Saturday, January 26, 2008

Bring on the Recession!

George Monboit never one to shy away from controversy now is putting forward the idea that a little recession never hurt anyone.

In Bring on the Recession Posted October 9, 2007 he asks: How else will the destructive effects of growth be stopped?
If you are of a sensitive disposition, I advise you to turn the page now. I am about to break the last of the universal taboos. I hope that the recession now
being forecast by some economists materialises.

I recognise that recession causes hardship. Like everyone I am aware that it
would cause some people to lose their jobs and homes. I do not dismiss these
impacts or the harm they inflict, though I would argue that they are the
avoidable results of an economy designed to maximise growth rather than
welfare. What I would like you to recognise is something much less discussed:
that, beyond a certain point, hardship is also caused by economic growth.

Friday, January 25, 2008

How to Build a Better Stimulus Package

I have been hostage to recent banter in the media about the ailing economy and the need for a rapid stimulus package so I decided to invest some time in airing my views about the situation.

The below diatribe I put together in response to an article written by
PETER S. GOODMAN and LOUIS UCHITELLE on Jan 25 and it is titled Critiques of Spending Plan Retrace Old Debate.

Obviously no one really sees the stimulus being talked about as making all our economic magically disappear and yet I do think there is a problem in understand the depth of the economic problems that are now causing this slowdown.

More Band Aid Solutions from the Out of Touch and Arrogant Beltway Insiders
The problem is not whether the lowering of the 75 basis points by the Fed and a stimulus package and all the soothing talk about the economy coming out of Washington will work, it very well may work. The real is whether or not a serious discussion will be initiated to consider the possibility that we need real and fundamental change in how Washington and Wall Street does business. Without this any stimulus package is basically a meaningless waste of time and money, because it does not address the core problems of the American economy.

I recall an economist wondering why so many Americans feel bad about the economy, when they have it so good. To me that exposes not only a problem with decision-makers and opinion leaders being out of touch with the people, but of their being out of touch with the facts of economics and the idea that a strong economy is not just about economics but many other factors as well.

Americans appear to have an almost an intuitive sense that something is very wrong not just with our economy and more deeply with regards to our society. Yet that because they can’t articulate it and of course are really not listened to by the policymakers (except on a very superficial level), the need for real change goes unheeded. The change needed to address their concerns is of course difficult to put forward because it is controversial, visionary and risky and no one in the corporate/institutional world likes risk.

How to do a Stimulus Plan Right
The right Stimulus Plan can have an impact on the short term reducing the scope of the economic downturn as well as start to right some of the issues discussed here. The issue here is do we have a leadership in place that can make those kind of well thought out and visionary decision to get the American economy back on a firm footing.

The Challenge is that it takes some planning and we have to consider the context of the particular situation America is in now and some of the possibilities that the underlying issues:

  1. Low rate of savings,
  2. High levels of imports
  3. High rate of debt

These trends which Greenspan was aware of, but basically swept under the rug for many years may be finally coming to a head. A stimulus plan that ignores these underlying trends will not be effective in addressing the long term trends that may be currently impacting the economy.

Capitalism and its Influence on Society
The influence of capital can distort the fundamental reality of the economy through subtle pressures and influences that dominant market players exert through various means as discussed in detail by leading leftist theorists from Marx to Chomsky. We don’t have to agree with everything they say to conclude that there is a shred of common sense truth in what they say. Regardless of the complex theories discussed within academia, we can observe and catalog the many ways in which the influence of money can distort people’s perceptions. In addition, a case can be made that this can sometimes adversely impact the long term public interest.

Economic Nationalism and the Myth of America’s Economic Supremacy
It is commonly repeated in the media about this incredible legacy of our American Economic Juggernaut and yet I wonder if the media could not be trusted to report accurately about companies like Enron or the Housing Boom that it would get this issue of the general state and direction of the economy right either. Economic nationalism is this idea that the American economy is somehow special and exceptional to the rest of the world. The terms commonly used are American Economic Juggernaut. There is no debating that the recent performance of the American economy has been impressive over the last 20 or so years. Yet what if the people responsible for this did not do this by making the fundamentals, but rather were very clever at plugging the holes in that American Economic Juggernaut?

Canaries in the Coal Mine
The Iraq War and also Hurricane Katrina are significant barometers of the country’s overall health and they expose a deeper crisis in American society. Those who are making very important decisions are not making very good ones about very costly things like wars and protecting our major cities from unprecedented natural disasters. So why would we expect them to make an informed decision about the economy when say we were at a pivotal time such as possibly right now? Not only were there issues about the preparation for a hurricane raised (unfortunately though after the fact) and also with regards to the immediate response but also with regards to the long term recovery. Indeed I would have liked to have something in the stimulus package that addressed both the need to finally clean up the mess of Katrina and make sure the flood walls are in place to prevent this from happening again.

Yet the point is that American has lost not only its moral compass but its common sense practical and pragmatic ability to make wise and informed decisions about how to move into the future. Is a stimulus package going to solve this?

Global Climate Change = Limits to Growth?
The mainstream media often in times of great challenge does not ask the tough questions about the sustainability of our economy. And I mean this not in the one dimensional way that most economists see it (despite the fact that everyone is talking Green) as merely relating to the economic fundamentals of sustained growth. Rather I am talking about the often complex and interrelated impact of global environmental and social issues on economic growth and visa versa. The WWF has noted that as economic growth has skyrocketed over the last 100 years natural systems and natural capital has suffered unprecedented declines. Obviously this is not sustainable, so then one might as a critical and informed citizen question this idea that America as one of the world’s most wasteful nations is really that much of an economic juggernaut. Yet there is not much we can do to change this overnight because there is such a fear about publicly talk about the growth dilemma and politicians cant touch that. However much could be done to design an economic stimulus package that could be a Marshall Plan for more green (sustainable) development and renewables to reduce our green gas emissions.

Recessions are a Fact of Life: Get Over it
I would argue that Recession is not really a bad thing Life is a cycle and so why would we assume that economies and societies grow forever? Economic Common Sense (many of those mainstream economists that the media cites in their reporting seem to be lacking in this) tells us that a recession is a valuable tool to balance out markets. Within sectors we have seen numerous times over the years in dotcoms and now in housing that if you have a time of irrational exuberance it has to be balanced out with a time of decline and a thinning of the chaff. Yet postponing a cycle and preventing a recession at all costs I believe is quite similar to the US Forest Service’s Smoky the Bear fire policies. Because they instilled in people that all fire was bad they create the perfect storm in that now the fires burn so fast and hot that they really are bad. And yet if they had just allowed fires to burn naturally it might have prevented the most devastating ones by control the fuel loads in the forest. Recessions and corrections in the economy have a similar effect. Recessions are a necessary albeit painful part of a sustainable and healthy economic cycle.

Fundamental Economic and Social Change is needed to Create Sustained Prosperity for America
How this country acts now may determine its destiny for a long time to come. A severe long term recession could be lurking that could alter the future of a whole generation like say the generation that went through the Great Depression. While we may not be headed for Depression or even a severe recession, the case can be made that there are some major decisions that need to be made by our society and our government about what kind of direction we want to take in this next century with regards to technology, growth and the impact of these on the make up of our society and also on the ecology.

I am not optimistic right now that we are ready to make those decisions but I believe that if enough of us do overcome our fear of speaking our voices about what we see as the fundamentals of why this country is headed in the wrong direction and how we can correct that, that we can reverse course and create in the 21st century an unprecedented era of prosperity for ourselves and the world.

Tuesday, January 22, 2008

The New York Times Endorses Clinton

The NYT in their endorsement of Clinton "opposed President Bush’s decision to invade Iraq and we disagree with Mrs. Clinton’s vote for the resolution on the use of force." Yet they still endorsed her explaining that "That’s not the issue now; it is how the war will be ended."

Yet Clinton very pragmatic and establishment foreign policy shows how Clinton will make decisions. Clinton's recent deceptive and very negative campaign against Obama is also significant. I hardly feel this kind of deceptive campaigning is what is going to bring a refreshing new approach to governance in this country.

We are trapped in our media echo-chamber and it is making us more and more ahistorical in our perspective. This only makes us more easily malleable to the intentions of those power. People perennially want change in their presidential campaigns and never get it? Why? They/we are unwilling players in The Change Game and they forget or lose their ability to see how they are being manipulated by the powerful for their vote as well as their dollar. People of influence get influential because they know how to use words, gestures and iconic forms to manipulate people and to convince them that this is the Change Agenda or our candidate is the Change Candidate.

We get polished leaders with much experience but with little understanding of complex and interrelated issues, because many in power really dont want the public to know what they are up to and more simply people are too overwhelmed with their personal duties and obligations as consumers and workers.

For example, we can only understand radicalism in Iran today if we look at the complete history of American policies starting in the 50s and leading to the overthrow of a popular leader by the CIA. Another example is that Saddam was not more upfront with the world about the fact he had no WMDs because he felt it was important to make a strong show to Iran his mortal enemy.

We have a system that sweeps complex issues quickly under the rug (as the Times did in its overlooking of Clinton's vote on Iraq and then Iran and also with regards to it underhanded campaign tactics), and instead prefers to fixate on horserace mentality when it comes to politics. The unsustainability of our socioeconomic system seems painfully evident in our never-ending presidential campaigns. The public elects corrupt and out of touch leaders, because the powerful frame the public discourse so that such candidates are the ones that rise to the top.

People then become cynical because the elites that run our society appear to not really care about doing what is right, but rather what is expedient to their fuel their ambitions for power and so they seek "change".

The bottom line is that experience and pragmatism almost always ends up trumping experience, as there is so much momentum against those who put forward an authentic vision of change in the political arena.

Real Change is not a beauty contest but forward by spinmasters rather its about cultivating a serious national discussion that leads to a deeper understanding of what is wrong with our society today and how to change it and so it is inherently incompatible with presidential politics. For example, the "mainstream" contenders seem totally uncritical in their support of the recent stimulus package to prop up a broken economy and yet what does this do to rebuild our crumbling infrastructure or to address the growing evidence (and pricetag) of global climate change?

What seems Like Common Sense...

Below is a response I came up with to WSJ Blog regarding concerns about the economy.

The blog post seems like an opportunity to spin real concerns about the mismanagement of this country's and indeed into fearmongering.

I don’t see this as fearmongering or pessimism; the problem is not whether or not we are going to have a recession, but how to address the bankrupt mindset that sustains and drives American society.

All too often the mainstream media discusses concerns and questions about the sustainability of our economy in a very dismissive way. However, I do recall Morton Zuckerman and Buchanan both expressed similar concerns on the McLaughlin Group a few months ago. Yet I am loath to put too much stake in their "insight".

I found this little tidbit about UK's Times interview of Ben Bernanke and his predictable response to questions about the state of the American economy:

BEN Bernanke, the man selected yesterday to be the world’s most powerful central banker says that the US economy is set fair for strong, non-inflationary growth in spite of the sharp rise in energy prices this year, and staunchly defends President George W. Bush’s controversial fiscal policies.



Speaking exclusively to The Times, Bernanke rejects suggestions that the US fiscal deficit and public spending are out of control and says that the rest of the world needs to do much more to redress global economic imbalances that have produced the largest US current account deficit on record.

I don't think anyone in the Beltway can get it right, because they are belly of the beast. Yet I won't leave Wall Street out either, the business mantra (to put it nicely) has been mindless and self-serving, but apparently that is what business is supposed to be all about.

A compelling case can be made that this too will not pass and that the fabled "American goldilocks economy" is about to burn away like a desert mirage, waking us up to the shocking reality of a world facing historically unprecedented challenges in terms of the sustainability of the global society economically, socially and ecologically. The potential ramifications of many of these challenges are the kinds of things that typically pampered and sheltered American is totally unprepared to deal with.

What seems like common sense...stimulating the economy in a way that mitigates global climate change would be the wisest way to prevent a major economic collapse...is not considered a serious option in Washington. Whose reality is for real? Maybe we won't have to wait much longer to find out.

The problem is that America has lost its ability to think clearly about public policy and to take courageous steps to really reform a grossly unsustainable economy. What if America is at pivotal time in it history just like the 1920s and 30s. What if the decisions we make as Americans in the next few years will determine the viability of our nation and democracy in the coming years?

Maybe it is not so much a problem of the "stupid average American" as the leftist elite likes to see the average American as. Who can blame people for going with flow and conforming to Wall Street? Where the money goes the people flow. The stuff that passes for news and information which is controlled by corporations can be overwhelming just like a force of nature.

Yet most economic classically trained economic pundits are left scratching their collective heads...if everything's been so darned good with this economy over these last few years...why are so many feeling so bad about the direction of the country? They just don't get it. What's wrong with people? Don't they know how good they have it?

When you take off those Wall Street, Hollywood, Beltway blinders, the real issue becomes: how can a society be sustained practically when public policy is not reflective of the real issues that everyday people face?

Of course it can't; such a system can't be sustained. How can good come to a country when it engages in so many bad investments such as the Iraq War? What about the long term impact of investing heavily in urban sprawl and car culture, while Europe and Japan have compact cities and strong mass transit and intercity rail systems, when there is rising consensus about Global Climate Change?

So if this is some minor blip as some economic pundits like to see it as...then let it roll...they'll be better times ahead soon why the deadwood of that American Economic Juggernaut is blown away.

There's a deep seated intuitive fear that the majority of Americans now have. It revolves most basically around the perception that our society and economy is broken. So how can you blame them for thinking that you'll need more than a 150 billion dollar stimulus package or 75 basis point rate cut? If you believe there is something fundamentally broken about this country and you feel the politicians can't really articulate a real change agenda, because that might them seem "out there," then apathy, cynicism and disgust become the lowest common denominator that drives the consumer economy - that “American Economic Juggernaut.” Indeed there is a growing perception that the American economy is in long term decline.

So we are left with an amazingly superficial approach to the world and to public policy fully supported by most of the establishment media, academia, the wealthy and the politicians, but very much out of touch with the reality of how the world actually works. No one wonder we keep seeing the "Enron effect" continuing to plaque Wall Street and Corporate Culture.

If there is some doubt about how much a juggernaut the American economy, then you’d better batten down the hatches baby, cause there are some rough seas ahead no matter how many tax credits or rate cuts are given out to pacify the concerns of the consuming masses!