“Just say no”

Massey’s single-entry bookkeeping system

The Massey Energy Company, which killed 29 miners on 5 April 2010, apparently kept two sets of books—one in which they recorded safety problems, and another they showed to federal inspectors.

That was among the conclusions of a large team of federal investigators, who spent a year sifting through more than 84,000 pages of documents, interviewing 266 people and examining evidence at the Upper Big Branch mine, where the explosion occurred.

Of course Massey Energy kept two sets of books.

The question is, why did it take this long for the Mine Safety and Health Administration to figure that out?

Economist of the day

The Eurocrats, led by the ECB, are now using this crisis to ram through their vision of Europe, which is fundamentally anti-labor and pro capital.  That explains why the markets are celebrating today. But it lays the groundwork for more hostility and conflict in the future.

Wasn’t this precisely what the European Union was designed to prevent?

Marshall Auerback, “‘Extend and Pretend’ Continues in the Euro Zone”

Cartoon of the day

Special mention

Protest of the day

Selling the city

We seem to be in the midst of a gigantic PR campaign for “the city,” to judge by the recent spate of books celebrating the idea of the city and selling particular kinds of cities (some of which are reviewed by Nicholas Lemann [behind pay wall]).

We’re being bombarded with Ed Glaeser’s free-market city, Elijah Anderson’s “cosmopolitan canopy,” Richard Florida’s “creative class,” John D. Kasard/Greg Lindsay’s “aerotropolis,” and many more.

All of these cities have a utopian dimension (and, in that sense, have a grain of truth, since they represent existing projects for making and remaking cities—but also lunacy, as in Michigan Governor Jennifer Granholm’s proposal to reposition depressed factory towns like Flint and Lansing as “Cool Cities”). But, in many ways, they don’t look much like the cities I know.

Thus, they beg more questions than they answer. For example, which cities—and which parts of which cities—are they referring to? Are the favelas of Rio part of their cities? What about the banlieues of Paris? Or the vast slums of Cairo, Mumbai, and Mexico City? Or Toronto’s three cities, the ruins of Detroit, and Daley’s other Chicago?

And why this new selling of the city? Is it because of a growing disenchantment with suburbia, those areas that were once destinations of opportunity for quality schools, safe neighborhoods, and good jobs and are now suffering from growing poverty?

And, finally, there’s Lemann’s question about what kind of society might exist in these cities:

Masters of the new economy, social visionaries, and tongue-studded app developers figure large in the imagination of urban theorists these days, but most people are looking for something pretty mundane: a neighborhood, a patch of ground, a measure of peace and security, a family, status, dignity. In twentieth-century America, some people found those things in tightly packed neighborhoods. Far more found them in the suburbs. They tended their gardens, washed their cars, took their children to Little League games, went to PTA meetings and to religious services. It’s one thing to create a vast metropolis. It’s another to create a society, with a distinctive order and a set of embedded bargains regarding who gets how much of what. Twenty-first-century cities haven’t yet figured out that part.

Rewriting the history of the financial crisis

Phil Angelides, chairperson of the Financial Crisis Inquiry Commission, which conducted the official inquiry into the nation’s financial and economic crisis, sees history being rewritten by the winners.

They say that winners get to write history. Three years after the meltdown of our financial markets, it’s clear who is winning and who is losing. Wall Street — arms outstretched in triumph — is racing toward the finish-line tape while millions of American families are struggling to stay on their feet. With victory seemingly in hand, the historical rewrite is in full swing.

The contrast in fortunes between those on top of the economic heap and those buried in the rubble couldn’t be starker. The 10 biggest banks now control more than three-quarters of the country’s banking assets. Profits have bounced back, while compensation at publicly traded Wall Street firms hit a record $135 billion in 2010.

Meanwhile, more than 24 million Americans are out of work or can’t find full-time work, and nearly $9 trillion in household wealth has vanished. There seems to be no correlation between who drove the crisis and who is paying the price.

The report of the Financial Crisis Inquiry Commission detailed the recklessness of the financial industry and the abject failures of policymakers and regulators that brought our economy to its knees in late 2008. The accuracy and facts of the commission’s investigative report have gone unchallenged since its release in January.

So, how do you revise the historical narrative when the evidence of what led to economic catastrophe is so overwhelming and the events at issue so recent? You and your political allies just do it. And you bet on the old axiom that a lie is halfway around the world before the truth can tie its shoes.

Costs of war

Käthe Kollwitz, "Nie wieder Krieg" (No More War) (1924)

Measuring the costs of war should have been conducted by mainstream economists. But they haven’t done it. So, the task has fallen to the Costs of War project by Brown University’s Watson Institute for International Studies, a multidisciplinary team led by political scientist Neta C. Crawford and anthropologist Catherine Lutz.*

Mainstream economists often defend what they do, and their superiority over other social sciences, on the basis of their quantitative methodology and rigorous empirical methodology. But they’ve been absent from the debate concerning the costs of the ongoing wars in Iraq, Afghanistan and Pakistan. The only exception is an analysis of the “Economic Consequences of a War in Iraq” [pdf] conducted by William D. Nordhaus in 2002. That’s it.

Instead, the responsibility has fallen to others—most famously, the 2008 book The Three Trillion Dollar War, by Linda Bilmes and Joseph Stiglitz (which they updated here).

And now the Costs of War project. Here are some of their key findings:

• While we know how many US soldiers have died in the wars (just over 6000), what is startling is what we don’t know about the levels of injury and illness in those who have returned from the wars.  New disability claims continue to pour into the VA, with 550,000 just through last fall.  Many deaths and injuries among US contractors have not been identified.
• At least 137,000 civilians have died and more will die in Afghanistan, Iraq, and Pakistan as a result of the fighting at the hands of all parties to the conflict.
• The armed conflict in Pakistan, which the U.S. helps the Pakistani military fight by funding, equipping and training them, has taken as many lives as the conflict in neighboring Afghanistan.
• Putting together the conservative numbers of war dead, in uniform and out, brings the total to 225,000.
• Millions of people have been displaced indefinitely and are living in grossly inadequate conditions.  The current number of war refugees and displaced persons — 7,800,000 — is equivalent to all of the people of Connecticut and Kentucky fleeing their homes.
• The wars have been accompanied by erosions in civil liberties at home and human rights violations abroad.
• The human and economic costs of these wars will continue for decades, some costs not peaking until mid-century. Many of the wars’ costs are invisible to Americans, buried in a variety of budgets, and so have not been counted or assessed.  For example, while most people think the Pentagon war appropriations are equivalent to the wars’ budgetary costs, the true numbers are twice that, and the full economic cost of the wars much larger yet. Conservatively estimated, the war bills already paid and obligated to be paid are $3.2 trillion in constant dollars. A more reasonable estimate puts the number at nearly $4 trillion.
• As with former US wars, the costs of paying for veterans’ care into the future will be a sizable portion of the full costs of the war.
• The ripple effects on the U.S. economy have also been significant, including job loss and interest rate increases, and those effects have been underappreciated.
• While it was promised that the US invasions would bring democracy to both countries, Afghanistan and Iraq, both continue to rank low in global rankings of political freedom, with warlords continuing to hold power in Afghanistan with US support, and Iraqi communities more segregated today than before by gender and ethnicity as a result of the war.
• Serious and compelling alternatives to war were scarcely considered in the aftermath of 9/11 or in the discussion about war against Iraq.  Some of those alternatives are still available to the U.S.

The authors of the report acknowledge the constraints of their analysis. With their limited resources, they focused on U.S. spending, U.S. and allied deaths, and the human toll in the major war zones.

There is still much more to analyze and understand. Unfortunately, they’re not going to get any help from mainstream economists.

* There are, in fact, a number of economists working on the project. They include Anita Dancs, Ryan D. Edwards, Heidi Garrett-Peltier, James Heintz, and Bassam Yousif. At least a couple of them received their doctorates from the University of Massachusetts Amherst. I don’t know whether the others consider their work to be mainstream or heterodox. The fact remains, mainstream economists have the quantitative skills to measure the costs of war but, for the most part, they’ve neglected the topic.

The question is, why? Maybe they were scared off after Larry Lindsey, director of the National Economic Council (2001–2002) and assistant to the president on economic policy, who played a leading role in formulating President Bush’s $1.35 trillion tax cut plan, was fired after he estimated the cost of the Iraq war could reach $200 billion.

Protest of the day

And more, from Athens and Manila. . .

Radical positions on the minimum wage?

Is Michele Bachmann’s support for abolishing the Federal minimum wage a radical position?

Greg Sargent thinks so.

I wanted to try to determine just how radical — and important and revealing — her position really is. It turns out that almost no GOP presidential candidates in history have held this position — not even Barry Goldwater, it seems. Ronald Reagan did support repeal early during the 1980 campaign, but even he subsequently downplayed and shifted his position.

The bottom line is that even if calling for doing away with the minimum wage is not that far out of the GOP mainstream. . .it is a very radical position for a GOP presidential candidate to take.

Calling for the abolition of the minimum wage may be a radical position for a presidential candidate but it’s not radical for the Republican Party or for neoclassical economists.

Just today, as he has many times before, Casey Mulligan blames unemployment—in this case, teenage unemployment—on the minimum wage.*

The fact is, blaming unemployment on the minimum wage and demanding that it be lowered or abolished altogether IS a radical position—and it’s a radical position that is solidly in the mainstream of both the Republican Party and neoclassical economics.

* Although, truth be told, it’s not clear when Mulligan makes that case, and calls for “reducing labor market regulation,” if he thinks the minimum wage should be lowered or abolished altogether.