The Overkill Emergency

Two years after the Cuban Missile Crisis a former Professor of American Civilisation at Brandeis University, Max Lerner, published his book entitled ‘The Age of Overkill’.

Mr Lerner – whose column for the New York Post earned him a place on the master list of Nixon political opponents [1] - noted that the early 1960s represented an historical epoch when, for the first time, at least two great powers have sufficient strength to obliterate each other – to overkill any and all enemy nations.


Lerner went on to describe what was then, and now, “the core of ‘classical politics’” [2]. He wrote that the crucial difference between classical economics and classical politics was that:

“the core of classical economics was wealth, while the core of classical politics was power. In the case of economics, with the acquisition of wealth at its heart, once could cling to a self-regulating system, but only so long as the naïve cult of self-interest could still sustain an economic order. In the case of classical politics, with power at its heart, there could be no question of laissez faire and self-regulation unless the balance-of-power principle is viewed as an automatic self-regulatory mechanism; power was the arbiter as well as the prize, and there was nothing to replace unless it was power itself.”

The animus of classical politics, Lerner explained is prescriptive, competitive and hostile. “The aim of each state is not only to acquire more power for itself, but to prevent enemies and competitors from acquiring more – or any.” [3]

The world, under this system of thought and action, becomes a world of enemies, potential enemies, allies and potential allies. The way to have peace, on the other hand, is to have bigger and better arms than the enemy. “The trouble is that the history to which [the followers of classical politics] point for confirmation is one that confirms the wrong thing. True, the world has always organized for war, but then the world has always got to war it organized for, and has had to pay for it. The payment this time will be intolerably high, which is why overkill has transformed the power problem.” [4]

“The fact is that the nation-state has ceased to be a viable unit of world order exactly because it cannot get along without at some point using its showdown war power, which it dare not do under overkill conditions; yet, when faced with a threat to its identity and survival as a nation, it dare not refrain from invoking its war power, however powerless it be.” [5]

Lerner didn’t suggest that the ‘power principle’, which he also refers to as ‘the principle of evil’ would be discarded in the then, near future. But he does point out that the ruling elites know that the dominance of this principle is a “short range perspective”.

“I suppose that relatively sane men still play with the idea of getting universal peace through universal empire….But, unilateralism aside, the road to world empire is unlikely to be achieved except by a world nuclear war – which might mean that there would not be very much of a world to enjoy the blessings of universal peace.” [6]

Today, forty five years after the publication of Max Lerner’s book, global citizens urgently need to use a much broader definition of ‘overkill’ and to treat the issue as the planetary emergency that it is. "Overkill is the use of excessive force or action that goes further than is necessary to achieve its goal.” [7] A glaring example of this, in the environmental and industrial context, would be the widespread use of residual and very toxic chemicals that are applied in a manner GUARANTEED to drift into drinking water catchments. This abuse is happening even when there are no long term economic justifications for the use these toxic chemicals.

In Siberia “the new rich Russians are hunting Siberian wolves from helicopters.” In Venezuela corporations interested in oil extraction and soya cropping send menacing guards to stop the Indians tribe of Guarani from “trying to protect the remnants of the forest in which they find all their needs for building their huts, natural medicine for health and food.” [8] In Australia – in our time of desperate climate emergency [9], [10], [11] - the world’s most carbon dense native forests are continuing to being intensely logged and converted to woodchip for sale to Japan and China. [12]

It turns out that overkill in classical politics has its equally threatening counterpart in economics. Max Lerner wrote that the historical concern in the classical form of economics was “largely with cyclical and fiscal theory, and with the controls needed to set the malfunctioning right.” In the postclassical stage of economics this disclipline “cuts across capitalist and socialist systems, and focuses on economic growth.” [13] “These growth ideas are being introduced largely into cultural systems where they are not at home” It turns out that economic growth is also “not at home” on a finite planet.

Economics, though, has always served the political agenda.

“The Government is not now and never has been an independent engine operating in a vacuum under its own momentum”; rather, it had ties to the profit economy by the common ideas and connections among people in influential positions. Men in government could not escape a philosophy of private advancement inherent in an economy characterized by intense competition for advantage, for raw materials, and for markets. “In short domestic politics and economics enter into foreign policy and influence its course.” [14]

Today we have, not one, but six global crises as a result of the long term use by Governments of the ‘power principle’ in both economics and politics. They are: the prospect of nuclear overkill; climate change; peak oil; global resource depletion; alarming species extinction rates and global economic collapse. They're all related to each other.

Activist Paul Gilding tries to give a picture of what just one aspect of one of our global crises may look like. Taking the example of sea level rise from climate change:

“We thought maybe 0.3 to 0.5 metres by 2100 was the average sea level rise forecast, a few years ago. It's now gone from 0.3 to 0.5 to 0.8 to 2 or more. Right? So 0.8 to 2 metres by 2100 is a, technically speaking, a shitload of sea level rise. This is a lot of ocean increase, remembering especially that storm surge, in a storm goes in obviously according to geology, around 50 times the level of sea level rise, so a metre of sea level rise takes a storm surge 50 metres more inland, right? So the impacts of this are very, very severe, and very, very significant, and actually not the most important issue in climate change but the one we understand the most because it makes for good graphics.” [15]

We need to find a way to deny every nation its war-making power. We need to also coexist with diverse other life forms on the planet. Quickly. Our form of ‘civilization’ is killing the planet. Our predicament is that we cannot save ourselves with our own will power alone, for to do so “will only make the evil in us stronger than ever.” [16]

"The instinct to command others, in its primitive essence, is a carnivorous, altogether bestial and savage instinct. Under the influence of the mental development of man, it takes on a somewhat more ideal form and becomes somewhat ennobled, presenting itself as the instrument of reason and the devoted servant of that abstraction, or political fiction, which is called the public good. But in its essence it remains just as baneful, and it becomes even more so when, with the application of science, it extends its scope and intensifies the power of its action. If there is a devil in history, it is this power principle. "

Mikhail Aleksandrovich Bakunin


[1] Max Lerner
http://en.wikipedia.org/wiki/Max_Lerner
on 1st July 2009

[2] ‘The Age of Overkill – a Preface to World Politics’ by Max Lerner. 1964. Publisher William Heinemann Ltd, Great Britain. Page 20.

[3] Ibid. Page 21

[4] Ibid. Pages 253 and 254

[5] Lerner qualifies this statement by pointing out that in actual fact the nation-state no longer exists in any sovereign sense “except in diplomatic abracadabra and in its formal voting in the Un and other international bodies. The working power units have become the power systems, which operate from power centers.” They hold “ a moving power equilibrium in the world…” Ibid. Page 254

[6] Ibid. Pages 254 and 255

[7] http://www.absoluteastronomy.com/topics/Overkill

[8] Overkill in Conservation and in the Pristine Forests.
http://www.en.articlesgratuits.com/overkill-in-conservation-and-in-the-pristine-forests-id2597.php

[9] Outside of the Vortex. Brenda Rosser. Wednesday, March 18, 2009
http://econospeak.blogspot.com/2009/03/outside-of-vortex.html

[10] Australia’s catastrophic Summer of 2009. Brenda Rosser. Friday, February 6, 2009
http://econospeak.blogspot.com/2009/02/australias-catastrophic-summer-of-2009.html

[11] Climate Code Red. The case against carbon trading
Brenda Rosser. Tuesday, May 19, 2009
http://econospeak.blogspot.com/.../climate-code-red-case-against-carbon.html

[12] Preserving old-growth forests is vital to saving the planet
GAVAN McFADZEAN. June 2009
http://tasmaniantimes.com/index.php?/weblog/article/preserving-old-growth-forests-is-vital-to-saving-the-planet/

[13] ‘The Age of Overkill – a Preface to World Politics’ by Max Lerner. 1964. Publisher William Heinemann Ltd, Great Britain. Page 153.

[14] American historian Charles Beard from his “Idea of National Interest” pages 89 – 120 as quoted in ‘The American Century – the rise and decline of the United States as a world power’ by Donald W White. Yale University Press. 1996. ISBN: 0-300-05721-0. Page 6.

[15] ‘The great disruption’ 14 June 2009
http://www.abc.net.au/rn/backgroundbriefing/stories/2009/2592909.htm#transcript

[16] Heini Arnold.

Waxman-Markey Passes the House of Representatives, 219-212 (sigh... )

So, here it is, this big disappointment for many, the great global warming bill passes the House by this 7 vote margin (which means it needed the 8 Republicans who voted for it to pass), a bill criticized by many here for many reasons (Peter Dorman especially), and by all reports loaded down with even more giveaways, loopholes, breaks for farmers and corporations, with a tariff trigger mechanism for 2020 that Obama does not like, but given how far out it is may not matter anyway, and the darned thing is so long (1300 pages?) that it will be a long time before we figure out what is in it really, although at least we know that it involves some sort of cap and trade mechanism, maybe, although with something like 85% of the permits given away rather than auctioned off, and emissions limits to go down so slowly that they will be considered a joke by the rest of the world in Copenhagen in December. What is a body to do or think of this?



Well, actually, the more I think about it, the more I think it is a genuine achievement, at least potentially. That the vote was so close is a reminder of how much opposition to doing anything about global warming there is in the Congress, and when it gets down to it, the public at large, despite all the polls showing people for doing something in the abstract. After all, 44 House Democrats voted against this. While there are Republicans who are lunatics and goofballs following wacko theories and listening to Rush Limbaugh, I suspect the solid majority of those 44 Dems believe that global warming is happening. But they do not see it as any near term threat to their districts, while they see serious potential costs to businesses and employment in their districts, something they are not keen on during a recession at all. After all, for much of the country, global warming is actually economically beneficial in the near term (lower winter heating bills). And in 1995, the Senate unanimously passed the Byrd-Hagel amendment, which said the US should sign no agreement that did not have China and India agreeing to emissions controls, which pretty much put the kibbosh on the US ever ratifying the Kyoto Protocol.

So, keep in mind, folks, cap and trade has been working pretty well for SO2. If warming clearly continues, there is now a mechanism in place that can be used to tighten up and enforce CO2 emissions reductions, if there is sufficient political will (if things cool down, as some predict, well, the whole thing will just be off anyway). So, now we have to get it through the Senate, even if most of the rest of the world thinks it is a pathetic joke. It will still be better than doing the big fat nothing that has been done so far.

Bondage in the Bond Age: A California View

In the midst of the Bush-Obama balance sheet bailout, one group stands out in its importance -- bondholders. I know -- a couple of times some bondholders have had to take a haircut to protect other investors.

Here in California, with our $24 billion deficit, it seems like nothing -- absolutely nothing -- and threaten bondholders. Yes, some bondholders are pension funds or charitable organizations. A minority of Republicans along with a movie star governor have adamantly refused to raise taxes, especially those taxes that might affect the class of people who are bondholders.

Education and healthcare are being slashed beyond recognition. My God, even prisons might be cut a bit. The state is also raiding the treasuries of cities and counties for funds. Their response will be the same as the state's: cut back on anything that might help the poor and if necessary extend the cuts to the middle class. All this so that California can payback its bondholders. No haircut here. They must be paid back in full.

And the children, deprived of adequate education and health care, of course, they must make a modest sacrifice to protect the interests of bondholders.

The Public Option Debate – is the Private Health Insurance Sector Competitive?

Greg Mankiw assumes it is:

IN the debate over health care reform, one issue looms large: whether to have a public option. Should all Americans have the opportunity to sign up for government-run health insurance? President Obama has made his own preferences clear. In a letter to Senators Edward M. Kennedy of Massachusetts and Max Baucus of Montana, the chairmen of two key Senate committees, he wrote: “I strongly believe that Americans should have the choice of a public health insurance option operating alongside private plans. This will give them a better range of choices, make the health care market more competitive, and keep insurance companies honest.” Even if one accepts the president’s broader goals of wider access to health care and cost containment, his economic logic regarding the public option is hard to follow. Consumer choice and honest competition are indeed the foundation of a successful market system, but they are usually achieved without a public provider. We don’t need government-run grocery stores or government-run gas stations to ensure that Americans can buy food and fuel at reasonable prices.

But what if you lived in an area where there was only one grocery store? Zachary Roth explains my query:

But the notion that most American consumers enjoy anything like a competitive marketplace for health care is flatly false. And a study issued last month by a pro-reform group makes that strikingly clear. The report, released by Health Care for America Now (HCAN), uses data compiled by the American Medical Association to show that 94 percent of the country's insurance markets are defined as "highly concentrated," according to Justice Department guidelines. Predictably, that's led to skyrocketing costs for patients, and monster profits for the big health insurers. Premiums have gone up over the past six years by more than 87 percent, on average, while profits at ten of the largest publicly traded health insurance companies rose 428 percent from 2000 to 2007. Far from healthy market competition, HCAN describes the situation as "a market failure where a small number of large companies use their concentrated power to control premium levels, benefit packages, and provider payments in the markets they dominate." So extreme is the level of consolidation, in fact, that one former top Federal Trade Commission official working with HCAN has sent a letter to the Justice Department's Antitrust Division, asking for an investigation into the health insurance marketplace.

Wendy Long Needs Remedial Spelling and Counting Lessons

We know Wendy Long is opposed to President Obama’s nominee for the Supreme Court but couldn’t she please get the spelling of the last name correct: Sotomayor! Incidentally, the Supreme Court vote was not 9-0 as 4 justices dissented from the majority opinion. The dissents came from Ginsburg, Stevens, Souter, and Breyer. By process of elimination, you are left to guess who the Usual Suspects were who thought that New Haven went too far in its scrapping a promotion exam because no African-Americans and only two Hispanic firefighters were likely to be made lieutenants or captains based on the results.

Poverty

Dear God
Please, please send clothes for all those poor ladies in Dad’s computer.
Amen

[Well, there aren't that many economists jokes here and I liked this one.]

When to Impose Fiscal Restraint and With What

Martin Feldstein discusses the modest rise in 10-year government bonds rates over the past six months and concludes:

It would be wrong for the Obama administration and Congress to reduce the fiscal stimulus in 2009 or 2010, since there is no clear evidence of a sustained upturn. But it would be equally wrong to allow the national debt to double to 80 per cent of GDP a decade from now. Increasing taxes even more than proposed would weaken demand in the near term and hurt economic incentives in the long run. The fiscal deficit should therefore be reduced by curtailing the increases in social spending that the president advocated in his election campaign.

Mark Thoma tackles the when to impose fiscal restraint question with:

Here's (my interpretation of) Paul Krugman's argument about the source of recent movements in long-term interest rates: There are two reasons long-term rates might rise, first more worries about the debt and inflation in the future would drive rates up, and second the prospect of better economic conditions in the future would have the same effect, rates would go up. Suppose we receive bad news about the current state of the economy. That should cause expectations of lower output growth in the future, and hence lower tax revenues and higher spending on social programs than would exist with a stronger economy. So the bad news should cause an expectation of a larger deficit and more inflation worries, and that would drive long-term interest rates up (these worries would also make foreign central banks less likely to fund US borrowing which would reinforce the increase in long-term interest rates). But if it is future economic conditions that are driving the changes in long-term interest rates, bad news about the economy should drive rates down. Last week, we received bad news about the economy. If the debt/inflation/foreign lending story is correct, long-term rates should have gone up. If the state of the economy story is driving rates, rates should have fallen. What did long-term rates actually do? They fell.

Even if we are not currently witnessing crowding-out, we shall one day have to alter the current fiscal stimulus. But that does not mean we have to curtail social spending. We do have alternatives such as raising taxes or cutting defense spending. Feldstein may be a Republican, which appears to mean that he is less willing to say that high defense spending and low taxes also lead to long-run crowding-out. But it does – and I just wish conservative economists would occasionally admit this reality.

Deficit Disorder

Ed Luce comes up with a clever title but then he includes some very stale rhetoric from Judd Gregg et alia:

Once merely a worthy subject of concern, America’s fiscal outlook has rapidly become the object of widespread alarm. “Aside from weapons of mass destruction and terrorism, America’s fiscal situation is the most dangerous challenge facing the country,” says Mr Gregg. “Unchecked, it will reduce growth, weaken the dollar and ultimately undermine America’s global leadership role.” The administration cannot be blamed for what is this year an almost entirely inherited deficit. Mr Obama’s new spending accounts for only about one-tenth of it. The effects of the recession, the costs of the bank bail-out and the structural legacy of the three large tax cuts and two wars bequeathed by George W. Bush account for the remainder. Nor do critics, including Mr Gregg, blame the new president for pushing through a $787bn two-year fiscal stimulus within a month of moving into the White House. “We needed to dig the economy out of a hole,” says Mr Gregg. “I understand that.”

Well, I’m glad that at least one Republican recognizes that this President inherited both a fiscal mess and a deep recession from the economic mismanagement of the previous Administration.

But politics is quick to change. The otherwise deeply unpopular Republican party is starting to sense an opportunity. A rapidly growing proportion of the US public is registering anxiety at the sea of red ink pouring out of Washington. In the past week, two prominent polls showed that twice as many Americans were concerned about growing budget deficits as reforming healthcare – Mr Obama’s overriding domestic priority.

Republicans for the past 30 years have only pretended to care about fiscal responsibility as they simultaneously push larger defense department budgets and more tax cuts. OK, healthcare reform may indeed increase government spending but why not pay for it with tax increases:

Mr Obama has also pledged to ensure that the $100bn-$150bn a year healthcare reform will be “budget-neutral” – requiring no net extra spending. Some liberals see this as a straitjacket that could pare back the benefits he promised to extend to the 47m Americans without insurance and the tens of millions who are seen as underinsured. Conservatives, meanwhile, flatly refuse to believe it. “Obama wants healthcare spending to be budget-neutral and I want to be six foot four and have a full head of hair,” says Mr Holtz-Eakin.

Look – I’m never going to be tall either but Douglas Holtz-Eakin knows that we could indeed raise taxes if the political hacks that currently lead the GOP drop their no new tax pledge. But the ultimate nonsense comes here:

But even if Mr Obama does ensure that expansion of healthcare is fully paid for, existing spending on healthcare and the Social Security retirement scheme remains on a path that will eventually bankrupt the federal government.

Oh please – the Social Security Trust Fund has a sizeable reserve that will continue to grow for the next decade. Luce sort of notes this later but why do we continue to see this kind of stupid association of Social Security finances with the rest of Federal government finances?

Paradox of Thrift or the Ineffectiveness of Tax Cuts?

Jack Healy reports that private consumption isn’t exactly soaring:

Tax cuts from the stimulus package and increases in Social Security checks lifted personal incomes sharply in May, the government reported on Friday, but it appeared that many people were putting that money away instead of spending it. Although personal spending increased slightly last month, the saving rate climbed to its highest level in 15 years as consumers tried to build a buffer against the threat of job losses and more economic hardships. The personal saving rate, which dipped below zero during the housing boom as Americans tapped home equity loans and other easy lines of credit, rose to 6.9 percent in May, the Commerce Department reported. That was its highest point since December 1993.

Pro-growth types often hail a rise in savings as means for generating more investment – but that assumes we are at full employment. Healy knows we are not:

As personal savings return to more normal levels, the increase prompts what economists call the “paradox of thrift.” Although saving money helps individuals repair their finances and pay debts, a sharp rise in overall personal saving can actually deepen a recession and hurt the people who are saving more. As people save money, fewer dollars circulate through shopping malls, Main Street businesses, and large employers and subsequently back to workers through their paychecks. This thrift pulls the economy lower.

Well said – but wasn’t those tax cuts that President Obama included in the stimulus package on the hope of getting bipartisan support supposed to give a boost to consumption demand? It seems that they neither got the Republicans to support his fiscal stimulus nor was a very good bang for the buck form of stimulus.

Some Religious Political Economic History of Iran (long under the fold)

As news coverage of events in Iran goes dark even as those events reportedly continue, I thought it might be worth putting up some background material on the religious political economic history of Iran, known as "Persia" prior to 1935 when Reza Shah changed the name to please his pal Hitler with his "Aryan" racial theories. The material is based on Chap. 17 of the 2004 (second) edition of Comparative Economics in a Transforming World Economy, MIT Press, by me and Marina V. Rosser. I note three interconnected themes in play before I go under the fold: national identity against outside powers (with Persia/Iran being the only Muslim nation besides Turkey not to be completely militarily conquered or directly ruled by an outside power during the past 500 years), its assertion of its Shi'i religious identity with this more recently coinciding with the effort to establish a "new traditional" Islamic economy, and, of course, the dominating role of oil in its economy in more recent decades (never below 85% of export earnings even in the 1960s when the price of oil was quite low). So, see those of you more interested below the fold, hopefully.



Persia achieved essentially its modern borders in 1501 with the coming to power of Shah Ismail, founder of the Safavid dynasty, who also imposed Shi'ism on most of the country in place of the previously dominant Sunni form of Islam. I shall not further here discuss details of Shi'ism versus Sunnism other than to note the importance of the concept of martyrdom in it and its tendency to a certain millenarianism based on the waiting for the reappearance of the Hidden Twelfth Imam, whom Shah Ismail claimed to be and who current President Ahmadinejad claims is actively supporting his government. Until the replacement of the Safavid dynasty by the Qajar one in 1785, the main foreign rival and competitor of Persia was its neighbor, the Turkish-ruled Ottoman Empire, which would become the "Sick Man of Europe" in the 19th century.

During the 19th century under the Qajars, Persia became a plaything in the Great Game between Britain and Russia, both of which had territory bordering on Persia. The Islamic clergy were the main base of nationalist resistance to them in this period, provoking a war with Russia in 1828 and pushing the cancellation a year later of the 1872 Reuter concession to Britain that allowed its companies to control mines, the national bank, and railroad construction.

However, in 1901 they failed to resist the first oil concession given anywhere in the Middle East, the d'Arcy concession to Britain in 1901. This would lay the foundation for what would first be the Anglo-Persian Oil Company, which changed its name to Anglo-Iranian Oil Company in 1935, and would later become the current British Petroleum. It was this company's holdings in Iran that democratically elected Premier Mohammed Mossadegh nationalized in 1951, which triggered MI6 to invite the CIA to organize his overthrow in 1953 in Project Ajax, which led to the reimposition of the autocratic Shah Mohammed Reza Pahlavi, and the allowing of some US oil companies to participate in the oil concession with BP, even though the Shah would nationalize all these in the 1970s.

In 1906 a combination of western-oriented intellectuals and liberal clerics overthrew the Qajar dynasty in the "Constitutionalist Revolt" and established a government based on the Belgian consitution of the day (a participant in that government was the then young Mohammed Mossadegh). The tsarist Russians organized the overthrow of this government and the reimposition of the Qajars in 1911. During WW I, Persia was humiliated by both the Russians and the British occupying parts of the country. Reaction to this led to the overthrow of the Qajars in a military coup by Reza Pahlavi, a military officer, who became Reza Shah and was father of the later Shah, Mohammed Reza Pahlavi. Reza Shah would side with the Germans in WW II to offset the Soviets and the British, and they had him removed and replaced by his son in 1941. The son was removed by Mossadegh in 1951, but would rule after his reimposition until his overthrow in the Islamic Revolution of 1979. Needless to say, since 1953 the US has been the center of attention as a foreign power (except for Iraq during the 198os war).

It should be noted that Reza Shah started many trends and patterns that remain today in the Iranian economy. He was a secular nationalist whose role model was Kemal Attaturk of neighboring Turkey. He banned Islamic clothing for women, stripped the religious foundations of their lands and the Islamic ulama of their control over the courts. He also asserted a strong state role in the government, with state-owned enterprises leading in various parts of industy using modest oil revenues available, including textiles, sugar, cement, iron, and steel. His son would establish indicative central planning in 1944, which is still in place and used today.

From the 1950s to the late 1970s, industrial investment was roughly evenly split between private and public sources, with industries then receiving public funds including in addition to those already mentioned, copper, machine tools, aluminum, and petrochecmicals, as well as auto assembly, paper, and synthetic fibres. An import substitution strategy was generally attempted, and some of these later investments involved joint ventures with foreign multinational corporations. By the 1970s, members of the Shah's families and his cronies had large interests in many of these operations, which would lead to much opposition due to corruption. Many of those firms would become those that would be taken over the bonyads, the Islamic foundations, after the Islamic revolution in 1979.

In 1963, the Shah initiated his "White Revolution" that further attempted to secularize the society (women were granted many rights), with attempts to redistribute land to peasants. Further taking of land from the Islamic foundations was an especially sore point for certain Islamic leaders, especially Ayatollah Ruhollah Khomeini, who went into exile and would return in 1979 to become the first Supreme Leader of Iran after the Islamic revolution. That revolution followed a period of increasing autocracy by the Shah following the oil price increases in 1973, which were accompanied by rising inflation and increasing income inequality, along with perceived corruption and excessive foreign cultural influences inimicable to Shi'i Islam.

The post-revolutionary regime has gone through several policy phases. We have labeled the first the First Radical Phase, 1979-1981, which was led by socialist oriented Islamic economists, with Ayatollah Taleqani one spiritual leader, who had been a supporter of Mossadegh in the early 1950s. Many nationalizations took place during this period, but there was also nearly constant fighting and much bloodshed.

The Second Radical Phase was 1982-1984, and was triggered by the Council of Guardians (appointed by the Vilayat-el-faqih, Supreme Jurisprudent or Supreme Leader, in this case, Khomeini) ruling as un-Islamic bills from the democratically elected Majlis to nationalize land and also foreign trade. This was the period in which the major Islamic elements of the economy were put into place, including the forbidding of interest in banks (which had been nationalized) as well as increased control by the bonyads of many sectors. Some industries that had been nationalized were re-privatized.

The First Pragmatic Phase was 1985-89, basically the second half of the Iran-Iraq war period, with current opposition leader, Mir Hossein Mousavi, as prime minister (a position that no longer exists). This involved opening to foreign trade and looseing of some regulations in support of the war effort. It ended with both the end of the war and the death of Khomeini, who was replaced by the current Supreme Leader, Ayatollah Ali Khamene'i.

The Second Pragmatic Phase was 1989-1997, coinciding with the two term presidency of Ali Akbar Hashemi Rafsanjani, now the leader of the Expediency Council, and apparently supporting Mousavi, with some of his children reportedly arrested in recent days. To a large extent, his policies were essentially an extension of those in the previous period, with more emphasis on private sector development, with his opponents accusing him of corruption and having achieved great wealth in this period. He was the opponent of Ahmadinejad in the 2005 election, and was veiwed then as the candidate of the entrenched clerical hierarchy against the upstart populist, Ahmadinejad.

The Social Reform Phase was 1997-2005, the period of the presidency of the somewhat moderat Mohammed Khatami. He attempted a social relaxation, but it ran into severe limits as the ulama and the Revolutionary Guards asserted their control over the police, security forces, and the courts under the authority of Khamene'i. In economics he was somewhat of a semi-socialist technocrat, emphasizing more of a state role and increasing the influence of the indicative central planners.

We do not have a label in our book for the period under Ahmadinejad, but I would call it the period of Populist Repression. He attempted to do some redistribution of income and also clamped down on social reforms. As it is, the Iranian economy remains as dependent on oil as it has been for many decades, and as I reported in another post, appears to be suffering from rising inflation and unemployment, especially youth unemployment, and ironically even rising income inequality, despite the stated goals to redistribute by Ahmadinejad.

The Health Care Debate in Washington has the Wrong Metrics

I don’t fault Max Baucus for trying to forge some sort of reasonable bill or being a fellow member of the deficit hawk wing of the Democrat Party but let’s not lose sight of what really matters:

A bipartisan group of senators at work on health care reported progress Thursday in holding the cost of legislation to their $1 trillion target, but Republicans quickly added there was no agreement on even the outlines of a bill. "We have options that would enable us to write a $1 trillion bill, fully paid for," Sen. Max Baucus, chairman of the Senate Finance Committee, told reporters. His comments came one week after analysts set the cost of earlier proposals at $1.6 trillion over 10 years.

How much the government pays for health care is not even an issue in my book. The real budgetary issue is what do we pay as a nation overall. Let me explain with a simple example based – suppose that the average citizen currently spends $6300 a year out of his own pocket or via private insurance for health care and the government is spending $700 per person per year so the total cost of health care is $7000 per person per year. If a new health care system doubled what the government was paying (to $1400 per person per year) but lowered private payments to say $5500 per person per year, the cost of health care would then be $6900 per person per year. If we could do that with sacrificing the quality of health care, then the only issue would be how to pay for the extra government spending. Of course, the answer is easy and generally supported by the public – it’s called raising taxes. Of course, some of our nitwit political leaders see tax increases as the ultimate sin.

Weaponized Keynesianism

Ali Frick reports on a very well articulated tirade from Barney Franks. The backdrop:

Last week, over the objections of Defense Secretary Robert Gates and the Obama administration, the House Armed Services Committee restored funding for the basically useless F-22 fighter jet, in the process stripping funding for nuclear waste cleanup efforts. Last night, Rep. Barney Frank (D-MA) filed an amendment to restore the waste cleanup funds and eliminate the money for the F-22. The move came after months of Republicans issuing dire warnings about the consequences of suspending the F-22 program: Frank Gaffney, for example, declared it would lead to “diminished military capability, emboldening enemies, and alienating our friends.”

But it’s time to give Congressman Franks the microphone:

I am of course struck that so many of my colleagues who are so worried about the deficit apparently think the Pentagon is funded with Monopoly money that somehow doesn’t count ... These arguments will come from the very people who denied that the economic recovery plan created any jobs. We have a very odd economic philosophy in Washington. It’s called weaponized Keynesianism. It is the view that the government does not create jobs when it funds the building of bridges or important research or retrains workers, but when it builds airplanes that are never going to be used in combat, that is of course economic salvation.

A follow-up question given the role of the marginal propensity to import in the size of the Keynesian multiplier: when the government purchases a military airplane, how much of that comes from domestic versus foreign content as opposed to when the government decides to have a bridge built?

Protest now defined as 'terrorism'

We have been informed that the current web-base [US Department of Defence] instruction course asks, as one of its multiple-choice questions, "which of the following is an example of low-level terrorism activity?" To answer correctly, the examinee must select "protests."

See here (.pdf).

Bang Goes 'Globalisation Theory'

[Related to previous post 'Before the Economic Crisis began in 2007']

What cannot be sustained is any hegemonic claim that globalisation theory is either adequate as it stands, capable of integrated development into an adequate theory, or superior to the theories which it has displaced.

.. we face a choice between a body of theory which, no matter how analytically coherent, unfortunately fails to explain the basi facts, and another group of theories that do offer an account of the most basic trends we can actually observe, the scientific choice seems clear to me; to make progress we have first to return to the abandoned theories that do in fact explain the facts, and ask ourselves how and why they achieve it, and whether their explanations and concepts can form an element of a new, and superior theory.

[Alan Freeman, 'The new world order and the failure of globalisation'. See full reference details below.]

Unfortunately F William Engdahl's description of 'Full Spectrum Dominance' is a much tighter fit of today's frightening reality.

[*] Alan Freeman (2002): The new world order and the failure of globalisation. Unpublished.
The new political geography of poverty. University of Greenwich
http://mpra.ub.uni-muenchen.de/2652/1/MPRA_paper_2652.pdf
[This is a fuller but earlier prepublication version of an analysis of stagnation and divergence in the world economy which appeared in Pettifor, A (2003) Real World Economic Outlook, pp152-159. Basingstoke: Palgrave MacMillan, pp152-164.]

Before the global economic crisis began in 2007

“In 1991, the GDP of the world in dollars was $4,997. In 2000, it was $4,909…. the wealth-producing capacity of the world is no longer keeping up with its population growth, and the wealth-producing capacity of nearly a quarter of its people is literally marching backwards…. In the 90s per capita GDP in the countries in transition fell between 50% and 75% depending on the measure adopted, catapulting them into the ranks of the developing countries.” .”… Even in PPPs, poverty is clearly increasing in the modern world…. [Since 1970] “differential growth did not speed up the growth of the advanced countries relative to the rest of the world. It slowed down the growth of the rest of the world, relative to the advanced countries The present organisation of the world economy [is] acting systematically to undermine it. The US is growing at the expense of other advanced industrial nations…. up till 1980, US investment was financed from internal savings, which always exceeded investment. This reversed in 1980 and savings from then on fell behind investment. This was particularly marked in the 1990s expansion in which savings and investment moved in opposite directions.” *

The new world order and the failure of globalisation
Alan Freeman (2002): Unpublished.

The new political geography of poverty. University of Greenwich
http://mpra.ub.uni-muenchen.de/2652/1/MPRA_paper_2652.pdf

[This is a fuller but earlier prepublication version of an analysis of stagnation and divergence in the world economy which appeared in Pettifor, A (2003) Real World Economic Outlook, pp152-159. Basingstoke: Palgrave MacMillan, pp152-164. ]