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"In this sense, what is in one way a parallel between now and the 70s is also a difference. Both eras brought into doubt a dominant economic paradigm - Keynesian social democracy is the 70s and neoliberalism now. However, because neoliberalism serves the interests of capitalists in a way that Keynesianism (by the 70s) did not, there’s less of a rush among the ruling elite to look for an alternative.
But this merely raises the question. Why - given that its living standards are falling now in a way they did not in the 70s - is the working class so quiescent compared to then?"
"We are in a depression, but not because we don’t know how to remedy the problem. We are in a depression because it is our revealed preference, as a polity, not to remedy the problem. We are choosing continued depression because we prefer it to the alternatives."
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But the preferences of developed, aging polities — first Japan, now the United States and Europe — are obvious to a dispassionate observer. Their overwhelming priority is to protect the purchasing power of incumbent creditors. That’s it. That’s everything. All other considerations are secondary. These preferences are reflected in what the polities do, how they behave. They swoop in with incredible speed and force to bail out the financial sectors in which creditors are invested, trampling over prior norms and laws as necessary. The same preferences are reflected in what the polities omit to do. They do not pursue monetary policy with sufficient force to ensure expenditure growth even at risk of inflation. They do not purse fiscal policy with sufficient force to ensure employment even at risk of inflation. They remain forever vigilant that neither monetary ease nor fiscal profligacy engender inflation. The tepid policy experiments that are occasionally embarked upon they sabotage at the very first hint of inflation. The purchasing power of holders of nominal debt must not be put at risk. That is the overriding preference, in context of which observed behavior is rational.
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That’s true. But the revealed preference of the polity is not balanced. It is not some cartoonish capitalist-class conspiracy story, where the goal is to maximize the wealth of exploiters. The revealed preference of the polity is to resist losses for incumbent creditors much more than it is to seek gains. In a world of perfect certainty, given a choice between recession and boom, the polity would choose boom. But in the real world, the polity faces great uncertainty. The policies that might engender a boom are not guaranteed to succeed. They carry with them a short-to-medium-term risk of inflation, perhaps even a significant inflation if things don’t go as planned. The polity prefers inaction to bearing this risk.
This preference is not at all difficult to understand. The ailing developed economies are plutocratic democracies. “The people” do have power, but influence is weighted in a manner correlated with wealth. The median influencer in these economies is not a billionaire, but an older citizen of some affluence who has mostly endowed her own future consumption. She would like to be richer, of course. But she is content with her present wealth, and is terrified of becoming poorer. For such a person, the depression status quo is unfortunate but tolerable. The risks associated with expansionary policy, on the other hand, are absolutely terrifying.
"However, from talking to numerous faculty members and academics from a variety of institutions, it has become clear to me that a central problem remains: none of these extra-curricular activities matter when a job search committee determines which graduate student to invite for an interview, and they do not matter for tenure. These facts make it subtly clear that, as a whole, the modern American academy expresses a keen indifference toward the relationship between academic knowledge and the public interest/public good"
"So, let's take stock. Is there a crisis? Not in the usual definition of the word, no. But, there are serious issues that we should consider, and these tap deep into both the mission and purpose of higher education and its relationship to society as a whole."
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The good things for society about the current system are that the over-supply of PhDs produces a steady stream of highly educated people for other industries and government to use. The over-supply means that low-quality departments will tend to improve over time because they can hire better people than their peers tend to produce. The over-supply also means that the best or most desirable departments will also tend to improve over time because they can select their new hires from the very best of the very best. For scholarship in general, this is a good thing. The over-supply means that academia has a large supply of low-cost skilled labor (graduate students) for producing research, educating younger students, etc. And, the over-supply means that academia has an adequate supply of potential faculty to facilitate restructuring needs, i.e., responding to the changing demands from society and the changing roles of universities.
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The bad things are that the over-supply is a colossal waste of human potential for people who aspire to be faculty but who ultimately fail to find employment. For instance, many very talented individuals will spend substantial time in low-paying, low-benefits temporary employment (graduate students, postdocs, adjuncts, research faculty positions, etc.) only to discover years or decades later that these years are now counted against them on the job market (and not just in the academic market). The over-supply makes the individual experience of finding a job fairly brutal and with a high error rate (many people who should get faculty jobs do not [13]). Success also comes with a cost in the form of moving a very large distance (the faculty job market is one of the few truly national labor markets). The over-supply has made it easy for susceptible colleges and universities to slowly replace their tenure track faculty with non-tenure faculty with less autonomy, less security, lower pay and lower benefits, which ultimately means these institutions basically abandon one of their missions: preserving human knowledge. It also makes the institution less democratic, which likely has a negative impact on the campus culture and the educational environment.
Critical transitions are sudden, often irreversible, changes that can occur in a large variety of complex systems; signals that warn of critical transitions are therefore highly desirable. We propose a new method for early warning signals that integrates multiple sources of information and data about the system through the framework of a generalized model. We demonstrate our proposed approach through several examples, including a previously published fisheries model. We regard our method as complementary to existing early warning signals, taking an approach of intermediate complexity between model-free approaches and fully parameterized simulations. One potential advantage of our approach is that, under appropriate conditions, it may reduce the amount of time series data required for a robust early warning signal.
"Contemporary capitalism, we are often told, is characterized by the relentless pursuit of efficiency. In one telling, a more efficient economy is one that gets more output out of the same amount of labor and resources. But from another perspective, a streamlined and ultra-efficient economy is one which produces more and faster in normal times, but which can only do so by cutting out the safeguards and redundancies that protect the system from catastrophic failure when things go bad. Thus the global economy becomes simultaneously more dynamic and more fragile. As Felix Salmon puts it, “as a general rule, the more efficient something is, the easier it is to break.” Both the economics and the politics of neoliberalism are turning out to be very efficient and very easy to break.
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"Almost all of the $8 in added debt since 2000 can be traced to policies enacted under the cover of post-September 11th nationalism; these policies cemented the transition from neoliberalism to full-blown neoconservatism. Nothing more accurately illustrates the contradictory movements of the neoliberal project than the biography of the fundamentalist son of an American-owned autocrat, who spent millions of American dollars expelling the Soviets from Afghanistan, then bankrolled and organized September 11th, then was assassinated by the US and dumped into the ocean."
"The once-stable incomes of America's biggest earners now fluctuate dramatically from year to year. And as go the rich, so goes much of the economy. "
"Colin Crouch – The Strange Non-Death of Neo-Liberalism "
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Instead of governments taking on debt to stimulate the economy, individuals and families did so, including some rather poor ones.
Crouch argues that this explains why workers in the Anglo-American world were willing to maintain consumer confidence when their equivalents in many continental European countries were highly unwilling to spend. Rising house prices allowed the former to borrow money. At first this was accidental – it soon became a necessary condition for governments to do what they wanted to do. In a key paragraph, he argues:
The dependence of the democratic capitalist system on rising wages, a welfare state and government demand management that had seemed essential for mass consumer confidence has been withering away. The bases of prosperity shifted from the social democratic formula of working classes supported by government intervention to the neoliberal conservative one of banks, stock exchanges and financial markets. Ordinary people played their part, not as workers seeking to improve their situation through trade unions, legislation protecting employment rights and publicly funded social insurance schemes, but as debt-holders, participants in credit markets. This fundamental political shift was more profound than anything that could be produced by alternations between nominally social democratic and neoliberal conservative parties in government as the result of elections. It has imparted a fundamental rightward shift to the whole political spectrum, as the collective and individual interests of everyone are tied to the financial markets, which in their own operations act highly unequally, producing extreme concentrations of wealth.
More succinctly financial “irresponsibility became a collective good,” albeit a perverse one – no-one wanted the party to stop or the bezzle to be revealed.
"According to a trade publication called Corporate Secretary, it's time for the banks to do a little crisis management of Occupy the Boardroom:"
"The Obama administration’s response to the crisis was visibly poor in real time. Klein shrugs off the error as though it were inevitable, predestined. It was not. The administration screwed up, and they screwed up in a deeply toxic way. They defined “politically possible” to mean acceptable to powerful incumbents, and then restricted their policy advocacy to the realm of that possible. The administration could have chosen to fight for policies that would have been effective and fair rather than placate groups whose interests were opposed to good policy. They might not have succeeded, but even so, as Mike Koncazal puts it, they would have lost well. We would be better off with good policy options untried but still on the table than where we are now, with policy itself — monetary, fiscal, whatever — discredited as both ineffective and faintly corrupt."
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Once you understand that the problem is a fairness issue rather than a dollars-and-cents issue, the policy space grows wider. Holding constant the level of expenditure, one can make bail-outs more or less fair by the degree to which you demand sacrifice from the people you are bailing out. TARP was deeply stupid not because it meant socializing risks and costs created by bankers. TARP was terrible public policy because it socialized risks and costs while demanding almost no sacrifice at all from the people most responsible for those risks. The alternative to TARP was never “let the banks fail, and see how the bankruptcy system deals with it.” The alternative would have been to inject public capital (socialize risks and costs!) while also haircutting creditors, writing-off equityholders, firing management, and aggressively investigating past behavior. It was not the money that made TARP unpopular. It was the unfairness. And the unfairness was not at all necessary to resolve the financial problem.
"And make no mistake, this is revolt — an insurrection against a monstrous status quo that's failed too many, too deserving, for too long, while serving too few, too undeserving, far too well. It is not in the nature of man or beast to stay yoked to the gleaming machines of their own economic, social, and moral annihilation. Better — as perhaps Bouazizi thought — to commit the ultimate act; to choose. To choose to let loose a brutally human cry, one whose echoes might come to define a defining decade."
We are the 99 percent. We are getting kicked out of our homes. We are forced to choose between groceries and rent. We are denied quality medical care. We are suffering from environmental pollution. We are working long hours for little pay and no rights, if we're working at all. We are getting nothing while the other 1 percent is getting everything. We are the 99 percent.
in list: Economic Crisis
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PP: It’s really interesting that you mention the lack of scientific funding after the Cold War. The eminent economic historian Philip Mirowski has noted this time and again. In his books he writes about how scientists found themselves increasingly in oversupply as the Cold War ran down and spending on military research dwindled. He contends that much of the ‘mathematicisation’ of modern economics – that is, the move away from realistic theories that help the public purpose and into ‘pure’ models that don’t really do or say anything – was due to this emigration from the hard sciences. Clearly without the threat of the ‘Evil Empire’ Western governments no longer see as much need to spend on expensive research. I mean, while I’m not hugely keen on the military-industrial complex, at least a lot of this research ended up serving the public purpose when it was released by the military.
"The Global Village Construction Set (GVCS) is a modular, DIY, low-cost, high-performance platform that allows for the easy fabrication of the 50 different Industrial Machines that it takes to build a small, sustainable civilization with modern comforts."
"As I see it, there are three main complaints one can make about economists and their role in the current crisis. First is the complaint that economists fell down on the job by not seeing the crisis coming. Second is the complaint that economists failed even to see the possibility of this kind of crisis — and that by pointing out the possibility, they could have helped head the crisis off. Third is the complaint that they have either failed to offer useful advice on what to do after the crisis struck, or that they have offered such a cacophony of voices as to provide no useful guidance for policy.
As I see it, the first complaint is mostly — though not entirely — unfair. The second is much more substantial: anyone with some knowledge of history should have realized that the age of financial crises was far from over. But the most damning failure of economists, I’d argue, was their acquired ignorance of what I’ve called depression economics — the principles that should govern policy after a financial crisis has left conventional open-market operations impotent."
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