Re: [PEN-L] China's Socialist Path
Shane Mage wrote: It is the opposite--a movement from a backward bureaucratic state capitalism, which reflected the semi-feudal and dependent colonial structures inherited by the CCP, towards a modern, globalized capitalism in which the proletariat is growing by leaps and bounds, in numbers, strength, and confidence. It is then, within the capitalist mode of production, an enormous step *toward* [the possibility of] socialism. I basically agree. The path is not a straight line.
[PEN-L] Fidel steps down
http://www.granma.cubaweb.cu/2008/02/19/nacional/artic10.html
[PEN-L] Krugman: a peak oil believer?
http://krugman.blogs.nytimes.com/2008/02/19/feeling-a-bit-peaked/
Re: [PEN-L] Deng Xiao Ping Theory: The Framework which Guides China's Development
Eric wrote: Hi Louis, I'm sad to see your comment below. Comrades should not speak to each other like this. With due zealotry and certainty, Louis protects the sacred flame of Marxism (tm) against anybody tempted to dim it by standing anywhere near the Brenner Thesis, China, Ahmedinajad, Lula, Daniel Ortega, Doug Henwood (not anymore, since they made peace), the ANC, the old CP of the U.S., the Democrats, religion, academia, or 99.% of the annual output of the film industry. Once one gets used to that, it's fun to watch.
Re: [PEN-L] David Brooks predicts a centrist Democratic president whoever wins
Louis Proyect wrote: I thought it was fairly shrewd of him [David Brooks] to make the case that the next Democratic president will run the country like Bill Clinton, whether it is his wife or that change guy. It's not shrewdness. It's wishful thinking. Of course, in politics, anything can happen -- as Babe Ruth would say of baseball. Even Brooks' fantasies might be realized. But the fact is that the fundamental political conditions of the country have changed in the last 7 years. Bush happened. 9/11 happened. The war on Afghanistan and Iraq happened. Katrina happened. The need for universal health care is more widespread and intense now than it's ever been. The level of political participation, whichever way we measure it, has increased significantly. The ideological center of gravity of the country has shifted. Just so that the obvious is transparent enough: That doesn't mean that I'm predicting a proletarian revolution in the U.S. I just think that Hillary Clinton or Barack Obama -- or even McCain -- will not be likely to run the country the way Bill Clinton did. There are hardened public expectations and political forces non-existent back then that will constrain their actions. There will be struggle and the outcome is to be decided.
Re: [PEN-L] David Brooks predicts a centrist Democratic president whoever wins
Doug wrote: By almost any orthodox economic measure, the U.S. is due for an austerity program. The consumption share of GDP is over 70%, up from 67% a decade ago, and 62% at the end of the 1970s. There was an unprecedented housing boom and massive mortgage borrowing. Household savings are 0 and the current account is a wreck. The currency is sagging. What is any president who takes office on 1/20/09 likely to do? No doubt the next president will inherit an economy in deceleration and with some inflation. The USD will continue its decline. But I don't see why *non-orthodox* policies would be impossible -- or less likely -- to implement in the late 2000s than, say, in the early 1990s. In fact, in the early 1990s, economic orthodoxy was the only game in town. History ended back then, remember? Except that it didn't. And now it's the age of turbulence! Back then, the neo-classicals were the leading force in academia. Nowadays, the neo-Keynesians rule. Even in the public perception old free-market economics has fallen in some disrepute. Back then, Paul Volcker's move had become an enduring legend on Wall Street. Notice how rapidly the ratings of Alan Greenspan declined as of late. So the chances that a new president would go global-Keynesian are much better now than at any point after the early 1970s. With a new president, the foreign policy of the U.S. is likely to change. A mere stylistic makeover -- even if it falls far short of a full progressive reform -- could help change economic expectations, domestically and globally. A few moves could help. Getting out of Iraq. Toning down the conflict with Iran. Re-launching the WTO and the World Bank for serious. Having a truce with Latin America. I don't see the opposition to the occupation of Iraq disappearing if the troops are not pulled out. A new president could get serious about reforming the international monetary system. After the subprime mess and the credit crunch, the financial sector is in a much weaker position to dictate policies than it was under Rubin/Fisher/Clinton. There's a lot of global money, sovereign funds, reserves, etc. out there. I don't see what can keep the biggest economy in the world from setting up conditions to induce the recycling of all that global liquidity into projects that are even marginally better for the global economy. The president could reverse the taxcuts for the rich and even tax them some more. Even Buffett and Gates are asking for that. Some reform to the health care system could also contribute to change economic expectations. People with some insurance are more willing to take economic chances and switch resources to areas of the economy offering a bigger bang for the buck. Even longer term projects, like tackling the crisis of basic and high school education, rebuilding the transportation infrastructure, dealing with global change, etc. could re-set expectations. All those problems are now more urgent than in the early 1990s. And, again, the main requisite to induce change (pressure from below) is more serious now than it was in the early 1990s. I just don't get the counter-posing of mass mobilization with electoral politics (see Louis Proyect's posting). That's a false disjunctive. It's ideological garbage. You can have both mass activity and electoral politics complementing each other. I think the left needs to become a more serious electoral force. Look, if you have the ability to mount a credible challenge to the DP, by all means, go ahead! If you don't, then build up the forces. But, for now, why do you feel you need to surrender the meager political weapons that are currently within your reach? Question: Did people get as excited and involved in the early 1990s with the presidential election as they are now? I doubt it.
Re: [PEN-L] David Brooks predicts a centrist Democratic president whoever wins
Doug wrote: Nothing's ever impossible, but why would a new president pursue them [non-orthodox policies]? Because they need to buy more time, more political wiggle room for capitalism. I wish the next president would appoint Julio Huato chair of the CEA, but I don't think that's likely to happen. Hey, no need to jinx me.
[PEN-L] On the third hand [was: Let.s Go Hillary]
Jim Devine wrote: Sure, I'm going to vote for whomever the Dems choose, to prevent the current version of Bush from being elected. But I know that the vote is wasted. It's totally harmless to the corporations. (Besides, as the anarchists say, if voting could change the system it would be illegal.) [clip] Voting is a futile act. We have to find those acts that aren't futile. The average influence of one individual vote is infinitesimally small, negligible. But it doesn't follow from it that the aggregate influence of voting is negligible. So, in this sense, the argument that voting is a futile act is fallacious -- as in fallacy of composition. Dan Scanlan wrote: Both Clinton and Obama are corporate functionaries. Clinton's job is to corral the votes of those who seek equality of the sexes. Obama's job is to corral the votes of those who seek racial justice. We need to stop thinking of regular working people as cattle. Whether Clinton or Obama, or those who write for them the big checks, think of people as cattle to be corralled, doesn't entail that people will simply accepted the corralling. When one thinks of the working people as conscious agents of history (even if their current actions don't measure up to the high expectations of some leftists), the whole picture changes.
[PEN-L] Obama on 60 Minutes
http://www.cbsnews.com/stories/2008/02/10/politics/main3813759.shtml
Re: [PEN-L] Let.s Go Hillary
Jim Devine wrote: On the other hand, if Clinton is elected, she'll probably turn out to be as bad as Obama would be. But it would be a sign that at least some of the struggle against sexism has been successful. Yet on the third hand, if McCain wins he may turn out to be as good as Bush!
[PEN-L] Hillary Clinton on 60 Minutes
http://www.cbsnews.com/sections/i_video/main500251.shtml?id=3814250n
Re: [PEN-L] Let.s Go Hillary
Carrol wrote: When a national coalition to replace the DP-Pimps at UFPJ == When something somewhere entirely unexpected and unpredictable now occurs [e.g., Walmart employees emulate the Fisher Body Sit Down Strike) -- When 50,000 white, black, asian marchers come out to a pro-illegal immigrant march in Chicago -- When something happens 'in the street' as they say -- And happens again, _larger_ -- Then it will make sense to talk of HOPE. In other words, you are HOPELESS.
Re: [PEN-L] Let.s Go Hillary
Jim Devine wrote: I know it's a cliché, but whatever happened to optimism of the will, pessimism of the intellect? How is voting for Hillary, McCain, Huckabee, Paul, Gravel, Nader, the SWP, etc. -- or not voting! -- a manifestation of this optimism of the will?
Re: [PEN-L] Let.s Go Hillary
Carrol wrote: It seems to me that to put one's hopes in either Obama or Clinton is to express utter despair. And putting your hopes in Nader is a sign of cheerfulness? (It's odd to have the words cheerfulness and Nader in the same sentence.)
[PEN-L] I hope you all vote(d) for Obama
C'mon everybody in the U.S. Go out and vote. For Obama, of course. Then keep doing whatever you're doing to advance socialism in the world.
[PEN-L] I hope you all vote(d) for Obama
Carrol is right. Individually, in isolation, the decision to vote or not vote (and for whom) makes an infinitesimally small difference. Negligible. If you rule out the improbable event of an extremely, tightly contested election, a few votes make no difference whatever. So, the decision has to be viewed not as individual or isolated. It has to be viewed as collective -- even if the collective body to which one belongs by chance or choice doesn't quite (yet) jell as a political force. It's about political motion. By Newton's first law, little motion is better than no motion. Errors of commission are much better than errors of omission. Collectively, we learn more by committing than by omitting. If we look at things from a collective point of view, then at some point Carrol's profound wisdom is either self-fulling or useless. The dynamics of crowds can be highly nonlinear. At the starting point, individually and even collectively, we have very little control over outcomes. And we don't have perfect foresight. That's all humbling. And another good reason to cool down the emotional huffing and puffing that these discussions tend to elicit. This is not a sharp, clear-cut ethical or political dilemma with full knowledge of consequences. So nobody is going to prove to us logically that, from the standpoint of our collective interests as working people, supporting Obama is better than supporting Nader or Michael Perelman for president. The argument will be mushier. Talking about mushy arguments, I don't want to repeat what I've said before. So, for those interested in my views, I stand by what I wrote here: http://www.swans.com/library/art11/jhuato01.html To keep things more specific, these are the main propositions I factor into my decision: First, about the general presidential election: The Democrats are a big threat to peace and the general interest of working people in the world, but Republicans are a much bigger one. So even if it comes to Hillary vs. McCain, it'll be a no-brainer for me. Second, about the primaries: Looking at the policy agendas and that alone, with the information I have, my expectations of the consequences of a Hillary or Obama administration for global peace and the interest of workers in the U.S. and abroad are not that different. The risks involved (high) are about the same. Advances on health care and the social safety net are crucial for the future political strengthening of U.S. workers. Yes, but I don't put too much weight on the differences between Hillary and Obama that Krugman emphasizes. Perhaps in terms of framing the argument, Obama is weakening the case. So, if you wish, subtract a point from Obama. Still, there are other reasons why Obama is better than Hillary. One, it follows from Carrol's wisdom that the outcome of the struggle for universal health care is likely to depend much less on personalities than on the political forces in motion. Personalities matter, sure. So, suppose that there'll be some political force backing up with demands for out of Iraq, universal health care, etc. Now, in that case, who'd be more likely to ride the tide and not get in the way? Obama or Hillary? Not by much, but I think the answer is Obama. Why? A hint can be gleaned from the campaign fund stats: http://www.opensecrets.org/pres08/donordems.asp?cycle=2008 Obama's distribution of funds is significantly wider (smaller donations, more donations) than Hillary's. People do talk with their money. Hillary's social base of support is narrower and richer. But, aren't politicians known for betraying their social base of support? Of course! We're talking probabilities here -- the probability that social forces will constraint their more likely inclinations. That cuts in both directions. We already have a recent observation from a president named Clinton. None from a president named Obama. The president named Clinton did betray his progressive social base. Hillary has been blatant in thumbing her nose on the antiwar movement, I think. With Obama, we really know less. So I tend to discount Hillary more heavily than Obama on this. But the strongest reason in favor of Obama is, IMHO, that race largely intersects with class in the U.S. and in large swaths of the world. This reason alone really overwhelms the other ones -- for me at least. Blacks in the U.S. are the most oppressed sector of the U.S. working class. Blacks in the world are the most oppressed sector of the global worker. Black and male in the U.S. is almost synonymous with political disenfranchisement, incarceration, and plain being the target of the nastiest forms of racism imaginable. Black in the U.S. is almost synonymous with worker. Black in the world fairs not much better. So I cannot but imagine that, even if Obama messes things up royally and disappoints (which he has a good chance of doing), his being Black is *very likely* to have a serious, positive effect on the individual
[PEN-L] I hope you all vote(d) for Obama
Just a quick addendum to my argument that a broader social base of support makes Obama less likely than Clinton to get in the way of the social struggle for out of Iraq and universal health care: The political stock of progressives (or whichever way you call that mass of people, loosely connected, that is for out of Iraq, universal health care, better working and living conditions for regular folks, etc.) today is significantly larger than in Bill Clinton's times. As a mass, we're more assertive and organized today than we ever were during the 1990s. It is a much more robust sentiment (if not movement) than anything existing in the 1990s -- even if you take into account the anti-glob crowd. Now, there's very little in Hillary's positioning, in her marketing proposition, suggesting to me that she gets it. Cynically perhaps and with a measure of soppyness that irks me, Obama seems to be tapping into real, deeper sentiments in favor of progressive change. Once you set your political profile at that scale, it's hard to recast it. It tends to crystallize into some kind of an objective reality that constrains your actions. Add to that the prospect of reelection. He's going to need that support base again in 2012, if he gets elected this year. Hillary will owe the left much less -- and will need it even less for reelection in 2012. That's why I think that the broader base of support has a greater chance of mattering.
[PEN-L] Paul Samuelson: Balancing Market Freedoms
http://www.iht.com/bin/printfriendly.php?id=8390223
[PEN-L] Paul Samuelson: Balancing Market Freedoms
P Samuelson wrote: Since we live ever in the short run... Before that he wrote: When I come to write a newspaper article like this 10 years from now, I believe America may still be leading the pack in per-capita affluence. He was born in 1915.
[PEN-L] Adbusters: Mankiw as a propaganda hack
http://adbusters.org/the_magazine/75/Economic_Indoctrination.html
[PEN-L] Paulson anticipates slower growth of U.S. economy
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vD5CqfchvmhI.asf
Re: [PEN-L] Gindin, Brenner and capitalist catastrophe
Patrick,
I just read your article on the Global Crisis. I'm not really sure I
get your point about over-accumulation.
First, it's not clear to me whether over-accumulation is, in your
view, (1) a chronic, systemic condition of capitalism, (2) a tendency
in a given stage in the history of capitalism, or (3) an acute
condition in the most recent historical juncture. May I assume you
mean (3)? Not sure.
Second, your definition of over-accumulation is not clear to me
either. Over-accumulation with respect to what? Profitability?
Social needs? If the former, why isn't the recent story of raising
energy prices and commodities one of under-accumulation in those
industries?If the latter, why isn't it the story one of
under-accumulation in education, public health, or the greening of the
economy?
Is over-accumulation the specific form of the global crisis, a process
or mechanism of the global crisis, its specific essence? Not that
it matters much, but the term crisis as used by Marx in Capital (as
well as in Grundrisse and the Contribution) is rather well defined.
The basic idea is Hegelian. Each moment, phase, or polar aspect in an
organic whole has its own inherent logic, which drives it apart from
the whole, counter-pose it to the whole in a curve that goes from
difference to contradiction to outright antagonism. At a point,
something has to give.
A crisis is the sudden, violent re-assertion of the unity of the
whole, the re-snapping back of these poles (pulled apart by their own
logic) into their respective positions in the whole. Without this
re-assertion of its unity, an organic whole would not flow, would not
be able to reproduce itself. Its centrifugal forces would destroy it.
Capitalist reproduction in its purity is the organic whole Marx had
in mind here.
Marx took this Hegelian idea and applied it to the inherent unity of
opposites in the reproduction of the material life of a capitalist
society -- e.g. production and consumption in general now mediated by
generalized exchange and production for gain, use-value production and
surplus value production, M-C-{LP+MP}...P...C'-M'. As I wrote
recently, Marx noted that the mere divorce of production and
consumption by commodity exchange was a necessary but not sufficient
condition for the emergence of the stereotypical, devastating,
relatively widespread (universal) capitalist industrial crises a
la 1825.
Necessarily, Marx's notion is inconsistent with viewing the capitalist
economy as in a permanent state of crisis. If you use the term
crisis to denote that process by which the polar aspects of the
unity are driven apart, imbalances pile up, etc., then you're
confusing the build up predating and preparing the crisis with the
crisis itself! In Marx's sense, what you call crisis is not the
crisis, but capitalist normalcy! The crisis is supposed to be --
again -- a sudden, violent purge of the distortions generated and
built up during normal times, only to set conditions trigger another
build up of imbalances, etc. The sudden de-valorization of capital
that you mention in your article is a mechanism of the crisis. Etc.
Don't get me wrong, as clear as Marx's notion of crisis is in Capital,
it is not immediately amenable to empirical measurement. How violent
is violent? How sudden is sudden? How deep or widespread
(universal) should the re-assertion of the essential unity of the
reproductive process of a capitalist society be to qualify as a
crisis proper?
How about partial, somewhat superficial, shallower by the historical
standard, re-assertions followed by an artifitious but unsustainable
in the long run continuation of normalcy, i.e. a return to
normalcy propped up by fiscal or monetary or trade policy gimmicks?
Would they qualify as -- I don't know -- partial crises? How about
crises whose sequels linger on and on as a result of policy
mismanagement (e.g. 1929-1933)? And how about the irruptions of the
political economy of labor (as Michael Lebowitz calls it) into the
pre-, through-, and post-crisis scenario, which Marx typically
abstracts from as he sets out to grasp the tendencies of capitalism in
their purity, i.e. under the assumption that workers simply obey and
submit to their functional role in M-C-M' as mere wage workers at the
expense of their broader human needs? Etc.
Life is always much richer than abstractions. So, these are all fair
questions that any attempt to operationalize the concept, to make it
empirically quantifiable, would have to resolve. Marx's notion of
crisis is not part of a conceptual package as precise and detailed
in its contours as, say, the criteria used by the NBER to date the
business cycle in the U.S. Please do not interpret this as my saying
that the NBER criteria is perfect or superior to the criteria that
Marxists could come up with. That's beside the point. I just mean
that Marx would not have objected *in principle* the attempt to
measure the ups and downs of the economy in a
Re: [PEN-L] Gindin, Brenner and capitalist catastrophe
Patrick Bond wrote: Very eloquent summary, Julio, which is excellent but for the lack of attention to the overaccumulation dynamic. Doesn't that feature in your story? (That's also where Sam, Leo, Doug, Giovanni and a few others depart from the crisis theorists.) Thanks, Patrick. Well, I confess my ignorance. I don't know what this over-accumulation story is about. Would you summarize it for me? This may be totally off target, but it seems to me that -- contingent on time, place, area of the economy -- capital is alternatively over-accumulated and under-accumulated with respect to profitability. Short of perfect foresight, capital accumulation can only take place in and through over- and under-accumulation. The profit rate that regulates a capitalist economy is an expectation. So only by chance (or in the abstraction of equilibrium) will expected returns be realized ex post. And, here and there, every now and then, there will be calcified obstacles to smooth correction of the imbalances, be it by markets or political processes. And, as a result, the mismatches will build up and breed potential crises (sudden, violent re-balancing) with different scopes and intensities. Admitting ignorance about that theory, I don't see an a-priori reason why over-accumulation should have a privileged role in any argument about the economic dynamics of capitalism -- say as compared to under-accumulation or by-chance just-right accumulation. But, again, maybe I just don't know or understand the argument. So in addition to, and both causing and flowing from inequality, the Achilles Heel must include the periodic rise of crisis tendencies to become serious factors in political economy, geopolitics and political-ecological relations. One could include economic instability explicitly as one of the main consequences of capitalism -- along with (1) exploitation of labor, (2) social alienation and division, and (3) environmental destruction. I guess, in my telegram, I was thinking of economic instability as both (a) a premise for the exploitation of labor that, as such, falls under the category of inequality and (b) an aspect of the exploitation of labor and of social alienation -- i.e. a result of the dynamics of capitalism. Not much different from what you say above. Inequality is a necessary condition for capitalism and capitalism reproduces inequality. Why (a)? Why is instability a premise? Why is it an element of inequality? Well, people perceive economic instability as risk. Risk of unemployment, risk of a worsening of their working and living conditions. Ownership is the main form of insurance against this type of risk under capitalism. You're wealthy, you're hedged. You're poor, you're exposed and exploitable. And (b), labor exploitation under capitalism is not only appropriating the immediate fruits of labor, lawfully or not. More broadly, it is also exposing the laborer, as a wage earner or unemployed on her/his own, as an individual largely uprooted from the rest of society, to the whims of the economy and the polity. I mean, not as an individual with an average insurance, but as an uninsured one, as poor. Yes, labor, broadly understood as purposeful human activity, is the way people appropriate the world, collectively. But I'm not talking only about facing the rest of society as an alien force, something that befits even the Masters of the Universe. I'm talking about facing this overwhelming alien force from an inherent position of special disadvantage as compared to the wealthy, the well-connected, the M of the U. Anyway, this is just to show my train of thought. raghu wrote: Is it actually possible to destroy all life on earth? I don't think it's impossible for humans to accomplish that. But I still wonder. That's why I wrote perhaps.
[PEN-L] Cristina Rosas free!
Only to report to PEN-L that, after 2 years and 9 months of unjust imprisonment in Queretaro, Mexico for helping workers in their fight for better living conditions, Cristina Rosas Illescas has been released. She is thanking all those who supported her. (Thanks Yoshie for publishing an article I wrote about Cristina.) http://www.antorchacampesina.org.mx/cristinari.html
Re: [PEN-L] Gindin, Brenner and capitalist catastrophe
Doyle wrote: The intelligence agencies of the U.S. have implied this end of neoliberalism would open the door to a revived Marxism. To the extent Greenspan's Age of Turbulence is not a inane act of self-rationalization, of public exculpation of his past sins, it is an equally dull attempt to exorcise the demons of communism that -- he fears -- lie dormant even in the soul of the American people. I always wonder why, if communism is dead (except, says Greenspan, in North Korea, Zimbabwe, Cuba, and Venezuela), they need to keep beating the corpse.
Re: [PEN-L] Gindin, Brenner and capitalist catastrophe
Jim Devine wrote: While there can be sectoral over- or under-accumulation, there can be macro-level over-accumulation, too, which then leads to something which might be called under-accumulation but that term seems confusing. (the idea of alternating under- and over-accumulation in different sectors seems akin to Say's Law. That Law doesn't work on the macro-level, as KM and JMK pointed out.) Jim, I don't deny this. I wrote: [C]ontingent on time, place, area of the economy -- capital is alternatively over-accumulated and under-accumulated with respect to profitability. Note that I also wrote contingent on time. That was the first item in the list. Imbalances are not only contingent on place (nation, region, etc.) or area of the economy (sector, industry, etc.). So, at a given time, *global* imbalances may exist. In fact, I added that, at a point in time, only by chance the level of accumulation (globally, locally, in a sector or industry) can be just right. So imbalances (global and not) are the norm, not the exception.
Re: [PEN-L] Gindin, Brenner and capitalist catastrophe
Michael Perelman wrote: I don't think so. Admittedly, the finals weeks have been draining. Right. The finals. Taking a break from marking and grading. My telegraphic opinion re. the prospects of capitalism is that capitalism is a bundle. We need to un-bundle it a bit -- to the extent most people do in their minds and attitudes, sometimes consciously, sometimes not. The basis of historical capitalism or actually-existing capitalism is a shifting, complicated mixture of (1) capitalist accumulation and (2) extra-economic appropriation. In turn, capitalist accumulation is based on (3) markets and (4) wealth inequality. (If it weren't obvious, I'd argue that extra-economic appropriation is also highly likely in the face of much inequality.) So, inequality sucks through (1) and (2). Now, the bases of historical capitalism are to be distinguished from its main consequences: (5) the exploitation of labor, (6) the social alienation and exacerbation of human differences, and (7) the destruction of the natural environment -- which together amount to (7) the degradation and destruction of human and perhaps all life on earth. As far as the bases, two of them are in the crosshairs: (4) inequality and (above all) (2) extra-economic exploitation. I don't mean that they are about to be abolished or reduced to marginal phenomena in human history. Not yet. The political movement required to abolish or minimize them is not here yet. But it will emerge, if it's not already emerging. Large masses of people in the whole world are starting to look at (2) and (to a lesser extent) (4) as aberrations, unacceptable in a civilized global society. That's why I believe that those two aspects of historical capitalism are fried. It's just a matter of time. Only a huge catastrophe could devolve legitimacy to (2) and (4). On the other hand, markets are safe for the time being. I mean, even Marx considered trade per se as a form of cooperation -- sure a form of cooperation in which the social division of labor takes place behind the backs of the producers, but cooperation nonetheless. Markets only entail the possibility, but not the necessity of capitalist crises -- Marx also wrote wisely. It's the social conditions on which markets operate that make the difference -- especially inequality. In the struggle to erode the bases of capitalism -- It's the inequality, stupid! If we regard economic theory as the highest form of ideological rationalization of historical capitalism, then inequality is its Achilles Heel. There's nothing (absolutely nothing!) in the robust elements of economic theory that can justify inequality. That's why the economists would rather shift the focus to markets. Regarding (6), specifically global warming and its quickly growing effects, the best strategy is to leverage the popular discontent against imperialism and inequality to push for a just distribution of the damage. Finally, with regards to the economic situation in the U.S., I think that even an ideological hack like Greenspan admits that the weight of the U.S. in the world economy is very likely to continue to shrink. A serious recession would accelerate that fall, which is always relative. The U.S. has still a large, resilient economy. Its resilience is based largely on the fragmentation of the working people. I used to think that there was, among the bourgeois elites in the country, an element that could make it possible for a positive-sum economy to be sustained. But now I'm much more skeptical of that. The elites are ideological much narrower than I use to think. But who knows, with a Bloomberg-Hagel ticket I may have to change my view. For the U.S. left, the task in the short-run is still to cohere the large but diffuse discontent against (2) (read here out of Iraq and foreign policy reform) and (4) (read here universal health care, fair preventive public action against the effects of global warming, and repealing the tax-cuts for the super-rich). In the long run, the task is still communism.
[PEN-L] Chile vs. Venezuela on N Roubini's blog
http://www.rgemonitor.com/latam-monitor/498/chile_-_venezuela__the_hidden_weakness_of_a_strong_economy
[PEN-L] The wiki again
Hoping to get a bit more input from people, I removed the registration hurdle of the wiki. Feel free to stop by and write/edit your soul away. Thanks Doyle for going through the trouble of registering. :) http://usprogress.wetpaint.com/
Re: [PEN-L] Moral hazard
What the economists consider as systemic (or macro) risk under capitalism includes a lot of faux systemic risk -- i.e. risk that arises from the specific nature of capitalism. As I suggested, *that* risk is entirely diversifiable... by building communism. Remember, the economists consider the basis of capitalism, markets and inequality, as facts of nature. But they are not such. Ultimately, the only true systemic risk facing humans is the risk that arises from their collective interaction with nature (including here, of course, their own human nature).
Re: [PEN-L] Moral hazard
I haven't read all the messages on this thread. Just a quick note out of nowhere. There's ambiguity in the notion of moral hazard as it used in economics. In general, it refers to cases in which insurance (in any form) shifts the best actions of people towards more risk. As such, it's a neutral term. Obviously, by definition, the induced actions are good for individuals -- they are best! That said, best individual actions can be socially good or bad. Moral hazard can have good or bad social effects. In the narrower sense, moral hazard refers to socially-bad cases. Often, the distinction is blurred. Also common, unwarranted assumptions about what the social good is are smuggled. In general, insurance means the purchase of non-systemic individual safety (the transfer of non-systemic individual risk) at a premium. If the premium is actuarially fair (net policy equals odds ratio times premium), then there's no externality, no free riding. If the insurer is risk loving, he may not need to diversify away his non-systemic risk -- i.e. use the law of large numbers to his advantage. But, whatever happens, with or without the assistance of the law of large numbers, systemic (or global or macro) risk remains. From the standpoint of social welfare, there's nothing inherently bad in insurance. The problem is that the main, prevailing form of insurance under capitalism (i.e. private ownership) is too narrow. Those with wealth cling to it to lower the variability of their future aggregate returns. They purchase some measure of private non-systemic safety at the expense of others, nature -- even themselves in the long run (that's why I typed best above). Their asymmetric position vis-a-vis the uninsured (the property-less) induces in them a most vicious, socially reckless type of moral hazard. But in this general sense, marching in mass against the war, organizing a union, building socialism are forms of insurance. Public ownership is the broadest form of insurance, the only one that can in principle vanish most non-systemic risk. Nobody knows the human powers it could unleash, powers repressed by the pervasiveness of private non-systemic risk. And since insurance won't be asymmetric (everybody is insured), then the socially-bad type of moral hazard can only go down.
[PEN-L] A wiki
http://usprogress.wetpaint.com/ Let's see where it takes us... if anywhere.
[PEN-L] Cue the NY Times
http://www.nytimes.com/2007/11/30/world/americas/30venez.html?hp
[PEN-L] Northern Rock and moral hazard
raghu wrote: Interesting column in the FT by Martin Wolf about the bids to buy Northern Rock. Another column by Wolf that might also be of interest here: http://www.ft.com/cms/s/0/afd6e830-978b-11dc-9e08-779fd2ac.html Why is the FT more bearish than the WSJ?
Re: [PEN-L] Northern Rock and moral hazard
And this one by L Summers: http://www.ft.com/cms/s/0/afd6e830-978b-11dc-9e08-779fd2ac.html
[PEN-L] Feldstein's (tepid) response to Krugman's and Stiglitz's criticism of Greenspan
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vUnG6vlnj7ec.asf
[PEN-L] The Art of Mental Warfare
Jason Funke linked: http://artofmentalwarfare.com/pog/ Videos are powerful agitational devices. However, before an agitational campaign is launched, one needs -- as they used to say -- a tactical plan and a strategy to underpin it. In Mexico, today, a broad group of left-wing intellectuals and political activists grouped in a lose front called Paz con Democracia published a 10-age document in La Jornada, A Call to the Mexican Nation: IMO a commendable attempt to unite the myriad of local and topical popular opposition struggles currently staged in Mexico into a single political stream. The signatories seem to be aiming for a movement that unites López Obrador's legitimate government movement with the Zapatista struggle, etc. -- against the current government. One might phrase things differently, but it is persuasively argued, in terms broad enough to invite unity, etc. So, overall, a good effort to isolate the government and push harder against it. The document has 5 parts: (1) a summary of the historical juncture; (2) the relevant facts in the area of international relations (submission to the 'collective imperialism' led by the U.S.); (3) the relevant facts in the economic, labor, and environmental areas (disaster); (4) the relevant facts in the legal area (advanced attempts to subvert the constitution piecemeal); and (5) a brief summary of the broad range of the struggle for the nation, which ends with calls for unity and redoubling the fight. Here's the document (in Spanish): http://www.jornada.unam.mx/2007/11/16/index.php?section=politicaarticle=024n2pol They say we should learn from the experiences of others. So, I wonder whether PEN-L or LBO-Talk could spearhead an attempt of this sort for the U.S. -- mutatis all the mutandis that need mutation. Take that as a direct exhortation. I think there's a huge ferment in the collective consciousness of this country. So far, this is a huge amount of diffuse political energy. The opportunity to harness this energy will not last very long. It's clear to me that the two springs in this shift int he collective consciousness could be put under two rubrics: (1) foreign-policy reform (anti-imperialism) and (2) economic security (universal health care, reduction in inequality, public investment in infrastructure, education, the greening of the country, etc.). Wait for Hillary or whoever to get elected and see what happens. Framing a vision for the country that appeals to the working people of the country (broadly understood) around these two axes would be a worthwhile effort. This, I believe, won't be done (if at all) by the Huffington Post or Daily Kos or the Democrats or the propagandistic left. I has to be an honest, plain-English effort to put all these into words trying to tie into a single array the struggles aimed to expand the power of the working class (or classes) over our living and working conditions. As pitiful as this may seem, I can only think of a few (non-leftist) intellectuals who are making a big-picture effort in this department. Paul Krugman is one of them (and here I'm referring to his new book and his NY Times column). Who else? Please, if you feel tempted to prove to me that this is useless or irrelevant or impossible, don't. Abstain. Instead, try to answer the question: How could we help to harness the current discontent felt among broad sections of the U.S. public into a more coherent (and therefore effective) movement that expands the power of workers over their living and working conditions?
[PEN-L] The Art of Mental Warfare
I wrote: The opportunity to harness this energy will not last very long. [...] Wait for Hillary or whoever to get elected and see what happens. I meant for the latter sentence to follow the former immediately.
[PEN-L] ECLAC: Venezuela's poverty extreme poverty 2002-2006: down 18.4 12.3 percentage points
http://www.cepal.org/publicaciones/xml/5/30305/PSE2007_Sintesis_Lanzamiento.pdf Venezuela (Rep. Bolivariana de) YearPoverty Extreme poverty 200248,622,2 200537,115,9 200630,29,9 Por su parte, la República Bolivariana de Venezuela logró disminuir sus tasas de pobreza e indigencia 18,4 y 12,3 puntos porcentuales, respectivamente, entre 2002 y 2006. La elevada tasa de crecimiento del producto, así como la implementación continua de programas sociales de gran amplitud, permitieron que tan solo entre 2005 y 2006 la tasa de pobreza pasara de un 37,1% a un 30,2%, y la de indigencia de un 15,9% a un 9,9%. Este acelerado avance señala una mejora sustantiva de las perspectivas de reducción de la pobreza e incrementa significativamente la probabilidad de cumplir con la primera meta del Milenio, que se analiza en el siguiente acápite.
[PEN-L] Stiglitz: The Economic Consequences of Mr Bush
http://www.vanityfair.com/politics/features/2007/12/bush200712
[PEN-L] Orquesta Sinfónica Juvenil Simón Bolivar de Venezuela
Departing a bit from the merely economic or politic, this caused a very enthusiastic impression on the critics: http://www.nytimes.com/2007/11/14/arts/music/14boli.html?ref=music
Re: [PEN-L] central bank credibility v. transparency
Jim, It's only on the macroeconomic level that the objective centers of gravity of prices are the values. Clearly, that was the context. Clearly, these values are the social aggregate (average) of private expectations about the amounts of social labor required to reproduce the MP and LP in normal conditions -- expectations conditional on existing information available to whoever is doing the valuation. I disagree or maybe I misunderstand. In any event, values don't reflect subjective expectations. Instead, they reflect objective facts (which are often unknown or poorly known). The value of labor-power, for example, is the cost of reproducing labor-power over time, stated in labor-value terms. Workers' subjectivity -- their class consciousness or lack thereof -- can raise or lower that cost, but it has to be expressed in practice, not simply in thoughts or words. I mean value in the Marxist sense. In Marxese, the value of a given commodity is the social labor time *required* or *necessary* to reproduce it under normal or average (i.e. expected!) conditions. Not necessarily the actual social labor it took to produce it. The normal (or average or expected) conditions of production are changing continuously. Ongoing changes in the productive force of labor cause continuous value revolutions (Marx). The value of existing or in-process commodities is continuously altered as the expected conditions of production shift. Before actually undertaking production, how can the amount of *social* labor that it'll take to reproduce a given commodity be determined *with certainty*? It can't. So, there's uncertainty. Even about the amount of your own *private* labor required. You may only know with certainty what it took in the past, but that's just information to determine values. The content of value can only be forward-looking. Otherwise it's meaningless. If the amount of social labor required to reproduce a commodity is uncertain, then it's an expectation. As simple as that. Value is the (social or market) average or *expectation* of a bunch of private expectations. An average of averages is an average. By the way, in statistics, aggregate, average, and expectation are essentially interchangeable terms. Finally, my previous post has a long paragraph, which I wrote to preempt the idea that social expectations are necessarily subjective. The whole point of that paragraph is that social expectations are a hardened social object. (Above, I obviously ignore the layer of complexity added by the deviations -- systematic or not -- between relative values and market prices.)
Re: [PEN-L] central bank credibility v. transparency
Jayson Funke wrote: are we not essentially in a situation in which global currencies are valued around the US dollar, and the value of the US dollar, de-linked from gold, is valued on financial market perceptions of the ability of the US to meet its debt obligations (ie. the ability of the state to tax its productive asset base)? This sounds right to me. In the last analysis. A major component of the coming financial meltdown seems to stem from the fact that the value-basis of the global economy (currencies - especially the US dollar) has shifted to an even more precarious value-basis. I'm not sure that the USD has necessarily been more precarious as world money than gold would have been. It's hard to tell. The value of gold is subject to demand and supply vagaries, including out of the blue technological shocks. Where once currency values hinged around market perceptions of gold, they now appear to hinge around market perceptions of the market itself. I don't think this is because currently world money is predominantly U.S. fiat money. Again, in the big picture, the value of gold is just as endogenous (chicken-and-egg) as the financial standing of the U.S. Treasury. Every injection of liquidity or increase in the supply of money through monetary manipulations appears to put more distance between the underlying value of assets produced in the real economy and the exponentially increasing amount of money in circulation. If we think of the injection of liquidity only in terms of the first order effect, that's a mere quantitative change. IMO, what separates the real economy from the financial superstructure qualitatively has to do with further-order effects or even phenomena that do not necessarily require more liquidity (these phenomena may arise from innovation). Among the further effects one can think of credit expansion, added layers of leverage. Among innovations one can think of the buildup of new and more complex layers of contingent claims (derivatives), the discovery, invention, or utilization of increasingly abstract underlying notions, etc. IMO, there's a rational kernel in the qualitative development of the financial superstructure of modern capitalism. I can see how those forms (with a completely different content) are of tremendous potential use in communist planning. To get that, we need to theorize the concept of ownership, which among Marxists has been taken as a mere descriptor. I'm not familiar with what Marxists may have written lately about this, but to my knowledge the only Marxist work that made a bit of an effort to open the conceptual black box of ownership was Gerald Cohen's _Marx's Theory of History_. To avoid misunderstanding, the notion of ownership has probably a richer content in the mind of Marxists than it ever had in Marx's mind. That's because we have the benefit of hindsight: the experience of post-Marx capitalism. But this is only a descriptive advance. IMO, the inside mechanism (so to speak) of the concept of ownership is closely tied to uncertainty. And, obviously, there are today much better conceptual tools to grapple with uncertainty than during Marx's times. Some of these conceptual tools have been developed by mathematicians and some by the economists, especially those who've worked in the modern theory of finance. These tools need critical appropriation to make them useful to us. That's the easy way. The hard way is to reinvent them from scratch. In any case, we need to build up our capacities as cooperative producers. I'll say more. It's naive to suppose that communist planning will make social uncertainty go away or tame it by decree. I'm not talking about uncertainty in our interaction with nature. I'm talking about the uncertainty that results from our mutual interdependence. After all, communist production is going to be more socialized than under capitalism. To place socialized production under social control doesn't mean to dismantle the interdependence, which -- with richer, more universally developed people -- can only grow. It means to manage it differently, for our own individual and collective self-development. And here I stop.
Re: [PEN-L] central bank credibility v. transparency
Doug wrote: Its supply [gold's] is strictly limited. The argument for gold has too many holes to poke them all at once. What does strictly mean here? Does it mean peak gold cum zero elasticity of demand? On the other hand, is the indebtedness of the U.S. Treasury unbounded? Apparently, judging by the latest events, it is not. It's not strict as in fixed, but neither is gold supply fixed. And, as Jim and you mention, (assuming that, indeed, the supply of gold always lags behind demand, something that is not warranted) how about the distributional effects of price deflation? Isn't price deflation disruptive? Moreover, under the gold *standard*, money was somebody's liability. It just had a contractual fixed parity with gold, which didn't keep goldsmiths, monarchs, etc. from issuing too much paper or debased coins. Fractional reserve banking is entirely compatible with the gold standard, as history shows. So, only if gold were to be used directly as universal means of exchange and means of payment would capitalism be able to circumvent these disadvantages, but then it'd invite other, bigger ones. The transaction costs of introducing and using gold as money in modern capitalism would be stratospheric. That's why it's not likely to happen, unless there's a global catastrophe.
Re: [PEN-L] central bank credibility v. transparency
Doug wrote: And central banks can throw scores of billions at troubled markets under the present system; try that with a gold standard. Isn't that a strong argument against the gold standard? At least that's how Keynesians have viewed it. Can moral hazard be dealt with within the present system? Keynesians would think so. They'd say that the issue could be addressed with better regulation. In any case, the issue here is, Who's more in tune with the needs of modern capitalism: Keynes or Hayek?
Re: [PEN-L] central bank credibility v. transparency
Shane Mage wrote: What meaning can the true probability distribution have here? Probability distribution (objective) can apply to the outcome of a series of random events like throws of dice or spins of a roulette wheel, or to (subjective) *an* estimate of the likelihood of various (mutually incompatible) future possibilities. The way I look at it, ultimately, all financial assets are contingent claims on physical productive assets: means of production (MP) and labor power (LP). This is a plain accounting fact. The price of MP and LP (in social settings where they're commodities) have objective centers of gravity: values. That's my view at least. Some respectable PEN-L members believe that valuing MP and LP is inherently impossible or self-contradictory. Not me. I've looked into the argument a few times and remain unconvinced. I'm with Marx on this. Clearly, these values are the social aggregate (average) of private expectations about the amounts of social labor required to reproduce the MP and LP in normal conditions -- expectations conditional on existing information available to whoever is doing the valuation. Ultimately, as Marx also believed, the valuation of MP and LP is social, that is, the computation or aggregation of expectations is conducted by trial and error in/through market exchange. Those values are what I call the fundamentals. They're social objects. They're objective: independent of the subjectivity of individuals. That said, we need to keep in mind that the objectivity of values is social. When people do things (e.g. produce in given social settings), their actions crystallize into new or transformed social objects (not necessarily tangible, but material or physical in the most general sense of these terms): products, social structures and their emerging properties, institutions, broader social conditions, culture, history. The degree of social objectivity of a given social object depends on its particular nature. Ultimately, these social objects are all historically contingent. Some are contingent upon a change in people's minds or habits or customs. Others are contingent on a change in laws or political conditions. Others are contingent on changes in more hardened economic structures. Etc. Keeping track of this, probability theory and statistical inference can be used productively. But (first case) variables in the social sciences are essentially unique (100% probable), like the present value of an asset as determined ex post. I really don't understand this. What is the PV of an asset as determined ex post? Are you talking about an actual asset price? Are you talking about the results of backtesting some asset pricing model? In those cases, indeed, you can think of those prices (actual or predicted) as unique realizations of the true random price under some probability distribution. But neither of these is a PV. PV is your best estimate of the price of the asset as of now. The one that dictates your next move (or lack thereof) regarding the asset. And that's an expectation, conditional on the information available to you (e.g. history of prices of the asset, etc.). And (second case) nobody ever even tries to estimate a true probability distribution comprising all possible values of such a variable. Well, it depends on your practical needs and resources. I don't think the all possible values is a big deal. There's nothing that stops you from assuming that the price of an asset can vary along the entire set of real numbers. I don't see why that'd be more costly than restricting the variation to a narrower range. The costly thing is the estimation of the parameters of interest of your distribution. There are trade-offs involved here, but simply put, how good is your data? The better your data, the more costly. Which parameters do you need to estimate? The higher the moments (center, dispersion, skewness, kurtosis, etc.), the more costly. Which assumptions about probabilistic behavior are you willing to make? The weaker your assumptions, the more costly. Etc. It boils down to a cost-benefit calculation. My impression is that, usually, most people in finance play the game at a level that only requires estimating the first 2-4 moments (center, dispersion, skewness, kurtosis). And, given their goals, they are willing to make strong assumptions. Still, that's a lot of compressed information about the true (unknown) behavior of the rv. More than most people use in their practice. So how can the people who make up the markets get it all wrong? The reason is that all is very long term, and their only interest is very short term because that is where the loot is. And in *every* short term they (collectively) make out like the bandits they are. The huge costs are borne by other people, including classsical shareholders, not only workers and their pension funds. Again, I don't think the issue is all. The rest, I think, is well
Re: [PEN-L] central bank credibility v. transparency
Doug wrote: There's a curious asymmetry here. When the markets are zooming upwards, it's meaningless speculation. When they're collapsing, it's fraught with meaning. I don't see the inconsistency in saying that speculation disconnects asset prices from long-run fundamentals and that their collapse bring them down to earth. In that sense, the up is like moving to a fantasy world (meaningless speculation) while the down is like coming back to reality (fraught with meaning). We may not know with certainty what the fundamentals are at a given time, but if there were no fundamentals, how would we explain the system's permanence? This could be something serious, but then again it could just be a problem that's getting amplified by extreme emotions. Who knows? Just like extreme emotions unglued asset prices from their fundamentals, extreme emotions may be snapping them back in place -- somewhat and temporarily. Doug is right in emphasizing the uncertainty surrounding all these events. But we need to update our priors as evidence piles up.
Re: [PEN-L] central bank credibility v. transparency
Michael Perelman wrote: But, we never really know what the fundamentals are, other than they are not too euphoric or not too pessimistic. We never know the true probability distribution of *any* interesting variable in the social sciences. That includes the ever shifting fundamental price of assets. So, what do human beings tend to do in a case like this? Apparently, they tend to form expectations about the main characteristics (average, dispersion, etc.) of that distribution conditional upon the information they have. With just a bit of technical sophistication, some humans will even use samples of observations to draw inferences about the characteristics of the unknown distribution. For that, if some conditions hold approximately, they can use laws of averages, convergence in probability, central limit theorems, etc. -- mathematical facts predicated on the very weak assumptions of probability theory (a Russian product refined by Soviet mathematicians). The procedures thus developed tend to work in practice, somewhat. It seems that randomness is not (completely) random. Marx's concept of value is an expectation: social labor required on average to reproduce a commodity. Marx didn't have a chance to study Markov, Lyapunov, or Chebyshev, but if he had, he'd have adopted the framework. I mean, probably. If people in the financial markets do this, how come they get the fundamentals so wrong? Maybe their perspective is not that of the working class. Maybe they don't care about human survival, let alone building communism. Maybe they only care about profits in the short run. Their fundamentals are not our fundamentals. They calibrate their models according to their interest and horizon of interest. Garbage in, garbage out.
Re: [PEN-L] central bank credibility v. transparency
Doug wrote: Not exactly. The markets were very disappointed with Bernanke's testimony yesterday because he made it sound as if another rate cut is not imminent. Should things really unwind, they'll undoubtedly change their mind, but the message they're sending now is no rate cuts unless the econ data look really bad. In his testimony, Bernanke emphasized the possibility of both a contraction *and* inflation. Why is he doing this? Isn't he being reckless or stupid? Wouldn't it have helped him better to issue an obscure statement a la Greenspan? I don't know. In my opinion, Bernanke is trying to accomplish two things. One, he's trying to show the big players that he means it when he speaks of transparency. He's willing to show the Fed's hand, to the best of his current (but evolving) understanding of the situation. And, two (as a case in point), he's saying, Look, we need a quick but comprehensive repricing of risk and a resetting of expectations so that credit can flow and the economy can resume a more normal course. It's going to hurt anyway, but it'll hurt the least if we do it quickly but thoroughly. Then and only then will I be free to move rapidly, tackle inflation, and slow down the USD decline. It's up to you how quickly we can proceed and leave the episode behind. It's not a terrible policy. Politically, that'd be ideal for them. But, of course, it's full of risks, since panic -- within the country and abroad -- could set in and force his hand under political pressure. The insulation (independence) of the central bank from popular pressure would be tested at a point when the discontent against both major parties is very high and as the country heads to a presidential and congressional election. Even if the central bank remains insulated, fiscal monkey wrenches can be thrown into the mechanism of monetary policy by the legislative branch. With all the international shocks feeding into it (Pakistan, Iran, etc.), the whole dynamics of the presidential election can become less predictable than it now appears. In any case, the fact that Bernanke decided that he cannot downplay either scenario, contraction or inflation, indicates how narrow his wiggle room is. (Sabri will speak for himself, but it seems to me that his remark on the CP article was not meant to criticize it for emphasizing the direst scenarios, but rather to defend the posing of those scenarios as sensible -- i.e. as *probable*. The certainty the author of the article displays may make the piece a bit too strident to our stylistic tastes, but the fact that things are in flux doesn't mean that all scenarios are equally likely. Not at this point.)
Re: [PEN-L] Petrocracy in Venezuela?
Maybe the real challenges of Venezuela's oil industry are a bit over (NYT's) Tina Rosenberg's head. Here's a point by point refutation of her hit job. It deserves to be read: http://oilwars.blogspot.com/2007/11/tina-rosenberg-goes-to-school-on.html
[PEN-L] (Costa Gavras, 1973) Estado de Sitio
http://www.dailymotion.com/video/xuzf1_estado-de-sitio-costa-gavras-1973_politics
[PEN-L] A report on Michael L's conference
http://www.venezuelanalysis.com/analysis/2784 The Bolivarian Project Without Workers Management There Can Be No Socialism October 30th 2007, by Kiraz Janicke – Venezuelanalysis.com Over the weekend of October 26 to 27, several hundred people attended a two day conference on Worker's Management: Theory and Practice, as part of a program, Human Development and Transformative Praxis, run by Canadian Marxist academic Michael Lebowitz at the International Miranda Center in Caracas. The first day addressed the theory and historical experience of worker's control and attempts to build socialism, with presentations by Pablo Levin, the Director of the Center for Planning and Development at the University of Buenos Aires, British Marxist economist Patrick Devine (the author of Democracy and Economic Planning), Michael Lebowitz, and sociologist Carlos Lanz Rodriguez, a former guerrilla and now president of CVG-ALCASA the state owned co-managed aluminum factory. The second day of the conference focused on the various practical experiences of worker occupied factories in Latin America. Speakers included, Carlos Quininir (Zanon) and Jose Abelli (FACTA), from the recovered factory movement in Argentina, Serge Goulart from the Occupied Factory Movement in Brazil, as well as spokespeople from various examples of state owned companies under workers control or workers co-management and worker run cooperatives in Venezuela, including the Tachira Textile Cooperative, Inveval - an expropriated valve manufacturing company under workers control, ALCASA, and Cemento Andino in Trujillo, one of the most recent examples of workers control in Venezuela. During his opening presentation Lebowitz said, On May Day 2005 I marched with workers in Caracas and the slogan workers were chanting at the time was, 'Without co-management there is no revolution!' Indeed, the main slogan of that march organized by the UNT [National Union of Workers] was Co-management is revolution and Venezuelan workers are building Bolivarian socialism. From its beginning, the UNT, which came together in December 2002 when the old corrupt Confederation of Venezuelan Workers (CTV) supported the bosses lockout and sabotage of the oil industry and has functioned essentially as an alliance of trade unions and union leaders and is characterized by internal divisions. Despite the million strong May Day march in 2005, the UNT was unable to organize a united May Day demonstration in 2006 and at its second congress shortly thereafter, in the context of simmering factional divisions, fractured over the question of whether to hold elections or wait until after the presidential elections in 2006 in order to focus on supporting Hugo Chavez's campaign for presidency. Since then the UNT has remained divided and although union leaders Orlando Chirino from the Current for Revolutionary Class Unity and Autonomy (C-CURA), and Marcela Maspero, of the Collective of Workers in Revolution (CRT), the two principal currents involved in the split, agreed in July to organize elections within the UNT before the end of this year, this has still not occurred. Although the UNT continues to organize on a regional level, it does not function as a united union federation and at the national level, it could be argued, its existence is nominal only. Problems of Worker Management As Lebowitz pointed out, we don't hear much talk of co-management or workers control coming from the UNT anymore. We don't have masses of workers saying, 'without worker management there is no socialism' or 'that you cannot build socialism without worker management.' Nevertheless, Lebowitz argued, I think we have to recognize the essential truth of this proposition Framing the discussion, Lebowitz said it is useful to look at the different dimensions of what President Chavez has called the elementary triangle of socialism, - units of social property, social production organized by workers, and production for the needs of communities. You can't separate these in socialism he argued. Capitalism is based on a different triangle he said; private property, exploitation of labor, and production for profit. Lebowitz then drew on the lessons of the experience of worker self-management in the former Yugoslavia. He pointed out that although the enterprises were state owned and were viewed as social property, they functioned in the market and were driven by one thing, self interest of the workers in an individual enterprise; there was no concept of solidarity, that is, production for the needs of communities. In order to maximize the income of workers in each individual enterprise, they invested in automation to increase production, rather than take on new workers. By 1971 there was 7% unemployment in Yugoslavia, plus 20% of the workforce worked outside the country as guest workers in Western Europe. Legally these enterprises were social property, but social property means that everyone in society has equal access to the
[PEN-L] Krugman: securitized mortgages = meat at the supermarket
The New York Times October 22, 2007 Op-Ed Columnist Gone Baby Gone By PAUL KRUGMAN It pains me to say this, but this time Alan Greenspan is right about housing. Mr. Greenspan was wrong in 2004, when he sang the praises of adjustable-rate mortgages. He was wrong in 2005, when he dismissed the idea that there was a national housing bubble, suggesting that at most there was some froth in the market. He was wrong last fall, when he suggested that the worst of the housing slump was behind us. (Housing starts have fallen 30 percent since then.) But his latest pronouncement — that the market rescue plan being pushed by Henry Paulson, the Treasury secretary, is likely to make things worse rather than better — looks all too accurate. To understand why, we need to talk about the nature of the mess. First of all, as I could have told you — actually, I did — there was indeed a huge national housing bubble. What even those of us who realized that there was a bubble didn't appreciate, however, was how much of a threat the bursting of that bubble would pose to financial markets. Today, when a bank makes a home loan, it doesn't hold on to it. Instead, it quickly sells the mortgage off to financial engineers, who chop up, repackage and resell home loans pretty much the way supermarkets chop up, repackage and resell meat. It's a business model that depends on trust. You don't know anything about the cows that contributed body parts to your package of ground beef, so you have to trust the supermarket when it assures you that the beef is U.S.D.A. prime. You don't know anything about the subprime mortgage loans that were sliced, diced and pureed to produce that mortgage-backed security, so you have to trust the seller — and the rating agency — when they assure you that it's a AAA investment. But in the case of housing-related investments, investors' trust was betrayed. Supposedly safe investments suddenly turned into junk bonds when the housing bubble burst. High profits reported by hedge funds — profits that were reflected in huge payments to the fund managers — turn out to have been based on wishful thinking. Thus, when two hedge funds run by Ralph Cioffi of Bear Stearns imploded last summer, it came as a huge shock to many investors, and helped trigger a market panic. But a recent BusinessWeek report shows that the funds were a disaster waiting to happen. The funds borrowed huge amounts, and invested the proceeds in questionable mortgage-backed securities. Even worse, more than 60 percent of their net worth was tied up in exotic securities whose reported value was estimated by Cioffi's own team. We're profitable because we say we are — just trust us. That hasn't ever caused problems, has it? Stories like this have led to a crisis of confidence. The current yield on one-month U.S. government bills is only 3.41 percent, an amazingly low number, and a sign that people are parking their money in government debt because they don't trust private borrowers. And the result is a shortage of liquidity — the ability to raise cash — that is greatly damaging the economy. Which brings us to the rescue plan proposed by a group of large banks, with Mr. Paulson's backing. Right now the bleeding edge of the crisis in confidence involves worries that there may be large losses hidden inside so-called structured investment vehicles — basically hedge funds that borrow from the public and invest the proceeds in mortgage-backed securities. The new plan would create a super-fund, the Master Liquidity Enhancement Conduit, which would seek to restore confidence by, um, borrowing from the public and investing the proceeds in mortgage-backed securities. The plan, in other words, looks like an attempt to solve the problem with smoke and mirrors. That might work if there were no good reason for investors to be worried. But in this case, investors have very good reasons to worry: the bursting of the housing bubble means that someone, somewhere, has to accept several trillion dollars in losses. A significant part of these losses will fall on mortgage-backed securities. And given this reality, the conduit looks like a really bad idea. I'd put it like this: Investors aren't putting their money to work because they don't know where the bad debts are. And when investors need clarity, the last thing you want to be doing is pumping out more smoke. Mr. Greenspan's take, expressed in an interview with the magazine Emerging Markets, seems broadly similar. If you believe some form of artificial non-market force is propping up the market, he said, you don't believe the market price has exhausted itself. Translated: this rescue scheme could be seen as an attempt to hide the bad debts everyone knows are out there, and as a result could delay any return of trust to the markets. Alan Greenspan is making sense.
[PEN-L] Stiglitz: China is a side show, the U.S. is the source of the global imbalances
I'm not sure Bloomberg still has this video up. It just disappeared from the list of links to its recent videos. The audio sucks during the first 45 min or so. http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/viOn6lTGkCEE.asf
[PEN-L] NYT on the Bank of the South
http://www.nytimes.com/2007/10/22/world/americas/22bank.html
[PEN-L] The Iraqi resistance
http://video.on.nytimes.com/?fr_story=8e9862a9f3a8216027ef2f9ecd1c3bc5345b4134
[PEN-L] Meeting Resistance
http://louisproyect.wordpress.com/2007/10/18/meeting-resistance/ Excellent review, Louis!
[PEN-L] Maskin on markets
http://www.reuters.com/article/newsOne/idUSN1538104320071015
[PEN-L] Stiglitz in Caracas
http://www.venezuelanalysis.com/news/2719
[PEN-L] Stiglitz in Caracas
Reports from other sources: http://www.bloomberg.com/apps/news?pid=20601086sid=aYUzqdrconXMrefer=latin_america http://www.guardian.co.uk/venezuela/story/0,,2189350,00.html http://www.hindu.com/2007/10/14/stories/2007101456591400.htm
[PEN-L] Hurwicz
No comment on Hurwicz or the other winners of the Nobel in economics? (I know, it's not the Nobel in economics, but that's the way regular people call it.)
[PEN-L] The Class Issue
http://pewresearch.org/pubs/593/haves-have-nots
[PEN-L] new spirit of capitalism
Doug wrote: We should have subordinated the fight against racism and sexism to the class struggle, like the most idiotic of Stalinists used to argue? (Not the CPUSA, which had a pretty good record on sex and especially race.) I'd argue that, under some conditions (e.g. Iran's conditions now), the fight against sexism (or against religious obscurantism) needs to be *subordinated* to higher priorities. The ranking of priorities in the struggle is not dictated by the left (inside or outside), but by the dynamics of each particular society. In the case of Iran, those struggles need to be subordinated to the struggle in defense of the nation against imperialist aggression. In fact, in the current conditions, the fight against sexism can -- and will -- be utilized by the imperialist aggressor to rationalize the aggression. The oppression of women in Iran may be extreme. I have no reasons to doubt that. Well, too bad that on top of that, the Iranian people have to be concerned with the U.S. threat and that, in that light, the struggle against female oppression must be pushed to the back burner. I don't think anybody here really believes that Yoshie is against women's rights in Iran or anywhere else. Her views are about the role of that struggle in that concrete, historical, current context. Yoshie's argument that, in the short run, a frontal struggle against sexism effectively divides families and therefore weakens the defense of the nation is not far-fetched. We all now of cases in which short- and long-run goals clash with each other. Perhaps Yoshie is bending the stick a bit too far in one direction, but that's because she may feel that little heed is paid to the priorities of the national struggle and too much emphasis is placed on the flaws of the actually-existing leadership in Iran's national struggle. And what actually-existing leadership is not flawed? If we were witnessing a mass upsurge in the struggle against sexism in Iran, and unity against the external threat weren't as urgently felt as it is (being Iran bordered by two countries invaded by the U.S.), then we could say that leaders like Ahmadinejad were the main obstacle to social progress. But that's not the case. Iran cannot successfully produce effective leaders to head battles that the masses of the Iranian people don't view as immediately necessary. (And, to the extent Iran is a society conditioned by its social, economic, and religious history, its leaders will carry at least some of that baggage with them. Again, too bad.) While Iranian exiles and other Iranians with an ability to have their voice heard abroad may be more immediately concerned about sexism and the type of daily oppressions sanctioned by the form of Islam prevalent in Iran, that is unlikely to be the sentiment of the broader masses of people in Iran (yes, including women). For all I know, the stance that Ahmadinejad embodies has vast popular backing, not only in Iran but in the whole Middle East and northern Africa regions.
[PEN-L] new spirit of capitalism
Apologies to the list. The previous note was intended to lbo-talk.
[PEN-L] Blinder: collective decision making and monetary policy
http://www.princeton.edu/~ceps/workingpapers/151blinder.pdf Do I understand the implication correctly? Does this paper show that a monetary policy under the full and direct democratic control of the demos would be superior -- and not slower to implement -- than a monetary policy dictated by a Fed board with or without a chairman? Does this also show that leadership is irrelevant to outcomes? Let's Build It Now then.
[PEN-L] NY TIMES slams Klein
I find this very interesting. The FT also has a full-page interview with Noami Klein covering her book with the usual snide remarks about her views. I think it speaks volumes of the deep insecurity the high priests of capitalism currently feel about their mode of production. They wouldn't need these hit jobs (using second-class Blackwater-type journalists) on Klein or any other critic of capitalism if they were as cocksure as they were back in the late 1980s or early 1990s when -- if I remember correctly -- History officially Ended. But now it's the Age of Turbulence. Of course, they will be safe without broader working-class unity and organization. But they care deeply about the Battle of Ideas. That's where it all begins. And I'll use the last paragraphs of my posting to plug again David Laibman's _Deep History_. It's a good starting point for people, even those without a Marxist intellectual upbringing, to reflect anew on the big picture. By the way, back in those times of euphoria and champagne toasts dedicated to the eternity of capitalism that accompanied the disintegration of the Soviet Union, David wrote: I am confident as never before in the soundness of the progressive, scientific, and humanist project in social science, and in politics; and in the ability of humanity to apply its enormous creative potential in overcoming obstacles to human development -- whether those obstacles stem from the external environment, from the powerful weight of responsibility in the deployment of modern technologies, or from archaic and irresponsible social arrangements. With all the clamor about the 'death of Marx' that is currently fashionable, there is no greater testament to the enduring importance of the Marxist tradition, in both scholarship and politics, than the fact that questions about continuing progress in the face of the monumental problems facing us today cannot even be posed without confronting that tradition and incorporating it into the quest for solutions. (Value, Technical Change, and Crisis: Explorations in Marxist Economic Theory.) I cannot think of any other Weltanschauung capable of dispelling the illusion of the epoch as that associated to the name of Karl Marx.
[PEN-L] Greenspan, Bernanke, etc.
I just rush-read the transcript of Greenspan's (and Klein's) interview by Amy Goodman on Democracy Now. I was also tempted to do Monday morning quarterbacking, but I find Goodman's show to be -- very consistently -- great. (Producing a daily Democracy Now must be very tough. And Klein did what she could under the format.) FWIW, I wonder whether Doug could (did?) invite Greenspan and have him on his show along with one of the following: - Paul Krugman (re. taxcuts for the rich and inequality), - Joseph Stiglitz or Dani Rodrik (re. free markets and globalization), or - James Galbraith (re. inequality). Re. the Bernanke part of the subject line, there's an interesting piece by Martin Wolf in today's FT. Here: http://www.ft.com/cms/s/0/9c0a6592-6b81-11dc-863b-779fd2ac.html As Wolf suggests, the yield curve is showing the limit of the Fed's power. Wolf heads his column with a quote from Greenspan. Regrettably -- says Greenspan -- the Fed is not god.
[PEN-L] Has Ahmadinejad ever read Kinsey?
Louis Proyect transcribes the NYT blogging on Ahmadinejad at Columbia: Pressed by Dean Coatsworth on the original question about the rights of gay men and lesbians in Iran, Mr. Ahmadinejad said: In Iran, we don't have homosexuals like in your country. We don't have that in our country. I so much admire Louis Proyect's continuous effort to show the world how Ahmadinejad disgraces and ridicules himself every time he opens his mouth. The efforts of the U.S. media are clearly insufficient to invite the public scorn this pathetic figure of a man deserves. I mean, if the working people of Iran, conditioned -- as they are -- by the iconoclastic dynamism of advanced capitalist production relations and imbued by millenarian secular values as well as the uber-liberal spirit of Islam, hadn't been (as the historical record shows) the initiators and drivers of the the most vigorous expressions of the modern movement for gay rights in the world, then (and only then) Ahmadinejad's obscurantist, reactionary sentiments would be easier to explain, even if still impossible to justify. It is so evident, in this day and age, that national vindication in the face of U.S. imperialism and Zionism in the Middle East is at best second or third in the agenda of oppressed Persians, Arabs, etc. Obviously, U.S. imperialism and Zionism are minor issues compared to the much more pressing demand for full individual rights for gays in Iran. This is the type of political courage the U.S. left needs. It provides a needed balance to the lionizing, the barrage of apologies in favor of Ahmadinejad that saturate the Western media, from the left to the right wing. Thanks Louis.
[PEN-L] Has Ahmadinejad ever read Kinsey?
I wrote: Obviously, U.S. imperialism and Zionism are minor issues compared to the much more pressing demand for full individual rights for gays in Iran Oops, I meant to add the following immediately afterwards: , demand that remains unfulfilled mainly as a result of the political backwardness and insensitivity of Ahmadinejad and his three or four hard-core followers.
Re: [PEN-L] Has Ahmadinejad ever read Kinsey?
Doug wrote: He was elected, and has the backing of the Supreme Leader, who speaks with god and is therefore above democracy. Like in the U.S., god is irrelevant in Iranian politics. The populace there (as here) is above and beyond that. More importantly, Ahmadinejad betrayed the mandate of those who elected him, the rural and urban poor majority in Iran, a crowd well known for their tolerance toward gays. So now he's fair game. If it weren't for Ahmadinejad, Iran would be aeons ahead of Chelsea or Greenwich Village.
[PEN-L] Krugman's NYT blog
Now that it's free, I'm glad to invite clicks to Krugman's blog, devoted to international economics and finance issues. (He keeps being on the right side of the issues -- witness his latest column on Jena: http://www.nytimes.com/2007/09/24/opinion/24krugman.html) http://krugman.blogs.nytimes.com/
Re: [PEN-L] Slavery and underdevelopment
Michael Lebowitz wrote: WOW, my old student! Bright guy; I was afraid he'd been warped by grad school. Good paper. Grad school is like capitalism.
[PEN-L] Fidel: Cuba saved Ronald Reagan's life
I know that was a catchy subject line -- and apparently factually true. That's not the only reason why this article is interesting though. * * * Reflections of President Fidel Castro The Empire and Its Lies It was Reagan who created the Cuban American National Foundation, whose sinister involvement in the blockade and in terrorist actions against Cuba would be revealed years later, when the United States declassified secret documents, albeit full of information that had been shamefully crossed out. Had these documents come to light earlier, our conduct would not have been different. When, on March 30, 1981, we received news in Cuba that Reagan had been shot with a low-caliber weapon in an assassination attempt, we sent him a message condemning the act. The 22-caliber lead bullet lodged in one of his lungs was causing him pain and putting his life at risk. The message is contained in the conversation that, following precise instructions, our then minister of foreign affairs, Isidoro Malmierca, had with Wayne Smith, former head of the US Interests Section in Havana. What follow are excerpts, quoted verbatim, of the conversation between the two: ISIDORO MALMIERCA: We summoned you to this meeting on the express request of President Fidel Castro. He asked me to begin by expressing our appreciation for the information on the assassination attempt on President Reagan that you provided us with through director Joaquín Más. On behalf of President Fidel Castro, we also wish to express how deeply we regret this event and our sincere hope that President Reagan will recover from this attack as quickly as possible. WAYNE SMITH: Thank you, very much. ISIDORO MALMIERCA: We have been receiving information about the medical attention the President is receiving. Initially, you had also received information that the consequences of the attack did not appear to be that severe, but it seems the situation is more complicated and he is undergoing surgery. WAYNE SMITH: Yes. Our impression is that he has been operated on already, but over the radio they are now saying that the operation is to begin now. It is likely to be over in, say, an hour. A 3-hour surgery, I mean, is nothing simple, especially for a 70-year-old man. They say there's no danger. My interpretation of this is that there's no immediate danger. But, for a 70-year-old man, a 3-hour surgery is a serious matter. They say he is not in serious condition, that his condition is stable. We hope everything goes well. I thank you for your best wishes, your concern and President Fidel Castro's message. ISIDORO MALMIERCA: In Washington, Mr. Frechette also approached the Cuban Interests Section and conveyed us information on this situation. He explained that you had also received information on this. Again, President Fidel Castro personally asked me to meet with you and to express our sincere hope that President Reagan recover promptly from the consequences of the attack. WAYNE SMITH: Thank you, very much. My God! This is a difficult situation. President Kennedy was assassinated in Dallas and it looks as though the person responsible for the assassination attempt on Reagan is from Dallas. He currently lives in Colorado, but he's from Dallas. I don't know... ISIDORO MALMIERCA: In some cables, I read that he was born near Denver, 30 kilometers from Denver. WAYNE SMITH: I don't know. One of my consuls here in the Interests Section told me he had heard on the radio that it's a guy who studied in the same school he did. I don't know, he may have lived a number of years in Dallas. I don't know what's in the air people breath in Dallas. ISIDORO MALMIERCA: They say they're three brothers, the sons of a man who's in the oil business. WAYNE SMITH: His dad, yes. He's 22 years old. He was a student at Yale University, but he had recently abandoned his studies. He may feel bitter, a young man who has failed, who acted out of resentment. To be completely frank, I'm glad it's a guy like that and not, say, a Puerto Rican or something like that, which could have political implications. ISIDORO MALMIERCA: You mean speculations about the political motivations behind that. WAYNE SMITH: Yes, that could, undeniably, prompt, encourage political readings. An attack by a white man from Colorado, Texas does not lend itself easily to political interpretations. ISIDORO MALMIERCA: There have even been a number of police reports which say that he acted alone, that he has no ties to any groups... WAYNE SMITH: Yes, it must have been an insane or fanatical person. He got so close to the President...He was captured immediately. He took out his weapon and fired… ISIDORO MALMIERCA: Brady died? WAYNE SMITH: No. ISIDORO MALMIERCA: They were saying he died. WAYNE SMITH: Yes. There were reports to that effect, that he had died. But the latest news is that he didn't, that he's in very serious condition, but that he hasn't died. I imagine that that a 45-calibre round would have been deadly,
Re: [PEN-L] a data question about the credit crisis
Sabri wrote: Here are some random thoughts: I don't remember this posting on my Gmane RSS feeds page (http://rss.gmane.org/messages/complete/gmane.science.economics.progressive-economists). I remember the before and after posts. By looking at the archives here (http://archives.econ.utah.edu/archives/pen-l/index.htm), I wonder if some postings may be unfed via Gmane RSS. Is this happening to others? Re. the substance of Sabri's posting, I'll just add that both, the critics of Bernanke (e.g. FT's Martin Wolf) and his defenders (e.g. WSJ's Greg Ip), write as if it were self evident where exactly the line dividing the effects on (1) a few fools who made the wrong bets and (2) the innocent real economy are. They do not know for sure. Is finance skin deep? Well, if the touted deepening and globalization of finance that media, academia, and think tanks have advertised has advanced as much as they say, then the mingling between (1) and (2) may be much deeper and complex than the columnists would want us believe. In his recent column, Krugman suggested that the uninsured creditors that got the ball rolling behaved as unregulated bank substitutes. Not only how much but *how* specifically did they substitute the banks in business and personal financing in the last few years? Looking at the data and doing some guessing to determine where this line (or something like a line) may lay is a key item in the Jackson Hole agenda. This reminds me of the proverbial beautiful person (any gender is fine here) who wanted to be loved not for her/his looks, but only for her/his brains. Nobody could prove true love to her/his satisfaction and she/he always felt unloved.
Re: [PEN-L] a data question about the credit crisis
Doug Henwood wrote: Pampers Can you elaborate?
[PEN-L] Who needs a recession?
http://www.economist.com/finance/displaystory.cfm?story_id=9687245
Re: [PEN-L] the glories of financial engineering
raghu wrote: The first [attitude] is exemplified by the principals of LTCM who appear to have sincerely believed in the infallibility of their models and the 25 standard deviations theory. I don't think this matters much, but FWIW historically: According to Richard Lowenstein (When Genius Failed), things didn't happen this way at all. On the contrary, Lowenstein says that Merton, Scholes (the leading quants in LTCM), and McEntee were opposed to taking positions outside of the fund's area of expertise -- bond arbitrage. They were also critical of the fund's amount of leverage. Scholes was the most outspoken of them all, but was marginalized. These clashes happened not once, but many times. According to Lowenstein, the board's meetings became almost scripted with the two bands bickering over the issues. But the critics didn't have the upper hand. Hilibrand and Haghani prevailed. And Meriwether went along with them. This was before the debacle, when the fund was still in good shape. Lowenstein described Hilibrand and Haghani as compulsive gamblers. Neither of them was a quant. And John Meriwether as a clever salesman, never a quant.
Re: [PEN-L] the glories of financial engineering
raghu wrote: Does anyone on the Street actually believe in these models, or are they just using it as an excuse to goose up their asset values? (i.e. are these guys liar and thieves, or are they merely naive and stupid?) With all due respect to raghu personally, what is naive is to think that the models are to blame.
Re: [PEN-L] the glories of financial engineering
I wrote: The objectivity of social structures is more hardened than that of political and legal systems, I meant to write: The objectivity of *economic* structures is more hardened than that of political and legal systems,
Re: [PEN-L] the glories of financial engineering
Doug wrote: Models can be illuminating. But the way they're often used in the markets is to: 1) try to beat the market, which is impossible over the longer term, 2) hedge against risk, which though it makes sense a lot of the time, is prone to go haywire when most needed, in a financial crisis, and also dulls participants' sense of risk, producing a kind of moral hazard, and 3) to bury toxic shit in structured securities that almost no one but their makers understand. Hubris and fraud cause problems. The point in my long posting is that *all* these phenomena result from specific economic structures, not from quant modeling. Ultimately, profit making, fraud, etc. are not caused by quant modeling. We should see below (or beyond) the fetish.
Re: [PEN-L] the glories of financial engineering
Ted Winslow wrote: On what rational grounds do you rule out the possibility that irrational psychology of a kind that can't be modeled in this way is at work in these markets? Have you made a serious study of the psychology of greed, mania and panic? I don't rule out that possibility. More generally, I don't start from a metaphysical postulate stating that the world is knowable. There may well be human phenomena that human minds are absolutely incapable of grasping. But which phenomena are absolutely unknowable and which are not cannot be determined a priori, once and for all. More importantly, it is not in the nature of human beings (at least in the nature of human beings living under some well-known social structures) to give up in trying to grasp these phenomena with the tools at their disposal. People will keep trying and people will keep developing tools to grasp all sort of phenomena. So, I don't accept that -- in principle -- certain psychological phenomena -- as complex as they may appear -- are not amenable to math. (Math is increasingly the form logic takes in our times.) But, ultimately, what I accept or not matters little. Look at the practice of people around us. Finally, just to stress this point: the process through which people push the envelope of uncertainty is necessarily constrained (and enabled) by the productive force of labor and by the social conditions in which such productive force is embedded.
[PEN-L] ... just a bull market correction
A contrarian view of the credit mess: http://www.ft.com/cms/s/0/925b018a-5111-11dc-8e9d-779fd2ac.html
[PEN-L] On Venezuela's economy
http://www.ft.com/cms/s/0/d83b3294-51b4-11dc-8779-779fd2ac.html
[PEN-L] How the Brits lost Basra
The link won't work if you are not subscribed. So here's the text: * * * Wednesday Aug 22 2007 All times are London time COMMENT ANALYSIS Analysis How the British army lost Basra By Stephen Fidler Published: August 20 2007 18:33 | Last updated: August 20 2007 18:33 In the immediate aftermath of the invasion of Iraq in 2003, British troops were regularly shown on UK television walking around Basra wearing berets. There was a sharp contrast with the way nervy, heavily protected US troops were throwing their weight around in Baghdad. The message received by the British public, which holds its military in high regard, was that this softly-softly approach would – thanks to experience in Northern Ireland and elsewhere – succeed in a peacekeeping mission where the Americans' heavy-handed tactics would fail. It was a view held almost universally in the British army. British military guys can be totally insufferable about this, says one retired US general who advises the Bush administration on Iraq. The four provinces comprising the UK's sector in south-eastern Iraq were also regarded as relatively friendly. The Shia majority in the region had largely welcomed the toppling of Saddam Hussein's Sunni regime and British forces did not confront the Sunni insurgency faced by the Americans in central Iraq. But the days of soft hats and handing sweets to children are now long gone. Casualties being suffered by UK troops in Iraq are now coming at a higher rate than at any time since the March 2003 invasion. UK troops are expected to pull out of Saddam's former palace in Basra, where a battlegroup of about 700 men has been under consistent fire, within weeks. The numbers of UK troops in Iraq will then fall from about 5,500 to 5,000, with a large majority of them based at just one location – Basra airport. UK military and MoD civilian fatalities in Iraq With such a small force, soldiers are being used essentially to protect themselves. Their objective, says Nick Clissitt, a retired brigadier who served in Iraq, appears to be largely to provide a symbolic show of support for Washington and the Iraqi government. And that's pretty expensive and it's not sustainable, he says. Officially, the British government says its approach continues to be that of handing over responsibility to Iraqi security forces as they become ready. Troops are still training members of the Iraqi army's 10th division and other forces, contributing to the protection of supply lines from Kuwait to Baghdad and elsewhere and carrying out targeted security operations, often in support of Iraqi forces, the Ministry of Defence says. But while the government's public statements give the impression of a job done, the reality of what UK troops are preparing to leave behind is different. A report from the International Crisis Group, a non-government group working to prevent conflict, said in June that relentless attacks against British forces in effect [have] driven them off the streets and into increasingly secluded compounds. It went on: Basra's residents and militiamen view this not as an orderly withdrawal but rather as an ignominious defeat. Today, the city is controlled by militias, seemingly more powerful and unconstrained than before. That point was driven home on Monday as Muhammad Ali al Hassani, governor of Muthanna province, next to Basra, was killed by a roadside bomb, becoming the second southern provincial governor to be assassinated in two weeks. British forces handed over Muthanna to Iraqi control in July 2006. Now hunkered down in defensive positions in Basra, they have lost the ability to reverse the downward spiral in the south. Anthony Cordesman, a specialist on the Middle East and military affairs at the Center for Strategic and International Studies in Washington, wrote in a report on February: The British decisively lost the south – which produces over 90 per cent of government revenues and 70 per cent of Iraq's proven oil reserves – more than two years ago. Privately, many serving and retired British officers who have been through Iraq have been saying similar things for some time, though some dispute the terminology. To speak of defeat is too simplistic. But we are living with the consequences of past decisions and actions – that's a reality – and there is no point in saying that everything in the garden is rosy, because it isn't, says a recently retired British general. One conclusion is almost universally drawn: British troops suffered from being the junior partner in a coalition whose senior partner comprehensively failed in its post-war planning. Clare Short, Britain's international development minister until she resigned less than two months after the start of the war, says the UK government's post-war planning was linked to that of the US state department and contemplated an internationally supported reconstruction effort. This approach was scrapped, she says, after the January 2003 presidential directive
[PEN-L] reflections on the current crisis
Robert Wrubel wrote: Wasn't there also a supply factor, in an excess of money that needed to find new outlets for investment? I replied: http://www.ft.com/cms/s/0/8c9dea94-3e30-11dc-8f6a-779fd2ac.html The surpluses built up faster as oil and other commodity prices went up. Somewhat analogous to the Eurodollar boom in the 1970s. (This Euro- prefix has nothing to do with the currency that got same name more recently.) In today's FT, Martin Wolf has a column in which he exculpates the Fed from the credit bubble -- at least partially. He lays some of the blame on the savings glut. The article is worth reading, because he breaks down the savings glut into its component parts. Unfortunately, I can't fetch the article online now. (If somebody can, please post.)
[PEN-L] reflections on the current crisis
Also, if somebody has Henry Kaufman's (WSJ) piece Our Risky New Financial Markets, please share with the list.
[PEN-L] reflections on the current crisis
Doug wrote: One of the many problems with CDOs and the like is that they're built by mathematicians who assume that the markets will always behave normally. Since long, people in finance *know* in their minds that the distribution of returns is nonstationary, that it has memory. On the analytical side, the fundamental intractability of nonstationarity forces them to frame the problem in terms of heavy-tail distributions. But that's like an arms' race: the quants keep fattening the tails of their respective distributions only to realize that even the fattest tails are unable to deal with the next extreme event. Clearly, the root of this silly practice is not lack of mathematical sophistication, behavioral quirks (in spite of Taleb), or sheer stupidity. It is moral hazard! Simply put, there's a strong incentive to disregard unlikely (extreme) events. Most of the time, disregarding extreme events works to your advantage. You'll do fine most of the time. And, when an extreme event hits you (if you haven't retired yet), many others along with you will be hurt. Nobody will fault you personally. You (like all others) can credibly claim that the event was truly unpredictable and demand that the Fed bail you out, as it's done before. You and all others are too big to fail. You and all others can bring the whole economy down. Etc. Ultimately, this will continue until those below pull the plug.
Re: [PEN-L] North American worker cooperation
A federal judge in Mexico City ruled yesterday that the workers' strike in Sombrerete, Zacatecas (http://www.sombrerete.com.mx/Galerias/somric/somric.html) has legal existence. http://www.jornada.unam.mx/2007/08/18/index.php?section=politicaarticle=012n1pol
Re: [PEN-L] Waiting for the end of the world
Doug wrote: But, looking at history, the odds are that it's not 1929 all over again. I'd agree with this. At this point, there's little basis to anticipate that the mortgage crisis and the turmoil in the markets will lead to a 1930s type of mess. But there are serious reasons to think that the U.S. may enter a *severe cyclical downturn*. You listed those reasons in your post. While such a scenario is not likely to threaten global capitalism, it is likely to weaken the U.S. position in the world. This is important. He, like many others, seems almost to *want* a crackup, because it might make the somnolent masses wake up and finally come around to embracing revolutionary socialism. But they could just as easily become jackbooted xenophobes or crazed survivalists. Right. The relation between the state of the economy and the political strength of the left is not mechanical or automatic. Paul Krugman wrote in today's NYT: http://www.truthout.org/docs_2006/081707C.shtml My guess is that [a solution to the mortgage mess] would involve federal agencies buying mortgages — not the securities conjured up from these mortgages, but the original loans — at a steep discount, then renegotiating the terms. But I'm happy to listen to better ideas. Is this possible? Those mortgages were securitized, pooled, tranched (sliced and diced), and traded. You cannot buy the underlying asset directly. Can you?
Re: [PEN-L] North American worker cooperation
Michael Perelman wrote: Maybe he was with the miners. He is supposed to be very well known. His first name is Napoleon. The steel workers were defending him. He is probably with the steel workers in the US now. The government charged him with corruption, but it seemed like he was doing too good of a job. Anyway, I have not heard about his case for a while. Okay. Yes, Napoleón Gómez Urrutia is the leader of the union. What I posted on this has been composed and passed along on the basis of e-mails I receive from a friend in Mexico whom I trust. The information is a bit telegraphic, but there's not much in the newspapers. So, based on the very little I know, I'll try to provide some broader context for those interested. The unionized workers' movement in Mexico is what is. Like in most other countries (rich and poor) it is not characterized by high standards of honesty or democratic practices. In Mexico, the movement started in earnest in the mid- and late 19th century by anarchists and then socialists and Christians, who organized workers in various industries. They played a key role before, during, and after the Mexican revolution of 1910. As the revolution became an institutionalized regime in the 1920s, the unions were purged of anarchists, socialists, and communists, and co-opted as political structures providing a popular-base prop to the regime, an electoral base, and even shock troops against the opposition -- all under the political umbrella of the PRI (originally under a different name). There was some give and take -- obviously. A progressive labor legislation was enacted, etc. But, basically, the design was to keep the workers' movement as a political appendix of the state under the PRI and to preempt the political independence, democratic, and militant development of the working class in Mexico. Paramount among their fears was communism. The leaders at the time were rabidly anti-communist and used everything to keep the communist out. Not surprisingly, the unions became extremely corrupt and brutal in their practices. Again, no doubt, base workers continued to receive something -- incremental advances in their working and living conditions, better real wages, etc. as Mexico's economy boomed ahead almost without pause during 50 years or so. Until the macroeconomic conditions became much more volatile -- in the 1970s. For decades (and until the present), the radical left had a very hard time penetrating the union movement. Of course, there was brutal repression and all that. There were many episodes used to teach exemplary lessons to the communists. Recently, Elena Poniatowska, a Mexican writer, was given the Romulo Gallegos Prize in Venezuela for her book on the history of the bloody repression of the railroad workers then led by Demetrio Vallejo in the late 1950s. (Elena was in Caracas to receive the prize and interviewed Chavez. The interview is available on youtube. In Spanish. But that's another thread.) All in all, the main reason for the failure of the left was a disconnect between the strategy of the left and the outlook and disposition of the base workers themselves, who -- to some undeniable extent -- had been deeply corrupted by decades of corporatism, political submission, prevarication, and mafia brutality. Throughout this whole period, just like the union movement in general was under the iron grip of Fidel Velazquez, a very picturesque icon in Mexico's political system under the PRI, the miners and metal workers' union was under the control of a similarly corrupt and brutal PRI leader, Napoleon Gomez Sada -- a metal worker from the norther state of Nuevo Leon (the father of the current leader, Napoleon Gomez Urrutia). To give a sense of the way in which the mining and metal industries evolved in Mexico, let me say that, historically (of course), intensive mining in Mexico goes back to colonial times. The Spanish crown extracted huge amounts of silver and gold from Mexico's subsoil and the colonial economy was largely dominated by extractive activities. There are many mining regions all over the country. In the mid 19th century, some serious metal manufacturing emerged in the north of Mexico: Nuevo Leon and then Coahuila. Let's skip to the 1970s, when the government of Luis Echeverria created a large state-owned steel company in a port along the Pacific, facing Asia, the port of Lazaro Cardenas, Michoacan (Michoacan is a state in the central/southwest of Mexico). When I was student in the Universidad Michoacana, as political activists in the student movement in Morelia, my comrades and I (we were all teenagers) supported the attempts made by various leftists groups to infiltrate the union in Sicartsa (the steel making company in Lazaro Cardenas). The fights were bloody and the press rarely reported anything. At the time (mid- to late 1970s), the press was very intimidated and controlled. The government was waging a dirty war against
Re: [PEN-L] North American worker cooperation
I wrote: The information is a bit telegraphic, but there's not much in the newspapers. I'll correct this. Actually, running searches I did find good information on the strike and the history of the conflicts on both La Jornada and El Universal online. So let me start by amending some things I wrote that are flat wrong: I said that there were strikes against 2 different companies. Also that the strike in Sombrerete, against another company, was about to start. Bot things are wrong. In fact, the strike is against companies that, although with different local names, all belong in the same holding of companies, the Grupo Mexico (www.gmexico.com). The main owner of the holding is German Larrea, the King of Cooper, a big supporter of Salinas and, after him, every other big politician who could help him out. He got the company after a rushy privatization process under Carlos Salinas. Larrea also own railroads -- which he acquired during the Zedillo administration. And the strike in Sombrerete, also against a company of the Grupo Mexico, began at the same time as the other two (on July 30, 2007). I had written erroneously that this strike was about to start. What is still pending about the strike in Sombrerete is the judicial ruling on its existence. In the previous posting, I didn't finish what I was typing about Sicartsa, the former state-owned company in Lazaro Cardenas, Michoacan. That was another victim of the corrupt process of privatization under Salinas. That one was swallowed by what became the Grupo Villacero (www.villacero.com), sold to the brothers Julio and Sergio Villarreal Guajardo. After the death of Napoleon Gomez Sada in 2002, the son Napoleon Gomez Urrutia -- current leader of the union -- was elected by the board and ratified by union assemblies as the new top leader. However, president Fox and the companies didn't like the idea a bit. Why? This is another case in which the class struggle takes rather ugly forms. Gomez Urrutia, as son of the old union patriarch, was raised as a privileged child in a rich family. You know, being a traditional union leader in Mexico pays. Gomez Urrutia studied economics in the UNAM, the public university, but he then went to Oxford and got a Ph D. He also did graduate work at a university in Berlin. Then, during several years, he was the director of the Casa de la Moneda -- Mexico's mint and member of the board of several companies, state-owned and private corporations. He also tried to run for governor of Nuevo Leon, but failed. He was a prominent bureaucrat in the state-owned industry sector: planning director of the state-owned holding Siderurgica Mexicana (which packaged into one Altos Hornos de Mexico, Sicartsa, and Fundidora Monterrey) during the Lopez Portillo administration. Later on, in the Salinas' administration, he was director of Compania Minera Aztlan, which he dutifully readied for privatization. But then, prior to his father death, he joined the union determined to inherit the father's union empire. In spite of his past, known to everybody, his reputation as a workers' leader took a turn. Nobody seriously disputes his history as a corrupt, authoritarian union leader. It's clear that he expanded the family fortune at the public expense. The workers don't ignore this. In fact, workers seem to like the fact that he's been an insider among insiders in the sector. A worker responded to a question from a journalist about Gomez Urrutia saying, I know all that. But he can't rob me, because I don't have anything he can steal. On the other hand, I know from experience that the union is know treated with more respect and he's attained benefits for workers that we never had before. He knows how to deal with the companies. Even before he became the leader of the union, he began to debate semi-publicly with Rodriguez Alcaine (see my previous posting), then the main union leader in Mexico. He even tried to lead the Congreso del Trabajo (the coordination board of Mexico's unions, which is often consulted by the government and corporate groups) while his father was still alive. He argued for a tougher attitude in the labor disputes. He advocated a harder attitude against capital and a more aggressive stance against the PAN (at a time when the PRI was collapsing or had already collapsed). To this day, he's remained an staunch PRI guy and believer that the PRI can regain power, although the current leadership of the party is not close to him. He also advocated a greater initiative in contacting U.S. and Canadian unions and inviting their financial support. For those who expect a black-and-white description of Gomez Urrutia, I'm sorry to disappoint them. I can get into his brain and don't care much about his personal motivations. His character embodies very bizarre contradictions, but those contradictions express the realities of Mexico's labor movement. It is what it is. I cannot comfortably say that his reputation as
[PEN-L] Sean Penn recently in Venezuela
http://news.yahoo.com/s/ap/20070803/ap_en_ce/people_sean_penn_2
Re: [PEN-L] North American worker cooperation
Michael Perelman wrote: Can the head of the union return to Mexico safely yet? I didn't know that the head of the union was exiled. How did you learn this?
Re: [PEN-L] Contagiousness
Sartesian wrote: Yeah, but the overall size of of the CDO market, like the $10 trillion mortgage market itself is not the issue. The issue is what portion of the securities become worthless. Hence the subject line: Contagiousness. At first, one individual gets infected. Then the infection spreads to a whole crowd. What we saw last week was a relatively discrete segment of the credit market (subprime mortgage lending) dragging down some exposed large funds. And, of course, even that started more modestly. At first, it was the riskier slices (the junior tranches) of these assets that became suspicious because the real-estate market cooled down. Now, the whole thing is a hot potato. And that's just the first-order effect. The balance sheets of the Special Purpose Vehicles (the legal term of securitized pools of assets) are, obviously, interlinked with the balance sheets of the banks and funds that hold them, and thereby with the balance sheets of everybody else. An adjustment in one balance sheet has repercussions in others. Repricing one significant item in one balance sheet can trigger a whole cascade. In a market tailspin, the cumulative effect can be n times the size of the first-order effect. These markets are substitutes of one another. However, pricing in segment X has commonalities with same in segment Y. So, aside from the urgency to sell off (which increases if the value of these assets melts), if you have reasons to second guess X, then you will have similar reasons to second guess Y. They are correlated. The whole outlook of the market changes without advanced notice. That's why liquidity can dry up all of a sudden. Here's the WSJ on the damn-if-you-do, damn-if-you-don't situation facing the Fed in the short run. Keep the rates low, avoid a nasty recession, stop the forex bleeding, slow down the depreciation of the USD, postpone the reckoning. Or vice versa. Since -- to paraphrase Chairman Mao -- pressing political needs are in command, I expect Bernanke to try to enforce low rates and fight with all he has. http://online.wsj.com/article/SB118696170827295489.html?mod=hpp_us_whats_news Here's Gertler's defense of Bernanke. The problem -- says Gertler -- is that macro policy has been too effective. Macro moral hazard. The gist of David Laibman's argument. http://blogs.wsj.com/economics/2007/08/13/bernanke-co-author-says-fed-was-not-too-easy-for-too-long/
Re: [PEN-L] Are central banks in control?
Jim Devine wrote: last time I checked, the EE exchange rate was depreciating... We have been looking at different numbers then. My figures show that China's RMB, Russia's rouble, India's rupee, Brazilian real, etc. -- i.e. the currencies of the main countries listed by the Economist -- have been *appreciating* against the USD in the last few years. But even if we ignore *that*, there's no contradiction in the gist of the article. There are two issues that the Economist article didn't care to disentangle, but that are obvious. One issue is the expansion of *local currency* supply, which translates into domestic inflation and, thereby, depreciation of the currency vis-a-vis the USD. That's not really relevant here, since we're comparing various countries with different political configurations and, therefore, diverging local-inflation patterns. The second -- and really relevant -- issue is what happens to money creation by each of these countries once you control for local inflation. You don't have to use PPP. You can use any theory you deem appropriate. Still, the fact is that largely -- as dd suggested in a recent post -- these countries have sterilized forex injections by holding them as reserves, keeping them in the USD economy (U.S. or Eurodollar markets). Imagine the local inflation rates if they hadn't sterilize export revenues or capital inflows. If, as a mental exercise, with the boom in these economies in the backdrop (way ahead of the U.S. output growth rate), you think in terms of *relative* PPP (or any alternative theory of your preference linking the growth rates of prices with the growth rates of exchange rates, rather than the price index with the exchange rate), then you can see Mexico's peso, South Africa's rand, or Venezuela's bolivar's holding their ground vis-a-vis the USD in the last few years as a de-facto appreciation of those currencies, once idiosyncratic influences are tossed out. For some reason (or combination of reasons), the countries in the Economist's list have accumulated large forex reserves. A while ago I wrote about Stiglitz's theory of why this was the case: post-Jamaica agreement forex uncertainty facing central banks. I think Stiglitz is right, at least partially. Again, these forex injections are deliberately sterilized as far as those domestic economies are concerned. Still, their effects have to show in the U.S. and Eurodollar markets (the USD economy). I'll add that this may wind up translating into a different outcome of the crisis -- whenever it may hit. The late 1970s caught Latin America with huge floating-rate liabilities as commodity prices were declining and the Fed was turning deflationary under Volcker. That devastated the region. I'd have to look carefully at the numbers, but I suspect that reserves and all Latin America, Russia, and India are nowadays net creditors of the USD economy (U.S. economy plus Eurodollar markets). No doubt China and the Gulf countries are. Will that protect the value of that money if kept in USD? Well, for sure those countries will do much better with the reserves than without them. But the outcome will depend on whether Fed and Treasury end up defending the sacred rights of capital -- as opposed to the interests of U.S. imperialism. And that's a political fight that will continue to take very interesting forms. We shouldn't underestimate the role of xenophobia in the U.S. political system. Since I'm at this, one way to read Larry Summers' recent argument in the FT that China's central bank shouldn't be viewed as a regular return-maximizing capitalist (and there's a large germ of truth to this, of course, whatever our judgment about the class character of the CP of China might be) is as prepping for an inflationary onslaught to rob China and other holders of USD-denominated paper. Or, at least, some U.S. readers of the FT (rich, conservative, xenophobic) will use this rationalization to accept inflation, at least in the short run. Large sums of money held by entities somehow accountable to crowds rather than to individuals, not into maximizing returns in the short run but deployed to advance strategic interests of other sort, are necessarily suspect. Let me say in passing that, for workers here and abroad, the first-order of business is to fight U.S. imperialism. Objectively, in the short run, that helps international capital. Bizarrely enough, in spite of the fact that the bulk of international capital (including physical assets) is held by U.S. individuals, the interests of international capital *as such* in the current context appear *first and foremost* as the interests of *the governments* of China, Russia, Iran, Venezuela! -- as well as others that the mainstream ideological machines in the English-speaking countries from academia to media tend to view as rogues. The punchline of the Economist's article stands: the laws of economic gravity don't necessarily overcome opposing frictional
[PEN-L] Liquidity trap?
http://www.afponline.org/pub/pdf/Liquidity_2007.pdf And an article by Joseph Stiglitz on the Shanghai Daily. Enjoy! http://www.shanghaidaily.com/article/print.asp?id=326522
[PEN-L] Contagiousness
Scholar-googling recent works on the structure of the credit system in the U.S., I bumped into this 2006 paper by NYU Stern's Edward I Altman on the recent boom of credit junk: http://pages.stern.nyu.edu/~ealtman/Are-Historical-Models-Still-Relevant1.pdf
[PEN-L] North American worker cooperation
On July 30, the 1,293 unionized workers (plus 305 temps) of Minera Cananea in Cananea Sonora, Mexico went on strike. They demand more safety in the mines, the opening of a local clinic to provide them with medical care, and recognition of their union representatives. They've been attacked savagely by the company, the local and federal governments, and the mainstream media in Mexico. To top it off, the equivalent of the NLRB in Mexico (the Junta Federal de Conciliación y Arbitraje) declared the strike non-existent on a technicality. The company says it's firing all the workers. The 2006 financials of the company don't look too bad (http://www.gmexico.com.mx/Modulos/Finanzas/Publicaciones/Anual/GMexico%20Informe_Anual_2006.pdf). Yesterday, delegations of steelworkers and miners from the U.S. and Canada arrived in Hermosillo to show support and solidarity with the workers in Cananea. They need all help they can get. Unfortunately, as far as I know, they don't have a web site on or some simple way for people to send them money. One historical reference. In 1906, the miners went on strike led by anarchist leaders. On June 1, 1906, the workers were massacred on the streets of Cananea by a group of U.S. private guards hired by the Cananea Consolidated Cooper Mining Co. This massacre was one of the events that triggered the Mexican Revolution of 1910.
Re: [PEN-L] Q A on credit crisis
Doug wrote: that's why there are central banks. They pump cash and make soothing sounds and hope the worst blows over. And it may or may not blow over. I have no idea, in this particular episode, whether the actions of the central bankers in the last two days succeeded in calming the waters, and for how long. I guess they closed the week with a positive note and now have the weekend to try to consolidate the feat. But taking a step back, instead of trying to divine the exact direction of the events to follow, I'm thinking of Michael Perelman's recent comments suggesting that, if a market meltdown is the rock, then inflation is the hard place against which the Fed will be wiggling. And, in the background, the constrains imposed by competition in the global scale (the emergence of China and India, and the re-emergence of Russia, the trend towards unity in Latin America), the failure of neo-conservatism and its sequels, and the reemergence of socialism. In his _Deep History_, David Laibman supplies an interesting synthesis of the basic contradictions in the logic of capitalism in general. The primary or primitive critical tendencies in the system are the tendency towards higher productivity and technical change (both induced by class struggle and competition). The former can lead to either a higher real wage or a higher profit share. The latter to either a higher profit share or a fall in the profit rate. As far as I can see, there's nothing problematic about these statements. They are straightforward algebraic decompositions of the definitions of technical change and productivity. In turn, the system now has three secondary critical tendencies: (1) an increasing real wage, (2) an increasing profit rate, and/or (3) a declining profit rate. Tendency (1) can lead to either a crisis of control (too much power by the workers in the workplace due to their improving working and living conditions) or a incentive crisis. Tendency (2) can lead to either a legitimation crisis (public disgust about the exhibition of lavish consumption by the parasites) or a demand/stagnation crisis of the old Keynesian type. Finally, tendency (3) can feed into either a demand/stagnation crisis or induce a financial crisis. The consequences of the tendencies clash with each other while, more importantly, progress in the consciousness, unity, and organization capabilities of the working class shrink the wiggle room within which the capitalists are able to displace crises from site to site. To this rock-and-hard-place scenarios, David refers as barriers. One barrier is precisely -- and I'll end with a long quote where David makes this argument -- the tendency towards the ineffectiveness of macro policy. I don't see anything teleological or mechanistic about David's schema. His text may seem a bit too concise and even dry, but the role of agency is duly incorporated and insistently noted. Here's the relevant passage: Cyclical crises must occur [...] due to the unavoidable need for periodic restructuring of accumulation and class relations. [In the previous paragraphs, David argues why this is so.] This, in turn, has two basic elements. First, in order to function without systemic crisis, capitalism needs to periodically rediscipline the working class and reproduce the proletarian dependency on which the extraction of surplus value rests. Second, it needs to shake out weak units of capital and consolidate capitalist power in a form suitable for continuing accumulation [...] [...] cyclically recurring crisis, no matter how intense its effects, can eventually be foreseen, and its critical impacts subjected to institutional offset or containment. An analogy with drug addiction is apparent: there is a progressive aspect, in which given doses of a drug (or of cyclical crisis) become increasingly ineffective, making stronger doses necessary. This, of course, follows Marx's insight that what appears politically as the 'crisis' is actually the resolution of the actual, underlying crisis: the emergence of structural contradiction on the path of accumulation. Crises that are resolved, or contained, or even significantly foreseen, do not do the work they are 'designed' to accomplish (the quotation marks around 'designed' warn, as usual, against a teleological reading of this term; no actual intention is implied). There is a need for crises of increasing severity, and, indeed, novelty, for the simple reason that any given degree of severity or novelty, once experienced, necessarily gives rise to class resistance and institutional responses, which then nullify its 'creative-destructive' role. This is the core reason for capitalism's inherently 'wild' character, and for its long-perceived resistance to regulation. It also constitutes to core of truth in the free-market ideological claim that policy to regulate capitalism, in the classical Keynesian mode, cannot ultimately be effective. Capitalists -- not, of course,
[PEN-L] Phil Izo (WSJ) interviews David Resler (Nomura) and David Wessel (WSJ)
http://link.brightcove.com/services/player/bcpid452319854?bctid=1137970231 Phil Izo (WSJ reporter): Do you think it [the central banks' injection of liquidity] is gonna be enough? DW (WSJ): I have no idea whether it's gonna be enough. I suspect they don't know whether it's gonna be enough.
