The bailout as epiphenomenon; or, how globalization kicked my puppy
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So I was planning to write a long, witty song-and-dance about a theme to which I've occasionally alluded lately: the importance of globalization in this bailout crisis. But then I decided I'd spare the words and write it out as a few easy and very approximate steps.
1. American wages rise with unionization. Capital is captive and cannot go on strike, must actually innovate.
2. Bad theories (==total liberal economic consensus, to this day) and self-interested political behaviour ratchets down trade barriers (but not in an intelligent way---there's a case for lowering them selectively).
3. Capital flight to cheaper jurisdictions.
4. Wages fall. (Unions weakened, but they can't stop this anyway, because they can't hold capital captive.) Rust belt rusts.
5. Exporting markets still need buyers and US politicians need to paper over the fact that workers are getting poorer: EASY CREDIT!!!
6. Easy credit creates moral hazard---on the part of banksters!
7. Feedback loop creates enormous bubble.
8. POP
9. For economy to recover, consumers need to start spending again.
10. MORE EASY CREDIT!!!
We are stuck on 10. The entire debate is framed around how to induce banksters to extend more easy credit. Punish and replace them, bribe them, hold them accountable, Zero Interest Rate regimes, it's really all the same in the big picture. Seriously, there's no fundamental difference between any of these solutions.
Because the problem is that the American consumer is maxed out, has no money, and won't because they are still too expensive.
Now there are two ways to solve this problem. Perpetuate their (American workers') impoverishment so that they are on the same level as Chinese workers (with Chinese workers being a bit better off than they are now). This is the solution that is being contemplated. This is why you will not see single payer health care ever seriously discussed. Because the intention is not only to have a cheaper health care system, but one that actually delivers much less.
If it were not the intention, then the other alternative is to pay American workers higher wages. That means trade barriers, because there's little but """services""" (ie, being a servant) that Americans can do that can't be done elsewhere for cheaper.
Trade barriers are not being discussed and will not be discussed any time soon. That's why I find it hard to get worked up over how foolish the netroots were or how progressive Obama feels on Thursdays. Because everything else is just tweaking, on the economic front, until globalization is dealt with. Everyone of note used to know this back in 1999. But the program started failing in 2000, and it broke completely in 2001 for obvious reasons. We are not going back to 1999 anytime soon, and when we do it will be Gotterdämmerung.
ADDED NOTE: I'd really like to emphasize one point. Whatever the administration does regarding the banksters, no matter how much moral hazard they eliminate, no matter who they punish, how they scrutinize it really makes no actual difference to the outcome. It does perhaps change the speed of the apocalypse, but it certain doesn't stop it. Of course, slowing it down is worth something, and something big: a few lives spared. That is, of course, why it remains worth doing.
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I might also add...
....the influence of David Harvey's spatial fix theory: capital is contained within space and has to expand its territory in order to avoid economic depression by the stagnating capital.
That idea has to be fixed too. Not to mention the idea that government won't manage (at the federal and local level), and therefore individual communities (read: local governments), must be entrepreneurial to replace the lost money and aid coming from the government.
Oh if only we had a voice like Polanyi out there trumpeting for the end of the market economy. My hopes for changes in the market economy are all but dashed within the first months of the Obama administration(not that I was expecting really anything, just maybe not to see Hoover running the depression).
Realpolitik, do you have time to explicate a bit more? Or give
some links to sites which go into Harvey's and Polany's approach? And is it Michael Polhani? Karl? T/U. New folks to me.
Sorry, jawbone, here is the info you wanted last night
was waxing a little too abstract last night at 1am.
Here is a link to a google Books preview of David Harvey's book, Spaces of Capital,
http://books.google.com/books?id=gebZ3_H...
(sorry, don't know how to use the 'a href' html, and never have...)
Spatial Fix theory is already searched within that, and you are directed straight to the section on it. David Harvey is central to my dissertation (and I am a big fan boy). He is a marxist geographer and has wrote books like 'The New Imperialism, and a Brief History of Neoliberalism'
Also, Michael Polyani is a political economist, scientist and philosopher, has this famous quote which I really like:
Is it globalism that's the Deux Wrecks Machina, or is
corporatism the true root causal idea? Corporatism, with its corollary of anti-unionism, would seem to be the heart of the matter.
And I think the reason easy credit is pushed so hard is that easy credit can be the vehicle for a fake (wageless) recovery. Because the only REAL recovery would be a bottom-up recovery. Which leads back to unionism. And that, like so much else, is simply off the table.
Unionism
You can unionize all you like: a company can still lay off your workers in favour of cheaper jurisdictions. Unionization may slow down the process, though, and it has fundamental value in other dimensions.
Corporations matter, of course, but at least as legal entities, well, the same dynamics can apply to sole proprietorships. Corporations as concentrations of wealth is another matter. If you had, say, a ceiling on corporation size, it might make a real difference. If you had a ceiling on ownership, and very strong anti-trust laws, I would conjecture that you might be able to kill the kinds of economies of scale that make offshoring profitable. But I kind of doubt it.
You need intelligent protection of industries that employ lots of people at middle class wages and lifestyles.
And the ONLY landscape where all that can occur is one that
includes a strong union movement. Otherwise there is no effective constituency for the rest of it.
Vicious cycle
But globalization is what weakens a strong union movement. So which comes first, roast chicken or omelette?
We're what's for dinner - even if we're not beef.
And yet globalism is not a new phenomenon. It was dominant in the late 1800s.
Yet somehow an industrial labor movement was able to form and grow. So it should be doable again, unless something else has changed besides the globalist resurgence.
Violence
The magical ingredient---special sauce, if you will---that ameliorated the Industrial Revolution is ultimately the threat of violence. The real question is, can we be the first civilization in history to do it without violence? Do we have an option?
There are alternatives to violence
Beyond your Obama/CDS fixation.
Even a casual look at the history of the labor movement (and women's suffrage and civil rights) shows that the violence was predominately by opponents of the liberal changes. Pinkertons and other union busters, violent cops, etc were the big perpetrators of the violence.
Your whole apocalypse is the only alternative to my view talk is getting old quickly.
Do you deny...
...that the American elite felt forced to accomodate reforms during the New Deal period due to the fear of communist backlash? Of course elites have always used the bulk of violence, that's because they own most of the means!
Yes
The American elite fought the New Deal from the get go. Guess what? They still are.
I'm not sure if you're disagreeing with me
Since it's obvious that they've been fighting it. The question was, were they ever afraid that the balance of chaos would tip against them? I say yes.
My answers are no, and no.
And that's a major problem, because the other side has amped up its military, surveillance, legal, political, and financial powers, perhaps to the point of invincibility.
They're not invincible...
... if they're fighting the last war, which (I would argue) decadent elites do tend to do .
For a 198-Fold Path approach that's locally driven and media savvy, all that power could turn out to be a Maginot Line. Eh?
Localism mandates technical, communicational, and societal
devolution. Yet it may be our only path.
And it has its pitfalls. See any neo-Nazi site for examples of some very unpleasant people who have reached the same conclusion.
Well, perhaps
Not sure it's not the best option, though.
I don't think there needs to be technical, communicational, societal devolution. I think "too big too fail" applies to a lot of things. Maybe a smarter network with more nodes is a good thing. It's certainly more robust.
On the loons, yes, I agree. We'll have to see.
Media savvy, especially
Especially the media savvy. Very much up on the savvy.
But you'll forgive my skepticism on the 198-fold path, I hope. I'll believe it when I see it, and at the moment what prospect for improvement I see comes from the elite being unable to see any safe way out of potential systemic breakdowns then, well, to fix the system. This may be the best hope for single-payer health care, that corporate America may see it ultimately in their own self-interest to soak their insurant brethren.
I'll take the bait
What, oh what, forces have the most (latent) potential to steer us away from this crushing corporatism and ought to be pressured/shamed into doing better?
Hmm, that's a tough one....
Most != sufficient
Certainly no force presently related to electoral politics, one way or the other---and no force that focuses on the banks apart from globalization. Federal politics is for mitigation at best. Which is nothing to be sneezed at.
Mandos: are corporations considered as "persons" as US Supreme
Court ruled long ago? Meaning in Canada, other developed nations. And, if not, does that make a difference in counties where they are not?
There is a wonderful documentary...
...of which you may be aware called The Corporation. I think it does make a difference, legal personhood as it is defined in most of the developed world, in that it makes it very difficult to demand that corporations serve primarily the public interest, and it encourages wealth concentration.
So it is related to trade and globalization, but I still believe that most of the pernicious effects of globalization can occur independently of corporate personhood. Just as the pernicious effects of corporate personhood can exist in a world with high trade barriers.
The common denominator is a commitment to regulating aspects of the economy with an eye towards the public good. There is an industry of economists---so called liberal and/or neoclassical economists---whose sole role is to use a particular form of argument (let's call it "freakonomicism") to show that regulation for the collective good produces perverse effects. However, observation of the real world shows to us that lack of regulation produces even perverser effects, so I know the poison that I would pick.
Vastleft, start with the media
If we can plant the notion that Big Corporations Bring Bad Things to Life, maybe the kids can run with it.
Given the rot in the media
One might look to the big blogs and The Greatest Orator Evah to cut through the nonsense. To little avail, sure....
walking and chewing bubblegum
I can haz both?
Nice post
And not meta MR SUBLIMINAL And about fucking time. I'm not sure about the end of the market economy -- trading seems pretty primal.
Then again, it's not clear that what we have here is a market economy, as opposed to a kleptocracy where the powerful simply dip into the stream of rents from various forms of debt peonage and take what they want with both hands.
Meta
Believe it or not, I consider all of this to be pretty inseparable from what I suspect you consider to be meta.
It's not just globalization
It's nationalization too, which is a bite that we could advance right now*.
As long as we have a national policy where one state (say, for example Tennessee) can use parochial state policy to allow one competitor (say, for example, Toyota), to stick it in the neck of another company (say, for example GM), by allowing them to (basically) avoid unionization and allowing other worker-destroying policies, which undercut ALL American jobs and ALL American workers.
The unions long ago called themselves Internationals, understanding that all workers everywhere had to be organized for it to work. Uniform labor laws in the US would be a good start. If only there were some way, some kind of organization, or pressure or something to make that happen.....
*Oops, didn't really want to take that "Obama on Thursday", "teh awsum netroots" bait, but there it is.
Currency
...but in general, even with state-by-state unionization laws, a common currency/market is protected against the kind of imbalances than a global floating exchange regime produces. For one thing, a particular state cannot ultimately inflate/zero-interest itself out of the medium-term consequences of running a cheap labour policy. That's why the gap between MA and AL is smaller than the difference between AL and Bangladesh.
Metabait! Well played.
Local currency
Which is, incidentally, a problem with localization and local currencies, taken to the limit at least. As soon as Hicksville starts trading in Rednex and Urbane with Latte Lira, we have the potential to set up floating currency trading regimes...
Shortly thereafter, Urbane has an incentive to conquer all the towns around Hicksville, just to make sure that Hicksville accepts a raw deal ad infinitum.
Any evidence this happened?
Or is just more meta?
In what context?
In the real existing global context, certainly. China (Hicksville) is going around making deals for oil and raw materials all over the world. They have the capital to do so. A bankrupt empire, America (Urbane), locked in an inextricable embrace with China, can only forestall this with military force based on money extracted from China, which it can in turn extract by dint of the fact that the Chinese peasantry's primary hope for getting rich is exporting to America...
This is another bubble feedback loop. The bubble pops, the imperial ability to fund the military machine starts breaking down. The only option is to break out of the loop, because otherwise China owns America. How do you break out of the loop of debt owned in your own currency? Zero interest!
And so on and so forth.
Zero interest
Oh, and, for zero interest to work in gradually inflating the currency, the banks must lend, or someone must lend. So the answer is to bribe them. Then they convert their money to gold to protect its value.
I've got some RL writing to do, if you want links I'll find them later, but here's the Graph of Doom, IMO:
In the context of my subject line
"Local currency"
No
I used fake city names because it was intended as a hypothetical scenario, mimicking current global trends. The last time we had real city-state local currencies they were gold-backed. Now that we know how to make non-gold-backed currencies (an advance IMO, BTW), we'd expect city-state local currencies supplanting national currency regimes to obey the same principles and social phenomena.
Or would we?
Currency?
Really? A common currency is the main difference and not lack of worker, environmental and other protections which creates phenomenon like this?
I don't know what "metabait".
Mexico
Of course, imbalances still happen. But that's why Mexico was eclipsed by China.
worker protection
Worker non-protection, etc, are all the proximate causes of the ills of maquiladoras, but the point is, once you institute them, the trade can always move elsewhere. Once the production moves elsewhere (as in, outside the USA or even Mexico), the consumption can only be financed by debt, especially in the USA. The trade deficit becomes entirely tied to the consumer deficit.
Trade deficit ==> currency issue. That's why American policymakers have often pressed China to raise the value of its pegged currency, met, of course, with "HAHAHAHAHA LOL as if" from China. This end game isn't great for China, especially not now, but voluntarily letting it happen is even worse.