In this summary, Walden Bello distills the key ideas and data contained in Thomas Piketty’s monumental work Capital and Ideology.
By Lynn Parramore, Senior Research Analyst, Institute for New Economic Thinking. Originally published at the Institute for New Economic Thinking website
Nobel laureate James Buchanan is the intellectual lynchpin of the Koch-funded attack on democratic institutions, argues Duke historian Nancy MacLean
Ask people to name the key minds that have shaped America’s burst of radical right-wing attacks on working conditions, consumer rights and public services, and they will typically mention figures like free market-champion Milton Friedman, libertarian guru Ayn Rand, and laissez-faire economists Friedrich Hayek and Ludwig von Mises.
James McGill Buchanan is a name you will rarely hear unless you’ve taken several classes in economics. And if the Tennessee-born Nobel laureate were alive today, it would suit him just fine that most well-informed journalists, liberal politicians, and even many economics students have little understanding of his work.
The reason? Duke historian Nancy MacLean contends that his philosophy is so stark that even young libertarian acolytes are only introduced to it after they have accepted the relatively sunny perspective of Ayn Rand. (Yes, you read that correctly). If Americans really knew what Buchanan thought and promoted, and how destructively his vision is manifesting under their noses, it would dawn on them how close the country is to a transformation most would not even want to imagine, much less accept.
That is a dangerous blind spot, MacLean argues in a meticulously researched book, Democracy in Chains, a finalist for the National Book Award in Nonfiction. While Americans grapple with Donald Trump’s chaotic presidency, we may be missing the key to changes that are taking place far beyond the level of mere politics. Once these changes are locked into place, there may be no going back.
This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy. We cannot cognize the potential harms to competition posed by Amazon’s dominance if we measure competition primarily through price and output. Specifically, current doctrine underappreciates the risk of predatory pricing and how integration across distinct business lines may prove anticompetitive. These concerns are heightened in the context of online platforms for two reasons. First, the economics of platform markets create incentives for a company to pursue growth over profits, a strategy that investors have rewarded. Under these conditions, predatory pricing becomes highly rational—even as existing doctrine treats it as irrational and therefore implausible. Second, because online platforms serve as critical intermediaries, integrating across business lines positions these platforms to control the essential infrastructure on which their rivals depend. This dual role also enables a platform to exploit information collected on companies using its services to undermine them as competitors.
The two global banks with the largest derivatives exposures are J.P. Morgan and Deutsche Bank. The derivatives exposure of J.P. Morgan is around $70,000 billion and of Deutsche Bank €55,000 billion. These figures are, respectively, about one-and-a-half times the total value of all the assets in the USA, and twenty times German national income. But the numbers in the balance sheets of these banks are much lower. Deutsche Bank declares its investment in derivatives at €768 billion: not a small amount, but only a modest fraction of the bank’s exposure. Deutsche Bank’s financial position is set out in Fig. 9.
We’d probably expect to see a pretty tenuous relationship between companies’ share price performances and the rewards of those at the top of them. We’d also probably expect to see a one-way ratchet, where pay goes up in good times for a company, but rarely falls in bad times. We probably expect to see executives quite often rewarded for luck, rather than skill.
And guess what? Those things are precisely what the latest data does suggest. The financial data firm MSCI has taken a sample of 428 large listed American companies and examined their performance between 2006 and 2015. And MSCI has found that shareholder returns at those firms whose boss earned below the median of their sector outperformed those firms whose boss earned above the median.
America’s celebrations of Martin Luther King Jr. typically focus on his civil rights activism: the nonviolent actions that led to the Civil Rights Act of 1964 and the Voting Rights Act of 1965.
The last few years of King’s life, by contrast, are generally overlooked. When he was assassinated in 1968, King was in the midst of waging a radical campaign against economic inequality and poverty, while protesting vigorously against the Vietnam War. Continue reading
A new book by Roberto Saviano:
The realisation that cocaine capitalism is central to our economic universe made Escobar the Copernicus of organised crime, argues Saviano, adding: “No business in the world is so dynamic, so restlessly innovative, so loyal to the pure free-market spirit as the global cocaine business.” It sounds simple, but it isn’t – it is revolutionary and, says Saviano, it explains the world. …
On capital, debt and the future of capitalism.
Richard Seymour, “Global military spending is now an integral part of capitalism,” 7 March 2014, Guardian
There are few surprises about the distribution of military spending: for all the current focus on China’s growing military outlays – and it is significant that they have embarked on a sequence of double-digit increases as a percentage of GDP – the United States still accounts for 40% of such expenditures. However, the distribution is not the only thing that matters; it’s the sheer scale of such investment – $1.756tn in 2012. The “peace dividend” from the end of the cold war has long since bitten the dust. Global military spending has returned to pre-1989 levels, undoubtedly a legacy of the war on terror and the returning salience of military competition in its context. In fact, by 2011 global military spending was higher than at any year since the end of the second world war. …