Politicians Did Not Get Rich From Hollowing Out the Economy

In his inauguration speech Trump said:

For too long, a small group in our nation’s capital has reaped the rewards of government while the people have born the cost. Washington flourished, but the people did not share in its wealth. Politicians prospered, but the jobs left and the factories closed. The establishment protected itself, but not the citizens of our country. Their victories have not been your victories. Their triumphs have not been your triumphs and, while they celebrated in our nation’s capital, there was little to celebrate for struggling families all across our land.

He claims that politicians got rich by off-shoring jobs and driving up trade deficits. This is an instance of a standard Republican lie, that our problems are caused by politicians. In fact, all the profits from off-shoring went to corporate executives and owners of corporations. They made political contributions, sure, but that doesn’t enrich anyone. The gains to citizens were some lower prices at a cost of whatever wars and worse-paying jobs.

The decisions to off-shore and outsource jobs are made by corporate executives and controlling owners. They had many reasons to invest in other countries, ranging from a desire to protect their own businesses from being underpriced by foreign entitiesk, incentives offered by foreign countries, lower labor costs, and access to foreign markets among others.

US policy in both parties since at least WWII has been generally sympathetic to foreign investment for many reasons, not least the belief that nations linked by commerce and trade are less likely to go to war.

Foreign investment is always dangerous. The risks include expropriation, local governments that won’t or can’t stop violence against plants and equipment, lack of protection of intellectual property, and others. Karl Polanyi discusses these risks in The Great Transformation. Hannah Arendt agrees in The Origins of Totalitarianism. In different words, and with different emphasis, they say Western European capitalists solved this problem by enlisting the government to protect them when they invested abroad. The same thing happened here. Thorstein Veblen saw it clearly in 1904:

… [W]ith the sanction of the great body of the people, even including those who have no pecuniary interests to serve in the matter, constitutional government has, in the main, become a department of the business organization and is guided by the advice of the business men. Chapter 8, Principles of Business Enterprises.

Here’s a discussion of the implications of that statement for foreign investment.

Right down to today, capital enlists the support of the government to protect it so it can make profits in other countries, and government responds for its own reasons. We have always used military force for that purpose, but now the primary tool is trade treaties. The recent example of the TPP stands out. It was written by corporations and their lobbyists and lawyers, and supported by mainstream economists. It was opposed by working people and unions and most progressives. It was supported by a bipartisan majority of legislators. It should be noted that it was rejected by Trump and Sanders and disparaged by Clinton.

I won’t try to untangle all the interlocking interests, or to discuss the negotiations between the two camps, government and capital. But Trump’s assertion that Washington politicians got rich off foreign investment is stupid and false. The people who got all the money from from foreign investment are the executives and the obscenely rich people who own and control these corporations.

The incoherence of Trump’s statements in his inauguration speech and in his campaign speeches about corporate overseas investment is displayed in this New York Times article discussing Trump’s meeting with CEOs of giant US manufacturers. The reporters, Nelson Schwartz and Alan Rappeport, say that Trump told the “titans of American business” that they had better move manufacturing jobs here, threatened them with taxes that look like tariffs, and offered rewards like lower taxes and fewer environmental regulations. The reporters say that this is pointless, because taxes and regulations do not determine where corporate investment are made.

The reporters say that the real cause of overseas investment is Wall Street, by which they mean Capitalists, including hedge fund managers, giant Banks, and the richest investors.

In some cases, Gordon Gekko-like hedge fund managers are to blame, but much of the time, it is the drive for bigger returns on 401(k) accounts, pension plans and other retirement vehicles that depend on steadily rising corporate profits and, in turn, a buoyant stock market.

That’s just wrong. Many pension funds are operated by private Wall Street firms through Gordon Gekko-like managers. The largest funds spread management around among several management firms, and invest with hedge funds, and get investment advice from Wall Street firms for the funds they manage themselves. The idea that Wall Street cares about small investors or their IRAs is silly. I’ll just ignore the stupidity of using a movie character when it’s easy to identify the real perpetrators. You could just read this article to find one, Daniel Loeb.

The actual problem is that the federal government let the interests of the rich set our industrial policy with no public input, and actively ignored the interests of US workers and citizens, and sometimes even the security interests of the nation.

I suppose it’s possible that Trump meant that the rich have too much influence in government, and he means to change that. But seriously, can anyone imagine that the Republicans or the neoliberal Democrats will allow Trump to initiate trade wars over protectionist tariffs? Does anyone think that Trump will do anything to harm the interests of the rich, or that Trump doesn’t personally identify with the rich and their interests?

And exactly how is this different from that time President Obama chewed out the banksters over their greed in April, 2009? Nothing changed then. Why should this time be different?

It won’t be different until a solid majority of voters come to grips with the fact that the dangerous elites in this country aren’t college professors or scientists or liberals. The dangerous elites are the rich people who control the giant corporations and the people who support them, in and out of government.

Ask Uncle Ed

Dear Uncle Ed,

I feel very, very badly for the people who are very scared for their way of life. From what I’m understanding, [Trump is] only really wanting illegal immigrants that have committed crimes to be deported, which I agree with. I feel bad for the lesbian and gay and transsexual community that fear for their way of life. From what I understand, he says he’s not going to mess with that.

Somebody called me a racist because I did vote for Trump. Hold on, you don’t know me. Doesn’t that make you a racist by calling me a racist when you don’t know me? I’m looking for a brighter future for me and my children, and honestly I felt l like our country was kind of at risk if we did elect Hillary.**

Signed, K.H. in AL

Dear K.H.

Uncle Ed is glad to see you acknowledge that lots of people are likely to be harmed by the election of Trump. As to immigrants, you are right to be careful in stating Trump’s position, because he has several. As to his position on the LGBT community, again, you may be quite right. Who knows?

But you seem to think the only issue is what Trump thinks. That’s just not true. Trump was elected as a Republican, and now the federal government is controlled by Republicans. As a group, they have repeatedly promised to get rid of immigrants, as did Trump mostly, and have relentlessly opposed decent treatment of immigrants who live here and their children born here or brought here. They support laws and rules treating the LGBT community as second class citizens.

You didn’t mention the risks facing African-Americans, who are already mistreated by the police, and treated unequally in education, safety and hiring. Trump calls himself the “law and order” candidate, which is Republican-speak for even more aggressive policing and mistreatment of Black communities.

You are offended that someone called you a racist. Uncle Ed is glad you don’t want to be thought of as a racist. But, here’s the thing. Your vote empowered known racists like Steven Bannon, Trump’s campaign manager and now a policy adviser in the White House. The Republican party will do its best to hurt immigrants, the LGBT community, and people whose religion or lack of religion they don’t approve, not to mention Blacks and Latinos.

Uncle Ed doesn’t know what’s in your heart. Uncle Ed doesn’t care. Uncle Ed cares about how you act. If you vote for a racist, if your vote emposers racists, then there is no functional difference between you and the most rabid KKK member in terms of the political outcomes for the outgroups. You are operationally a racist.

The most that can be said is that you are willing to accept racism if it makes your life better. That’s how you defend your vote. You claim just you want a brighter future for yourself and your children. As you put it: “…our country was kind of at risk if we did elect Hillary.” Again, what makes you different from self-acknowledged racists?

What about all the other minorities who will be harmed directly by installing racists in the White House and racism in Congress? You are willing to sacrifice all of them and their children. You are willing to deny them their claims to equal dignity and equal rights in whole or in part.

Equal dignity and equal rights are a crucial part of what it means to be an American. The Declaration of Independence says that all of us are entitled to equal dignity. The 14th Amendment to the Constitution says that all of us have equal rights under law. Those ideas, however imperfectly we have lived up to it, are the heart of our democracy.

Now, thanks in part to you, we are governed by a party that flatly doesn’t believe in that kind of equality. They are perfectly willing to ignore some or all the rights and interests of vast numbers of Americans. the LGBT community, women, Muslims, and who knows, maybe even white male coastal elites like Uncle Ed. They don’t think we are real Americans. They expect those despised groups to follow all their laws, to respect their politicians, and to pay taxes, but they do not intend to treat us equally in rights or dignity.

You violated a core American principle. It was thoughtless of you to act this way. Uncle Ed wishes you hadn’t. Calling you a racist seems like a mild reproof when you consider the likely consequences for millions of your fellow citizens. Uncle Ed hopes you continue to think about people other than yourself in the future, and refuse to vote for any politician whose first principle is to deny any of us our rights as Americans to equal dignity, and to be treated equally by our government.

* This is perhaps the first of an occasional series. I’ve been trying to figure out how to respond directly to the stated reasons people give to explain their vote for Trump. It’s mostly a way for me to justify my own position. I’ve been debating whether to post this, but today I saw the movie HIdden Figures, which helped me make up my mind.

Lefties, liberals, coastal elites, all of us are constantly told we need to understand and sympathize with the concerns of Trump voters. Trump voters are never told they must work to understand and sympathize with people who voted for the Democrat. In fact, Trump voters are told that liberals are their enemies, that we hate them and want to hurt them. Of course, they don’t read my posts, and I know I won’t ever persuade anyone that they made a terrible mistake. But I do wish they were forced to think about why those they believe are The Other might be so angry.

** This is quoted from this New York Times article.

2017 Divisional Playoff Weekend Trash Talk

Thank you to Marcy for handling Trash Talk last weekend. That was one hell of a NCAA Championship game between Clemson and Alabama. I was at the 1997 Rose Bowl, which I thought previously was the greatest college football championship game I had ever seen, whether live or on television, and I think the last second Clemson win eclipses that pretty easily. Wow.

But now we are into week two of the NFL playoffs, and there are four games on tap. First up is Seattle at Atlanta. On the surface, this seems like a great game and you would have to think the Squawk’s savvy and playoff experience winning games is every bit the match for Atlanta, and their history of losing them. I don’t think so this year. Something is deferent about these dirty birds. I’ll take Matt Ryan and his crew today.

The night game for Saturday is the Texans at the Pats. I am not sure this is the total mismatch a lot of the national sports media are making it out to be, because the Houston defense has really grown and coalesced since early in the season. Yes, Bill Bel and the boys waxed them early in the year, even with Jacoby Brissett at QB. Houston is better now. But that ain’t enough, irrespective of the final score, just cannot see the Pats not moving on.

First up Sunday is, now thanks to heavy weather in KC, the game that was supposed to be the late Sunday featured NBC game, the Packers at Cowboys. I honestly don’t know what to think about this one. Both the Cheese and Boys have serviceable, and at times good, defenses. But neither are world beating; slight edge to the Cowboys because the Pack secondary is being manned by a few Game may well come down to the QB’s, as NFL games usually do. As good as Dak Prescott has been, that edge goes to Mr. Rodgers, who has been on a roll of all time historic proportion lately. But, if Prescott avoids turnovers and Elliott gets going on the ground, that can keep Rodgers off the field. In Lambeau, I’d take the Pack easy, In Big D, I dunno. No clue what turns out, a serious pick em in my book.

The new finale is Scribe’s Steelers in KC to face the Chefs. The weather has been so foul that the NFL moved the game time. What kind of bad weather can this be? Thanks to Peterr, we have the official forecast:






Gulp, that doesn’t sound good! But presumably the game goes on anyway, even if at a new time. Like Houston/NE and GB/Dallas, this is another rematch of an in season game. Early in the year, the Chefs were blown out by the Stillers, at Heinz Field. (Thanks for the editing Peterr!) Lot of people think KC can, and will win at home against the AFC North Champs. Not me. Big Ben, Bell and Brown are healthy and clicking in synch better than they ever have. That is saying something. KC is a great team, and Andy Reid is a seriously underrated great coach. But that is not enough with the way Pittsburgh is rolling right now. And Harrison, Bud Dupree and the Steel Curtain, while maybe not what that name once implied, are still pretty damn good, and playing well together. Stillers move on.

So, that is it for now. Have a GREAT Martin Luther King weekend and holiday folks. And, may I point out that John Lewis is an American hero for all ages, and Donald Trump is a worthless piece of shit.Music this weekend by Stanley Clarke, Al Di Meola and Chick Corea, i.e. Return To Forever.

The Great Transformation Part 6: Labor as a Fictitious Commodity

Previous posts in this series:

The Great Transformation: Mainstream Economics and an Introduction to a New Series

The Great Transformation Part 1: The Market

The Great Transformation Part 2: More on Markets

The Great Transformation Part 3: Neoliberalism Before It Got Its New Name

The Great Transformation Part 4: Reaction and Counter-Reaction To Self-Regulating Markets

The Great Transformation Part 5: Polanyi on Marxian Analysis

In Chapter 6, Polanyi says that the theory of the self-regulating market, which is at the heart of laissez-faire and neoliberal economics, requires that all of the elements of production and consumption be subject to the price-setting mechanisms of a market, and that government is not allowed to interfere with those markets in any way. Polanyi defines commodities as things produced for sale; and markets are “contacts between actual buyers and sellers”. Following that definition, commodities are generally subject to market pricing, and that was generally true at the beginning of the Industrial Revolution, say the late 1700s. But three crucial elements of production were not at that time fully subject to markets: labor, land and money. In order for the self-regulating market to function, these three elements had to be brought under market control and freed from government regulation.

In Chapter 6, Polanyi calls these three elements “fictitious commodities”. That’s because they aren’t produced for consumption as the definition requires. Labor is human beings, who are part of society, not some product. Land stands for our natural surroundings, the place we live, and if we treat it like a cornucopia of goodies we’ll foul our own surroundings and make our lives miserable. Money is a social creation, not a commodity produced for sale.

And yet, for the self-regulating market to work, any element of humanity that extends beyond slavery, all efforts to preserve our home planet, and social control over our social creations must be stripped out, and the remains shoved into the same mold of one-dimensional value as potatoes and shoes. Anything less gives the defenders of laissez-faire and today’s neoliberals room to argue that the self-regulating market has never been allowed to do its magic and provide us with a material heaven on earth.

Polanyi discusses the impact of bringing the three fictitious commodities into market control in Chapters 14, 15 and 16. We start with the market in labor, which means the market in people’s lives. In Chapter 10, The Discovery of Society, Polanyi explains the separation of the economic and political spheres, starting with Joseph Townsend’s 1786 A Dissertation on the Poor Laws. Townsend tells the story an island populated by dogs and goats. The dogs eat the goats until there are too few to support the number of dogs. Then the dogs die down and the goats thrive. Then the dogs thrive and eat the goats, so the population of goats goes down. Here’s Townsend’s moral:

The weakest of both species were among the first to pay the debt of nature; the most active and vigorous preserved their lives. It is the quantity of food which regulates the numbers of the human species.

Here’s how Adam Smith explains it in Book 1 Chapter 8 of The Wealth of Nations:

Every species of animals naturally multiplies in proportion to the means of their subsistence, and no species can ever multiply be yond it. But in civilized society, it is only among the inferior ranks of people that the scantiness of subsistence can set limits to the further multiplication of the human species; and it can do so in no other way than by destroying a great part of the children which their fruitful marriages produce.

The liberal reward of labour, by enabling them to provide better for their children, and consequently to bring up a greater number, naturally tends to widen and extend those limits. It deserves to be remarked, too, that it necessarily does this as nearly as possible in the proportion which the demand for labour requires. If this demand is continually increasing, the reward of labour must necessarily encourage in such a manner the marriage and multiplication of labourers, as may enable them to supply that continually increasing demand by a continually increasing population. If the reward should at any time be less than what was requisite for this purpose, the deficiency of hands would soon raise it; and if it should at any time be more, their excessive multiplication would soon lower it to this necessary rate. The market would be so much understocked with labour in the one case, and so much overstocked in the other, as would soon force back its price to that proper rate which the circumstances of the society required. It is in this manner that the demand for men, like that for any other commodity, necessarily regulates the production of men, quickens it when it goes on too slowly, and stops it when it advances too fast.

It’s an unpleasant picture, but with decent nutrition and good medical care along with birth control and abortion, it’s an accurate description today. Birth rates decline in recessions and increase when the economy is booming. The difference, of course, is the element of choice available today, as this recent Wall Street Journal article explains:

While the uptick in fertility and birthrates is modest and could reverse, it appears the country’s improving economy is encouraging more couples to have children. The lingering financial toll of the recession prompted many young and less-educated Americans in particular to delay childbearing.

In Chapter 14, Polanyi describes the technique for bringing labor under market control.

To separate labor from other activities of life and to subject it to the laws of the market was to annihilate all organic forms of existence and to replace them by a different type of organization, an atomistic and individualistic one.

Such a scheme of destruction was best served by the application of the principle of freedom of contract. In practice this meant that the noncontractual organizations of kinship, neighborhood, profession, and creed were to be liquidated since they claimed the allegiance of the individual and thus restrained his freedom. To represent this principle as one of noninterference, as economic liberals were wont to do, was merely the expression of an ingrained prejudice in favor of a definite kind of interference, namely, such as would destroy noncontractual relations between individuals and prevent their spontaneous reformation.
P. 171.

Could that be closer to the neoliberal view of humans? Economic freedom is the only kind that matters, say the neoliberals. And government is to be used to enforce the kinds of contracts the neoliberals want, and strike down all contracts neoliberals don’t like. All debts are to be enforced to the letter against human beings and cities. All cooperation among workers is a restraint of trade, and is stopped by courts. All labor is available for consumption by employers, and if you don’t want to work, you are free to starve.

Corporate Profits as Percentage of Gross National Product

Corporate Profits as Percentage of Gross National Product

Meanwhile, the capitalists will not accept the possibility of any reduction in their take from the system, currently at absurd levels. When Donald Trump, who represents the Republican consensus, says that wages are too high, he means that returns to capital must be kept at the highest possible level. In order for profits to remain high, we have to keep wages low. Then we have to destroy the social safety net so workers will be forced to work for whatever wages are available. The lash of hunger should do the job, along with a militarized police force. This is the society envisioned by the early economists.

And, this is what Polanyi means when he talks about the dangers of treating labor like any other marketable commodity. It means the subordination of every aspect of the lives of workers to the maintenance of the wealth of the filthy rich.