Film by Alfonso Cuarón setting out the thesis of the book.
I wasn’t far through The Shock Doctrine: The Rise of Disaster Capitalism by Naomi Klein when I realized that this quite probably is the most important book I’ve read all year and certainly a must-read for anyone interested in what caused the ongoing global economic catastrophe that’s spreading poverty and helping the elite hoard more and more of the world’s wealth. (Right now 2% of the population owns 50% of the wealth, and 50% of the population collectively owns 1%, a human rights catastrophe by the measure of anyone whose soul and mind hasn’t completely been hardened by ideology.) I won’t lie; it’s a depressing book. I burst into small tears of relief at the end when Klein managed to carve out some signs of hope for the world, a light at the end of the tunnel for democracy and justice in light of the past 30 years, which is best described as a long-range racketeering scheme of the wealthiest designed to loot the assets of the poor and the middle class until we have nothing.
Of course, you can’t just walk into the collective houses of a nation, steal all their shit, sell it, and hand it over to the wealthy. No, you need an ideological justification, and Milton Friedman and the Chicago School of economics that we know best as “free market” capitalism* provided the cover story with an economic ideology they called neoliberalism, but in practice tends to turn into neoconservatism or what I cheerily call neofeudalism—slash taxes, especially for the rich, moving the tax burden onto the working class, free trade, slashed social services, privatize national assets, abandon price controls, government austerity that leads to massive layoffs. By the strict orthodoxy, government intervention should be absent, but most anyone who buys into this economic philosophy immediately realizes that it’s just a fancy way of saying that the best economic system is one where the nation’s wealth is rapidly redistributed into the coffers of the few, with massive poverty for everyone else. Friedman felt that it was the only economic theory compatible with true freedom,** but even he and certainly all of his followers around the world quickly realized that the system was incompatible with democracy and had to be forced down the throats of people worldwide, with a thick dose of flag-waving and talk of freedom to make the destruction of democracy more palatable. Which meant that despite libertarian bullshit about “small government”, the governments would not be small when it came to any function of the direct redistribution of wealth or the forcing of the system at gunpoint. It’s a book about economics, but it’s not dry at all, and in fact, is a real page-turner, albeit one where you find your eyes bugging out in anger or tearing up in despair at your fellow humans’ cruelty to one another.
Thus the “shock doctrine”, a strategy idea that Klein traces straight back to the supposedly anti-tyrannical Friedman, which was the idea that neoliberal economic reforms should all happen at once, “shocking” a population so badly that they didn’t have time to regroup and protest. Of course, in a democracy, people can and will simply refuse to vote for someone who openly plans to “shock” them out of retirement, health services, and a job so some asshole in a mansion can get even richer, so you have to shock them into submission through other means or gain control of their democracy through deceit in order to get the power to induce these economic shocks.
Klein then carefully details around the world how the Chicago School orthodoxy was spread by force country by country, leaving a wave of misery in its wake. She starts with the military juntas in South America, the very ones openly supported by the U.S., with training and funding supplied by the CIA, economic theories, and mass murder and torture to make sure that the people were too afraid to rebel to get their democracy back. “Free market” capitalism required the deaths of 10s of thousands in South America and the torture and imprisonment of hundreds of thousands of others. The beginning of the free market revolution came on September 11, 1973 when neocon hero Pinochet sacked the capital, causing the fairly elected president Allende to commit suicide rather be taken alive. It was a telling beginning, and that our own September 11th came on the anniversary of that day strikes me as unlikely to be a pure coincidence.
A good protection racket, however, doesn’t require non-stop violence, just a lot at the beginning to show you’re serious, and only intermittent violence afterwards to remind people you’re serious. After the wild success of wealth redistribution in South America, the world’s elite were hungry to get their share of the stolen goods, and better methods of causing people to live in fear and pain so they’ll give you anything they want were developed, methods that required less squawking from Amnesty International. The two favored methods that Klein then details are to pounce on a pre-existing catastrophe like a war or a natural disaster and use the chaos to shove neoliberalism down the unwilling throats of the people or to create the catastrophe by choking off a country economically until they agree to debt relief from the IMF and the World Bank, with the string attached that they starve their poor to pamper their rich (or better yet from the IMF’s perspective, starve the whole country to line the coffers of American elites). One country after another has faced catastrophes, only to be strong-armed during its weak period into forsaking democracy for this economic agenda: England and America (to a minor degree), Bolivia, Poland, South Africa, China, the rest of Asia, Russia, many Pacific islands post-tsunami, and Israel has managed to pull off Bush’s dream of non-stop low-level warfare to keep people in economic submission. For a lot of these countries, IMF debt alone has been enough to cause their leaders to sign away their economy against the will of the people, selling national assets at cut-rate prices to capitalists, cutting social services, allowing their working class to slide into grinding poverty. Within our own country, we’ve had to figure out a backdoor way to do it, and the solution has been to militarize the economy, cut social services and use the money as a giant cash giveaway to security and defense contractors—Klein doesn’t mince words on this and describe Halliburton as using our Treasury as an ATM machine. It’s a direct transfer of wealth from your pockets to the rich through cronyism.
In Iraq, of course, there was no waiting around for the shocks to just happen so the capitalists could swoop in unnoticed and take everything. For various economic reasons, oil rich Middle Eastern nations have been able to hold off the looters, so the Bush administration, finally sick to the teeth of it, decided to shock (and awe) Iraq into submission. Klein’s assessment is that it’s not working nearly as well as planned; turns out the Iraqi people have more nerve to fight back than Cheney and Rumsfeld thought. Our reasons for torturing, it turns out, are not different in any relevant way than strategy of disappearing people in South America.
So, she ends on a muted note of hope. Very, very muted. Economic devastation around the world has had some serious and obvious ugly effects, most notably the rise of racist violence, terrorism, and religious fundamentalism. Racists and fundamentalists recruit from desperate people well, even though some of these groups (like Lebanon’s Hezbollah) have taken on enough economic populism and have redirected a lot of the blame to the blame-worthy economic elite that there’s hope that the good might outweigh the evil with them. Latin America is regrouping, lucky to have had a tradition of knowing exactly who’s to blame for this shit, they might be able to work out a form of independence from worldwide neofeudalism. Klein’s faith in the idea that people can in fact run a democracy as long as they are able to recover from chaos and shock to see the reality of the world around them is persuasive, and despite the fact that this is a very sad book, that thread of optimism buoys it.
Visit the site here. If you can’t watch the movie right now, the article resource page is a good starting point. Klein was a Milliband Fellow at the London School of Economics and as such, can piece together economic information that might be very confusing to those of us who aren’t as well-versed.
*I refuse to call it that. Friedman equated the right of the wealthy to stomp all over the working class with “freedom”, but I disagree. I think freedom only exists when it’s shared alike, which can’t happen in an oligarchy. Even free markets can’t happen in an oligarchy; the captains of capitalism forcefully disallow competition, making us all subjects to our corporate monarchs.
**Apparently on the justification that the word “free” got dropped a lot, but it makes a certain kind of sense if you assume that “freedom” is only appreciated by the 1-2% of the population who needs to be free to rob the rest at paperwork gunpoint.
It sounds like a good complement to this book would be “Confessions of an Economic Hit Man” which details the ways that the shock doctrine dovetails with crippling debt from foreign lenders to force the sale of domestic industry to foreign investors. The end goal is to create a situation where the globalized upper class can milk the third world poor for every last penny.
The great irony of the neocon/Chicago School axis is that it presents itself as the alternative to communism and/or socialism, arguing that the ideological focus of collectivist ideology is disconnected from the real dynamics of the economy, leading inevitably to oppression. Of course, the free market ideology is based on idealized theoretical models which are known to be based on flawed assumptions, and its imposition inevitably leads to - you guessed it: opression! tadaaa!
I’m so glad this is beginning to get noticed. It’s one of the most scary and, yeah, depressing books I’ve read in a while. Want to feel worse? Read a book about fascism at the same time! I just finished reading Naomi Wolf’s Letter to a Young Patriot before I started Shock Doctrine and it’s eery how well fascism and neoliberalism work together. But this put together a whole lot of things for me that have been happening over the past couple of decades. It’s gonna be a really long haul for progressives for a while.
I’m so glad this is beginning to get noticed. It’s one of the most scary and, yeah, depressing books I’ve read in a while. Want to feel worse? Read a book about fascism at the same time! I just finished reading Naomi Wolf’s Letter to a Young Patriot before I started Shock Doctrine and it’s eery how well fascism and neoliberalism work together. But this put together a whole lot of things for me that have been happening over the past couple of decades. It’s gonna be a really long haul for progressives for a while.
I wasn’t far through The Shock Doctrine: The Rise of Disaster Capitalism by Naomi Klein when I realized that this quite probably is the most important book I’ve read all year
I just started reading it and I heartily agree. IMO, the theories of Milton Friedman and “The Chicago Boys” are nothing more than Social Darwinism burnished with academic trappings. If there is any justice in the universe, Friedman’s theories will be consigned to the dustbin of history alongside Karl Marx’s.
Along with The Shock Doctrine I would also heartily recommend John Dean’s book Conservatives Without Conscience which does a good job examining the authoritarian mindset that is the basis of the so-called “conservative movement”.
Dean references the research of University of Manitoba psychologist Bob Altemeyer who has devoted over 30 years to the study of the authoritarian mindset. At Dean’s urging, Altemeyer wrote a book which offers a simplified look at his research called The Authoritarians. His detailed descriptions of what he calls the “Right Wing Authotarian” and “Social Dominance” mindsets are a must-read (especially chiling is his description of the people he calls “Double Highs”–people who score high on both the Right Wing Authoritarian and Social Dominance scales).
I think you’ve misunderstood what a Miliband Fellow is: it’s someone who gives a few public lectures and perhaps a few to the students. It’s not an academic appointment in the sense you imply here (as, for example, Atrios’ sojourn at the same place was an academic appointment).
Also, the LSE does not only teach economics (although that was my subject there) but a whole range of social sciences. It’s entirely possible to go through the place without learning any economics at all.
No, I haven’t read the book but I have read her articles based upon it and a number of reviews of it. The problem is that Klein doesn’t actually understand either economics or history.
“must-read for anyone interested in what caused the ongoing global economic catastrophe that’s spreading poverty and helping the elite hoard more and more of the world’s wealth.”
For example, the poor are not poorer than they were. They are richer. For the economy is not a zero sum game: wealth is created.
“economic ideology they called neoliberalism”
No, Friedman called himself a classical liberal, as did Hayek. It’s their opponents who called them neoliberals.
“slash taxes, especially for the rich, moving the tax burden onto the working class, free trade, slashed social services, privatize national assets, abandon price controls, government austerity that leads to massive layoffs.”
You refer later to the UK havin suffered this. Slash taxes on the rich? Certainly, the top rate was 98%! more revenue is brought in now that the rate has dropped (yes, at extremes, the Laffer Curve really is true). The tax burden on the working class has risen, yes, but that’s the European Union that, insisting upon a VAT of 17.5%. We all know that consumption taxes are regressive, don’t we? Free trade is something bad now? Social services are larger now than they ever were in the UK, in both cash terms and as a percentage of th economy. Privatise national assets? Sure, why should the phone com+pany be owned by hte Govt? The car manufacturer? The airline? You do know that the private water companies in England work better (ie, are cheaper, have better water quality and cause less environmental damage) than the Govt owned one in Scotland, or the directly Govt provided water service in N. Ireland?
Abandon price controls? What are you talking about? You think it’s better than bureaucrats set prices? You’ve seen the horrors caused by rent control in NYC?
We’ve not even had Govt austerity. There’s been no cuts in spending: even under Maggie Thatcher that kept rising.
But the grander point is that Klein’s got it entirely the wrong way around. Every crisis has brought forth greater State control, greater government intervention. It’s crisis statism that has been the driving force (from the Great Depression leading to Roosevelt’s interventions to 9/11 and the idiocies of Homeland Security), not crisis capitalism. Whether or not those interventions are desirable (I happen to think not) is different from whether a crisis was used to reduce State power or increase it, It’s the latter, not the former that Klein avers.
The real problem is I think that Klein’s written a book of economic history and she knows next to nothing about either economics or history.
You don’t seem to know any more:”in light of the past 30 years, which is best described as a long-range racketeering scheme of the wealthiest designed to loot the assets of the poor and the middle class until we have nothing.”
How on earth can you say something like that when hundreds of millions of Asians, both Chinese and Indian (and many others) have risen up out of poverty in hte past few decades? Since WWII we’ve seen the biggest reduction in poverty of any period of human existence so far!
in light of the past 30 years, which is best described as a long-range racketeering scheme of the wealthiest designed to loot the assets of the poor and the middle class until we have nothing
If this is true, then the level of real wealth possessed by the poor and the middle class in 1977 should be considerably higher than the level of real wealth possessed by those classes today.
Was it?
Every crisis has brought forth greater State control, greater government intervention. It’s crisis statism that has been the driving force (from the Great Depression leading to Roosevelt’s interventions to 9/11 and the idiocies of Homeland Security), not crisis capitalism.
I was able to tell you’re not an American pretty quickly, Tim.
You do know that, right now, the Bush administration is pressuring the US Congress to immunize our telecom companies for the actions that the telecom companies took at the behest of the administration, yes? They want Congress to say that it was perfectly fine that the telecom companies broke the law, because they did it on behalf of the administration. In fact, it’s been shown that the administration actually punished a telecom company that refused to go along with the administration’s scheme for illegally monitoring the calls of US citizens. And it’s not a gray area — what the companies did is flat-out illegal, and has been for 30 years. But now they’re gaming the system to try and have what they did declared legal in retrospect.
How, exactly, is that the free market capitalism that you’re touting when the government and the telecom industry are working together against the citizens of the country? It sounds like a quite different system to me. You know, the one where the government and corporations work hand-in-hand to keep the country’s population in check. What is that system called again? Something about sticks in a bundle being stronger than single sticks …
mnemosyne, in addition, the FDA has fast-tracked a new board for approving drug trials that includes, among others, CEOs of major drug corporations.
If this is true, then the level of real wealth possessed by the poor and the middle class in 1977 should be considerably higher than the level of real wealth possessed by those classes today.
Was it?
Yes, it was. Wages have been depressed for 30 years. Adjusted for inflation, workers today are making less in real dollars than they did in 1977.
Did you not know this basic economic fact?
mnemosyne:
What makes you think President Bush is anything like a free-market capitalist?
Tim:
To be fair, both increases in the standard rate of VAT since its inception have been made by Conservative governments. The EU rules mean we can’t reduce the rate, and can’t exempt things that are currently taxed, but I don’t think you can blame the EU for the tax rises.
Wages and wealth are not the same thing.
Oh, bravo, QT. “I have two TeeVees so I’m wealthy!” What a compelling argument.
Tim–if the poor are richer now than they were 30 years ago (and I’m not conceding that they are), that’s only due to technological progress, and not due to the economy. The overall standard of living has gone up, in the west at least, but the gap between the wealthiest and the poorest has widened to Gilded Age levels. What you’re really saying is that since poorer people have mobile phones now, and they didn’t have them 30 years ago, they’re richer, because 30 years ago, only the very wealthy had mobile phones. That’s dishonest.
meomosyne: I did call the Homeland security thing idiocies, didn’t I? In normal usage that means that I think they’re silly, you know, not things I approve of?
Your second paragraph rather makes my point for me. The crisis of 9/11 hasn’t lead to greater freemarket capitalism, it’s lead, as you point out, to greater corporatism, to greater State power. The opposite to what Klein was stating.
In your second comment, sorry, but you’re missing something. Using hourly wages of all employees over that time span doesn’t tell you that the composition of the workforce has changed over that time.
The series that graph is taken from measures the hourly wages of everyone working. But, from 1970 there’s been a huge explosion of both women and part timers into the workforce.
As we know (it’s said often enough around here) both women and part timers make less per hour than full time males do per hour. So that apparent “no increase” since 1970 is actually an effect of the change in the composition of the workforce.
Sorry, but it just isn’t true that average (whether mean or median) wages for full time male workers are lower now than they were in 1977. Nor are female, nor are part time wages of either sex (all fully adjusted for inflation).
What we’ve seen is a change in the composition of the workforce from being one made up primarily of full time males to one much more varied. That’s one of the problems with averages: they can conceal more than they reveal.
“Tim–if the poor are richer now than they were 30 years ago (and I’m not conceding that they are), that’s only due to technological progress, and not due to the economy. The overall standard of living has gone up, in the west at least, but the gap between the wealthiest and the poorest has widened to Gilded Age levels. What you’re really saying is that since poorer people have mobile phones now, and they didn’t have them 30 years ago, they’re richer, because 30 years ago, only the very wealthy had mobile phones. That’s dishonest.”
This is where I’m beginning to see the wisdom of one of Paul Krugman’s saysings, that it can be very difficult to explain economic ideas when people don’t have a grasp of the underlying reasoning.
There’s two concepts here, common in economics. Absolute poverty and relative poverty. Start in 1970. I have $1 and you have $2 a year. It’s now, and my income has risen to $2 a year and yours to $5 a year.
(All after inflation, of course).
We have both absolutely gained in wealth. But you have gained relatively more than I. Thus, while my absolute poverty has decreased, my relative poverty has increased.
Now, my stating that my absolute poverty has reduced is not dishonest: it’s simply the truth. Just as your implied statement that my relative poverty has increased is not dishonest, it’s also the truth.
But we both have to be very clear about the terms we’re using. Relative or absolute?
When someone says “poverty is increasing” then as the qualifier is absent then I assume they’re talking about absolute. And in general they usually are: I’m sure that Amanda thinks that the poor are getting poorer in absolute terms. It’s just that they’re not. They are getting richer in absolute terms, even if they are getting poorer in relative terms.
I would also recommend “Confessions of an economic hit man” for the mechanics of how the corporate interests subdued nations and peoples.
Are you always this disingenuous or is it just a good day?
No, the reason you can’t explain economic ideas is because economics doesn’t study real things. It’s like theology and astrology - you’re not modeling reality. You pretend that people are rational actors when they aren’t. You pretend like your equations don’t have catastrophic effects on the lives of actual people, when they do. Absolute poverty, relative poverty, who the fuck cares? I somehow doubt people who are starving give two shits about your semantics. Look, the people who read this site are intelligent, highly educated individuals. So your knowledge of tea leaves isn’t going to impress anybody here.
FDR was a hero, but maybe if you’re not American and don’t have family members who lived throught the Depression you don’t realize it. The grinding poverty my grandparents experienced permanantly warped them. I don’t believe anybody should go through that, but then I’m not an economist.
>>Wages and wealth are not the same thing.
True. Ironically, those with the most wealth don’t work for wages…
But for the rest of us, wages = wealth. Our wages have less purchase power than they had in the past, thus we are poorer than we were.
No, the reason you can’t explain economic ideas is because economics doesn’t study real things. It’s like theology and astrology - you’re not modeling reality.
Actually, economics does a pretty good job of modeling reality and people are rational, which explains why given the choice of paying less money than more for the same item, we’d prefer to pay less.
Regards.
>>FDR was a hero
I’ve had this discussion before on Orcinus. I’ll summarize my position briefly:
1) It was business leaders who drafted the plan for the New Deal and pressured FDR to adopt it
2) The labor movement at the time was in full force and it is quite likely, IMO and that of other far left thinkers, that these gains would have been obtained eventually through its actions, and potentially more would have been gained by continued direct action and strikes
3) The New Deal had the effect of buying off a section of the working class, mostly its radicals and leaders, with access to a middle class lifestyle, which resulted in unions becoming a factor of conservativism in American politics rather than a factor for radicalism
4) Therefore it is not far-fetched to think that the New Deal was deliberatly drawn up as a way to make the labor movement irrelevant in the public mind and by buying off certain of its more radical elements
5) Therefore, for the far left FDR is far from a hero. We believe the New Deal was basically the first of many knifes put in the back of the American labor movement, which incidently happens to be the most morribund of all industrial nations, having the lowest unionization rate in the West.
Even assuming that FDR did it out of genuine concern for the working class, this narrative still posits the Big Man theory of history, where history is made by the actions of a few discrete heroic men (and women, but mostly men considering who writes history) instead of the actions of masses. IMO it is more accurate to say that the labor movement, due to its mass actions, resulted in concessions being made by the state and businesses, which expressed themselves through FDR’s New Deal.
It’s just that they’re not. They are getting richer in absolute terms, even if they are getting poorer in relative terms.
But those relative differences wind up mattering more than the absolute ones do. It’s the relative differences that cause the poor to get their torches and pitchforks and march on the mansion on the hill, both metaphorically and literally.
And if that were the only thing economists were saying with their models, you’d have some kind of a point.Did you see someone claiming that consumers will, given two equivalent items, fail to go for the cheaper chicken? Who on earth are you responding to?
Hey, look–my astrology tells me that the sun rises in the east! Therefore, astrology is deliciously valid. Take that, cranky skeptics!
Your second paragraph rather makes my point for me. The crisis of 9/11 hasn’t lead to greater freemarket capitalism, it’s lead, as you point out, to greater corporatism, to greater State power. The opposite to what Klein was stating.
That’s the funny thing — you seem to have a pretty idiosyncratic idea of what “freemarket capitalism” means. What we have right now is what was designed to be “freemarket capitalism” by Friedman and his pals, which is basically allowing corporations to run rampant over citizens with no check by the government. And when you have a conflict between a corporation with access to millions of dollars and dozens of high-paid lawyers, and a citizen with only a citizen’s financial resources, who do you think is going to win?
That’s why the government needs to be available to run interference. Otherwise, corporations are happy to destroy their own market just to make a little extra money in that particular quarter. Look at the dissolution of the housing market that’s going on here in the United States. Banks and mortgage companies made a series of bad but profitable loans, and now people are defaulting on them in droves. Mortgage companies are laying people off. Home values are plummeting. Foreclosures are at a record high, with more to come.
And what is the government doing? They’re protecting the banks and mortgage companies from their bad decisions and letting homeowners dangle in the wind. Because everyone knows that businesses are more important than people, and the poor innocent banks had no way of knowing that people wouldn’t be able to pay back their loans just because they didn’t have enough income to cover the loan payments!
Sorry, but it just isn’t true that average (whether mean or median) wages for full time male workers are lower now than they were in 1977. Nor are female, nor are part time wages of either sex (all fully adjusted for inflation).
Link, please. Because every article I’ve seen has said that the wages for white males working full-time have stagnated since the 1970s. You may not believe that’s what’s happened, but you seem to have a lot of beliefs that don’t match up with reality.
Sigh. I hate moderation.
There was an economist named Steven E. Landsburg that asked the oh-so-important question “Why do people walk up stairs but not escalators?” I shit you not, this is how economists spend their time. Apparently people are also supposed to walk up escalators because it is more effiecient. Ok, it probably is. I might do it if I’m in a hurry, but not if I’m tired or don’t feel like it or for any number of other random reasons. The point is that it might be rational to walk up the escalator, but not everybody is going to walk up the escalator 100% of the time because it’s the rational thing to do. This is the brilliant and necessary work done by economists? Work that models a reality where we’re all escalator-climbing automatons?
“and people are rational, which explains why given the choice of paying less money than more for the same item, we’d prefer to pay less.”
So explain Haagen-Dazs to me. The company was failing until they simply raised the price of their existing formulation and called it “premium”.
People say “you get what you pay for”, implying that a more expensive purchase is seen as being more capable, powerful, and satsifying, even though it may be none of these.
Interesting. I’ve never looked at it that way, but it does make a lot of sense.
Quiet Truths — yes, actually. The distribution of wealth has been changing so that it is more concentrated int he hands of a few. No, really. Even in the last decade there has been a drastic change.
Some of this has to do with depression of wages, but, admittedly, it also has to do with the rich just getting richer. Which is still ab problem, cause if they can do it, why isn’t it happening anywhere else too?
Yes, we might have gained in monetary wealth, but perhaps we have actually lost in all other forms of weath:
1) Can $2 a year now pay for as much square feet of housing as $1 in 1970?
2) Can the housing afforded by $2 a year now be as crime-free as the housing available at $1 year in 1970?
3) Can the public education a child receives in a neighborhood that is affordable at $2 a year now be good as in $1 a year housing available in 1970?
4) Does $2 a year now provide as much college-level education as $1 a year in 1970?
5) Does $2 a year now provide as much health care as $1 a year in 1970?
6) Does $2 a year now buy as much healthy groceries as $1 a year in 1970?
I could go on for a LONG time. The point is: yes, if you focus only on the inflation-adjusted money available, we seem to be richer now than in 1970, but you look at what that money can actually buy — even after adjusting for inflation — most people are getting far less for their time.
Sure, we have more TVs, more computers, safer cars, and vastly more medical options, but we really have less access to the things we actually need than we did in 1970. If you break a bone today even WITH good health care, you might be set back hundreds of dollars for the doctors to take the SAME X-rays and put the SAME cast on it as they did in 1970. If you want a low-end new car that will last at least three years before the first major repair, it will cost in absolute terms much more than it did in 1970.
Finally, speaking economics: as the raw natural resources of the world get scarcer and the demand grows with increasing population, the price MUST go up. Der. Ecomonists today are spending their time justifying this situation rather than trying to fix the root issue (reduce world population growth) or even pushing for the technology to find new resources that could sustain the current model (mining for materials in space).
It’s just an internet poll, I know, so it doesn’t mean anything, but it’s interesting all the same given our conversation here. The question is
Guess which one is winning–the absolute or the relative?
in fact few people are rational, not when “rational” depends on prioritizing currency above all else. why don’t we sell off our children? that would be an efficient way to make money now and save money later, right?
anyway, really i just wanted to say that “debt relief” isn’t the right phrase in that context, amanda, and i wouldn’t be so nitpicky except it’s the opposite of what you mean, which is plain old debt.
I really hate to keep nitpicking on this, but this is a habit amongst progressives that drives me nuts. Neoliberalism has nothing what so ever to do with feudalism. Calling it that simply deflects attention from the fact that neoliberalism represents nothing more than a reversion to classical capitalist orthodoxy and that its effects, particularly in terms of inequality and exploitation, are not qualitatively different from most of capitalism’s history in most of the world except US/Europe 1945-1970.
Milton Friedman and Frederich Hayek by and large re-asserted the doctrine of the classical liberals a la Locke.
How can anyone watch that video and take what it says seriously? It’s the most absurd hyperbole. The only shock is to free-marketers who see the straw men they’ve falsely been portrayed as.
It seems many of these comments, in addition to not distinguishing between the distribution of wealth and its quantity, fail to recognise that the economy and technological progress are inter-twined. If you think that a government-controlled industry would be able to provide me a computer as good as the one I now use as cheaply or quickly as the company I purchased it from then…well, incredulity springs eternal. it is the combination of profit-incentive and fierce competition that requires and rewards innovation. See how the Middle East has managed to stump capitalism’s growth at their cost: they now enjoy the pleasures of stagnation.
Tim,
Without wanting to aid in the derailment of this thread into the discussion of minutia, as to your point about the working poor today all I’ll note is that the statistics on household income adjusted for inflation and hours worked by the household will very quickly demonstrate stagnant to falling household income for the majority of people in the U.S. since 1977. I do recall a statistic being bandied about that something like 95% of the wealth created in the last thirty years has gone entire to the wealthy in the U.S.
This leads precisely to one of Klein’s questions; how to enforce neoliberalism in the face of it being obviously antithetical to the interests of the great majority. In the global South the answer has been rather unpleasant, involving CIA sponsored coups, death squads, murderous dictators supported for their support of neoliberalism (i.e. Pinochet), IMF and World Bank loan conditionalities and structural adjustment programs (such as the one that reduced Russia’s standard of living by 50% for the majority while giving away most of its assets to the oligarchs).
In the global North the answer is much more complex and subtle. The question is how have people been convinced that ‘there is no alternative’ and how has neoliberal orthodoxy enmeshed itself in the vast majority of parties both right and left. In the U.S. for instance there is no non-neoliberal party.
cpp, don’t you know what inflation is? Measures of inflation can take all those costs (at least indirectly) into account. They normally operate on the ability to purchase a hypothetical “basket of goods”, which can include services such as healthcare and education. Tim’s example could take all those into account and his point would still stand about the difference of absolute and relative poverty and the different moral issues they represent.
Byron Crawford hip hop “shock” blogger reviews Shock doctrine here:
http://www.byroncrawford.com/2007/10/the-shock-doctr.html
Cuaron’s “Children of Men” was probably my faborite film last year.
Damn, Tim Worstall sure gave a black mark for the negative team didn’t he? Yo Tim, you’re pretty unclear, and have not so small signs of idiocy and common contempt.
Anyways, I also have pretty serious reservations about Naomi Klein’s book (tho’ I just read her article in this month’s Harpers). I vehemently disagree that this is an important book, at least for the content (as much as I am aware of what that is).
As I posited on The Agonist and on Brad Delong’s site, Naomi Klein isn’t really talking about anything new. Insofar as she *is* talking about something new, Chalmers Johnson goes quite a bit more in depth about the modern day economic pictures and its antecedents.
This is the thing, what Naomi Klein is talking about is an artifact of industrial era imperial (mass) capitalism. It’s been going on since England started fiddling around with water power. As Henry C Liu explained in one of his ultra long economic articles for asiatimes.com, industrial capitalism is about a system of collectivation, because industry is so massively capital intensive, of savings that constantly seeks high returns investments. Corporations with these capital assets, all the way from the East India Company (which Adam Smith railed against) destabilizing Subcontinent nations and using the Pitt era governments to collect profits for it from the New World–remember Boston Tea Party? The end result was the loss of American colonies and a massive series of wars on the European continent that nearly unseated British power.
The Soviets did the same thing, I mean, Troskyism isn’t all that much different from capitalist shock strategy. Bolshevik attempts at rapid collectivization in places like the Ukraine led to famines, which surprised gave the central government more control. If you were familiar with Hayek, it’s one of the themes of his work.
Anyways, this isn’t really economic history, which is why it’s apparently easy to read. If you wanted to understand why the world is the way it is, and how this particular situation came about, you need to read quite a few books, actually. Chalmers Johnson for example. Some others that be good…
Overthrow by Steven Kinzer
The Great Divergence by Ken Pomeranz
American Theocracy by Kevin Phillips
The Great Transformation by Carl Polanyi
The Market System by Charles Lindblom
One will have a much more ready appreciation of what is actually going on with this mixture of books, some for the more lay reader, some for the more cerebral reader. I quite suspect Naomi Klein is part of the same kind of mixing society that Seymore Hersch is. Bright people, but they do have a social network, and they do have their own interests, and one should most definitly not take them at their words without checking to figure out the angle…
cpp: all of the things you mention are in fact encompassed in the word “inflation”. That is, the change in prices over the years. Now, we normally talk about the average level of inflation but in reality each and every different thing has its own inflation rate. We also tend to find that services have higher inflation rates than manufactures (it’s called the Baumol effect). Because wages generally rise faster than average inflation (yes really) then things that contain a lot of human labour like services go up in price faster than things that don’t. It’s also true that we know how to raise productivity in manufacturing better than we do in services (that is, reduce the amount of labour we have to use). This is why manufacturing employment has been going through the floor in the US while manufacturing output keeps going up (yes, really!).
This is an example of two things mentioned above: how difficult it is to discuss economics with those who don’t have a basic grounding and, as entomologista disagrees, why economists do indeed do interesting and useful things. We expect the price of education, of health care, of a haircut, to become more expensive relative to the price of a manufactured good. It isn’t a “what the hell happened there?” question, it’s something well known.
As to a sq foot of housing, well, building it has fallen after accounting for inflation. But the land to build it on, at least in places, along with the permission to do so, has gone up. Partly because lots of people want to live in certain places, thus there’s a shortage of land, plus zoning ordinances, meaning that in certain places there’s a shortage of permissions. Then on top of that there’s the effect of the last few years of interest rates below inflation rates: that was always going to create a bubble in house prices (err, something that economists were predicting, Paul Krugman for one, Dean Baker another, if you want another example of what the subject can be used for).
“as the raw natural resources of the world get scarcer and the demand grows with increasing population, the price MUST go up. Der.”
No, there’s more than that going on. Sure, more people demanding more resources will push prices up. But people don’t want resouces, they want the things resources do. We don’t actually want gas, we want transport, we don’t actually want copper, we want the transmission of information. My car in the early 80s in Virginia did 10 mpg. My current one does 30. We could have twice as many cars doing 30 mpg instead of 10mpg and gas prices would fall, not rise: we need to balance the two effects. Similarly, we can have millions more connected to the net and the telephone system but the demand for copper falls because we’re using fibre optics now.
“I could go on for a LONG time. The point is: yes, if you focus only on the inflation-adjusted money available, we seem to be richer now than in 1970, but you look at what that money can actually buy — even after adjusting for inflation — most people are getting far less for their time.”
You really don’t understand what is being said here. “Inflation adjusted” means looking at what the money will actually buy, not the nominal sum of money available. What you’re doing there is looking at the nominal sum, that is, before adjusting for inflation.
As I’ve said several times now, tough to discuss matters economic with people who don’t have the most basic grounding.
Holy Shit, Praxis, you’ve really nailed so much of the problem I had with Klein’s book in so short a comment!
Blackbloc, You left out the part where the New Deal was a disaster for black people in the South, as FDR allowed southern white people to be lifted more out of poverty, even as black people were left behind.
I still think FDR was a hero. Anyone who knows much about the 30s knows just how far from a nasty revolution we were. Not by much. The conflicting winds that tore apart Weimar Germany were affecting both UK and US societies…I don’t think unions would have gotten a better deal with more action. What is more likely is the same game Hindinberg played in Germany. Some right wing idiot like George W Bush gets forcibly installed to put down the rabble under cover of authority…
Just an aside (in context of your whole argument, with which I agree) — no one actually knows if Allende committed suicide. It’s just as possible, and probably more likely, that he was simply killed when Pinochet’s forces overran the presidential palace. It was far more convenient for the purposes of the coup for him to be dead rather than alive and protesting, and also far more convenient for the purposes of the coup to say he “gave in” & took his own life as opposed to being murdered in the office to which he was democratically elected.
As I’ve said several times now, tough to discuss matters economic with people who don’t have the most basic grounding.
It’s really tough to discuss economic matters with people who insist that when their theories conflict with reality, it’s the theory that’s right, and reality is wrong.
There’s two concepts here, common in economics. Absolute poverty and relative poverty. Start in 1970. I have $1 and you have $2 a year. It’s now, and my income has risen to $2 a year and yours to $5 a year.
(All after inflation, of course).
We have both absolutely gained in wealth. But you have gained relatively more than I. Thus, while my absolute poverty has decreased, my relative poverty has increased.
You have two problems with your ideas, Tim:
i, People measure themselves against their peers, not their past. There’s an assumed “standard of living” in any society; the middle class these days find it harder and harder to stop themselves slipping away from that. Stating “oh, you have it better than in the 70s, or the Middle Ages” doesn’t cut it.
ii, If your income has risen from $1 to $2 - but you’re paying $0.50 more in health insurance and getting $0.25 less in government services while paying the same tax then, hey, you haven’t doubled the utility your income is giving you.
True. I didn’t think the precision was necessary here as I think most of the posters here would know that middle class privilege was mostly extended to whites and males, but it doesn’t hurt to mention it.
I don’t believe in heroes anymore. I believe in mass struggle.
As one of those who do work on getting that revolution going, that’s most of my beef with FDR’s New Deal.
I wish I could be on the next leg of the revolutionary journey instead of having to rebuild what was lost in the last half century.
Tim, you’re amazing at trying to distract from the main point by bringing up inconsequential details. Yes, yes, the elite are robbing the rest of us at gunpoint but LOOK OVER HERE!
People are catching on, and you won’t be able to stop it with the hand-waving. Slow it down, at best.
Sigh…if only my PhD were in economics, then I might feel more secure in questioning our esteemed, English, American-progressive-blog-reading, LSE-graduated, upper-(middle-?)class, economist(s).
But I’ll do it anyway.
What was your point with the horrors of NYC rent-controled apts? That to have a *few* rent-controled buildings means that other places are more expensive? If that’s what you mean, I have to disagree. I love the idea of a rent-controled place (if I could find one!). If you live somewhere with rent control, don’t be surprised when you go to renew your lease and there’s a 24% increase in your already heart-(and wallet-)breaking rent. Landlords raise rent depending on the market, any renovations, and personal sadism. This is just my observation over the past 3 years of living in Manhattan. If I missed your point, oops.
I also had another question: How much does it cost to attend a big Economics school, in any country? Do institutions offer generous scholarships to underpriveleged students? Are there a varietey of approaches and contexts in which one studies Economics? Do students and professors from underpriveleged backgrounds contribute to the discussion of absolute and relative poverty?
Because Economics, to me, sounds like something a bunch of stuffy, conservative, priveleged, white men like to lord over the rest of us in order to make us feel stupid for a)even questioning and b)not “naturally” understanding and therefore proving our unworthiness to join the discussion. (the same can be said of much of academia, but I tend to see more openness and diversity in the Lib. Arts).
Cheers to whoever suggested Confessions of an Economic Hitman; second most non-fic eye-opening book I read in undergrad. The first, and another reading recommendation if you want to find out more about 9/11, is The New Pearl Harbor. The coincidence of Pinochet and WTC occuring on that day is intriguing. Like all the stuff that happens on Halloween in Harry Potter. (sorry, had to get in a reference somewhere!)
Rock on Amanda!
That’s the funny thing — you seem to have a pretty idiosyncratic idea of what “freemarket capitalism” means. What we have right now is what was designed to be “freemarket capitalism” by Friedman and his pals, which is basically allowing corporations to run rampant over citizens with no check by the government.
Well, one kind of check—the check we’re writing them for billions. Right now the Bush administration is in the process of a giant wealth transfer from our pockets to the very rich through the use of taxes. Taxes should pay for the commonwealth, but right now more and more of them don’t come back to the taxpayers in commonwealth but to the elite in direct cash payments that are technically legal and all sorts of graft.
I’m sure that Amanda thinks that the poor are getting poorer in absolute terms.
The middle class is getting poorer in absolute terms. By any reasonable measure, my boyfriend and I should be doing better than our parents, especially since we’re white collar professionals and my parents really weren’t, especially when I was a little kid. But my parents were able, in 1976, to start a family, buy a house, etc. and I’m just not. I don’t want a family, but if I did, I’d be SOL. House? Out of the question. Health care? Iffy. New car like my parents had when they were years younger than me? Ha! Retirement savings? Now I’m going to cry.
But it’s true—we do have a bigger TV than they really made in the 70s. Conservatives appear to believe that the only economic measure worth paying attention to is the screen inches index.
“Conservatives appear to believe that the only economic measure worth paying attention to is the screen inches index.”
It’s all part of the size obsession on the right - Houses, TV’s, SUV’s, codpieces, etc…
BlackBloc: Good luck getting mass action without someone to spark/spearhead/figurehead it. Most revolutions come complete with a charismatic leader. There’s a reason we don’t talk so much about “French Revolutionary Era” as “Napoleonic Era”….
Oh, and as far as FDR is concerned: short-circuiting revolution is usually a good thing, because revolutions are messy and difficult to control. there’s no gaurentee you’ll end up with your anarcho-communist utopia instead of a grinding totalifascist dictatorship. ‘Swhy I much prefer co-opting and reforming existing structures, esecially when they aren’t, you know, absolute and pure evil.
Tim, you’re the one who doesn’t understand how inflation works. Because it’s a measure of a ‘basket’ of goods it can seriously misrepresent things. For example, over the last several years some basic things have been going up faster than inflation such as housing, healthcare, and education. This is ‘balanced’ by the fact that many items have decreased in price such as most consumer goods. In other words, the inflation rate can be low if ‘luxury’ items are going down in price while ‘essential’ items increase in price–because inflation is an average. If this happens, many people can be worse off even if their wages adjusted for inflation is stable or even increases.
Ironically, it seems that you are the one that doesn’t have a “basic grounding” in economics, yet you seem to want to project that on everyone else.
“Average inflation” hides much more inflation than it reveals. The fact is that there is a much greater increase in the money supply per year than is reported by the gov’t. Actual inflation rate for the US in the past decade is something like 10-12% per year.
“In the last decade, M3 has increased 120%.”
Directly from the belly of the beast: http://www.mises.org/story/2302
No, the main reason manufacturing employment is going through the floor is because of the petrodollar. By tying oil to US dollars in the 70’s, Nixon virtually guaranteed that global labor and products would be forced to lower their value in relation to US goods and labor, insuring that the price of both labor inside and outside the US would be artificially suppressed in value. Nixon was a Freidmanite as well.
The increasing US manufacturing output is more funny number crunching. Actually, the US produces far less than it used to, and although it does produce more high value goods which would account for some “increases”, much of the increase in manufacturing output are actually calculated due to the phantom GDP created by including overseas outsourced manufacturing.
Read it and weep: http://www.truthout.org/docs_2006/061107P.shtml
More about growing inequality:
http://select.nytimes.com/2006/09/15/opinion/15krugman.html?_r=1&oref=slogin
my boyfriend and I should be doing better than our parents, especially since we’re white collar professionals and my parents really weren’t
Um, no.
That’s been the historical trend in the United States: children do better economically than their parents did. Now the trend has been reversed, and many children are doing worse economically than their parents did.
You can complain about the philosophy of expecting to do better than your parents, but don’t ignore the facts, please.
Because it’s a measure of a ‘basket’ of goods it can seriously misrepresent things. For example, over the last several years some basic things have been going up faster than inflation such as housing, healthcare, and education.
And don’t forget that most inflation calculations leave energy and food out of the mix. Barry Ritholz over at The Big Picture rails against this all the time. My money does not go farther now than it did ten years ago, even though I’m making a lot more of it.
Three things:
1) People are not rational. They’re not irrational. They are simply non-rational. I think one of the biggest problems economics has is the assumption of rationality–it works sometimes, but is often flat-out wrong.
2) Economic forecasts can only forecast for the metrics they track (kind of obvious…). Many metrics we currently use don’t convey good information–GDP is a measure of economic activity, but what about the *quality* of that activity? Why do we look at nations rather than cities as the major functional economic units?
3) Economics wishes to be the physics of the social sciences, but it is not. Much of its current approach to analysis is based on either the small-and-simple kind of problems in Newtonian physics or the large-and-homogenous kind of problems in statistical mechanics. But economics exists somewhere in between, in the middle-range often inhabited by nonlinear systems, game theory, etc. These sorts of problems are large/medium-and-diverse.
Basically, while I do think economics can tell us very important things and has some decent functionality at present, I also think that it’s joined at the hip with the state and is solving problems using the wrong tools.
As my father is fond of saying,
“The rational is not always reasonable.”
(It’s got better nuance in French, though.)
Libertarian:
Sure, because Amanda couldn’t possibly know her own familial economic history better than you do.
Libby, I’m afraid you’ve already exceeded your allotted pomposity quota for this thread. No cookie for you.
Suspect Timmy is a Brit -writes that way - probably Conservative.
Or the more pejorative—’Thatcherite’
He also credentializes, here:
“As I’ve said several times now, tough to discuss matters economic with people who don’t have the most basic grounding.”
“Well phew on you…hoi polloi!”, sez he.
Fuc*k that everytime.
AToL is an excellent place to try to think economic…
lot of it’s well over my head. Or TMI.
Features Chalmers Johnson, Tom Englehardt and the inimitable Pepe Escobar…I’ve no idea how he he seems to be -on the scene- so often.
Liu is excellent..but as per caveat longish.
His last piece…I thought worth reading…two sections, 9 pages…but I learned a few things…even me.
[disclaimer…don’t even subscribe to the magazine/journal…just on my book marks]
And the Altemeyer book can be had for free .pdf and is terrific. Wouldn’t even let me leave a donation.
Several people above have recced “Confessions of an Economic Hit Man.” I can’t agree: it rang my bullshit-o-meter something *fierce*, mostly because of the Sexy Lady Who Trained & Seduced Me While Talking Like a the Old Guy in a Heinlein Novel. It’s a pity, because much of it comes across as extremely plausible — but I can’t trust the whole when some of the crucial parts reek of fiction.
Do you mean that white collar professionals shouldn’t be earning more than non-white collar professionals? Do you mean that Amanda and her boyfriend are bad people, so they should be poor? I mean, this is pretty much a “TWINKIE HOUSE!” level of incoherence. Try a little harder, please.slash taxes, especially for the rich, moving the tax burden onto the working class, free trade, slashed social services, privatize national assets, abandon price controls, government austerity that leads to massive layoffs.
One question. What form of price controls do you feel should be maintained? How would you account for the potential rise of black marketeering and government corruption that may result when the demand for necessities outstrips the supply available at that given controlled price?
This question arises from having family and neighbors who lived in countries with government mandated price controls.
Their recollection was that while the controlled prices were nice to have for basic necessities, they also dealt with shortages/nonavailability of those necessities that resulted. This meant they ended up paying much more and risks associated with dealing with black marketeers and/or corrupt government regulators that were on the take…or more often, they ended up doing without those necessities.
Hey, financially things are pretty good for me, therefore the system is working great! Anyone can get money, you just have to apply yourself. Duh.
One of the interesting things about the doctrinaire “conservative” economists that’s kinda funny is the way that they insist on measuring everything in units — money — that everyone knows are a bad representation of utility. You’d almost think they had some kind of religious belief going on.
” Libertarian: my boyfriend and I should be doing better than our parents, especially since we’re white collar professionals and my parents really weren’t
Um, no. ”
Do you mean that white collar professionals shouldn’t be earning more than non-white collar professionals? Do you mean that Amanda and her boyfriend are bad people, so they should be poor? I mean, this is pretty much a “TWINKIE HOUSE!” level of incoherence. Try a little harder, please.
grendelkhan,
I can see two somewhat intertwined possibilities.
1. Has mentality that no one is entitled a job/certain standard of living.
2. If a non-white collar professional: Possible anger or annoyance at the implication that white collar work automatically entitles one to higher pay/status.
On absolute vs relative changes in income:
If capitalism–or for that matter absolutely any human economic system whatsoever–is not completely dysfunctional, we would expect the “absolute” income to rise over time, because productivity–which is just the measure of how much material stuff gets produced by a given number of work hours–should increase with the general advance of human knowledge. To be sure, if meanwhile population is increasing or resources are being depleted irreversibly, it is harder to produce a given amount per capita at any given state state of the art; these trends have very often overwhelmed the pace of the advance of technical progress in human history. Indeed through most of history the pace of advancing states of the arts has been so slow as to be unnoticable in anyone’s lifetime.
Capitalism very definitely facilitates the rapid employment and continued development of technology; I think it is fair to say that modern science as we know it co-evolved with capitalism. Thus, if there were not an absolute rise in human standards of living at any level of income, even the lowest, under capitalism, that would be an especially damning indictment of capitalism in that time and place. (Of course, we all know–well, those of us who aren’t trained neoliberal economists, anyway–that that indictment has been brought fairly against the modern global capitalist system in this past generation. Some people are enjoying an explosion of absolute wealth undreamed of; many of us are basically stagnating, gaining stuff like Web access and cell phones but becoming less able to rely on our drinking water and finding the prices of new homes skyrocketing out of reach while rents also climb. And many more are losing ground, even absolutely.
Relative impovershment matters very much, even when absolute wealth commanded by the relatively shrinking income is indeed actually rising, because wealth is power. Ownership of things is power; control of land is power; political influence is power; ability to buy better legal representation is power; belonging to a social class court judges are comfortable associating with is power; access to better (or for that matter any) health care is power; better schools for your kids and yourself are power.
And I had much to say on the power–the class power–involved in maintaining a class of snotty, supercilious high priests of mumbo-jumbo in the guise of academic “economists,” but it turned into a long rant.
“That’s the funny thing — you seem to have a pretty idiosyncratic idea of what “freemarket capitalism” means. What we have right now is what was designed to be “freemarket capitalism” by Friedman and his pals, which is basically allowing corporations to run rampant over citizens with no check by the government.”
No, I have a very clear idea of free market capitalism, what it should be. I agree absolutely that what is being implemented by the Bush Administration isn’t it: that’s Big Government Conservatism. Milton Friedman, just as an example, argued very strongly in favour of the legalisation of all drugs (look for his open letter to Bill Benett). His PhD thesis was on the power of the AMA in raising the cost of health care by restricting the number of doctors. The USA today may be many things but it’s not Friedmanite.
As to others above: yes, I’m English, yes, I’m a classical liberal. I blog, for example, for the Adam Smith Institute, something of a sign of that.
University education? In my day, fees paid by Govt, plus a maintenance grant (the grant was means tested). No one did or did not go to that school because of the costs.
“all I’ll note is that the statistics on household income adjusted for inflation and hours worked by the household will very quickly demonstrate stagnant to falling household income for the majority of people in the U.S. since 1977.”
If you can show that I’d love to see the cites. It’s a subject I’ve written on extensively. Working hours (+paid and unpaid together) for both men and women have been declining while incomes have risen.
“I love the idea of a rent-controled place (if I could find one!).”
Yes, that’s the point. If you lower the cost of a good or a service below its cost of production then you’ll end up with a shortage of it as people will no longer produce it. That’s the horror: that you can’t find a place because of rent control.
“The middle class is getting poorer in absolute terms.”
Amanda, I would happily debate you on that subject in a more formal manner. It’s not true and I could show that to be so. You decide whether you’d like to take me up on that outside a comments section.
“Tim, you’re the one who doesn’t understand how inflation works. Because it’s a measure of a ‘basket’ of goods it can seriously misrepresent things. For example, over the last several years some basic things have been going up faster than inflation such as housing, healthcare, and education. This is ‘balanced’ by the fact that many items have decreased in price such as most consumer goods.”
John, reread the above comments, I both note this and explain why it happens. We always expect the inflation rate for services (education, health care) to be higher than that for manufactured items. It’s one of the lessons that economics has for us.
“Tim, you’re amazing at trying to distract from the main point by bringing up inconsequential details. Yes, yes, the elite are robbing the rest of us at gunpoint but LOOK OVER HERE!”
No, it’s not an inconsequential detail, It’s the very heart of the entire debate. 1) Are we being robbed? 2) Who by? If it turns out that we’re not actually being robbed, both you and I, children of the middle classes, then the second question is really rather moot, isn’t it?
Thus question 1) is the most important to answer: and Klein and you assume it. What you need to do first is prove it, before moving on to the second.
As a final note, no, I don’t think things are perfect. I regard myself as a liberal, a progressive and a radical. I am interested in the maximal possible wealth for all along with as much freedom and liberty as it’s possible for people to have without them bursting from the sheer pleasure of it. I assume also that those are the desires and aims of those here.
All we disagree about is how to achieve those things….at least, I hope that’s what any disagrements are based upon.
Dead on.
One needs to define what utility means to the economists that use the term.
I think McKibben & Herman Daly.
It’s an important definition and not intuitive.
Over to you.
“If capitalism–or for that matter absolutely any human economic system whatsoever–is not completely dysfunctional, we would expect the “absolute” income to rise over time, because productivity–which is just the measure of how much material stuff gets produced by a given number of work hours–should increase with the general advance of human knowledge.”
I agree absolutely. Thing is, of all the economic systems we humans have invented, that liberal capitalism (and here liberal does indeed mean regulated, monopolies should be crushed, etc etc) is the one we’ve found that encourages this best.
Doctor Science — I SO SO SO second your “b.s. meter” reaction to _Confessions of an Economic Hit Man_. That sexy trainer lady was straight out of the james frey school of memoir….
To more of an emphasis on something…
One of the reasons I am more impressed by Chalmers Johnson is that his work puts the “disaster capitalism” in it’s proper context as an endstage of economic growth. I.E., “disaster capitalism” in the global north is an indication of autoconsumption, and things are cracking up or is about to. Naomi Klein *seems* to think that this type of economic system can persist, when it’s really a case of burning furniture to keep warm one more night. That is, the wealthy class burning everyone else’s furniture in order to warm one more party…
Of course, there is one school of economics that has opened my eyes to how real-world capitalism works; that indicates numerous and useful explanations for our every-day reality; that harmonizes with rather than is contradicted by history and anthropology; that gives us a handle on understanding the actual workings of our economy without trying to commit us all to the insane theology of Homo economus derided so neatly by Thorsten Veblen in this quote I just re-discovered today, pasted into my blog:
http://ratracebypass.blogspot.com/2007/10/teh-veblen-quote-self-contained-globule.html
And here’s a quote from the introduction to the 1976 edition of the foundational work of this school, outlining what it can and has actually accomplished:
http://ratracebypass.blogspot.com/2007/02/because-it-apparently-has-to-be-said.html
God, this blog attracts a lot of cranks.
Welcome to cranks anon, Philip Thomas! Do you take your coffee with supercillious naming or just black?
Well that’s just convenient isn’t it? “Oh, the reason your money doesn’t ACTUALLY go further in the categories you list is because of the well-known Baumol Effect, and the fact that the items you list account for some 80% of an average family’s spending is more than offset by the fact their cellphones/TVs/cars are cheaper or more efficient. But still, you’re wealthier than your parents. Really.”
So if the Baumol Effect explains why my parents had more leisure time and more disposable income than my siblings and I, what is the solution?
/me reads Philip’s website.
Wow, I suppose you do find this place comfortable to do a little cranking off, eh?
If you think that a government-controlled industry would be able to provide me a computer as good as the one I now use
Well in fact it did–who do you think were the initial customers and specifiers for Silicon Valley’s products?
Hah, Tim.
Wait till you see what I think about where your vaunted liberal capitalism is going. It’s currently tied up in moderation. (my post, not capitalism–I only wish that is what had happened in history…)
Human progress is the product of human labor. Period. We are arguing about forms of organizing that labor, and what is rational for the working-class majority of this world is to consider which forms will deliver the best results for them. Not for a few people made richer and hence more powerful than anyone could dream of before, but them. I argue that even if a rising standard of living can be sustained for the majority–even so, if the elite minority gains too much relative to them, this will reduce the majority to slavery to the power of the wealthy.
And of course the countertendencies I indicated–shrinking resource base per capita, basically–are compounded by the rise of wealth, insofar as this means more resources are needed. The working class under capitalism is damned if it does–if it seeks to maintain some relative parity with their betters, since this would greatly hasten the collision between limited resources (however rapidly expanded by technical progress) and exponential growth of both per capita demands and the population itself. And damned if it doesn’t; if for the sake of treading more lightly on the earth, the majority of human beings were to accept a fixed material standard and take what progress in human capability there is in the form of more leisure, then the capitalist owners would gain all the more power relative to the rest of us.
An optimist might hope that our corporate masters would use this power benignly and wisely. A realist looks at the evidence Amanda has offered us today, notes that it jibes with all our life experiences and knowledge of current events over those lifetimes, and laughs at that notion.
As I said in the moderated post, there is an economist, and a school of economics, I respect for its accomplishments in usefully and lucidly analyzing the capitalist system so as to be able to make actual predictions of its general trajectory as well as make sense of its real-world features, as opposed to some abstract marginalist Flatland. A school that used real business data to say something about what would really happen.
I decided to omit my judgements on the character of mainstream economics, so-called, in the interest of brevity and civility.
Just one question, Tim.
What have you marginalist economists ever actually accomplished, outside the realm of politics, I mean? You’re real good at projecting a sober aura of gravitas and pomposity over political behavior that amounts to banditry without this cloud of squid ink covering it–but can you, you know, explain anything useful about the world as it is today? Can you show how the evolution of human history is consistent with your notions of who and what we are?
Whenever asked to explain some concrete thing that has actually happened in human history, such as for instance the Great Depression, or the underlying causes of actual wage distributions, or anything real like that, all the mainstream economists I’ve ever heard of wave their hands, mumble, and wind up saying nothing more than “that’s the way it happened.”
So, you hold we are just too ignorant of your noble science to follow your clear reasoning. Well then, choose a simple example and let us see a glimpse of your mysteries.
But it won’t be easy–despite that characteristic economist smarm, the vast majority of us have indeed heard all about your premises and arguments. We just don’t all think they make any sense as applied to reality.
Yeah, as a sociologist, I have to say, we do consider economics kinda silly. Kinda like that annoying pompous uncle that goes on about his importance, while everyone else in the family considers him a bore. The jokes that fly around the table at sociologist get-togethers about economics are many.
Economics is a study of society without accounting for things like how people, groups, and, you know, society, actually operate. It’s a social science that is hamstrung by it’s own narrowness of vision and insecure attempts to suck-up to the ‘big-boys’ of the ‘hard’ sciences and be accepted.
In all seriousness, as a descriptive science it’s not bad, so long as its lack of objectivity is heavily, and OVERTLY, policed. But as a predictive science? It’s really terrible, and really only operates in really narrow sets of ideal conditions.
Except for the fact that all other first world developed nations run a version of a social(ist) democratic redistributive economic systems … except for, you know, the US. Wonderful success rate, I have to say.
Funny that.
shah8,
me “crank off”?…what?…oh..oh, wait, I see what you did there…
In the rant I censored, I shared some anecdotes about what Caltech students thought of our vaunted campus Economics department. So committed is (or was) the Caltech administration to the notion that Ec, at least as studied and taught there, is indeed the Queen of Social Sciences that they’ve defined Political Science as “Non-Market Decisionmaking,” teh Magick of the Marketplace being how we normally make all decisions.
I hope my second post ever comes out of mod; I finally found that Thorsten Veblen quote, the one about how economists like to imagine that human beings are “self-contained globules of desire.”
I agree absolutely. Thing is, of all the economic systems we humans have invented, that liberal capitalism (and here liberal does indeed mean regulated, monopolies should be crushed, etc etc) is the one we’ve found that encourages this best.
Of course (at least, so far) - but the problem is that we assume the market and capitalism will be tools used in the service of the greater community good when they tend to take over and subvert that wider commons for their own benefit. When money buys political power, citizens become consumers.
As regards relative vs absolute wealth, consider this scenario, Tim:
Imagine a society with two classes, say the nomenclatura and the proles. Imagine that resources are allocated between them by a bureaucracy, and that this allocation is justified by propaganda about the glorious Collectivist Harmony and the sacrifices of the nomenklatura in managing society for the benefit of all.
Now, imagine a disease with no treatment, giving everyone a 50% chance of dying. If you’re a prole and your kid gets this disease, it’s a tragedy.
Imagine a cure being invented. Imagine it being allocated mostly to the nomenclatura. This now gives proles a 40% chance of dying, and the nomenclatura a 10% chance of dying. If you’re a prole and your kid gets the disease, it’s a tragedy - and also a political matter. You might even start resenting the system and questioning the justification for it as possibly self serving bullshit. Claims that your kid is *absolutely* better off aren’t going to mollify you.
Now, imagine a second society with two classes, say the wealthy and the workers. Imagine that resources are allocated between them the ability to throw money around, and that this allocation is justified by propaganda about the glorious Market System and the sacrifices of the wealthy in creating business for the benefit of all…
Priceless. Seriously, economists. WTF?
Human progress is the product of human labor.
Heh. Human progress owes more to smart lazy bastards trying to avoid human labour.
exholt, I see what you mean, and I agree that commodities which are price-controlled often get to be the focus of corruption and black marketeering. Anybody who doubts that ought to take a good look at the results of the Drug War. So: tactics intended to regulate commodities in the name of the greater social good often generate untoward consequences. That’s a proposition with which I don’t argue.
OTOH: we can also see, in light of the events of the last few years, that attempts to deregulate commodities in the name of the greater social good also have a way of generating untoward consequences. Anyone who doubts that ought to take a good look at the results of the Iraq war. It’s tempting to think that, because governmental tries at improving citizens’ access to jobs, goods, and power often fall flat, the solution is simply to allow the major powers/major players to have free run of the field and to do as they will. But we’ve been experimenting with that idea for the better part of the last 30 years, and the result of the experiment has been that the quality of life has diminished perceptibly for most Americans.
Our water is worse, our air is worse, our access to health care tends to depend strictly on our never getting sick, and our infrastructure is rotting. How problems such as these to be solved by less, not more, big-money accountability?
What’s more, the Administration with which we are now burdened, the Administration which has proven loudest and most consistent in defense of the free-market gospel, and which has lent the defense of that gospel an explicitly religious tone it lacked during the Reagan incumbency, has turned out to be an Administration as corrupt as the Administration of the Harding Presidency—if not more so. Now, I know that correlation and causation are not equivalent. But do you really think that the aggregation of giant clumps of money in certain social sectors has no bearing on the corruptness of the very same governmental functionaries who most avidly defend the interests, financial and otherwise, of those same sectors?
Honestly?
exholt, I see what you mean, and I agree that commodities which are price-controlled often get to be the focus of corruption and black marketeering. Anybody who doubts that ought to take a good look at the results of the Drug War. So: tactics intended to regulate commodities in the name of the greater social good often generate untoward consequences. That’s a proposition with which I don’t argue.
OTOH: we can also see, in light of the events of the last few years, that attempts to deregulate commodities in the name of the greater social good also have a way of generating untoward consequences. Anyone who doubts that ought to take a good look at the results of the Iraq war. It’s tempting to think that, because governmental tries at improving citizens’ access to jobs, goods, and power often fall flat, the solution is simply to allow the major powers/major players to have free run of the field and to do as they will. But we’ve been experimenting with that idea for the better part of the last 30 years, and the result of the experiment has been that the quality of life has diminished perceptibly for most Americans.
Our water is worse, our air is worse, our access to health care tends to depend strictly on our never getting sick, and our infrastructure is rotting. How problems such as these to be solved by less, not more, big-money accountability?
What’s more, the Administration with which we are now burdened, the Administration which has proven loudest and most consistent in defense of the free-market gospel, and which has lent the defense of that gospel an explicitly religious tone it lacked during the Reagan incumbency, has turned out to be an Administration as corrupt as the Administration of the Harding Presidency—if not more so. Now, I know that correlation and causation are not equivalent. But do you really think that the aggregation of giant clumps of money in certain sets of pockets has no bearing on the corruptness of the very same governmental functionaries who most avidly defend the int