REAL DEBATE:
Caffeinated versus Real Art on Economics (II)

First, if you haven't already read it, go check out part one, and then go check out Matt's response at his blog Caffeinated. Okay, done? Good. Are you seated comfortably? Good. Time for my response.

On Galbraith, Keynes, and the post WWII expansion

I think Galbraith's explanation of the abandonment of Keynesian principles is right on target except for his prioritizing of causes. I think a good rule of thumb for historical or political analysis is to never attribute negative consequences to individual failings when a motivational social structure is fully in place. That is, Matt's comment "those in academia validate the theory that those in power believe" strikes me as being a much bigger factor than hubris. People with wealth and power are always going to be chasing after more wealth and power, and part of that chase in an ostensible democracy is apologetics for their actions--intellectuals who support them are handsomely rewarded in terms of status and career advancement. Indeed, most elites were advancing themselves and their interests quite nicely in the 50s, especially those from the military industrial complex. There was profound incentive, therefore, to keep the whole status quo going as-is. Consequently, what was called "Keynesianism" ended up being something else entirely because actually taking the revered economist's advice would have meant changing the way things were, which was unpalatable to the elites, who wanted to keep the gravy train coming.

Intellectuals and politicians, like all humans, have extraordinary powers of self-deception, especially when there is great motivation to self-deceive. I think calling it a misdiagnosis is far too kind. When it became clear just how nicely the US was sitting in the post war period, the government should have massively cut both spending and taxes, but didn't, fooling itself into believing that their circumstances were somehow of their own making, which set the stage for the structural downfall starting in the 60s.

Also, the political influence, and needless economic impact, of the the military industrial complex cannot be underestimated, and we're still dealing with that today, but I'll leave that to another discussion.

On replacing the real US economy
with an investment economy

Matt asserts that the global economy as currently constructed, because that's really what we're talking about here, is actually quite a good thing: global capitalism has created a great deal of wealth and innovation. He then goes on to make some good points in support of that view, with which I only have a few small objections. Yes, great technological innovation has come from corporate globalism. However, it strikes me that one of the major attributes of globalism is the well-known "race to the bottom" in terms of wages, working conditions, and benefits. It strikes me as good business sense to try to minimize production costs as much as possible, so I totally understand why corporations have been celebrating this outsourcing orgy for years now. The problem with this, setting aside questions of egalitarianism for a moment, is that cheap labor tends to stifle technological development, at least as far as production is concerned. For example, European technological innovation in the Middle Ages and Renaissance stemmed directly from the fact that the continent had such a small population compared with other civilizations. Labor was expensive, which economically forced technological development to proceed faster there than elsewhere. Ultimately, this resulted in Europe's scientific superiority, which allowed the civilization to dominate the whole world--actually, we're still benefitting from that expensive labor today. So this "race to the bottom" strikes me as being, at the very least, counterproductive in the long run, despite it's clear value in the short term.

Matt also cites greater capital flow as an innovation in and of itself. That's true in all likelihood. Of course, greater capital flow is simply an adjunct of greater information flow, which I'd be insane to condemn. The reality is that my problem is not with greater information flow, but the loss of production capacity here in the United States itself, which I believe leaves us in a dreadfully weak position should the economic framework under which we now operate fall apart. Complicating matters further is that corporate globalism makes such a seemingly unlikely event all the more likely, but I'll get to that in a moment. I'm also disturbed that the loss of those good factory jobs signals a potential end to the middle class in America, which, again leaving aside questions of fairness, ultimately means great social, and therefore economic, instability.

Matt observes that politicians tend to impede innovation with their short sightedness, and, again, I have to agree. However, I've also got to point out that many, if not most, of these politicians, from both parties, are pretty much hand-picked by these same capitalist uber-organizations whose innovation is being held back. That is, if you want to be a political player at the national level, it is highly unlikely that you'll get there without the blessings, in the form of campaign contributions, of the corporate elite. Two steps forward, three steps back. It strikes me that these political barriers aren't so much blocking the forces of global capitalism as they are blocking good common sense, in which there is no corporate profit.

Matt then asserts that the innovations of corporate globalism are, in the long run, key to fighting terrorism. However, it is my belief that most terrorism is the direct result of globalism. That is, terrorism as a tactic first appeared as a response to the imperialism of the Great Powers. It continued to be used against imperialism's replacement, globalism. I'll get to that, too, in a moment, but I think that the belief that the US ought to rebuild and economically stimulate the countries it pounds militarily is something of an impossibility because, especially in the third world, there's generally not much profit in doing so--corporations have proved time and again that a country doesn't need to be economically viable in order to be exploited; hell, a bombed out wasteland is far more docile, generally, and easier to push around.

Anyway, this brings me to my bottom line about global capitalism. Globalism is only good for corporations and their shareholders, who, despite what the Wall Street Journal and Thomas Friedman say, are not most Americans. The real costs of this outflow of American capital are hidden. Direct military action costing billions, and direct payments, also costing billions, to corrupt regimes to keep all that cheap labor in line, create massive levels of resentment among rank and file citizens. Not only is the ability for multi-national corporations to do business heavily subsidized by the American tax payer, the manifestation of these corporate welfare payments as military repression, either by our armed forces, or by US supported client states, makes the world a much more dangerous place, stifling economic activity by pretty much everybody else.

The absurd situation with oil and the Middle East is the perfect example. If you factor in the billions of US tax dollars needed to provide a friendly busines climate over there, paying for the enforcement powers of Israel, Egypt, Saudi Arabia, and other states, the real cost of a gallon of gas shoots way up, to around, I've read, eight or nine bucks. Meanwhile the repression paid for by you and me has created such a hostile atmosphere there that now we, not just Israel, have to constantly fear terrorism. Remember that sixteen of the 9/11 hijackers were Saudis, the rest were Egyptians--both countries are US allies, receiving millions in military aid, which is generally used to keep down popular political movements. What I'm saying is that global capitalism isn't just unfair: it's downright irresponsible and dangerous.

Since 9/11, I've said many times that the only real way to fight terrorism is to completely change how we do business. Unfortunately, big business thinks we're doing just fine.

Anyway, I think it's clear that this business model called globalism isn't really capitalism as we understand it. It depends heavily on state subsidy. It creates massive instability in the long run. It enriches only a fraction of the world's population. There's hell to pay for globalism today, and there'll be even more to pay for it in the future.

A few more words on big government

I fully agree with Matt's assessment of the problems stemming from how our big goverment currently operates, especially the part about how my suggestions for reform are unlikely to happen. However, it's not as though reform is impossible; it's simply politically unviable at this time. Discussions like this one might one day be seen as catalyst for the cultural change necessary for making Big Government a responsible entity. For every shortcoming of the current system, there is a fix; what's needed is political will and enough stamina to keep the retooling an ongoing process.

Was it Thomas Jefferson who advocated a revolution every twenty years? I think this is the kind of thing he was talking about.

You know, it's not really even my and Matt's personal responsibility to have a fully fleshed out solution for the problems of massive government. He's in marketing; I'm a theater artist: we're not political scientists, for god's sake! I think that if there is enough demand, solutions will be found. Until then all the smart guys in poli/sci are working for the elites, instead of the citizens as they ought to be.

In conclusion (hooray!)

Matt says:

As for [big government] being a counter to business, here Ron and I differ.

Just for the record, I'm really only worried about big business. If government were to be a counter to business itself, we'd all be in big trouble because I can't help but think that such a thing would be really bad for the economy. Big business, on the other hand, has demonstrably undermined democracy, foreign policy, and the market principles so embraced by the ruling class. Big business is dangerous and incompatible with commonly held American values. That's why, if we have to deal with it, we should heavily regulate it. Only big government has the ability to do that.

Phew! What a mouthful. But then, I guess we are discussing, well, everything.

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