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)

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

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.

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.

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."

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.

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.

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.

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:

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.

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