One aspect that defines our current economy is that things are happening that shouldn’t be happening. I don’t mean that things are happening that are illegal or immoral. (Well, some of them are immoral, but that’s not what I mean.) Rather, things are happening that defy economic logic—a slippery term that really means, the economic patterns of roughly the past half-century.
The first such logic-defying thing is that corporate profits are soaring even as corporate revenues limp along. The quarterly reports of S&P 500 corporations for the first three months of 2013 are almost entirely in now, and they show profits rising by more than 5 percent even while revenues have risen by less than 1 percent. Seventy percent of these companies—the largest publicly traded U.S. firms—exceeded the analysts’ profit projections. On the other hand, 60 percent came in under the projections for their sales.
John Maynard Keynes was the sexiest economist who ever lived. This might seem like half-hearted praise since in our mind’s eye the typical economist appears as a dowdy and almost always balding man, full of prudential advice about thrift and the miracle of compound interest. Keynes, with his caterpillar moustache and mesmerizing bedroom eyes, cut a more dashing figure.
He had many lovers of both genders, and was married to one of the great beauties of the age, the ballerina Lydia Lopokova. His genius at playing the stock market allowed him to enjoy the life of bon vivant, socializing with the writers and artists of the Bloomsbury group such as Virginia Woolf and E.M. Forster rather than dull number crunchers he knew at Cambridge and in the British Treasury. While other economists focused on maximizing economic growth, Keynes wanted to go further and maximize the pleasures of life.
The right-wing press is chock-a-block with articles decrying the Obama administration’s romance with industrial policy. So reflexive is this ideology that some of them are even written by major beneficiaries of industrial policy, whose sense of entitlement must be so ingrained that they fail to notice this anomaly.
Exhibit A appeared in Monday’s Wall Street Journal op-ed page, in which Charles Koch of Koch Brothers fame took out after crony capitalism and industrial policy.
In response, it seems, to criticism of his economic plan—which will raise taxes on the vast majority of Americans in order to cut taxes for the wealthiest taxpayers—Mitt Romney has released a one-page “plan for a stronger middle-class.” The provisions are what you would expect:
Back to Full Employment, by Robert Pollin. A Boston Review Book. The M.I.T. Press. 187 pages. $14.95
Achieving full employment has been at the center of the progressive project for more than a century. If work is available at decent wages for everyone who wants it, then the rest of the agenda is a lot easier. Opportunity proliferates. People feel a sense of dignity and worth. Human potential is fully utilized. In a virtuous circle, adequate purchasing power has a rendez-vous with the economy’s productive capacity. Tight labor markets give workers the leverage to bargain for decent wages. Social-transfer programs can be reserved for special needs rather than being strained to make up for the fundamental lack of decent income.
A prophet, says the Bible, is not without honor save in his own country. As the most prestigious economic dissenters of this era, Joseph Stiglitz and Paul Krugman form a category of two: astonishingly prescient, widely read, and largely ignored by those in power.
In a 2009 poll conducted by the BBC, only one out of every four Americans thought that capitalism in its current form was working well. Then came Occupy Wall Street (OWS), a physical manifestation of the anger of millions of Americans at an economic system in which big banks are bailed out by taxpayers only to turn around and pay billions in bonuses while filing record home foreclosures. Between the second quarter of 2009 and the fourth quarter of 2010, our nation's total income rose by $528 billion, but of that economic growth, 88 percent went to corporate profits and just 1 percent—that's right, 1 percent—went to workers.
I’ve grown so used to dismissing Tom Friedman’s work for TheNew York Times that when he writes something genuinely good, it comes as a surprise. To wit, in his column for the Sunday paper, he aruges that our political system has devolved into a “vetocracy”—a system where “no one can aggregate enough power to make any important decisions at all.”
The culprits, according to Friedman, are polarization, broken institutional norms—in particular, filibuster abuse—the massive proliferation of special interests, and the growing importance of money in politics. The ultimate outcome of this, says Friedman, is governmental paralysis:
I've argued that the legal arguments against the Affordable Care Act are just libertarianism in a thin disguise—the arguments fundamentally make very little sense unless they're part of a broader argument about the unconstitutionality of the welfare state. Janice Rogers Brown, the ultra-reactionary appointed by George W. Bush to the prestigious D.C. Circuit Court of appeals, doesn't see any need for the disguise.
Romney’s backers say he did the tough work needed to restructure the economy. Actually, he seized opportunities that the tax, securities, and bankruptcy laws should never have given him.
“Creative destruction” is Mitt Romney’s best defense for his career in private equity and the trail of displaced workers some of his ventures left behind. The idea comes from the economist Joseph Schumpeter, who argued that capitalism generates economic growth through “gales of creative destruction” that sweep away obsolete technologies and products. As Romney’s advocates have it, that’s what his firm, Bain Capital, has advanced—painful economic changes that are essential to a rising standard of living.
Socialism was supposed to create a new socialist man—a fellow or gal whose labor was unalienated, who was freed from want, who had time off to read, to fish, to play, to parent. He would be healthier, longer-lived, better educated and wiser than his counterpart under capitalism. To a considerable degree, social democracy (or even its attenuated American cousin, New Deal liberalism) has accomplished some of those goals (higher pay, more time off, widespread education) if not all of them (unalienated labor, widespread wisdom).
I've been thinking about the term "capitalism" since Frank Luntz, the renowned pollster, told Republicans to quit saying it. The Occupy Wall Street movement has turned "capitalism" into a dirty word, he said. If Republicans want to win in 2012, they'd better stop worrying and learn to love "economic freedom" instead.
Obama gave a really good speech yesterday, one that clearly announces his main campaign strategy for the next year and has the potential of having his 2008 base return to occupying his camp. You should read it, but if you don’t have the time, Derek Thompson has a pretty thorough reader’s guide.
Last night, Ron Paul was on The Daily Show, and under the gentlest of questioning from Jon Stewart, he said some truly insane things. After alleging that people who don't support him "don't understand what freedom is all about," Paul made his usual case that government is bad because it makes decisions for everyone, whereas "when you make a bad decision, it only hurts you."
Why did the greatest failure of laissez-faire capitalism since the Great Depression lead to a turn to the right rather than the left in both Europe and the U.S.?
(Sipa via AP Images) President of France's far-right National Front party Marine Le Pen gives a press conference after protesting a French National Assembly vote that authorized a 15 billion euro aid package for Greece.
The epic financial crash of 2007–2008 should have produced a massive political defeat for the conservative ideology whose resurgence began three decades ago. Its signal achievement, liberated finance, did not reward innovation, enhance economic efficiency, or produce broad prosperity. Rather, the result was a speculative bubble followed by a severe crash. Along the way, the super-rich captured a disproportionate share of the economy’s gains, while other incomes stagnated. In the aftermath, ordinary people have suffered large losses of earnings, assets, social protections, and hopes for their children.
