Does Alan Greenspan Understand the Banking Sector?

Mark Thoma and John Cochrane applaud Alan Greenspan for his call for higher bank capital requirements. While Mark does not agree with Greenspan on the assertion that higher bank capital obviates the need for Dodd-Frank style regulation, John applauds that portion of Greenspan’s latest as well. This did not stop John for having a little fun as the inelegant way Greenspan talked about the expected return to equity versus the expected return to assets:

Competition for equity capital should drive the risk adjusted rate of return for bank equity to be the same as for other businesses. If banks issue more capital, the raw rate of return to equity should decline. So should the variability (beta, risk) of that return. (Other things held constant, which may well be why the historical record is muddy.) In fact, Alan seems precisely to be making the banks' argument. They claim that the return on equity capital is independent of leverage. They have to pay (say) 10% to shareholders, but only 1% to debt holders, so debt is a cheaper source of financing. Banks claim that forcing them to issue more expensive capital will force them to raise loan rates and strangle lending. Which, curiously, Alan seems to be endorsing.

Admati, DeMarzo, Hellwig, and Pfleider made the same argument over four years ago:

We examine the pervasive view that “equity is expensive,” which leads to claims that high capital requirements are costly and would affect credit markets adversely. We find that arguments made to support this view are either fallacious, irrelevant, or very weak. For example, the return on equity contains a risk premium that must go down if banks have more equity. It is thus incorrect to assume that the required return on equity remains fixed as capital requirements increase.

After all – this is nothing more than the Modigliani-Miller proposition. Leverage affects the expected return to equity but not the expected return to assets. But I still have a serious problem with claims that banks and other businesses would have the same return even if defined in terms of a return to assets. Banks likely have less operational risks than other businesses. I read all of this very early this morning before my first cup of coffee and fired off this at Mark’s place:

CAPM types would see this as an issue of what the unlevered beta is (see R.S. Hamada's 1969 and 1972 papers). For a lot of manufacturers, this beta is near 0.8 so the risk premia is 4% (see my Econospeak post on Cochrane's other ramblings). Banks are not the same sector and their unlevered betas are closer to 0.2 which is why their expected return to assets is generally only 1% more than their cost of debt. Banks and other businesses are fundamentally different businesses. If Greenspan thinks otherwise - why should we listen to him at all?

Then I remembered that one can find estimates of unlevered betas by sectors from Aswath Damadoran who notes that the unlevered betas for the banking sector are half that of a typical business. I would hope that the former chairman of the Federal Reserve understands all of this and was just having a bad writing day.

Cochrane on the Equity Risk Premium and Macroeconomics

After reading some interesting discussions, I paused and wondered what two scholars who passed away over a decade might say. I’m thinking of Franco Modigliani and James Tobin but permit me to put that in context by noting a couple of interesting papers. John Cochrane commented on an interesting discussion of real returns to government bonds from the CEA while Stephen Williamson brought our attention to a discussion of real returns to capital by Paul Gomme, B. Ravikumar, and Peter Rupert:

The returns on all three Treasury securities have been declining and are currently low. The 5-year return, for instance, has been close to zero recently … pre- and post-tax real returns on (i) business capital and (ii) all capital have not been declining.5 The returns fell during the Great Recession, as they typically do in recessions. However, the returns quickly rebounded and are now as high as they have been over the past three decades! The after-tax return on business capital is more than 8 percent now, much larger than the pre-tax 5-year Treasury return. The after-tax return on all capital is more than 6 percent

. The authors present this evidence as a challenge to Larry Summer’s secular stagnation hypothesis:

While many authors have documented the low and declining returns on government debt, these returns bear little resemblance to the returns on productive capital: The latter is a direct measure and a much better indicator of adequate private investment opportunities and has been rising for the past five years. Summers (2014) and others have articulated the secular stagnation hypothesis based on insufficient aggregate demand: The evidence on investment strongly suggests otherwise. Indeed, the private sector has undertaken large capital outlays since the end of the recession. The takeaway here is that the current recovery is not an example of secular stagnation. The evidence on investment and returns on productive capital shatter the essential components of the secular stagnation hypothesis.

Before commenting on the macroeconomics here, let’s note Cochrane read what Williamson wrote and made the following two statements:

There is a risk premium, and it's big, and it varies over time. Practically all macro and growth theory forgets this fact.

I recently had some fun with the authors of DOW 36000 who wanted to pretend that the equity risk premium is zero. While Cochrane is certainly brighter than these two goofballs – I hope he does not think the current spread between the return to stocks and the return to bonds is a more appropriate measure of this risk premium. I tend to be a fan of Aswath Damodaran:

the historical equity risk premium for the US is between 2.73% to 8%, depending on the time period, risk free rate and averaging approach used. I will also cheerfully admit that I don't trust or use any of these numbers in my valuations…Using the framework described in the last section, I estimated an equity risk premium of 4.96% for the S&P 500 on January 1, 2014: During 2014, the S&P 500 climbed 11.39% during the year but also allowing for changes in cash flows, growth and the risk free rate, my update from January 1, 2015, yields an implied equity risk premium of 5.78%:

He has a lot more to say about his forward looking model of the equity risk premium. What is clear is that Damodaran would not argue that the 8% spread between the actual return to stocks and the actual return to bonds is an appropriate measure of expected returns and risk premia. But what frustrated me was how Cochrane dismissed the nation that macroeconomics ignores basic finance. Modigliani and Tobin were part of a team of economists who virtually invented modern financial economics. Which brings me to something else from this interesting paper not emphasized by Williamson:

the time series on private domestic nonresidential investment. Consistent with the pattern of the real return on productive capital, private domestic nonresidential investment has been steadily increasing since the end of the recent recession. The insert in the figure shows the deviations from trend and that private nonresidential investment is now more than 5 percent above trend. Private nonresidential investment is also 14.5 percent higher than its pre-recession peak in the fourth quarter of 2007.

I suspect Modigliani and Tobin would bring up Tobin’s Q in a tale that goes something like this. We saw both an increase in global savings and a collapse in investment demand which sent world economy into the tailspin Summers and Bernanke are noting. While both Keynesians would have argued for fiscal stimulus, we know most policymakers were doing just the opposite. So all we had left was monetary policy, which seems to be slowly working to reverse the Great Recession very much in the mode that their specifications of the Keynesian model would predict.

What Is The Chinese Economic System?

In a recent post Paul Krugman in while criticizing China's interventions in forex markets to engage in a peculiarly managed minor devaluation of  the yuan/rmb (not worth all the hype and flagellating, frankly), he labeled the Chinese system as being "rapacious crony capitalism."  This has led various commentators in various papers to have varying degrees of vapors.  But even if we grant that "rapacious" is not a scientific term that may be dramatic for blogging but is not useful for seriously categorizing the Chinese economic system, the hard fact is that it is not obvious what it is, and it may simply be too complicatedly mixed and large for any of the usual categories to really fit.

This is actually a  current professional problem for  me and my wife, who are nearing completing the third edition of our textbook, Comparative Economics in a Transforming World Economy, MIT Press.  It is one of the two most widely used textbooks in that field, our big rival being one by Paul Gregory and Robert Stuart (with Bob having just passed away very recently).  Our second edition was in 2004 and is seriously out of date, and unlike textbooks in many fields, pretty much all of our chapters need substantial rewriting.  As it is, we are nearly done, but the remaining country studies are the hardest to do, and of those the last to be done and the hardest to do will be our chapter on China.  From the standpoint of professional comparative economics, what the heck the Chinese system is is a matter of serious and substantial debate.

So, at some level we are sort of traditional on these matters.  There are two big categories out there: the degree to which an economy is run by markets rather than central planning and the degree to which it is characterized by private or state ownership of the means of production, with private ownership being "capitalism" while state ownership being "socialism," this last categorization being basically codified by Karl Marx himself.  There are of course many other such matters of significance, such as policies about social safety nets and redistribution, but these are generally viewed as less central in determining the fundamental nature of the system.

So, the US has always been more or less a market capitalist system, despite episodes during major wars, especially WW II, of being command capitalism.  After all, while there remained private ownership of the means of production (capitalism), there were no private automobiles produced in the US due to command orders of the US government.  But, the US and UK and others who went into such modes during wartime dropped them when the wars were over.  They were strictly temporary.  As it is, the command mode has pretty much disappeared in the world, with only a handful of pathetic cases left, most notoriously North Korea, although even it is moving towards more of a market system (especially in agriculture, usually the first sector to move in that direction), even if it remains the last remnant of the old command socialist type.

As it was, China never was that much of a full-blown command socialist economy.  It was always more decentralized than the old USSR, with this partly due to its sheer size and diversity, something we characterized with a quotation for the beginning of our China chapter in the past (and which may yet be kept): "The mountains are high; the emperor is far away." (old Chinese proverb)

OK, so our old title for the chapter was "China's Socialist Market Economy: The Sleeping Giant Wakes" (the last drawing on a famous statement Napoleon Bonaparte supposedly made about China: "China is a sleeping giant. When China wakes, she will shake the world.")  Very likely that title will stay.  But it is in fact a title that comes from the Chinese government itself, a characterization that they continue to hold to; China is a "socialist market economy."

OK, it is indeed a market economy.  It probably was not during the Mao era, even if command central planning was much  weaker than in the old USSR.  There was still command planning, but a lot of it was decentralized to local levels.  After Deng Xiaoping took control in 1978, he pretty much undid most of the command central planning apparatus, moving the economy to being predominantly a market one.

The more complicated issue involves property ownership, and here there is no agreement.  A major part of this is that China has property forms that are not seen anywhere else in the world.  One of the larger parts of the Chinese economy, which used to get lots of publicity but has not received much lately, is what was called the Town and Village Enterprise (TVE) sector.  This is the sector  that lies between the remaining state-owned sector (from the center) and the fully privatized corporate capitalist sector of the Chinese economy.  There are at least four different property forms in this mostly rural part of the Chinese economy, with them varying from being somewhat more publicly (if locally) owned to being more privately, although in some cases cooperatively so, owned.  Much of this sector, which as more than a third of the whole economy, is very hard to characterize as being either socialist or capitalist, although clearly the Chinese like to consider it more  socialist.

Now this odd term is close to others that have been or still are used to  describe economies around the  world.  One is "market socialist."  That was most famously used to describe the former Yugoslavia, which also  had a form of workers' management that attracted lots of attention from comparative economists.  Other nations also were called this, especially Hungary, which lacked the workers' management part.  They had forms of collective or state ownership, but no (or little) command central planning.  The state-owned enterprises operated in market environments.  The famous Hungarian comparative economist, Janos Kornai, came up with the matter of "soft budget constraints" as something such economies generate, governments regularly bailing out their firms, although we do see this quite a bit in more market capitalist economies as well.

The other similar term is  "social market economy," which Germany uses to label its system ("sozialmarktwirtschaft" in German).  This is really a fully market capitalist system, but one with a large social safety net. And the Germans have that, certainly compared to the US, and many have commented on the generally better functioning of that economy (which also  has lots of labor-management cooperation) than many other economies around.

So, the  Chinese system is not like either the old Yugoslav or the current German system, even though it has a lot of  state or  collective ownership, and certainly is heavily a market system.  Clunky and not precisely accurate and vaguely propagandistic as it is, "socialist market economy" may be the best we can do.

Additional material:  Oh, on the "cronyism" part, this clearly is an issue, and a big one in China now.  Especially favored to get high positions in larger enterprises, whether privately or state or hybridly owned are reportedly children of high Communist Party officials. Corruption has increased substantially, and current Chinese leader (holding all three of the top power positions, Party General Secretary, President, and Chair of the Military Commission) has put into place a large anti-corruption campaign.  This has much support because of the scale of the problem, even as many perceive it to be somewhat directed at political enemies.

Barkley Rosser

Just because you are right doesn't mean you are not stupid

"I don't give a fuck about the white gaze, I don't. I literally don't." -- Marissa Janae Johnson

"What's true about this moment is that it's not about the tactics. If you're caught up in tactics you're missing the point." -- Alicia Garza 

"Myself and Alicia in particular are trained organizers. We are trained Marxists. We are super-versed on, sort of, ideological theories." -- Patrisse Cullors (in response to an interview question citing a "loving critique" from Jalil Muntaqim)

"When I use Assata’s powerful demand in my organizing work, I always begin by sharing where it comes from, sharing about Assata’s significance to the Black Liberation Movement, what it’s political purpose and message is, and why it’s important in our context." -- Alicia Garza, "Herstory of Black Lives Matter"

"I am not a criminal, nor have I ever been one." -- Assata Shakur

"The Black Liberation Army was formed after the repression began to come down on the Black Panther Party and people in the Party were seeing that there had to be a clear separation between military apparatus and aboveground apparatus and they were waiting on the leaders to make this decision. But by then, it seemed like the leaders had sold-out to get out of jail and for $600 apartments, such as Huey P. Newton, Eldridge Cleaver, Bobby Seale, so that they weren’t interested in making decisions to save the movement. So that people began to take it on their own since they were the ones getting killed in the process, they were getting framed up and getting arrested and driven underground all around the country." -- Sundiata Acoli, trial testimony quoted in Unearthing the Underground: A study of radical activism in the Black Panther Party and the Black Liberation Army, PhD dissertation by Gaidi Faraj

"The McGovern people were afraid that the Yippies were endorsing McGovern as a way of destroying him. We had to reassure them that no, this was really on the level, and then they said if you really want to help McGovern stay away." -- Stew Albert

"The fact that Abby [sic] Hoffman, Jerry Rubin, Angela Davis, among others, support McGovern should be widely publicized and used at every point." -- Richard Nixon to John Mitchell  

"Assata's legacy represents a mandate to broaden and deepen anti-racist struggles." -- Angela Davis

The "broadening and deepening" of incarceration.

Sandwichman is not a true believer in the emancipatory efficacy of "revolutionary armed struggle." But setting aside my own idiosyncratic old, white, male weirdo populist economic determinism objections to adrenaline and testosterone-fueled adolescent action fantasies, I'm even more skeptical of political posturing that makes dog-whistle allusions to a legacy of armed resistance while denouncing armchair critics for being "caught up in tactics" and "missing the point."

Unless I am mistaken, the "point" of armed struggle has nothing to do with the audience "getting it."

Sandwichman, for one, hasn't miss any point. On the contrary, I find the profusion of points rather fascinating. Here's a few odd ones:

Naomi Klein:

That’s my hope for 2015. That we get off defense and put forward this very clear vision, bringing all of our movements together, because they are mobilizing in incredible ways. Some of you may have read the piece I wrote trying to connect the #BlackLivesMatter movement with the climate justice movement, because so much of what we are fighting for is based on the principle that black lives matter, that all lives matter. The way our governments are behaving in the face of the climate crisis actively discounts black and brown lives over white lives. It is an actively racist response to climate change that we should expose. I think we have to not be afraid to bust down these barriers if we really mean it when we say that if we’re going to change everything, it’s going to take everyone.

Peter Linebaugh:

As concerns Black Lives Matter and the movement, that so far, I think, this year 464 people have been killed by the police, this is sending force against people without trial by jury, not in accordance with the law of the land. And so, when Black Lives Matter began, after the—last August, after the killing of Michael Brown, many of us remembered that slavery itself came to an end thanks to Frederick Douglass’ references to Magna Carta. So Magna Carta has played a major role in American history in the freedom struggle led by former slaves and the African-American population. This is why Black Lives Matter is so important, not only against the racist power structure and the forms of white supremacy that exist in so many ruling institutions, but it’s also a recovery of this long tradition of struggling against sovereignty in the name of habeas corpus, trial by jury and prohibition of torture.

Fucking monomaniacs, eh? Sandwichman eagerly awaits the happy day when Black Lives Matter joins the struggle to eradicate the menace of the bogus "lump-of-labor fallacy" claim. 

"We believe that people should fuck all the time, anytime, whomever they want. This is not a program demand but a simple recognition of the reality around us." -- Abbie Hoffman, "Revolution towards a free society:Yippie!" manifesto, Chicago, 1968.

The Future of Work and the Demise of Scholarship

I've pointed out before that the future of work has a chequered past. Evidently it also has a questionable present and future.

Paul Saffo teaches forecasting at Stanford University and chairs the Future Studies and Forecasting track at Singularity University. In his contribution to the "Future of Work" project of the Center for Advanced Study in the Behavioral Sciences at Stanford University, Saffo wrote:

"In 1930, Keynes observed that technological unemployment was a self-solving problem. On balance new technologies create more jobs than they destroy."

Sandwichman call bullshit. Saffo's claim couldn't be further from the truth. In 1934, Keynes gave a BBC radio address titled "Is the Economic System Self-Adjusting?" His answer was "No." The "create more jobs than they destroy" refrain is a version of what is otherwise known as Say's Law, which Keynes paraphrase in his General Theory as "Supply creates its own demand." Keynes's general theory was a debunking of Say's Law.

6% Real GDP Growth and DOW 36000

Jonathan Chait says Huckabee has trumped Jeb!

But there’s a weakness in basing your economic message on pulling a crazy number out of thin air: Another candidate can always pull an even crazier number out of thin air. And now Mike Huckabee has done it. The obvious choice would be to one-up Bush by promising 5 percent growth. But Huckabee, thinking two steps in advance, probably realized that if he went with 5 percent, another candidate could still leapfrog him. So he went with 6 percent.

His voodoo economics seemed to be based on passing that “FAIR” tax. But never mind Huckabee as how Jeb! came up with 4% is really funny:

That ambitious goal was first raised as Bush and other advisers to the George W. Bush Institute discussed a distinctive economic program the organization could promote, recalled James Glassman, then the institute's executive director.

Glassman once wrote that one should value stocks by assuming that all companies have a value to sales ratio equal to one. He also co-authored DOW 36000 which claimed valuations should be 100 times profits. How is this supposed to work unless all companies have a profit margin of only 1 percent? Pulling numbers out of thin air is bad enough but putting forth valuation multiples that are so wildly inconsistent seems to be the specialty of Team Republican.

#TwerkDownBernie

Trained Marxist Evangelical Christian Revolutionary Fashion Statement

What is a "trained Marxist"?

UPDATE: What is Looting?

This is going to hurt me more than it will hurt you. I feel your pain. In fact, I feel your pain more than you do, you anaesthetized leftist zombies. So sit down, shut up and listen.

Patrisse Cullors, Black Lives Matters co-founder, in an interview with Jared Ball of the Real News Network said:

The first thing, I think, is that we actually do have an ideological frame. Myself and Alicia in particular are trained organizers. We are trained Marxists. We are super-versed on, sort of, ideological theories. And I think that what we really tried to do is build a movement that could be utilized by many, many black folk. We don't necessarily want to be the vanguard of this movement. I think we've tried to put out a political frame that's about centering who we think are the most vulnerable amongst the black community, to really fight for all of our lives. 

And I do think that we have some clear direction around where we want to take this movement. I don't believe it's going to fizzle out. It just gets stronger, and we see it, right. We've seen after Sandra Bland. We're seeing it now with the interruption of the Netroots Nation presidential forum. 

What I do think, though, is folks -- especially folks who have been trained in a particular way want to hear certain things from us, that we're not sort of framing it in the same ways that maybe another generation have, has. But I think it's important that people know that we are, the Black Lives Matter movement doesn't just live online, although there's many people who utilize it online. We're in a different set of circumstances, a different generation that -- social media may feel like it's diluting the larger ideological frame. But I argue that it's not.

This certainly throws a new light on Alicia Garza's comment that "no candidate who is really about this werk would break a sweat in response to a question in the form of 'Do Black Lives Matter?' The simple answer should be 'Yes' not some weirdo populist economic determinism." Those untrained populist weirdos must be made to bow down to the ideologically super-versed Marxist vanguard! What Adolph Reed Jr. described as "visceral and vitriolic anti-Marxism" could conceivably be visceral and vitriolic "trained Marxist" sectarianism.

In all fairness, the comrades "don't necessarily want to be the vanguard of this movement." Indeed, humility and reluctance are admirable qualities in self-appointed leaders. But seeing as how they "actually do have an ideological frame" and "some clear direction around where we want to take this movement," they really have no choice but to accept the mantle of leadership, do they?

"We are not reasonable!"

There's one thing that puzzles me though. Is it customary for trained Marxist cadre to publically announce that they are trained Marxists?

A Movement at the Crossroads: SNCC, Yippie! and Position Paper #24

All my life I've been sick and tired. Now I'm sick and tired of being sick and tired. -- Fannie Lou Hamer

The materialist presentation of history leads the past to place the present in a critical condition. -- Walter Benjamin

I went to the crossroad
Fell down on my knees
I went to the crossroad
Fell down on my knees
-- Robert Johnson 

During the 1968 Democratic Party convention in Chicago, demonstrators being assaulted by the police chanted "the whole world is watching, the whole world is watching." This was before the English translation of Guy Debord's Society of the Spectacle was published but after Marshall McLuhan's The Medium Is the Massage had achieved best-seller status.

What the "whole world" watched on television news from Chicago in August 1968 was later described by the Walker Report to the National Commission on the Causes and Prevention of Violence as a "police riot," provoked by some rather inchoate political theatrics conducted by the erstwhile Youth International Party (Yippie!) founded eight months earlier by Abbie and Anita Hoffman, Jerry Rubin, Nancy Kurshan and Paul Krassner.

Four years earlier, at the 1964 Democratic National Convention in Atlantic City, N.J., Fannie Lou Hamer of the Mississippi Freedom Democratic Party (MFDP) gave her dramatic testimony to the credentials committee about the violence she had endured and witnessed in attempting to register to vote. The 1964 convention refused to seat the MFDP delegation but at the 1968 convention in Chicago, Hamer was seated to became the first African-American delegate from Mississippi since reconstruction and the first woman ever from that state.

Before Abbie Hoffman became a Yippie, he had been the founder and self-appointed chairman of Worcester Massachusetts chapter of the Friends of SNCC, a group dedicated to raising funds to support the activities of the Student Nonviolent Coordinating Committee. namely the Freedom Summer activities of 1964.

Hoffman traveled to Atlantic City in 1964 to join demonstrators supporting the Mississippi Freedom bid for delegate recognition and in 1965 traveled to Georgia and Mississippi, where he met Jesse Morris, a SNCC organizer who was setting up a Poor People's Corporation to fund worker-owned crafts co-operative. Back in Worcester and, later in New York City, Hoffman operated stores to sell crafts made in Mississippi.

In December 1966, SNCC staff voted  -- by a margin of 19-18 with 24 abstentions --to exclude whites from the organization. Hoffman was incensed and wrote a scathing (and scurrilous) denunciation of the decision and SNCC leadership for the Village Voice. The Village Voice article was Hoffman's first as "Abbie" employing his characteristic slangy hipster style. In one provocative passage Hoffman confided, "Now I feel for the other whites in SNCC, especially the white females. I identify with all those Bronx chippies that are getting conned out of their bodies and bread by some dark skinned sharpie over at the annex." Reportedly, his earlier drafts were even more outrageous.

The response to Hoffman's Village Voice piece demonstrated to him that if he wasn't afraid to be offensive and break taboos he could get attention, which was what the whole Yippie thing was about: getting on TV so the whole world could watch. Hoffman was a showman, an exhibitionist.

Still, Hoffman outed unspeakable tensions that undoubtedly did exist in the 1960s movement. For a brief moment in the mid-1960s people spoke of "the" movement as if the affinity of civil rights, anti-war and student protest -- perhaps even counter-cultural "lifestyles" -- was inevitable. "Love, trust, brotherhood, and all the other beautiful things we sang about," as Hoffman phrased it, in rebuttal to Stokely Carmichael's Black Power.

Those unspeakable tensions could be called "intersectional," to use a later terminology, They sprang from from sexual relationships and taboos as well as from organizational hierarchies and racial and sexual stereotypes. "There was a lot of sex in SNCC," staffer Jean Wheeler Smith, an African-American woman, recalled, "we were twenty years old... what do you expect?" Penny Patch, a white activist remembered:

We were young, we were living in wartime conditions. We were always afraid; we never knew whether we would see one another again. We were ready, black and white, to break all taboos. SNCC men were handsome, they were brilliant, they were brave, and I was very much in love.

But "not all sex was equal":

Since Black men had historically paid with their lives for intimacy with white women, dating white women in SNCC could be a form of liberation. For Black women, sex with white men did not have the same effect. White men had a three-hundred year history of sexual assault and rape of Black women in the South (and North) without fear of consequences, so the opportunity for intimacy with white men did not manifest as a form of freedom for Black women.

The chance discovery in 1994 of boxes of old letters, journals and political manifestoes sent home during Freedom Summer by Elaine Delott Baker became the impetus for a document collection that focuses on a "pathbreaking feminist manifesto" -- the Waveland Memo or Position Paper #24. It would be more accurate to call that paper paths-breaking, in context it documents simultaneously clearing the way for and the breaking up of multiple paths. The authors recall different motivations for, attitudes about and responses to the paper. In her account of the writing of the paper, Casey Hayden recalled that "Mary King says we were asking SNCC to broaden its concerns, to take women's roles on as an issue. I don't believe I ever felt SNCC should do that. The movement had enough to do."

The purpose of the writing was more diffuse than that, as I recall, more like everyone was writing about whatever their gripes or problems or positions were and, hey, let's put ours out there, too. In late 1965 I did feel the time was right and drafted a memo ["Sex and Caste"] which Mary and I signed and sent to our black and white women friends in SNCC and the new left.

The Waveland Memo archive "How and Why Did Women in SNCC Author a Pathbreaking Feminist Manifesto, 1964-1965?" contains such an incredible collection of insights, remembrances and analysis that am reluctant to summarize from it more than I already have. As Elaine Baker noted in her comments on contextualizing Waveland Memo, "to understand anything we must understand everything, and that to understand everything we must know everything. Tough job." The archive's introduction is compelling, informative and concise. The timely relevance of its historical account might be gauged by the following snippet:

SNCC was in crisis before and after the Waveland conference, its scope and vitality waning as staff sought an alternative to reforming the Democratic Party. The women's memo was part of a process designed to air all discontents, the main ones being well- known before the conference...  Underlying many of the issues raised at Waveland was the growing friction between white and Black staff. Anticipating the theme of Black Power, which emerged later, many Black staff members questioned the role of whites in the movement, making white activists unsure of their place in SNCC's future.

"Too Tall to Bow Down"

There are "white supremacists" and then there are White Supremacists.

In an interview with This Week in Blackness podcasters Elon James White and Imani Gandi, Black Lives Matters activist Marissa Janae Johnson defended her #BowDownBernie action as "super important" because it confronted the "hordes and hordes of white liberals and white progressives" whose political effect "is often very harmful and is upholding the white supremacist society that we live in."

The "bow down" command apparently is a reference a Beyonce song. It's inappropriateness has been noted by several commentators but in researching the Waveland Memo archives, I came across an ominous historical document that highlights the hideous stupidity of indulging in false equivalence between ineffectual leftists and avowed white supremacist.

The Freedom Fighter announced the "awakening" of the Klu Klux Klan "from a thirty five year sleep." It, too, relied on a facile rhetoric of false equivalence, explaining the reasons for the return of the KKK in the following terms:

It has now been proven that the negro that is trying to take over in America is communist led. If you are senile enough to think this is wrong, you are a complete fool and a very useful tool in the hands of both the negro and communist.

As for politeness and all that respectability jazz, the KKK proclaimed itself "too tall to bow down" because it "is made of men."

The KLU KLUX KLAN is made of men. Real tall American men who love America very much. They are not going to give up to the Kennedys, Johnsons, communist and negros. These men are bound together in a Holy and Fraternal order, depending upon God and each other, answering to God and each other. Tall strong men, men of great courage, coming out of fields, stores, factories, service stations, men that are doctors, builders, lawyers, writers, barbers, mechanics and laborers. These men are too tall to bow down. They are men who have had enough. Enough of the Kennedys, communist, negros, high taxes, foreign aid, cheap politicians, governmental crime and graft, the united nations, cash for bastard negro babies, cotton acreage, Walter Ruether, social security and half made this and that. They have had enough of ruin, and will now restore sensible rule in our land. They see all, hear all, know all. They live among you. These men are TENS OF THOUSANDS STRONG, TOO TALL TO BOW DOWN, AND THEY HAVE HAD ENOUGH!!!!!!!!

To an interviewer's question about the people who say the Seattle action was hurting the cause of Black Lives Matters, Ms. Johnson replied, "I don’t give a fuck about the white gaze, I don’t. I literally don’t."

Some folks don't give a fuck. They just don't.

Does World Peace Depend On Steny Hoyer and Ben Cardin of Maryland?

That would be Steny Hoyer (D-MD), minority whip in the House of Representatives, reportedly still undecided about the Iran nuclear deal, as well as Benjamin Cardin, also (D-MD) of the US Senate.  The minority whip in the Senate, the person who is supposed to line up party members to vote on bills, Chuck Schumer of New York, has come out against the Iran nuclear deal.  While it does not appear that he is working hard to convince other Dem senators to join him, his decision makes it much easier for fence-sitting Dem senators to join him in opposing the deal (there might actually be one Republican senator for the deal, Jeff Flake of  AZ).

Watching the Washington Post and certain blogs (especially Juan Cole) closely, it is clear to me that in neither house of Congress is there yet a third of members who support the deal.  This is what is needed to sustain the veto that Obama will do of the bill that will almost surely pass both houses to cancel the deal.  Many are complacent and simply assume the veto will be sustained, but this is far from certain, far from clear.

Public opinion has turned sharply against the deal.  It has not been just a matter of members of Congress telling Secretary Kerry that he is some kind of fool who was "bamboozled," but a heavy round of ads criticizing the deal, with all but zero ads countering the misrepresentations in these skillfully produced ads.  Heck, they are so well done, I am almost convinced the deal is bad after watching one.  Congress is on recess at home listening to the home folks, and what is going on is a major barrage under the radar of criticisms of the deal, with a story about alleged violations at the Parchin military base in Iran in yesterday's WaPo feeding the frenzy (this has to do with them sanitizing the place about past nuclear research, which we know they did but which everybody agrees they stopped over a decade ago, but somehow some think it is very important that we have every shred of information about that).

It has gotten to the point that the usual VSPs in Washington are at their old tricks of tilting to a hardline warhawk policy, even when they actually know better.  So, in recent days we have seen that old reliable and former fan of the Iraq war, Fred Hiatt, denouncing Obama for daring to suggest that opponents of the Iran deal were supporters of the Iraq war, noting he supports the deal, although he then proceeded to go on at length about a list of supposed flaws it has.  Today we had Ruth Marcus, admitting that it will simply be a disaster if the deal is not approved, but tut tutting at Obama for speaking too  strongly at American University for it and his supposedly disrespectful remarks about intelligent critics who are raising serious points supposedly.  Even the usually perspicacious David Ignatius, who is better informed and generally much wiser than the awful Hiatt, was while saying that the deal must go through was suggesting that somehow Obama "needs to throw Congress a bone."  Well, David Ignatius, just what kind of bone would that be that would not upset Iran, not to mention the unanimous UN Security Council?  Certainly there is no bone the GOP in Congress will take, and I am unclear what bone can be thrown to these Dem fence sitters, who are apparently getting all offended and upset over Obama's strong language and vigorous advocacy of the deal, poor things.

So, not only has Schumer defected from Obama in the Senate, but his boss, Harry Reid is simply not putting any pressure that anybody can see on wavering Dems to support the deal.  Maybe he will in the end, but the current count has supporters in the teens with likely supporters only in the 20s, whereas supporters of the deal need 34.  There is a serious distance to go, and without a "bone," it is very unclear that the distance will be filled there, especially without any push coming from the leadership (maybe Reid will do something by the time it gets down to it).  But, the hard fact is that the probability of a failure in the Senate to sustain Obama's veto is much higher than most are thinking is the case.  Complacency on this is completely out of place.

Which brings us to the House of Representatives and Representative Cardin.  Again, those who have pubicly stated their support for the bill remain far below the number needed to sustain the veto, despite some prestigious Jewish members having done so, including Sander  Levin of Michigan, the most senior of Jewish members of Congress, and Adam Schiff of California, the ranking Dem on the House Intelligence Committee, whose support one would think might be taken seriously.  Furthermore, in contrast to Reid, Nancy Pelosi, the minority leader, has come out strongly for the deal and is reportedly pushing members to save it.  That may be sufficient, but Cardin, her whip, looks like the real key. If he not only signs on but joins Pelosi in urging other Dems to do so, this would probably be enough to  bring that total supporting the veto to the necessary one third number.

So, it may well come down to the US House of Representatives, not  the supposedly more deliberative US Senate, to save the world from a major war in the Middle East by sustaining President Obama's veto of the bill to reject the deal, and having Ben Cardin support this effort may just be the key to making sure that this happens.

Note on Changes made day later:  I goofed.  This post previously had Benjamin Cardin as the crucial undecided House Minority Whip.  In fact, it is Steny Hoyer, who is also from Maryland and is currently in Israel on this trip with 21 other Congresspeople and has just told CNN that he remains undecided on the Iran deal.  Cardin is the junior senator from Maryland and is important for the outcome in the Senate, probably the most important undecided there.  His status comes from long international experience, including service on the Board and as Vice President of the Organization for Cooperation and Security in Europe.  He is crucial for what happens in the Senate.  I apologize for this snafu, but the bottom line of this post remains that the Senate is quite likely not to support the deal, especially if Cardin does not do so, which will put it on the House, where Minority Whip Hoyer will be crucial in helping Nancy Pelosi whip enough Dems together to sustain the veto.

Barkley Rosser

Jobs Guarantee vs. Work Time Reduction

Max Sawicky says Matt Bruenig is wrong about the Job Guarantee idea. Sandwichman wrote about this back in 2009, so I'm reposting a condensed and edited version of it here and will add further reflections on Max's and Matt's points.

2009:

Would a Minsky-inspired "job guarantee program" be an economically feasible response to that jobs crisis? Randal Wray is probably the best-known current advocate of such a program. In August 2009, Wray posted a brief description of the idea along with some references for further reading. 

The Sandwichman's familiarity with the debate around the job guarantee idea comes largely from a discussion in Robert LaJeunesse's book, Work Time Regulation as Sustainable Full Employment Strategy, in which LaJeunesse sought to show why work time regulation would be superior to a jobs guarantee.

LaJeunesse's main objection to the job guarantee idea is that it expands work and consumption instead of questioning the compulsion for and ecological sustainability of perpetual, artificially-induced economic growth. Peter Victor's book, Managing without Growth, and the Sustainable Development Commission's report, Prosperity without Growth?, give persuasive evidence in support of such criticism.

While the Sandwichman agrees wholeheartedly with LaJeunesse's ecological critique, he also has microeconomic concerns about job guarantees. There are three aspects that particularly trouble me.

First is the historical precedent that explicitly "make work" jobs have always carried a stigma. This was true of the 19th century workhouse in Britain and of WPA jobs during the Great Depression.

Second, the necessity for some kind of administrative overhead -- managers, planners and staff -- must necessarily lead to the creation of a bureaucratic empire whose denizens will have a stake in the continuation and expansion of their institutional niche.

Finally, a job is not simply about the exchange of a certain amount of time and effort for a paycheck. Some kind of learning and social interaction goes on in the workplace. Not all of it is directly tied to the work. What kind of informal culture of "lifers" and "transients" is likely to emerge in the "buffer world" of guaranteed jobs? What's to prevent the lifers (as well as the administrators) from devising schemes to divert the efforts of enrollees to their private interests?

2015:

Matt argues that Guarantee Jobs are inclined to be "low-capital, short-term jobs that are not that important to do." He suggests it would be preferable to establish targeted public works programs, "which can be ramped up and down cyclically as needed," which, of course, was precisely the idea behind the Public Works Administration established during the Roosevelt New Deal.

Max argues that an Employment of Last Resort (ELR) program could be designed that complies with Matt's targeted public works program. He thinks that "Matt’s notion of how an ELR system could work is too narrow."

Sandwichman thinks the discussion could be better informed by attention to 1. what happened, in the long run, to the New Deal public works program and 2. what are the alternatives to a job creation program -- especially a a work-sharing program and permanent reductions in the hours work, what John Maynard Keynes called the "ultimate solution" for unemployment.

"...the full employment policy by means of investment is only one particular application of an intellectual theorem. You can produce the result just as well by consuming more or working less. Personally I regard the investment policy as first aid. In U.S. it almost certainly will not do the trick. Less work is the ultimate solution (a 35 hour week in U.S. would do the trick now)."

Essentially Inarticulate: slouching "towards a radical democratic politics"

It is precisely this polysemic character of every antagonism which makes its meaning dependent upon a hegemonic articulation to the extent that, as we have seen, the terrain of hegemonic practices is constituted out of the fundamental ambiguity of the social, the impossibility of establishing in a definitive manner the meaning of any struggle, whether considered in isolation or through its fixing in a relational system. -- Ernesto Laclau and Chantal Mouffe, Hegemony and Socialist Strategy: Towards a Radical Democratic Politics

Clearly I'm not… that’s not where I am, because, you know, people... like... leave high school and go to college and they like… [inaudible, interviewer talks over] -- Marissa Johnson on Sarah Palin

For reasons unknown (but time will tell) Sandwichman's ear instinctively hears Laclau and Mouffe's monologue being spoken by the character Lucky from Waiting for Godot.

"Articulation" plays a privileged role in Laclau & Mouffe's analysis, in opposition to -- or, one might say, as the antithesis of -- "essentialism." Essentialism was reductivist (bad); its "last redoubt" was the economy. By elevating class struggle as the presumed locomotive of history, so the story goes, Marx and Engels had sidelined other differences such as gender, race or nationality.

Essentialism and articulation remain key terms within the burgeoning academic-activist intersectionality complex. Instead of presiding as the determining difference (even if only in the "last instance"), class -- often relabeled as poverty -- has been demoted to the status of a residual effect of the other, formerly subordinate, differences, which are, of course, legion.

The logic of Black Lives Matter co-founder Alicia Garza's complaint about "some weirdo populist economic determinism" follows from the critique that an economic class analysis inherently subordinates other forms of oppression to the presumably primary difference of class. The characterization tends toward the hyperbole that class analysis is inherently reductivist and thus must be eschewed in favour of some other analysis of (more essential?) categories of difference. This game of identity musical chairs is not debatable as any and all objection can be disallowed as "condescending weirdness."

There was a Polish joke about how under capitalism man exploits man but under communism it is the other way around. One might paraphrase that to say that under orthodox Marxism, class struggle subordinates all other differences but identity politics does just the reverse. Another variety of essentialism enters through the back door because the framing concept of "articulation" has proven to be incoherent -- it is essentially inarticulate.

Bow Down, Weirdo Populist Economic Determinism

"What choice was there for the workers between the fascist costume drama and a socialism that urged them to regard their own working clothes as a costume?" -- Harold Rosenberg, "Pathos of the Proletariat"

It shocked and confused many of my American friends when Black Lives Matter activists confronted Bernie Sanders, first at Netroots, and then again in Seattle. Didn't they realize Sanders was the candidate with the best anti-racism record? Was this some kind of agent provocateur action? Hillary? Soros? Cointelpro?

The only thing that should come as a surprise is that the actions and their motives would be surprising. The pattern and the analysis has been out there for years... decades. In a 2009 essay, "The limits of anti-racism," Adolph Reed noted the "visceral and vitriolic anti-Marxism" that prevails among many activists who make identity the cornerstone of their political strategy.

Reed characterized anti-racism as consistent with a "left" neoliberal ideology which "looks suspiciously like only another version of the evasive 'we’ll come back for you' (after we do all the business-friendly stuff) politics that the Democrats have so successfully employed to avoid addressing economic injustice."

It would not be useful to absolve political Marxism of all responsibility for this state of affairs, however. Identity politics is only the latest iteration of what Harold Rosenberg termed "destiny politics" way back in 1949:

"Primarily, destiny-politics consists of a demonic displacement of the ego of the historical collectivity (class, nation, race) by the party of action, so that the party motivates the community and lays claim to identity with its fate and to its privileges as a creature of history."

For party, substitute movement... for movement substitute hashtag... and, finally, for hashtag substitute activists, founders, executive directors or scholars. But whereas political Marxism proceeded from the imperialistically homogeneous image of the Proletariat as universal subject, identity politics culminates in the fragmentation of multiple -- or multiplicative -- sites of oppression: class, race, gender, disability, sexuality. Through this "intersectional lens," the notion of a heroic, revolutionary subject of history is translated into that of an abject, anti-heroic victim of oppression:

"Thus, if one is poor, black, elderly, disabled, and lesbian, must these differences be organized into a hierarchy such that some differences gain prominence over others? What if some differences coalesce to create a more abject form of oppression (e.g.. being poor. black, and disabled), or if some differences support both privilege/invisibility within the same oppressed community (e.g., being black, homosexual, and male)?" -- Nirmala Erevelles, Disability and Difference in Global Contexts

The "pathos" in the title of Rosenberg's essay refers to one of the three modes of persuasion analyzed by Aristotle, the other two modes being "ethos" and "logos." Ethos seeks to persuade through the character of the author, logos through the use of reasoning and pathos by appealing to the readers' emotions. The irony that Rosenberg highlighted is that what was argued to be a historical process of development and "awakening" has been transformed into a rhetorical process of persuasion. The erstwhile revolutionary subject of history had already been demoted within political Marxism to a mere personification.

"As a liberating program Marxism founders on the subjectivity of the proletariat. So soon as it declares itself, rather than their common situation, to be the inspiration of men's revolutionary unity and ardor -- how else can it offer itself simultaneously to the French working class and to non-industrial French colonials? -- Marxism becomes an ideology competing with others. When fascism asserted the revolutionary working class to be an invention of Marxism, it was but echoing the Marxist parties themselves." -- Rosenberg

Of course identity politics and intersectionality cannot and do not inspire "revolutionary unity and ardor" to both "the French working class" and "the colonials." What they can do, though, is offer a moral (or moralizing) surrogate for the absent class struggle. Understandably, in this ideological frame, inherited from political Marxism, the foundering of the class struggle offers to those "not fooled by the illusion" an occasion for hubris. Bow down, weirdo populist economic determinism!

Ideology and Economic Facts

Letter from Friedrich Engels to Franz Mehring, July 14, 1893, excerpt:

Ideology is a process accomplished by the so-called thinker consciously, it is true, but with a false consciousness. The real motive forces impelling him remain unknown to him; otherwise it simply would not be an ideological process. Hence he imagines false or seeming motive forces. Because it is a process of thought he derives its form as well as its content from pure thought, either his own or that of his predecessors. He works with mere thought material, which he accepts without examination as the product of thought, and does not investigate further for a more remote source independent of thought; indeed this is a matter of course to him, because, as all action is mediated by thought, it appears to him to be ultimately based upon thought. 

The historical ideologist (historical is here simply meant to comprise the political, juridical, philosophical, theological – in short, all the spheres belonging to society and not only to nature) thus possesses in every sphere of science material which has formed itself independently out of the thought of previous generations and has gone through its own independent course of development in the brains of these successive generations. True, external facts belonging to one or another sphere may have exercised a co-determining influence on this development, but the tacit presupposition is that these facts themselves are also only the fruits of a process of thought, and so we still remain within that realm of mere thought, which apparently has successfully digested even the hardest facts. 

It is above all this semblance of an independent history of state constitutions, of systems of law, of ideological conceptions in every separate domain that dazzles most people. If Luther and Calvin “overcome” the official Catholic religion or Hegel “overcomes” Fichte and Kant or Rousseau with his republican Contrat social indirectly “overcomes” the constitutional Montesquieu, this is a process which remains within theology, philosophy or political science, represents a stage in the history of these particular spheres of thought and never passes beyond the sphere of thought. And since the bourgeois illusion of the eternity and finality of capitalist production has been added as well, even the overcoming of the mercantilists by the physiocrats and Adam Smith is accounted as a sheer victory of thought; not as the reflection in thought of changed economic facts but as the finally achieved correct understanding of actual conditions subsisting always and everywhere – in fact, if Richard Coeur-de-Lion and Philip Augustus had introduced free trade instead of getting mixed up in the crusades we should have been spared five hundred years of misery and stupidity.