Commentary on Political Economy

Wednesday 4 August 2021

It's just Another DAY IN THE LIFE of a Franciscan Monk

 The historian Albert Mathieson, in his classic account of the French Revolution, recounts how the first omen of what was to come was when a man walked into a tavern flipping a “Louis d’or”, a gold coin with the imprint of the King (Louis the Eighteenth, soon to be guillotined with Marie Antoinette) and asked the barista: “Change me this drunkard”, referring first to the king, and second to the worthlessness of the heavily debased coin… Something similar is happening now across the West, not to mention places from South Africa to Brazil to Tunisia - you name it. But rest assured: there is no official inflation… why? Because monetary authorities keep moving the goal posts… 

They have to do so because of what is called “financial repression”: governments are so indebted, that interest rates simply… cannot be allowed to rise! Which means that living costs - the “real” ones, as in “real estate” - are beyond the reach of the vast majority of people

So… what follows next?

That is Albert Mathiez, not Mathieson (wonder sometimes where autocorrect comes up with these fictitious names… could it be a rap or be bop “artist”, or a movie star or… boh!)

And this is the famous introductory paragraph to the book:

"REVOLUTIONS properly so called-that is, those which go beyond a mere

change in political forms and those who govern, transforming insti￾tutions and transferring property from one class to another-work under￾ground for a long time before they break out openly as a result of fortuitous

circumstances. The French Revolution, the overwhelming suddenness of

which surprised those who provoked and profited by it as much as those

who fell victims to it, had been slowly coming to a head for a century or

more. It arose from the ever-increasing divorce between reality and law,

between institutions and men's way of living, between the letter and the


The producing class, upon whom the life of society was based, were

increasing their power every day, though work, according to the code, re￾mained a stigma. A man's nobility was in proportion to his uselessness.

Birth and leisure brought with them privileges which were growing more

and more intolerable to those who created wealth and held it in their


I would have thought that simply owning an asset that keeps appreciating is the classic definition of "aristocratic uselessness". Financial abracadabra called "innovation" and now Big Tech and FinTech "disruption" are just appalling instances of simple trickstery and plain theft disguised as "technology". How long the "dumb f__cks" (Zuckerberg) will put up and shut up, I don't know. Usually, though, once people are thrown "on the street", they... "take to the streets"!

The High Court just handed down this decision on work contracts... Whatever one's view, it is clear that it has the potential to reduce all workers to... Uber drivers! Yet another example of how the "system" is creating an underclass of desperados with "flexible" working conditions who don't know if they'll be able to afford rent... Forget about "owning" anything...

This AFR editorial is a contemptible furphy. The point is not whether workers could "double dip"... And it is most certainly not about"freedom of contract"! The point is that once "voluntary casual flexible precarious"... Shit work... becomes the norm, then AND ONLY THEN the necessity arises to avoid... "double dipping"!!!

Classic "camorristeria"... The wolf upstream accusing the lamb drinking downstream...OF POLLUTING THE WATER!!

This piece by Greg Ip just came up at the WSJ. It encapsulates my own thoughts about the nature of industry, which are that there are two sides to capitalism: one social which relies on consumption and what can be called broadly political and managerial "governance", and the other strategic, which relies on the industrial productive side, although this aspect also relies on governance. 

It is entirely obvious that the Chinese Dictatorship - one which comprises nearly 100 million members - believes that ultimately power ... comes from the barrel of a gun, said Mao, but also from DOING and MAKING things, ... Not from "moving fast and breaking things" - Zuckerberg's bullshit twaddle. That's why they are beating the West hands down! Doing and making lead to powerful strategic knowledge; consuming and distributing lead to rearranging deckchairs on the Titanic, to Hollywood and Disneyland..

China Wants Manufacturing—Not the Internet—to Lead the Economy

Even as Beijing unleashes a regulatory assault against tech companies, it continues to shower subsidies and protection on manufacturers

Chinese President Xi Jinping, center, during an April visit to a machinery manufacturer.


By Greg Ip

Updated Aug. 4, 2021 8:00 am ET




To Western investors, China’s regulatory crackdown on superstar companies such as Alibaba Group Holding Ltd. , Tencent Holdings Ltd. and Didi Global Inc. must seem suicidal. How better to undercut growth than to kneecap some of the world’s most successful technology companies?

President Xi Jinping would beg to differ. In his estimation, technology comes in two varieties: nice to have, and need to have. Social media, e-commerce and other consumer internet companies are nice to have, but in his view national greatness doesn’t depend on having the world’s finest group chats or ride-sharing.

By contrast, Mr. Xi thinks the country needs to have state-of-the-art semiconductors, electric-car batteries, commercial aircraft and telecommunications equipment to retain China’s manufacturing prowess, avoid deindustrialization and achieve autonomy from foreign suppliers. So even as the Chinese Communist Party unleashes a multifront regulatory assault against consumer internet companies, it continues to shower subsidies, protection and “buy-Chinese” mandates on manufacturers.

Mr. Xi described these differential priorities in a speech published by the party journal Qiushi last year. He acknowledged the online economy was flourishing, and said China “must accelerate construction of the digital economy, digital society and digital government,” according to a translation by Georgetown University-affiliated researchers. “At the same time, it must be recognized that the real economy is the foundation, and the various manufacturing industries cannot be abandoned.”

Historically, as most countries develop, manufacturing displaces agriculture and then services displace manufacturing. In recent decades manufacturing’s share of gross domestic product in most-advanced economies has declined, especially in the U.S. and Britain, which have seen swaths of factory employment migrate overseas, especially to China.

While manufacturing’s share of Chinese GDP has declined, at 26% it remains the highest of any major economy, and the Chinese government wants it to stay there—in effect insisting that China not follow others down the path of deindustrialization.

“It cannot be like the U.K., which is so successful in the sounding-clever industries—television, journalism, finance, and universities—while seeing a falling share of R&D intensity and a global loss of standing among its largest firms,” Dan Wang, a technology analyst at China-focused research service Gavekal Dragonomics, wrote earlier this year.

Didi’s Rough Ride: Why Beijing Is Looking to Rein In Its Tech Giants



Didi’s Rough Ride: Why Beijing Is Looking to Rein In Its Tech Giants

Didi’s Rough Ride: Why Beijing Is Looking to Rein In Its Tech Giants

After Chinese ride-hailing giant Didi made its Wall Street debut, Beijing said it plans to tighten rules for homegrown companies looking to raise money overseas. WSJ’s Yoko Kubota takes a Didi ride to explain what the crackdown means for China’s tech titans and investors. Photo illustration: Ang Li

Politicians world-wide tend to fetishize manufacturing; investors don’t. Most manufacturing is fiercely competitive and requires enormous amounts of capital and labor, all of which weighs on profits. By contrast, a consumer internet company with a dominant platform can generate boatloads of cash with minimal incremental investment. That is why Facebook Inc. is worth 11 times as much as semiconductor manufacturer Micron Technology Inc. though Facebook employs only 50% more people. It is why in February, before the recent selloff, Alibaba, affiliate of online finance giant Ant Group, was worth 20 times as much as Semiconductor Manufacturing International Corp. , the heavily subsidized “national champion” of China’s chip sector.

But in the view of Chinese leaders, consumer internet companies inflict costs on society that aren’t reflected in private market values. Companies such as Ant threaten the stability of the financial system, online education feeds social anxiety and online games such as Tencent’s represent an “opium for the mind,” as one state-owned publication put it this week.

Conversely, Chinese leaders think manufacturing confers social benefits that market values don’t reflect. For decades, it has been how the country created jobs, raised productivity and disseminated essential skills and know-how. Now, to achieve parity with the West, they think China must be able to make the most advanced technology, and will use subsidies, protectionism and forced technology transfers to achieve that.

American leaders can sympathize: They, too, worry that big tech suffocates competition, violates privacy, propagates misinformation and encourages online addiction. They are ready to emulate China in their readiness to subsidize manufacturers seen as essential to national security. But in the U.S., the government takes a back seat to private markets in allocating capital. In China, it’s the reverse.

This doesn’t mean China is right. Allocating capital to industries deemed necessary for national development yielded big returns when the economy still had plenty of catching up to do. As China has caught up, returns have plummeted and Chinese industries are often awash with excess capacity and debt. Moreover, China’s domestic market can’t absorb everything its factories churn out; the surplus must be exported. To maintain such a large manufacturing share of GDP, China in effect compels other countries to accept a smaller share, perpetuating trade friction.

Yet whether the Communist Party’s priorities make sense in the long run, the recent turmoil in Chinese shares shows they can make or break a company’s future in the short run. “The state runs capitalism to serve the interests of most people,” Ray Dalio, founder of the hedge fund Bridgewater Associates, wrote last week. “Capitalists have to understand their subordinate places in the system or they will suffer the consequences of their mistakes.”

This final passage from Thomas Edsall at the NYT is on all fours with what I’ve been arguing - the vicious circle of growing inequality leading to democratic deficits, leading to more inequality, and so on…

“Biden goes into battle with one crucial advantage: he, his appointees and his advisers have more experience in the trenches of elections, legislative fights and bureaucratic maneuvering than the top personnel of any recent administration

On the other hand, if what his voters need is equality — that is, resource redistribution — experienced advisers may not be enoug

Mart Trasberg and Hector Bahamonde, of Wake Forest University and the Universidad de O’Higgins in Chile, authors of “Inclusive institutions, unequal outcomes: Democracy, state capacity, and income inequality,” pointed out in an email that redistribution is exceptionally hard to achieve in an advanced democracy like the one in operation in the United State

The increase in inequality through market processes puts pressure on fiscal policy, making it difficult to increase redistribution via taxes and transfers. With increasing foreign investment flows and more developed financial sectors, domestic and international corporate and financial elites become stronger actors in domestic politics. Given that these changes are slow-moving and incremental, disorganized voters are not able to vote for a higher taxation of income-concentrating elites. Of course, other mechanisms are likely at play: political elites trick voters to vote on identity issues that do not concern socio-economic redistributio

In the end, much of the dynamism that powers today’s political competition comes back to — or down to — racial and cultural conflict. Can Biden find a redistributive work around — and protect voting rights at the same time? The fate of the Democratic Party depends on it.”

I like the bit that says “political elites TRICK voters to vote on identity issues that do not concern [wealth redistribution]”. 

This has been my point all along against identity politics in the US and elsewhere in the West…

Joe Biden’s economic neo-populism

President Biden has more in common with Donald Trump than with any of the neoliberal administrations that preceded either of them.

Nouriel Roubini


Aug 4, 2021 – 4.36pm



About half a year into Joe Biden’s presidency, it is time to consider how his administration’s economic doctrine compares with that of former president Donald Trump and previous Democratic and Republican administrations.

The paradox is that the “Biden doctrine” has more in common with Trump’s policies than with those of Barack Obama’s administration, in which the current President previously served. The neo-populist doctrine that emerged under Trump is now taking full form under Biden, marking a sharp break from the neoliberal creed followed by every president from Bill Clinton to Obama.

Spot the populist: Donald Trump and Joe Biden, who has stuck with several of his predecessor’s economic policies. AP

Trump ran as a populist – commiserating with left-behind white blue-collar workers – but governed more like a plutocrat, cutting corporate taxes and further weakening the power of labour vis-à-vis capital. Nonetheless, his agenda did contain some truly populist elements, particularly when compared with the radically pro-big business approach that Republicans have pursued for decades.

While the Clinton, George W. Bush, and Obama administrations each differed in its own way, their basic position on key economic-policy questions was the same. For example, they all advocated trade-liberalisation agreements and favoured a strong dollar, seeing that as a way to reduce import prices and support the working classes’ purchasing power in the face of rising income and wealth inequality.

Each of these previous administrations also respected the US Federal Reserve’s independence and supported its commitment to price stability. Each pursued a moderate fiscal policy, resorting to stimulus (tax cuts and spending increases) mostly as a response to economic downturns.

Finally, the Clinton, Bush, and Obama administrations were all relatively cosy with big tech, Big business, and Wall Street. Each presided over the deregulation of goods and services sectors, creating the conditions for today’s concentration of oligopolistic power in the corporate, technology, and financial sectors.

Together with trade liberalisation and technological advances, these policies boosted corporate profits and reduced labour’s share of total income, thereby exacerbating inequality. US consumers benefited from the fact that profit-rich businesses could pass along some of the gains reaped from deregulation (through lower prices and low inflation), but that was about it.

The Clinton, Bush, and Obama economic doctrines were all fundamentally neoliberal, reflecting an implicit belief in trickle-down economics. But things started to move in a more neo-populist, nationalist direction with Trump, and these changes have crystallised under Biden.

Whenever inequality becomes excessive, politicians – of both right and left – become more populist.

While Trump was more heavy-handed with his protectionism, Biden nonetheless is pursuing similarly nationalist, inward-oriented trade policies. He has maintained the Trump administration’s tariffs on China and other countries, and introduced stricter “buy American” procurement policies, as well as industrial policies to re-shore key manufacturing sectors.

Equally important, the broader Sino-American decoupling and race for domination in trade, technology, data, information, and the industries of the future has continued.

Similarly, although Biden has not formally followed Trump in demanding a weaker dollar and browbeating the Fed to finance the large budget deficits created by his policies, his administration has also enacted measures that require closer Fed co-operation. Indeed, the United States has moved into a de facto, if not de jure, state of permanent debt monetisation – a policy that began under Trump and Fed chair Jerome Powell.

Under this arrangement, if inflation were to rise moderately, the Fed would have to adopt a policy of benign neglect, because the alternative – a tight anti-inflation monetary policy – would trigger a market crash and a severe recession. This change in the Fed’s stance represents another sharp break from the 1991-2016 era.

Furthermore, given America’s large twin deficits, the Biden administration has given up on pursuing a strong-dollar policy. While it does not favour a weaker greenback as openly as Trump did, it certainly would not mind a currency shift that could restore US competitiveness and reduce the country’s surging trade deficit.

To reverse income and wealth inequality, Biden favours large direct transfers and lower taxes for workers, the unemployed, the partially employed, and those left behind. Again, this is a policy that started under Trump, with the US$2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act and the US$900 billion stimulus bill that passed in December 2020.

Under Biden, the US has passed another US$1.9 trillion stimulus package and is now considering US$4 trillion of additional spending on infrastructure, broadly defined.

While Biden is pushing for more progressive taxation than Trump did, his administration’s ability to raise taxes is constrained. Hence, as under Trump, large fiscal deficits will again be financed mostly with debt that the Fed will be forced to monetise over time.

Biden also will be channelling a public backlash against big business and big tech that started under Trump. His administration has already taken steps to curb corporate power through antitrust enforcement, regulatory changes, and eventually legislation. In each case, the goal is to reapportion some share of national income from capital and profits to labour and wages.

Joe Biden is a transformational president. 


Biden’s reversing the Reagan revolution

President Joe Biden behind the wheel of a Ford F-150 Lightning truck in Dearborn, Michigan, last month.


Biden’s trickle-up economics is bound to fail

Biden has thus come out of the gate with a neo-populist economic agenda closer to Trump’s than to that of the Obama administration. But this doctrinal shift is not surprising. Whenever inequality becomes excessive, politicians – of both right and left – become more populist. The alternative is to let unchecked inequality become a source of social strife or, in extreme cases, civil war or revolution.

It was inevitable that the US economic-policy pendulum would swing from neoliberal to neo-populist. But this shift, while necessary, will bring risks of its own.

Massive private and public debts mean that the Fed will remain in a debt trap. Moreover, the economy will be vulnerable to negative supply shocks from de-globalisation, US-China decoupling, societal ageing, migration restrictions, the curbing of the corporate sector, cyber attacks, climate change, and the COVID-19 pandemic.

Party pooper: Larry Summers says the Biden economic rescue plan could set off once-in-a-generation inflation.


America can’t afford to get it wrong on debt and deficits

Loose fiscal and monetary policies may help to increase labour’s share of income for now. But, over time, the same factors could trigger higher inflation or even stagflation (if those sharp negative supply shocks emerge).

If policies to reduce inequality lead to unsustainable increases in private and public debts, the stage could be set for the kind of stagflationary debt crisis I warned about earlier this summer.

Project Syndicate

"Whenever inequality becomes excessive, politicians – of both right and left – become more populist. The alternative is to let unchecked inequality become a source of social strife or, in extreme cases, civil war or revolution." - Roubini

"[Biden's] administration has also enacted measures that require closer Fed co-operation. Indeed, the United States has moved into a de facto, if not de jure, state of permanent debt monetisation – a policy that began under Trump and Fed chair Jerome Powell.

Under this arrangement, if inflation were to rise moderately, the Fed would have to adopt a policy of benign neglect, because the alternative – a tight anti-inflation monetary policy – would trigger a market crash and a severe recession."

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