Thursday, September 29, 2016

Open Letter to Young Leftists.

Dear Young Leftists,

It's been ten years since the housing bubble burst in the US back in 2006, followed by the Great/Long Recession.

Time flies, as they say.

Ten years passed but things still aren't okay in the global economy. Europe never really recovered, and Deutsche Bank already looks like a repeat of Lehman Brothers, threatening to sink Germany and the rest of Europe. Even the Lucky Country, Australia, which avoided a recession, is teetering on the brink. To say nothing of political extremism, surveillance state, terrorism, wars, sabre rattling between nuclear powers, climate change, and mass extinction.

Things don't look promising for anybody I know. For once, I don't envy the young.

I know. It's not popular to tell the truth unvarnished. One is supposed to say there's an easy, painless, safe solution; a little reform here and there. But the truth is, you don't treat a gangrenous limb with a touch of iodine, a band aid, an aspirin and pseudo-scientific mumbo jumbo.

What can we really expect from a "reformed" capitalism?

The chart above speaks for itself: not much. Since 1950 the share of gross domestic income corresponding to wages has been falling in the US, the richest, most advanced capitalist economy.

Let that sink in: wages have been slowly eroding for sixty six years. Yes, 66! That's longer than you've been alive.

And it has fallen under recessions and under booms, under Democratic and under Republican administrations. More importantly: it has fallen under Keynesian and under Monetarist/neoliberal policies, with and without globalisation, free trade, and financial deregulation.

----------

Whatever they might call themselves these days (Social Democrats, Fabians, Third Way, New Left, New Labour), anti-Marxist pseudo-Leftists always loved the myth that in a capitalist economy there is a sweet spot where the interests of capitalists and workers can both be served at the same time. And, conveniently, who better than them to perform that trick?

According to that old legend, rediscovered by Keynesians, only they -- Keynes' truest disciples -- inherited the sacred esoteric knowledge from their prophet and it's thanks to them that humanity for roughly thirty years (what the French charmingly call Les Trente Glorieuses) lived in the Garden of Eden.
(Isaiah 11:6-9)

Humanity, they say, only fell from grace when the Monetarist/neoliberal serpent entered Paradise, in the mid/late 1970s. But at the end of times (indeed, the end of history), they prophesy, we shall return and wolves and lambs, leopards and calves, capitalists and workers, shall live in harmony guided by the priesthood of Maynard.

There's just one problem with that prophecy, as the chart shows: it's just a legend. Workers have been losing the class war for 66 years. There's little difference between the priests of Keynes (with or without prefixes) and the neoliberal/neoclassical heathens.

There is no invisible hand of Maynard, in a capitalist economy, to stop capitalists and their state from squeezing workers.

----------

And, for all their talk about science and pragmatism, for all their supposed hard-nosed realism and their technocratic posturing, post Keynesians do believe in the invisible hand of Maynard. They do believe, against all evidence to the contrary, that there's something inherently moral in capitalism:
"So Krugman is wrong. Economics *is* a morality play – because its about the production and distribution of goods and services to fulfil the needs of *society*."
Ironically, even Paul Krugman knows better. If that doesn't qualify as fanatical faith, I don't know what does.

----------

I'm a 55 year old man and I won't be around forever. Men in my family seldom live long. I may still avoid the worst, should things go further south. If you, my friend, are younger, you (or your children) may not be that lucky.

You can't say nobody warned you. Don't let those people bullshit you.

Best regards.

11 comments:

  1. good post,swooping bird
    - the oo

    ReplyDelete
  2. Thanks, Birdwatcher.

    Your friend, the -- 0 ---,

    :-)

    ReplyDelete
  3. Well said. Keynesianism is the left pole of respectable leftism and it has done tremendous harm. Society's problem becomes not one of concentrated and hostile minority power, but merely a bit of insufficient demand that can be stimulated with a wee bit more government spending. I'd add that workers have been losing the class war for far more than 66 years; by my count it's been about 5,000 years.

    Jim
    https://commentsongpe.wordpress.com

    ReplyDelete
  4. I'd add that workers have been losing the class war for far more than 66 years; by my count it's been about 5,000 years.

    I know what you mean, Jim. Those 66 years of loss I show are just as far as the data go.

    It seems as I age I'm growing more optimistic, paying less attention to the negative bits.

    Now, that's a disturbing thought.

    ReplyDelete
  5. Oh my god.... it's true that Brad Delong is in the bible...

    ReplyDelete
  6. Since 1950 the share of gross domestic income corresponding to wages has been falling in the US, the richest, most advanced capitalist economy.

    The chart above doesn't show that.

    Constant share of about 50% followed by continual decline when les Trentes Glorieuses ended, at the oil crises, the 70s is clearly a much better description.

    ReplyDelete
    Replies
    1. Hi Calgacus,

      Thanks for your comment.

      "The chart above doesn't show that.

      "Constant share of about 50% followed by continual decline when les Trentes Glorieuses ended, at the oil crises, the 70s is clearly a much better description"


      Calgacus, download the data and adjust a linear trendline and tell me what it says. :-)

      You can see the data has a random component and there are ups and downs. There is a number of recoveries lasting more than a year or two (we are currently going through one):

      1. 1948-1953
      2. 1965-1970
      3. 1996-2000
      4. 2006-2008
      5. 2013-2015

      You can see that in the chart. Why would one object not including the first one -- as you do -- but say nothing about the last three ones?

      Delete
  7. Calgacus, download the data and adjust a linear trendline and tell me what it says. :-)

    That procedure would yield a line, no matter what data, of course. So it cannot provide evidence against what I said; it is basically assuming what is to be proved.

    Why would one object not including the first one -- as you do -- but say nothing about the last three ones?

    Not sure of your exact meaning, but show the graph to anyone, without labelling it or saying what it is, and I assert they would say what I did: the graph shows that something changed (around 1973). The graph agrees with the "Trentes Glorieuses" followed by a distinct neoliberal era, not one period without major change.

    I'm not saying nothing about the last 3, just saying what many have said, that the neoliberal era recoveries have become weaker and much more angled towards the top. This means a decline in wages after 1973, as we both agree.

    ReplyDelete
    Replies
    1. "That procedure would yield a line, no matter what data, of course. So it cannot provide evidence against what I said; it is basically assuming what is to be proved."

      Come on, Calgacus, the procedure I used is exactly the opposite: the data do not suggest a better trendline. In fact, one doesn't need to be an expert statistician to see that the data look like a linear trend.

      ----------

      But this problem has an easy resolution.

      You believe my procedure is flawed. Fair enough.

      Prove it. No need to write volumes for that or bet about what other people would say. Present your alternative.

      As none of us is a professional statistician, let's stick to the basics. Again, download the data and use any spreadsheet you may have.

      Assuming you are using a garden-variety spreadsheet: they have plenty options. The one I use (LibreOffice Calc version 5.1.2.2) has:

      (1) Linear
      (2) Polynomial
      (3) Logarithmic
      (4) Exponential
      (5) Power
      (6) Moving average

      You can specify for the spreadsheet to present the equation and its coefficient of determination (R^2). Do it.

      We are interested in a model where the COE share of GDP is a function of time; we also need a comparison statistic (the easiest is R^2, which probably every single spreadsheet calculates). These two criteria rule (6) out. But, other than linear, you still have 4 options.

      Pick the linear trend line and write down its results (equation and R^2). Do the same for your own alternative and next time you reply, instead of arguing this and that, (i) explain what made you think of that model (for instance, which diagnostic technique, like plotting on log scale, or whatever, you used) and (ii) present both its equation and coefficient of determination, so as to compare them with those of the linear trend.

      Something simple, like a paragraph to explain why you chose that model, maybe some links, and a table (like the example below), will do:

      Your alternative | linear
      ------------------+------------
      your R^2 | linear R^2
      your model | linear model

      It should take you less time to do that than it took me to write this, but I'll give you one day. Sounds good?

      Delete
    2. Damn, for some reason the bloody table appears all fucked up.

      Delete
  8. This comment has been removed by the author.

    ReplyDelete