Monday, October 13, 2014

Why the Economy is Bad for Most People and Getting Worse

Why the Economy is Bad for Most People and Getting Worse



by Ian Welsh
This is the second collation of articles on why our world is what it is, and how we can change it.  Some of these articles are old, as I don’t write as much as I used to about economics because the decision points for avoiding a completely lousy economy are now past.  The last decision points were passed when Barack Obama announced his economics team and refused to try and get rid of or bypass Bernanke to enforce decent policy on the Federal Reserve.
However this economy was decades in the making, and if we do not understand how it happened we will only wind up in a good economy through accident, and having obtained a good economy, will not be able to keep it.  These articles aren’t exhaustive, a better list would include almost 5 centuries of economic history, at least in summary, and certainly deal with the 19th century and early 20th century.
I was heartened that hundreds of people read the articles linked in my compendium on ideology and character  so I dare hope that you will, again, read these pieces.  If you do you will walk away vastly better informed than almost anyone you know, including most formal economists, about why the economy is as it is.
The Pundits today natter on and on about income inequality, but the fundamental cause of income inequality is almost always how power is distributed in society.  As power goes, so goes income: and wealth.  The last period of broad based equality was the liberal period which started with the Great Depression.  You can locate the end of that era at various points from 1968 to 1980, but 1980 was the point where turning back became vastly difficult, because it was the moment when a new political order was born: an order born on crushing those who were willing and able to fight effectively for their share of income and money.
Those who are middle aged or beyond remember the relentless march of free trade agreements, the creation of the WTO and endless drumbeat of propaganda about how FREE trade was wonderful, inevitable and going to make us all rich.  It didn’t, and it was never intended to, but understanding fully why it only enriched a few requires understanding the circumstances required for free trade to work; the incentives for free trade; and the power dynamics which make free trade perfect for elites who want to become rich, often by destroying the prosperity of their own countries.  Free trade is about power: and power is about who gets how much.
All societies change and face new challenges.  What matters is how they deal with new circumstances.  America in specific, and most of the developed world in general, are in decline because of simple broken feedback loops: to put it simply, ordinary people live in a world of propaganda and lies; while the rich and the powerful live in a bubble, isolated from the consequences of their decisions on the majority of the population or on the future.
This may be the hardest thing to explain to anyone with a connection to power or money: the bailouts are WHY the world has a lousy economy; not why it isn’t even worse.  If you cannot understand why this is so, if you cannot understand that other options were, and are, available, other than making people who destroyed the world economy even richer and more powerful, then you will never see a good economy ever again.
You may have noticed; you probably have noticed, that countries are becoming basket cases faster and faster.  Some are destroyed by war and revolution, others by forced austerity, but however it happens, the end of anything resembling a good economy in places like Greece, or Ukraine, or Italy, or Ireland or through war, in places like Lybia and Syria is sure.  Understand this: what is done to those countries, is being done to yours if you live in the developed world, just at a slower pace.  And one day, you too will be more valuable dead than alive.
Many of you will realize that much of the answer to this is related to the article on free trade.  Weakness, national weakness, is built into the world economic system, and done so deliberately.  The austerity of the past six years is just the impoverishment of ordinary people, for the profit of elites, on steroids.  But it is worth examining, in detail why countries can’t or won’t stop it, and what is required for a country to be able to do so.
We live in the remnants of a mass society, but we aren’t one any more though we think we are. In a mass mobilization society with relatively evenly distributed wealth and income and something approaching competitive markets public opinion mattered. If it was not King, well, it was at least a Duke.  Today it matters only at the margins, on decisions where the elites do not have consensus.  Understand this, and understand why, or all your efforts to resist will be for nothing.
Money, my friends, is Permission, as Stirling Newberry once explained to me.  It is how we determine who gets to do what.  He who can create money, rules.  This is more subtle than it seems, so read, and weep.
We have almost no significant problems in the world today which we either could not have fixed had we acted soon enough, or that we could not fix or mitigate today, were we to act.  We don’t act because we mis-allocate, on a scale which would put Pyramid building Pharoahs to shame, our social efforts.
No one ever told you that, I’m sure.  Read, and learn.
The USSR fell in large part because of constant and radical mis-allocation of resources, because those running the economy did not receive accurate feedback.  Despite the triumphal cries of the West and the managerial class who pretend to be capitalists, a version of this exact problem is at the root of our current decline, and it would serve us well to understand how and why the USSR fell.
Of all the ideological bugaboos of our current age, one of the strongest is the idea that private enterprise is always more efficient and better.  It’s not, but that belief is a very profitable one to our elites, and understanding how the engine of privatization works is essential to understanding both our current economic collapse and how the fake bright economies of neo-liberal era, especially the early neo-liberal period of Thatcher and Reagan, were generated.
It is, perhaps, odd, to put this article so far down the list, but it’s wonky and important and not very dramatic.  Simply enough, what we define as prosperity isn’t, which is why we are sick, fat and unhappy with rates of depression and mental illness and chronic disease which dwarf those of our forbears despite having so much more stuff.  Fix everything else, and if we insist on continuing to produce that which makes us sick and unhappy, what we have will not be what we need, or want, nor, truly, prosperity worth having.
Prosperity, at its heart, is an ethical phenomenon, as much as it is anything else. Without the right ethics, the right spirit, it will not last, nor be widespread.  If we want a last prosperity which is actually good for us, we will start by reforming out public ethics.
The internet is wonderful, but despite all the cries of progress, progress, it has mostly made a few people rich, created a prosperous class of software engineers who often lose their jobs in their 50s, and at the same time as it has risen, seen the decline of the prosperity of most people in the developed world.  It has not produced the prosperity we would have hoped it would.  Here’s why, and how to fix it.
Concluding Remarks
The above is so far from comprehensive as to make me cry, but it’s a start.  I do hope that you will read it and come away with a far better idea of why the economy sucks for most people, and a clear understanding both that it is intended to, why it is intended to, and how the old, better economy was lost.

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