This Cutting Edge (John McWhorter & Glenn Loury)

[Bloggingheads]

[jimM47]

John says that Obama is not a fighter and laments that because of the Tea Party he needs to be. Glenn imagines a potential Obama as a Huey Long long and waxes poetic about a left-populist version of the Tea Party that never was. I am unconvinced.

Glenn starts out by talking about his mortgage. When the value of his house went down, he lost equity, but his bank doesn't lose anything on the credit it had extended. But this is just a restatement of the definition of equity-holder vs. creditor. The creditor doesn't get anything from rising values but doesn't take losses until after the equity-holder is wiped out. Those are the rules. The calls of Glenn's hypothetical left-populist to change them as things progress, tit-for-tat-style, because of the bailouts, don't sound like justice. They sound like deciding to change the rules unpredictably. They sound like giving some people two chances and sticking other people with the costs. They sound scary to a whole lot of Americans who have money, education, and the ability to organize politically, but not the security of a good sob-story to tell of the little guy, or the security of the political connections and economic rationalizations of the really big guy. If you want to frighten the bourgeoisie, just start messing with property rights; start putting the President in charge of every economic problem that crops up. Remind them of Mark Twain's aphorism that no man's life or property is safe while the legislature is in session. You'll have your populist revolt then, but not the one you wanted.

My sense is that this is exactly what happened. The Tea Party could generate anger at ObamaCare and it still had the energy to push an agenda on the debt ceiling, but I don't sense the same urgency, the same foreboding, that really animated the movement in its nascence. In the last year of the Bush there was a fear, crystallizing into a certainty in the first year of Obama, that the rules were being rewritten in unpredictably ways, and in ways that weren't going to benefit the middle and upper-middle class. We bailed out the banks with Treasury's gun to our head. We passed a stimulus in a never-waste-an-emergency frenzy. We bailed out the auto companies. We scrapped the "clunkers" that modest people buy used so that people who could afford it could buy "fuel-efficient" new toys. We started talking about running the banks and car companies by the whims of the political class, because, hey, didn't we have leverage over them now? When the BP spill happened, the President knew just who should get paid first, nevermind what the courts and the law would say. (And the post-mortems I have heard more recently paint these things as even worse than I imagined them when they were happening.)

These were the days when I remember the anger and the worry. I remember the surprise that suddenly other people were caring! If this was a trend that was going to continue, well dear god, where would it stop?! But stop it did. Maybe Obama learned something. Maybe he ran out of opportunities for easy mischief. But whatever the reason, the really scary shit stopped, and before it got to epic levels. I don't want to downplay what happened next, which is health-care reform. As I've made clear elsewhere on the board, I was deeply opposed to it, and my blood still boils a little every time one of its provisions is given form and effect. But a year-long legislative process implementing the long-time hobby-horse of a major political party, even if really bad policy, just isn't scary the way the early stuff was.

Maybe Obama's problem is that he should have gone all-out. If he was going to start messing with things, maybe he should have gone full Huey Long? I guess that is what Glenn is playing at advocating. But I think that would only have created an even bigger backlash. Right now the Tea Party is a burning flame. It could have been a powderkeg. If Obama had pursued a populist agenda, I can easily see huge opposition emerging, and mobilizing against any left-wing populists. The bitterness that could have ensued would have hurt Obama seriously, and the country even more.

But Obama didn't do that. He stopped finding emergencies. He stopped "taking charge." The pundits can call him weak all they want, but I don't count the President out by a long shot these days. If the Republicans are going to sweep into power in 2012, it is only going to be by reminding people how they felt in 2009. They need to feel like they are still staring at that precipice. And I don't see it. Sure, the employment numbers are living up to our worst fears, but the rule of law ain't unraveling the way it looked like it might. I don't think you can recapture that. When the price of gas goes up 2 bucks a gallon, people start worrying it will go up another 10, but only so long as it is still rising. Once it hits a ceiling and goes down a bit, the fears dissipate, even if in actual terms the price has experienced a large gain. The same goes for political fears. We know who Obama is now, and lots of Americans don't like what they see, but they also aren't afraid that he could turn out to be unimaginably worse anymore.

His supporters' sense of "hope" and "change" may be gone, but so are his detractors' sense of "fear" and "chaos."

[badhatharry]

Originally Posted by jimM47

We know who Obama is now, and lots of Americans don't like what they see, but they also aren't afraid that he could turn out to be unimaginably worse anymore.

And they really have no idea of what a republican will do. No one acts alone and no one is sure who is in the wings pulling the strings.

[ledocs]

JimM47 wrote:

Maybe Obama's problem is that he should have gone all-out. If he was going to start messing with things, maybe he should have gone full Huey Long? I guess that is what Glenn is playing at advocating. But I think that would only have created an even bigger backlash. Right now the Tea Party is a burning flame. It could have been a powderkeg. If Obama had pursued a populist agenda, I can easily see huge opposition emerging, and mobilizing against any left-wing populists. The bitterness that could have ensued would have hurt Obama seriously, and the country even more.

First, could you tell me if you have me filtered or not? The reason I tell people that I am going to the filter them is so that they don't have to ask this question.

So I don't know what you are really saying in the above paragraph. My sense is that the Tea Party is maxed out in terms of number of adherents, and is actually in decline. That's what everyone says. Brink Lindsey was making the point, in talking to Loury, that all the grassroots passion in the country seems to be with the Right and the Tea Party. I think that an organization like MoveOn did everyone a great disservice by not organizing peaceful street protests at various strategic moments during this first Obama term. And the issue around which to organize would have been the redistribution of income from labor to capital that has been proceeding apace for about 20 years. A consensus is building among everyone on the so-called Left in America that this redistribution is a major cause of the lack of employment opportunity in America. But it's not really a left-right issue, isn't this the "philosophy" attributed popularly to Henry Ford, to put money into the pockets of people who can buy mass consumer goods?

And is the American public really so squeamish that it can't handle a little straightforward ideological conflict? You seem to be saying that the health of the polity depends upon the fact that only one side, the Right side, exhibits passion. What possible justification, in principle, could there be for such a position? It makes no sense whatever to me, a priori. I realize that politics does not belong to the a priori, but I still have no idea what you are really saying here. I see no problem whatever with the idea that the "Left" should organize and shout on the streets and from the rooftops about its interpretation of what ails us.

On some of your other points. I haven't heard this dv. Loury is completely incoherent on economics, which is one of the more bizarre phenomena to be observed. However, the point might be that one can have an idea about the just way to handle the foreclosure crisis in principle, i.e. to honor the intention of contracts, and another idea about what would be beneficial to the economy, if honoring contracts doesn't seem to be too practical, or is not working out too well. This is especially so because the contracts to be honored mostly relied on an asymmetry of information between debtor and creditor. The creditors had more information, and should therefore bear more of the burden of sorting out the mess. I understand that you want the private contracts to be in some sense inviolate, that there is a very important principle at stake, but there is also an argument to be made that the contracts should not be inviolate, because a lot of them should never have been made and validated in the first place. If lenders want their mortgage contracts to be inviolate, they should behave with a lot more prudence and rectitude.

On the BP oil spill, I don't feel the same way. There, I am inclined to think that you probably have a good point, although I know nothing about the legal specifics. On the other hand, I thought it was really bizarre that there was not more organized street protest about the mere fact that this spill occurred. And it's not that I don't understand that accidents are bound to happen when drilling for oil at these depths. But the purpose of protests could have been to put into bold relief the nature of the situation that humanity is in with respect to fossil fuels. That is a necessary part of educating the electorate. I just heard a very interesting episode of "This American Life" about drilling for natural gas in the shale of rural Pennsylvania. There is clearly a very concerted and largely successful attempt by the drilling industry to conceal from people the environmental dangers of what they are doing, I really don't think there can be reasonable debate about this. And I don't think that private property rights extend this far, that people should have the right to lease their "private" underground mineral rights without regard for the externalities to everyone else, including future generations of humans.

[stephanie]

Originally Posted by ledocs

So I don't know what you are really saying in the above paragraph.

Jim can answer, of course, but my suspicion is that it's about the role of populism in what's happening and the growth of the TP. Many people, including me, and apparently Loury, see the TP as an expression of RW populism and one of the failures of the Obama administration's response is the Dems' rejection of populist rhetoric for the most part, even the kind of mild populism that it's usually adopted. Given the popularity of populism in bad economy times and its prevalence in even the right-wing TP rhetoric (from gov't hands off our Medicare to freak outs about TARP and big business and the efforts by many in the TP to link the anger to welfare to the rich and the poor, paid for by the middle class, etc.) it seems apparent that one of the failures of the Dems politically was being completely unable to channel any of this anger to their own support.

Now, I hate populism -- it's one thing that freaks me out about the TP, although not the only thing -- and I've been generally glad since the '90s that the Dems have rejected it, but I can't help but see that this happened at a political cost to the Dems. And, more significantly, and what's probably changed my mind about its use by the Dems, it doesn't go away if the Dems don't play that card. It just gets channelled in an even uglier way, as by the TP.

Anyway, would some TP-like force have existed if Obama had played that card? Hard to say, and there are huge forces against him doing so (the donors in the Dems). It obviously wouldn't have been the same people (which Loury wasn't claiming), but it might have taken some of the wind out of their sails. It seems to me that a lot of those people and their hangers on are much more able to claim that the Dems don't care about their middle class economic concerns any more than the elites in the Republican Party do with more certainty than they would have if the Dems had pursued a more populist line. But I'm also not so convinced that reality matters with regard to this kind of thing, vs. perception. And there's a fervent perception here that's immune to reality.

I think that an organization like MoveOn did everyone a great disservice by not organizing peaceful street protests at various strategic moments during this first Obama term. And the issue around which to organize would have been the redistribution of income from labor to capital that has been proceeding apace for about 20 years. A consensus is building among everyone on the so-called Left in America that this redistribution is a major cause of the lack of employment opportunity in America. But it's not really a left-right issue, isn't this the "philosophy" attributed popularly to Henry Ford, to put money into the pockets of people who can buy mass consumer goods?

Yes on Henry Ford, but I remain skeptical that protests, even peaceful ones, really convince people to adopt a cause. If they are by people that you generally feel akin to, maybe they convince you that you should care more or get you excited. But that seems long odds. Granted, I'm probably projecting too much here.

More generally, I think the redistribution problem suffers from the same problem as the health care reform. People may be angry about what's going on, but there's no simple solution to push for. (This is also, I think, why the Dems haven't played populism. In favor of what?)

This relates to Glenn's suggestion that it could have worked because people were upset about their lost equity. But anything solution to promote would have been unpopular, because it would have either seemed unfair or seemed to benefit others who didn't deserve it over you, in the eyes of many. Heck, that's something the TP played up initially -- both with the opposition to TARP and the rant at the CBoT. When there's not an easy solution to deal with the basic inequities (as I think is the case now), it's often easier to pit the less advantaged groups against each other. You may not get what you think is fair, but you can prevent someone else from getting something you think you won't. IMO, taking advantage of this sentiment is the most significant force in the growth of the TP.

[jimM47]

Originally Posted by ledocs

First, could you tell me if you have me filtered or not?

I can see your posts, if that's what you mean. But I don't come remotely close to reading every post in the forums, and I try to limit my post volume.

I'll try to respond substantively when I have time to do so, if others don't say it first. But the post probably won't make sense without the specific context of the idea that Glenn was entertaining. (It's not clear to me he was advocating it, so much as trying it out for size.) The editors have dingalinked the relevant section as "Glenn envisions..."

[jimM47]

As so substance, SteveD prompts me toward brevity and probably greater clarity here, stripped of anecdote, remembrance and speculation.

[Florian]

Originally Posted by ledocs

And the issue around which to organize would have been the redistribution of income from labor to capital that has been proceeding apace for about 20 years. A consensus is building among everyone on the so-called Left in America that this redistribution is a major cause of the lack of employment opportunity in America. But it's not really a left-right issue, isn't this the "philosophy" attributed popularly to Henry Ford, to put money into the pockets of people who can buy mass consumer goods?

The Russian-French Hegelian-Marxist, Alexandre Kojève, thought that Henry Ford's "philosophy" of consumerism was the answer to Marx's apocalyptic scenario for the self-destruction of capitalism: give workers big enough salaries so that they can buy the things that they produce, and capitalism will last forever. End of history, end of story. Yippee.

Francis Fukuyama, neo-conservative Straussian, repeated this lesson. Have American conservatives already forgotten it?

[whburgess]

Originally Posted by Florian

Francis Fukuyama, neo-conservative Straussian, repeated this lesson. Have American conservatives already forgotten it?

FYI--most American conservatives are not neo-conservative Straussians

[Florian]

Originally Posted by whburgess

FYI--most American conservatives are not neo-conservative Straussians

No doubt, But the Kojève-Fukuyama lesson is still valid. If income is redistributed disproportionately upwards to owners of capital at the expense of labor, there will be excess capacity and underconsumption.

[whburgess]

Originally Posted by Florian

No doubt, But the Kojève-Fukuyama lesson is still valid. If income is redistributed disproportionately upwards to owners of capital at the expense of labor, there will be excess capacity and underconsumption.

The excess capacity is stored in capital, right?
Where is that capital stored?

If it's stored in banks, what do banks do with it?

If its stored in stocks, what do corporations do with that capital?

If it stored in loans, who is borrowing the money, and what are they doing with it?


Where else can it be stored? You tell me.

[ledocs]

Q&A with WH Burgess:

The excess capacity is stored in capital, right?
Where is that capital stored?

If it's stored in banks, what do banks do with it?

Buy T-Bills. Repurchase stock.

If its stored in stocks, what do corporations do with that capital?

Sit on it. Repurchase stock. Buy T-Bills. Pay dividends. Expand in emerging markets.

If it stored in loans, who is borrowing the money, and what are they doing with it?

Apparently, net new loans are few and far between anywhere. This is the problem.

[jimM47]

Originally Posted by Florian

If income is redistributed disproportionately upwards to owners of capital at the expense of labor, there will be excess capacity and underconsumption.

No doubt. Though the word "disproportionately" is unnecessary to the truth of that statement. Any time the distribution of surpluses from production moves toward owners of capital away from controllers of labor, the basket of consumption and investment goods demanded by those with purchasing power will change. If the shift happens rapidly, it will cause a mismatch: the economy's resources will be optimized to produce one basket of goods, but another basket of goods will be demanded. There will be too much capacity to produce the goods that labor desired, but there will be not enough capacity to produce the goods that capital requires. But the same is true of a shift away from capital toward labor. The basket of consumption and investment goods demanded by those with purchasing power will change there as well. And if the shift happens rapidly, it will also create a mismatch. There will be not enough capacity to produce the goods that labor desires, and there will be too much capacity to produce the goods that capital requires.

So, change is what is disruptive. Any balance between capital and labor can be found at equilibrium. Which is to say that no particular balance between capital and labor is a priori most desirable. What should determine the balance between capital and labor is the relative scarcity of the inputs of production. If capital is more scarce, it should receive a higher return in order to induce more effort directed at the formation of capital (at the expense of currently productive labor). If labor is more scarce, it should receive a higher return in order to induce more effort directed at laboring (at the expense of capital formation).

Note, of course that capital and labor are somewhat artificial constructs here. Capital comes in many varieties, and it is not uniform: most laborers in a modern economy are the owners of a(n increasingly) large amount of social and educational capital; most producers have much more than financial capital and capital goods, they also have reputational and organizational capital. A notable feature of many of these forms of capital is that unlike financial capital and capital goods, they require a significant amount of time to make come into existence. So with that in mind, why not ask what type of capital is reaping disproportionate benefits? A quick look at interest rates and stock performance suggests that it isn't the owners of financial capital, per se. So it must be the owners of some other type of capital. A few plausible candidates chosen to represent larger categories are: entities lucky enough to own capital goods whose value has increased due to shifts in demand, entities that have extremely good creditworthiness, entities with greater access to some necessity of production.

The first answer is depressing but not unsettling. In means there is a lot of malinvestment out there, and we just need time for people to wind up their old commitments and move on to more productive investments. The second answer is a bit more unsettling. Once upon a time we had financial institutions capable of assessing risk allocating financial capital to productive resources that were not bottlenecked by a lack of reputational capital for creditworthiness. Those institutions have probably been under-cautious in recent years, and we can expect them to take some time to readjust. But until they do, that is a major part of the economic engine that is out of commission. The third answer is potentially quite unsettling. One fears that the access we are talking about is access to a non-productive resource: a license, a government bail-out guarantee, a regulatory assurance, an artificial monopoly. I think it is fair to say that each of these three answers must be true to some degree, and moreso now than at other times.

Now, I have left myself open to a criticism in this story, because I discuss the distribution of surpluses between capital and labor in a static economy at equilibrium. But, of course, economies are not static. In a healthy growing economy where technology is advancing and producers are engaged in risk and information discovery, the economy is constantly getting knocked out of equilibrium. (Indeed it probably never reaches the equilibrium point before the equilibrium point changes.) So, you could ask not only whether a distribution of surpluses between capital and labor is optimized for current demand, but also whether the distribution is optimized for a particular level of economic dynamism. It is a basic truism both that people are risk averse, but that on the margin people become less risk averse as they become more wealthy. Risk aversion is an impediment to change and information discovery. So if a new technological change requires that, for the economy to be most productive, the people at the bottom of the income scale need to make adjustments and assume entrepreneurial risk, all else being equal, a society with a more equal income distribution is going to be able to respond more quickly than a society with a less equal income income distribution.

So there's an intellectual case to be made for the idea that income inequality is inhibiting long-term economic prosperity. But I'm unconvinced empirically. And while I don't know enough continental philosophy to comment on Kojève, I don't think Ford was commenting on economic dynamism -- he was trying to sell consumer goods!

[ledocs]

Any balance between capital and labor can be found at equilibrium. Which is to say that no particular balance between capital and labor is a priori most desirable. What should determine the balance between capital and labor is the relative scarcity of the inputs of production. If capital is more scarce, it should receive a higher return in order to induce more effort directed at the formation of capital (at the expense of currently productive labor). If labor is more scarce, it should receive a higher return in order to induce more effort directed at laboring (at the expense of capital formation).

You have to define equilibrium.

The idea that equilibrium could occur at any arbitrary intersection of two curves, one measuring income to capital and the other measuring income to labor, seems very far-fetched. There may be no ideal solution, but surely there is some fairly narrow range for equilibrium, once you've defined it (e.g. everyone who wants to work is working), given any level of technology. That is, one would not expect it to be the case that 99% of income could go to capital and 1% to labor and that that would satisfy some definition of equilibrium. Secondly, in the world in which we currently live, labor is not ever going to be scarce, and therefore capital is always going to be the scarcer of the two inputs. Particular kinds of labor might be scarce.

The problem of our world is a superabundance of labor. There are too many people. If equilibrium means the market-clearing price for labor where all the police and military power is in the hands of capital, it will follow that the equilibrium price of labor is low, because the supply of labor is high. The price of labor will be so low that the world becomes highly unstable and in an inherently revolutionary situation. The capitalist class will be in a permanent state of siege. But this is not far from where we are now, as noted by Nouriel Roubini in his interview with "The Wall Street Journal" cited by florian in "The Marx was Right" topic in the "Life, the Universe, and Everything" section of these forums. One might think that the equilibrium price of labor could be made so low that the supply of labor would gradually dwindle due to malnutrition and poverty and that the market will be self-correcting in that way. "Operative" recently stated a view that was not unlike this. Things do not seem to be working out this way.

[Florian]

The problem of our world is a superabundance of labor

Precisely. But I wonder if the superabundance of cheap labor hasn't always been a problem in the development of capitalism. In a 1957 lecture on the relation between the developed capitalist world and the third world (at the time, just emerging from colonialism), Kojève said this:

"à la longue le capitalisme ne peut ni se développer, ni même se maintenir, si la plus-value obtenue grâce au progrès de la technique industrielle n’est pas répartie entre la minorité capitaliste et la majorité laborieuse. »

"In the long run capitalism cannot evolve or even maintain itself unless the surplus value obtained from technological progress is distributed between the capitalist minority and the working majority."

It was from these premises that Kojève concluded that Henry Ford was the greatest Marxist of the 20th century. But the United States was always fortunate--until now?---in having a relative scarcity of labor.

[harkin]

Originally Posted by Florian

"In the long run capitalism cannot evolve or even maintain itself unless the surplus value obtained from technological progress is distributed between the capitalist minority and the working majority."

In the long run, captialism and free markets are the worst form of societies, except for everything else (apologies to W Churchill).

It should never be lost on anyone the complete and utter failure of everything else so far in the history of man.

"The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."

[ledocs]

People seem to be confidently predicting that China will surpass the US in scientific "production" soon. No doubt defenders of the West will say that the Chinese have not yet shown that they can really compete at the highest levels of theoretical science. But I think it's too early to be confidently asserting Western supremacy in this regard, or the incompatibility of science with a heavy-handed state.

[Florian]

Originally Posted by harkin

In the long run, captialism and free markets are the worst form of societies, except for everything else (apologies to W Churchill).

It should never be lost on anyone the complete and utter failure of everything else so far in the history of man.

"The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."

Who said anything about "equal sharing"? The question confronting capitalism, now as always, is the distribution of "surplus value" resulting from technological progress, between two basically antagonistic groups---the owners of capital and everyone else---so that capitalism can avoid the fate predicted by Marx. Since Kojève thought (somewhat tongue in cheek) that Henry Ford was the greatest Marxist of the 20th century, he can hardly be accused of being a "socialist"---assuming the word means anything.

By the way, Kojève despised Stalin and the Soviet Union. He much preferred living in France and acting as the eminence grise of De Gaulle.

[badhatharry]

Originally Posted by Florian

Who said anything about "equal sharing"? .

Churchill

[Florian]

Sharing what? Blood, sweat and tears?

But neither capital nor empire.

I don't think you understood Harkin's point.

[badhatharry]

Originally Posted by Florian

Sharing what? Blood, sweat and tears?

But neither capital nor empire.

I don't think you understood Harkin's point.

You asked who said anything about 'equally sharing.' I let you know according to Harkin's quotation, Churchill did. I'm just a literal kinda gal. Getting in the weeds with you big time intellectuals is likely to ruin my stockings.

[harkin]

Originally Posted by Florian

By the way, Kojève despised Stalin and the Soviet Union. He much preferred living in France and acting as the eminence grise of De Gaulle.

Those who most vociferously despise capitalism usually do so while enjoying its comforts.

Originally Posted by myceelf

1. I call BS on your cruise invite. I personally can't think of anything I'd be less willing to spend a vacation doing, but there's nothing in the Nation cruise about organizing flash mobs of any kind.

You can call BS but you would be wrong. I will not call BS on you because I just believe you are uninformed.

And you must not be a typical Nation reader (I'm not either but most know that) if you aren't itching to organize a flash mob. For some reason they not only tout the class but they seem to think it's a pretty important enticement, leading off with it. Look at the email invite if you received one (the email subject does not mention the cruise btw, all it actually says is 'FLASH MOB 101', how's that for subtle?) and not the cruise site they link to. If you look you'll see that not only are they going to give instruction on organizing flash mobs but those kooky america-loving scamps from Code Pink are the guest facilitators! And oh, yes, by coincidence to earlier remarks, Van Jones will speak!

Originally Posted by stephanie

I assumed he was joking. I may be naive.

Of course you're naive. But you're fairly nice for a clique member.

Originally Posted by myceelf

Making that assumption more generally would probably be wise. It would make me feel better about my fellow man.

If I opened your eyes at all regarding The Nation then I feel better.

[badhatharry]

Originally Posted by harkin

If I opened your eyes at all regarding The Nation then I feel better.

very nicely done.

[miceelf]

Originally Posted by harkin

And you must not be a typical Nation reader (I'm not either but most know that) if you aren't itching to organize a flash mob.

Well, given that neither of us are typical Nation readers, I am not sure how either of us would know. But you were right about the Nation mailer. So kudos.

I am still not clear on how this is any more incongruous than the Weekly Standard cruise with the neocons, but then I won't be going on either one.

Cruises are for spending time with people you love, not people you agree with.

[stephanie]

Originally Posted by miceelf

Well, given that neither of us are typical Nation readers, I am not sure how either of us would know. But you were right about the Nation mailer. So kudos.

Well, he wasn't quite right, not unless he claims poetic license or (as I guessed) joking.

The implication of his comment was different than the language quoted. Nothing suggesting that the Nation was promoting the kinds of flash mobs we've seen lately and nothing about "disgruntled welfare recipients." On the other hand, you were wrong to assume that there would be nothing about organizing flash mobs. You just should have narrowed your challenge, but showing confidence is admirable. ;-)

Cruises are for spending time with people you love, not people you agree with.

I've mentioned before that I have a friend who's gone on several National Review cruises. He was all excited about how you could mix the fun of the cruise (his wife goes too, at least) with the mental stimulation of hanging with Jonah Goldberg. Okay, he didn't really mention Jonah, he mentioned the lectures and so on. I keep thinking that if only NR had started the cruise thing earlier, it would have made for a great very special episode of The Love Boat. Ideally involving both William F. Buckley Jr. and Charo.

Cruises don't appeal to me, but I suppose if I went on one, one with lectures and the like would be best. These political magazine ones do seem a little narrow, though.

[miceelf]

Originally Posted by stephanie

I've mentioned before that I have a friend who's gone on several National Review cruises. He was all excited about how you could mix the fun of the cruise (his wife goes too, at least) with the mental stimulation of hanging with Jonah Goldberg. Okay, he didn't really mention Jonah, he mentioned the lectures and so on. I keep thinking that if only NR had started the cruise thing earlier, it would have made for a great very special episode of The Love Boat. Ideally involving both William F. Buckley Jr. and Charo.

Cruises don't appeal to me, but I suppose if I went on one, one with lectures and the like would be best. These political magazine ones do seem a little narrow, though.

I can't imagine my wife enjoying a cruise that had lectures. She's very much a "let's completely veg out" kind of vacationer. By implication, I am too.

[harkin]

Originally Posted by stephanie

Well, he wasn't quite right, not unless he claims poetic license or (as I guessed) joking.....nothing about "disgruntled welfare recipients".

You're shooting the messenger. I merely took it for granted that when The Nation said that the flash mobs in the UK were the result of entitlement reductions, that they actually believed that tripe. I'm happy to see that even you reject the false narrative, but it isn't mine.

Originally Posted by stephanie

The implication of his comment was different than the language quoted. Nothing suggesting that the Nation was promoting the kinds of flash mobs we've seen lately

You got me there, I called the mobs that the Nation was seeking to promote 'flash mobs' and the email claimed that they wanted to instruct in organizing a 'flash mob'.

[ledocs]

Cruises are for spending time with people you love, not people you agree with.

Great formulation. I like that. Although there are all these theme cruises, devoted to spending time with people who in theory share your tastes. Another point of cruises is presumably to try to meet someone with whom to fall in love, someone who shares your tastes and can afford to go on a cruise you can afford to go on.

[eeeeeeeli]

Originally Posted by harkin

"The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."

Nothing personal, but I hate these kind of quotes. They revel in their own preciousness at the expense of clarity, depth, and ultimately, truth.

Capitalism and socialism have their share of blessings and miseries. Never more so when both are combined, in the mixed-economies we all hopefully can agree are better than either singularly.

[Diane1976]

Originally Posted by eeeeeeeli

Nothing personal, but I hate these kind of quotes. They revel in their own preciousness at the expense of clarity, depth, and ultimately, truth.

Capitalism and socialism have their share of blessings and miseries. Never more so when both are combined, in the mixed-economies we all hopefully can agree are better than either singularly.

Definitely agree. I've heard that expressed as a combination of "can do" capitalism and "will do" socialism. Certainly nobody has come up with anything that better suits us in terms of ensuring our economic well being, our concerns about the less fortunate, opportunities for ourselves and, especially our kids, and the principles and freedoms we value. I, personally, think we become obsessed with small differences in the promises and performances of our politicians, but, no doubt, that's part of what keeps the system going, and us happy, in the long run.

[ledocs]

Florian, I don't know if you have figured this out, but I became interested in Leo Strauss and Kojeve, and their debate in "On Tyranny," when I was about twenty. That did not work out for me, ultimately, as an academic career path, and I actually had a brief discussion with Bernard Williams about this once. But I did study with this fellow Stanley Rosen, who studied with both Strauss and Kojeve.

[Florian]

Originally Posted by ledocs

Florian, I don't know if you have figured this out, but I became interested in Leo Strauss and Kojeve, and their debate in "On Tyranny," when I was about twenty. That did not work out for me, ultimately, as an academic career path, and I actually had a brief discussion with Bernard Williams about this once. But I did study with this fellow Stanley Rosen, who studied with both Strauss and Kojeve.

This might interest you. Stanley Rosen "remembers" Kojève:

http://editions.bnf.fr/pdf/telecharger/Kojeve.pdf

Rosen comes across as a bit, shall we say, bizarre. But Straussians often do.

[Ocean]

Originally Posted by ledocs

You have to define equilibrium.

The idea that equilibrium could occur at any arbitrary intersection of two curves, one measuring income to capital and the other measuring income to labor, seems very far-fetched. There may be no ideal solution, but surely there is some fairly narrow range for equilibrium, once you've defined it (e.g. everyone who wants to work is working), given any level of technology. That is, one would not expect it to be the case that 99% of income could go to capital and 1% to labor and that that would satisfy some definition of equilibrium. Secondly, in the world in which we currently live, labor is not ever going to be scarce, and therefore capital is always going to be the scarcer of the two inputs. Particular kinds of labor might be scarce.

The problem of our world is a superabundance of labor. There are too many people. If equilibrium means the market-clearing price for labor where all the police and military power is in the hands of capital, it will follow that the equilibrium price of labor is low, because the supply of labor is high. The price of labor will be so low that the world becomes highly unstable and in an inherently revolutionary situation. The capitalist class will be in a permanent state of siege. But this is not far from where we are now, as noted by Nouriel Roubini in his interview with "The Wall Street Journal" cited by florian in "The Marx was Right" topic in the "Life, the Universe, and Everything" section of these forums. One might think that the equilibrium price of labor could be made so low that the supply of labor would gradually dwindle due to malnutrition and poverty and that the market will be self-correcting in that way. "Operative" recently stated a view that was not unlike this. Things do not seem to be working out this way.

ledocs, with my limited understanding of economics, your statement above and Florian's ("The question confronting capitalism, now as always, is the distribution of "surplus value" resulting from technological progress, between two basically antagonistic groups---the owners of capital and everyone else---so that capitalism can avoid the fate predicted by Marx.") make sense to me.

Do you have a sense that this is limited to developed countries, the US only or is it worldwide? Also, even if it is limited to the developed world, would there be some kind of reset needed? How would that affect the rest of the world?

I'm just wondering if these are topics that are being discussed in the world of economics.

[ledocs]

Marxism, or any kind of thinking and writing about economics that is highly influenced by Marxism, is not taken at all seriously in economics, as economics is understood in the Anglo-Saxon world, in Scandinavia, or in parts of the world dominated by US influence, e.g. South and Latin America. That interview that Roubini did with the WSJ was unusual in that regard, in that he cited Marx approbatively. People who consult with capitalists in the US for a living normally do not do that. But I think this is really a matter of rhetoric. For example, I listened to a 50-minute speech that Robert Reich gave at his alma mater, Dartmouth, last week, and Reich has been making all these essentially Marxist points for years, it's just that he makes what can only be construed as a concerted effort never to mention Marx as an influence. And I think the same thing probably applies to Dean Baker, to Krugman, and so on. Bringing up Marx while speaking qua "economist" is a sure way to become marginalized in a hurry, that appears to be the perception. So Roubini does not care about that, which is interesting, but I can't offer a complete hypothesis about why this would be so, except to say that he is probably confident that he will continue to make a good living, despite the fact that he does not share the general contempt of the economics profession for Marx. The prevalent view in that profession is that Marx was an economic imbecile whose work does not belong to the economics curriculum, it belongs in the dustbin of courses on the history of political theory. In particular, Anglo-Saxon economics rejects the labor theory of value and Marx's theory of surplus value, which derives from the former. Instead, value derives from satisfying the utility curves of consumers.

The Marxist analysis applies anywhere and everywhere where there is a primarily capitalist economy.

Another somewhat strange thing I noticed recently. I started watching a course emanating from UC Berkeley called "Global Sociology." The course, and its instructors, are heavily influenced by Marxism, particularly by someone called David Harvey, who is an avowedly Marxist geographer. (There is lots of David Harvey available on youtube.) Geography no longer means what it used to mean, it's sort of a catch-all social science at this point, it's the supra-social-science. But the point is, outside of the world of mathematical economics, and including what used to be called political economy, Marxism still has some cachet in the social sciences in the English-speaking world.

[badhatharry]

Originally Posted by jimM47

The first answer is depressing but not unsettling. In means there is a lot of malinvestment out there, and we just need time for people to wind up their old commitments and move on to more productive investments.

I pick curtain #1. The whole thing is going to take time. Twenty years from now we will look back (if we're not in the midst of another crisis) and see that the thing settled out and malinvestments dissipated. Prices dropped to where they should be and the engine started running again. No one will be able to point to any particular program or measure to account for this because no program can account for this. The best we can hope for is that the economy doctors keep their hands off of the patient.

Of course curtain #2 is a part of the process of the economy getting back into some kind of equilibrium. Unfortunately things like Dodd-Frank and the new consumer protection agencies will force banks to pass those costs onto their customers in one way or another because surely they won't absorb those costs themselves, something that always seems to escape the minds of the do-gooders.

Curtain #3 will always be with us as the government seeks to control and profit from industry. Sometimes it's neccessary for business to be regulated surely. Finding the right balance between regulation and freedom is probably impossible but still a worthy goal.

[Jay J]

Hmm, you walk me through the steps and still I don't know. First, may I just ask if you're actually saying the same thing as Florian? You say that any change in the balance between labor and capital is disruptive. As you give your reasons, they across to me as, relatively speaking, particularized, at least next to Florian's claim, which seems to be that capitalism has a fundamental flaw: the laborers can't buy back the product they make on account of labor saving technology. Florian's point doesn't seem to be (I'm sure I'll be corrected if I'm wrong) that there is a two-way balance between labor and capital, that, if disrupted, will lead to a mismatch of goods demanded and goods supplied. Rather, Florian seems to be saying that owners engage in suicidal behavior by continually sucking money from labor, such that total demand will dry up and capitalism will be in crisis. The crisis will be on its on terms. By "on its own terms" I don't mean that the workers will storm the Bastille, (they might) but that capitalism will fail to sustain itself because economic activity won't be able to keep humming along, and the reason will be that capital took too much money from labor. This seems thoroughly Marxist, and you replied "No doubt." But since your reply struck me as noticeably different from Florian's, I thought I would go to you. Is it different?

[Florian]

Originally Posted by Jay J

Florian's point doesn't seem to be (I'm sure I'll be corrected if I'm wrong) that there is a two-way balance between labor and capital, that, if disrupted, will lead to a mismatch of goods demanded and goods supplied. Rather, Florian seems to be saying that owners engage in suicidal behavior by continually sucking money from labor, such that total demand will dry up and capitalism will be in crisis. The crisis will be on its on terms. By "on its own terms" I don't mean that the workers will storm the Bastille, (they might) but that capitalism will fail to sustain itself because economic activity won't be able to keep humming along, and the reason will be that capital took too much money from labor. This seems thoroughly Marxist, and you replied "No doubt." But since your reply struck me as noticeably different from Florian's, I thought I would go to you. Is it different?

I accept the paraphrase, but I think that capitalists in the West are not, yet, facing a "storming of the Bastille" moment, and perhaps never will. In those countries where capitalism is well-established (Europe and the US), where there is some re-distribution of wealth through taxation, where there is a social safety net---social security, health care and unemployment insurance--- revolution is not very likely.

But Kojève's point is still valid: if capitalism produces far more goods and services than workers can afford to buy because they are underpaid, there is a big problem.

[Jay J]

Ok good. Thanks for the reply.

I guess where I tend to disagree, or where I perceive a disagreement, is in whether this problem of demand is an inherent feature of capitalism, or if our problems are, in Krugman's words, "narrow and technical" (this was Krugman crediting Keynes. I think we can agree that when placed on the whole spectrum economic thought, Keynes' diagnosis of the problems of capitalist economies is relatively mild).

And it's also my understanding that inequality (economic, political, and otherwise) can be rampant, poverty can be widespread, and total demand can zoom along just fine. In such a scenario, the poor can be shut out of the process and get the worst opportunities and be exploited by the rich. The worse it gets, the more likely they'll storm the Bastille. This sounds plausible to me, and aside from the intrinsic moral problem present in such a scenario, the possibility of a social breakdown like this (and other ills springing from rampant inequality) make me interested in the Gini index.

But this doesn't necessarily strike me as Marxist, since in order for Marx's critique to go through, it has to be that capitalism isn't sustainable *from a purely economic standpoint.* In other words, the eventual lack of demand of capitalist economies is due to internal contradictions, namely that workers can't simultaneously buy back the products they create while owners make a profit, and labor saving technology puts this problem front and center. Now, the Bastille storming story can still make one sympathetic to leftism, (or maybe on the flip side authoritarianism), but it doesn't come across to me as Marxist.

Thoughts?

[Florian]

Originally Posted by Jay J

........in order for Marx's critique to go through, it has to be that capitalism isn't sustainable *from a purely economic standpoint.* In other words, the eventual lack of demand of capitalist economies is due to internal contradictions, namely that workers can't simultaneously buy back the products they create while owners make a profit, and labor saving technology puts this problem front and center. Now, the Bastille storming story can still make one sympathetic to leftism, (or maybe on the flip side authoritarianism), but it doesn't come across to me as Marxist.

Thoughts?

I am not an expert on Marx, I read him a long time ago, and when I read him I was immunized by liberal economists and scholars like Aron and Schumpeter against his arguments for the inevitable self-destruction of capitalism and the advent of socialism, i.e. the expropriation of the means of production by the proletariat and the "withering away of the state".

But the problem you identify above in the bolded sentence is real. It is the problem that Kojève, somewhat facetiously, thought that Henry Ford, "the greatest Marxist of the 20th century," had solved by paying workers generous enough salaries to allow them to buy the cars which their labor produces. If capitalists forgo some of their profits, returning "surplus value" (profit) to labor in the form of higher wages, capitalism will, according to Kojève, avoid the fate predicted for it by Marx: the replacement of living labor (variable capital in Marxist terminology) by labor-saving devices (fixed capital), a necessity forced on capitalists by competition and ever diminishing profits. This is why capitalism is doomed, according to Marx. Beyond a certain point it can only generate further profits by lowering labor costs, and this means employing fewer and fewer workers or lowering their wages. (One might add today: by offshoring labor costs to third world countries). In any case, the result is the same: Overcapacity and underconsumption.

There are other mechanisms, however, to redistribute surplus value besides raising the wages of workers: higher taxes on capital and capital gains. But shhhhhh, that is socialism!

[jimM47]

Originally Posted by Jay J

you replied "No doubt." But since your reply struck me as noticeably different from Florian's, I thought I would go to you. Is it different?

As I see it, Florian made a factual statement that I think is true (perhaps only in a technical sense, but still in an important technical sense), but which I think is true for different reasons, and is best understood in the context and detail I put forward.

I suspect the key distinction that separates the positions Florian and I are articulating is this: As I read him, Florian regards it as necessary for the sustainability of a capitalist economy that workers be able to purchase the consumer good that the society is capable of producing. As you paraphrase him: "[if] owners ... continually suck[] money from labor ... demand will dry up." Or as he says, "if capitalism produces far more goods and services than workers can afford to buy because they are underpaid, there is a big problem."

I think this is looking at only part of the story. Consumption by consumers, or laborers, is not the sum total of consumption in a society, and demand does not dry up permanently simply because that component of demand is missing. It can dry up temporarily, but it can also dry up for any change. It might be morally wrong for certain distributions of income to exist, but it is not economically self-destructive for the return on capital to increase relative to the return on raw labor.

Imagine that you and a hundred other people get shipwrecked on a deserted island. The island has resources, but you have no provisions other than what you can gather. Oh, and this isn't a tropical island, so you'd better be ready when winter comes. I venture to say that you would all be doing quite a lot of work, and be doing very little "buying back the product." You're probably going to be consuming at a subsistence level, while trying to build up the resources of the group for future survival, and you're going to be making tools and other things that will make your future existence more pleasant. In other words, you'll be deferring consumption in order to build up capital, which is presently very scarce.

But imagine one of you does have a lot of capital. One of you is a doctor, which means she has a whole lot of human capital! (Sure the rest of you had training and education, too, but for most of you that capital took a precipitous decline the moment you were wrecked on this island.) I venture to say that the doctor might have to do considerably less work, and considerably easier work, while still getting a pretty good share of the productive efforts of the islandfolk. Who is gonna be the one to say "you don't deserve that" and risk not getting treatment. Now, the doctor has a monopoly here, but even if there are more people and two competing doctors, I suspect their services are still going to get a higher return than those of the accountant-turned-woodchopper. The market is saying "we need the next doctor more than we need the next woodchopper."

Of course, a difference between this hypothetical and the real world is that in the real world this would give an incentive to create more doctors. Doctoring skill capital would become less scarce, and its owners could thus extract a smaller share of the surplus. It takes a lot of time and resources to become a doctor, which is to say that it takes a lot of financial capital to make doctoring skill capital. But in normal circumstances, with time, we can transform that lesser value capital into greater value capital. On the island, you can't really do that. The workers can build up capital in the form of tools, and houses, and crops, etc., but there is no way to turn tools into doctors. Absent a medical school also crashing on the island, they aren't making any more of 'em. The market won't equilibrate.

In economic terms, the doctors are extracting a "rent" - a payment for something in excess of its cost, but which isn't going to end up bringing more of it into existence. And there are rentiers in the real world. The money the landlord collects isn't going to bring more land into existence. The money the cartel member makes won't give more people membership in that cartel. The money someone gets from government favoritism won't necessarily create more favorites.

If you think about this historically, the times when there were the greatest and most persistent class differences were when land, which you can't make more of (unless you are Dutch), was a scarce and necessary factor of production controlled by the wealthy minority. Some of the major social breakthroughs correlated to changes in land-holding. There was major class disruption when money first came to Greece and the nobles could start selling off their land monopolies. There was a major turn to the advantage of peasants after the Black Plague left workers rare and land more relatively more plentiful. And there was major disruption when advances made in agriculture and industry made major land uses a much smaller part of the economy.

But, for the most part, holding capital in a modern economy isn't the same as being able to extract a rent. For most capital, you can make more of it. That's certainly true of financial capital. So if the issue is that capital takes too much of the returns, and labor doesn't take enough, then the answer is either to make capital less scarce or people more scarce. And the fact that capital gets a high return should induce more people to forego consumption in order to produce more capital. Of course, I am not convinced the return on capital is so very high, and I suspect that people are pretty rationally making the decision not to forego more current consumption in order to get higher returns later. There are diminishing returns to wealth, and you can't take it with you when you go.