Rebuilding a Sustainable Global Capitalism

One of the most tragic aspects of some of the more hysterical people in the country since President Obama was elected is the oft-heard charge that he is some sort of socialist. Nothing could be further from the truth. A true socialist seeks to put the "means of production" (aka capital, property, plant and equipment) under the direct control of the workers. In practice, in socialist states, this meant direct control of industries and businesses by the government (not just regulation). When the government starts making the shoes you wear, then you can call Obama a socialist. President Obama could have conceivably have nationalized the banks in 2008/2009 but he decided not to. The bailout of General Motors and Chrysler was done in a fashion that would have made a private equity firm proud and GM is about to go public and buy back stock from the government. If anything, the US Government and the Federal Reserve made important investments in US firms when financing and investment funds were impossible to come by due to the recession. Many of those investments will actually pay off handsomely. The more you learn about socialism, what it really is, the more you understand that a real socialist would have viewed the entire Obama Presidency thus far as one dramatic missed opportunity.

So what is President Obama if he is not a socialist? Well, he is an American Liberal by and large. By this I mean someone who wants to make capitalism work for everyone in the country. Ultimately, some wealth redistribution, infrastructure investment, and health and education spending is necessary for the continued success of global, US-led, capitalism. It is really quite simple. The globalization of capitalism produces overall and often imperceptible benefits for everyone but highly concentrated and steep losses for particular individuals and groups that lose out in the global shifting of production. Political economy models (the Stolper-Samuelson Model, Stopler and Samuelson 1941) predict precisely who will lose out in globalization and who will gain. Abundant factors will gain while scarce factors will lose. In other words, what you have the most of will gain and what you have the least of relative to the countries you trade with will lose. In the US context, we have a lot of capital, so financiers benefit the most. We have few unskilled laborers relative to countries like China, so they lose the most. Ultimately if you do not compensate the persistent losers (unskilled laborers) they will either reject globalization actively (through protest or voting against free trade politicians) or passively. Some wealth redistribution is absolutely essential to maintaining support for globalization. If ordinary people could actually build a little capital, they might see the benefits of globalization through the growth of that invested capital.

President Obama also wants to support global capitalism by increasing the competitiveness of the US economy. If the US economy is uncompetitive in the long term, more jobs will be lost and wages cut, and support for continued globalization will erode. Cutting taxes may make the US economy more competitive in the short run, but damage it in the long-term (but the American voter thinks short term). Cutting taxes ultimately leads to less spending on education, health care, and infrastructure. The first two lead to economic growth by increasing the country's stock of human capital while the last by increasing the physical capital stock. In a sense, much of the stimulus was a long term investment in the productivity of America, something that will probably pay big dividends in the long term. The President has faced short-term consequences for this, and Republicans may actually reap the ultimate benefits if economic growth picks up under their watch. It is a cruel irony. Following the Republicans' advice and merely cutting taxes and spending decreases funds available for the long-term investment in America's economic growth and would hasten the decline of the country and undermine support for global capitalism. But a lot of political hay can be made in the present.

The health care bill will dramatically increase access to affordable medicine for the American public, increasing the quality of our human capital stock almost immediately. It will decouple health insurance from the particular job, allowing entrepreneurs to take risks and a freer movement of labor market participants to the most appropriate jobs. No more being stuck at a job because it provides your health care. This will make the labor market more efficient and lead to less unemployment and more growth. But I guess "taxes!" and "spending!" are simpler for the broader public to understand. President Obama has been doing what is right for America and what is wrong for his immediate political career. He knows this, that is one of the reasons he appears "aloof," because he is not pandering to myopic public sentiment. If someone is going to torpedo support for global capitalism, it is not Obama. Some socialist.


Stolper, Wolfgang F., and Paul A. Samuelson. "Protection and Real Wages." The Review of Economic Studies 9, no. 1 (Nov. 1941): 58-73.

Seriously, What is Wrong with Trains?

http://www.jsonline.com/news/wisconsin/106705698.html

One thing I have a hard time understanding, why do state politicians like our new governor elect hate trains so much?

If you are not aware, part of the stimulus package passed in the wake of the Great Recession was to build a "high-speed" train route from Milwaukee to Madison (which could eventually link up with Minneapolis). Walker wants to scuttle the whole project even though the feds have committed $810 million for it. The argument (see above link to JS Online) is that it will cost the state $7.5 million in annual expenses, although some estimates say the feds will pick up 90% of that tab. Is this a case of cutting off the state's nose to smite its face?

Having lived in countries where train travel is the main mode of transportation, I see many potential benefits to the project. Taking trains makes a person more productive, you can do work or read while riding, and it saves on gas. The main counterargument seems to be that no one will want to ride it, but I think that if it is faster and more convenient than taking a car there is no reason to believe that it will not be popular. If the train depot is in a central and easy to access location near popular work/tourist spots and it is indeed faster it could work. The highest paying jobs are available in the large cities, and if people were not so inconvenienced by traffic congestion and could get to places like Chicago and Minneapolis quicker and easier, people may be able to live in Madison and work in Milwaukee or vice-versa. It could also make existing roads less congested and reduce wear and tear that needs to be repaired constantly. It would bring the jobs "closer" to the people rather than making people move to where the jobs are. That could help a rust-belt state like Wisconsin. But, that requires big thinking and boldness, two things I regret to say seem to be lacking in the current political environment. Rather than taking the new economic situation we find ourselves in by the horns and investing in new ideas that will pay off in the future, taking risks, we seem to be retreating. Instead, we just have to cut everything and hope for the best. The country did not always hate trains, why now?

The Blogosphere Sucks

Every time you make a comment on other blogs that they disagree with they call you a "troll." It's as if everyone thinks they have the world figured out. On this blog, you are free to disagree.

What the Founding Fathers Really Said (Part II of a Series)

Man, John Jay was really wordy. He used a lot of words to say very little. Federalist Papers No. 2,3,4 and 5 were about the importance of the Union for the security of the nation. Jay argues that the first order of a government is to secure its people. He thought that the Union would be a more powerful and deliberate way to secure peace. He viewed a confederation of independent states as unruly and prone to irrational and unjust conflict based on emotion and pride. He also thought that a wise national government would be more able to cool the passions and particularistic interests of states. Jay also highlighted the importance of following international law (the laws of war at the time) with respect to other nations. Here are a few excerpts.

The number of wars which have happened or will happen in the world will always be found to be in proportion to the number and weight of the causes, whether REAL or PRETENDED, which PROVOKE or INVITE them. If this remark be just, it becomes useful to inquire whether so many JUST causes of war are likely to be given by UNITED AMERICA as by DISUNITED America; for if it should turn out that United America will probably give the fewest, then it will follow that in this respect the Union tends most to preserve the people in a state of peace with other nations.

The JUST causes of war, for the most part, arise either from violation of treaties or from direct violence. America has already formed treaties with no less than six foreign nations, and all of them, except Prussia, are maritime, and therefore able to annoy and injure us. She has also extensive commerce with Portugal, Spain, and Britain, and, with respect to the two latter, has, in addition, the circumstance of neighborhood to attend to.

It is of high importance to the peace of America that she observe the laws of nations towards all these powers, and to me it appears evident that this will be more perfectly and punctually done by one national government than it could be either by thirteen separate States or by three or four distinct confederacies.

There you have it, the justification of war is the violation of treaties and direct violence. Sponsoring terrorism would probably fall under that category of direct violence. How would the Iraq War fit into this conception? Can you make it fit? I am skeptical.

But the safety of the people of America against dangers from FOREIGN force depends not only on their forbearing to give JUST causes of war to other nations, but also on their placing and continuing themselves in such a situation as not to INVITE hostility or insult; for it need not be observed that there are PRETENDED as well as just causes of war.

The rest of 4 and 5 emphasize that a united country would be less likely to be threatened by foreign force, more easily defended, and less likely to quarrel among themselves.

Alexander Hamilton wrote Federalist 6,7, and 8. He is becoming one of my favorite Founding Fathers. He argued, in a very realist sense, that human nature is power grabbing and a confederacy of independent states would lead to conflict. He also warns against professional militaries, saying that they elevate the military above the citizens and can lead to increased conflict. Perhaps the Founder's intended that the military be drafted, but who supports this nowadays?

James Madison wrote 9 and 10, mainly extolling the virtues of unity and the desirability of a republic to check the passions of a nefarious majority. He also came out against paper money. I guess that battle has been lost. Do we really want to go back to using gold? The necessities of a modern economy cannot jibe with some of the Founders' intents, and I think that if they were alive today they would realize that.

Hamiton, in 11, wrote of the benefit of the Union towards the creation of a navy and the assertion of US commercial interests. This passage was really interesting:

The world may politically, as well as geographically, be divided into four parts, each having a distinct set of interests. Unhappily for the other three, Europe, by her arms and by her negotiations, by force and by fraud, has, in different degrees, extended her dominion over them all. Africa, Asia, and America, have successively felt her domination. The superiority she has long maintained has tempted her to plume herself as the Mistress of the World, and to consider the rest of mankind as created for her benefit. Men admired as profound philosophers have, in direct terms, attributed to her inhabitants a physical superiority, and have gravely asserted that all animals, and with them the human species, degenerate in America--that even dogs cease to bark after having breathed awhile in our atmosphere.1 Facts have too long supported these arrogant pretensions of the Europeans. It belongs to us to vindicate the honor of the human race, and to teach that assuming brother, moderation. Union will enable us to do it. Disunion will will add another victim to his triumphs.

An interesting acknowledgement of the Eurocentric nature of the world and the ideological pathologies that resulted from that.

Federalist 12, 13, and 14 generally describe the benefits of the Union for the economy and revenue collection. Hamilton extols the virtues of free trade for the US and argues for a consumption tax rather than a property tax given that most of the country's people are employed in agriculture their land is not easily turned into a revenue stream capable of paying taxes, as would a rentier landlord or a commercial enterprise. Clearly, the founding fathers designed the tax system to suit the nature of the economy of the time. If the economy had been different I'm sure they would have proposed a different system.

What the Founding Fathers Really Said (Part I of a Series)

A certain movement in American politics today, namely the Tea Party movement, has a particular view of the US Constitution and other founding documents. They view these documents in the same manner that a devout Christian reads the Bible, looking and trying to understand the received truth from on High. If there is a work of God, those that look critically on this work are heathens at best and devils at worst. Now, I don't mean to say that the founding fathers were not great philosophers and public servants who created a great and durable political system. They had a certain wisdom that we should follow today. Our political system could not work without a reverence for the Founding Fathers and the political system they created. That is healthy patriotism. However, sometimes patriotism slides into idolatry. The Founding Fathers were not gods, but they were great men, with great ideas.

Therefore, in order to better understand the Founding Fathers, what they said, what they didn't say, and how to interpret their message for today, I'm going to read and analyze some founding documents, particularly the Federalist Papers.

The Federalist Papers were a series of political pamphlets that some of the Founding Fathers wrote to the people in various states attempting to convince them of the desirability of the Union and the system they developed. We can begin at the beginning Federalist No. 1 written by Alexander Hamilton to the State of New York, here are some excerpts I thought relevant:

This idea will add the inducements of philanthropy to those of patriotism, to heighten the solicitude which all considerate and good men must feel for the event. Happy will it be if our choice should be directed by a judicious estimate of our true interests, unperplexed and unbiased by considerations not connected with the public good. But this is a thing more ardently to be wished than seriously to be expected. The plan offered to our deliberations affects too many particular interests, innovates upon too many local institutions, not to involve in its discussion a variety of objects foreign to its merits, and of views, passions and prejudices little favorable to the discovery of truth.

Hamilton is here lamenting that though the US Constitution is a great document written in the spirit of the public interest, the decision to adopt it cannot help but be influenced by a need to accommodate the selfish interests of many of the parties to it. It would be great if politicians all looked out for the good of everyone, but they often do not, this is why a balance of powers is necessary.

And yet, however just these sentiments will be allowed to be, we have already sufficient indications that it will happen in this as in all former cases of great national discussion. A torrent of angry and malignant passions will be let loose. To judge from the conduct of the opposite parties, we shall be led to conclude that they will mutually hope to evince the justness of their opinions, and to increase the number of their converts by the loudness of their declamations and the bitterness of their invectives. An enlightened zeal for the energy and efficiency of government will be stigmatized as the offspring of a temper fond of despotic power and hostile to the principles of liberty. An over-scrupulous jealousy of danger to the rights of the people, which is more commonly the fault of the head than of the heart, will be represented as mere pretense and artifice, the stale bait for popularity at the expense of the public good. It will be forgotten, on the one hand, that jealousy is the usual concomitant of love, and that the noble enthusiasm of liberty is apt to be infected with a spirit of narrow and illiberal distrust. On the other hand, it will be equally forgotten that the vigor of government is essential to the security of liberty; that, in the contemplation of a sound and well-informed judgment, their interest can never be separated; and that a dangerous ambition more often lurks behind the specious mask of zeal for the rights of the people than under the forbidden appearance of zeal for the firmness and efficiency of government. History will teach us that the former has been found a much more certain road to the introduction of despotism than the latter, and that of those men who have overturned the liberties of republics, the greatest number have begun their career by paying an obsequious court to the people; commencing demagogues, and ending tyrants.

This is a VERY strong message sent by Hamilton to the people that oppose the Constitution and the formation of an effective government. Often the zeal and jealousy for liberty leads to tyranny. More tyrants have been created by ineffective government that cannot secure the liberties of the people than by a government that is too strong. A zeal for liberty can lead to demagoguery and a violation of the liberties of others if not checked by effective government.

Full-text of Federalist No.1 can be found at http://www.foundingfathers.info/federalistpapers/

Why Men Should Embrace Feminism

There is a bit of a crisis of manhood in the United States and much of the world today. You can see it in the gender gap that is so apparent this election season. Men are much more likely to support candidates that have reactionary stances on women's rights. The bad economy has hit men particularly hard and in the long-term the post-industrial society is going to produce less and less of the typical "man jobs" like construction and manufacturing. Men will have to re-evaluate their sense of self and self-worth in a society that values "manpower" less and emotional, persuasive, intellectual, creative, and caring power more. It is not that men do not have the capacity to be the equals of women in all of these categories, it is simply that men have been conditioned to express their masculinity in more physical ways. That may have been appropriate for industrial society, but it produces deeply alienated men in post-industrial society.

Our men are subject to a double-bind. On one hand, some of the jobs that men have traditionally done (like physical work) are disappearing or are paying less, others that are status-power jobs (like physicians, lawyers, etc.) are not as plentiful to begin with and men must now compete with women for them. On the other hand, a man's sense of self-worth is very intertwined with his job, to the detriment of family life. So, less jobs or worse jobs plus a sense of self-worth contingent on the job produces very angry men. Angry male voters are not likely to make well thought-out, rational decisions at the ballot box, and are likely to want to regress to a prior period of idealized manhood. When one's sense of self-worth is being assaulted, people look for extreme solutions.

How can men in America regain a sense of self-worth? I argue that going back to the 50s is simply not an option. Let the dead bury their dead. The only way that men can regain this self-worth is to radically re-evaluate what it means to be a man. Women have been radically re-evaluating what it means to be a woman for over 50 years now (maybe longer), but men have only just begun. It is not that men should all do a 180 and become stay-at-home dads, work is still important for anyone's sense of self-worth. Men must find additional and coequal sources of self-worth that can survive a job loss. Being a thoughtful man, being a good and coequal partner, being a good dad, being an active part of the life of our communities and their decision-making processes in partnership with women. There are many ways to rescue men from the current state of anomie. This will improve our lives in many ways:

It will lead to less self-destructive behavior:Many men do not see a future for themselves due to the changing nature of the economy and the stubborn tendency to have a very narrow work-centric and anti-female notion of masculinity. When this notion of masculinity fails men, some act out in very destructive (self or other) ways.

It will make us better lovers: When a man is a good partner and respects his partner as a coequal part of the relationship, that respect will be returned (IF she is also a good partner!). This will cause less tension and more happiness in a relationship, more love, and better sex!

It will make us better educated Women have been whipping our butts in education attainment over the last 30 years or so. I do not think this is because men are any less capable than women, I simply think that education and critical thought are less important in our industrial-era mentality. Education is not seen as a good it itself but as a means to attain that all important sense of self-worth that can be provided by bringing home the bacon. When high-paying construction jobs that do not require a college education are plentiful, the incentive is to go for them and forgo a higher education (at least a technical education, which I think is undervalued in our society). On the other end of the spectrum, men want to be doctors or engineers and not social workers or teachers (part of this problem is the pernicious stigma that men in childcare are suspect, which is abetted by a sensationalist media), but these jobs are only available to a select few, in the middle there are much less men. I remember a women (a mom) telling me when I was a financial advisor that it was more important for her daughter to go to college than for her son because her son could get a high-paying job without a degree, maybe 40 years ago, but that calculation makes almost no sense today.

It will make us better fathers Fathers of the 50s put almost everything they had into work and play, and delegated nearly total authority for parenting to their wives. Sons and daughters need fathers that are do not just work but are engaged in family life. If women can juggle both, then I don't see why we can't too. Father engagement has improved dramatically but not to the level it could be.

In short, men must continue the process of redefining what it means to be a man, we will all be better off for it. Feminists are not the enemy in this task, but an important ally. They've been doing it for over 50 years.

The Questions No One Wants to Ask

"Between me and the other world there is ever an unasked question: unasked by some through feelings of delicacy; by others through the difficulty of rightly framing it. All, nevertheless, flutter around it. They approach me in a half-hesitant sort of way, eye me curiously or compassionately, and then, instead of saying directly, How does it feel to be a problem? they say, I know an excellent colored man in my town; or I fought at Mechanicsville; or, Do not these Southern outrages make your blood boil? At these I smile, or am interested, or reduce the boiling to a simmer, as the occasion may require. To the real question, How does it feel to be a problem? I answer seldom a word.

And yet, being a problem is a strange experience, -peculiar even for one who has never been anything else, save perhaps in babyhood and in Europe. It is in the early days of rollicking boyhood that the revelation first bursts upon one, all in a day, as it were. I remember well when the shadow swept across me. I was a little thing, away up in the hills of New England, where the dark Housatonic winds between Hoosac and Taghkanic to the sea. In a wee wooden schoolhouse, something put it into the boys' and girls' heads to buy gorgeous visiting-cards - ten cents a package - and exchange. The exchange was merry, till one girl, a tall newcomer, refused my card, - refused it peremptorily, with a glance. Then it dawned upon me with a certain suddenness that I was different from the others; or like, mayhap, in heart and life and longing, be shut out from their world by a vast veil. I had thereafter no desire to tear down that veil, to creep through; I held all beyond it in common contempt, and lived above it in a region of blue sky and great wandering shadows. That sky was bluest when I could beat my mates at examination-time, or beat them at a foot-race, or even beat their stringy heads. Alas, with the years all this fine contempt began to fade; for the worlds I longed for, and all their dazzling opportunities, were theirs, not mine. But they should not keep these prizes, I said; some, all, I would wrest from them. Just how I would do it I could never decide: by reading law, by healing the sick, by telling the wonderful tales that swam in my head, - some way. With other black boys the strife was not so fiercely sunny: their youth shrunk into tasteless sycophancy, or into silent hatred of the the pale world about them and mocking distrust of everything white; or wasted itself in a bitter cry, Why did God make me an outcast and a stranger in mine own house? The shades of the prison-house closed round about us all: walls strait and stubborn to the whitest, but relentlessly narrow, tall, and unscalable to sons of night who must plod darkly on in resignation, or beating unavailing palms against the stone, or steadily, half hopelessly, watch the streak of blue above.

After the Egyptian and Indian, the Greek and Roman, the Teuton and Mongolian, the Negro is a sort of seventh son, born with a veil, and gifted with second-sight in this American world, - a world which yields him no true self-consciousness, but only lets him see himself through the revelation of the other world. It is a peculiar sensation, this double-consciousness, this sense of always looking at one's self through the eyes of others, or measuring one's soul by the tape of a world that looks on in amused contempt and pity. One ever feels his twoness, - an American, a Negro; two souls, two thoughts, two unreconciled strivings; two warring ideals in one dark body, whose dogged strength alone keeps it from being torn asunder."

-W.E.B. DuBois The Souls of Black Folk (1903)

When you realize that infant mortality is black neighborhoods in Milwaukee is as bad as third world countries, how far have we come? When there are more black men in prison than in college, how far have we come? When the black unemployment rate is more than twice that of whites, how far have we come? When more than one in three black children live in poverty, how far have we come? You tell me, how far have we come in 107 years?