Sunday, November 9, 2014

Weekend Update

Thought I'd do a quickie on post-election links but I've been so bummed and lethargic this week it's taken until Sunday anyway. Not just the elections, either, nor the news that the Supreme Court will practice its ideological activism on insurance subsidies for people unfortunate enough to live in states that couldn't (actually, wouldn't) get their act together under the ACA.

The takeaway from the election seems to be that voter suppression and nearly infinite money works for Republicans. The 4% "skew" toward the Democrats that Nate Silver found in the polls seems to be people who intended to vote but at the last minute either didn't or couldn't. That was enough to tilt about 5-6 senate races. But also Democrats didn't do a good job of articulating issues -- it's noteworthy that progressive issues won pretty much across the board when they weren't attached to candidates who could be linked to Obama. To pick on one example: Mark Pryor's campaign consisted of a vacuous slogan ("Put Arkansas First") and ads warning that Tom Cotton wanted to kill off Medicare and Social Security. That's not inaccurate, and would have won if voters really took Cotton to be that much of a threat, but many voters concluded that the risk wasn't that great. On the other hand, Cotton's ads did nothing more than equate Pryor with Obama. I can't tell you why that mattered, or why that worked, but it did.

  • Ryan Cooper: What Democrats get wrong about inequality: Lots of things.

    There are various complex models for this, but the general explanation is fairly intuitive: Modern economies are built on a mass market. But if the great majority of people don't have much (or any) disposable income, then there is no mass market, and it's harder to start a business relying on any kind of mass sales. And with weak consumer spending, existing businesses have little reason to invest in growth, and instead disgorge their profits to shareholders, exacerbating the trend. In the end, you get a hollowed-out, bifurcated economy, where low-grade goods are sold to the broke masses on razor-thin margins, while incomprehensible sums slosh around weird luxury markets.

    There's more to it than this. The breakdown of capital controls makes it easy to reinvest profits abroad, where there is more potential for middle-class growth. (I first noticed this in the early 1990s, when Greenspan lowered interest rates to stimulate the economy, and virtually all of that cheap money went abroad -- mostly, it seemed, into currency speculation, resulting in busts in East Asia, Mexico, and elsewhere. Conversely, foreign investors buy up assets in the US -- there was a tremendous boom in this during the 1980s, and while less commented on the trend continues.)

    By the way, I accidentally clicked on a link in Cooper's article and it led to a fascinating article by J.W. Mason, Disgorge the Cash:

    If you read the business press, you're used to these kinds of stories. A company whose mission is making something gets bought out or bullied into becoming a company whose mission is making payments to shareholders. Apple is only an especially dramatic example. But the familiarity of this kind of story is a sign of a different relationship between corporations and the financial system from what prevailed a generation ago.

    Prior to the 1980s, share repurchases were tightly limited by law, and a firm that borrowed in order to pay higher dividends would have been regarded as engaging in a kind of fraud. Shareholders were entitled to their dividends and nothing more -- neither a share in any exceptional profits, nor a say in the management of the firm. In the view of Owen Young, the long-serving chairman of General Electric in the early 20th century, "the stockholders are confined to a maximum return equivalent to a risk premium. The remaining profit stays in the enterprise, is paid out in higher wages, or is passed on to the customer."

    This, of course, has all changed since the 1980s, and it's worth underscoring that changes in law, and therefore political policy, were necessary to enable it. Much more of interest here -- I like the line on the post-WWII corporation: "Whether the managerial firm was the 'soulful corporation' of Galbraith or the soul-crushing monopoly capital of Baran and Sweezy, it was run according to its own growth imperatives, not to maximize returns to shareholders." Then there's this:

    Keynes's call for the "euthanasia of the rentier" toward the end of The General Theory is typically taken as a playful provocation. But as Jim Crotty has argued, this idea was one of Keynes's main preoccupations in his political writings in the 1920s. In his 1926 essay "The End of Laissez Faire," he observed that "one of the most interesting and unnoticed developments of recent decades has been the tendency of big enterprise to socialize itself." As shareholders' role in the enterprise diminishes, "the general stability and reputation of the institution are more considered by the management than the maximum of profit for the shareholders." With enough time, the corporations may evolve into quasi-public institutions like universities, "bodies whose criterion of action within their own field is solely the public good as they understand it." Veblen, observing the same developments but with a less sunny disposition, imagined that the managers of productive enterprises would eventually tire of "sabotage" by the notional owners and organize to overthrow them, seizing control of production as a "Soviet of engineers."

    Of course, that never happened, but maybe it should have -- the "euthanasia of the rentier" if not necessarily the "Soviet of engineers."

  • Kathleen Geier: Inequality, the Flavor of the Month: From June, but linked to post-election to remind us how little mileage the Democrats gained from the great issue of our time.

    Truth be told, it was never clear how serious Obama ever was about fighting inequality. Though his big inequality speech marked a step forward, as many of us noted at the time, it also contained serious omissions. The economist Max Sawicky observed that much of that speech didn't actually concern inequality. Rather, it was about social mobility, which is something entirely different.

    Writer Anat Shenker-Osorio pointed out that perhaps the most glaring omission of all in Obama's inequality speech was a simple one: a villain. To hear Obama and the Democrats tell it, inequality is something that just happened. An awful lot of sentences in Obama's speech used passive voice constructions -- phrases like "the deck is stacked," "taxes were slashed," and so on. His speech failed to craft any compelling narrative about exactly who did what to whom. Inequality remained an abstract concept.

    The timidity of Obama's rhetoric -- a faintness of heart that extends to many other Dems -- stands in sharp contrast to the talking points of many Republicans. Right-wing populists consistently point the finger at a rogues' gallery of liberal elitists, government bureaucrats, and the like. In the past, not only did economically progressive presidents vilify the plutocratic enemies of the American people, but they went about it with a certain gusto. Theodore Roosevelt issued thundering denunciations against "malefactors of great wealth." In his "I welcome their hatred" speech, FDR attacked as "tyrants" the "employers and politicians and publishers" who opposed the pro-labor policies of the New Deal.

    But today's Democratic Party is a different animal. By default, Democrats are the party of working Americans, and sometimes they do pass legislation that helps the majority. But they are also deeply corrupted by their own corporate ties. The Democrats' anti-equality agenda is a case in point. The party supports some admirable policies targeted at helping low-income Americans -- like raising the minimum wage, expanding the Earned Income Tax Credit, and universal pre-K. But party leaders are far more ambivalent about policies that challenge the one percent and the power of capital -- stricter financial regulations, cracking down on CEO pay, a return to confiscatory income tax rates, fair trade, and intellectual property reform. Unless we rein in the wealth and power of the one percent, inequality will continue to spiral out of control.

  • Paul Krugman: The Uses of Ridicule: Case example is billionaire hedge fund operator Paul Singer, who has discovered proof that hyperinflation is actually happening:

    Meanwhile, a quick hit. Matt O'Brien has a lot of fun with Paul Singer, a billionaire inflation truther who is sure that the books are cooked because of what he can see with his own eyes:

    . . . check out London, Manhattan, Aspen and East Hampton real estate prices, as well as high-end art prices, to see what the leading edge of hyperinflation could look like

    Hyperinflation in the Hamptons; hard to beat that for comedy, although Matt adds value with the Billionaires Price Index.

    Actually, I noticed this long ago (so long it certainly doesn't suggest Weimar- or Zimbabwe-style hyperinflation). When workers' wages rise, we worry about inflation, assuming those rises will be factored into future prices (because, heaven forbid, they can't possibly come out of profits). On the other hand, when asset prices rise, we assume they're finding their true value, even though the 2008 collapse of the housing bubble shows us that there is no such thing. That all seems awfully convenient for asset holders (and damn unfortunate for wage earners). But doesn't basic economic theory tell us that prices reflect the balance of supply and demand? When demand goes up relative to supply, prices rise -- and how is that different from inflation? We happen to live in a world where the rich is getting so much richer so fast that there simply isn't enough rich-folk-goods (Hamptons real estate, high-end art) to go around, so of course they bid up, and therefore inflate, the prices. That's really all there is to the bubble in Hamptons real estate. And the corrollary to that is that a lot of very rich people currently own assets that aren't really worth anything like they think: there is a substantial real transfer of wealth going on from the 99% to the 1%, but also this asset inflation bubble. If, say, there was a serious effort to rein in the super rich -- increasing income (and capital gains) taxes up toward 70%, regulating hedge funds and other rentiers out of business -- that asset bubble would collapse.

    Krugman makes other good points, but the best come from this golden oldie by Molly Ivins (from 1995, on Rush Limbaugh, but how little has changed?).

    Psychologists often tell us there is a great deal of displaced anger in our emotional lives -- your dad wallops you, but he's too big to hit back, so you go clobber your little brother. Displaced anger is also common in our political life. We see it in this generation of young white men without much education and very little future. This economy no longer has a place for them. The corporations have moved their jobs to Singapore. Unfortunately, it is Limbaugh and the Republicans who are addressing the resentments of these folks, and aiming their anger in the wrong direction.

    In my state, I have not seen so much hatred in politics since the heyday of the John Birch Society in the early 1960s. Used to be you couldn't talk politics with a conservative without his getting all red in the face, arteries standing out in his neck, wattles aquiver with indignation -- just like a pissed-off turkey gobbler. And now we're seeing the same kind of anger again.

  • Martin Longman: Waning Power for Blacks and Democrats: No coincidence that 2014 was the first election without the Voting Rights Act to protect black voters in the Old South. The Republicans have put a lot of effort into eradicating white Democratic office holders in the South, no matter how little ideological difference they present. The effect is reduce visible Democratic office holders to the black minority, reinforcing the Republican brand as the White People's Party. Whether they've done this because they are racists or just because it's a winning strategy, the effect is to prolong racism in the South and elsewhere. Assuming Landrieu is toast, the only Democratic senator in the old confederate states are in outliers Virginia and Florida, and neither is easy.

    There's no point in sugar-coating this. In the Deep South, the Democratic Party is now the non-white party, and minority politicians don't have the white partners they need to exercise any but the most local political power. While the problem is less severe in the border states, it has clearly made advances there. You can look at pretty much the whole Scots-Irish migration from the Virginias to Oklahoma and see that the Democrats were trounced last Tuesday. They badly lost Senate elections in West Virginia, Kentucky, Tennessee, Georgia, Mississippi, and Arkansas, and they actually lost two Senate elections each in South Carolina and Oklahoma. Their seat in Virginia was only (just barely) saved by the DC suburbs in the northeastern part of the state.

    Longman also has a detailed piece on the House elections, The Midterm Results Were Not Completely Preordained, if you're still interested. If not, you might consider this paragraph -- one recipe for an exceptionally low turnout is the media message that these elections didn't matter:

    Regardless, you can say that your models predicted a big night for the Republicans all you want, but I still blame the media. I blame the media for creating the first federal election season in my lifetime in which the elections weren't the top story for the last two months of the campaign. By focusing so heavily on other stories, like ISIS and the Ebola virus, the media smothered the Democratic message.

  • Wendy R Weiser: How Much of a Difference Did New Voting Restrictions Make in Yesterday's Close Races?: The 2014 election was the first one run without the protections of the Voting Rights Act. It was also the first midterm election run under a spate of new voter suppression laws ushered in by Republicans after 2010 to keep turnout low. Weiser cites close election cases in North Carolina, Kansas, Virginia, and Florida, with various studies showing 2-3% drops due to new laws. "Under Florida's law, the harshest in the country, one in three African-American men is essentially permanently disenfranchised." Weiser also points out that while the Texas governorship was decided by more than "the 600,000 registered voters in Texas who could not vote this year because they lack IDs the state will accept" those citizens' inability to vote has an effect up and down the ticket, and indeed makes it that much harder for Democrats to run candidates. One thing that's rarely commented upon is that voter restriction laws not only prevent some people from exercising their voting rights, they intimidate many more from even trying.

    For more, see Brad Friedman: The Results Were Skewed Toward Republicans, which cites Wieser but goes much further, as well as casting a jaundiced eye at Nate Silver's conclusion that the polls were skewed.

Also, a few links for further study:

  • Q&A: James K Galbraith on the Myth of Petpetual Growth, How Language Shapes Economic Thought, and More: An interview with Galbraith, whose new book, The End of Normal: The Great Crisis and the Future of Growth is next on my reading list. Galbraith seems to doubt Ryan Cooper's argument that we need to counter inequality to increase growth. I've long agreed with Cooper (and Stiglitz, but not Krugman) that inequality is depressing demand at least in the US, but Galbraith seems to be arguing that growth is being hampered by more than just inequality -- e.g., that technology has something to do with it. One thing I'm pretty sure of is that technological advances have done much to blunt the political impact of inequality -- in effect, big TVs and smart cell phones make us less bitter about the rich getting richer. The new book is certain to be interesting. I've said many times that Galbraith's The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too is the best political book of the last decade.

  • Mike Konczal/Bryce Covert: The Real Solution to Wealth Equality: "Instead of just giving people more purchasing power, we should be taking basic needs off the market altogether." Social Security does this. So would universal healthcare and free education. Konczal and Covert have expanded this into a regular column in The Nation. All of these are worth reading:

  • Peter Van Buren: What Could Possibly Go Right? Iraq War 3.0, he calls it. Ignoring 1.0, I'm reminded more of Marx's quip about the Bonapartes: history repeats itself, first as tragedy, then as farce -- although for all concerned it'll look more like tragedy all over again: it's only from an insensitive distance that one can sit back and revel in how ridiculous everyone involved is.

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