Saturday, March 28, 2015

How to Think About the Debt

Paul Krugman recently pointed out something that doesn't get enough attention: debt is money we owe to ourselves. In other words, wherever there is a debtor, there must also be a creditor (otherwise who would the debt be owed to?)
...[N]o, debt does not mean that we’re stealing from future generations. Globally, and for the most part even within countries, a rise in debt isn’t an indication that we’re living beyond our means, because...one person’s debt is another person’s asset; or as I equivalently put it, debt is money we owe to ourselves — an obviously true statement that, I have discovered, has the power to induce blinding rage in many people...Britain did not emerge impoverished from the Napoleonic Wars; the government ended up with a lot of debt, but the counterpart of this debt was that the British propertied classes owned a lot of consols.
http://krugman.blogs.nytimes.com/2015/02/06/debt-is-money-we-owe-to-ourselves/

Really then debt is a wealth transfer mechanism, as are taxes. This is illustrated by Krugman again, below:
Here’s a thought experiment that may clarify matters (or alternatively make the usual suspects even more enraged.) Suppose that for some reason the government were to decree, arbitrarily, that every American whose last name begins with the letters A through K now owes $100,000 to a special government agency; meanwhile, every American L through Z is given a $100,000 bond to be paid by that agency.
Clearly, the overall level of debt in the U.S. economy has suddenly increased (actually by about $1.6 trillion). But has the nation become any poorer? Is that $1.6 trillion of additional debt money taken from the next generation? No and no: the additional debt represents a claim by one set of Americans on another set of Americans — and we’re talking about people here now, not future generations. 
But, but, you say — that’s not where the debt comes from. It comes from people spending more than they earn. And that’s true — debtors get there by spending more than they take in. But creditors get there by spending less than they take in...
http://krugman.blogs.nytimes.com/2015/02/06/debt-a-thought-experiment/

Similarly, here's economist Dean Baker:
    As a country we cannot impose huge debt burdens on our children. It is impossible, at least if we are referring to government debt. The reason is simple: at one point we will all be dead. That means that the ownership of our debt will be passed on to our children. If we have some huge thousand trillion dollar debt that is owed to our children, then how have we imposed a burden on them? There is a distributional issue — Bill Gates’ children may own all the debt — but that is within generations, not between generations. As a group, our children’s well-being will be determined by the productivity of the economy, the state of the physical and social infrastructure and the environment....One can make the point that much of the debt is owned by foreigners, but this is a result of our trade deficit, which is in turn caused by the over-valued dollar.
Now there are few points to raise here.  I would be remiss to not mention that Steve Keen has pointed out that when banks get involved in debt transactions the macroeconomic effects are different due to banks' role in money creation. Keen is correct, or course, but that doesn't mean that Krugman is necessarily wrong conceptually (just overly simplified).

No, what's important to note is that debt is a distributional issue, exemplified by Proverbs 22:7: "The rich rule over the poor, and the borrower is slave to the lender." As Krugman adds, "There is still, of course, the definition of we, white man. Debt has distributional implications, and it may have macroeconomic effects because of those distributional issues. But again, all this is within the current generation; it’s not about the present versus the future. "

Succinctly put, over the past few decades, we have collectively decided to borrow from the wealthy instead of taxing them!

Think about it, if there is enough money available to buy the bonds, then there is enough money to tax! In both cases the money is temporarily unavailable to it's owners.

Deficits started exploding after the imposition of Neoliberalism under Ronald Reagan after 1981. This made the deficit explode. See this post: Why did rich-world deficits start exploding around 1980? The chart is above. "The U.S. federal deficit, which had been decreasing since the end of WW2, began to trend upward beginning around 1980. Why? Well, the proximate cause was big tax cuts, without any offsetting spending cuts. The beast was not starved, and tax cuts did not pay for themselves."

Now the way this works is simple. Government has a certain level of spending. They need to (in theory) collect taxes equivalent to the amount of spending. If they do not, there is a deficit (just like a company taking in less revenue than their expenditures).

To make up a shortfall, the money must be borrowed from someone. The instrument it uses to do this is the government bond. This makes up the shortfall.

And who buys government bonds? In theory anyone, but in reality, it is primarily the ultra-wealthy who have the kind of scratch to buy up enough bonds to cover massive budget shortfalls (and foreign governments, but that's a can of worms we'll leave closed for now).

Thus deficits lead to debt, and the bonds are representative of that. Every year's debt gets rolled into the "national debt" which keeps growing and the interest on the national debt is a major expenditure of government tax revenue. But who gets that interest?

These commenters nail it (I have combined various comments, emphasis mine):
I'd say that most comments are about tax policy, and a "redistribution" policy where we are cutting taxes on the wealthy so we can borrow the money from them instead.
I often thought that since it was basically rich people who were lending to the government, they could just about as easily pay it in taxes. Of course, that wouldn't be as pleasant as getting bonds...there is no reason that government has to run a deficit in order to borrow from the wealthy instead of simply taxing them. And there is no reason the government must spend only on current operations and on unproductive war materials. It could instead spend on productive infrastructure and human capital. With real rates currently about zero or less, the cost would be nothing. It's a once-in-(my)-lifetime opportunity, and Washington is letting it slip away. Tragic.

It seems to me the people who worry most about the "debt crisis" are misleadingly (and shamelessly) using it to convince the GOP base that social safety net programs must be cut. If the .01% have so much money they can afford to loan it to everyone else, they can afford to (1) pay their workers more so personal debt is less necessary and (2) pay more in taxes to lower Uncle Sam's borrowing requirements. What does affect the future is the investment we make (or don't make) now which enriches (or not) the future, or failed environmental policies now that pollute the future. Or transfers of wealth to elite classes now that pass on increasing inequality to the future, with all the associated costs.
This commenter to Noahpinion gets at the heart of the matter:
Private wealth increases especially strongly when Public debt increases. Public debt is a safe asset to store value and to facilitate the existence as a rentier. Rentiers can have a disproportionate influence on the policy of a country if the polity allows such, and recent studies confirm that the USA is now more an oligarchy than a democracy. It's in the interest of the rentiers to decrease taxes, especially capital gains and estate taxes. It is also in their interest to find safe returns on their investments, and government debt seems to fit the bill. It can be seen right now that even negative nominal interest rates do not kill the demand for government debt. So rentiers have both an interest in low taxes as well as in more government debt. It's a self-sustaining process.
In other words, the government's debt is a safe asset for the investor class. This is in a world very short of safe assets. Why is it a safe asset? Because of the institutional ability to tax the citizenry. Plus the debt must be paid back with interest. So the debt is not stealing from our grandchildren, or whoever, it is a mechanism to transfer wealth from the public at large to the investor class (the one percent, or more accurately the top ten percent who own over 80 percent of the bonds)

Clear enough? Instead of paying a tax, park your money in a government bond at get it all back, with interest! Who wouldn't want to do that?

Who loses in this scenario? All of us non-rich, whose tax dollars are going ever more to pay service on the debt which winds up in the hands of the rich while dealing with the rising tuition and potholed streets (among other things). Just  ask the "spendthrift" Greek people. Plus the rich get to cry to heavens about the "unsustainable debt"and "big government," and use it as an excuse to sell off public assets and slash the social safety net (but never defense spending or corporate welfare).

So the real purpose of reducing taxes on the wealthy had nothing to do with the government being too large or anything like that. It is much more insidious. It was simply to create a situation where the government has to borrow the taxes it no longer collects. This gives the wealthy a safe asset to store their wealth and a way to suck interest payments out of the general public. Taxes increasingly go to servicing the debt and not to essential functions (like keeping bridges standing up). Taxes are redistribution from the wealthy to the rest of us. Bonds are redistribution from the rest of us to the wealthy. Is it any wonder why the wealthy prefer that policy? Their "concern" over unsustainable debts is just kayfabe.

Included in this is increased spending on the military. This one-two punch (decreased taxes and increased military spending) allows them the rhetorical ammo to both smash the state (the only theoretical constraint on their power) and justify destroying social insurance (to create poorer, more desperate workers). Because the increased spending goes primarily to overseas adventures and not domestic items like health care or education, the average American sees no benefit and sides with the anti-government politicians who militate for even lower taxes. If tax money were spent on good infrastructure and decent public services, it would be much harder to demonize government as useless and wasteful, which is a key part of the strategy. Instead it is spent on war, prisons, and domestic spying

Shrinking government spending will never happen, of course, the reason being that big deficits are exactly the point. In fact the rich need the debt. "Shrinking the government" is just rhetorical red meat to the Heartland rubes; the real purpose is to lower taxes and drive the government's need to issue bonds and borrow from the wealthy whom they no longer tax. The rich get a safe asset to park their cash, their fortunes grow, essential government services shrink, and our tax dollars go to pad their fortunes. It's a key part of the Neoliberal redistibutionist private affluence/public squalor agenda.

It is not stealing from the future. It is crass redistribution from the public to the one percent. Just look at the latest GOP budget - eliminate inheritance taxesincrease military spending and gut the social safety net. It's a pretty transparent technique. Here's another Times commenter:
The most elucidating piece on debt I've read was Piketty's section on debt in Capital in the 21st Century. There he talks about how, in general, government debt is a way to get around the politically unpalatable necessity of raising taxes, and is almost always a transfer payment from society as a whole to the very rich (people who can afford to buy bonds). He gives several examples, and the ones that stuck with me the most were of 19th Century Britain on the one hand and 21st Century Europe on the other. During the Napoleonic War Britain amassed massive amounts of debt, and then the government proceeded to pay it all off over the next hundred years, with almost zero inflation, and constant 5% interest rates! The upper class of Britain lived for one hundred years off these bonds purchased by their ancestors. If that was the only way to deal with debt, then I would be all for forcing a balanced budget, however it is not. He then talks about modern Europe, where in general each government's assets are completely cancelled out by its debts. People tend to be very upset by this and claim they are borrowing against their children's future and must (as he put it) "wear sackcloth and ashes" to atone for the sins of debt. However, private wealth in Europe is around 6 times GDP, making Europe the wealthiest society that has ever existed, matched only by pre-WWI Britain. If the governments simply taxed some of that private wealth, they could become solvent within a year.
Here are the top tax rates historically in the U.S. (click to enlarge):

source

Sunday, March 22, 2015

The Information Superhighway to Serfdom

In the 1940's an Austrian academic wrote a book with the provocative title The Road to Serfdom. His bogeyman was not concentrated private wealth, but the government. He argued that if the government took too much control of the economy from private actors, people would be reduced to dependency on the state, and thus be reduced to "serfs."  This philosophy, elaborated by others and codified in the "Austrian School" holds that individual actors, absent the government, will lead to an ideal economy where concentrations of wealth power are impossible. This philosophy has been used throughout the past forty years as a justification to dismantle the state's role in economic affairs and reduce taxes on businesses and capital in general, far beyond the intentions of the book's author.

A lot of people  are waking up and noticing that we seem to be traveling down the road to serfdom, but it's not at all the scenario outlined by the Austrian School of an all-powerful communist government.  There doesn't seem to be much in the way of central planning, or any planning at all, in our current economic arrangement. Indeed, the government in the United States cannot even guarantee affordable health care or decent education to its citizens (although it will lock them up for long periods for minor infractions). Rather, the private sector seems to have decided that it just doesn't need most of us anymore. Private wealth has concentrated to an extent never seen before, even surpassing civilizations such as ancient Rome and the Medieval period.

In this powerful post, Ian Welsh points out that capitalism is based on dependency, whether on the state or private corporations. In clear, simple language, he spells out what we are not supposed to think about - the logic of the unregulated capitalist market (do go and read the whole thing):
Capitalism is based on dependency—on wage laborers needing to work for someone else, or their lives are miserable or short.  (Marx’s “whip of hunger”.)  It is voluntary only in the sense that you can offer your labor to anyone willing to pay, not in the sense that you can opt out of the system and have anything approaching a decent life. 
Today, if you lose your job and you’re an ordinary person, you can’t support yourself. If the government, friends or family don’t give you what you need, you have to beg for it.  If you don’t get it, you die. ...Absent a job, or charity, you will probably wind up dead... 
Our forebears in the 19th century understood this. It’s why they called jobs “wage slavery.”  You do what you’re told by your boss, where you’re told to do it, when you’re told to do it, how you’re told to do it, and if you don’t, feel free to try and find another job...Whether you can find another job is often unrelated to your personal attributes and has little to do with anything approaching virtue...Those who came out of the Great Depression understood this because they had seen many people, through no fault of their own, reduced to poverty, unable to find any work....What they didn’t do was overthrow capitalism...As a result, many men stayed in positions of vast private power and wealth...and were eventually able to use that money to overthrow the liberal state...  
What is on offer, then, is not neo-feudalism, with neo-serfs, but aristocrats and their slaves–slaves towards whom the aristocrats feel less and less an obligation to even feed (see all the cuts to food stamps). In some ways it’s superior to even slavery for the master-class: Surplus labor beyond what is needed to keep wages down is now completely disposable and doesn’t have to be paid for, after all. 
So understand this: What is being offered you, increasingly, is a chance to scramble for pennies from your masters and when considered superfluous to their needs, to suffer and quite probably die before your time. 
Serfdom?  You should be so lucky.
Serfdom Is Better Than What the West is Heading For (Ian Welsh)

The words serfdom and feudalism have come up an awful lot lately, and almost always with reference to the new economy powered by automation that is currently being developed by Silicon Valley.
Master and servant. Cornucopian wealth for a few tech oligarchs plus relatively steady but relatively low-paying work for their lucky retainers. No middle class, unless the top 5 percent U.S. income bracket counts as middle class. Silicon Valley is a tableau vivant of what many economists and professional futurologists say is the coming fate of America itself, a fate to which Americans, if they can’t embrace it as some futurologists hope, should at least resign themselves. 
The increasing ability of computers to perform ordinary tasks will inexorably transform America into an income oligarchy in which the top 15 percent of people—with skills “that are a complement to the computer”—will enjoy “cheery” labor-market prospects and soaring incomes, while the bottom 85 percent, that is to say, 267 million out of America’s 315 million people, will be lucky to find Walmart-level jobs or scrape together marginal “freelance” livings running $25-a-pop errands for their betters via TaskRabbit (say, picking up and delivering a pair of designer shoes). 
“There are many other historical periods, including medieval times, where inequality is high, upward mobility is fairly low, and the social order is fairly stable, even if we as moderns find some aspects of that order objectionable,” Cowen writes in his new book.
In other words, what is coming is the “new feudalism,” a phrase coined by Chapman University urban studies professor Joel Kotkin, a prolific media presence whose New Geography website is an outlet for the trend’s most vocal critics. “It’s a weird Upstairs, Downstairs world in which there’s the gentry, and the role for everybody else is to be their servants,” Kotkin said in a telephone interview. “The agenda of the gentry is to force the working class to live in apartments for the rest of their lives and be serfs. But there’s a weird cognitive dissonance. Everyone who says people ought to be living in apartments actually lives in gigantic houses or has multiple houses.” 
The big names in tech might be awash in capital and might have made their founders billionaires (New Economy founders typically retain large blocks of their own stock), but they employ surprisingly small numbers of U.S. workers. Google, the valley’s largest employer, has 46,000 people on its payroll. Facebook employs only 4,600, and Twitter, in San Francisco, fewer than 2,000. 
Apple claims 400,000 people putting together components and creating apps and other extras for its iPhones, iPads, iPods, MacBooks, and desktop computers. Yet only 16,000 of those are on the payroll in Cupertino. Another 31,000 work at Apple operations in Texas and other states, but the vast bulk of manufacturing is outsourced abroad via contractors to China and other cheap-labor purgatories. Yet those 16,000 in Cupertino make Apple the second-largest employer in the valley. The New Economy generates prosperity all right, prosperity that mostly flows to those in the upper echelons.
Silicon Chasm (The Weekly Standard)
Why? Why do we hate the new tech boom?
The answer has two parts. First, there is unsettling realization that the middle is losing economic ground while Silicon Valley execs babble on about “changing the world” for the better. Income inequality is growing ever worse, and it is increasingly clear that one of the forces fueling this trend is the technological innovation flowing out of the Bay Area. Second: The very fact that this boom is not a bubble, and will not suddenly vanish, means we can’t ignore it, or laugh it away. This is the new normal, and for those not lucky enough to have catered foodie gourmet lunches in brand-new downtown office complexes, the new normal sucks. Back in 1999-2000, the ridiculousness of what was happening was so obvious that it was hard to take it seriously. Everyone knew an economy boom built on online pet product company IPOs was doomed. Sooner or later, the bubble would pop and sanity would be restored and all those annoying dot-commers crowding your favorite bar or restaurant would go back to where they came from. The traffic would finally ease up.

But that’s not going to happen this time. The current boom isn’t a flash in the pan, doomed to disappoint arriviste gold miners. It’s here to stay. A mature Internet economy is generating huge riches, and it is remaking the face of San Francisco and the larger Bay Area in the process. But unless you really, truly want a job chauffeuring the new rich around town, or delivering their same-day groceries, or pouring their flights of craft beers — jobs that, incidentally, won’t pay enough to afford you an apartment anywhere in San Francisco — this new boom may not seem worth cheering about. Might as well root for it to fail.

All over the Bay Area, according to Joint Venture Silicon Valley, average incomes are rising, while median household incomes are falling — a strong sign that the wealth created by the thriving tech economy is not getting evenly distributed.
Unemployment is obviously and thankfully down — but serious questions remain as to the distribution of the new jobs. It’s a familiar story nationwide: The last couple of decades have seen the middle class get squeezed, and new technological innovations that have resulted in the automation or outsourcing of jobs are a big part of that narrative. The rising antagonisms directed at the tech economy’s nouveau riche are a direct consequence of a couple of decades of seeing “Star Trek”-like technological advances accompanied by a measurable fall in individual living standards.
Why we hate the new tech boom (Salon)
But wait — won't the digital economy eventually lead to better jobs? After a period of adjustment, won't things get better? Unfortunately that's not the path we're on. One of the biggest misconceptions about the digital economy is that for every middle-class job rendered obsolete by technology, there's a new, equally good (or better) job created by Silicon Valley. 
But exactly the opposite is happening. The digital economy is vaporizing the good jobs and replacing them with two kinds of jobs: minimum wage jobs (think Amazon warehouse employees) and so-called "sharing-economy jobs" (think Uber drivers).
The sharing-economy jobs are even worse than minimum wage jobs because they offer no stability or protections for workers. Sharing economy jobs aren't really jobs at all; they're freelance gigs. 
Sure, Silicon Valley doesn't owe America jobs. But something is wrong with the picture of a handful of tech billionaires overseeing a kingdom of falling wages, decreased worker protection and zero job security.  
This "winner-take-all" digital economy is not sustainable. People on both sides of the political spectrum are worried. Liberal luminary Robert Reich, a professor at the University of California at Berkeley and former secretary of labor under Bill Clinton, calls the sharing economy the "share-the-scraps" economy. Speaking of tech companies that utilize on-demand labor, such as Uber, Instacart and Taskrabbit, he says, "The big money goes to the corporations that own the software. The scraps go to the on-demand workers." 
Meanwhile, conservative columnist Ross Douthat fears a dystopian future in which "a rich, technologically proficient society will no longer offer meaningful occupation to many people of ordinary talents." 
Put simply, Silicon Valley's utopia is the rest of America's dystopia. And those who are punished more than anyone else are recent college graduates, whose lifetime earning potential has already suffered an irreversible setback. 
And if you think your own job is safe, think again. New research predicts that nearly half of all jobs are susceptible to automation over the next two decades. This is a giant leap backward, but it's deceptively described as technological "progress." As anyone who's talked to an automated system on the phone lately can attest, "automated" usually means "worse." 
What can be done? How can we fight this slide back toward the Middle Ages? If we take no action, we're headed toward a kind of digital world feudalism where there are a handful of kings, a lot of peasants and no middle class.
Silicon Valley to millennials: Drop dead (CNN)

Digital overlords with harems of women presiding over a workforce of on-demand, precarious, overworked, impoverished servants who are unable to even afford a family, is a grim view of the future.

From the above articles, it's hard to blame 'Big Government" on this new reality which so many writers instinctively compare to feudalism.

But as Ian Welsh points out, serfs had rights, and serfs had access to what they needed to sustain themselves, giving them a modicum of independence. This was eliminated with the enclosure movement, and indeed Neoliberalism has been described as a new enclosure movement. It's also been described as "accumulation by dispossession," as formerly public services are sold into private hands, and the people whose ancestors' time talent and treasure went into building them now have to buy them back from the investor class.

The benefits that were extended to the public during the twentieth century were predicated on economic expansion and the fact that large amounts of people were needed for production, what David Blacker calls the "all hands on deck" phase of capitalism, or otherwise the "Fordist" model. The Post office, public schools, parks, libraries, zoos, and the like were created as a part of this expansion. Today all of those are under merciless assault.

Now we're in a new phase. Several economists have used the analogy of horses to describe the plight of modern workers. Here's economist Wassily Leontief:
Any worker who now performs his task by following specific instructions can, in princi­ple, be replaced by a machine. That means that the role of humans as the most important fac­tor of production is bound to diminish — in the same way that the role of horses in agricul­tural production was first diminished and then eliminated by the introduction of tractors. 
The general theoretical proposition that the worker who loses his job in one industry will necessarily be able to find employment, possibly after appropriate retraining, in some other industry is as invalid as would be the assertion that horses who lost their jobs in transportation and agriculture could neces­sarily have been put to another economically productive use.
A warning about the robot revolution from a great economist. (Fabius Maximus)

And Gregory Clark:
There was always a wage at which all of those horses could have remained employed. But that wage was so low that it did not pay for their feed.
Machines Replacing Humans: They Shoot Horses, Don’t They? (Asymptosis)

The rulers of the past also had a sense of noblesse oblige. But the philosophy of the new ruling class predicates against this. It says that the economy is a perfect meritocracy, and the ruling class deserves their position due to "skills" and "talent." It furthermore says that the people who are struggling deserve to struggle because of their incompetence, laziness and stupidity. The impoverishment of Americans has been accompanied by a raft of articles about the loss of "values" of the poor - their eschewing of marriage, their out-of-wedlock births, their lack of (extraordinarily expensive) college degree attainment, even their poor dress and grooming habits.

Today's elite believes that they are John Galts holding the world on their shoulders. Furthermore, they believe that the poor are simply parasites on the work of great men like themselves. This self-justifying ideology allows them to rationalize a world where the vast majority are getting poorer even while they amass unprecedented fortunes. Furthermore, government protection just retards"progress" and shelters the weak from the consequences of their own actions in this view. Unlike the aristocrats of the past, today's elite feel no compunction to improve society for everyone, only for themselves, because they are told that their selfishness is what drives "progress." In place of past notion of the common good, they have latched on the the philosophy of Libertarianism and Ayn Rand:
The truth is, what Silicon Valley still calls “Disruption” has evolved into something very sinister indeed. Or perhaps “evolved” is the wrong word: The underlying ideology — that all government intervention is bad, that the free market is the only protection the public needs, and that if weaker people get trampled underfoot in the process then, well, fuck ‘em — increasingly recalls one that has been around for decades. Almost seven decades in fact, since Ayn Rand’s “The Fountainhead” first put her on the radar of every spoiled trust fund brat looking for an excuse to embrace his or her inner asshole.

Consider the following quote…

    The question isn’t who is going to let me; it’s who is going to stop me.
Or this one…

    The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws.

Either of those lines could have come from the mouth of Travis Kalanick, or any of his Disruptive ilk. The first is frighteningly close to the line you’ve heard from every entrepreneur you’ve ever wanted to punch: “It’s easier to seek forgiveness than ask permission.” The latter is just a really great excuse for breaking whatever silly law is frustrating your ambitions. Of course, both quotes are Rand.

But Rand’s worldview isn’t confined to breaking laws and risking public safety. It’s when she moves on to human relationships that she really gets into her stride. Courtesy of The New Republic (hardly the most liberal of publications), here’s a handy guide to some other things that Rand and her followers believe….

    Greed good; altruism evil
    It’s rational to be self-interested, selfishness is thus a mark of high ethics. Q.E.D. Winners deserve to be winners because they are winners.

    The rich are being exploited by the poor
    In Atlas Shrugged, Rand’s hero John Galt grows tired of the leeching workers that live off the business acumen of others, so he leads an upper-class strike that leaves industry decimated. Rand’s point is that without economic supermen, the country would collapse. She of course ignores the fact that the same outcome would result if every working stiff in the country up and quit too.

    No social services
    Rand compared Medicare, which she reportedly received, to “a ‘hoodlum’ who robs and kills to acquire a yacht and champagne.”

    Male chauvinism
    Rand was a self-professed “male chauvinist” who believed women should engage in male hero-worship. For this reason, she rejected the idea of a female president. [Specifically she said: “For a woman to seek or desire the presidency is, in fact, so terrible a prospect of spiritual self-immolation that the woman who would seek it is psychologically unworthy of the job”]
Travis Shrugged: The creepy, dangerous ideology behind Silicon Valley’s Cult of Disruption (Pando)
So while Silicon Valley is no doubt a socially progressive place (i.e. gay marriage), if one looks past social beliefs, there is as much ruthlessness as you’d expect in any capitalist industry. Look at the offshore tax avoidance, the despicable overseas working conditions, the outright violations of privacy and illegal behavior. There is a very real arrogance within Silicon Valley that seems to care little about rules and regulations.
Libertarianism preaches a night-watchmen government that stays out of businesses way, and allows private industries to regulate themselves. It is a utopian ideology, as was communism, that has an almost religious-like faith in the free market, and an absolute distrust of any government. It is a perfect philosophy for a large corporation, like Apple, Google or Facebook. If we lived in an ideal libertarian society, these companies would not have to avoid taxes, because they would be non-existent, and they wouldn’t have to worry about annoying restrictions on privacy. In a libertarian society, these companies could regulate their own actions, and surely Google, with their famous “Don’t be evil” slogan, believes in corporate altruism.

In the Valley, innovation and entrepreneurship is everything, so a blind faith in the market is hardly shocking. And last year one of the leading libertarians, Rand Paul, flew out to San Francisco to speak at the Lincoln Labs Reboot Conference, held to “create and support a community of like-minded individuals who desire to advance liberty in the public square with the use of technology.” Paul said at the conference, “use your ingenuity, use your big head to think of solutions the marketplace can figure out, that the idiots and trolls in Washington will never come up with,” surely earning laughs and pats on the back.

Rand Paul has had one on one meetings with Mark Zuckerberg, and the floating island billionaire himself, Peter Thiel. The founder and CEO of Uber, Travis Kalanick is another noted libertarian, who used to have the cover of Ayn Rand’s “The Fountainhead” as his twitter icon. Kalanick runs Uber just as a devoted follower of Ayn Rand would, continuously fighting regulators and living by what writer Paul Carr has called the “cult of disruption.” Carr nicely summarizes the philosophy of this cult: “In a digitally connected age, there’s absolutely no need for public carriage laws (or hotel laws, or food safety laws, or… or…) because the market will quickly move to drive out bad actors. If an Uber driver behaves badly, his low star rating will soon push him out of business.”

So basically, with the internet, regulation has become nothing more than a outdated relic of the past, and today consumers truly have the power to make corporations behave by speaking out on social media, or providing negative ratings on Yelp, or filing a petition on Change.com, etc. It is the same old libertarian argument wrapped up in a new millennial cloak, that corporations will act ethically because if they don’t, consumers will go elsewhere.
Welcome to “Libertarian Island”: How these One Percenters are creating a dystopian nightmare (Salon)

And Silicon valley is reflecting this new reality:

The 1% wants to ban sleeping in cars – because it hurts their 'quality of life' (Guardian)

Homeless on the steps of Airbnb: the faces of San Francisco's other story (Guardian)

San Francisco Catholic Church Floods Steps to Keep Homeless Away (Gawker)

Skyrocketing Prices Drive Single Mom to Rent San Mateo Garage for $1K a Month (NBC)

In Silicon Valley, a New Investment: Eviction (Bloomberg)

The Jungle: San Jose shuts notorious homeless encampment (San Jose Mercury News)

This Map Of Homelessness In Silicon Valley Shows Just How Close The Tech Elite Are To The Destitute (Business Insider)

HOTEL 22: The Dark Side Of Silicon Valley (Business Insider)

Crushing Dispatches from Inside the Silicon Valley Culture Bubble (ValleyWag)

Serfdom? We should be so lucky. Most of us are headed to the glue factory leaving the new overlords to pop nootropics like candy and genetically engineer their children. If you aren't scared you might want to read this: Death Is Optional.

Wednesday, March 18, 2015

Fun Facts for March

Income inequality in San Francisco matches Rwanda’s
http://www.theguardian.com/us-news/2015/feb/08/silicon-valley-forgotten-poor-unlikely-hero-greg-gopman

The Wall Street bonus pool for last year is roughly double the total earnings of all Americans who work full time at the federal minimum wage.
http://www.nytimes.com/2015/03/14/upshot/wall-street-bonuses-vs-total-earnings-of-full-time-minimum-wage-workers.html?abt=0002&abg=0

Since the start of the global financial crisis at the end of 2007, the total debt worldwide has risen by $57 trillion, rising to 286 percent of global economic output from 269 percent.
http://www.nytimes.com/2015/02/06/upshot/global-debt-has-risen-by-57-trillion-since-the-financial-crisis-heres-why-that-is-scary.html?smid=tw-share&abt=0002&abg=0

Between 2008 and September 2012, there were 66 No. 1 songs, almost half of which were performed by only six artists (Katy Perry, Rihanna, Flo Rida, The Black Eyed Peas, Adele, and Lady Gaga); in 2011, Adele’s debut album sold more than 70 percent of all classical albums combined, and more than 60 percent of all jazz albums. Between 1982 and 2002, the number of Americans reading fiction withered by nearly 30 percent. In a 1966 UCLA study, 86 percent of students across the country declared that they intended to have a “meaningful philosophy of life”; by 2013, that percentage was amputated by half, “meaningful” no doubt replaced by “moneyful.” Over the past two decades, the number of English majors graduating from Yale University has plummeted by 60 percent; at Stanford University in 2013, only 15 percent of students majored in the humanities. In American universities, more than 50 percent of faculty is adjuncts, pittance-paid laborers with no medical insurance and barely a prayer to bolster them. In the publishing and journalism trades, 260,000 jobs were nixed between 2007 and 2009. Since the turn of the century, around 80 percent of cultural critics writing for newspapers have lost their jobs. There are only two remaining full-time dance critics in the entire United States of America. A not untypical yearly salary in 2008 for a professional dancer was $15,000.
http://www.newrepublic.com/article/120932/scott-timberg-culture-clash-review-americas-creative-destruction

Fois-gras was invented in Ancient Egypt.
http://socialevolutionforum.com/2014/12/25/the-ultimate-health-food-revealed/

Trained elephants were once used to execute people
http://io9.com/elephants-were-once-used-as-executioners-1685751446

Americans have collectively lost forty-one million IQ points as a result of exposure to lead, mercury, and organophosphate pesticides.
http://www.theatlantic.com/features/archive/2014/03/the-toxins-that-threaten-our-brains/284466/

In 2003, 150,000 jobs went overseas, and only 2,000 came back.
http://www.bbc.com/news/world-us-canada-31447904

The U.S. has more jails than colleges.
http://www.washingtonpost.com/blogs/wonkblog/wp/2015/01/06/the-u-s-has-more-jails-than-colleges-heres-a-map-of-where-those-prisoners-live/?utm_source=SAS+Master+List&utm_campaign=3cf5892806-SR_Daily_Digest9_23_2014&utm_medium=email&utm_term=0_0eb25d4404-3cf5892806-221394897

If states were still spending on corrections what they spent in the mid-1980s, adjusted for inflation, they would have about $28 billion more each year to spend on more productive investments or a mix of investments and tax reductions.
http://www.offthechartsblog.org/growing-incarceration-contributed-little-to-drop-in-crime-study-finds/

The percentage of young people languishing in low-skill, low-paying jobs is 44%, a 20-year high. Only 36% of college grads have jobs that pay at least $45,000, a sharp decline from the 1990s, after adjusting for inflation....the percentage of young people making below $25,000 has topped 20%, worse than in 1990.
http://www.cnn.com/2015/03/18/opinions/wheeler-silicon-valley-jobs/

Every year cows kill more people than do sharks.
http://io9.com/cows-are-deadlier-than-you-ever-knew-1690950434

Saturday, March 14, 2015

Bureaucracy, Capitalism and Freedom

Have you had to deal with a large, faceless American company recently? Maybe the Internet monopoly Time-Warner? Or a bailed-out bank or credit company? Or an airline? Did you think of freedom and liberty?

David Graeber is back with a new book, more of a collection of his writings over the past few years. One of the things I like about Graeber, and why he serves as a model to me, is that he points out all the ways in which the free market capitalist propaganda which we're constantly subjected to does not square with reality. He looks around and notices that the "free" market does not work as advertised.

For example, in previous essays he pointed out that in Soviet bureaucracies where work was seen as an unalloyed good and full employment was the end goal, you had all these people doing essentially useless busywork tasks. But we see plenty of "bullshit jobs" under capitalism - busy make-work of dubious value, or sometimes even socially harmful value, like advertisers or predatory lawyers. I can recall going to see the the doctor and seeing 6-8 sedentary, portly women all occupied for a full work day doing nothing else but filling out forms and dealing with health insurance billing.

Graeber also noted the large amount of "guard labor" required in highly unequal capitalist societies - large amounts of people are employed in doing nothing else but keeping other people in line (police, military, prison guards, security guards, parole officers, bail bondsmen, etc.). This is not exactly productive activity that enlarges the pie and makes us all better off like capitalist theory predicts.

Somewhat related is the main subject of Graebers' latest book - bureaucracy. It's not a matter of government bureaucracy versus the "lean and mean" free-market. Rather, he points out that the amount of bureaucracy needed to make the "free" market work the way it is supposed to is enormous. He further points out that the liberal project to make the free market more humane always leads to even more bureaucracy in the end (filled out your proof of insurance on your tax forms yet?). And he points out that deregulation is a myth - it's really just reregulating in favor of a different set of stakeholders. There is no such thing as deregulation because the Market is by definition is a set of regulations. His final claim is that we secretly "like" bureaucracy because it allows us a degree of anonymity which is absent in the more intimate relations of small-scale business interactions.
Last month, I became a customer of Time Warner Cable, New York’s favorite quasi-monopolistic provider of patchy broadband that’s worse than the internet in Bucharest. Given the firm’s reputation, I was genuinely surprised at how smoothly it all went, up to the point at which I’d entered my debit card details. (I know, I know; in hindsight it seems so obvious.) Then the trouble began. It took five visits from engineers, plus countless phone calls, to get things working; the job required a specific ladder, but the booking system seemed serially unable to dispatch a van equipped with one. Finally connected, I went online to cancel the stopgap internet service I’d been using from another company, only to find that online cancelation wasn’t allowed. And yet, how weird is this: when the day came for Time Warner to process my first month’s payment, everything went off without a hitch. 
No part of this tale of bureaucratic tedium – nor all the stuff I’ve left out, because I don’t want your death from boredom weighing on my conscience – will surprise anyone living in the United States, the UK, most of Europe or much of the world today. Our lives are spent grappling with bureaucracy: filling in online forms; listening to recorded voices claiming that “your call is important to us”; lying to Apple about having read 56-page iTunes Terms of Service agreements; cursing the stupidity of HR departments, government agencies or university subcommittees.
But there’s something strange about this utterly familiar aspect of modern life, as the anthropologist David Graeber notes in his new book, The Utopia of Rules: it’s the opposite of how the free-market world’s meant to work.... Abandon the narrow definition of “bureaucracy” that exclusively involves government functionaries, and it becomes plain that America in 2015 is the most bureaucratic society there’s ever been. “No population in the history of the world has spent nearly so much time engaged in paperwork,” he writes – and not in spite of free-market capitalism, but because of it. Graeber’s “The Iron Law of Liberalism” proposes that there has never been a government policy to “slash red tape” or “reduce government interference” that hasn’t actually led to more red tape, more regulations, and more bureaucrats. “Maintaining a free market economy,” he writes, “[requires] a thousand times more paperwork than a Louis XIV-style absolutist monarchy.”

For one thing, as Graeber told Salon recently, it takes a huge bureaucracy “to make people behave the way that economists say they are ‘supposed’ to behave”. People must be encouraged to compete fiercely and amorally against each other, motivated solely by personal gain, yet also prevented from taking this to its logical conclusion and simply killing or stealing to get the other guy’s stuff. That necessitates big police and legal bureaucracies, just to begin with.

Then there’s the machinery designed to keep global capitalism running “freely” – the World Trade Organization, International Monetary Fund and the rest – which are in fact a “planetary-scale administrative bureaucratic system”, protected by state violence when challenged. And it’s no coincidence, of course, that you end up in bureaucratic quagmires not when paying for (say) internet service, but when you’re canceling it, or trying to get it to function. Bureaucracy is a system “whose ultimate purpose is to extract wealth in the form of profits.” Your call isn’t really “important to us”; it’s just vastly cheaper to play that recording, and make you wait, than pay an extra operator to answer it.

Oh, and “deregulation”? This never really happens, Graeber maintains. Mostly it just means “changing the regulatory structure in a way that I like”:
    Simply by labeling a new regulatory measure ‘deregulation’, you can frame it in the public mind as a way to reduce bureaucracy and set individual initiative free, even if the result is a fivefold increase in the actual number of forms to be filled in, reports to be filed, rules and regulations for lawyers to interpret, and officious people in offices whose entire job seems to be to provide convoluted explanations for why you’re not allowed to do things.
Capitalism was supposed to reduce red tape. Why is bureaucracy worse than ever? (The Guardian)

It's worth quoting Graeber in full from the Salon interview about a common theme here on the HCV - there is nothing "natural" about the "free" market. A modern globalized industrialized market is not just a natural extension of humans' innate instincts to "truck and barter and exchange one thing for another," the way  Adam Smith claimed, and the invisible hand is invisible because it doesn't exist:
The idea that free-market policies create bureaucracies is pretty counterintuitive, at least for most Americans. So why is it the case that laissez-faire policy creates bureaucracy? 
Part of the reason is because in fact what we call the market is not really the market.
First of all, we have this idea that the market is a thing that just happens. This is the debate in the 19th century: market relations creeped up within feudalism and then it overthrew [feudalism]. So gradually the market is just the natural expression of human freedom; and since it regulates itself, it will gradually displace everything else and bring about a free society. Libertarians still think this. 
In fact, if you look at what actually happens historically, this is just not true. 
Self-regulating markets were basically created with government intervention. It was a political project. Certain assumptions of how these things work just aren’t true. People don’t do wage labor if they have any choice, historically, for example. So in order to get a docile labor force, you have to create police and [a] large apparatus to ensure that the people you kick off the land actually will get the kinds of jobs you want them to … this is the very beginning of creating a market. [ii]
Basically, we assume that market relations are natural, but you need a huge institutional structure to make people behave the way that economists say they are “supposed” to behave. So, for example, think about the way the consumer market works. The market is supposed to work on grounds of pure competition. Nobody has moral ties to each other other than to obey the rules. But, on the other hand, people are supposed to do anything they can to get as much as possible off the other guy — but won’t simply steal the stuff or shoot the person. 
Historically, that’s just silly; if you don’t care at all about a guy, you might as well steal his stuff. In fact, they’re encouraging people to act essentially how most human societies, historically, treated their enemies — but to still never resort to violence, trickery or theft. Obviously that’s not going to happen. You can only do that if you set up a very strictly enforced police force. That’s just one example. 
Stipulating that the bureaucratic state inexorably grows in response to free-market policy, why should it bother us? It’s annoying, sure; but are there costs bigger than that? 
I really think that bureaucracy is a way of crushing the human imagination. It also makes people stupid. And that was the thing that really impressed me about my first major encounter with bureaucracy — I found myself turning into an idiot! I was filling out the form wrong, I was making the obvious mistake that anybody with any degree of intelligence wouldn’t do, and constantly being told: “But you did it wrong!” And that experience of wandering around and feeling like an idiot and incompetent in life, is the necessary clunkiness of living under a bureaucratic regime.
“I found myself turning into an idiot!”: David Graeber explains the life-sapping reality of bureaucratic life (Salon)

This argument is not new, you may recall the exact same argument made by Philip Mirowski. He pointed out that Neoliberalism claims it is an anti-government philosophy centered around "freedom" and "liberty," but this claim is not true. It takes very strong governments to impose the kind of markets Neoliberals favor - there is nothing "natural" about them. As Mirowski puts it, when a market fails, Neoliberals favor the imposition of "new and stranger" markets to solve the crisis caused by the operation of the Market in the first place. The classic example here is "carbon trading" schemes, which are hardly a "natural" activity. This leads to even more complexity and bureaucracy, not less. It would be much simpler to issue quotas of allowable carbon emissions.
Laurie Taylor: So we're talking about - it is a belief in markets - markets have knowledge which will solve all our problems. But from time to time Neoliberals would want to believe in a strong state which does something to enable the development of new markets, is that right?

Philip Mirowski: Yes, because, that's another part of their project. Let's say that people believe that markets have gone awry or failed in some sense. Their immediate-term project is basically to propose new and stranger markets to fix any problems with old markets or previous markets. And, in  order to do that, this doesn't just happen by itself. This is why need a strong state, because it takes a strong state to impose these new market forms to supposedly address the crisis. One can see this in the economic crisis with various maket-based forms of saving the banks and saving finance rather than simply nationalizing the banks and causing them to shrink and reorganizing them.

Laurie Taylor: So, if you talk about this development of new markets, what would be an example of that? How would the government enable the development of new markets which would be in line with neoliberalism's requirements?

Philip Mirowski: Well, a nice clean example has to do with global warming. The common way to address problems of carbon emissions recently since Kyoto has been to develop these markets in carbon emission permits. So instead of having the state cause various emitters to emit less, instead we have a marketplace of permits which will supposedly cut down on the amount of emissions that are being emitted. And so what's interesting about that is that even though these markets are very popular with certain--for example, in finance--that they don't actually reduce the amounts of emissions. So what happens is that you introduce various markets to fix problems, but really what it does is it just sort of spreads out the problem over the longer term.
Another example is health care. People forget that the Obama plan was first proposed as the right-wing Neoliberal alternative to single-payer or "socialized medicine" (cue the scary music). In single-payer, everyone is covered, and there is very little paperwork from what I'm told.

In Obamacare, however, you need to shop for insurance in the private "health care exchanges" (created by the government and paid for by tax dollars) and buy your own health insurance in the "free" market. You need to somehow navigate from hundreds of different plans with varying principles, co-pays, deductibles, coverage levels,  lifetime limits, and so forth (despite the fact that you have no reasonable way of knowing what your future health needs will be). Since everyone now needs to have insurance, you need to prove you have insurance on your tax forms or pay a penalty (yet more bureaucracy!). Since there are multiple private insurers, there is no unified system, so if you switch employers get ready to enter a bureaucratic nightmare [i]. If you are deemed by the government as "too poor" to afford health insurance (which you have to prove with even more paperwork), the government will step in with tax dollars only then, but probably still subject you to an army of rules about what is covered and what you have to pay.

Pensions are another example. Instead of a defined pension taken out of your weekly check, you're supposed be a mini J.P Morgan playing the stock market and managing your "wealth portfolio" in between working those 80 hour weeks and picking up your kids from soccer practice. We recently had a seminar in planning for your own retirement that was, and I am not kidding, over 20 hours of information!

University education is another example. See this article:Why Are So Many College Students Turning Down Free Money (The Atlantic) Why are billions of dollars set aside to help pay for America's hideously expensive education system (like the health care system, the costliest in the world) being wasted? The answer again is an endless array of difficult forms:
The $3 billion figure is according to the online financial resource NerdWallet. Its researchers took the number of graduating high-school seniors who, during the 2013-14 application cycle, failed to fill out the FAFSA (the Free Application for Federal Student Aid), and multiplied figure that by the average amount of need-based Pell Grant money that was disbursed among the year’s grant recipients.

It’s worth noting there are caveats to NerdWallet's findings: For one, the study dealt with high-school graduates who hadn't yet enrolled in college and only accounted for potential—rather than actual—aid money. And many American families aren't eligible for the aid. Still, what the report reveals is, perhaps, shocking: Less than half of high-school graduates last year actually filled out the FAFSA.

The FAFSA is the first step toward receiving Pell grants. As its name implies, the application is free—and, for the low-income students who are deemed eligible, the money it generates is free, too. Unlike loans, students don't have to pay off the aid. With the maximum Pell Grant amount valued at $5,775 per student for the 2015-16 year, the FAFSA alone doesn't always make a huge dent in tuition for students, especially those attending expensive private colleges. But for many it could cover the majority of the tuition at many public two- and even four-year colleges.

The amount of paperwork required complete the application could explain why so few people complete it. Filling out the lengthy form is a laborious process—and the Department of Education doesn’t try to hide that. In fact, the FAFSA "FAQ" page prominently displays the time requirements for each portion:

        55 minutes to complete and submit an initial application
        45 minutes to complete and submit a renewal application
        10 minutes to make FAFSA corrections
Compare this to countries where everyone is eligible to go to college, perhaps with the passage of a comprehensive exam. It doesn't matter who you are or what race you are or what you parents do for a living or what their income is. That is fair and egalitarian. Here students need to get a stack of books that are several inches thick each and page through them all to find "private" scholarships that will dole out free money with humorously restrictive strings attached. Are you a half-Filipino female whose father worked for Union Pacific and is studying geriatric nursing? Well then there's money for you! Do you not fit into a narrowly defined slot? Don't have time to comb through dozens of thick tomes in search of a scholarship that fits your narrow profile? Don't have time to write a ten-page essay on your deep love of Ayn Rand for the Reason Magazine memorial scholarship in honor David Koch? Well, then, I guess no college education for you! As ThinkProgress pointed out, we already spend enough money to try and make education "affordable" to give everyone a free college education. But that wouldn't involve the "free" market and hence not enough difficult paperwork. The right-wing Neoliberal solution for education expenses is special accounts where you put your money in the hands of Wall Street (assuming you've wisely picked appropriately wealthy parents, of course). Such tax-sheltered accounts require even more paperwork and bureaucracy, of course.
Every so often, a higher ed story from around the world will grab some attention stateside. A few years ago, it was students protesting in the U.K. over an increase in tuition price caps which would allow universities to charge up to £9,000. More recently, students in Chile took to the streets for the better part of two years to demand free, quality education in what had become a system increasingly segregated by class. And yesterday, an announcement by a lone holdout state in Germany has returned that country entirely to a system that charges no tuition at all.

You could forgive students on this side of the pond for being jealous and incredulous. Over here, tuition and fees have risen nearly five times the rate of inflation in the past thirty years. At public schools, they’ve more than doubled in the past twenty years. It would be sweet relief for U.S. college students just to see tuition stay stable for the years they’re in college, and beyond the pale to see tuition actually fall from one year to the next. Eliminating tuition entirely would be a unicorn.

But maybe not. Sure, rising tuition and student debt is just one of those things that people take as a given—like rising sea levels, or Justin Bieber—things that are too big to wrap your head around but cause anxiety nonetheless. But a system of high tuition and fees isn’t inevitable, and eliminating all or most of them at public schools may not even be unfeasible. Even without eliminating all tuition and fees, eliminating student debt at most colleges wouldn’t require the level of government resources that you might think.

Let’s examine. Public colleges and universities took in $62 billion in tuition in 2013. These are schools that educate three of four American college students, and eliminating that entirely—as Slate’s (formerly the Atlantic’s) Jordan Weissman and others have shown—could be done just by rearranging what we already spend on student financial aid....the federal government disbursed almost $31 billion in loans to undergraduate students at public schools in 2012-13. Without wading into the issue of how much the government profits (or doesn’t profit) on student loans, that $31 billion in “borrowing need” could be entirely made up for by reforming what we spend on ineffective and regressive tax incentives for higher education each year.
Germany Just Eliminated Tuition. It Wouldn’t Be That Hard for Us to Do the Same—And Then Some (Demos)

Home affordability is another example. Rather than make homes affordable directly, the government gives mortgage interest tax deductions. This program disproportionately benefits the wealthy and encourages high mortgage prices. It favors home ownership over renting. Yet most people think the government plays no role in the housing market.

And there's more. Recently Republican governors are besotted with the idea of humiliating anyone who needs government assistance by making them pee in a cup. This creates even more bureaucracy (be sure and keep track of all those cups!). The idea here is not to make government simpler, cheaper or more efficient (which this clearly does not), it is just political theater designed to enforce the idea that anyone who is hurting is a drug fiend, and poverty is always due to "personal failure" and "lifestyle choices" (and not, for example, low pay and lack of jobs).

Much of this is due to the "submerged state" which I see as another feature of Neoliberalism. The idea here is that the government wants to encourage certain behaviors (go to college, have kids, buy a big house, etc), and fix certain deficiencies (externalities, market failures), but cannot be seen by the public to be interfering in the workings of the infallible Market. Hence it has to use all sorts of stealth tactics like tax credits and government grants which require loads of paperwork to create the illusion that the free market is not being interfered with.

And it works. Studies have shown that most people think they derive no benefits from government action when in fact at least 96 percent of survey respondents do in some way. This leads to what one political scientist has labeled a kludgeocracy - a way for the government to try and solve problems without looking like the government is solving problems. This leads to even more waste, inefficiency, fraud, costs, and yes bureaucracy, than if we just openly acknowledged the socialized nature of the modern economy.
 In recent decades, American politics has been dominated, at least rhetorically, by a battle over the size of government. But that is not what the next few decades of our politics will be about. With the frontiers of the state roughly fixed, the issues that will define our major debates will concern the complexity of government, rather than its sheer scope.

With that complexity has also come incoherence. Conservatives over the last few years have increasingly worried that America is, in Friedrich Hayek's ominous terms, on the road to serfdom. But this concern ascribes vastly greater purpose and design to our approach to public policy than is truly warranted. If anything, we have arrived at a form of government with no ideological justification whatsoever.

The complexity and incoherence of our government often make it difficult for us to understand just what that government is doing, and among the practices it most frequently hides from view is the growing tendency of public policy to redistribute resources upward to the wealthy and the organized at the expense of the poorer and less organized. As we increasingly notice the consequences of that regressive redistribution, we will inevitably also come to pay greater attention to the daunting and self-defeating complexity of public policy across multiple, seemingly unrelated areas of American life, and so will need to start thinking differently about government.

Understanding, describing, and addressing this problem of complexity and incoherence is the next great American political challenge. But you cannot come to terms with such a problem until you can properly name it. While we can name the major questions that divide our politics — liberalism or conservatism, big government or small — we have no name for the dispute between complexity and simplicity in government, which cuts across those more familiar ideological divisions. For lack of a better alternative, the problem of complexity might best be termed the challenge of "kludgeocracy."

A "kludge" is defined by the Oxford English Dictionary as "an ill-assorted collection of parts assembled to fulfill a particular purpose...a clumsy but temporarily effective solution to a particular fault or problem." The term comes out of the world of computer programming, where a kludge is an inelegant patch put in place to solve an unexpected problem and designed to be backward-compatible with the rest of an existing system. When you add up enough kludges, you get a very complicated program that has no clear organizing principle, is exceedingly difficult to understand, and is subject to crashes. Any user of Microsoft Windows will immediately grasp the concept.

"Clumsy but temporarily effective" also describes much of American public policy today. To see policy kludges in action, one need look no further than the mind-numbing complexity of the health-care system (which even Obamacare's champions must admit has only grown more complicated under the new law, even if in their view the system is now also more just), or our byzantine system of funding higher education, or our bewildering federal-state system of governing everything from welfare to education to environmental regulation. America has chosen to govern itself through more indirect and incoherent policy mechanisms than can be found in any comparable country.
Kludgeocracy in America (National Affairs)

Kludgeocracy = bureaucracy. Neoliberalism = paperwork. As Corey Robin writes:
There is a deeper, more substantive, case to be made for a left approach to the economy. In the neoliberal utopia, all of us are forced to spend an inordinate amount of time keeping track of each and every facet of our economic lives. That, in fact, is the openly declared goal: once we are made more cognizant of our money, where it comes from and where it goes, neoliberals believe we’ll be more responsible in spending and investing it. Of course, rich people have accountants, lawyers, personal assistants, and others to do this for them, so the argument doesn’t apply to them, but that’s another story for another day.

The dream is that we’d all have our gazillion individual accounts—one for retirement, one for sickness, one for unemployment, one for the kids, and so on, each connected to our employment, so that we understand that everything good in life depends upon our boss (and not the government)—and every day we’d check in to see how they’re doing, what needs attending to, what can be better invested elsewhere. It’s as if, in the neoliberal dream, we’re all retirees in Boca, with nothing better to do than to check in with our broker, except of course that we’re not. Indeed, if Republicans (and some Democrats) had their way, we’d never retire at all.

In real (or at least our preferred) life, we do have other, better things to do. We have books to read, children to raise, friends to meet, loved ones to care for, amusements to enjoy, drinks to drink, walks to take, webs to surf, couches to lie on, games to play, movies to see, protests to make, movements to build, marches to march, and more. Most days, we don’t have time to do any of that. We’re working way too many hours for too little pay, and in the remaining few hours (minutes) we have, after the kids are asleep, the dishes are washed, and the laundry is done, we have to haggle with insurance companies about doctor’s bills, deal with school officials needing forms signed, and more.

What’s so astounding about Romney’s proposal—and the neoliberal worldview more generally—is that it would just add to this immense, and incredibly shitty, hassle of everyday life. One more account to keep track of, one more bell to answer. Why would anyone want to live like that? I sure as hell don’t know, but I think that’s the goal of the neoliberals: not just so that we’re more responsible with our money, but also so that we’re more consumed by it: so that we don’t have time for anything else. Especially anything, like politics, that would upset the social order as it is.

That’s what the neoliberal view reduces us to: men and women so confronted by the hassle of everyday life that we’re either forced to master it, like the wunderkinder of the blogosphere, or become its slaves. We’re either athletes of the market or the support staff who tend to the race.

That’s not what the left wants. We want to give people the chance to do something else with their lives, something besides merely tending to it, without having to take a 30-year detour on Wall Street to get there. The way to do that is not to immerse people even more in the ways and means of the market, but to give them time and space to get out of it. That’s what a good welfare state, real social democracy, does: rather than being consumed by life, it allows you to make your life. Freely. One less bell to answer, not one more.
Socialism: Converting Hysterical Misery into Ordinary Unhappiness for a Hundred Years (Crooked Timber)

A couple other brief points. It seems like the "free" capitalist market is resembling the Soviet equivalent that it supposedly "defeated" more and more these days. Graeber's examples above consist of Stakhanovite work ethics, wasteful busywork and pointless jobs, and massive amounts of red tape and bureaucracy. But as I've also noted previously, the capitalist market is extremely centrally planned and controlled. Recall this study from a few years back that a handful of companies control the world's money flows: Proof of Global Domination By a Few Corporations (Treehugger) As I like to point out, Wal-Mart is a planned economy. It does what free market fundamentalists claim is "impossible" every single day - coordinate production, distribution and global supply chains of every good under the sun from lawnmowers to barbecues to bananas and heads of lettuce all around the world with little disruption or acute shortages.

And finally, we all know that modern capitalist economies of the U.S. and Western Europe spy on their citizens to a much greater extent than the KGB or the Stasi ever did. The U.S. locks up more people than even Stalin's Soviet Union, and uses prison labor extensively to make its goods: From Our Prison to Your Dinner Table (Pacific Standard) Recently, "black ops" sites have been revealed in Chicago where select arrestees are "disappeared," beyond the reach of the law. America even has it's very own "gulag" at Guantanamo Bay and is mired in expansionist wars all over the globe. This isn't unrelated to the above. The extreme inequality and oligarchy that leads to extensive guard labor and prisons also leads to a society where mass surveillance is commonplace, and prisons are full of citizens. I'll leave the last word to this powerful essay by Cory Doctorow in the Guardian:
Why spy?...One obvious answer is: because they can. Spying is cheap, and cheaper every day...IT has been responsible for a 2-3 order of magnitude productivity gain in surveillance efficiency. The Stasi used an army to surveil a nation; the NSA uses a battalion to surveil a planet.

Spying, especially domestic spying, is an aspect of what the Santa Fe Institute economist Samuel Bowles calls guard labour: work that is done to stabilise property relationships, especially the property belonging to the rich.

The amount a state needs to expend on guard labour is a function of how much legitimacy the state holds in its population’s reckoning. A state whose population mainly views the system as fair needs to do less coercion to attain stability. People who believe that they are well-served by the status quo will not work to upset it. States whose populations view the system as illegitimate need to spend more on guard labour.

It’s easy to see this at work: Bahrain, Saudi Arabia, China and North Korea spend disproportionate sums on guard labour. Highly redistributive Nordic states with strong labour laws, steeply progressive taxation and tenant protection spend less on guard labour. They attain social stability through the carrot of social programmes, not the stick of guard labour.

In Capital in the 21st Century, Thomas Piketty...is trying to convince global elites (or at least the policymakers beholden to them) that it’s cheaper to submit to a redistributive 1% annual global wealth tax than it is to buy the guards to sustain our present wealth disparity.

There’s an implied max/min problem here: the intersection of a curve representing the amount of wealth you need to spend on guards to maintain stability in the presence of a widening rich/poor gap and the amount you can save on guards by creating social mobility through education, health, and social welfare is the point at which you should stop paying for cops and start paying for hospitals and schools.

This implies that productivity gains in guard labour will make wider wealth gaps sustainable. When coercion gets cheaper, the point at which it makes “economic sense” to allow social mobility moves further along the curve. The evidence for this is in the thing mass surveillance does best, which is not catching terrorists, but disrupting legitimate political opposition, from Occupy to the RCMP’s classification of “anti-petroleum” activists as a threat to national security.

Technology also brings productivity gains to social programmes. Basic sanitation, green revolution crops, cheap material production, and access to vaccines and mobile internet devices allow states to lift the desperately poor into a more sustainable existence for less than ever, affording stability to wealth gaps that might have invoked the guillotine in previous centuries. The mobile phone is important to this story, since it’s both a means of raising quality of life – through access to information and markets – and keeping its users under close, cheap surveillance.

The neoliberal answer to this is: so what? If the rich can be richer than ever without the poor having to starve, doesn’t that mean that the system is working? Boris Johnson’s big cornflakes have been sorted to the top of the packet, and have produced so much efficiency that everyone is better off for it, just as market theory predicts.

Even if you think that hereditary dynasties and extreme wealth for the few and hereditary, extreme poverty for the many is morally fine, the reality is that extreme wealth concentration distorts policy. We want policy to reflect the best available evidence, but when legislators are drawn from, and beholden to, a tiny ruling elite, they can only make evidence-based policy to the extent that the evidence doesn’t inconvenience rich people...A state that is beholden to a small number of people is also beholden to that elite’s sacred cows. It is incompatible with evidence-based policy.

Why spy? Because it’s cheaper than playing fair. Our networks have given the edge to the elites, and unless we seize the means of information, we are headed for a long age of IT-powered feudalism, where property is the exclusive domain of the super-rich, where your surveillance-supercharged Internet of Things treats you as a tenant-farmer of your life, subject to a licence agreement instead of a constitution.
Technology should be used to create social mobility – not to spy on citizens (The Guardian)

[i] this actually happened to me - when I presented my health care card at my doctor's office (we switched from United Healthcare to Blue Cross), the women I gave it to turned to the cublicle next to her and said, and I quote, "I guess I won't be talking to you for the next five hours."

Tuesday, March 10, 2015

The Sheconomy Revisited

Key takeaway - in the main, the redder the line (more female), the higher it slopes up; the bluer the line (more male), the steeper it slopes down.

The Changing Nature of Middle-Class Jobs (Big Picture)

Soon, everyone will be a nurse.
 Right now the compass seems to be pointing in the direction of health care.  That probably won’t change anytime soon:

In 1980, 1.4 million jobs in health care paid a middle class wage: $40,000 to $80,000 a year in today’s money. Now, the figure is 4.5 million.

The pay of registered nurses — now the third-largest middle-income occupation and one that continues to be overwhelmingly female — has risen strongly along with the increasing demands of the job. The median salary of $61,000 a year in 2012 was 55 percent greater, adjusted for inflation, than three decades earlier.

And it was about $9,000 more than the shriveled wages of, say, a phone company repairman, who would have been more likely to head a middle-class family in the 1980s. Back then, more than a quarter of middle-income jobs were in manufacturing, a sector long dominated by men. Today, it is just 13 percent.
The new and increasingly female path to the middle class (Marginal Revolution)

Here are the most common jobs right now:

Map: The Most Common Job In Every State (NPR) - Interactive map at the link showing change over time.

If self-driving cars are a reality, what about all the truck drivers?

Watch out, coders -- a robot may take your job, too (InfoWorld)

Jobs, automation, Engels’ pause and the limits of history (FT Alphaville)

Oh, and don't think a Ph.D. will help you: How an oversupply of PhDs could threaten American science (Teaching Report)

Monday, March 9, 2015

Innovation and Capitalism

Great points:
Human innovation exists despite capitalism not because of capitalism. The assumption that capitalism makes these innovations and creations is inaccurate. Correlation is not causation.

People claim they love capitalism because of all the innovations and luxuries it has brought them. This is despite the obvious fact that we live in a capitalist system therefore must function within it to meet our basic needs. There is a more problematic element to this joke, the assumption that capitalism makes anything good or innovative happen. As stated above innovation exists despite capitalism not because of capitalism.

Vincent Van Gough painted some of the most iconic and innovative art in the world. Van Gough sold one single painting his entire career. According to capitalism this was not successful. Reality is that Van Gough had one thing in his favor, he did not have to contend with the cost of living. His brother paid his way as he painted and failed at capitalism. Many innovations are made in technology today through groups who work on open source projects. These are done not for profit but to better the world. The claim that the motive for profit is what drives innovation is false.

Capitalism exploits innovation. People create and innovate for many reasons. The capitalist system hinders this. How many great untapped talents have wasted their lives struggling to only meet the cost of living or scrape by without being able to even meet this? I’m sure most people reading this can say they have untapped talent. Many feel if only they were not focused on just getting by they could do more. We see this in privilege. Those of wealth and privilege are able to cover the cost of living while they focus on dreams, innovations and future endeavors. Others find they simply cannot make the basics yet alone put their time, money and efforts into the brilliance and creativity they have to offer the world.

The current system we have is a hindrance to human advancement. In a system of capitalism we see competition which requires a loser or many losers for one’s success. This is on top of the exploitation of labor which restricts the liberty and advancement of others through wage labor. We choose wage labor over pursuing our talents or brilliance because we wish to survive, not because we want to toil for the capitalists benefit.
I love Capitalism Because Of All The Good Things It Gave Us (Soap Box Books)

Related: Forget Edison: This is How History's Greatest Inventions Really Happened (Atlantic) That's not even considering all the accidental inventions: Whoops! The 10 Greatest (Accidental) Inventions of All Time (Gizmodo) It seems like the link between capitalism and invention is coincidence rather than causation.

Sunday, March 8, 2015

Growth Bites Back

It's smog, not the Great Wall, that can be seen from space.
One of the simplest tenets of skeptics of growth and technology is that growth always has costs, and after a while, the costs of increased growth outweigh the benefits. This fact is so simple and so profound, you would think people, even those mesmerized by modern technologist propaganda, would have an easy time getting it.

Those of my readers who peruse the Archdruid Report regularly (and I suspect that's most of you) are aware that the recent subject has been that of externalities. I wrote about that subject back here, and my point was that economists always treat externalities as minor exceptions that can safely be ignored in most cases, whereas in reality, in a complex, mass-production economy, there is virtually no transaction which does not include significant externalities. Thus economics once again uses a sleight of hand to assume an economy that has no connection to the real world in which we actually live.

I did take exception to the idea that technology can be defined as that which increases externalities. The fact that technology does often do this in practice is not in question, but I do not think it is a workable description of technology in general. That is, technology does not behave this way by necessity, rather I argue (as he does, really) that it is our economic system which promotes the dumping of externalities on the wider society rather than simply the use of technology per se. It's nice to see that Ran had some of the same objections (March 4).

But the externalities issue is important as two very prominent recent stories show. Both came out at the same time, and both show the extent to which our intensification of technology is having unintended and unacceptable consequences.

The first is a study which got some attention - chemicals which we are now dependent upon disrupt the hormones in our bodies costing billions of dollars:
Common chemicals that disrupt human hormones could be costing more than €150bn ($165.4bn; £108.5bn) a year in damage to human health in Europe, a series of studies claims. The data suggests the high economic impact of chemicals in pesticides, plastics and flame retardants. The team, led by New York University, said the estimates were conservative. However, experts cautioned the findings were "informed speculation" and called for more detailed research. The data was presented at the annual meeting of the Endocrinology Society.
Hormone-disrupting chemicals ‘cost billions’ (BBC)


99 Percent Certainty Hormone-Altering Chemicals Cause Serious Health Problems (Disinfo)

I like this comment:
I read an article somewhere the other day about a certain chemical that had been found in a particular food product. One of the first people to pipe up on the comment thread was someone who claimed that the amount of the chemical found was inconsequential, etc. They had various numbers they offered to demonstrate that point. I just kept thinking about all of these inconsequential amounts of chemicals of various kinds, combined in unpredictable ways under a variety of conditions in various foods, and how that had to add up to something potentially very harmful.

And then, of course they'll make you out to be some sort of environmental flaketivist, ignorant of the crucial role of chemicals in all of life, plus WATER! I didn't bother to reply, because damn, some things should just be readily apparent. I could only wonder if that person's greater level of ignorance was part of a job description, or simply due to the blindness that can be induced by the pursuit of a particular discipline, be it scientific in nature or otherwise.
That's interesting because apparently "leftists" and "flaketivists" (great term) are the only ones concerned about, I don't know, having a healthy, disease-free body! Red-blooded Sarah Palin Americans just ingest chemicals all day long like real, patriotic Americans without worrying about getting cancer like those sissy libruls. Time for some coal-rolling!

The other is the air-quality documentary that is taking China by storm: Under the Dome. I was surprised the government even allowed it to be made and released. It looks like the leadership is having second thoughts - it has now been pulled from online. I think the reaction was more than they bargained for.

Now, here's my guess. Recent headlines are that the Chinese leadership is finally trying to rein in growth to more acceptable (and realistic) levels. This is a tricky balancing act, because growth is how the leadership has bought off its people for so long under miserable conditions (cancer villages, FoxConn, "anthills', etc.). When that slows, you could have potential unemployment and unrest. This documentary gives the leadership an excuse to say, "yes, growth is slowing, but that's a good thing. It's the only way to start to clean up the environment." By framing it as a tradeoff between continued growth versus, well, breathable air, the leadership can claim lower growth as a good thing for most people. And to accomplish that, it helps to point out just how bad the environment actually is. This gives them the perfect excuse to hide behind as they rein stuff in. As the article above quotes an official as saying, "Deep-seated problems in the country’s economic development are becoming more obvious. The difficulties we are facing this year could be bigger than last year. The new year is a crucial year for deepening all-round reforms." See: China Will Need A Series Of Miracles To Sustain Growth (BI) and Why China Needs Such Rapid GDP Growth: More Jobs (Bloomberg)

But all this points to the fact that the costs of growth are getting higher and higher. Things, like, well, cancer and disease. But then again, cancer and disease cause growth - and not just of tumors, but of hospitals and doctors and pharmaceuticals. So it's all good right? As Edward Abbey said, growth for the sake of growth is the ideology of the cancer cell.
Even when inequality and pollution problems are described, they are considered separate from the growth process—as “side effects” of growth rather than issues that detract from the extent of growth itself. Headlines read, “China Blocks Access to Air Pollution Data,” “China Declares War on Pollution,” or “China’s Wealth Disparity Erupts in Protest.” It could, however, be argued that such destructive types of growth both take away from “good” growth and dampen positive growth in the long-run, so we should read about growth and its associated externalities within the same context. This is clearest in the case of pollution, where natural resources are destroyed and rendered unusable to future generations.

For example, China is home to many “cancer villages” along the Huaihe River, into which toxic factory effluents are emitted. This has reduced production costs in the leather and paper industries while poisoning a source of drinking and irrigation water. The pollution of the river not accounted for in the cost of production of leather and paper goods, and future health care costs and resource destruction costs are not accounted for either (except that “defensive expenditures” like health care or environmental cleanup costs will add to future GDP!). Yet the GDP growth rendered by production processes along the Huaihe River is part of what has been considered China’s stellar “post-reform” economic performance.

A better representation of China’s growth would include social and pollution costs. These costs would detract from GDP itself by incorporating negative externalities. Years ago, China attempted to account for environmental costs in GDP using a measure called Green GDP. However, after taking into account pollution costs, GDP was substantially reduced; this proved politically unfeasible and the practice was ended. If inequality were similarly accounted for within growth statistics, China’s GDP would also decline. If prices reflected the social and environmental costs of Chinese goods, producers and consumers would think twice before supporting this type of production regime.
Is All Growth Good? The Case of China (Naked Capitalism)

One fifth of China's farmland polluted (Guardian)

China’s Suicide Rate Among the Highest in the World (Freakonomics)

Is Work Killing You? In China, Workers Die at Their Desks (Bloomberg)

Could Diabetes Derail China? (Bloomberg)