united colours of vruz

The Nation

—via silas216:

While austerity is all the rage among politicians on both sides of the Atlantic, the International Monetary Fund has found that deficit cuts of  1 percent of gross domestic product tend to raise unemployment by 0.3 percentage points. Markets have also tended to react accordingly. The Dow fell by fully 265 points, or 2.2 percent, on the day Obama signed the Boehner deal and twice that amount again—512 points; 4.3 percent—just two days later. Since the showdown began earlier this year, according to economist Simon Johnson, the stock market has lost about 20 percent of its value (roughly $10 trillion). Thus, the consequence of Tea Party anti-Keynesianism has been, in Johnson’s words, “to reduce publicly funded social benefits—including pensions and Medicare—even as its methods dramatically reduce the value of private wealth now and in the future.”

[…]

….Keynesianism is not a perfect guide to economic reality, but it has proven a better one than any available alternatives, and certainly the Republicans’ discredited Depression-era mantras. Should not the job of the media, as Keynes said of “skilled investment,” be to “defeat the dark forces of time and ignorance which envelop our future”?

—via letterstomycountry:

Malcolm Gladwell argues professional sports don’t operate like a normal business, citing former Red Sox owner Tom Yawkey as an example. Even though it would have boosted attendance in the 1940s and 1950s, the Red Sox integrated the team very late in the game:

Yawkey was not just a racist, in other words. He was a racist who put his hatred of black people ahead of his desire to make money. Economists have a special term they use to describe this kind of attitude. They would say that Yawkey owned the Red Sox not to maximize his financial benefits, but, rather, his psychic benefits. Psychic benefits describe the pleasure that someone gets from owning something — over and above economic returns — and clearly some part of the pleasure Yawkey got from the Red Sox came from not having to look at black people when he walked through the Fenway Park dugout. In discussions of pro sports, the role of psychic benefits doesn’t get a lot of attention. But it should, because it is the key to understanding all kinds of behavior by sports owners — most recently the peculiar position taken by management in the NBA labor dispute.

This is one of the main reasons why I don’t buy the Libertarian argument that the Civil Rights Act was unnecessary, or that Black people in the post-Reconstruction South remained oppressed due to the enshrinement of discrimination in the law via Jim Crow.  Libertarians argue that if discrimination hadn’t need given State sanction, private forces would’ve naturally given Blacks alternatives to meet their needs, because it would’ve been profitable to to do so.  

But what Libertarian advocates are forgetting is this: the reason Jim Crow was so easy to facilitate in the post-Reconstruction South is because private actors and organizations threatened people who voted for the wrong candidate.  Private coercion and threats created a government capable and willing to pass Jim Crow laws with ease, because abolitionist whites and newly-freed slaves were either underrepresented, or simply not represented at all, on account of being scared away from the polls.

The argument also assumes that there was a body of White business owners in the South large enough to give Southern Blacks, in aggregate, meaningful alternatives to the racist shops that refused to serve them.  Assumedly it would’ve been profitable for some people to tap into the “Black” market to get the customers that racist business owners were turning away.  But this again, misses the forest for the trees: what do you think happened to White people that helped Blacks in the post-Reconstruction South?  Do you think they were merely rapped on the knuckles?

There are human desires and motives stronger than the profit motive.  Traditional economic models based on rational self interest do not work when a person would rather see his shop close than serve someone of a different skin color.

vruz: I think Umair Haque is onto something. He calls it Capitalism 2.0 but I think that’s just better marketing than Socialism 1.5

—via letterstomycountry:

Nouriel Roubini worries about the state of the global marketplace:

So Karl Marx, it seems, was partly right in arguing that globalization, financial intermediation run amok, and redistribution of income and wealth from labor to capital could lead capitalism to self-destruct (though his view that socialism would be better has proven wrong). Firms are cutting jobs because there is not enough final demand. But cutting jobs reduces labor income, increases inequality and reduces final demand.

Recent popular demonstrations, from the Middle East to Israel to the UK, and rising popular anger in China – and soon enough in other advanced economies and emerging markets – are all driven by the same issues and tensions: growing inequality, poverty, unemployment, and hopelessness. Even the world’s middle classes are feeling the squeeze of falling incomes and opportunities.

To enable market-oriented economies to operate as they should and can, we need to return to the right balance between markets and provision of public goods. That means moving away from both the Anglo-Saxon model of laissez-faire and voodoo economics and the continental European model of deficit-driven welfare states. Both are broken.

How about a surplus-driven welfare State? Like Sweden?

In the last decade, from 1998 to present, the [Swedish] government has run a surplus every year, except for 2003 and 2004. The surplus for 2011 is expected to be 99 billion ($15b)kronor.^[31]