Why Swedish Sadomonetarists Don’t Stroke Cats

One more note on Swedish Sadomonetarists. Why, asks Krugman, did the Sadomonetarists insist on high interest rates that would tank the economy?

Where does this gut dislike for low [interest] rates come from? At some level it has to reflect an instinctive identification with the interests of wealthy creditors as opposed to usually poorer debtors. But it’s also driven, I believe, by the desire of many monetary officials to pose as serious, tough-minded people — and to demonstrate how tough they are by inflicting pain.

What Krugman doesn’t get is that when monetary officials tried to show how tough they are by inflicting pain on the middle class and the poor, that’s just another form of their instinctive identification with the 1%. What exactly is “tough-minded” about letting Finance make outrageous profits by running wild until they push the economy over the cliff, then sticking the rest of us with the bill? This is the very opposite of being a serious hard ass. How do you define what it means to be tough is all about who you identify with.

When most folks do evil things, they don’t think of themselves as being evil. Only in Bond movies do the bad guys sit in a chair stroking a cat while making plans to inflict pain. In the real world, human beings are exceptionally skilled at coming up with reasons why what they’re doing to burn other people while they rack up the cash is actually good for all of us, including the people who will get hurt the worst. More often than not, they end up believing their own PR; it’s so much easier that way. But that doesn’t make it any less of a con game.

Sadomonetarists And the Limits of Swedish Social Democracy

Oy. Sweden, touted by the Washington Post as “the rock star of the recovery”, has been overrun by what Paul Krugman calls the Sadomonetarists who demanded high interest rates even when inflation was absurdly low. The result: Sweden has turned “into a tale of stagnation and deflation as far as the eye can see.” It's a painful lesson about the high price of austerity-crazed elites. But it's also an important lesson for US progressives about the limits of Social Democracy.

Why did the Sadomonetarists win in one of the most progressive countries on the planet? No doubt it's partly because the power of Finance has been rising around the world, both in their direct influence over political decisions and also in shifting the terms of public debate. But I think it's also traceable to 2 weaknesses in the way Swedes did Social Democracy:

1) While Swedish style Social Democracy did a lot of good, over time it also undermined the ability of grassroots folks to mobilize. It was remarkably good at building high-level consensus in cooperation between top-level folks in unions and corporations. But building a base that was fired up? Not so much. And so when economic circumstances changed, Swedish progressives weren't in a position to gear up and kick ass.

2) Swedish style Social Democracy encouraged Swedes to think globally – but as well meeting citizens of the world, not folks who were trying to build power and protect their flank. Leftie Swedes were very concerned about the plight of peasants in Nicaragua — and it's a good thing they were — but they didn't pay serious attention to the plight of Second and Third World manufacturing workers. Eventually that inattention came back to bite them as good paying manufacturing jobs in Sweden came under increasing pressure from globalization. Economists often talk about globalization as if was a force of nature, but it only appears that way to us because folks in a position of privilege and some power, like the Swedish left, hadn't tried to do anything about it.

I'm not arguing that Social Democracy was a mistake; it was one of the great achievements of the 20th century. But if you focus on building good policies without also focusing on building & maintaining grassroots power, eventually you will pay the price.

Or to put it another way, if we want to live in a more just, prosperous world, we need more organizers than policy nerds.

 

Rethinking: Theory as Pie

Here’s what I’ve been playing with:

More on this in upcoming posts.

Too Big to Fail: the $70 Billion/Yr Handout

How much does Too Big to Fail subsidize the big banks? The IMF has put a price tag on it: up to $70 billion a year. And of course, that's nowhere near the true price — the IMF didn't factor into account the harder to measure impacts.

Slavery’s Massive Impact on the US Economy

Just how important was slavery to the US economy? Some stats from a post cited by Coates:

by 1860, there were more millionaires (slaveholders all) living in the lower Mississippi Valley than anywhere else in the United States. In the same year, the nearly 4 million American slaves were worth some $3.5 billion, making them the largest single financial asset in the entire U.S. economy, worth more than all manufacturing and railroads combined….

The rapid rise of “the Cotton Kingdom” wrought a momentous transformation, Cotton became a driving force in expanding and transforming the economy not only of the South but of the United States as whole–indeed of the world. While the growing of cotton came to dominate economic life in the Lower South, the manufacture of cotton textiles was fueling the industrial revolution on both sides of the Atlantic. Most of the exported American cotton went to Britain, in particular to the port of Liverpool, convenient to the textile mills of Lancashire.

During the immediate postwar years of 1816 to 1820, cotton constituted 39 percent of U.S. exports; twenty years later the proportion had increased to 59 percent, and the value of the cotton sold overseas in 1836 exceed $71 million. By giving the United States its leading export staple, the workers in the cotton fields enabled the country not only to buy manufactured goods from Europe but also to pay interest on its foreign debt and continue to import more capital to invest in transportation and industry. Much of Atlantic civilization in the nineteenth century was built on the back of the enslaved field hand.

 

Racism in the US: Some Useful Links

From a piece by Ta-Neisi Coates about the development of his thinking, some useful links on race in the US:

I was grappling with the Civil War. I had some sense of Reconstruction. I had begun to grasp that slavery was not a side practice in America, but big business. I still (sort of) believed in “class-based” solutions, for racist problems. I hadn't read Patrick Sharkey's research into neighborhoods. I hadn't grappled with Robert Sampson's work on Chicago and the vast gulf that divides blacks and whites. I hadn't read Walter Johnson's work on the intrastate slave trade. I hadn't thought about Rousseau's sense of slavery as useful killing. I hadn't read Isabel Wilkerson.

 

I’m Not As Smart As I Think I Am

It happens like clockwork. About two weeks after I wrote that I was taking a break from blogging, I hit a wall and decided it was time to really stop for a while. Two days later: a new framework popped into my head.

Recently I saw a great little TEDx talk by Jason Roberts about how he ended up organizing the Better Block Party. Part of the talk is about how the rules that were created a long time ago – often for very good reason – can eventually end up strangling us. When I first started blogging, I forced myself to write at least once a week – no small task for someone who could only write using creaky voice recognition software and who had an all-consuming job. I set that rule because I needed the structure to push me, to get stuff out of my head. A few years later, that rule is running me off the rails.

So, I’m going to try a little experiment. No expectations about when or how often I post. Just write when I’m in the mood.

And try to write short. I’ve started working on an open source project on GitHub, and it’s been changing the way I code. It’s amazing how much you can get done if you just take small, fun, relatively frequent steps. Hopefully I can find a way to bring that ethos into my political economy writing.

Taking Another Break

Although I really want to make blogging a priority, other facets of my life are demanding most of my attention. Once I’ve got them squared away — hopefully in a few months — I’ll be back at it.

The Union of Coal Mine Canaries

Once upon a time, coal miners worked in a dirty, incredibly dangerous environment where the people who ran the coal mining companies weren’t too worried about their working conditions (come to think of it, that’s not too different from how it is now). One of the dangers they faced was that mines could contain pockets of gas that was odorless but lethal. If they couldn’t see or smell the gas, how could they protect themselves against it?

Somewhere along the way, someone made an important discovery: canaries were even more strongly affected by the odorless gas than coal miners were. So, coal miners started carrying canaries in cages into the mines. When the canaries started dying, it was time for coal miners to run like hell.

It was a good solution for coal miners. For canaries? Not so much.

One thing you can be sure of: if those canaries had had a union, this story would’ve played out differently.

Maybe the Union of Coal Mine Canaries would’ve suggested a timeout until a better solution could be found for everybody. Or maybe they would’ve suggested putting selected senior management in cages in the mines and see if that helped management come up with a win-win solution. No matter what, using canaries as an early warning system would’ve been a nonstarter.

Sometimes when we make economic decisions, the consequences are completely unforeseeable. But a lot of the time, those consequences hit some folks – usually folks lower down on the economic ladder – a lot sooner than others. So those folks have a much bigger interest in making sure we figure out what’s going on a lot sooner.

And sometimes, consequences which might seem “unforeseeable” to the people who are making the decision are eminently foreseeable to the folks who are going to get hit by them.

A good example: the devastating impact of what we called “globalization” on US manufacturing jobs. When GM, Ford, and countless other manufacturers started getting stiff competition from Japan, then South Korea, then elsewhere, their answer was to lay off hundreds of thousand of workers and shift manufacturing work overseas. Most US economists said, that’s okay, free trade” will solve the problem. Yes, in the short run it’ll cost us a bunch of good paying jobs. But all that free trade goodness will create even more good paying jobs, so don’t sweat it.

We can all see how that turned out.

In Germany, “don’t worry about free trade” didn’t win the day. German workers had a lot more power than US manufacturing workers did. Not only were German unions stronger, but through industrial work councils etc. they had a lot more say in the decisions that affected their livelihood. So they made damn sure the government and industrialists worked with them to do everything they could to keep good paying blue-collar jobs in Germany. They still took some hits, but it wasn’t anywhere as bad as what happened here.

Why did Germany and the US deal with the potential consequences of globalization so differently? It wasn’t because German economists were smarter than US economists. It wasn’t because they better understood the potential consequences. It was because German manufacturing workers had the power – both political and economic – to ensure that the wonks and the people who called the shots weren’t going to let workers get run over.

You could argue that the consequences of globalization were not unforeseen, they were deliberate — as we say in the tech world, it wasn’t a bug, it was a feature.” The beauty of the Union of Coal Mine Canaries approach is that it doesn’t matter. If you ensure that the people who are most likely to get hit by the consequences of economic decisions have the power to have a real say, it doesn’t matter whether the consequences are unintended/unforeseen, deliberate, or just a result of sloppy thinking. Either way, people have the power to protect themselves.

Up next: hedge fund managers, NIMBYs, and the Union of Coal Mine Canaries

Bring Me the Decrypticizer!

Reading over my notes dump, one thing pops out: I am getting way too cryptic. It’s one thing to use shorthand when I can link to the arguments I’ve made before. But there’s an awful lot here that is brand new. So before I do any more theorizing, it’s time to spell out some of the details of my argument so far.