Re: Sharecropping: question to Melvin
Melvin P. writes: Any impartial investigation of the plantation belt of the South after the Civil Wall will reveal who owned what. Wall Street imperialism owned the vast majority of the land, possessed the capital and political will... Melvin P. Could you give some more details on the ownership issue? Thanks. Paul
Basra: The Geneva Conventions
Summary The entire city of Basra's water supply was cut last Friday (affecting some 1 million people). For a heavily populated third world city in the desert, no water (and thus also no sanitation with the resultant epidemics) can lead to tens of thousands of deaths. This is what happened in 1991 and coalition forces had given public assurances that they would cooperate with Red Cross and UN efforts to maintain civilian water supplies. The water plant is outside the city and controlled by Coalition forces; until today access to restore the water supply was denied, even to the International Committee of the Red Cross (ICRC) international inspectors. Finally, apparently after behind the scenes protest by the Red Cross and the UN Secretary-General, limited access was given today to international Red Cross staff, but the inadequate nature access still leaves a very dangerous situation for the civilian population. The Geneva conventions require the US and UK to provide rapid and unimpeded access. Details (source: International Committee of the Red Cross, Geneva - audio clip report of the ICRC head of Water and Habitat programmes in Iraq): http://www.icrc.org/Web/Eng/siteeng0.nsf/html/audio_iraq 1) On Friday the electrical supply was cut to the main pumping station for all of Basra, the Wafa' Al-Qaed, north of the city towards the international airport. This station pumps ALL of the water for the City of Basra, drawing it from the Tigris river; it also contains the largest of the 5 water treatment sub-plants. The pumping station was under the control of the Coalition Forces with no reports of fighting in the immediate area. Anticipating the disastrous humanitarian consequences of a power cut, the UN and ICRC had pre positioned 3 electrical generators at the plant. However access to the pumping station was not granted by coalition forces to startup the generators. 2) Over the weekend the ICRC was therefore obliged to hook up the four remaining treatment substations (under Iraqi control, in the city) to the Shaat al Arab a salinated industrial waterway providing an unclean sources of water and for only 30-40% of the population. 3) Since Friday the ICRC undertook efforts in Kuwait to obtain access. It should also be noted that for several days in his morning comments to reporters the UN Secretary General expressed, without specifics or naming parties, his concern over humanitarian access in the besieged cities. (source of latest and most subdued statement: http://www.un.org/apps/sg/offthecuff.asp?nid=405 ). 4) Today (Tuesday) limited access was granted to the ICRC so as to start the generators. But this limited access only permits the main treatment plant to operate at 60-70% of capacity [not the 90% reported by CNN] and even this is subject to the generators not stalling\breaking down. The Coalition has not permitted access to restore the main electrical hookup. 5) The Geneva Conventions require the US/UK to provide rapid and unimpeded access to these plants: The Parties to the conflict and each High Contracting Party shall allow and facilitate rapid and unimpeded passage of all relief consignments, equipment and personnel provided in accordance with this Section, even if such assistance is destined for the civilian population of the adverse Party. [Protocol Additional to the Geneva Conventions of 12 August 1949, and relating to the Protection of Victims of International Armed Conflicts (Protocol I), 8 June 1977. Art 70. Relief actions; para.2.] 6) The ICRC points out that should Baghdad also be besieged the same crisis could be reproduced. Of course it would be on a yet larger scale.
Re: The Stalingrad thesis.
Jim Devine wrote: right. I've been telling people that I fully expect the US to win the war (especially since Honor is At Stake and we wouldn't want a repeat of Somalia) but then lose the occupation. I think I've been right: the US will be trying to run a Gaza Strip the size of California. Personally, I am cautious on this point - one has to be realistic. To me it IS clear that this will be a massive setback to the region overall, moving it further away from finding a more equitable development path (and in most cases anything that could be called any kind of development path). In the Mid-East overall there will be lots more of the instability you mean. [BTW, I continue to be shocked at how little is written about the rise of fundamentalism as national development was blocked and neo-liberalism was introduced in the Mid-East. Radical Fundamentalism is treated as if it were the Islamic Billy Graham and has been around for hundreds of years, rather than the Islamic Timothy McVeigh - a very contemporary reaction to bitter angers rooted in some specific economic failures.] But when it comes to Iraq itself, I honestly could see things go either way. Maybe the U.S. occupation will end in resistance - especially if the US blunders (never to be ruled out). Still, there is a reason the US picked this particular fight - you would have to be a particularly cruel and insensitive occupier not to have a chance to pull it off. The U.S. will be able to draw on vast Iraqi resources (even after part is taken away) and a sophisticated base to draw on. People are also exhausted after two decades of death, sacrifice and isolation. The left is decimated, the activists of the nationalist right were mostly killed through Bathist purges starting 24 years ago; politics have often been discredited and repressed. There will be an enormous but unspecific sense of nationalism but since Saadam Hussein took power he has gone to great lengths to de-politicize society and reinforce clan (not national) loyalties. How far can the Shia fundamentalism take a rebellion (unless Iran decides to take a big gamble), especially since most Iraqis are proud of their secular 'modernism'. Obviously people will put up this current fight (as did the German people). But afterwards...I wouldn't want to predict.
'Oil for Food'/ Contol of future Oil Exports
http://www.alertnet.org/thenews/newsdesk/N25115325.htm Reuters continues to follow the story, although it does not seem to have the specifics. Note: Condoleezza Rice is flying to NY today (Teusday) to meet urgently with Annan in person. It would not seem likely she would do so at such time if the main issue under negotiation was just the technicality of how to handle the 'Oil for Food' funds already in the pipeline. One imagines that she may also publicly emphasize that she went to emphasize humanitarian needs... Paul Muddled UN negotiations on oil, food plan for Iraq By Evelyn Leopold UNITED NATIONS, March 25 (Reuters) - Despite U.N. Secretary-General Kofi Annan's call for a quick resumption of humanitarian aid to Iraq, the politics of war stymied Security Council envoys in revamping the U.N. oil-for-food program. Discussions among envoys resume on Tuesday after hours of talks over the weekend on Annan's proposals for the United Nations to take control of Iraqi contracts and adjust them to current needs whenever deliveries are made possible again. The oil-for-food program, which began in 1996, uses Iraqi oil revenues to pay for food, medicine and other civilian goods to ease the impact of sanctions imposed in August 1990 following Iraq's invasion of Kuwait. Some $8.9 billion worth of contracts have been ordered and paid for by Iraq but not delivered. Condoleezza Rice, the U.S. national security adviser, is to meet Annan on Tuesday to discuss humanitarian issues, Bush administration officials said. But an expected resolution to restructure the oil-for-food program for 45 days, subject to renewal, was delayed although all nations agreed that releasing supplies under the program is essential for the 60 percent of Iraq's 26 million people dependent on food rations under the plan. WATER AND ELECTRICITY .
Politics of 'Oil for Food': First Shoe Drops
Further to my post yesterday. The article, posted from Brussels, is short on specifics: exactly what has the US\UK proposed, what is in the draft resolution circulated in NY and being discussed in a closed Security Council Meeting today. Am not aware of any reporting from the UN or Washington, oddly enough. But one gets the basic idea. (Hey back to you Jim). paul a. http://www.nytimes.com/2003/03/22/international/worldspecial/22BRUS.html France Opposes Proposal for U.S.-British Rule in Iraq By ELAINE SCIOLINO BRUSSELS, March 21 The battle within Europe prompted by the war in Iraq raged on today as President Jacques Chirac of France vowed to oppose a British idea for a Security Council resolution that would give the United States and Britain the right to govern Iraq.. The deepest fissure was between Britain and France, whose leaders seemed to be talking past each other about the postwar administration of Iraq. Rejecting an idea floated by Prime Minister Tony Blair of Britain earlier in the day for a resolution to give international authority to an occupation government in Baghdad, Mr. Chirac told a news conference, This idea of a resolution seems to me to be a way of authorizing military intervention after the fact and so is not from my point of view fitting in the current situation. Asked in a news conference whether he and his fellow leaders in Europe want a United Nations mandate over Iraq as soon as possible, Mr. Blair replied that a resolution was necessary, not just to address the potential humanitarian crisis in the country but also to authorize what he called the post-Saddam civil authority in Iraq. I think there is a general agreement about the central involvement of the United Nations, Mr. Blair said. Now exactly how that process takes place is precisely the issue that we discuss, but there is a common view now, not just amongst the Europeans but also with the United States, that it is important that we have a new United Nations resolution that authorizes that and that governs not merely the humanitarian situation but also the post-Saddam civil authority in Iraq. With the United Nations' role in postwar Iraq unclear, Security Council diplomats indicated after a meeting today that the oil-for-food program, which for the past few years has been the main source of food for 60 percent of the Iraqi population, should be revived under the temporary authority of Secretary General Kofi Annan. The program was effectively suspended on Monday when United Nations workers were pulled from Iraq. Experts representing the 15 Council members are to meet Saturday to discuss Mr. Annan's March 19 proposal to reauthorize the program. On Thursday, the European Union leaders signaled that they would resist an American-led administration for Iraq and in a joint statement called for the United Nations to play a central role. But Mr. Chirac seemed to think that a Security Council resolution would make the United States and Britain the de facto governors of Iraq. He added, France would not accept a resolution tending to legitimize the military intervention and giving the Americans and British the power to administer Iraq. He said the United Nations was the only body that could take responsibility for rebuilding Iraq, underscoring that he is willing to consider some sort of resolution for rebuilding the country but not one that would seem to legitimize the war or give the United States and Britain exceptional powers. Whatever the results of the military operation, Mr. Chirac said, Iraq must be rebuilt, and for that there is just one forum, the United Nations. Later in Washington, Secretary of State Colin L. Powell said the United States was in contact with members of the Security Council as to what is appropriate for a postwar Iraqi authority. I hope that France will want to be a partner in such an effort, but that remains to be seen, Mr. Powell said. The leaders in Brussels wrapped up their meeting with a 36-page declaration that pledged to forge creative strategies to combat the global economic slowdown. Still, not all of the insults could be held back. Britain, which has committed 45,000 troops to the Iraqi campaign, continued to hurl accusations that France sabotaged an effort to win international approval at the United Nations for the war. ..
The Politics of Food for Oil: A second shoe drops
Just found this on the wire - according to Google News this is the only such report. The big issues seem to be out on the table yet I still know of very little reporting in the press or tv. Looks like yesterday's France's position at the Brussels meeting may lead the US/UK to postpone trying for authorization to export/control the oil. What will happen when the funds that are in the pipeline run out (a few weeks?) and humanitarian desperation requires a Security Council authorization of some oil exports? paul a. UNITED NATIONS (Reuters) - Security Council members decided Friday to work through the weekend on U.N. Secretary-General Kofi Annan's plan to put him in charge of a humanitarian program for Iraq that uses oil revenues to pay for food, medicine and other civilian goods. A resolution is expected to emerge Monday after discussions among Middle East experts of the 15 council members sitting on a council committee set up to monitor the now-suspended oil-for-food program. The plan was created to ease the impact of U.N. sanctions imposed on Iraq in mid-1990. The United States and Britain, which had wanted to draw up the measure, have now declined to do so. A council diplomat told reporters any resolution would have a better chance without their fingerprints in a Security Council bitterly divided over the U.S.-led invasion of Iraq. Germany's U.N. ambassador, Gunter Pleuger, chairman of the committee and a leading opponent of the war, said there were no fundamental problems in adjusting the oil-for-food program so that basic goods could flow again to Iraq as soon as possible. There are no points of contention, he said following Security Council consultations on the program. There are only practical problems. But members are expected to be careful the new resolution concentrates on immediate humanitarian aid rather than the future working of the program. U.N. officials point to some $8.9 billion in goods already ordered and paid for by Iraq but not yet delivered. More than 60 percent of Iraq's 26 million people are entirely dependent on the oil-for-food program, which has been jointly administered by the United Nations and Iraq since 1996. U.N. officials estimate Iraqis have enough food to meet immediate needs unless they are forced out of their homes. OIL INDUSTRY CONTROL SENSITIVE Annan, in his letter to the council Thursday, said Iraq should continue to control the country's oil industry, retaining the right to sign contracts with partners of its choosing. The proceeds of those sales, however, should be deposited in an account controlled by the United Nations, as they were before the war. But diplomats said the resolution would probably avoid reference to oil exports while the war was going on. The council is trying to avoid, at present, dealing with or recognizing any possible U.S. administration at the end of the war, which might administer Iraq's oil wealth. Russia's ambassador, Sergei Lavrov, told reporters the resolution had to deal with immediate concerns of goods already in the pipeline. Other ideas of the secretary-general would have to come later, he said. We should not jump the gun. U.S. Ambassador John Negroponte emphasized again that the United States wanted the oil to be used for the benefit of the Iraqi people. At such time as the present Iraqi regime should fall ... we will ensure that Iraq's natural resources, including its oil, are used entirely for the benefit of the people of Iraq, he told reporters. Annan had proposed that once exports resumed, the council should leave oil sales in the hands of the Iraqi State Oil Marketing Organization, or SOMO, which had a sophisticated infrastructure. The United States and Britain fought for years to eliminate fly-by-night traders from getting contracts from SOMO, believing they were paying illegal premiums to President Saddam Hussein. But Russia and others blocked that. Copyright 2003, Reuters News Service
Re: Re: Politics of 'Oil for Food': First Shoe Drops
Ken Hanely wrote: Is there really any possibility that the US would allow the UN to be in charge of post-Hussein Iraq? Of course they want a do-gooder role for the UN so that the cost of humanitarian aid and reconstruction can be shifted from the destroyers to critics of the war. But isnt it clear that whatever type of administration it is, the design will be primarily a product of US input. If the UN does not go along with this it will again be irrelevant. The complete contempt the US has for the UN should have been evident long ago. People like Pearle, Krauthammer, and Kristol simply express this contempt in an unambiguous fashion. But it will be interesting to see to what degree the US bothers with a UN resolution of the sort discussed here. Probably the US is content to let the UK push for this sort of thing on the ground that it will make Blair feel good if it passed. The Hegelian Bush knows that the US and UK do not need UN authorisation to rule postwar Iraq. Their military might gives them that right. How many legions does the UN have parphrasing someone or other. Cheers, Ken Hanly I think you are right there will not be a UN Administration of Iraq a la Kosovo and that it will largely be a U.S. Military Administration, dressed as civilian and with some multilateral and Iraqi elements. BUT, that does not mean either that the U.S. can just have the Military Government start selling oil. There is a UN Sanctions ban on that oil (allowing exports only through the U.N. with certain provisions) and to lift the ban the U.S. HAS to have a new Security Council Resolution. Kofi Anon gave an opening bid: continue to give the future proceeds for the UN to administer. This will not be acceptable to the U.S. On the other hand, Chirac sharply said some (unspecified) terms will have to be met to get him to revise the rules on exports; Russia has said one will have to negotiate with them. Blair may try to repair some damage at home and in the EU by looking 'magnanimous' on this issue. This may all degenerate into backroom commercial deals (no surprise there). But at this particular moment a lot of public opinion is in the streets and cares about the future of the Iraqi people and there are a few governments in the Security Council who want to look good in the eyes of that public - for the next few weeks. I am not naively arguing that what can emerge from such a process will be good; I am just saying that if there is public pressure it can be made less bad in some extremely important ways. History has shown that the immediate post-war arrangements are decisive - often with unexpectedly tragic consequences. It is not a given that post-war Iraq will be reduced to the *long term* status of Panama or Afganistan, it is a sophisticated country with vast resources. So, I think that giving up and failing to pay attention to this issue now will be a pity and will have important long term consequences. Fair(er) treatment for post-war Iraq is worth putting in front of people now. Paul
Politics of 'Oil for Food': The big catch
http://www.moscowtimes.ru/stories/2003/03/20/042.html Thursday, Mar. 20, 2003. Page 7 Report: U.S. Plans to Tap $40Bln Iraq Account In itself, the current proposal of Kofi Anon is technical and almost required: the residual unspent amounts left over from the sale of Iraqi oil under the sanctions (in the billions) will be needed by desperate and suffering people. So the U.N. Secretariat should be authorized to use the residual funds quickly on its own since there will be no Iraqi government in the picture (the current Resolution requires the UN Secretariat to use lengthy procedures involving the Iraqi government and the Security Council). The catch - who will control the NEXT batch of Iraqi oil to be sold (and, of course, for the long term)? The Military Government? Under what rules? For example: - Will 'humanitarian needs' include 'public safety' and thus reimburse the U.S./UK for the costs of the occupation? - The current 'Oil for Food' took billions (25% or maybe some $10 billion?) from Iraq and gave it to other countries as war reparations (surpassing Versailles). Now will the US/UK receive reparations for the cost of the war using this precedent? - Until there is a legally recognized national Government, who will control the oil fields and sell the oil? U.S./UK oil companies under a leasing arrangement with the Military Government? (Of course this leads to the issue of the ultimate privatization of the oil fields themselves.) There is one big point of leverage over the US/UK. To export Iraqi oil legally (other than through 'Oil for Food') there will have to be a Security Council Resolution. Could the US/UK try to attach the first steps in this direction to a more innocuous Resolution? The press reports that the US/UK have floated a private draft of a new 'Oil for Food' resolution. Alternatively they may have to wait for some weeks or months, when there is an impending crisis as the residual funds run out and when they have some sort of local Iraqi partners.
Did you attend the ASSA? Press reviews
I just did a quick web search of the press coverage of the AEA meetings. In a way, it jibs with the thrust of Ellen Frank's remarks. The Post and the Boston Globe leave an impression of establishmentarian discomfort with the Bush tax proposals (at one panel Allen Sinai of Wall Street and Andrew Brimmer ex-Fed Reserve Bd. lead the AEA criticism; John Taylor, now Treasury Under Scty was there trying to defend). (Not clear how much direct impact this has on a White House staff that isn't very policy wonkish?). It seems that the Far Eastern and Lat American papers picked up on Ann Krueger's (#2 of the IMF) discomfort with more money for Argentina (as you may have read, the Fund went ahead anyway and this may have been posturing). Anyone see her presentation? The best was Forbes who stressed the presentation by Grimlich (a member of the Federal Reserve's Board of Governor's) who used his AEA time to urge the Fed to prepare for a post-Greenspan era by formalizing inflation targeting (yes, that was his priority issue in these times), perhaps with a modified 'Taylor rule'. Greenspan has been resisting this as too doctrinaire. Forbes points out that there are now several Board members on board. Oh boy. Paul Ellen Frank wrote: Re the ASSA. I had to arrive late and leave early, so I missed quite a bit, but looking at the program I was struck by more or less complete lack of engagement with the real world. Nothing much on deflation, unemployment, corporate scandals, globalization, etc. No real big picture stuff at all. Of course, the profession has spent 25 years working with models that assume full employment and general equilibrium, so what is there to say except what the Bush administration says? Those who work with alternative models spend their time explaining their models to the others. The science isn't advanced enough to inform policy, and all that. The URPE sessions I attended were all quite good and reasonably well attended, though nowhere near the numbers that shows up for a set of papers on efficient pricing of futures contracts. Ellen What was the tone? (continuing triumphalism of the NeoLibs?; hedging bets by giving a bit more space to the long neglected Stiglitz\Solow wing?) What were the 'star' big sessions? Any rising themes (how to deal with deflation; financial crises; corporate 'agency')? Given that it was Wash D.C., how were the budget\tax issues handled; did any Bush admin figures show up (CEA, Treasury figures)? Did the Bretton Woods crowd give a good performance? Did they get a free ride? For URPE: How was attendance numbers? Age mix? Quality of sessions? Did non-URPE types show up? Any striking presentations? Many thanks for any thoughts. Paul
Did you attend the ASSA?
Anyone out there willing to comment on the ASSA meetings? Some questions (feel free not to address these): For the AEA: What was the tone? (continuing triumphalism of the NeoLibs?; hedging bets by giving a bit more space to the long neglected Stiglitz\Solow wing?) What were the 'star' big sessions? Any rising themes (how to deal with deflation; financial crises; corporate 'agency')? Given that it was Wash D.C., how were the budget\tax issues handled; did any Bush admin figures show up (CEA, Treasury figures)? Did the Bretton Woods crowd give a good performance? Did they get a free ride? For URPE: How was attendance numbers? Age mix? Quality of sessions? Did non-URPE types show up? Any striking presentations? Many thanks for any thoughts. Paul
Rates of Profit: Lat. Am. Debt
Yea...I threw it in because it is one of the more overlooked aspects of the Lat Am debt crisis of the '80s. Only a small slice was sovereign debt. The biggest single slice was parastatals (with government guarantees ranging from none to limited) and this debt carried the resultant risk premiums. But there was even a significant chunk of entirely private debt (in Brazil and Argentina this chunk was large indeed). Most of '83 was spent convincing the Latin governments to unilaterally convert ALL of it to sovereign debt. It was a major turning point in international economic relations and tells us much about how the key actors move in historical situations. Of course, there was no hope of an orderly process for the national governments to fully 'validate' (militarize) such sums given the political situation of most of them at the time (and, turning to your interest in a general theory for such proposals, I think this points to one of several possible outcomes). Sorry not to have ready access to some primary references, although the issue was reported in the media especially the financial press (without due weight IMO). For some amusement read through the explanations of the IMF and the Bank as to why this was fiscally responsible and how this will lead to a quick resumption of growth. Not surprisingly the bankruptcy and 'debtors cartel' options get airbrushed out of the official histories of the period. Paul At Fred Moseley wrote: Hi Paul, Thanks again for your comments. A couple of responses below. Doesn't the analogy to Latin America remind you of just how outrageous it was in the early '80s that their massive debt, largely private or non-sovereign, was nationalized without even a bargaining process or concessions? What cowardly and selfish leadership; how disingenuous of the Bretton Woods institutions to help push this along. Are you sure about this? I thought that most of this earlier Latin American debt was governent debt from the beginning. Please explain further. What were the main private sectors whose debt was taken over by the government? Thanks again. Comradely, Fred
Rates of Profit: Recent Estimates\Japan
Fred, This has been very useful. Thanks for the stimulating posts. The point about debt and financial fragility really must be kept as a prime issue. You asked for reactions about Japan and nationalizing the bank debt. I understand that by new proposal you mean it is a new alternative to the U.S. pushed proposal of a classic bankruptcy\deflation with assets being sold off cheaply (and bought by you-know-who). I also understand you are not asking about the political morality of the proposal, just how would it work out from the macro economic perspective of nation states and capitals. I don't want to duck the question but I am NO expert on Japan and very rusty on what seems to me to be the key theoretical question: the numerous transmission mechanisms that fiat money take when private debt is transformed to state debt\money. But it seems to me that the long Japanese stalemate is really 4 four crises coming together: - a whale of a classic industrial overaccumulation crisis (long wave) aggravated by the inherent limits of export-led growth. - a nifty asset bubble crisis (short wave) that came at the end of the overaccumulation (logically enough). - a sectoral\structual crisis, with the hollowing out of Japan's old industrial core and the rise of China (like our 'rust belt' problem before). - an 'undertow' (Jim are you there?) caused by the failure to grow domestic consumption (despite, or maybe because of, relatively favorable income distribution patterns). It seems to me that nationalizing the debt would help solve some, but by no means all of these issues - and even then it could only be a first step. Of course success depends on how the debt gets monetarised and I don't know Japan well enough to speculate or provide scenarios - I believe this is the tough part one needs to think through. Also, who shoulders the burden? In Latin America in the 1980's, the struggle over sharing the debt nationalizations led to ruinous rounds of hyperinflation as the burden was passed back and forth Kalecki-style. As you know well, these struggles were resolved by classic deflations. By the early '90s the only thing left to do was sell off assets in a wave of privatizations. And in Latin America the debt was a far smaller share of GDP (although a larger share of foreign currency earnings). On the other hand Japan is not Latin America and it does have more established mechanisms and a serious track record for resolving such burdens (viz. the oil shocks). Then there is the socio-political feasibility. In the Japanese case I think such a large scale socialization of private costs would use up enormous political resources - probably so much that no likely group of political players would have enough political resources left for the next steps that would be needed before the country saw enough economic results to keep them in power. So whichever political players started down this road they would be left mid-way, out of gas and ruined politically. A national unity government could possibly have enough political resources to see the whole process through, but I see no prospects on the horizon. In fact, it is my sense that though Japanese capital is very fragmented on these questions the largest single block (still a minority) favors the opposite U.S.-type approach. (I'd rather rely on others on the list for these points though.) Some of the political costs I have in mind: internally you would probably need to nationalize the banks themselves (or at least somehow broaden the base of participation). Power-sharing would be demanded by the public but also the large segments of Japanese capital that do not directly benefit (the banks are also often owned or partnered by the same leading business groups that would directly benefit). And of course one would have to take on Washington and the Washington consensus. Just some quick thoughts though. Paul P.S. Doesn't the analogy to Latin America remind you of just how outrageous it was in the early '80s that their massive debt, largely private or non-sovereign, was nationalized without even a bargaining process or concessions? What cowardly and selfish leadership; how disingenuous of the Bretton Woods institutions to help push this along. At 07:13 AM 1/15/2003 -0500, you wrote: Hi Paul A., Thanks again very much for your very interesting comments. A few responses below. On Tue, 14 Jan 2003, Paul_A wrote: Hi Fred, Thanks to you for your post and, more to the point, your hard work and serious contributions to precisely this question over a number of years. Yes, D L are very measured on this point. In fact they explicitly limit themselves to just presenting the stylized facts. Still, since seeing D L's numbers I am asking myself 'what-if' -type questions. [FWIW, my own view is just a shift to a neutral policy stance (to borrow the Fed's language). But I think we can usefully brainstorm.] My own
Rates of Profit: Recent Estimates
Hi Fred, Thanks to you for your post and, more to the point, your hard work and serious contributions to precisely this question over a number of years. Yes, D L are very measured on this point. In fact they explicitly limit themselves to just presenting the stylized facts. Still, since seeing D L's numbers I am asking myself 'what-if' -type questions. [FWIW, my own view is just a shift to a neutral policy stance (to borrow the Fed's language). But I think we can usefully brainstorm.] My own sense of 'received wisdom' was certainly what you point out - that a sustainable long upswing required considerably more domestic pain (including bankruptcies) than the '77-mid 80s experience and that sooner or later we would face such a scenario in the U.S.. But below are some of the speculations (underline speculations) that I think we need to face (I am not advocating these points; just trying to bring them out for purposes of discussion): 1) Can we be vastly underestimating the importance of the international dimension? Certainly the third world HAS been seeing 1930's style bankruptcies and depression since '82. Eastern Europe goes far beyond that (although the impact of the big industrial collapse on U.S. profits would be somewhat different, at least in the first few years). Also, doesn't the scrapping of the old style U.S. industrial base and moving it overseas partially mimic a bankruptcy process? One does get the scrapping of physical capital (but admittedly not the write off of fictitious financial capital that comes with bankruptcy or debt restructurings). Maybe some of the financial write off comes with the stock market dip (I wonder how much of DL's core sector used the stock bubble to unwind their debt position; this could then be functional equivalent to a debt write off). It makes me want to dust off the debates of the classical imperial era on the role of foreign investment and trade on home profit levels. 2) Maybe upswings in today's world require a bit - just a bit - less pain than we previously thought (we generalized too much from the 1930s and its aftermath) to produce an upswing. I.e. Perhaps the 'pain-to-profit gain' coefficient need not be exactly like the 1930's. ((Before we try out numbers for the 19th century, let's remember Michael's point about how inexact out numbers are even today.)) I realize this is a slippery slope and one should proceed with great caution, but it is not a surrender to hydraulic Keynsianism to say some (just some) of the previous pain WAS unnecessary (even for their own long term interests) and the result of misguided government policy pushed on us by greedy narrow-minded interests. Is, say, Japan really likely to get that much more of an upswing by accepting that much more pain or are there boundary effects to the benefits of pain (such as Jim's points about an undertow or the 'overshooting'/domino effect that widespread bankruptcy produces)? There might also be boundaries on the profit level highs. Unless someone devastates Europe and Japan again (I shouldn't joke), should we really be expecting any upswing to produce profit levels like the early post-war peaks in core countries? In short, (just trying this out for discussion) maybe we've had a moderate restructuring\pain process (maybe with more to come) and that this IS what a moderate upswing looks like? If this is true, and this is as good as it gets, that's no praise for the system. In today's world, the high's and lows are just more reduced (for those who live in the core countries). In any event, I think one point is clear: this area is now central to any strategic thinking and merits a lot more attention and research, especially empirical research. I think your own work becomes ever more vital. Paul At 11:27 PM 1/13/2003 -0500, you wrote: Hi Paul, Thanks for calling our attention to the Dumenil-Levy article and for your comments and questions. I think it misleading to talk in terms of a new long-run upward trend in the rate of profit. I think D-L are measured and cautious in what they have to say about this. The recovery in the rate of profit since the early 1980s is very weak and partial. Excluding the highly capital intensive industries (Transportation and Public Utilities, and Mining) (as D-L suggest), the increase in the rate of profit since 1982 has been only about 25% of its prior decline, so that the rate of profit today is roughly half of its early postwar peaks. Extending the estimates to 2002 (which is a more appropiate comparison with 1982), as Jim D. suggests, would lower these %'s further. Plus, I am puzzled by the 25% increase in D-L's estimates of the profit share for the corporate sector. Other estimates that I have seen of the profit share show little or no increase in the profit share since 1982. For example, the BEA estimates for non-financial corporate
Rates of Profit/Jim Devine
Jim, Thanks for your reply and apologies for my delayed reply (difficulty in reading). The draft pamphlet, from the link you posted, is really quite good. I hope you plan to finalize and put it out - it will be a useful resource. But I am still nagged by the big picture question. IF, IF indeed back in 1982 we started a 'long wave upswing' (and I realize that phrase carries a lot of baggage and assumptions), then isn't the post '97 downturn more of a trend within a trend? The downturn is very important within its own right (just ask the 401k crowd), but more of a 3-5 year type issue, unless major things happen (which they can, and that is another reason why one should be mechanistic and deterministic about OCC-type long wave ideas, even if one buys into them and weighs them heavily). The point is that the upswing is a bit like a big heavy truck with lots of momentum (you see how your 'speedboat' analogy sets people off). If it exists, it would seem like it will be a background force we will have to consider for some years ahead. AND now one could add the recently vastly restructured relations with the less developed countries, and perhaps soon-to-be restructured relations with oil producing countries. These could even enhance the upswing effect - maybe even on a very big scale. A few specific comments about the pamphlet: What do rising profits rates really mean? You made a good point: a rising rate of profit does not simply translate to certain (if uneven) growth. I think this will be an essential and much overlooked point. A rising profit rate is just a context and everything else still needs to be negotiated and maneuvered through. These are not natural smooth equilibrium processes being described. I wish we had some more historical analysis on the profit rate\growth rate question. Are the profit numbers meaningful? You rightly point out that the data is just for the U.S. and also that the U.S. profits might be understated because of management remuneration (I wonder how large this is in the big picture). Maybe it should be pointed out that since the 80's the corporate tax and regulatory environment has created a whole host of reasons to suspect that profits have been allowed to be understated compared to previous estimates (of course in a bad crunch the reverse happens and phony profits appear in some cases). This happens in all aspects of operations so it is probably on a scale vastly larger than just personal remuneration. Likewise the new international climate fosters transfer pricing techniques on steroids. Of course it is through many techniques, and not just transfer pricing that corporations can avoid reporting U.S. profits by having funds initially accounted for overseas. To have a sense of the scale of this one need only think of the reverse situation: the massive percentages of capital flight, where businesses in the periphery avoid reporting profits to their home countries. The impact of foreign competition on U.S. profits since '97 through price competition. This one made me flinch. Do we really know much about this? The whole process has seemed very tightly controlled with the U.S. government having its foot very close to the brake pedal, when it chose to. In the case of many imports haven't U.S. profits by some companies been sacrificed to help profits by other U.S. companies (e.g. cheaper inputs)? No doubt the political process doesn't carefully weigh the profits and losses, but are we clear that it is a net loss of profits and on an increased scale? [Incidently, have you seen the paper on profit rates by Jim Crotty (on the UMASS website?) that argues along the same lines as you?] Once again, much encouragement for your pamphlet. Paul At 08:24 AM 1/10/2003 -0800, you wrote: Duménil Lévy are excellent people and scholars. Their research on the (conventional) rate of profit in the US is ground-breaking. (What Fred Moseley calls the conventional rate of profit is a measure of the kind of profit rate that matters most to business. It differs from the Marxian rate of profit that includes the wages of unproductive labor-power in the numerator as part of surplus-value and excludes them from costs and the denominator (along with some other adjustments).) My interpretation of their work (and others') is that the long fall in the rate of profit up to the early 1980s is part of the process (along with stagflation) that provoked the one-sided class war of the last 25 years or so. This has been seen in the victory (so far) of the neo-Liberal policy revolution (Reaganism, following Pinochetism and Thatcherism and followed by Bush/Clinton/Bushism) which is dismantling what existed of the welfare state and feeding the rich and the military. This has led to an incomplete recovery of the rate of profit up to 1997. I interpret the incomplete recovery in terms of (1) increased international competition, including unused capacity; and (2) the fact that booming CEO salaries aren't counted as
Rates of Profit: Recent Estimates
There is a 'must-see' article in URPE's RRPE, Fall issue (latest?) by Dumenil and Levy. The most salient point is that they see a LONG RUN upturn in the rate of profit since 1982 which was the bottom of a 34 year decline. So far, as of 2000, there has only been a partial recovery (since 1982 profit rates have returned roughly to the 1965 level). This is long wave analysis, so of course there are ups and downs within these trends. They see changes in productivity (technical change) as driving much of the downswing and now the upswing, but there are also shifts in the share of profits. So, between the lines, they would seem to point to falling rate of profit theory although the article is deliberately limited to the stylized facts. They consciously draw on Shaikh, Tonak and Moseley. To bring out the trends D L rely on removing from consideration very capital intensive industries such as power, communications and transport on the grounds they are a special case. They also use 1956-65 as the base years. Of course the implications are central: are we well into a long upswing in profit rates that, very broadly speaking, might last for another 15 years or so? I would love to hear what people think of the article (especially Fred Moseley and Jim Devine). Is the difference in emphasis with Moseley largely because they now bring more recent data into play? I recall that the paper was to be presented at the ASSA LAST year. Does anyone know how the discussion went? Paul A. P.S. Who are these French fellows Dumenil and Levy? They seem to be quite prolific. At 03:41 PM 1/9/2003 -0800, you wrote: [was: RE: [PEN-L:33695] Re: Re: quesion from Michael Yates] Fred B. Moseley wrote: You might want to take a look at my 1992 book *The Falling Rate of Profit in the Postwar US Economy*, and a more recent 1997 RRPE paper The Rate of Profit and the Future of Capitalism. Doug writes: So where's the ROP these days? according to the SURVEY OF CURRENT BUSINESS (http://www.bea.doc.gov/bea/ARTICLES/2002/09September/0902CorpProfit.pdf), what Fred calls the conventional rate of profit for the non-financial corporate sector has fallen pretty drastically in recent years. Its cyclical peak was in 1997, suggesting that the 2001 recession was partly -- or maybe completely? -- caused by the fall. I presume that the ROP fell more drastically in 2002 because of falling rates of capacity utilization (and profit realization) as it did in 2001, though the government hasn't calculated that yet. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Rates of Profit\Measuring K
You make a very valid point. Also, as I understand it, you are saying that the measurement is empirically difficult but not conceptually flawed (since we are unabashedly measuring the cost of capital in the context of a ratio and NOT pretending to 'measure capital' to then make 'what if' comparisons). In that case, and since we will never get better historical data, where do you thing we should go with this line of inquiry: - proceed, but beware (use sensitivity analysis, trust only big enduring trends, etc)? - forget about this line of approach? - do the analysis but avoid any conclusions? Paul At 09:39 AM 1/10/2003 -0800, you wrote: To beat on a not yet dead horse, of the major problems in estimating a rate of profit is the denominator -- the capital stock. Most of the debates center around the measurement of total profits, but the capital stock is the truly difficult part to measure. In recent decades, investment has been shifting from long-lived capital goods and buildings to capital goods of a very uncertain lifetime. I believe that even software is now suppose to be part of the capital stock, but I'm not sure. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Sweezy's occ\Shaikh
Jim Devine writes: Shane, you've opened up a can of worms much larger than I can stomach at this point. Instead of trying to do so, I'll simply agree to disagree: 1) I find that Marx's theory of unproductive vs. productive labor to be superior to other versions of that theory (e.g., those of Smith or the neoclassicals). However, it's not very useful, as far as I can tell, for understanding the laws of motion of capital. It's the rate of profit that is calculated treating unproductive labor-power costs as _costs_ (as capitalists treat them) rather than as part of surplus-value (as some Marxists treat them) that seems most relevant to empirical work. In addition, some unproductive labor is indirectly productive (raising the productivity of productive labor), which makes the theory quite fuzzy. 2) I have not been convinced by the various presentations of the theory of the tendency for the rate of profit to fall that I've seen. I have been convinced by an alternative crisis theory, which I'll summarize if anyone is interested. 3) As I said in my original missive, how one measures the degree of capital intensity of production (the OCC) depends on one's theory and the purpose of one's research. As far as I'm concerned, since I'm not convinced by _a priori_ assertions that the degree of capital intensity rises, I'm interested in measuring whether or not it does empirically -- or rather, whether or not it does so enough to depress the rate of profit. 4) Of course, I think that the kind of issue that Shane Mage and Michael Perelman brings up (the issues of the incorrect measurement of the capital stock) are quite relevant. However, sometimes empirical research must rely on imperfect measures in order to get a preliminary understanding. (It's not like the neoclassical theory of the aggregate production function, which _must_ be based on totally unrealistic assumptions about the nature of capital goods.) BTW, I found that Mage's dissertation was quite useful to my research. I was lucky enough to get a photocopy. Jim Devine Jim: I would love to know what you think of Shaikh and Tonak's book. I plan on absorbing more of it (it can be slow going for the mathematicly impaired) but seems to be extremely relevant to your interests. It is a good example of both the empirical side AND shows how issues such as productive/unproductive shed light on the laws of motion. I believe Shaikh has put the first chapter on his New School web page.
Yen still overvalued\Japanese Keynsianism
Isn't this a bit out of date? The Japanese had been bashed for not running large fiscal deficits but for the last few years DID turn to fiscal Keynsianism, and on a large scale (sorry, I don't have the numbers handy). What is significant - and scary - is how little it has worked. Perhaps this has been the largest test of Keynsianism in modern history (well, the standard 'hydraulic' version of Keynes). Certainly it is the first case of a major industrial economy turning to this standard perscription for a mid-size crisis (since these only appear every few decades). It all strikes me as a very under-studied issue considering it involves one of the core precepts of a major political (and theoretical) stream. Paul A At 02:09 PM 3/6/02 -0800, you wrote: Gil writes:The interesting question, in light of Peter's assessment, is why the Japanese government can't use traditional Keynesian fiscal tools to pull itself out of the recession. 1) the IMF and the assembled economic pooh-bahs argue against it. 2) they've already done it a lot, building a lot of infrastructure, much of it useless, but never enough to get the Japanese economy moving again. 3) they don't want to get into raising government consumption (building pyramids, as Keynes suggested) and they're still restricted from doing Military Keynesianism. But that doesn't mean that fiscal policy couldn't be used. My idea is that they should stimulate the Japanese economy by giving foreign aid to poor areas (such as East St. Louis, IL) that's tied, i.e., can only be spent on Japanese goods. This is what the U.S. did for many years. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
re: Yen still overvalued\Japanese Keynsianism
I wrote:
Isn't this a bit out of date? The Japanese had been bashed for not
running large fiscal deficits but for the last few years DID turn to fiscal
Keynsianism, and on a large scale (sorry, I don't have the numbers handy).
Jim Devine writes:
If it's out of date, I'd like to know. I'm not a student of Japan as much as
I'm curious. I'd heard that the fiscal deficits were stop-and-go in nature,
perhaps being cyclical rather than structural in nature (i.e., being due to
stagnation rather than as an effort to fight stagnation).
Some rough numbers illustrate:
Budget deficit 1994:2.2% of GDP
Budget deficit 2000:8.0% of GDP
{IMF Country Report Japan}
Don't you think it is fair to say that for most mainstream Keynesians this
represents the 'pedal to the metal' range and thus a fair test of a
stimulus package? Certainly the current reports of the IMF (admittedly,
not Keynsian) have tried to raise (incite?) the fear of financial market
refusal of any further debt if this policy is continued. That is an
unusual step to take when dealing with one's second most powerful member
state (not unusual when they are small).
The deficit increase came from a shift in policy stance rather than
cyclical fluctuations (Japan hasn't seen a downturn, only stagnation;
perhaps mainstream Keynesians will claim this as a victory, but politically
it is not a sustainable one). The deficit buildup was a bit halting, but
only as one imagines these things will be as a political and economic
crisis unfolds.
I think it is also fair to say that Koizumi represents those who now want
to try a more neo-liberal tack. After all, over the last 25 years this is
what has happened in most countries when orthodox Keynesianism is perceived
to have failed.
I wrote:
What is significant - and scary - is how little it has worked. Perhaps
this has been the largest test of Keynsianism in modern history (well, the
standard 'hydraulic' version of Keynes). Certainly it is the first case of a
major industrial economy turning to this standard perscription for a
mid-size crisis (since these only appear every few decades).
Jim Devine wrote
If an active Keynesian fiscal stimulus program is failing, that's
earth-shaking to the Keynesian perspective.
Krugman, who dismisses fiscal stimulus out of hand, never uses the fiscal
policy has failed to stimulate demand line. Instead, he complains about the
worthless investment projects the Japanese government engages in (bridges
that go nowhere, etc.) This suggests that even anti-Keynesians don't see the
demand-stimulus piece of fiscal policy as ineffective.
My recollection of Krugman's 'planned inflation' proposal and his analysis
is vague. I also see him as an aggressive part of the neo-Keynsian crowd,
but you know him much better - and so so much longer ;) I do recall he
briefly explained away the failure of fiscal stimulus by saying Japan was
in a classic liquidity trap. Yet presumably this would mean a flat LM
curve rather than a vertical one so it didn't make sense to me. I saw his
'planned inflation' proposal as a backdoor incomes policy, ironically a
step more towards some of the post-Keynsian crowd. Anyone familiar with
any neo-Keynesians trying to come to grip with this at a theoretical level?
[My sense is there are not many economists trying which in itself is
meaningful.] I suppose one has to reach for 'special case' weakenings of
the multiplier.
Personally, I don't doubt that one can torture the neo-Keynsian curves so
that the theory fits. But this may be a case where one of the most central
policy tools doesn't work in a middle-level crisis that seems not to have
that many special circumstances. Events like that can have a big impact
on a theory's future.
[P.S. I am also no student of Japan and would love to hear what others may
make of this.]
Paul A.
Yen still overvalued\Japanese Keynsianism
Jim writes: To see a structural deficit, there would have to be (1) legislated tax cuts; (2) legislated transfer-payment increases; and/or (3) increases in government purchases. Have these happened in a big way? Yes. In a very big way (especially #3). And that is why it seems to be such an amazingly overlooked story. Sorry again not to have a wider array of stats handy this week but let me try it a different way: As % GDP19942000 Govt Revenue31 %30% Govt Expenditure33 %37% Again GDP did not shrink (it slowly grew) so you can see these are marked and policy driven shifts. Japan now has the highest budget deficit in the OECD (I believe). The share of govt in the economy is not quite double the U.S. and comparable to the northern Europeans - although not as devoted to social well being. The last fact may be why we hear so little about it: the struggle over Koizumi's vision for the budget is not mainly a fight for social benefits but rather more between two versions of economic growth. I wrote: My recollection of Krugman's 'planned inflation' proposal and his analysis is vague. I also see him as an aggressive part of the neo-Keynsian crowd Jim writes: He's a neo-Keynesian who, like Mankiw _et al_, tries shot-gun marriage of Walrasian general equilibrium and Keynes. This is well put. Have people pointed out that this seems much much more like Hicks (pre-1965)? [Now this is something Matthew can't claim not to be a student of.] His liquidity trap theory is about the failure of monetary policy, not fiscal policy. It's not a true liquidity trap à la Keynes: instead it refers to the fact that nominal interest rates can't fall below zero. I saw his 'planned inflation' proposal as a backdoor incomes policy,... maybe, but his explicit story is that planned inflation raises inflationary expectations which lowers the real interest rate which stimulates the economy (while combatting deflation). Yes, but I recall that he also largely relied on anticipated rising prices to force consumers to spend (whittling down those savings pools) and businesses to buy up real estate, etc (whittling down the bad loan problem). Maybe I am stretching an analogy but usually the incomes policy crowd are faced with restraining spending and resort to tax policy and the like; Krugman was emphasizing using the 'inflation tax' to exhort and guide spending. Anyway the point is that the second largest economy in the world has experimented with probably the largest Keynesian fiscal policy in history. First the U.S. demanded it (Bush I and Clinton); now U.S. economists seem to ignore it and even urge its abandonment. Strange world. Paul A.
SL bailout cost: what effects?
A new congressional study puts the price tag of the savings and loan debacle at $ 480.9 billion, much higher than previous estimates of the government bailout. Question: what are the tangible effects of putting $500 billion into a financial system - directly and without links to productive circuits? What are the intangibles (or where is moral hazard when you need it)? Has anyone seen any discussion of the impact of the SL bailout on the subsequent bubble? Paul
Nader 3? Blaming who?
If you think there's no difference between a Clinton-Gore EPA and a Bush-Cheny EPA you need to have your brain overhauled. Brad: Surely by now you have caught the point: people don't feel there is ENOUGH of a difference to endure a permanent abandonment by the Democratic Party of many of its core values in the face of serious underlying shifts in the American economy and society (short term booms not withstanding). Surely you can imagine a different set of preferences over a longer time frame? For years now I have had to listen to the Clinton-Gore operatives tell me that I didn't understand real politics. Now it turns out THEY were the ones who miscalculated. More then a million people have 'defected' and who do they to blame? Can't be they 'triangulated' a little too close? No, its the one million people who are too purist and expect too much. In fact it was their blind arrogance. I suspect they could have pre-empted the Nader movement with very little effort on their part. What would it cost ClintonGore to have gone a different route on welfare reform? Reined in a few 20-something Country Directors at the IMF? Stood up for just a bit for those blue collar workers in the upper mid-west. Tonight is probably the first time in eight years that they think they MAY have underestimated their inferiors and that they DO have somewhere else to go. And I say its a good thing. The sad part is that they only think of the votes they didn't get and not the wasteful suffering they caused in the name of their 'smarter' politics. PA
Re: Re: Nader 3? Blaming who?
Sorry, I don't think you want to listen (and this has been the larger problem all along) and I'd rather not continue in this tone. Signing off for now. PA PS I am not a faction You shoot yourself in the foot and then look around for someone else to blame? Why not be an adult, recognize that there is a big difference between a Clinton-Gore EPA and a Bush-Cheney EPA, and admit you fucked up? Take some responsibility for the actions of your faction. Be a grown up. If you want to make the world a better place, do politics for real. If you'd rather express yourself, go join a theater troop somewhere. Brad DeLong
Bolivia, A16, and Bechtel
Am I right that the tragedy in Bolivia REALLY needs to be brought out at A-16? Are these a few relevant points?: 1) Bolivia is hardly an exception. For a number of years the WB has made privatization and imposing higher prices for basic drinking water supply to the poor a centerpiece a centerpiece of policy for each and every poor country. ((For a self congratulatory review of their impact see "Water pricing experiences : an international perspective" World Bank technical paper ; no. WTP 386 1997 on the WB WebSite)) 2) Drinking water is hardly an exception. For example, the World Bank has likewise forced poor countries to charge for the most basic essential health care to the poorest and impose charges for basic education on the poorest people on earth. 3) These policies are presented in papers with titles like: "How Adjustment Programs Can Help the Poor: The Experience of the World Bank" or "Adjustment Programs and Social Welfare" (both real examples of World Bank publications). As A-16 approaches the WB President argues that he is really about "helping the poor" and that 25% of its money is used to support its social policies. People should be reminded how they use language. 4) But, of course, the Bank and the IMF are part of a larger picture and far bigger interests. . Am I right that the Bechtel connection is HEAVEN-SENT? I wish I could remember more and I hope other Pen-lers do (maybe our West-Coasters?). Bechtel has long been a WB favorite contractor - naturally since they are infamous for using their heavy handed Repub political clout for getting the big infrastructure projects overseas and in the defense industry. This goes back to the days of "discovering" Saudi Arabian and their oil company links. Here's a brief list that I know of : - MANY monster environmentally unfriendly projects (including favorites like the Diablo Canyon Nuclear Power Station). - Lots of unpleasant and inhuman defense projects - Sleazy political corruption scandals (sure wish I could remember more; weren't they convicted for overseas bribes in the 70's?) - Good ole anti-union actions along with their mining company buddies (Salt of the Earth?) - AND for the baby boomers even a Nixon connection: Nixon confident George Shultz was their past Pres and remains on the Board (even Cordell Hull was a Bechtel-er for you conspiracy buffs). This sure looks like a coalition builder! Any reactions? Paul
