Neoliberal Economics Destroyed the Economy and the Middle Class

By Paul Craig Roberts

Source: PaulCraigRoberts.com

According to official US government economic data, the US economy has been growing for 10.5 years since June of 2009. The reason that the US government can produce this false conclusion is that costs that are subtrahends from GDP are not included in the measure. Instead, many costs are counted not as subtractions from growth but as additions to growth. For example, the penalty interest on a person’s credit card balance that results when a person falls behind his payments is counted as an increase in “financial services” and as an increase in Gross Domestic Product. The economic world is stood on its head.

It is aggregate demand that drives the economy. Payments made on a rise in interest rates on credit card balances from 19% to a 29% penalty rate reduce consumers’ ability to contribute to aggregate demand by purchasing goods and the services of doctors, lawyers, plumbers, electricians, and carpenters. Contrary to logic, the fee is magically counted in the “financial services” category as a contributor to GDP growth. The extortion of a fee that reduces aggregate demand lowers GDP, but builds paper wealth in the financial services sector.

GDP growth is also artificially inflated by counting as GDP abstract concepts that do not produce income streams. For example, for homeowners the US Department of Commerce estimates the rental values of owner-occupied housing, that is, the amount owners would be paying if they rented instead of owned their homes, and counts this imputed rent as GDP.

These and other absurdities have caused economist Michael Hudson to conclude correctly that the “financial reality of how the U.S. economy works is no longer captured in GDP statistics.”
https://michael-hudson.com/2019/10/asset-price-inflation-and-rent-seeking/

Today we have two economies. One is the real economy of production and consumption. The other is the financialized economy of paper wealth. The former is doing poorly, and the latter is doing well. The financialized economy is growing much faster than the real economy. Indeed, the real economy might not be growing at all.

Michael Hudson describes the difference. The stock market is at all time highs that have created massive wealth in financial assets for stock and bond owners. In the real economy the situation is totally different: “The Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2018 reports that 39% of Americans do not have $400 cash available for a medical or other emergency, and that a quarter of adults skipped medical care in 2018 because they could not afford it ( https://www.federalreserve.gov/publications/files/2018-report-economic-well-being-us-households-201905.pdf ). The latest estimates by the U.S. Government Accountability Office (GAO) report that nearly half (48 percent) of households headed by someone 55 and older lack any retirement savings or pension benefits ( https://www.aarp.org/retirement/retirement-savings/info-2019/no-retirement-money-saved.html ). Even in what the press calls an economic boom, most Americans feel stressed and many are chronically angry and worried. According to a 2015 survey by the American Psychological Association, financial worry is the “number one cause of stress in America today” ( https://www.apa.org/news/press/releases/2015/02/money-stress ).

The data is completely clear. The rich are becoming much richer, and the rest are becoming poorer. Michael Hudson explains:

“The creation and trading of property and financial assets at rising prices has been fueled by rising debt levels owed to the financial sector. This sector’s returns therefore are best seen not as real wealth on the asset side of the balance sheet, but as overhead on the liabilities side. And the process is multi-layered: income accruing to the financial wealth owned by the top 10 Percent is paid mainly by the bottom 90 percent in the form of rising debt service and other returns to financial and other property.

“In the textbook models of industrial capitalism’s mass production and consumption, an asset’s price is determined by its cost of production. If the price rises above this level, competitors will offer it cheaper. But in the financialized economy an asset’s price is determined by how much credit buyers can borrow to buy it, not by its cost of production. A home is worth as much as a bank will lend to a bidder.

“The engine of industrial capitalism and its consumer society is a positive feedback loop in which widely shared income growth, expanding consumption and markets generated yet more investment and growth. By contrast, the feedback loop of financial capitalism is an exponential growth of credit-driven debt, driving up asset prices and hence requiring yet more borrowing to buy homes, retirement income and other assets. Corporate management and investment today is mainly about obtaining capital gains for real estate, stocks and bonds than about earning income.

“We illustrate this by charting the flow of income and capital gains in the real estate sector to show the dominance of asset-price gains over net rental income – and how rental income is used up paying interest in our financialized economy. Likewise, corporate income is spent (and new debt taken on) largely for stock buybacks to raise share prices. The resulting dynamic is exponential and destabilizing.”

This dynamic is destabilizing, because as more of consumers’ discretionary income is drawn off to service mortgage, credit card, automobile and student debt and for compulsory health insurance, less is left to purchase the goods and services in the real economy. Consequently, credit-driven debt grows faster than the income that services it, and this impoverishes the 90%. However, for the 10%, money creation by the Federal Reserve in order to protect the balance sheets of the “banks too big to fail or jail” drives up the values of financial assets. As a result the distribution of income and wealth becomes hightly polarized.

Think about the many Americans who meet their living expenses by making only the minimum payment on their credit card balance. At 19% interest their debt grows monthly. Eventually they hit a credit card debt cap and can no longer use the card to cover their living expenses. But they have the burden of a large debt balance to service without an income stream capable of servicing it.

Think about the corporation that decapitalizes itself in order to produce short to intermediate term capital gains for shareholders and executives by indebting the firm in order to buy back the firm’s shares. The end result is that all income goes for debt service.

In a financialized economy, the only possible outcomes are debt forgiveness or collapse.

As Michael Hudson makes clear, the combination of nonsensical categories in the National Income and Product Accounts and a financialized economy means we have no accurate picture of the economy’s condition. Michael Hudson has a proposal for correcting these problems and making GDP accounting more accurate, but as ecological economists such as Herman Daly have made clear, GDP measurement also omits the external costs of production. This means that we do not know whether GDP is growing or declining. It is entirely possible that the ecological and social costs of an increase in GDP (as currently measured) are greater than the value of the increased output. (See Paul Craig Roberts, The Failure of Laissez-Faire Capitalism, https://www.amazon.com/Failure-Laissez-Faire-Capitalism/dp/0986036250/ref=sr_1_2?crid=16NHZEQ9G3JRW&keywords=paul+craig+roberts+books&qid=1576440032&s=books&sprefix=Paul+Craig%2Caps%2C173&sr=1-2 )

Perhaps the major way in which GDP is overstated is the exclusion of external or social costs. External or social costs are costs of producing a product that the producer does not incur but imposes on third parties or on the environment. For example, untreated sewage dumped into a stream imposes costs on people downstream. Runoff of chemical fertilizers from commercial farming produces dead zones in the Gulf of Mexico and toxic algal blooms such as Red Tide that result in massive fish kills, make seafood unsafe, cause human ailments and adversely impact the tourist trade of beach areas. The result is lost incomes, ruined vacations, health expenses, and none of these costs are born by the commercial farmers.

Real estate development produces massive external costs. Scenic views from existing properties are blocked, thus reducing their values. Construction noise and congestion impose costs on existing residents and reduces the quality of their lives. Water runoff problems are often created. Infrastructure has to be provided, such as larger highways to provide evacuation from hurricane-impacted areas, usually financed by taxpayers. If the global warming case is correct, the external cost of human economic activity can be the life of the planet.

Lakshmi Sarah in the May/June, 2019, issue of the Sierra Club magazine provides an excellent detailed account of the external costs of coal-fired power plants being built in India by the Indian conglomerate Tata with a loan from the International Finance Corporation, a branch of the World Bank. The ground water in the area has been ruined and is no longer drinkable. Farmers are no longer able to grow crops on half of the area farmland. Heated wastewater that is dumped into the Gulf of Kutch is destroying fishing. The ecology and the livelihoods of the population are essentially destroyed. None of these costs are born by the private power companies.

Tired of being doormats for capitalists and the World Bank, the residents of the affected provinces rebelled. They have succeeded in getting their case before the US Supreme Court. It seems that the International Finance Corporation is so accustomed to financing projects that produce large external costs that it overlooked its obligation to examine the environmental impact of the projects it finances. This oversight resulted in Indian farmers and fishermen getting their case before the US Supreme Court. The International Finance Corporation’s lawyers argued that the World Bank lending agency had “absolute immunity.” The Supreme Court said no and remanded the case to the circuit court to rule on the damages.

Perhaps the most surprising thing about this apparent victory for ordinary faraway little people in an American court against the World Bank, a principle instrument of American imperialism, is that the Trump administration appeared in court as a friend of the Indian farmers and fishermen. The US Solicitor General, represented by Jonathan Ellis, rejected the notion that international orgnizations have absolute immunity. The Establishment exists on its immunity. Here we see the ultimate reason that the ruling Establishment wants rid of Trump.

Already the senior staff of the International Finance Corporation have come to the realization that they have other responsibilities than just to shuffle money out the lending shute. If the Indian farmers and fishermen succeed in protecting themselves from ruination by external costs, perhaps Americans who suffer external costs will follow their lead.

Perhaps economists will also come to the realization that they owe us accurate GDP accounting and not fanciful accounts that serve elite wealth in the financialized economy.

This holiday season, American workers have little to celebrate

By Danny Haiphong

Source: Intrepid Report

Every year, much of the U.S. population celebrates Thanksgiving and Christmas to show appreciation for their families and friends. Thanksgiving normalizes the colonial origins of the United States and erases the brutality of the English settlers who massacred indigenous people to prepare the land for capitalist accumulation. Christmas is the annual holiday of big business. On no other day are workers more encouraged to spend their wages on the latest consumer product to gift to their loved ones. The holidays bring with them a deep pressure to be merry. Yet on this holiday season, workers have little to celebrate.

A new study by Brookings Institution provides a snapshot into the devastation wrought on the working class by American capitalism. Forty-four percent of all workers between the ages of 18-64 are employed in low-wage sectors and earn an average of $16 or less per hour. The study excluded workers who logged over 98 hours per week over the last year as well as certain sections of the college-educated population such as those living in dormitories and attending graduate school. Had these groups of workers been counted, the percentage of low-wage workers out of the total population would likely be even higher. This verifies prior datasets which proved that around half of the U.S. population makes less $30,000 per year.

The growing poverty of the American worker is a major contributor to the growth of toxic stress and mental illness. Half of all U.S. adults will develop a mental illness over the course of their life. Serious mental health conditions afflict nearly ten million people in the United States and over a quarter of these individuals live below the official poverty line. Suicide rates are at a thirty-year high. An obvious connection exists between rising poverty and the worsening mental health of the American worker.

Workers in the United States see no future under the current stage of capitalism. They struggle to afford rent in a nation where the federal minimum wage cannot pay for a two-bedroom apartment anywhere in the country. They indebt themselves in the trillions to attend college and obtain healthcare. They work in redundant, service sector jobs where hours are long and mistreatment, abuse, and injury are all too common. The American worker is increasingly alienated from themselves and each other. Union density rates in the U.S. have fallen to just ten percent of all workers since World War II.

The shrinking labor movement has followed a larger trend in U.S. society. Privatization has decimated the public sector. Workers have few places to socially convene independent of the machinations of consumer capitalism. Workers are competing for fewer jobs, most of which are not worth competing for at all. Homelessness, mass incarceration, and endless war remind workers that they can easily be turned into cannon fodder if they step out of line. In such an environment, addiction and self-destruction is encouraged while organizing for justice is discouraged.

Economic insecurity and alienation place more pressure on families to make up for stagnant wages and exorbitant amounts of debt. More young workers are living with their parents than at any other time in the last one hundred years. Older workers are not only forestalling retirement but also finding themselves without family or community support as siblings and adult children chase the highest paying jobs and the lowest rents and property values. Couples feel compelled to remain in toxic relationships for economic reasons. A strong link exists between domestic violence and poverty.

Contrary to the messages in Hallmark cards or the corporate media, the holidays are far from a time of celebration. Many workers view the holiday season as a harsh reminder of the loss, alienation, and despair that they’ve experienced over the course of their lives. Holidays place added pressure on workers to dismiss the ills of capitalism and the personal stressors associated with them. It should come as no surprise that most workers already struggling with mental health conditions report that the holidays only worsen their symptoms. Instead of embracing humanity, the holidays encourage workers to embrace rampant commercialism and the nuclear family.

To break from a culture steeped in the profit motive, workers will need to create their own traditions based upon solidarity and social transformation. Not everything about the holidays needs to be thrown out in the process. Spending time with family and friends during a day off from work can and should be rewarding to the psyche and to society. The conditions of capitalism prevent the holidays from serving a social purpose. Holidays under capitalism breed despair but brand themselves as moments of pure joy.

While workers may have little to celebrate this holiday season, there are reasons for the working class to be optimistic in the years to come. Teachers in cities such as Chicago and Los Angeles have won key gains in 2019 by using the most powerful weapon at the disposal of organized labor: the strike. At the beginning of the year, the Los Angeles Teachers won smaller class sizes and more support staff. The Chicago Teachers Union massively increased the number of nurses in the school district by forcing the city to hire nurses rather than continue the inefficient and harmful practice of hiring private contractors. The UAW’s strike of General Motors (GM) earlier this Fall made global headlines even if it was unable to win every demand that the workers put forth. These strikes reflect a growth of class consciousness in the United States. The continued growth of class consciousness will be critical toward building the kind of struggle capable of bringing about massive political and economic change for the working class.

Furthermore, workers around the world are leading the way in the struggle against class inequality and foreign-sponsored wars. Massive protests in Haiti, Chile, Honduras, and Algeria are just a few of many occurring around the globe. The protests have mainly targeted repressive U.S.-backed governments and their neoliberal economic agenda. China is leading the world in poverty reduction. Cuba is the most sustainably developed nation in the world. A vast majority of workers around the world want to see an end of the miseries imposed by global capital and are actively fighting to make their demands a reality.

The question is whether workers in the United States can decisively break from the despair, the racism, and the extreme alienation shaping their current condition. Being determines consciousness. At this moment, the neoliberal race to the bottom has rendered most workers too fearful, disorganized, and full of self-blame to fight back. However, millions of workers have rallied behind the political campaign of Bernie Sanders. Labor unrest is likely to continue as neither political party appears interested in implementing Bernie Sanders’ social democratic agenda. Workers in the United States are in desperate need of a revived labor movement to quench their thirst for a better life. Putting our energies into building this movement will go a long way toward shaking the Holiday Blues and giving workers something to really celebrate: a society run by workers, in the interests of workers.

The Need for a Greater Vision: Recognizing Reality

By Jennifer Ladd

Source: Resilience

Question Beliefs

We live in a culture that is embedded in unquestioned beliefs passing as truth. These beliefs are the source of our current crisis. We attempt to solve the problems of degradation of our environment and climate disruption, but we do not look at these core beliefs. We hold on to the idea that capitalism is the only right way to organize an economy, that democracy is essential to our freedom, that freedom itself is a core ingredient to our happiness. We believe corporate slogans such as “Progress is our most important product” (General Electric), and subscribe to the belief that technology will solve whatever problems we have, even the ones caused by technology.

Grasp the Scope of the Crisis

Most of us are unable to back away far enough to grasp the whole picture. We are like a tourist with a flashlight trying to get a view of a huge mural that covers a block-long wall. The news media can only focus our attention on a tiny fraction of the image at any one time. We read daily reports of record temperatures in the arctic, of ice sheets melting in the Antarctic, of floods, forest fires all over the world, political gridlock, and recession fears. We are deluged with information. Most of us have been touched directly by at least one aspect of the crisis. Today I am breathing the smoke of fires in British Columbia and Alaska hundreds of miles away. These are direct experiences, yet there are still those who deny that climate change is real or that it is a problem. And worse yet we do not have the political will or mechanism to respond. Many scientists clam we are beyond the tipping point. They say the damage done to the ecosystem is so great that further decline is assured, even if we drastically reduce our impact in the next 5 years.

We are confronting a confluence of issues – environmental degradation, climate disruption, political tension and economic instability – that create an unprecedented risk to future generations. Climate disruption is getting all the headlines, but talk to a fisherman anywhere on the coast and he will point to depleted fish stocks making it impossible to earn a living fishing. Some of that is due to climate, but over-fishing, water pollution and destruction of spawning grounds also play major roles. Agricultural runoff is creating large dead zones at the mouths of rivers, areas that used to be some of the most productive.

Insect populations are plummeting with some reports of 75% loss in the last 50 years1.Insects are the base of the food chain for many creatures. If they die off then we will all go. The cause is not simple but insecticides on farm land and habitat destruction are major factors.

Fresh water is another resource in critical decline. We have been pumping water from aquifers at rates that far exceed the rate of recharge. Worldwide, 40% of our food grown on irrigated land.2 Without irrigation we will face severe food shortages. In addition, much of the remaining irrigated land is dependent on snowpack that feeds reservoirs in the mountains. As the climate warms there is less snow and it melts sooner, reducing the amount of stored water available.

If we listen to the economic news we cannot help but be aware of the rapid increase in the US national debt. Politicians seem incapable of holding the debt in check, especially the Trump administration that established policies and tax cuts that have dramatically increased the debt at a time when the economy is doing relatively well and we should be reducing the debt. Despite the ignorance of some lawmakers, debt cannot continue to rise indefinitely. Many countries have tried that. In the end it leads to hyper inflation, and in extreme cases, a collapse of the government.

A more subtle and less talked about issue is that of resource depletion. True, Malthus warned the world of this 200 years ago during a time when energy resources in the form of wood were being depleted.Then we discovered coal, then oil, and the industrial revolution sparked a new level of development and environmental destruction on a level Malthus could never have foreseen. The issue is that while technology has kept the price of raw materials from increasing dramatically, metals like copper, and energy sources like oil and gas are finite. The deeper we have to mine or drill and the more complex the extraction process, the smaller the final product derived from the energy expended to get the material. When oil was first discovered it took roughly one barrel of oil’s worth of energy to extract 100 barrels. Now that one barrel might get us 10 barrels. The costs are multiplied throughout the system. In other words if it now takes 3 times as much energy to mine a ton of copper as it did 50 years ago, because the high quality and easily extracted ore are gone, and that energy is derived from oil which itself requires 10 times more energy to extract, then the two factors multiply the real cost of the copper. In our example it now “costs” the equivalent of 30 times more oil to produce a ton of copper. Again, we run into limits.

I am proposing that the solution is a radical redesign of our civilization based on a more sustainable model. To do that we need to examine the core beliefs of our society to see which ones are compatible with a new vision and which ones need to be abandoned. This requires that we face our fear of change, grieve for the losses, clear our nervous systems of intergenerational trauma that blinds us to seeing the reality of our time and open our hearts to living in connection. This cannot come about by any rational decision by a governing body. Those in power have a vested interest in keeping the current system alive as long as possible. Call it a form of corruption, but it is also simply a matter of self preservation. We can, however, make changes on a personal and local level. We can have working models established on a small scale that can replace systems on a national level as they fail. We either cling to the existing paradigm as it implodes, or we can place our attention and focus our energy on creating new systems that support life in harmony on the planet.

Look Below the Symptoms

A partial list of these beliefs was mentioned already – that our prosperity depends on capitalism, democracy, and progress through technology. Let’s go deeper to see how these structures of society evolved, and how they affect us today. The core belief that underlies our current civilization is the idea that we are separate from nature and superior to other creatures and even other races of human beings. It leads to a distrust of nature which shows up even in the fables we tell our children, which are filled with images of the dark and dangerous forest and the merciless ocean depths.

Another belief is that security consists of having enough food or money stored away to last through hard times. In itself the belief is true, but it becomes dysfunctional in a world of finite resources when each person is focused on maximizing their own resources without consideration for the whole. To justify our actions we convince ourselves that there are no limits, we can have it all and, through technology, everyone can be raised up to the lifestyle we enjoy in the USA.

We are embedded in the psychology of capitalism, and we live in a world shrouded in fear. The combination is lethal. Fear leads to contraction and thinking only of one’s own survival. Capitalism promotes the value of gathering resources for our own use and enjoyment. When capitalism is combined with the Puritan work ethic, it allows us to justify income inequality because of the unspoken belief that if we have more than our neighbor it is because we worked harder or smarter and therefore deserve the rewards. We may feel no obligation to share our good fortune because those who are less well off obviously did not work hard enough. The result is a society that is fundamentally adversarial, pitting the wealthy against the poor, those in power against those who would like to be in control.

That leads to us versus them thinking that pervades our culture and shows up on all levels, particularly in public arenas like politics. The two party system has devolved into two conflicting ideologies that feel irreconcilable. Each party has become more isolated and rigid in their doctrine to the point that many people only listen to information that supports their point of view or their party’s view. Where is the middle ground that allows for a cooperative solution? Problems that require dramatic solutions like climate disruption cannot be effectively addressed.

Capitalism has been the driving force behind the industrial age. It has brought us technology that was unimaginable 200 years ago.  The problem is that it is fundamentally incompatible with a sustainable world. The core precepts – private ownership of goods and land, a competitive market for labor and materials, emphasis on capital accumulation – lead to a society that is made up of a few wealthy “owners” and a large number of “workers”. The system is dependent on keeping the wages paid to labor low enough that the owners can produce products that are competitive in the market place. When labor unions were strong there was a balance of power, but the advent of free trade and multinational corporations has robbed labor unions of their bargaining power because of the availability of cheap labor in the developing world. The result is an ever increasing disparity of wealth between the owners and the workers, and an ever increasing number of workers at the lowest level of the economy. Until the last 10 years, this has been partly disguised by an overall improvement in living standards through technology, but when one compares the hours worked in 1950 to support a family, when one person’s income was adequate, compared to the present when both adults of the family have to work, it’s clear that the average working family has to work harder simply to pay for the necessities of life. Free time to enjoy life has evaporated. We do not account for that in the statistics of progress like GDP.

To facilitate the transactions of a capitalistic economy we invented money and a banking system to manage the creation of money. In our system, money is created by the banks in an equal amount to the loans they make. In other words the creation of money is dependent on the creation of debt. Debt, however, once created, tends to grow faster than the money supply because of the effect of compounding interest. Debt will tend to accumulate with those members of society that are unable to pay it off, and capital will accumulate to those who have wealth already and are free from debt. At first it works well, but as debt accumulates to the workers, they have less money to buy the goods produced by the owners and the economy goes into recession. Debt is reduced through bankruptcies and foreclosures. Capital is reduced by the downsizing and failure of businesses. Eventually a new cycle begins. Historically, the cycle often becomes extreme and outcome is revolution as the tension between the wealthy and the poor becomes intolerable.

Capitalism is a natural outgrowth of our survival instinct in disconnected world. If we do not feel supported by our fellow humans, by the natural world, and by a greater presence, then there is a level of insecurity that we continually try to appease by building protective shells around us. In modern times this translates into ownership of land, house, and enough money and other resources to allow us to feel secure. Unfortunately in the rush to acquire these items we have sold our soul to the banks which in effect own our homes and often our cars. We end up feeling even less secure because we now have even more to lose if the economy turns down and we lose our job. We crave a sense of control over our lives, but we can no longer hunt for our food or harvest it directly from the earth so even to eat we are dependent on a complex web of corporate-run systems of transportation and production that we do not control or even understand.

Healing the Wound Of Separation

In order to live in harmony with each other and with the earth we need to heal the core wound of separation from a close community, separation from the earth and the natural world, and separation from the spiritual ground from which all of this manifested world arises. Without resolving all three levels of separation we will continue to live in fear and grief, maybe depression. It is that core sense of not enough that drives the Euro-American addiction to doing, to trying to get somewhere or get something that we think will cure that sense of not enough. We invent better technology, more powerful machines to get us there faster, but the result is that we find out ever sooner that the goal we had set is not going to satisfy the sense of lack. We may accumulate more wealth at the expense of the community around us and defend that wealth with all our strength, but it does not bring us the security we seek.

In order to heal, let us acknowledge the true state of our own life and of the world. Let us fully feel the grief of the separation and fully feel the rage that lies hidden. We may have a sense of being betrayed by the society that we were taught to trust as a child. We accepted the promise of perpetual progress and came to expect that we should have a better life than our parents.

On a global level, can we feel the pain and destruction this has caused to the earth? Can we acknowledge and feel the horrors of genocide against the native population of this country and other colonized places in the world? Can we feel the full impact of enslaving millions of African natives to work our fields? The grief is immense. We have kept it suppressed for centuries, but it must be felt. Let us clear the intergenerational trauma so we can come into our hearts and truly feel the connection with the earth and with each other.

Only then, free from clinging to a failing system, in the hope of preserving the status quo, can we reconnect with source and make the leap to a new way of living. We do not have to invent better ways of living on this planet. There are models of aboriginal societies that have lived here for more than 10,000 years without destroying their environment or collapsing from internal dysfunction. They have evolved sophisticated systems of government and economic systems that allowed the wealth that was accumulated to be redistributed to those in need. They held their land in common for the benefit of the whole tribe. We have much to learn from their societies.

1. In 2017, scientists reported a decline of more than 75 percent in insect biomass across 63 nature areas in Germany between 1989 and 2016. https://www.scientificamerican.com/article/as-insect-populations-decline-scientists-are-trying-to-understand-why/

2 .http://www.fao.org/nr/water/aquastat/infographics/Irrigated_eng.pdf

Stick to the Plan

Illustration by Mike Faille

Reclaiming central planning from the clutches of corporations

By Brendan James

Source: The Baffler

What do you think the Russians talk about in their councils of state—Karl Marx? They get out their linear programming charts, statistical decision theories, minimax solutions, and compute the price-cost probabilities of their transactions and investments, just like we do.

–CCA Chairman Arthur Jensen, Network

WHAT DO JEFF BEZOS AND JOSEPH STALIN have in common? A certain supervillain chic. Cold-blooded austerity. Iron discipline. A penchant for back-breaking output targets. A healthy appetite for terror.

Yet perhaps their most surprising overlap is that the General Secretary and the chairman of Amazon, Inc. built two of history’s largest centrally planned economies. Then again, maybe it’s not so surprising: What embodies the trademark Bezos-ethos of “Get Big Fast” better than the Five-Year Plan? Thanks to its cutting-edge logistics and coordinated supply chains, Amazon last year clocked a GDP of $230 billion[*]. To Jared Kushner’s recent demand that “the government should be run like a great American company,” let all communists raise a fist of solidarity!

In fact, write Leigh Phillips and Michal Rozworski in The People’s Republic of Walmart, Amazon is just one of thousands of firms, big and small, that centrally plan their inputs and outputs. Of the top hundred global economies, around sixty-nine of them are businesses, not countries; most, if not all, are internally planned. (Sears, which over the last decade broke its firm into an “internal market” of competing units thanks to CEO and Ayn Rand-devotee Eddie Lampert, is conspicuously absent from this list.) Despite the collapse of the USSR and the global gospel of markets that spread in its wake, it seems planning is still working all around us.

The problem is that planning is not working for most of us. Yes, automation and “Big Data” have conjured cheaper goods for consumers—unfortunately, most consumers are also laborers who remain ruthlessly exploited. As the promise of new technology expands each day, workers sleep while standing or collapse from heat exhaustion. Planning, once a revolutionary tool meant to reduce labor time and eliminate exploitation, has become just another vulgar mechanism for maximizing the profits of unelected, authoritarian, union-busting, planet-cooking, superrich vampires. The People’s Republic of Walmart makes the case that the left should reclaim the radical demand for a democratically planned economy and repurpose this corporate apparatus for the flourishing of all. Far from a dry pamphlet on logistics theory, the book raises crucial questions about justice, technology, and our capacity to build a new world in the face of economic and climate catastrophe.

The planned economy was supposed to have gone extinct three decades ago. The Soviet Union gasped its last breath, American capitalism sprayed a bottle of Cristal, European social democracy ordered another latte, and China pressed a big button labeled “Market Socialism.” But if you really put the time in, you could probably get a wonk from the Hoover Institution to grudgingly accept that government planning still beats the market in the realm of certain public services, such as health care or fire departments. The knives come out, though, when this approach is proposed for things like housing, pharmaceuticals, energy, or, heaven forbid, consumer goods in general.

What may surprise newcomers, however, is that many self-described Marxists are wary of planning, too. Despite being thanked in Phillips and Rozworski’s acknowledgements, Bhaskar Sunkara, editor of the left-wing magazine Jacobinidentifies as a market socialist. In a 2013 essay sketching an agenda for the left, Jacobin’s executive editor Seth Ackerman conceded that markets are necessary, so perhaps we’d best just find a way to socialize them. Vivek Chibber, professor of sociology and, along with Sunkara, one of several co-authors of The ABCs of Socialismdismisses planning as a dead-end: “We can want planning to work, but we have no evidence that it can.” One of the left’s “worst legacies” has been to “identify socialism with central planning.” Market socialism, we’re told, is communism for grown-ups.

Everyone from the market socialist to the Austrian economist has taken one side of an incredibly sexy academic exchange known as the “socialist calculation debate.” The argument should be familiar: market transactions provide producers with essential information about what consumers and other producers need, and therefore how much to make. To try and calculate (that is, plan) this galaxy of interdependent inputs and outputs is impossible in a fluid economy. It’s a matter of information, you fool. And like it or not, market prices are the best way to collect the information we need to map out supply and demand.

A rich tradition of heterodox economics, mathematics, and computer science has materialized to answer this problem of calculation. But it is modern processing power, dwarfing the bandwidth available in the twentieth century, that truly rebukes the argument above. Consider computer scientist and economist Paul Cockshott who, in about two minutes, using only university equipment, claims to have run models that were able to optimize an economy “roughly the size of Sweden.” You get the feeling that the mammoth data centers at Amazon, Ford, or Foxconn might be capable of even more impressive calculations. And besides, to insist communist theory prove some perfect equation is either disingenuous or missing the point. The question is not whether planning is mathematically pristine, but whether it can allocate better than the market.

The answer, to return to the material world, is yes it can. It’s true that under capitalism firms plan internally but compete with each other, a dance that keeps companies innovating new ways to capture surplus and, sometimes, inadvertently benefit regular people. This dynamic would not occur naturally in a planned economy; one cannot just seize Amazon or Walmart, socialize it, and call it a day. Phillips and Rozworski apparently recognize this (there is an entire chapter in The People’s Republic of Walmart titled “Nationalization Is Not Enough”) and point to an interesting line of thought from economist J. W. Mason: Banks tend to operate as a privatized Gosplan, where the slush fund of finance capital flows to whichever firm a group of Brooks Brothers-clad planners decide deserves investment, regardless of profitability. Market competition, in other words, is hardly the divine engine of innovation if so many firms are, as Mason writes, “born new each day by the grace of those financing it.”

Even so, could planning replicate the market’s capacity to innovate? Ford’s former CEO Mark Fields certainly seemed to think so, declaring in 2016 that his company would soon “be able to use analytics to anticipate people’s needs, as opposed to people trying to tell us what they want.” And to the perennial taunt of the lizard-brained conservative—“I love seeing idiot millennials protest capitalism on their Apple-made IPHONES”—one may point out it was largely the market-immune Pentagon and Department of Energy, not Apple, that developed the batteries, algorithms, touch screens, and microprocessors our right-wing friend uses to tweet about the Muslim Caravan. Once again, none of this is to celebrate the actual decisions or practitioners of planning as it exists under capitalism, but to recognize its power and how else it might be put to use.

So much for feasibility. Still, the left has good reason to harbor deeper techno-skepticism. When most of us hear the phrase “data collection,” we think not so much of social justice but of Facebook selling our personal information, NSA surveillance, and racist models of “predictive” policing. In Automating Inequality, Virginia Eubanks catalogs state policies that placed welfare applications, housing allocation, and child welfare investigations under algorithmic control. The results have been catastrophic for the poor and working class, of every race and gender. Algorithms, after all, are written by humans, and prejudices operate just as easily in digital form as they do in twentieth century analog—perhaps even more so. Phillips and Rozworski acknowledge this reality and rightfully urge vigilance. If planning is to make use of such technology, we must make sure not to bake this poison into the cake.

But hope lies in the very recognition that technology is a political construct, rather than some transcendental, neutral force. If we can program the reinforcement of hierarchies, we can certainly work to program their destruction. (There’s already encouraging research as to how to account for problems such as “disparate impact.”) As Eubanks writes, “if there is to be an alternative, we must build it on purpose, brick by brick and byte by byte.”

Beyond algorithmic justice, the real specter haunting socialism is, naturally, the Union of Soviet Socialist Republics, whose record in planning was less than exemplary. While capital-C Communism brought about modern industry, literacy, and social security, Phillips and Rozworski don’t deny the ultimate failure of the Soviet experiment. The October Revolution was contorted and compromised by a world war, a civil war, imperialist invasion, economic backwardness, another world war, and a half-century of military competition with the United States. For the sake of the revolution, democracy was indefinitely postponed. Even if Soviet and East German firms were just as or more efficient than their Western counterparts, this arrangement still resulted in workers resisting work and managers lying about output, i.e., bad information. (In a particularly cruel irony, Gosplan bureaucrats even took to sabotaging new computerized approaches to planning, lest they personally lose their political clout. Their unlikely co-conspirators were “reform” minded crypto-capitalists who worried the algorithms would actually succeed, leaving planning in place forever!)

For Phillips and Rozworski, it wasn’t communist planning that led to authoritarianism and disaster, but authoritarianism and disaster that led to bad planning. “Democracy,” they write, “is not some abstract ideal tacked on to all this, but essential to the process.”

A few years ago. Francis Spufford’s novel Red Plenty cast the very idea of Soviet planning as its hero, wherein it falls from grace, as all tragic heroes do. There’s no need to understate that tragedy, but it ispossible to overstate it. Let’s not forget what happened after the victorious arrival of the market in the former USSR: production of consumer goods, industrial output, and human life expectancy all cratered. A new class of homeless citizens emerged, frozen to death in streets, alleyways, and parks. We often discuss the millions of deaths in the Stalinist 1930s. We don’t discuss the millions of deaths in the post-Communist 1990s. Unsurprisingly, recent polling revealed that a majority of those surveyed in Russia still regret the collapse of the USSR and its planned economy. (In 1996 they nearly voted in Communist presidential candidate Gennady Zyuganov until—get this—right-wing hucksters colluded with a hostile foreign government to help install a widely unpopular and corrupt buffoon through a media campaign that peddled rank propaganda.) The Soviet experience was a lesson, all right, but not quite the one many smug market fetishists would have us believe.

And if all that can happen to a superpower, imagine what faced Chile, the would-be socialist alternative to Soviet technocracy: in 1970, buoyed by the support of the working class, Marxist president Salvador Allende was elected and set about building a nation-wide, participatory planning network. This novel approach was predictably stymied by a U.S. economic blockade and finally snuffed out by a CIA-backed military coup in 1973. Still, the pioneering spirit of this moment was poignantly captured by Eden Medina in her wonderful study Cybernetic Revolutionaries. What happened next is a depressing cliché: Chileans were placed under the rule of a distinctly not-left-wing dictatorship and enrolled as fresh test subjects in the mad laboratory of the market.

How will that same market treat the workers of tomorrow who fall victim to imminent waves of automation? Is the market really compatible long-term with progressive policy goals like universal basic income, or full employment? Will the market really permit the end of mass incarceration? Then there’s the C-word: last month we learned that potentially catastrophic climate change is now beyond prevention, and that even if we swore off carbon tomorrow, by 2099 the Arctic will still be 5°C hotter. The expression “glacial pace” doesn’t quite mean what it used to. In light of this, The Atlantic, official mouthpiece for the death god Nyarlathotep, predictably suggests that “any realistic plan to decarbonize the U.S. economy will almost surely require the sort of commercial technological breakthroughs that tend to come from private entrepreneurs.” Not to be outdone, the New York Times last month published an op-ed titled—no shit—“Can Exxon Mobil Protect Mozambique From Climate Change?

It doesn’t have to be this way. Converting industries to renewable energy, Phillips and Rozworski argue, is wholly within the power of America, India, and China. But, wouldn’t you know it, the principles of commerce just aren’t incentivizing them fast enough! Carbon-free agriculture is a trickier feat, but certainly less tricky as a state-sponsored venture freed from market meddling, à la Sputnik or the Manhattan Project. Climate reporter Kate Aronoff suggests: “If you create a successful drive to nationalize [the fossil fuel industry] or rapidly scale back their power that will create a real precedent for other industries . . . then you can nationalize Monsanto. Have that be the crux of a populist demand of a climate movement.” There are different schools on the left when it comes to ecology (Phillips, science writer by day, has been criticized for consumerist, growth-happy “ecomodernism”), but one hopes we can all agree that smashing the existing energy market is a necessary step.

More than any other crisis of capitalism, ecological calamity is the most self-evident reason to abandon the dumb, short-sighted, animal logic of the market for a rational and humane plan. It has been, to quote the superior critique of capital, Gremlins 2, “a complete failure of management.” And if the history of capitalist crises is any guide, the odds are that climate change will produce a bigger, bulkier, more controlling state no matter what. Before things really start to crack up, we may want to pick whether that state runs on egalitarian principles or the fascist death drive. Does anyone who doesn’t own a yacht called Fountainhead truly want to cede that decision to the invisible hand of the market?

To their credit, Phillips and Rozworksi return throughout the book to the necessity of mass mobilization. Planning is not One Weird Trick to Achieve Socialism. Unless we simply want state-capitalist profit optimization, the real thing will require continuous and brutal class struggle. It will require experimentation, failure and, as Marv Alpert once said, tenacious defense. Any hope of success lies in a rejuvenated, robust and, yes, global people’s movement to shatter the political, legal and physical barricades put up by governments and capital. But planning must be part of the agenda.

Here the cybernetic concept of feedback is useful: the very idea of a plan, of giving everyone control of their own lives, is just the kind of revolutionary notion that can energize, inspire, and keep such a movement alive. The final line of Spufford’s Red Plenty need not be read as the end of a dream, but the real beginning of history: “Can it be, can it be, can it ever be otherwise?”

Hope for the best, of course. And plan for the worst.

Capitalism, Empire, and the Infernal Gloom Machine

By Jason Holland

Source: Dissident Voice

Depression is built into this machine and the evidence is plastered on the morose faces of people caught in the clutches of its business as usual activities. Depression is found in the insurmountable debts we owe for spending a lifetime of preparation and labor to serve the machine. In addition to debt, the machine awards us for our servitude with trinkets, gadgets, doodads and gizmos that provide a moment of hollow amusement and then sit on shelves in garages and decay. They represent the planned obsolescence of the human heart. The sacrifice paid for our fetish with materialism is the actual quality of our lives.

The gloom machine tells us the quality of our lives is defined by the machine in the driveway, and the machine that flushes away our excrement, and the machine that chills the tortured slaughtered animal flesh for later consumption, and the machine that flashes pornographic images and supplies numbers detailing how much we are liked by our so called friends. But to us humans it seems that quality of life is more appropriately measured in the amount of disposable time we have to pursue that which we want, and the quality of the community around us, and living without being chronically stressed with threats of being displaced from the land upon which we live for not working hard enough for the machine.

Depression is waking up at 6 in the morning in darkness to sit in traffic for an hour to arrive at a job that we don’t want to be at, only to serve the machinations of people with nothing but greed in their overstuffed bellies. And we go to these jobs so that we can pay rents that are unaffordable, and to service debt we’ll never escape, and we go home in darkness to our lonely lives in places where community is absent with a view of an equally lonely tree or a man-made retention pond which is an upgrade over the view of staring directly at your neighbor’s domicile. Depression is the realization there is no vacation on the horizon, no respite, just more of the same. Depression is knowing that such a life is better than many others have it.

Depression is recognizing the cynics were right about this society, that Cohen spoke truth when he sullenly moaned:

Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
That’s how it goes
Everybody knows

Depression is watching art die. The surrealist, the bohemian, the rock ’n roll, and the anti-authoritarian soul has lain down and pledged fealty to the dollar. For money, they’re now all willing to become ready made predictable cubes to be packaged and sold in plastic wrap placed in cleverly designed boxes which deliver to the depressed public what they want, more of something that’s pretty on the outside and vacant within. We are left with monthly subscriptions of more tales of self aggrandizement for the throngs of temporarily embarrassed millionaires.

Depression is watching the worst of us rise to legitimacy and awarded iniquitous riches for it. The popular is depressive, musical hack Cardi B sings about her money money money and she is loved. Jordan Peterson sells cheap self help stolen from better written material decades ago amalgamated with misogyny and dictates of hierarchal subjugation and becomes wildly popular. Trump purveys hatred of people of color and a love of authoritarianism and the depressive people, oh do they eat it up. This is sickness, depressive sickness.

Depression is acceptance of the violent now. The grossly unhappy men with their armaments spread their gloom and horror across the planet and claim righteousness for doing so. Depression is watching society applaud murderous hearts for their crimes who don badges and camouflage and have holidays to celebrate their violent history, while villains are made of those who simply don’t want to stand up for songs of oppression. Thank you for your service to the machine.

Depression is watching notions of resistance and revolution take form in slightly altered subservience. The great reformation desired now is for a “green new deal” that doesn’t come close to mitigating the impending culling of humanity from soon to be ecological catastrophes. Their plans offer only more endless work at the behest of the gloom machine while promising healthcare that will never happen, less debt it will also never deliver, and affordable housing that still won’t solve homelessness. They don’t want to break the machine, just tweak it, and they lack the ability to do that even. Never have I borne witness to such eager slaves and such depressive aspirations. The people seem to adore their cubicle lives, their environmental destruction, their corporations, their debts, their corrupt leaders, their prisons, their banks, and their taxes.

They want to continue to be put to work under the thumb of the status quo western civilization authoritarian mind and this is all the depressed mentally dominated masses can think of as a possible improvement. Instead of wanting to taste real liberty and be actual equals, their dreams are limited to being better treated servants. The gloom machine chugs along fueled with dimwitted ideas sold by boxed-in thinkers without any possibility of escaping the darkness, rather simply offering a more cushy seat for viewing the end of everything.

The machine bellows out demanding more, more, you owe me more, and somehow those wearing red, white, and blue agree and celebrate the demands of the machine. These debts we owe are servitude. The numbers held in digital machines are immoral which demand one must wake up to a dreary existence to do more of what is killing our souls along with the flora and fauna around us.

Depression is the downtrodden plebs who celebrate their corrupt democracy, which is in reality a thinly veiled oligarchy that should be obvious to all. They prop up a system of voting that allows the election of the presidency, a position that shouldn’t exist in the first place in an egalitarian society, to be awarded to candidates who don’t capture the most votes. What little democracy there is in a representative system is lost in totality when the winner of elections need not win the majority of votes. The gloom machine is straight up tyranny.

A non-depressed society would reject being served faux democracy. They’d reject a system absent of reason or compassion and disdain would be for ideas of continuing to support such a destructive way of being. But instead, within the gloom machine shame is reserved for those who don’t want to take part in the busted system, and it venerates those who cast votes for imperialist conquerers and planet destroyers, and those voters are lauded as doing their civic duty for taking part in open public corruption.

Depression is the insincere know it all crowd who are incapable of honest debate and have rarely endeavored to open a book of substance or engage in critical thought, but they know trivialities which they mistake as facts and wisdom. They know arrogance well and emanate it with aplomb. They know how to believe all they see in the corporatized media, but thinking without boundaries or limitations is beyond their capacity. This is not even depression, this is tragedy.

Depression is watching the trees be plowed down for more tract housing, a portion of which will sit empty for years because no one can afford to move there, and even if they could it’s a heinous boring life that awaits which is only significantly better compared to being homeless. Depression is knowing this is the reason why we are rapidly destroying our habitable environment and commencing a 6th mass extinction event which is now accelerating.

Depression is to know there is nothing we can do to stop the country we live in from mercilessly killing innocent people all over the world for no reason other than more economic expansion and our sadistic ideas of exceptionalism that entail spreading pain and hardship so a few elites can have more of what they already have more than enough of.

Depression is the powerlessness to change anything of significance. There is no other way they say other than the desolate gloom machine, they say this is how it must be. And so we remain here waiting for the horror that is soon to approach us all as the gloom descends in ever quickening waves.

A zombified indoctrinated populace can see no other way than capitalism and beating each other over the heads to satiate egos in needless competition that is unnecessary for survival and deleterious to the common good. Capitalism is the primary tool of empire, and a word that should be synonymous with depression. It’s the accumulation of resources in an effort to gain more power in man-made markets to leverage that power over other people and get them to do what the person with the most power desires. Capitalism’s depressing ideology is defined by the lecherous desire for more for the sake of it so the winner can pound their simian chest in victorious celebration of the devastation they’ve created.

Capitalism is inherently unsustainable due the way it allows power to coalesce via the leveraging abilities given to money to buy land, the means of production, elections, and advertising. It allows the whims of the few to overrun the needs of the many where those with the worst intentions aspire to gain more than others because they will attempt to fill the void in their hearts with self importance expressed via power over others. This is why it cannot be used.

If there is no central currency or advantage to collecting huge amounts of resources then the motivation to hoard would evaporate, as those resources would simply rot or become a burden to maintain. There’s no fun in that kind of hoarding. The “fun” comes to the simpleton power seeker when they acquire power to make others do what they want and thus gain the ephemeral validation they so desperately seek.

If one runs the math on players competing for money at different rates of gain over a certain amount of time, there will be a doubling effect which becomes exponential. And this effect will accelerate as it plunders along due to gains in leverage which allows for ever greater amounts of money to be made at faster rates. Eventually it always ends the way a game of monopoly ends, someone has all the power and everyone else is subservient to that entity/person.

These dour thoughts manifest from the recognition of the stranglehold empire has over our lives. The depression is the result of the myriad of expectations I can’t let go of that wants to see a kinder more egalitarian and sustainable world emerge while knowing how unlikely it is. Our collective depression is rooted in the foundations of social hierarchy and its economic tools of control, and understanding what a perfect trap it is, and so it goes, and everyone doesn’t know, but they feel it, though.

Saturday Matinee: I fight, therefore I am

I fight therefore I am (in french: Je lutte donc je suis) is a documentary film about social and political struggles in Greece and Spain which provides an overview of the struggles in Europe against austerity, capitalism and fascism. A musical journey celebrating Resistance from one end of the Mediterranean to the other. The title is made from the aphorism of the philosopher René Descartes Cogito Ergo Sum (I think therefore I am). Although it hasn’t been distributed by any mainstream company, it has enjoyed great success, and has been shown to numerous theaters, festivals, in France and in Europe.

Retconning History

By CH

Source: The Hipcrime Vocab

“He who controls the past, controls the future; and he who controls the present, controls the past.”–George Orwell

“The mistake of judging the men of other periods by the morality of our own day has its parallel in the mistake of supposing that every wheel and bolt in the modern social machine had its counterpart in more rudimentary societies…”–H.S. Maine

“The past is a foreign country; they do things differently there.” –L.P. Hartley

I’ve often referred to the “Flintstonization of history”—a concept I borrowed from the book Sex at Dawn. It’s the tendency to project our present-day circumstances onto the past, assuming that people basically thought and acted much as we do. But when we do that, we bring our “modern” sensibilities and worldview along with us. And those have been decisively shaped by the time and culture in which we live.

Today I’d like to introduce a related concept–the retconning of history.

Looking back, that’s been the theme of a lot of my writing over the past year. I’ve looked at a lot of history which challenges and overturns the conventional narrative that our present-day circumstances and social organization are basically the same as past societies, except with better technology and a few more creature comforts (i.e. the past, but with cell phones). Or that they are the way things have always been, and that there are no alternatives.

Now, most of you probably know what retconning is. It is short for the phrase “retroactive continuity”. In order to make a narrative coherent, the authors “rewrite” (or simply ignore) what has occurred in previous episodes or iterations of a long-running franchise in order to maintain continuity with the ongoing “new” narrative arc and characters. The phrase originated with comic books, and is typically used in reference to films, television shows, books, video games, etc.

From there, the word has passed into common parlance. Normally, retcon is still used in the context of a work of fiction. However, I’ve seen the word spread beyond just talking about movies and TV shows to the world in general. When people say retcon now, they are usually referring to an attempt to “rewrite” past events by deliberately distorting them or altering the record after the fact. That is, “[people] tell themselves a different story about what happened in prior events in order to maintain consistency with their current circumstances.” That story may include a blatant distortion of facts and a general disregard for reality. Much of this is derived from our current political situation. A politician may suddenly reverse their position, and then declare that what came before didn’t happen (“fake news”), or simply ignore it altogether if it doesn’t fit with the narrative “spin” of the political parties.

At it’s heart, it is an attempt to “erase” or “rewrite” the past for the sake of present circumstances. As one of it’s earliest descriptions had it“retroactive continuity ultimately means that history flows fundamentally from the future into the past.”

What’s any of this got to do with history? It strikes me that much of what we learn about history are attempts to “retcon” the past.

What do I mean by this? It seems that history often adopts a “modern” point of view to explain past events. In this narrative, we were always heading to exactly where we are: globalized free-market corporate monopoly capitalism.This is done to depict our present circumstances not as deliberately engineered, or contingent on any historical circumstances, or political choices, but rather as something “natural” and just an expression of unchanging human nature. With this retconning, we are unable to think of different ways of organizing things, because those ways—even in the very recent past—have been retconned out of history. Even things in recent living memory—such as not going into debt for an education, or being able to afford a single family house on 25 percent of your income—are retconned to make it so that they never happened.

Here are just a few of the major retcons I have discovered over the past year or so:

1. Economists tend to depict all of human history as heading towards “free and open” markets, if only government would only just “get out of the way” and drop all restrictions and regulations on merchant princes and wealthy oligarchs. That is, globalized corporate free trade is “natural” (as is currency), and collective governance is “artificial” and unnecessary. Our “natural instinct” is to “truck, barter and exchange” declared Adam Smith. John Locke argued that the reason governments came to exist was to protect and secure private property, and that they should do little else besides this.

Of course, all of this is false. For example, an attempt at retconning history was engaged in by economists Santhi Hejeebu and Deirdre McCloskey (of ‘bourgois virtues’fame) attempting to refute some of Karl Polanyi’s book The Great Transformation. As political economist Mark Blyth countered, citing the works of Polanyi and Albert Hirschmann:

“While gain-seeking has indeed existed throughout history…the historical oddity was that gain-seeking became equated with market transactions only relatively recently. This was a qualitative and not a quantitative change; otherwise Incas, Mayans, Romans, and contemporary Britons were/are all living in societies that were more or less similar in their economic structure, despite the differences in, for example, the presence of slaves.”

“Painting the history of all hitherto existing societies as the history of capitalism in vitro probably obscures more economic history than it illuminates…capitalism did not simply evolve, it was argued for. It was propagandized by Scottish enlightenment intellectuals, English liberals, and French physiocrats long “before its triumph”. And it was as much a project of governance; limiting the state; constructing the commodified individual; building a singular notion of economically based self-interest, as much as it was one of creating wealth…”
“Capitalism was created, it did not just ‘happen’, and labeling all hitherto existing societies as ‘almost capitalism’ hardly erases the distinctions between historical periods and economic systems. The fact the ‘we’ today accept Smith far more readily than ‘we’ accept Polanyi speaks directly to the power of ideas rather than the discovery of facts…”

The great transformation in understanding Polanyi: Reply to Hejeebu and Mccloskey(Critical Review)

As Polanyi himself summed it up: “Laissez-faire was planned, planning was not”. From The Great Transformation:

Indeed, on the evidence available it would be rash to assert that local markets ever developed from individual acts of barter.

Obscure as the beginnings of local markets are, this much can be asserted: that from the start this institution was surrounded by a number of safeguards designed to protect the prevailing economic organization of society from interference on the part of market practices. The peace of the market was secured at the price of rituals and ceremonies which restricted its scope while ensuring its ability to function within the given narrow limits. The most significant result of markets—the birth of towns and urban civilization—was, in effect, the outcome of a paradoxical development. Towns, insofar as they sprang from markets, were not only the protectors of those markets, but also the means of preventing them from expanding into the countryside and thus encroaching on the prevailing economic organization of society…
Such a permanent severance of local trade and long-distance trade within the organization of the town must come as another shock to the evolutionist, with whom things always seem so easily to grow into one another. And yet this peculiar fact forms the key to the social history of urban life in Western Europe…Internal trade in Western Europe was actually created by the intervention of the state.

Right up to the time of the Commercial Revolution what may appear to us as national trade was not national, but municipal…The trade map of Europe in this period should rightly show only towns, and leave blank the countryside—it might as well have not existed as far as organized trade was concerned. So-called nations were merely political units, and very loose ones at that, consisting economically of innumerable smaller and bigger self sufficing households and insignificant local markets in the villages. Trade was limited to organized townships which carried it on either locally, as neighborhood trade, or as long-distance trade—the two were strictly separated, and neither was allowed to infiltrate into the countryside indiscriminately…neither long-distance trade nor local trade was the parent of the internal trade of modern times—thus apparently leaving no alternative but to turn for an explanation to the deus ex machina of state intervention…

This retconning has been particularly egregious by the debunked “Austrian economic school” which was expressly created to overturn history and rewrite it for the benefit of capitalists and the wealthy. Michael Hudson, an economist who probably knows more about ancient economic organization than anyone since Polanyi, writes:

…Karl Polanyi[‘s] doctrine was designed to rescue economics from [the Austrian] school, which makes up a fake history of how economics and civilization originated.

One of the first Austrian’s [sic] was Carl Menger in the 1870s. His “individualistic” theory about the origins of money – without any role played by temples, palaces or other public institutions – still governs Austrian economics. Just as Margaret Thatcher said, “There’s no such thing as society,” the Austrians developed a picture of the economy without any positive role for government. It was as if money were created by producers and merchants bartering their output. This is a travesty of history.

All ancient money was issued by temples or public mints so as to guarantee standards of purity and weight. You can read Biblical and Babylonian denunciation of merchants using false weights and measures so see why money had to be public. The major trading areas were agora spaces in front of temples, which kept the official weights and measures. And much exchange was between the community’s families and the public institutions.

Most important, money was brought into being not for trade (which was conducted mainly on credit), but for paying debts. And most debts were owed to the temples and palaces for pubic services or tribute. But to the Austrians, the idea was that anything the government does to protect labor, consumers and society from rentiers and grabbers is deadweight overhead.

Above all, they opposed governments creating their own money, e.g. as the United States did with its greenbacks in the Civil War. They wanted to privatize money creation in the hands of commercial banks, so that they could receive interest on their privilege of credit creation and also to determine the allocation of resources.

Rewriting Economic Thought (Michael Hudson)

So we see that in this case that there is a very specific political agenda behind the retconning of history. It’s pressed in economic textbooks and expressly designed to promote a libertarian point of view. Much of retconning history does serve a political agenda that benefits a select group of people.

Trying to analyze all premodern economies as though they were just proto-capitalists lead to all sorts of errors, as Branko Milanovich points out in a recent post:

“The equilibrium (normal) price in a feudal economy, or in a guild system where capital is not allowed to move between the branches will be different from equilibrium prices in a capitalist economy with the free movement of capital. To many economists this is still not obvious. They use today’s capitalist categories for the Roman Empire where wage labor was (to quote Moses Finley) ‘spasmodic, casual and marginal’.”

Marx for me (and hopefully for others too) (globalinequality)

2. The individual has always been the basic unit of social organization. People have always thought of themselves primarily as citizens of territorial nation-states (British, German, French, Canadian, etc.) with well-defined borders. The neolocal monogamous nuclear family is the only natural and logical form of human social organization.

None of these statements are true, of course. Such arrangements are very contingent upon time and place and culture, and often very recent. For most of human history, the nation-state did not exist. There is nothing “natural” about it–it was created from above by oligarchic elites, just like the One Big Market. They are artificial creations.

And while families are, indeed, “natural,” the form they take varies widely. Most families were extended, and consisted of many generations living either on the same land or under the same roof, together with agnatic relations. Who was or was not considered a part of the family had to do with kinship structures, typically encoded into the language and culture.

Extended kinship networks were the primordial form of human social organization (as Lewis Henry Moran discovered). Religion, too, played a significant role, especially ancestor worship, collective rituals, and food-sharing meals and feasts (even bonobos do it).

This was the conclusion made by Henry Sumner Maine by studying ancient legal structures and comparing to them to surviving village communities in India, Java, North America, and elsewhere. He writes, “We have the strongest reason for thinking that property once belonged not to individuals nor even to isolated families, but to larger societies composed on the patriarchal model.” Concerning private property, he concludes,

“…[P]rivate property, in the shape in which we know it, was chiefly formed by the gradual disentanglement of the separate rights of individuals from the blended rights of a community. Our studies…seemed to show us the Family expanding into the Agnatic group of kinsmen, then the Agnatic group dissolving into separate households; lastly the household supplanted by the individual; and it is now suggested that each step in the change corresponds to an analogous alteration in the nature of Ownership.”

“…if it be true that far the most important passage in the history of Private Property is its gradual elimination from the co-ownership of kinsmen, then the great point of inquiry…what were the motives which originally prompted men to hold together in the family union? To such a question, Jurisprudence, unassisted by other sciences, is not competent to give a reply. The fact can only be noted.” (p. 159)

This is why Marxists argued that “primitive communism” was the original form of property ownership, i.e. socialism. Historically, this is correct. The problem was that this was predicated upon extended kinship networks and not large, industrial, nation states, composed of strangers. That is, primitive communism does not scale, which is why market economies came to supplant them over time.

Regarding the “lone individual” posited by Classical Liberals as the primordial atomic unit of society, this, too, is ahistorical. Like the primitive barter economy, anthropology has failed to turn it up anywhere it has looked for it:

It is here that archaic law renders us one of the greatest of its services, and fills up a gap which otherwise could have only been bridged by conjecture. It is full, in all its provinces, of the clearest indications that society in primitive times was not what it is assumed to be at present, a collection of *individuals*. In fact, and in the view of the men who composed it, it was an *aggregation of families*. The contrast may be most forcibly expressed by saying that the *unit* of an ancient society was the Family, or a modern society the individual. We must be prepared to find in ancient law all the consequences of this difference.

[Archaic Law] is so framed as to be adjusted to a system of small independent corporations. It is therefore scanty, because it is supplemented by the despotic commands of the heads of households. It is ceremonious, because the transactions to which it pays regard resemble international concerns much more than the quick play of intercourse between individuals.

Above all…it takes a view of *life* wholly unlike any which appears in developed jurisprudence. Corporations never die, and accordingly primitive law considers the entities with which it deals, i.e. the patriarchal or family groups, as perpetual and inditinguishable…
Ancient Law pp. 134-135

Surveying continental Europe and much of the colonial world, French scholar Emile de Lavaleye came to the same conclusion:

Originally the clan, or village, is the collective body owning the soil ; later on, it is the family, which has all the characteristics of a perpetual corporation. The father of the family is merely the administrator of the patrimony: when he dies, he is replaced by another administrator. There is no place for the testament, nor even for individual succession…Such was also the law everywhere where these communities have existed; and, probably, every nation has passed through the system.

The point of all this, of course, is not to advocate a rewind to the past. Rather, it is to show us that social forms change over time; and what may adaptive in one context (say, Fordism), will not work in another (say, an information economy). Lavaleye points this out himself:

“…the object of this book is not to advocate a return to the primitive agrarian community; but to establish historically the natural right of property as proclaimed by philosophers, as well as to show that ownership has assumed very various forms, and is consequently susceptible of progressive reform.”

3. Everyone before the Industrial Revolution was miserable, sick, and hungry all the time, irrespective of time and place. Life was, as Hobbes argued, “nasty, brutish and short” throughout prehistory before the last hundred years or so. We’ve doubled the human lifespan—a thirty year-old man was considered “old” just a few generations ago.

I’ve written so much disproving this idea that it’s not worth reiterating here. But here is yet another item that shows us that life in the past was not as horrible as it is commonly depicted by the evangelists of the Progress Gospel:

Medieval peasant food was frigging delicious (BoingBoing)

This Reddit Ask Historians question: Was there ever a civilization that had proper nutrition prior to modern society? begs the question. Its very formulation assumes that everyone was malnourished—a product of such retconning. Here are some good answers:

According to my history professor at Dalhousie University, Cynthia Neville (one of the top scholars in early medieval Scottish history), the Scots in medieval times had an incredibly healthy diet compared to many other parts of Europe at the time.

Wheat doesn’t grow well so far north, but hardier grains like oats and barley do quite well, and provide much better staple foodstock, along with many native vegetable varieties. Also, because cows weren’t as viable (except for the wealthiest lowland nobles), they lived on sheep’s milk and goat milk, which are much easier on the human digestive system. Much of their proteins came from seafood, which, as we know today, are loaded with omega fatty acids and essential vitamins.

There was a bit more to it, but that’s about all I can recall off the top of my head from her classes. This is one of the reasons why the Scots had a reputation for being taller and stronger, because their diets and hardy lifestyles kept them fit and healthy.

And:

When the Romans invaded Gaul, they noticed the Gauls were more than a foot taller, on average, than the Romans. This was due to better nutrition. Many prehistoric people’s had great nutrition. They were defeated by “civilized” people’s who had the advantages of greater numbers and organization. The same was true of the Indians of Massachusetts, when the Pilgrims arrived.

Not all prehistoric people had good nutrition, and not so people’s proliferate societies had bad nutrition. The Norse (Vikings) were dairy farmers and fishermen, and had excellent nutrition, like the Scotch, in medieval times.

4. People need “jobs” in order to feel valuable, or else they will go crazy. That is, we need to find a willing buyer for our labor, or we will feel like a useless burden on society. Furthermore, working forty hours a week is something we’ve just always done since forever. We would all be bored otherwise.

Of course, “jobs” are very recent invention. Most people in the past did not have formalized “jobs”—wage-labor was actually seen as a kind of slavery for much of ancient history. Yet today we’re told that jobs are an absolute necessity to feel “meaningful” and to have any kind of social outlet in today’s society.

Moreover, even when wages were paid, it was for a specific task and a specific duration (say, bringing in the harvest), not selling precisely 40 hours a week of your time to the highest bidder. Modern jobs are more of a babysitting operation than anything else. Of course people in earlier times had occupations and professions—farmers, craftsmen, warriors, artisans, clerks, priests, and so on. One of the biggest challenges capitalism faced was overcoming the previous work/leisure patterns and “disciplining” workers. Ryan Cooper sums up the very novelty of these ‘eternal’ notions:

The idea that work is a bedrock of society, that absolutely everyone who is not too old, too young, or disabled must have a job, was not handed down on tablets from Mount Sinai. It is the result of a historical development, one which may not continue forever. On the contrary, based on current trends, it is already breaking down.

The history of nearly universal labor participation is only about a century and a half old. Back in the early days of capitalism, demand for labor was so strong that all the ancient arrangements of society and family were shredded to accommodate it. Marx’s Capital famously described how women and very young children were press-ganged into the textile mills and coal mines, how the nighttime was colonized for additional shifts, and how capitalists fought to extend the working day to the very limits of human endurance (and often beyond).

The resulting misery, abuse, and wretchedness were so staggering, and the resulting class conflicts so intense, that various hard-won reforms were instituted: the eight-hour day, the weekend, the abolition of child labor, and so forth.

But this process of drawing more people into the labor force peaked in the late 1990s, when women finally finished joining the labor force (after having been forced out to make room for returning veterans after World War II). The valorization of work as the source of all that is good in life is to a great degree the result of the need to legitimate capital’s voracious demand for labor.

America is running out of jobs. It’s time for a universal basic income (The Week)

And here’s investigative journalist Yasha Levine recounting part of capitalism that have been retconned out of existence, citing the underappreciated work of economist Michael Perelman:

One thing that the historical record makes obviously clear is that Adam Smith and his laissez-faire buddies were a bunch of closet-case statists, who needed brutal government policies to whip the English peasantry into a good capitalistic workforce willing to accept wage slavery.

Francis Hutcheson, from whom Adam Smith learned all about the virtue of natural liberty, wrote: ”it is the one great design of civil laws to strengthen by political sanctions the several laws of nature. … The populace needs to be taught, and engaged by laws, into the best methods of managing their own affairs and exercising mechanic art.”

Yep, despite what you might have learned, the transition to a capitalistic society did not happen naturally or smoothly. See, English peasants didn’t want to give up their rural communal lifestyle, leave their land and go work for below-subsistence wages in shitty, dangerous factories being set up by a new, rich class of landowning capitalists. And for good reason, too. Using Adam Smith’s own estimates of factory wages being paid at the time in Scotland, a factory-peasant would have to toil for more than three days to buy a pair of commercially produced shoes. Or they could make their own traditional brogues using their own leather in a matter of hours, and spend the rest of the time getting wasted on ale. It’s really not much of a choice, is it?

But in order for capitalism to work, capitalists needed a pool of cheap, surplus labor. So what to do? Call in the National Guard!

Faced with a peasantry that didn’t feel like playing the role of slave, philosophers, economists, politicians, moralists and leading business figures began advocating for government action. Over time, they enacted a series of laws and measures designed to push peasants out of the old and into the new by destroying their traditional means of self-support.

“The brutal acts associated with the process of stripping the majority of the people of the means of producing for themselves might seem far removed from the laissez-faire reputation of classical political economy,” writes Perelman. “In reality, the dispossession of the majority of small-scale producers and the construction of laissez-faire are closely connected, so much so that Marx, or at least his translators, labeled this expropriation of the masses as “primitive accumulation.”

Yasha Levine: Recovered Economic History – “Everyone But an Idiot Knows That The Lower Classes Must Be Kept Poor, or They Will Never Be Industrious” (Naked Capitalism)

Indeed, average non-agricultural workers had much more autonomy and leisure time in the past, according to Perelman:

A medieval peasant had plenty of things to worry about, but the year-round control of daily life was not one of them. Perelman points out that in pre-capitalist societies, people toiled relatively few hours over the course of a year compared to what Americans work now. They labored like dogs during the harvest, but there was ample free time during the off-seasons. Holidays were abundant – as many as 200 per year. It was Karl Marx, in his Theory of Alienation, who saw that modern industrial production under capitalist conditions would rob workers of control of their lives as they lost control of their work. Unlike the blacksmith or the shoemaker who owned his shop, decided on his own working conditions, shaped his product, and had a say in how his goods were bartered or sold, the modern worker would have little autonomy. His relationships with the people at work would become impersonal and hollow.

Clearly, the technological wonders of our capitalist system have not released human beings from the burden of work. They have brought us more work. They have not brought most of us more freedom, but less.

Fifty Shades of Capitalism: Pain and Bondage in the American Workplace (Naked Capitalism)

Yet now we’re told that we need “jobs” to have any sort of meaning? Really?? WTF??? The vast majority of human existence has occurred outside of formalized wage work, as anthropologist James Suzman points out. Yet society will fall apart if we don’t submit ourselves to worker ‘discipline’ and scientific management? I don’t buy it. Whom does this narrative benefit, anyway?

See also this post from Reddit: What did an average day look like in medieval Europe?And this: Myths about the Medieval Times? Lots of good debunking in that last one.

In addition, laborers who recalled the previous autonomous lifeways–as late as the eighteenth century–were much more resistant to the constraints and insults of corporate capitalism. Now that the past has been retconned, we no longer even remember those past ways of being. Why is there no longer any resistance to the crushing or workers? Why do we not resist, even celebrate, the fortunes of today’s robber barons, unlike our forefathers? American resistance to our ruling elites has vanished. A lot of it has to do with the retconning of history, as this review of the Steve Fraser’s excellent book The Age of Acquiescence makes clear:

The fight against slavery had loosened the tongues of capitalism’s critics, forging a radical critique of the market’s capacity for barbarism. With bonded labor now illegal, the target pivoted to factory “wage slavery.” This comparison sounds strange to contemporary ears, but as Fraser reminds us, for European peasants and artisans, as well as American homesteaders, the idea of selling one’s labor for money was profoundly alien.

This is key to Fraser’s thesis. What ­fueled the resistance to the first Gilded Age, he argues, was the fact that many Americans had a recent memory of a different kind of economic system, whether in America or back in Europe. Many at the forefront of the resistance were actively fighting to protect a way of life, whether it was the family farm that was being lost to predatory creditors or small-scale artisanal businesses being wiped out by industrial capitalism. Having known something different from their grim present, they were capable of imagining — and fighting for — a radically better future.

It is this imaginative capacity that is missing from our second Gilded Age, a theme to which Fraser returns again and again in the latter half of the book. The latest inequality chasm has opened up at a time when there is no popular memory — in the United States, at least — of another kind of economic system. Whereas the activists and agitators of the first Gilded Age straddled two worlds, we find ourselves fully within capitalism’s matrix. So while we can demand slight improvements to our current conditions, we have a great deal of trouble believing in something else entirely.

A similar point is made in this review of the book in the London Review of Books:

Resistance to capitalism, it appeared, could look back as well as forwards; it was rooted not only in utopian visions of the future but also in concrete experience of the present and past, in older ways of being in the world, depending on family, craft, community, faith – all of which were threatened with dissolution (as Marx and Engels said) in ‘the icy waters of egotistical calculation’. Radical critiques of capitalism might well arise from conservative commitment to pre-capitalist ways of life, or memories of that life.

This wasn’t only an American pattern. E.P. Thompson, in The Making of the English Working Class (1963), rescued the Luddites and other artisans from ‘the enormous condescension of posterity’ by showing that their apparently reactionary attachments to custom and tradition created the leading edge of working-class consciousness. Soon American historians were making similar discoveries.
The Thompsonian history of the working class revealed a common pattern on both sides of the Atlantic: as workers became less grounded in traditional ways, their critique of capitalism tended to soften.

The Long Con (The London Review of Books)

5. New technology and innovation increases leisure time.The Industrial Revolution was accomplished purely by technological advances with no dislocation or bloodshed, and it made everyone better off with no government intervention whatsoever.

If there’s one consistent trend in technology, it’s this – new technology increases the amount of work! Greater leisure has only and ever been delivered due to worker insurrection and deliberate organization, and not by the “invisible hand” of the Market. Furthermore, entire generations were sacrificed and written out of the historical narrative to make the Industrial Revolution seem like a harmless win-win. As this commenter to Slashdot writes:

“Luddites weren’t just angry conservatives (literal, not political) trying to maintain some mythical “way of life”, it was a movement stated due to massive unemployment brought on by innovation in the textile industry. It became a generic insult because we’re so far removed from their (very real) suffering.”

There was [sic] close to 80 years of unemployment following the industrial revolution that is seldom talked about (if you took history in high school or college you got maybe a paragraph at best). This is because text book historians like to keep an upbeat tone and because school boards are often staffed by economically conservative (political now) who don’t want anyone speaking ill of capitalism. Go find a book called “A People’s History of the United States” if you want a sense for how screwed up American history actually is.”

https://hardware.slashdot.org/story/19/01/04/180226/robots-are-taking-some-jobs-but-not-all-world-bank

Or, just read this post: The US Government Has Always Been a Tool of Greedy Corporations (Vice)

5. Ancient people were uniformly ruled over by evil despots (i.e. ‘Oriental Despotism’). The “West” was all about freedom, justice, and democracy compared to the yoke of despotism the rest of the world lived under in primitive places such as Asia, Africa and the Americas.

As we’ve seen, Classical civilization–from the ancient Greeks to the Romans–was the most slave-driven economy in history to that point (only to be surpassed in the ‘Western’ colonial Americas). While that slavery decayed due to the dissolution of the Roman Empire, subsequent serfdom could hardly be considered freedom. By contrast, not all “primitive” societies were anywhere near as despotic as Western Europe and Imperial China were. That was a retconning of history to depict Western European civilization as “enlightened” in opposition to the ignorant “heathens.” For example, here is an excerpt from the book The Story of Manual Labor:

At no time in the history of ancient Mexico do we find that heartless oppression of the poor by the rich, that lack of humanity toward the wage-worker, that blackens the annals of so many European peoples. Luxury existed in the court of the Montezumas, it is true, but to support that luxury the poorer classes were not plunged into poverty and degradation. They were a simple people, and their needs were small and easily satisfied. Living in a tropical climate, upon a soil that repaid a thousandfold the slightest effort of the farmer; surrounded by forests full of game and rivers teeming with edible fish, the Mexican lived a life of comfort that to the Saxon churl or French bourgeoise of the same day would have seemed idyllic.

The Story of Manual Labor (Archive.org)

There are countless other examples, from long car commutes, to 20+ years of formalized schooling and expensive post-graduate degrees required for a job (or any formalized education at all), but I think you get the point.

As Chris Hedges poignantly writes in his latest book, America: the Farewell Tour:

If we do not know our history and our culture, if we accept the history and culture manufactured for us by the elites, we will never free ourselves from the forces of oppression. The recovery of memory and culture in the 1960s by radical movements terrified the elites. It gave people an understanding of their own power and agency. It articulated and celebrated the struggles of working men and women and the oppressed rather than the mythical beneficence of the powerful. It exposed the exploitation and mendacity of the ruling class. And that is why corporatists spent billions to crush and marginalize these movements and their histories in schools, culture, the press, and in our systems of entertainment.

Not only does the people have no precise consciousness of its own historical identity,” Gramsci lamented under fascism, “it is not even conscious of the historical identity or the exact limits of its adversary.

If we do not know our history we have no point of comparison. We cannot name the forces that control us or see the long continuity of capitalist oppression and resistance… p. 17

Anyway, here’s to a happy (or at least, tolerable) 2019, and I hope you all stick around and continue reading and commenting. Thanks!

National Bankruptcy as a Board Game

By Dmitry Orlov

Source: Club Orlov

Most people are familiar with the game Monopoly. Its goal is to teach capitalist kiddies a valuable lesson about capitalism; namely, that in running a business it isn’t useful to shoot for some happy modicum of accommodation with your competitors or to strive for a sustainable steady state. Instead, what you need to do to survive (never mind win) is to grow as quickly as possible and eat up your competitors alive, or you’ll get eaten up yourself. That’s not just a game; that’s exactly how capitalism actually works, and if that doesn’t work for you (it doesn’t for most people) then that’s exactly how capitalism doesn’t work.

And so the Waltons couldn’t just run Walmart as a mart; they had to make it into a global empire—just in order to survive. Now, most governments in the world realize that this sort of unbridled capitalism is harmful and seek to regulate it. For instance, Russia has a Federal Antimonopoly Service. The US Justice Department has an Antitrust Division, which is aptly named if its mission is to destroy Americans’ trust in their government’s ability to regulate business. It also has a website which currently says: “Due to the lapse in appropriations, Department of Justice websites will not be regularly updated.” Perhaps that’s all right for a country that seeks to monopolize everything—international finance and law, defense procurement and, of course, the dispensation of “freedom and democracy” and “universal values.”

Most people are also familiar with the concept of national debt. The federal debt of the US government currently equals… never mind; it’s going up much faster than you can write it down. If you want to watch it go up real time, you can look it up here. The exact number is useless: if you take a snapshot of it—say, $21,921,420,945,123.00—that will no longer be the payoff amount by the time you write out the check, and if you write out the check, no matter who you are, it will bounce. But it won’t even get that far: if you mail that check to the US Treasury Department, they wouldn’t be able to deposit it because “Due to the lapse in appropriations…” (You get the picture.)

The debt goes up all the time, and the rate at which it goes up is accelerating. The concept of acceleration may not be intuitive for some of you, so let me explain. Debt goes up with some speed. Acceleration is the amount by which that speed increases, measured in, for example, dollars per minute per minute. Calculating it is a fun little arithmetic exercise. During Barak Obama’s reign it went up by $8.6 trillion, starting from $11.6 trillion and gong up to $20.2 trillion. Trump plans to add $4.8 trillion during his first three years. (Relevant numbers can be looked up here).

Thus, Obama’s velocity was $8.6 trillion over 8 years—roughly $1 trillion per year or $2 million per minute while Trump’s velocity is roughly $1.6 trillion per year or a little over $3 million per minute. Therefore, the acceleration is only a few cents per minute per minute—but it sure adds up! Acceleration tends to sneak up on you. For instance, if you want to gain some intuitive appreciation for acceleration due to gravity (9.81m or 32 feet per second per second) then try jumping off a chair while keeping your knees straight. You can also ponder the fact that satellites that fall out of Earth’s orbit tend to burn up on reentry as they decelerate due to friction with the atmosphere.

Any sane, numerate person can tell you that increases in debt are fine provided your revenues are increasing significantly faster, but if that’s not the case then the eventual result is bankruptcy. And that is most definitely not the case. Hence the name of this board game is National Bankruptcy. But I am not sure what the objective of the game should be. Is it to go bankrupt as quickly and efficiently as possible, or is to go bankrupt as slowly and painfully as possible?

I am quite sure that players who aren’t on a path to national bankruptcy would prefer to keep it that way, and would furthermore prefer to be rid of all sovereign debt issued by whoever is going to go bankrupt before that happens. (Russia seems to have that problem solved already while China is far behind.) In any case, I am a very serious person who doesn’t like jokes and doesn’t have time to play games, board games included, so I’ll leave it to others to ponder such questions. Still, the board game metaphor seems useful for discussing this topic.

One problem with playing this game is the problem of scale. People have a problem appreciating such huge numbers. They are familiar with what a dollar is, but what’s a trillion? Here it is, represented as double-stacked pallets of $100 bills.

That seems a bit cumbersome for our board game. Reasonable values for the chips in our National Bankruptcy game would be $100 billion, $500 billion and $1 trillion. We could use a few $5 trillion and $10 trillion chips too, though not too many because I doubt that the game would go on long enough to make them useful.

I propose that for the sake of this game we introduce a handy new unit called a “piffle” which is equal to $100 billion. A trillion is 10 piffles, 10 trillion is 100 piffles. Then our chips can be 1, 5, 10, 50 and 100 piffles. Piffles allow us to express various huge quantities without going through any arithmetic contortions. US federal debt is currently 220 piffles. US trade deficit for 2018 was 6 piffles while the US defense budget was 7 piffles. For 2019 the federal budget deficit (covered by increased borrowing) is 10 piffles and rising while tax revenues are just 3 piffles and falling. The interest payment on federal debt is 3 piffles but with rising interest rates it’s going to 5 piffles within a few years.

Speaking of rising interest rates… just today Trump wished for 0% interest rates again, like Obama had while he was running up his 80 piffles’ worth of debt. But now it’s hovering around 3% and is unlikely to go down no matter what Trump wishes. Why? Well, here’s the reason. The US imports much more than it exports because it can’t afford to or lacks the ability to make all the stuff it needs; that’s why there are 6 piffles’ worth of trade deficit. When other nations sell to the US more than they buy, they end up holding lots of piffles, and since the US needs lots of piffles (remember, the budget deficit is 10 piffles) it makes plenty of sense to borrow that money right back. A little while back it was possible to borrow it back at 0% interest because the US was powerful enough to threaten those who refused to play this game with military annihilation (cue pictures of bombed-out Libya and Iraq). But times have changed, and unless the US bribes its debt-holders with 3% interest rate or better—no deal.

How have times changed? There are two effects worth mentioning. First, the military annihilation threat isn’t working any more. Yes, the US still spends a stunning, record-shattering sum of 7 piffles on defense, but none of that is working. Call it the free money effect. When people spend their own hard-earned money, they tend to be careful with it, but if it’s somebody else’s money that they got for free never intending to pay it back, then they tend to throw caution to the wind. And so US military spending has become less and less effective over time, in one of two ways: procurement costs have gone through the roof, and the resulting products have become useless.

In terms of procurement costs, the purchasing parity between the US and (just as an example) Russia seems to be at least ten to one: to get the same result, the US has to spend at least ten times more than Russia. And so although Russia spends well less than 1 piffle on defense, its military is far more effective. In terms of product uselessness, the Pentagon now resembles a woman who has a closet jam-packed with expensive designer labels but has absolutely nothing to wear because her entire wardrobe is no longer fashionable. There is the entire set of aircraft carriers none of which can operate close enough to enemy shores to be of any use at all because they can be readily sunk using hypersonic rockets launched from very far away. There are the stockpiles of Tomahawk cruise missiles which can’t make it past Soviet-era air defense systems (with a few electronics and software upgrades). There are the Patriot air defense systems which are useless even for stopping Soviet-era SCUD missiles, never mind anything more modern.

Add to this Russia’s (and soon China’s) new hypersonic weapons with conventional payloads and new air and space defense systems such as the S-400: these provide what’s known as “escalation dominance.” Suppose the US does something unspeakably nasty and Russia and/or China decide to teach it a lesson. They now have the ability to blow up any target within the US without getting anywhere near it and without placing any of their military assets at risk.

They could, for instance, take out the US electric grid in a way that will take many months to get it back on line. They can then reliably intercept anything that the US tries to retaliate with. Of course, the US can become suicidal—that’s always a risk—and launch a full-on nuclear first strike, then sit back and wait to be completely obliterated along with much of the rest of the planet. But that’s not a military strategy, that’s pure suicide, and the officers in charge of military strategy tend to be emotionally stable family men who look forward to playing with their grandchildren upon retirement.

So, why then should the US continue to spend 7 piffles on defense? The sad answer is that it will go bankrupt whether it zeroes out the defense budget or not. If the defense budget goes to 0, then there is still 3 piffles’ worth of budget deficit left, plus those 6 piffles of trade deficit aren’t going anywhere but up. But what about MAGA?—you might ask—What about firing up US manufacturing, bringing the jobs back and exporting our way out of this? After all, if we turn those 6 piffles of trade deficit into 6 piffles of trade surplus, suddenly it all works out and bankruptcy becomes avoidable.

No, sorry, that just not realistic. You see, in order to get an industrial economy going again the US needs several things. It needs cheap energy, cheap labor, low cost of doing business and readily available markets, both domestic and export. And the US doesn’t have any of these. In terms of energy—and oil is by far the most important form of energy—in 2019 the US will import exactly as much oil as it did in 1998—around 8 million barrels a day. Yes, the shale oil industry has sprung up in the meantime, and the US is currently producing 11.5 million barrels per day. But also in the meantime US oil consumption has gone up a lot—to 20 million barrels a day, which is a stunning 20% of the world’s consumption for 4.4% of the world’s population.

And so the oil deficit is still very much there. Plus the shale oil patch has never made any money but has accumulated over 2 piffles’ worth of debt and has spent over a piffle’s worth more than it made. With interest rates going up they are unlikely to be able to borrow enough to keep up the same hectic drilling rate, and with declines from existing wells at over half a million barrels per day per month it won’t take many months to whittle down that 11.5 million barrels per day, forcing the US to either boost imports or cut consumption.

But the oil price has gone down a lot lately, so there shouldn’t be a problem in any case, right? Again, sorry, no. Peak Oil for most countries has come and gone. There is now only a handful of countries left that are able to meaningfully boost oil production: Russia, Canada (mostly tar sands), Iran, Iraq, United Arab Emirates, Kuwait and Brazil. Russia has recently announced that it isn’t planning to boost production. Saudi Arabia is a huge oil producer but does not seem to have any spare capacity left. Canada’s tar sands patch is a money-losing environmental disaster. Iran and Iraq (call them Iranq, since they are both Shia Moslem, are politically aligned and neither loves America too much) aren’t exactly going to gallop to the rescue. That leaves UAE, Kuwait and Brazil, and if you add them all up together that’s nowhere near enough. So, get ready for oil price spikes, followed by a wave of demand destruction, followed by oil price collapses, followed by supply destruction—you know, the usual.

Moving on to labor. In order to stay competitive, the US will need to lower its median wage a lot. It has to be lower than what the Chinese and the Southeast Asians earn because the US needs to outcompete them to steal their export market share. Without various other major changes this will cause US workers to either rebel or starve to death in short order. The changes involve nationalizing medicine and education to drive down their costs by a factor of 1000 or so, converting to public transportation and pretty much banning the use of private cars to make transportation affordable, putting up high-rises right next to factories for affordable worker housing and so on. That’s a lot of piffles’ worth of effort!

The cost of doing business is a tough one too. The US spends way more on courts and lawyers, insurance and regulatory compliance than most other countries, and the regulatory maze that entrepreneurs have to run in order to run even a small and simple business is very costly and absolutely confounding. How does one take a machete to that whole ridiculous, corrupt scheme? I have no idea. It’s an imponderable. The Chinese would probably just call it a “cultural revolution,” round up all the lawyers and the bureaucrats, make them wear dunce caps and sandwich boards that say “I am what is wrong with this country” and march them in procession while pelting them with rocks and beating them with sticks. Something like that…

Finally, there is the question of export markets. What exactly is the US going to export more effectively than other countries are exporting already? China out-manufactures just about anybody on the planet and isn’t about to give up its spot. Russia exports grain and other foodstuffs (all non-GMO, unlike the US), nuclear and space technology, defense technology (that actually works) and much else. Pakistan and India, and various other countries, export textiles. The world is full up with product. It’s consumers to bankrupt that are in short supply. And if the US cuts its labor rates to make itself competitive, then its consumer base will shrink rather dramatically.

So it looks like bankruptcy is it, no use fighting it. But what should the US do in the meantime? I suggest that it should put up some really huge walls—just for the sake of leaving behind some spectacular ruins for future generations to marvel at. The one along the southern border seems to be going up already, but there should be at least two more. There needs to be a wall along the Mason-Dixon line, because given the heated state of US politics there needs to be a way to prevent people from trying to reenact the Civil War (a misnomer, that!) with actual real weapons and live ammo. And there also needs to be a wall along the northern border, to keep various groups of armed troglodytes from escaping to Canada and ransacking it (it’s the least we can do for our peaceful northern neighbors). How much will these three walls cost? Glad you asked! They will cost roughly 0.005 piffles apiece, 0.015 piffles total—a truly piffling amount. That’s my 0.000000002 piffle’s worth. But, you know, it’s the thought that counts.

Oh, and if you want to actually design this National Bankruptcy board game, please resist the temptation to contact me about it. Seriously, I don’t like games, board games especially. I am a very serious person who doesn’t have time for such piffles.