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

Week-end Wrap, June 2, 2019

by Tony Wikrent

Strategic Political Economy

[Valdai Discussion Club, via Naked Capitalism 5-26-19]

When analyzing the place that Russia and China occupy in each other’s bilateral trade, there is an imbalance arising from the difference in the size of the two economies. But it is hard to think of a way China could use it to blackmail or pressure Russia. Fuel and energy resources dominate Russia’s exports to China as well as Russian exports in general – fossil fuels accounted for 73 percent of its 2018 supplies. Russia is one of the main suppliers of oil to China, competing for first place with Saudi Arabia.
This does not speak well of the structure of the modern Russian economy. But, from a political standpoint, all prior experience tells us that trade in energy products creates a strong interdependence between supplier and buyer. Unlike other types of goods, any pressure on energy exporters is always associated with immediate and significant losses for the importing country, so it is only used as a last resort in rare cases.

Tech cold war: how Trump’s assault on Huawei is forcing the world to contemplate a digital iron curtain

[South China Morning Post, via Naked Capitalism 5-26-19]
I distinctly remember 20 and more years ago repeatedly arguing with conservatives in AOL message boards that utilizing cheap Chinese labor for manufacturing was going to cause long-term strategic shifts and problems that would greatly afflict USA interests. Their responses were unequivocal and never varied: an ideological recitation of the benefits of free trade, most especially how trade with USA would sneakily introduce changes into China and force adoption of “democracy.” The only variation from this line was the occasional addition of complaining that American workers were paid too much, and expected too much. 
[FifthDomain, via Naked Capitalism 5-26-19]
Mark Sumner, June 1, 2019 [DailyKos]

China’s Plan To Influence Global Commodity Pricing

[SafeHaven, via Naked Capitalism 6-1-19]

The Electric Vehicle Revolution Will Come from China — not the US
by Lambert Strether [Naked Capitalism 5-26-19]

[Asia Times, via Naked Capitalism 5-27-19]

(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.)

The Failure of Establishment Neoliberal Economics

After Neoliberalism
Joseph Stiglitz [Project Syndicate, via Naked Capitalism 5-31-19]

The neoliberal experiment – lower taxes on the rich, deregulation of labor and product markets, financialization, and globalization – has been a spectacular failure. Growth is lower than it was in the quarter-century after World War II, and most of it has accrued to the very top of the income scale. After decades of stagnant or even falling incomes for those below them, neoliberalism must be pronounced dead and buried.

Vying to succeed it are at least three major political alternatives: far-right nationalism, center-left reformism, and the progressive left (with the center-right representing the neoliberal failure).

Three decades of neoliberal policies have decimated the middle class, our economy, and our democracy 

Joseph Stiglitz [MarketWatch, via Naked Capitalism 6-1-19]

Three years ago, President Donald Trump’s election and the United Kingdom’s Brexit referendum confirmed what those of us who have long studied income statistics already knew: in most advanced countries, the market economy has been failing large swaths of society.

Nowhere is this truer than in the United States. Long regarded as a poster child for the promise of free-market individualism, America today has higher inequality and less upward social mobility than most other developed countries.

After rising for a century, average life expectancy in the U.S. is now declining. And for those in the bottom 90% of the income distribution, real (inflation-adjusted) wages have stagnated: the income of a typical male worker today is around where it was 40 years ago.

Prisoner’s Dilemma shows how exploitation is a basic property of human society
[MIT Technology Review, via Naked Capitalism 5-30-19]

 Climate and environmental crises

US Corn Crop Failure

Ian Welsh [IanWelsh 5-30-19]

The simplest initial scenario for events going Fubar due to climate change is actually a problem with food production. This isn’t big enough to be the one that sends everything spinning, but imagine a much larger crop failure, my go-to being monsoon failure, and then world food prices spiking massively. Even if there is enough food in theory to feed everyone, many people won’t be able to afford it, and many places will have shortages.

This isn’t that event, but it is a harbinger. As my friend Stirling Newberry pointed out back in the 90s, the first result of climate change is more and worse extreme weather events.

In the meantime, please bear this particular spike in mind, as it’ll likely hit supermarkets this fall and winter.

Dan Gunderson, May 29, 2019 [Moorhead, Minn.]

“In my farming career, we have not ever been delayed this long, in terms of planting. My father-in-law who’s in his early 80s made the comment yesterday that he’s never seen a spring like this, and obviously he’s been around and seen a lot of springs,” Hettver said.

[Associated Press, via Naked Capitalism 5-27-19]

“The residents of [Mosby, MO, a] small riverside town have become accustomed to watching floods swamp their streets, transform their homes into islands and ruin their floors and furniture…. Finally fed up, [Elmer] Sullivan and nearly half of the homeowners in Mosby signed up in 2016 for a program in which the government would buy and then demolish their properties rather than paying to rebuild them over and over. They’re still waiting for offers, joining thousands of others across the country in a slow-moving line to escape from flood-prone homes….. Over the past three decades, federal and local governments have poured more than $5 billion into buying tens of thousands of vulnerable properties across the country…. The AP analysis shows those buyouts have been getting more expensive, with many of the costliest coming in the last decade after strong storms pounded heavily populated coastal states such as Texas, New York and New Jersey. This year’s record flooding in the Midwest could add even more buyouts to the queue. The purchases are happening as the climate changes.”

How to Pay for the Green New Deal (abstract)
L. Randall Wray, May 2019 [Levy Instititute, WORKING PAPER NO. 931]

This paper follows the methodology developed by J. M. Keynes in his How to Pay for the War pamphlet to estimate the “costs” of the Green New Deal (GND) in terms of resource requirements. Instead of simply adding up estimates of the government spending that would be required, we assess resource availability that can be devoted to implementing GND projects. This includes mobilizing unutilized and underutilized resources, as well as shifting resources from current destructive and inefficient uses to GND projects. We argue that financial affordability cannot be an issue for the sovereign US government. Rather, the problem will be inflation if sufficient resources cannot be diverted to the GND. And if inflation is likely, we need to put in place anti-inflationary measures, such as well-targeted taxes, wage and price controls, rationing, and voluntary saving. Following Keynes, we recommend deferred consumption as our first choice should inflation pressures arise. We conclude that it is likely that the GND can be phased in without inflation, but if price pressures do appear, deferring a small amount of consumption will be sufficient to attenuate them.
How to Pay for the Green New Deal

Climate crisis more politically polarizing than abortion for U.S. voters, study finds

[Anthropocene, via Naked Capitalism 5-28-19]

“Most climate efforts focus on carbon dioxide, but methane is in some ways a worse offender. While it does not last as long as carbon dioxide in the atmosphere, it traps 84 times as much heat in the first two decades. Agriculture and livestock are the biggest source of methane emissions, followed by oil and gas production and use. Removing methane would kickstart the reduction of global warming, say the researchers. And that ‘would buy us considerable time to address the [larger] problem of carbon dioxide emissions,’ Rob Jackson, a professor of earth system science at Stanford University told Technology Review. Jackson and his colleagues propose removing methane from the atmosphere and oxidizing it to produce carbon dioxide. This would turn 3.2 billion metric tons of methane into 8.2 billion metric tons of carbon dioxide, which is just a few months’ worth of the 40 billion tons of carbon dioxide emissions the world produces each year. The challenge of capturing methane from air is that its concentration is very low. But the researchers recommend using zeolite, a highly porous material made mainly of aluminum, silicon and oxygen, to soak up methane. They envision giant renewable-powered arrays of electric fans that push air into chambers full of the zeolite. Heating the catalyst in the presence of oxygen would then create carbon dioxide that can be released into the air.”

“Fishing fleets have doubled since 1950—but they’re having a harder time catching fish” 

[Science, via Naked Capitalism 5-28-19]

“The number of ships more than doubled to 3.7 million between 1950 and 2015, the team reports this week in the Proceedings of the National Academy of Sciences; in Asia, the number quadrupled. Another important trend is the spread of motors. In the 1950s, only about 20% of fishing vessels around the world had motors; by 2015, 68% did, most with power under 50 kilowatts—a small engine, or outboard motor, for example. Tabulating all these figures, [Yannick Rousseau—a graduate student in the lab of Reg Watson, a fisheries ecologist at the University of Tasmania in Hobart, Australia] and his co-authors found that the combined engine power of small vessels equals that of the industrial fleet. ‘It was a very counterintuitive result,’ Rousseau says, given the public and political attention attracted by large fishing vessels…. But compared with ships in the 1950s, today’s global fleet catches only 20% as much fish for the same amount of effort. This metric—called catch per unit effort, sometimes measured by days at sea—is a key indicator of fish population size and responsible management, which limits the number of fishing vessels or stops them from overfishing. These actions have stabilized fish stocks in the past 2 decades in North America, Western Europe, and Australia, where government regulators have tightened the rules and subsidies have made it more attractive to retire ships. Not so in Southeast Asia, the Mediterranean, and Latin America.”

Health Care Crisis

As Suicides Rise, Insurers Find Ways to Deny Mental Health Coverage
[Bloomberg, via Naked Capitalism 5-26-19]

‘Medicare for All’ backers find biggest foe in their own backyard
[Politico, via Naked Capitalism 5-26-19] Very important; insurance companies are not the only problem; hosptials are, too.

“Report: Babies Are More Likely to Die in States That Didn’t Expand Medicaid”
[Governing, via Naked Capitalism 5-31-19]

“As the country grapples with increasing rates of maternal mortality, a new study from the Georgetown University Center of Health Policy found that one of the biggest things a state can do for the health of new mothers and babies is to expand Medicaid… The United States is the only developed country [sic] where the maternal mortality rate has increased, doubling over the past two decades.”

Predatory Finance

The Wealth Detective Who Finds the Hidden Money of the Super Rich

[Bloomberg, via Naked Capitalism 5-27-19]

The richest 10% of households now represent 70% of all U.S. wealth

[MarketWatch, via Naked Capitalism 5-26-19]
[The Journal, via Naked Capitalism 5-26-19]

Researchers at the University of California in Berkeley monitored motorist behaviour at a pedestrian crossing in California. It is illegal for cars in California to not stop for a pedestrian at a zebra crossing but half of the drivers in expensive cars broke that law and didn’t stop for their fellow citizens who were waiting to cross the road. Perhaps the most interesting thing in that survey is that the very oldest and least expensive vehicles were classified as ‘beater cars’ – In Ireland we would call them ‘bangers’. Every single one of the people driving a banger stopped at the pedestrian crossing….

Seven experiments produced similar results leading researchers to conclude that higher social class predicts unethical behaviour.

[One] game was programmed so that participants got a maximum score, that meant that anyone reporting a score of more than 12 was cheating. Not only were rich people more likely to cheat. People earning more than €130,000 a year were four times more likely to cheat than someone earning €14,000 a year.

[Wall Street Journal, via The Big Picture 5-24-19]

Together, 10 of the largest banks issuing small loans to business lent $44.7 billion in 2014, down 38% from a peak of $72.5 billion in 2006, according to an analysis of the banks’ federal regulatory filings.

The Public Banking Act “AB 857” passes the California Assembly
]Public Banking Institute 5-31-19]

The Public Banking Act, “AB 857,” has taken public banking a historic step forward in passing the California Assembly yesterday 41 Aye’s to 26 No’s. The bill now proceeds to the CA Senate. Assembly member Miguel Santiago, the bill’s co-author, tweeted “The CA Assembly just sent a historic message to Wall Street banks that we’re going to put people over profits – not the other way around.”

California Public Banking Alliance co-founder Trinity Tran tweeted, “This is California’s moment to take the lead in creating a banking option that will strengthen rather than extract profit & resources from our communities.”

Collapse of Independent News Media

The Ponzi scheme of marauding news conglomerates

[Medium, via Naked Capitalism 5-27-19]

Just what the hell is the end game or business model for these companies as they continue to cut their newsrooms to oblivion?

The answer is simple, if painful, and the business model is as equally straightforward: A small group of executives at each corporation finding a way to maintain the ability to draw enormous, disproportionate salaries from these conglomerates. How do they do that? By showing shareholders/Wall St. that these newspapers are eking narrow profits….
Despite having few skills beyond finding ways to keep themselves disproportionately compensated at the expense of dying companies, the execs running these newspaper companies are not stupid. They’ve figured out that as a business, newspapers and producing journalism, is no longer something you can succeed at. (Thanks to Google, Facebook, and an ineffectual Congress, etc, but that’s another story). But grabbing up a bunch of those dying newspapers, centralizing costs, slashing staffs and grinding every penny out of them in the short term, then trying to unload them to the next buyer, is a winnable venture. Why do you think all the current news conglomerates are constantly searching for new buyers?

Digital media and Google and Facebook are part of the problem, but NOT the origin of the problem. The decline of local news reporting began with the effective termination of the Fairness Doctrine under Reagan, most especially the end of rules which effectively limited control of local news sources to local companies and owners. The two big mistakes were to let local media companies strive to become large, national corporations, and the let large national and international corporations buy control of local media companies. In the grand sweep of things, the real underlying problem is allowing the republicanism of the early USA to be replaced by capitalism, and most especially by its latest iteration: international financial and rentier capitalism. New local media companies need to be organized based strictly on local, or at most, regional or state, ownership, with no outside capital allowed except on the strictest, non-voting terms. A good model for voting by stock ownership would be Alexander Hamilton’s proposed plan for the Bank of the United States, which was that no one was allowed more than thirty votes, no matter how many shares of stock they owned.

Economics in the real world

The Economy Is Booming. So Is Financial Stress.
Barry Ritholtz, May 30, 2019 [The Big Picture]

To identify what might be happening beneath the broad averages in the economy, we sometimes need to get more granular. The St. Louis Federal Reserve Bank has done just that, with a more comprehensive look into household balance sheets. “The Unequal Recovery: Measuring Financial Distress by ZIP Code” used a clever data analysis to measure financial distress among households.

To determine changes in levels of financial stress, researchers looked at “the percentage of people within a ZIP code that have reached at least 80 percent of their credit limit, that is, the maximum balance that they can hold on their bank-issued credit cards.” They compared that debt against measures of household assets, including median home price, stocks, and bonds across the two time periods.

The results were fascinating. What the St Louis Fed found was an unevenbifurcatedpost-credit crisiseconomy….

Debt makes the most mischief in the poorest ZIP Codes measured by average gross income. Since 2015, debt and financial distress have been rising the fastest in those areas. Debt and financial distress rose the slowest since 2015 for the wealthiest households.

The poor and middle class have less total debt than affluent buyers of expensive homes, nice cars and high college tuition. But those lower on the economic scale rely more on borrowing for day-to-day costs, which means that some of their standard of living had been subsidized by the unusually low interest rates that prevailed over the past decade. When the Fed began raising rates, those at the bottom felt it most acutely.

Advertising as a Major Source of Human Dissatisfaction: Cross-National Evidence on One Million Europeans
Yves Smith [Naked Capitalism 5-28-19]

War on Labor
“Mulvaney Tightens Grip on Labor Chief After Trump Allies Grumble” 
[Bloomberg Law, via Naked Capitalism 5-31-19]

“President Donald Trump‘s acting chief of staff, Mick Mulvaney, has seized power over the Labor Department’s rulemaking process out of frustration with the pace of deregulation under Labor Secretary Alexander Acosta… This has led to an acceleration of previously languishing rules on overtime pay, job training, and workplace safety that businesses have sought during the first two years of Trump’s administration. The White House intervention also signals more contentious regulations—such as rules to bolster union oversight or restrict workers from taking medical leave—could now be in the pipeline at a department that appears less likely to embody its secretary’s risk-averse style for the remainder of Trump’s presidency.”

Tennessee Gov. Bill Lee’s Office Is Working With Volkswagen to Crush a Union Drive
Chris Brooks [Intercept, 6-1-19]

“Companies working hand-in-glove with conservative politicians to defeat unions is becoming the new normal in the South.”

Trump NLRB Cancels UAW Vote at Volkswagen in Chattanooga
[NC AFL-CIO 5-27-19]

[NC AFL-CIO 5-27-19]

Castro, the former secretary of Housing and Urban Development and former San Antonio mayor, marched with roughly 200 activists, minimum wage workers and union representatives from a park in Durham to a nearby McDonald’s. He joined them in chants of, “Put some respect in my check,” and “What do we want? 15! When do we want it? Now!”

Take Action: Attend Workers’ Bill of Rights Town Hall in Statesville June 20th
[NC AFL-CIO 5-27-19]

On June 20th at 6:00 PM in Statesville, UAW Local 3520 will host a Workers Bill of Rights Town Hall. Unions, workers, community members, and elected officials will come together to declare that unions are the best way for workers to reclaim our rights. We will share a comprehensive Worker Bill of Rights, detailed plans for labor law reform, and discuss what communities and workers outside of the urban center need. Join us to make your voice heard and to stand up for our economic freedoms and workers’ rights! Where: UAW Local 3520, Gymnasium, 2290 Salisbury Rd, Statesville, NC 2867

A tried and true way to fix inequality in America: unions
[NC AFL-CIO 5-27-19]

Democrats have an ambitious plan to save American labor unions [NC AFL-CIO 5-27-19]

“In Appeal to Moderates, Sanders Calls for Worker-Ownership of Means of Production” 
Eric Levitz [New York Magazine, via Naked Capitalism 5-31-19]

“Bernie Sanders appears to understand all this. Which is why the 2020 candidate is preparing to shift the focus of his economic message away from divisive “tax and spend” liberalism and toward more broadly popular approaches to reducing inequality — like, say, worker ownership of the means of production. As the Washington Post’s Jeff Stein reports: “We can move to an economy where workers feel that they’re not just a cog in the machine — one where they have power over their jobs and can make decisions,” Sanders said in an interview. “Democracy isn’t just the opportunity to vote. What democracy really means is having control over your life.” Sanders said his campaign is working on a plan to require large businesses to regularly contribute a portion of their stocks to a fund controlled by employees, which would pay out a regular dividend to the workers. Some models of this fund increase employees’ ownership stake in the company, making the workers a powerful voting shareholder. The idea is in its formative stages and a spokesman did not share further details.

Disrupting mainstream politics

Democracy and Its Discontents
Adam Tooze [New York Review of Books]

For the American right, Donald Trump’s inauguration as the forty-fifth president of the United States was a moment of political rebirth. Elements of American conservatism had long fostered a reactionary counterculture, which defined the push for civil rights as oppression, resisted the equality of women and the transgression of conventional heterosexual norms, pilloried the hegemony of the liberal media, and was suspicious of globalism and its corporate liberal institutions, including the UN and the WTO….

Centrist Democrats also view the administration as historic, but for them it represents the betrayal of all that is best about America. The election of a man like Trump in the second decade of the twenty-first century violated the cherished liberal narrative of progress from the Civil War to the New Deal to the civil rights movement to the election of Barack Obama. This was a self-conception of the United States carefully cultivated by cold war liberalism and seemingly fulfilled in the Clinton era of American power. The election of a man as openly sexist and xenophobic as Donald Trump was a shock so fundamental that it evoked comparisons with the great crises of democracy in the 1930s….

…Only a few years ago the mood in the Democratic Party establishment was not one of defiant resistance. What prevailed was bland futuristic complacency. The evolving diversity of America and the manifest political preferences of the Californian digital oligarchs would guarantee the Democrats’ grip on power. Trump’s supporters were not just deplorable, they were doomed to extinction. On both sides of the Atlantic, it was the job of centrist intellectuals to swat down critical talk from the left about the rule of undemocratic technocrats and the hollowing out of democracy.

America’s revived left wing, mobilized by Bernie Sanders and drawn to organizations like the Democratic Socialists of America (DSA), does not doubt the disastrous consequences of the Trump presidency. Yet for the left he represents not a historic rupture but a continuity. As Jed Purdy put it in Dissent last summer, Trump is “not an anomalous departure but rather a return to the baseline—to the historical norm.”1Trump exposes starkly what the civility of Obama and his administration obscured—the subordination of American democracy to capitalism, patriarchy, and the iniquitous racial order descended from slavery.

“Dear Candidates: Here’s What Black People Want”
Alicia Garza, May 28, 2019 [New York Times, via Progressive Caucus NCDP member]

The most common response among people who were politically engaged was that no politician or pollster has ever asked them what their lives were like. Fifty-two percent of respondents said that politicians do not care about black people, and one in three said they care only a little….

We want the things that everybody deserves. Ninety percent of respondents, for example, say that it is a major problem that their wages are too low to support a family, and that figure jumps to 97 percent among those who are electorally engaged….

To solve these challenges, respondents propose raising the minimum wage to $15 an hour, making college affordable for anyone who wants to attend and requiring the government to provide health care and adequate housing for everyone. A vast majority of them want to see the wealthy and corporations pay their fair share of taxes.

Biden Will Run on Fear. Trump Will Run on Hope.
Ian Welsh, June 1, 2019 []

Right now we have the spectacle of Democrats running against their own base (as is very common, Clinton certainly did, so did Obama, but with more concealment.) Obama won because Bush was really unpopular, and Clinton lost because Obama had fucked up the economy. But if Clinton hadn’t run against her base, she probably would have won….

Unless Biden’s support among likely Democratic voters crashes out, this is the de-facto Democratic plan. Biden voted for Iraq and is unapologetic about it, and Trump will kill him on it. He was for NAFTA and Trump will kill him on it. He was for a bunch of other policies that Trump can’t attack him on, but left wingers won’t forget he’s been for basically ever regressive policy possible for his entire career. Making bankruptcy impossible for students, by the way, is also one of those policies….

So Biden will probably win the nomination, thanks to the Onion making him into “Uncle Joe,” (which they should be ashamed of) and Democratic party members actually being centrists, but the left wing voters needed to, like, actually win an election are likely to not come out. The only thing motivating them will be fear of Trump.
That means that Biden will run on fear, and Trump will (again) run on hope.

Ian Welsh has made freely available his new book, in two versions. The PDF version of “It Doesn’t Have To Be This Way: The collected Essays of Ian Welsh” is the preferred version. An EPUB version of “It Doesn’t Have To Be This Way: The collected essays Of Ian Welsh” is also available, but Welsh warns “The formatting isn’t quite as good (and looks awful in any browser, you’ll need a dedicated EPUB reader.)”  I cannot recommend Welsh’s essays highly enough. He has, over the past decade, consistently posted some of the most lucid, concise, and insightful commentaries on political economy and the philosophy of governance. Also, he his holding his annual fund raiser, and I urge anyone who values excellent writing on the great issues of our time to stop over and donate.

The Dark Side

Perry Bacon Jr., May 28, 2019 [FiveThirtyEight, via The Big Picture 5-31-19]

Is Conservatism Running on Brand Fumes?
Yves Smith, May 30, 2019 [Naked Capitalism]

A provocative article in the Guardian, ‘A zombie party’: the deepening crisis of conservatism, is a must read. I am going to focus on a few key observations rather than attempt to summarize it….

Its one big shortcoming in my eye is that it focuses on politics and ideology and not very much on economic outcomes, like stagnant worker wages and rising inequality. Another way to think about it is that the Reagan/Thatcher neoliberal wave ushered in a tooth and claw version of conservatism. It sold the false promise that “getting government out of the way” would unleash abundant opportunities for everyone, lifting all boats. We know how that movie ended.

Many of the trappings of traditional forms of conservatism that made its fundamental injustice of preserving the privileges of the ruling classes acceptable were stripped away. No more noblesse oblige. No more caring about the health and welfare of your local community. No more recognizing that the lower orders needed a reasonable degree of stability in order for them to be willing to stay put (in economic terms). And no more defense of families. Laborers sold their services into markets, and that meant they had to be mobile, including uprooting children and moving away from relatives who often provided child care or at least emergency backup, sometimes having partly absentee fathers due to travel, and vastly more women with real careers as a challenge to traditional roles.


Biden Will Run on Fear, Trump Will Run on Hope


Why Elites Are Creating Surveillance States


  1. Hugh

    2014 was the best year in terms of net job creation in the last 5 years. It was a year of solid but not spectacular job growth. So when I hear all this talk about a booming economy or a coming recession I am perplexed. For many people, the recession that began in December 2007 never ended.

  2. StewartM

    It’s good to see Sanders actually promoting a push towards real socialism and not just New Dealism; though as usual I think his plan does not go far enough. I think worker control over companies is the only thing that will stop the rape of our technological and manufacturing infrastructure for the sole cause of short-term profit by the capitalist investor class.

  3. anon y'mouse

    Mr. Wikrent, thank you for these.

    i don’t think you get a lot of comments because you provide so much stuff that it’s time for info-processing, not yet synthesizing. but they are appreciated.

  4. Marcus

    Same here Tony. Dense work that is appreciated over on my end.

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