Politics in More than One Dimension

The terms ‘right’ and ‘left,’ as political terms in use today appear to me to be applied in an ad hoc and makeshift manner.  Certainly, there seems to me to be no clear theory underpinning their application to politics.  So let’s develop one.

We will start with two positions: 1)  Society should act to benefit the individual.  We will suppose that to be the premise of the right.  The nest step is the notion that society is best served when it serves the individual.  The extreme logical conclusion is that society can be sacrificed for the individual.

                                                      2)  The individual should act to benefit society.  We will suppose that to be the premise of the left. The next step is that the individual is best served when he serves society. The extreme logical conclusion is that the individual can be sacrificed for society.

This is just where we are starting.  We will come back to this. 

This will not give us our usual alignment of interests.  For instance, from this basis, universal health care is something which should be desired by someone on the right. On the other hand, the justification for national defense is found on the left.  So, apparently we have another axis, independent of the left or the right, which is the size of government.  The argument against universal healthcare, then, is against a larger government, and in favor of a smaller one. But it cannot be one of efficiency.  There are dozens of examples where universal healthcare is more efficient at delivery of services to citizens than what happens in its absence.  Neither can it be a liberty argument, and it cannot be a danger argument.  

We also observe that while totalitarianism is indeed on the left, anarchy, reputed to be a phenomenon of the left, is under these premises, in fact a possibility of the right.  Note we have said nothing about inequality.  We have not mentioned any relationships between individuals, but only between an individual and the rest of his society.

Now our two premises are incomplete, and in fact pejorative of the left.  We have placed the benefits to the individual on the right, and the costs to the individual on the left.

Lets go back to what we see. Or rather what we are told is what we see:   We see Right and Left.  We see Republicans and Democrats.  We see the rights of the individual versus the demands of the state. But I do not think that is the real situation.

Consider instead that all politics comes down to who gets the benefits, and who bears the costs.   And remember, all benefits have to be paid for.  The extreme positions on each of these then is either the individual as a particular, or society as a whole.

But this gives us the following table:  I have also included some rubrics one might consider these positions, and their arguments, to go under.

  Society pays: Society Benefits                     Society pays:  Individual benefits

           (Communism)                                                      (  Capitalism )

Individual pays: Society benefits                 Individual pays: Individual benefits  

           (          ?           )                                                   (Libertarianism)

          

So these statements are like the corners of a physical table.  They are the extremes, and all of politics, all the actions of and in society, goes on on the surface of this table, inside these corners. 

                     

Now, no society really exists, or has ever existed, at the corners, or even at the edges, of the table.  Robinson  Crusoe, for instance, being both the individual and his complete society, is squarely in the middle.   They are ideals that (misguided) individuals strive for.  They are misguided because these corners properly apply to different aspects of every society.  These values are themselves a higher dimensional structure than we have come to understand, and -  and the table,  it’s actually a tetrahedron.  I am preserving the line of my thinking because, even described, it is far more difficult to jump directly to the tetrahedron.

But to return to consideration as a table, the left-right axis is from the lower left corner to the upper right hand corner.  The lower left corner, we can substitute for the question mark "altruism."  Or, taxes.  Similarly the upper right, which we have shown is congruent with universal health care, we have put capitalism. As we have stated above, there is another, independent, dimension, which is size of government.  On the right we can have all government, (which de facto I suppose would be fascism,) and on the left no government, which we have named "altruism," extending the definition of the word to include the corresponding political structure, however it may be constructed.   

I Just Got Gallup Polled.

I just got Gallup polled.  Over the phone. The lady was quite nice and quite patient.  Some of the questions were- limiting, and I was unable to provide a correct or at least an accurate answer that I considered truthful.  But maybe my thinking is too literal.  Anyway.  Their education question wasn't easy, as I have a lot of college, not some, though no degree, not even an Associate's.  Also, they didn't ask what my job was, but maybe the sample wasn't large enough for that to be useful. Hmm- No they could have grouped occupations so the statistics could be meaningful.  By economic sector, say.  There's like 8 or 10, so each would have had on average about 170 people out of a sample of about 1500, which I believe is typical for these kinds of polls. Or if I was retired, or disabled.  (According to the article linked below, they take 1000 samples per day. 

No questions on hobbies, which I think could also be grouped into a few useful categories.  They asked an interesting question- something about whether I had a leader in my life who helped me ah, feel good about things?  Something about that.  I told her no.  Lots of questions about my health.  I don't actually have diabetes, but I am pre-diabetic. How to answer that? Same with my blood pressure, for which I receive  minimal treatment.  I do have other health problems, but they are mostly pretty trivial. I won't go into them, here.  An I a Christian?  I value Christ's contribution to humanity, in general, and to society and theology in particular, but I don't obsess about it.  That I consider inappropriate.  Even un-Christian. Questions about depression, but not other mental conditions, of which I have one.

Some redundancy, but that may be for 'truth checking,' on which I may not have done well.

She did ask my opinion about the economy.  Is it good or poor?(Poor.)  Is it getting better?(No.)  I did say I thought my situation was going to get better.  Didn't ask where I got my news, (very little mainstream, mostly off the Web,) or whether I identify as a Republican or Democrat or neither, liberal or conservative.

They asked a lot of questions.  I think, by asking a few more and by further partitioning the domain of their sample space, they could have gotten a lot more information.  

For the interested: https://en.wikipedia.org/wiki/Gallup_%28company%29

Oops.  I got Gallup polled last night, but I forgot to publish this then.

Our Financial Sector has Become a Parasite

This post is (mostly) a copy of a comment (@131) in response to reason (@123 & @ 124) over at Crooked Timber:  http://crookedtimber.org/2015/11/29/secular-stagnation-and-the-financial-sector/comment-page-3/#comment-650750

This is John Quiggin, the original poster, quoting himself in a previous post:

The financialization of the global economy has produced a hugely costly financial sector, extracting returns that must, in the end, be taken out of the returns to investment of all kinds. The costs were hidden during the pre-crisis bubble era, but are now evident to everyone, including potential investors. So, even massively expansionary monetary policy doesn’t produce much in the way of new private investment.

“Hugely costly financial sector” does not really describe what is going on:  Massive tumor sucking the life out of its host is a much better description.  The financial sector no longer serves society.  It serves itself.  Indeed, is 'Serve Oneself." not the motto of Capitalism?  While the financial sector, (and we are talking about the activities of the large, and very large, and the wealthy, and very wealthy,) does occasionally allocate resources in the rest of the economy, to the rest of the economy, mostly it plunders the resources of society and allocates those resources to itself, for its own engorgement.

My comment:

You have disinflation in the real economy, but inflation in the fictitious (financial) economy. They have become separate economies. Money is being taken out of the real economy and pumped into the financial economy. Not only does this drive up the price of financial assets, (like money, BTW. but other assets which do not have a real value in themselves, but only value depending on the health of the real economy. Most tech toys and their industries, for instance. ) but financial assets chasing each other also drive up the price of financial assets.

Imagine a continuum of reality, starting at the left and going to the right, most real on the left, and decreasingly real and increasingly imaginary as you go to the right : Food and energy, on the left end, mining, then manufacturing, transport, etc, retail, hospitality, etc. in some order, high tech in there somewhere, then money in its various forms, bonds, stocks, etc. derivatives, other phantasmagorical financial instruments. It is an enormous bubble of ‘value’ where each item to the right is dependent for its survival on the health of the parts of the economy to its left. If, for instance, the food and energy sectors collapse, none of the rest of it will have any value.

The economy on the right is easy to capitalize and leverage and extract (financial) profits. So all investments are allocated over there. ( Capitalism invests in what is profitable, and only incidentally in what is needed.) The economy on the left, however, is leverage poor, and profit poor, so it is instead being allowed to deteriorate, and even where possible, plundered for its capital.

It is the size of this bubble which is maintaining the value of the dollar. And as the bubble increases relative to the size of the money supply, the value of the dollar also increases. (There is also a deflationary effect due to the trade deficit, since money is continually being taken out of the real economy, and put into the fictitious economy when, say, the Chinese deposit their money in US banks.)

It is all, of course, a manifestation of debt. Were the debt of the real economy honestly accounted for, it would be clear to everyone that there was no possibility that the people who actually produce the things we need could ever paying those f**king bloodsucking leeches even a fraction of what our f**king masters of the universe have defrauded the people of the world out of.

Indeed, our masters own our world, and our country several times over.
It just comes down to the day they decide to collect what is owed them.

Progress and Pseudoprogress

What changes to what elements of society would qualify as evidence of ‘progress?’  We sort of assume society is making ‘progress,’ but we seldom check to see what is actually happening, or ask if what is happening is really motion toward a desirable, and necessarily sustainable, goal.  So let’s look at some trends, and decide whether they are indicative of ‘progress.’

 

Let’s start with some of the good ones. 

For instance:  Is increasing inequality a sign of ‘progress?’  One could argue that it is a (necessary) price for progress, one that fortunately doesn’t have to be paid by the wealthier beneficiaries of progress.  But do those who do have to pay this price benefit from ‘progress’ at all?  Or is other people’s progress bought with their decline? 

The environment is mostly more polluted.

More people, greater stress on limited resources.

http://efergy.com/blog/world-population-2013-what-do-we-now-know/#

More forests cut down.

Fewer wild animals.

More fisheries depleted or facing depletion.

Soil depletion.

http://news.berkeley.edu/2015/05/07/soil-depletion-human-security/

Increased depletion of ground water.

http://www.wrsc.org/story/groundwater-depletion-rate-accelerating-worldwide

http://water.usgs.gov/edu/gwdepletion.html

Warmer more acidic oceans.

(US).  Fewer factories  More office space

http://www.crosscamp.us/2013/12/peak-office-space-los-angeles/

http://www.industryweek.com/expansion-management/decline-number-us-manufacturing-factories-not-due-offshoring

 Fuel efficiency

But use more energy

Increasing reliance on distant sources of oil minerals which must be extracted at increasing cost.   including mineral fertilizers.

 

Increased incarceration.

http://www.delanceyplace.com/view-archives.php?p=2563

Increased polarization of society

Increased concentration of ownership of the means of production

 http://www.informationclearinghouse.info/article36743.htm 

  Increased concentration of ownership of media.

Increased concentration of ownership of whisky production

 http://www.zerohedge.com/news/2015-01-29/drink-world-4-companies-control-global-whiskey-production 

 

And:

 https://www.google.com/search?q=mega+corporations+that+own+everything&biw=1920&bih=996&tbm=isch&tbo=u&source=univ&sa=X&ved=0ahUKEwidr5SB_6nJAhWJ8z4KHTqYAgoQsAQIHA

Increased debt burdens of government and non-wealthy

http://www.goldcore.com/us/gold-blog/global-debt-now-200-trillion/

More people:

More land planted

http://www.ers.usda.gov/topics/crops/corn/background.aspx

Increased spending on military.

Increased threats from terrorism

Lots more ‘data’

More money

(US)More guns in private hands.

(US) Increased costs of health services

(US) Increased costs of higher education.

(US) Increased trade deficit

http://www.tradingeconomics.com/united-states/balance-of-trade

(click on the little ‘MAX’ button)

Reduced spending on infrastructure.

More and more expensive technology for non-poor  especially the very rich

The Internet.

(US ) Bigger houses.  More mega mansions.

https://www.aei.org/publication/todays-new-homes-are-1000-square-feet-larger-than-in-1973-and-living-space-per-person-has-doubled-over-last-41-years/

(US) More homeless.  Increased poverty.

http://www.coalitionforthehomeless.org/state-homeless-2015/

More useless anti-biotics

 http://www.triplepundit.com/2015/11/antibiotic-apocalypse-economics/

The rise of neo-liberalism

(US) More militarized police force

https://en.wikipedia.org/wiki/Militarization_of_police

More corrupt politics  Serving narrow constituency, vs, the people.  

Increased concern with the self. Vs public.

Increasing privatization of the commons.

More mega yachts

http://www.nbcnews.com/id/13345720/ns/business-cnbc_tv/t/worlds-fleet-private-mega-yachts-growing/#.VlPki142cSY

I'll get around to filling in most of the other references. (Or you could.)  And perhaps some other indicators. (Or you could.) I apologize that some data are merely indicative.   But I wanted to get the next post out.

Thank you.

When, and Why, did the Economy Start to go Downhill

When, and Why, did the Economy Start to go Downhill

This post is in response to a question to a comment I made over at:

http://econospeak.blogspot.com/2015/11/gas-all-boomers-or-at-least-tax-and-cut.html

It is also posted as a series of comments at that site.

rosserjb@jmu.edu  asked the question:

“So, greg, please, exactly when out of all that mess was "the turning point"?” referring to the point at which I said “when the increasing energy cost of energy and other resource production started to be a significant problem.”  The word “mess” refers to the entire price history of oil production.

So:  The short answer might be that point when it became (nominally) more profitable to exploit society, to plunder it, rather than provision it and invest in it.  When it became more profitable to be a pirate, than a builder.  (Understanding this clarifies the motives and actions of the Right, and the modern capitalist. “Greed is good” is the motto of a pirate, not a builder.)   But this transition itself is a consequence of the increased difficulty in extracting resources from the environment.  In particular, non-renewable energy resources. 

So if you want a date, sometime around the Reagan presidency, in perverse reaction to the oil crises of the1970’s.

Roughly:

In the beginning, (Well, once the ball got rolling, about 1880.) http://cdn3.chartsbin.com/chartimages/l_oau_dff4ad5a049ca559d9105471f82bf873

the real cost of energy extraction was low, lower than the cost of  developing the infrastructure needed to distribute and consume the oil.  So the cost of extraction was the benchmark for the price. Only as the infrastructure for demand was emplaced did demand on occasion drive the price.  In the first half of the 20^th Century, because of the- inconsistent nature of the supply and its irregular rate of increase, sometimes demand, sometimes supply drove the price. 

With the opening of the Middle Eastern fields, supply smoothed out.  Supply and demand both expanded apace, the price relatively stable and low.     Until the Arab oil embargo of 1973, and the later panic in 1979 due to the Iranian crisis. The result was an effective and dramatic increase in the *real* cost of oil to the US, since it now had to hand over an increased quantity of goods and services to pay to import foreign production.  Domestic fields were becoming exhausted.  New ones (Prudhoe Bay, etc.)  more expensive to develop.

In an energy based society such as ours, (almost) all inputs can be traced back to the energy needed to support them. Thus the size of the economy can be measured in terms of energy consumption, and this is measured in terms of energy input. This instead of dollars.  With this understanding, the inverse of the EROI, the energy return on (energy) investment, is the portion of the real economy which must be devoted to the extraction of energy.  Only the remainder of the economy is available not only to providing services to society, but also to investment and maintenance.

For EROI, see: "Energy, EROI and quality of life"

http://www.sciencedirect.com/science/article/pii/S0301421513006447

Check out: Fig. 1  The Net Energy Cliff

Now:  From about 2004, supply has been constant, but until the 2008 crisis, demand increased, driving up the price.  Demand and price then crashed with the recession, increased with the recovery, and recently spiked again, and is now again depressed. 

http://www.themacrotrader.com/wp-content/uploads/2012/03/Global-Oil-Supply-1.jpg

The question is why is the price, and demand, now (relatively) depressed. 

We return to the short answer, considering the gradually decreasing EROI, that is, a gradually increasing average real cost of extraction.   

So:  We have two different measures of accounting in an economy:  Energy accounting, and money.  Is the price in money necessarily a faithful measure of the real cost, in energy, of energy production?

Why should it be?  Instances where monetary price does not reflect cost, real or even merely monetary, are common occurrences.  Is the current energy market one of them?  In particular, we ask: “How can we subsidize energy production? 

Well, we can’t.  When we subsidize something, we divert real resources from elsewhere in the economy to promote the production of the subsidized good.  We decrease the nominal cost, and therefore the nominal price at which the good may be offered for profit.  However, the real cost must be greater than if the good were produced without the subsidy. So when we subsidize the real cost of energy, we are merely increasing the real cost of production. (Note:  Subsidizing production is not to be confused with subsidizing the capitalization of production.)   That is, because of the cost of our churning resources through the mechanism of subsidy, we are worse off than if we let the price reflect the real cost of production. 

However, we can still manage to increase quantity produced, and depress price. Especially if we also depress demand.  Remember, those resources transferred to subsidize production can only come from one place:  The remainder of the economy, where a portion of those resources would have gone to maintain and capitalize the infrastructure which supports the economy, the infrastructure which also enables the consumption of oil.  

How much is the subsidy?  Well, according to: http://thinkprogress.org/climate/2015/11/12/3721677/g20-fossil-fuel-subsidies/

the world formally spends about $400 billion per year, one way or another subsidizing fossil fuel production.  (The US, formally, a mere $25 billion.)  Given an inelastic demand curve, this can result in a dramatic reduction in price. 

But there are other mechanisms of subsidy.  For instance, consider the US trade deficit in goods.  All those goods, if made in the USA, would require energy inputs, and concomitant infrastructure, for their production.  Just as agricultural imports can be regarded as water imports, the importation of goods can be regarded as energy imports. So energy supply is increased, while demand is contracted. 

Further, the production cost of fracking, while recently improved, is still above the current market price of oil. (Externalization of costs also represents a form of subsidy.)  This production has been financed in large part by massive quantities of debt. This debt represents an enormous effective subsidy, much, much larger than the formal subsidies provided the fossil fuel industry, especially those debts, (and they represent a substantial fraction,) which will never be repaid.  Considerations of the relative discount rates of oil and money, also suggest the actual effective subsidy is much greater.  (The discount rate of a non-renewable resource should probably be considered at most zero, and more likely negative, since all current consumption necessarily implies less ultimately available in the future, likely coupled with an increase in demand.)  And as above, these debts represent demand transferred from the larger real economy to support the production of energy.

Infrastructure neglect is also an effective subsidy. 

My guesstimate of a price that reflects the real cost, everything I can think of considered, of oil is somewhere well over $100 per barrel.  The difference between that and what we actually pay we are passing to the future, our own and that of our descendants.  It is a price we will begin to pay when the delusion live under (and which requires an input of real resources to maindain,) can no longer be sustained.

So, sometime around or, actually before1980, the leaders of society decided to pursue their own narrow and what may ultimately prove to be ephemeral gains, rather than look after the enduring interests of their society. The actual process of their choosing the consolidation of power has been noted elsewhere.  (Consider also eg the Exxon climate data suppression scandal.)  They propounded an ethos to justify their actions, and geared up their media to convince society of the rightness of those actions.  And the people, for their part, got to live beyond their means, splurging on underpriced energy,  their political acquiescence purchased with their own futures, and that of their descendants.  Most of them.  So now society is in a hole, 30 years and many trillions of dollars of squandered resources and mal-investment, with an economy ill-adapted for a future of costly energy.  

Now some might argue that the economy has not been going down hill for the past 30 or so years.  That we have instead made remarkable progress during that time.  We will address that issue in the next post. 

A Few Brief Remarks on Walmart

A few brief remarks on Walmart

We examine some of the effects of Walmart on a local economy, and the nation’s. There is about one store per 100,000 in the US, each with average revenues of about $110 Million.  The revenue of a small retail establishment is about $3 Million, so a Walmart displaces about 35 small retailers, generally locally owned businesses which previously helped provide much of the community leadership.  If we include the earnings of the owners of these businesses, the payroll of the Walmart is less than that previously provided by the sum of the small retailers, so the employment situation is also worsened when a Walmart moves in. 

This calculation, of course, does not include the benefit of the increased consumer surplus provided by Walmart’s always lower prices.  However, if these benefits are limited to an increase in purchases of consumer goods and services, as we would expect since the consumer surplus is widely dispersed among Walmart customers, we would not expect this to improve the capital situation of the community. Indeed, the value existing capital in the community is severely reduced. Downtown commercial rents, for instance, would be severely depressed, as the value of the buildings themselves.

In compensation for this damage, Walmart paid taxes of  $7 Billion on $22 Billion profits, or 31.8%.  But: Public assistance for its employees cost the US government $6.2  Billion last year, so in effect Walmart paid $800 Million taxes on $15 Billion profits, or slightly over 5%.   If instead it had paid its employees the $6.2 Billion more, so they would not need to collect public assistance, it would still have to pay 31.8% on $15.8 Billion. To raise the salary of their employees $1, roughly, they would have to pay out $2. The people at Walmart Headquarters are probably smart, so presumably they have made this calculation also, and given present government policy, optimized it.   Indeed, as the reference indicates, this is probably general behavior among retailers, and other low wage industries.  An interesting problem for economists. 

This calculation is for 2013:

http://www.forbes.com/sites/clareoconnor/2014/04/15/report-walmart-workers-cost-taxpayers-6-2-billion-in-public-assistance/ 

Many of Walmart's employees did receive a raise last year, somewhere between $1 and $3 so the figures have changed a little.

http://fortune.com/2015/06/02/walmart-workers-raise/

But not a lot.

 

Fast food companies do pretty much the same thing:

http://www.forbes.com/sites/clareoconnor/2013/10/16/reports-fast-food-companies-outsource-7-billion-in-annual-labor-costs-to-taxpayers/

So we're probably talking about a comparable manipulation of their tax bill, as well. Nominally, retailers seem to pay a lot more in taxes than they really do, if we subtract the billions and billions of dollars the government has to fork out to support the retailers'  under-paid employees.  So these retailers are not at all quite the good citizens they try to appear to be.

Clearly, a minimum wage where taxpayers have to supplement  the worker's income for them to reach subsistence is inadequate. 

Edited and corrected: 12/2/2019

A Third and a Fourth Reason Libertarian Societies Must Fail

A Third and Fourth Reason Libertarian Societies Must Fail

We previously presented two social problems libertarian societies are incapable of solving.  The first is the producer-consumer problem:  Without a compulsive mechanism to continually, or at least periodically, redistribute demand, that is, a government capable of effective taxation, the net consumers, (which is to say, those who actually allocate consumption,)  end up with all the money, and the producers end up decapitalized.  The second is the bully problem:  In the absence of a government, there is no mechanism to prevent the strong from victimizing the weak. 

A third reason is the necessity to regulate competition among the powerful.  The problem here is that, among the powerful, there are two incompatible expressions of self interest. 

Consider the rest of society as the common resource of the wealthy. Clearly it is in the collective interests of the wealthy to manage, maintain, and nurture society, since they are dependent on it.  However, it is in the individual interests of the wealthy to exploit society as much as they can, since any one who does not will be left with less, and weaker than the others.  The wealthy are thus in competition with each other to exploit society, and to the greatest of their ability.  It is the tragedy of the commons, where the commons is the entirety of society.

Now there are (many) cases of successful community regulation of shared resources.  But they are invariably local in scale, and associated with strong and close community relationships.

In the absence of close community, there are only two solutions.  One is to divide up the resources.  In terms of a country, this would be the fragmentation of that country into smaller ones, and the assumption of the government functions of each new country by a single individual. In this case, the libertarian society fails by fragmentation into a collection of independent autocracies. However, the force of competition between nations need not allow this as a solution at all, as resources may be consumed in a greater than sustainable rate in an arms race.  That is, the competition between the new, smaller, nations to build force will impose a higher rate of discounting the future. 

The other solution is to restrain and direct the self interested behavior of the wealthy by an overarching agency. That is, the institution of a government of sufficient strength to restrain the wealthy.  One of the necessary requirements of strength needed to accomplish this is an effective monopoly of force by the government.  So the third reason, then, that a libertarian society will fail, is that either it will tear itself apart, or it will acquire a government.

And this is already incompatible with the premises of Right Libertarianism.  However, even this government is not sufficient. The monopoly of force will merely prevent the competition between entities from itself degenerating into a balance of realized and potential violence.    The other required ability of the government is to force the internalization of costs.  The internalization of costs must be done in both space and time.  In particular, pollution must be eliminated, or at least paid for in real, compensatory, investment.  Also, all resources must be consumed at a sustainable rate. Since the consumption of non-renewable resources by definition cannot be sustained, they must be either recycled or, if they are of a nature where they cannot be recycled, dependence on them must be eliminated. Only with this requirement can society be assured that the benefits of production are greater than the costs. 

One note here. The greater the concentration of wealth, the greater the powers of government required to counterbalance it.

To put the point nicely: Right Libertarianism, except perhaps on the smallest scale, lacks the necessary organization to respond to the demands of its physical environment. This includes the demands made by other, more organized, societies.  This is the fourth reason libertarian societies will fail.  

Regarding organization, the body politic of Right Libertarianism might be regarded to most closely resemble that of a jellyfish, rather than any higher life form with some sort of functioning brain.  In consideration of that, the increasing rise of moneyed power, the concomitant reduction in government functionality as it increasingly becomes subject to control by the wealthy, the "Libertarianization" of our nation, are given additional perspective.