Things Shouldn't be This Difficult in Retirement

Social Security is engineered to cheat a lot of people. Why?

Social Security was one of the great and enduring accomplishments of the New Deal. It followed European models of progressive policy, insuring old age income for what was at the time a very low cost- a 2% tax on wages. It is fundamentally a semi-progressive program, with payouts indexed to what you earned (and paid in as taxes) while working, but using a formula of sharply diminishing returns at higher income levels. As we live longer and have fewer children, the finances of Social Security have had to be shored up a few times, with higher taxes, longer waits till retirement, and other revisions. One of the most devious of these has been the offer to get early benefits for a lower payout.

Basic Social Security rules: The monthly benefit payment is constructed out of a set of tiered rates, by income level, to define the "primary insurance amount", or PIA. The income level is based on the highest ten years of earnings. The lowest level of income (here up to $774 monthly) is paid back at 90%, for example.

A recent opinion column (with followup) noted that while 90% of people would be better off waiting to take their benefits, only 10% do, missing out on a large amount of lifetime income. The deal is that full retirement age is (now) pegged at 67 years of age. If you take benefits at the earliest time, age 62, you will get 70% of the full payout, forever. On the other hand, if you wait till age 70, you will get 124% of the full payout, (plus some extra based on inflation and other factors), which works out to almost double the lowest payout, each month. The life-time payout is of course highly dependent on when one dies, and the break-even point ends up at about age 77, after which everyone would do better waiting than taking the early payout. For example, if you make it to age 85, you would be 30% ahead in lifetime benefits having waited to take payments till age 70.

This is, as the columnist notes, a fraught policy. Psychologically, it resembles some of the most classic marshmallow experiments, testing self control in children. Just as most children don't have the self-control to wait for the two marshmallows, most retirees apparently do not have the foresight to maximize their ultimate income. And this is quite understandable. Principally, the future holds a great deal of uncertainty. Who knows (or wants to know) when one will die? Even if the average life expectancy, upon reaching age 62 is ~83, well past the breakpoint noted above, it is easy to rationalize taking the money while one can. Poorer people tend to have worse jobs, that they really want or need to retire from as soon as possible. The poorer one is, the less savings one is likely to have to tide one through from 62 to 70. And the poorer one is, the poorer health one is likely to be in, with a shorter prospect of collection. All in all, it can be an attractive, even compelling, deal.

But statistically, this ends up being a regressive policy, cancelling much of the otherwise progressively engineered system. Poorer retirees are in this way snookered out of possible income, on top of getting lower payouts to begin with (due to their lower incomes and contributions), and typically having shorter lives. It seems akin to the ever-loosening restrictions on gambling, sports betting, sub-prime lending, and the like, one more way to separate the poor from their money, via financial chicanery, aka engineering. It was a policy gradually developed over several Social Security reforms, from 1961 onward, and may have seemed a fair way to offer the option of earlier benefits to workers, to meet what can be rather urgent needs. But the psychology of it is very problematic and has produced what is described above- bad decisions by most people.

Some alternative models, accentuating their progressivity. Current Social Security is shown in red. A simple pay-in/payout plan is show in dashed lines, with no progressive aspect at all. And the solid line shows a flat payout scheme, where everyone is paid the same benefit. This was done by the Social Security administration in 2009, and notes that "... the program's progressivity has declined in recent decades."

How could all this be improved? There are innumerable ways to cut this cake, but the one I see as most promising is to go back to basics. Make the retirement age 65, and make the payout the same for everyone, across the board, at whatever level retains system viability. Then perhaps a special request board could be set up to offer earlier retirement, in cases of hardship or disability, related to the SSDI system already in place. This would be a way to reduce the complexity of the existing system, reduce the bad incentives, and make it more progressive at the same time. It would also strongly increase the incentive, at the lower end of the income distribution, to attain the needed work credits to participate in the system, which amounts to ten years of work that pays Social Security taxes. Death makes us all equal in the end anyhow, so a retirement system that brings that fundamental equality forward by a few years seems not just reasonable, but even a little poetic.

• Morality is a battle.
• Liz Trussification?
• Who's a democracy?
• Jesus is Black.

Who Needs the Fed?

Project 2025 promotes "free" banking, which is to say, no pesky regulations or backstopping from the Federal Reserve. What could go wrong?

Policy wonks can't help themselves- they need to write down their plans so that all the world can see how brilliant they are, and how real they could be, if only others recognized their brilliance. In that way, the project 2025 plans from the Heritage Foundation have been a gold mine, at least for Democrats. And since the Republican Party couldn't be bothered to write down a platform, other than "anything Trump wants", this project serves as the functional platform of the current Republican campaign, written as it was by scores of officials from the first Trump administration, plus many others itching to be appointed to a second. And it is crazy- more like a project 1825 than anything we would want to look forward to.

One of its less publicized planks is its approach to banking. It heaps criticism on the Federal Reserve, and recommends, as the most effective solution, its abolition and a return to "free banking". Which means a world where no regulator controls the banks, and no federal reserve backs it up against panics and crises. And just to complete the return to barbarism, it recommends a return to the gold standard as well.

"In free banking, neither interest rates nor the supply of money is controlled by the government. The Federal Reserve is effectively abolished, and the Department of the Treasury largely limits itself to handling the government’s money. Regions of the U.S. actually had a similar system, known as the “Suffolk System,” from 1824 until the 1850s, and it minimized both inflation and economic disruption while allowing lending to flourish." - From Chapter 4

Needless to say, US history is littered with banking panics, runs, and depressions, usually due to the unregulated nature of this "free" banking and to monetary gold backing. It is hard to express just how absurd and damaging it would be to return to such a world. The Federal Reserve was conjured up after a long history of the establishment of the first national bank, then its destruction by Andrew Jackson, a century of economic instability with particularly damaging panics in 1893 and 1907. By 1913, the US finally had had enough, and set up an updated national bank in the form of the Federal Reserve, to regulate and backstop the banking system. 

Illustration from 1873, portraying "Panic" on Wall Street.

Unfortunately, until the advent of Keynesian economics, it didn't really know what it was doing, and was particularly ineffective during the Great Depression, making things worse instead of better. Even now, it amounts to a cabal of bankers who are more interested in jacking up interest rates than in national prosperity. MMT economists tend to think that interest rates should be kept low, and the functions of the Federal Reserve folded into the Treasury Department, with greater political oversight. The use of interest rates- which are such a blunt tool of economic policy- could then be de-emphasized, in favor of more dynamic fiscal policy to manage inflation and monetary conditions. It is worth noting that over the last eighty years, the Fed has routinely over-shot its mark in raising interest rates, ending up with recessions, and rapid, belated retreats to lower rates. It is only with the current cycle that it has achieved, at least so far, the dream of a soft landing, taming inflation while avoiding recession.

Recessions (gray) have regularly followed interest raising campaigns by the Fed, and not always intentionally.

But note that the word "depression" is no longer in our lexicon. For all its faults, the Fed has kept the economy on a much more even keel than was possible under the wild-west free banking era, when monetary conditions were hostage to whatever Yosemite Sam dug up in the Yukon, or how wildly bankers over-extended their issuance of notes. Banks built impressive buildings to foster the illusion of stability in an environment where stability was impossible, lacking the infinite backstop that the Federal Reserve can now bring to bear during a crisis. Both individual depositors and the population as a whole benefit. It is a classic example of the people of the US coming together to create an institution that makes our lives better, so that we can worry about other things than the next banking panic. 

This economic craziness is just one small example of the fevered imaginations of the right wing in current US politics, which seems to have crawled out from the former fringes of Lyndon Larouche and the Birchers to take over an entire half of our political system. And this is fundamentally thanks to the air given them by an appalling right wing media that cares nothing for truth or civility, rather making its money from button pushing, whining grievance, and reflexive anti-state propaganda. And people complain about social media! Just how long ostensibly reasonable and decent (even Christian(!)) people will wallow in this environment is anyone's guess, but our common, rational, and beneficial institutions will in the mean time be in constant danger.

• Luddites of today.
• We need to win this war.
• Profile in courage.

Correction- The Republican convention did actually come up with a platform.

Jimmy Carter, on Work

Jimmy Carter's "An Hour Before Daylight".

One marked contrast between the recent political conventions was the presence of former presidents. The Republicans had none, (excepting the candidate), not even the very-much alive George W. Bush, or past candidates such as Mitt Romney. The Democrats had two, plus Hillary Clinton, not to mention the current president, Joe Biden. There was additionally a representative of a fourth, Jimmy Carter, to say that he will be happily voting for Kamala Harris in the fall. It speaks to the extremist journey the Republican party has been on, compared to much more conventional (sorry!) path of the Democrats, with recognizably consistent values and respect for character and institutions, both their own and those of the country at large.

None of these Democratic leaders grew up rich. Each was formed in modest circumstances, before joining the meritocracy and working their way up. The Democratic party is now generally viewed as the party of educated people, government workers, and minorities, against the Republican coalition of the very rich and the very poor. One might summarize it as strivers through the educational system, as opposed to strivers through the capitalist system. For one group, being kind, smart, and hard-working are the annointing signs of god, while for the other, it is being rich. Some (usually Republicans) may think these are equivalent, but the current candidates demonstrate the opposite.

This theme is exemplified by the career of Jimmy Carter, who worked his way through Annapolis and a naval career partly spent in the naval nuclear program under Hyman Rickover, then worked his way to the Georgia governorship, the Presidency, and then kept on working through retirement, churning out books and doing good works. The finest of his books, (which are, frankly, a mixed bag), is apparently his memoir of his early life and environment, "An Hour Before Daylight". The theme, for me, was work- hard work. Carter grew up on a large farm, and worked constantly. The book's title comes, naturally, from when the farm day starts. There are pigs to feed, eggs to collect, cows to milk. There are fields to plow, trees to chop down, fences to mend, products to sell, and supplies to buy. The work was evidently endless, as it is on any family farm, and while Carter tells of many swimming, hunting, amorous, and other expeditions, it is the cycle of chores and worries around the farm that was clearly formative.

Jimmy with family, in his Sunday best.

But he was not the hardest worker. His family owned a lot of land, and in this segregated time during the depression, had numerous sharecropping tenants and employees, all black. Carter comments gingerly about this system, balancing his worship of his father with clear descriptions of the hopelessness of the tenant's position. They worked without dreams of attending Annapolis, or inheriting a large estate. Rather, debt was the typical condition, as the Carters ran the supply store as well as owning the land. Carter looked up to many of these employees and tenants, and recounts very close and formative relations throughout his childhood, with both black children and adults. At least until he was drawn, as the system had designed it, into the segregated churches and schools.

Jimmy at his most intense, a naval graduate.

It is hard to grasp, in our heavily urbanized and regulated existence, where work is a 9-5 job and we dream of weekends, family leave, remote work, and retirement, how much work went into a normal existance like this on a farm. Success depended not only on unstinting work, but on an even temper, shrewd foresight, family support, good community relations (including church attendance), and a lot of luck. The wealth and power of the US was built on this kind of scrabbling for economic survival and advancement. The capitalist system continually applied the screws, lowering prices for cotton when too much was being produced, a particular crisis during the depression. Carter tells of the continual inventiveness that his family devoted to new ventures, like selling flavored milks, roasted pecans, sugar cane syrup, boiled peanuts, and tomato catsup, all from their own crops. Not everything was successful, but there was a continual need, even in this out-pf-the-way rural area, to meet the market and keep coming up with new ideas for making money.

Most of all, Carter speaks with pride of his and his family's work. It provided their sustenance, and their relationships, and was thus intrinsically and automatically meaningful. Headed by a benevolent regime, at least as he understood it under his parents, it was an ideal world- busy, endlessly challenging, stimulating, and productive. This is what we need to think about in these end times of the loneliness epidemic and the plague of homelessness and meaninglessness. Religion was a strong presence, but hearing Carter tell it, it weighed relatively lightly on him and his family, (other than sister Ruth, perhaps, who became a renowned evangelist), being more a solace to the poor than a spur to the well-to-do. Their meaning came more from their community and their many and varied occupations. So when people speak of basic income programs, one has to ask whether that really addresses the problem. Much better might be a guaranteed job program, where everyone is offered basic work if they can not find it in the private sector. Productive work that benefits the community, along the lines of the WPA projects of the depression. Work is critical to meaning and mental health, as well as to our communities and nation.

• Zoning and housing.
• Religious nutters lose their minds.
• Another great use of crypto- pig butchering.
• Unbutchering one candidate's garble.
• It smells like the mob.

The Lucky Country

The story of California, the story of the US, and optimism about free frontiers.

I am reading "California, the great exception". This classic from 1949 by Cary McWilliams is stoutly jingoistic and pro-California. But it also provides a deeper analysis of the many things that made California such an optimistic and happy place. Mainly, it boils down to free land and rapid settlement by ambitious working people. The Native Californians were so weak, and so ruthlessly extirpated, that they did not present the irritating conflict that happened elsewhere in the US. California's gold was so widely and thinly distributed (as placer in streams) that mining was a matter of small partnerships, not huge businesses, as it became elsewhere in the West, in the deep hard rock silver and later copper mines of Nevada (Carson city and the Comstock lode) and Montana (Butte). The immigrants were of working age and enthusiastic to work, dismissing slavery and corporatism in favor of a rapacious entrepreneurialism. 

California never had a paternal territorial government, but transitioned directly from self-rule to statehood, its riches speaking volumes to the national government in Washington. And the national government was anxious lest secessionist sentiment spread to the still far-distant west, so it funded the building of a transcontinental railway, during the civil war when money must have been extremely tight. That feared secession was not to join the South, but rather to found a new and prosperous nation on the West Coast. San Francisco went on to serve as the financial capital of the West, particularly of western mining, creating almost overnight a collusus to rival the centers of the East. In due time, gushers of oil also appeared on the California landscape. It is no wonder that Californians became fundamentally optimistic, ready to take on huge challenges such as water management, building a great education system, and the entertainment of the world.

California was also blessed by weak neighbors on all sides. There were no foreign policy predicaments or military threats. It could nurse its riches in peace. It was, in concentrated form, the story of America- of a new continent limited more by its ability to attract and grow its population than by its land and the riches that land held. An isolated continent that wrote its society almost on a blank slate- a new government and a melting pot of people from many places. 

Bound for California, around 1850.

How stark is the contrast to a country like Ukraine, neighbor of imperialist Russia and before that host to the Scythians, Goths, and Huns. A flat land exposed on all sides, that has been overrun countless times. A fertile land, but always contested. The idea that history would stop, that Ukraine could join the West, and enjoy its riches in peace and security- that turns out to have been a dream that bullies in the neighborhood have a different view on. Better to beat up on the little "brother" than to build up both nations and economies through beneficial exchange and prosperity. Better for both to go down in flames than that the little "brother" escapes the bully's clutches into a more humane world.

But the happy place of the US and Calfornia has hit some rough patches too. It turns out that our resource riches are not endless after all. The foundation of material wealth- the agricultural land, the mines, the lumber- underwrote social and technological innovation. No wonder the US was first in flight, and led the way in electricity, automobiles, the internet, the cell phone. Now we have an innovation economy, and get much of our materials and lower-grade goods from far-off places. The people we have attracted and continue to attract are the new wealth, but therein lies a conflict. Places like California have huge homeless populations because we have ceased to grow, ceased to embody the hope and optimism of our lucky past. Conflict has raised its head. There is no more free land, or gold in the streams. Now, with the land all parcelled up and the forests mowed down, everyone wants to hold on to what they have, and damn those who come after. Prop 13 was the perfect expression of this sour and conservative mood- let the newcomers pay for public services, not us.

California is transitioning from a visionary frontier into a cramped, normal, and not especially lucky place. The fabulous climate is suffering under fire and drought. The population is growing significantly older, while next generation is educated less well then their parents. The app innovation economy has fostered a nightmare of surveillance and social dysfunction. The pull of a new frontier is so strong, however, that some of our richest people now imagine it on other planets. The irony of sending rockets, fueled by vast amounts of fossil carbon and compressed oxygen, to other worlds where there isn't even air to breathe, let alone plants to cut down, begs belief. It is the final gasp of a dream that somewhere, out there, is another lucky country.

• We are a front in the authoritarian war for the world.
• Truth will out, eventually.
• Aging is in the crosshairs.
• The sad fate of Russia's Silicon Valley.
• Do we vote for merely corrupt, or fully bought and paid for politicians?
• New advances in low power, low cost, low fright MRI.

Renewable Power in Africa

Prospects for growth in electricity access and in clean energy.

Africa is an enormous continent, notoriously larger than China, the US, and Europe combined. Its population is also large- as large as that of India, at about 1.4 billion people. This population is growing rapidly, while its social and economic systems are developing more slowly. But as we know, the main ingredient of an advanced economy is power, which as traditionally been drawn from fossil fuels. Advanced economies are in the painful and reluctant process of transitioning away from fossil fuels. We can do a lot to help Africa to leapfrog this history by front-loading renewable energy.

There was a recent paper about the hydropower prospects in Africa. It notes that there are many projects on the drawing board, with many undammed rivers on the continent. But as we have learned in the US, the implications of river damming are quite destructive and wide-spread. For example fish ladders simply do not work- not at the scale needed to keep fish populations (and fisheries) healthy. Then there are problems of siltation, water temperature, erratic flows, and population displacement. There is a movement in the US to remove dams wherever possible, to free ecosystems back to a functional state. 

"More than 300 hydropower plants, corresponding to an additional 100-GW power capacity, are under consideration across the continent."

The article made the basic point that, given the state of other renewable power sources, and the prospect of lower water levels and droughts due to climate change, that roughly half of the planned hydropower projects they know of are economically inviable, even putting aside environmental considerations. 

This leads to the question of what to do instead? Maybe the answer is microgrids. In the developed world, it is increasingly common for people to take control of their own electricity production through the use of solar power. But at a single house level, power inputs and consumption are both erratic and require a lot of storage capacity to furnish a reliable system. The typical system is highly reliant on the larger grid to manage this intermittency. Microgrids occupy a middle range between grid-scale power, which is subject to problems of centralized political and social development, and the individual house, where the expense of managing fully independent electrical supply is highest.

The current grid in Africa, colored for >66 kV (dark blue) and the rest light blue. Note the patchy regional distribution, with lots of underserved areas. The US has a much denser grid. 

A map that suggests likely locations for smaller microgrids in Africa.

These maps note that there are many underserved areas in Africa- some concentrated urban areas, and a great spread of rural areas. Electrification is well-advanced in South Africa and the heart of West Africa. But there are many rural areas that would be better served by microgrids of various scales. Microgrids can be altered over time and integrated into larger systems. Their production and storage capacities are both beneficial for larger grid stability and scalability. Africa is, naturally, positioned ideally for solar power, and the Sahara is a natural location for massive power installations, to serve both Europe, the Middle East, and Africa.

A proposal to run a super-grid around much of Africa, to harness supplies from the Sahara, among other sources.

One of the main characteristics of renewable power is that it has high up-front costs. The fuel is free, and clean. But the mechanisms to capture and store it are expensive. Thus if we want to encourage a more rapid transition to sustainable power systems in Africa, we would help pay for the up front costs, sharing capital investment in the interests of everyone, both here and there. Africa is currently a big exporter of oil and gas. As other regions transition away from those fuels, it is imperative that this production not be redirected and propped up by further Western investment, but rather replaced with better energy sources.

• Advanced nuclear power is not going to cut it.
• The heat pump song.
• Treason, again.
• On silence and isolation.
• Housing prices should not always go up.
• Medicare disadvantage.

Ideologies of Work

Review of Elizabeth Anderson: "Hijacked: How neoliberalism turned the work ethic against workers, and how workers can take it back."

We live by the sweat of our brow, though work. At least that has been the story after we were thrown out of the garden of Eden, where we had previously foraged without effort. By the time of Puritans, work had been re-valued as being next to godliness, in what became known as the Puritan work ethic. Elizabeth Anderson takes this as her point of departure in a fascinating historical study of the winding (and mostly descending) road that attitudes toward work took down the centuries, in the perennial battle between workers and parasites who have found ways to avoid sweating, yet eat just the same ... or better.

Anderson trots through all the classical economists and philosophers, down to John Stuart Mill and Marx, showing two main threads of thought. First is the progressive thread, in which the Puritans can (curiously) be classed, as can Adam Smith. They value work as both a cultural and meaningful activity, not just a means of sustenance. They think everyone should work, and criticize anyone, high or low, who shirks this responsibility. Genteel landowners who spend their time hunting rather than improving their estates are just as culpable as drunkards and other able-bodied peasants who fail to do their share. Learning and innovation are highly valued, as not just ameliorating the lot of those making improvements, but at the same time raising the wealth of, and standard of living for, all.

In contrast is the conservative thread. Anderson herself describes it trenchantly:

"From the conservative perspective, however, poverty reflected an individual's failure to filfill the demands of the work ethic. Society is at fault solely in establishing institutions that violate natural law in promoting vice through provisions such as the Poor Law. Conservatives agreed that the Poor Law must therefore be abolished or radically reformed. If poverty is caused by the vice of the poor, the remedy for poverty must be to force the poor to practice virtue, to live up to the demands of the work ethic. Conservatives differed somewhat on which virtue was most necessary for the poor to practice. Priestly focused on frugality, Bentham on industry, Malthus on chastity, Paley on contentment (understood as the opposite of covetous envy of the rich). Thus, Priestly hoped to convert poor workers into virtuous bourgeios citizens through a legally mandated individual savings plan. Bentham favored a workfare system that turned the working poor into imprisoned debt peons of capitalist entrepreneurs. Malthus advocated leaving the poor to starvation, disease and destitution, but offered them the hope that they could rescue themselves by postponing marriage and children. Burke and Wately agreed with Malthus, but attempted to put a liberal-tory paternalist veneer on their view. ...

"The moral accounting that assigns responsibilities to individuals without regard- and even in inverse proportion- to the means they have to fulfill them remains a touchstone of conservative thought to the present day. ...

"The ideology of the conservative work ethic is distinguished by a harsh orientation toward ordinary workers and the poor, and an indulgent one toward the 'industrious' rich- those who occupy themselves with making money, either through work or investment of their assets, regardless of whether their activities actually contribute to social welfare. in practice, this orientation tends to slide into indulgence toward the rich, whether or not they are industrious even in this morally attenuated sense. ...

"Here lies a central contradiction of the conservative work ethic. All the conservatives claimed that the key to overcoming poverty was to make the poor bourgeois in attitude. All they needed to do was adopt the work ethic, or be forced to adopt it, along with the spirit of competitive emulation, the desire to better others in the race for riches and ensure that one's children not fall beneath the standard of living in which they were raised. Poverty was proof that they hadn't adopted bourgeois virtues and aspirations. This presupposed that the poor suffered from no deficit in opportunities. The path to prosperity was open; the poor were simply failing to take it. Yet we have seen that, Priestly partially excepted, conservative policies knowingly reduced the opportunities of the poor to acquire or retain property, work for themselves, or escape precarity."

My major critique of Anderson's analysis is that putting all this conflict and history into the frame of the work ethic is inappropriate and gives the work ethic far more weight than it merits. Firstly, everyone thinks of themselves as working. The most sedentary rentier doubtless thinks of his or her choosing among investments as of critical importance to the health and future of the nation. Even his or her shopping choices express taste and support a "better" sort of business, in that way performing work towards a better community. The English royals probably see themselves as doing essential cultural work, in their choice of hats and their preservation of cherished traditions. Parenting, community associations, and political agitation can all, to an expansive mind, be construed as "work". And indeed some of our greater artistic and other accomplisments come from the labors of wealthy people who were entirely self-directed rather than grubbily employed. All this implies that a work ethic can be accommodated in all sorts of ways if markets are not going to be the standard, as they hardly can be in any philosophical or moral system of a work ethic. This makes work ethics rather subjective and flexible, as Anderson implicitly demonstrates through the centuries.

However a more serious problem with Anderson's analysis is that it leaves out the ethic of power. Her presentation laments the sad misuse that the work ethic has been subjected to over the years, (by conservatives), without focusing on the reason why, which is that a whole other ethic was at work, in opposition to the work ethic. And that is the power ethic, which values domination of others and abhors work as commonly understood. Or, at best, it construes the organization of society for the benefit of a leisured upper crust as work of momentous, even civilizational, significance. Nietzsche had a field day calling us to recognize and embrace the power ethic, and not hide it under sweeter-smelling mores like the Christian or work ethics.

Anderson does helpfully discuss in passing the feudal background to the Puritan work ethic, where the Norman grandees and their progeny parcelled out the land among themselves, spent their time warring against each other (in England or in France), and lived high off the labors of their serfs/peasants. No thought was given to improvement, efficiency, or better ways to organize the system. Conservatism meant that nothing (god-willing) would change, ever. Even so, the work of politics, of war, and of religious ideology was never done, and the wealthy could easily see themselves as crucial to the maintenance of a finely-balanced cultural and economic system.

Anderson also notes that the original rationale of the gentry, if one must put it in an economic frame, was that they were responsible for military support of the king and country, and thus needed to have large estates with enough surplus in people, livestock, horses, and food to field small armies. When this rationale disappeared with the ascendence of parliament and general (at least internal) peace, they became pure rentiers, and uncomfortably subject to the critique of the Puritan work ethic, which they naturally countered with one of their own devising. And that was essentially a restatement of the power ethic, that the rich can do as they please and the poor should be driven as sheep to work for the rich. And particularly that wealth is a signifier of virtue, implying application of the work ethic, (maybe among one's forebears, and perhaps more by plunder than sweat, but ... ), or transcending it via some other virtues of nobility or class. 

But in Locke and Adam Smith's day, as today, the sharpest and most vexing point of the work ethic is not the role of the rich, but that of the poor. By this time, enclosure of lands was erasing the original version of the job guarantee- that is, access to common lands- and driving peasants to work for wages, either for landowners or industrialists. How to solve extreme poverty, which was an ever more severe corollary of capitalism and inequality? Is it acceptable to have homeless people sleeping on the streets? Should they be given work? money? social services? education? Do the poor need to be driven to work by desperation and starvation? Or is the lash of work not needed at all, and lack of wealth the only problem? Malthus was doggedly pessimistic, positing that population growth will always eat up any gains in efficiency or innovation. Thus it requires the predatory power of the gentry to enable society to accumulate anything in the way of capital or cultural goods, by squelching the poor in sufficient misery that they will not over-reproduce.

The progressive view of work and the poor took a much more sanguine view. And here one can note that much of this discussion revolves around "natural" laws. Is the population law of Malthus true? Or is the natural communitarian tendency of humans also a natural law, leading to mutual help, spontaneous community formation, and self-regulation? Are some people "naturally" superior to others? Is a hierarchical and domineering social system "natural" and necessary? Adam Smith, in Anderson's reading, took a consistently pro-worker attitude, inveighing against oppressive practices of employers, collusion of capital, and cruel goverment policies. Smith had faith that, given a fair deal and decent education, all workers would strive to the best of their abilities to better their own condition, work diligently, and thereby benefit the community as well as themselves.

For the story of Eden is fundamentally wrong. Humans have always worked, and indeed valued work. Looking outside the window at a squirrel trying to get into the bird feeder ... is to see someone working with enthusiasm and diligence. That is our natural state. The only problem was that, as human civilization progressed, power relations, and then even more- industrialization- generated work that was not only cruel and oppressive, but meaningless. The worker, forced to work for others instead of him- or herself, and routinized into a factory cog, became fully alienated from it. How to get workers to do it, nevertheless? Obviously, having a work ethic is not a full solution, unless it is of a particularly astringent and dogmatic (or tyrannical) sort. Thus the dilemma of capitalist economies. For all their trumpeting of the "natural laws" of competition and "freedom" for employers to exploit and workers to be fired, capitalism violates our true natures in fundamental ways.

So the question should be, as Anderson eventually alludes to, do we have a life ethic that includes work, rather than just a work ethic? She states plainly that the most important product of the whole economic system is ... people. Their reproduction, raising, education, and flourishing. It is not consumption products that should be the measure of economic policy, but human happiness. And a major form of human happiness is doing meaningful work, including the domestic work of the family. The world of Star Trek is even alluded to in Anderson's last chapter- one where no one works for subsistance, but rather, people work for fulfillment. And they do so with zeal.

Anderson sees great potential in the more progressive forms of the work ethic, and in the social democratic political systems that implemented them after World War 2. She argues that this is the true legacy of Marxism (and of Thomas Paine, interestingly enough) and expresses the most durable compromise between market and capital-driven corporate structures and a restored work ethic. Some amount of worker participation in corporate governance, for instance, is a fundamental reform that would, in the US, make corporations more responsive to their cultural stakeholders, and work more meaningful to workers. Tighter regulation is needed throughout the private economy to make work more humane for the very low-paid, giving workers better pay and more autonomy- real freedom. More public goods, such as free education to university levels, and better provision for the poor, especially in the form of a job guarantee, would make life bearable for many more people. For my part, inheritance seems a key area where the ethics of the dignified work and equal opportunity run up against completely unjust and artificial barriers. In America, no one should be born rich, and everyone should grow and express themselves by finding a place in the world of work.

• Annals of capitalist control.
• Corporations and the royal we.
• More equal societies are better societies.
• The Stepford wife.
• The Supreme Court is dangerously wrong.

Spiritual Resources for the Religiously Abstemious

Nones are now a plurality in the US. What are we supposed to do?

The Pew research institute recently came out with polling that shows a significantly changed religious landscape in the US. Over the last couple of decades, while the religious right has been climbing the greasy pole of political power, gaining seats on the Supreme Court, and agitating for a return to patriarchy, their pews have been emptying. The religiously unaffiliated, or "nones", comprise 28% of the US population now, almost double the level two decades ago.

One has only to see the rabid support evangelicals give their orange-haired messiah to understand what has been turning people off. Or glance over the appalling chronicle of sexual abuse unearthed in the Catholic church. Maybe the horsemen of the Atheist apocalypse have had something to do with it. Russia under Putin is strenuously demonstrating that the same system can be just as cruel with or without religion. But these patterns of gross institutional, moral, and intellectual failure, and their ensuing critiques, are hardly new. Luther made a bit of hay out of the abuses of the Catholic church, Voltaire, among many other thinkers, ridiculed the whole religious enterprise, and Hitler was a forerunner of Trump in leaning on religion, at least early in his career, despite being a rather token Christian himself (other than in the antisemitism, of course). What is new now?

A dramatic rise in numbers of people with no religious affiliation and little interest, from Pew polling.

I am not sure, frankly. Europe has certainly been leading the way, showing that declining religion is quite compatible with prosperous and humane culture. But perhaps this phenomenon is part of the general isolation and atomization of US culture, and thus not such a good thing. It used to be that a community was unthinkable without a church (or several) to serve as the central hub. Churches served to validate the good and preach to the bad. They sponsored scout troops, weddings, charitable events and dinners, and committees and therapeutic encounters of all sorts. They were socially essential, whether one believed or not. That leaders of society also led the churches knit the whole circle together, making it easy to believe that something there was indeed worth believing, whether it made sense or not.

Now, the leadership of society has moved on. We are mesmerized by technology, by entertainment, and sports, perhaps to a degree that is new. The capitalist system has found ways to provide many of the services we used to go to churches for, to network, to get psychotherapy, to gossip, and most of all, to be entertained. Community itself is less significant in the modern, suburban, cocooned world. Successful churches meet this new world by emphasizing their social offerings in a mega-church community, with a dash of charismatic, but not overly intellectually taxing, preaching. Unfortunately, megachurches regularly go through their own crises of hypocrisy and leadership, showing that the caliber of religious leaders, whatever their marketing skills, has been declining steadily.

The "nones" are more apathetic than atheistic, but either way, they are not great material for making churches or tightly knit communities. Skeptical, critical, or uninterested, they are some of the least likely social "glues". Because, frankly, it takes some gullibility and attraction to the core human archetypes and drama to make a church, and it takes a lot of positive thinking to foster a community. I would promote libraries, arts institutions, non-profits, and universities as core cultural hubs that can do some of this work, fostering a learning and empathetic culture. But we need more.

As AI takes over work of every sort, and more people have more time on their hands, we are facing a fundamental reshaping of society. One future is that a few rich people rake off all the money, and the bulk of the population descends into poverty and joblessness, unneeded in a society where capitalism has become terminally capital-intensive, with little labor required. Another future is where new forms of redistribution are developed, either by bringing true competition to bear on AI-intensive industries so that they can not take excess profits, or by thorough regulation for the public good, including basic income schemes, public goods, and other ways to spread wealth broadly. 

Such a latter system would free resources for wider use, so that a continuing middle class economy could thrive, based on exchanges that are now only luxuries, like music, personal services, teaching, sports, counseling. The destruction of the music recording industry by collusion of music labels and Spotify stands as a stark lesson in how new technology and short-sighted capitalism can damage our collective culture, and the livelihood of a profession that is perhaps the avatar of what an ideal future would look like, culturally and economically.

All this is to say that we face a future where we should, hopefully, have more resources and time, which would in principle be conducive to community formation and a life-long culture of learning, arts, and personal enrichment, without the incessant driver of work. The new AI-driven world will have opportunities for very high level work and management, but the regular hamburger flippers, baristas, cabbies, and truck drivers will be a thing of the past. This is going to put a premium on community hubs and new forms of social interaction. The "nones" are likely to favor (if not build) a wide range of such institutions, while leaving the church behind. It is a mixed prospect, really, since we will still be lacking a core institution that engages with the whole person in an archetypal, dream-like fantasy of hope and affirmation. Can opera do that work? I doubt it. Can Hollywood? I doubt that as well, at least as it applies to a local community level that weaves such attractions together with service and personal connection.

• Those very highly moral religious people.
• Molecular medicine is here.
• Why do women have far more autoimmune syndromes?
• What to do about Iran.
• "As we’ll see, good old-fashioned immortality has advantages that digital immorality cannot hope to rival." ... I am not making this up!

Credit where Faith is Due

The enormous, and sometimes underrated, value of faith and credit in the US financial instruments and institutions.

To hear the chaos caucus in congress put it, the country can go to hell, because their pet peeves- abortion, culture war, gay rights, gun rights ... have already gone to hell, so how much worse can it really get? Well, it could get a lot worse. We are a rich country for many reasons, but an important one is good management at the federal level of our financial and monetary affairs. It is this stability that undergirds not only the currency, but also economic expectations of the future, as expressed in inflation, and markets such as the commodities, bond, and stock markets, not to mention political stability, such as it is.

Every dollar is a credit instrument, staked on the faith and credit of the United States. Without that faith, it is worthless. Even with that faith, it is a debt of the government, counted under the vast rubric of "the federal debt". The more money we have (or that is out in the wild somewhere), the more that debt is. And that money has proliferated remarkably. Quite a few small countries have formally dollarized their economies, such as Ecuador, Zimbabwe, Palau, and Panama. Many more countries use dollars as a defacto currency or black market currency, including much of the criminal world. Most countries hold large reserves of dollars to anchor their international trade and financial stability. So we should not be surprised that our federal debt is very large. Does anyone (maybe our children!?) have to "pay it back"? Not really, since all those dollars can keep floating around forever. That is, until some other country's currency becomes the reserve currency of the world, and those dollars become either worth less, or we buy them back with that new currency. Forestalling that day should be one of our major foreign policy and economic goals.

Another dimension of the credit of the US is the formal debt, in bonds that the Treasury department issues to account for spending that was not matched by incoming taxes. The Federal Reserve accumulates Treasury bonds as it issues new dollars, but these bonds come with the obligation to keep paying interest. While this makes it convenient and profitable for other countries and rich people to hold bonds instead of dollar bills, (and earns the Fed itself plenty of notional money), it puts us on the hook for endless payments (of newly minted dollars) to support those interest payments. This is a rather dangerous situation, since the level of interest is not always under tight control. Depending on your view of financial affairs, the interest rate is dictated by the market, or by the Fed, or by the general level of inflation, which in turn influences the actions of both the market and the Fed. In any case, the interest on thirty trillion dollars is a heck of a lot more at higher rates than at low ones. This strongly motivates the Fed to use all its tools to curtail inflation and keep long term interest rates under control.

A graph of the price/earnings ratio of the SP500 collection of stocks, over the long term. This ratio indicates the length of time holders of stock are willing to wait for their returns to come in, in years. Notice how in the last few decades, the P/E ratio has persisted at significantly higher-than-historical levels, indicating, despite ups and downs, increased faith in the long-term stability of the economic and financial system. There may be other reasons- better regulation, technological innovation, 401K rules, lowered taxes, etc. But financial markets like the stock market are sensitive indicators of the credit given to our institutions.

All this comes back to the sound management of our financial affairs. We have a lot of room to maneuver due to economic expansion, both at home and abroad, which makes ongoing federal debts a built-in necessity. But we do not have endless room, and taxation plays an important role in making up the difference between money we can freely spend/issue to satisfy growth without inflation, and the rest of the money needed for government operations. What that gap is, is difficult to say, in the same way that the causes and time course of inflation are hard to pin down, but there is a gap, which taxes cover. Incidentally, in the MMT view of things, taxes reduce the level of private spending and consumption to make room for government spending, vs actually "funding" the government, which issues the money in the first place. But either way, taxes are an essential part of the financial cycle, and haphazardly forgiving tax obligations (or hobbling enforcement) is just as bad management as profligate spending or lax control of interest rates and inflation.

All these factors are part of the credit of the United States, and have been under fire from the right wing for several decades. When they are not cutting taxes of the rich or spending mindlessly on the military, they are shutting the government down or muttering about the deep state, the evils of the civil service, and how we should get back on the gold standard. Meanwhile the whole stability of our position as a rich economy and leader among nations hangs in the balance when thoughtless policy and extreme politics encroach from the fringes. Can the US run things better? Absolutely. Are there tradeoffs between humane and cultural virtues and financial / economic success? Absolutely. But from our founding era, when the Treasury Department under Alexander Hamilton established the US debt as a powerful instrument of union and stability, the credit of the US has been an underappreciated pillar of our position both domestically and internationally. Toying with it, via artificial crises and bad policy, is correspondingly an under-appreciated danger to our way of life.

• Business needs more regulation.
• Misogyny has a new hero.
• Hospitals are becoming scarcer and poorer. In part due to medicare "advantage".
• My congressperson is on the job.
• The state of solar.

Why do we Put up with the Specter of Unemployment?

A post by Paul Krugman got me thinking... why do we allow unemployment at all?

Paul Krugman has been ruminating a lot about inflation- why it went up, and why it is back down. One insight is that, asssuming that interest rate increases are supposed to work by raising unemployment, they have not evidently accomplished anything, yet inflation is back down and has been at 2-3 % for the last year, on a month to month basis. Perhaps the rate increases operated through other channels, like dampening the real estate market or general confidence. Or perhaps the rate increases had as much inflationary as deflationary effect, which is to say none at all, and our current state is simply due to the working-out of all the supply chain disruptions, emergency federal spending, and opportunistic profit-making brought on by the pandemic. As was, incidentally, supposed by the MMT school from the start.

But why make workers the focus of inflation policy in the first place? And why use unemployment as the index of inflation-fighting effectiveness? Why have unemployment at all? Unemployment is a central and classic feature of capitalism, certainly not of our natural state. Chimpanzees never experience unemployment- there is always something to do. But when it comes to capitalism, once workers have bought into the labor-rental scheme, they are dependent on the specific employer for pay, and on the employer class as a whole for the existence of a labor market. While employers like nothing better than to "discipline" workers with the prospect of sleeping on the streets, we can do better.

The Phillips curve, of unemployment related to inflation (the non-accelerating inflation rate level of unemployment, or NAIRU). A somewhat mythical and protean concept that used to be taken as a "law" of economics, that low unemployment drives higher inflation, via hotter labor market and wage increases. Even the Fed doesn't take this seriously any more.

Capitalists manage to pay themselves pretty well, to the point that our whole economy and social life (and politics) has been deranged by whole new classes of super-rich and their lackeys. So an allergy to income is not generally the problem- merely parting with money to pay others fairly. It is clear from the recent minimum wage increases that paying the lower end more has very little inflationary effect- it is peanuts on top of peanuts. But is immensely meaningful for those on the receiving end.

Similarly, the provision of a job guarantee, (as previously posted), thereby eliminating involuntary unemployment, would help workers on the low end of the scale with much greater security. The government would be the employer of last resort, at a decent wage, offering a wide range of work, from street cleaning and park maintenance to non-profit collaborations and technical operations appropriate to whatever skills are on offer. Looking around the country, there is no end of work that needs doing. The Great Depression, which gave us so much innovative legislation, also gave us a model of public works and public jobs programs- something well worth learning from and using on a permanent basis.

Such a job guarantee would automatically provide a floor for the minimum wage, (and also a floor for work conditions, hours, and benefits), and replace most unemployment insurance and other benefit programs. If a person didn't want the jobs offered, they could take a lower basic welfare-type income. But the work would not be designed to either onerous or easy- the point is to get some useful work done for society, and take in the bottom level of the labor market as needed from fluctuations in the private market. It is an insurance system, just as we have for health, for property hazards, and, as embodied in the Federal Reserve, for the banks and US capitalism writ large. Such a guarantee of work is, I think, far superior to the current unemployment insurance system, which is grudgingly funded by employers, pays people to not work, which is morally perverse and heavily abused. Private employers would naturally be able to bid workers off the system with higher pay.

Such a system would have little effect on the Fed's interest rate policies, (assuming they are effective in the first place), since unemployment is really just an index of economic activity, not the point of interest rate increases. Economic slowing would be reflected in higher numbers of people thrown into the job guarantee, and presumably getting lower (but still decent) pay. (A pay scale that would, incidentally, be more anti-cyclical than current policies.) And would be reflected in a myriad of other slowdowns that would contribute, if needed, to inflation control. 

The irony is that welfare reform of the last few decades focused relentlessly on "work requirements", and of the decades prior to that on "job training". The latter was a boondoggle, and the former forced the poor into appalling, coercive, and low-paying jobs- the very bottom end of the capitalist system. Which was the design, no doubt. I can imagine that capitalists would yell "communism" about a program where governments give decent work with decent income and benefits to anyone willing to work. Well, if that is communism, we need more of it.

Unemployment is currently used as a potent weapon- both by capitalists, given its dire consequences, and paradoxically by unions as well, which walk off the job and strike as a way to pressure employers who may find it inconvenient to hire scabs in a short time. A job guarantee could transform such conflict by taking the most dire consequences off the table. Everyone could maintain their livelihoods, and negotiations could proceed with less drama and coercion. And that is what our society should be about, promoting freedom and civility by removing forms of unjust and pernicious coercion, whether political, criminal, military, or economic.

• Bill Burns and Russia.
• Some statistics.
• When insurrection becomes policy.
• Think of the children...

Euthansia of the Rentier

It is bad enough when business models make people rich for destroying the planet. Do we have to enrich those who do nothing at all?

John Maynard Keynes had a famous quip in his central work, The General Theory.... which goes, slightly re-arranged:

"Interest today rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land con obtain rent because land is scarce. But whilst there may be intrinsic reasons for the scarcity of land, there are not intrinsic reasons for the scarcity of capital. ... It would be possible for communal saving through the agency of the state to be maintained at a level which will allow the growth of capital up to the point where it ceases to be scarce. Now, while this state of affairs would be quite compatible with some measure of individualism, it would mean the euthanasia of the rentier, and consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity value of capital."

Keynes assumed that this day would naturally come as capitalism developed and piled up endless riches in the form of money. But recently Thomas Piketty came along and stated that this day will never come, because for some curious/mysterious reason, returns on capital are persistently higher than they have a right to be, and higher than the economic growth rate. That means that the rich keep getting richer, on a magic escalator, forever, and the only way to change this, historically, has been the horsemen of the apocalypse- war, pestilence and famine. Economic depressions can be pretty effective as well. Sadly, we have rendered all these mechanisms less effective than they have been in the past, so need to come up with something else for this modern age.

It is quite clear that advanced economies have plenty of capital. Companies routinely give money back to shareholders or buy back stock, for lack of anything better to do with their mountains of money. Interest rates tend to be low. The Federal Reserve has campaigned mightily over the last three decades to raise interest rates, to what they deem "normal" rates, which are roughly 5%. The Fed is heavily influenced by the private banking industry, which benefits (perhaps) from higher rates, as do rentiers. Each time, however, some catastrophe has intervened and sent rates back to zero. Whether the latest push turns out be the charm is not clear, but Paul Krugman expects rates to eventually return to very low levels. Japan has had near-zero rates for a couple of decades, with little harm to its domestic economy. So it seems as though the natural interest rate in this era, among stable, peaceful economies, seems actually to be very low, approximately equal to the inflation rate, and thus approximately zero.

History of US interest rates and Japanese interest rates. We keep flirting with zero rates.

This abundance of capital has sent investors to the stock market as a better bet for growth. This has sent stock valuations higher, with price/earning ratios coasting at much higher than historical levels. There is a metric called the "Buffet index", which relates stock valuations to total GDP, and this is also unusually high, twice what it has been historically. Whether all this reflects overall wealth, or the greater profitability of current corporations (due to monopolies, lack of regulation, repeated stock buy-backs, shortchanging workers, etc.), or the push of too many investors into this market, it is a worrisome situation over the long term, as returns may fail to justify expectations.

At any rate, the question is.. how to address inequality and particularly the basically unjust income of rentiers, and bring Keynes' prophecy to fruition? The recent tax changes by the Democratic congress, to impose a cost on stock buy-backs, is a tiny step in the right direction. The the fact that federal taxes on income from work (except when that work is done for hedge funds!) is twice that on investment is a clear bias, inherited from the Reagan era, that needs to be eliminated. Outright wealth taxes are also needed, as are programs against off-shore wealth hiding and abuse of trusts. There is a very long list of ways to reduce the ratchet of wealth, and especially inherited wealth, that fundamentally corrodes the basic equality on which our social and political system is (or should be) based.

The modern monetary theory community has long advocated for another policy that would address this problem, which is to end the issue of federal government bonds. They see these bonds as a relic of past times when we were on the gold standard, and really had to borrow money from the public to make ends meet. With a fiat currency, closely managed by the Federal Reserve, the federal government has no need to borrow at all. It can and does print as much money as needed ("print" being a metaphor for creating mostly electronic forms of money). State and local governments, on the other hand, are financially constrained, and need to put out bonds if they want money for large projects, beyond what taxes bring in. In 2022, the federal government spent 476 billion dollars on interest payments on the debt, which may increase drastically if inflation rises on a durable basis. 

Who holds US federal bond debt?

Whom do these interest payments go to? Well, the Fed itself and the Social Security Administration hold huge amounts- no real loss there. Foreign countries hold huge amounts- China, for example, has a trillion dollar's worth; so does Japan. But then come banks, pension funds, and mutual funds- rich investors who like these low but extremely reliable returns. The mainstream argument for bond issuance, in the absence of a gold standard, is that bonds drain demand from an economy, preventing inflation that would result were the government to not "balance" its spending with borrowing that brings that money back into its coffers. What MMT proponents point out is that those who invest in government bonds are already rich and don't need the money they are parting with. Bonds are not displacing effective demand in the economy, just productive (or unproductive) investment. Secondly, federal bonds are a fully liquid market- the money is not actually tied up in a way that prevents it from turning into economic demand.

These are the classic rentiers, whom we are collectively paying roughly half a trillion dollars a year that could be much, much better spent on other things. The last time that the federal bond market came into doubt, as the Clinton administration, under pressure from the deficit scolds, went into surplus and started paying back the "debt", who raised a hue and cry? The banks, of course, who could not imagine a world without this manna falling from heaven. Well, the fact of the matter is that the foreign countries, and the banks, and all the other rentiers, could just as well hold the fundamental debt instrument of the US government- the dollar, instead of bonds. We don't have to pay all these entities a premium to take dollars off our hands, if that is what they want.

What keeps us from ending these bond payments? It isn't economics, it is purely legislative fiction, the same kind of fiction that makes congress go through the absurdities of raising the "debt" ceiling. The US federal debt is the obverse of economic growth, for which more currency needs to be issued. The Fed and treasury issue new dollars into the economy, channeled through federal spending, and a notional debt is created. The current law just means that one debt (dollar bills) must be traded for rentier-paying debts (bonds) ... because ... we used to do so. But it is no different than the debt implied by every dollar bill: that the government, and the economy in total, stand behind each dollar bill as a manifestation of faith and credit (and good federal management). The debt does not need to be "paid off", it will not drag down future generations, and most of all, it shouldn't be compounded with interest payments to the least deserving recipients imaginable.

• Maybe some de-oligarchization is in order.
• Loneliness is a political risk.
• A curious conference just happened.
• After holding out the hope of carbon capture for decades, it is now not "deployable".
• Perhaps maturity is better than growth.
• How do you think?
• They should come up with something better than they.

Bukharin's Lesson in Communism

A review of "The ABC of Communism", by Nikokai Bukharin and Evgenii Preobrazhensky, 1920.

Nikokai Bukharin was one of the 1917 revolutionaries that brought communism to Russia. He was in New York (as was Leon Trotsky) in February 1917, as the news of the budding revolution spread around the world, and joined that revolution in May. He and Trotsky were penning a socialist newspaper at the time, and were particular fans of the New York public library- a great example of a public-private partnership, (not to mention free speech), which houses countless products of private enterprise, in a public facility. Back in Russia, they helped establish the world's first socialist and communist state, destroying the nascent parliamentary system of Karensky, and then the arrayed forces of the old aristocracy in the Russian civil war. They did this by promising something even better than parliamentary democracy- a proletarian state that would forever place workers in power, and end the power of capital and the aristocracy. 

A convenient document of the thinking behind all this is the "The ABC of Communism", by Bukharin and Evgenii Preobrazhensky, put out in 1920 and republished long thereafter to provide a popular argument for communism and the soviet system. It encapsulates the economic and political theories that animated, at least at a conscious level, the new rulers. Bukharin was relatively young, regarded as a leading theoretician, and somewhat on the liberal side, not quite as ruthless as Stalin and Lenin. An autobiography and film about his wife tried to paint a positive image of him and of what things would have been like if Bukharin had managed to not get murdered by Stalin. So this work should present a relatively coherent and attractive case for communism.

Bukharin (center) in happier days, in Soviet leadership.

Well, I have to say that it is not very impressive as either economics or politics. While it provides insight into some capitalist dynamics, it fundamentally fails to understand the most basic drivers of economic systems, and obviously has not engaged with Adam Smith, who had written almost 150 years before. 

On the plus side, there is a lengthy treatment of the economies of scale, which rightly describes the advantages that large industrial enterprises have over smaller ones. The point of this, however, is mostly political, to show why anarchism, which was one of the many revolutionary threads still active at the time, made little sense. The Bolsheviks were besotted by industry and large-scale industrialization, which was at least one area where they put a lot of resources and accomplished a great deal, saving their skins in world war 2, later on.

"Consequently, THE LARGER THE UNDERTAKING, THE MORE PERFECT IS THE TECHNIQUE, THE MORE ECONOMICAL IS THE LABOUR, AND THE LOWER IS THE COST OF PRODUCTION."

Secondly, the author's treatment of cyclical crises in capitalism is not too far off the mark. They pin the problem on over-production, which then leads to workers getting laid off, loss of income and buying power, loss of credit, loss of ancillary business, and the downward spiral of depression. Whether lack of demand or over-supply, imbalances of this kind are indeed central to this kind of crisis. The author's solution? Better organization, in the form of state control over every aspect of the economy. They ceaselessly rail against the waste of capitalism- the competition with similar products, the disorganized manner of production by competing and cut-throat capitalists, the lack of overall harmonious coordination for the public good. But what of Adam Smith? It turns out that the chaos of capitalism has its beauties, and its efficiencies, squeezing every drop out of the environment, and out of workers, in its Darwinian competition.

Thirdly, they make a great deal out of the ambient excesses of capitalism, which were truly horrific, and were clear enough all over the world, leading to the communist's program of world-wide revolution by the working class. The monopolies, the strike-breaking, the child labor, the inhuman conditions, and the vast inequality- these were unquestionable evils, some of which remain endemic to capitalism, others of which have been ameliorated through reform in (relatively) democratic countries. As is typical, criticizing is easy, and there were, and remain, plenty of problems with capitalism and with democracy as well. The question is whether Bukharin plumbs the essential depths of economics sufficiently to come up with a better economic system, or of its associated politics to come up with a better form of the state.

And here the answer has to be, as history demonstrated, no. In their discussion of large scale enterprise, they go through a rather particular example to show the power of scale.

"How great is the advantage of this system was made manifest by some American researches instituted in the year 1898. Here are the results. The manufacture of 10 ploughs. By hand labour: 2 workers, performing 11 distinct operations, worked in all 1,180 hours, and received $54. By machine labour: 52 workers, performing 97 operations (the more numerous the workers, the more varied the operations), worked in all 37 hours and 28 minutes, and received $7.90. (We see that the time was enormously less and that the cost of labour was very much lower.) The manufacture of 100 sets of clock wheels. By hand labour: 14 workers, 453 operations, 341,866 hours, $80.82. By machine labour: 10 workers, 1,088 operations, 8343 hours, $1.80. The manufacture of 500 yards of cloth. Hand labour: 3 workers, 19 operations, 7,534 hours, $135.6. Machine labour: 252 workers, 43 operations, 84 hours, $6.81."

... "All these advantages attaching to large-scale enterprise explain why small scale production must invariably succumb in capitalist society. Large scale capital crushes the small producer, takes away his customers, and ruins him, so that he drops into the ranks of the proletariat or becomes a tramp. In many cases, of course, the small master continues to cling to life. He fights desperately, puts his own hand to the work, forces his workers and his family to labour with all their strength; but in the end he is compelled to give up his place to the great capitalist."

If we read this carefully, and do the math in the case of the ploughs:

$54 / 1180 hours = 4.58 cents per hour in wages

$5.40 per plough in cost

$7.90 / 37.5 hours = 21.1 cents per hour in wages

$0.79 per plough in cost

... we can see that not only is the plough almost ten-fold cheaper (some of which is presumably shared with the buyer in the market), but the workers were paid almost five-fold more per hour. How is this a bad reflection on capitalism? This is by way of telling why small scale production dies in a capitalist system ... it doesn't stand a chance. But the authors fail to mention that, in their own example, some of these gains are apparently shared with workers. So the gains in efficiency are shared quite widely- with customers, with workers, and also with the managers and capitalists, since this new form of work requires much greater contributions of management and capital equipment.

Bukharin and Preobrazhensky are "doctrinaire" communists, blind to a gem hidden in their own data that tells us how and why the capitalist system really works. Why did workers flock to the cities when there were agricultural jobs to be had? It was higher pay. Were the new capitalists holding workers as serfs against their will? Not at all. In the US likewise, whatever the horrors of capitalism, it did not hold a candle to the horrors of slavery.

More broadly, Bukharin and the communists generally had little appreciation for the difficulties and role of management. The surplus labor theory of Marxism leaves no room for management contributions of value to the final product- it is all excess labor stolen from the worker, to be restored in the idealized worker state/paradise. The capitalists are parasites:

"In communist society parasitism will likewise disappear. There will be no place for the parasites who do nothing and who live at others' cost."

Rentiers may be parasites, but managers are not. Theirs is the job to locate the resources, drum up the customers, to build the factories, to negotiate the wages, to run the work and fire the lazy. It is not an enviable or simple position to be in, rather is perhaps the most complex in the capitalist system, or any economic system. (And it is noteworthy that failures of management are endemic in government, of even the most enlightened kind, where crucial parts of this constricting set of incentives are often lacking.) It is the competitive forces pressuring on all sides- from customers, from workers, from government, from the financial markets, etc., that are integrated by the petty bourgeoisie / kulak class into a solvent enterprise, and are the soul of the capitalist system, for which they take a premium of profits off the top.

Bukharin and colleagues never pause to consider why capitalism is so dominant:

"Contemporary capitalism is world capitalism. All the countries are interconnected; they buy one from another. We cannot now find any country which is not under the heel of capitalism; we cannot find any country which produces for itself absolutely everything it needs."

Why is this? There was no shortage of experiments in the 1800's in socialistic styles of life, extending from the Shakers and the Owenites to the Tolstoyans. Few of them even survived very long, and none had a broader impact, let alone rising to the organic level of country-wide economic system. Religious monasteries are probably the only example of successful long-term socialistic organizations, though most are run on more or less totalitarian lines, with a whole separate set of emotional and personal committments. This starkly unsuccessful track record should have been a red flag- forgive the pun!- that while socialist utopianism is very popular, it is not practical.

This cavalier disregard of management and the elementary aspects of human economic demand (aka desire, aka greed) naturally came back to bite the communist Soviets, when, in the absence of a well-thought out way to run things in the wake of winning power on the back of their fantasy of a perfectly (and apparently easily, thanks to a mythical "statistical office") ordered and efficient economic system, they fell to the lowest device in the manager's toolbox- terror.

Bukharin on his way to execution, after having helped Stalin hound Trotsky to death.

Why the loose economics, fantastical pronouncements, and embarassing lack of realism? The reason becomes apparent as you read through "The ABC of Communism", which is that its main purpose is to inspire hate. It is a political tract that, as was current among communists then and since, seeks to frame an enemy, inspire hatred of that enemy, and support for the valiant vanguard that will vanquish that enemy. 

"What civil war can compare in its destructive effects with the brutal disorganization and devastation, with the loss of the accumulated wealth of mankind, that resulted from the imperialist war? MANIFESTLY IT IS ESSENTIAL THAT HUMANITY SHALL MAKE AN END OF CAPITALISM ONCE AND FOR ALL. WITH THIS GOAL IN VIEW, WE CAN ENDURE THE PERIOD OF CIVIL WARS, AND CAN PAVE THE WAY FOR COMMUNISM, WHICH WILL HEAL ALL OUR WOUNDS, AND WILL QUICKLY LEAD TO THE FULL DEVELOPMENT OF THE PRODUCTIVE FORCES OF HUMAN SOCIETY."

... "We are thus confronted by two alternatives, and two only. There must either be complete disintegration, hell broth, further brutalization and disorder, absolute chaos, or else communism."

Millions of people all over the world were thoughtless enough to accept this poisoned chalice, and went down the road of economic brutalization, famine, mass terror, and the gulag. Communism turned out to be a power play, not an economic Oz. It was a bright and shiny political lie. We are in the US becoming familiar with the power of such lies- their use of the basest and most powerful instincts- hate, and hope. Their ability to cut straight through any rational and empathetic analysis, and their ability to make seemingly reasonable people believe the flimsiest absurdities.

• China is looking at some serious problems.
• Utopias should be strictly for thinking, not doing.
• Wait, I can't live in an exclusive neighborhood?
• Is it OK for lawyers to engage in insurrection?