Bob Herbert's vision of the class war ... and mine

The NYTIMES columnist Bob Herbert had an article in this morning's online edition entitled

Winning the Class War

Reading this against the background of just having finished Tolstoy's "War and Peace" was fascinating. Herbert describes an American system anno 2010 that is remarkably similar to Russian system anno 1810, in the sense that wealth and power are to a higher and higher degree inherited. Americans anno 2010 don't call themselved "Count" and "Prince", and they no longer feel obliged to take care of and provide for their serfs. Those are the main differences.

Of course I'm exaggerating. Herbert is, too, when he says that "Aristocrats were supposed to be anathema to Americans. Now, while much of the rest of the nation is suffering, they are the only ones who can afford to smile". There's still a middle class out there. Most of it is still gainfully employed, and enjoying the benefit of low interest rates. Most of it has a looooong way to fall before it hits the living standards of the 1950s, and even back then, they could afford to smile.

The problem, as I see it, is that a return to the affluence of the 1950s (relative to the rest of the world back then) would leave 75% of us unemployed today ... and that we have no mechanism for taking care of the unemployed. The problem isn't the upper class that Herbert is complaining about, but that the economic contraction is creating a rapidly expanding new underclass: People who don't have what it takes to compete for the jobs that will be left in tomorrow's economy.

The best that this underclass can hope for, seems to be to compete on equal terms with unskilled workers in China. Except they can't even hope for that, since the cost of merely staying alive in the US, is so much higher than it is in China. Put a big enough underclass of this type into any society, and let its desperation start spreading upwards, and you have a recipe for disaster.

Karl Marx saw this problem. His recipe for solving it was a disaster in its own right, but the economic force that he described, is still very real: Unless we do something to contain them, the upper classes are going to grab more and more and more, until almost everybody else is left in poverty.

As long as we had the Soviet Union as a credible alternative, we did what was necessary to contain those upper classes. Now that utopian socialism is dead, the American economic and social system is heading full speed down the same old drain as before. When I was reading Tolstoy, what I kept seeing in my inner eye was the Russian nobility laying the noose of history around its own neck.

Fascism is also dead, for the time being. That leaves only two of the alternatives standing, that naive political idealists clung to at the end of the 1800s: Anarchism (represented today by the "Tea Party Movement") and Religious Fundamentalism. None of these are going to solve the basic economic or social problem. The only thing we can hope for is a Resurgence of Reason. A New Age of Enlightenment.

It's not going to happen on its own. Is it too late to hope that somebody who understands the true nature of things, will get out and talk to the people in a way that makes them understand the danger, and the power they have to avoid it if they act together?



:-J

Bubbles and busts: An airplane analogy

This morning's reading of Rob Alderman's blog made me think of another analogy of the economy.

Your airplane analogy is good, but I think it can be taken further. The primary problem isn’t turbulence, but that the plane has developed an undersized engine (agricultural and industrial sector) and an oversized passenger compartment (private consumption). A plane like that is only capable of flying slowly, and even slower if it needs to climb.

Every time the stall speed warning has gone off (the economy has slowed down), the Fed has done what every good pilot would have done. It has put the plane into a dive, by adding more money to the system. This makes the plane (economy) go faster, at the expense of altitude. As long as we were sure we were high up, higher than anybody else, this didn’t seem to matter. We stayed focused at airspeed (GNP), not altimeter (national debt).

Today, we’re painfully aware that China’s engines are getting stronger and stronger, while ours are due for a major overhaul. That has caused a lot of simple-minded people to go bananas over the way the altimeter is spinning backwards … to the point where they’re willing to pull the stick backwards and jerk the whole thing into a tailspin. If they do, it will be the end of America as we know it.

Every time we’ve piled up more debt, we’ve given power to our creditors: Power that we’ll no longer have to solve our own problems the way they should have been solved in the first place.

Right now, with the stall-speed warnings blaring all around us, I support trying to jump-start the economy once more by putting the plane into yet another dive. This is something we can’t afford to NOT do.

However, the only thing that can get the aircraft back in airworthy condition in the long run is to drop dead weight overboard, focus all remaining engine power on actual propulsion, and put all available manpower and talent to work improving the system.

The idea that freer markets and even lower taxes will solve this spontaneously, is ridiculous. If left to their own devices, most passengers will continue to spend their energy on useless luxury items or personal “profit”. In today’s speculation-driven economy that means buying some more or less useless asset in the hope that someone else will pay more for it another time (=asset price inflation).

We need leadership. We need to stop doing things that don’t work.

When I say dead weight, I mean things that don't solve real problems. Like putting drug offenders in jail, when on the one hand it doesnt't really restrict the supply of drugs, and on the other hand contributes to destabilizing neighbouring countries, and ends up stuffing the pockets of hardned criminals with hundreds of billions of our hard-earned dollars.

:-j