Goodbye 2010

Well, 2010 is over and it’s been a year of contradictions for me. In personal and family terms, things have gone very well, starting with the birth of my first grandson, James in March. Then there’s my literary offspring Zombie Economics, which seems to be going very well, and my election as a Fellow of the Econometric Society (quite a big deal in the academic circles where I move, if not exactly a barbecue-stopper among family and friends in general).

Politically on the other hand, it’s been a year of frustration.

The problems began in December 2009, with the half-baked compromises and evasions of the Copenhagen summit, followed by Malcolm Turnbull’s one-vote loss of the Liberal party leadership to Tony Abbott. But the real disaster came early in 2010 with Kevin Rudd’s unaccountable failure to go to a double-dissolution election over the Libs’ obstruction of the emissions trading scheme. From then on, Labor seemed determined to pile on the own goals, first dumping the ETS altogether and then dumping Rudd himself for Julia Gillard, who rapidly proved to be a policy-free zone. Things were just as bad, or even worse at the state level, where Labor governments’ desperate pursuit of privatisation and PPP schemes has proved politically suicidal in the past, and seems certain to do so for both the Queensland and NSW governments.

The story was equally depressing internationally. Despite the catastrophic failure of the financial system, and of the whole market liberal ideology, centre-left and social democratic parties seemed unable to put forward a coherent response, and instead we have had the disaster of ‘austerity’. Obama in particular has been a huge disappointment in this respect. In the 2008 campaign he seemed ideally suited to articulate a message of hope. But after negotiating an inadequate stimulus package in early 2009, he has barely mentioned the issue of unemployment, leaving it to the financial sector to take him from both sides, directly exerting its power while channeling the anti-finance anger into the Tea Party movement which has helped to elect pro-finance Republicans.

Still, there were some hopeful signs as the year ended. Despite the miserable performance of our political leaders, the evidence on climate change continued to accumulate and Australia still looks like getting some kind of carbon price. More importantly, global business seems to have concluded that a carbon price will come sooner or later, resulting in continued investment in renewable energy. And the long-hoped for economies of scale seem to be coming to bear at least, with sharp drops in the cost of solar PV and continuing falls in the cost of wind turbines.

As far as the broader issues of social democracy and market liberalism are concerned, the negative message of ‘austerity’ is a double-edged sword for the advocates of market liberalism. Advocacy of pain can work surprisingly well, in political terms, as a short-run response to crisis, but it has far less long-term appeal than the story that free markets would bring universal prosperity, a story discredited by the financial crisis. The British Conservatives have demonstrated beyond any doubt that they are the same old “nasty party” that was voted out in 1997. The US Republicans have gone ever deeper into Fox News delusionism on every kind of issue. And the European right now relies heavily on tribalist and xenophobic resentments, forces that are ultimately doomed by the fact that individually, we all want and expect the kind of mobility that generates those resentments.

76 thoughts on “Goodbye 2010

  1. As usual, it is left to Jill Rush to shed some light on the subject. The two problems are the (profound) secrecy coupled with the utter- inexplicable, to me- stupidity of the perversely perservered with privatisations.
    If you are like me, you are likely overcome with a sense of foreboding, resulting from some unpleasant guesses about who is really running Labor these days and in whose interests they have been appointed, thru rigged selection processes and the like.

  2. @Jarrah

    “True” is not practically meaningless. It is an adjective and gets its meaning from its noun and context.

    But surely, if what you say:

    But since the conditions that result in perfect competition … can’t really exist, then the profit level never reaches zero.

    is true, then this is yet another refutation of your own original question. ❗ ❓

    As far as I am aware Marx did not start his analysis in a pure state where competition eroded capitalist profits to zero. What evidence do you have for this claim?

    By labelling others as cranks, you only demonstrate that the face at the bottom of the well is your own.

  3. @Michael of Summerhill

    “and ordered its breakup into 34 companies for reasons Standard’s dominant position in the refining industry was due to various discriminatory and unfair practices.”

    No, it ordered its breakup because there was the political will to change the laws to make it happen. The ‘unfair practices’ turn out to be not much more than vigorous competition and exploitation of market power. Since the only people to lose out under that scenario were other capitalists, I really don’t see a problem.

  4. @Chris Warren
    “It is an adjective and gets its meaning from its noun and context.”

    Definitely, but when I said ‘practically meaningless’ what I meant was when trying to use ‘true’ as a practical measurement of markets, it turns out to be meaningless. Practically meaningless = meaningless in practice in this context. Clear now?

    As for purported refutations, I am making none, so you must be terribly confused about what it is that I’m claiming or questioning. It’s quite simple – why can’t free markets exist? I can see why they can be undermined and taken over, and I acknowledge the socio-political forces that work against their survival, but for anyone to claim they are impossible, almost by definition, seems positively surreal.

    “As far as I am aware Marx did not start his analysis in a pure state where competition eroded capitalist profits to zero. What evidence do you have for this claim? ”

    Heilbroner, R. ‘The Worldly Philosophers’, revised 7th edition, discussing ‘Das Kapital’ on pp.155-6:

    For what Marx has set for his goal is to discover the intrinsic tendencies of the capitalist system … he erects the most rigorous, the purest capitalism imaginable … We enter a world of perfect capitalism: no monopolies, no unions, no special advantages for everyone … The stage is set and the characters take their places. But now the first difficulty appears. How, asks Marx, can profits exist in such a situation? If everything sells for its exact value, then who gets an unearned increment? … How can there be profit in the whole system if everything exchanges for its honest worth? It seems like a paradox. [blah blah labor-power blah surplus value blah blah blah].


  5. Goodbye to 2010 and all the zombies…… and may you all resolve to join a damn union in 2011… (letter to editor Jan 3 Tele)

    “the public sector has a good union that fights for the rights of workers. It strikes deals to balance out a work life and home life. We are well paid, have great resources and provide a service as best we can to the taxpayer.
    If you dont like it perhaps you should stop listening to the right wing union bashing and sign up.
    You too could be at the beach with your family instead of selling your soul to your boss who, I bet, is here at the beach with his family.”

  6. @Jarrah

    Unfortunately you have shown yourself “why can’t free markets exist?”

    You now create another label – “confused” – so wear it well.

    Where exactly in all that text from Heilbroner, you confusedly presented was their any evidence that Marx assumed [in Jarrah-speak] “there would be no profits”.

    In fact the Heilbroner quote says the exact opposite – clearly indicating that, in Heilbroners view, Marx assumed the existance of ‘unearned increment’. If this was not the case Marx would have had nothing to write about.

    So even relying on secondary sources, Jarrah misunderstood his own reading.

    No sensible person would attack a primary writer by misunderstanding secondary sources.

    So obviously, perfect, true, or uber “free markets” cannot exist. Capitalist profits rely on deliberate unfree markets.

    And obviously Marx did not make any (Jarrah-faked) “assumption”.

    All Jarrah can do is squabble over adjectives and secondary sources – both of which he totally misunderstands.

  7. Undoubtedly. This is, in fact, my original point – criticising “free markets” (as JQ does in his post) doesn’t make any sense when we’re talking about highly regulated markets.

    I believe you are misinterpreting JQ. JQ criticises:

    the story that free markets would bring universal prosperity

    Jarrah writes:

    If it were, the list of the top companies in the world (by any measure – capitalisation, profitability, market share, whatever you like) would never change. Since that’s not true, the simplistic argument must be wrong in some respect.

    This is not an appropriate test of the hypothesis, firstly take media, consolidation of media. We know competition in news papers is barred via barriers to entry, and proactive nich filling by Murchoch, as well as anti competative pricing when a startup threaten. We also know that the papers largely set the agenda for broad cast news, and provide one of the few models to fund journalism.

    Despite lack of competition in press this does not result in things “never changing”. Rather people stop buy papers for the journalism ad by it for the TV guide. The extent that media is not further consolidated is only prevented by regulation.

    There is a breakout now with new technology of internet, which is not a free market, rather its freedom depends of regulation like Net Neutrality. And even this option for media is not sustaining journalism .

    So things change due to external forces despite lack of competition. And the competition where it does exist is enabled by regulation.

    So in a sense I am agreeing with you – free markets won’t last when special interests can bend governments’ coercive power to their own ends. This is not an argument against free markets, though.

    Yes we agree on that first part, and this is a reason to protect democratic process and fight inequality. But your later argument is redundant, as truly free markets cannot exist (see above). A market is more free with regulation than without.

  8. Jarrah, to cut a long story short the original text of the Sherman Act for Section 1 delineates and prohibits specific means of anticompetitive conduct, while Section 2 deals with end results that are anticompetitive in nature. In 1911, the Supreme Court found Standard Oil violated the 1890 Sherman Antitrust Act because of excessive restrictions to trade, and in particular its practice of buying out the small independent refiners and/or that of lowering the price in a given region to force bankruptcy of competitors and ordered the Company to be broken up into various entities which we know as Exxon, Mobil, Chevron, Esso, etc. No marks for being wrong.

  9. the simplistic argument must be wrong in some respect.

    I like this point, especially it’s simplicity. There is some truth in it.

  10. I don’t know John if you read the IMFs Fiscal Monitor document of November 2010 but it is depressing reading. The High Priests of capitalism are admitting that inappropriate fiscal tightening is required to satisfy the market’s irrationalities and that this will lead to lower economic growth and higher unemployment. Some extracts from p. 11 of the document below
    ‘The debate on what fiscal policy should do in advanced countries in 2011 has been heated in recent months. Surely—argues one side—it is folly to tighten fiscal policy at a time when
    unemployment is at a record high. Surely—argues the other—it is reckless not to tighten
    fiscal policy when public debt is at a record high. …….An abrupt, front-loaded tightening is risky and should be avoided, except when market conditions make it inevitable. Fiscal tightening is likely to reduce GDP growth (the multiplier is small—0.5 to 1—but is not zero), compared to a situation in which fiscal policy is not tightened and financing continues to remain easy for the government. Thus, given the relatively slow pace of economic recovery, stepping on the brakes with excessive enthusiasm would not be appropriate unless there is acute market pressure.
    So why not delay fiscal adjustment altogether? There are two reasons …..First, markets could lose confidence in the willingness of governments to pay back their debt. Markets may now be too pessimistic about some countries, but that does not mean that risks can be ignored. ………But markets typically react late and abruptly (spreads on Greek debt were as low as 100 basis points just one year ago). The ideal course of action would be to avoid any tightening now, while also credibly committing to future tightening. ……Unfortunately some up-front tightening is likely to be needed to ensure that future plans are credible.

  11. @Chris Warren
    So many errors in so few words – well done, Chris. I’ll keep my riposte short.
    1. You clearly haven’t understood Heilbroner, or Marx. You apparently missed the word ‘paradox’, or don’t know what it is. Marx was looking for profit but idealised capitalism has no profit. Trying to mistakenly resolve that paradox (instead of realising that ‘idealised capitalism’ is physically impossible) he invents an edifice of exploited labor-power surrendering surplus value to capitalists.
    2. Secondary sources? I’m sure you read all of Das Kapital, and in the original German too! Heilbroner is one of the most respected economic historians ever, and was “an outspoken socialist for most of his career” according to Wikipedia (before eventually acknowledging his error) so he was hardly an opponent of Marx’s teachings when he wrote about him.
    3. “So obviously, perfect, true, or uber “free markets” cannot exist.” All those adjectives refer to different kinds of markets. Free DOES NOT EQUAL perfect, or true. The closer to perfect competition the better, of course, but free markets don’t need perfect competition to exist.

  12. @jakerman
    “This is not an appropriate test of the hypothesis”

    That wasn’t my response to JQ’s criticism, but to the contention that wealth accumulation and market power accumulation has a feedback loop that can’t be broken. To see my response to JQ, you only need look at the top of the first page of comments.

    “The extent that media is not further consolidated is only prevented by regulation.”

    This is true, but incomplete. Quite a bit of media regulation is geared towards preventing competition and diversification. See anti-siphoning, TV licenses, spectrum restrictions, etc.

    “as truly free markets cannot exist (see above)”

    I’m sorry, but I don’t see it. Perhaps we have different definitions of ‘free’, which I find is often the case in these sorts of discussions.

  13. @Michael of Summerhill
    You get a B for effort, but D for everything else. I haven’t disputed the courts found what they did, so you gain nothing by repeating the judgment. I am saying a) the anti-trust laws (and the action against Standard Oil) were driven by special interests, not the state of the market or notions of competitive justice; and b) the courts erred in their findings, as demonstrated by the remarks I quote on the previous page.

  14. Jarrah, I will end it here for you don’t seem to understand the significance of the case and what is meant by restraint of trade. Furthermore, the Court did not err but developed the Rule of Reason doctrine.

  15. Of course the court erred. The concept they effectively championed was that the facade of competition was more important than the benefits that flow from it. Thus, despite the clear facts that SO’s market share was in decline, that consumers were not being gouged, that the market appeared very healthy in several respects, SO was still the bogeyman to be disbanded. By the court’s own standards – “Based on this review, the Court concluded that the term “restraint of trade” had come to refer to a contract that resulted in “monopoly or its consequences.” The Court identified three such consequences: higher prices, reduced output, and reduced quality” – SO was not engaged in consequential restraint of trade.

  16. Jarrah, one could argue that Standard Oil was Janus faced just like our large supermarkets in Australia. On one side of the face Standard Oil would by lowering it prices forcing competitors to go to the wall and on the other side it acted as a monopolist raising prices where there was no competition. The end result was a unanimous decision whereby the Supreme Court affirmed the lower court’s judgment that the conduct of Standard Oil had violated both Sections 1 and 2 of the Sherman Act. (In 1909, the US Department of Justice sued Standard Oil under federal anti-trust law, the Sherman Antitrust Act of 1890, for sustaining a monopoly and restraining interstate commerce by:”Rebates, preferences, and other discriminatory practices in favor of the combination by railroad companies; restraint and monopolization by control of pipe lines, and unfair practices against competing pipe lines; contracts with competitors in restraint of trade; unfair methods of competition, such as local price cutting at the points where necessary to suppress competition; [and] espionage of the business of competitors, the operation of bogus independent companies, and payment of rebates on oil, with the like intent.”)

  17. Jarrah :
    @Chris Warren

    1. You clearly haven’t understood Heilbroner, or Marx. You apparently missed the word ‘paradox’, or don’t know what it is.

    Unfortunately Jarrah is not qualified to make this judgment.

    He has lost track of his own argument, which was a demand for people to elaborate specifically on “What prevents a free market ever existing?”.

    He has now been knocked senseless with replies, so is trying to cover his tracks with dissimulation by arguing about the meaning of various adjectives.

    He now seems to have fraudulently changed the question to:

    “What prevents a ‘not-perfect’ free market from existing?”

    I suppose it is his convenient bolt-hole.

  18. Chris gives up on debate, resorts to fabrication, still doesn’t realise free =/= perfect. Confirms his status as resident moron.

  19. @Michael of Summerhill
    So, despite my assurance that you don’t have to repeat the judgment, with which I am familiar, your lack of logical arguments reduces you to parroting the court’s finding as if it were some sort of devastating comeback. Whenever you’re ready to debate facts about markets, including the oil market in SO’s time, I’m happy to continue. But since you haven’t shown an inkling of a position, other than as court reporter, I doubt you’ll take up the offer.

  20. Jarrah, your response is either evasive or nonsensical.

    “This is not an appropriate test of the hypothesis”
    That wasn’t my response to JQ’s criticism, but to the contention that wealth accumulation and market power accumulation has a feedback loop that can’t be broken. To see my response to JQ, you only need look at the top of the first page of comments.

    Huh? I didn’t conflate your response to JQ with your inappropriate tests of my hypothesis. You misrepresented JQ as I showed you .

    Let me put the quotes together for you:

    Jarrah cites me and wrties:

    “Show me a free market and I’ll show you its transitory or an illusion.”

    Undoubtedly. This is, in fact, my original point – criticising “free markets” (as JQ does in his post) doesn’t make any sense when we’re talking about highly regulated markets.

    To which I said and cited JQ:

    I believe you are misinterpreting JQ. JQ criticises:
    ”…the story that free markets would bring universal prosperity”

    Then in the next paragraph I gave an examples of how lack of stagnation in the share ranking of the top few corporations is an inappropriate test of my hypothesis that:

    Competition, leads to winners, which stifles competition. Power becomes consolidated. Consolidated power (anti-democratic: especially in media) undemocratically influences power. Disproportionate power mixed with the profit imperative makes free markets impossible in the long run.

    You agree that my example shows that media would be even more consolidated without regulation. But your claim that spectrum regulation are anti competitive are bizarre. How well do you suppose the spectrum could be used by anyone if everyone was broadcasting anywhere and on any spectrum? It would be dysfunctional, and regulation is necessary to enable the spectrum to be as useable as it is.

    Then perhaps you could explain how anti-siphoning regulation restricts diversity and competition? I think you’ll find it does the opposite and prevents monopolists like Fox increasing their monopoly. And anti siphoning laws do not restrict diversity. Of the 12 sports covered by the regulation, they are all delisted 12 weeks before the event starts, so that any rights to listed sporting events that are not acquired by free-to-air broadcasters are available to pay TV.

    I.e. it prevents Fox monopolising existing events, and does not restrict them creating new content. Thus it promotes diversity.

    “as truly free markets cannot exist (see above)”
    I’m sorry, but I don’t see it. Perhaps we have different definitions of ‘free’, which I find is often the case in these sorts of discussions.

    Double Huh?

    You’ve not made a single point that show free markets can exist. And you’ve agreed with several points that demonstrate free markets don’t exist. All you have done is attempt to change the definition of free market to included pseudo free markets that have consolidating anticompetitive characteristics.

    If you are happy to include pseudo-free markets, then what is your problem with government regulation? Markets with government regulation are also pseudo-free markets, just with more competition.

  21. OK – slow learners – pay attention ….

    Jarrah demanded;

    1 – show us where free markets had a crisis….

    2 – what prevents a free market from existing …..

    He received several replies, including that capitalist competition prevents free markets from existing. The main issue being that capitalist profits only exist if true (or perfect) ‘free competition’ does not exist.

    Whether the adjective is ‘true” or ‘perfect” does not matter. This has been explained to Jarrah, who has yet to digest this point.

    Jarrah was asked to provide evidence for his claim that Marx assumed that competition would compete capitalist profits away – we are still waiting. (Marx did not assume that competition would compete capitalist profits away).

    So now Jarrah waves his hands madly claiming:

    “free markets don’t need perfect competition to exist.”

    This is capitalist dogma. For the rest of humanity – any example of a so-called free market that had no perfect competition, would automatically be un-free.

    Capitalist so-called ‘free markets’ are not based on perfect competition. But then they are not truly free anyway.

    Capitalists (and fellow-traveling academics) use the word ‘free’ as propaganda. It is part of the smoke and mirrors necessary to camouflage the real source of capitalist profits (or ‘unearned increment’ in Marx’s terminology).

    In general, free markets must coexist with perfect competition. You cannot have one without the other.

    Except in the world of Jarrah.

  22. Good points Chris, Jarrah should now use accurate language rather than propaganda. Jarrah is arguing in favor of “anti-competative markets”, not “free markets”.

  23. Jarrah, I was just interpreting what was law in 1911 in respect to imperfect markets, price fixing, barriers to entry, and the effects of horizontal and vertical integration, etc. none of which you seem to raise but like to rave on. And speaking about markets, the news just gets better and better for NSW Labor as the latest job figures show the state unemployment rate to be at 4.6 per cent.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s