Stranger economies

Choose your capitalism

Eduardo Porter [ht: sm] is right: this election is all about what kind of capitalism we want.

In trying to reconcile the entrepreneurial spirit that the American brand of capitalism provides with its social costs, American voters must choose between Mitt Romney, the businessman who offers to move the economy forward by making government smaller and more efficient, and President Obama, who offers the government as an agent to assist the less prosperous, to put a thumb on the scale on the side of the have-nots.

What’s amazing is that, given the spectacular failure of the U.S. form of capitalism, the polls are indicating a very close election.

Yet for all the riches we have amassed, by the O.E.C.D.’s calculation, the income of Americans of working age in the middle of the distribution has grown less since the mid-1980s than in virtually every other developed nation. Perhaps unsurprisingly, we suffer from some of the worse social ills known to the industrialized world.

It is not just that income inequality is the most acute of any industrialized country. More American children die before reaching age 19 than in any other rich country in the O.E.C.D. More live in poverty. Many more are obese. When they reach their teenage years, American girls are much more likely to become pregnant and have babies than teenagers anywhere else in the industrial world.

We understand the importance of early childhood development. Yet our public spending on early childhood is the most meager among advanced nations. We value education. Yet our rate of enrolling 3- to 5-year-olds in preschool programs is among the lowest among advanced nations. Our 15-year-olds place 26th out of 38 countries on international tests of mathematical literacy, according to the O.E.C.D. The first nation to understand the value of widespread college education, the United States has dropped from the top to the middle of the pack of our economically advanced peers in terms of college graduation rates.

The American way has produced a high-tech health care system that offers sophisticated cures for those who can afford them, yet is astronomically expensive and poor at combating many run-of-the-mill ailments, and leaves millions uninsured.

Our safety net — to protect the most vulnerable from globalization’s ravages — is threadbare. Where would you rather lose your job to cheap competition from China? In the United States you would lose health care, too — unless you had the money to buy private insurance. If you were the breadwinner in a family of four earning the average wage, benefits would replace only 52 percent of it, even including any extra welfare payments you were entitled to, the O.E.C.D. found. And they would drop to 37 percent of your last wage after two years tops. In Britain, by contrast, you would still receive over 70 percent of your wage for 60 months after you lost your job. And your health care needs would be addressed by the public, universal National Health Service.

A particularly telling statistic speaks of how we deal with social dysfunction: there are 743 Americans in jail for every 100,000. That’s more than in any other country in the world, according to the International Center for Prison Studies. The next country down the list is Rwanda, with 595.

Social ills like obesity and child mortality have, of course, multiple and complex causes. But the battery of dismal statistics suggests, at the very least, a troubling pattern. Yet though we seem to suffer more than our fair share of social ills, by the O.E.C.D.’s calculation our public spending to address them is smaller as a share of the economy than in any other country in the developed world.

Unfortunately, there’s a third option not even on the table in this election: an alternative to capitalism.

Once more on zombie economics

It’s Halloween. So why not spend a little time reading the latest version of zombie economics?

It comes from Casey Mulligan. He’s so hell-bent on criticizing Keynesian economics and attacking government programs to help the poor and unemployed, he doesn’t even mention let alone analyze two of the key causes in creating the Second Great Depression: the rise in inequality and the crisis of the financial sector.

Instead, Mulligan focuses on the “expansion of food-stamp eligibility to enlargement of food-stamp benefits to payment of unemployment bonuses” and blames such programs for “sharply eroding (and, in some cases, fully eliminating) the incentives for workers to seek and retain jobs, and for employers to create jobs or avoid layoffs.”

That’s right: that’s the kind of zombie economics currently being peddled by neoclassical economists like Mulligan.

A pinch of salt

Apparently, all we need is the political equivalent of a pinch of salt.

Here’s Amy Wilentz on zombies:

The only way for a zombie to have his will and soul return is for him to eat salt. . .

There are many reasons the zombie, sprung from the colonial slave economy, is returning now to haunt us. Of course, the zombie is scary in a primordial way, but in a modern way, too. He’s the living dead, but he’s also the inanimate animated, the robot of industrial dystopias. He’s great for fascism: one recent zombie movie (and there have been many) was called “The Fourth Reich.” The zombie is devoid of consciousness and therefore unable to critique the system that has entrapped him. He’s labor without grievance. He works free and never goes on strike. You don’t have to feed him much. He’s a Foxconn worker in China; a maquiladora seamstress in Guatemala; a citizen of North Korea; he’s the man, surely in the throes of psychosis and under the thrall of extreme poverty, who, years ago, during an interview, told me he believed he had once been a zombie himself.

And does this mean all Romney is missing are the top hat and dark glasses?

In traditional Voodoo belief, in order to get back to lan guinée, one must be transported there by Baron Samedi, the lord of the cemetery and one of the darkest and most complicated of the religion’s many complicated gods. Baron is customarily dressed in a business jacket, a top hat and dark glasses; he’s foul-mouthed and comic in a low, vicious way. One of Baron’s spiritual functions, his most important, is to dig a person’s grave and welcome him to the other side. If for some reason a person has thwarted or offended Baron, the god will not allow that person, upon his death, to reach guinée. Then you’re a zombie. Some other lucky mortal can control you, it is believed. You’ll do the bidding of your master without question.

Chart of the day

source [pdf]

European unemployment continues at record levels.

The euro area seasonally adjusted unemployment rate was 11.6 percent in September 2012, up from 11.5 percent in August. The European Union unemployment rate was 10.6 percent in September 2012, stable compared with August. In both zones, rates have risen significantly compared with September 2011, when they were 10.3 percent and 9.8 percent respectively.

What this means if that 25.751 million men and women in the Union, of whom 18.490 million are in the euro area, were unemployed in September 2012. Compared with August 2012, the number of persons unemployed increased by 169,000 in the Union and by 146,000 in the euro area. Compared with September 2011, unemployment rose by 2.145 million in the Union and by 2.174 million in the euro area.

Compared with a year ago, the highest increases were registered in Greece (17.8 percent to 25.1 percent between July 2011 and July 2012), Cyprus (8.5 percent to 12.2 percent), Spain (22.4 percent to 25.8 percent) and Portugal (13.1 percent to 15.7 percent).

Meanwhile, in all of its financial wisdom, the European Central Bank continues to be concerned about inflation, attempting to keep the rate at or near 2 percent. The Euro area annual inflation [pdf] is expected to be 2.5 percent in October, down from 2.6 percent in September.

Zombie or voodoo?

It’s Halloween. So, the relevant question is, zombie or voodoo?

What’s the best way to characterize the Romney-Ryan economic plan—in terms of zombies or voodoo? Joss Whedon, above [ht: mfa], chooses the zombie metaphor. Ezra Klein, on the other hand, looks to voodoo:

Thirty-two years ago, George H.W. Bush called the idea that tax cuts would pay for themselves “voodoo economics.” He was right, but his party decided he was wrong: Bush was exiled from conservatism after raising taxes as part of the 1990 budget deal, and every Republican presidential nominee after him has offered huge tax cuts as a matter of course.

Mitt Romney, interestingly, is an exception to this rule: He’s not offering huge tax cuts. Or, to be more precise, he is offering huge tax cuts but he’s promising to pay for them by closing tax breaks and ending deductions. That is to say, he’s at least admitting that tax cuts cost money and need to be paid for. Given that his various numbers don’t add up, there’s a bit of pixie dust there, but it is, rhetorically at least, a turn away from voodoo and towards responsibility.

More worrying is what we might call Romney’s voodoo spending cuts: His promise that his promised spending cuts, despite being deeper than any in modern history, won’t hurt anyone, anywhere, at any time, for any reason. In fact – shades of supply-side economics here — they’ll probably make government services even better.

As it turns out, zombies and voodoo are related, as Timothy Sexton explains:

Those who believe in the power of voodoo look upon the stage of being a zombie not unlike many Christians look upon the concept of purgatory. In essence, according to voodoo mythology, when people commit acts of evil during their lives they open themselves up the potential of being subjected into a state of utter limbo. An even better description of this state is that they are stripped of everything that makes one human; they are the absence of humanity. Since only a voodoo priest is capable of putting another human being into this state, the priests are invested with tremendous power. In fact, it is less the zombie itself that believers fear and dread than the priest who possesses this magical spiritual power. The real fear of the followers of voodoo is not that a zombie will arise and come looking for their brains; the real terror is that they may one day face retribution for their sins by being the target of this great spiritual transformation.

What are we to conclude? Clearly, that Romney and Ryan imagine themselves as voodoo priests who will make us pay for our sins (like wanting decent and well-funded government programs for the poor, sick, and retired) by turning us into zombies.

Or, alternatively, some voodoo priest (aka the Republican Party and a long line of billionaires) has already turned Romney and Ryan into zombies, having stripped them of everything that might make them human. In other words, they have become the absence of humanity.

Happy Halloween!

Cartoon of the day

Special mention

 

Prediction and uncertainty

Readers of this blog know that I have sung the praises of Nate Silver’s statistical work for quite some time, long before the right-wing attacks on his electoral predictions started.

My appreciation stems not from Silver’s predictions per se but, rather, from his appreciation of uncertainty, as this review by Samuel Popkin makes clear.

One of the biggest problems we have in separating signal from noise is that when we look too hard for certainty that isn’t there, we often end up attracted to noise, either because it is more prominent or because it confirms what we would like to believe. This is a worse problem in politics than in baseball or poker. If most polls are reporting a tight race, an outlier showing a bigger gap will be the poll that makes news, thus getting more of our attention. Partisan TV pundits try to assuage the worries of the faithful on their side instead of making accurate predictions. When Silver analyzed 1,000 predictions on The McClaughlin Group, he found them no more accurate than flipping a coin. . .

In his analysis of fascinating examples ranging across all the areas in which we try to predict future outcomes, Silver stresses the gap between what we claim to know and what we actually know. In 1997, the National Weather Service predicted that heavy winter snows would cause North Dakota’s Red River to flood over its banks in two months, cresting at 49 feet. The residents of Grand Forks were relieved, since their levees were designed to withstand a 51-foot crest. If the Weather Service had mentioned that the margin of error for its forecast was five feet, the three feet of water that poured over the levels in an eventual 54-foot crest might not have destroyed 75 percent of the town. Happily, the Weather Service now provides that information—an example of an easy reform to forecasting.

Reinventing unions for the 19th century

 

Under the guise of modernizing unions, Sean Rust wants to send us back to the nineteenth century, before the National Labor Relations Act.

Under the NLRA today, a majority-supported union is given stringent rights regardless of the economic consequences, which can make unionization costly for business owners.  By reducing this cost, the results of returning to a pre-NLRA market-supported structure may be somewhat unexpected. With the right of workers to organize without retaliation remaining in place, a repeal of statutory bargaining requirements could make it easier for workers to organize and voice their opinions.  This is because unions would no longer have monopolistic power, which adds tension to an already adversarial situation. Businesses would have less to fear from unions, and thus would not be as adamant to quash organization efforts as they are today.

Rust is right about one thing: “The future of organized labor in the United States looks grim.” But the solution is not to end exclusive bargaining and create a situation in which unions only exist because they serve the interests of employers.

As long as one group of people is forced to have the freedom to sell their ability to work to another, much smaller group, there will be a need for workers to organize to improve the conditions of that exchange—as well as the conditions under which they work and the nature of the goods and services they produce. Reinventing unions doesn’t mean returning to the nineteenth century but, instead, to a situation in which unions recognize the needs of the larger communities within which they live and work, within and across national boundaries.

That would be a real union movement for the twenty-first century.

Cartoon of the day

Special mention