Saturday, November 17, 2018

MbS Guilty!

According to the top stories in both the New York Times and Washington Post this morning, somebody in the CIA has leaked that Mohammed bin Salman (MbS) ordered the assassination of journalist Jamal Khashoggi.  Of course no sensible observer is remotely surprised, but the Trump administration had been working mightily to deny this obvious fact, with reports surfacing that they were plotting to send Turkish cleric Gulen to Turkey as authoritarian President Erdogan has long been demanding (Gulen is Erdogan's all-purpose scapegoat for everything) in the hopes that Erdogan would stop making it clear that MbS was guilty of ordering the assassination.  But now there is no point in that as the cat is fully out of the bag, no matter how much this leak will anger Trump (Fake CIA leak!).  Indeed, it may well have been reported unhappiness by various government officials in the face of this effort to sacrifice Gulen that triggered the leak.

What is a bit surprising is that the leak involved publicizing that NSA bugs the Saudi embassy, although I would imagine that anybody there who did not know that was stupid.  But crucial to the leak is both that MbS phoned his full brother, Khalid bin Salman, the Saudi ambassador to the US, ordering him to phone Khashoggi and tell him he should go to the Saudi consulate in Istanbul to the documents he needed to marry his Turkish fiancee, and that he would be safe in doing so, and that KbS then followed through and made the phone call. The only thing we do not know is whether KbS was in on what was going to happen to Khashoggi or not when he made the phone call.

This really puts Trump on the spot, although ultimately he put himself there by being such a sucker for  all this phony baloney nonsense MbS has fed him through Jared Kushner.  Indeed, reports have it that Trump had begun to figure out that MbS was not all that reliable.  Trump already some time ago backed off supporting the ridiculous MbS campaign against Qatar, which hosts the largest US military base in the Persian Gulf, with that campaign a total flop, even as MbS persists with it.  Also, at least some in the administration (Pompeo and Mattis at least) seem to have begun to sour on US support for the Saudi war in Yemen.  The US is going to stop refueling their bombing planes there, although reportedly they do not really need that US support, so not too big a deal.

Nevertheless, it is clear that Trump has really not wanted to have to do much more and wanted the Saudis to have a "better coverup," he having already used that word in a critical way. Now the cover is completely and hopelessly gone, although it is highly likely that inadvertently Trump himself encouraged this assassination, making MbS think he could get away with anything and that given Khashoggi was writing for the "Enemy of the People" Washington Post, he might even be doing Trump a favor. 

Trump's main argument has been that he did not want to lose $110 billion in arms sales, but in fact there never was anywhere near that number.  Much of what was signed was already in the pipeline from Obaama, and most of the rest was just vague statements of intent.  If MbS were to react by canceling Trump-made agreements, it would amount to very little.  This was always a matter of farcical propaganda, which made it all the more nauseating as Trump clearly valued it way over any concern for what happened to Khashoggi.

The other important area has to do with oil markets, which had already gotten into a state of high volatility over Trump's reimposing of sanctions on Iran, a stupid move itself. This economic war on Iran of course is the other reason why we are supposed to be big pals with KSA and ignore them murdering their own people.  But that whole effort has been a farce, given Iran adhering to the JCPOA nuclear agreement.  As it is, apparently out of fear higher oil prices would hurt GOP chances in the midterms, Trump got the Saudis to increase oil production, but then oil prices tanked, partly on weaker demand due to the decelerating growth in China, so now we have them all scrambling with the Saudis now announcing production cuts to push the prices back up.  It is not at all cleat that there is any clear US interest in all that, so however Trump might sanction them, if he actually does, will probably not have much impact on that already discombobulated market.

Anyway, Trump is now facing a hard choice.  Does he openly show how much he loves authoritarians murdering dissident journalists even when they are based in the US and work for US news media?  He praised Putin for being "strong" when asked about him allowing dissident journalists to be killed.  But this is a different kettle of fish, and even lots of Republicans in the Senate are up in arms about this matter.  It is clear that MbS has really messed up, and now Trump is on the hot seat.

Barkley Rosser


Monday, November 12, 2018

Is It Not The Economy, Stupid?

On many Mondays I indulge in taking Robert J. Samuelson to task after his regular Washington Post column of the day.  Today he was almost right, or if you prefer, even mostly right.  This one was titled "It's Not the Economy, Stupid" about the outcome of the midterm election, as well as a delayed comment on the 2016 presidential election (although, of course, HRC did win the popular vote by three million popular votes, if not the electoral college).  His main argument is that in both of these elections, but especially last week's midterms, the state of the economy was relatively unimportant.  The argument is that here is Trump with GDP growth exceeding 3%, the unemployment rate under 4%, inflation largely under control, but this supposedly good performance did not help him out much with his party taking a pretty serious hit (the size of which still being counted).  He also sees something similar in 2016, although arguably the economy was not as strongly favorable, but still quite respectable while not obviously helping the incumbent party.  Indeed, in 2016 many saw the economy as hurting the Dems, especially in the Rust Belt.

There is a lot of truth to this, with a lot more attention on ethnic and cultural issues, although it should be kept in mind that the top issue for Dems, health care, is at least partly an economic issue.  Certainly one sign of the weakness of the economic issue is the matter of the big GOP tax cut.  They were quite convinced when they passed it last December that this was their ticket to a strong showing in the midterm election.  And indeed it is almost certain that at least some of the acceleration of GDp growth can be attributed to it even if it may be setting up the economy for slower growth down the road.  So according the usual views, it should have helped the GOP. But in the end it seems to have been an electoral flop.  It has consistently done poorly in the polls, and most GOPs running for reelection in the end barely mentioned it.

But then the major source of reported public unhappiness with the tax cut is revealing.  It is the massive inequality obviously inherent in it: the vast majority of the gains went to the top ends of the income and wealth distributions, and everybody knows it.  As it is, supposedly the vast majority of taxpayers did get a cut, but for vast majority of that vast majority, it was such a small cut that they barely noticed it.  In fact, Obama gave a bigger tax cut back in 2009, but the same thing happened then.  When the GOP claimed he had raised taxes, a majority of voters believed them.  They barely noticed the actual cut they got.  No, it does not seem voters are all that upset about the increased deficit, but they resent that so much of it went to the rich.

So in both 2016 and in 2018, a major problem was that while there were all these good looking aggregate statistics, a majority of people really did not notice much improvement.  Yes, job security has steadily improved, but this still has not shown up in wage increases, although reportedly there has begun to be some increase of those recently.  But as with the tax cut, not too much, or maybe too little too late.  The bottom line here is that most people simply are not seeing all that much economic improvement, so while it is not a negative, the economy is not remotely the positive many think it might have been or should have been.  Most of those gains have gone to the top, and that was going on while Obama was president as well.

There is another matter in the midterm election where economics may have shown its old important tole, curiously reported on in WaPo two days earlier.  This is that it looks like Trump's trade war may have impacted several congressional races, mostly not to the GOP's favor.  There seems not to have been much impact, if any, on Senate races, with Dem candidates in Indiana, North Dakota, and Missouri losing even while trying to score against Trump's trade war.  But supposedly the issue played for the Dems in in several races where growing soybeans is a big deal, notably two races in Iowa, one in western Illinois, one in southwestern Wisconsin, and one in southeastern Minnesota, with Dems flipping all these seats while pushing hard on the trade issue.  OTOH, one of the two seats that flipped from GOP to Dem was the northeastern seat in Minnesota.  This is where the Mesabi range is and still probably the largest source of iron ore of any House district in the nation.  Anyway, its economy is booming thanks to the tariff on steel and aluminum imports.  So, we know that so far basically the one industry that has really done well from the Trump trade war has been steel, and so it is not surprising that a district heavily dependent on producing iron ore would boom and favor the GOP, while districts with industries, like soybeans, hurt by the war would go the other way.

So, Samuelson's claim that "It's not the economy, stupid," seems to be a bit overdone, if not completely false.

Barkley Rosser

Sunday, November 11, 2018

A Serious Centennial

After failing to show up at a major American cemetery in France at least our president did not add to his shame by failing to show up for the big show with 60 or so other national leaders at the Arc de Triomphe for the official ceremony marking the centennial of the 11th hour on the 11th day of the 11th month of November, 1918, when the guns fell silent on the western front of World War I, officially ending it in the eyes of most historians, even though fighting would escalate in certain other important zones whose outcomes still shake the world, most notably between Greece and Turkey, with the dissolution of the Ottoman Empire coming out of that leading to many wars since, some of them gong on right now.  We get it that Trump was uncomfortable given that President Macron was lecturing against the sort of nationalism that led to WW I, with a three day forum to follow that Trump will run as fast as possible back to the US to avoid. And, hey, Macron did not even have tanks and missiles for the parade this time, which Trump really likes to see.

This important day, the first Armistice Day, which we renamed Veterans Day in the US after the War to End All Wars' unfortunate sequel (actually  in 1954 right after the end of the "forgotten" Korean War) and have since turned into one of those Monday holidays, has turned into a curiously sad one personally.  It involves another war, Vietnam.  My cousin, Bill Atwater, died yesterday, the day before this serious centennial and also the 243rd birthday of the U.S. Marines.  Yes, Bill was a Marine and was in Vietnam where he was exposed to Agent Orange that led him to have various cancers that basically led to his death, although it was an opportunistic pneumonia that finally actually did him in.  He will be cremated with his ashes spread over the cemetery at Arlington. I had not communicated with him directly for over 20 years (did through another cousin), but he told me at his mother's funeral that he had been spat on when he returned to the U.S.  I have more recently seen stories that such reports were exaggerated, if not outright true.  As it is, I have no way of checking on Bill's story now, but I know  that he was a multiply wounded man.

Maybe those tales of spitting were exaggerated or untrue, but it is true that in the immediate aftermath of the Vietnam War its vets were widely disrespected.  Peaceniks did not like them because of alleged war crimes (some of which were committed) while hawks did not like them because they lost.  This attitude began to change with the dedication of the Vietnam "wall" memorial in Washington on Veterans Day in 1982.  But the rancor remains as I could see in a Veterans Day parade this afternoon in Harrisonburg happening because of the centennial, with a lot of Vietnam vets marching or riding on their hogs, with all those POW-MIA flags flying,

Of course every war leaves its survivors as victims, even those surviving a supposed clear victory like that War supposedly to End All Wars a century ago.   Millions died and a world order was broken. We know that as it started many leaders and people in the combating nations were enthusiastic about it, hoping or a glorious victory within a short time period, even including most of the leftist socialists who were supposed to recognize international working class solidarity, but in so many numbers went along with the nationalist frenzy and war whooping enthusiasm.  And now we see the same sorts of noises and delusions in many nations, fed by lies upon lies.  Resisting this is so important on this anniversary.

Barkley Rosser


The Death of Shame

In any society not in a state of civil war, shame is a powerful force, perhaps the most powerful.  Individuals or organizations caught cheating, lying or otherwise doing evil, when exposed and called out, are expected to be embarrassed.  They should repent their sins and promise to make amends.  Other than pure coercion, what else can disarm those who violate the norms of society?

Evolutionary biologists tell us shame is hardwired not only in humans but many other social animals.  (They may not experience shame the same way humans do, but the outward markers and consequences are the same.)  We seek group membership in good standing, and while there is an incentive to exploit others for personal gain, or just relax our commitment for a while, the punishment of group rejection is a more powerful force.  That’s what holds us together.

It is natural that shame is invoked as a political weapon.  Corrupt businessmen, politicians and public officials may be flying high, but if we can document the facts they are trying to hide, we can clean them out.  A video documenting otherwise hidden police abuse, an audio recording of the murder of civilians released by Wikileaks, the disclosure of evidence of law-breaking by justices or political leaders should accomplish this.  Also testimony from women abused by powerful men: if they come forward and tell the world what really happened, that should stop abuse in its tracks.

All of this depends on the biological mechanism of shame to kick in: those whose hidden misdeeds have been exposed should feel disarmed and admit defeat.  It isn’t enough that they be reviled by other members of the community; if direct coercion is unavailable for any reason, it is only the shame response that makes exposure a force of justice and not an empty gesture.

But the shame response shouldn’t be assumed.  In fact, what evidence we have suggests it operated only within limited circles through most of human history.  Liars and cheaters were accountable to their peers but not underlings or outsiders.  If a Roman warlord falsely took credit for a battle won by a rival, this might be a problem if the truth were known by other commanders, but would it matter what the soldiers knew?  Shame was circumscribed and structured by deeply embedded customs and social hierarchies.  You might have the fantasy you could go back in history and present the truth those who lived through events couldn’t see, but how much difference would it have made?

The faith that shame is a force of universal application and effectiveness is a modern indulgence, a product of the rationalism and optimism of an Enlightened world.  It ignores at least two uncomfortable truths.  The first is that the shame response is not equally strong in all people.  Some are ruled by the fear of shame and exercise little independent judgment or initiative.  Others are almost impervious to it; they seem almost to feed on the disapproval of those around them and succumb only to the application of overwhelming power.  The second is that shame, like all other psychological factors, is mediated by the way we make sense of the world—religion, ideology, and social custom.  This is why priests and warlords experienced shame only among their peers and not universally, and why the notion of universal shame is a historically specific political hypothesis.

So back to the present time.  Those of us who take the Enlightenment outlook for granted tend to assume it’s enough to bring out the facts about dishonest, corrupt or abusive power holders to cause their downfall.  In case you have noticed, however, it’s not working.  We have a president whose rampant dishonesty and exploitive behavior has been amply documented, but he doesn’t care and just continues on.  The Kavanaugh hearings were more of the same, not only for Kavanaugh himself but also the senators shepherding him to his seat on the Supreme Court.  And it is wider and deeper than this: think of the campaign for war against Iraq after the 9/11 attacks, when Bush could even make a comedy skit out of the pretext of looking for weapons of mass destruction.  Or the patently dishonest arguments put forward to justify tax cuts for the rich.  Exposing these lies gave many of us a sense of vindication, but it had no effect on outcomes.  Above all, those in power showed no sign that they cared whether or not they were exposed.  To stop them it was necessary that they be stopped.

I see two reasons why we are having an epidemic of shamelessness.  The first is the emergence of a philosophy on the political right that the majority of the public is craven and easily duped, so the higher good depends on a strategy of deceit.  This has its roots in the teachings of Leo Strauss, the philosopher who taught generations of University of Chicago students after fleeing the Third Reich in the 1930s.  Strauss believed the great works of philosophy were written in code, since deep thinkers, by virtue of their very depth, understood that most people were shallow and un-virtuous.  They couldn’t say this out loud, so they had to devise clever ways to say it to their inner school of acolytes.  (For a counter-view, see this, but it argues only for Strauss, not his students.)  Strauss transmitted this perspective to young skeptics of liberalism, who developed it into a high-minded critique of democracy, from which it devolved into the end-justifies-the-means credo of movement conservatism.  Far from evoking embarrassment and shame, being revealed as a liar is a badge of honor among the elect; it shows they are elevated above the credulous masses.  Movement activists discovered this philosophical stance is also a source of tremendous power: once you are no longer in thrall to your scruples or anyone else’s and can be held back only by a superior force, most mechanisms of social control have no effect, and you can accomplish greater things.  Note, by the way, that such cynicism is not a monopoly of the Right; classical Leninism too justified shameless deceit on the ground of the relativity of morals and the overriding logic of History; public exposure of facts had no effect on Communist show trials.

It seems to me another element is at work, although I can’t quite describe it.  Many people who have not transcended the shame response in their own lives (they are “good people”) nevertheless vicariously identify with heroes and celebrities who have.  It seems there is a thrill to be had in cheering on the bully we are not capable of being ourselves.  But why should there be a historical ebb and flow to this spectacle?  Why now and not before?  Why is Trump admired for his disdain of social norms, while Nixon succumbed to his?  Is it connected to the evolution of movement conservatism, as the Straussian sneer is translated into tweets and viral video clips?  Is it a product of the pseudo-intimacy of the virtual world, where the thrill of the bully, transmitted to us through what feels like a personal medium, can be experienced almost first-hand?  Or something else, or all of the above?

I would like our culture analysts, who are so adept at discerning subtle shades of colonialism in language and art, to take up the study of shame and its progressive disappearance from public life.  In the meantime, those of us who are disgusted by the shameless behavior of those in power should have no illusions.  We won’t get them to back down by uncovering further evidence of their misdeeds, although evidence remains the basis for rational judgment and should always be sought.  Only greater political power will overcome shamelessness.

Friday, November 9, 2018

Siphoning off the Increment to Pay for the Excrement, 2018

"In a Wednesday morning note to investors entitled "It's always a party, regardless of party," Jefferies investment analyst Sheila Kahyaoglu noted the 2006 midterm election, in which Democrats seized the House at the height of the U.S. war in Iraq. Defense companies' share prices climbed an average of 18 percent during that year."

A Washington State Carbon Tax Goes Down in Flames

Initiative 1631, which would have created a carbon tax in Washington State, lost by almost 12% of the vote this week.  Commentators on all sides have interpreted this as a decisive defeat for carbon pricing, making more indirect policies like subsidies to renewables the only politically feasible option.*

I don’t have time for a lengthy analysis, but in a few words I want to suggest that this conclusion is premature.  I live in Washington State and saw the battle unfold first hand in real time.  Voters were not asked by opponents of 1631 to reject carbon pricing; on the contrary.  And it was the failure to draft and promote a straight-ahead carbon pricing law that doomed it.

While supporters of 1631 point to money from fossil fuel interests as the “cause” of their defeat, the actual propaganda of the No side did not belittle the threat of climate change, nor did it even argue against the need for action to reduce emissions.  It hammered on these points:

1. 1631 was weak.  It excluded too much of the state’s emissions and wouldn’t have a meaningful impact on them.

2. Nevertheless it would raise energy bills for virtually all the state’s residents.

3. It proposed an undemocratic procedure for allocating carbon revenues.

The money behind this message may be “bad”, but the message itself was correct.  1631 was so poorly conceived that the arguments of the troglodytes were closer to the truth than those of the progressives.  Take them one by one:

1. 1631 was the second carbon tax initiative in two years.  Last year’s effort, I-732, had broader coverage and allowed for higher carbon prices over time.  It was opposed by progressives, who organized to defeat it and then drew up their own, weaker proposal.  There is a lot of detail to go into, but the short version is that 1631's carbon price was essentially symbolic, a few cents on the carbon dollar.  It was not a meaningful action to deal with the threat of a climate catastrophe.

2. This one was particularly galling for me as an economist.  Supporters of 1631 actually campaigned on the argument that the tax would be paid by a few large corporations, not by all of us.  On this point the No crowd was entirely right and the Yes entirely wrong.  I’m sure many pro-1631ers really believed that energy taxes aren’t passed through to consumers, but those at the top who drafted the proposal knew better.  Their public communication was dishonest, they got called on it, and they lost.

3. 1631 was the product of horse-trading between various interest groups.  Environmentalists wanted carbon revenues to go for green infrastructure.  Identity groups wanted funds funneled into minority, immigrant and low-income communities.  Unions wanted money for workers in the fossil fuel sector who might lose jobs.  Tribes wanted the state to defray the costs of climate change that impinge on them with particular force.  All of these are worthy goals in their own terms.  The problem is, how to translate a deal reached around a table between various representatives of these movements into a political process for disbursing public funds.  The solution they came up with was an appointed board of 15 “experts” who would control the allocation, carving off the carbon money from the general fund and its control by the state legislature.  Do I understand the distrust of the legislature?  Yes.  Was this blatantly undemocratic and contrary to the widely-held principles of how government ought to operate?  Also yes.  The No people blasted this idea again and again, and the public responded predictably.

The defeat of 1631 was an own goal by the progressive community.  We still haven’t had a vote on a sensible, defensible carbon pricing measure.  Until we do, I don’t want to write off the political feasibility of taking direct action against climate change.  A better bill would have universal coverage, as stiff a carbon price as possible, and—because carbon prices would eat significantly into household budgets—would return most or all of the revenues back to the public, ideally in equal lump-sum rebates.**

*Subsidies to renewables, energy efficiency programs and the like, while highly desirable, have only indirect effects on the use of carbon energy.  They shift the demand for fossil fuels to the left by some amount, but in a complex, evolving world with many other factors influencing global energy markets, the effect on emissions is unpredictable.  A direct approach uses the power of law to keep some portion of fossil fuels themselves in the ground, either by a cap on their use or price increases calibrated to corresponding use reductions.  The indirect approach to carbon is direct in its impact on renewables and other resources it targets, just as the direct approach to carbon is indirect in its effects on renewables and efficiency.  Ideally we should adopt both approaches, with programs directed against carbon fuels and for energy alternatives.

**732 was intended to rebate carbon revenues, but through tax cuts.  This was a mistake, since the amount of the rebate was variable (depending on how complex tax formulas would be affected by changing state economic conditions) and the rebates greater for those with higher incomes.  Worse, a portion of the cuts was allocated to business taxes in a misguided effort to buy off business and conservative interests.  The mobilization against it by progressives was vigorous and emotional; I attended an event in which supporters of 732 were called racist from the podium.  Mainstream environmental groups joined this opposition in order to demonstrate their social bona fides.

Thursday, November 8, 2018

US Policy On Iran After The Midterm Elections

A curious coincidence is that the US midterm elections happened one day after the US reimposed its second round of illegal economic sanctions on Iran, with the focus on oil, shipping, and banking, along with some other sectors.  Despite all but a handful of governments  around the world supporting Iran in this matter (despite apparently two attempted assassinations of opponents of Iran's government in European nations recently) against the US out of a hope to keep Iran following the JCPOA nuclear agreement as it has by all reports been doing, the impact of the midterm elections is probably to reinforce support for Trump's policy, even as mostly he lost support in the election.  The reason is that the most important location for serious critics of a president's foreign policy usually come out of the Senate, not the House of Representatives or governors.  So, even though the Dems have taken the House and gained governorships, the GOP gaiined in the Senate, and some of the GOPs leaving included the few Trump critics, notably departing Foreign Relations committee Chair, Robert Corker of TN.  This is the case, even as those GOP gains may only amount to a net two (Dem Sinema now ahead in AZ) or even only one (Nelson in FL may yet pull it out too).

Yet another reason the gains by Dems will probably not lead to much more pressure on Trump on this is that many Dems at least somewhat support his policy, especially those strongly influenced by the Israeli government.  Thus in today's Washington Post, a lead editorial (presumably by neoconnish Fred Hiatt) said there may be reasons for imposing some sanctions because of "malignant" policies by Iran, notably supposedly supplying missiles to the Houthis in Yemen, plus the Syrian government, and Hezbollah in Lebanon (there are doubts on the extent of all this), even as WaPo opposes the US withdrawing from the JCPOA and is highly critical of Saudi Arabia due to the murder of their journalist, Jamal Khashoggi, probably on orders of KSA Crown Prince MbS, a main enemy of Iran.  Indeed, members of both parties in the Senate have become unhappy with the Saudi war in Yemen and may move to cut US military support of the Saudi war effort there.  But this will probably have little to no effect on the reimposed economic sanctions on Iran.

As it is, the ultimate impact of the new sanctions is quite complicated with various cross-cutting effects that are already damaging the Iranian economy, but may end up having less impact than Trump would like.  The most important part of the sanctions involves Iran's oil exports, which US officials claim they would like to see go to zero.  Early forecasts had those falling to about a third of the about 2.8 million bpd of a few months ago, which anticipation helped push oil prices up substantially, with Brent crude topping $80 per barrel while West Texas intermediate crude topped $70 per barrel.  But the Trump administration has granted temporary waivers to 8 countries allowing them to continue importing Iranian oil for awhile, supposedly to avoid excessive disruption of global markers (while not officially announced, the Japan Times claims the 8 waivered nations are China, India, Japan, South Korea, Taiwan, Turkey, Italy [only EU nation on list]. and UAE [yes, that big anti-Iran oil exporter imports oil from Iran]).  As it is, with surging oil inventories in the US, prices have fallen sharply in the last two weeks, with Brent down to nearly $70 and WTI to nearly $60 , with some commenters today claiming that oil is turning into a "bear market."  While this clearly allows Iran to export more oil than previously thought for now, the price decline will hurt Iran.

A fundamental clash in this is between governments and the businesses based in their nations.  Only a handful of national governments officially support Trump in this policy, basically the odd group of Saudi Arabia, Israel, UAE, Bahrain, and apparently Egypt, with a few others sort of semi-supportive, such as Jordan, if with little enthusiasm.  Russia, China, Turkey, and the major EU nations all oppose Trump's policy.  While businesses in Russia in particular go along with their government's view, nearly all of those that are reasonably large in the EU nations are obeying the demands of the US government to cut back business relations with Iran, with poster  boys for this being Total and Peugeot from France out of fear of losing markets in the US or facing sanctions from the US government.  All of this has led to efforts in both China and the EU to set up alternative payment systems to avoid using US dollars and going through US-controlled financial intermediaries, a big conflict over this involving the SWIFT payment system, which the US would like to prevent Iran from using while the major European nations oppose this move by the US.  As it is, given the ongoing efforts by they EU nations to help Iran out, it seems especially unwise of Iranian intel agencies to be attempting to assassinate people in France and Denmark as they have reportedly done, albeit unsuccessfully so far.

A final point is that it is extremely unlikely that this policy by Trump will lead to Iranian leaders kowtowing to him and entering into any negotiations.  If anything, they might get pushed into pulling out of the JCPOA or create trouble for their enemies in various ways.  OTOH, it may be that the sanctions will not lead to as harsh impacts on the Iranian economy as forecast, whether this is due to the Europeans and Chinese setting up alternative payments systems, or due to Iran wriggling out of the sanctions whether due to waivers or through such maneuvers as barter transactions involving oil or the use of "ghost ships" that do not use any radio communications, something reportedly already going on.  We shall see how this all turns out, but for now Trump probably has gotten a modest boost of support for his policies within the US as a result of the midterm elections, much as I am not pleased to see this.

Barkley Rosser




Tuesday, November 6, 2018

Monday Before The Midterms And WaPo Is At It Again

It is Robert J. Samuelson doing his usual schtick, albeit with some recognition of other issues, such as global warming and immigration.  But these are not what has his prime attention on the day before midterm elections in the US.  Moaning that "Everyone" will lose this election, his main focus is on the budget deficit, without a single mention of the Trump tax cuts.

We get, "Start with budget deficits. In fiscal 2018, the gap between federal spending and revenue was $782 billion, nearly 4 percent of gross domestic product (GDP). That's up $116 billion from 2017. Based on current spending and taxes, the Congressional Budget Office expects large deficits forever.     
With a 3.7 percent unemployment rate, no one can attribute these deficits to a weak economy.  Put simply, Americans want more government benefits and services than they're willing to pay for in taxes.....

Our leaders are making proposals that would worsen deficits. Trump backs more tax cuts [ah ha, that he passed some is implicitly recognized]; Democrats advance expensive new health benefits and guaranteed jobs for all [well, at least he did not call for cutting Social Security, as he usually does]."

OK, this could be worse.  He could have actually called for cuts in "entitlements" as he so often does.  But clearly after not mentioning that the deficit has swelled due overwhelmingly because of Trump's tax cuts, he implicitly puts forward cutting "government benefits" as at least equal to raising taxes in terms of dealing with budget deficits.  There is no end to it.

Barkley Rosser






Friday, November 2, 2018

Some Questions about the Ten-Hour Week

Three weeks ago, in response to the IPCC report warning that CO2 emissions had to be reduced to 45% of their 2010 levels by 2030 to avoid the possibility of global temperature rising above 1.5°C, I posted "The IPCC 1.5° C Report and the Ten-Hour Week," which offered the sketch of a plan for how to do that. I have no illusions that the IPCC or any other prestigious organization will latch on to this idea and seek to flesh it out with concrete policy proposals. In some respects, I offered the Ten-Hour Week more as a thought experiment, a way of thinking about the scope and scale of effort required.

I still think it is a damn good way to think about the problem and actually would be worthy of elaboration if only it wasn't "easier to imagine the end of the world than the end of capitalism." Several of my subsequent EconoSpeak posts -- "The Political Economy of the Working Class" "Absolute Decoupling and Relative Surplus Value: Rectification of Names" "Business As Usual: Running on Empty" and "Scratch That" -- have in fact been elaborations on the Ten-Hour Week thought experiment and the issues it raises.

I also posted it to the sustainable consumption discussion list, SCORAI, where it got some very perceptive questions from participants. With permission, I am posting the questions and answers below. Thanks for questions, comments and permission to Thomas Love, Professor of Anthropology, Linfield College, Oregon; John de Graaf, film maker and co-author of Affluenza, Seattle, Washington; Anna Berka, Research Fellow, Energy Centre, University of Auckland Business School, New Zealand; and William Rees, Professor Emeritus Faculty of Applied Science School of Community of Regional Planning, UBC, Vancouver, BC.

Tom Love:
Thanks Tom Walker for a compelling thought experiment.  Interestingly compatible with the analysis David Graeber takes in his recent Bullshit Jobs, wondering about the nature of work in late capitalism and why we work so hard, even when over a third of people in the UK and the Netherlands report that their work (for which they are sometimes well remunerated) makes no difference in the world.  The work week could be drastically shrunk with little apparent effect on overall economic performance. 
But I’m missing a step in your thinking here.  The kinds of bullshit jobs Graeber documents are almost all white collar bureaucratic positions, whether private or public.  So even taking all your simplifying assumptions into account, why would emissions reduce by a rate corresponding to hours worked?  Presumably agricultural and industrial labor would proceed pretty much as is, in current quantities, no? 
John de Graff:
I hope Tom [Walker] won't mind my jumping in here.  The bureaucratic jobs you mention pay better than many of the production jobs and the people who have them then spend on all sorts of consumer products, travel etc.  It's the total compensation/spending (eg. per capita GDP) that has the strongest connection to carbon footprint since there is no absolute de-coupling at all, and with relative decoupling, ecological and carbon footprints continue to rise (albeit more slowly) as GDP increases. The spending of the white collar workers drives the increases in production of the agricultural and industrial laborers.  It may not be a 1:1 effect, but Tom is absolutely right here.  A cut in these bullshit jobs will render much overproduction untenable, forcing shorter working hours in the ag and industrial sectors to prevent massive unemployment.  Am I getting this right, Tom?
Reply from Tom Walker (Sandwichman) to Tom Love:
"So even taking all your simplifying assumptions into account, why would emissions reduce by a rate corresponding to hours worked?" 
That is an excellent question and my answer is that initially emissions wouldn't reduce by a rate "corresponding to hours worked" but explaining why they wouldn't and why that is o.k. anyway would complicate matters more than I want to in a first volley. I am convinced that the first 25% or so of work-time reduction would actually be an efficiency measure that would have little downward effect on final output BUT would also shift investment away from capacity expansion because of the continuing nature of the work-time reductions and higher wage share of income. After that initial 25% or so, there will come declines in output, incomes, consumption and thus emissions resulting directly from, and corresponding to, the reductions in hours. At the lower end emissions reductions may be > 1:1 to reduction in hours. 
So to put some imaginary numbers on it (albeit grounded in very recent empirical research), Let's say the initial 11% reduction in hours in the U.S. corresponds with a 4% reduction in emissions. That might seem disappointing but its something... and it comes with an improvement in "work/life balance." The second year brings a larger emissions reduction but still less than 1:1. People are meanwhile learning that they don't need to work as much as they used to to get by. And so on.
Anna Berka:
Hello Tom, all,  
Thank you for elaborating the thinking behind limiting working time; that's the part of the degrowth agenda I've not yet been able to get my head around.   
Like others in this thread I also have some concerns around the effectiveness, ethics and political feasibility of this proposal that you may have already thought long and hard about:  
  • Your reasoning seems to rest on the fact that a large number of middle and upper income earners could benefit from less work and less stuff, and don't know it - a fair point. It would result in downsizing, more family time, more community time - all good things. But limiting work hours hits low wage earners hardest; people who spend a higher proportion of their income on power, food and commuting, and are already just getting by. In many emerging economies or liberal market economies, low income earners may be working three jobs to cover the basic cost of living, and work life balance would seem of secondary concern. Under the scenario that you set out, it is likely that supply constraints would translate into higher prices (although to the extent to which there is unemployment, production could continue by simply hiring more workers on shorter term contracts) further exacerbating the problem. People would take to the streets.   
  • It doesn't affect the super rich at all, and certainly not in proportion to their footprint - because they are not employed by anybody and do not work in the formal sense, except to reinvest their money.   
  • It affects start-ups, social enterprises that are attempting to deliver positive change for instance by investing in clean technology (ie. doesn't it also put a break on the kind of innovation that we need?). In short, it seems a very indirect/convoluted way to reduce consumption of high emission goods, compared to for instance a carbon tax, which automatically directs investment towards low emission production.  
Like many other ideas in this area, we seem to hit a wall when consumption reduction measures fundamentally transgress notions of individual freedom that underpin democratic society today; and that now seem to be getting in the way of a livable future...
But limiting work hours hits low wage earners hardest; people who spend a higher proportion of their income on power, food and commuting, and are already just getting by.  
Reply from Tom W. to Anna Berka:
That is an excellent point -- and one that I have indeed thought and researched long and hard about. During the 19th century movement for the 8 eight hour day, Mary Steward coined a ditty: "Whether you work by the piece or work by the day, decreasing the hours increases the pay." Her husband, Ira, and his disciple, George Gunton worked out a theoretical explanation of this apparent paradox that was subsequently confirmed, empirically by the industrialist Thomas Brassey and theoretically by the neo-classical economist Sydney J. Chapman.  
To put it bluntly, the low wages of low wage earners are substantially a RESULT of overly long hours. Reducing the hours of work does not automatically increase the pay but it removes a formidable obstacle to higher pay. Whether they understand this or not, employers, RESIST shorter hours because they give workers more leverage in determining wages and other working conditions including subsequent reductions in hours. It establishes a virtuous cycle for worker power, which the employers understandably view with alarm. "Mainstream" economists have taken the side of employers to the extent of ignoring or suppressing the theoretical work in economics that supports the shorter work time argument and slandering policy proposals as "fallacious/" 
Yes, I have indeed thought long and hard (and longer and harder) about this and have written a background manuscript that surveys the arguments against shorter working time and their origins.
John de Graaf:
Anna, It shouldn't be either or.  For lower paid workers, the loss of hours should be at no loss of pay, with greater progressive taxes and earned income credits.  I for one would support a basic income guarantee as well.  But there can be no de-growth without cutting working hours.  Tom has been right on this for a long time.  And if it happens slowly, people get used to the income reductions (except for the poor).  see my piece, "Life Away From the Rat-Race."
Bill Rees:
Friends - 
Think about this. So far, this discussion assumes all else remains constant.  However, if the world takes the recent IPCC report seriously, and reduces fossil fuel (FF) use by nearly half in the next couple of decades, then there will be a massive shortage of energy (demand is actually 'scheduled' to rise by a quarter or more).  The fact is that wind, solar, etc., cannot substitute for many uses of FF and even if they could, the rate of investment required is beyond reach.  In short, there may well be a great increase in the demand for human labour just to provide the necessities.  
Of course, if the world doesn't take IPCC seriously, we'll see 3 Celsius degrees warming and catastrophic impacts that will .. 
(fill in your own blanks)
This should help.
Reply from Tom Walker to Bill Rees,
I agree that transition away from fossil fuels will require more hours of necessary work as well as far, far less hours of bullshit work and fossil-fueled work. In my thought experiment I conceded that "some of these reductions in working time could be reversed by de-industrialization — that is the substitution of less energy intensive but more labor intensive methods of production" but for the sake of brevity didn't go into the complexity of that de-industrialization. 
I am not actually advocating a Utopia of leisure, although it may seem like it. There are two more salient aspects to my thought experiment. One is the effect that a phased, coerced regulation of working time could have on transition from fossil fuel, with the transition to fossil fuel serving as the precedent. The other is translating the intangible and unimaginable -- the 45% reduction of carbon dioxide emissions -- into something that people can imagine: hours of work. Nobody sees or experiences carbon dioxide emissions. Almost everybody experiences work. The global carbon dioxide emissions intensity of paid employment has been remarkably stable over the past quarter century. So REPRESENTING tons of carbon dioxide as hours of work makes quantitative sense. 
One thing that I try to keep in mind at all time is Georgescu-Roegen's warning against the idea that there is a "blueprint for ecological salvation." The "ten-hour week" is not meant as a blueprint. It is meant in the spirit of G-R's eight-point minimal bioeconomic program, which concludes, incidentally, with the admonition: 
...we should cure ourselves of what I have been calling "the circumdrome of the shaving machine," which is to shave oneself faster so as to have more time to work on a machine that shaves faster so as to have more time to work on a machine that shaves still faster, and so on ad infinitum. This change will call for a great deal of recanting on the part of all those professions which have lured man into this empty infinite regress. We must come to realize that an important prerequisite for a good life is a substantial amount of leisure spent in an intelligent manner.

Trump Says Dems Support Venezuelan "High Taxes And Open Borders"

The  average tax rate in Venezuela is 25%. The average tax rate in the US is 26%.  Sorry, Trump, this is yet another lie by Trump, but what else is new on this?

I do not know the details of Venezuelan of immigration policies, but at this point in time the issue  in Venezuela is not immigrants freely arriving and causing economic problems, but just the opposite: people leaving in massive numbers leading to crises in all the neighboring countries of Venezuela.

So, bottom line: Trump not for the first time is totally full of it on all of this.

But now it is time to deal with the political-economic problem of Venezuela, a matter that may lead to some regular readers of this blog to differ with me.

Indeed, Venezuela has turned into a political-economic disaster: extreme hyperinflation with a plunging real output, with massive outmigration, so massive that the receiving nations (Columbia, Brazil, Guayana, Ecuador), have had serious public complaints.

So GOP standard stories have now focused  on Venezuela as the supposed world model of "socialism."  Oh gag on many issues. I have from the moment Hugo Chavez came to power I never supported him, a military guy who had attempted a failed coup.  I shall not name prominent economists who now are fumbling with the current awful situation. 

As it is, indeed for most of the time Chavez ruled the Venezuelan economy performed not too badly, and indeed had had reductions in inequality, long demanded for politically.   Even now, a substantial portion of the Venezuelan population is better off than in the past due to the Chavist policies, even as the general state of the economy is horrendously collapsing under his successor Maduro, who has suppressed normal democratic processes.  And while the economy maintained a not-too-bad performance while Chavez was in power, it has  totally collapsed under Maduro, his  successor.

Of course the critics have argued that the policies that led to this  hyperinflationary collapse were due to Chavez and not his pathetic loser  successor, Maduro. This is a more complicated matter, and gets to the systemic question: has Venezuelan policy been a world avatar of "socialism"?

Chavez avoided such claims, even as he cut a deal with Cuba for them to provide doctors for oil, a deal still in place last I heard. Regarding how "socialist" he was, a lot less than many would say, and that was not how  he described  himself  or his policies  He claimed a nationalist position derived from the great liberator of South America from Spanish rule, Simon Bolivar, who indeed did come from Venezuela.  So the original Chavismo was proclaimed by him to be "Bolivarianismo," a term that has now basically disappeared, for better or worse.

So how "socialist" has Venezuela been, with its failed Bolivarianismo?  Much less than either it  s fervent supporters or its far more numerous critics have  claimed.  In terms of the most hard core definition of socialism, state ownership of the means of production, the  most important part of the economy, the oil sector, was nationalized decades ago, back when Venezuela and Saudi Arabia cooked up OPEC in 1960.  There have been nationalizations since Chavez took power, but most of the Venezuelan economy not in the oil sector actually remains privately owned, not soicialist.

Which brings us to how Chavez and Maduro really messed up the economy. Yes, they imposed some dumb price controls here and there, since totally swamped by the  hyperinflation.  Yes, there were nationalizations of some firms, even as most of the economy remains privately owned and pays lower taxes than in the US. But the real problem was/is corrupt political cronyism, with the  crucial oil sector the central problem for the economy. And the bottom line on that as that when Chavez took power he fired the competent  managers of the state-owned  oil company and installed incompetent cronies who proceeded to destroy the Venezuelan oil industry.  I saw this from Day One and never supported Chavez or Maduro.

What we dealing with here is not socialism, but corrupt incompetence.  Venezuela is not a socialist economy more than it was before Chavez came to power.  It is just a corrupt loser oil exporter that has lost it.

Barkley Rosser