The sky is falling

For the Steven Pearlstein’s (and Tea Partiers and other right-wingers), the problem is not unemployment or capitalist exploitation but the fact that we’re “living beyond our means.” For them, the sky is falling and it’s a result of high levels of private and public debt:

a level of debt that leaves us vulnerable to that inevitable but hard-to-predict moment when creditors lose faith, interest rates rise and debtor countries get sucked into a vicious downward spiral in which increasing debt payments, slower growth and currency devaluations all feed off one another until the economy collapses.

The only choice they see is to make “painful adjustments to our standard of living” now or later:

Inevitably we’re talking about higher taxes, higher interest rates, reduced government benefits and services, delayed retirements, higher prices for imported goods and slower growth, all of it lasting several years until things are brought back into balance.

The fact is, these “painful adjustments” have been going on for over two decades and the majority of the population, not the tiny minority at the top, are the ones who are suffering—with lower pay, longer work hours, more unemployment, increased insecurity, and so on. If the sky is falling it’s not because of federal deficits and private debt but because people who work are being squeezed for the benefit of those few on top who are making out like bandits. And all Pearlstein can think of is to squeeze them more.

How to rob a country

Here’s the conclusion to the Real News Network’s interview with Bill Black, entitled “To rob a country, own a bank”:

The other four parts can be found at the New Deal 2.0.

Cartoon of the day

Labor theories of value

The responsible answer to a query such as “I would be curious to know what you consider the biggest flaw in the labor theory of value to be” is “to which labor theory of value are you referring?” But that’s not how Tyler Cowen responds. Instead, he repeats the familiar misunderstanding of Marx’s labor theory of value and, having erected a straw man, proceeds to identify its “fatal flaw.”

What Cowen fails to understand, or reveal to his reader, is that there are different theories of value based on labor. Ricardo’s labor theory of value is not the same as the labor theory of value elaborated by Marx. In fact, Marx’s is a critique of Ricardo’s approach. They are radically different labor theories of value, oriented by different questions and concepts, and they provide very different conclusions, about the value of capitalist commodities and much else.

It is a sad fact about contemporary economics that students are not exposed to the Marxian labor theory of value, much less the differences between it and other (e.g., classical and neoclassical) theories of value. That’s because most practicing mainstream economists have chosen not to learn about the different theories. They have no interest or background in theories of value other than the neoclassical one, and they simply cannot teach them.

This is not the place to teach the history of economic thought (which has been eliminated from most economics curricula, especially at the graduate level) or the analytical differences among theories of value (which are rarely taught in microeconomics courses and are never discussed in the mainstream journals). Suffice it to say, whereas the point of Ricardo’s labor theory of value is to show that the value of capitalist commodities can be reduced to and explained in terms of nature (especially population growth, soil fertility, and the rate of capital accumulation), Marx’s labor theory of value shows how a surplus-value arises from exploitation and is in turn distributed through a capitalist economy.

So, as my friends and colleagues Richard Wolff, Bruce Roberts, and Antonio Callari showed back in the 1980s, Marx’s approach to the “transformation problem” should not be confused with the problems that arise in Ricardo’s theory of value.* Therefore, Cowen’s “simplest response, . . .to give up the labor theory of value,” would mean abandoning a project that no other theory of value can accomplish: to show how flows of unpaid labor affect (and, of course, are affected by) the exchange ratios among capitalist commodities.

* R. D. Wolff, B. Roberts, and A. Callari, “Marx’s (not Ricardo’s) ‘Transformation Problem’: A Radical Reconceptualization,” History of Political Economy 16 (1982) and “A Marxian Alternative to the Traditional Transformation Problem,” Review of Radical Political Economics 16 (1984).

Publicly owned banking

An alternative to private, for-profit banking. What an idea!

North Dakota has had a state bank since 1919. And Ellen Brown reports on the fledgling movement to create more publicly owned banks.

Actually, what is surprising is that there’s only one such bank in the United States. And only 7 political candidates in as many states who are proposing publicly owned banks. And this, after the world economy was taken to the brink by the actions of the existing banking sector (and, of course, the inactivity, of the Fed).

One of the candidates is Gaelan Brown, of Vermont, whose “fiscal” policy platform is based on the following propositions:

Vermont should explore creating a State-owned bank that would work with private VT-based banks, to insulate VT from Wall Street corruption, and to increase investment capital for VT businesses, modeled after the very successful State-owned Bank of North Dakota.

Vermont needs a stable currency that is valued based on our productive activity and not manipulated by Wall Street and the unconstitutional, private central bank known as the Federal Reserve.

A State-owned bank could also serve as an “Emergency Fund,” offering low-interest loans to any Vermont resident to cover health-care or other emergencies like fuel-assistance, unemployment, temporary food-subsidies for people who are laid off/sick, or otherwise unable to provide for themselves. This emergency-loan function alone could eliminate the need for a bloated state social service bureaucracy while still providing a strong safety net and encouraging personal responsibility.

If Senator Dodd and Obama’s economic team are going to fritter away the opportunity for real financial reform, perhaps publicly owned banks should be considered among other alternatives to a situation in which the country is held hostage to the fortunes of 6 banks.*

* The usual suspects: JPMorgan Chase, Citigroup, Goldman Sachs, Morgan Stanley, Wells Fargo, and Bank of America.

Catholic theocracy

At the time, few understood Sinead O’Connor’s decision to tear up a picture of the pope during her 3 October 1992 appearance on Saturday Night Live. Now, evidence of the church’s child-abuse scandals—which have spread from the United States through South America to Western Europe—is there for all to see. And, according to the most recent reports, it has arrived at the doorstop of the highest level of the church hierarchy, both past and present.

O’Connor has just published an essay describing what it was like to be raised in the Catholic theocracy of Ireland and challenges Pope Benedict’s apology—”of sorts”—for past church abuses in that country.

Benedict’s apology states that his concern is “above all, to bring healing to the victims.” Yet he denies them the one thing that might bring them healing — a full confession from the Vatican that it has covered up abuse and is now trying to cover up the cover up. Astonishingly, he invites Catholics “to offer up your fasting, your prayer, your reading of Scripture and your works of mercy in order to obtain the grace of healing and renewal for the Church in Ireland.” Even more astonishing, he suggests that Ireland’s victims can find healing by getting closer to the church — the same church that has demanded oaths of silence from molested children, as occurred in 1975 in the case of Father Brendan Smyth, an Irish priest later jailed for repeated sexual offenses. After we stopped laughing, many of us in Ireland recognized the idea that we needed the church to get closer to Jesus as blasphemy.

Meanwhile, the Vatican has gone on the offensive, “attacking the media for what it called an ‘ignoble attempt’ to smear Pope Benedict and his top advisers ‘at any cost’.” All of this has been happening at the same time that the U.S. Conference of Catholic Bishops went on the offensive against health care reform in the United States. Perhaps they should spend as much time guarding the kids already under their care instead of chasing down nuns and politicians over the kids not yet born.

And Matt Taibi is even tougher:

That’s all the church is. They’re a giant for-profit company using predatory salesmanship to sell what they themselves know is a defective, outmoded, basically unnecessary product. They’ll use any means necessary to keep their market share and if they have to lie and cheat and deflect and point fingers to keep the racket going, they’ll do it, just like any other sleazeball company.

But I think it’s time we started considering that what the church is is even worse than that. It’s possible we should start wondering if the church is also a criminal organization that in this country, anyway, should be broken up using RICO statutes.

Public art of the day

Ripo

Cartoon of the day

What recovery?

This is what the current “recovery” looks like, in terms of employment, compared to all other postwar recessions in the United States, according to the Minneapolis Fed.

Economics—in 5 acts

David Brooks, never one of my favorite columnists, actually does a pretty good job summarizing the history of mainstream economics:

Act I • the era of economic scientism, “the period when economists based their work on a crude vision of human nature (the perfectly rational, utility-maximizing autonomous individual) and then built elaborate models based on that creature.”

Act II • the past few decades, when “a few brave economists tried to move beyond this stick-figure view of humanity.”

Act III • the economic crisis of 2008 and 2009, which “exposed the shortcomings of the whole field.”

Act IV • “the period of soul-searching that we are living through now.”

Act V • “they will blow up their whole field.”

OK, the fifth act is merely wishful thinking. And what Brooks presents is a play that only pertains to mainstream economics. If boiled down to two acts (let’s call them classical and neoclassical economics), then we can see that mainstream economics first appears as tragedy, then as farce.

As for Brooks’s imagining that mainstream economists will first blow up the discipline and then reinvent it as a “subsection of history and moral philosophy,” we need go no further than Marx’s analysis of the “Eighteenth Brumaire of Louis Bonaparte“:

The tradition of all dead generations weighs like a nightmare on the brains of the living. And just as they seem to be occupied with revolutionizing themselves and things, creating something that did not exist before, precisely in such epochs of revolutionary crisis they anxiously conjure up the spirits of the past to their service, borrowing from them names, battle slogans, and costumes in order to present this new scene in world history in time-honored disguise and borrowed language.

FOLLOW-UP

Greg Mankiw’s response is hardly surprising:

I doubt there will be a fundamental change in the field of economics.  The old textbooks don’t need to be thrown away.

His textbook should have been thrown away long ago.