Archive for June, 2012


If it weren’t such a glorious summer day here on the mountain, I’d be reading and writing about a variety of things, such as. . .

The success of “Sweeney Todd: The Demon Barber of Fleet Street” in ConDem England.

The Hegelian fundamentalism of Slavoj Žižek.

How “states built on exploitation inevitably fail”—including the kinds of exploitation Daron Acemoglu and James Robinson don’t want to talk about.

How the Wall Street mafia holds America hostage.

How difficult it is to dramatize the Second Great Depression in novels.*

But it’s summertime and, at least for today, the livin’ is easy. . .

*Although I’ve decided to teach Don DeLillo’s Cosmopolis next spring.

Special mention

Yesterday’s Supreme Court decision concerning the Affordable Care Act contains elements that are good, some that are bad, and some that are downright ugly. (Here’s a link to the text of the decision [pdf].)

The good: the 5-4 majority decision establishes the principle (likened by Justice Ginsburg to the provision of Social Security in the 1930s that installed a federal system to provide monthly benefits to retired wage earners) that all Americans—regardless of employer or employee status, age, preexisting condition, and so on—have  a right to decent and affordable healthcare.

The bad: the opinion of Chief Justice Roberts, who found a way of construing the penalties associated with the individual mandate as a tax, was accompanied by a 7-2 decision to strike down federal authority to require states to expand Medicaid coverage for poor people.

The downright ugly: Chief Justice Roberts’s opinion suggests that, as Steven Rosenfeld put it, there is a majority on the Court that would vote to take the country back to “the so-called Lochner Era, where in 1905 the Court started issuing decisions reversing progressive healthcare and labor reforms, holding an individual’s freedom to have a ‘contract’ with their employer was more deserving of constitutional protection than societal concerns.” Justice Ginsburg wrote that the Chief Justice’s interpretation of the commerce clause was a “rigid reading of the Clause [which] makes scant sense and is stunningly retrogressive.”

Since 1937, our precedent has recognized Congress’ large authority to set the Nation’s course in the economic and social welfare realm. See United States v. Darby, 312 U. S. 100, 115 (1941) (overruling Hammer v. Dagenhart, 247 U. S. 251 (1918), and recognizing that “regulations of commerce which do not infringe some constitutional prohibition are within the plenary power conferred on Congress by the Commerce Clause”); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 37 (1937) (“[The commerce] power is plenary and may be exerted to protect interstate commerce no matter what the source of the dangers which threaten it.” (internal quotation marks omitted)). THE CHIEF JUSTICE’s crabbed reading of the Commerce Clause harks back to the era in which the Court routinely thwarted Congress’ efforts to regulate the national economy in the interest of those who labor to sustain it. See, e.g., Railroad Retirement Bd. v. Alton R. Co., 295 U. S. 330, 362, 368 (1935) (invalidating compulsory retirement and pension plan for employees of carriers subject to the Inter­ state Commerce Act; Court found law related essentially “to the social welfare of the worker, and therefore remote from any regulation of commerce as such”). It is a reading that should not have staying power.

Do you see a pattern between countries’ social spending and their current borrowing costs?

I don’t, nor does Matthew O’Brien.*

*Although O’Brien also repeats the shibboleth, adored by mainstream economists everywhere, that the euro crisis is caused by “uncompetitive wages.” Why don’t mainstream economists ever refer to uncompetitive profits?


Joseph Stiglitz raises the issue of exploitation in a recent interview with Lynn Parramore:

Lynn Parramore: An argument has been made, particularly since the end of the Cold War, that capitalism is great at producing things that can improve our lives, and so we ought to therefore tolerate some unfairness. What’s wrong with that narrative?

Joseph Stiglitz: Well, capitalism does have a lot of strengths, including producing things that are very innovative. But what drives capitalism is the profit motive. You can profit not only by making good things, but also by exploiting people, by exploiting the environment, by doing things that are not so good. The narrative that you describe ignores the extent to which a lot of the inequalities in the United States are not the result of creative activity but of exploitive activity.

OK, Stiglitz is not really invoking a Marxian notion of exploitation (whereby the surplus is appropriated by a class other than the one that creates it). But it is interesting that, in trying to make sense of the causes and consequences of the grotesque levels of inequality in the United States, Stiglitz does find it useful to rely on some notion of exploitation.


Special mention

Brad DeLong is right: there are certain things we understood about financial crises and their effects, because we knew where we’d been.

In particular, we understood that the rapid run-up of house prices, coupled with the extension of leverage, posed macroeconomic dangers. We recognized that large bubble-driven losses in assets held by leveraged financial institutions would cause a panicked flight to safety, and that preventing a deep depression required active official intervention as a lender of last resort.

Indeed, we understood that monetarist cures were likely to prove insufficient; that sovereigns need to guarantee each others’ solvency; and that withdrawing support too soon implied enormous dangers. We knew that premature attempts to achieve long-term fiscal balance would worsen the short-term crisis – and thus be counterproductive in the long-run. And we understood that we faced the threat of a jobless recovery, owing to cyclical factors, rather than to structural changes.

But we knew—or should have known—much more than that. We knew that deregulating financial markets, and then creating a no-strings-attached bailout, would create Too Big to Fail banks. We knew that increasing inequality in the distribution of income and wealth would fuel an unsustainable financial bubble and, slowly but surely, lower living standards for a large part of the population. We knew that the combination of stagnant wages and increasing productivity would lead to higher rates of exploitation. We knew that the Reserve Army of the Unemployed and Underemployed would keep wages low and allow profits to rise. And we knew that wealthy individuals and large corporations would fight tooth and nail to pass on the costs of the crises to everyone else.

We knew, in other words, that we’d end up in the Second Great Depression and that the 1 percent would continue to separate themselves from the 99 percent.

And, finally, we knew that we couldn’t trust mainstream economists like “Paul Krugman, Paul Romer, Gary Gorton, Carmen Reinhart, Ken Rogoff, Raghuram Rajan, Larry Summers, Barry Eichengreen, Olivier Blanchard, and their peers” to help us fully understand or chart a path beyond the crises of capitalism.

Here are my two cents before the Supreme Court ruling on the Affordable Care Act, aka Obamacare, is handed down: it’s fine with me either way—either that they uphold it or that they strike some or all of it down.

It’s fine if they uphold it, because it means one (admittedly small) step toward providing healthcare for more Americans. And we can build on that.

And it’s fine if they strike it down, because there are plenty of better options for providing decent healthcare to all Americans—like public and community provision of healthcare services.

The fact is, the Affordable Care Act still leaves both providing healthcare and financing healthcare in private, corporate hands. And we can do better much better than that