Month: July 2014

In his Peloponnesian War, Thucydides has the Greek leader Pericles defend his policy of imperial expansion against Athenians who have grown weary of the death, destruction, and disease it has brought to their community and their world. Says Pericles, “Your empire is now like a tyranny: it may have been wrong to take it; it is certainly dangerous to let it go.”

I was reminded of this line when I woke up this morning to find this headline in the International Edition of the New York Times: “Obama’s Blueprint for Fighting Terrorism Collides With Reality in Iraq.” Yes, since the Bush’s deceitful, failed intervention in Iraq, we have created a hornet’s nest from which it is almost impossible to extract ourselves without getting stung. But just as Pericles got it wrong in the Fifth Century BCE, so Mark Landler, Michael R. Gordon, and Mark Mazzetti get it wrong in the New York Times piece. Yes, it was wrong to take it. But the solution is not to persist in the same failed policies that got us into this mess in the first place. The solution is to develop strategies to make imperial intervention unnecessary and undesirable. Whether Obama’s back-end blueprint fits this criteria is open to question. But to suggest that an ongoing insurgency created by the Bush’s wrongful and disastrous intervention is proof that we should continue that policy displays a remarkable lack of insight bordering on idiocy.

Yes, it was wrong to take it. And, yes, it is certainly dangerous to let it go. But it does not follow that an alternative, softer, back-end policy is off-base. Had the Bush’s pursued the Obama blueprint back in the 1980s and 2000s, we would never have been in this mess in the first place.

One of the things I truly like — no irony — about neoclassical economics is that, insofar as there are literally hundreds of variables whose relative weights shift in relationship to one another, we can talk sensibly about a nearly infinite variety of “what ifs.” This is surely the case with June’s jobs numbers. What if we dropped taxes on capital gains by .25? What if we dropped taxes on the bottom third quartile by .4? What if we decreased the national debt by increasing taxes on the top 1 per cent, or even the top .1 percent by .25? All of these “what ifs” can be plugged into models to produce predictions of where the economy will be in, say, six months, a year, three years, and so on.

One of the variables that economists should be talking about in the next news cycle is: “What might have happened if Congress had approved the $1.2T stimulus that ALL — yes ALL — professional economists recommended back in 2008?” That is a strange claim. All? Yes, all. Which is extremely odd. What would have happened? Well, for one, there would be greater consumer demand and, ergo, greater production, greater tax revenues, greater paying down on debt, cheaper money, etc., etc., etc. That is to say, most of the professional economists who weighed in on this issue were thinking about economic growth.

But what if the real problem in 2008 was not unemployment or underemployment or underconsumption? What if the real problem in 2008 was an under regulated global economic system that is reluctant to compel investors to demonstrate the value of their assets because, were they compelled to demonstrate the value of their assets this would show their assets wanting and would draw financial capital out of global markets and deprive speculators their return on investment?

But obviously, this only pushes the question back one step. Let’s say the asset base really isn’t there? Then what? Most economists — even progressive economists — would say that in this case the market is overvalued and, therefore, that the reduction in value is painful, but necessary. (This pain can be reduced by responsible, targeted deficit spending that places money in the pockets of consumers and allows them to pay back the deficit gradually through economic growth until T[n].) But, again, what if we do not really need any more economic growth? What if the problem is that, owing to the spectacular efficiency of technology and science, we really do not need people to work as much or as hard; but that the only reason people need to work as much and as hard is to produce spectacular returns for investors? In other words, what if the problem of 2008 was not about wealth — material wealth — the kind of wealth that people can wear, and eat, and drive, and listen to, and fly; but was instead about immaterial value, the immaterial value that speculative investors need in order to invest and that they invest in order to have more?

But, more of what? Well, more overly value, and ultimately inscrutable assets of course. And why inscrutable assets? Well because only those assets — assets that fly under the regulatory radar — are able to produce returns outside of the window of actual asset valuation. But, again, here is the beauty and brilliance of neoclassical economic theory. What is any asset worth, even a non-tangible asset? In neoclassical economic theory, that asset, call it a “pet rock,” is worth whatever buyers are willing to pay for it. Let’s say I have convinced buyers that my pet rock is worth $25. I sell 100,000 of my pet rocks and then have builders build a house for me. Real jobs. Real house. Real neighborhood. Garden. Schools. Etc. Real economic growth. Was the pet rock really worth 2.5M? Evidently it was.

But let us now say that what people really needed in 2008 was not pet rocks, but houses, schools, hospitals, universities, roads, parks, museums, etc. And, let us say that investors, looking at this range of things that people needed, said to themselves: “How am I supposed to turn a profit off of houses, schools, hospitals, universities, roads, parks and museums? Those are real things, with known values; values that are not really very spectacular. I’ll take the pet rock.” And, yet, it is the pet rock that, at the end of the day, will lead to a burst bubble and a market collapse.

Maybe, then, the question we should be asking is not how we can pump up the economy, how we can achieve economic growth, but how we can produce the things and services that people really need. Do we need economic growth? Maybe not. Maybe public hospitals will not bring economic growth. But we do need hospitals. Will another, better school bring economic growth? Probably not. But that is what we need. Moreover a better public school will probably make a better society, but may not bring economic growth.

The real question, then, is how do we want to carve up the pie? We can send it up the line to the 1 per cent. And then we can trust that they will create the growth that will create the schools, hospitals, parks, museums, etc. Or we could simply say, “We want the schools, hospitals, parks, museums, etc.” So let’s spend our social dividend there. But, oh, will that make the 1% angry. And, did I mention, the 1% are the guys who own our Congress?

I am currently living in the northeastern corner of a nation whose “failed revolution” and externally enforced fragmentation has left it devastated. It is an entirely curious place from which to reflect on the US celebration of its Declaration of Independence. So many complexities. So many shared threads.

On the surface the Fourth of July celebrates the moment when thirteen colonies declared their intention to separate their interests from Great Britain, which, in order to finance its ongoing conflict with France, elected to impose increasingly burdensome taxes on colonists who, lacking representation in the House of Commons, could not effectively register their complaints in a politically sanctioned manner. Beneath the surface, however, another scenario was playing out. While nearly all business people in the colonies wanted to keep a larger share of their earnings, it was the business community in the northeast and the plantation owners in the south who stood the most to gain from relieving themselves of these tax burdens. Yet, without the support of the common people, it is unlikely that the wealthy elites could have fielded an army. Here the British came to their aid by compelling common people to pay a relatively larger share of their income on things, such as tea, that they viewed as essential. This gave the wealthy elites their opening.

Did the elites have any intention of shifting this burden come victory? Hardly. If we read the proceedings of the Constitutional Convention of 1787 we can see that the failure of the 1783 Articles of Federation — the United States’ first constitution — arose chiefly from the continuing reluctance of these elites to shoulder their fair share of the tax burden and their refusal to police themselves. Yet, in the interim, in 1776, the elites could use overburdensome taxes as the reason why farmers, tradesmen, sailors, and laborers should take up arms to free themselves from British tyranny. Interestingly, when we read their diaries and correspondence, these soldiers actually believed that when they defeated the British, they would all have the right to vote, they would be given title to their own property, and they would be invited to actively participate in self-government.

Nothing of the kind in fact happened. To the contrary, in 1783 less than 5% of those who were of voting age actually received the right to vote. Wealthy landowners following the revolution proved even more tyrannical than their British predecessors. And, as for the women who built IEDs in church basements and working men who set ambush upon British forces in house to house combat; well, following the war, the independent states and their wealthy elite legislatures had absolutely no interest in compensating those who had fought and died. And since the Constitution of 1783 gave no authority to the central federal powers, there was nothing whatsoever that Philadelphia could do to help them — no authority to tax, no authority to raise an army, no authority to mint money, regulate commerce, overrule state or local judiciaries. Revolts among slaves and homeless non-slaves in the south; taxpayer and renter revolts in the north.

I am reflecting upon this divided nation not simply to recollect US history; it is very much an image of contemporary Bosnia and Herzegovina, a fragmented nation governed by wealthy elites on behalf of wealthy elites who have learned how to rig the national divisions in their favor.

For over two hundred years, anti-federalists have threatened to overturn the Constitution of 1787 — the US Constitution that is currently in force. And, no wonder. None of them were invited to the 1787 Constitutional Convention in Philadelphia. They were not invited because they had no stake in the outcome. Then as now, the anti-federalists were composed of the working poor and tradesmen who wanted nothing of shared wealth and res publica, but only individual independence, and businessmen whose short-sightedness and cynicism would not allow them to see why an ongoing civil war would not serve their economic interests and why an educated and economically empowered public might serve these interests. They really did not care if slave revolts spread across the south or if renters revolts spread across the north since they felt certain that they would be able to hang or imprison all of these “freedom haters.”

We will meet up with these same hoodlums a century later in 1865, and then in 1964 and 1965, and then in 1980 and 2000. But that’s another story.

It so happens that when they emerged from Convention Hall with a new Constitution, that Constitution was virtually identical to the Constitution of Great Britain which they had overthrown. Two houses, a high and a low, the smaller composed of the wealthiest Americans, the larger composed by their cousins. A strong executive, not as strong as the King, but much stronger than a Prime Minister. A strong central government, strong centralized institutions, federal law, federal courts. In almost all respects a xerox of the Constitution of the UK, but without a King, and arguably even less representation of the public than even in Great Britain.

So what gives? If we can accept that the neoliberals were the instigating force behind both revolutions, in 1776 and in 1992, then we might also be able to appreciate why 1995 is Bosnian for 1783. Both created horrible, destructive Constitutions. And, yet, the elites in the US had sufficient wherewithal to see that their interests rested with a strong federal and republican system. In Bosnia and Herzegovina, it is time for the elites to get together in Sarajevo — or, even better, in Tuzla — and, as in Philadelphia, tell the anti-federalists that they are not invited, and write a new Constitution. (However, remember that you will need the French to back up your swagger, as the US did when the British had a change of heart.)

Bosnia and Herzegovina had its Fourth of July. And just like the American Fourth of July it was a disaster. What Bosnia and Herzegovina needs now is its own 1787, a new constitutional convention, and a new constitution.

Which makes me wonder. What ever did happen to Constitution Day in the US? Did it die with the neoliberal coup in 1980?