When Tom Walker first raised the topic of Overton’s Window, it did not seem to us to hold much value beyond the obvious conclusion that a democratic society, when it is at equilibrium, allowed for only the most modest changes at the margins.
We thought: Hey Tom, tell us something we don’t know.
After years of living with two wars, after the catastrophe that was the 2008 financial crisis, and after witnessing the fiery critique of American foreign policy that resulted in nearly 3000 deaths on September 11, 2001, and the watery critique of its domestic policy with Katrina, if society could pass through this and emerge with political relations pretty much undisturbed, we thought even marginal change itself seems like an overly optimistic goal.
Our opinion was simple: Society would change when it was impossible for its members to muddle along from one catastrophe to another. In the case of shorter working time, that means when you will reduce hours of work when, no matter whether you have a job or not, you still face starvation.
When hunger and want stalk you, no matter how many hours you sell yourself into slavery, the idea of selling yourself into slavery will die on its own
Okay – a little over the top, we admit. Not wrong, we believe, insofar as it goes, but it certainly doesn’t offer much hope that things will change short of really desperate times. (And, frankly, you can’t be trusted to do the right thing in relatively good times, how likely is it you will instinctively do the right thing in really desperate times?)
So we got to thinking, and trying to imagine something other than the worst case scenario. (Really difficult, mind you, this imagining something other than the worst case scenario. The last time we got our hopes up for real change was when the Soviet Bloc disintegrated, and a tiny handful of people began talking of a peace dividend. But, then HW’s sweetheart got bitch-slapped by Saddam Hussein, and suddenly it was the Munich in the Summer of 1938 all over again. Our children will never know how close this proud nation came to speaking Arabic with Iraqi accents! Just thinking about it gives us chills!)
Short of really desperate times how might the reduction of working time be realized?
After years of subpar performance, the leadership of the SU finally admitted they had among themselves no new ideas how to reverse the decline in the living standards of the country. Much like the US today, massive amounts of work time were being squandered on a useless buildup of military might, environmental degradation, social alienation, and war. A new leader, Gorbachev, ascended to power and found the support among the sclerotic elite to make one last push to break the spiral of decay – in a campaign they called Glasnost (openness and freedom) and Perestroika (economic restructuring). The idea was to take a hidebound, autocratic, ideologically rigid statist political system and open it up to new ideas that would, in some undefined fashion, make it possible for the Soviet Union to overcome the catastrophic course on which it clearly traveled.
It was, in other words, an announcement of the impending systemic collapse of the society by the Soviet bureaucracy in the only way a bureaucracy can admit its complete and utter failure: They put up a suggestion box.
Much like Overton’s Window the question of the moment in the Soviet Union was how to expand the range of possible change to which the system would be subject.
That it failed is not the point of this brief recollection; rather, the point is this item taken from the Wiki:
Arriving in Berlin on June 12, 1987, President and Mrs. Reagan were taken to the Reichstag, where they viewed the wall from a balcony. Reagan then made his speech at the Brandenburg Gate at 2 PM, in front of two panes of bulletproof glass protecting him from potential snipers in East Berlin. About 45,000 people were in attendance; among the spectators were West German president Richard von Weizsäcker, Chancellor Helmut Kohl, and West Berlin mayor Eberhard Diepgen. That afternoon, Reagan said,
We welcome change and openness; for we believe that freedom and security go together, that the advance of human liberty can only strengthen the cause of world peace. There is one sign the Soviets can make that would be unmistakable, that would advance dramatically the cause of freedom and peace. General Secretary Gorbachev, if you seek peace, if you seek prosperity for the Soviet Union and eastern Europe, if you seek liberalization, come here to this gate. Mr. Gorbachev, open this gate. Mr. Gorbachev, tear down this wall!
Later on in his speech, President Reagan said, “As I looked out a moment ago from the Reichstag, that embodiment of German unity, I noticed words crudely spray-painted upon the wall, perhaps by a young Berliner, ‘This wall will fall. Beliefs become reality.’ Yes, across Europe, this wall will fall. For it cannot withstand faith; it cannot withstand truth. The wall cannot withstand freedom.”
The words President Reagan saw on the Berlin Wall, were not written by a young Berliner. The words were actually spray painted on the Berlin Wall by an American. On October 10, 1986, William Ozkaptan spray painted the words “The wall will fall. Beliefs become reality. W.Oz 10/10/86”.
Another highlight of the speech was Reagan’s call to end the arms race with his reference to the Soviets’ SS-20 nuclear weapons, and possibility of “not merely of limiting the growth of arms, but of eliminating, for the first time, an entire class of nuclear weapons from the face of the Earth.”
A little background to understand this excerpt
When National Security Council Report 68 was written in 1949-1950, the authors anticipated that the Soviet Union would, on occasion, make peace proposals to limit the possibility of conflict between the two empires. In their view, such proposals were little more than ploys designed to undercut Western resolve to contain the SU and its bloc of allies.
However, whether these were ploys or legitimate attempts by the Soviet Union to deescalate the conflict is besides the point, since the reality the authors of NSC-68 faced was the possibility that such “ploys” might appeal to public opinion in Western Europe and the United States – and they wanted nothing to compromise Western willingness to contain the SU for what promised to be a very long time.
Gorbachev’s Glastnost and Perestroika was viewed in the same light by the authors of NSC-68 – who had, since, abandoned the Democratic Party in disgust, and rallied to Reagan during the Carter Presidency. A Soviet leadership committed to change on its own terms threatened an already grumbling coalition of Western governments and malcontents, and presented the threat that Washington Empire might disintegrate as well. To answer this threat, Reagan took to the podium on that day in Berlin to issue the ultimate challenge to the Soviets: Tear down this wall!
The Soviets called his bluff, and the American Dollar Empire went looking for a new evil to justify its bloated existence.
The rest of the story is a collection broken bodies, burnt beyond recognition, in buildings, wedding parties, and beds.
What lesson is there in this?
Gorbachev set out to widen the window of possible change in the Soviet Union. Reacting to this event, and intent on maintaining its coalition, the United States responded to this charm offensive by demanding that the Soviet Union do more than widen a window in the wall: The wall itself must be brought down.
The Soviet Union had to abolish itself.
Having abolished itself, it imediately called into question its opposite – the American Empire – the leaders of which have been working mightily to justify its continued existence based on the proposition that 48 percent of global war spending must be devoted to the extermination of one guy in a cave on the Afghan-Pakistan border.
Don’t widen the Overton Window, tear down the Wall.
As Barkely Rosser at Econospeak has pointed out, all of the most pressing problems today, which have produced fairly broad, if mostly unconnected, movements for change are rooted in the need to reduce hours of work. (Rosser made this point only to disparage the work of Tom Walker, but it is true.)
To give a few examples:
- The wars in Afghanistan and Iraq could not be waged were it not for the excess hours of work put in by us that take the form of armaments production.
- The waste that results in environmental degradation occurs first as the waste of the human labor which produced it.
- The problem of containing health-care costs and delivering medical care to those who need it is generated not by too little working time in that sector, but too much.
- The inequality endemic in all major industrial nations, which has led to bubble after bubble, and financial collapse, is created by hours of work set at unsustainable levels, which makes for massive profits seeking any outlet for reinvestment – even as unconscionable levels of human want is left intact.
- Free trade, protectionism, immigration reform are all clearly connected to the problem of global excess capacity and an large global pool of unemployed labor that owes its existence to the overwork of those who are employed.
- The overhang of debt, both public and private, rests on a large pool of superfluous profits that exist to be loaned out to governments and individuals – it is these superfluous profits which compel the growth of debt, not the other way around.
We could go on and list any of a number of social ills that have produced movements of individuals devoted to their eradication that are, at their core, only symptoms of a society which simply suffers from overly long hours of work.
(In fact, it was our intuition at the time, that the Soviet Union faced precisely this problem – albeit in a more pronounced form. Economists called it investment hunger, or some such stupid label. However, the paradox presented by this investment hunger was that adding ever more labor resources to enterprises only raised cost without significantly raising output)
We think it is time to take Ronald Reagan’s advice and tear down the walls that separate work time reduction from each of these movements, and, which separate and compartmentalize these movement each from the other – often on opposite sides of the political spectrum. Advocates of work time reduction must do the painful, difficult work of amassing evidence to support the proposition that each of these ills are no more than symptoms of overwork.
Much has been done so far to make the connection between global warming issues and long hours of work. Still more work like this is needed on a host of issues, even – dare we say it – wading into emotionally charged issues like immigration, and speaking to the leaders and members of a movement not known for political correctness.
We would like to know your thoughts on this.
In fitting tribute to the Messiah’s new shovel ready jobs program which is to be rolled out this week – 40,000 public employees digging foxholes in Afghanistan at the rumored cost of about $1 million per employee per year – Tom Walker has posted the full text of a remarkable yet almost forgotten 1952 speech by Dwight David Eisenhower exposing how Washington was solely responsible for inflation in the economy by using Cold War armament production to create a false prosperity under NSC-68.
As I said at the outset: all our problems today are tied to one another, and none can be solved by itself. With tens of billions spent on armaments, another six to seven billion yearly on foreign aid, we see again that the soundness of our financial health at home depends on the soundness of our foreign policy.
The blunt truth is this: we cannot bear this huge burden indefinitely. We cannot—year after year, decade after decade— both maintain our standard of living, finance huge armaments, and help to rebuild economies of nations all around the globe. We cannot, in short, win the peace with foreign policy of drift, makeshift, and make-believe.
We must ‘honestly face the fact that such a policy not only fails to secure the peace: it also places the hopes of the free world in jeopardy by the strain it puts on our economy., and by the confusion it creates in other lands.
There is in certain quarters the view that national prosperity depends on the production of armaments and that any reduction in arms output might bring on another recession. Does this mean, then that the continued failure of our foreign policy is the only way to pay for the failure of our fiscal policy? According to this way of thinking, the success of our foreign policy would mean a depression.
We are trying to figure out what of the criticism we leveled at Paul Krugman is relevant, and what is not.
Krugman’s article raised two important points:
- Schumpeter was not some flat earther who believed in a stable, steady state theory of capitalist markets. He believed, based on what I have read of his works – a tiny. perhaps, unrepresentative fraction – both that markets were prone to sudden and even violent dislocations, and had a definite trajectory toward ultimate collapse. The former, at least, driven by technological change. Perhaps the latter as well. He also seemed to believe these two tendencies were not exceptional cases, needing to be explained or accounted for separately from a description of how capitalism worked, but had to be accounted for in the description of the capitalist market itself. The fact that even the most rudimentary examination of his work reveals how different his ideas were from how he is presented by Krugman is telling.
- The same conclusion applies to how Krugman treats Lord John Maynard Keynes. I have not been a fan of his, and only came to understand his work based on tutoring by Tom Walker. I had absorbed much of what I knew of his theories from reading the post-war American interpretation. That interpretation, which, apparently, Krugman has swallowed whole cloth, calls for government intervention to stabilize the economy through fiscal and monetary policy tools. It completely neglects Keynes’ comments that shorter working time is the long term solution to the problems arising from the depression. However, it is one thing for me to fall victim to this misunderstanding, it is quite another for Krugman – who fancies himself as a follower of Keynes – to spout the same one-sided interpretation.
Schumpeter’s main criticism of the steps taken by the Federal Reserve and the Roosevelt administration during the Great Depression was simple: the Great Depression, however, difficult, was a necessary adjustment to the changes which had taken place in the economy over several decades – changes which had virtually transformed the economic landscape, and increased the productive power of labor beyond anything imagined up until that time.
To cope with those changes, a number of measure had been taken, some of which were necessary – relief for the unemployed – some of which only served to intensify the crisis – protectionism, the replacement of gold by fiat money, and the imposition on Germany of the costs of World War I – some of which were called for, but vulnerable to charges they undermined economic activity – the Glass-Steagall Act (which ultimately was undone by the Clinton administration) comes to mind.
And then there were those measures specifically designed to prevent the economy from adjusting to the new economic reality of less work: the Keynes inspired government intervention, using its fiscal and monetary powers to promote an inflationary expansion of the working time.
Tom Walker has pointed out recently that, based on the available evidence, at least one author of the history of working time, Benjamin K. Hunnicutt, believed the Roosevelt administration undertook the latter set of policies specifically to avoid reducing the work week as proposed by the Black-Connery 30 hours legislation:
It is true that Ben Hunnicutt doesn’t see the New Deal programs as a conspiracy. What he does say, though, is that the only real coherence to the programs was the intent to defeat the Black Bill. Or, to soften that somewhat he attributes the view to a few of his sources (Keyserling and Connery) without directly disputing it. Whether or not one calls an intentional program a conspiracy depends, technically speaking, on its legality and secrecy.
“In a letter to Arthur Schlesinger dated April 9, 1958, Leon Keyserling stressed that Roosevelt came to Washington without a “systematic economic program.” The “highly experimental, improvised and inconsistent” programs of the first New Deal defy categorization. They were the products of “schools of reformers” that had been promoting diverse programs that Roosevelt, higgledy-piggledy, picked up.
“According to Keyserling, the PWA, CWA, NIRA, and the rest were not parts of any systematic plan or overall purpose. The only coherence given these events came from outside the administration. It was the “desire to get rid of the Black bill” that prompted the administration to draw up such things as the NRA, “to put in something to satisfy labor.” This same point was made by other notables in Roosevelt’s administration, among them Raymond Moley.
“Throughout the depression, 30-hour legislation goaded Roosevelt to action. The Black-Connery bill, introduced in each depression Congress until passed in highly modified form as the Fair Labor Standards Act [FLSA] in 1938, with all the work-sharing teeth pulled, continued to function as a sort of reverse polestar, enabling Roosevelt to chart his course by the simple expedient of sailing in the opposite direction.
Roosevelt’s instinctive reaction against 30 hours matured to positive approaches to industrial stabilization and reemployment. They were built on work creation, not work spreading, founded on industrial growth and increased spending as the wellsprings of progress. In the process, he and his administration discarded the century-old notion that work reduction had the potential for social and individual advancement.
“From the point of view of someone like Representative William Connery, who pushed for 30 hours from 1932 to 1937, the New Deal had a coherence, a reason for happening when and as it did, that was lost on others not so positioned. From Connery’s perspective, the New Deal was what it was because of its opposition to 30 hours. — Hunnicutt, Work Without End, pp.248-49″
The relevance of Schumpeter’s observation to the present crisis is compelling. If he is correct, what we are witnessing is not simply a replay of the Great Depression, but of the Great Depression PLUS all the accumulated changes to global economy which have taken place since that time.
But to this balance of adjustment which must be accounted for in this crisis, we should add all the imbalances that have built up over that time, and, which resulted from seven decades of government intervention to forestall the adjustment to all the economic changes over that entire period.
For any revival which is merely due to artificial stimulus leaves part of the work of depressions undone and adds, to an undigested remnant of maladjustment, new maladjustment of its own which has to be liquidated in turn, thus threatening business with another crisis ahead. Particularly our story provides a presumption against remedial measures which work through money and credit. For the trouble in fundamentally not with money and credit, and policies of this class are particularly apt to keep up, and add to, maladjustment, and to produce additional trouble in the future.
By contrast Keynes believed there was a role for just the kind of monetary and fiscal intervention that Schumpeter wanted to avoid.
The problem, from Krugman’s perspective, is that he saw this as a strictly limited intervention, with clear limited aim, and further limited in duration.
The blog, Econospeak, has reproduced his ideas on this in full, of which we excerpt the relevant portion:
4. After the war there are likely to ensure [sic] three phases-
(i) when the inducement to invest is likely to lead, if unchecked, to a volume of investment greater than the indicated level of savings in the absence of rationing and other controls;
(ii) when the urgently necessary investment is no longer greater than the indicated level of savings in conditions of freedom, but it still capable of being adjusted to the indicated level by deliberately encouraging or expediting less urgent, but nevertheless useful, investment;
(iii) when investment demand is so far saturated that it cannot be brought up to the indicated level of savings without embarking upon wasteful and unnecessary enterprises.
In Keynes’ view, in other words, following World War II there would be a period of rationing while the economy recovered; a period where economic policy would be to encourage some additional investment to bring the economy up to its potential; and a period where, in his words, “It becomes necessary to encourage wise consumption and discourage saving,-and to absorb some part of the unwanted surplus by increased leisure, more holidays (which are a wonderfully good way of getting rid of money) and shorter hours.”
Keynes estimated that it would take some 10 to fifteen years after the war ended to get to the point where working time would have to be reduced in order to discourage saving and prevent unnecessary and wasteful over-investment – what we would call a bubble today.
The war ended in 1945, which would have put the ideal time to begin reducing hours of work at around 1960 at the latest.
If we double Keynes’ off the cuff estimate, just to be conservative – to thirty years, rather than fifteen – we are in the middle of the stagflation of the 1970s, which brought about the collapse of the Keynesian Revolution in economics.
It is impossible to say with precision how this insanity will unfolds over the next period, but we believe any comparison to the Great Depression completely underestimates the degree of adjustment that must impose itself on the global economy to account for unfinished adjustments of the Great Depression, the accumulated changes since then, and the perversities introduced into what Schumpeter called the economic organism in the seven decades since World War II, which have resulted in one after another bubble.
This triple threat is now aimed at the survival of millions of working families in this country, and billions more beyond.
The management of this crisis is now in the hands of the very men and women who failed so miserably to avoid it. It really is not clear that it can be managed even in the best of circumstances, but it is obvious that the first step in that process is to remove those who made it inevitable by prolonging the very policies that made it inevitable – this is now a political catastrophe.
History, Marx believed is a continuous process – that is, a cumulative unfolding of events which do not merely change the faces of the actors, but alters the relations they enter into even as they may imagine they are performing the same old play.
Speculators in the stock market, however, very often imagine it ruled by regularities – cycles, patterns, waves – in which the same events play themselves out again and again across an equities landscape which never fundamentally changes.
They have a rule for this: “Only fools believe it is different this time.”
Of course, it may be a matter of your time horizon: we leave home each day and return to find everything pretty much as we remembered it; but we return to our childhood home and find everything just seems so much smaller than we recalled – if it is there at all.
The median price of a single family home in 1950 was around $3000.
By 2005, a single family home fetched about $264,000.
Blogger Cassandra asks us to consider which of these two prices is the normal one; and, what, if anything, we take for granted in the economy today can be considered normal, as well:
In Japan, “normal” meant that in 2004 residential real estate prices were roughly 30% of late 1980s or early 1990s prices. In Germany , though nominal prices might be similar in many places to those prevailing two decades ago, the real price destruction would be probably be similar to Japan’s. But what is “normal” for economic growth? Or what is “normal” for aggregate US consumption? Or the amount of debt a typical household can sustain? What is the “normal” leverage for a bank, or the normal return on equity o a listed company? What is a normal share of GDP for corporate profits in an economy experiencing deep recession? What is “normal” for sustainable government budget deficits? What is the normal income multiple of a banker or CEO to a policeman, a professional baseball player to a school-teacher or a doctor to a nurse? What is the normal amount of due diligence a bank should do before extending a loan and what is normal for the amount Honeywell Industries will earn per-share in the coming years?
During the time from 1950 to 2008 Washington’s role in the economy has increased several magnitudes, and with this intervention, debt has increased phenomenally, as has the financial sector and prices generally.
Seen one way, price levels for all goods has increased to the astounding heights we currently take for normal.
But, since Marx reminds us history is a continuous process, we cannot afford to ignore the growth of the other factors in the equation – government intervention, public and private debt, and the bloated financial sector.
The latter – financials – is mostly dead; public and private debt continue to hover over us like some massive Sword of Damocles; and, government, whose growth accounts for much of the debt, and much of the growth of the financial sector, is teetering on the icy edge of disaster.
Now, what is normal? With all the changes to the economy between 1950 and 2005 is is clearly unknowable what the “real” price of a single family home is now, much less to assume that it fall somewhere on a curve between the beginning of the housing bubble and when it burst in 2005 or so.
But, let’s add another complication:
Oops! Another complication: Change in labor productivity 1950 -2004
According to Erik Rauch, “the number of weekly hours needed to produce the 1950 worker’s output declined by almost one hour per year until the mid-1970’s, and has been declining by about half an hour per year since then.”
Rauch estimates, “An average worker needs to work a mere 11 hours per week to produce as much as one working 40 hours per week in 1950.”
Which implies, all things being equal, the actual “real” median price of a home built in 1950 (the price measured in the actual expenditure of human working time) may have declined to as little as $825.00.
That’s EIGHT HUNDRED TWENTY-FIVE DOLLARS, not $264,000.
For pretty much the price of your congressman’s shabby, not ready for Wall Street, ill-fitting, rumpled, J C Penny’s quality business suit, you could have a three bedroom, two bath, McMansion on a cul-de-sac in Culver City.
So, even if we assume government statistic on productivity are correct – and there is evidence they are not – clearly home prices have significantly further to fall.
Deflation: a good idea whose time has come.
The financial system set up after World War II to assist Washington in its strategy of siphoning economic resources to maintain and expand its vast military empire has collapsed.
Nowhere is this more clear than the complete breakdown of monetary policy, already touch and go in the last downturn, in the present financial crisis: the Federal Reserve Bank, the institution responsible for managing the mechanism of credit markets to assure continuing financing for Washington’s growing debt, has exhausted its traditional tools.
According to Brad Setser, the Fed has been forced to step into the role formerly played by private market players:
Over the last few months, the Fed has more or less taken over a slew of functions previously performed by the private financial system.
Banks with spare cash (more deposits than loans) used to lend to banks that were short of cash (more loans than deposits). Now they lend to the Fed, and the Fed lends to the banks that are short on cash. That way no bank risks taking losses lending to a bad bank ….
Money market funds used to lend both to the financial sector and to firms with short-term financing needs. Now they (to simplify a bit) just buy Treasuries. The Treasury met this demand by increasing its issuance, and (to simplify a bit) putting the cash it raised on deposit with the Fed. That in turn allowed the Fed to lend to institutions in the US and abroad that previously relied on money market funds for financing.
Foreign central banks used to buy rather significant sums of Agency bonds, and in the process finance (indirectly) the extension of credit to American households. Now foreign central banks just want Treasuries. The Fed now plans to purchase rather significant quantities of Agencies, in effect making up for the fall off in demand from other central banks.
To paraphrase a thug from an earlier time: L’Économie c’est Moi.
But, closer to home that might be rewritten thusly, Markets “R” Us!
According to the Economist, the Federal Reserve’s effort is aimed to provide, “investors with the confidence that a committed buyer is in the market.”
Which is to say, the Fed is intent on using your tax dollars to support asset prices long enough until, they desperately hope, capital markets begin to function again on their own.
Deflation, the WMD of the poor and dispossessed, is here, and Washington has stepped down into the filthy gutter of Wall Street ponzi schemes to prevent the global and domestic Joe Plumbers from ever seeing the fruits of their victory – a victory they have achieved simply by being what they are: poor, dispossessed, and utterly dependent on social production and consumption.
It is, above all, absolutely critical to Washington to prevent the general fall in prices of goods and assets, a ensure their continuing upward spiral.
This much is understood by many, since deflation is a dagger aimed at the heart of accumulated wealth.
Forty-eight percent of investment assets are held by the top one percent of Americans; with the top ten percent holding 85 percent of such assets – as the charts show below.
Table 2: Wealth distribution by type of asset, 2001
|Top 1%||Next 9%||Bottom 90%|
|Stocks and mutual funds||44.1%||40.4%||15.5%|
|Non-home real estate||34.9%||43.6%||21.5%|
|Housing, Liquid Assets, Pension Assets, and Debt|
|Top 1%||Next 9%||Bottom 90%|
|From Wolff (2004).|
At first blush, this looks like a classic case of “comforting the comfortable.”The Federal Reserve is clearly stepping in to prevent the wealth of a handful of individuals from being dissipated through deflation, and it is doing it using the money of those who have least.
The astounding concentration of wealth demonstrated here should cause one to question democracy itself: how is it possible a government, “of the people, by the people,” could stand by and allow the most amazing impoverishment of that people, and the lopsided distribution of the product of that people into so few hands – and to follow this tragedy by working furiously to maintain this lopsided distribution?
The cynical answer is, of course, it wasn’t that hard at all. They just waited until you were off to the mall shopping off the effects of September 11, 2001 – as instructed by the Moron.
The serious answer, however, is the concentration of wealth was the outcome of the deliberate Washington policy of inflating the economy and siphoning off an increment of this inflated economic activity to fund its empire.
Specifically, Washington secretly planned an open-ended inflation of economic activity, because economic growth,
…would permit, and might itself be aided by, a build-up of the economic and military strength of the United States and the free world; furthermore, if a dynamic expansion of the economy were achieved, the necessary build-up [of US military forces] could be accomplished without a decrease in the national standard of living because the required resources could be obtained by siphoning off a part of the annual increment in the gross national product.
It was a secret deal between Washington and Wall Street – not a secret deal in the conspiratorial sense, since all the players overlapped, and had to overlap, given Washington’s nationalization of industry to fight World War II – but a secret deal in the sense the American people were locked out of the discussion, never provided any meaningful alternate economic policy choices, and because the real reason for the economic policy decisions made in the decades after were never provided in a way alternatives could be examined.
So, when inflation began to bite in the 1950s, when 100 years of trade surpluses turned into trade deficits in the 1970s, when industry began abandoning the Midwest for the South, and for China and the low wage periphery, when trade deficits turned in budget deficits, and those budget deficits turned in personal savings deficits, and as the national, corporate and personal debt ballooned to the kinds of cataclysmic number we witness today, no one in mainstream politics stepped forward to say:
“Well, it would not be this way, if Washington would simply stop surreptitiously stealing national income to fund its empire. That really is the entire cause of our economic problems.”
Because, you see, if you want to sipon off the wealth of a nation to fund your empire, you need a pump, and Wall Street was that pump – in the entirety of human history, no social organization has ever been as efficient as finance capitalism in siphoning off wealth.
But now deflation has broken the pump – the ongoing collapse of real estate, the collapse of credit and equity markets – all the result of a mass of impoverished and dispossessed billion slaves who cannot feed themselves with what they earn producing the whole world of wealth that is now crashing aound us.
And, the last target of deflation – Washington – finds itself desperate to get the pump running again.
In Paul Krugman’s opnion, “Seriously, we are in very deep trouble. Getting out of this will require a lot of creativity, and maybe some luck too.”
To which, the residents of Kibera reply, “What do you mean ‘We’ white man.”
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We received an email from Tom Walker, a leader of the Work Less organization in Canada, who has provided further evidence of the consequential moment which may be upon us:
[S]ubstantially reducing the hours of work is a NECESSARY, not an optional or “wouldn’t-it-be-nice” response to the current financial crisis. That necessity, however, is no guarantee that it will occur. People have to organize to demand that it happens. The reason it is necessary is spelled out plainly but densely in a few lines contained in Marx’s Grundrisse, “Capital itself is the moving contradiction [in] that it presses to reduce labour time to a minimum, while it posits labour time, on the other side, as sole measure and source of wealth.
Hence it diminishes labour time in the necessary form so as to increase it in the superfluous form; hence posits the superfluous in growing measure as a condition — question of life or death — for the necessary.”
Each individual capitalist firm must find ways to cut costs through the introduction of labor saving techniques. But value continues to be measured in labor time expended. Productivity increases the quantity of wealth produced with an hour’s labor but not the quantity of value. So economic growth requires the expenditure of ever more labor time even those ever less labor time is required for the production of socially-necessary wealth. In the 19th century, this contradiction could be “resolved” through periodic crises that devalued capital. But with the advent of state interventionist policies in the 20th century, the escalation of the scale of the productivity overhang and the immensity of the consequences of a full self-correction, including the very real possibility of a revolutionary response to the crisis, it has become constitutionally impossible to “let events run their course.”
It cannot be emphasized too strongly that the root of the crisis lies in the nature of abstract labor time. Solutions to the crisis involve either “buying time” — which is to say not solving the problem but putting off the solution to a future date — or transforming SUPERFLUOUS labor time to disposable time. Unemployment is not disposable time but the failure to transform superfluous labor time into disposable time will result in the massive displacement of labor to unemployment.
The choice is that stark: freedom or unemployment. It sounds like it should be a no brainer. But people are SO afraid of freedom that they might let unemployment creep up on them while they’re wracking their brains trying to think of some other resolution to the crisis than freedom! We can’t let that happen. We’ve seen where it leads: fascism and war.
Perhaps, I am wildly off-base on this, but I really fear I am not.
From the Boston Globe:
No government gesture in recent days – no matter how many billions of dollars were involved – could calm investor anxiety over the health of banking institutions and the global economy.
“It seems that nothing worked this week,” said Allen Sinai, chief global economist at Decision Economics Inc. in Boston. “What has emerged over the last week or so is that the US is in a full-fledged recession. It’s no longer tentative.”
I will continue to carp on this: reducing hours of work is not simply one solution to the current bout of economic bad news, it is the ONLY solution. Without immediately pushing through such a reduction, working families in every country will see their conditions begin to deteriorate horrendously.
From Naked Capitalism:
De Grauwe argues in particular that trying to recapitalize banks while the liquidity crisis is on merely throws money into a black hole. The new equity goes poof when the liquidity worries resurface (as they have, each time in more virulent form).
The Great Depression never ended; it was only papered over with fiat money and credit – a strategy which has worked for some sixty years, but has finally begun to collapse.
Now, governments around the world will be forced to do what they should have done in the 1930: Reduce working time.
This is not an optional measure, this is not “nice to have,” this is not a, “we hope to get to it someday,” policy, which can be promised to working families during election years, like an American health care system that actually covers every one, THIS IS WHAT THIS COLLAPSE IS ALL ABOUT.
We do it, or it will be imposed on us by this crisis – in the form of massive layoffs, as governments at every level go bankrupt in a cascade of of horror, along with the biggest employers and banks.
Trillions in productive assets – GM, Ford, international trade – are threatened by this crisis – simply shuddering to a halt, and dumping millions of working families in every country into the streets, as capital does to itself what we have failed do to it.
This needs to be done NOW before the effects of this crisis begin to impact working families.
Latest in unfolding slide toward Depression level unemployment:
- England, which has been more candid in talking about the financial crisis than other countries (the governor of the Bank of England has said, for instance, that living standards will fall) issued a blunt assessment earlier today. The scary update is that even overnight lending is starting to break down.
- Another sign of market panic: even though Fannie Mae and Freddie Mac are now officially wards of the state and the Treasury has assured that they will not fall into a negative equity standing, the general credit market stress and flight to quality means that their mortgage backed bonds are trading at elevated spreads. However, mortgage rates are lower than in July due to the rally in Treasuries.
- Those who wrote $400 billion plus of protection on Lehman’s credit default swaps had been expected to make a substantial payout in the 80% to 85% of face value range, but the preliminary auction showed even worse results.
- Economist Paul De Grauwe, who has been an astute and harsh critic of central bank’s models and priorities, makes a very simple point and draw a conclusion. Banks are not lending to each other out of mistrust. Various measures to increase liquidity and backstop banks have not made them look any more favorably upon their brethren, A modern economy needs a banking system. De Grauwe argues in particular that trying to recapitalize banks while the liquidity crisis is on merely throws money into a black hole. The new equity goes poof when the liquidity worries resurface (as they have, each time in more virulent form). The only way to break the cycle is for governments to take over banks, or a least most of the big ones.
- The credit crisis is spilling over into the grain industry as international buyers find themselves unable to come up with payment, forcing sellers to shoulder often substantial losses.
New York Times:
- GM verging on bankruptcy, in talks for merger with Chrysler: Speculation about a possible bankruptcy filing by G.M. has mounted in recent weeks because of the automaker’s dwindling cash reserves. The automaker had $21 billion in cash on hand at the end of the second quarter, but it was burning through more than $1 billion a month.
- Stocks post their worst week ever