Saturday, March 31, 2012

Axis of Bastards

What is the next cold war?

The US has benefitted in the past from simplified foreign policy frameworks. The Monroe doctrine, Containment, "Making the world safe for Democracy". However crude, they helped define and communicate our basic intentions. In the last decade, we have labored under a welter of much less clearly thought out or coherent policies, from the Axis of evil to "hearts and minds" and the global war against terror. It has not been a good period, either rhetorically or substantively.

Worst of all was the "Axis of evil", George Bush II's lumping together of his motley foes (Iran, North Korea, Iraq) whose only shared characteristic was their imperviousness to US influence. The rhetoric had nothing to do with either Iran or North Korea, it turned out, as Iraq was the target (in January, 2002) for reasons better given over to personal psychology than foreign policy.

We head into an interesting world from here, as Bush's wars die down. The relative influence of the US declines as other countries grow economically. The influence of our European allies is fading even faster as they stumble through the current crisis to ever-deeper economic retrenchment.

On the other hand, we face no mortal enemy of diametrically opposed philosophy or globe-straddling totalitarian ambition. All countries of any consequence are more or less market-based in their economics, and geopolitically stable within the confines of the Pax Americana we have managed since World War II. The jihadis are a nuisance, but hardly a state threat.

What we face on the long term is a third way of quasi-repressive government and "controlled democracy": authoritarianism exemplified by China and Russia, but shared with many other countries, from Pakistan, Belarus, Kazakhstan, Saudi Arabia, Syria (most notoriously ), with new members Hungary and perhaps also Turkey, depending on how things go, and on to old friends Iran and Vietnam, among many others.

The old model of Stalinism is out, aside for the very few holdouts like North Korea. Even Cuba is tiptoeing into market-based reforms. However attractive to the power-mad, Stalinism tends toward complete implosion on the medium term. So the way I see the world developing is as a contest between the truly free world, exemplified by the US, Europe, India, Japan, South Korea, et al., and this other class of repressive countries, which one could call an Axis of Bastards. In truth, the spectrum is very broad. We in the US have an impaired democracy with open political corruption and a legal system that is applied in highly selective, not to say prejudicial, fashion; overly complex, and much mocked and evaded. On the other hand, the state does not routinely kill journalists, rig elections, or own all the major media, either.

I'll note in passing that a third class of country is the failed states, like Somalia and Congo, and perhaps Afghanistan again within a few years, (given that we are standing up a government with little legitimacy and doubful capacity), which pose entirely different problems of humanitarian disaster, extremist infestation, and Hobbesian politics. An Axis of Hobbes, if you will. As uncoordinated an "axis" as the others, one would have to confess, quite unlike the original Axis of World War II.

Just as Stalinist systems break down in the span of a few decades, authoritarian systems are also untenable on longer time scales. Their economics are clearly more productive, as China, Singapore, and post-war South Korea have shown. But there remain economic and social soft-power limits to systems whose closed nature (at least at the top of policy-making) makes them prone to corruption and determinedly unresponsive to wider currents of technological and social change. As long as completely free states / systems show superior levels of economic prosperity along with all their other attractions, the authoritarian system will clearly be second-best. A way to stave off chaos- yes- which post-communist Russia and China are understandably sensitive to, but no way to fully enjoy the fruits of their own economic potential.

What does the future hold? With some apologies to Jean Kirkpatrick, who advanced the idea that authoritarian governments were inherently more likely to open up and evolve into open democracies, (towards the Reaganite policy of befriending all and sundry bastards of her day), the tide does seem to be heading in that direction, following where South Korea and Argentina, among many others, have gone before. Burma is perhaps the latest intriguing example.

China is on a vaguely positive track, experimenting with local democracy and slowly instituting rule of law as ways of combatting the disease of corruption. It seems unlikely that China would face down another Tiananmen square crisis in the same way today, though with the sincere jingo-ism it has stoked in its young, the prospect of needing to do so also seems far off. But the debates within the ruling structure may also become increasingly divisive after the simplest goals of economic development are attained, and break out into the open, forming parties that seek legitimacy from their ultimate source, the people.

Rumblings of freedom have erupted into the open in Russia, Syria, and Iran, with crackdowns of varying brutality. Russia has rushed to Syria's aid, just as Saudi Arabia rushed to Bahrain's aid during the Arab Spring protests. Syria and Iran are close allies, with healthy ties to China and Pakistan. So these repressive countries tend to help each other, knowing that the weight of world opinion is against them, and that cracks in the facade of happy Orwelliansm are damaging to all of them together.

Perhaps the key question is technological. Stalinism was a creature of its technological moment, with the advent of crude mass media and industrial mass-production somewhat amenable to brutal top-down command-and-control. Today, no one would dream of running a command-and-control economy, but command-and-control media are quite a different matter. Russia and China are each, in their own ways, highly sophisticated in controlling their media environments. We have our own FOX news- organ of the plutocracy, for heaven's sake.

So a global arms race is afoot in the new media environment, between freedom, connectedness, transparent openness, and repressive forces (both corporate and state-sponsored) that divert, dilute, drown out, or if needed, destroy dissenting voices and movements. Information is power, as the old saying goes. And along with the repression comes corruption, its natural corollary in abuse of power. Free information is the prerequisite of all other freedoms, as our founders knew very well- the killer app of democracy, if you will.

"Minsky criticized the Kennedy-Johnson War on Poverty, warning that without a significant job creation component it would fail to reduce poverty even as it created a welfare-dependent and marginalized class. He showed that offering one full-time job per low income household instead– even at the minimum wage- would raise two-thirds of all poor families above the poverty line. Further, he estimated that the output created by putting people to work would more than provide for the extra consumption by increasing GDP by a multiple of the extra wages. 
Minsky argued a legislated minimum wage is “effective” only with an “employer of last resort”, for otherwise the true minimum wage is zero for all those who cannot find a job.
 The government as employer of last resort serves as a bookend to the central bank as lender of last resort– just as the lender of last resort sets a floor to asset prices (by lending so that banks do not have to engage in firesales), the employer of last resort sets a floor to wages (anyone willing to work can get the minimum wage) and thus also to aggregate demand and consumption."
  • Bonus- economics figure. It is the private debt that leads to bubbles and collapses:

Saturday, March 24, 2012

The Amish, Apple, and modern community

On the religion of objects, their morals and connection with community.

PBS offered a beautiful documentary of the Amish, asking how and why they have resisted the modernity the rest of us worship. To me, the most interesting observation is that community is the core purpose of Amish life. Anything that tends to weaken community, like cars, phones, women's rights, and domestic conveniences, is negotiated in a way that either is excluded completely, or kept at arm's length such that it doesn't invade the home. Work per se is valued as good, so doing more of it via traditional technologies isn't such a bad thing. Just look what the "English" do with all their free time!

One can call this conservative. The Amish certainly embody true conservatism. But it is conservatism with a point, recognizing that humans must live in community, and are happiest in community. Thus the quality of that community deserves special care. Which sometimes requires renunciation of those temptations the rest of the culture regards as the birthright of individualism, free enterprise, and the American way. Particularly, the ideology of progress is something the Amish apparently deny categorically, content to sweat and toil in this way-station to a better world.

The diametric opposite attitude comes from Apple, perhaps the leading purveyor of the narrative of progress and modernity, succeeding on our many previous infatuations with railroads, electrification, atomic power, television, et al. Steve Jobs distilled this ethos into an extremly powerful drug, indeed a "reality distortion field". Each new product is the best ever, the most chic, the most free-ing of creative professionals to destroy the reigning paradigms of dead "past" values and designs in favor of a "think different" future.

Both the Amish and Apple take a moral attitude towards objects and the material environment. One asks that its technologies serve its community and is willing to forego labor-saving and consciousness-extending devices in that service. The other claims that all its technologies make everything better, freeing each individual from historical limitations and collective tyranny, while simultaneously uniting us in new "distributed" social networks with increased artistic, cultural, and political powers. The Amish sincerely doubt the latter proposition, or at least the quality of these new "communities".

A recent review of Steve Jobs and Apple focused interestingly on their deep debt to the Bauhaus design school, and evaluated Apple's position as purveyor of a sort of prophetic design sense. It doesn't so much fulfill its customers needs as show them needs they didn't know they had, wrapped up in designs they hardly deserve. It is a somewhat imperious relationship, breathlessly marketed with revolutionary slogans and peans to creativity, mostly redounding to house of Apple rather than its customers.

Compared to its main competitor, Microsoft, which offers militantly un-designed products of utilitarian, even anti-user ethics, yes, Apple morality does successfully inject a modicum of taste and ease into an otherwise daunting concept- that of advanced computer operation and maintenance. But that just begs the question of whether sitting on our couches staring into ever-more refined screens is what we truly, deeply, want to be doing. (However, thank you for reading this blog in electronic form!)

Here, the morality is of perfection in an aesthetic and functional sense, expressing faith that if we get just what we individually want, it will enhance our human-ness, at least until the next model comes out. Is this free-market individualist conception of human fulfillment working properly? Are our politics, for example, enhanced by the new powers of computers and communication? Have our media become deeper and more informative, or rather shallower? Does the endless procession of newer and better objects through our lives make them better, our thoughts deeper? Is it good for the human and indeed larger biological communities we exist within?

I think it is fair to say that people need to be nudged into community consciousness. We have always had hermits, mountain men, and other loners, but primitive conditions generally force people into communities for subsistance in addition to other needs. This is part of what Marx disparaged as the "idiocy of rural life", and is of course what he tried to replace through his vanguard of worker solidarity. It is the bread and butter of religion, which as the rabbi says, is about love and doing, more than it is about belief. It seems that the US is leading the way, via its prosperity and its absolute dedication to personal emancipation through personal choice and free markets, towards de-community-ization: the shallowing-out and hollowing-out of all forms of non-monetary connection. Not only are corporations people, they are also our reigning community, both in the guise of the workplace as well as the media, the social network, the local coffehouse.

It isn't easy to propose a solution that doesn't go back on some of our cherished freedoms, rights, and usages, while restoring a deeper sense of connectedness. If we need large common tasks, the fight against climate change is certainly one, as are the perennial searches for social and economic justice in the US, and around the world. Our civic religion desperately needs refurbishing, with policies like publicly funded campaigns and media, holidays for voting, and mandatory public service. For me, the community of scholarship has always been the deepest form of communion, expressing faith in progress, human potential, and openness. But knowledge alone doesn't make communities, for all its other virtues. Indeed, it can be rather frosty and exclusive.

Millions of people visit the Amish country each year. One can imagine they feel some unease on the treadmill of modernity and see something attractive in a culture that is sure enough of itself to forego that greatest of American myths- that we can successfully make virtues of avarice and covetousness, towards a future that is always better, where the grass is always greener, if you adjust the screen just right.

  • Michael Sandel on the moral and political distortions of market values.
  • Public sector job creation- Obama/Bush comparison.
  • Official honorifics are for office-holders only, please.
  • Absolutely appalling climate denialist series on CBC.
  • Matt Taibbi does his best to drive BofA out of business. All I can say is ... Citi is even worse. "By the end of last year, the government reported, more than half of all the crappy loans that Fannie wanted to return came from a single bad bank – Bank of America."
  • Lessons in extractive economics.
  • Interesting set of graphs on possible post-crisis trajectories.

Saturday, March 17, 2012

Ode to Monarchs

Review of "Wings in the meadow", by Jo Brewer.

A friend sent us the classic 1967 book about Monarch butterflies "Wings in the meadow", by Jo Brewer. It is beautifully written, with shameless advocacy for her subject and equally shameless anthropomorphism. As I have noted before, anthropomorphism in biology has more going for it than scientists traditionally allow, since feelings and intuition are the fundamental currency that animals use to guide their lives.
"During these three days, Danaeus the son had doubled in size. In his first twenty-four hours he had chewed four small holes in his leaf and consumed an amount of milkweed equal to his own weight. Parts of his skin had darkened until his body was encircled by nine chocolate-colored bands. Now his skin was stretched so tightly about him that he could eat no more and his black face mask, which had once covered his whole head, had become a tight black glass button pinching his mouth. The time had come to shed his first skin. With his two anal prolegs, he grasped a bit of the silk which he had spun, and summoning all his little stength, pushed his head forwrad until, splitting his skin at the thorax, he was able to wriggle his way out of it. This herculean task, which taxed his every muscle, required nearly three hours of his life."
I found it completely captivating, and ask- why is this book not in print, and read in every school in the land? It would be such a positive answer to Catcher in the rye and other cynical staples of middle school.
"He was free of the earth at last. The long desperate struggle was over, and the long night past. Red of the firebrand and gold of the sun were fused in the fiery wings he presented to the noonday sun, and a delicious fragrance- sweet and spicy and erotic- was diffused across his back. His wings and his body were filled with power and he was free. He leapt high in the air and encircled the field, fliding, dipping, soaring, surveying from his place in the sky a world of leaves which he had already forgotten."

Brewer combines a detailed and dramatic description of the life cycle of Monarchs with copious scenes of other animals around the meadow. Even a human shows up, in the form of Mr. Stevens, whose heart is in the right place, preserving the peace of this meadow that he owns, but only seeing its true magic late in the book as the Monarch life cycle comes back to roost, ever so briefly, in his trees.
"He found the flashlight he kept in his jeep and walked slowly toward the tree. In the beam of light which he cast upon it there was again that same sudden motion- an evanescent flash of golden-bronze: a warning flash that come and went in the fraction of a second, leaving nothing in its wake but the surprise of the beholder- and the congregation of Monarchs which had gathered there for the night become once more invisible. But this time Mr. Stevens had seem them open and close their wings, and he could make them out, hidden and small in the shadows. There were perhaps three or four hundred of them. It was a sight so unexpected and unusual that he looked upon it with a kind of awe. The butterflies were just out of his reach, but he would not have touched them anyway. For the moment, the tree was theirs not his, and he was filled with a sensation of very great pleasure. He did not know that scarcely one person in a thousand ever sees a little butterfly tree like the one in his meadow."

"It is in the nature of living creatures to cling to life with the greatest tenacity when the promise life holds is least. When the cup is full, the precious liquid is spilled with reckless joy- when nearly drained, the last few drops become a priceless treasure."

  • Wings today... at the Xerces society.
  • Haidt on spirituality, religious experience, modernity, and group selection.
  • What moral decay do we suffer from especially?
  • Pay for failure.. brought to you by the free enterprise, private market!
  • What is banking like today- I?
  • What is banking like today- II? The management/agency model is deeply flawed.
  • Some men seem to suffer from hysteria.
  • Programming is ... not so easy.
  • Medieval economics- more bleeding, please.
  • The Augean stable of MERS ... requires total reworking of property title in the US.
  • Economics quote of the week: Bill Mitchell provides the most concise summary of the financial crisis I know of, with a little editing help from me.
"In the past, the dilemma of capitalism was that the firms had to keep real wages growing in line with productivity to ensure that the consumptions goods produced were sold. But in the recent period, capital found a new way to accomplish this which allowed for the suppression of real wages and increasing shares of the national income produced to emerge as profits.
The trick was found in the rise of “financial engineering” which pushed ever increasing debt onto the household sector. The capitalists found that they could sustain purchasing power and receive a bonus along the way in the form of interest payments. This seemed to be a much better strategy than paying higher real wages.
The combination of a hollowing out of the state, an out of control deregulated financial sector, and the rising fragility of non-government balance sheets thus set up the world economy for the crisis.
The crisis represents a fundamental rejection of the neo-liberal vision that self-regulating markets will operate to advance the best interests of all of us. The neo-liberal paradigm fails on every dimension."
"Most people do not consider the irretrievable nature of these losses. Every day that unemployment remains above the full employment level (allowing for a small unemployment rate arising from frictions – people moving in-between jobs) the economy is foregoing billions in lost output and national income that is never recovered.

The magnitude of these losses and the fact that most commentators and policy makers prefer unemployment to direct job creation, shows the powerful hold that neo-liberal thinking has had on policy makers. How is it rational to tolerate these massive losses which span generations?

As noted, to some extent these losses are a mystery to society in general. While the unemployed and their families are certainly aware of them, the remainder of the society are less aware. For example, we might notice rising crime rates in our neighbourhoods but do not associate it with unemployment."

Saturday, March 10, 2012

Notes on savings and wealth

What happens when grasshoppers turn into ants?

One theme that seems underemphasized in our economic debate is the importance of desires for saving in structuring the economy and generating the swings of economic activity. It sounds so nebulous, even touchy-feely, but has very real effects.

As the fable goes, the ant diligently stores up its little grains and other food for the winter, while the prodigal grasshopper fiddles and sings its summer away, then has nothing to eat come winter. The grasshopper asks the ant for a morsel, but the ant says no, and that is the bitter end of the tale. (Though a biologist adds that in reality, grasshoppers lay eggs that hibernate just fine, so not to worry!)

But in macroeconomics, a better metaphor might be that of a river as the normal course of economic activity, and a dam, which stores a reservoir of money saved in arbitrary amounts. To complete the analogy, the river would feature a prepetual motion system where outflows magically return as inflows to the system, completing the cycle. While the savings of ants are limited to their own insurance needs over relatively short periods of time, (however long those seeds keep), and are to that degree an unquestioned virtue, the advent of money allows unlimited stores of wealth to be accumulated, with dangerous consequences.

If everyone suddenly decides to save all their money, the stream down from the dam runs dry, no money is spent / returned, everyone is fired from their jobs, and the economy grinds to a halt. This is of course an extreme thought experiment. Most people have necessities that require ongoing spending, whether they like it or not. And there are always people being born and getting old, evening out the demographic savings cycle.

Additionally, the financial industry mediates the transformation of savings into new spending, via loans, stocks, bonds, and other investments. But when investors / gamblers head for safety, like in our current downturn, making fewer loans, fewer investments, and bidding down yields on the safest bonds, then a similar effect takes place- lots of inert money storage, and economic seizure.

There are also distributional issues. Is the stored money used to insure everyone's prosperity in lean times in equitable fashion? Or is it, by other rules, captured and used by a minority with military, political, or ideological power? Is it inherited by people with no claim to such wealth other than being born lucky? Or is it recognized as the patrimony of our forebears in common who painstakingly built our current wealth over generations in forms large and small? Should wealth and power be transmutable into each other? Who decides when to turn the spigot when times are lean and more flow down the river is needed? Is it the few with great wealth, or the many who have built it up, drop by drop?

Savings by different sectors of the economy have very different characteristics. I will discuss four sectors- individuals, businesses, banks, and the federal government. My discussion will mirror MMT viewpoints, as recapped recently by Bill Mitchell. One could also mention a fifth sector, of ecological savings, which has the biggest, baddest impact of all, but that is quite another topic!

Savings by individuals are removed from their consumption and may go to consumption by others depending on how they are invested. They could go to a personal loan to a relative, who founds a business and promises to make more money to repay in the future. Net spending hasn't been affected, and future economic growth may have been increased. If the money goes to the stock market, it increases that liquid store of wealth, with unclear future ramifications, but no immediate spending is implied.

If the savings are deposited at a bank, they may or may not be put to further use and spent as loans, depending on the mood of the bankers and the demand of their clients. Lastly, if the money buys government bonds, government spending is not affected in the least, as will be explained below. So individual saving definitely reduces the saver's own consumption, which may be replaced by other consumption or not, depending on how the saving is done.

Businesses save much like individuals. After Apple's near-death experience sixteen years ago, they were clearly eager to maintain a cushion to fall back on in their dotage, and by now have $80 billion lying around, which investors are eager to see as dividends. Other companies in the US are also sitting on very large piles of cash, adding their measure of pro-cyclical non-investment to our problems of economic growth.

Banks, on the other hand, are an entirely different beast. To them, loans are assets and savings, liabilities. All they need is capital, not savings from individuals. If a bank has $100 of capital, and no depositors at all, it can make $1000 of loans, which then instantly become deposits when the loan is "funded" (for retail banks, funding typically comes from borrowing in turn from other institutions, [the interbank market], whose rate is ultimately based on government bond rates, and which ultimately involves someone up the line creating money by leverage). This power of literally making money means that individual savings play an optional role for a bank, despite its historical importance from when money was not so easily conjured. In the dam analogy, banks might require a foray into science fiction, being able to produce water by the magical means of writing some words on paper, which matches each conjured drop of water with an anti-water debt certificate, the two of which mutually anihilate when brought together again.

But banks don't have to make loans, and can get by in today's environment where the Fed pays them to take a couple trillion in reserves, and where the spread between government bond rates and deposit rates remains positive. They can make do during a downturn with little loan activity.

As other businesses do, however, banks would like to have savings for one thing- to insure themselves against calamity. But since their business is leverage and their loans are always in the hands of others, it is impossible to do so significantly. Their safety revolves around their capital ratio. It is their appetite for risk, and their regulators, which decide whether 1:1, 10:1, 30:1, or 50:1 leverage is a prudent cushion of capital. Fluctuating opinions about this risk insure that banks will create the least amount of water just when it is needed most.

Last is the government, which is typically supposed to go into debt by deficit spending and to save by accumulating surpluses. When looked at from the perspective of the larger economy, however, the exact opposite is the case. The currency-issuing government can't run out of money, so to it, saving money has no meaning. It could just as well burn whatever comes in as tax receipts and print anew whatever it spends.

To the rest of us, federal deficit spending adds to the flow of income. (The associated bond sales have little net effect, transferring private savings from one to another form). Conversely, federal surpluses directly subtract money from the economy, reducing incomes and wealth. In the dam analogy, government is the sky which either rains down water or takes it back from the parched earth, limited by nothing other than its wisdom.

Putting all this together, economic conditions (or less tangible "mood", when considering future prospects) dictate whether individuals and businesses increase their savings, or whether they invest and demand loans. Our recent "little depression", where loss of wealth and unwise lending & borrowing created an enormous "debt overhang", requires excess saving for long periods of time, can depress this mood for years, even decades, as in the case of Japan. A population may be very savings-minded, again as in the case of Japan.

All this means that, even without economic bubbles, bank fraud, and complete regulatory breakdown as we saw over the last decade, swings in the economic system can result from changes in savings behavior. The government is in the position to address those swings, accommodating higher savings desires with higher deficit spending, allowing the inert pool of savings to grow while maintaining stable economic activity.

It is also worth noting that the government's capacity for deficit spending expresses implicit wealth, since such a practice can only avoid causing inflation when other balances are positive, such as population growth, people producing more than they consume, or other countries saving our dollars and giving us goods in return.

The bigger the reservoir of money gets, the better managed it needs to be, protecting us in common both from inflationary excess (dam breaks, monsoons of rain), and from deflationary evaporation. Nor is saving always a virtue. We eat bread, not money, so tending the systems of real production is what will sustain us in the long term. By this time in developed countries, we have far more money than we know what to do with. Yet it is so unevenly distributed that those with money can hardly find enough ways to spend it, let alone invest it, and those without flirt with insurrection and contemplate changes to the rules of acquisition.

"But fiscal flows – spending and taxation – are accounted for but once they exit the economy – as a surplus (spending less than taxation) then they are gone for good. There is no storage shed in Canberra or Washington or anywhere else where the surpluses are saved up and available for the government to drive a truck down and pick up some dollars to spend.
Surpluses destroy financial assets that were previously in the hands of the non-government sector and these assets are gone forever."
"The reality is that most of the gains in good times – and until the PSI ['private secotr involvement' in Greece's slow motion default] were privatised while most of the losses have been now socialised. Taxpayers of Greece’s official creditors, not private bondholders, will end up paying for most of the losses deriving from Greece’s past, current and future insolvency."

Saturday, March 3, 2012

New monies for public purpose- an economic third way

Why is the same money used to buy toothpaste and political campaigns?

After the decline of the competing ideologies of the 19th & 20th centuries- colonialism, communism and socialism- nationalism and capitalism were left triumphant, alone and without an existential critique, other than the tribal, bitter opposition of Islamism. China is more capitalist than we are in many ways, with a pell-mell no-health-insurance, no-safety-net ethic of ruthless get-rich-ism.

Yet there is a great deal of unease in other quarters. Hatred of the US as the world exemplar of hyper-capitalism is widespread, if not for our wealth directly, then for the lack of taste with which we display it, and abuse it.

What other countries hate most about cultural invasion by the West is materialism .. the crass, amoral wastefulness, hedonism and concomitant lack of human values. The West has been given over to its greediest, basest elements rather than uplifted by their most introspective and spiritually inclined. God is dead, and the Market rules in its place.

These thoughts were sparked by a review of Vaclav Havel's career (incidentally also by a biography of Glenn Gould). Havel knew the stifling hand of totalitarian government, as well as its meaningless, hollow post-totalitarian variant. But for all his yearning to break free, he was quite ambivalent about the boons of the West. He was very much a spiritual atheist, an absurdist seeking meaning while leading the cultural evolution of Czechoslovakia; indeed to some extent, the entire West.

Many have dreamed of transcending the market, which mediates many of the brute realities of mundane existence. The Marxists drew on Hegel and some rather cracked economics to simply assert the historical inevitability of its end, replaced by a worker's paradise, then proceeded to make a royal mess of it. Other dreamers have sought to separate more circumscribed human values from the market, with mixed success. The enlightenement brought democracy and the novel currency of votes- one per person. We are still grappling with the question of whether votes can be bought with money (not terribly successfully, judging by the current political season).

The wealth of the West, established through the slow accumulation of technical mastery over the environment, (as well as supple modes of political organization), now enables a dramatically different relationship with markets and materialism in general. Food makes up only 7% of US household spending. Many of our other goods come from overseas, at far less cost than it would take us to make them. They are, in large part, free. With increasing mechanization / robotization, this trend will only increase, making necessities ever less significant shares of our budgets.

Yet GDP is ever-increasing, as we dollar-ize more of our lives, from birth to death and every interaction in between. On top of that, the more luxury-based our economic system becomes, the more unstable it is, prone to enormous diversion by financial gamblers, rentiers, and misappropriating agents like CEOs.

One of the dark comedies of our economic system is the quest for a "business model". Innovators who create phenomenal public services like Twitter are forced to the corrupting rack of advertising in order to "monetize" their users. Great reporters and news organizations dissolve before our eyes in the face of free media, bloggers, and the shameless propagandists of FOX news and the rest of the cable universe. The public interest goes begging because participation in the dollar economy requires making one's service precisely antithetical to the public interest in some critical way that generates ... the business model.

Thus I see a great need to carve out more spheres of non-monetary interaction- more currencies like that of the vote. Today, finance accounts for roughly 10% of GDP- to what end? So that we can gamble with our savings and pad the pockets of those entrusted with them? CEOs serve on each other's boards and compete in paying each other ever more ... because they can. Money increasingly reflects social relations and status rather than fundamental measures of productivity, let alone of personal worth. The mantra of "free markets" has blinded us to the their enormous defects, even in an ideal state. And blinded us to the essential nature of public goods and our rising capability to provide them.

Does our political system need to run on dollars and its attendant corruption? Does the media that conducts our public debates need to be owned by corporations and paid by advertising? Not really. One could imagine currencies like Facebook's "like" system replacing dollars to fund these and many other public services. Citizens would get equal amounts of them just like they get votes ... for being citizens. They would send them to media services or candidates they favor, perhaps electronically. This would resemble a school voucher system, only instead of being used to destroy an existing public service, it would be used to enhance a public service by insulating it from corruption and dramatically broadening its support base. Just imagine what public broadcasters could do if their funding reflected their actual listenership / viewership rather than just those guilted into parting with hard-earned salary money. What if the choice to contribute to a political candidate didn't mean going without essentials like food and medicine?

Similar special-purpose currencies could be used to support the arts, direct selected areas of public spending such as infrastructure, parks, and foreign aid, and support a full range of charities and non-profits. Substantial areas of our public lives could be more democratically directed by getting away from the current binary system of system of dollar-rule or legislative sausage-making. Some corporations could even remake themselves into public interest entities or utilities (such as software makers, perhaps), and tap into such forms of funding. The new currencies would be convertable at the point of use by the receiving organizations into dollars to pay their expenses, or in the case of political candidates, into the new media currency with which in turn to buy exposure.

Ideally, enough resources would be budgeted in each of these areas to render the use of actual dollars superfluous, while still permissible. Actual dollars would be (progressively) taxed out of the remaining economy sufficiently to make room for all this new democratically-directed spending. Such a "new economics" offers a way to foster high personal freedom and democratic principle while reforming corrupt practices, and furthering the public interest in many areas where it is badly or under-served today. It addresses some of the goals of the Occupy movement whose overriding critique is the reality of economic and especially political control / corruption by the 1%, which so starkly contrasts with the democratic principles we supposedly follow. It would represent an important step in our travels towards a truly democratic and public spirited national community.

  • Economic transitions, from feudalism to capitalism, and on to post-capitalism.
  • What do we perceive as fair?
  • How do the 1% get there? It isn't pretty.
  • What class warfare really looks like. Bloodless edition with chart.
  • Introverts are OK ... better than OK!
  • "Because, in my mind, that’s what addiction really is — people trying to blot out the pain of being human with chemicals that inevitably just make the pain even worse."
  • The oceans are in miserable condition. Please don't eat seafood. Incidentally, the Earth is full.
  • Mumbai is also full.
  • Another problem with corporations- they support war.
  • A small critique of finance and Krugman.
  • Economics quote of the week, Ben Bernanke, testifying before Ron Paul:
"Nice to see you again, Dr. Paul."
This exchange was a sterling example of what makes a currency active. Ron Paul held up a silver coin that he claimed had held its value far better than our paper money, and was natural money- not a fiat currency that is fake in some way. Bernanke said that Paul was welcome to hold and exchange as much silver as he liked. Then Paul complained that he couldn't use silver to pay taxes and make other relevant transactions. It was an object lesson in what differentiates a state currency (fiat or otherwise, however virtual, paper, or "fake" it seems ) from a natural currency.