Sunday, April 19, 2009

Cultural Roots of the Economic Crisis

Insight about the cultural roots of the economic crisis is finally making the rounds of some big-city papers. Gail Collins gets at the heart of the cultural problem with the bailouts, though here she's talking about the governor of Texas:

Perry, who is the sort of person who calls other guys “dude,” used to be a cotton farmer, a group that seems to have a special talent for combining rugged individualism with intransigent demands for government assistance.
I call this psychological structure submissive individualism. It's an old US tradition (I first identified it via readings of Ralph Waldo Emerson work from the 1830s). It's tied up with fear and American Christianity - salvation finally coming only from God and not from You. But the core is that individual agency needs strong social systems to be effective economically, US social systems have always been weak, individual agency is therefore a weak and fragile thing for most Americans, and yet the obligation to have big agency is absolute. The endless attacks of the US Right on government only makes the psychological contradictions worse. The result is hypocrisy and double-standards.

Collins continues.
The big mystery here is why the tax-protest crowds were behaving as if the world was coming to an end when all Obama’s infant presidency has done is lower taxes for a vast majority of the public. And why people like Perry seem to feel compelled to egg them on.

The answer is that what’s left of the Republican Party is intent on cutting off the knees of the administration before it actually manages to fulfill any campaign promises on reducing the huge economic gap between the top 5 percent of the country and the rest of the populace. In pursuit of that mission, fortune favors the hysterical and rewards politicians who behave like gerbils that just bit into an electric wire.
Yes. And what is the link between submissive individualism and the obsessive pursuit of inequality? Because the only psychologically plausible solution to submission is superiority - especially superior wealth, either achieved or imagined for one's future. Imagined superiority drives out individuality. That combination of inequality and repression is the whole history of the modern Republican party.

So we get simultaneously the culture wars and the budget wars. The latter take the form of endless ongoing cuts at the state and city level even as the banks are flooded with public money. And they are driven by the sheer unilateralism of financial rules in the US - the banks decide, we take it, even now after they have ruined everything.

Thursday, April 09, 2009

Not Learning Too Much Yet

Bloomberg in NYC is just one of many examples of leaders who are doing big cram-downs on salaries and benefits Herbert Hoover-style. Cut wages, cut benefits, make the Great Recession worse. Let the state governments imitate the auto industry so we can all be Michigan.

Or the world, for that matter, where 1.8 billion people work informally, with no benefits or protections whatsoever.

Not much cram-down potential there.

Tuesday, April 07, 2009

Angry Economists

Jeffrey Sachs on bailout rip-off potential.
Dean Baker on attacks by failed bankers on the great success known as social security.

Monday, April 06, 2009

More on Summers and Geithner

Glenn Greenwald has a good piece in Salon about what, to save space, we can can the Obaman administration complicity in the financial failures they are claiming to solve. See the link to the good story in Stanford's magazine about the active role Robert Rubin and others back in power played in catastrophic deregulation. See also the link to a Post piece about Obaman efforts to shelter some financial executives income from the caps they themselves imposed.

Last night, France 5's discussion show Ripostes treated the G20 and NATO.
One guest, Jacques Attali, who had headed a commission on the French economy for the Sarkozy government and cannot be considered a strong opponent, nonetheless described the G20 like this: it was a huge victory for the Anglo-Saxon banking system. It supports the Geithner plan, which gives public money to banks to use as leverage in the same way that caused the crisis. There was nice talk about crackdowns on off-shoring banking countries and so on by no enforcement of any kind. And if the G20 plan works to save the financial system, it will block the recovery of the real economy.

For a similarly unhappy assessement from the Financial Times, see Wolfgang Muchau's column today.

And last but not least, Chris Hedges warns against the read road to serfdom

Friday, April 03, 2009

Summers' Conflicts of Interest

The NYT has gone through the financial disclosures of various White House officials and has discovered that Lawrence Summers, the director of Obama's Council of Economic Advisors, "earned more than $5 million last year from the hedge fund D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money."

Or this
The disclosure forms also shed further light on the compensation received by a top Obama aide who previously worked for Citigroup, one of the largest recipients of taxpayer bailout money. The aide, Michael Froman, deputy national security adviser for international economic affairs, received more than $7.4 million from the company from January 2008 to when he joined the White House this year.

That money included a year-end bonus of $2.25 million for work in 2008, which Citigroup paid him in January. Such bonuses have prompted political controversy in recent months, including sharp criticism from Mr. Obama, who in January branded them as “shameful.” . . .
Thomas E. Donilon, the deputy national security adviser, reported earning $3.9 million as a partner at the Washington law firm O’Melveny & Myers.
My favorite:
Millionaires work in a variety of positions across the administration, and they include Desirée Rogers, the White House social secretary. Ms. Rogers, a close Chicago friend of the Obama family, reported income of $2.3 million last year. She earned a salary of $1.8 million from People’s Gas & North Shore Gas
The mildest thing to say here is that the Obama White House is peopled by that upper-upper PMC (professional managerial class) whose "knowledge work" places them in their own private Idaho economy.

A second charitable thing to say is that only large established firms have this kind of money, and don't pay $135,000 for an hour speech (Goldman Sachs) to hear unorthodox or novel views. The Obama millionaires make that money by delivering conventional wisdom with a name brand (e.g. President of Harvard Emeritus). The scholarly literature does suggest that medical researchers among others are profoundly affected by such ties. Even if Obama's top economists aren't directly "bought off" through their financial relationships, all this pitching to chief executives kills original thinking. The bad news for us is that these Obama economic policymakers are unlikely to come up with ideas that a) hurts the hedge funds that have made millionaires of them, and b) are original and new.

Obama policy behavior is prima facie evidence that these effects are at work with Summers et al. They have given half if not all of the country's annual income to incompetent, insolvent banks, and followed a double standard in treating them much more kindly than they've treated Detroit. The banks have ruined us once. Summers, Geithner, et al are on the job as the banks ruin us for a second time.

The same pattern was evident at the G20 meetings. The French coverage emphasized the U.S. resistance to Franco-German calls for much stronger and fully international controls on banking, including crackdowns on offshore banking that pulls enormous amounts of money out of big countries and their public redevelopment projects (a half-trillion euros per year, 20 billion for France - OECD). The Obama administration stressed stimulus. I've criticized this pattern before: public money is shovelled in unheardof quantities towards the private sector, which retains economic decision rights, even though their decisions caused the disaster in the first place.

In the conflicts of interest, we have at least a partial explanation of Obama's willingness to take public money without insuring. public knowledge and authority. This is a kind of liberal Bushism. And because of the kind of banker decisions that will be made with the trillions of public money, it's not going to work.

Or think of it this way. Summers will have been paid a dollar for every job hedge funds have cost the economy.

Thursday, April 02, 2009

The Word Worry

Glad the G20 leaders are feeling good. What, We Worry?

"Worry" appears in the majority of the daily musings of my capitalist pals, in this case of Wolfgang Munchau of the Financial Times. He's not worried that the bankers are getting too much. He's worried they're getting too little: "By the end of December, global banks had written off about $1,000bn (€752bn, £699bn) in bad assets, approximately half of that in the US. Since the onset of the crisis, the writedown of assets in the US has exceeded the provision of new capital."
The EU is not much better off. The Geithner plan is way too small for Munchau, and he adds, "Europe, too, will have to start to address the problem, by forcing banks to write down their assets in exchange for new capital." The same concern about inadequate size applies to the G20 pledges of new stimulus money.

But the question at this point is what has the public gotten from the money we've spent so far? Bloomberg estimates that government commitments just in the US are nearing $13 trillion. So the "worry" that appears everywhere in financial commentary is, well, worrying. Has as this just gone into the big back-yard hole for toxic waste the banks can't fill up even with $26 trillion, or $39 trillion?

How much are you going to want? And why should we pay another dollar before Geithner et al can offer a plausible answer to that question?

A much better big picture comes from the geographer and famed analyst of capitalism David Harvey, both on Grit TV (with Alexander Cockburn) and on Democracy Now. Among other good moments he:
  • clearly defines neoliberalism as the reconstruction of class power
  • says at one point "Last January 2008, the Wall Street bonuses collectively came in at $32 billion. OK. And at that time, two million people had already lost their houses. Figure, two million people have lost their houses; Wall Street rewards itself $32 billion. Nobody got angry about that. And I was extremely angry about that. It seemed to me this was class robbery."
  • describes the Right to the City movement in terms that should lead people to look here.
  • suggest the need to theorize zero-growth economics, which he points out will not be capitalist
Among other things, the interview is a relatively short refutation of the familar claim that socialist or marxist economics have no practical solutions. Harvey is good at answering Amy Goodman-style questions like "What does this current crisis mean for the future of capitalism, David Harvey?" But at the point where she asks him "were you for no bank bailouts," he replied, " Well, I was in favor of solving the foreclosure crisis. You see, if you’ve solved the housing crisis, the banks wouldn’t be holding any toxic assets. If you had gone in and bailed out all of the people, there would be no problem on Wall Street."

For the interesting overlap between Harvey's marxism and the analysis of a former IMF banker, see the Atlantic Monthly article by Simon Johnson on how the US became a banana republic of bankers.

G20 in France

France 2's 8 PM news spent 12-15 minutes lavishly covering the G20 and found an economist to validate the claims of Gordon Brown, Nicholas Sarkozy, and Barak Obama that an historic economic accord had been reached. There would be stimulus (Brown and Obama) and regulation (Sarkozy). The Indians, Brazilians, and Chinese were not quoted.

At about 8:15 or so the anchorman mentioned a web poll that France 20 had conducted in France. The question was, "Faites-vous confiance au G20 pour changer les règles de l'économie mondiale ?" (Do you have believe that the leaders of the G20 can change the rules of the global economy?). The response so far is about 93% NO.

The abyss continues to grow.

Dream instinct desire revolt

Wednesday, April 01, 2009

London Calling