Who Is The Bigger Terrorist Threat: Iran Or Saudi Arabia?

Yesterday's WaPo had competing headlines about Iran and KSA (Saudi Arabia): Iran is described as a "potential" terrorist threat while the likely Saudi role in the death of journalist Jamal Khashoggi is described as threatening the US-KSA relationship.  The latter problem (likely to be smoothed over by claiming it was done by "rogue agents") has distracted from the ongoing story of how Iran is this awful enemy and threat to the US, "the world's leading state sponsor of terrorism" as organs oof the US government repeatedly tell us.  The problem is that in recent years there have been zero terror attacks by entities principally funded by Iran. 

The new story reports on "potential" attacks, with the most serious possibility being in Europe, where indeed in thr 80s and early 90s Iranian MOIS apparently killed as many as 60 opponents of its regime in various attacks in Berlin and other locations. An Iranian embassy official based in Vienna has  been arrested in Bavaria in connection with an alleged plot to attack Mujahedin-el-Khalq (MEK) activists near Paris, which plot was foiled.  As it is, the MEK was labeled a terrorist group itself by the US government until 2012.  It may be that such a plot was in the making, but it did not happen.  Regarding the US two supposed Iranian spies were arrested in the US who may have been plotting something, but again, no actual attacks, and there is a related report that at least one spy supposedly supported by Iran working for Hezbollah went to the FBI to offer to become an informant but was arrested.  Ah ha!  Another terrorist!

Of course, there is the usual complaint that Iranian forces are in Syria and Iraq, but they are in both nations at the invitation of their governments.  Iran supports Hezbollah in Lebanon, but like Iran itself it ceased engaging in terror attacks in any serious way back in the 90s and is now too busy ruling Lebanon to mess with such stuff.  There are also claims they arm the Houthis in Yemen, but most evidence says they do little of that, and the main problem there comes from the US-Backed Saudis bombing the Yemenis, including civilians.

Which brings us to the Saudis.  So now people are suddenly questioining the close US alliance with them after this Khashoggi business.  But they are the ones bombing and killing civilians in large numbers in Yemen.  They have supported al Qaeda related groups in Syria.  It was fro KSA that most of the bombers on 9/11 came from.  And while the Saudis may now have allowed women to drive, women were never kept from driving in Iran.  The  Saudi-funded madrassas all over the world have been major breeding grounds for Sunni terrorists of various factions and stripes.  Really, this is a no-brainer.  It is the KSA that is a much more serious terror threat than Iran.

Barkley Rosser

Giving Up On Fighting Global Warming

That is what Robert J. Samuelson did in yesterday's Washington Post (I have not picked on him for awhile, time to gt back at it).  The new UN report on global climate change has brought from him a giant shrug of the shoulders along the lines of, so what?  He makes three arguments.

The first is that we do not have the technology to do anything.  Only 4% of total energy is coming from renewables he says, by which he means solar and wind. But there is also geothermal, hydro, and nuclear.  They add up to quite a bit more.  Maybe we have reached the limits on the first two and lack political will to do more on the third, although it is still expanding in China and in some other nations.  But this seems overly pessimistic.

Then he gets into a rant about how in the US there is no focus on the future.  That may be true, but emphasizing that seems to be just giving up.  Every other nation in the world has signed the Paris Accord. Just because the current US administration has pulled out does not mean we cannot get back into it.

Finally he notes that we shall likely see further emissions from poorer nations, especially China and India.  That is certainly true.  But China in particular has begun to move against GHGs, and India is leading the world in efforts to develop clean and safe nuclear power using thorium the US gave up on in the 1950s because one cannot make nuclear weapons from it.  Really.  None of this seems like we should do nothing.

Just to make himself look really ridiculous, on the second argument he goes back to one of his longstanding bugaboos.  He concludes his argument on the lack of future orientation in the US by denoucing the lack of change in Social Security and Medicare, presumably meaning cuts in benefits as he has long advocated.  For me personally, I oppose this as I want to see my children and grandchildren get the same benefits I shall get.  I oppose cutting those benefits  out of my concern for future generations.  This is probably the most  shameful part of what is already a pretty shameful piece by him.

Barkley Rosser

U.S. Saudi Trade

Donald Trump appears to be reluctant to investigate the murder of Jamal Khashoggi because of an alleged trade deal?

Donald Trump has said US investigators are looking into how Jamal Khashoggi vanished at the Saudi consulate in Istanbul, but made clear that whatever the outcome, the US would not forgo lucrative arms deals with Riyadh. The president’s announcement raised concerns of a cover-up of evidence implicating Saudi Arabia’s powerful crown prince, Mohammed bin Salman, in plans to silence the dissident journalist…Any sense that the administration might seek to impose serious consequences on Saudi Arabia was dispelled by the president. Asked at an impromptu press conference in the Oval Office whether the US would cut arms sales if the Saudi government was found to be responsible for Khashoggi’s disappearance, the president demurred, saying the US could lose its share of the huge Saudi arms market to Russia or China. In the Oval Office Trump pointed out that the disappearance took place in Turkey and that Khashoggi was not a US citizen.

He may not be a citizen but he did hold a green card and worked for the Washington Post. Credit to the Republicans in Congress for pressing on the appropriate investigation of this matter. My only comment today will be to challenge Trump’s argument that our trade with Saudi Arabia is more important than sanctioning the Saudi government for this murder likely ordered by Mohammed bin Salman. The Census Bureau reports on both our imports from Saudi Arabia and our exports to them. Over the last decade, imports have varied from less than $17 billion per year to over $55 billion. These imports are predominantly been oil of course. Exports have never reached $20 billion per year so we have run persistent and sometimes large deficits with the Saudis. In Trumpian “logic” – aren’t we losing to them? To be fair, we choose to import Saudi oil but then again, the kingdom is not the only supplier of this commodity. But Trump is telling us that we may have yuuuge exports of military goods:

I know they’re [Senators] talking about different kinds of sanctions, but they’re [Saudi Arabia] spending $110 billion on military equipment and on things that create jobs, like jobs and others for this country. I don’t like the concept of stopping an investment of $110 billion into the United States.

Of course this figure is considered “fake”. Maybe the Saudis will purchase more military goods in the future than they have in the past. But as the Census Bureau notes, their 2017 purchases were a mere $2 billion whereas the Saudis purchased over $2.7 billion in civilian aircraft and $1.6 billion in automobiles. I’m sure Boeing, Ford, and GM enjoy exporting their products wherever they can but these amounts are indeed peanuts compared to the world market for automobiles and airplanes.

The Political Economy of the Working Class

The political economy of the working class is pluralist.

The political economy of the working class is pragmatic.

The political economy of the working class is critical.

Karl Marx chronicled and contributed to the political economy of the working class. He did not invent, conclude or supersede it. In  his Inaugural Address to the International Working Men’s Association, Marx celebrated the first victory of the political economy of the working class, the passage, in 1847, of the Ten Hours' Bill:

This struggle about the legal restriction of the hours of labor raged the more fiercely since, apart from frightened avarice, it told indeed upon the great contest between the blind rule of the supply and demand laws which form the political economy of the middle class, and social production controlled by social foresight, which forms the political economy of the working class. Hence the Ten Hours’ Bill was not only a great practical success; it was the victory of a principle; it was the first time that in broad daylight the political economy of the middle class succumbed to the political economy of the working class.

This passage tells us what we most need to know about the political economy of the working class. It is founded upon "social production controlled by social foresight" in opposition to "the blind rule of supply and demand laws." The "most notorious organs of science" had predicted and "proved" that "any legal restriction of the hours of labor must sound the death knell of British industry" and, of course, they were subsequently proved absolutely wrong. Not 'merely' wrong, but the exact opposite of apposite.

The political economy of the working class is innovative.

The political economy of the working class is traditionalist.

The political economy of the working class is eclectic.

The first victory of working class political economy Marx spoke of occurred 17 years before his inaugural address, 20 years before publication of Das Kapital and a year before The Communist Manifesto. It would be anachronistic to give credit for that outcome to Marx's analysis or agitation. Moreover, Marx says that the victory culminated 30 years of struggle, which would make the political economy of the working class at least older than Marx.

The political economy of the working class is conservative.

The political economy of the working class is revolutionary.

Why does this even matter? It matters because the alternative between "social production controlled by social foresight" and "the blind rule of supply and demand laws" cannot be reduced to Marxism vs. non-Marxism or socialism vs. capitalism. It is instead a contest between collective wisdom and a very peculiar sort of solipsistic, motivated passivity. If there ever was such a thing as "laws" of supply and demand, they would only be self-enforcing to the extent that market participants were not aware of them. As soon as those regularities are observed, they will be gamed.

It also matters because units of  radically different type lie at the heart of the two political economies. The political economy of the middle class is denominated in monetary units, while the political economy of the working class revolves around qualitative as well as quantitative time. The limitation of the length of the working day confers "physical, moral, and intellectual benefits" above and beyond simply "more time off" and a better bargaining position for wages. "After all their idle sophistry, there is, thank God! no means of adding to the wealth of a nation but by adding to the facilities of living: so that wealth is liberty -- liberty to seek recreation -- liberty to enjoy life -- liberty to improve the mind: it is disposable time, and nothing more."

Andres Malm tells us that with passage of the Ten-Hours Bill in 1847, "Water power received its coup de grâce." "If labour scored a gain in the Acts of 1847 and 1850, capital retaliated by speed through steam." "[A]ccording to Von Tunzelmann, the Ten Hours Act was 'probably the most important determinant' of the rise of high-pressure steam and, by extension, the final victory of the engine in the cotton industry (and beyond)."

So, there you have it. The great victory of the political economy of the working class over the political economy of the middle class had the unintended consequence of completing the victory of fossil fuel over renewable but erratic water power.

But, of course the story doesn't end there. Might not the same political economy of the working class act as a lever in the transition away from fossil fuels? The IPCC 1.5° C Report and the Ten-Hour Week

The IPCC 1.5° C Report and the Ten-Hour Week

I read the IPCC summary for policy makers so you don't have to. You may have heard that CO2 emissions have to fall by 45% by 2030 to avoid the possibility of overshooting 1.5°C global warming. Actually emissions must decline by 45% from 2010 levels, which are already substantially lower than 2018 levels. The strategies for reducing emissions by that amount are quite complex and depend on hundreds of governments adopting scores of policies that they have no intention of adopting.

So, burn in climate catastrophe Hell, grandchildren!

But wait! Didn't Keynes write something long ago about the economic possibilities for our (their) grandchildren? "What can we reasonably expect the level of our economic life to be a hundred years hence?" Keynes asked that in 1930 -- which just happens to be a hundred years before the IPCC 2030 target date! What about the ecological survival possibilities for our grandchildren?

I have translated the IPCC report into terms compatible with Keynes's prognostications. Remember his prediction of a 15-hour week being "quite enough to satisfy the old Adam in most of us"? How rapidly and how steeply would we have to reduce workweeks to achieve the 45% reduction in emissions by 2030, assuming no other changes in technology (or population)?

I've taken quite a few short-cuts to calculate these estimates. For starters, I only look at the twenty top emitters of CO2 from 2015. I assumed that emissions reductions targets for each country should be allocated on the basis of convergence toward a uniform emissions per capita standard, which would be 45% below average emissions per capita in 2010 (for the 20 countries).

Several countries among the top twenty currently emit fewer tons per capita of carbon dioxide than the hypothetical 2030 standard. These include Brazil, India and Indonesia. Mexico is currently emitting close to what its 2030 quota would be. So my estimates are concerned only with the remaining 16 countries.

To achieve emissions reduction through hours and population limitations alone would require annual reductions in working time of between one percent for Turkey and twelve percent for Saudi Arabia. Also near the top end are the U.S., Canada and Australia at around an eleven percent per annum reduction. With considerable rounding and a generous allowance for holidays and vacations, these reductions in annual hours would indicate a workweek in 2030 of around ten hours.

In the middle range, France and the U.K. could look forward to workweeks of around 20 hours a week. China, currently the world's largest emitter of CO2 would see its workweek cut to somewhere in the neighborhood of 25 hours per week.

Of course some of these reductions in working time could be reversed by de-industrialization -- that is the substitution of less energy intensive but more labor intensive methods of production. Hours reduction could also be moderated by transition to solar and wind energy, by energy conserving technological advances and by the introduction of carbon-capture technologies, including large-scale reforestation.

This hours reduction exercise is only meant to give a simplified view of the scale of transition required. But it also alludes to an earlier transition that consolidated the central place of fossil fuels in an expanding industrial economy.

In 1847, after decades of struggle by factory workers, the U.K. parliament passed the Ten Hours Bill. In response, manufacturers turned to the high-pressure steam engines to compensate for the loss of factory working time with faster, more powerful, more fuel efficient machinery that could do more work in less time. By the end of the 1850s, steam power had decisively eclipsed water power and high-pressure steam had surpassed the low-pressure Watt steam engine.

It was not the intention of the ten-hour legislation in the mid-19th century to deliver the "coup de grâce," to water power, as Andreas Malm termed it, but that was its effect. Might not a working time policy designed and intended to enforce a transition away from fossil fuels be worthy of serious consideration?

Nobel Prizes in Economics, Awarded and Withheld

Most of the commentary today on the decision to award Nobel prizes in economics to William Nordhaus and Paul Romer has focused on the recipients.  I want to talk about the nonrecipient whose nonprize is perhaps the most important statement by the Riksbank, the Swedish central bank that decides who should be recognized each year for their work in economics “in memory of Alfred Nobel”.

Nordhaus was widely expected to be a winner for his work on the economics of climate change.  For decades he has assembled and tweaked a model called DICE (Dynamic Integrated Climate-Economy), that melds computable general equilibrium theory from economics and equations from the various strands of climate science.  His goal has been to estimate the “optimal” amount of climate change, where the marginal cost of abating it equals the marginal cost of undergoing it.  From this comes an optimal carbon price, the “social cost of carbon”, which should be implemented now and allowed to rise over time at the rate of interest.  In his first published work using DICE, from the early 1990s, he recommended a carbon tax of $5 a tonne of CO2, inching slowly upward until peaking at $20 in 2085.  His “optimal” policy was expected to result in an atmospheric concentration of CO2 of over 1400 ppm (parts per million) at the end of this planning horizon, yielding global warming in excess of 3º C.  (Nordhaus, 1992)

Over time Nordhaus has become slightly more concerned with the potential economic costs of climate change but also more sanguine about the prospects for decarbonized economic growth, even in the absence of policy.  In his latest work he advocates a carbon tax of $31 per tonne in 2015, increasing at 3% per year over the following century.  This too would result in more than 3º warming.  To give a sense of how modest his suggestion is, consider that, in the same paper, Nordhaus calculates that the most efficient carbon tax to limit warming to 2.5º is between $107-184 per tonne depending on assumptions.  The target of the Paris Accord is 2º, and most scientists consider this an upper bound for the amount of warming we should permit.

What do these “optimal” tax numbers mean?  Based on the carbon content of gas, each $1 carbon tax translates into a one cent tax on a gallon of gas at the pump.  If we adopted Nordhaus’ suggestion for carbon pricing, the result would be minuscule compared to the year-to-year fluctuations in energy prices due to other causes.  In other words, while his prize is being trumpeted as a statement from the Swedish bankers on the importance of climate change, in fact he is a key spokesman for the position, rejected by nearly all climate scientists, that the problem is modest and can be solved by easy-to-digest, nearly imperceptible adjustments to energy prices.  If we go down his road we face a significant risk of a climate apocalypse.

But Nordhaus is not the only climate economist on the block.  In fact, he has been locked in debate for many years with Harvard’s Martin Weitzman.  Weitzman rejects the entire social-cost-of-carbon approach on the grounds that rational policy should be based on the insurance principle of avoiding worst-case outcomes.  His “dismal theorem” demonstrates that, under reasonable assumptions, the likelihood of tail events does not fall as rapidly as their degree of catastrophe increases, so their expected cost rises without limit—and this applies to climate scenarios.  (I explain this graphically here.)  Not surprisingly, Weitzman's work is often invoked by those who, like me, believe much more aggressive action is needed to limit carbon emissions.

It also happens that Weitzman is a giant in the field of environmental economics quite apart from his particular contribution to the climate debate.  He did the original work on environmental policy under uncertainty and has contributed significantly to other areas of economic theory.  (His analysis of the uncertainty problem is explained here.)  Even if the greenhouse effect never existed he would be a candidate for a top prize.

Because of this, whenever economists speculated on who would win the econ Nobel, the Nordhaus scenario was always couched as Nordhaus-Weitzman.  (For a recent example, see Tyler Cowen, who adds Partha Dasgupta, here.)  It seemed logical to pair a go-slow climate guy with a go-fast one.  But as it happened, Nordaus was paired not with Weitzman but Paul M. Romer for the latter’s work on endogenous growth theory.  I won’t take up Romer’s contribution here, but what is interesting is that the Riksbank committee chose to yoke together two economists whose work is only loosely related.  I can’t recall any forecaster ever predicting a joint prize for them, no matter how much commentators have scrambled to justify it after the fact.

The reality is this is a nonprize for Weitzman, an attempt to dismiss his approach to combating climate change, even though his position is far closer to the scientific mainstream than Nordhaus’.  An example of the enlistment of the uncritical media in this enterprise is today’s New York Times, where Binyamin Appelbaum writes:

Mr. Nordhaus also was honored for his role in developing a model that allows economists to analyze the costs of climate change. His work undergirds a new United Nations report on the dangers of climate change, released Monday in South Korea.

Wrong.  The work Nordhaus pioneered in the social cost of carbon is mentioned only twice in the IPCC report, a box in Chapter 2 and another in Chapter 3.  The reason it appears only in boxes is that, while the authors of the report wanted to include this work in the interest of being comprehensive, it plays no role in any of their substantive conclusions.  And how could it?  The report is about the dangers of even just 1.5º of warming, less than the conventional 2º target, and far less than the 3+º Nordhaus is comfortable with.  Damages are expressed primarily in terms of uninhabitable land and climate refugees, agricultural failure and food security, and similarly nonmonetary outcomes, not the utility-from-consumption metric on which Nordhaus’ work rests.

The Nordhaus/Romer combo is so artificial and unconvincing it’s hard to avoid the impression that the prize not given to Weitzman is as important as the one given to Nordhaus.  This is a clear political statement about how to deal with climate change and how not to deal with it.  The Riksbank has spoken: it wants a gradual approach to carbon, one that makes as few economic demands as possible.

Nordhaus, William. 1992. An Optimal Transition Path for Controlling Greenhouse Gases. Science. Nov. 20. 258(5086): 1315-1319.

Nordhaus, William. 2017. Revisiting the Social Cost of Carbon. PNAS. 114(7): 1518-1523.

The Susan Collins Excuse

I listened very carefully to Senator Collins as she detailed her excuses for letting Brett Kavanaugh become a Supreme Court Justice. Two aspects of her speech were particularly absurd and kind of appalling. Her claims that Kavanaugh is a moderate akin to Justice Stevens were beyond absurd. The most appalling aspect of her speech was how she dismissed the claims that Kavanaugh sexually abused women in high school and/or college:

Some of the allegations levied against Judge Kavanaugh illustrate why the presumption of innocence is so important. I am thinking in particular not at the allegations raised by professor Ford, but of the allegations that when he was a teenager Judge Kavanaugh drugged multiple girls and used their weakened state to facility gang rape. This outlandish allegation was put forth without any credible supporting evidence and simply parroted public statements of others. That’s such an allegation can find its way into the Supreme Court confirmation process is a stark reminder about why the presumption of innocence is so ingrained in our a American consciousness. Mr. President, I listened carefully to Christine Blasey Ford’s testimony before the Judiciary Committee. I found her testimony to be sincere, painful, and compelling. I believe that she is a survivor of a sexual assault and that this trauma has upended her life.

She believes Dr. Ford but then she went on and on like a defense attorney why she did not believe her when she clearly said it was Kavanaugh. But the real stunner was when she said this:

I do not believe that the claims such as these need to be proved beyond a reasonable doubt. Nevertheless, fairness would dictate that the claims at least should meet a threshold of more likely than not as our standard. The facts presented do not mean that Professor Ford was not sexually assaulted that night or at some other time, but they do lead more to conclude that the allegations fail to meet the more likely than not standard.

I guess “the facts presented” is the key aspect as we know the FBI was not allowed to pursue corroborating evidence, which is why this episode is clearly absurd. But does Senator Collins truly grasp this more likely than not concept? I’m an economist not a lawyer but I have worked with tax attorneys and accountants on the transfer pricing aspects of tax provisions under FIN 48:

Under the Interpretation, absent the existence of a widely understood administrative practice and precedent of the taxing authority, an enterprise cannot recognize a tax benefit in its financial statements unless it concludes that it is more likely than not that the benefit will be sustained on audit by the taxing authority, based solely on the technical merits of the associated tax position. In this evaluation, an enterprise must assume that the position (1) will be examined by a taxing authority that has full knowledge of all relevant information and (2) will be resolved in the court of last resort.

Let’s key in on “full knowledge of all relevant information”. I have seen multinationals trying to convince financial auditors not to impose tax reserves based on some suspect report that key intercompany prices are arm’s length and where material information was not disclosed. In my experience, the financial auditors would refuse to give FIN 48 clearance until this information was disclosed and properly evaluated. It is well known that the latest FBI inquiry literally ran away from material information that may have corroborated Dr. Ford’s testimony. So when Senator Collins raises this More Likely Than Not standard – she should know better given the fact relevant information was not properly explored. Nicole Belle makes a strong case that the Republicans even knew ahead of time that Dr. Ford’s allegations are true:

Don't Kid Yourself. The GOP KNOWS Kavanaugh Tried To Rape Someone ... The FBI notifies the White House of the letter to see if they want follow-up. The White House declines further investigation. But now they know. And now they pass it on to GOP operatives. Early August. So now, Kavanaugh, the FBI, the White House AND GOP operatives all know. BEFORE the hearing even begins. So now the PR campaign goes into overdrive.

Read the entire thing as it explains a lot of the Republican fake anger at Senator Feinstein, which was all a gigantic smoke screen to disguise the fact that the Republican operatives were doing all they could to demean Dr. Ford, pump up Kavanaugh, and evade any real investigation. Senator Collins little More Likely Than Not sort of puts this in the domain of civil litigation rather than criminal charges where the standard is:

preponderance of the evidence - n. the greater weight of the evidence required in a civil (non-criminal) lawsuit for the trier of fact (jury or judge without a jury) to decide in favor of one side or the other. This preponderance is based on the more convincing evidence and its probable truth or accuracy, and not on the amount of evidence. Thus, one clearly knowledgeable witness may provide a preponderance of evidence over a dozen witnesses with hazy testimony, or a signed agreement with definite terms may outweigh opinions or speculation about what the parties intended.

Suppose Dr. Ford chooses to file a civil lawsuit against Brett Kavanaugh and Mark Judge. What then? We would have actual discovery if this lawsuit is allowed. Then again I bet Kavanaugh would hire some slime ball lawyers to squash this lawsuit even if they had to take it to the Supreme Court where Justice Kavanaugh could file the fifth vote in favor of his own motion.

"Lock Her Up!!!"

For several years now we have all grown accustomed to the fact that President Trump likes to go to rallies of his supporters where they relentlessly chant the subject head of this post.  It has always referred to his opponent in the presidential election of 2016, the person who got about 3 million more votes than he did, even as he managed to win in the determining electoral college.  While I recognize that Hillary Clinton has many flaws, she has been investigated more times than I can count for many alleged offenses, some of which I suspect she is guilty of, even as some of them were pretty minor (see financial shenanigans back in Arkansas).  She also was subjected to many Congressional investigations by several committees for many alleged offenses, including her notorious getting emails in her home like her three predecessors did, although none of them were ever so investigated. She even had 8, really 8, investigations of her role in the Benghazi fiasco, these costing taxpayers many millions of dollars.  The final one involved her  sitting for 11 hours straight while a GOP led committee interrogated her, ending up with them looking like a bunch of exhausted foolish idiots while she looked  cool as a cucumber. The final bottom line is that none  of those investigations led to even an indictment for anything.

A peculiar sideshow on this is that among the more bizarre investigations of her, costing millions of US taxpayer dollars, was that in 1998 by the Starr group of the chance that she had been responsible for the death of Vincent Foster, who committed suicide on the GW Parkway.  The person advocating this investigation of a conspiracy theoty and engaging in it, only to find a big fat nothing, was none other than Brett Kavanaugh, apparently about to be confirmed to be the  next lifetime member of the US Supreme Court.

So now we come to why I am posting this.  This past Tuesday President Trump attended a rally in Mississippi where he mocked Dr. Christine Blasy Ford on her memory lapses in connection with her allegations about Kavanaugh sexually asssaulting her.  In fact Trump lied about certain parts of what she failed to remember, notably the year it happened and where in the house it happened, which in fact she reported under oath.  For this lying, Trump was rewarded with the chant he usually gets at his rallies, the chant usually directed at the not likely to be indicted or prosecuted or jailed Hillary Clinton, but now apparently at Dr. Ford, who even if her memonty is flawed is not remotely near being guilty of any crime, that now nauseating chant of "Lock he Up!"  And even after this abysmal display by Trump and his supporters, or perhaps more disturbingly precisely because  of it, Brett Kavanaugh will be sitting on the Supreme Court of the United States for a very long time.

Barkley Rosser 

I Was Wrong: US-Mexico Trade Deal Lives With Canada: USMCA Rarher Than NAFTA

At the last minute last night the US and Canada cut a deal, so now Canada is on on the deal to change NAFTA to USMCA.  I think the name change is the biggest part of it, even though Trump still claims that NAFTA was "the worst trade deal ever" and the new deal makes relatively minor changes in it, especially if one considers what would have been the case if the US had actually joined the TPP, as most of the environmental, labor, and intellectual property parts of the new deal (the environmental and labor parts largely improvements, if not too dramatic) were already agreed to by Mexico and Canada when rhey joined TPP, which they belong to along with all its other members aside from the US.

Beyond continuing NAFTA and adding the TPP parts, the main changes are in the auto industry and the dairy industry, the former mostly affecting Mexico, the latter mostly affecting Canada.  Between the restrictions on outsourcing and the $16 per hour limit on imports, there may be some shifting of auto parts production from Mexico to the US and possibly Canada as well.  This will lead to job losses in Mexico, but there may be some Mexican autoworkers who see wage boosts also.  The auto deal has little impact on Canada aside from Trump retracting his threat to impose tariffs, which was opposed by GM and Ford as well as the UAW thanks to the profound integration between the US and Canadian auto industries.

However, it must be noted that while there may be some increase in production and employment in the US auto parts sector, there is likely to be other damage to the US auto industry.  The new rules will increase costs on top of the existing steel and aluminum tariffs, which were not removed by this agreement, although both Mexico and Canada wanted them to be removed.  So  US consumers will be hurt, but the higher costs will make all auto exports from the three nations less competitive, and indeed US auto exports have been declining in recent months, something likely to accelerate after this deal really goes in.  It is quite unclear whether there will be a net gain or loss for employment in the US auto industry overall as a result of this.

Regarding dairy, well, Scott Walker gets some help in Wisconsin as indeed there will be some increased exports to Canada of dairy products, especially powdered milk and infant formula.  Apparently the opening is not as big as being advertised, and this looks to be where Trump made some give.  Probably overall US dairy industry is getting about 50% of what was asked for.  I note that dairy was never part of NAFTA, so I guess it will now officially be part of the new USMCA. 

I cannot leave this without noting that while the Canadian dairy industry has been heavily protected (and Canadian consumers might get a gain in lower dairy product prices), the US government has long subsidized the US dairy industry.  My favorite outcome of that was that the USDA long bought butter surpluses and piled them up in an underground "butter mountain" near Madison, WI.  Quite a few years ago that mountain caught fire and burned for about three months.  I think those subsidies have been reduced, but it is not the case that all the protectionism and subsidies have been on the Candian side rather than the US side.

Anyway, I prefer to admit that I am wrong upfront before somebody points it out, and I was on this one.  Lighthizer and others pulled out the deal at the last minute, even if it is not that big of a deal.

Barkley Rosser

I Believe Kellyanne Conway

In an interview with Jake Tapper on CNN's State of the Union, Kellyanne Conway said, "I’m a victim of sexual assault, I don’t expect Judge Kavanaugh or Jake Tapper or Jeff Flake or anybody to be held responsible for that. You have to be accountable for your own conduct."

I believe Conway because she spoke about this before, in October 2016, in an interview with Chris Matthews, right after the Access Hollywood tape of Donald Trump's "locker room talk" came out.

KELLYANNE CONWAY: I would talk to some of the members of Congress out there when I was younger and prettier, them rubbing up against girls, sticking their tongues down women's throats who - uninvited, who didn't like it.

CHRIS MATTHEWS: Yes. 

CONWAY: Yes, you're saying yes because you know it's true. They used to - 

MATTHEWS: No, I'm hearing it - I've heard the accounts, of course, but I want to ask you – 

CONWAY: They did - no, absolutely. And some of them, by the way, on the list of people who won't support Donald Trump because they all ride around on their high horse.

Conor Friedersdorf summed up that exchange at the time: "the GOP nominee’s campaign manager declared on national television that multiple prominent Republicans –– some who oppose Trump, and others, apparently, who support him –– perpetrated sexual assaults, and she knows their names."

The headline on that story was, "Trump Tries to Intimidate Republicans Into Sticking With Him" and the subhead was, "His campaign manager, Kellyanne Conway, warned that she knows of GOP congressmen who perpetrated sexual assaults."

Trump Destroys His Favored SCOTUS Nominee

Yes, I am weighing in on this overly hyped story on the problematic proposal by President Trump to appoint Brett Kavanaugh to the SCOTUS.  Obviously the main reason why BK will end up not on the court is all his lying about his past sex and drinking behavior, ironically some of which he may not remember, although claiming he does remember all his past may lead to him convicted of perjury.

For poor Brett Kavanaugh, his personal tragedy is that Trump nominated him for SCOTUS.  If DJT had not done so, BK would probably have reasonably quietly lived out his life as a far right wing member of the Washington District Appeals Court, basically the second most important and powerful court  in the US. Dr. Prof. Ford would not have come forward to drag up his ugly ancient past, much less the several other women who have done so.  His  10-year old daughter would not have been publicly embarrassed, and he might even have been able to coach a few more years of school basketball teams, certainly the most important thing one can do personally. Shame on Trump for destroying his Kavanaugh's fragile life.

Of course the reason Trump destroyed the life of this worthless scumbag is that he was reportedly the only judge at his level in the system who publicly proclaimed that  a president should not be investigated, that he can refuse a suppoeana, even though Nixon accepted one.  BK has gone down because he would not even accept this precedent, and laughable madman President Trump really wants some sucker on the SCOTUS to help save his behind if/when it comes to pass.

But, frankly, I do not feel sorry for Brett Kavanaugh.  While what is doing him in is all this sex and drinking scamdal, what makes him completely unacceptable as a SCOTUS nominee is his role in the W. Bush admin, most of the relevant papers not publicly released, is his reported role in writing memos supporting torture  as an appropriate activity by the US.  Nobody is talking about this, but his support of torture is the most important reason Kavanaugh should be rejected for sitting on SCOTUS.

Barkley Rosser

The US-Mexico Trade Deal Dies

Nobody is calling it that, but the low key story on the back pages of today's major papers report that this is what has happened, not to my surprise.  September 29 (or maybe the 30th at a stretch) is the deadline for President Trump to submit to the Congress the final version of the US-Mexico trade deal if there is any chance of it being passed by the US Senate in time for outgoing Mexican President Pena Nieto to sign it on his lats day in office on November 30 after the outgoing Mexican parliament could approve of it.  The US Senate rules are that there is a 90-day waiting period for the initial announcement of a trade deal and a 60 day waiting for delivering the final detailed agreement.  The Trump administration got their initial report in on time, but with only it involving US and Mexico.  Sept. 29 is the deadline for the final deal.

As noted in previous posts here (Aug. 29, econospeak.blogspot.com/2018/08/marrying-nafta-and-tpp-us-mexico-free.html and Sept. 6, econospeak.blogspot.com/2018/09/has-trump-gone-over-the-edge-on-negotiating.html , sorry having trouble providing the links), top Republican senators such as No. 2 John Cornyn of Texas and others have said they will not approve a deal that does not include Canada, a reformed NAFTA.  Let me note that it was not impossible for this US-Mexico trade deal to form the basis of such a deal.  But, unfortunately, in the immediate aftermath of the announcement of the US-Mexico deal Trump announced that Canada must settle the negotiation on "our terms."  Oh.  The funny thing is that there was a possible deal.  The US was making demands of Canada about the dairy industry (never a part of NAFTA because it was so hard to make a deal) and Canada was making demands about the lumber industry, generally described as a dispute over "dispute resolution."  There were other issues, but these were the politically hard and sensitive  ones involving such places as Wisconsin and Quebec.  In the end it appears that no deal between the US and Canada has been made and probably will not be made in time for the Sept. 29 deadline.

The newspaper reports provide zero details of the official negotiations, led by official US trade rep Robert Lighthizer on the US side, a hardline but experienced and knowledgeable official. All we have is that there is no deal between and the US and there will be no further official negotiations between now and the deadline of Sept. 29 or 30. We have just passed a last possible moment to save the US-Canada negotiation at the UN meeting (where the US president for the first time in history was laughed at while addressing the UN General Assembly filled with around 100 national leaders from around the world), actually two.  One was a possible meeting between Lighthizer and Canadian Foreign Minister, Chyrsta Freeland, which might have happened on the sidelines of the UNGA meetings.  I do not think that happened, and while she has in the US media been regularly identified as the Canadian opposite number of Lighthizer, she certainly was not the Canadian rep in the now failed negotiations, presumably somebody on the same level as Lighthizer (US SecState Pompeo is the opposite number of Freeland), whose name I have never seen reported.

But that meeting became completely irrelevant as there became a possible meeting at the same meeting (after Trump got laughed at) between Trump and Canadian PM Justin Trudeau.  Trump very loudly and publicly declared that he would not meet with or speak with Trudeau, claiming that he did not like the Canadian ngotiating "style."  Really.  In any case, any possible meeting between Lighthizer and Freeland was simply out the window.  And, of course, this means there will be no agreement between the US and Canada prior to the Sept. 29 deadline.

According to the back page WaPo report today, despite this failure of getting an agreement with the US's largest national export destination, the Trump admin will submit the current US-Mexican agreement without Canada (NAFTA minus Canada) to the US Senate (assuming that some not well-reported details of this agreement with Mexico have been resolved).  I suppose there is a small chance that the Senate will accept it and that will be it.  But based on previous statements by important Republican senators, this will not pass without Canada aboard, and while a few Dem senators (Sherrod Brown) have made supportive noises about Trump's trade war, I doubt there will be enough to offset the loud GOP opposition, especially given that that United Autoworkers Union has come out against the agreement without Canada, joining in this with the US Chamber of Commerce and the US Business Roundtable.

It looks like the successor to NAFTA, if anything, will have to be renogiated from scratch with the incoming leftist Mexican president, Lopez Obrador, but Canafa will have to be brought in, no matter what, or else involved will laugh very loudly at President Trump.

Barkley Rosser

Catch 22.4

As the number of workmen that can be kept in employment by any particular person must bear a certain proportion to his capital, so the number of those that can be continually employed by all the members of a great society must bear a certain proportion to the whole capital of that society, and never can exceed that proportion. -- Adam Smith, The Wealth of Nations

An"invisible hand" reaches up out of the subterranean depths of that "whole capital" periodically to re-establish the "certain proportion," which lies somewhere between 20 and 25 percent. The average from 1948 to the end of 2017 was 22.43434%. It looks rather like this:

Household and non-profit net worth and GDP track each other quite nicely from 1948 to 1973 until "something happens" in 1973. (What could that "B"?!) After 1973, net worth underperforms GDP until sometime in the late 1990s when a series of wild gyrations commences. As you can see from the chart, though, the authorities have the situation well in hand and nothing could possibly go wrong.

Henry Hoyt in 1886 and Leo Amery in 1908 chided Smith's "fallacy" of "terminological inexactitude" and the consequence of ignoring the fact that the capital of a nation, "grows by the exercise of the qualities and energies of which it consists." Well, yes, but to some extent those qualities and energies are bound up in the possession of assets whose market values at any particular time can be aggregated. The amount of work to be done is not fixed but it is bounded. Hoyt and Amery had a point -- but so did Smith.

It seems to me that my little chart above tells a story of how those bounds might even be stretched a bit -- presumably by the expedients of easy credit, fiscal deficits and financial deregulation. But there seems to be inevitable leakage from stimulation to speculation and from speculation to Ponzi finance, as Minsky warned. From 1948 to 2016, the CPI-adjusted net worth of households and non-profits never exceeded five times real GDP (or GDP never less than 20% of Net Worth). At the end of the second quarter of 2018, GDP was 18.7% of Net Worth.

A Weak Defense of Citizen United: Ownership v. Control

Many thanks to Peter Dorman for highlighting Citizens United As Bad Corporate Law. I guess we had to endure this comment, which is a really weak rebuttal:

Corporate shareholders are most definitely owners; they alone have the authority to sell their shares or the company's assets. Their rights are based not on contract law but statutory rules of franchise. They are guaranteed rights of assembly abd representation, and they cannot legally surrender those rights even if they elect Directors who vote to do so.

My first thought to this attempted rebuttal was the complaints of condominium owners in San Francisco. They may own the rights to what is effectively an apartment but they have to deal with management as they really do not own the land. And even the land owner does not have that much control in a city where regulations control land use. My second thought involved the minority shareholders of Yukos Oil during Yeltsin’s Russia, which I noted in this related post:

AB noted yesterday that some of Sinclair Broadcasting’s shareholders were upset the decision of management to aid the Bush-Cheney ’04 campaign with free air time for another smear of John Kerry. Their stock, which was around $10 a share in early August, is trading now for about $7.30 a share.

Now I get that the corporate governance rules in the U.S. are not as pathetic as they were during Yeltsin’s Russia but the idea that an individual shareholder has any real control of how a corporation is run is quite naïve. Peter asked this commenter if he had read the paper. Had he done so, he might have noticed footnote 34 on page 19, which included a seminal paper by Ronald Coase entitled “the Nature of the Firm”. This paper initiated an entire literature on what this recent paper calls the “nexus of contracts theory”. If our commenter has not read this literature, he should.

A Few Thoughts on “Sorry to Bother You”

I saw this film several weeks ago and have been meaning to say a few things about it.  Herewith:

1. This is an exceptionally intelligent movie by American standards.  It maintains a high level of wit and observation from beginning to end, and little zingers flash by in almost every frame without announcing themselves.  It speaks up to its audience, something I really appreciate.

2. STBY fits into a tradition of films in which the act of organizing a union and carrying out a job action is held up as a revolutionary political and personal challenge.  Other examples include “Norma Rae” and “Bread and Roses”, but actually I was reminded even more of “The Cradle Will Rock”, at least in spirit.

3. There’s a California, loose-limbed absurdist aspect too.  I was reminded a bit (giving away my age, race and sensibility) of the Firesign Theater.

4. Kate Berlant as the employee motivation hack was perrrrfect.

5. Thank you, Boots, for showing us so clearly the “race versus class” debate is vacuous.  These are not separate things in America.

6. Maybe the horse stuff was a little too much, even for me.

On a serious note, the fundamental question in any strike is whether there will be scabs, and whether the police will push them through the line.  If the job doesn’t require scarce skills, the boss is willing to alienate the workforce, and the power of the state is enlisted to break the strike, it will almost always fail.  (Maybe the only exception is where a boycott of the strikebreaking company can be effective.)  All the politics of labor action swirl around these issues.  Spoiler alert: the intervention of the horse people at the end is not just a plot device, it’s a way to finesse the the central problem labor activism has to deal with in the twenty-first century.  But that’s OK—it’s only a movie.