In this summary, Walden Bello distills the key ideas and data contained in Thomas Piketty’s monumental work Capital and Ideology.
Economic insecurity has become the “new normal” in the UK with at least 70% of the UK’s working population “chronically broke”, according to a study by the thinktank the Royal Society of Arts.
Thriving, striving or just about surviving, the RSA/Populus survey of more than 2,000 workers, found that while about 30% of respondents said they lived comfortably, 40% said their finances were permanently precarious. The remaining 30% said they were not managing to get by. Continue reading
What lessons can we take from this sad story? One, obviously, is that it’s high time for Congress to take a hard look at the laws governing co-ops. It needs to be made clear that no corporation gets the legal privileges of a co-op unless it truly represents the little guy without any conflicts of interests. While there is nothing wrong per se with co-ops becoming vertically integrated, the law should ensure that the money co-ops make on all their operations goes back directly to their members.
Another lesson is that monopoly begets monopoly. Gary Hanman wasn’t wrong when he told farmers that the increasing concentration of ownership among agribusinesses meant that farmer co-ops had to grow bigger, too. But he didn’t tell them that as their traditional co-ops merged and consolidated into the Goliath that became DFA, they were creating a new oppressor. This dynamic is what Supreme Court Justice Louis Brandeis meant when he referred to “the curse of bigness.” Continue reading
Between 2007 and 2016, the average wealth of the bottom 99% decreased by $4,500. This decline was particularly
concentrated among the housing wealth of AfricanAmericans. Outside of home equity, black wealth recovered its 2007 level by 2016. But average black home equity was still $16,700 less. Meanwhile, over the same period, the average wealth of the top 1% increased by $4.9 million. Much of this decline in wealth, we argue, was the direct result of policies enacted by President Obama. His housing policies, particularly regarding foreclosures, were a disastrous failure that led to millions of families losing their homes, with black families suffering especially harsh losses. What’s more, Obama had power—money, legislative tools, and legal leverage—that could have very sharply ameliorated the foreclosure crisis, if not largely prevented it. He chose not to use them.
In the following essay, we shall examine the circumstances that led to the housing bubble, and its eventual collapse in Part I. In Part II, we shall take a close statistical look at the decline in black housing wealth. And in Part III, we shall outline an approach that would have halted the foreclosure crisis, had President Obama chosen to pursue it.
Basically what you had in the Bronze Age and every ancient society was a different concept of time than you have today. You had the concept of time as circular. That meant economic renewal. The idea was that every new ruler, every new reign, began time all over again. It wasn’t really time, it was really the economy had to start from a new position of equilibrium. This equilibrium – basically freedom from debt, the ability to support yourself – had to start afresh. Continue reading
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.
Using cross-national fixed effects models covering 25 EU countries from 1995 to 2010, we quantified fiscal multipliers both before and during the recession that began in 2008.
We found that the multiplier for total government spending was 1.61 (95% CI: 1.37 to 1.86), but there was marked heterogeneity across types of spending. The fiscal multipliers ranged from −9.8 for defence (95% CI: -16.7 to −3.0) to 4.3 for health (95% CI: 2.5 to 6.1). These differences appear to be explained by varying degrees of absorption of government spending into the domestic economy. Defence was linked to significantly greater trade deficits (β = −7.58, p=0.017), whereas health and education had no effect on trade deficits (peducation=0.62; phealth= 0.33).
By “liberalism” I mean what is considered under this term in the US. By “to blame” I mean “for the rise of Trump and similar nationalist-populists”.
What are the arguments for seeing liberal triumphalism which began with the collapse of Communism in the 1990s as having produced the backlash we are witnessing today? I think they can be divided into three parts: economics, personal integrity, and ideology.
The Resolution Foundation’s study found that the current parliament would be the worst for living standards for the poorest half of households since comparable records began in the mid-1960s and the worst since the early years of Thatcher’s 1979-90 premiership for inequality.
Note that the level of manufacturing employment, while it has cyclical ups and downs, is nearly constant from 1970 to 2000 at around 17 million. It plunged in the early years of the last decade as the trade deficit exploded. Most of the fall in employment was before the collapse of the housing bubble in 2008. This is what happens when a trade deficit increases from around 1.5 percent of GDP, the mid-1990s level, to almost 6.0 percent of GDP at its peak in 2005-2006 (over $1.1 trillion in today’s economy).
In his article Brad does a bit of slight of hand on this rise in the trade deficit, attributing it to an over-valued dollar rather than trade agreements like NAFTA. I agree with him on this, but I think the ignorant masses can be excused for failing to recognize that the jobs lost to trade were due to the Clinton administration’s dollar policy rather than its trade deals.
The UK has long depended on heavy flows of investment from abroad to make up for the weaknesses in its own corporate and financial institutions. In 2015 the UK ran a deficit in its external trade in goods and services of 96 billion pounds ($146 billion in 2015), or 5.2 percent of GDP, the largest percentage deficit in postwar British historyand by far the largest of any of the G-7 group of industrialized economies. By comparison, the US ran a deficit of 2.6 percent of GDP, while Germany earned a surplus of 8.3 percent, Japan a surplus of 3.6 percent, and France broke even. In the memorable words of Mark Carney, the Canadian-born Governor of the Bank of England, the UK must depend on “the kindness of strangers” to remedy its trade gap.
The reason for this unusual dependency is that for decades the UK has been unable to produce enough goods that the rest of the world wants to buy. According to WTO statistics, between 1980 and 2011 the UK’s share of global manufacturing exports was halved, from 5.41 percent to 2.59 percent, so that by 2011, according to UN statistics, the dollar value of UK merchandise exports at $511 billion was not far off the level of Belgium’s at $472 billion, an economy with one six the UK’s population, (and not included in the Belgian figures, the value of German exports routed through Belgium ports).
Looking at export industries such as IT products, automobiles, machine tools, and precision instruments, all strongly dependent on advanced R&D and employee skills at all levels, the UK’s performance looks even worse. The period of 2005-2011 is especially revealing because it includes both the years of the Great Recession and the collapse of trade between the advanced industrial economies, but also years in which their trade with China and other BRIC economies such as India and Brazil grew rapidly. Since one of the chief claims of the Brexit campaigners has been that there are now these exciting new markets in BRIC countries waiting for British exporters to conquer, it is worth looking at how British companies actually performed during those years.
Deep Place is a holistic approach to sustainable place-making. It is grounded in an empirical concern with how to achieve more economically, socially, environmentally and culturally sustainable places and communities. It seeks to overcome what it identifies as the harmful consequences of the current dominant Neoliberal economic paradigm. Although it is not anti-capitalist, it recognises the weaknesses and failings of Neoliberalism, which is exploitative of human and natural resources as factors of production. There has been a significant drive toward Neoliberalism since the 1980s, and the costs in terms of increased inequality are all too clear (Ostry et. al., 2016). The UK is now one of the least equitable countries in the world. Income inequality has been well above the OECD average for the last 30 years. The average income of the richest 10% is 10 times that of the poorest 10%. Between 2005 and 2011 the average income of the poorest 10% in the UK fell by a further 2%, and the share of the top 1% of income earners has grown from 6.1% in 1981 to 12.9% in 2011. (OECD, 2015)
Deep Place is based on the premise that the economy is socially constructed, and it therefore argues that it can be socially reconstructed. Even some of those who have been so closely linked to Neoliberalism, such as the IMF, are now appearing to accept the significant economic and social damage that arises from the inequality it causes. Key people within the IMF have now argued that policy makers should be more open to redistribution (Ostry et. al., 2016). At the same time, the Capital Institute has argued for a form of ‘regenerative capitalism’. They suggest that ‘…today’s greatest challenge is to address the root cause of our systemic crises – today’s dominant (Neoliberal) economic paradigm and the financial system that fuels it and rules it – by transitioning to a more effective form of capitalism that is regenerative and therefore sustainable over the long term’ (Fullerton, 2015, p. 12). Deep Place does not deny the complexity of global economic interrelationships; indeed, it fully recognises the difficulties and implications of managing and controlling these hugely complex circumstances. The impact of the 2007/8 Global Financial Crisis and the as yet not fully understood consequences of the decision of the UK in a referendum to leave the European Union, clearly illustrate the limitations of national governments to control such forces. That is why Deep Place is place-based. It argues that more localised action can often have a significant impact on strengthening community resilience against these external forces. In order to be most effective however, it contends that local action needs to be coordinated and fully integrated: it needs to be whole-place. Continue reading
Slow economic growth is not just an after-effect of the Great Recession but part of a deeper malaise that predates, and indeed may have helped cause, the financial crisis. A number of narratives have emerged in recent years to try to explain this global dearth of growth, such as the ‘debt overhang’ narrative, which states that growth is primarily hampered by an excessive indebtedness of economic agents, or various versions of the ‘secular stagnation’ narrative, which sees the cause of slow growth in a chronic shortfall of demand resulting from population ageing and the rise of income and wealth inequality, and/or in the diminishing returns of technological innovation. These various narratives probably all have some degree of validity. However, they tend to focus on developments that, even if they act as mutually reinforcing drags on growth, are in fact symptoms of the world’s economic predicament rather its deeper root causes.
Even more than from what most economists usually look at, i.e. constraints on capital and labour and on the productivity of their use, the slowdown of global economic growth since before the financial crisis might be resulting from factors that they typically ignore, i.e. constraints on the supply of energy and other biophysical resources that feed into the economic process and impact its functioning. In fact, the world’s capacity to create additional wealth is getting increasingly eroded by biophysical boundaries that over time tend to raise the acquisition costs, constrain the quantity and degrade the quality of the flows of energy and natural resources that can be delivered to the economic process, as well as by the constantly increasing costs of some of the economic process’ side effects (i.e. ‘negative externalities’ including environmental degradation and climate change), and the growing need to ‘internalise’ them into the price system. These biophysical constraints, as they increase, tend to weigh more and more on the economy’s productive capacity, thus eroding the potential for productivity and output growth.
A wonderful article. Brilliant analysis.
Indeed, a revolution had occurred. But the contours of that revolution would not be clear for decades. In 1974, young liberals did not perceive financial power as a threat, having grown up in a world where banks and big business were largely kept under control. It was the government—through Vietnam, Nixon, and executive power—that organized the political spectrum. By 1975, liberalism meant, as Carr put it, “where you were on issues like civil rights and the war in Vietnam.” With the exception of a few new members, like Miller and Waxman, suspicion of finance as a part of liberalism had vanished.
Over the next 40 years, this Democratic generation fundamentally altered American politics. They restructured “campaign finance, party nominations, government transparency, and congressional organization.” They took on domestic violence, homophobia, discrimination against the disabled, and sexual harassment. They jettisoned many racially and culturally authoritarian traditions. They produced Bill Clinton’s presidency directly, and in many ways, they shaped President Barack Obama’s.
The result today is a paradox. At the same time that the nation has achieved perhaps the most tolerant culture in U.S. history, the destruction of the anti-monopoly and anti-bank tradition in the Democratic Party has also cleared the way for the greatest concentration of economic power in a century. This is not what the Watergate Babies intended when they dethroned Patman as chairman of the Banking Committee. But it helped lead them down that path. The story of Patman’s ousting is part of the larger story of how the Democratic Party helped to create today’s shockingly disillusioned and sullen public, a large chunk of whom is now marching for Donald Trump. Continue reading
Torsten Bell, director of the Resolution Foundation, provided a useful breakdown of voting patterns in last Tuesday’s presidential election. Taken at face value, the results seem to show that Hillary Clinton did well among those voters on the lowest incomes. She led 53%-41% among those earning less than $30,000 a year and by 51%-42% among those earning between $30,000 and $50,000.
But these statistics are misleading. There was actually a 16-point net swing to the Republicans between the 2012 and 2016 elections among those earning less than $30,000 a year and a 6-point swing among those earning $30,000 to $50,000. By contrast, there was a swing to the Democrats among those on higher incomes, and this was particularly pronounced among those earning more than $100,000 a year. Continue reading
But what if both camps are right about the effects they observe and wrong about the causes? What begins to make sense of this odd picture is a problem that previous generations of Americans also had to confront—a concentration of economic control that enables a few corporate bosses to manipulate technological advance entirely outside of any open and competitive marketplace. Put another way, what can explain both of these problems is that the masters of America’s biggest technological corporations increasingly enjoy the power to speed the rollout of technologies that favor capital and to slow those that disfavor their own private interests.
Back in the 1930s, America suffered from a similar set of ills, and the government took direct aim. Specifically, starting in the second half of the New Deal, Franklin Delano Roosevelt’s administration combined stepped-up antitrust enforcement with the forced licensing of key patents held by monopolistic enterprises. Today, few people know this history, but the policy laid the groundwork for the long era of prosperity and technological progress that followed, including the birth of Silicon Valley.
We typically think of the economy as consisting of four sectors: the external sector, households, businesses, and the government. In China however it is more practical to subdivide these further into the following:
- Creditors. Creditors are forced to absorb the losses associated with writing down the debt when the borrower defaults on its debt and restructures it with a principle or interest reduction. Much of China’s debt burden has been extended through the banking sector, however, and because the debt that must be written down exceeds the banking industry’s capital base, ultimately the cost will be passed on to some other economic sector – for example Chinese households ultimately absorbed the cost of the banking sector losses generated in the late 1990s.
- The external sector. To pass on costs to foreigners requires that they have significantly larger exposure to China than they actually do, and would also probably require defaulting on external debt, a path Beijing is unlikely to choose to follow.
- Ordinary households. Most banking crises, like the recent US and European crises and the Chinese banking crisis at the end of the 1990s, are resolved by hidden transfer mechanisms that pass the cost of writing down debt to households. China today however must increase household wealth, not reduce it, if consumption is to rise fast enough to allow investment to decelerate, which means ordinary households cannot be allowed to absorb the cost.
- Wealthy households. Given high levels of income inequality, and the low propensity to consume of the wealthy, forcing them to absorb the costs of writing down debt – in the form of highly progressive income taxes, for example – is likely to be among the less costly ways economically for Beijing to pass on the costs of paying down debt. As their income or wealth is reduced, the wealthy are likely to convert most of that reduction into lower savings and very little of it into lower consumption, thus minimizing its adverse impact on domestic demand.
- Small and medium enterprises. Chinese SMEs are among the most efficient economic entities in China and are likely to be the main source of innovation and value creation in the future. Their long-term success is vital to China’s long-term growth. Like ordinary households they should be protected from absorbing the costs of Beijing’s debt-management policies.
- Local and provincial governments. These have amassed a considerable amount of assets whose liquidation would most efficiently absorb debt write-down costs and would entail the lowest medium and long-term economic costs, although not perhaps the lowest political costs. As their assets are liquidated, total Chinese savings will decline and Chinese consumption will remain largely unchanged, thus minimizing the adverse impact on domestic demand.
- The central government. Beijing too could pay for the cost of writing down debt by liquidating central government assets, although this may conflict with other economic policy objectives, including overcoming vested-interest opposition to the reforms.
Note two things here. First, there are a lot of dots with very low income growth, low enough to deserve the label “stagnant”. Second, wherever similar-coloured dots are on an upward slope, higher-income groups left their lower-income compatriots behind. Aside from the very lowest deciles (who are often cared for with welfare benefits), that very often seems the case. Again, Lakner and Milanovic looked into this, and wrote: “Some examples with particularly low real growth rates among rich economies include almost the entire lower halves of the income distributions in Austria, Germany, Denmark, Greece and the United States. They all had overall 20-year growth rates of less than 20 per cent which translates, in the best case, as 0.9 per cent per capita annually.”