Monday Message Board

Another Monday Message Board. Post comments on any topic. As usual, civilised discussion and no coarse language. Lengthy side discussions to the sandpits, please.

158 thoughts on “Monday Message Board

  1. “Twenty people are confirmed dead and 50,000 are homeless after days of severe flooding in the Indonesian capital Jakarta.”- ABC News.

    “Located on the northwest coast of Java, Jakarta is the country’s economic, cultural and political centre, and with a population of 10,187,595 as of November 2011, it is the most populous city in Indonesia and in Southeast Asia, and is the thirteenth most populated city in the world.” – Wikipedia.

    “Jakarta lies in a low, flat basin, averaging 7 metres (23 ft) above sea level; 40% of Jakarta, particularly the northern areas, is below sea level… Moreover, Jakarta is sinking about 5 to 10 centimeters each year, even up to 20 centimeters in the northern coastal areas.” – Wikipedia.

    Combine the above problems with sea level rise due to global warming. At what point globally will damage from all global warming factors exceed World Gross Product as WGP itself begins to decline from resource limitation effects? It would interesting to model that one.

  2. Flood control is a problem in developing countries because they are poor especially if it rains a lot – monsoons.

    Rich countries build flood levees and dikes and so on. Voters treat loss of life in floods as a failure of governments to tame nature.

  3. I recently received a relic of my past in my email inbox this morning. Does anyone else know that the Sandy Hook shooting was a government psyop by the Illuminati/NWO agents to prepare the US people for disarmament (they used the standard operating procedure of bizarre references to Hitler, Stalin, Mao, Pol Pot etc with respect to gun control) so that said NWO can proceed with their campaign of concentration camps and genocide? It was very smugly pointed out that the armed conservative American people are the last hope of humanity, all the other countries having surrendered their weapons a long time ago and being analogous to chattel.

  4. @Will

    ROFL. White lunatics with guns! With any luck they will just shoot each other and leave the rest of us alone.

    Note: I am white so I can call white lunatics “white lunatics” without any hint of rascism.

  5. @Chris Warren

    I don’t think its formally modelled in Keynesian economics, but I do agree that its a non-sustainable trend. In my opinion, the problem arises from the the fact that Keynes, accepted Arrow-Debreu model which assumes technology change is exogenous.

    Although new growth models have now changed that assumption to endogenous, there was not much mention of “capital biased technology change” in the current mainstream economics profession (including New Keynesians before Krugman pointed out the issue). I guess its one of the examples where market incentive does not align to social benefits and that economists simply had too much faith in the market and capitalism to think that the benefit of technology change will be efficiently distributed to benefit the society.

  6. @Tom

    Yes precisely. Models with exogenous variables are one of my pet peeves.

    It is hard to object to modelling if the modelling is correct. This highlights the importance of the underlying understanding prior to the construction of a model.

    If you try and work out your understanding using a model – it is too late.

  7. @Chris Warren

    In my opinion, the empirical tendency can be explained by pointing out the ideologically driven political campaign to strip labour of rights; bargaining rights, wage rights and conditions rights. There is no purely economic inherent tendency for wages / profits to settle at any particular ratio under a democratic mixed economy capitalist system other than the obvious limits at the extremes. Unrestrained laissez faire capitalism with no labour rights will push wages down to the reproductive costs of labour.

    Wages cannot be pushed below the reproductive costs of labour. Reproductive costs of labour include costs of sustenance, shelter and reproduction, care and education of the next generation of workers. One suspects that capitalism has a “crumble point”. Push the profits’ share below a certain value and the capitalist system fails to self-sustain and crumbles away leaving a worker owned and managed system.

    Before wages are pushed right down to reproductive levels (when workers have historically enjoyed better rewards), there will be a crisis and conflict; possibly a revolution. Where attempts are made to seriously reduce the profit share of capitalists by whole percentiles (I mean by one or more chunks of 10% each), the oligarchic capitalists will get seriously nasty and employ violent reaction (using the suborned state and its police and military apparatus) to murder sufficient workers to cow or attempt to cow the rest.

    The flash points are socio-political though based ultimately on fundamental material considerations as the reproductive cost of labour and the break even point for the reproduction of capital. (At least I think so. I admit my notion of a “break even point for the reproduction of capital” is pretty vague.)

  8. @Ikonoclast what is he doing in the green party of the USA. is Wolff trying entryism because he is fully aware that running as a marxist would win no votes because his message fell with the Berlin wall.

    there are 70 in congress who belong to democratic socialist of american so socialists can get elected by running for office and winning democratic party primaries.

  9. @Jim Rose

    Maybe he is avoiding the sectarianism that blights history.

    If the Green want an ecological future they, unlike you, better look past the Western constructed Cold War.

  10. @Jim Rose

    How is Ikonoclast’s view “re-writing history”?

    Some Marxists at the time, thought otherwise, many did not.

    But then capitalists betrayed huge swathes of the world’s population to fund their fancy manor houses and estates dotted across the countryside of not-so-Great Britain.

    And you will find that statements such as marxists “betrayed their countries” have no more fidelity to reality than saying Christians abuse children.

  11. If marxists ‘betrayed their countries”, then neo liberals send them broke. The apostles of neo liberalism have conducted a 30-year global experiment, which resulted in total failure, according to George Monbiot. ” ..staring dumbfounded at the lessons unlearned in Britain, Europe and the US, it strikes me that the entire structure of neo-liberal thought is a fraud.”
    He quotes last year’s annual report by the UN Conference on Trade and Development: ”Relearning some old lessons about fairness and participation, is the only way to eventually overcome the crisis and pursue a path of sustainable economic development.”

  12. @Jim Rose

    Jim, if you are an Australian conservative, no doubt your prefer patriots like ‘Pig Iron’ Bob Menzies. Attorney-General and Minister for Industry Robert Menzies earned the nickname ‘pig-iron Bob’ with his stand against the waterside workers who refused to load scrap iron heading for Japan in 1938. No doubt, you also approve of his pre-war admiration for Nazi Germany.

    “In August 1938, as Attorney-General of Australia in the pro-Appeasement Lyons government, Menzies visited Germany, letting it be known that he was “prepared to give Hitler the benefit of the doubt, and draw my conclusions about Germany myself.”

    Menzies spent several weeks in Nazi Germany and was extremely impressed with the achievements of the “New Germany” (such as the abolition of trades unions, suppression of the right collective bargaining, outlawing of the right to strike); he was also “deeply impressed” by the “spirituality” of the German people, their unselfish attitude, their less materialist outlook on life, and their preparation to make sacrifices on behalf of the Nation. On returning to Australia the following month Menzies unashamedly expressed favourable views of Nazism and the Nazi dictatorship, based as he said on his own first hand experience. In October 1938, after five years of escalating violence against the Jews and others, and scarcely one month before the infamous Nazi atrocity known as Kristallnacht, he made a speech in Sydney where he drew a contrast between the quality of the leadership of Lyons (then Australian PM) and Hitler (then German Chancellor); Menzies’ critique strongly favoured Hitler.” – Wikipedia.

    The point is that unless one is very careful to measure political movements by the yardsticks of real democracy and real individual rights, it is very easy to get caught up in misled enthusiasm for dangerous movements. The conservative right wing were and are just as easily misled as leftist enthusiasts have been. The US today teeters on the brink of fascism of the corporate capitalist kind but my guess is that you haven’t noticed that yet. Indeed, in many ways it is already over the brink.

  13. @Ootz

    I agree, the empirical evidence is in after the “30 year” experiment. Actually, I think the experiment has been running closer to 40 years.

    “The apostles (of Hayek and Friedman) have conducted a 30-year global experiment, and the results are in. Total failure.” – Monbiot.

    This goes further than Monbiot is willing to take it. The failure is not just the failure of Hayek-Friedmanite style capitalism. The failure is of capitalism itself. Capitalism is a failure. The rule of the rich elite for themselves with no regard for other humans or the environment is antithetical to human rights, antithetical to democracy and antithetical to environmental sustainability.

    Those who can’t see that capitalism is about to fail catastrophically are blind adherants who cannot read the clear empirical signs. The clearest sign is the failure of capitalism to take scientific advice in 1972 with regard to the limits to growth. The capitalist system chose (that is the rich oligarchs and their suborned governments chose) to ignore the irrefutable case for limits to growth and embark on a final orgy of production of unneccessary consumerist junk, extravagent luxury for the wealthy and wasteful consumption of resources. These resources, if properly utilised and even left partly unutilised as the case required (e.g. fossil fuels), could underwritten a transition to a sustainable, material steady state economy. That opporunity is now lost. It’s a missed opportunity of immense and tragic proportions.

  14. @Ikonoclast

    Speaking of Menzies (Attorney General in 1934), Nazis and fascism – remember that he tried to stop anti-fascist activist Egon Kisch from addressing crowds in Australia.

    This is from the debate in Parliament 14 November 1934:

    “Mr BRENNAN (Batman) …The fact was that after Herr Kisch had been in England for some time and when he was in Paris, a kind of mock trial or inquiry was proceeding in London into the burning of the Reichstag. Evidence was taken before a self-constituted tribunal designed to show mainly that the accused were denied that justice that they were entitled to in that connexion. When Herr Kisch left France for England to give evidence on that matter he was refused admission by the action of the Fascists in Germany acting in co-operation with the Fascists in Britain who are now acting, apparently, in co-operation with the Fascists in Australia. … The Government, and especially the Attorney-General, have bungled the matter inexcusably, the Attorney-General sacrificing accuracy and a sense of responsibility to his insatiable hunger for notoriety and the applause of his press claqueurs.”

  15. Of course, Menzies was keen to stop people like that coming to Australia in boats.

    His reply:

    “Mr MENZIES (Kooyong – Attorney-General) [4.23] – The matter raised by the honourable member for Batman (Mr. Brennan) is, I agree, one of importance, and I rather welcome the opportunity to explain to honourable members and through them to the public exactly where the Government stands in connexion with it. The action in relation to Herr Kisch was taken pursuant to certain provisions of the Immigration Act which have for a long time enjoyed the sanction of this Parliament. Parliament has declared its policy, and reinforced – if I may use the expression – the right of every civilized country to control the terms upon which foreigners shall enter it. We have, as an independent country, a perfect right to indicate whether an alien shall or shall not be admitted within these shores. …”

    I believe that is the origin of the catchcry: “We shall decide who comes to this country and the manner in which they come.”

  16. @Ikonoclast
    “The failure is not just the failure of Hayek-Friedmanite style capitalism.”

    I’ve never understood this Big Switch thinking, the idea that in the early ’70s the entire world just threw a switch to change from Golden Age to neoliberalism. Such an assertion ignores historical reality and defies common sense.

    Furthermore, while there have been innumerable failures in economic management, some even attributable to Hayekian or Friedmanite ideology, to say that ‘style’ of capitalism (whatever that actually means) is a failure sounds like a comforting mantra for an anti-capitalist rather than a rational assessment.

    “Capitalism is a failure. The rule of the rich elite for themselves with no regard for other humans or the environment is antithetical to human rights, antithetical to democracy and antithetical to environmental sustainability.”

    Your second sentence isn’t an objectively functional description of capitalism because it could equally apply to feudalism, communism, and basically every socio-economic system except some forms of anarchism.

    “scientific advice in 1972 with regard to the limits to growth”

    Advice which turned out to be incorrect.

    “a sustainable, material steady state economy”

    I have done more than a little reading about how a steady-state economy would work, and I still don’t understand how it could without authoritarianism.

  17. Jarrah, according to Monbiot “Last year, the world’s 100 richest people became $241 billion richer. They are now worth $1.9 trillion.” Since you have done more than a little reading on steady-state economy, could you explain to me how sustainable this trend is in the long run? If you truly believe in that there are no limits at all, then you are on the economic equivalent of escape velocity and on the way to outer space. In regards to “I still don’t understand how it could without authoritarianism.”, you may want to reread Monbiot’s last couple of sentences on the failed neo liberal experiment and the motive behind this obscene disproportionate wealth distribution.

  18. @Jarrah

    A point by point refutation of your arguments follows.

    1. There was a big change in the modus operandi of capitalism in the 1970s. Previously, we had the Keynesian “social democratic” accommodation which accorded significant rights to labour, implemented or extended the welfare state, expressly fostered a public sphere and a private sphere in the economy (a mixed economy) and followed a demand side theory, i.e. public spending could increase aggregate demand to overcome recessions and depressions. With the rise of monetarism, neoclassical economics and supply side theory, the previous “Keynesian consensus” was tossed out.

    At a deeper level, capitalism had reached a crisis of growth and capital accumulation. Continued growth of at least 3% is required by the capitalist system. New areas of investment are needed to re-invest accumulated capital and get the return capitalists require. To overcome the stagnation of the 70s, wages were repressed (never to rise again in real terms in the US), state assets were privatised, the welfare state was progressively retrenched, the world economy was globalized, production was off-shored from the mature capitalist countries to undeveloped or under-developed countries with low age structures, debt was pushed on the consumer class (to replace the lost wage growth) and so on. The costs of enviornmental damage and social damage were externalised off the capitalist balance sheets.

    All these processes too have their end point. Wages cannot go below the reproductive costs of labour. Welfare payments cannot be reduced to less than zero. Debt cannot be taken on for ever. It must be paid off or defaulted upon. Once all state assests are sold and plundered there are no more to plunder. There are not endless undeveloped countries to expand into. The environment cannot be endlessly damaged before it reaches a point where it will not sustain us.

    How have you missed all this history? Only those with no understanding of history and political economy could fail to see an inflection point in the 1970s.

    2. To say neoclassical economics is a failure and that capitalism itself will prove a failure is not comforting. Indeed, it is profoundly frightening if you think the consquences through. Those who are trying to comfort themselves through denial are those who think everything is rosy in the capitalist garden. In terms of the failure of neoclassical-monetarist capitalism consider the following. Does no real wage growth since 1979 in the US sound like success to you? Does 8% unemployment in the US sound like success to you? Does the Global Financial Crisis and the failure of the US “jobless recovery” sound like success to you? Does 25% unemployment in places like Spain and Greece sound ilke success to you? Does the Chinese pollution crisis look like success to you? Does 4 degrees C or more of global warming already built into the climate system sound like success to you?

    3. The scientific advice in 1972 with regard to the limits to growth was and is correct. If you are saying the advice about limits to growth is incorrect then you are saying the earth is infinite in size and thus has no limits to growth. That is the logical corollary of your statement. I wonder, do you believe the earth is infinite in size?

    It is commonly believed because of misrepresentation by capitalist apologists and cornucopians (believers in endless growth) that Limits to Growth predicted collapse by 2000. This is not correct. It predicted that if we did not change our trajectory and methods by 2000 then a collapse would occur by about 2050 plus or minus about 10 years. Subsequent studies show that this projection is still on target to become reality.

    3. A steady state (or even declining economy) will be forced on us by the laws of physics whether we will it or not and regardless of what kind of political economic system we adopt. The specious philosophy of voluntarism (in the sense that we can voluntarily create any kind of future) is refuted by the empirically discovered natural laws (the laws of physics of the known cosomos).

    Voluntarism is a school of thought that regards the will as superior to the intellect and emotion. By extension it regards human will, ingenuity and action as superior to “nature” and thus unbound and unbounded by the natural laws (laws of physics and chemistry of the known cosmos). Voluntarism of this school (like modern cornucopianism of the Julian Simon variety) is complete, specious nonsense.

  19. In the above, I meant “low wage structures” but actually “low age structures” is true too and not entirely irrelevant to the point.

  20. @Ootz
    “Since you have done more than a little reading on steady-state economy, could you explain to me how sustainable this trend is in the long run?”

    Depends on your definition of ‘long run’, and in what sense of ‘sustainable’ – economic, political, physical, etc.

    “If you truly believe in that there are no limits at all”

    Since I haven’t said any such thing, nor even hinted that I might hold such a belief, this is a strawman argument. Of course there are limits.

  21. @Ikonoclast
    “Previously, we had the Keynesian “social democratic” accommodation…With the rise of monetarism, neoclassical economics and supply side theory, the previous “Keynesian consensus” was tossed out.”

    This is what I mean by Big Switch thinking ignoring the actual complexities of the evolution of political economy since WWII. Your simplistic take is immediately refuted by the fact we have just been through a massive exercise in applied Keynesianism (the economic stimuli across the globe), and of course never really gave it up, as even a casual look at economic policies since the ’70s will show.

    “which accorded significant rights to labour, implemented or extended the welfare state”

    Again the over-simplification. Since the supposed abandonment of this feature, in some parts of the world labour rights have decreased, but in others they have increased. And the welfare state has never stopped expanding in size and scope in most advanced economies, despite repeated attempts by the right wing to cut it here and there.

    There’s also the unspoken assumption that prior to the Big Switch everything was just fine and dandy. On the contrary, there had been a sustainability crisis in Keynesianism developing during the 1960s. The rise of neoliberalism wasn’t just a front in the culture war, but a response to actual problems.

    “Continued growth of at least 3% is required by the capitalist system.”

    An assertion without foundation in theory or practice.

    “The costs of enviornmental damage and social damage were externalised off the capitalist balance sheets.”

    They were never on them in the first place. Luckily, in general people start caring about the environment once they’re rich enough to not worry about the next meal or next season, something that only became possible thanks to capitalism. The strongest correlation for the good health of a particular environment (with people living in it) is with wealth.

    “Only those with no understanding of history and political economy could fail to see an inflection point in the 1970s.”

    An inflection point, sure. A Big Switch where suddenly capitalism became unsustainable? No.

    “Does no real wage growth since 1979 in the US sound like success to you?”

    No, no, and no. But why do you think the Big Switch is to blame? Have there been no other changes in the global economy, no demographic changes, no technological changes, no sociological changes, that might have been contributing factors?

    “Does 8% unemployment in the US sound like success to you? Does the Global Financial Crisis and the failure of the US “jobless recovery” sound like success to you?”

    Why concentrate on the US? Cherry-picking much? What about right here, where wage growth since 1978 is 25% and unemployment is 5.4%?

    “Does 25% unemployment in places like Spain and Greece sound ilke success to you?”

    Yeah, because their economic collapses are all because of ‘capitalism’, and not because of anything else. These are spectacularly bad examples to rest your argument on.

    “Does the Chinese pollution crisis look like success to you?”

    Since that’s a function of industrialisation and weak or non-existent property rights – the former being utterly independent of capitalism and the latter being a prevention of capitalism – you have unwittingly bolstered my case.

    “If you are saying the advice about limits to growth is incorrect then you are saying the earth is infinite in size and thus has no limits to growth.”

    A ludicrous strawman that doesn’t pass the laugh test. I say specific advice was incorrect, therefore I think resources are infinite? Please don’t troll me.

    “By extension it regards human will, ingenuity and action as superior to “nature” and thus unbound and unbounded by the natural laws (laws of physics and chemistry of the known cosmos).”

    Since human ingenuity builds on itself, manifested as technological change, many of the limits we worry about today will be irrelevant in the future. Features of capitalism (like price signals leading to greater efficiency or substitution) mean that our use of resources is highly adaptive.

    Personally, I think capitalism will itself become irrelevant thanks to technological change. Capitalism is the emergent behaviour when you have people living with scarcity and private property. When nanotechnology (and eventually picotechnology) reaches the point of being able to transcend such things, the only limit will be the heat death of the universe.

  22. @Jarrah

    “This is what I mean by Big Switch thinking ignoring the actual complexities of the evolution of political economy since WWII. Your simplistic take is immediately refuted by the fact we have just been through a massive exercise in applied Keynesianism (the economic stimuli across the globe), and of course never really gave it up, as even a casual look at economic policies since the ’70s will show.”

    The need for stimulus recommended by the IMF (2% of GDP) in the immediate aftermath of the GFC fell far short of what was needed. Some countries implemented larger stimulus and some implemented smaller stimulus to the recommendation which is fine because the damage of the GFC to the economy can vary. The detail to look for is how the stimulus is designed, as there are difference in the multiplier and short term impact of consumption spending and investment spending as well as various sub-categories in the two type of spending (e.g. temporary tax cut, spending on public transport, health and education etc). Prominent Keynesian economists in the US, such as Krugman, Christina Romer and Galbraith calculated a number around 2 trillion was needed but only around 800 billion was pass and later reduced to less than 700 billion. Other than that, infrastructure spending in the package was far too small, 105 billion, when the infrastructure spending in US have a far larger multiplier (quite a number of estimates close to 3, including DSGE models) due to decades of lag behind Japan, South Korea and China. Krugman commented straight after the negotiation of the stimulus that it was not enough to kick start a recovery hence the current state of the US at least was predicted by Keynesians.

    With regards to post 70s budget deficits, situations varies, some due to actual discretionary spending but most are due to automatic stabilisers. The budget stance for any period will have to be calculated eliminating cyclical factors rather than just looking at surplus or deficit.

    The 3%, or to be more accurate 3.5% real GDP growth is a figure for Australia. This figure means that when the annual increase in labour productivity, labour force and technology is taken out, the unemployment rate will remain unchanged.

    “non-existent property rights”

    This is false. It also does not relate to pollution.

  23. Jarrah, I’ll let you define an appropriate time value for the sustainability of disproportionate accumulation of wealth. You’ll find history is littered with bloody test cases, starting with Herodotus account of Croesus, the first to mint coins, only to pay mercenaries with it. Further, I would have thought that economic, political (social?) and physical (ecological?) sustainability are all linked. As to my strawman argument, at least it flushed out your “there are limits”. So, since we were ill-advised in 1972 by science, what constitutes your limits to growth? Personally, I am with Lucius Annaeus Seneca “Non avaritia, non crudelitas modum novit”.

  24. @Jarrah

    Capitalism is the emergent behaviour when you have people living with scarcity and private property.

    Wrong – other economic systems can exist on this basis.

    To get capitalism you need to show how those with private property use this to accumulate income from other members of society.

  25. Is Gillard TRYING to lose the next election?

    It’s really sad to see all the ALP die-hards justifying her dictatorial announcement that a ‘captain’s pick’ from outside the ALP will replace a NT senator who, presumably, will simply be sacked.

    At least have the decency to get the proposed senator to join the party first and then quietly do a deal to get someone to ‘decide’ they want to spend more time with the family.

    It certainly looks like a very public humiliation of Crossin for speaking up about the Howardesque ALP treatment of refugees (and probably secondarily for being a Rudd supporter).

  26. @Jarrah

    “Continued growth of at least 3% is required by the capitalist system.”

    An assertion without foundation in theory or practice.

    This is the most important point to understand capitalism and its succes or failure; 3% continued growth.

    3% is the lowest inflation that is not too dangerously close to deleveraging which starts deflation which is capitalist economy killer. Since wealthy hate inflation that destroys accumulated wealth they want it the lowest posssible. And growth % is around inflation %.

    Inflation of 2% only can start deleveraging process. Just take a look at the world today and you can see that majority of countries in recession have inflation around 1.5% and are in a deleveraging process. Australia did succed in preventing the deleveraging but barely and is on the edge of it. Once it starts your economy will crush and burn without more stimulus to prevent it from starting.

    I wrote many times about dangers of deflation and benfits of inflation on an economy. And how when debt growth which enables economic growth is suspended by inability of income growth to sustain debt growth and that starts deleveraging which colapses the economy. You can read it in Trifecta comments.

    The Big Switch did not happen all at once as you stick it to Ikonoclast, but it did happen when income growth is replaced with debt growth as economic generator in 1972. The Big Switch process did happen over long period of time, forces that worked on it did start at the end of the WWII and over time they sold the ideology to the public. There was a failure in Keynesian economy but it was external, not internal.

    The failure of Keynesian theory came from Military Industrial complex fighting wars in Vietnam instead of spending those resources on populations benefit. In times of economic expansion they spent more because of wars even tough that was contrarian to Keyness. Meddling in Middle East provoked a punishment from oil exporters and they reduced production in order to stop Israel and its supporter USA from further wars.
    They did succed somewhat, just as Osama Bin Laden did follow that same logic and pushed USA into wasting its resources into neverending wars.
    This is all external influence on Keynesian policy failures, or if you want, succes of forces that wanted it to fail.

  27. @Chris Warren
    “Wrong – other economic systems can exist on this basis.”

    Not without authoritarianism. Private property and free exchange IS capitalism, as I understand it. I realise people have different definitions, but I find those unconvincing or conflationary. Happy to have that conversation if you want.

    “To get capitalism you need to show how those with private property use this to accumulate income from other members of society.”

    Why do you persist with the Marxian fallacy? It’s self-evidently wrong. They accumulate income in conjuction with other members of society. There are all sorts of ways someone with assets or capital or money can extract more than their fare share, but those ways inevitably involve the manipulation of the confluence of government and enterprise.

  28. @Tom
    Your extended description of the supposed inadequacy of the US stimulus (seriously, what is the obsession in this thread with just one country?) is a quibble at best. The fact remains that the underlying rationale and the method of execution of the stimuli around the world was firmly grounded in Keynesianism, thus utterly refuting Ikonoclast’s repeated assertion that there was a wholesale Big Switch from golden age hunky-doryness to failing failure. And that’s without referencing the repeated Keynesian solutions-that-weren’t since the supposed Big Switch, in places like Japan.

    “This is false. It also does not relate to pollution.”

    Well done on ignoring half my point, ie the ‘weak OR non-existent property rights’. FYI, that is definitely true – China is notorious for what we would call ’eminent domain abuse’, ie the subordination of local interests to a centrally determined public good. And it most certainly does relate to pollution, as China has devastated many environmental assets because it could ignore the effects on the people actually living in an affected area, due to those people lacking the property rights to resist the development, extractive industry, or polluting industry that impacts negatively on the environment. If the central committee decides a chemical plant should be built on the outskirts of Chongqing, then nothing can stop it because the farmers working the land have no proper recourse, no strong legal right to hold onto their property if they so wish.

  29. Last week, the Anglia Ruskin University in Cambridge launched a lengthy research report “Resource constraints: sharing a finite world – Implications of Limits to Growth for the Actuarial Profession.The evidence and scenarios for the future” It assessed the resource constraints which are likely to affect the world economy and concluded that in a BAU scenario,“ …. the assets of pension schemes will effectively be wiped out and pensions will be reduced to negligible levels.”

    Dr Aled Jones, the inaugural director of the Global Sustainability Institute at Anglia Ruskin University and lead author writes in the Guardian “The multiple overlapping resource constraints, coupled with climate change, may produce a set of connected risks that are more difficult to respond to. This systemic risk in the global economy would not be identified by examining each resource on its own. … Will the increasing cost of resources, the impact of climate change and the scale of biodiversity loss, result in investments into new methods of doing things or merely increase our investments into business as usual? Will any individual, organisation or sector take responsibility for a transition to a new economic paradigm or a new technological revolution? Will society or physical events force this responsibility in time (or too late)?”

  30. @Jarrah

    “Wrong – other economic systems can exist on this basis.”

    Not without authoritarianism. Private property and free exchange IS capitalism,

    That is so funy. Private property is reduced as time goes by. You know that in slavery people could be included in private property. In feudalism, wast trakts of land were king’s private property at disposal to give to other nobility and transfer them the property.
    By your logic slavery and feudalism are capitalism since they had private property.

    Free exchange is not so free as it used to be. Today states have much more influence by tax and spend policy on free exchange then ever before in history. And thats how it is for the last century.

    What you compering capitalism to is what define your idea of capitalism. You compare capitalism to socialism and thats how you got your definition. You do not take historical perspective only comparing what capitalism is turning into and you as a conservative want to conserve that system.

  31. @Megan I can find no information on Egon Kisch’s view of the nazi-soviet non-agression pact of 1939. he was a communist.

    Did either the communist parties in the West or marxists in general repudiatate the USSR as a facist collaborator in 1939 after this pact with Hitler?

  32. @Jim Rose
    The whole communist and marxist world was totaly under STallin’s autocrathic control. Those that weren’t like Barcelona Commune he destroyed, or Tito’s Yugoslavia he put under embargo just as USA put Cuba under embargo. Remember Trotsky?

    WHy do you ask about communist parties repudiating Hitler-STallin packt? Did capitalist parties repudiate it at the time?

  33. @Jarrah

    I am not concerned about labels. However I do expect some rigor. So there are 3 forms that need specification:

    I) A society with private property and free markets. This, by itself, will not necessarily end up in a GFC.

    II) A society with private property and free markets, plus having one class accumulating wealth at the expense of others is not this. This is feudal and has no inherent tendency for economic crisis.

    III) A society (as above) but where the accumulation is achieved, not by feudal relations, but by the power of capital. This is a different form of economy and one that will go into crisis if the level of profit does not decline to zero.

    So, if you call the first one “capitalism” what label do you want for the third?

  34. @Jim Rose
    Wait, what? Are there really 70 members of the Democratic Socialists of America in Congress? Who are they, and where are you getting this information from?

  35. @Jordan

    Stalin died in 1953.

    The Associated Labour Act was passed 1976, after a new Constitution in 1974.

    Tito died in 1980.

    Yugoslavia was not under Stalin’s autocratic control.

    Socialist Cuba did not exist until long after Stalins death.

  36. @Jarrah

    I detailed the US case because I have more knowledge about the issue. I have not looked in detail with regards to the economic structure, the detail of the stimulus and other factors which affects stimulus measures implemented in EU or other countries hence I avoid commenting too much on that matter. 2% GDP stimulus definitely fell far short of what was needed when there was such a large drop in output, however you criticism on my comment’s focus the US was a valid point.

    If you believe that the world is still practicing Keynesianism post 70s that is fine, people are entitled to their beliefs.

    With regards to China, I’m sorry, but you know absolutely nothing. I guess it depends what your definition of property right is. In China, you are allowed to own assets (house, car etc); private companies are allowed their own assets; people are allowed to own copyrights or patents (my father has a patent himself for research in Chinese Medicine); people are allowed to buy shares in listed companies and invest in land and properties, and other assets such as paintings etc. If these meant people do not have property rights, I’ll need you to define what you mean by property rights first.

  37. @Tom

    “In my opinion, the problem arises from the the fact that Keynes, accepted Arrow-Debreu model which assumes technology change is exogenous.”

    Your opinion is an anachronism!

    The Arrow-Debreu-McKenzie model was developed after Keynes’ wrote – about 20 years later.

  38. @Tom

    One of the scariest things about the TPPA is its secrecy. Our mainstream media (rare exception, above) has been negligent/complicit in avoiding publicity of it and exploring its draconian potential.

    Today’s ‘National Security’ announcement specifically raised the ‘Cybercrime’ strawboogeyman.

  39. @Megan #20
    Megan, I was in the South Aust Immigration Museum recently where they have a nice display on White Aust policy and the Dictation Test: truly an evil connivance to selectively discriminate against the immigrant. Passing a Dictation Test “in any European language” was required, apparently at the discretion of the govt people. Kisch spoke a few languages, so I think they gave him a test in Gaelic, which he failed but later was able to have it acknowledged on appeal to not be a European language. From memory of the display the test operated from 1909 to sometime in the 1950s, and not one person passed it over all that time! Was it Primo Levi who talked about the “banality of evil.” Sounds like Stasiland.

    Do Australian children get taught about these things in school?

  40. According to Wikipedia:

    “Capitalism is an economic system that is based on private ownership of capital goods and the means of production, and the creation of goods and services for profit. Elements central to capitalism include capital accumulation, competitive markets, and a price system.”

    We ought to add that the capitalists (the owners of the means of production) extract surplus value from their workers who are wage labourers with only their labour to sell. To the capitalist class we ought to add the “rentier”. Indeed many capitalists are rentier-capitalists.

    The “rentier” receives income derived from economic rents, which can include income from real estate, patents and copyrights.

    The defining characterstic of the rentier-capitalist is that he/she owns property and by “right” of this “ownership” obtains a very large income generally without work or effort. Any individual work or effort that a rentier-capitalist undertakes as a sole person can be no more work than one person can do, thus the work that a capitalist-rentier might undertake can be no more than that of a manager, book-keeper or overseer. Any income above this amount must come from the surplus value of work performed by other workers. Said “surplus value” is not paid to the workers but appropriated by the capitalist-rentier. This appropriation of part of the workers’ produced value is theft. The supposed legitimisation by the system of bourgeois ownership is not morally valid.

  41. To be clear in the above comment, the Keynesians refered to above are the neo-classical synthesis (A.K.A. Neo-Keynesians).

  42. @Jordan
    “By your logic slavery and feudalism are capitalism since they had private property”

    Since you are ignoring the second criteria, it’s no wonder you’ve arrived at such a ridiculous conclusion.

  43. @Tom
    “If you believe that the world is still practicing Keynesianism post 70s that is fine, people are entitled to their beliefs.”

    I presume by this condescending dismissal that you don’t want to actually discuss whether my ‘belief’ has any basis. Is that because you suspect I might be correct?

    “If these meant people do not have property rights”

    Why do so many people insist on erecting strawmen? I didn’t say “do not have property rights”, so basing your argument on a false accusation is a waste of your time and mine.

    Perhaps you’d like to do some research before lodging your foot so firmly in your mouth.

  44. @Ikonoclast
    “We ought to add that the capitalists (the owners of the means of production) extract surplus value from their workers who are wage labourers with only their labour to sell.”

    So what? Workers extract surplus value from their collaboration with the capitalist too. This is why both groups (so far as they can be distinguished in reality) join up to produce.

    “The “rentier” receives income derived from economic rents, which can include income from real estate, patents and copyrights.”

    Not any old income from real estate, only the extra derived from artificial scarcity. Also note that the second two are government-provided monopolies, and thus antithetical to capitalism.

  45. @Jarrah
    Maybe you could read second sentence to see that i did not ignore it.

    Real differences in capitalism vs feudalism is in what is produced. Rest of the descriptions is equaly applied. Feudalism does not have slavery, which is only difference from it. Feudalism is based on agrarian production, just as slavery.

    Feudalism has a description of a “rentier” from capitalism and capitalism is about that relationship translated onto capital goods and means of production that produces other then food. Not much of a difference in relations just difference in products.

    Democracy changed that relationship, but not as much as it did change banking system. Before democracy, debt would be forgiven after king’s death. Whatever debt king (state) accumulated, it would be forgiven, hence there were many royal assasinations for that purpose. For me, it was hard to swallow such widespread fratricide in history of assasinations untill i connected it with higher purpose of forgiving the debt of state as a new begining for the new king.

    If a king lived long time it succeded only by looting other countries to pay off debt. Force of a compund interest is a killer of an economy. Even Moses knew that and ordered a Jubilee every 7 years. Deutoronomy:15. Romans were first in history of banking that did not have Jubilee and erased it from Izrael, when Jesus advocated return of a Jubilee, Romans killed him.

    I am connecting history of economic tought by Michael Hudson, Richard Wolf and Robert Lietar and pulling out other relations in history known to me.

    Keynes offered another solution to debt besides looting other countries and since then there was no wars within developed world. Except in Yugoslavia.

  46. @Jordan
    “Maybe you could read second sentence to see that i did not ignore it.”

    In your disparagement of my definition, where you conclude that feudalism and slavery fit, you ignored it.

    “Real differences in capitalism vs feudalism is in what is produced.”

    The real difference was cultural. See Appleby’s ‘The Relentles Revolution’.

  47. @Jarrah
    No i did not ignore it, i said that free market is less free today then ever in history.

    The real difference was cultural. See Appleby’s ‘The Relentles Revolution’.

    So, are you agreeing that culture of getting sick of death and suffering is leading the change in relations of production and consumption?
    That was my point just expressed in other words.

    What is produced is about economic observation, what changed it in human is psychological observation. Just a different point of observation in POV, not difference in understanding.

  48. @Jarrah

    You are struggling because you are not using concepts in a rigorous way. Citing other authors who also may have done so (if so – Appleby) does not help.

    Just cherry-picking a few characteristics that apply generally, and assume they apply specifically to capitalism – is futile. But then to pretend that they define capitalism is fallacious.

  49. A culture is a visible result of social coordination. The social coordination is changing violence and suffering in political and economic history led by idea in Bible in form of a better world-heaven.
    That social coordination is enlarged and strenghten by speed of communication. As social coordination becomes stronger it enlarges state sizes and relations in production and distribution. Speed of communication is hugely advanced by internet and planes hence you can expect social coordination to enlarge and consider the whole world as a single social organization prety soon.

    Such huge social coordination changed differences in developed areas across the world. Last few decades were marked with lessening the difference by developing China, S. America, India and Africa somewhat. That is a mark of social coordination on the level of the whole world. It was led by right wing political spectrum which is on the first look opposed to such thing. But that is a product of it. It looks like social coordination in aristocrats is working toward better world no matter what is a policy prefference. Something of an aristocratic benevolence/ philanthropy that changes the world for the better led by social cooperation and culture of discust for death and suffeering.

    Social coordination suported by speed of communication will change the world in the imediate future much more then we can imagine, led by discust toward human suffering and death. It is going toward idea of heaven on earth given in Bible.

    Social coordination can organize production and distribution as it wants, limited only by a notion of what is possible. Every change always have loosers who will fight the change and such conservativism changes it for the better toward more durable solutions.

    J.M. Keyness expressed idea of new financial system that enables change for the better.
    MMT is a slightly changed Keyness theory of a system that enables even better world if allowed to creep in into conservative population who fear loosing what they have.
    As i wrote before, you can understand MMT only if you are ready to forget what you can loose, but think of what everyone can get and it is based on strict separation of real values vs nominal values.

    Neoclassical economic understanding assumes that nominal price is representative of real value of products and services and never looks back. It assumes that nominal value is real value. MMT keeps separated nominal from real value to reach to the process by which enables distribution with the least suffering to anybody.
    Neoclassical theory is protected by fear of loosing an advantage over others.

  50. @Jarrah
    “Luckily, in general people start caring about the environment once they’re rich enough to not worry about the next meal or next season, something that only became possible thanks to capitalism. ”

    Oh come on, do you really believe this? Got a reference?

    The old hunter-gatherers were people who cared about the environment?

    And you make far too much of Ikon’s ‘simplification’ of issues. In a discussion some things have to be simplified, you know that.

  51. @Julie Thomas
    “Oh come on, do you really believe this? Got a reference?”

    Yes and yes.

    “The old hunter-gatherers were people who cared about the environment?”

    No, in general they did not. Their small ecological footprint was due to low population.

    “In a discussion some things have to be simplified, you know that.”

    Absolutely. Every single one of my comments, for example, has been massively simplified. There is a difference, however, between simplification and incorrect blanket statements.

  52. @Jordan
    “No i did not ignore it”

    Yes, you did:

    By your logic slavery and feudalism are capitalism since they had private property.

    ..which totally ignores the fact I stated private property AND FREE EXCHANGE was a succinct definition of capitalism.

    Please stop trolling. I admit I’ve encouraged you by replying, so unless you deal with what I actually write, I won’t do so again.

  53. Note to Ikonoclast and Julie Thomas – my replies to you are in moderation due to having links in them.

  54. @Jarrah
    You ignored what Chris Warren wrote to you.
    You assumed that free market did not exist in slavery and feudalism and i am saying that it did exist with same processes and laws troughout history so you can not claim that free market exists only in capitalism and hence define it.

    Wasn’t market at the time so free that included sales of people?

  55. Here is a transcript of speech of representative Jim McDermont to hearing on a debt ceiling by GOP.

    ““The whole world is watching this hearing. It is the first hearing on this issue. The whole point of a society is to create and run a government to make order for people. People don’t like chaos and this hearing is about how to create chaos to get what you can’t get politically with votes.”

    This represent the difference in worldview between conservatives and liberals.
    Conservative base their worldview as individual in the world fighting for its own benefit, on the other hand, liberals base their worldview as group of individuals fighting for benefit of all, toghether and in coordination.
    Due to such worldview; for liberals a government is a group that works for benefit of most in the whole group that decides on how trough social coordination, while conservatives see government as an obstacle to advancement of particular individuals.

  56. @Jarrah on ‘still practicing Keynesianism post 70s’, Greg Mankiw in a 2006 JEP article made great use of Laurence Meyer’s recent memoir A Term at the Fed to show who was really influencing modern macroeconomic policy making.

    The book by Meyer left the reader with one clear impression: Recent developments in business cycle theory, promulgated by both new classicals and new Keynesians, have had close to zero impact on practical policymaking in the USA.

    Meyer’s analysis of economic fluctuations and monetary policy is intelligent and nuanced, but it shows no traces of modern macroeconomic theory.

    Meyer’s reasoning would seem familiar to someone schooled in the neoclassical-Keynesian synthesis that prevailed around 1970 and had ignored the scholarly literature ever since.

  57. There was no Keynesianism in the 70s.

    I have just a piece on that after the laughable piece by Arnold Kling which Sinclair Davidson linked.

    You only use fiscal policy when monetary policy doesn’t work i.e a liquidity trap. That happened during the GFC but never at any other time in the USA post war!

    David Glasner made the incisive comment once the General Theory was more about monetary economics.

    Most people have never read the book. It wasn’t his best book and in some places hard to read but it is essential reading.

  58. JR you are right in real terms since deficit spending has the same effect as fiscal policy, and
    nottrampis you are right in literal sense only.

    Problem is that fiscal spending by deficit spending have a danger of comming under attacks by deficit hawks and ask to reduce debt that such spending has accumulated.

    Since deficit and debt are not a problem for sovereign state in time of fiat money and it can increase indefinetely unless politicians say that it can’t. It is not a problem operationaly only politicaly.

  59. @Jarrah

    That link is really inadequate, but the reasoning on which I base this assessment will not be acceptable to you, or understood by you, until you address the problem that Chris Warren has raised about your – very prolific and energetic – efforts to defend what is an indefensible position.

    And again, you take such a simplistic view of life. The question of whether hunter-gatherers ‘cared’ for the environment can be ‘won’ by you if you rely on old-fashioned outdated ideas of what life – psychological as well as physical – was like for the hunter-gatherers. There is lots of new stuff from Anthropology and evopsych about how dodgy these old assumptions were. Pfft, so much rubbish written about human nature based on the notion that the white man was the peak of human evolution.

    So, you are necessarily simplifying and I don’t think you have been criticised for doing that?

    But the simple message I get from your arguments, is that capitalism is a good thing, the best thing humans have come up with and despite all the problems, we should continue on with this same ideology; that growth is an unquestioned good and any other possibility a bad thing.

    The thing is Jarrah, the thing that you don’t really get, is that there are a lot of people like me, who have ‘rational’ – as rational as yours anyway – and evidence based reasons for arriving at the conclusion that the last 30 years have not been ‘good’ and on balance, looking back, all the choice and freedom that people like you insist is ‘progress’ and essential, seems to have only made some people, perhaps people who have your particular personality type, happy.

    Let’s not argue about the happiness research; as an ex-psychologist, I am not impressed with self-report data and real measures of happiness, such as suicide rates and health – both physical and psychological, are showing that people are not happy with all the choice and stuff they have been suckered into thinking are good things.

    And you support this obscene imbalance of power where marketers can lie and mislead and use any psychological coercion they like to convince people that they need to buy stupid ugly stuff. Of course there is good stuff that came about through capitalism; the question is was it worth all the bad things?

  60. @Julie Thomas

    It is very clear that capitalism is at a final crisis point. Naturally, a lot who have been beating the capitalist drum for a very long time are in complete denial about the looming realities.

    1. Capitalism demands endless growth. The biosphere is a finite system. Ergo capitalism is in conflict with the laws of physics and the laws of ecology.

    2. Climate change analysis shows at least 4 degrees C of global warming are already built in to the natural systems. With current unabated growth in greenhouse emissions 6 degrees C plus will soon be built in. This will be catostrophic to the biosphere. Certainly, global civilization will collapse over about the next 100 years. Regional adaptations may allow remnants of our species to survive.

    3. Many other analyses (e.g. ecological footprint analysis) and signs (mass extinctions and range migrations of species) show the dire state earth’s biosphere systems are in.

    4. At the same time, a massive rearguard justifcation, defence and apologia for capitalism is mounted to prevent positive change. This, coupled with the immense momentum of the system, its modes of production, demographics and geopolitics make it immensely difficult to turn the ship of political economy around. This could perhaps been averted if post 1972 we had taken Limits to Growth seriously and begun to change our system including jettisoning capitalism. We actually needed to have fossil fuels phased out by 2000 and the world population stablised by that date. The 30 years from about 1972 to 2002 were our last chance. Instead we saw an exponential growth and intensification of all the wrong things. Our fate was sealed.

    A comprehensive catabolic breakdown of civilization will now occur and the process has already started. The current economic crisis will be permanent and indeed will deepen. There is no way now to grow out of this crisis. There are not enough quality resources left to underpin the neecessary growth.

    Around the globe, the first signs are the food crises beginning to overtake certain countries. Food crises will deepen and widen. In Australia, this will take the form of rapid food inflation. By 2022, I suspect so-called middle class families wanting to eat to the same standard will need to increase spending on food and non-alcoholic beverages from the current 17% to about 35% i.e. a doubling.

    Households will also find it very difficult to keep household “infrastructure” running. The quality and reliability of whitegoods is declining rapidly and this decline will become systemic. It will soon be very difficult to buy a fridge, dishwasher or washing machine that lasts longer than two years. Most households could dispense with the dishwasher and probably will. It is a little more difficult to do without washing machines and fridges though in time people will have to do so. Ironically, the load on our grid may be lessened by the collapse of the whitegoods and air-conditioning industries as the “middle-class” becomes unable to afford these items.

    Capitalism has entered the mode of churning out the cheapest stuff possible with built-in obsolesence the norm. Nothing in the whitegoods arena is now meant to last longer than the warranty period. This of course is an inefficient use of our remaining resources and energy sources. Cars (although the best ones still remain reliable) are also a great waste of our remaining resources. The costs of cars and fuel will also escalate rapidly over the coming decade. A transport crisis will occur as many people can no longer afford automobiles and our inadequate mass transit system is in no position to take up any slack. This transport crisis will compound unemployment and other economic problems.

    I could go on but you get the picture.

  61. anything to do with the budget is fiscal policy.

    In normal times when there is an economic downturn Keynesians would argue let automatic stabilisers ( passive fiscal policy) do their work BUT make monetary policy your main tool.

    The GFC was a bit like a Depression , it lead to a liquidity crisis and therefore made monetary policy impotent. Hence the need for active, not passive, fiscal policy

  62. @Ikonoclast

    I may sound like a pedant here, but this statement:

    1. Capitalism demands endless growth. The biosphere is a finite system. Ergo capitalism is in conflict with the laws of physics and the laws of ecology.

    needs qualification.

    Capitalists will still demand their profits even if there is no growth, or even in a long-run recession, or even during wars, when growth is corrupted.

    However capitalism only seeks growth because it maximises profits. If a capitalist could make 10% in a no-growth, sustainable project, and 5% developing growth, – no growth will occur.

    Modern capitalism has captured normal economic activity and then parasitically claimed it as its own. However this faux association with growth means that capitalism has some funds it can use to temporarily fund countervailing tendencies, eg welfare state.

    Of course capitalists have to be forced to fund the welfare state, and if they can erect a military dictatorship to avoid this sliver of humanity – that is what they will do if they get the nod from the world’s centre of capitalism (originally UK, more recently USA). These hugely profitable capitalist dictatorships ringed America – and boosted American growth in the 1950’s-1970’s

    South Korea
    South Vietnam
    Saudi Arabia
    Dominican Republic

    Thankfully much of the Yankee fascism has been thrown out, although America dispatched many terrorists to prop-up its satellites, and arranged many assassinations, so America is in early deep trouble – surviving mostly on the fact that the dollar is still the reserve currency.

  63. nottrampis :

    Ever heard of business cycles? There were quite a few depressions before the grest Depression.


    What is your point?

    Capital accumulation occurs despite business cycles, although this may require greater concentration, greater population and yet more stimulus.

    No one is saying that capitalism means endless growth “forever”, because it eventually collapses in one final business cycle.

  64. @Chris Warren

    I appreciate your reply. It’s a very good one. I have no problem with pedantry. In most cases it is accuracy and comprehensiveness. People who can’t handle accuracy and comprehensiveness in thinking get all huffy and call it “pedantry”.

    David Harvey’s video “Crisis Theory and the Current Conjucture” is very enlightening. I recommend it to all who read this blog. Even if you are pro-capitalist watch it. As John Stuart Mill said “He who knows only his own side of the case, knows little of that.”

  65. the life expectancy of the downtrodden proletariat has close to doubled under the horrors of capitalism according to Robert Fogel:
    1. Of the children born between 1835 and 1845, nearly a quarter died in infancy, and another 15 percent perished before age 15. Those who survived endured persistent malnutrition, typhoid, tuberculosis, measles, rheumatic fever or malaria while labouring hard seven days a week.
    2. Those born in the 1920s had about a 10% chance of dying before age 15.
    3. Those born in the 1960s had about a 99% chance of making it to 15.

    The idea that parents should not bury their children is a blessing of 20th century capitalism. Parents in the good old days had large families in the hope that some would live to adulthood.

    The good old days were terrible. How much extra would you want to step into a time machine and go back 100 years? 40 years back to 1972 – pre-colour TV? To the Menzies era?

  66. ^^ the above

    This is getting tiresome. Boring drivel. I wish you guys would knock off “we are for freedom and free markets and capitalism, you aren’t” crap.

  67. @Jim Rose

    All those existed under Gorbachev and in Yugoslavia.

    But under capitalism – the right to own colour TV’s is not equal. How many colour TV’s can you afford working at $2 per day?

    Thanks capitalism.

  68. @Ikonoclast
    “1. Capitalism demands endless growth.”

    No, it doesn’t. It tends to create growth (in economic activity and capital – it would be better if you were precise about what you mean by ‘growth’). This is an important distinction. People being what they are, this tends to create growth in consumption and resource use. If people were content to keep consuming at previous, lower, more simple levels, then the fairly constant growth in productivity and efficiency that capitalism allows would deliver a diminishing use of resources, even better than your preferred steady-state economy.

    But people aren’t like that. What you want to happen would require wholesale change in our cultural expectations, even our very biology. Good luck.

  69. On the matter of endless growth is shown i Say’s Law about interaction of unemployment and inflation and Okun’s Law about necessary growth of 3,9% to account for population growth of 1% and productivity growth of 1% so it doesn’t cause unemployment. Having growing unemployment year over year will cause social and political instability. To prevent instability economy have to grow over 3%. Therefore, capitalism demands endles growth.

  70. @Jordan
    “To prevent instability economy have to grow over 3%. Therefore, capitalism demands endles growth.”

    You are conflating capitalism and ‘people who want economic stability’. Capitalism is just an ism, it doesn’t and can’t demand anything at all. Like so many intellectually lazy people, you think ‘capitalism’ means ‘whatever is the current socio-economic complex’. Capitalism is a big part of our current system, but still just a part.

    Your assertion (without foundation in theory or practice, as I’ve said before) implies that capitalism collapses when there isn’t 3% economic growth. Your theory doesn’t give a time limit, but let’s say 20 years is a reasonable time. Japan has had less than 3% growth since the early ’90s. Why hasn’t capitalism collapsed there?

  71. @Jarrah
    Instability doesn’t mean collapse, but it is true that implies to all other systems.
    Japan did not have instability because of good employment no matter finacial collapse in 1992. Unlike present USA, Japan have kept employment good for 2 decades but with fiscal spending that reached 230% debt to GDP. They did not allow collapse of financial system to cause high unemployment.

    Japan have GDP corresponding population rate which is also falling.
    Okun’s Law considers productivity growth and population rate. In Japan, both were falling last two decades. ANd working hours were also falling, from 72 to 58 hours a week. All of it just says much about GDP as measure of wellbeing.

    Bush was just siting there expecting that stimulus of 2008 would bring the financial crisis over election time and dump it to new president. But stimulus worked for only 3 months, it gave every person only $600, what was stimulus in Australia? AUD 2300?

  72. @Ikonoclast
    Yanis Varoufakis presentations also point to Savings(capital) glut as the problem of present capitalism. There is no enough assets to invest to in the world for such ammount of capital.
    Since 1980s, that saving glut is pushing down interest rates which led to lower inflation. Without benefits of higher inflation eating up debt, it came to the debt limit and that started deleveraging and unemployment.

    Huge deficits in developed world had some effect of clatching onto capital glut but at the same time interest paid out on that capital also enlarged it and exascerbated the problem. SImple high marginal taxes acros the world would solve that problem easy. Tax it instead of borrowing it for what deficit spending is used is the way to solve the problem of Saving glut.

    For those that cry wolf about high taxes, let me point out that such savings (except pension savings which low interest rates are ruining) are never going to be used for consumption and thats why they keep growing. It is a surplus which can never be consumed by owners of that capital, they allready have consumed what they wanted, this is saving after consuming.

  73. On a side note, it looks like Krugman finaly understood the correct relationship between private sector and public sector:

    Those who claim to be deeply upset about public sector deficits should be asked, what would have happened, given this attempt by the private sector to move into surplus, if the public sector had tried to stay in balance. Can you say Second Great Depression?

    It says that private sector (all of us) is a beneficiary of deficits of public sector which MMT is desperately tring to show to clueless economists who argue against public sector deficits and go for surplus as something moral and good for people.

  74. @Jarrah

    In fact capitalism has restricted growth in the Third World.

    It has also misallocated growth in Western societies and according to Christine Legarde is now producing “contraction”.

    A normal, non-capitalist growth would not produce this worsening disaster.

    But like bad apples – one capitalist eventually destroys everyone.

  75. Life under Capitalism, but not as we know it…

    In capitalism, unions are typically banned, as this assists profiteering. However workers can fightback, sometimes at the risk of their lives (as in Colombia).

    In Korea – capitalism runs riot and still displays the values of the Kwangju massacre of pro-democracy students. Currently – according to LabourStart …

    The President of the Korean Government Employees’ Union (KGEU), Kim Jungnam, launched a hunger strike in the streets of Seoul outside the offices of the Presidential transition committee on 15 January.

    He is protesting the sacking of 137 workers, among them the union president and general secretary, who are being punished for their union activities. They are accused of being leaders of an “illegal organization” — the KGEU.

    President-elect Park Guenhye, who will take office on 25 February, has pledged to achieve social integration. The KGEU is demanding that she recognize the union and reinstate the sacked employees.

    Kim will continue his hunger strike until these issues are resolved.

    We call upon trade unionists around the world to show their solidarity by sending off messages of protest and solidarity today.

    Click here to send off your message.

    Please spread the word – share this message with your friends, family, co-workers and fellow union members.

    Thank you!

    Eric Lee

  76. @Jarrah

    I agree with Zhang’s paper that there there are difference in the level enforcement of property rights (some areas strongly enforced while some areas are very weak) in China. He’s argument that the “asymmetric property rights” is related to China’s growth is an interest point which I have not looked into.

    For the argument that, “asymmetric property rights” is one of the reason for China’s pollution you’ll have to explain other countries, say, the top 10 polluted countries in the world.

    Furthermore, to argue industrialisation being utterly independent to capitalism is a strange argument if you argue capitalism tends to create growth because growth in consumption will need to be accompanied with growth in production. On a global scale, even if China didn’t industrialise, some other country will have to, if the local manufacturing industry declines or fails to meet the grow in demand.

  77. @Ikonoclast

    So that is why, in the last week, and in a new house with Harvey Norman supplies whitegoods, i) the door to the oven fell off; ii) the dishwasher just stopped & I was told “it’s not worth fixing it”.; iii) the fridge door handle came off & the only way to fix it meant a new door; then iv) water pooled on the floor in front of the fridge and it had to be regassed – & now, again, there is that puddle; and v) the mesh inside the microwave door detached itself, presumably letting the radiation out into the room; and vi) the agitator in the washing machine decided that it wanted to free itself from any material attachment to the rest of the machine.

    I’ve had it.

  78. I’m surprised and disappointed. I expected more from Alan Kohler in today’s The Drum.
    He makes the silly and naive case for privatisation you rightly decry, JQ. He believes paying down gross government debt is an inherently responsible thing to do, never mind the effect on net fiscal position. All this must apparently be done to appease credit rating agencies who make the same basic error, who embarrassed themselves so thoroughly during the GFC, and who were completely ignored by investors after they downgraded the US. I now put Kohler in Paul Krugman’s category of “Very Serious Person.”

  79. @Tony Lynch

    Yes, I am getting quite concerned about the decline in quality of most goods now. To give some recent examples from my situation;

    1. Brand new, supposedly high quality brand, $8,000 ride-on mower began snuffing out after 20 minutes operation with just 15 operational hours on the clock. Took the dealership 5 attempts to fix it, taking it away for a day or two each time. They have been good about it but they really had no option under warranty and I was starting to demand a “replacement engine since this one doesn’t work”. Tested OK for an hour once. But is it really fixed? Time will tell after this rainy spell.

    2. New fridge, less than one year old. Mid-range brand. Door closing latches are cheap plastic and both have now broken in warranty period under normal use by four sensible adults. One fixed under warranty, wonder what they will say when I claim for the other one? Clearly, as soon as 1 year warranty period is over they will break again within one year. Already, a cooling or circulation fan has become rattly and noisy. Wonder what that presages? I find fridge mechanics these days to be of the opinion “there ARE no good fridges now”. Where does that leave the consumer? All whitegoods are headed the same way.

    3. All meat purchased from the large grocery duopolies is pumped full of water. I have measured one and a half to two cups of water coming out of 1 kg of “lean, 5 star” beef mince, beef strips or round steak cut up for curries and stews. The same for chicken breasts supposedly natural, free range, organic and all the other meaningless bulldust they claim. It is actually impossible to sear this meat as the water just comes out and broils it. I’ve found a new butcher who seems better… for now… probably until the duopolies drive him out of business. Also, did you know all of Australia’s top quality meat is exported? We get only the dregs the overseas rich don’t want yet we pay top dollar for it with 25% to 33% infused water content. Where is the consumer protection in this country?

    4. All fruit and vegetables purchased from the large grocery duopolies are old (not fresh) and spoil if not used within 2 or 3 days even if stored appropriately. A proportion (about 10% to 20% it varies) is unuseable when cut open. That is, it is bad inside. Specialist fruit are a little better and much more expensive. I can recall as a kid, my uncle had a bag of potatoes under his house. These lasted for months (stored in a cool, dark place). Funny how modern potatoes go soft and grow from the eyes after a week even if stored in the same manner.

    If these trends continue, I expect possession of a middle class income will be next to meaningless within 5 to 7 years. You simply won’t be able to buy any goods worth having with it. The current whitegoods and food fiasco is the beginning of the end. Sure, we will scrape by. You can live on potato peelings if you have to. And there’s a kind of justice to it. The Western middle-class will finally get to share poverty with the third world workers they have directly and indirectly exploited.

  80. @Sam

    Fair enough point (not that I shop at HN very often). But with respect to refrigerators can you name a single brand worth buying now or are they all, as I suspect, junk? It’s no good naming a $10,000 or $20,000 millionaire’s brand unit and recommending it for the average middle class person.

    I’ve noticed a phenomenon now in consumer blogs where one set of people will say brand X is good (fridges or whatever), “my brand X has lasted 10 years etc. etc.” Then another set will say I bought brand X (comparable model) in the last two years and it is junk. Of course, with any brand you will find a range of people from supporters to detractors based on personal contingent experience.

    However, there seems to be a pattern that once good and reliable brands can no longer be trusted at all. Quality has declined markedly. It seems to be bound up with parts (compressors etc.) all being made in places like India and China and then assemblage happening in places like Mexico.

    Essentially, the collapse in manufacturing in USA and Europe is accompanied by off-shoring to places that do it on the extreme cheap. In addition, experienced workers are laid off in USA and Europe and in the developing world the workforce, management and quality control still havr their training wheels on. In addition, late stage manufacturing capitalism is finding it harder and harder to squeeze profits from real goods. The push is to cheap, rushed, intentionally rapid-obsolesence products.

    There are some areas where this is not true yet, notably heavy manufactures, automobiles and solar equipment from the better quality manufacturing countries namely Japan, Sth Korea, Germany and sometimes still the USA (though less and less). In time, at little as 10 years now, it will all go the same way. The decline process is inevitable for reasons of physics (limits to growth and the law of entropy) and reasons of political economy (impending collapse of late stage capitalism).

    In the meantime, we all have to live, so the search for fridge that might last longer than a few years goes on. I still have a family. If I was an old curmudgeon (well I am that) who lived on his own (not yet), I wouldn’t give a rats. I’d build myself a Coolgardie safe and make do with that. One can live on dried, cured and salted meats and fish, pickles, preserves, root vegetables, powdered milk, flour, tea, damper, some fruit dried and fresh etc. Probably be far healthier than most modern diets.

  81. As for the shop online claim, I looked and I saw all the usual suspects; same junk as in HN or other chain stores. Maybe I am looking in the wrong place?

  82. Ikonoclast: “Clearly, as soon as 1 year warranty period is over they will break again within one year.”

    Retail/ manufacturer warranties don’t override stat warranties. I’m surprised by how many people don’t know this. Also, if a product has a major fault, you can demand a refund or replacement. You do not have to settle on a repair.

    And yes, Harvey Norman are in my experience, lying sleazy scum. I almost shoved a defective vacuum cleaner up the ar$e of a smug salesman on one occasion last year 😉

  83. Essentially, the collapse in manufacturing in USA and Europe is accompanied by off-shoring to places that do it on the extreme cheap. In addition, experienced workers are laid off in USA and Europe and in the developing world the workforce, management and quality control still havr their training wheels on.

    This process in now in reverse.

  84. Ikonoclast, your talk about future food shortages had an impact on me. On a very small corner of my garden I’ve grown tomatoes and other vegies (water from the tank of course). I’ve got a substantial excess supply of tomatoes (all plants, grown from seeds, prospered this year, the year when tomatoes are relatively cheap in the shops). I wonder how long my enthusiasm will last. I am not into the manufacture of fridges as yet but yoghurt production is on the list.

  85. Katz, the Communist Party of each country was a conspiracy controlled and financed by a hostile foreign power that recruited members for clandestine work and used that apparatus to collaborate with espionage services of that hostile power. Their treason from 1939 to when Germany attacked the USSR is one of many examples.

    A contemporary analogy would be a Fundamentalist Muslim party running for elected office while partly funded by Al Qaeda, whose policies are dictated by Al Qaeda, and whose leaders and some members have aided Al Qaeda via espionage activities. It is not clear that free speech and free elections require a government to tolerate the existence of such a party, and that the government could not close it as a criminal conspiracy.

    The Venona intercepts revealed Wally Clayton, a leading official within the Communist Party of Australia, was the chief organiser of Soviet intelligence gathering in Australia. It was Venona intercepts that led Chifley to set-up ASIO.

    As Bob Carr recently recalled, PAUL Keating, as president of Young Labor in 1968, always referred to the Left of the ALP as “the comms”. important figures in the ALP Left were dual members of the Communist Party of Australia.

    See and Mark Aarons’ reply.

  86. @Jordan

    This piece did not make much sense to me.

    But quantities matter. Continual borrowing might be sustainable, depending on the amount of new borrowing required, the interest rate on the debt, and the growth rate of borrowers’ incomes. If the interest rate is lower than the growth rate of income to poorer households, then there is room for new borrowing every period while holding debt-to-income ratios constant. Even without much income growth, sufficiently low (and especially negative) interest rates can enable continual new borrowing at constant leverage.

    When has interest rates ever been lower than the growth rate of income to poorer households? What data source underpins this?

    Also I counted around 12 “If”s in this relatively short piece – which generally means it lacked substance.

  87. To evidence his “argument” JR links to an opinion piece (superfluous term, really) from ‘The Australian’.

    Apart from zealots, does anyone take that hateful dirty little loss-making Murdoch soapbox seriously?

  88. @Jim Rose

    One could probably make a pretty good case that Liberal Party circa the Vietnam era was controlled by a foreign power (the USA) threatening to be hostile if the Libs and Australia weren’t an obedient puppet power.

    Then of course there is the issue of CIA involvement in overthrowing the Whitlam Govt.

    Tony Douglas: “The Central Intelligence Agency or CIA was set up in 1947 when the United States Congress passed the National Security Act. Since then the CIA with its large and secret budget has involved itself in the politics of nearly every country in the world. One of its four divisions, innocuously entitled PLANS is responsible for covert actions. Covert Action often means the propping up or overturning of foreign governments. I asked Ralph McGehee, a former CIA agent, as to how many governments the CIA had overthrown.”

    After detailing Iran, Chile and many other attempts at interferring in the internal affairs of other countries comes this exchange.

    Tony Douglas: “Over the years there have been many reports linking CIA activities with the downfall of the Whitlam government. Does Ralph McGehee think they were involved?”

    Ralph McGehee: Well, my views are as though what’s the problem? I mean, we had a whole series of Agency spokesmen said, `oh, yes, there was an Agency role in the overthrow of the Whitlam government’. I just don’t know why Australians can’t accept that. I did just a little bit of research before I came out and you had Ray Cline, a former Deputy Director of the CIA, saying `when Whitlam came to power there was a period of turbulence and the CIA will go so far as to provide information to people who will bring it to the surface in Australia, say a Whitlam error which they were willing to pump into the system so it may be to his damage and we may provide a particular piece of information to the Australian intelligence services so that they make use of it’. And then the CIA National Intelligence Daily said, `some of the most incriminating evidence in that period against the ministers in the Whitlam government may have been fabricated.’ This is about as strong as you get them to say so. It is quite obvious that information was being leaked about ministers Rex O’Connor and Jim Cairns and some of it was being forged which is a standard CIA process. Jim Flynn, who was associated with elements who were involved with the Nugan-Hand bank, he said that he was involved in manufacturing the cables and leaking them to the press. Now he would not be a very credible source except that he worked for Nugan-Hand. Admiral Bobby Inman, former Deputy Director of the National Security Agency and Deputy Director of the CIA, said on two occasions that he expressed deep concern that investigations of Nugan-Hand would lead to disclosure of a range of dirty tricks played against the Whitlam government. You have the statements by Christopher Boyce who was in a relay point for information from the CIA and in his trial he said that `if you think what the Agency did in Chile was bad, in which they spent 80 million dollars overturning the government of Chile there, the Allende government, you should see what they are doing in Australia’. On the Shackley Cable, which was a virtual ultimatum to the head of ASIO to do something about the Whitlam government, it is sort of prima facie evidence of CIA interference in the Whitlam government. This was on November 10. On November 11, Governor-General John Kerr dismissed the Whitlam government on a parliamentary technicality. John Kerr earlier had been the founder of Law Asia, a CIA-front organisation.”

    Excerpts from:
    Transcript of a 5-part radio documentary,
    Watching Brief, Public Radio News Services,
    Melbourne, Australia, October-November 1986.

    So Jim, is it only commies who are the bad guys? Is that the biased, simplistic line you are pushing?

  89. @Jim Rose

    You are mixing up the subversion by CIA agents and Catholics such as Mannix with rather opportunist links between Soviet embassy staff and members of the then Australian communist party.

    You should read David McKnights book “Australia’s spies and their secrets” ch 7, and page 92-93.

    The real subversion in Australia was accomplished by importing millions of dollars through Mannix to set up Catholic Action and linkages with associated entities – Knights of the Southern Cross.

    A contemporary analogy would be a Fundamentalist Muslim party running for elected office while mostly funded by Al Qaeda, whose policies are dictated by Al Qaeda, and whose leaders and some members have aided Al Qaeda via espionage activities.

  90. @Chris Warren
    That describes dynamic system, not a moment in time.
    What it says; increase in savings pushed interest rate down which enabled more borrowing.
    At fixed income, borrowing limit increases with lower interest rate. Lower interst rate means lower monthly payment on the same debt which allows for more borrowing.

    If IR is 3% and income growth is 3.3% then in time it will allow for more borrowing which will keep debt to income ratio at same level.
    Even if income growth is 0%, fall in interest rate from 4% to 3% will allow for more borrowing but monthly payments will be the same (leverage).

    This is decriptions of how IR affects borrowing, it is not saying that IR was lower then income growth. IR is always higher then income growth of poorer households but both were moving down with IR lagging and that is percisely how in 40 years it reached debt ceiling and collapsed once IR reached 0.

  91. Those “if’s” were theoretical descriptions of laws. It says that “if this” then it would be “that” but since it was “this” observed in real world then by conclusion it must be “other that”.
    If A->B it was C not A in real world therefore C->D
    -> are economic laws

  92. Chris & Ike (re:CIA & Whitlam),

    That reminded me of this:

    Laurie Oakes to Leigh Sales on ‘Lateline’ 29/10/2010:

    “But what I learn I should make public, it’s what I’m paid for, what the public trusts me to do and you’re in the same position. I don’t think we can keep secrets because we think that we know better than the voter. We can’t protect the voter from information. That’s anti- journalism.”

    That’s funny. Remember his book ‘Power Plays’ from way back in 2008? In one column on the twentieth anniversary of the sacking of the Whitlam government, Oakes describes having dinner at the home of a US diplomat in October 1975:

    “The other guests were the US labour attaché, who was a senior CIA operative, and a British MI5 agent working in Canberra under diplomatic cover.”

    According to the column, they wanted to know what would happen if the coalition used its Senate numbers to block supply. Oakes wrote, in 1985, that:

    “I told them confidently that if the coalition kept its nerve and Whitlam refused to call an election, there could be only one outcome: Sir John Kerr would dismiss the Labor government.”

    Of course, Oakes kept that information secret from us for 20 years. Well, he didn’t say how long he should wait before he made things public, did he? 20 years isn’t that long to sit on a story. Things moved more slowly back then.

    “That’s anti-journalism”!


  93. Good to see that the basic facts about communist subversion after 1945 and treason from 1939 to 1941 are all begrudgingly agreed.

    The best response was to allege that the Micks and the Masons were at it too.

    The communist party and its sectarian offshoots were conspiratorial cabals that got less votes that the monster raving loony parties.

    p.s. did not the communist party spilt over whether to worship Moscow or Peking?

    See too on those that saw the future and it worked and how Leftists repeat the mistakes of these useful idiots in the 21st century.

  94. @Chris Warren
    Thanks for this Chris. “Capitalist industrialization in Korea” by Clive Hamilton, Westview Press (Boulder), 1986 is a great book about the way a capitalist class was formed there. Clive says in the Intro that he started with the premise that radical dependency theory would explain it, but later rejected externally-driven perspectives (including the orthodox theory of comparative advantage). He moved to seeing the process as the political and economic ascendancy of Korean industrial capital, utilising the strong state to do it: “Korean industrial development under US tutelage was autonomous in the crucial sense that it was undertaken almost entirely by Korean capitalists” p 115. A book of great depth and clarity – cited 117 times says Google Scholar.

    It’s probably not understood in Australia how militant and strong the workers’ movement has become. The coercive Korean state has long been oppressive towards labour: I was going through my notes from when I studied this formally 22 years ago, and found a cover story in the Far Eastern Econ Review of 27 Aug 1987: “Labour strikes out: After years of repression, workers demand more rights.” The article said that the average working week was 57 hours and every single strike at the time was illegal. You would hope that the Right’s obsession with what they call “economic freedom” would include labour market rights, but I fear not.

  95. @Jim Rose

    “did not the communist party spilt over whether to worship Moscow or Peking?”

    LOL. Now Washington and Canberra worship Beijing for its business. Note that Beijing’s version of capitalism (a form of state capitalism and dirigisme with party and corporate capitalism hand in glove and mixed socialist policies at other levels) is currently far more pragmatic and effective than the West’s hardline neoliberalism.

    Note also that Beijing and Washington are both hand in glove with their own oligarchs and that little real freedom exists for the poor of either country.

    Jim, you are getting all your wishes. Capitalism (state-oligarchic-corporate) is now triumphant everywhere. You can sit back and see what a godawful mess it all turns into.

  96. @Ikonoclast Andrei Shleifer in The Age of Milton Friedman found that as the world embraced free markets since 1980, living standards rose sharply, while life expectancy, education and democracy improved and absolute poverty declined.

    XAVIER SALA-I-MARTIN (2006) found that for 138 countries in 2000, poverty rates and head counts were between one-third and one-half of what they were in 1970 There were between 250 and 500 million fewer poor in 2000 than in 1970. All eight indexes of income inequality show reductions in global inequality during the 1980s and 1990s.

    A simple test: visit Asia regularly since the mid-1990s. I was tall when I first visited – looking over the top of the crowd. No longer the case for the young adults in both the cities and rural areas. each Asian generation is head and shoulders taller than the last and they live decades longer.

  97. @Jim Rose

    Point 1 correlation does not necessarily equal causation. Though it may do so I admit. Yes, the historical process of capitalism has raised total wealth. It tends to immiserate the lower classes unless other movements (social democracy, organised labour, religious reformers etc.) wrest some of the wealth and power from the capitalists. So you are eliding quite a bit of history to make your case.

    “Current figures indicate that as much as 44.2 percent of the Mexican population (over 49 million) lives below the poverty line as defined by the country’s National Council of Social Development Policy Evaluation (Spanish: Consejo Nacional de Evaluación de la Política de Desarrollo Social, CONEVAL). In 2008, 33.7% of the population lived in moderate poverty and at least 10.5% suffered from extreme poverty… Carlos Slim, the richest man in Mexico and in the world has a personal fortune equal to 4 to 6 percent of the country’s GDP. In spite of efforts by government officials during the past three administrations; transition to globalization, the NAFTA agreement; Mexico has been unable to create efficient public policies in order to compensate for the distortion of its market and the poor distribution of national income. – Wikipedia.

    It is clearly never capitals’ intention to distribute wealth fairly nor to act to help the poor. Other forces have to do that although the raw power of capitalism can certainly lead to high production.

    Finally, all these faux “achievements” are about to come crashing down as capitalism collapses due to its unsustainability. Capitalism simply made too much of the wrong stuff and squandered too much of our natural endowment of resources on consumer junk of temporary value rather than worthwhile infrastructure of much more enduring and adaptive value.

  98. @Katz
    Perhaps the above answer to Ikonoklast gives a clue. JR’s #11 is exactly the same as his answer at Monday Message Board January 15th, 2013 at 16:12 | #2. Pretty rude IMO.

    Is he just a robotic answering machine like ? Maybe there isn’t a formula answer available yet.

  99. Katz, “Which countries and what do you mean by “betray”?” The democracies where communists lived.

    Communists are bound by the rule of law and fidelity to democratic change as per John Rawls. Democratic socialists such as in the labor parties had no difficulty winning many seats and later forming governments.

    As for the meaning of betray, I suggest you borrow Lance Armstrong’s dictionary. He no longer needs it for moral guidance on the meaning of basic words.


    “By 1948 the accumulating evidence from other decoded Venona cables showed that the Soviets had recruited spies in virtually every major American government agency of military or diplomatic importance.

    American authorities learned that since 1942 the United States had been the target of a Soviet espionage onslaught involving dozens of professional Soviet intelligence officers and hundreds of Americans, many of whom were members of the American Communist party (CPUSA).

    The deciphered cables of the Venona Project identify 349 citizens, immigrants, and permanent residents of the United States who had had a covert relationship with Soviet intelligence agencies”

    American cryptanalysts deciphered only a fraction of the Soviet traffic, so many additional agents must have been discussed in the thousands of unread messages.

    Virtually all of the spies had been members of or were closely associated with the Communist Party – a Party the was a wholly owned subsidiary of Moscow. Check the Comintern archives on this – they were opened to the public in the 1990s.

    The communist party was financed and directed by a hostile foreign power. It recruited spies and it subverted the war effort when Hitler and Stalin were allies. Menzies banned the communist party after the fall of France for this reason.

  100. I notice that you name only the US and Australia. You don’t want to add to that very short list? Were communists who lived in places such as Nazi Germany, Fascist Italy, or Falangist Spain equally bound by the legal systems under which they lived? What about Indian Communists or Black Communists living under Jim Crow? So, I repeat, what countries do you mean?

    I’m well aware of Venona.

    Communist Parties worldwide at the time we are discussing were strictly compartmentalised. A tiny number of members were illegals or were aware of illegal activities. The vast majority of members were utterly unaware of illegal activities.

    So I repeat, what do you mean by “betray”?

  101. @Katz #16

    Perhaps his answer #11 to Ikonoklast #10 gives a clue. JR’s #11 is word for word the same as his answer at Monday Message Board January 15th, 2013 at 16:12 | #2. Pretty rude IMO.

    Maybe there isn’t a formula answer available yet.

  102. katz, The only complaint of communists who lived in Nazi Germany, Fascist Italy, or Falangist Spain was that they were not the dictator.

    Hayek commented in 1944 that the relative ease with which a young communist could be converted into a Nazi or vice versa was well known to the propagandists of each side. Communists and Nazis clashed frequently because they competed for the same type of mind and reserved for each other the hatred for the heretic.

    Hayek also said that while to the Nazi, the communist, and to the communist, the Nazi, and to both, the socialist are potential recruits “made of the right timber”, both knew there can be no compromise between them and those who really believed in freedom.

    See on the recently opened archives of the former Soviet Union:
    • the Soviet Union heavily subsidized the CPUSA;

    • the CPUSA maintained a covert espionage apparatus with direct ties to Soviet intelligence;

    • the testimony of former Communists concerning underground Communist activity can be substantiated;

    • American Communists working in government stole documents and passed them to the CPUSA, which sent them on to Moscow;

    You spend much time defending people who were not committed to democracy in any way. Communists and fascists are cut from the same timber. Neither are ‘liberals in a hurry’.

  103. I’m not defending them politically. But I am defending the vast majority of them juridicially against your irrational and unjudicial charge of treason.

    I trust that you understand the distinction.

  104. Sorry guys, to hark back on to ‘uncertainty’, as discussed in the last sandpit. But since iko asked explicitly about it, here is an important aspect that needs to be considered in that context, namely climate sensitivity. Recently there was quite a bit of attention in the media on a single Norwegian study suggesting that global warming may be “less extreme than feared”. This sounded too good to be true. Don’t get me wrong, I truly wish the 10 odd percent overall ‘uncertainty’ will carry us through unscathed in the end. Thus this study pricket my ears, though as it was only a single study, and the “less extreme than feared “turned out to be 1.9 degrees of warming instead of 2. It was still good, yet unconfirmed news. However, the ever vigilant was on to it this morning, confirming my suspicion, as well as highlighted some problems with uncertainty:

    “Another problem can arise if the models overfit short-term noise (natural variability), and there are also significant uncertainties in the overall global energy imbalance and measurements of changes in global heat content, both of which are components of these sensitivity calculations.”
    “Aerosols and clouds are two of the least well-constrained contributors to the global energy imbalance, and thus two of the largest sources of uncertainty in climate sensitivity estimates.”

    As an aside, there is this beauty in the comment section:
    “The following comment posted at The Guardian explains it nicely (H/T JohnM):
    “One other thing: I’m amazed at how many deniers have suddenly found computer models to be accurate, considering how many years they’ve been telling us they are utterly crap. Don’t suppose this epiphany has anything to do with liking the results of some models (“good”) while hating the results from others (“bad”).”

  105. On an other matter, recently I have been commenting on the dodgyness of superfund investment into coal within the Whitehaven hoax discussion. Take the recent PriceWaterhouse Climate Change report’s “unburnable carbon” scenario, as in, “we can only ‘safely’ extract a fifth of known carbon resources to stay within the accepted 2 degrees warming” and prove me wrong that investment into developing these resources is dodgy. In fact today I came across an article in, headlined “Unburnable carbon – value of fossil fuel giants at risk”!
    Is carbon going to be the new sub-prime mortgages?

  106. @Katz Educated people denied the Moscow show trials, the great famines and gulags but were not drummed out of the regiment.

    Look at “Political Pilgrims: Western Intellectuals in Search of the Good Society” and “The end of commitment: intellectuals, revolutionaries, and political morality” by Paul Hollander.

    these books are about how famous cultural and religious leaders from the West visited the Soviet Union, China, Cuba, and other communist countries, and told the most appalling lies to flatter their hosts and express their contempt for Western society.

    In spite of massive evidence, these political pilgrims never wavered in their loyalty to failed, left-wing ideals and genocidal utopianism

  107. Oh well JR you talk of the past, I’ll give you a contemporary loyal right-wing idealist, hanging on to this genocidal utopian cornucopianism, while lying through his teeth. The newly appointed chair of the yesterday announced new Business Advisory Council by the LOTO, Australian Business leader Mr Maurice Newman.

    This is Newman’s take in regards to whether human activity is leading to warming of the atmosphere, as he wrote in The Australian on November 5 last year:
    “When Mother Nature decided in 1980 to change gears from cooler to warmer, a new global warming religion was born, replete with its own church (the UN), a papacy, (the Intergovernmental Panel on Climate Change), and a global warming priesthood masquerading as climate scientists.”
    On he goes ..
    “Regrettably for the global warming religion, its predictions have started to appear shaky, and the converts, many of whom have lost their jobs and much of their wealth, are losing faith. Worse, heretic scientists have been giving the lie to many of the prophecies described in the IPCC bible. They could not be silenced.”

    He also rubbishes renewable energy sources, such as wind technology, with totally unsubstantiated claims. And such a person gets promoted into a leading position by our alternative Government, extraordinary.

  108. @Jim Rose

    Of course when Mark Twain saw the lies being told to him by capitalism – he coined the famous phrase: “beautiful lies”.

    American capitalism was built on the most shocking of lies – this gave rise to the famous phrase: “forked tongue”.

    American sport is based on drug lies.

    American invasions are based on official lies.

    American politics is based on lies – socalled “plausible denial”.

    When Khruschev visited the USA he was told a whole bag of lies about capitalism.

    You are the agent of genocide.

  109. Just because we have this nutter – Jim Rose.

    Here is a list of American government funding of Cuban entities.


    GOAL: Promote Rapid, Peaceful Transition to Democracy in Cuba, Helping Develop Civil Society

    OBJECTIVE: Increase Flow of Information on Democracy, Human Rights and Free Enterprise, To, From, and Within Cuba

    NOTE: As a matter of policy, USAID grantees are not authorized to use grant funds to provide cash assistance to any person or organization in Cuba.


    Freedom House: Transitions ($500,000 – completed)
    Center for a Free Cuba ($3,317,479)
    The Institute for Democracy in Cuba ($1,000,000 – completed)
    Cuban Dissidence Task Group ($250,000 – completed)
    International Republican Institute ($2,174,462)
    Freedom House: Cuban Democracy Project ($1,325,000)
    Grupo de Apoyo a la Disidencia ($2,700,000)
    Accion Democratica Cubana ($400,000)


    Cuba Free Press ($280,000 – completed)
    Florida International University: Journalism Training ($890,000)
    CubaNet ($833,000)
    Carta de Cuba ($293,000)


    Partners of the Americas ($172,000 – completed)
    Pan American Development Foundation ($553,500)
    ACDI-VOCA: Independent Agricultural Cooperatives ($265,000 – completed)
    University of Miami: Developing Civil Society ($320,000 – completed)
    Florida International University: NGO Development ($291,749)


    American Center for Int’l Labor Solidarity ($168,575 – completed)
    National Policy Association ($424,000 – completed)


    Cuba On-Line ($2,625,479)
    Sabre Foundation ($85,000 – completed)


    Rutgers University: Planning for Change ($99,000 – completed)
    Int’l Foundation for Election Systems ($136,000 – completed)
    U.S. – Cuba Business Council ($852,000 – completed)
    University of Miami: Cuba Transition Planning ($1,545,000)
    Georgetown University Scholarships ($400,000)


    Univ of Florida: Measuring Public Opinion ($110,000 – completed)
    PriceWaterhouseCoopers: Program Evaluation ($225,000 – completed)

  110. In an interview with Robbert Desaix in the 1990s, Robert Manne remarked that the most important lesson of 20th century communism and fascism was the need to support and defend representative institutions, liberal democratic freedoms and the rule of law.

    Now, if one accepts this, then in certain historical situations one had a duty to unite with the communists against the anti-communists. Apartheid-era South Africa is a case in point. Another is Queensland during the Bjelke-Petersen era. Now Senator George Georges was a terribly naive Tanky when it came to the Soviet Union and its satellites, but in the specific context of Queensland in the 1970s and 1980s there were few who did more to advance the cause of representative institutions, liberal democratic freedoms and the rule of law against the anti-communist Bjelke-Petersen government.

    That Joh mght have been symbolically cheering the goodies and George the baddies in Eastern Europe and the USSR was as meaningful as throwing creampuffs at the Berlin Wall. In the Queensland and Australian context where their positions and actions counted for something, George Georges was unquestionably on the sde of good and BJelke-Petersen on the side of evil.

  111. @Chris Warren

    Evidence does not convince a nutter; they have faith in their system and faith is an awesome thing. That magical invisible hand, and the impressive simplicity of the idea, is scientific enough for people like Jim and the other capitalist tragics.

  112. In fact I would go so far as to say that with a few honourable exceptions like Manne, anti-communism in Australia was a movement to throw creampuffs at the Berlin Wall on the other wise of the world whilst condoning and practicing reaction and repression within Australia, and supporting unjust wars and genocide in our neighbourhood (think East Timor).

  113. @Chris Warren

    Yup, basically all of orthodox American history is a lie.

    Manifest Destiny – A grandiose lie.

    American Exceptionalism – A grandiose lie.

    The US is a democracy – A lie (It’s an oligarchic republic.)

    The US founding fathers were humane democrats (A lie. They were oligarchic slave owners and/or apologists for same.)

    The US War of Independence was about “liberty and equality” for all Americans. (A lie. It was about American oligarchs freeing themselves from the British oligarchy.)

    The US Civil War was about “freeing the slaves”. (A lie. It was about northern industrial capitalism destroying southern landed aristocracy. Again, a new oligarchy superseding an old oligarchy.)

    * * *

    As an amusing aside, I quite enjoy the Paul Verhoeven movie “Starship Troopers”. I read it as a satire fore-grounding US crypto-fascism (and corporate-capital-fascism) and its fight against “bugs”. “Bugs” of course are all other humans (apart from a few puppet allies) that the US is permanently at war with around the world. If this was not intended to be a satire it nevertheless is one. It is so over the top it satirises itself and the system it refers to, whether this in consciously intentional or not.

    No doubt, Richard Heinlein himself did not intend the original novel as a satire. Heinlein was very clearly a crypto-fascist in his attitudes and fictional theses.

  114. Correction to my post above. Starship Troopers clearly is conscious, intentional satire by Paul Verhoeven. Read in this manner, the intent of the film is revolutionary in a very nasty, Machiavellian way. As most US crazies (gun crazies, war hawks, crypto fascists etc.) will enjoy and be encouraged by a movie that looks like war pawn, reeks like war pawn (spelling changed to avoid filter) this will intensify their craziness. What is Verhoeven’s rather amoral method and intent? It’s this. Encourage the US crazies to be as crazy as possible. This way they will reliably destroy themselves in time. I am not sure I agree with such an amoral intent as a lot of innocent parties also get destroyed along the way.

  115. Ikonoclast, if you want a parody of “Starship Troopers”, I recommend Harry Harrison’s “Bill the Galactic Hero”. Better (and funnier) than anything Heinlein ever managed.

  116. Sorry guys, I just can’t get this ‘fascination’ on ye olde left-right fare dished out by a renown troll, all the while we are flooded with burning issues from one end of this continent to the other. Never mind the big league crooks legitimately ripping us off to the degree we, one of the wealthiest nations on this planet, can hardly afford a decent health system. Go figure.

  117. Jim,
    educated people now deny austerity leads to the economy reducing in growth except in good times, deny that there is climate change going on, deny it was the shadow banks responsible for the sub-prime debacle, deny government spending is falling here.

    sound familiar at all?

    Hey this sounds good for an article tomorrow!

  118. @Ootz

    The issue in this arena is that capitalism expends excessive real resources (real resources are what counts) on short term money making projects for the oligarchic capitalists. Thus we get lots of consumerist toys, cars, boats, holidays and junk food produced, holiday accomodation, entertainments and useless food items – useless for good health. Conversely, we get too little infrastucture and what we do get is woefully under-engineered so that it breaks, fails etc after a day or two of heavy rain and 60 to 80 kph winds.* In addition we get too little spending on education, health, welfare, mass transit, research, science etc. etc. etc.

    * Note: I really want to take up this issue. Our infrastructure IS woefully under-engineered and often it is in the wrong place i.e. on flood plains and/or next to bushfire hazard. It is totally unacceptable that our infrastructure can’t handle two days of heavy rain. It does not matter if it is a 1 in 200 year event flood event. Our infrastructure via correct situation and adequate engineeering ought to be able to handle it.

    1. Never build houses and buildings on flood plains unless totally unavoidable. In some regions, as Australia is a very flat country, there may be little good high ground to utilise. In this case, towns should utilise what hills, ridges, outcrops do exist but structures unavoidably on a wide flood plain should be on cross-braced steel stilts, anywhere from 2 to 8 metres high if necessary. Alternatively some slab based structures (not residences) where required should be engineered to be floodable and submeragable. They should be designed for rapid clearing and removal of goods/fixtures and have large all-round doors both manually openable and also automatically opening under flood strain (locking bolts designed to break under a certain strain). An alternative in some cases (not residential buildings nor hospitals) might be flood-bunker buildings built to be sealed and to survive under the flood. Clearly these would not have vertical walls.

    2. All power transmission should be moved undergound except where this is absolutely prohibitively expensive. Above ground tranmission should be over-engineered and all trees cleared.

    3. A general building rule ought to be that no tree can be left where it can fall on any structure anywhere. This won’t obviate blown, broken branches but will reduce incidents.

    4. All new houses, buildings, infsstructure etc. in all parts of Australia should be engineered to withstand category 5 cyclonic weather and catastrophic bushfires. Only designs that can do this ought be permitted.

    We could easily afford this level of “over”-engineering if we ceased to waste enormous resources on vast arrays of relatively short-lived and unecessary consumer toys, a good part of the vast private car fleet being the prime example. A major problem with our culture is its facile consumerist orientation. We are going to have to grow beyond this cultural infantilism if we are going to survive in the hard new world of resource limits and climate change.

    Personally, I stand condemned along with all the rest. My collection of wordly goods is also mostly of this facile consumerist orientation. However, only comprehensive collective change can really address this issue. One cannot seriously live “green” or for sober, sustainable, long-term survival values when the whole system supports only facile short-termism intellectually, culturally and materially.

  119. Cheers Iko for breaking the JR communists under the bed deja vue spell. The issues you are bringing up are fairly broad spread, however as you correctly identify, are connected. Your emphasised concern re our woefully under-engineered and misplaced infrastructure is legitimate. There have been many recommendations, along your lines, made by studies, such as Tropical Cyclone Yasi Structural Damage to Buildings.
    What is lacking is the political will for genuine risk management. More often than not, and I speak from personal experiences, decisions are made on various government levels to override sensible guidelines and even laws to feed the demanding ‘develop at all cost’ moloch.

    I do question though your personal statement, where you say:
    “One cannot seriously live “green” or for sober, sustainable, long-term survival values when the whole system supports only facile short-termism intellectually, culturally and materially. ”
    Call me an idealist, but I do believe that the situation is changing, perhaps too slow, nevertheless it is changing. I am very much encouraged by the social networking phenomena, including new developments such as kickstart and Kiva – loans that change lives. Just that we are able to have this discussion here on this blog is tremendously empowering. There are strong social movements building up and gathering pace, which provide an individual with the necessary social space to develop new ways of living, despite the countervailing or lagging system. If you focus on a half empty glass you never take advantage on the part which is half full. Perhaps it is easier for those of us who consistently refused to be pressed into the mould to hitch a comfortable ride and relished in looking for sustainable alternatives without hitting the hippy trail. Today these skills are propagated by a lose movement which takes as it’s principle resilience. Perhaps Resilience is the new Growth!

  120. Rubbish BilB, English is my third language and my brain is slightly scrambled from my chronic ailment, must have stumbled over this one. However, I am inspired by good company here, particularly since many ex LP commenters have made here to the good Professor’s blog. Perhaps also a sincere thank you goes to our gracious host and the moderators and other support workers in the background carrying this blog.

    I am really interested what others think in relation to the ‘unburnable carbon’ scenario and investment therein, as per my reneweconomy link above and the recent PriceWaterhouse Climate report.

  121. From a must read article in The Conversation today, ‘Planning for floods and fires now the recipe for disaster has changed.’

    Resilience – according to US National Academy of Sciences:

    Resilience is the ability to prepare and plan for, absorb, recover from and more successfully adapt to adverse events. Enhanced resilience allows better anticipation of disasters and better planning to reduce disaster losses — rather than waiting for an event to occur and paying for it afterwards.

    Also, it was interesting to observe haggling on ABC news over the responsibilities and cost, between the flood affected local governments and insurance companies. One Mayor was commenting that they have now the most stringend town planning scheme available (it is another thing to stick to it though) and Insurances claim that Local Governments should bear some of the blame because of lack of mitigation effort. An estimated $ 200m of damage have been claimed sofar.

    BTW be proactive, harden up Queensland

  122. BilB :
    You’re a great writer, Ootz.
    “…flooded with burning issues!”
    that is a gem.

    I thought “flooded with burning issues” was a good play on words re our bushfires and floods, both very recent. Well done Ootz, it was clever. At some level you were aware of the word play even if unconsciously.

  123. @Ootz “What is lacking is the political will for genuine risk management.”

    You can file this under regulation/deregulation and business everywhere is banging on about the economic costs of compliance. Never mind that said regulation could be vital and necessary and that when disaster strikes the first bleats are from business complaining of lack of govt action. And also never mind the poor management displayed by much of business.

  124. @nottrampis Australia came out of the Great Depression earlier than most because of the fiscal discipline of the Premiers’ Plan.
    • The premiers’ plan required federal and state governments to cut spending by 20%, including pensions. It was accompanied by tax increases, and reductions in interest on bank deposits and government internal loans.
    • The plan was complementary to a 10 per cent wage cut of January 1931 and the devaluation of the Australian pound.

    The New Zealand government also cut everything that could be cut by 20%. NZ had the most rapid recovery of all countries from the 1930s depression.

    By the mid-1930s, the unemployment rates in Oz and NZ were in mid-to-high single digits similar to the pre-1929 rates.

    As for ‘the shadow banks responsible for the sub-prime debacle’, you mix the Diamond-Dybvig bank run on the repurchase agreements (repo) market with the Kareken and Wallace moral hazard theory of the government guarantees such as in the sub-prime mortgage market.
    • In the Diamond-Dybvig adverse selection model of spontaneous bank panics, a system of deposit insurance completely eliminates the incentive to panic.
    • In the Kareken and Wallace moral hazard theory of bank runs, actual or implicit deposit insurance encourages high-risk lending – a crisis is inevitable. A bank need not fear losing customers by holding a risky portfolio. The deposit insurance pays depositors in the event of asset gambles that go bad.

    The Diamond-Dybvig model of bank runs was influential in 2008 policy responses: Don’t panic, your deposits are safe, so no one panics and runs.

    Policy advice from the Kareken and Wallace moral hazard theory of bank runs is do not let your-self fall into such a deep hole, which is little help with climbing out.

  125. make that Australia. NZ grew strongly after spending increasing by the government hence the discrepancies between the two unemployment rates.

    The best Australia ever got to was 8%. recession levels

  126. Jim,

    I forgot Herr Professor Quiggin has imposed a one comment rule on you so you can make as many as you wish over at mine on this topic or any other!)

  127. @Jim Rose
    Jim, if you have time it would be nice to take a look at this video and hear what “moral hazard theory” really is. Moral hazard means fraud, controll fraud where managers work against clients and the bank they manage in order to get rich and banks are saved by governments. This happened before great Depression and before this GFC.

    Search it at youtube as “Social cost Part 2” with Prasch and Wray.
    Prasch asks a good question: Is society there to serve GDP/economy or is economy supposed to serve and support society?

  128. @Jim Rose

    We’ve been through this before.

    1. While wage control didn’t harm Australia’s recovery from the GD, it is necessary to note that the nominal fall in wages was not a real fall in wages owing to deflation.

    2. Australia’s recovery from the GD was export-driven. Australia enjoyed a major trade surplus from 1933 until WWII. Britain favoured Australian wool and wheat over all non-Empire sources. Australian producers enjoyed a 30% advantage after 1931 due to a massive devaluation of the Australian pound.

    3. Australian governments retired high-interest foreign government debt by means of an unprecedented series of loan raisings among Australian lenders. While these new loans paid lower interest than the old loans, still the yield was between 6% and 7%, which in an era of deflation and financial stringency was very high. The propertied classes in Australia were lavishly congratulated, and they congratulated themselves, on how “patriotic” they were in accepting this “sacrifice” in the national interest.

    However, it is important to notice that these lenders had discovered themselves trapped with much devalued Australian pounds, which without prior warning overnight bought 30% less in foreign terms. Thus they turned a necessity into a virtue and accepted their new status of preferred creditors in a much diminished national home.

    Thus devaluation by stealth stimulated the economy and stabilised public financing.

  129. @nottrampis The point of a debate is a large fiscal contraction did not plunge unemployment into a deeper recession. Unemployment peaked at 29.0% in 1932.

    To ask again, what was the sign and size of fiscal multiplier of the premiers’ plan? What was its persistence: when would its effects die down?

    The June 1931 Premiers’ Plan of fiscal consolidation had time by late 1932 to become credible and take hold given the usual leads and lag on fiscal policy.

    MacLaurin (1936) dated the Australian economic recovery from the last months of 1932. It was to take another three years before unemployment rates fell below 10 per cent — the rate it had been during the 1920s.

    Most countries had abandoned the gold standard by 1931 and 1932 and devalued by about 10% including the UK.

    These competitive devaluations were called currency wars. Many accounts have these early 1930s devaluations and trade wars worsening the Depression.

    In mundell-fleming models, fiscal contractions result in exchange rate crowding-in.

    What did Australia do to recover faster than everyone bar NZ? Fiscal consolidations that were pleasant monetarist arithmetic!

  130. Jim,

    I address all this in my article.

    We see the consequences of fiscal contraction in 1932. The economy went south after rising in 1931!

    By 1933 we had a massive devaluation plus everything else I cover.

    the devaluation did tow main things as Ralph Hawtrey always said any devaluation should.
    It produced inflation.
    this meant no more liquidity trap
    it led to real wages falling.

    Really you are like those old communists of the 50s.

    Do not matter with facts just stick to ideology.

    every country had a poor record of getting out of the great depression bar Germany and Japan.

  131. @nottrampis To ask again, what was the sign and size of fiscal multiplier of the premiers’ plan? What was its persistence: when would its effects die down?

    How long did it take for the 1932 competitive devaluation to have effect on employment and output?

    The early 1930s variations in annual GDP growth are much smaller than either the spikes in unemployment or their subsequent falls. Where did the output go when 10-15% of workers lost their jobs and then found them again all within two or three years?

    The fastest recovery from the depression was in NZ. Australia was close behind.

  132. The effects of fiscal policy were more than offset by the MASSIVE not competitive devaluation.

    This not only got rid of deflation and introduced inflation but had two large consequences. real wages fell and there was NO liquidity trap.

    When did real wages rise significantly and then do the opposite Jim?

    The budget had buggerall to do with it.

    Ironic you are displaying the same characteristics as those communists of the 1950s you criticised!

  133. @nottrampis • In the 1930s, one country after another pushed down its exchange rate in a desperate effort to export its way out of depression.
    • each country’s depreciation only aggravated the problems of its trading partners, who saw their own depressions deepen.
    • Eventually even countries that valued currency stability were forced to respond in kind.
    • In the end competitive devaluation benefited no one, it is said, since all countries can’t devalue their exchange rates against each another. The only effects were to fan political tensions, heighten exchange rate uncertainty, and upend the global trading system.
    • And no country succeeded in exporting its way out of the depression, since there was no one to sell additional exports to.
    • But this was not what mattered. What mattered was that one country after another moved to loosen monetary policy because it no longer had to worry about defending its exchange rate.

    From Barry eichengreen he has written on Australia in the 1930s.

    The UK and the sterling bloc abandoned gold and largely avoided more trade barriers.

    Strict fiscal policies made sure that fiscal sentiment was positive. The tight budgets in Oz and NZ ensured that there was no expectation of an imminent switch to a higher tax regime.

    People usually suspect that the tax structure that will be implemented to address large fiscal imbalances will be far from optimal

  134. nottrampis
    • In the 1930s, one country after another pushed down its exchange rate in a desperate effort to export its way out of depression.
    • each country’s depreciation only aggravated the problems of its trading partners, who saw their own depressions deepen.
    • Eventually even countries that valued currency stability were forced to respond in kind.
    • In the end competitive devaluation benefited no one, it is said, since all countries can’t devalue their exchange rates against each another. The only effects were to fan political tensions, heighten exchange rate uncertainty, and upend the global trading system.
    • And no country succeeded in exporting its way out of the depression, since there was no one to sell additional exports to.
    • But this was not what mattered. What mattered was that one country after another moved to loosen monetary policy because it no longer had to worry about defending its exchange rate.

    From Barry eichengreen he has written on Australia in the 1930s.

    The UK and the sterling bloc abandoned gold and largely avoided more trade barriers.

    Strict fiscal policies made sure that fiscal sentiment was positive. The tight budgets in Oz and NZ ensured that there was no expectation of an imminent switch to a higher tax regime.

    People usually suspect that the tax structure that will be implemented to address large fiscal imbalances will be far from optimal

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