Commentary on Political Economy

Wednesday, 18 May 2022


In the short extract below, the NYT writer refers to my favourite political theoretician of the last century, Hannah Arendt (my most popular piece, The Philosophy of the Flesh, borrows her words for the title and is a lengthy analysis of her “The Life of the Mind”).

Here is the extract:

“The experience of reading Hannah Arendt’s 1951 classic “The Origins of Totalitarianism” in the year 2022 is a disorienting one. Although Arendt is writing primarily about Nazi Germany and Stalinist Russia, her descriptions often capture aspects of our present moment more clearly than those of us living through it can ever hope to.

Arendt writes of entire populations who “had reached the point where they would, at the same time, believe everything and nothing, think that everything was possible and that nothing was true.” She describes “the masses’ escape from reality” as “a verdict against the world in which they are forced to live and in which they cannot exist.” She points out that in societies riddled with elite hypocrisy, “it seemed revolutionary to admit cruelty, disregard of human values, and general amorality, because this at least destroyed the duplicity upon which the existing society seemed to rest.”

[You can listen to this episode of “The Ezra Klein Show” on Apple, Spotify, Google or wherever you get your podcasts.]

It’s hard to read statements like these without immediately conjuring up images of Vladimir Putin’s Russia or Donald Trump’s presidency or the QAnon faithful. But that’s exactly the point: The reason Arendt is so relevant today is that her diagnosis doesn’t apply just to the Nazi or Soviet regimes she was writing about. It is more fundamentally about the characteristics of liberal societies that make them vulnerable to distinctly illiberal and authoritarian forces — weaknesses that, in many ways, have only become more pronounced in the 70 years since “The Origins of Totalitarianism” was first released.” 

Note that the writer refers to Putin and Trump…but not to Xi! Unforgivable.

But the biggest omission is that the reason why Western publics are ripe for authoritarian turns is that the “normality” of their everyday life has been SHREDDED by the elites (to facilitate “globalisation”). From social media, to cancel culture to sexual and gender trauma, citizens emit “a verdict against the world in which they are forced to live and in which they cannot exist [wherefore in societies riddled with elite hypocrisy] it seemed revolutionary to admit cruelty, disregard of human values, and general amorality, because this at least destroyed the duplicity upon which the existing society seemed to rest.”

This systematic destruction of, first, normality, second, solidarity, and third, security is the reason why our societies are becoming utterly and irreparably ungovernable!

The mistake of the “liberal” elites is to think that the real problem is populism when in reality populism is a REACTION to the social devastation of bourgeois “liberalism” both in the ethical-moral AND in the political-economic spheres!

Sunday, 8 May 2022

 And almost to prove my theories AND Ross Douthat's account, here is Maureen Dowd attacking the conservative judges on the Supreme Court WHILST WHOLLY IGNORING the politico-economic reality that these elite Republican judges are THEMSELVES exploiting these "woke" issues TO MAINTAIN CLASS DIVISIONS!

Here Democratic and Republican elites exploit MORAL beliefs TO MAINTAIN CLASS DIVISIONS!

But class conflict, which both US parties wish to conceal behind the "judicial screen" of court-made law (removed from Congress) actually comes back to haunt the American polity!

These same dynamics are playing out in Australia, as is made plain by the current electoral campaign!

Saturday, 7 May 2022

This is a MASTERFUL piece from Ross Douthat at the NYT. WELL WORTH READING, if you have time. It will help understanding the political and economic dynamics of how "wokeism" divides and fractures Western societies ONLY APPARENTLY on moral lines BUT IN REALITY along CLASS CONFLICT.

I often jokingly suggested on my Blog that perhaps Ross Douthat was a frequent visitor (!) given how his columns seemed "to shadow" the theories I had just advanced!

This piece is almost a case in point because, from a political, economic and sociological standpoint it clearly reinforces my view, based on politico-economic theory, that business elites use these "woke" matters as (a) potent weapons to divide class solidarity in favour of capitalist globalisation and (b) distract from the negative social effects of this globalisation.

Here it is:

How Roe Warped the Republic

Credit...Damon Winter/The New York Times

Opinion Columnist

In one sense, liberal outrage at the prospect of the Supreme Court overturning Roe v. Wade seems like an uneasy fit with liberalism’s current master narrative, which holds that liberals are defending democracy against the threat of authoritarianism and fighting for the principle of majority rule against a Republican Party that benefits from counter-majoritarian power. After all, overturning Roe would return the abortion issue to the democratic process, after two generations in which abortion policy has been set by a juristocracy, an elites-only vote of 7 to 2 or 5 to 4.

However, narratives are adaptable. “In Draft Abortion Ruling, Democrats See a Court at Odds With Democracy” ran a recent Washington Post headline, over a story summarizing some of the arguments (the polls showing public support for Roe, the fact that three of the justices were appointed by a president elected with a minority of the popular vote) being offered to prove that letting states or Congress legislate on abortion is actually authoritarian, not democratic.

I don’t want to argue with these interpretations so much as take note of them, while offering a different view of abortion’s place in the American republic’s discontents. I share some of the anxieties that inform the liberal master narrative these days — about a country too deeply polarized to function, a populist right that’s steeped in paranoia, a decay of the norms that allow republican government to function. But if I set out to write a story about how exactly we got here, I would place the original Roe decision near the center of the narrative — as an inflection point where the choices of elite liberalism actively pushed the Republic toward our current divisions, our age of chronic strife.

When seven Supreme Court justices overturned the nation’s abortion laws in 1973, they were intervening in a debate whose politics were unstable and complex. Both pro-life and pro-choice sentiment cut across both parties, and across ideologies as well — there were anti-abortion liberals, many of them Catholic Democrats, and Republican and right-wing supporters of abortion who regarded it as a possible prop to social stability.

It’s likely that the debate would have been nationalized and polarized eventually no matter what. But the Supreme Court decision nationalized abortion politics in a very specific way, removing most abortion regulation from the realm of legislative debate and linking it to the court itself and the office of the presidency. Thereafter, instead of being fought over in the institutions that are designed to channel mass opinion and activist mobilization into stable settlements — whether state legislatures or the Congress — abortion would be bound to the all-or-nothing outcomes of presidential elections and Supreme Court nomination fights.

The predictable result was an increasingly Manichaean politics: You were either for the original ruling or against it, no compromises could be negotiated or local policy experiments conducted, and the issue was distilled every few years to a referendum on presidential candidates and high court nominees, the friend-enemy distinction in its purest form.

Over time the apocalyptic style that this encouraged in both parties would expand to encompass other issues, such that the role of abortion was partially obscured. But whether it was feminists rallying to a sexual-predator president in the 1990s or religious conservatives throwing over all their ideas about character and decency and piety to back Donald Trump in 2016, when polarization corrupted principle, the Roe debate was usually at the root.

But the nature of the polarization also mattered. A nationalized abortion debate split America along two especially dangerous lines of fracture, class and religion. Though liberals often insist that they are championing abortion rights on behalf of the poor and marginalized, the reality is that poorer and less-educated Americans are more likely to be pro-life, while the rich and well-educated are more likely to be pro-choice. Likewise, though pro-lifers stress the secular arguments against abortion, the reality is that Christian beliefs are one the best predictors of anti-abortion sentiment.


Continue reading the main story

So the sorting that defines our politics today — a right that’s working-class, rural and religious, a liberalism of the city and the secular and the managerial class — was accelerated by the divisions over Roe.

And the way Roe was decided made this polarization worse. From the perspective of geography and class — was accelerated by the divisions over Roe.

And the way Roe was decided made this polarization worse. From the perspective of geography and class, a group of robed lawyers in Washington, D.C., demanding that the country simply accept their settlement on one of the gravest moral questions imaginable is the perfect primer for a populist revolt.  What has happened in similar ways with other issues — immigration, most notably — happened with abortion first: The elite settlement failed to settle the issue, and the backlash encompassed not just the issue itself but elite legitimacy writ large.

From the perspective of religion, meanwhile, by constitutionalizing the issue Roe didn’t just hand a normal political defeat to the pro-life side; it seemed to read their core convictions out of the American constitutional order entirely, seeding a religious alienation that continues to bear bitter fruit today. And the timing was particularly unfortunate: When Roe was handed down, both Catholicism and evangelicalism had just passed through periods of reform and modernization that promised a reconciliation between Christian faith and liberal modernity. Then immediately, liberal modernity changed its demands and made them all-or-nothing, making the moral price of admission more than many Christians could reasonably pay.

Finally, and crucially for the deformation of liberalism itself, the price demanded was not just moral but intellectual — because Roe was not a persuasive constitutional decision,  but rather the clearest-possible case study in what it looks like when justices legislate from the bench.


Continue reading the main story

This is something that was acknowledged by a few rigorous liberals from the beginning, and the best feminist legal scholarship — including the work of Ruth Bader Ginsburg — always sought a different grounding for abortion rights.

But once you have nationalized and constitutionalized an issue, it is not so easy to adapt your position or your arguments. Having (seemingly) won the policy battle, you are incentivized to avoid hard debates, avoid reopening vexing questions, assume the worst of your opponents and never admit they have a point. And in that sense the commitments that Roe required of its supporters anticipate the entirety of liberalism’s drift: toward a debilitating mix of expert certainty and incuriosity, moral superiority and ignorance of what its adversaries actually believe.

Nothing in the story I’ve just told means that overturning Roe now will necessarily improve either liberalism or conservatism, reinvigorate democracy or depolarize our politics. You begin from where you are, and where we’ve ended up does not inspire confidence in whatever may come next.

But if Roe does fall, it makes sense that a decision that did so much to divide our parties and delegitimize our institutions would ultimately be undone by the very forces it unleashed: In its beginning was its end.

Tuesday, 3 May 2022


Edward Luce

Remember Goldilocks? We are unlikely to be hearing much about that fairy tale character in the near future. For Jay Powell, the US Federal Reserve chair, the odds are that the American economy will either run too hot or too cold, or go from one to the other. Unlike in the 1990s, or indeed for most of the last generation, it would be rash to bet on a soft landing for the US economy. The era of easy money was also one of relatively easy central banking. That job is getting much tougher. Goldilocks has left the building. Some of the Fed’s woes are self-created. Its chief sin has been wishful thinking — a trait that was also shared by the markets. The Fed has not yet explained why it got inflation so wrong in the last year. For most of 2021, the Fed insisted higher inflation was “transitory” even as evidence accumulated that it was not. Then in November the Fed switched to admitting the problem was stickier than it thought. But it did not act as though it meant it. It took another four months to end its monthly injection of $40bn into a housing market that was already booming. Even after proclaiming a turn in the interest rate cycle, the Fed signalled the shift would be modest. Its first interest rate increase of 25 basis points came in March — months after inflation began to overshoot its 2 per cent target. Real monetary conditions have in fact got easier since then. Inflation has risen by more than the Fed funds rate, which makes America’s real interest rate even more negative than it was before. It is as though Powell, reappointed Fed chair, cannot bring himself to let go of Goldilocks’ hand. It is hard to blame him. For decades, the markets have thrived on the one-way bet that when conditions got rough the Fed would prop up asset prices with steep rate cuts and quantitative easing. It thus always made sense for investors to “buy on the dip”. Even when the Fed complained that it was the only game in town — in frustration with the fiscal gridlock that disabled Washington for most of the years after the financial crisis — it carried on playing. Not to have done so would have been far worse for everybody. But the super-rich have been the overwhelming beneficiaries, which has not been healthy for democracy.

 On the one occasion the Fed did try to alter the rules, it was quickly whipped into line. Ben Bernanke’s attempt to end quantitative easing in 2013 was shut down by the market’s “taper tantrum”.

The pandemic returned the Fed to the 2008 mindset of “whatever it takes” — only this time with the fortunes of the non-rich explicitly in mind. A few months after Covid-19 struck, the Fed replaced its strict 2 per cent inflation target with far more fungible language. Almost everybody, not just the Fed, converted to the view that the US economy could be run far hotter than theory dictated for the sake of full employment.

That stance has now sadly been discredited. Inflation, it turns out, is still a death eater of income gains. In addition to fast wage growth, China’s addiction to “zero Covid” lockdowns and the war in Ukraine are likely to sustain inflation across a broad range of products for months. Though the Fed can do nothing to ease global supply chain problems, the risk is that it will have to overcompensate for its failure to tackle inflation sooner. On Wednesday, Powell is likely to announce the first 50 basis-point increase in years. That is already priced in. But with headline inflation at 8.6 per cent, a doubling of the Fed funds rate to 1 per cent is hardly disinflationary.

This underlines two growing threats to the Fed. The first is that it might be forced to induce a US recession with far higher interest rate increases than it now anticipates. The Fed’s last dot plot predicts a 1.9 per cent rate by the end of this year. Last week Deutsche Bank predicted the Fed would have to lift that rate to 5 or 6 per cent to tame inflation. For similar reasons, Morgan Stanley warned that the US was entering a bear market. Both views are a minority. But consensus forecasts, including the Fed’s, have been so badly off that it would be unwise to take the majority literally. The middle class wage renaissance may turn out to be fleeting.

The second worry is about the harm to the Fed’s credibility. Powell did not acknowledge that inflation was non-transitory until after President Joe Biden reappointed him. Doubtless this was a coincidence. Either way, the institution that was until recently seen 
as Washington’s most effective may be forced to relearn the lessons of the 1970s and early 1980s — even if today’s woes are not as great. Credibility is bought at great expense over a period of years. Alas, it can also be risked with remarkable ease.


Monday, 2 May 2022


Western leaders must prepare public for a war economy The cost of living crisis is likely to get worse before it gets better 

 Inflation pressures in the west could increasingly steal attention from the Ukraine conflict © Anita Pouchard/Bloomberg Share on twitter (opens new window) Share on facebook (opens new window) Share on linkedin (opens new window) Share on whatsapp (opens new window) Save Martin Sandbu MAY 1 2022 259 Receive free War in Ukraine updates We’ll send you a myFT Daily Digest email rounding up the latest War in Ukraine news every morning. The expression is ugly and its content even uglier, but “Ukraine fatigue” is a real risk in western democracies. Their citizens are repulsed by Vladimir Putin’s war of unprovoked aggression and are full of sympathy for the Ukrainian people. Their leaders have surprised even themselves with the strength of their support for Kyiv. But as things drag on, challenges closer to home could increasingly steal their attention. It is easy to see how the cost of living crisis, which is compounded by war and snarled-up supply chains, and which is probably already putting a chill on demand, could erode western leaders’ focus on Ukraine. To let this happen would be an error and a failure. An error, because inflation in the west is to a significant extent made in Moscow. A failure, because it would mean that political leaders had neglected their chief task of preparing the public for the unavoidable hard choices to come. Western politicians must explain to their voters that the cost of living crisis is likely to worsen, and why. This is the sort of speech they could give: “My fellow citizens, “The past few years have been hard. The pandemic brought illness and death, heartache and loneliness, and threats to the livelihoods and businesses of millions among you. Even as we were opening up our economies and thought the worst was behind us, we were hit by rising inflation and more expensive energy. “Since February 24, we have witnessed the horrors of war revisited upon Europe, decades after we swore ‘never again’. We stand with Ukraine against the unjustified assault by Vladimir Putin’s Russia. Our soldiers will not join the battle; we will not enter a third world war unless Russia attacks us. But we will do everything to help Ukraine’s brave people defend themselves, and to weaken Putin’s capacity for unleashing violence in the world. “If we ourselves are not at war, the consequences of war have long since reached us. The price of freedom in Europe is paid by Ukrainians first and foremost, but also by so many of you, who worry how you are going to keep on your lights and heating, buy healthy meals for your children, or keep your businesses running. “Let us be clear: the cost of energy has soared because Russia’s dictator has turned oil and gas into weapons. The price of food is going up because he is laying waste to Europe’s most productive farmland. And our sanctions on Russia inevitably involve economic sacrifice from ourselves. “I wish I could tell you that things will soon get better. But the truth is that they are likely to get worse. Prices of energy, food and commodities could go up further. Our economic growth and our incomes may slow. It is essential that we look this reality in the eye and that we work together to face these coming challenges. “We cannot deny that higher import prices make our economy poorer. Our central banks cannot save a lost Ukrainian harvest or fix global supply chains by raising the cost of credit. And should Putin cut off more of Russia’s gas supply overnight, we cannot pretend that we would not be harmed. “Something like a wartime economy is being imposed on us — not of our choosing, but we must not shrink from it. That requires all of us to put the common good first. “Those with broader shoulders must be prepared to contribute more in taxes. Those most exposed to inflation should expect more help but also accept that help cannot do away with the need to adapt. “We may have to ration some essential goods. Everyone must be patient with more indebted public finances. And we have to help those countries worse placed than us, or their problems will soon be ours. “It is tempting to close one’s eyes to what is right and go with what seems comfortable. But the path of least resistance is both wrong and unwise. Backing down against Putin for some short-term respite in commodity prices would only leave us more at his mercy. “And let us be honest that this crisis forces us to take steps we should have taken long ago for the sake of our grandchildren. The future health of their planet requires an end to fossil energy. Today, our immediate geopolitical security demands the same — starting with Russian fuels. “It is our duty to invest in an energy system that is both clean and safe from democracies’ enemies. Jobs may be lost and consumption curtailed in the process. But like war, this is a task our generation must carry out for the sake of the next.”

 Rana Faroohar at the FT is always good value. This is well worth reading and in line with my theses on capitalism:

The failures of stakeholder capitalism

ESG investing is missing the realities of market power in an age of corporate concentration and rising profits


People who care about creating a fairer and more sustainable market system tend to think about things like “ESG” investing (environmental, social and governance issues) and “stakeholder capitalism”. But what they need to start thinking about is power.

Consider Elon Musk’s purchase of Twitter. Tesla ranks above average on many metrics tallied by JUST Capital, an influential non-profit focused on stakeholder capitalism. But its chief executive is preparing to sell a big chunk of his stock in the electric carmaker, a company that could actually do some good in the world, to buy a social media platform which has arguably made it worse. Musk, who plans to take it private, may, for example, re-enable the former Tweeter-in-chief, Donald Trump.

Portraying Musk as the saviour of free speech and democracy may strike some as ludicrous. This is a man, after all, who views tax as some kind of personal assault and yet has enjoyed billions in government subsidies. But it’s not the only recent example of a billionaire posing as a defender of the public good.

Consider a letter from Carl Icahn, the shareholder activist and veteran of some of Wall Street’s most hostile proxy battles, to the grocery chain Kroger last week, in which he slammed the company’s record on corporate pay.

“What is totally reprehensible is that you managed to personally profit from the extremely high margins caused by the pandemic while at the same time reneging on your ‘Hero Bonus’ promise to frontline workers,” he wrote.

Icahn went on: “This mockery of meritocracy is the quintessential example of why capitalism and business get a bad rap and people are disillusioned with the American dream.”

Ever-adept at exploiting the politics of the moment, Icahn sees himself like Musk (however improbably) as a defender of the little guy. But he is on to something.

Regulators in Washington are beginning to sniff around any number of companies perceived as having benefited from the current inflationary pressures in the economy by raising profit margins unfairly.

Some leading companies haven’t covered themselves in glory, with chief executives boasting about their pricing power on earnings calls.

Yet stakeholder capitalists, “while assertive about the obligations of firms in many areas, have been utterly silent” on instances of concentrated corporate power, says Denise Hearn, a senior fellow at the American Economic Liberties Project, and competition lawyer Michelle Meagher, co-founder of the Balanced Economy Project. They make a good point.

The pair released a paper last week arguing that those who care about more equitable markets should focus on monopoly power. “The inherent dissonance between the perpetual drive for scale and dominance, and the recurring market abuses of the largest corporations, is a conflict that stakeholder capitalism ignores,” they write.

Hearn and Meagher point out that America’s most “just” company, according to JUST Capital, is Google — a behemoth accused of antitrust violations on two continents.

Corporate concentration, like profits, has reached record levels in recent years: since 1990, more than 75 per cent of US industries have become more concentrated. The pandemic has only magnified this trend.

Even as ESG investing increased, concentration — along with global M&A, private equity deals, and financial engineering like share-buybacks — did, too. Of course, so did worker pay. But it remains to be seen whether labour’s pricing power will survive in the next downturn.

Corporate power certainly will, and that has political consequences, as Stanford business professor Anat Admati makes clear in a recent paper about what has gone wrong with capitalism. As concentration has increased, she writes, corporations have made it “challenging for governments and the legal system to protect citizens from undue harm” inflicted by companies themselves.

While many market participants view government as the problem, Admati notes, they fail to “reflect on why democratic governments are failing” and how corporations and their leaders “contribute to this failure” by undermining the public sector’s “ability, effectiveness, and willingness to act in the public interest”.

Big company market power, political power and the cognitive capture of policymakers is huge, particularly in the US. But it only takes one or two strong leaders to change things.

I was struck, at the annual University of Chicago Stigler Center’s monopoly conference a couple of weeks ago, by barn-burning comments from the head of the Federal Trade Commission, Lina Khan, and Department of Justice antitrust division chief Jonathan Kanter. Both insisted on the need to look beyond consumer welfare, for more than four decades the touchstone of US antitrust law, to “market realities” when thinking about regulatory action.

Both made it very clear that they were ready to “take on the big fights,” as Khan put it, and hold not just companies, but individuals, accountable. Referring to Jesse Eisinger’s eponymously titled book on the decline in the DoJ’s willingness to go after corporate wrongdoing, Kanter said: “We aren’t part of the chickenshit club.” Investors, take note.