Wednesday, July 27, 2011

Patent Trolling: Just Another Form of Capitalism

The dawn of the information age has ushered in a new form of value in intellectual property. Patents are based upon the innovative character of new kinds of tools, business models and processes with economic value. And like all economic functions, the patent occurs in, and helps to propagate, a specific social relationship of value.

Enter the "patent troll:" an irreverent term referring to those who deal in the purchase and defense of patent rights. Patent trolls purchase troves of patents, then litigate to turn a profit on their purchase. Sometimes, the patent merchants get a cut of the proceeds from litigation executed by their customers. All this is justified as defense of intellectual property and encouragement of innovation. But this is actually a simple form of capitalism.

Monday, July 18, 2011

Profit or Society?

I want to talk about the profit motive, because despite being the cornerstone of capitalism it is highly misunderstood. All sorts of proclamations about the profit motive's success as a social and economic model are published in the media daily. Other causes for social and economic conditions are often avoided, and where profit has a clear negative bias, it is generally de-emphasized.

The profit motive is a simple form of the incentive model. Incentives are conditions in a system which reward or punish different kinds of behavior. Profits refer to one subset of incentives: those which resolve in positive or negative changes to net worth. Needless to say, human incentives are more complicated than this, and strictly for-profit business models still need to account for more different changes which may not be clearly linked to positive or negative account balances. But the capitalist system tends toward this model of profit, and incentives processes are typically explained in this way as well.

Friday, July 15, 2011

The Job Creator's Tragedy

It's tough being a job creator these days. High taxes make it virtually impossible to hire more workers and an atmosphere of uncertainty is discouraging more investment in capital. Nobody would propose raising taxes on job creators under these conditions, right?

George Washington oversees the "car in the ditch" economy on Wall St / September 16th, 1920
That's the setting for the latest tragedy, that is. The job creator, ever heroic and noble, is accosted at all sides in his attempt to get the economy back on track. He confronts the Hydra of government and the armies of ignorance in his uncompromising quest to get the economy back on track. And this truly is a tragedy - our hero could perhaps be known as Supervacuo, and his tragic weakness - the fact that the job creator has absolutely no interest in creating jobs.

Monday, July 11, 2011

Alex Tabarrok Doesn't Get It: Why Civil Society is a Victim of Capitalism and Statism

Why don't Americans think that they use government services?

In citing Yglesias, Bartlett and Rampell, Alex Tabarrok attempts a moralization about coercion - without seeing that his attack on the government is no different than an attack on capitalism. See the following:
"What Rampell et al. implicitly imagine is that the natural state is slavery and any departure from that state a government benefit. Thus, if the government taxes your saving for a college education less than your other savings, you should be grateful for how government has benefited you and your children.
And if the government doesn’t jail you today, you should be grateful for how government has granted you the benefit of liberty.
This is the attitude of a serf not an American."
Some of these are forgivable - I enjoy the Home Mortgage Interest Deduction, for instance, but I don't think of it as a social program, or rather, I wouldn't have thought to include that if I were asked the question. But by the time you get to Social Security, Unemployment and Medicare, it is shocking that people don't consider them government programs. At face value, one can only speculate that the preeminent narrative - that Tabarrok reinforces here - is successful in claiming that the market can solve problems where the state has been the only actor - since its usually unprofitable to provide services to those who cannot pay out of pocket for them. Implicitly, Tabarrok is creating a distinction between government and market forces - the latter as civil society - in an attempt to make the ignorance of government-mediation (and I use this term purely for his own benefit) of economic functions a "virtue" of our "lack of deference" to the government. But capitalism is just as prevalent in these structures, perhaps just as misrepresented, and certainly worse for civil society in creating disproportionate power relations.

Friday, July 8, 2011

Measuring Marxism: The Democratic Ideal

This post is part of a series attempting to quantify Marx's theory of socialism.

The preeminent question in Marxism is the creation of socialism: this is roughly reflected in the democratization of the means of production. Democracy and productive, Marxist-style socialism are not the same, though.

What distinguishes Marxian socialism is its ability to birth a new society founded on different relations of production. These relations center on the "socially aware" human being, which is forced into existence by the extreme economies of capital accumulation which are decreasingly able to hide the underlying relations of production from the exploited populations.

Indeed, this kind of society is predicated on a rather basic understanding of democratic principles. It stems from the recognition of accumulated economic power, the treatment of those powers as utilities (see Yves Smith: Why Do We Keep Indulging the Fiction that Banks are Private Enterprises?) and the application of the democratic ideal of equal representation in that model.

Tuesday, July 5, 2011

Some Thoughts on Positive and Negative Liberty (Pt 1)

The positive/negative liberty dichotomy always bothered me. Not so much because it is necessarily wrong (though it is, as I'll explain), but because Isaiah Berlin and the propertarian (free-market) conceptualization has been the primary narrative on the subject. This is not to say that I dislike Berlin per se, or that he is undeserving of his acclaim. But this does speak to the imminent need for the ruling narrative to fit into the vision of the ruling class.

Indeed, Berlin starts his essay, Two Concepts of Liberty, by blasting so called "fanatically held social and political doctrines" reflected in the works of Marx/Engels as "dangerous ideas." To Berlin, this speaks to the supreme importance of ideas in shaping our world. Yet for all of his inquiry, the materialist conception of history is lost on Berlin. He claims without irony that "political theory is a branch of moral philosophy," perhaps ignoring just how many transfers of wealth and power occur as a result of the material conditions of society rather than abstractions like "morality" - abstractions that have their own place, but not as the foundation of rational inquiry into the movements of society. With Marx, the moral foundation is absolutely critical - but only in guidance.

Thursday, June 30, 2011

Measuring Marxism: The Centralization Myth

This post is part of a series attempting to quantify Marx's theory of Socialism.

Marxism is largely a method of accounting and interpreting the mechanisms of economic power. While political power is understood to play a role, it is largely considered subservient to the role of economic motion. In times of stagnation, wherein technological changes often do not correspond with expanding markets and economic power is uniquely centralized, contemporary nodes of power are entrenched, and their social relations tend to become apparent. In such times, the condition of civil society becomes increasingly apparent, with all its nuances and relations to these power structures. Gramsci notes of this phenomenon:
"when the state trembled, a sturdy structure of civil society was at once revealed. ... Hegel's conception belongs to a period in which the spreading development of the bourgeoisie could seem limitless, so that its ethicity of universality could be asserted: all mankind will be bourgeois. But, in reality, only the social group that poses the end of  the State and its own end as the target to be achieved can create an ethical state - i.e. one which tends to put an end to the internal divisions of the ruled, etc., and to create a technically and morally unitary social organism."1

Tuesday, June 28, 2011

Measuring Marxism: Where Did We Go Wrong?

 In my previous series, I assessed one aspect of the moral vision in Marxism - its relationship to individualism. This time around I want to confront the so-called "failure" of Marxism, and how can we measure his vision of socialism. This post is part of a series attempting to quantify Marx's theory of socialism.

Comprehensive privatization in China. The bureaucratization that plagued the Soviet Union. Repressive policies in nearly all 'socialist' states. The dilution of democratic apparatuses in the same. The data seem conclusive: Marxism has failed. Either that, or our measurements are off.

In fact, these failures reveal a number of conditions which do more to support Marxism than anything else. The accurate measurement of the Marxist framework has very little to do with the propaganda efforts of the NATO / Soviet blocs, which often invoke the imagery of workers' power for their own political gain.

Furthermore, it is the self-proclaimed anti-communists themselves who long ago quantified the very measurements which prove just how right Marx was.

Thursday, June 23, 2011

Why Can't We Get Good Data on Corporate Tax Rates?

And why does it consistently come from firms with a material interest in lowering taxes, and therefore embellishing current rates?

Politifact Virginia recently reviewed comments by George Allen which claimed that the US tax rate on corporations is 35% - 2nd "worst" in the world, according to him. Politifact argued that the rate was 27.6% (the official "effective" tax rate) - 4th highest in the world. Comprehensive accounting might place the real US corporate tax rate as lowest among all industrialized nations. The conservative Tax Foundation places the rate at only 24.1%. Whatever the case, US corporations have paid more taxes overseas than in the US since 2008, relying on accounting practices that transfer profits out-of-state or overseas, while sales are mostly captured at home - taking advantage of a high-cost consumer infrastructure without having to pay for that platform.

Like so many economic indicators, the official corporate tax rate has a very important function in politics. In the context of a political philosophy which conflates job creation with accumulation of wealth, higher corporate tax rates provide political capital which allows for a more effective lobbying effort to lower taxes. Capitalist graft, therefore, has two incentives in its model of accounting and government graft:

  • to diminish the apparent profits reported to governments, while maintaining (or even expanding) profits reported to stockholders
  • to maintain official tax rate figures

Tuesday, June 14, 2011

Nothing But Buzzwords

From the Wikipedia on Computer Monitors:

In 2008 the computer industry started to move over from 16:10 to 16:9. According to a report by displaysearch the reasons for this were/are:
  • Innovative product concepts drives a new product cycle and stimulating the growth of the notebook PC and LCD monitor market.
The source is not much better.

Monday, June 6, 2011

Individualism: The Basis of Socialism

This is part 3 of a 3-post series dealing with the Marxist concept of Socialism and Individualism.

Part 3: The Basis of Socialism

Socialism is on the one hand the transfer of the control over the means of production to the working class, in order to relieve this oppression. It is to overthrow the irrational, free-market state of political economy. But it serves a far more fundamental purpose for human society. As we have seen, socialism seeks to abolish the state of things wherein human labor is objectified. Human labor should, given the conditions of emancipation, serve the essential interests of the human being in the context of satisfied human needs. Erich Fromm:
"For Marx, socialism (or communism) is not flight or abstraction from, or loss of the objective world which men have created by the objectification of their faculties. It is not an impoverished return to unnatural, primitive simplicity. It is rather the first real emergence, the genuine actualization of man's nature as something real. Socialism, for Marx, is a society which permits the actualization of man's essence, bu overcoming his alienation. It is nothing less than creating the conditions for the truly free, rational, active and independent man; it is the fulfillment of the prophetic aim: the destruction of the idols."7
The socialization of the political economy is in keeping with the rejection of values, processes and constructs which do not meet the essential interests of a society of human beings. It is the judgement of capitalism, and all forms of organization, for the specific value in terms of rights and privileges it bestows on its members.

Thursday, June 2, 2011

Individualism: The Freedom of Independence

This is part 2 of a 3-post series dealing with the Marxist concept of Socialism and Individualism.
Part 2: The Freedom of Independence

Human existence is a social phenomenon. The "individualist" ideal of capitalism seeks to privatize the sum of human relations in order to free the human being. Indeed, the many libertarian ideals seek to arrange society in such a way that "nobody steps on anybody else's toes." Property should exist as an extension of the individual. And the individuals, in turn, voluntarily exchange property.3

“The rate of privation between members of society is precisely the antithesis to the rate of independence or individualism.”
The facts, however, paint a different picture. The calculus of human "utility" posits that the disutility of uncomfortable jobs should incur greater pay - the opposite is true. Jobs with less autonomy, greater physical requirement, greater tolls on health and dirtier conditions tend to pay less. The social supply of labor, rather than the individual valuation of labor is the chief determinant of the value paid to workers. It is precisely this irrational construct which determines that an increase in the available productive forces of society, that is an increase in supply of labor, should instead decrease the value and incentive of a worker. What appears as an obvious supply-demand function is in the aggregate an irrational transfer of value to a minority - the capitalist who can pay his or her workers less, and yet has more supply (labor) available, and a larger potential market (laborers as consumers).3, 4

Sunday, May 29, 2011

Individualism: The Myth of Utopian Socialism

This is part 1 of a 3-post series dealing with the Marxist concept of Socialism and Individualism.

Part 1: The Myth of Utopian Socialism

Socialism: the penultimate state of equality. Everything shared, the power and interests of each individual so intertwined that the most minor discomfort will be done away with: Utopia. But Utopia is, by definition, an unattainable state of things: it means "no place." Nature itself precludes perfection.

But socialism isn't a utopia, either. The closest proximity it ever gets to Utopia is that socialism defines the conditions which allow for humans to strive for utopia. The daily struggle to subsist, wherein basic human need resolves itself into conflicts between individuals, stands in the the way of Utopia more than nature. But the triumph over the conditions which create these conflicts could allow humans to redirect their efforts.

If the problem of hunger is restricted to our history, we can then seek to resolve the intricate issues of human inter-personal relations. The state of the individual in need is a state of oppression, for the simple reason that it disallows the free actualization of the human being: in such a state, one is tied above all to the very struggle to exist before one can exist as a free person:

Saturday, May 28, 2011

Nothing is as Sure as U.S. Debt Payments

For all the hype about fiscal deficits, the numbers don't add up to any significant threat to the U.S. economy: The U.S. is highly unlikely to default on its debts, and debts are mostly held by private and public U.S. firms and individuals.

As Ludwig von Mises famously argued, if you print money (or create loans) you'll get inflation, and whoever gets the money first benefits from it most. But whom does inflation hurt? In a global economy, it is the relative debt/capital holdings that matter. These are called "net account balance" and "capital account balance." The U.S. far supersedes other nations in terms of net debt and net capital. What will expanded government purchases do to this dynamic? It depends on where those purchases go. If we look at the current data from the U.S. Treasury, we see that U.S. debt goes primarily to U.S. interests: 70.7 percent of U.S. debt is owed to U.S. firms or individuals.

If we decide to take Rep. Paul Ryan's advice, we will be reducing government purchases that expand net capital in the U.S. and net debt to entities in the U.S. If we follow these plans, the U.S.'s place in the global economy will contract: Capital will leave the nation.

In a nation with fiat currency, the government can simply create money. The trend in government borrowing is a testament to this fact; as Binyamin Appelbaum noted on "NewsHour": "Nothing is as sure in financial markets than that the United States government will repay its debts. And so the government gets the cheapest rates available."

(Originally at Richmond Times Dispatch: Letters to the Editor: Dean Sayers: Nothing is as Sure as U.S. Dept Payments)

Thursday, May 26, 2011

Ames: California Class War History: Meet the Oligarch Family that's been Scamming Taxpayers for 150 Years, and Counting

Henry Miller collected the largest wealth of land in US history,land largely aqcuired by scams:
"Miller scammed the federal government for land and ruthlessly used corrupt state courts to steal land from owners of Mexican land grants. One of his crowning achievements was when, with the help of the notoriously corrupt lawyer and future California governor Harry Haight (after whom Haight Street was named), Miller and Lux litigated a Mexican-American landowning family into insolvency and forced them to sell a property called Buri Buri Ranch, which stretched from the southern tip of San Francisco all the way down to Burlingame, spanning some of the best property in the Bay Area."
Today, the same bloodline uses their inheritance to accrue massive federal funds and favor with the political elite:
"Jim Nickel runs the family’s agricultural and water operations, while Jamie Nickel serves at the director of Federal Crop Insurance Corporation at USDA and manages the real estate end of the business.  Meanwhile his grandson, George W. Nickel, III, is is a budding politician in California, who unsuccessfully ran for the state senate and now works in the Obama administration. Oh, and on top of everything, the family gets a nice revenue stream from the federal government, pulling in roughly $3.6 million in farm subsidies since 1995."

Read the rest here:

Capital Volume 1 Chapter 1 Notes

This is part 1 of a series in which I'll be summarizing the framework of Marx's Capital, Volume 1. For this series I am using the translation by Ben Fowkes, © 1990 & published by Penguin Classics.

All numbered and lettered lists are as they appear in the literature; further organization is my own doing. Occasionally, notes appear outside of the section they are sourced from in the book. This was done to improve the organization and flow of the notes.

I. The Two Factors of the Commodity: Use Value and Value (Substance of value; Magnitude of Value)

-There are two kinds of value applicable to commodities:
Use-value (substance: subjectively represents usability to consumer, represents wealth)
Depository for exchange value
Exchange Value (magnitude: realized by way of market exchange)
Since magnitude of value is our subject, ‘value’ and ‘magnitude of value’ are often used interchangeably.
-…and two creative factors for value:
Labor Value (prerequisite, subsumed into commodity, creates commodity value)
A value or quantity of labor is the common denominator among commodities
Resources (See Section II)

Wednesday, May 18, 2011

Economic Liberals Admit it: Capitalists Own Us

"Don't tax the rich, as they create jobs," so the mantra goes. However, this line of thinking betrays the underlying structure of production: namely, that the capitalist class has executive control over the means of production - control which is a concern of public policy, as Cato and the Heritage Foundation admit by requesting policy that regards its standing. Despite that fact, policy proposals argue for diminished public input. Indeed, history shows us that such control has always underlined this graft:1,2,3,4

  • Today, the Capitalist creates jobs by allowing the working class to use the means of production and sell their labor to him.
  • Before that, the Lord created jobs by allowing the working class to use the means of production and give part of their labor to him.
  • Before that, the Slaver created jobs by having the working class use the means of production and he (and it was always a man - patriarchy and all that) provided basic subsistence to them.

It has always been the narrow control over the means of production that allowed the interests of a group of oligarchs to consistently stand as a barrier to the production process. Interestingly, when these power structures shifted, it was always by diminishing the returns that older systems could replicate. The oft-revered Mises agrees: it is by diminishing the surplus value on capital investment that the same is disincentivized.2 Is calling for safer structures for capitalism simply another incarnation of the tactical perpetuation of power? And does this activity fit the theoretical model of consumer-driven capitalism?

Monday, May 16, 2011

Paving an Interstate on the Moral High Ground

Lev Lafayette reminded me of something easy to forget:

On one level such attitudes are the result of an apparent inability to consider life from the perspective of a person living in such countries. For decades these countries have been ruled by absolute monarchs, dictatorships, or regimes with only a pretence of democracy, all of which have engaged in gross violations of basic human rights. -Lev Lafayette, How beautiful is freedom /
The same kind of alienation occurs throughout human activity every day. It variously manifests as the structural-procedural diminishing of general human interests to the end of efficiency, political maneuvering and one-sided interest-fulfillment, to things like the very structure of language meant to engineer - consciously or not - the refutation or dilution of interests competing with one's own.

Sunday, May 1, 2011

May Day 2011: If They Tell You You Can't, Then You Can

Today, I got a chance to momentarily leave my armchair and rise up with my fellow discontents. May Day 2011 saw a motley crew of 300-500 core Richmond leftists hit the streets. There was much ado about the police this time around: namely, the police claimed that protection had to be purchased, and the organizers had to foot the bill. The ACLU even got involved, ineffectively. By the time the rally came about, it seemed like we were already fighting for a lost cause, despite how little the permit meant.
 "I couldn't help but wonder: would we have gotten better turnout if we had been campaigning for fly-fishing somehow?"
It was the same message, the same tactics, the same speakers. A few things were new, but they were scant in today's message. The open-source speaking program policy looks good on paper (and is probably the best way to keep from pissing people off when their pet group doesn't get 5 minutes). But just about everybody seemed ready to skip most of the speakers and hit the streets.

Friday, April 29, 2011

Astroturfing Bankers in the Age of Jackson

In the early 1800s, the US banking system was dominated by a unique blend of proprietary bank notes held by wealthy merchants and a working class mostly limited to foreign currencies (when they were lucky enough to earn real money at all). New England merchants, ever reliant on European trade, had developed or maintained extensive connections to prominent European trading partners. The capital to valorize these products, coupled with the unique trading opportunities that a continent of untapped resources offered, were fertile ground for a rising class of bourgeois. A shipbuilding/fishing economy had given way to an international-mercantilist model, and the monetary supply could hardly keep up with growth.

As this rapid accumulation of capital progressed, a clear winner was bound to emerge - and the US Government wasn’t playing around: they were going to enthrone the financiers to their own ends. Remember, in those days money wasn’t quite as easy as it was now – loans were in the form of promissory notes or proprietary bank notes: unlike fractional reserve banking, there was little liquidity in loaned value. This was such a problem that it would cause a run on debt in 1937. For the better part of the century, the country was set to witness profound clashes between nearly monolithic financial interests - interests, it turns out, that would manipulate popular movements to push their own financial agenda, all in the name of the "free market."1

Tuesday, April 19, 2011

Authority is Only Acceptable When it is Turned Against Oppression Itself

The best approach to the application of authority to situations of oppression is a materialist one. Exercises in avoidance and punishment rarely do much to solve the issues of oppression and exploitation. The underlying social relations have to be confronted to resolve oppression, and this can only occur by an open, systematic inquiry into the relations of oppression. Furthermore, the rate at which oppressive authority figures are able to freely express their own bigotry is directly proportional to the depth and accuracy of investigations into the same oppression.

Authority does, in fact, develop legitimacy when turned against oppression (and by extension oppressors). For that reason, leftists frequently correlate bigotry in language with oppression that follows a bigoted division. Leftists internalize a phobia (embodied in a self-restriction) of (from) the language of the oppressor, and this is not to be ashamed of. As the oppression diminishes, so, too, will the sting of the language and the internalization of authority against that language. This is all in keeping with a revolutionary overthrow of the structure of oppression, and fine at that.

What needs to be questioned, however, is the pedantic nature of this phobia when you apply it socially. The fact is that it does nothing to reveal and excise the oppression it seeks to confront. To ban the language of the oppressor is to conceal the identity of the oppressor. It internalizes the sense of oppression on all sides. It fights against the recognition of oppression and in fact insulates oppression.

Monday, April 11, 2011

Glass-Steagall: Dead for 2 Decades and Counting

Where the Wealthy Meet to Engineer Crises
Clinton's 1999 repeal of Glass-Steagall was hardly a repeal at all. In fact, it was just the dying breath of legislation that had been steadily eroded for decades. Following Alan Greenspan's pivotal moves for deregulation, the Gramm-Leach-Bliley Act merely confirmed in official canon what had been increasingly evident for the past 2 decades.

In 1996, Greenspan gave the Federal Reserve Board the green light to change the practices governing commercial bank holding companies. Under Glass-Steagall, they could only invest up to 5% in investment banks (due to the added risk). Greenspan quickly doubled this limit twice: first to 10%, and then to 25%. 8 months later, another decision opened the doors to insurance underwriting, allowing Traver's (under the management of Sandy Weill, who had already unsuccessfully tried to acquire JP Morgan) to acquire Solomon Brothers. Less than a year later, Traveler's merged with Citicorp.1

Enter the beast: a bank which merged securities underwriting, insurance underwriting and commercial banking - precisely the amalgamation which ushered in the banking instability of the early 1900s - only this time, the publicians had a new motto: too big to fail. Perhaps more ominous is the name itself though: Citicorp, now Citigroup Inc., was once known as National City Bank, variously administered by James Stillman (who managed the bank in his retirement via discrete courier), Charles E Mitchell (touted in 1933: "Mitchell more than any 50 men is responsible for this stock crash" -Carter Glass).2 Mitchell was also on the board of directors for American IG Farben3 (a pharmaceuticals combine which produced Zyclon B for the Nazis), which cartelized with Standard Oil New Jersey with the help of a 30 Million bond from National City Bank.2,4

Sunday, April 10, 2011

Thomas Jefferson: Marxist

"I am conscious that an equal division of property is impracticable. But the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise. Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labour and live on. If, for the encouragement of industry we allow it to be appropriated, we must take care that other employment be furnished to those excluded from the appropriation. If we do not the fundamental right to labour the earth returns to the unemployed." Thomas Jefferson - Letter to James Madison (Oct. 28, 1785) / My Emphasis /
 Some highlights:
  • Cites the disproportionate dispensation of property as the cause of misery
  • Government would do well to increasingly "subdivide property" or break up this accumulation of property
  • Supports progressive taxation
  • Property rights "violate natural right" when it acts as a barrier between the working class and resources (a.k.a. capital)
  • Earth is "common stock"
  • Labor is a fundamental right

Friday, April 8, 2011

Egypt's Old Regime Still in Power

"Now, we must not forget that this military council (individuals) are all hand-picked generals who have been chosen and cleared both by President Mubarak in the past years, and they are also picked by the Americans, by the CIA. I'm sure that there is some form of nebulous collusion between these three parties to remain in power as long as possible and to have some sort of subservient civilian administration.

The popular pressure today is trying to undo this holy alliance."

Thursday, April 7, 2011

Expansion of Financial Credit Eventually Leads to Negative Growth

VoxEU: Too Much Finance?
"Our results show that the marginal effect of financial development on output growth becomes negative when credit to the private sector surpasses 110% of GDP. This result is surprisingly consistent across different types of estimators (simple regressions and semi-parametric estimations) and data (country-level and industry-level). The threshold at which we find that financial development starts having a negative effect on growth is similar to the threshold at which Easterly et al. 2000 find that financial development starts increasing volatility. This finding is consistent with the literature on the relationship between volatility and growth (Ramey and Ramey 1995) and that on the persistence of negative output shocks (Cerra and Saxena 2008)."

Wednesday, April 6, 2011

U.S. Defense Secretary Gates: Pro-Democracy Protests are Iranian Conspiracies

Well I guess it's pretty obvious that the stabler U.S. allies wouldn't have burgeoning democracy movements, but dangerous Islamism - bankrolled, of course, by the regional Islamic state that just happens to have nationalized key western interests:
""We already have evidence that the Iranians are trying to exploit the situation in Bahrain and we also have evidence that they're talking about what they can do to create problems elsewhere," Gates said.
"Saudi Arabia led a joint Gulf force that deployed there last month, enabling Bahraini authorities to quell protests calling for democratic reforms.
"On Sunday, foreign ministers from the Gulf Cooperation Council (GCC), of which Saudi Arabia is a leading member, accused Iran of interference in the affairs of Bahrain and Kuwait in a campaign to destabilise the region."AJE: US and Saudi Arabia discuss Iran 'meddling
Oh yes, you read that right: the U.S. is with S. Arabia in claiming that Iran is fomenting pro-democracy conflicts in the region (which makes sense because the "green revolution" protesters in Iran certainly couldn't be emboldened by these demonstrations). The Saudi Arabians have a good point though: unspecified Iranian meddling is certainly more of a cause for alarm than the Saudi-backed violent repression of a marginalized ethnic majority. Yep: Bahrain has an ethnio-nationalist oligarchy imposing unpopular rule over the ethnic majority; an unpopular rule that is being bankrolled by USAID and enforced by the engorged Saudi military when Bahrainians can't keep their ethnic underclass under control.

But don't worry folks, the real threat are those Iranians who had the audacity to demand that a local regime control (some) of their capital. The same Iranians who bankroll the resistance to another ethno-nationalist regime aligned with the west. Is it just me, or is this story getting old?

Data on how Tax Day Loans Hurt the Poor

  • A typical tax refund loan carries an APR rate of 149
  • 7.2 million taxpayers used them in 2009, costing 606 million in fees, 58 million in additional charges
  • 64% of those who took these loans out were eligible for the Earned Income Tax Credit, a credit for low wage-earners
  • Their primary market, according to John Hewitt, CEO of Liberty Tax Service, is the 17 million Americans who do not have their money in 'traditional' banks
  • "Taxpayers living in extremely low-income communities are 560% more likely to use these loans"
  • Banks like Wells Fargo are closing traditional banks in these communities while they invest in predatory loan firms

  Statistics taken from Tax Day Temptation Full of Tricks and Traps by Bryce Covert New Deal 2.0

Tuesday, April 5, 2011

Herbert Hoover Left False Evidence to Hide Influence of J.P. Morgan, Thomas W. Lamont

According to Thomas Ferguson, Hoover wrote diary entries which directly conflicted with his private account of events:
"The onset of the Great Depression opened a new phase in the decay of the now creaking system of '96. As the Depression grew worse, demands for government action proliferated. But Hoover, who gradually became so in thrall to the big banks that he concealed Morgan's crucial role in initiating his famous European debt moratorium of June 1931 by deliberately faking entries in a "diary" that he left historians (one of whom years later cited it as evidence for the independence of Hoover, and the American state from the bankers), opposed deficit-financed expenditures and easy monetary policies.79 After the British abandoned the gold standard in September 1931 and moved to establish a preferential trading bloc, the intransigence of Hoover and the financiers put the international economy onto a collision course with American domestic politics. Increasingly squeezed industrialists and farmers began clamoring for government help in the form of tariffs even higher than those in the recently passed Smoot-Hawley bill; they also called for legalized cartels and, ever more loudly, a devaluation of the dollar through a large increase in the money supply." Golden Rule: The Investment Theory of Party Competition Thomas Ferguson, pp. 145 (my emphasis)

Monday, April 4, 2011

The Wage Rate and Globalization

VoxEU on the Euro and competition for capital:
"This analysis leads to the conclusion that if the underlying problem of Europe’s periphery were lack of competitiveness, it should relate to the types of products they export (vis-à-vis Germany) and not to the fact that their labour is expensive (their wage rates are substantially lower), or that labour productivity has not increased (it has significantly). The problem is that they are stuck in the manufacturing goods also produced by many other countries, especially the low-wage countries. Reducing wages would not solve the problem. What would an across-the-board reduction in nominal wages of 20%–30% achieve? The most obvious effect would be a very significant compression of demand. But would this measure restore competitiveness? We argue that it would not allow many firms to compete with German firms, which export a different basket, and in all likelihood it will not be enough to be able to compete with China’s wages." -VoxEU
This is more confirmation of the point that competition for capital along varying economies transfers market shares to economies which demand less labor compensation. This same process depresses the average for this and other standards across the board.

HT: Yves Smith at Naked Capitalism

Thursday, March 31, 2011

Obama's Graft and the Woeful State of Consumer Arbitration

I've occasionally cited industrial investment in party politics as the primary motivator in party competition (a point I've largely refined from my reading of Thomas Ferguson: Golden Rule: The Investment Theory of Party Competition...). Yves Smith agrees - its donations that manage the presidential policy positions:
"Obama needs to raise an estimated $1 billion to win the 2012 election. He’s moved further and further to the right over the course of his Presidency. Why is he going to change gears and alienate one of his biggest donor groups by appointing Warren?"
Also, Yves points out to these startling statistics on the bias of consumer arbitration:
"An example we cited a few days ago, that of the settlement reached between the Minnesota attorney general and the National Arbitration Forum, illustrates this point. The [NAF] was so successful in stacking the deck on mandatory arbitrations in favor of its clients, big busineses, via the roster of arbitrators it chose that consumers won in only 4% of the cases." Yves Smith: Why Liberals Are Lame (Part 2)

Wednesday, March 30, 2011

Let them Eat (Un-iodized) Salt

From Inter Press Service:
"Karpov also told IPS: "In Russia, there is solid opposition (to iodising salt) and that opposition is in the commercial world where people want to make some business out of this." 
"One source at the Belgrade conference, who asked not to be named, told IPS: "The people who are against this in Russia and the Ukraine are pharmaceutical companies who want to market more iodine tablets, salt producers, other food industries and the government. They say that iodine is available in other products and therefore there is no need for legislation on mandatory salt iodisation."" IPS: Market Interests Fight Iodized Salt

Monday, March 28, 2011

Secret Muslim or Secret Jew?

Seems like the western hysteria against "secret Muslim" infiltration has a different manifestation in the Middle east:
Syrian authorities have arrested an Egyptian-American man and accused him of selling photos and videos of events in Syria and visiting Israel “in secret”. (my emphasis, Evan Hill @ AJE)
It's not explained why a photographer or journalist "secretly visiting Israel" should cause alarm to Syrians, but his father has an idea why he was targeted:
“He looks very Egyptian, he has very green eyes, and so a lot of ignorant people will see him and think, ‘This is a typical Israeli,’” he said. “He fits perfectly with a plot about foreign agents.” (Evan Hill @ AJE)
Its not like racism is some new phenomenon in the Middle East (nor is exploitation and false accusations of racism). What is interesting here is that the Syrian government is trying to use old conflicts and fears to turn marginal parts of their population against the protesters. We saw precisely the same dynamic in Egypt and Libya. They seem to forget just how important extant power structures are to this dynamic, however.

Saturday, March 26, 2011

The "Different" Palestinian Protests

The protests in the middle East are markedly different in Palestine, but only because of how fundamentally similar they are.
An Israeli skyscraper rises behind an impoverished Jewish community, the target of gentrification.
As the pro-democracy protests swept the region, most commentators kept their eyes trained on a 60-year old conflict whose turbulent history is hard to match. The body of articles referencing this conflict can easily dwarf the output of media on entire continents. Withstanding this girth of knowledge are the stubborn and unassuming prejudices that some media cultures exhibit - perhaps most persistent across the US.

Across the country, pro-democracy protests across N. Africa and the Middle East have been heralded as everything from liberating populism to Islamist barbarism. This is notable only because the same kinds of 3rd-world uprisings have historically been met with direct augmentation of oppressive regimes on the ground, and deliberate maligning of the struggle for liberation in the form of media whitewashing of prevalent power structures. This is hardly better illustrated than the examples in South America: Nicaragua, Argentina, Colombia, Venezuela and Chile to name a few.

Friday, March 25, 2011

Krugman on the Failure of Austerity

Krugman points out that austerity measures have reduced employment(HT:Brad Delong):
"Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up.
"What do these events have in common? They’re all evidence that slashing spending in the face of high unemployment is a mistake. Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong."

Thursday, March 24, 2011

Marx, wrong on one count

One of the preeminent aspects of Marxism is the conflict between the capitalist, who owns the means of production, and the producer, who is represented by the working class that executes the labor required to bring the commodity-value to the table. It is precisely this conflict of interests, the competition for the value this operation provides, that leads to working-class upheavals across the globe.

Marx noted the upheavals in his day, and suspected that a new class would soon rule over the means of production once these conflicts were resolved. In terms of the shifting of value to the hands of the working class, this indeed occurred across the globe during the innovation and industrialization of many of the high-infrastructure  societies of today - a feat that the expanded employment of labor helped accomplish. This expansion of employment has helped (or is helping) create an high rate of value-exchange: when high-consumption wages (lower class wages go primarily to consumption) are a large percent of income and total value('currency'), a greater sum of money returns to the consumer to augment aggregate demand.

Libyan Oil and Consumer Demand

Auerback makes a few critical points in his recent article,The Economic Policy Behind Intervention in Libya Chases Its Own Tail (HT: Naked Capitalism). Forgive the banal usage of "we" to associate oneself with the ruling clique, and we have a viable polemic against US fiscal and foreign policy:
"We seem to have developed a very basic rule of thumb when it comes to these wars of choice: if an insurgency threatens oil supplies directly or indirectly, we move. If it doesn’t, we don’t. Hence Syria can kill thousands of insurgents (as they did in the early 1980s) and we do nothing. Yemen doesn’t have oil facilities; so we do nothing. In Bahrain we have a huge base and unrest has repercussions for the Shiite part of Saudi Arabia where the oil is. We move via the Saudis. In Libya there is oil. Again, we moved.

Wednesday, March 23, 2011

India, Liberalization and Real Wages

VoxEU has a report arguing that liberalization has increased the productivity of industries in India:

  • First, from 1985 to 1990, average productivity rose by over 8%, while the reallocation component actually fell by more than 6%, indicating that more productive firms lost market share to less productive firms.

Friday, March 18, 2011

Falsifiability, Popper, Marx and Mises

Hristos Verikukis has an illuminating paper revealing, among other things, that Karl Popper's criticism of Karl Marx's social theories is not only applicable to Marx's, but Popper's social theories, and the latter actually said just about as much in his body of works. Briefly touching on another thinker, Mises' 'Praxeology' appears to be just as vulnerable as Popper's Rationality Principle - as are those theories of Einstein, who Popper credited as "following real science."

Popper claimed that falsifiability was the foundation for the scientificity of any theory: if it cannot be falsified, it is thrown out; if it can be tested (and therefore potentially falsified), it is thrown out if such falsification succeeds. his particular criticism of Marxism was that this falsifiability was not present in the theoretical framework that Marxism comprised.

Thursday, March 17, 2011

Why Marx Was Right - and Terry Eagleton was wrong

 Update: It turns out my criticism of Eagleton was too rash - read Joseph Rebello for a vindication of Eagleton's quotes - with the context this time.

Marginal Revolution has a blurb criticizing Eagleton, and his new book, Why Marx Was Right. Cowen quotes a few unfortunate quotes, without condescending to analyze them (that's left to the reader, of course). But the quotes are wrong in their own right, and merely vindicate Marx, if not Eagleton:

"But the so-called socialist system had its achievements, too.  China and the Soviet Union dragged their citizens out of economic backwardness into the modern industrial world, at however horrific a human cost; and the cost was so steep partly because of the hostility of the capitalist West."
"Revolution is generally thought to be the opposite of democracy, as the work of sinister underground minorities out to subvert the will of the majority.  In fact, as a process by which men and women assume power over their own existence through popular councils and assemblies, it is a great deal more democratic than anything on offer at the moment.  The Bolsheviks had an impressive record of open controversy within their ranks, and the idea that they should rule the country as the only political party was no part of their original programme."
Perhaps better context may help Eagleton, but its deplorable inaccuracy stands on its own right.

The Credit Crisis as a Valorization Problem

Naked Capitalism has a great guest post today which exposes the incentivization process at work in the credit system:
"One source of credit market friction arises from coordination failures among lenders (see for example Gorton and He 2008). In these models, banks are heterogeneous and their behaviour strategic. The individually rational actions of heterogeneous lenders can generate collectively sub-optimal credit provision in both the upswing (a credit boom) and the downswing (a credit crunch). This is a collective action, or co-ordination, problem among banks.
"In the face of stiffening competition, banks were increasingly required to keep pace with the returns on equity offered by their rivals – a case not so much of “keeping up with the Joneses” as “keeping up with the Goldmans”."
So we see that the underlying cause of the expansion of credit is the valorization of capital. Not only the simple valorization, but the competition for capital (which I hope to cover soon on its own right) serves as an important ossifying process for companies which cannot necessarily sustain this model:

Wednesday, March 16, 2011

What Will Replace Collective Bargaining in Wisconsin?

With all of the debate around workers' rights in Wisconsin, surprisingly little attention is being paid to the groups which stand to benefit from the elimination of the organized labor's influence among public sector employees (apart from the value of a market with fewer unions and hence less labor influence).

Make no mistake about it: the legislative process in Wisconsin is an attempt to destroy the influence of public sector workers, by eliminating the American Federation of State, County & Municipal Employees (AFSCME) locals, which provide them with a unique tool to influence their workplaces. Once the annual recalls of the union start (a stipulation of the legislation), it is only a matter of time before the union locals fail to accrue a sufficient number of votes in one cycle, lose their funding and experience fatal insolvency.

Tuesday, March 15, 2011

Demand 101

Perhaps the right way to start off a new blog is to discuss one of the more obvious points that have been ignored in recent economic austerity measures. Namely, the issue of aggregate demand has been roundly ignored by the "clear cutter" majority who view any and all cuts to public service as the starting point for fiscal reform. Not only this, but the narrow focus on government regulation and spending has crippled the narrative of economic reporting in all major media outlets. In fact, any accumulation of wealth constitutes a game-changer in economic structure: not only the distribution, but the direction and velocity of exchange are all tied to this issue.

Aggregate demand in particular is critical to the structure of production and distribution, and then the disbursement of wages which provide a basis for - demand. As Nick Rowe points out, demand is the measure of growth (or lack thereof) in an economy:
"Quantity sold is whichever is less: quantity demanded; or quantity supplied. If there is excess supply of goods in aggregate, then realised sales of goods, and income from those realised sales, is demand-determined. And if people are unable to realise their plans to sell as many goods as they wish (if they face Clowerian quantity constraints) then their demand for goods will depend on their realised sales, which is demand-determined." - Rowe