US Comparative Advantage for World’s Elite

I’m not the world’s biggest fan of Brad de Long; he’s a liberal, and he announces it, as when he reposts, in criticism of Occupy Seattle, Matthew Iglesias’ flat claim, using an opportunistically-myopic historical viewpoint, and a decidedly non-class disaggregated viewpoint, that capitalism is a boon to the world. Hell, Iglesias even goes so far as to assert that Africa has prospered under capitalism. It seems the economist right hand of liberalism is never in touch with the on-the-ground NGO/charity/anthropology/military left hand of liberalism. According to Iglesias, the only, really–technical, issue for these econ liberals is that the global elite has lied once too often to the American middle class. …I wonder why! Could it be that capitalism is not actually a boon to everyone, and Occupy Seattle’s analysis is in fact superior? Don’t say it’s so!

However, I do like to keep an eye on de Long, because a liberal will post some figures and occasionally even an analysis of utility to a marxist. Here in his post “A Note on the US Comparative Advantage in the Sale of Political Risk Insurance,” de Long briefly engages the problem of how the US comes by its trade deficit. He speculates that half of the trade deficit is basically the world elite’s insurance policy against revolution in their own countries, and he cites statistics from China. This global elite causes the US to financialize/militarize, and thereby innocently, inadvertently gut its own middle class.

Now I think that for much of the world’s elite, de Long’s attribution of motivation is correct. But for a number of reasons, it’s not correct with regard to the largest components of the strategy: Chinese and Indian elites. They are not buying dollars to the US’s profit because they are insuring against a bad  revolutionary turnout in their countries. They have another, perhaps longer-term strategy in mind, although, say Minqi Li and John Gulick, one that may be complicated by the historical decline in capitalism-fueling fossil fuels.

De Long also provides the EMRATIO:

Given this data, here‘s his Keynesian argument.

For the record, however, and in direct refutation of the romantic, churlish defenders of neoclassical economics and rabid liberals, the world would be a better place if the neoclassical economists and liberals were to some day develop humility in proportion to their achievements.

Capital Makes Capitalists Stupid

Elaine Scarry on stupidity (p. 294 in The Body in Pain: The Making and Unmaking of the World):

Witness: Stupid capitalists (video)

Matt Tabbai accurately describes the class-divided treatment of debt, risk, failure, and criminality, and how the apparently-adolescent capitalist class’ big stupid hypothesis about Occupy outrage at this corrosive disparity is that the 99% is “jusst jealousss.”

Maybe it’s just for the rhetorical power, but it’s surprising that Tabbai fails to acknowledge that this grotesque corruption is precisely what capitalism is all about. It’s time we join together with capitalists on this one dimension: recognizing capitalism for the stupid, ignoble system of alienation and rapacious exploitation that it is. Here’s where we part: We can do better.

Chris Hedges on stupid priorities:
It is a capitalist nation. 

Capital Likes It Dirty

In Big Wind Farms Cost More than Small Ones we learn why US capital opposes renewable energy: Green technologies can’t feed monopoly capital like polluting technologies can. And baby, capitalism’s all about capital accumulation; and not so much about happiness after all. Good try, though, Smith et al.


 This good article swiftly explains the US’s premier agro-conservation program. Where the US farm bills once either paid farmers to blanket chemo-monocrop their land from property boundary to property boundary or–as “conservation,” leave their land untended, now the program pays farmers to use ecological approaches to farming.

 Paying for stewardship isn’t cheap — the government spends about $600 million on the conservation program yearly

What this means is that to farm food sustainably is not compatible with the profit model.

Be very clear: Now we spend even more massive public money on subsidizing toxic agroindustry in North America (including direct subsidies, R&D, tax incentives, environmental remediation, addressing the health costs arising from consumption of industrial chemo sub-food, and the bureaucratic and military costs of forcing other countries’ markets open to subsidized North American industrial sub-food), in large part to promote the ideological capitalist illusion that food can and should be subsumed by the profit motive.

If we can understand that ecologically-sound food production is not compatible with the profit model, we can see the path to fighting the huge, expensive public subsidies for toxic agroindustry that corrupt and reduce food–a human need and right–to 1) a source of profit and power-hoarding for toxic agrobusiness like Monsanto, and 2) a commodity weapon for destroying other countries’ peoples’ food production systems.

Since healthy food production isn’t compatible with the profit system, we need to be and should be spending public money on subsidizing food production–for healthy food for us and for clean environments, not for Monsanto executives’ power, environmental destruction, and warfare on other peoples’ capacity to feed themselves.

Looking at public subsidies to ag, the USDA does not promote healthy diets.

Lo-till/no-till is a farming practice that only makes sense with organic agriculture, not with industrial agriculture. According to Rodale’s research, the average net return for organic systems, which rely on no- or low-till practices as an important part of an overall system of pest and soil management, was $558 per acre per year. Conventional no-till corn, which by definition means planting genetically engineered crops and growing them with the assistance of chemicals, brought in just $28 per acre per year (not counting conservation subsidies, of course).

Confidence Game

‎”The confidence we experience as we make a judgment is not a reasoned evaluation of the probability that it is right. Confidence is a feeling, one determined mostly by the coherence of the story and by the ease with which it comes to mind, even when the evidence for the story is sparse and unreliable. An individual who expresses high confidence probably has a good story, which may or may not be true…(Y)ou should not take assertive and confident people at their own evaluation unless you have independent reason to believe that they know what they are talking about” Daniel Kahneman, “Don’t Blink!“, October 2011.

Productivity for Profits: Killing Off Quality Jobs

One of the problems with overripe capitalism is that as it promotes increased productivity to enhance profits, it simply kills off both unskilled and quality jobs–obviously, without dispersing throughout society the benefits of the increased productivity (or you wouldn’t increase profits–concentrated wealth).

These charts from the US Aerospace Industries show one example of capital destroying high-skill, quality work (R&D science and engineering) as it has ramped up production and profits.

This finance-led profiteering strategy–putting productivity increases on steroids and hoarding the resulting concentration of wealth–eventually results in crisis, as capital smothers to death a huge portion of its consumption base, as well as desiccates labor’s skills, innovative capacity and even its social reproduction. Consequently, capital creates the conditions whereby its profiteering strategy is largely reduced to primitive accumulation.

Primitive accumulation doesn’t just ravage non-elite capacities and the environment, it stifles entrepreneurial rationality. In “A Generation of CEOs Who Don’t Know How to Raise (Employees’) Wages,” Dean Baker dryly comments on the puzzling complaint, heard occasionally on the NYTimes and from the Democrat leadership, that the economic problem in America today is that there is a skills shortage (!):

“CEOs apparently do not know how a business is supposed to respond to the inability to find qualified workers. According to standard economics, when businesses can’t fill job openings, they are supposed to offer higher wages. If these businesses offered higher wages, then they could lure away workers from their competitors. They may also be able to attract workers from other states or even other countries. If these CEOs raised wages high enough, then these workers would be willing to work for their companies.

However, they have not chosen to raise wages to the market clearing level for some reason and therefore can’t get the workers they want. Apparently, these CEOs do not know how to raise wages.

This is a problem that could be easily remedied. The government could offer short courses to CEOs and other top executives that would teach them how to raise wages and why this would be beneficial to their firms. These raise-waging instruction sessions should not be very expensive; even the thickest CEO could probably learn how to raise workers’ wages in a day or two. Most state and local governments could afford the cost, which should be easily repaid in stronger growth when employers learn how to address their skills shortage.

Companies should not have to forego expansion and workers should not have to be unemployed just because CEOs don’t how to raise wages.”

Keynes: Manage Capitalists Like Domestic Animals

After a tepid political response (overly accommodating to US capital’s corrosive sense of entitlement) and an initial partial recovery from the early 20th century Depression, the US slumped back into economic crisis. In this 1938 letter, Keynes advised FDR on how to more emphatically direct social wealth to the working class in order to get the US out of economic collapse. (David Cay Johnston calls this the ‘circulatory’ understanding of money–If social wealth, like blood, is blocked from getting to the working class, money pools up and rots the system.)

In this advice, Keynes urged FDR to have the confidence to understand and manage capitalists as a species of domestic animals.

There is indication in FDR’s response to Keynes that the capitalist US President understood US prosperity simply as a good in service of outcompeting communism–or at least non-Anglo-centric economies–around the globe. Again this is evidence that, for capitalists (obviously with human lifespans and thereby very time-delimited strategic horizons), economic decline is not perceived as a direct threat to their self-interest–so long as they maintain ownership of a society’s accumulated wealth. That is, capitalists appear to be systematically incapable of understanding economics beyond their own relative advantage. I think that economic inequality (produced by the normal, alienating functioning of capitalism) regularly produces this solipsistic capitalist conceptual error, ensuring economic crisis.

(Thanks to Doug Henwood for posting this link.)

What Is and Is Not Social Democracy

This Varoufakis political analysis applies as well to the federal-level, organized-labor-backed, social service NGO-backed liberal parties of North America. And kindly recall, North Americans, that simply sitting a bit to the left of one or even two conservative capitalist-dedicated parties, in no way qualifies a party for social democratic status in any historical-comparative empirical sense.

Social democratic historically meant, and in order to retain a sense of perspective and strategic possibility needs to continue to mean: Within capitalism, a) the parliamentary wing of b) an actual left, working class-for-itself social movement coalition that includes politicized, organized labor, pressing for, inter alia, socialism-building goals.  The moment you drop part b,  you are a liberal party. Possibly lefty-liberal in some fortuitous historical moments and on small  geographic scales, but liberal.

A liberal party champions (usually, the immediate) interests of politically-organized capital. The peripheral concerns of the welfare of the working class and the economic and geo-strategic health of the region cannot come into stable focus for a liberal or conservative party. That’s why, ironically, actual social democratic parties can manage the capitalist economy better than dedicated capitalist parties.

A social democratic party in capitalism is a party of internal tension. A social democratic party is a dialectical engine; a social democracy is a dialectical machine. The ultimate goal of social democratic parties is always their own aufhebung. The goal of a social democratic party is to work within capitalism to build the institutional and cultural conditions of socialism, see Rudolf Meidner. If that aint the goal, you’ve lost the tension. The bourgeoisie have successfully co-opted the party; and what you’ve got left there is a liberal party, not a social democratic party. At that point, you’re carrying the name “Social Democratic Party” for branding continuity only.

Social democratic parties differ from socialist parties in capitalism in that they are a coalition between socialists and lefty-liberals. Most social democratic parties, because they are coalitions of socialists and the lefty-liberal idealists of a kinder, gentler capitalist utopia that can never exist independently (because capitalism requires alienation and exploitation), shoulder relentless, organized capitalist pressure and undergo internal struggles over whether to turn away from the socialist horizon.

A social democratic culture then is a most peculiar balance of strategic thinking and pragmatism, sentimentalism, and egalitarianism and utopianism.

The Liberal Misrecognition of Social Democracy: Equilibrium Third-way Establishment Politics?

Barnard Europeanist Sheri Berman is also keen to distinguish social democracy from the many unmoored, opportunistic uses of the term.

“Correctly understood, social democracy is far more than a particular political program. Nor is it a compromise between Marxism and liberalism. And neither should it apply to any indivdual or party with vaguely leftist sympathies and an antipathy to communism” Berman “Understanding Social Democracy” XXXX: 4.

Berman argues that social democracy is distinguished from liberalism and communism by active political management of a capitalist market. The capitalist market is assumed to be required for provision of “the material basis upon which the good life could be built” and the promotion of “real growth” (Berman XXXX: 23). So the market is perhaps “traditionally accepted or tolerated,” but it is also effectively TINA, sacred to social democrats, just as it is as for laissez-faire liberals. Yet soc dems’ Nordic-cool dis-stance toward the sacred market uniquely requires a state capable of active market care and management, rather than liberals and conservatives’ preference: state capture. In Berman’s (Peter Evans-affine) view, the capitalist market is something like social democrats’ troublesome god.

Berman insists that armed with such a superior approach to capitalist market and society, social democracy is a third-way, in equilibrium. In such a perspective, active politics is institutionalized polity economic policy. Social movement, especially Marxism, is at most an initial condition to be overcome.

Berman’s is a laudable attempt to rescue social democracy from political obfuscation; it is a compelling narrative; and it jibes with some of some social democrat party members’ assumptions, actions, and strategic claims. However, to understand social democracy, we need to remedy Berman’s liberal oversights in terms of social democratic origins and active politics, as well as her equilibrium view of polity politics. When Berman attempts to understand social democracy, she tells us she will take us back to the origins of social democracy. And yet she does not.

Social movement is starkly missing from Berman’s origins narrative. Restoring the extra-establishment active politics is key to an holistic theoretical-empirical understanding of social democracy. There is a related problem with Berman’s static equilibrium view of polity politics: You cannot theoretically recognize or cogently explain both the rise and decline of social democratic institutions and culture –despite the many empirical indicators of such–unless you see social movements, including especially Marxist socialism, as central to not just the initiation, but also the ongoing development and robustness of social democracy–how it is resolved at critical junctures of essential class conflict.

In a better explanatory framework, social movement does not uniquely inhabit a disequilibrium state; rather, social democracy (like any other political regime), despite its impressive institutionalization, develops in tension and periodically arrives at critical disequilibria. The data better fit a more dynamic, dialectical conception of social democratic politics, where both the changing opportunity structure and extra-establishment social movement continue to matter profoundly to establishment polity political formation.

The Marxist Misrecognition of Social Democracy: Class Conflict Denial?

The notions that the capitalist market is a sacred tree (Yggdrasil, for example. An alternative to  Berman’s distemperate child-god metaphor.) to “true” social democrats (Norns perhaps), and that social democracy is a equilibrium-state third way, are widely-accepted theses. Too widely. I am sorry to say that most Western Marxists’ analysis likewise tends to collapse the historical social democratic internal tension. Like Varoufakis, such Marxists do not differentiate social democracy from liberalism. This is a conceptual error imparted especially to the Anglosphere by the Fabian tradition, which is the Revolution-poor British people’s approximation of social democracy, gelded of its socialism, but retaining a moral commitment to intervening in capitalist excess and crisis, for example with poor-relief social programs, taxation, and capital regulation.

Where Berman and the Fabians regard the capitalist market-as-sacred-tree approach to be ideal, most Marxists see it as an obstructionist, even Machiavellian form of liberalism. These Marxists regard social democratic parties as homogeneously-liberal “Decepticon” organizations in service of capital. They hold that social democrats use deceptive strategies–including the pacifying denial of class conflict–in order to compete for, absorb,  neutralize and betray working class energy. The reductive Marxist perception of social democracy as merely a competitive strategy to crowd out socialism is the crucial linchpin to these Marxists’ ad-hoc understanding of social democracy.

There are two obvious and curious side effects to this Marxist theoretical collapse. First, while they are periodically outraged by “social democracy,” Northern Marxists also misidentify semi-peripheral and peripheral social democratic societies as socialist societies, as in the case of Latin American countries such as contemporary Venezuela. This misrecognition clouds analytical and strategic judgment (More on that later).

Second, in reducing their conceptualization of social democracy to liberalism, most Western Marxists are completely, utterly uninterested in the experience, the tension of social democracy where it was most prominent and sustained, in 20th century Scandinavia. (Except to the extent that they can find an obliging Scandianvian to say that social democracy is reducible to Anglo Fabianism.) That is to say, they are completely uninterested in actually assessing social democracy.

They tend to discuss (complain about) social democracy as strictly something that happens to Canada, New Zealand, the UK, or Germany… or now, as with Varoufakis, southern Europe. These are countries and regions that in the best of cases have had an organized-labor-backed party that ceased to be social democratic in anything but name about a hundred years ago (eg. Germany). In the most far-fetched cases, the liberal parties Marxists call “social democratic” have never claimed to be social democratic, and may not even have much of a labor affiliation (Canada’s NDP is a great example). All we can say, rigorously, is that these parties have working-class electoral bases and are to some degree to the left of the US Democrat Party, which is saying profoundly little indeed. It is neither surprising nor is it hypocritical when liberal parties spearhead neoliberalism.

Exactly, swerve the Marxists. That is why social democratic strategists have nothing to offer, they insist. Marxists believe that the only thing to be done is revolution. There is, in their view, no possible route forward in an institutional coalition with any portion of the (unbounded) bourgeoisie, on any time or geographic scale. In effect, these Marxists have a priori determined that social democracy is impossible. Therefore, for such Marxists, social democracy only exists in places where it doesn’t. Such Marxists’ consistent geographic and historical displacement should immediately strike us as symptomatic of an insufficiently-valid analysis.

I think that there is no good (rational) reason why Marxism cannot accommodate a more valid, rigorous, empirically-embedded conceptualization of social democracy, related to but distinct from both liberalism and socialism. Marxists can start with a sober version of their recognition of the socialist strategies and goals of social democracies such as Venezuela, combined with a more sustained, empirically-observant modeling of how the incessant political power of capital tends to erode social democracy–by attacking its socialist backbone. The capitalist context is why social democratic coalition parties, while distinct from liberal parties, are vulnerable to liberal co-optation, rather than liable to reach the socialist horizon that distinguishes social democrats from liberals.

A more valid, change-sensitive (dialectical)  conceptualization would in fact contribute to Marxism, obviously. First, on the issues of social democracy and socialist strategy, it would bring Marxism out of the idealist ether, and back into its theoretical home territory–historical-materialist grounding.

Additional benefits for Marxists of improving their conceptualization of social democracy:

2) Improves our understanding of historical moments of collective class compromise. Permits Marxists to recognize a broader, yet still-robust and delimited coalitional (samarbete) strategy. For example, we can better recognize that the 20th century advancement of social citizenship owed its lifeblood to the existence of a credible communist threat/alternative. This allows us to demonstrate that capitalism’s non-capitalist and petite bourgeoisie adherents’ capitalist utopia (eg. historically, the US in the 1950s-1960s, or alternately, a racism/sexism/heterosexism/ablism/pollution-free capitalist utopia of the postmaterialist future) is dependent upon socialism and communism as a credible threat and alternative. In other words, it’s possible to make a hearty, unflinching argument to lefty liberals: If you pine for a(n imagined) capitalist utopia, and yet you aren’t among the top 1% wealth earners, you need socialism. They kind of know it; they need to be confronted with it.

3) Allows better analysis of the crucial points of social democratic breakdown. Liberal Swedes still don’t know that Swedish social democracy was slated to die in 1976 when their capitalists defeated Meidner’s proposal to socialize profits. In their triumphal co-optation of the Social Democratic Party (SAP), they are bereft of any idea of how to analyze the purportedly “social progressive” neoliberal policies today that steadily break down social democracy and class compromise, clearly reducing their co-opted SAP to impotent electoral rubble–precisely in the historical moment when the SAP utterly forgot both that it needs a socialist lodestar to exist and that its existence as an institution is not the point of its existence.

4) Stops Marxists from contributing to neoliberal obfuscation tactics that undermine organized labor and the working class.


Research Plan: Compare Anglo tradition (Fabianism & Keynes) with Scandinavian social democratic intellectuals (Meidner, Rehn)


Get to Know a Non-autistic Economist, for example this unique guy who understood social democracy:

Rudolf Meidner and his brilliant wage earner funds that could have saved the Swedish model from the dustbin of history.

(See also?: Whyman, Philip B. 2007. “A case for Swedish wage earner funds.” Journal of Post Keynesian Economics30 (2): 227-258.)

Chris Hedges Smacks Down Corporate-whore Media

Chris Hedges knows who he is and what he’s seen; he has the steadying background to summon the strength and call down liberal corporate-whore media. Watch him, on his feet, control this interview:

CBC: Called down, smacked down, served, pwned.
If you’re going to employ crude meat, do what the American and Latin American media does and at least get it fresh out of the sorority house.

Inequality, Economic Growth & Standards of Living

In this 2011 PERI paper by Thompson & Leight, “Searching for the Supposed Benefits of Higher Inquality,” the authors review the messy literature on the relationship between economic inequality and economic growth. They propose an alternative approach to this research stalemate.

If you are interested in charting the relationship between inequality and economic growth, urban & regional-level data is your best bet. Only in 2006 did Saez & Picketty pull together (fairly) reliable international comparative data on income inequality. See Saez‘s data and analysis on his Berkeley website.