Trumped up and buried under the ashes of neoliberalism

Introduction

At the time of preparing this talk, January 2017, Donald Trump had just been elected the 45^th president of the United States of America.    This talk is not really about the United States under the tutelage of the newly elected American President Donald Trump.  Rather this talk is more about how we arrived here: about the legacy of neoliberal policies that forged the trump card for the explosion of right wing populist movements and their victories across the advanced capitalist zone including in the United States.  As the vivid title of this talk makes clear, I am not arguing that we have moved to a post neoliberal order as of yet–although there are signs we may be in a bad transition out of the neoliberal epoch.  Alternatively, I will argue that we are living with the consequences of neoliberal institutions and policies: suffocating under the ashes of neoliberalism with Donald trump as the brightest burning coal at the top of the ash heap.

As most people know, to play the “trump card” in any game—political, economic or otherwise—confers a decisive advantage to the person who plays it given the right circumstances and timing.  The idiomatic expression “trumped up” refers to situation that has been manufactured to produce one set of outcomes while falsely claiming to produce another.  A trumped up criminal case is promulgated on phony evidence where the wrongly accused faces a criminal sanction while the broader public is misled to believe justice is being done.  There is close analogue here to the phrase gaslighting.  Much of neoliberalism, indeed an important explanation for its ideological spread was the initial promise of employment and renewed economic growth, i.e., what we might call the remedy to economic shame[i].  There is a sense in which neoliberalism is and was a scam and a manipulation of public morale: the difference today is most, including significant sections of the ruling classes admit this. They simply do not care because its all just a contemporary communications game.

If you are on the left it is easy, in this context, to simply be against Donald Trump and the sundry list of right wing populist movements and leaders. Who reading this post is for racism, sexism, xenophobia and soft and hard bigotries of all stripes?

Rather the problem for the putative left, particularly but not solely, its formal parliamentary forms; the Democratic Party in the United States, the New Labour Party in Britain and Australia, the Socialist party in France, the New Democratic Party in Canada, and the Sozialdemokratische Partei in Germany, for example, is to come to terms with what is now 40 years of their own internal drift to the right and their own hand in building the very neoliberal institutions which  created the conditions in which right wing populism and inequality flourish and left wing politics languishes.[ii]

In the above regard, it is my suspicion that it will be much harder for the institutionalized left to come to grips with the folly of neoliberalism than the right.  This is particularly so in the upper echelons of the progressive social structure (intellectuals, academics, politicians and the quasi woke citizenry).

Here is why.  For the right, neoliberalism was an internally motivated project, which sought to roll back, dismantle, and or fundamentally restructure the post World War II social order.   Neoliberalism was never about jobs, productivity, or economic growth for conservative elites: it was about a redistribution of power upwards.  In this regard, the adoption of neoliberalism did not require a conversion of ideological convictions as it did for the left. It was broad and important segments of the left which made the conversion:  It is the Clinton democrats, Tony Blair’s ‘new labour’, Gerhard Schröder’s ‘third’ way, and the legions of intellectuals and academics which made their own accommodations, and indeed in many cases who crafted neoliberal innovations that will have to do the hard work of soul searching, shame letting, and back tracking.

I am not very sanguine about the prospects of the aforementioned coming to pass for three reasons.  For one thing, most left accommodations to neoliberalism were made within the reality of a very constrained political economy characterized by high unemployment,fears of high inflation, and low economic growth and a concomitant ideological restructuring to the right.  For example, Tony Blair inherited Margaret Thatcher’s new United Kingdom, and Bill Clinton inherited Ronald Reagan’s “New Day in America.”  It would be impish to maintain that these were not real reconfigurations to the possibilities facing policy makers—left or right.

The second reason I am not optimistic about the chances of a volte-face on the part of the neoliberal left is quite simply that we are now almost two generations into the neoliberal epoch and easily one generation into its hegemony.  Educational attainment, political identities and careers have been formed and built within a neoliberal cognitive and material framework.  None of which is particularly easy (and in some cases possible) to walk away from.

Third, the left remains fractured between insiders and outsiders.  Because the political insiders on the left will not admit to the paucity of neoliberalism and the role they played in constructing the neoliberal order, the most vigorous and energized elements of the left remain largely outside formal political institutions and the broader public policy processes.  Indeed many insiders on the political left are still gaslighting the outsiders.  And if they are not merely sociopaths, its fairly hard for serial abusers to admit they have a problem…lotta shame needs to be overcome.

Moreover, it is by now blatantly apparent in American politics that the political process is over-determined by campaign and party financing—with the democrats still requiring that some professional politicians and administrators be the front for the donors and with Trump era republicans increasingly disposing of the political ‘middle men’ (sic) and opting instead to just put the donors in power. That is, within American politics it is increasingly the case that the Democrats and Republican parties do not merely represent different fractions within the haute bourgeoisie–they are the haute bourgeoisie.  There is, therefore, a toxic stasis on the European and North American left facing a dynamic, well funded, and popularly organized right.

Afterword to the introduction

It has been almost a year since I gave this talk and there is reason today to feel a bit more sanguine than one may have felt in the morning after Trump was inaugurated.   The British labour party had a major coup d’état with the victory of Corbyn. Equally positive has been the increasing traction of non normie style democrats.  Moreover, and I think more importantly, there are some positive signs that that the non parliamentary left is finally working through some of its major dysfunctions of which I will just touch on two below.

First, there are strong signs that the non parliamentary left intelligentsia is moving beyond the internecine, unproductive and self defeating debates of the naughties and teenies.  I think Trump’s election was a brutal wake-up call signalling that the prosaic and bitter debates of grad school educated lefties had become a waste of real resources.  Do not get me wrong, I think those debates had to be had, but they went beyond their best before date and ossified  into petty silos.  It was as if by sitting in grad school seminars and by standing giving grad lectures we were going to change something all on our own, as if the logical consistency of our interior ontological righteousness could alone change the world:  to be sure a much more meaningful exercise than Dynamic Stochastic General Equilibrium models, but often not much (there is a future post in this analogue, someone remind me of it).

Second, while we were busy, people like Jane McAlevey and countless others were actually being a part of helping communities organize.  Her title gets right at the problem, there are no shortcuts to the real work of organizing: there is no one big existential idea, no coupling of mobilizing and online communication hubs (often falsely called communities) for living in, and being a part of, organizing ourselves in the broader (as in not self selected) communities we live in.  Life has an unavoidable spatial context and real social complexity.  Organizing involves dealing with both.  I think the non parliamentary left is finally getting this.

[i]   See Arlie Russel Hochschild, “Strangers in their Own Land: Anger and Mourning on the American Right”, (2016), The new press.
[ii]  It remains to be seen if Jeremy Corbyn marks a shift in English politics.

NGDP targeting: wither monetarism?

Monetarism is like a Zombie: it can be found theoretically wanting, empirically false and technically infeasible but in one form or another it just soldiers on.  In some ways the hype surrounding the conversation about the possibility of moving from an inflation based paradigm to targeting NGDP could be read as the end of monetarism.  But viewed from another angle it (NGDP targeting) can also be read as the latest reincarnation of monetarism.

Purists will of course bulk: monetarism died along time ago as central banks realized they did not control the money supply as private banks also create money all the time in the form of credit.  But if in narrow technical terms monetarism died soon after its birth, in broader political terms it came of age in the ensuing years.  As I see it there were three initial pillars to monetarism only one of which technical.  First, the CB can control the money supply (false) and thereby inflation; second, the CB should be independent (from democratic influence) to pursue price stability (not amenable to boolean operators); third, monetary policy is the preferred technocratic as opposed to democratic policy (fiscal) lever.  Even though the first be dead the second and third live on.

My problem with NGDP targeting is threefold.

First, proponents of of inflation targeting like the quasi monetarists are want to argue that the last twenty years of  inflation targeting has been a dizzying success.  As per Nick Rowe:

 We have 20 years of empirical evidence showing how inflation targeting works to stabilise expected and actual inflation.

Not so fast.  We have twenty years in which many things were happening: a move across the advanced capitalist zone to flexibilise labour markets and the incorporation of broad swaths of eastern European and Asian, and south Asian labour reserves into the global market; and increasing trade liberalisation and capital mobility. So I am not sure the CB’s should get all or even most of the credit for price stability over the last twenty years.  Although they may warrant some of the blame for higher average unemployment than the pre-monetarist CB regime.

Second, I remain to be convinced that the CB’s can actually target NGDP.  They, the CB,s, have a limited range of arrows in their tactical quiver.  If anything the present crisis has taught us (like the crisis of Keynesianism) at such periods in the micro-economic motivations swamp the thinking of businesses.  I suspect the BOC could announce tomorrow that it had raised its inflation target to 6% and not much would happen in real or nominal terms.  Defeating inflation was a rather simple exercise even if politically difficult.  All the CBs had to do was to put interest rates through the roof and kill off every marginal producer of goods and services.  Similarly keeping inflation in check (on target) was and is a relatively easy affair when one simply has to throw sand in the financial gears.  It becomes a problem of second order magnitude to target NGDP growth when everyone who counts knows you do not really have the ability to independently bring it about.

Nominal growth targeting means nominal investment targeting and in the context of already hyper low interests rates it is hard to see where the CB has a viable policy lever.  They can play around with quantitative easing (as they have already done) but all that appears to have done is set a soft floor on some classes of asset values.  And it is an open question as to whether or not this is a good thing.  On what rational basis was it decided that some asset values were worth preserving and others not?  More importantly putting a soft floor under some classes of asset values has done next to nothing for investment rates which is after all how you target underlying economic growth even when not discounted by inflation.

Third NGDP targeting is opaque in a way that inflation targeting is not.  There is a relatively decent link between the credible threat of high real interest rates and the threat of low real interest rates.  The former pushes noun against a verb the latter not so much.  Without the direct ability to determine aggregate investment rates the CBs are forced into much more cloistered channels with little to no capacity to sanction the relevant actors should it not get what it wants.

My critique probably boils down to the following.  It is only under a supremely unique set of circumstances that CBs found their targeting regime and interest rates to have such a profound positive influence on the level of economic activity.  In capitalist economies it is businesses that invest and hire (something both liberal and Marxist economists agree on) interest rates and asset valuations play only a small part of the calculus to invest.  The government on the other hand can use fiscal policy to indirectly stimulate investment through tax policy and directly control aggregate investment and thus employment via direct spending.

Ironically if the government was to monetize the debt by putting Peter in bed with Paul (the CB and the treasury) it would inadvertently give some real teeth to the CB’s ability to prove to the relevant economic actors that it was serious about targeting NGDP growth.  But I suspect Tory New-Keynesians like Rowe and Sumner would not abide.  For once you show that fiscal policy is in fact a powerful force for economic regulation the last two pillars of monetarism come a tumbling down.  Some version of industrial democracy would be back on the table.

Hardly what a Tory goes shooting for when they wake up early in the morning.

The irony of greed: The end game for Neoliberalism?

The global economy is in the toilet and the Boomers’ representatives are chanting: “flush, flush, flush.”  Me? I am eating cigarettes and wine while admiring the remarkable consistency in the myopia of all of it.

In the name of fiscal prudence the whole of the advanced capitalist zone is in engaged in austerity budgeting and calls for more of the same.  Even Martin Wolf, in his otherwise insightful column in the FT online today, felt the need to tap his hat and nod in the direction of the genteelism of supply.  Exhibit A, the conclusion to his incisive intervention:

Reconsidering fiscal policy is not all that is needed. Monetary policy still has an important role. So, too, do supply-side reforms, particularly changes in taxation that promote investment. So, not least, does global rebalancing. Yet now, in a world of excess saving, the last thing we need is for creditworthy governments to slash their borrowings.

As is widely acknowledged, monetary policy has little outside of conciliatory role to play at this time.  In so far as the CBs should not make the mistake of tightening policy as the ECB and the BoC did.  But apart from the role of spoiler there really is not much left for the CBs to do.  The problem is squarely fiscal.  As Wolf himself went to pains to argue.  Why then the conclusion given that further tax reductions are not only going to make the fiscal positions of governments worse they will also likely have the same effect as lowering interest rates at this time:  Nadda, ziltch, rien, nothing?  The problem is that Wolf has to tip his hat to conventional wisdom.  If not; he has no hope of bending the ears of policy makers.  Oh well, that is his plight not mine.

Here, given none are listening we may speak frankly.  The world economy is in the toilet because free trade, tax cuts, deregulation and above all the liberalization of finance over the last thirty years let loose a Tsunami of forces both economic and political.  The liberalization of finance and production allowed for the national gutting and then global whipsawing of labour.  As the profiteers profited and retired workers slept while the assets they had built were being systematically stripped and the fortunes being amassed were then turned to the seedy business (although a time honoured practice if one cares to actually read Smith) of buying off the government–and it must be stressed the intelligentsia too–broadly understood.

We now have the perfect storm.  A generation of public and private sector functionaries has been trained to believe that the market can do no wrong and the government no good.  As a corollary is of course the proposition that monetary and regressive tax policy is everything.

The irony, of course, is that any credible account of the present crisis would have to admit that we are here because free trade, tax cuts, deregulation, the flexibilization of labour markets  and above all the liberalization of finance brought us here.  How odd it is then that we should be treated to more of  the same as the cure for what ails us.

The Circus of Greed: the Political Economy of Ratings Agencies

Would be hard not to know by today that the S&P downgraded the US .  What is less well known is why it is further evidence of the circus of greed that is the American financial and political system.  First, read this post by Bill Mitchell, S&P decision is irrelevant.  If you are pressed for time just scroll down to where he talks about Japan’s experience with the ratings agencies.  Next go read this excellent post over at Naked Capitalism, Matt Stoller: S&P’s Predatory Policy Agenda.

Now remind yourself how poorly the ratings agencies did at rating the TBTF financial institutions in the walk up to the crisis.  Now ask yourself why ratings are not being done by competent, independent, and a not for profit third party.

The Right Wing Commentariat is getting Desperate

Just go read Terence Corcoran’s latest in the National Post.  Never mind that the world was plunged into economic crisis by unregulated financial institutions and near fully captured regulators; never mind that by most accounts the financial regulatory reform that has taken place since has been mild and the regulators are still, for the most part, in the hostage room.  Terence tell us that one of the central reasons for the continuation of the slump is:

Banks are being regulated to an extent never seen before, forcing the world’s core providers of credit for business expansion to curb their appetite for risk. Confusion reigns as global and trans-national regulators blunder their way to impose ill-conceived rules and policies. The hard reality of new rules, ­especially new capital requirements, is that it forces banks to accumulate risk-free liabilities while curbing risk-taking loans.

For the right it is always the same villain: the government.  During the crisis they blamed the government because…wait for it…they did not regulate properly and the crisis was therefore evidence of state not market failure.  Now, as then, it is the state that is failing, not markets.

To wit, Terence finishes with:

Similar government interventions, bolstered by constant calls for more spending and taxes, are the norm through most of the G20 membership. To end the many debt crises, the first step should be to abandon growth-killing policies. With growth, even debts cease to be a problem.

Just where is Terence getting his information from?  The G20 is busy doing austerity across the advanced capitalist zone and not in the form of tax increases.  Does he even read his colleagues blogs?

The food insecure amongst us

Every year the UN-OCHA (Office for the Coordination of Humanitarian Affairs) says that 3-4 million (always different) subsistence farmers and pastoralists in a variety of different regions in Ethiopia are food insecure, and thus in need of food aid (out of a total population of 80 million) The Ethiopian government then holds a press conference and asks donors to pitch in. The number of food insecure in Ethiopia is roughly the same this year, and yet when reading the news reports in the Western media about famine in the Horn of Africa you would think something totally dramatic and different has been happening in Ethiopia this year.

On the other hand as a percentage of the population the numbers of food insecure people are substantially higher in southern Somalia where “access” to food insecure places is a key factor in donor activity in the region. When I say “access” what I mean is that getting physical access to southern Somalia is a key issue in donor efforts in the region. Southern Somalia is also controlled by Al Shabbab. And, well the powers that be have been trying to tame southern Somalis for the past 20 years, but without much success. Thus, in the past 20 years, we have had two formal military interventions (one US led and one led by Ethiopia) and myriad small scale regularly inflicted informal interventions, sometimes in the form of drones, sometimes coming as ak47s, etc. So between the war on terror, and the war on poverty it is hard to know why Somalia is in the news right now.  But also more difficult to know is what is happening in the Horn of Africa militarily, politically, and economically beyond sensational reports. But, certainly since there is always enough food to feed the people of the world, we must become cognizant of the fact that famine has its own specifec political-economy, as does war, and also news reportage. So, just as poor news reporting is never a disaster of an individual mind, famine is never a natural disaster. Bad institutional configurations produce both :)

Where does that leave us? I am not suggesting  a conspiracy theory. But when I start to put the pieces of this story together the Cassandra in me certainly hears grumblings of another military intervention in all of this news making activity. After all, what else can “access” mean?

In the mean time, though I am still waiting for a really good article/analyses on the framing of this years biggest “humanitarian disaster”, I see that other people have questions too. We are starting to get closer to a better analyses of this event with this blog post. Check it.

http://apeaceofconflict.com/2011/08/03/the-over-simplified-narrative-of-the-somali-famine/

A rotting fruit that does not give vent to its own demand?

Given we seem to be stuck in fairly heady economic times it seems worthwhile to me to put out another post on the subject of employment, labour force growth and unemployment. In this post I am going to revisit the question of labour supply and demand and then take a closer look at the related issues of structural unemployment and the rotting skills (hysteresis) and dependency thesis  that has gained so much popularity in policy circles since mid 90s.

In a former post I mentioned the surge in labour supply during the 70s and 80s yet the graph I produced was a little underwhelming because it took a look at the underlying demographic growth of potential labour supply and not actual labour supply.  So this time I have have subtracted total labour force growth from total employment growth. Again, a positive reading indicates demand growth is outstripping supply growth and thus a decrease in the unemployment rate.  The inverse is that a negative reading says labour supply growth is greater than labour demand growth and thus leads to an increase in the unemployment rate. Here is the graph:

This is fairly sobering stuff.  The jobs boom of the 60s gave way to the deluge in the labour supply of 70s from which the employment market not to mention the welfare state has never fully recovered.  All that talk in the 90s about the need to reform UI/EI was not really about workers gaming the system it was about a welfare state that could not and would not provide the kind of insurance necessary to cover an over 70 % participation rate in which workers were more likely to be unemployed.  The graph below shows just how ugly it can get.

Clearly the deluge in the labour supply 70s had profound impact on long term unemployment which amounted not to an institutionally determined behavioural switch in workers propensity to work but rather a structural shift in the labour supply curve sans an equally profound shift in the demand curve for labour.  We know for example that for two decades, from the late 70s to late 90s, that real wages were stagnant indicating a loss in the bargaining power of Canadian workers. Yet despite the loss in wage bargaining traction, demand for labour was not forthcoming until the dot com and later housing booms of the late 90s and 2000s.  At the end of the day it was the bubble economies which finally, and fictitiously managed to work through the supply boom of the 70s.

If there is any doubt that demand for labour is the most important determinant of structural unemployment rates we need only look south to our American cousins.  In the graph below I have plotted US long term unemployment rates along side the Canadian rates.

Despite or because of higher US productivity during the 2000s the US had already begun to move towards higher levels of structural unemployment than Canada during the early 2000s something not seen since the mid 70s.  Clearly the severity of the last recession in US accounts for most of the difference in long term unemployment rates.  I have not seen any research which argues that the US has a significantly more generous unemployment insurance system than Canada.

The popular myth promulgated throughout 90s was that structural rates were high because they were high.  In the literature this is called hysteresis.  The basic idea is that the longer  a worker is unemployed the less employable they become because their skills degrade like a piece of fresh fruit on the kitchen table.  The hysteresis argument was used in turn to argue for more restricted access to EI and lower benefits to encourage workers to get back to work before their skills rotted.  This all had the air populist plausibility particularly when combined with the trend toward increasingly individualistic explanations for collective social problems in the social sciences especially economics.  But whatever the strange brew of populist folk wisdom–that workers prefer the dole to working–and academic fads the problem is, as the graph above demonstrates, high structural unemployment and hysteresis seem to magically disappear when there is strong demand for labour.  And that demand, as the graph above also suggests, is determined by the general health of the macro economy and has nothing particularly to do with the supply characteristics of labour.

To put a fine point on the argument what needs to be demanded of the purveyors of the hysteresis hypothesis is just what reversed the rotting of workers’ skills that magically made them employable after 1991-92.  Was there a steady increase in the funding of retraining programs for example?  And what about the US what was going on after 2001 did the Skills of US labour all of sudden just start rotting?

The alternative narrative to the rotting skills / lazy labour thesis is that the 70s was a period of structural realignment in which secular period of decreased GDP per capita growth set in matched by a deluge of labour supply.  The 80s and 90s were thus periods of adjustment to this new reality.  The UK the US and Canada were early supply side reformers which consciously sought to re-enforce the punitive logic of capitalist labour markets in order to assure price stability (tame inflation) and break workers bargaining power.  In other words, neoliberal macro-policy, despite protestations to the contrary, had nothing much to with solving the problem of long term and high structural rates of unemployment.  It was a feature not a glitch that the solution to that problem would have to wait until the supply side reforms delivered up their magic via a tsunami of consumer credit and control fraud serving up a ponzi economy that could approach something close to what could be called full employment.

As this report from the BLS (p.23 A-12) demonstrates long term structural unemployment has gotten worse in the US not better since 2009.  Most sober economists will concede that this has everything to do with the health of the US economy.  But it will not be long before the rotting skills thesis is floated into the stream of policy discourse as a cover for the fact that like with the financial sector the solution is to kick the problem down the road and blame the victims along the way.

*Note that Stats Can defines long term unemployment as 1 year + whereas the BLS defines it as 27 months weeks +.  By using 6 months + which conforms to the format of the data reported by the OECD I have more less deployed the BLS definition.

A little perspective on GDP growth or does policy matter?

These are odd times.  Not one policy seems to get floated these days which does not include in the tag line that it will be good for economic growth.  And it is not just tax cuts for the rich or corporations which get rationalized as such: everything from eating organic to getting a post secondary education are all said to be good for economic growth.  What all these claims have in common is that they are patently false if real GDP per capita growth rates is anything to go by(1).  What is more, in almost every advanced capitalist country the obligatory policy meme has been that policy X will be good for GDP growth.  The reality is that since the 1960s it would appear nothing has been particularly good for GDP growth from financial liberalization to the increasing consumption of soy “milk”*.  The hard facts are illustrated in this (below) graph of real GDP growth per capita:

I do not know about you but does anything strike you as patently obvious about the trend rate of growth for these advanced capitalist countries?  Anything, anything at all.  Well in case you missed what they all share in common, with perhaps the exception of the UK, is that it has been a toboggan run since the 60s. Sure the Netherlands gets a bump and then reverts to mean; and sure the UK runs horizontal for a time; and sure Japan descends from mount Fujimori making Whistler look like a bunny hill but the overall undeniable fact is that things have been going down hill since the 60s.  That is, despite all the fan fare behind deregulation, privatisation, free trade, corporate income tax cuts, bicycle helmets, tofu, gay liberation and the Prius; in terms of real GDP per capita growth things have been going down hill.

Look at Canada.  For all the bluster and loud pronouncements about which policy and what size of government was going to tank or reinvigorate the economy the reality is that the last five decades have been characterized by ever lower real GDP growth rates regardless of who was in power and what policies were pursued.  Does this mean policy does not matter?  Of course not.  Policy matters tremendously.  Good policies alleviate poverty which is good for public health and the quality of life of the poor; a strong system of unemployment insurance provides a bridging loan and helps match workers to jobs for which they are qualified(2); a good education, like a garden, improves the quality of life and the autonomy of citizens; exercise helps us keep our form and tax public health care less.

All true.  But do any of those things necessarily boost GDP growth per capita?  And if they don’t maybe we need to stop trying to justify them on those terms and justify them on their merits. If policies such as privatisation, free trade, tax cuts for the rich and corporation cannot be proven to increase GDP per capita growth, which they can’t, then let their boosters provide an alternate rationale.  I am all ears.

*Bean juice from a cow?

1. Of course if we make the right assumptions we can claim that in absence of all of these things GDP growth would have been worse.

2.Skill mismatching is rarely considered by those advocating shortening search times.

Just who are Paul Krugman’s people? And a side dish of MMT

I know Paul thought he was just being relaxed. Moses knows we all have a right to relax de temps en temps but it is a really remarkable slippage. In his latest post he writes:

So: I basically think of asset prices in a Tobin-type stock equilibrium framework (pdf). People make portfolio choices, allocating their wealth among bonds, stocks, etc.. Asset prices – including the famous “q” – rise and fall to match these portfolio choices to the actual asset supplies (emphasis added).

I have never been able to get past the basic misrepresentations of reality that are hard wired into (liberal: both reform and conservative) economists heads. How can a social science do such a violent abstraction? People in general do not allocate their assets into portfolios. I imagine Paul does, as I imagine some retires who do not have retirement plans but nonetheless who have saved must. But these are fleetingly small group of asset allocators. The vast majority of asset allocation is done by a special class of people who work in the FIRE sector for large institutions which in turn attempt to maximize (beat/achieve the average) by any and all means necessary. If there is a mismatch between assets demanded and assets supplied it has nothing much to do with people.

Now none of this really has much to do with Krugman’s post. But it is still incredibly annoying.

At the end of his post Krugman drops this bomb:

Update: Also, if you think that US interest rates are being held down by the fact that in some sense the Treasury hasn’t had to go to the market lately, since the Fed is buying debt — although the Fed isn’t actually buying it direct from Treasury — consider the case of Greeece (sic). Greece isn’t going to the market at all these days, since it’s getting all its funding from the bailout package. That hasn’t stopped the 10-year interest rate on its outstanding debt from reflecting investors’ perception of its underlying solvency:

This is just weird. Paul himself has noted that you just can’t compare Greece to the US–EVER–period. The Greeks do not have currency sovereignty. For all intents and purposes Greece is a province of the EMU. California can go broke the US can’t. Now politically the US federal government can be forced to go marked to market and normally they are but they do not have to as it is a self imposed constraint. That is not to say that there are not consequences to refusing to abide by this solemn constraint it is just to say the US ain’t Greece no matter how many e’s you put in it.

Update: Yes PK is of course right even if the analogy is bad. The point of my post was that loose talk and poorly thought out analogies lead people to think un-rigorously. Specific type of people do asset allocation. California and Greece cand be compared because they are both wards of a larger monetary union. The point is crucial because the discourse on deficits is completely confused at this point and just down right wacky in the US.

Personhood, Romantic Love and the 3rd world.

By Elleni Centime Zeleke,

My interlocutors seem angry and defensive about my claim that romantic love in north America is sinister. Let me respond to their anger with a few more points.

So, we think of ourselves in the West as having unique attributes, and we define ourselves through the exercise of our individual free will upon those unique attributes.

Indeed our idea of what it means to be free is to be a person who can exercise her free will so as to produce whatever outcome she desires. As a result, we think of alienation as the separation of our will from our creativity such that we cannot recognize ourselves in the things that we make.

But one of the things that I have been arguing is that this notion of the self has been historically produced, which is to say that what we imagine to be an individual is not common to all times and spaces.

On the other hand, the doubly free subject of capitalist social relations is a good way to conceptualize the newly formed modern subject that has free will. This is a subject that is free from social obligations and free to move about and sell their labour where ever they please. But in this sense then the doubly free subject has no corporate identity, instead he or she must rely entirely on his or her own wit and will power in order to survive.

But what we also know is that the doubly free subject is created by economic and social processes. Thus, through the process of establishing capitalist social relations you get new forms of freedom and new ways of being a person. But there is nothing inevitable or foreseen in the social processes that led to the establishment of capitalism in England, Western Europe and North America.

Thus one of the things that I have been arguing is that even as you have capitalism developing in the 3rd world at the same time as it develops in Europe, the creation of the doubly free subject was never complete in the 3rd world.

Indeed, typical of the 3rd world economy is that you have people labouring under a number of different social arrangements in order to make goods for the capitalist market but who have not been transformed by capitalism as such.

On the other-hand the transformation into modern individuals in NA is utterly complete. Thus in NA life is organized around the nuclear family, and the nuclear family assumes that two people out of their own free will can choose each other and so form a family. But the nuclear family is “the gendered family par excellence” (Oyewumi, Oyeronke 2002). It consists of husband and wife who are defined by their gender and sexuality rather than a corporate identity derived from the community. But as such the nuclear family operationalizes and takes for granted the idea of being double free– it assumes a certain historically specific institution related to modernity as its base and its ideal.

On the other hand in the 3rd world people make a living in the informal economy, or through combinations of wage labouring with farming that over laps with remittances and migration. The point is that as capitalism travelled around the world it needed a much smaller labour force when it expanded industrialization (Bernstein, Henry 2004). Thus capitalism promotes a world proletariat but cannot accommodate a generalized living wage (Bernstein, Henry 2004). Reproduction happens under insecure and oppressive conditions, and most often in the informal sector. Here kinship structures, and lineage systems become modernized and adapted to urban spaces and even trans-national spaces as a means to survival (Cooper, Fredrick 2001).

Now, as we have been saying westernized folks tend to take the nuclear family for granted and they define freedom as being doubly free. This produces a number of conceptual problems: 1) It assumes the individual is the bases for organizing society, 2) even when western feminists produce critiques of the family it is based on the fact that in the context of the nuclear family women are subordinated, 3)produces a universal feminist project based on the fact that the nuclear family is universally oppressive, therefore all women must be oppressed, 4)advocates a liberated form of romantic love where the doubly free subject is granted freedom such that he or she can have the kind of the free choice that is exercised between two doubly free subjects.

But what we know is that in real life the nuclear family was never really instituted outside of western Europe and NA. And as I have been arguing a lot of this has to do with the fact that well paid, regular, and routinized wage labour was never commonly available outside of the West and still is not.

On the other hand, what we also know is that under these oppressive economic and historical conditions 3rd world nationalism often calls upon supposedly primordial identities as a way to construct feelings of belonging. Race is often used in this way but ideas of what it means to be a woman is also mobilized in this regard. Indeed, one of the things that is common to the formerly colonized countries is how the modern nation-state mobilizes “invented tradition” as a way to give people a sense of identity and belonging, for example, Tutsi vs Hutu, etc. But in many ways Tutsi and Hutu are entirely modern identities even if formally they are based on a pre-colonial past. This is because the fixing of customary law and ethnic affiliations are actually based on the invented colonial law that was administered through native authorities and native courts (Mamdani, Mahmood 1996).

So one of the things we need to be vigilant about is how so called traditional identities get used to foster a contemporary sense of identity, i.e. a sense of what it means to be African or Indian or whatever, and yet these traditions really have no historical base.

That said we also need to be cognizant of the multiple ways that colonialism and nationalism coupled with the more general transition to capitalist property relations in the colonies has not only transformed the nature of the family, kinship ties and lineage systems, it has also entrenched patriarchal rule.

Here we see that gender does not simply shape a person’s life; rather gender itself is produced and reworked through changes to the governing structures of social and economic conditions. But more importantly, gender is a concept that is increasingly fought over and contested as a means through which people can both shape their own lives but also satisfy certain interests.

For example, the West gazes upon the colonial subject and then claims that the way the colonized subject loves or the way he treats women is backward (and it is always a he that is being addressed in that gaze, after all “the women” are too veiled or too passive and cannot be addressed). But what follows from this is that the West makes policies to reform the backward subject, and as such codifies tradition on the one hand but also introduces new ways of being a man or a woman. Then the colonial subject internalize those ideas of what it means to be both traditional, as well as a modern man or a woman, but since these modes of being can never match up to European expectations, precisely because social relations are organized differently than under fully formed capitalist social relations in the West, the colonial subject still gets called barbaric and backward. But now the colonial subject holds on to the new definition of manhood inherited from the codification of tradition, and says no, look, I am not backwards, but he does this at the expense of making himself more static and more fixed.

How to solve this conundrum? Well, here, the question of hope or liberty clearly is not about individualizing the subject in the vein of fortifying a miniature homo economicus. Rather, the question is how can we take on our already existing collective projects at the level of the nation and also at the level of the transnational. Now, of course the future cannot be predicted, but at least we can say that in this scenario love is established through becoming companions in struggle and supporting the other in the freedom to find a form for that struggle. But here, what we also witness is that love is a sediment that arises from knowing that history and our collective formations are the condition from which to reach out to someone.

This kind of companionship is exactly the opposite of what is encouraged by the doubly free subject. After all romantic coupledom as it is practised in the West is the expression of a doubly free subject, but that expression is the privilege of the richest group of people in the international division of labour. It simply is not available to most people.

On other hand, my interlocutors seem to think that romantic love might give them hope for what ultimately is a dissatisfied existence in the advanced capitalist countries, but as Walter Benjamin has warned, “hope is for the hopeless”. In the end romantic love in North America is about disavowal and retreat from the world, because people are privileged enough to do just that. It is the longing for ahistorical stasis, and a frozen image of reality. Marx also called this animality.

Back in 1844 Marx also knew that freedom as it is expressed by the doubly free subject was the ultimate form of alienation. In opposition to the modern subject he wrote “suffering humanely conceived is the enjoyment of self for man.” I urge my friends that are so firmly committed to romantic love to enter the circle of suffering with their fellow human-beings. My interlocutors might find that they will finally enjoy being in the world so much more.