you wish.

The Game Theory of Giving Up Private Justice or Ending The State Monopoly On Violence

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On December 24, 2024

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In the state of nature, if someone does you wrong, it’s up to you and your mates to deal with it. This often means violence.

For most of English history there was no police force. Republican Rome had no police. There was law, but it was often privately enforced and often families and friends would take vengeance for wrongs. This led to rather a lot of violence and death, as well as feuds, where violence would continue long beyond the original offense.

Private justice; private vengeance thus comes with huge downsides, so in many societies we give up our right to use violence to right wrongs. We give that right to government in some form, and we reap the benefits of safety and that, in principle, stronger groups can’t bully those who are too weak to obtain their own justice.

The benefits are huge and everyone with sense recognizes that going back to private justice, to saying “they did me or mine wrong, I should beat or kill them” will mean a huge loss of public safety.

But whenever there’s a situation where changing from the status quo entails a huge cost there will be those who say “in that margin, I can benefit. All I have to do is take just a little less than the cost of change.”

How many people does private insurance and denials of care kill? It’s certainly, at least, in the tens of thousands.

What happens is simple enough. Some people, rich and powerful, get the right to harm others for money: the government doesn’t go after them for killing or hurting people. This is true of private equity buying companies, larding them up with debt then running them into bankruptcy so that many of their employees wind up impoverishing and homeless, for example. It was true of bankers causing a financial crisis. It is true of pharma jacking up prices or bosses stealing employees wages and water companies in the UK dumping sewage into the river and giving the money intended to clean sewage to their executives and investors.

None of this is punished by the law, yet people suffer.

But the cost of going back to private justice is HIGH and the transition cost, where the police and courts will charge those who enforce private justice with crimes, while not charging those who kill thousands with crimes, is awful.

So the bet by those who commit what has come to be called “social murder” is that they can get away with it: the cost of private justice is too high.

Still, there’s always the temptation to take a little more, then a little more and then a little more. To think, “well, I’m so rich I can have bodyguards and travel by helicopter and private jet and armored limo. The peons can’t get to me.”

But slowly (then all at once) ordinary people realize it’s not a good deal for them. Americans come to realize that Putin and Xi aren’t their real enemies, because their real enemies are those who are actually going to kill them or make them homeless, and those people are the rich and powerful in their own country.

Elon Musk, right now, is trying to cut Social Security and Medicare. If he succeeds a lot of people will wind up in pain, homeless or dead who wouldn’t have otherwise. He’s a direct threat to many, many people.

Putin isn’t going to make you homeless or kill you or deny you health care.

And when this switch flips, well, perhaps people decide that the high cost of going back to private justice is worth it and that when they gave up their right to private justice, they gave up their power. It was a good deal, as long as they could keep control of government and use government to control the wealthy and powerful, but once government control was lost, well, the power they gave up was used against them.

And this is, maybe, where we are. If more and more executives, CEOs and politicians wind up targets of extra-judicial justice, we’ll know it’s happened.

This isn’t, of course, an endorsement. It’s analysis. It’s in no one’s interest for the situation to become so awful that ending the state monopoly on violent justice makes cold hard rational sense for millions of people.

But that appears to be where we’re heading, if we aren’t there already.

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Some Countries Need Less Population

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On December 23, 2024

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There is a genre of population decline doomerism. An example:

Here’s the thing, Japan imports about sixty percent of its food. Japan is, by any reasonable measure, over-populated.

If you can’t feed your population and if there is no reasonable prospect that you could feed your population, perhaps you have too many people?

Another country for which this is true is Britain, which imports about 80% of its food. Yet the British have also been importing over a million people a year.

One might suggest, as well, that any country which has a large number of homeless people is also overpopulated: clearly it has more people than it is capable of taking care of. (Though we all know that’s usually a choice, not a constraint.)

The world is overpopulated by humans and our domesticated animals. We are in classic population overshoot.

When climate change and ecological collapse and resource depletion hit, there isn’t going to be enough food to go around. When that becomes the case, countries are going to prioritize themselves first and their close allies second. Entire countries which are now breadbaskets will either produce less, or will no longer produce enough for themselves. When the Gulf Stream turns off, which is expected any time in the next 50 years, for example, Europe as a whole will face a huge food deficit.

Better to start shedding population now, gradually, than to do it thru famine, food riots, revolution and war.

If you can’t feed your population, you have too much population. (Partial exception for city states and small states. Partial.) If you can’t house your population, you have too much population.

There are very few countries in the world which genuinely need more people. Russia, perhaps. Japan doesn’t. China doesn’t. India doesn’t. Most European countries don’t. Most African countries don’t. Etc…

Population doomers never ask the simple question: Under what circumstances is population growth good and under what circumstances is population decline good?

And for whom?

There was no better time to live in Medieval Europe than after the Black Death.

Decline now, while it’s gentle. If you insist on not doing so, you will do it the hard way.

(Much of this is driven by prioritization of GDP, a desire for low wages, and a deep misunderstanding of what makes an economy strong. More on that in the future.)

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Week-end Wrap – Political Economy – December 22, 2024

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On December 22, 2024

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Week-end Wrap – Political Economy – December 22, 2024

By Tony Wikrent

 

Strategic Political Economy

From the Middle Out and Bottom Up: The president of the United States outlines his economic principles, and his record.

Joe Biden, December 16, 2024 [The American Prospect]

…When I took office, the economy wasn’t working for most Americans…. economic policy was in the grip of a failed approach called trickle-down economics. Trickle-down tried to grow the economy from the top down. It slashed taxes for the wealthy and large corporations and tried to get government “out of the way,” instead of delivering for working people, investing in infrastructure, and ensuring America stays at the leading edge of innovation.

But this approach failed. Too many Americans saw an economy that was stacked against them with failing infrastructure, communities that had been hollowed out, manufacturing jobs that were offshored to China, prescription drugs that cost more than in any other developed country, and workers who had been left behind.

[TW: I was surprised BIden’s writing in The American Prospect did not attract much interest. Probably because after the electoral victory by Trump, everything Democrats do seems anticlimactic. There were many more articles on why Bidenomics failed, such as James Galbraith’s article in The Nation on December 9, Why Bidenomics Was Such a Bust. But I think even these pulled back from fully exploring the anger and rage most working people have towards elites, which was fully revealed by the murder of a health insurance CEO in Manhattan. It is exactly that anger and rage that Trump is able to manipulate — “I am your retribution” — but which Democrats are too cowardly to acknowledge and condone. As I posted in April 2008, Euthanize Wall Street to save the economy.

[LORD, how long shall the wicked, how long shall the wicked triumph?

– Psalm 94:3 ]

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Open Thread

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On December 21, 2024

18 Comments

Use to discuss topics unrelated to recent posts.

Elon Musk Threatens Congress Successfully

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On December 20, 2024

20 Comments

This is some amazing shit:

Congress was about to vote on a bill called a “Continuing Resolution”, which would fund the operations of the federal government. But yesterday, Musk started tweeting around the clock about how he hated the bill and that he would fund the campaigns of politicians who ran against Congress members who supported it.

….Shortly after Musk decided he was against the Continuing Resolution, Trump and JD Vance issued a statement saying they were against it, too. The politicians in Congress fell in line, and now it looks like the government funding plan is dead.

Here’s the thing. Being rich only means you’re good at making money in a specific way. It doesn’t mean anything else. Gates, for example, pushed the “Common Core” education changes, and there’s no evidence they did any good and some reason to think they were harmful.

We have a rich man (maybe a billionaire) as President. We have Musk, the world’s richest man, who spent a lot money helping Trump win as one of the most important people in the new administration, who has said he wants to cut Social Security and Medicare.

Money is the ability to tell people what do. It let’s you control their actions, either directly or indirectly.

FDR defined fascism as:

Ownership of Government by an individual, by a group, or by any other controlling private power

The US has been trending towards oligarchy for ages. The final victory for oligarchy was probably “Citizen’s United”, which made money the same as speech and thus protected under the first amendment.

The famous Princeton oligarchy study, which used data from 1981-2002, which is to say from back when the rich weren’t nearly as powerful as they are now, found that:

…when one holds constant net interest-group alignments and the preferences of affluent Americans, it makes very little difference what the general public thinks. The probability of policy change is nearly the same (around 0.3) whether a tiny minority or a large majority of average citizens favor a proposed policy change (refer to the top panel of figure 1).

By contrast—again with other actors held constant—a proposed policy change with low support among economically-elite Americans (one out of five in favor) is adopted only about 18 percent of the time, while a proposed change with high support (four out of five in favor) is adopted about 45 percent of the time. Similarly, when support for policy change is low among interest groups (with five groups strongly opposed and none in favor) the probability of that policy change occurring is only .16, but the probability rises to .47 when interest groups are strongly favorable (refer to the bottom two panels of figure 1). Footnote 41

Musk is the world’s richest man. He threatened members of Congress using his money, and they caved.

It’s always amusing when Americans call Russia an oligarchy. It isn’t. Russia’s oligarchs have very little power compared to Putin. If they cross him, he destroys them. They do what he wants, when he wants or they go to jail or have to flee the country, giving up any wealth in Russia.

America, on the other hand, is sickeningly an oligarchy and it’s going from indirect to direct oligarchical control.

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