Guilty, Guilty, Guilty

I finished the first draft yesterday, so it was with some pride that I note this news today. As the subtitle of this endeavour says, "It's the Distribution, Stupid". Yes, one can have an economy and society which runs on many poor and a few rich, but that wasn't the notion of the founding fathers, or Adam Smith (who published "Wealth of Nations" in 1776, too). No, the notion of the founding fathers was that autocracy shouldn't happen here. Their ideas depended on an America which ceased to exist in mid 20th century: if you didn't like the society outside your door, you light out for Indian territory, where there's free land and abundant resources. We're going European. Well, gone European. Our survival depends on recognizing that an economy which wastes resources at light speed can't sustain.

I was surfing through the Yahoo! financial pages, when I saw a headline to an article: "Modern Economics has Failed". Neat headline, but not much meaning. "Economics" is the study of how economies actually work. The various theories, attributed to the field, include the ever famous Keynesian, supply side, Austrian, classical, neo-classical, and a host from the 19th century back to before Adam Smith (the real one). For most of these centuries, the field was called Political Economics, in recognition of the fact that States make the rules; while autocracies bent toward social Darwinism long before he was even born, structures of rewards and punishments were always around. And there were always rules, generally tilted toward the Monarch. But rules there were. Economics, when prescriptive, is divergent in thought, and this divergence isn't based on some fundamental economics, but politics. Despite the rise of Behaviour Economics, what economics has to offer is cause and effect policy. Thus, the Right Wingnuts continue to cling to Trickle Down, in the face of total failure over decades. Failure, of course, from the point of view of the commonweal, but not from the point of view of the 1%-ers, who support the Right Wingnuts' marketing.

Which brings me to the thrust of this musing, -isms.
tribalism
monarchism
socialism
capitalism
communism
fascism

That's the historical lineage. Tribes looked out for their own, and to a lesser or greater extent, tried to usurp from neighboring tribes. Once tribes got big enough, and society built cities, monarchism became the rule. And was the (nearly) universal structure in "civilized" societies for millennia. There are those who argue (and I agree) that feudalism marked the beginning of socialism, in that the sovereign recognized a duty to provide for lower classes. In today's arguing, feudalism is often portrayed as slavery, and it certainly wasn't. Not much upward mobility, though. While some describe today's rightward drift as toward a new feudalism; if only we were headed to something that good.

So life remained pretty boring until industrialization made capital more significant than before. Capital in agrarian societies is mostly an oxymoron.

Capitalism brought a drastic set of changes. Urbanization. Concentration of power. And lots of machines. The China situation, where much of American goods are produced (is that, too, an oxymoron?), is a lot like 19th century New England mill towns. The state of people living and working in those mill towns is ably documented by photographs. Yes, the hell of child labor and the rest existed into the modern age. The Foxconn facility is larger, but the principle of production is the same: many cheap hands. For the Chinese government, it makes sense. It's the same sense that happened here in the 19th century, and even early 20th; coerce, cajole, entice the rural population to migrate to cities for "a better life". India has done the same. It's a simple proposition, you get to earn enough for some food and a place to sleep, the only question is whether you prefer to work amongst piles of animal shit outside in the rain and snow or inside without the shit. The quality of your skills is not relevant (if this sounds familiar, yes Mao did that too), since none are needed.

Marx saw where this was all going, and concluded that it wouldn't last for long. He devised a different set of principles, studied a country (which was not Russia, but England), and invented communism. The basic idea is that intelligence is what matters, not accumulated wealth. Accumulated wealth leads to sloth. Living in a seat of hereditary monarchy, he well saw that smarts weren't a qualification for having power. He posited that smart decision making would be made by those best equipped, not those who'd managed to just get rich.

Russia, tossed out the Czar and adopted a version of Marx. Not really very close, but enough to scare the crap out of capitalists in Europe and the USofA. Which gets us to Mussolini. He's the guy who invented fascism, both in word and fact. Here's the Wiki article. What our dear Tea Baggers are promoting, although they claim to be against The Elites, is fascism.

Which brings us to the Pubs. While Obambi hasn't lived up to his (own) billing, none of the set of flunkies can lay a glove on him. Well, if he treats the election as war, which is what the Koch Party surely does, and he's conspicuously lacked so far.

Back to the beginning: in what way has modern economics failed? I said it hadn't, only because economics is largely descriptive in nature. Yes, Keynes and Laffer and Friedman and so on offer up "theories", but The Great Recession wasn't caused by failure of economics. (For those in the know: Samuelson was the one who started the trip into mathematical economic theory, thus obscuring the principles of economics ever further. Somewhat off topic, but here's a post on the effect of interloper quants; follow the back links for more detail. That happened in economics in the mid 1970's. The profession has devolved ever since.) There has been, at least since Harding and the roaring 20's, a split within professional economics between those who earn a living at it by providing justification to constituents (just like a lawyer) and those who look for ways to advance the commonweal. And for those in the second set, much internecine conflict over how to do it. As always, the loggerhead is whether to support the wealthy or the poor with government action. Those that wish the State to support the wealthy generally phrase their argument in terms of social Darwinism: the rich have to be coddled or they'll up and leave for someplace else, and we can't have that; my beloved Bermuda is deep in such throes. I know, that doesn't make sense, but I didn't say that Right Wingnuts made sense.

The failure which drove us to The Great Recession was purely political. We are where we are because for 22 of the 28 years from Reagan to the end of BushII, the Wingnuts controlled at least 3 of the 4 branches of the Federal government. Re-read that sentence. The Wingnuts, largely because Democrats are feckless, have gotten away with blaming anyone to the left of Attila the Hun with anything bad in the economy. Even given the stark evidence that only under Clinton did median income in the nation make any upward progress. One of my favourite quotes, of all time, comes from a recent Times article (spoken by a Bankster): "Financial services are one of the last things we do in this country and do it well. Let's embrace it. ..." Said the spider to the fly. And some wonder why there's an Occupy Wall Street?

Which brings us back to a failed economy (I was tempted to say Failed State, but that would only insult some really famous ones). First, what do we mean by modern economics having failed? Thus encouraged, I went past the headline to the story. And he's right: it's all about politics. Failed in the jingoist notion of American superiority. Failed in the sense that our tribe has been torn asunder. But the author gets it wrong in ascribing the cause to the profession of economics. The cause is purely political.

Now, how to fix the situation. If by fix we mean restoring GDP, then only Keynesian knobs and switches will work. None others have worked in identical times before, they won't work this time either. The Wingnuts always lay the blame for economic decline on workers getting too big a piece of the pie, in face of the pure fact that demand for the Wingnuts' widgets fell off the cliff because workers had no money to buy widgets. The punish labor approach of Reagan and both Bushes didn't work; they gave us The Great Recession.

The simple answer is that an economy can't grow out of depression by making most folks poorer tomorrow than they are today. Making the rich richer is the Right Wingnut agenda. It always works for the 1%-ers, but not the rest of us. It is obvious that restoring a growth inducing distribution of income is the only solution. How that's done really doesn't matter. Only until, and if, the middle class does have most of the income, and thus broad based consumption, will we progress. Japan never did.