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Where the money is

July 27th, 2011

Over at Crooked Timber, there’s been an extensive neoliberalism (mainly, though not exclusively, in the US sense of this term, which is broadly akin to “Third Way” Labor”) and political theory. I’ve been largely on the sidelines. That’s mainly because, observing the US political and economic situation, I have a very clear view on what policies could, in principle, sustain a progressive political movement, but (given my distance from the scene and the absence of anything substantial enough to force its attention on the mass media) no real idea about how such a movement might develop. Here’s a post I put up there, slightly edited to remove some points that led to thread derailment.

My analysis is quite simple and follows the apocryphal statement attributed to Willie Sutton. The wealth that has accrued to those in the top 1 per cent of the US income distribution is so massive that any serious policy program must begin by clawing it back.[1]

If their 25 per cent, or the great bulk of it, is off-limits, then it’s impossible to see any good resolution of the current US crisis. It’s unsurprising that lots of voters are unwilling to pay higher taxes, even to prevent the complete collapse of public sector services. Median household income has been static or declining for the past decade, household wealth has fallen by something like 50 per cent (at least for ordinary households whose wealth, if they have any, is dominated by home equity) and the easy credit that made the whole process tolerable for decades has disappeared. In these circumstances, welshing on obligations to retired teachers, police officers and firefighters looks only fair.

In both policy and political terms, nothing can be achieved under these circumstances, except at the expense of the top 1 per cent. This is a contingent, but inescapable fact about massively unequal, and economically stagnant, societies like the US in 2010. By contrast, in a society like that of the 1950s and 1960s, where most people could plausibly regard themselves as middle class and where middle class incomes were steadily rising, the big questions could be put in terms of the mix of public goods and private income that was best for the representative middle class citizen. The question of how much (more) to tax the very rich was secondary – their share of national income was already at an all time low.

The problem is that most policy analysts and commentators grew up in the world of the 1950s and 1960s, or at least in the mental world created by that era. So, they are busy fighting about tax expenditures, barber licensing and teachers unions, and the implications of these things for a hypothetical working class mobilisation. Meanwhile, most of the anger created by the collapse of middle class America is being directed not at the rich but at those who don’t look, sound or pray like Americans of the vanished golden age.

fn1. When I was at the American Economic Association meetings in January I went to a session where a group of Very Serious Economists (Holtz-Eakin, Elmendorf and others) discussed the US budget problem, which comes down to the fact that on a structural basis US public expenditure exceeds revenue by something like 7 per cent of national income. I made the comment that this gap was almost exactly equal to the increase in the share of income going to the top 1 per cent of households over the last decade or so. The Very Serious Guys declined to respond, and waited for a serious question. I wasn’t surprised, but I wasn’t impressed either.

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  1. Chris Warren
    August 1st, 2011 at 13:39 | #1

    TerjeP :
    Chris – I don’t think you understand logic. My efforts are wasted.

    Yes, Terje-type logic does not compute, and your efforts are illuminating – we all have to be a wake-up to flat-earth theories even though they come camouflaged in buckets of water.

  2. J-D
    August 1st, 2011 at 16:00 | #2

    J-D :I take it that the essence of the original point is that in a massively unequal and economically stagnant society nothing can be done about an economic crisis except at the expense of the small number who have most of the money. …
    Maybe Terje has some other good argument against the idea that a resolution of the economic crisis is only possible at the expense of that tiny minority. But arguing about exactly which fraction of the population make up that minority is just a distraction.

    It seems that Terje has no such good argument, or at least none that can be produced here, and prefers to continue to concentrate on the distraction, for reasons which must be left as an exercise for the reader.

  3. Mulga Mumblebrain
    August 1st, 2011 at 17:17 | #3

    The relative income equality in the USA during the 1950s and 1960s was always fiercely resented by the Right and the global parasite class. It was tolerated purely out of fear of communism. Meanwhile a subterranean claque of theorists of free market neo-feudalism, the Mont Pellerin pathocrats, worked away like good and faithful golems, on the political and economic formulae that would prove useful when the reaction was unleashed.
    And so it was, probably starting with Nixon and the abrogation of Bretton Woods. The first concrete exercise in Chicago style Friedmanite neo-liberalism was Chile, introduced in the preferred manner, at the point of a bayonet and with the malcontents who believed in equality and fraternity tortured and exterminated or disappeared. We can see the Right’s preference for the exterminationist method to instill obedience since, from Guatemala, El Savador and Argentina to Indonesia and Colombia, amongst many others. Thatcher and Reagan and the treachery of the ‘social democrats’ followed, allied with IMF and World Bank thuggery in the Third World.
    Then the USSR disappeared thanks to Gorbachev’s understandable desire to avoid a nuclear Armageddon that the Reaganite apocalypticists were slavering for, and his baffling decision to take the word of the Americans as to their future intentions. The years since have been halcyon days for the parasites, with income redistribution to the rich, the destruction of trade unions, welfare ‘reform’ motivated by basically insatiable appetites for sadistically mistreating the weakest in society and a series of wars of aggression and pitiless sieges, sanctions regimes and blockades.
    Still there remains one silver lining. As elite greed, wealth and power burgeoned, so too did their moral insanity. One feature of this predictable development (give psychopaths unlimited power and their narcissism and egomania must spiral out of control) was that the masters have decreed ecological reality a ‘Carmnist plot’ and with that well-attested Rightist gift for paranoid delusion, they have weaved a web of deception that denies every ecological crisis, basically because remedial action would threaten profit maximisation. So, soon, very soon, the ecological collapse will finally trigger resistance from the human fraction of humanity, and the Right will be removed from dominance, once and for all, or humanity will disappear, and the risk of Homo destructans escaping this planet to ravage and pillage the cosmos will end.

  4. John Brookes
    August 1st, 2011 at 18:24 | #4

    Beautifully said Mulga! Not sure I agree, but I am so glad that your world view exists.

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