Saturday, July 30, 2011

Government, Capitalism, and the Flow of Capital

With its Reaganesque trickle-down paradigm, basic capitalism --- raw, primal, Social-Darwinistic --- is like a purely gravity-fed water system. It'll function, but its reliability and volume of flow are at the mercy of changing, uncontrollable external conditions, and its destinations are completely constrained, often not where delivery is most needed.

Such water distribution systems worked (in a manner of speaking) for the Romans two millennia ago. But no reasonable citizen would choose them for a complex modern society, populous and sprawling, needing to maximize the benefit to be derived from scarce resources, and hopefully also concerned with a modicum of fairness for all of its people. Analogously, such a paradigm makes no sense as distribution method for the modern flow of capital.

Yet that is the direction to which virtually all Republicans and many Democrats are taking this nation. It must rank as one of the great ironies that capitalism, always arguing for the "best" use of scarce resources, so frequently and so thoroughly mismanages the scarce resource from which it takes its name.

And capital does seem to be a scarce resource, at least to the average person. Beyond personal finances, lack of money has become the rationale encountered for countless actions, ranging from corporate opposition to wage hikes (including even the minimum wage), through the neglect of infrastructure, to the elimination of some government services and the scaling back of others such as Social Security, Medicare, and Medicaid.

However, an objective observer from another planet might conclude that our problems arise less from inadequate capital than from failure to use it properly.

Consider the financial "industry". The stock market is basically a combination of numbers racket and circular firing squad, periodically resuscitated by cash transfusions delivered by its minions in Washington and fresh marks in the hinterlands. Except for IPOs, stock buybacks, and hedging of raw material costs and foreign exchange rates, trading is of little benefit to genuinely productive companies, and far exceeds the levels needed to establish a credible secondary market.

As to the rest of our economy, many of its goods and services --- expensive or cheap, exalted or plebian --- are actually of little true value. They are basically churn that only serves to provide the populace with enough employment and income to purchase its own stash of unnecessary junk, while business takes a portion of each transaction as profit.

I'm not advocating that we don sackcloth and become wandering ascetics. But I do find it intensely objectionable that we as a nation devote the overwhelming part of our economic energies to the unimportant, and to militarism, while the essential functions of a civilized society are aggressively being demolished. That combination, however, appears to be the inevitable outcome of laissez-faire capitalism coupled with inadequate governmental revenues, faulty leadership, and a fearful and easily-manipulated populace. These mutually reinforce each other, to our great national detriment, and as remedy we need to address each of them not in turn, but simultaneously. They are where our political focus should be, not on the dance-of-the-debt-ceiling, which serves only as distraction to enable the further looting of our nation by the wealthy, the corporations, and the military-industrial complex.

To return to my opening metaphor: It is clear that right-wing trickle-down is a faulty paradigm for the twenty-first century. Government, when it operates properly, is like a pumped water system, delivering a precious fluid when and where it is needed. When operating properly, government performs vital economic and societal functions which the capitalistic corporate sector cannot do without conflict of interest and/or added cost (if it were even willing to address them at all). To the extent that government does not function properly, we the citizens of the United States need to reclaim it, not cede it to the forces of greed, ignorance, and incompetence.

More WWII Analogy

In my previous post, I neglected to mention another way in which WWII and its run-up are appropriate metaphors for contemporary politics:

The German Nazis and Italian fascists got substantial initial support from business interests in general, and industrial and banking interests in particular, who thought that they could control them to the extent necessary for their corporate profit.

In the U.S., the Republicans and the Tea Party have received substantial support from American business, industrial, and banking interests, who similarly expected to effect control. However, judging from today's New York Times' report of the flow of lobbyists to Congress, it appears that businessmen are now experiencing some degree of fear, as it becomes apparent that, as in twentieth-century Germany and Italy, they have created a Frankenstein monster likely to damage their long-term interests.

Wednesday, July 27, 2011

World War II is the Appropriate Analogy

While the widely-made point that a government shutdown will have significant negative consequences is correct, frankly, I see no other way, unless President Obama wants to be the Neville Chamberlain of the 21rst century and the Democrats in Congress want to be his assistants in a shameful surrender. Obama's two-and-a-half years of concession "strategy" has already greatly empowered the Republicans and Tea Partiers, and they think they're on a roll.

World War II, not the American Civil War so often cited, is the appropriate analogy for our present situation. In it, the Allies were fighting fascists --- fascists in control of the power of the state, and who were initially supported by a large portion if not the majority of the populations of the Axis nations. One need only look at the newsreel images of the German crowds cheering for Nazism and its initial gains in Austria, Czechoslovakia, Poland, Belgium, France, and Russia to understand the exhilarating effect on the masses of a seemingly-winning strategy, irrespective of its immorality and long-term inviability. Only when German soldiers met enough resistance in Russia, enough dead and wounded started coming back from the front, and consequences began to drop from the sky, did the average German start to have second thoughts. Should the Allies have not fought WWII because of the collateral damage they would inevitably inflict?

As an unabashed progressive, I believe that the consequences of a government shutdown, felt by right-wingers advocating massive governmental cuts, are now the only forces capable of stopping these traitors to the American Dream.

Democrats in government, do not forget that your party was once known as the party of FDR's New Deal. Do not destroy that legacy --- and the party's future prospects --- by agreeing to debt-reduction strategies that no matter how spun, are no more than obscene cuts that will produce massive damage to long-standing social programs and the poor and middle class of this nation.

The Debt Ceiling and Rogue Elephants

What should the President do regarding the debt limit?

While David Barash's New York Times July 27 Op-Ed metaphor comparing the Republican Party to an elephant gone rogue due to musth was relevant, I'm not sure it was that helpful for suggesting a solution, given Obama's past surrenders of most of what his opponents have wanted.

I don't think Obama has it in him to "stop playing the game", the general solution advocated by Mr. Barash. As a confirmed right-wing pseudo-centrist, Obama has spent the past two-and-a-half years in an intimate relationship with that Republican "rogue elephant" --- and based on his last speech, he's still a "battered spouse" who can't bring himself to truly leave his abuser(s).

If Obama really were to find his castanets, he'd stop trying to reach a bad-vs-worse agreement with the Republicans. Why? Because the Republicans have fed their base a steady stream of lies regarding the role of government, until those people are now completely out of their minds with hatred towards it --- and the only way to stop the derangement and its consequences is to bring them face-to-face with the world they advocate. In my opinion, the need for that transcends even the detrimental consequences of a reduction in our national credit rating postulated under even a temporary default.

As first order of business, Obama should announce proportional cuts to federal funds going out to each state --- with the cuts based not on the overall federal receipts compared to obligations, but on that ratio for each state. So Alaska, for instance, which gets much more than it remits, would lose proportionately much more than a state with neutral federal dollar flow. (Perhaps someone can research and post the federal dollar flows for each state? And also correlate that to Republican and Tea Party sentiment?)

Just as jingoism doesn't stop until enough coffins roll in, the right-wing anti-government craziness won't stop until enough consequences are felt.

Fred Drumlevitch

Monday, July 25, 2011

U.S. Economic Problems: The President, The Congress, Us

As we try to solve our current economic and budget problems, perhaps the biggest roadblock is the mindset in the political and economic centers of power: they're either trying to put Humpty Dumpty together again (but minus an arm and a leg) --- or they're advocating radical surgery designed to eviscerate him, and plan to feast on the yolk. No competent doctors have treated the patient.

Let's first make a proper diagnosis.

The current situation has many causes including a housing bubble, financial vaporware, inadequate regulation, tax cuts, trade imbalances, military spending, consumer spending, and many more, all tied together via complex interactions and feedback loops.

Consider the graph diagramming the housing bubble. There is an obvious set of links connecting nodes for the banksters, poorly-vetted loans and securitization thereof, and inadequate regulation. But we should also ask ourselves: Why did so many individuals/families --- be they the sub-prime mortgage crowd, or members of the middle class, or the serial flippers --- take part in the irrationally exuberant speculation? (Yes, some such speculation is nearly always implicit in the purchase of a major asset at a price significantly above its historical trendline).

The answer to that question gets to the heart of our problems. I believe that beyond the perfectly-understandable desire to own their own home, many of these people simply wanted --- no, needed --- a small slice of the pie. They looked around, and saw decades of inequity and decline: massive Wall Street profits from speculation and vapor capitalism; corporate CEOs raking-in obscene pay packages while cutting worker salaries and benefits, or worse, offshoring work and laying them off; the demise of defined-benefit pension plans; the evisceration of unions; repeated warnings about Social Security and Medicare shortfalls; rapidly-rising costs for essentials including healthcare, education, and fuel. Many people knew that they needed to do something in order to grab themselves a small piece of the American Dream, before it disappeared completely. And if speculation mostly worked for Wall Streeters, why shouldn't it work for them too? So that's where many additional connections join our bankster graph, with the additional vulnerabilities and instabilities that, depending on connections and feedback, a large network may suffer. That's how --- to choose just one factor, and just one result --- increased income inequities predisposed us to a banking crash.

Think of the banking crisis and our many other problems as "blowback" (if I might borrow that term so well used by the late great Chalmers Johnson) --- Karmic blowback onto a system that has spent the past three decades pulling the rug out from under the poor and the middle class. Unfortunately, those same citizens have now been shafted twice, the second time as collateral damage inflicted by that blowback. Most obscenely, we're about to be given the big one a third time, victimized by a political system that will cut benefits to those who need them most, decimate our infrastructure, and refuse to raise taxes on the rich and the corporations.

Three strikes and we're out, the end of the American Dream. All that's left is a bunch of people on the make --- no, not for a hot Saturday-night date, nor for wealth, just for some measure of basic financial security. Those of us who through prudence and a great deal of luck are not yet impoverished don't know how long that'll last; those doing worse don't know when it'll get better. We're just hanging on, often with both physical and psychological insecurity. Maslow's hierarchy of needs? Many people are barely at his lowest level (if even there). And let's not fool ourselves into thinking that entrepreneurship will solve our problems, as some have suggested. In today's economic climate, new businesses are less likely than ever to address essential needs; startups are frequently based on what can be started with minimal capital and little hired labor, and often provide frivolous services to a shrinking pool of people able and willing to part with money.

What is to be done? The truth is self-evident. We need an intelligent and moral transformation, the restructuring of our society away from militarism, speculation, inequity, and the mindless consumption of consumer products --- and towards ecologically-sound, infrastructurally-beneficial, humanistically-enriching, morally-defensible goods and services: items such as education, medical treatment, social justice, conservation, clean energy, mass transit, other infrastructure development and repair, the arts, literature, music... .

Despite the unique opportunity afforded by the financial crisis, that clearly hasn't happened. It hasn't even been attempted. The Republicans, in their obsessive defense of the so-called "free-market" and opposition to taxes, rabidly oppose the prioritization and planning (and yes, tax-funded government investment) that would be necessary to improve our nation. The Democrats have either lacked the courage to confront the Republicans on these issues, or may have made a seriously-flawed calculation that short-term results (i.e. before the next election) are more important than long-term transformative improvements that might take more time to kick in. A darker explanation is that most politicians --- Republicans and Democrats --- simply aren't on our side. Their most-influential patrons don't really want substantive transformation; they want a restoration, not the reformation that is needed.

This nation is caught in a maelstrom of greed, irrationality, and incompetence. Unless we act properly, in a true progressive manner, we'll keep swirling down, our demise inevitable. In such a current, going with the flow, even with a flotation device, won't deliver safety; it'll just take a bit longer for the end to come. There is no substitute for unabashedly progressive action.

Fred Drumlevitch