Impossible Things

Sometimes I’ve believed as many as six impossible things before breakfast.

— The White Queen, Through the Looking Glass by Lewis Carroll (1871)

In this week’s Sift:

  • More Economic Nonsense. Increasingly, the debate between liberal and conservative economists has become irrelevant, as Republicans have divorced themselves from any economic theory whatsoever. Last week it was Boehner. This week it’s Pawlenty.
  • The Sifted Bookshelf: Why Marx Was Right. Terry Eagleton makes Marx understandable, and challenges us to take a second look.
  • Short Notes. The Germans plan to de-nuke. Business tax credits may kill jobs rather than create them. A Koch sock puppet denounces alternative energy in the NYT. Not only do bad decisions cause poverty, it works the other way too. Comedy: Borowitz on Palin, Colbert on Romney, Stewart on Fox. And a female Daily Show correspondent tells the sad truth about male sexting.
  • This Week’s Challenge. Check out the Sift’s twitter feed.

More Economic Nonsense

Reasonable people can argue liberal or conservative economic theories, which mostly differ the relative effectiveness of the private sector versus the public sector, and on regulations versus market incentives. But to an extraordinary extent these days, those legitimate arguments have nothing to do with the debate we’re hearing in the mainstream media. Instead, many economic ideas coming from the Right are entirely nonsensical, backed by no legitimate economic theory at all.

Last week I called out John Boehner’s claim that spending cuts would grow the economy and create jobs. (The Street Light blog does the simple arithmetic about spending, demand, and growth.) Tuesday, Boehner’s view was contradicted by that noted leftist Ben Bernanke — President Bush’s choice to run the Fed. Why? Because whatever else Bernanke might be, he’s an economist. He doesn’t want to embarrass himself in front of the other economists by spewing nonsense in public.

Tuesday, Tim Pawlenty — along with Mitt Romney and Jon Huntsman, supposedly the “sensible” Republican presidential candidates — came out with an utterly delusional economic plan. Its centerpiece is a tax reform that I can only describe as pro-aristocracy: Eliminate all the taxes that rich heirs would have to pay on their family legacy. Not just inheritance taxes, but taxes on interest, dividends, and capital gains as well. (“When you deposit a dollar in your bank account, every penny should be forevermore yours and your children’s.”) So Muffy inherits from Mom and Dad, lives luxuriously without working a day in her life, and then passes an even larger estate down to the next generation of parasites — all tax-free.

And in case any rich people are still earning wages, let’s cut the top individual tax rate from 35% to 25%, and cut the corporate tax rate from 35% to 15%. And pursue a “strong dollar” policy, which is code for high interest rates. (This will prevent Muffy from losing purchasing power through inflation, and insure that her CDs pay enough to keep the summer house in good repair.)

What fills Pawlenty’s gaping revenue hole? Mostly unspecified spending cuts — a constitutional amendment to cap spending at 18% of GDP, which is impossible without big cuts in Medicare, Medicaid, and Social Security.

So far Pawlenty’s plan isn’t irrational, it’s just class warfare. What’s irrational is how he fills the rest of the revenue hole: By assuming 5% economic growth for the next decade. He justifies that number like this:

5% growth is not a pie-in-the-sky number. … Between 1983 and 1987, the Reagan recovery grew at 4.9%.  Between 1996 and 1999,  under President Bill Clinton and a Republican Congress the economy grew at more than 4.7%. In each case millions of new jobs were created, incomes rose and unemployment fell to historic lows. The same can happen again.

So 5% for a decade is reasonable because if you cherry-pick the best days of the Reagan boom and the Clinton boom, the economy maintained growth not quite that good for less than half that long. And we’ll get back there by imitating not Reagan or Clinton, but George W. Bush, whose massive tax cuts gave us the worst growth since the Depression. Plus we’ll have growth-killing high interest rates.

He also makes amazing claims like “cutting just 1% of overall federal spending for 6 consecutive years would balance the federal budget by 2017” and unverifiable ones like “federal regulations will cost our economy 1.75 trillion dollars this year alone”. Although that one might be right: Imagine how much money the chemical industry saved by dumping their waste in Love Canal instead of dealing with the kind of federal regulations we have today. Or how much Massey Energy saved by ignoring regulations about ventilating their mines. Nuclear power could cost less if no one regulated radiation. Health care and air travel could be cheaper if doctors and pilots didn’t have to have licenses or well-maintained equipment. The possible savings are endless.

You know what you won’t find in Pawlenty’s speech: the name of any economist, economic theory, or econometric model that justifies his projections. That’s because there isn’t any. It’s pure nonsense, undiluted by economic thinking of any type — liberal, conservative, whatever.

The Minneapolis Star-Tribune, which has covered Pawlenty since his days as goveror, comments:

Pawlenty didn’t even try to support his central argument — that tax cuts and smaller government would spur astounding economic growth of 5 percent annually over 10 years — with evidence. That’s because neither economic research nor reality confirms his promise.

And have his Republican rivals called him out on his nonsense? Not yet. We’ll see if they do it in tonight’s debate, but I’m not holding my breath. More likely, Romney and Huntsman will have to offer their own nonsense to stay competitive.

While we’re talking nonsense, let’s not ignore what Republicans are saying about the debt ceiling. The academic cover for this position comes from the Mercatus Center — a wing of the Koch Empire. The New Republic debunks.

You should be reading: Brad DeLong’s economic blog Grasping Reality With Both Hands. He does a daily Virtual Green Room post, giving simple rebuttals to the economic nonsense of the day.

The Sifted Bookshelf: Why Marx Was Right by Terry Eagleton

When a thinker has had an impact on history, it’s hard to put that out of your mind and read his or her words in their original context. It’s hard not to judge Christ by the Christians, or Freud by the Freudians. Nietzsche was done writing before Hitler was born, but it is hard not to equate Nietzsche’s supermen with Hitler’s master race.

That’s what Terry Eagleton is asking us to do for Karl Marx: Put aside the distorting lens of Stalinism, Leninism, and Maoism and read Marx on his own terms — as a 19th-century critic of capitalism rather than the patron saint of 20th-century communism. The book’s main point is that most of what “everybody knows” about Marx is stereotype, not reality. Correctly understood, Marxist ideas about 19th-century capitalism still provide a lot of insight into what’s going wrong with 21st-century capitalism.

Eagleton defeats one stereotype immediately: that Marxists are dour and humorless, and that they write in an impenetrable style whose jargon is meaningful only to other Marxists. Chapters of his books begins with plainly stated present-day attacks on Marx. Chapter One, for example:

Marxism is finished. It might conceivably have had some relevance to a world of factories and food riots, coal miners and chimney sweeps, widespread misery and massed working classes. But it certainly has no bearing on the increasingly classless, socially mobile, postindustrial Western societies of the present.

Each chapter is an answer to a particular attack like this, and is written in an engaging style that doesn’t make you feel like you missed the prerequisite course. There’s no Marxist glossary in the back, and I never felt the need for one.

Capital, property, and oppression. Here’s the main definition you need in order to understand Eagleton’s version of Marxism: Capital is labor that makes future labor more productive. The purpose of clearing and plowing a field, for example, is not any immediate consumption; the purpose is to make future planting and reaping more productive.

Economic progress happens because capital accumulates, and so labor keeps getting more productive. So I’m more productive as a journalist because I can use computers, which wouldn’t be possible if people like Ben Franklin hadn’t spent countless hours experimenting with electricity. Franklin’s labor — and the labor of generations of successor scientists and engineers — is capital for me.

The fundamental mystery of economic progress, then, is: Why do people create capital? They could be laboring to produce something immediately consumable, or they could be resting or playing. Why labor to make future labor more productive?

Marx has two answers: property and oppression. A person will create capital if the surrounding society will recognize it as property. (I’ll plant in the spring if my tribe will recognize that the fall crop is mine to reap. Otherwise I probably won’t. Or I’ll clear the stumps out of a field if people will recognize it as my field, so that it is my future labor that will be more productive.)

A society’s level of technology determines what kinds of capital are possible, and that in turn determines what kinds of property the society will recognize. The Native Americans who sold Manhattan to the Dutch, for example, had no notion of what it meant to “own” an island. It would be like someone offering you trinkets in exchange for your share of the Moon. The Moon isn’t property to us, but it could be to a space-traveling society.

The other reason people create capital is oppression — someone forces them. They work, and the capital they create belongs to someone else. (Picture the slaves who dug the irrigation systems of ancient Sumer.)

Property and oppression interact. If I own all the arable land in a region, then people will work for me or they will starve. Naturally, I will set them to raising the food that they will consume. But I will also make them create capital that will belong to me, not them.

Subsistence and abundance. Looking at individuals, Marx saw two important production levels: subsistence, which is enough to keep the person alive, and abundance, the level at which a person will stop working and enjoy leisure. (When a deer is cooking, a tribal hunting band will not keep hunting. They’ll gather around the fire and tell stories.)

Looking at societies, Marx saw that any surviving society had to be achieving subsistence. But until his own era, no society had achieved a level of production that could provide abundance for everyone. For that reason, he theorized that every previous society had needed oppression to keep growing its capital. Somehow, large numbers of people had to be kept working for future productivity, even though their present needs were not being satisfied.

So when Marx looked at any historical society, he saw:

  • a technological level that determined what could be produced,
  • a definition of property appropriate to that production system,
  • a ruling class that owned the vast majority of the defined property,
  • a system of oppression that forced everyone else to labor at creating capital for the ruling class.

He wasn’t judgmental about this. It was just the way things had to be if a society was going to grow its capital to a point where it could provide abundance. (How, for example, could ancient peoples have invented writing — a great capital improvement for the rest of history — if slaves hadn’t supported a class that had the time to think about such things?)

But in his own era, Marx believed that abundance-for-everybody was finally possible, because the highly efficient oppression of capitalism had accumulated enough capital to make labor sufficiently productive. If only the fruits of labor could be properly distributed, everybody could work enough to produce abundance for himself/herself, and then stop and enjoy leisure. To the extent that capital needed to develop further, it could be a kind of play — like Ben Franklin mucking about with electricity or volunteers creating the Wikipedia.

In Marx’s era (and even moreso today) considerable effort went into controlling production, so that overproduction didn’t swamp the markets and ruin the capitalists. So you frequently had (and have) fallow fields, idle factories, unemployed workers, un-used raw materials — and people whose needs go unsatisfied.

This state-of-affairs Marx did get judgmental about, because he believed we could finally be done with systems of oppression. The only thing that prevented this happy development was that society was still organized around the goal of growing capitalists’ capital as fast as possible. He believed that a revolution was necessary to re-orient the economy towards producing abundance-for-everybody rather than ever-increasing capital for the ruling class.

So what didn’t Marx foresee? Several things. He didn’t foresee the European welfare state, which produces something like abundance-for-everybody by taxing capitalism rather than overthrowing it. He also didn’t foresee the extent to which technology could create new products and advertising could create dissatisfaction, so that people would keep working for iPhones and HDTVs and designer jeans even after they had achieved a 19th-century level of abundance.

But mainly he didn’t foresee that communist revolutions would happen in countries like Russia and China, which hadn’t accumulated enough capital yet to provide abundance. So he didn’t anticipate Stalinism: communist oppression to build mines, factories, and other productive capital. The kind of revolution Marx expected — one in a highly developed capitalist economy like England — has never happened.

Say you want a revolution? To Marx, it goes without saying that the ruling class rules for its own benefit, and preserves the institutions that solidify its power. Everything putters along nicely as long as the interests of the ruling class are in line with the economic possibilities of the era, and its institutions are socially productive.

But sooner or later new possibilities develop, and those possibilities line up with the interests of a new class. Eventually that class achieves enough consciousness to understand its potential, and then you have a tug-of-war until the new class comes out on top. The prime example here was what Europe had recently gone through: the transfer of power from the feudal aristocracy to the businessmen. Unlike the suddens spasms of the French or Russian Revolutions, the feudalism/capitalism revolution played out over centuries.

The symptoms of a revolution, then, are also symptoms of a ruling class being out of joint with its times. The institutions, traditions, concepts, and categories that support the ruling class become baggage rather than assets. Society has to do complicated tricks to keep them functioning, and they seem increasingly artificial rather than natural. (To see how artificial feudal traditions looked in the early capitalist era, read Jane Austen.)

In this context, it’s interesting to look back at Martin Ford’s The Lights in the Tunnel, which I reviewed two weeks ago. Ford is worrying about how we will provide human jobs in an era of intelligent machines, and so continue to have enough viable consumers to keep a consumer market economy going. He winds up with elaborate systems to pay people for socially productive behaviors that aren’t considered “jobs” today.

Whatever you may think of Ford’s specific suggestions, they’re a symptom. Capitalist-era concepts like jobs and profits are starting to hobble economic thinking rather than facilitate it. Increasingly, the problem isn’t how to produce stuff and distribute it; the problem is how to produce stuff at a profit and distribute it by paying people to work jobs.

Now that the 19th-century proletariat is shrinking, I don’t have a clue what class Marx would think is achieving consciousness or what re-definitions could make the economy work for them. But it sure looks like this era is getting long in the tooth.

Short Notes

Imagine: The Germans are planning to live without nuclear power by 2022. You couldn’t even start that discussion here.

Encouraging new tech: better batteries and solar panels. Even without these developments, solar power has reached the point where it can make sense for homeowners who live in the right place and have sufficient ingenuity. My friend Malacandra blogs about the installation process.

NYT readers might wonder what the point is, though, after reading an op-ed about the hidden costs of solar and wind power written by Robert Bryce of the Manhattan Institute. The Times does not mention that MI is yet another academic tentacle of the Koch octopus, which (as is so often the case) will profit directly if you accept their propaganda at face value. The Class M blog debunks.

Tax breaks for business investment are supposed to create jobs, as companies expand production and buy tools from American factories. But in a low-demand globalized environment, companies might buy machines overseas to automate jobs in the U.S.

Middle-class people often look at the poor and think, “I’d make better decisions than that.” New psychological research indicates that the poor would make better decisions too — if they didn’t have to make so many of them. The kinds of trade-offs that confront the poor turn out to be inherently draining. If you have to make too many such choices, you exhaust your mental stamina and start choosing badly.

Translate that insight to the conservative health-care vision, where we all manage our own care and are constantly seeking the best value. How many vital decisions could you make on iffy information before you just started picking stuff at random?

The funniest reaction to the Anthony Weiner fiasco: the Daily Show’s Kristen Schaal telling men the sad truth about penis photos.

Check out Andy Borowitz’s parody of Sarah Palin’s history tour. At Monticello, Sarah says:

at a time of our history when the American people needed leadership, it was Jefferson who said the immortal words, “We’re movin’ on up.”

Stephen Colbert takes apart Mitt Romney’s claim to be a private-sector job-creator. Actually, he made his money as a job-destroyer.

More comedy: Texas traded to Mexico in 4-state deal. We get Baha, Yucatan, and a state to be named later.

Watch Glenn Greenwald’s speech on corporate-media propaganda to the Fairness & Accuracy in Reporting conference.

You’d think this would be obvious: Food service workers need paid sick days.

Vyan speculates that Jon Stewart is inoculating his viewers against Fox News.

If Wisconsin’s Walker administration is for the common man, then why is it attacking craft beer brewers and credit unions?

This Week’s Challenge

This one isn’t very challenging. If you do Twitter, check out the brand new @weeklysift. It’s the easy way to get the Link of the Day, and to be notified when a new Sift goes up on the blog.

The Weekly Sift appears every Monday afternoon. If you would like to receive it by email, write to WeeklySift at Or keep track of the Sift by following the Sift’s Facebook page.

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  • […] why somebody isn’t as crazy as you think, I’m more likely to be talking about Karl Marx than Ayn Rand — or even John Boehner. Most of the bridges I’m building these days go […]

  • […] Innocent Frauds of Economic Policy by Warren Mosler (reviewed in two parts: first, second), Why Marx Was Right by Terry Eagleton, The Lights in the Tunnel by Martin Ford, and Consumed by Benjamin […]

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