Monday, October 1, 2007

Shameless Self-Promotion: My New Book

My new book, The Confiscation of American Prosperity, will appear tomorrow.
This book resembles a crime story in four parts. The first part, The Plunder, uses the example of the regressive redistribution of income in the United States since 1970 -- a redistribution that quantitatively dwarfs the Russian or the Chinese Revolutions -- to give a sense of the extent of the right wing revolution, which has remade all branches of government, the legal system, and perhaps most of all, the way people understand their condition in society. In the process, I show how the official statistics fail to capture the scope of this revolution, using examples such as corporate jets for executives and excessive fees and interest rates charged to the poor.
The second part, The Plot, tells the story of the right wing takeover in the United States from the perspective of political economy.
The third and most extensive part, Retribution, explains how this right wing revolution is laying the foundation for the next Great Depression, a cataclysm that will cost everyone dearly, even intended beneficiaries of the revolution.The final part, The Impotence of the Economics Profession, tells the story of the missing cop on the beat the economics profession -- showing how we economists have nurtured a trained incapacity for doing what should be our most important work, warning about dangerous tendencies in the economy and pointing to a better way.

The Confiscation of American Prosperity:
From Right‑Wing Extremism and Economic Ideology to the Next Great Depression
For the last three and a half decades a tiny minority of people has captured the lion's share of the fruits of economic growth in the United States. At the same time, the middle class is disappearing and much of the rest of society is rapidly falling behind, producing a level of inequality that has not been seen since the eve of the Great Depression. Business leaders, along with most politicians and economists, celebrate this new state of affairs, and pretend the benefits are certain to trickle down soon to the rest of society.
This book does not belabor the obvious injustices of inequality; instead, it describes the extent of this confiscation of wealth, how the perpetrators managed to pull it off, and finally how this confiscation is setting the stage for a catastrophic depression. Leaders in the world of business and government, as well as professional economists, seem oblivious to the dangers ahead. The extreme inequities in society breed a hubris that prevents them from even considering the possibility that they are contributing to a catastrophe. All the while, the economics profession seems unable to comprehend the depth of the problem.
Unless strong actions are taken, the calamity that currently afflicts the poor is certain to trickle up, engulfing even the very rich. I do not mean the very rich will become destitute; only that the losses they will eventually experience will far outweigh the vast amount of extra wealth and income that they now claim for themselves.
Despite the dangers ahead, the United States still possesses the most powerful economy the world has ever known. The unique conditions that once made the US economy so effective are already beginning to unravel. People in power commonly realize that the US economy has fallen considerably short of its promise. In terms of traditional measures, such as Gross Domestic Product, the economy has modestly progressed, but the rate of growth is disappointing at best, especially considering the proliferation of new technologies. The quality of life for the majority of society has deteriorated.
In many respects, the gross inequities of United States society are coming to resemble some of the more impoverished countries in the world. Amidst splendid opulence, we find declining industries, unemployment, and even squalor. With so much potential, providing a decent standard of living for everybody should be a simple matter.
Despite these unpleasant symptoms, the deeper problems are not yet obvious. The dangers that I will explore do not appear in the media ‑‑ not even in the business press.
In his justly famous farewell address, President Eisenhower identified the main problem identified in this book as the "disastrous rise of misplaced power." At the time, he was referring to the military‑industrial complex. Today the pathology has advanced much further. The complex now includes a vast network of corporate power, political parties, well‑financed think tanks, and religious movements. This network has also enjoyed the support of much of the media and even a good part of academia. These parties did not have identical goals in mind, but they all shared a distaste for the sociopolitical climate of the late 1960s. The result was a conservative revolution.
The US had already been on a steady path to the right. Indeed, since the election of Franklin Roosevelt in 1932, every Democratic administration with the exception of Lyndon Johnson's has been more conservative ‑‑ often far more conservative ‑‑ than the previous Democratic administration. Similarly, every elected Republican administration, with the single exception of George Herbert Walker Bush's, has been more conservative than the previous Republican administration. Although the national election in 2006 appears to be a repudiation of the right‑wing agenda, the most important factors in the election were the disastrous war in Iraq and a multitude of scandals that damaged the Republicans.
Given this relentless drift to the right, the policies of Richard Nixon now appear to the left of those of Bill Clinton. Yet by the time Nixon took office, business was distraught. Many business leaders at the time were under the impression that socialism would soon triumph in the United States. The first part of the book will explain this paradox.
In the early 1970s, business successfully launched an aggressive campaign to take a firmer hold on the levers of power. Instead of the gradual drift toward more conservative economic policies, revolutionary changes became the order of the day. Within a couple of decades, a right‑wing revolution had swept aside much of the New Deal.
These right‑wing revolutionaries professed conservative ideals, including a more modest role for the state. In practice, their willingness to use state power was hardly modest, except insofar as the state might otherwise inconvenience the interests of the corporations and the super rich. Backed up by the strict dogma of economic theory, conservatives categorically promised markets would cure all social ills. Markets, however, pay attention only to commercial activities, ignoring considerations such as quality of life or environmental degradation. Markets also disempower people from making political choices.
Rules and regulations provide a counterweight to market forces, creating a means to keep the harmful effects of markets in check. By this standard, the United States certainly has the most market‑friendly economy in the world.
Regulations can protect people's health and safety and limit fraud; however, rules and regulations are not necessarily positive. They can also be used to shore up the corporate power to the detriment of society. The right‑wing revolution has gone a long way toward dismantling the protective regulatory layers, while hardening the procorporate parts. This book emphasizes the importance of regulations as a check on some of the destructive speculative forces that can unleash depressions.
This reformulation of the ground rules of the system has given birth to a grotesque form of crony capitalism, which has been metastasizing for many decades. Under this crony capitalism, markets lack the capacity to discipline the most powerful players, which is supposedly one of the greatest benefits of capitalism. A wave of corporate manipulation and government favoritism will eventually wreak havoc on the economy.
This book explains the evolution of this system, while analyzing the deeper but often less obvious consequences of this deformed economy. It also shows the inevitability of a disaster so extreme that it will devastate even the most affluent who are benefiting the most from the current economy. The last part of the book explains why economists are unable to come to grips with this dangerous slide into disaster.
The trajectory of The Confiscation of American Prosperity resembles a crime story. The first part, The Plunder, describes the caper. The second part, The Plot, shows how brilliantly it was organized. The third part, Retribution, explains how it is going to blow up in the faces of the perpetrators, and finally the book turns to the presumptive cops on the beat, the economists, who should have known to have spoken up.
But this is not really a crime story. Although a few of the major players may have violated the law, most of what happened was perfectly legal. People combined raw power with dazzling tactics to engineer a right‑wing takeover. While they mastered the short term tactics necessary to achieve their objectives, their ambition and greed blinded them to the long‑run consequences of their actions.
The first part of this book describes how the conservative revolution permitted a small number of people to plunder the lion's share of three decades of economic growth ‑‑ perhaps the greatest confiscation of wealth and income in the history of the world.
The second part begins with the economic crisis in the late 1960s that pushed business to go on the offensive. Economists refer to the period following World War II as the "Golden Age" because conditions at the time were so exceptional. During that period, both business and the majority of the economics profession had been under the impression that with proper management, including government intervention in the economy, the good times could last forever.
Unfortunately, this faith was groundless. Business, political, and economic leaders were caught unaware of the inevitable unraveling of the Golden Age. No market economy, even with the most intelligent management, has ever achieved the kind of stability people came to expect during the Golden Age. Instability, even if punctuated by periods of calm, is a natural part of capitalism.
As the Golden Age ended, profits shrunk and business first became despondent then launched a furious campaign to reshape the social and economic structure of the United States in an effort to restore corporate power to its pre‑Depression level.
This victory was even more impressive because the right wing managed to induce many people to support an agenda that was sure to undermine their own economic welfare. The right succeeded in this effort in large part because the deteriorating economic conditions left many working‑class people confused and angry. Taking advantage of this mood, the right wing electoral machine caused many people to lose sight of their own economic interests by effectively railing about the contentious social conditions of the 1960s.
By the time Richard Nixon came to office in 1968, everything seemed aligned to allow conservatives to take political power. The Democrats had discredited themselves with an unpopular war and had done little to address the real needs of their political base.
Building upon the grass roots movement begun in the wake of Barry Goldwater's defeat in 1964, the Nixon administration launched a frontal attack on the New Deal coalition by appealing to the culture war of the day. Now the rich and powerful appeared poised to win support for their agenda.
These divisive machinations seemed to have cleared the way for an economic revolution, except a problem remained. Although part of the working class was antagonized by the upheavals of the 1960s, a growing antiwar movement and an energized civil rights movement presented serious challenges. The emergence of the environmental movement with the broad sympathy of much of the middle class complicated matters even more. Nixon moved to placate the environmental movement to appear to be more inclusive. Within this contentious political climate, he did not dare to carry out a broad offensive against labor.
Suddenly, the conflict took a decisive turn. A small group of business interests carefully engineered a conservative takeover of the main organs of power in the United States beginning in the 1970s. Using a combination of well‑financed think tanks, racist demagoguery, and sophisticated political maneuvering, business countered the modest progressive successes of the 1960s. These institutions worked to change the political climate of the country by influencing the media. Even more importantly, business used its newfound powers to counter a falling rate of profit by turning back many of the reforms dating back to the New Deal.
The third part concentrates on how the right‑wing revolution set in motion the destructive forces that are responsible for many of the difficulties that the US economy already faces and why the future damage will be far more extreme. I will also explain why not just ordinary working‑class people will suffer from its harmful consequences, but even the intended beneficiaries of the right‑wing revolution ‑‑ business and the very wealthy ‑‑ will pay a price.
In some cases, the costs of the right‑wing revolution are already relatively obvious. For example, the obscene military budget crowds out important social and economic programs while military adventurism promises to make even greater demands on the economy in the future. In other cases, such as the undermining of the educational
system, the effect is less immediate, but just as devastating.
The right‑wing revolutionaries express vehement hostility toward the government. Indeed, the ability of t
he government to regulate some of the worst business abuses is now practically non‑existent. Today, public agencies are less capable of protecting the environment, providing education, and promoting science and technology ‑‑ all of which are essential ingredients of a vibrant economy. All the while, bu
siness shameless
ly wallows in generous government subsidies and other forms of favoritism.
In the fourth and final part, I discuss the impotence of the economics profession. This part recounts the evolution of the economics profession in the United States, including the long‑standing suppression of critical voices. Despite intense and even acrimonious debate about minor issues, economics evolved into a narrow orthodoxy. I also discuss how the largely ideological nature of modern economics has more or less led the discipline into a dead end, leaving it incapable of dealing with the emerging economic catastrophe.


Robert D Feinman said...

Good luck on your book!

I have a quibble (at least with your summary). I think you are making an assumption that better equity in the US economy will lead to better growth and help restore the US's place as the dominant economic and innovative engine.

I think this is wrong. The world has changed in a fundamental way and the US is never going to be able to regain its former dominance. The two factors are the rise of rival economies and the inability of the military to enforce economic policies on states that we approach militarily.

The EU is already a larger economy than that of the US. We can expect that China and India will become important economic powers in the coming decades as will Russia.

Our model of capitalism is based upon access to cheap raw materials and finished goods. This has been enforced by soft and hard power in the past. As the cases in South America show this no longer works. The era of gunboat diplomacy is over. We are about 4% of the world's population and consume 40% of the resources. There aren't enough resources for everyone to rise to our level, so we will have to do with less.

This means an absolute drop in the standard of living. This has already occurred for the bottom half of the society, but the effect has been masked by the increasing wealth of the top 1%. The response to this sort of decline is usually civil unrest. The response to civil unrest is government crackdown. It doesn't take much to cower an entire population, there are plenty of examples at hand even at the moment.

There isn't even a sign of widespread dissatisfaction in this country There is unhappiness over losing the wars and some discontent over health care, but that's about it. Brittney and OJ provide adequate distraction.

Empires end and turn into dictatorships. We already have all the structures in place to facilitate this when the time comes. A few civil libertarians calling attention to warrantless spying and national databases hasn't resonated with the public. I don't see this changing as the Dems are as in favor of militarism as the GOP.

ProGrowthLiberal said...

Maybe I should skip buying Murder at the Margin and just purchase your latest. Thanks!

Anonymous said...

Never apologize for self promotion, shameless or otherwise. If you don't talk it up, who will? Let's hope that your publisher puts its money where it will do some good, and promote the heck out of the book. A picture of Ann Coulter in drag would probably add significantly to the sales figures. Or maybe a picture of Georgie Boy peering out from behind cell bars, would that be Dick Cheney leering laciviously in the background? Marketing. It's all in the marketing.

Michael Perelman said...

I don't disagree with Richard's point about United States. Publishers insist on a dose of happy talk at the end so that people don't get two bummed out.

bobw said...

Feinman makes an almost seamless presentation of the main factors. The key points for consideration are the logic of a capitalist economy, and the dynamics of an apathetic public.

One wants to say, and maybe Michael does say,that somewhere in the mix there could be a moment when the people wake up and exert their power, democratically, and force the state back into the role of regulator and provider of socially necessary services. But this would be the equivalent of a legal expropriation of corporate power, and it's hard to see how that could happen.

The democratic left has been trying to find the lever, or linguistic frame (to echo Lakoff) for convincing the broader population to consider fundamental change. We've had almost no success, especially compared to the right and religious fundamentalists.

I suppose the great Depression Michael mentions will be our proving ground. Can our message prevail?

(Does the Jack who posted above by chance live in Marin County?)

Anonymous said...

No sir, I'm a long term New Yorker. Anything interesting going on in Marin County? Or, is there someone there with a totally cynical perspective on the current body politic that you may have confused me with?
Perelman, Your focus on the failure of economics as a profession is probably too harsh. As the man said, "Money talks, nobody walks." And the world, professionals included, hear the music. Naomi Klein has a brief article about Economist Numero Uno, Alan Greenspan. In it she refers to his inspiration drawn from an early reading of Atlas Shrugged by Ayn Rand. This source of inspiration in the business world has been cited ad nauseum. Then I'm suddenly struck by the thought that the book was a work of fiction. No research. No objective measurements to support her ideas. Just a work of fiction, and it serves as a primary motivator for the nation's chief economic spokesman for nearly two decades. Are we nuts? Is this reality? Perelman, facts apparently don't mean crap to some of the more influential members of the economics profession, but then again nor do they to the entire leadership community of this country. Oh Robespierre you are sorely missed now that your time has come once again.

Michael Perelman said...

Gosh, I wish I had you people at my side when I was working on this. I don't think I was too hard on the economics profession. Dean Baker said I may have been to soft on Martin Feinstein.
I do discuss the potential for change before the Depression, but it will take a great deal of work.

bobw said...

Jack, you sound a lot like a close friend of mine in Northern Marin; in addition to "cynical perspective" he has a street-fighter's heart and a poet's soul. He also confounds me regularly with Zen perspectives.

I heard Noami Klein speak two nights ago. Pretty impressive! Her concept of *Shock Doctrine* deserves a place in the current descriptive literature. She grounds it in Milton Friedman's thought and expands it into a suggestive metaphor for late capitalism.

Anonymous said...

Great. More bogus statistics.

The U.S. consumes about twenty-five percent of the world's resources (not forty percent), BUT it produces THIRTY-ONE percent of the world's economic output. In terms of efficiency in the use of resources, the U.S. ranks above average (and far better than many of the least efficient countries).

Myrtle Blackwood said...

Michael Perelman: " this right wing revolution is laying the foundation for the next Great Depression.."

2004 – US elections rife with fraud. Result disputed. Severe problems with MEDIA coverage. On the 9th November a CBS employee claimed that “lock-down orders had come down [the previous] year after the invasion of Iraq” and that the latest ‘lock-down’ involved (i) the complete banning of TV coverage of the real problems associated with voting in the US Federal elections of 2nd November 2004 and (ii) staff being forbidden to talk about it even on their own time. She said that a friend of hers, a producer at MSNBC said that an anchor by the name of Keith Olbermann had brought the election voting problems up on his show on Friday and the axe came down. He was reported to be fighting back and talking about it on his blog. There are only 8 corporations that own and control most of the media in the US. NewsCorp with Fox News is one of them (Fox is a news network with more viewers than CNN and MSNBC combined. ) During the election Fox News constantly repeated, often verbatim, the messages out of the White House and the Bush campaign. It would be worth hundreds of millions of dollars if you had to pay for it. But Bush and Co. didn't have to pay. It was a gift from Rupert Murdoch, the owner of Fox . In Australia the Murdoch media empire controls virtually all regional and metropolitan newspapers. British Prime Minister, Tony Blair had three conversations with the media magnate Rupert Murdoch in the nine days before the start of the Iraq war. An inside observer called Mr Murdoch "the 24th member of the [Blair] Cabinet". He added: "His presence was always felt. No big decision could ever be made inside No10 without taking account of the likely reaction of three men, Gordon Brown, John Prescott and Rupert Murdoch. On all the really big decisions, anybody else could safely be ignored."

Anonymous said...


Sounds like an excellent book.

Does it consider causes/consequences of what I tend to think of as the shift in capital's mode of organization, from national and international to transnational and global...?

Myrtle Blackwood said...

Michael's books all sound very interesting!

Juan: "...the shift in capital's mode of"

Such a shift! I am tending to suspect that what we have today may no longer be 'capitalism' or even the 'corporatism' version soon. The emergence of sovereign wealth funds vying out with each other. What is this?

Yes, global now. with a handful of firms in league with a handful of national governments controlling whole global industries.

These enormous corporations also having major interests in other global industries.

..and the sovereign wealth funds to buy out what might be left.

"1950s-1983 – The number of major mass media companies declines from several hundred in the 1950s to about.
1984 – 2004 – The fifty major mass media companies drops to twenty six in 1987, twenty three in 1990, less than twenty in 1993 and in 1996 the number was closer to ten. In 2004 it was at most eight. Besides a predictable narrowing of voices, the problem with this system is that many of these huge companies have other interests, such as General Electric and52 Westinghouse (Viacom), both of which have board members that also sit on the boards of other companies, such as defense contractors, energy corporations, pharmaceutical companies and so on. General Electric and Westinghouse themselves are also involved with weapons production and nuclear power. Clearly, they have interests beyond merely serving the public good. Ultimately, private media corporations are answerable to their stockholders, not the public, despite the enormous impact they have on informing the public about the world around them. This system is not only inherently undemocratic, it also approaches Fascism, in the sense that Mussolini used the term when he said “Fascism should more properly be called ‘corporatism,’ since it is the marriage of government and corporate power” (Ivins, 2003)..

Also see:
'Sovereign Wealth Funds - The World's Most Expensive Club'

Michael Perelman said...

Juan, yes, I do address that structural changes you described.

Anonymous said...


See what you think of the articles in this 2005 Special Issue of the Journal of World Systems Research (Vol II, no 2):
Globalizations from ‘Above’ and ‘Below’
The Future of World Society


Thanks, looking forward to reading it.

Myrtle Blackwood said...

Juan, thanks for the link. I'm reading this edition at present.

Anonymous said...

Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for all of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars. Transfered FROM US TO THEM. Over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They will never settle for a reasonable share of ANYTHING. They will do whatever it takes to get even richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductable crumbs and call themselves ‘humanitarians’. IT CAN’T WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. Crime, poverty, and suicide will skyrocket. So don’t fall for all of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductable contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah, Ellen, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. So don’t fall for their ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTABLE PR CRAP. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. EXTREME WEALTH HAS MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.