A Rudderless One World Economy
The twentieth century topped the previous two centuries in economic growth. These last three centuries produced virtually all the per capita economic growth the world has ever seen. That growth, driven by the dual liberations of democracy and innovation, is evident in and is a result of the spectacular betterment of the standards of living in the world industrialized nations. The most accurate definition of economic growth might in fact be increasing standards of living because all economic activity is ultimately consumption or funding producing things for consumption.
The growth spurt of the last 1/3rd millennium, a spurt in the collected economic history of mankind, is said by some to be coming to an end. Indeed, much of the economic growth of this latest century has been driven by easy credit making up for near zero growth in wages as a slice of the economic pie. The illusion of growth driven by that easy credit was substantially erased when consumer credit dried up and the markets for housing and jobs fell apart in 2008.
We built up the housing market bubble on a credit bubble and it burst. They always burst. The gravity of the underlying economy pulls us all back to economic reality. That reality is that in order for prices to be sustained consumers have to have the wherewithal to pay them or to pay the debts incurred to pay those prices.
For those that would blame consumers for taking on more debt than they should I would remind the critic that in no time since the New Deal era have Americans not enjoyed wage growth outpacing their debt burdens. In other words you could count on paying a marginally affordable debt more easily in the future due to your salary increasing. By the first decade of the 21st century, this was no longer a dependable American reality.
In our economic past, the longer you lived and worked, the higher was your standard of living. That came to an end with globalization. Exploitation of wage differentials between nations has made raises and even job security a thing of the past. In the bargain it has made economic growth a thing of the past.
Consumption is the sole driver of economies. If one consumer makes a dollar less per year the economy is, filtered through all the import/export, government expenditures and investment terms of the GDP, a dollar smaller per year. Export a job from a higher wage country to a lower wage country and the global economy shrinks by the net loss of the wages for the more highly paid worker.
Making and selling a product more cheaply is a good thing economically, but not when it comes from exploiting wage differentials. Exploitation of international wage differentials dilutes wage pricing power of domestic labor leading to lower domestic wages and so a shrinking real economy.
In our new borderless world economy, multinational corporations are overseeing the destruction of the global wage base. Multinationals think that’s a good thing. It is a good thing for them individually in the short term. In the long term, collectively, it’s a terminal illness. If one company does it, it’s a competitive advantage. If every company does it it’s no longer a competitive advantage and simply creates a self accelerating trajectory of global wage destruction. It’s almost as if the international community of CEOs has now come to think of global wage destruction is a good thing.
A boat rudder stuck in one position is not a rudder. Multinationals have, so far, shown zero concern over the fact that the ultimate outcome of the direction in which the global rudder is stuck is toward destruction of the global economy to the level at which no one will care about the profits of multinationals, capitalists or bankers. That destination has a name. It’s called communism.
Don’t think that since communism has been discredited for now that capitalism can’t bend the curve of history back on itself to the point where communism looks relatively attractive again. The “Y” generation is already showing the signs. After all, a share of a cooperative has only to be proved better than a share of nothing. So far, governments are either unable to understand the inevitable result of a rudderless global economy or are unable or unwilling to do anything about it. We may actually need a one world government, other than the WTO, to fashion a new working rudder for the world economy.
We are in the midst of a global economic experiment testing Aynn Rand’s hypothesis of rational self interest. The design of the experiment is whether the multinationals will realize the folly they have undertaken in time to redress the damage or they will go on using a subset of their reasoning power, the greed subset, and destroy the global economy.
Meanwhile the superset of reason has long acknowledged the fact that what benefits the working class benefits the capital class more than does their exploitation of the working class. It applies to main street as well as Wall Street.
Aynn Rand probably didn’t think any of this through, her rudder having been stuck on reliance on the reasoning power of humans as to their own best self interest. She might ought to have spent some time thinking about just how capable people are of identifying their best self interest. Her CEO heroes, in real life, seem to be lacking in the attribute her philosophy most relied on them to have.
Guns In My Life
A shadow box sits on my mantle. In it are the effects of my great uncle Homer who was killed in WW I serving as a U.S. volunteer in the Canadian forces deployment to Europe. Thereafter my family were pacifists. Pacifism, however, does not seem to shield you from danger anywhere on the scale from accident to terrorism to war.
My personal experience with guns started as a pre-teen. My father, drafted in WW II, managed to stay out of the fighting until the very end by teaching marksmanship at home until deployed as a company commander. He taught me marksmanship. Skill with a rifle did not serve me when, at age fourteen, I found myself looking at the muzzle of a loaded gun. A split second later I was shot in the throat, no time to react, to move, to speak, only to realize that in a split second I was going to be shot.
It was an accident. My best friend had picked up the rifle we had just been hunting with and thinking it was no longer loaded, pulled the trigger. He was smiling when he pointed it, a kids game, a toy gun like we played with for countless hours theretofore. This time there was real gun powder and lead and primer. This time the look on his face changed from play to terror as he heard the report and saw a hole appear in my larynx.
I was shot, knew it, felt it hit like the doctor would wrap your knee with his reflex testing hammer. The flesh didn’t much resist. If I’d not seen the muzzle, the grin, heard the blast and seen the flash I might not have known I’d been shot. The bullet, a .22, bored a path from larynx to spine in a classic curve from the rifling and came to rest short of severing the brachial nerve of my right arm. I noticed a dull pain when I moved my right arm. The bullet rested there until it was removed during a six hour surgery. My parents were distraught, but a little plastic surgery later the only ill effects were a weak voice and a lightning shaped scar from jawbone to clavicle.
I was lucky. I was lucky beyond the reasonable. My mother’s sister was lucky on August 1, 1966. That was the day that marks my first awareness of any mass shooting ever, when Charles Whitman began shooting people from the University of Texas Library tower. My aunt was on campus that day. But for the good old boys stopping their pickup trucks, grabbing their deer rifles out of their gun racks and shooting back, the toll might have been higher than 16 dead. She was lucky.
During the fall of 1970 I was at work in a gas station and got a call from my girlfriend, a nurse working for an obstetrician with addiction issues. She was at his home and implored me to come help her with him. He was intoxicated on some unknown substance. When I arrived she was calling the doctor’s psychiatrist. She asked me to go check on the doctor while she remained on the phone. He was in his bedroom. As I entered I was frozen by the sight of the man sitting on the floor beside the bed loading a revolver. What went through my mind is that harm could come to any one or all of us there if he were to finish loading that revolver. I walked over slowly, squatted down in front of him and gently but quickly slid my finger between the frame of the revolver and the ammo holding cylinder, knowing that if you couldn’t close the cylinder the gun couldn’t be fired. I asked him, “What are you going to do with that gun doc?”. He said, “I’m going to kill myself”. I said, “I can’t let you do that”. He tried to close the cylinder three or four times and then gave up. I took it from him just in time for the psychiatrist to be showing up. I gave the gun to the shrink and went back to work. The doctor, the psychiatrist and my girlfriend were all lucky. So might I have been.
No guns were involved in Oklahoma City on April 19 1995 when Tim McVeigh blew up the Federal Building there. Another aunt of mine was in that building on yet another fateful day in the sad history of Americans doing violence to Americans with no rational explanation. She was facing the blast when it came, talking to a woman standing in front of her desk. That woman shielded her from a torrent of glass, concrete and steel shards so violent it tore the woman to shreds. My aunt witnessed it, mourned as only a survivor can mourn the caprice of fate, and survived. She was lucky. She was lucky enough to live to bear the searing yoke of survivor guilt, but she lived. She died a few months later of cancer, but had time to resolve with and bid farewell to her family, a peace not afforded to the family of the shredded woman.
In 1995 along Coal Creek Parkway in Newcastle WA a King County deputy discovered a naked man in an intersection on Coal Creek Parkway. He stopped his patrol car and attempted to talk to the naked man who thereupon grabbed the officer’s gun and shot him to death. I passed through that intersection not five minutes before, carrying a gun as I’m licensed to do. Had I passed five minutes later I could have, and given my lackadaisical regard for personal safety probably would have, come to the officer’s aid, as a distraction for the naked assailant at least. Officer Herzog was not lucky.
There is no tabulation of the lucky. There are only long lists of the innocent unlucky, the in the wrong place at the wrong time, the reckless and the criminal. Having lived through much and survived so far myself, having witnessed random violence visited on my family, I find it irreconcilable that solutions for violence that respect both personal liberty and personal safety appear to be beyond the ability of our political system to find. My luck, of which I’ve had plenty, may run out some day, and as a rule I depend on it much less that I used to. Neither should your family and children have to depend on luck for the sole apparent purposes of salving the paranoia of the 10% extreme wing of the NRA or the making of electoral math of the GOP easier.
Vote the Cause if Not the Candidate
All debates are said and done. Nothing was resolved for the informed voter. Obama’s performance in the first debate was that of a man annoyed by the fact that he was debating an opportunistic shape shifting weasel. The movement in polls is just among a few low information voters who routinely couldn’t decide in which direction to hang their toilet paper, overhand or underhand.
Now comes the time when history is made or unmade. On November 6th, the nation will vote on its fate and the fate of humanity. At question is whether our 236 year old experiment in plebian democracy will succumb to the Siren song of a demonstrably anti-democratic conservative promising what he thinks we want to hear with every intention of delivering the opposite. Running against the conservative is an incumbent you may be disappointed in as it seems he did not deliver what you think he should have in terms of legislation or in terms of change in Washington gridlock. You may think the incumbent somehow lied about his intents and be suspicious that he has taken Wall Street money. Hardly any of that matters.
Lash yourself to the mast like Odysseus and hear the Siren song so that you may know it for your time. Promises are promises and can break hearts or break nations even when they sound at the time as if heaven had answered a prayer. Heaven is not in charge. Mankind is in charge.
What matters is the arc of history. For all of it - history – the mankind that runs things has been struggling to throw off its first and most regrettable political invention. That invention was despotism. The rule of one or a few over the many has been the heaviest yoke on mankind ever constructed. From our earliest history to our future histories in science fiction, the struggle of the people against tyranny is continuous theme.
In our current political climate, there are two distinct sides that fight for the sake of two opposite theories. One theory, the one the nation was founded on, is that the concentration of power – despotism – is bad for the people in general, even if you are in the 1%. The other theory is that true democracy is dangerous because it will rob from the rich and give to the poor. This is exactly the debate that was foremost in the Framing of the Constitution 236 years ago. The people fear despots and despots fear the people.
That debate was settled for 200 or so years. We designed a government with separation of powers and separation of church and state to deal with the potential of despotism and to assure that the ultimate power was held by the people, all the people. Beginning with Reagan and now a standard carried by Romney, there has been a resurgence of the argument that the people are more dangerous than despots. Yes the people are dangerous to despots, but not as dangerous to the people as are despots.
This election ultimately resolves along that ancient issue divide, whether power is wielded by those who fear despots or those who fear the people. The candidates are actually irrelevant to the question of what direction the country should take. The two political parties, and those who identify with them, demark the simplest yes or no question of the era of American democracy. Do you believe in an inclusive democracy or do you not?
Issue polls show the American people to be informed and nearly exact on what is best to do for the country now and in the future. Our problem is that the Republicans don’t like what the country wants to do and will do anything they can to stop us from doing it. There’s your motive to vote.
So don’t whimper about politicians not representing you if you don’t vote for the politicians who have advocated for your participation since the beginning of the constitutional process, the Democrats. It’s also the Democrats that have fought tooth and nail to overturn voter disenfranchisement measures adopted in all the states where Republicans won total control of government in 2010. Republicans won those states and the U.S. House exactly because you stayed home and did not vote. Don’t tell me it doesn’t matter and the parties are both the same. That snide cynicism of highly presumptive sophistication just shows a distinct deficit of perspective. The parties are so different that they can’t agree on what color the sky is. Vote on November 6th or just shut the hell up and “enjoy” the experience like Odysseus, lashed to the mast and unable to do a thing but endure it.
Government Doesn’t Create Jobs, But Spreading the Wealth Does
There’s a critical piece missing from the Democratic narrative. It’s not just this year either, it’s ever since progressive thinking began to dominate our government a hundred years ago. That piece, this year, has variously been defined as fairness, an equal shot or a level playing field, inaccurately. What that narrative is, in fact, is how spreading the wealth creates jobs. As it is, half of the country seems to believe that spreading around the wealth creates jobs and the other half doesn’t. But it is not an article of faith, it’s observable, rational, and economic reality.
Unfortunately when you utter the word economics, people’s eyes glaze over and they change the auditory channel. They’d rather listen to traffic sounds than whatever follows THAT word. Too bad. It’s too bad because economics seems complicated and it’s not. Yes, you can get way off in the weeds of detail, but the principles are simple and it’s not about math at all. It’s about human behavior.
Economics is about how people get money and then what they do with it, that’s all. All the complexity stems from the math required to try and figure out exactly what people are doing to get it and what they are doing with it. Detail is not necessary to understand what is being observed, only to be precise, and precision is not necessary to settle a question so broad as how is it that jobs are created. It is especially not necessary when brute force is needed and finesse is irrelevant.
Understanding the practical mechanics of how jobs get created is also not necessary. Distilled down to basic principles, jobs are created by demand for goods and services. Demand comes from consumers who have money to spend. Whether or not consumers can get enough money to spend on something is the problem our public and businesses have faced for the last four years.
The only real political question at stake in 2012 depends on whether or not you can follow this logic. If the consumers in an economy have no money they will not be able to buy anything. If consumers aren’t buying anything then it’s called a recession. If you can follow that logic, then you are prepared for making a decision on the solution to getting America, and the world, out of this recession hole that we are in.
Conservatives say that jobs are created by “job creators”. Jobs are, in fact, created by humans with a motive to hire people. The only motive there is to hire people is in order to make money off their labor. If you can’t make money by hiring someone, you will not hire anyone.
Liberals, and most economists, say that jobs are created when a “job creator” is motivated to hire someone. Businesses does not hire anyone just because they have the extra cash to do so. From an individual businessman’s standpoint that would be stupid. From a government standpoint, it is your job to make sure hiring happens.
Conservatives simply gloss over the essential step of motive. Conservatives say that money, tax cuts and not motive, is all that is necessary for the “job creators” to hire people, and that is so fundamentally stupid an assertion that it can be rejected out of hand as sophomoric. The only exception is entrepreneurial enterprise, but then the investors who would fund an entrepreneur still need motive to invest, and they are investing at historical lows right now because of that.
How do you motivate a businessman to hire? You motivate him with customers who can pay.
How do you create customers that can pay? You create customers that can pay by motivating the “job creators” to hire more people or pay the employees they already have more money. But, the “job creators” will not do that without a motive to do it.
The circular nature of the problem is inescapable. No motive no hiring, no hiring no motive.
That’s where government, for the 80 years since FDR led the way out of the Great Depression, has always served to break the circular conundrum. Government can do any one of several things, in the long and short term, to break the self reinforcing stalemate of employers waiting to hire until other employers do so first.
Long term, government can foster unions in the private sector. Unions serve to keep increases in pay at parity with increases in productivity. Medium term, government can tax profits that are not reinvested in the operation of a company, motivating hiring if only to avoid taxes. Medium term, government can manage trade in favor of American jobs and wages instead of the opposite. Short term, government can borrow/print money to inject directly into the economy to provide motive to hire people to earn that money from the government. History suggest that government make work jobs create momentum in the economy that persists after the shot in the economic arm.
What these measures by government do, fostering unions, structured and progressive taxation, trade and stimulus, is characterized as one thing by conservatives. They call it “redistribution of wealth”. Obama called it “need to spread the wealth around” in a verbal exchange with “Joe the Plumber”. Obama was right. We, as a country and as nation among nations, need to recognize that if the wealth is not spread around, then the consumers on which business depends for profit and growth will whither up and disappear. No one will be “creating” a “job” for anyone if there are no consumers.
The answer to our economic woes is not to give control to a political party, the GOP, that does not even understand what it is that their philosophy has wrought for us in the last 30 years. The answer is to reestablish the control of our government in the hands of people smart enough and responsible enough to the public to fix it through breaking the circular feedback of motives that are keeping the economy from recovering. Raise taxes on the rich and spread the wealth around. Intervene on behalf of unions. Raise the minimum wage and regulate trade. Right now, when the Fed is actually fighting deflation as hard as it can, is the ideal economic opportunity to do so and recover from the deficit of Republican thinking that has driven America into the economic crapper. Then the deficit and debt will, to borrow from Romney, self deport.
The America You Think You Know
The United States of America hasn’t had a free market economy since sometime in the first 100 days of FDR’s administration. We have been socialists since 1933, and you may or may not have noticed that during that time the United States of America developed the world’s largest economy and became one and now the only surviving member of the world’s superpowers.
Some people, particularly conservatives, somehow consider socialism a threat to the free market principles that made America great. The trouble with that viewpoint is that socialism was with us the entire time during which the U.S. grew into the socioeconomic superpower that it now is. How did America become so prosperous while continuously pursuing socialist economic policy?
It must be that either capitalism is too strong a positive force to be subdued by socialism, or socialism is too weak a force to affect the progress of capitalism. That, of course, assumes that the two systems, capitalism and socialism are mutually exclusive as economic philosophies. They are according to strict definition. They aren’t in practice because of the deliberations of previous generations who labored to reconcile the benefits and detriments of both into the system we have. Americans, in 1933 and on, took the best of each and discarded the worst. The result of that deliberative process was the economic powerhouse that America has since been. It was a political milestone in history that has yet to be recognized by the people of this country in enough numbers to influence the future of this country in light of it.
What has carried the country forward so far is in one part the naked sense of fairness, justice and inherent compassion that socialism brought to our consciousness. FDR did not sell the “New Deal” as socialism, he sold it as economic justice. The other, and equal part, is the acknowledgement of capitalism as the force that drives creativity and so wealth creation. Neither socialism nor capitalism alone could have attained the heights of success that America has attained.
Raw capitalism has the inherent moral hazard of profit over community and was rejected worldwide by the end of the 19th century. The 20th century was politically about nothing more than what would replace it as an economic system. Socialism has the moral hazard of appropriating private gain at the whim of the masses. Kings and Barons have been felled by the masses in bread riots. Both have natural limits due to their respective pitfalls. Capitalism ruins itself through instantaneous gratification of personal greed and socialism ruins itself through instantaneous gratification of public need.
The need to balance out the excesses of both natural tendencies in mankind is obvious. The means to balance them has been obscured by generations of conflict over which pure model, capitalism or socialism, is best. Both have moral hazards that make them unsustainable. All the while the answer has been lived out by the United States. Neither is sustainable as a pure philosophy. A shotgun wedding enforced by an enlightened government is necessary, and it’s an ongoing task to keep the two from divorcing.
In 2010, and now 2012, conservative believers in pure capitalism are seeking to dispense with the marriage. They are convinced that capitalism, unencumbered by the economic balance of socialism, can make the country, or at least them, more prosperous. This, despite the Reagan, Bush and Bush experiments that showed lower taxes and deregulation coincident with decreasing general prosperity. The few that prospered more under those GOP administrations were predicable by the intrinsic moral hazard of capitalism. Private greed, when allowed, trumps the public good in the short and long term. That’s why the entire world rejected pure industrial age capitalism a century ago.
Just as capitalism must be balanced with the public welfare, so must socialist tendencies. In this election no one is running as a socialist. Obama is running as the status quo of a form of government and with policy that created the America you know. It is an election that is not a choice between two candidates for president, it is a referendum on the American socioeconomic system that created the America you know, the only America any living American has ever known as an adult. Should we replace the democratic socialist government we have had for 80 years with a throwback to a pure capitalist system that failed everyone but the one percenters of the Gilded Age? That is the question.
It is the most critical question to be on a ballot in a hundred years. You may doubt the ability of government to make things better for the public now. But history is exact in the fact that you cannot doubt that government, it’s balance of raw capitalist self interest and mob rule, has made things enough better in the past to make America the world’s greatest nation.
At this point in history, there should not be a political contest between free market capitalism and socialism. The two political parties tend to be identified with the ideological poles of an antiquated argument. We should be beyond the argument of pure capitalism versus pure socialism, but we are, for some reason, not.
The real political argument is now not over whether or not the harnessing of capitalism by socialism works as an economic system, but instead is over whether or not we will become so socialist that capitalism can no longer work. That is a valid argument. But it is not a valid argument that we are already so socialist that capitalism does not work. It does work. Even in the world’s greatest recession since the Great Depression, corporations are making huge profits and have $2 trillion dollars on the sidelines waiting for the economy to turn around.
The problems we now have are due to lack of demand, due to the great recession, corruption and abuse in the medical establishment, peak oil, and defense spending on the scale of a global war that does not exist. Of these problems, only medical spending can be attributed to socialist policy. Lack of demand was caused by the real estate bubble, a classic free market exuberance. Peak oil is a matter of the U.S. being behind the curve of resource reality, which is being taken advantage of by classic market exuberance. Defense spending is just a hangover from times when the military industrial complex had a blank check from Washington. Medical spending is only a problem because of the free market greed of practitioners and suppliers leeching off political recalcitrance in prosecuting fraud. All of these can be easily fixed with the political will to do so. It’s the political will that is hard to fix.
The reason political will is hard to fix is because our political parties are fixated on ideological purities, the left on public welfare and the right on the ease of the formation of capital. Neither can exist, public welfare or the raising of capital, without the other. The status quo of 80 years of success says that balancing the two primeval forces of greed and need is essential in a 21st century government should we ever be able to achieve a modern government that transcends the ideological political pitfalls of the past.
The right thing to do on November 6th is to vote to build on the things we have learned about ourselves and our government over the last 80 years, and not to tear it down and start over where the last century began. We’ve lived the 19th century once before already. It sucked more than anyone now living is capable of imagining.
Obama is the right choice for a future built on knowledge and experience in governing a complex socioeconomic balance of markets and humans. Romney is the wrong choice as his ideology as a man is indecipherable but the ideology of his party, the new Tea Party/GOP, is willfully ignorant of the policy principles that created the America anyone now living has ever known.
Vote. Vote and lean left until there’s a time when you should lean right. That’s being an independent.
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Ian Fletcher - Simon Johnson
- Robert Reich
