Assar Lindbeck Passes On

 Assar Lindbeck died on Aug. 28 at the age of 90, probably the most influential Swedish economist of the latter part of the 20th century.  He was the main driving force behind getting the Swedish central bank at the end of the 1960s to establish the Sveriges Riksbank Award in Economic Sciences in Memory of Alfred Nobel, a.k.a., the "Nobel Prize in Economics" (I get increasingly tired of the usual retreads who every fall remind us when the media refers to it by the second name that it "really" should be called by the official first name; we all know this by now). He was a professor at Stockholm University, longtime director of the International Institute for Economic Affairs, and in 1992-93 chaired the "Lindeck Commission," which laid out policy proposal for scaling back the Swedish welfare state, many of which were adopted after 1994.

In terms of his own contributions to economic thought beyond the matters noted above, I note that he wrote influential articles about insider-outsider labor market models, rent control (he was against it), and also on how an extensive welfare state system may lead workers to become shirkers, with this argument in particular playing into the recommendations of the Lindbeck Commission, which led to reducing health leaves and related matters in the Swedish system, although it remains among the most generous in the world, although now not as large as those in Denmark, France, Finland, and Belgium, to name a few.  Sweden is now the "liberal welfare state," not the largest or most extensive as it was in its heyday under Prime Minister Olof Palme before he was assassinated.

Certainly one can debate whether Sweden needed to scale back somewhat, and maybe it did.  After performing very well on multiple criteria from low poverty through low unemployment and inflation and low budget deficits for many decades, the Swedish model sort of went off the rails in the late 1980s, leading to serious macroeconomic crisis in the early 1990s, which was the immediate trigger for the government adopting the kinds of proposals Lindbeck advocated. It has performed better since, doing better than most European nations during the Great Recession, with having stayed out of the Eurozone probably helping, as well as using a very expansive monetary policy with negative interest rates, none of this particularly part of Lindbeck's agenda or suggestions.

I shall further note that it has long been argued that Lindbeck's motive for pushing for creating the Prize was indeed ultimately driven by internal Swedish politics and a desire to support the kinds of reforms he ultimately managed to get accepted in the 1990s.  Crucial in this was not just that he got the Prize established, but he became by all accounts the dominant force on the selection committee until the mid-1990s. about the time his recommended reforms were accepted, stepping down after an outbreak of controversy associated with the first game theory award for Nash, Harsanyi, and Selten.  More generally, it was observed, that with an occasional exception, the prizes tended to favor advocates of neoclassical orthodoxy, with this viewed as supporting the kinds of policy arguments Lindbeck favored in Sweden.

There are some oddities I shall recount based on gossip from primary sources I have heard.from.  So when I went to his Wikipedia page to double check on details of his career, it claimed that the award for James Buchanan in particular in 1986 was especially important for him as part of this general ideological agenda. Maybe, but I have heard otherwise.  Indeed, what I heard a long time ago, sometime before that award was made, from a primary source, was that Lindbeck had claimed at one point that there were two people who would get the Prize "over my dead body."  One was Joan Robinson, still alive when that remark was made, and indeed she never got it.  The other was James Buchanan.  So, assuming my source heard right, the award for Buchanan was not the result of some longstanding plot by Lindbeck to give it to him as part of his general plot to classically liberalize Swedish policy. Something came up, and from what I have heard from other sources (I used to have good sources on that famous committee, but no longer) was that it was the large budget deficits being run by the Reagan administration, which Lindbeck disapproved of and saw as roiling international financial markets, with the upward surge of the USD to 1985 driven by high interest rates creating havoc in Europe.  At the time Buchanan was pushing for a balanced-budget amendment to the US Constitution, basically a silly idea. But supposedly Lindbeck saw that as a way to send a message to the Reagan administration of disapproval for their high budget deficit policies, and this overcame whatever it was that had previously made Lindbeck so negative on Buchanan.

I have mixed feelings about Lindbeck ansd his recored and influence, but I shall wish him an RIP.

Addendum (9/1): Some might argue that Lindbeck's influence may be seen at least indirectly in recent policies in Sweden during the pandemic that have not been very successful.

Barkley Rosser

There Will Be No Postponing Social Security Taxes

 Among the items that President Trump issued an "executive action" about three weeks ago was that for people earning less than around $104.000 per year, their fica taxes were to be postponed until Jan. 1, not cut, merely postponed, although Trump made noises that if he is reelected he will simply eliminate the fica tax entirely, although unclear how he plans to fund Social Security without it.  

Anyway, Allan Sloan in the Washington Post reports that this initiative is now just completely dead in the water.  It has too many problems, too many opponents, and action on implementing it in the Treasury Department has simply stalled out, almost certainly for good due to all this.  Quite aside from people facing potentially huge fica tax bills in January due to four months of postponement, it apparently is very complicated to set this up, and would take many months to do so, involving businesses and the Treasury Dept. having to put in place all kinds of mechanisms to figure out exactly which people would get their taxes postponed and which would not.  A real killer is that businesses pretty much across the board have objected to this proposal, with this now official as 30 different such groups have called for the cessation of this effort through the US Chamber of Commerce.  This is just going nowhere.

This should be contrasted with the temporary fica tax cut that Obama had in place during 2011-2012. There are two large differences between that and what Trump has so incompetently proposed. One is that Obama had it pass through Congress, not be the result of a presidential directive or memo.  The other is that it was completely simple: all Social Security taxes stopped being collected for the period in question, not a system based on treating people differently based on their incomes and also not a postponement.  It was a straight cut, if only a temporary one.

An odd aspect of that Obama cut was that when it came to an end the GOP members of Congress were pretty near unanimous in voting to end it and bring back fica taxes.  Somehow this did not prevent them from continually ranting about supporting tax cuts and opposing all tax increases.  Of course it was technically not an increase but simply undoing a cut, but funny how something that raised taxes more on poorer people received their ready support as they argued for cuts for higher income people and still do.

Barkley Rosser

An Increasing Anomaly In The US Balance Of Payments

 On Econbrowser Menzie Chinn has posted about an increase in the scale of US international net indebtedenss. Since the late 1980s the US has been a net debtor internationally, borrowing more from abroad then we are lending and investing there.  The increase in this net indebtedness has noticeably accelerated since our current POTUS took office, and especially this year.  The size of that net indebtedness has gone from about 40% of US GDP to somewhat more than 55%, a pretty substantial increase, given that we have been in this condition for over three decades and in three years by more than a third.  The fiscal stimulus of this year has definitely been overwhelmingly financed by foreign borrowing.

This increase in net indebtedness highlights a longstanding anomaly that now looks even more anomalous.  Even though the US has been a net debtor for over three decades, it has remained a positive net earner on capital income arising from all those international capital movements into and out of the US.  This is mostly measured by the primary income part of the international capital account, which last year was in surplus at a bit over $60 billion.  What is more curious is that this does not seem to have changed much at all over the last five years, some slight changes here and there, but mostly unchanged.  I confess to being mystified as to how an increase in net indebtedness by more than a third has led to essentially no change in the capital income payments situation.

I have not gone digging to get the exact breakdown, but a few years ago it was clear that what was going on is that most of the US assets abroad are in business investments earning large profits and thus high rates of return on the investments, while foreigners are holding assets in the US earning much lower rates of return, most notably US government securities, the outcome of all that foreign borrowing by the US government over a long period of time.  The foreigners have been sending their money here as the "safe haven," an argument or motive that may be breaking down according to some.  So they have been willing to accept the low returns for the supposed safety, while US investors have been taking bigger risks but getting bigger returns as a result.

This all is clear, and maybe the super low interest rates on current US government securities are sufficient to explain why we have seen barely any change in that capital income balance, even as the net indebtedness has substantially increased, but somehow it would seem there must be more, with somehow the US holdings abroad becoming more profitable.  In any case, I do not have a solid explanation for this apparent anomaly.

Barkley Rosser

Remembering The Bombing Of Sterling Hall A Half Century Ago

 A half century ago at 3:42 AM on Monday, August 24, 1970, the New Year's Gang set off an ammonium nitrate bomb in the back of a Ford pickup track next to Sterling Hall on the University of Wisconsin-Madison campus.  They were aiming it at the Army Mathematics Research Center, then directed by my later father, J. Barkley Rosser [Sr.]. However, they were notoriously the Gang That Could Not Bomb Straight and hit the physics department instead, killing a physics post-doc, Robert Fassnacht, and injuring several other people, as well damaging buildings even blocks away, aside from the major damage to Sterling Hall itself.  

Of the gang, three would eventually be apprehended and serve time in jail: the two Armstrong brothers from the east side of Madison, sons of an Oscar Mayer plant worker, Karl, the group's leader who was caught first and served seven years, and his younger brother, Dwight, who served three years and is no longer alive, with David Fine of Baltimore also serving three years.  The fourth member, Leo Burt, remains at large.

Last October I wrote an 8-page essay reminiscing about the bombing that contains details both representing my peculiar perspective as well as some tidbits not widely public information.  I am willing to send it to anybody who requests it of me.  It contains six parts.

The first and longest part is about my relations with my parents, with a lot of information specifically about my late father.  We respected each other personally, but disagreed politically, although I never approved of violence and thus severely disapproved of the bombing, as well as some personal mistreatment my parents experienced.

The second part recounts my own experiences on the day of the bombing, which is short as they were unexceptional, especially compared to many other people then (I was nowhere near it when it happened).

The third part, also long as the first one, involves a more detailed analysis of the AMRC and issues surrounding it.  This includes that indeed people working there, certainly including my late father, did work of the value to the US military, with some of it being used in Vietnam, the main complaint of protesters who wanted the center shut down or at least moved off campus. However, I also note that mathematics has many uses, both good and bad, and that some of the math developed there is also used in economics, including in such beneficial areas as environmental economics.  It is easy to say that maybe there should be a "good" math research center not funded by the military, but in fact when the military funding disappeared later, none other was forthcoming and the center simply closed.

The fourth part reveals that the wrong person died in the bombing.  Fassnacht was in the lab because the wife of his professor, the late Bill Yen, demanded that Bill stay home for domestic reasons.  Bill was supposed to be in the lab, not the unfortunate Robert Fassnacht.

The fifth part involves a later event, a mitigation hearing held in the fall of 1973 after Karl Armstrong was captured.  He plead guilty, but the mitigation hearing was officially about his sentencing, although it ended up being essentially a trial of the whole war in Vietnam, with famous outside lawyers participating such as William Kunstler. I offered to testify, thinking the judge was not impressed by all this, but one of the local attorneys said this was not needed. However, in the end, the judge imposed the maximum sentence of 25 years, of which seven were served.  After getting out, Karl Armstrong for many years ran a fruit juice stand near campus, "Loose Juice," and I got to know him.

The final section recounts a banquet in July, 1989 associated with a conference of old UW radicals returned to town.  At the banquet, which I attended, Karl Armstrong appeared and delivered an eloquent and unequivocal apology for what he and his gang members did, ranging from to the Fassnacht family to the anti-war movement, which the bombing severely damaged. 

There is much more detail I am leaving out in the essay, but I conclude this by noting that we have seen some protesters in recent months engaging in violence.  This event needs to be remembered as a warning that it is easy for violence to get out of hand and go too far and damage the cause that is supposed to be serving.

Barkley Rosser

Whining About Lack Of Academic Leadership

 At my so-called university named for the fourth president, the slaveowning "Father of the Constitution."  No, I am not going to talk about the racism issue, which there is some effort to deal with on campus, notably in renaming three buildings named for Confederate figures, with our Provost originally from South Africa speaking reasonably intelligently about that issue.

No, we had our annual general faculty meeting to begin the year, classes supposedly beginning on Wednesday, supposedly a mixture of live and online, although likely to go totally online any minute as Eastern Mennonite University also in Harrisonburg just went totally online and delayed student move-in due to an outbreak of the virus, and Facebook is full of photos of our students partying without masks and packed together on balconies. We will not be far behind on that one.

So many of my colleagues never attend these meetings, but when I have been in town, I have since I first started here in 1977, the year the name was changed from Madison College and there were only a third as many students as there are now.  The speeches are mostly full of party line rah rah baloney I have always had fun making snide remarks about to pals. But in fact I have long enjoyed seeing faculty from across campus, with this meeting increasingly the only time in the year one sees any of them.  I knew that was not to be this year with the meeting virtual, but another regular feature has been a speech by our president, with the current one starting his 8th year here, Jonathan R. Alger.  These speeches, despite usual propaganda, also usually do provide some information about new developments on campus, and there have been some not related to racism or coronavirus, not to mention relations with Richmond, important as this being a state school.

But, no, Alger did not speak except for a minute at the beginning to introduce the Provost. OK, I get that he does not want to say anything inaccurate, but there is much he could say that is not inaccurate, including being honest about just what all we do not know and is up in the air. But he chiekened out, a complete failure of academic leadership.  I am already down enough as it is with everything, but I admit that irrational as it might be, this failure of him to speak at all left me completely demoralized at the end of the meeting, which they did not even clearly announce.  The Provost stopped speaking and sort of said "have a good semester," with many of us watching still pictures for quite some time obviously expecting Alger to appear and speak, gradually dropping off. I hung on until the number dropped below 30, the old number of statistical significance, before I left demoralized and depressed.  I have gotten over that and am now just disgusted and ticked off at this complete cowardice and lack of academic leadership.

Barkley Rosser

Kamala Harris Also Has An Economist Uncle

 Who I happen to know and who got his PhD in economics and computer science from the University of Wisconsin-Madison.  He is now being identified in the media as Gopalan Balachandron, which puts his last name first.  I knew him as a grad student when Kamala's dad, Don Harris, was on the UW faculty, and he was "Bala Gopalan" to all of us, a very witty and cosmopolitan guy.  When I saw him on the news, now 80 years old and living in Delhi and praising the selection of Kamala as Dem VP candidate, I was not sure it was him, but quick checking established it is.  I finally also remembered somebody bringing it up that he was Don's brother-in-law, only two years older than him, but he did not want to talk about it, this being when the marriage of Don and Bala's sister was going down the tubes.  

The news reports have it that when he was working most recently he was working for an Indian government-related think tank called the Institute for Defence Studies and Analysis in its American Affairs section.  I also saw one report referring to him as "Prof." which makes me think he was an academic for awhile, but I lost track of him after he left Madison, except for hearing from a common old friend of ours in Chennai that Bala "works for the government in Delhi."  But I guess not anymore.  It strikes me that if Biden-Harris win, Bala might become an important diplomatic player.

It also strikes me that if Kamals's dad, Don Harris, continues to lay low and essentially not support her, I could imagine Uncle Bala getting brought in to provide some male family support.  I bet he could handle the media well. He is quite a character and very sharp as well as articulate.

Barkley Rosser

The UAE-Israel Deal

 Several days ago the United Arab Emirates (UAE) and Israel have agreed to have diplomatic relations, with this being the third Arab nation to officially recognize Israel, following Egypt in 1979 and Jordan in 1994. President Trump and his supporters are claiming that this is a great breakthrough to world peace, with Jared Kushner supposedly the key player on the American side.  But most observers think that this is an exaggeration, to put it mildly.  The standard summary is that this deal is a win-win-win-lose: a win for the US, UAE, and Israel, but a lose for the Palestinians.

Let me give the Trump people, including even the usually incompetent Jared Kushner, some credit.  They have managed to achieve only a handful of international agreements.  And given the long and difficult relationship between Israel and the Arab nations, it must be recognized that making such an agreement is difficult, so they deserve some congratulations, even if this is far less than what they claimed they were going to achieve, which was supposed to be a much broader agreement. But given the administration's strong tilt to Israel from the beginning, supporting moving the US embassy to Jerusalem, recognizing the annexation of the Golan Heights, and supporting a plan that would countenance annexation of territories in the West Bank, it is unsurprising that the Palestinians simply withdrew from any negotiations being pushed by the Trump administration. There simply was not going to be that more general agreement.

Of course we must admit that there is a sort of gain for the Palestinians: the UAE leadership demanded a cessation of the Israeli plans to annex West Bank territories, thus retaining a smidgeon of a chance for the nearly dead two state solution that supposedly came out of the Oslo Accord. Of course, Netanyahu says this is only temporary, and he retains the plan to do annexation. But that plan is now on hold. But this is a matter of the good thing being a matter of Israel not doing a bad thing that Trump and Kushner were supporting them in doing. This is not something to get too into praising about.

There is also the matter that there was a lot less input from Trump and Kushner to this outcome than they would have us believe. This deal has been in the works for a long time. Indeed, while he did not make a big deal about it and was ridiculed by the Trumpisti when he mentioned it, Biden and Obama did play a role in the early stages of this. The initial openings between the UAE and Israel date as far back as 2013 with more definite moves happening in 2015, with the top people in the Obama admin aware of this and encouraging it.  From 2015 on there were Israeli businesses operating in the UAE, and the two have shared intel since from around then, if not earlier, mostly about Iran, whom they share an enmity towards.  The key player on the UAE side has been its top leader, Prince Mohammed bin Zayed (MbZ) of Abu Dhabi. He is viewed by many as more important in Middle East matters than his junior sometime ally, MbS in Saudi Arabia.  While these two generally work together mostly, they have backed different groups in Yemen, and Saudi Arabia is apparently not likely to follow UAE on making an open deal with Israel, although rumors have Bahrain and Oman possibly doing so.

Will this deal lead to peace between Israel and the Palestinians or peace between Iran and its regional enemies or even a major relaxation between Israel and the broader Arab world?  Probably not, possibly even aggravating some of these.  But it may reflect public acknowledgement of the reality on the ground.

Barkley Rosser

"UTTERLY DESTITUTE OF ARRANGEMENT"

 

MARX’S PAMPHLETIST: CHARLES WENTWORTH DILKE AND HIS TRACT ON THE SOURCE AND REMEDY OF THE NATIONAL DIFFICULTIES (1821)

Giancarlo de Vivo, Contributions to Political Economy, Volume 38, Issue 1, 2019, Pages 59–73,  LINK

Abstract

This paper considers a largely unknown pamphlet, originally published anonymously in 1821, and assesses its place in the history of classical and Marxian thinking about value, surplus value and profits. It identifies its author and outlines his career and background in the context of nineteenth-century British politics.

"The pamphletist is a neglected economist—he is even absent from Seligman’s famous 1903 article "On some neglected British economists," which deals with many of his contemporaries, with the intention of rescuing them from undeserved oblivion. All in all, we can say that the pamphletist, even though not completely forgotten, has not received the attention it [sic] deserves if one accepts Marx’s claims on his behalf."

...

"We may last briefly comment on the fact that, apart from his grandson’s statement, no other grounds have been provided for assuming that Dilke was the pamphletist, and indeed this seems to be often taken with a dubitative formula when the attribution is noticed." 56

The End Of Special Fiscal Stimulus

 A week ago a two week long negotiation between Dem Congresspeople, Nancy Pelosi from the House and Chuck Schumer from the Senate and Treasury Secretary Steve Mnuchin, who cut deals with Pelosi and Schumer three times earlier this year, but now Trump's Chief of Staff, former Freedom Caucus leader in the House, Mark Meadows, notorious for only destroying deals and never making any. And in this case all the reporting is that a week ago he "blew up" the negotiations, taking a hard line on orders from Trump. So, where are we at now?

For starters yesterday the Senate adjourned until after Labor Day. So, the market expectations that a deal will be cut soon are a joke. There will be no deal anytime soon, and maybe never. Many things have run out, whose impact has not fully arrived: end of extra unemployment, end of PPP assistance for small businesses, end of no evictions, and several other things.

Yes, there have been vague noises in the past week about restarting the negotiations, but they went nowhere.  Dems indicated that they were willing to compromise on many issues.  To pick a big symbolic one has to do with the total spending level.  Going into this the Dems were pushing $3+ trillion and the GOP was pushing $1 trillion. Gosh, looks like $ 2 trillion would be an obvious compromise, and the Dems have publicly indicated they would be willing to go to that, but, no, Meadows held the hard line, and, along with some other issues, such as a roughly $800 billion difference over state and local aid, which is clearly the largest chunk of this stalemate. As it is, Meadows left town and the Senate has gone on leave until after Labor Day.  No deal.

What is unclear if Trump and his incompetent advisers actually think that his "executive actions" put out 6 days ago will save the US economy or not.  I recently posted on that, but it needs some updating, but the bottom line is that, no, what he did last weekend will not stimulate the economy and even overcome all the disappearing fiscal stimulus from the deals earlier in the year, especially the increased unemployment benefits and the PPP aid for small businesses, not to mention evictions, the only matter out of 4 actions last weekend was an actual Executive Order, but it was an order that HUD "consider" changing rules so people will not be evicted, and, big surprise, HUD has done nothing.  I am not going to waste time by going through the details of his UI and Social Security proposals because they seem to have fallen into a hole and are going nowhere. The only item actually happening is that in contrast to my last post on that is that indeed interest payments on student debts will be put off until the end of the year, which is fine, but a very small matter.

So, the latest evidence is that indeed the former V recovery is indeed slowing down, with retail sales up only by 1.2% in July.  Many are now suggesting we may see an actual GDP decline into a "wiggly W" pattern, although  I am not going to pass on that, but that V is definitely flattening. 

But it seems that maybe Trump and Meadows foresaw that maybe their actions would not improve the economy. So their plan in that case is to blame the Dems for the bad economy outcome: hey! they did not accept our offer!  They seem to have forgotten, if they ever knew it, that the president is held responsible when elections arrive for the state of the economy, and certainly for other big events such as the pandemic.  Trying to blame Dems in Congress for the economy or governors, the media, the Chinese, the WHO, the scientists, or anybody else other than the administration for what is going on with the pandemic, especially given that all other high income nations have done better than the US, suggests that Trump and Meadows are completely delusional.  Hopefully the US electorate will not be so deluded.

Barkley Rosser

Donald J. Harris And His Daughter Kamala Harris

 Now the Democratic candidate for Vice President of the United States, a historic pick, no matter what one thinks of her, and I know quite a few people on the left and Dems more generally who are not fans of hers, although many observers think she may be the strongest VP candidate for Biden to beat Trump and Pence, and I am looking forward to her tearing current VP Pence to shreds in their debate.

Anyway, as I have noted a few times before here, I have come to realize how old I am because I know parents of people running for president, and one of those happens to be the father of the now-selected Dem VP nominee, Kamala Harris, who was running for prez before she strategically pulled out early back in January, now an obviously smart move (and I do think she is plenty smart, whatever else one thinks of her).  I have never met her, but I know her dad, Don Harris quite well, although I have not seen him for some time now.

I first met Don in 1968 when he arrived at the University of Wisconsin-Madison where I was in my senior year as an undergrad. I took Development Economics from him, and he had a serious influence on my thinking.  He was the first faculty member I had encountered who took Marx seriously.  Like his friend Joan Robinson, he is not a Marxist, seeing too many problems with Marxian theory. But he took Marx seriously and had us read people who had Marxist perspectives on colonialism and imperialism and how these issues affected poorer less developed nations.

Later as a grad student there I would take Advanced Macroeconomic Theory from him, and he was even on my committee briefly before he left for Stanford in 1972, where he was on the faculty until retiring in 1998.  He is still alive, and I think 82 years old, or so.  He did a lot of advising the UN as well as the government of his home nation, Jamaica.

Two papers by him that I think are important are his 1973 "Capital, Distribution, and the Aggregate Production Function," in the American Economic Review. In this he provided an excellent perspective on the Cambridge controversies in the theory of capital, and with Amit Bhaduri, "The Complex Dynamics of the Simple Ricardian System," 1987, Quarterly Journal of Economics. Besides showing his links with the neo-Ricardian school of Sraffians, it showed how chaotic dynamics can arise from that model, something of considerable interest to me.

An unfortunate matter is that apparent the father and daughter are not on particularly good terms right now.  Some of this may reflect actual political differences, with him probably to the left of her.  But most seem to think that it mostly has to do with the apparently bad divorce between Kamala's parents, with her and her sister going with their mother, who was from Tamil Nadu in India.  BTW, Kamala's sister resembles their late mother, while in fact Kamala looks like Don.

More recently there was a contretemps over marijuana, which Kamala supports legalizing, even though she put pot smokers in jail back when she was DA in San Francisco, even though she has admitted having smoked pot herself.  In an event in New York she was asked about this and said "Of course I am for legalization, I am from Jamaica" or something like that.  This upset Don, who is proud of his family background in Jamaica, which is quite elite actually, with him a very proper person personally, despite his leftist politics.  I do hope they overcome their differences so he can stand up for her, especially given that her mother is no longer around to do so.

Barkley Rosser

"Executive Oder" Versus "Executive Action" Such As A Memorandum

 Most o the  news media has reported that President Donald J. Trump has signed four "executive orders" involving extending unemployment benefits at a $400 rate, deferring (or ending?) payroll taxes for Social Security (opposed by both parties in Congress), extending a ban on evicting renters, and extending student loan deferments.  An important detail not mentioned in most reports that of these three of them are not actual orders but rather memoranda, which can count as "acrtions," that essentially implore others to do something that requires Congressional action in order to be done, basically the first two of these, or is already happening (deferment of student loans, although this is complicated).  Only one of them is an actual order that must be followed, the one regarding evicting renters, although all this order does is to make HUD "consider" extending the ban on evicting renters.  The order itself does not actually do it.  In short, these orders amount to a campaign list of wannabe actions, no actual real actions.

This is all obviously the brainchild of the incompetent and brainless Chief of Staff, Mark Meadows, who is apparently incapable of making any deals and totally focused on the reelection campaign.  So he "blew up" the two week negotiations with Congressional leaders by most accounts by making rigid demands.  I am not going into details, but there were obvious compromises available, just to pick one on the total size of the relief package.  The Dems were proposing $3 trillion based on what the House passed months ago while the White House and some GOPs held to $1 trillion. Reportedly the Dems offered the obvious compromise of $2 trillion, but that was blocked by Meadows who simply made demands and warned if they were not accepted, Trump would issue "executive orders" to do what he wants.  But, as careful analysis shows, only one of these is ab actual order, and even the one that is an order that only orders a department to consider doing something.

Reportedly the final sticking point in the negotiations on Friday involved aid to state and local governments, which was a third of the Obama fiscal stimulus in 2009. I have signed a petition by economists going around calling for more such aid.  There was some in the first aid package, but it is pretty much gone.  Apparently the GOP offered $150 billion while the Dems asked for $915 billion.  There were other issues on which they were divided, but reportedly that was one there was no budging on.  Apparently the Trumpists still think that only Blue states are being damaged by the coronavirus and the bad economy. There are also reports that a major reason Trump has done so little to combat the virus has been that he wants to blame all the problems on the governors, somehow thinking it will only be the Dem governors (and mayors).  Little does he seem to realize that for better or worse people will be holding him responsible for how this all turns out.

Barkley Rosser

Interpol Supports Murder Charge Against MbS

 In today's Washington Post David Ignatius reports that Interpol refused a request from Saudi Crown Prince Mohammed bin Salman (MbS) to extradite Saad Aljabri to Saudi Arabia from Canada in 2017. MbS had been trying to entice Aljabri to return and had arrested his children, who remain arrested despite complaints from the US government and basically the entire rest of the world. Aljabri was the top aide of MbS's rival, the former Crown Prince, Mohammed bin Nayef (MbN), who was overthrown by MbS in a coup. Aljabri and MbN were highly regarded by officials in the US of several administrations, as well as orther governments, and apparently was personally responsible for blocking a serious possible terrorist attack in the US.  

After Interpol refused to extradite Aljabri from Toronto, MbS sent a crew to kill him. This was two months after MbS sent such a crew to Istanbul to kill and dismember Kamal Khashoggi, a columnist for the Washington Post.  Aljabri warned the Canadian government they were coming and the team was detained at the Toronto airport, where they were found to have exactly the same implements that were used to dismember Khashoggi.  

Aljabri is now suing MbS in US courts for trying to kill him.  MbS has claimed that Aljabri stole funds, but Aljabri says this is a false claim.  Ignatius notes that MbS will have to produce his claims, and the big deal here is that up until now the Interpol report was not public.  They refused MbS's extradition request on this claim, and their report makes it clear that much lies behind their decision, including massive violations of human rights in Saudi Arabia by the murderer, MbS.

Barkley Rosser

The Disaster That Lebanon Has Become

It is now on the front pages with a massive explosion of over 2000 tons of ammonium nitrate in a warehouse near Beirut's port, with over 100 dead and thousands injured and possibly more than 300,000 displaced from their homes.  Juan Cole reports that this had been dangerously sitting there since 2013, when it was moved off the Moldavan Rhosus, where it was apparently unsafely loaded after having been on its way to make fertilizer in Mozambique. But thanks to entrenched corruption and dysfunction in the Lebanese government nothing was done with it while the freighter has sat in the harbor.   Now it has exploded.

Just to add to the trouble, President Trump claimed that some people at the Pentagon had told him that this was a bomb, and that Lebanon was under attack by somebody.  Juan Cole reports that many in Beirut took this seriously and think that attacker is Israel, where PM Netanyahu is facing a corruption trial and would love a foreign policy distraction to boost his popularity.  The Saudis have encouraged some reporters in Riyadh and Dubai to claim that it was Hezbollah that did it, the Iranian-backed group that is powerful in what is left of the Lebanese government and that was charged by Netanyahu recently of engaging in a border incident, although Hezbollah has denied this latter charge.

However, Beirut-based CNN reporters communicated with people at the Pentagon who apparently all deny that anybody at the Pentagon told Trump that it might have been a bomb or attack. Now SecDef Epper has apparently publicly piled on with this, denying that it was an attack or a bomb, although ammonium nitrate certainly has been used as a bomb, from Sterling Hall in Madison, Wisconsin a half century ago to the Murrah building in Oklahoma City about half as much time as that ago.  It is pretty clear now that Trump has baselessly hyped an unfortunate accident into a possible causus belli.

As it is, this highly destructive explosion culminates what has been an accelerating economic collapse triggered by a long-running political gridlock between the many factions involved in Lebanese politics, with these largely defined by their religious affliiations. This collapse has become life threatening, with Juan Cole reporting that as many as half of the children in the nation are facing hunger, with Lebanon not having had a famine since WW I when it was under siege as part of the Ottoman Empire.  Massive inflation has reduced purchasing power by a massive 85%.  Lebanon is defaulting on its huge foreign debt, with the IMF and France refusing to lend it any money.

The economic pain is especially focused on the large refugee groups in the nation. Lebanon's over 16 different identifiable ethno-religious groups of citizens number 4.7 million.  But there are now 1.5 million refugees on top of that from the Syrian war, and over 400,000 Palestinian refugees that have been there for over 70 years.  Given all this it is amazing that this collapse has not hit Lebanon sooner.

Given its long civil war several decades ago, it is easy to forget that once upon a time Beirut was known as "the Paris of the Middle East." Those days are long gone, and just to add insult to injury, the tourism industry has also now collapsed, with a bad coronavirus situation simply putting the nail in the coffin on that. Maybe this awful explosion will bring about responsible conduct by the entrenched and corrupt leaders (who have also faced long-running street protests), but the recent past does not provide much hope.

Barkley Rosser

Team Trump on Susan Rice as Biden’s Running Mate

Next to Joe Biden, Susan Rice may be the most qualified person to lead our nation back from the utter disaster created by our allowing Donald Trump to pretend to be our President. So what is this from the camp of the Liar-in-Chief? Trump’s aides and allies accuse Rice — without delving too deeply into the evidence — of helping cover up crimes for two of the president’s favorite foils, Barack Obama and Hillary Clinton, making her just the kind of "deep state" villain who could fire up his MAGA base. “She is absolutely our No. 1 draft pick,” a Trump campaign official said. I suspect Team Trump fears who Rice would be in a national campaign so they doing a classic head fake. Don’t fall for it. Dr. Rice has committed no crimes and everyone (except for those MAGA hat wearers whose brains have rotted by now) knows it. What’s this? Four years earlier, she faced allegations that she misled Americans when she announced on national TV that the fatal attacks in Benghazi, Libya, occurred after spontaneous protests in response to an anti-Muslim video. That was determined to be inaccurate. On Monday night, Tucker Carlson, the Fox News host influential in Trump’s orbit, opened his show with a lengthy diatribe about Rice and her role in the 2012 Benghazi raid — strikingly similar to the attack Republicans lodged against Clinton in the 2016 race against Trump. This Benghazi BS is false so why highlight the rant from the racist liar Tucker Carlson? And unfortunately this Politico story continues with one false allegation after another. The real beef seems to be that Dr. Rice ably points out the many failures of the Trump Administration, which gets Team Trump all “energized”. So what? Democrats are supposed to cut and run when Team Trump goes off on one of their patented attack campaigns? Give me a break. The Republican rants about the lack of resources for our ambassadors in Benghazi were always pure hypocrisy Leahy said: “House Republicans have wasted millions of taxpayer dollars on a partisan exercise. For that, and for blaming the Administration for failing to protect our diplomats, without acknowledging their own efforts to slash resources for embassy security, is pure, distilled hypocrisy.” BEFORE BENGHAZI: After Republicans took over the House in January 2011 -- before the Benghazi attack -- they proposed deep cuts for U.S. embassy operations and State Department programs across the board, including for diplomatic and embassy facility security. The House Republican Appropriations Committee cut $1 billion from the embassy security budget proposed by the Obama Administration in the two years prior to the Benghazi attack The Republican attacks back then were based on lies to shift responsibility from their own failures. Let the Republicans try this again and just keep reminding people about the true reasons for our current failures – the dishonesty and incompetence of Team Trump.

From the archives: "The Source and Remedy of the National Difficulties"

 With a minimum of editing or preface, I am reposting this one from February 2009. Next year will be the bicentennial of the publication this astonishing but undeservedly obscure pamphlet. One "event" that I am conducting to celebrate the anniversary is posting of around 65 questions that I have mined from the text. I hope that there will be others but that sort of depends on gathering a critical mass of audience.  

How is it that notwithstanding the unbounded extent of our capital, the progressive improvement and wonderful perfection of our machinery, our canals, roads, and of all other things that can, either facilitate labour, or increase its produce; our labourer, instead of having his labours abridged, toils infinitely more, more hours, more laboriously...?

Published anonymously in 1821, The Source and Remedy of the National Difficulties, Deduced from Principles of Political Economy in a Letter to Lord John Russell was, according to Frederick Engels, "saved from falling into oblivion," by Karl Marx, who, in published writings up to the time of Engel’s remark, had scarcely mentioned the pamphlet in a cryptic footnote in Volume I of Capital. Engels acclaimed the pamphlet as “but the farthest outpost of an entire literature which in the twenties turned the Ricardian theory of value and surplus value against capitalist production in the interest of the proletariat.”

For his part, Marx declared in his unpublished notebooks that the pamphlet was an advance beyond Adam Smith and David Ricardo in its conscious and consistent distinction between the general form of surplus value or surplus labour and its particular manifestations in the form of land rent, interest of money or profit of enterprise. In commenting on the pamphlet, Marx returned several times to what he upheld as the "fine statement": "a nation is really rich if no interest is paid for the use of capital, if the working day is only 6 hours rather than 12. WEALTH IS DISPOSABLE TIME, AND NOTHING MORE." Marx noted that Ricardo had also identified disposable time as the true wealth with the difference for Ricardo, however, that it was disposable time for the capitalist that constituted such wealth, thus the ideal should be to maximize surplus value relative to total output.

One of those citations occurs in Marx's Grundrisse, immediately after the following characteristically revolutionary proposition: "Forces of production and social relations -- two different sides of the development of the social individual -- appear to capital as mere means for it to produce on its limited foundation. In fact, however, they are the material condition to blow this foundation sky-high." Indeed, in his reinterpretation of Marx's critical theory, Time, Labor and Social Domination, Moishe Postone placed the issue of disposable time at the "essential core" of Marx's analysis in Capital. Although Postone didn't emphasize the pamphlet itself, he highlighted a passage from the same paragraph in the Grundrisse that concludes with the pamphlet's "fine statement."
Just how successful Marx was in saving the 1821 pamphlet from oblivion remains to be seen. Obviously, the pamphlet was spared from total oblivion or I wouldn't be writing this. A copy of it was included in the microfilm Goldsmiths-Kress Library of Economic Literature. Routledge republished it in 2005 as part of a ten-volume collection of Owenite Socialism : Pamphlets and Correspondence edited by Gregory Claeys. Aside from the few references by Marx and Engels, there have been scattered mentions of the pamphlet but, to my knowledge, no sustained consideration, which seems odd considering the importance that Engels -- and in his manuscripts, Marx -- assigned to it.

Perhaps one of the difficulties has been the anonymity of its authorship. That problem would appear to have been resolved by a disclosure in the biography of the 19th century editor and literary critic, Charles Wentworth Dilke, Papers of a Critic, written by his grandson, Sir Charles Wentworth Dilke. The younger Dilke reported having found an annotated copy of the pamphlet, acknowledging authorship, among his grandfather's papers. Subsequent authorities on Dilke and on the literary journal he edited for [30?] years, The Athaeneum, appear satisfied with the plausibility of this attribution, given Dilke's writing style, his proclivity for anonymous and pseudonymous publication, his political inclinations and his subsequent career. There doesn't appear to have been any concerted effort to either definitively establish or to refute Dilke's authorship. So Dilke qualifies as the leading and, so far, only candidate for authorship.

If Dilke was indeed the author, this presents at least two rather significant bits of context to the pamphlet as well as several minor but intriguing ones. First, Dilke was an ardent disciple of William Godwin. The poet, John Keats, who was a close friend and next-door neighbor referred to him as a "Godwin perfectability man". He was said to have retained this political inclination throughout his life. Second, in his career as editor of the Athaeneum, Dilke campaigned famously against journalistic "puffery" -- the practice of publishers placing in literary journals, for a fee, promotional material for their books under the guise of independent reviews.

Both of these contextual items could be significant for an interpretation of The Source and Remedy precisely because the pamphlet lends itself comfortably to a reading as a Godwinist tract (rather than a pre-Marxist one) but also to a reading as a polemic against yet another brand of puffery -- political economic puffery. As for "turning the Ricardian theory of value against capitalist production," such an intention would hardly seem to fit an essay that on its closing page counts among the great advantages of the measures proposed therein that "their adoption would leave the country at liberty to pursue such a wise and politic system of financial legislation as would leave trade and commerce unrestricted [emphasis in original]."

The Source and Remedy of the National Difficulties appears to have had something to say somewhat distinct from the message Marx took away from it. In his various notes on the pamphlet, Marx seems to have paid closest attention to the first six pages of the 40-page pamphlet and to have glossed over the rest somewhat disparagingly or with an eye to the arresting quote. In his discussion of the pamphlet in Theories of Surplus Value, for example, the reader may wonder if Marx is actually still talking about the pamphlet after a few pages or has gone off on a tangent inspired by the pamphleteer having overlooked the impact of unemployment on wages. It has to be cautioned, though, that Marx's extended comments on the pamphlet appeared in manuscript notes that were published posthumously. They are not polished, fully thought out positions directly intended for publication.

Although the first six pages are indeed interesting, in the context of the pamphlet as a whole their function is to set the stage for the crucial pair of questions that appear on page seven. That is, after deducing from principles of political economy that capital, left to its natural course, would soon do away with further accumulation, the author asks why that seemingly inevitable result has never happened and how it is that with all the presumably labor-saving wonders of modern industry, workers work longer hours and more laboriously than ever before.

Dilke's answer was that government and legislation act ceaselessly to destroy the produce of labor and interfere with the natural development of capital. They do this indirectly by, on the one hand, maintaining "unproductive classes" at a constant proportion to productive laborers and on the other by enabling the immense expansion of "fictitious capital," based ultimately on protectionism and government finance. Government does these things so that it may raise an enormous level of revenues that it couldn't through direct taxation of the laboring population, because "it would have been gross, open, shameless, and consequently impossible." Instead, it makes the holders of this fictitious capital "particeps criminis" in a stratagem to exact a much-enlarged revenue. As partner in crime, the capitalist lays claim to a generous portion of the booty. Not surprisingly, war is a "powerful cooperator" in this relentless process of destroying the produce of labor and expanding the claims of fictitious capital.

As for the "natural" claims of surplus value exacted by the capitalist, Dilke viewed it as causing the laborer "no real grievance to complain of," a position at least apparently at odds with Marx's views of exploitation and almost certainly incompatible with Engels' assertion that the pamphlet turned Ricardian theory "against capitalist production." Not only was Dilke not opposed to capitalist production, he described it as leading to a Utopian condition of freedom if only it was left to unfold according to its nature. In his note, Marx objected that the pamphleteer had overlooked two things in coming to such a sanguine conclusion about the trajectory of capitalist accumulation. One was unemployment; the other Marx never got around to specifying.

Dilke's reasoning, although thought provoking, is far from airtight. He confesses in his closing pages that his argument "is not so consecutive, that the proofs do not follow the principles laid down so immediately as I could have wished. The reasoning is too desultory, too loose in its texture." Whether such regrets are heartfelt or simply an obligatory rhetorical gesture of modesty is hard to say. The subject matter itself is elusive and no treatment of it could be exempt some flaws. But, nevertheless, the case he presents is an original and important one that has as far as I know been overlooked by Marx and his intellectual heirs.

The part of the argument that Marx appropriated to his own analysis -- the author's consistent reference to surplus value as the general form underlying profit, rent and interest was ultimately incidental to Dilke's main points that nature places a limit on accumulation and that the surpassing of those natural limits occurs only as a result of government intervention, which, in effect mandates excess exploitation of labor.

There is a problem that arises from Marx appropriating the (for Marx) correct premise of the pamphlet without first having systematically refuted the author's own deductions from it. What if Dilke's deductions were either equally or more plausible than Marx's? Rather than being a focal point of class struggle, might not surplus value then be "no real grievance to complain of?" Rather than underpinning a contradiction fated to blow the foundation of capital sky-high, might not the tension between "things superfluous" and disposable time have the potential to be adjusted like wing flaps to help bring capital in for a soft landing?

By things superfluous, I refer, first, to the unholy trinity of fictitious capital, unproductive labor and inconvertible paper money and second, to their commodified expression as luxury goods. What I am suggesting is that for Dilke it seems that the primary contradictions of capitalism (to use Marx's expression) lay not so much between capital and labor as between real and fictitious capital, productive and unproductive labor, convertible and inconvertible money, necessities and luxury goods. This internalizing of the contradictions recalls Solzhenitsyn's observation in the Gulag Archipelago that, "the line separating good and evil passes not through states, nor between classes, nor between political parties either, but right through every human heart, and through all human hearts." Might we not ask if it's not only the line between good and evil that passes through every human heart but also the line between labor and capital, proletariat and bourgeoisie?

From the standpoint of the arguments presented in The Source and Remedy, a proletarian revolution would be entirely unnecessary. Ironically, the non-necessity of the revolution would arrive precisely at the moment in which such a revolution would have become possible.

How To Measure Quarterly Changes In GDP Can Make A Big Difference

We have had dramatic headlines and commentary in recent days since the BEA issued its initial estimate of quarterly changes in GDP, which they do not officially measure on an shorter time period. This is a measure of the average GDP in one quarter compared to the average GDP in the next quarter.  Looking at Q1 of this year and Q2 of this year, they reported the largest quarterly decline ever recorded, -32.9% on an annualized rate, about -9.5% on a quarterly rate. This is a sharper decline than seen either for any pair of quarters in the Great Depression or the immediate post-WW II demobilization, much less such later events as the Great Recession of 2007-09.  Of course this generated big headlines and much breathless commentary, including quite a few commentators who did not get it that the -32.9% number was the annualized rate rather than the quarterly rate, so we had quite a few of them foolishly talking about how the economy had "fallen by a third."  Yikes.

As I have noted in previous posts here, the economy has been doing a lot better than a lot of reporting and forecasts have let on, even as it is certainly slowing down now.  But if rather than looking at quarterly averages, which are heavily influenced by the fact that the economy did not "fall off a cliff" until mid-March, about 5/6 of the way through Q1 so that most of Q1 was at the high pre-fall level, one looks at where the economy was at the end of Q1 and compare it to where it was at the end of Q2, one gets a dramatically different story.  Over on Econbrowser Menzie Chinn has produced a figure from IHS Markit that estimates these shorter period changes. According to them the US GDP at the end of March (end of Q1) was at about $17.6 trillion annual amount while at the end of June it was at about $18.0 trillion, about 2.2% higher on a quarterly rate, which is about 9% higher on an annualized rate.  Needless to say, there is a dramatic contrast between -32.9% and +9.0%, but I have seen zero media commentary on this.

Indeed, growth has continued through July, although probably at a slower rate than in June, with a slower growth of retail sales of only 3.2% suggesting it has indeed slowed down quite a bit.  But in fact the economy has been growing for probably more than three months, something although "worst ever" stories seem to have ignored, and indeed the figure Menzie showed that went through May and June but not July sure looked a lot like a V, if just a bit flatter going up than down.

For anybody for whom this is just unacceptable to think about and you must think all is bad, well, unemployment remains high and indeed apparently the unemployed numbers have started going up again.  The economy may be ahead of where it was at the end of March, but it is still pretty far from where it was in February, and it is definitely slowing down, with its fate clearly closely tied to what happens with the coronavirus pandemic, which is not easily forecast..

Barkley Rosser

Trump's Churchillian Fight Against COVID-19

The push to open the schools, open up everything, ignore CDC gudelines, etc,etc:

It's Churchill  --- at Gallipoli!

Is The Latest Apparent Economist Suicide A Sign "Economics Is A Disaster"?

On July 23, 41-year-old Emmanuel Farhi, Professor of Economics at Harvard, a native of France with Egyptian Jewish ancestry, "unexpectedly" died a few hours after having a Zoom conference on how economics and economists can help the world (or something like that) with fellow Frenchmen, Nobelist Jean Tirole and former IMF Chief Economist Olivier Blanchard.  No one has officially given a cause of death, but the entire internet has decided that it was a suicide, with a long thread with over 800 comments going on the infamous Economics Job Market Rumors (ejmr) about it with scads of speculation about it. On July 29, Claudia Sahm, formerly a Division Chief at Fed Board of Governors and now at Center for Equitable Growth, published a long post on her EconoMom blog called "Economics is a Disaster," in which she singled out what she called his "suicide" as a leading sign of the general "toxicity" of the economics profession, although most of her piece focuses on issues of sexism and racism in the profession, as well as giving bad advice to the public (more on her post below, although I note Fed Chair Jay Powell responded to a question about her blog post when asked by the media, admitting the Fed has had a problem with discrimination and is trying to deal with it).

Many are now saying there is a suicide epidemic in the economics profession, with Alan Krueger and Marty Weitzman (also of Harvard) doing themselves in last year, and Bill Sandholm of U-Wisconsin doing it quite recently. Farhi was a top math student in high school and later in France and many thought he would go into math or physics (which he won a prize for) with some saying he would be alive today if he had gone into one of those fields. But he got an MIT PhD in 2006 and tenure at Harvard by 2010.  He has been a leading mathematical macroeconomic theorist, following some ideas I am sympathetic with, such as agent-based modeling of macroeconomies and considering seriously heterogeneous capital and reconsidering the old Cambridge controversies in the theory of capital.  He has also been involved in some policy analysis and advising, proposing a "social VAT" for France as well as studying proposals for revising the international monetary system. Some claim that as Weitzman was depressed by not winning the Nobel Prize, Farhi may have been so for not getting the John Bates Clark Award for Best Economist Under 40, although he won many awards and was widely praised and respected.

Regarding Claudia Sahm's post I note I have never met her or directly communicated with her, and I am not going to comment in detail on her long post, most of which I either definitely agree with or think looks reasonable.  She recounts personal experiences at the Fed of being mistreated, accounts of mistreatment of RAs and grad students, especially women and minorities.  She also recounts bad or badly given advice by economists. She also names names of quite a few prominent economists she charges with bad behavior of one sort or another, including among others Dick Thaler, Larry Summers, Olivier Blanchard, James Heckman, Harald Uhlig, Lones Smith, and Bill Dudley, along with some who remain anonymous, including an especially unpleasant sounding "tormenter" at the Fed.  I shall make just a few comments on that.

At least one of those she criticizes has engaged in public behavior that is well known and notorious, namely Larry Summers, who is also notoriously arrogant, and some of these the charge of arrogance is a large part of her argument, indeed mostly towards those beneath them, as well as simply to rivals, with it being especially nasty when directed at women or minorities. The views of Summers on women are well known, and she reinforces what has been known. 

I shall defend one of these people, Lones Smith, who is at Wisconsin and whom I know quite well. She makes a vague accusation, no specifics, and none have since been provided near as I can tell in subsequent debates in various places, about mistreating women grad students when he was at Michigan.  I am pretty sure there has been none of that at Wisconsin, and he is personally a very nice guy, unlike several of those other people on her list.  He posts lots of stuff on various media and is known not to necessarily carefully censor himself, so may well say things that annoy people from time to time.  He also got Sahm angry during debates about Harald Uhlig on Twitter.  My observation on that is that I am not on Twitter and every time I hear about something an economist said there it seems to be embarrassing.

I could say more, actually a lot more, but I think this will do for now.  Anyway, although I did not know him (I did know Krueger, Weitzman, and Sandholm) I am sorry that Farhi has died so young, however it happened. RIP to Emmanuel Farhi, and indeed I agree with Sahm that economics and economists have some very serious problems to deal with.

Barkley Rosser