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Roger Altman reminds us we don’t live in a democracy

Wall Street financier and former Clinton Treasury official Roger Altman steps forth today to yet again inform us that we’re ruled by the bond market and not democratically elected leaders.  Few with a reasonably sound grasp of events would disagree with his assessment, but it’s always grating hearing it from one who so clearly glories in it all.  He penned a similar article a year and a half ago in which he praisingly identified the “markets” as the second most powerful force on earth behind nuclear weapons.  I was motivated then to write a post comparing this adulation of power to that of Wagner’s gods as they entered Valhalla in Das Rheingold.

In the current article, he now tells us quite rightly that “It was not Angela Merkel, chancellor of Germany, or other political leaders who pushed austerity on to Italy, Spain, Greece and others”, “it was private lenders”.  “Markets triggered the Eurozone crisis, not politicians” and “21st century markets are much more powerful than any government leader”.

The terms he uses here, “private lenders” and especially “markets” need to be quickly branded as mere euphemisms, though, for the harsh underlying reality that hovers over us.  National governments are mere small town functionaries compared to this larger force; real power isn’t in their hands, and it’s not in the hands of a neutered faceless invisible creature of implied fairness called “markets”.  True power rests with an extraordinarily tiny gang having immense power assembled through their tight grip on corporate ownership, wealth, and banking.  In short, they rule by the concentrated ownership of money.  The traditional term for this form of rule, going all the way back to Aristotle, is oligarchy.

Altman is telling us nothing less than that we don’t have agency over our lives, that we don’t live in democracies, and that we live instead under the tyrannical rule of an oligarchy, albeit he understandably prefers the term “markets”.  It’s not necessarily too smart for the oligarchs and assorted mercenaries to emphasize this hard political fact as it risks waking up a confused and dozing population who still tend to see their real rulers as elected through some type of however imperfect democratic process.

Altman’s a bit too confident for his own good it seems; he’s dazzled by the radiance of his gods, and assumes way too easily that the “political” can forever be safely segregated from material well being, i.e. the “economic” and that “markets” will always be identified with the fairness of, say, the local farmer’s market.  He tells us that “History is not likely to view these austerity trends in political or moral terms.  Rather, the context will probably be a financial one”.  As if overruling popularly elected governments and forcing hundreds of millions into destitution isn’t the very purest example of what politics and morality actually are; and as if “finance” somehow exists in some strange dimension of the universe completely disconnected from politics and morality.

The immoral, fully political system for which Altman speaks is a brutal tyranny that will begin its final collapse when majorities start realizing its true nature; when they stop blaming the Merkels of the world and see the oligarchy for what it truly is.  We should thank Altman for aiding in this great educational process.

Professor Krugman goes to Mexico

Poor Mexico, so far from God and so close to the United States!  Or to paraphrase this well known quote: So far from social justice and so dominated by neoliberalism.  Either way, the fundamental cause of the misery, poverty, and insecurity in Mexico should seem clear to even the most casual observer – it’s not a lack of natural resources or the ability of the nation to provide for itself agriculturally, Mexico is fundamentally rich; the core problem, plain and simple, is inequality.

Mexico is one of the most unequal nations on earth, second only to Chile in all of Latin America.  The OECD reports that the top 10% grab a massive 36% of total income while the bottom 10% somehow subsist on but 1.3%.  The wealthiest tycoon on the planet, Carlos Slim, is Mexican and his estimated net worth is $78,000,000,000, 16.6 million times the median household income of $4,689.  The Mexican agency CONEVAL  reports that 46.2% of the population is poor, and an additional 34.7% is vulnerable due to either social deprivation or low income.  Only one in five Mexicans, they show, has enough income to satisfy basic needs and live without social deprivation.

The elites of this feudal system have no modesty in the degree of their parasitic extractions and the Bank of Mexico plays its part by maintaining an extraordinarily high rate of interest for a nation on a fiat currency.  The current short term riskless benchmark rate is a whopping 4%, a transfer of purchasing power to the most powerful of $40,000 per million of wealth, 8.5 times the median income.

While unreported in the American press, I noted today that our very own Paul Krugman visited Mexico the other day and delivered an address to the annual convention of the Aseguradores (insurers) de México in Mexico City.  He was one of the three headline speakers, along with, get this, Spain’s former right wing president José Maria Aznar and Rudolph Giuliani.

So, what did the world’s premier conscience of a liberal tell this illustrious, socially undeprived audience about their country?

Well, here’s a few excerpts on Krugman’s presentation via the Mexican paper La Jornada (translated from Spanish here and here).  No hint of the inequality problem for this well heeled audience, everything’s essentially ok in fact, let’s wait a few decades and see if better education and a bit of child nutrition bear fruit.

Mexico seems to be a happy story in the context of the international economic crisis.  Everything functions very well except the rate of growth, which doesn’t correspond to the policies adopted, suggested Paul Krugman, winner of the 2008 Nobel Prize in Economic Sciences.

Krugman indicated that “there is constant growth, but there is something that doesn’t click” and suggested as an hypothesis that although Mexcio has improved its social policies in support of the most poor, there are tasks, like the quality of basic education and child nutrition, that will take time to bear fruit.

“We don’t understand at what mysterious point in time that Mexico lost its capacity to grow at a faster rate while other countries, equally unregulated, were able to increase their growth in a sustainable way”, he said.

He recommended to have patience in order to permit the changes in the system of basic education to begin to show results, after emphasizing that investments in human capital tend to take 15 or 20 years to impact growth rates.

“I feel optimistic over the long term for Mexico.  There are those who think it will be around 2030 when higher rates of growth will arrive and that seems about right”, he said.

What vacuous nonsense!  Adam Smith hit the nail on the head on these types of feudal societies back in the 18th century:

Wherever there is great property there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many.  

Comparing Krugman’s words to this icon of the right is quite a depressing exercise.  But such is the state of 21st century “Keynesianism”.

Health care and other services have no need for finance

Obama health care advisor Ezekiel Emanuel’s article today in the Wall Street Journal is an excellent example of how the discourse of finance so easily trumps the real world.  Fearing that health insurance premiums will be too high if not enough healthy young people sign up for Obamacare, he calls for a marketing campaign to get the youngsters to sign up and pay up.

While I suppose this could make sense in the warped regime of finance, it’s quite twisted in the realm of the real.  Real health care resources, after all, are available and they’re standing by eager to provide their services.  In fact, the Journal had an article the other day showing there’s actually an oversupply of nurses.  So, given this availability in the real world, why do we need to worry about finance?  Why do we need to take money away from the average person in order to have a health care industry?

We need to look at this within the broader context of a thoroughly abused population that’s seen its median income as a share of total national income drop an incredible 40% since the 1970’s.  This is robbery, pure and simple; and it’s become a stable fixture of our world given the neoliberal dynamics of ever intensified global labor competition and ever advancing labor saving technologies.  Few things in life are more certain: left to themselves, incomes and general living standards will continue to decline.  Unions helped retard the power dynamics inherent in capitalism during the first seven decades of the 20th century but they’re now gone.  Collective democratic action is the only remaining recourse.

I think the most effective immediate means to improve general prosperity is to fund via direct monetary creation those programs that benefit everyone.  This would include health care, retirement, and other public services.  Providing these for free would be far more effective at achieving a just society than the assorted road, airport, and infrastructure projects funded by debt that are so adored by the center-left but would do little for median incomes.  Not that we shouldn’t also do some of those projects as well, but I think we need to first begin to correct the robbery of living standards that’s occurred for decades now.

It’s highly doubtful that direct monetary creation would be inflationary given humanity’s enormous productive capacity.  Perhaps some of the oligopolistic firms would seek to increase their profit margins in the face of higher purchasing power, but the straightforward solution is price regulation, the obvious requirement for any monopoly-like industry.

Finance isn’t the solution, it’s the problem and basic programs that serve everyone shouldn’t be financed.  They shouldn’t be because, in a world of vast productivity, they don’t have a cost.  Only in the strange world of orthodox finance is a cost created, as if by magic.  The global problem is a lack of employment and purchasing power and not remotely one of real costs needing financing.

The average person won’t see an improvement until the entire foundation of orthodox finance collapses.

Krugman is faking it

Krugman tells us today that “One dead giveaway that someone pretending to be an authority on economics is in fact faking it is misuse of the famous Keynes line about the long run”.  He often likes to use this particular quote but I wonder if it’s perhaps the only one he’s ever read of Keynes given that so much of his economics violates the spirit and very words of Keynes.  He then goes on to provide an excellent example of this Keynesian fakery by asserting that we must recognize “that the boom, not the slump, is the time for austerity”.  What!? Just a cursory look at the entire history of capitalism’s unending boom / bust cycles should dispel the myth that there’s ever an appropriate time for austerity.  Keynes saw this very clearly and the very idea of instituting austerity in boom times violates many of Keynes’s famous lines as we can see:

Thus the remedy for the boom is not a higher rate of interest but a lower rate of interest! For that may enable the so-called boom to last. The right remedy for the trade cycle is not to be found in abolishing booms and thus keeping us permanently in a semi-slump; but in abolishing slumps and thus keeping us permanently in a quasi-boom.

Furthermore, even if we were to suppose that contemporary booms are apt to be associated with a momentary condition of full investment or over-investment in the strict sense, it would still be absurd to regard a higher rate of interest as the appropriate remedy. For in this event the case of those who attribute the disease to under-consumption would be wholly established. The remedy would lie in various measures designed to increase the propensity to consume by the redistribution of incomes or otherwise; so that a given level of employment would require a smaller volume of current investment to support it.

I feel sure that the demand for capital is strictly limited in the sense that it would not be difficult to increase the stock of capital up to a point where its marginal efficiency had fallen to a very low figure. This would not mean that the use of capital instruments would cost almost nothing, but only that the return from them would have to cover little more than their exhaustion by wastage and obsolescence together with some margin to cover risk and the exercise of skill and judgment. In short, the aggregate return from durable goods in the course of their life would, as in the case of short-lived goods, just cover their labour costs of production plus an allowance for risk and the costs of skill and supervision.

Now, though this state of affairs would be quite compatible with some measure of individualism, yet it would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are no intrinsic reasons for the scarcity of capital.

See any Krugman in these words?  Of course not.  While we can agree with some of his moral points regarding social policy, we must recognize they aren’t grounded in anything like a sane or progressive view of economics.  I don’t think it’s possible to have a socially useful economic theory that’s to the right of Keynes.

I liked yesterday’s post along these lines, by the way, by economist Matias Vernengo on his blog Naked Keynesianism.

The link between spending and debt must be severed

Paul Krugman rather disingenuously tells us the other day that “there won’t and can’t be any current-events test of MMT until we get out of the slump, because standard IS-LM and MMT are indistinguishable when you’re in a liquidity trap”.  This theorem of untestability is a pretty broad claim by the professor, one that not only lacks imagination but also fails to stand up to the light of the real world.

It’s true that both positions call for increased deficit spending to counter today’s misery, but there’s a fundamental difference: Krugman’s generic center-left school claims the spending must be accompanied by higher public debt while the “Modern Monetary Theory types”, in contrast, see no reason to necessarily link the two.  Krugman does sometimes subtly hint that direct monetary creation may be ok, but he never comes close to proclaiming it in a straightforward and obvious way.  In the public mind, the center-left platform is quite clear: spending should be increased today but, critically, it should be accompanied by a rise in public debt.  This should actually be seen as a quite shocking, even radical, proposition: even though there is massive un/under employment and no identifiable real cost to bringing people into the economy, society must still pay a cost to the “financial markets” in the form of higher indebtedness.

Linking public spending at a time of unemployment to expanded public indebtedness is so embedded in our collective common sense that we’ve become unable to see how absurd it truly is.  Suppose Krugman asserted there couldn’t be a “current-events test” between his theory that, say, linked public spending with the sacrifice of a family’s first born son to another that allowed for spending but without the sacrifice.  The “current-events test” would then be quite easy would it not?  The public would simply not support the former, while it would be expected to support the later.

And that’s the way it is in our real world where the public’s sacrificial offering is rising debt.  We find a public that’s confused and powerless.  Debt has such hugely negative connotations that no politician can realistically support it for very long.  The center-right will be condemned and kicked out of office for failing to provide prosperity, only to be replaced by the center-left which will do about the same, only to be then kicked out in turn and replaced by the center-right, ad infinitum.  All populations support public spending, we know this from polls and from common sense; the issue is debt.  A perfectly reasonable “current-events test” clearly shows that Krugman’s proposition is completely nonviable and won’t ever be tried; while the MMT position would be highly popular if presented as an option.

Financial Times writer Tony Barber gives us a few independent words on this general subject today.  Speaking of Europe, but the same applies everywhere, Barber notes that “a collective howl of protest and despair” is on the streets this May Day and “for the first time in generations, parents fear the future living standards of their children will be lower than their own.”  Clearly there’s massive support for a public spending solution, but he rightly observes there’s little action from the center-left parties who “no longer appear capable of fulfilling their historical mission as protectors of jobs, welfare and social cohesion.”  It’s an endless circle: “the shortcomings of centre-right governments guarantees that the centre-left will one day return to power” but the center-left’s “fatal” problem is that it presents itself as “an engine of high public expenditure”, violating the central tenant that “responsible nations keep public debts and budget deficits under control”.  “Winning a reputation for sound management of the public finances”, Barber correctly tells us, “is essential for the left’s long-term success”.

This is the on the ground reality, the “current-events test” – spending will not occur if it’s to be tied with rising debt.  Ignoring this, Krugman marches forever onward as the proud leader of a school of thought that can’t possibly garner widespread support.  The real world gives us exactly the “current-events test” we need, and nothing can be clearer – Krugman’s position is politically and morally bankrupt.  The link between spending and debt must be severed.

Reinhart – Rogoff and the center- left economists

There’s a great deal of jubilation among center-left economists these days ever since the demolishing of the Reinhart – Rogoff proposition that horrible things happen when public debt exceeds 90% of GDP.  And, of course, I’m quite pleased whenever a hack for oligarchy is cut down to proper size.

But the conclusion being drawn – that yes, we can now expand our debt to well over 90% and we have no reason to fear it – is completely off kilter and assuredly destined to fail as long as we remain stuck in the current paradigm.  Reinhart – Rogoff were wrong on the details but they’re living comfortably in the orthodoxy that permeates our world.

Those of us who aren’t wedded to the individualist liberal / neoliberal cannons of orthodoxy take comfort in the insights of Abba Lerner, the MMT economists, and simple common sense that there truly can’t be such a thing as public debt, in the way we normally understand debt, in a fiat currency regime.  But we need to remember this is true only in a universe in which a collectivist paradigm rules.  In the actual paradigm that’s existed since the beginnings of the industrial age through to today, though, public debt is quite definitely debt and has a positive interest cost attached to it. And its level is clearly a cause for concern because it will require future interest transfers between the average citizen and wealthy bond holders.  Interest rates are low today, but let’s not forget that our central bankers are firmly cemented into orthodoxy and are chomping at the bit to raise rates as soon as conditions allow.  Deep down, they’re all German, and all this money printing will stop dead in its tracks as soon as things look less dire.

Only in a collectivist paradigm are we assuredly correct that debt fears are nonsense.  The main center-leftists, though, are falsely assuring us that we can comfortably fit collectivist ideas into the orthodox paradigm.  It’s completely irrational to claim debt shouldn’t be feared in our current state, and it’s highly unlikely any majority would ever support them.  It fails on the merits and it fails on the politics.  And we see it demonstrated today.

Without a much wider critique, completely absent from our mainstream center-leftists, there’s a very high risk we’ll have another eventual repudiation of Keynesianism on the same scale as in the 1970’s, and Reinhart – Rogoff and the forces of conservatism will emerge fully renewed and proudly victorious.

A hatchet job in the New York Times on Denmark’s welfare state

What a hatchet job by the New York Times today on Denmark’s welfare state!  In a piece that could have been written by Paul Ryan or the most right wing Chicago economist, Denmark’s system is condemned without nuance and without the niceties of even one differing opinion.  The Times and the author, Suzanne Daley, should be ashamed of themselves.

The article completely ignores the plain and simple fact that human productivity is at stratospheric levels and the real global problem within capitalism is far removed from a need to squeeze ever greater work out of people.  The problem, in fact, is exactly the opposite; we have no freaking idea how to go about employing everyone.  Unemployment and under-employment are the central issues everywhere, not, as Daley suggests, a lack of a work ethic.  We’ve clearly solved the production problem and it’s far past time we move beyond it.  In the eloquent words of John Kenneth Galbraith,

“To have failed to solve the problem of producing goods would have been to continue man in his oldest and most grievous misfortune.  But to fail to see that we have solved it, and to fail to proceed thence to the next tasks would be fully as tragic.”

So, people of the small nation state of Denmark have decided that the great richness of human productivity should be, at least to some degree, widely shared.  But speaking as if it were an objective fact rather than a right wing opinion, Daley decrees this to be a fault.  There are limits to how well people can live collectively and Denmark has greatly exceeded them.  Harking back to the welfare queen of Reagan, she cites a single mother, “pitiable” she implies, who receives $2,700 per month in welfare benefits, and then proceeds to identify such other “faults” as “dawdling university students” who receive free education, young pensioners, “cradle-to-grave” safety nets, free health care, child care support, and, God forbid, maid service for the elderly.

She states that “few experts here believe that Denmark can long afford the current perks” but doesn’t identify who these so called “experts” are and what interests they represent.  Nor does she recognize the crucial question of what “afford” can mean in a world of massive productivity.  She quotes an editor who claims “We need to be an agile society to survive”, but why is that?  An animal in brute nature needs to be agile, but why would man need to be so in our current state of development?  What are the forces which demand agility rather than perhaps friendliness, compassion, or community spirit?  Are they physical forces of nature or are they mere products of our socio-economic system?

That this is a pure propaganda piece is displayed in the brightest of lights when she compares the percentage of people working in Denmark to the United States.  Denmark wins this contest actually with 73% working versus 65% in the US.  This would seem to demolish her entire thesis of a lazy pampered people but she’ll have nothing to do with mere empirical facts.  “(C)omparisons are misleading”, she informs us, “since many Danes work short hours and all enjoy perks like long vacations and lengthy paid maternity leaves, not to speak of a de facto minimum wage approaching $20 an hour. Danes would rank much lower in terms of hours worked per year.”

Apparently there’s something improper about people having decent vacations and maternity leave.  And what exactly is her point about a minimum wage of $20?  What should it be, Suzanne?  And on the facts about hours worked, had she checked with the OECD, she would have found that average hours in Denmark are actually higher than in France, Germany, and the Netherlands.

The people of Denmark should be proud of their relatively high level of social justice and well being.  There are many people in Denmark and throughout the world, the “experts”, who seek to reverse these great gains, and their prime weapon is the false claim, based solely on the callous demands of the gods of finance, that despite massive productivity, we somehow can’t “afford” to live richly.  This Times piece is nothing but an editorial for this viewpoint and would sit comfortably on the opinion pages of the Wall Street Journal.

Ratio analysis using Excel

Reinhart and Rogoff have given us a fantastic demonstration of the sheer power of Excel when it comes to the analysis of the political economy.  While their conclusion that catastrophes result when the ratio of public debt to GDP exceeds 90% turns out to be sheer nonsense, we mustn’t lose sight of the fact that Excel is a powerful tool indeed when it comes to political economy ratios.  I think it only proper, then, to devote a complete post to political economy ratio analysis using Excel.  Here are five ratio based questions in which I think Excel demonstrates its great power.  For instructional purposes, I recommend that Reinhart and Rogoff practice with these examples.

1) QUESTION: Since the beginning of industrial capitalism in say 1775, what is the ratio of human generations (25 year periods) in which the global system had either a major systemic crisis or devastating war to the number of periods in which it didn’t?  ANSWER: In our spreadsheet, we find there are 10 such periods, 10 of which present crises, wars, or both and exactly zero which don’t.  Using the mastery of Excel, we find the ratio is #DIV/0!

2) QUESTION: Continuing with the long term, what is the ratio of governments which have been controlled by concentrated wealth to those in which true democracy ruled?  ANSWER: Using the sophisticated data base features of Excel, we assemble a comprehensive listing of governments and find the ratio is exactly #DIV/0!.

3) QUESTION: John Kerry tells us today he is in a “confrontation with evil”.  What is the ratio of foreigners killed by American nuclear weapons to Americans killed by foreign nuclear weapons?  Excel provides the answer: #DIV/0!  What is the ratio of wars started by the US against foreigners since WW2 to those started against the US?  In an instant, Excel tells us it’s #DIV/0! 

4) QUESTION: What is the ratio of the world’s median income to the wealth of the richest man, Mexico’s Carlos Slim?  Excel makes this easy by enabling one to view the tiniest of fractions!  The ratio is .0000017%, so small it’s not easily understood.  If Mr. Slim is the distance between here and our furthest planet Neptune, then this ratio tells us that the median income is a bit less than half the 100 miles between the luxury confines of Park Avenue and the mansions of the Hamptons, a reasonably doable bike ride.  What a great tool is Excel!

5) QUESTION: Returning to our Secretary of State, what is the ratio of the median net worth in the US to that of John Kerry?  ANSWER: Again, how easy with Excel!  It’s .025%.  If Kerry were the distance between Park Avenue and Beverly Hills, 2,448 miles, the median net worth would be just over half a mile, perhaps a short walk to the local grocery store. 

So that’s it.  Despite the ineptness of Reinhart and Rogoff, I think it’s clear that when it comes to the ratio analysis of our political economy, few tools are more powerful than Excel.

It’s the labor share, stupid!

Japan is attempting to stoke a bit of inflation through its new monetary policy and, unsurprisingly, Paul Krugman is quite pleased.  His trademarked solution for getting out of the current depression, after all, is right down these lines: real interest rates, despite being near zero, are still too high because the profitability of new investment spending is even less.  The central bank, accordingly, should create inflation so as to lower the real interest rate and the way to do so is to “credibly promise to be irresponsible”.  It’s the same policy at the Fed.

The premise that new investment won’t occur unless it’s more profitable than the going rate of interest is one of the few ideas of the original Keynes that Krugman has retained.  While there’s some merit to this interest rate differential theory of investment (disregarding the risks of stoking higher inflation), it seems to almost completely miss what’s really going on today and where the focus needs to be.

The problem with mainstream economists is that they can’t go beyond tiny tweaks; if they did, after all, they wouldn’t be mainstream economists.  To get real insight, we therefore need to move way beyond the mainstream; and where better to start than Michal Kalecki.

We know, through Kalecki, that in a private capitalist economy, profit is necessarily equal to the amount spent by the capitalists, either for luxury or investment.  We also know that we live in a world of massive productivity in which oligopolistic corporations have tremendous power, both in setting prices and in forcing down the wage.

Kalecki, unlike Krugman and the mainstream, stresses the importance of the level of real wages in determining output and employment and we gain great understanding by following his logic.  From his analysis, it becomes clearly self-evident that output and employment will expand faster with a higher real wage as every monetary unit spent on investment would have coupled with it the spending power of the higher wage.  We note that total global profit is unaffected by the higher wage because the wage is both an expense and a source of income, netting to zero as far as profit.

Here is Kalecki’s simplified formula for total output:

       Total Output = Investment / Share of Profit in Value Added

The formula is simple common sense – of course output, and therefore employment, will be determined by both the combination of investment spending and the amount of additional production brought on for worker consumption.  But we find it gives us great insight into what’s truly needed to bring us toward full employment.  Krugman focuses like a laser on investment, the numerator of this formula, but as we’ll see, the denominator is far more important.  Let’s demonstrate.

According to the NBER, the labor share of non-farm business sector output in the United States was just 58% in 2010, its lowest since WW2.  Declining worker shares of total income are a global phenomenon and, given the great inequality in wages themselves, the figure is even misleadingly overstated as far as the average worker is concerned.  Nevertheless, let’s use this number, a 42% share to capital, and determine the effects on output given a 10% increase in investment versus a 10% increase in the worker share.

If we start at a base investment of 100, then the beginning output would be 238 (100/.42).  If we increase investment 10%, then the new output assuming the same labor share would be 262, a 10% increase (110/.42).  But if we keep investment at 100 and increase the labor share by 10%, what do we get?  A whopping 31% increase in output!  (100/.32.)  And if we allow labor to capture yet another 10% of income bringing it to 78% of the total, output increases by an incredible 91%!  Paraphrasing Bill Clinton, it’s the labor share stupid!

These are incredible numbers and they demonstrate the fundamental falsity and class interest involved in focusing only on investment.  It’s even worse, though, as much of mainstream economics and global public policy actually do focus on wages, but, incredibly, they try to reduce them even further, claiming the need for ever greater “competitiveness”!  What would happen to output if the labor share dropped another 10% from where it is today?  Output / employment would drop 19%!

The global problem is clearly one of a grossly abused workforce and its extremity is one of the foundational aspects of neoliberalism.  No proposal should be considered as serious unless it puts the labor share of output fully front and center.

The Debt Justifiers: purveyors of weakness

We have a veritable industry these days on the center-left seeking to convince us that debt, while bad, isn’t quite as horrible as we might think.  These Debt Justifiers, mostly self proclaimed Keynesians, remind me of purveyors of junk food in that they offer us nothing but a diet guaranteeing collective weakness.

We see it well illustrated today in a post by Dylan Matthews appropriately entitled “Why do people hate deficits?”.  Unsurprisingly, it’s strongly recommended by that prime junk food purveyor of all, Paul Krugman.

The essential truth so very well hidden by these Debt Justifiers, however, is that we as a people are in a horribly demeaned position.  As individuals, we are little more than commodities desperate to sell ourselves in a globalized “labor market” dominated by incredibly powerful oligopolistic “bosses”.  We are mere “employees” and, as such, lack just about all agency.

We are as a society like we are as individuals, existing in a state of extreme weakness under the thumb of our collective boss, the financial markets.  The prime question we’re prompted to ask by the Debt Justifiers is whether or not we can possibly afford to borrow ever more from this collective boss.  Can we, as a society of mere employees, afford to keep borrowing in order to maintain a quasi-civilized way of life?  The Debt Justifier, like a mortgage hustler, says don’t worry – yes we can.  But the very question itself is completely sterile and does nothing but expose our collective dependence.

There is only one healthy way to act as a society, and that’s to firmly assert collective agency and stand up, against the power of the boss, and begin producing in a manner and level that brings about widespread prosperity.  We demonstrate health when we speak of collective real productivity and technological capacity and quality of life and monetary sovereignty; we remain bedridden in sickness when we stay mired with the Debt Justifiers.