Recent Items

Guest Post: Austerity and Runaway Inequality Lead to Violence And Instability

Posted on by

By Washington’s Blog


Study Shows That Austerity Leads to Violence And Instability

A study this month by economists Hans-Joachim Voth and Jacopo Ponticelli shows that – from 1919 to the present – austerity has increased the risk of violence and instability:

Does fiscal consolidation lead to social unrest? From the end of the Weimar Republic in Germany in the 1930s to anti-government demonstrations in Greece in 2010-11, austerity has tended to go hand in hand with politically motivated violence and social instability. In this paper, we assemble cross-country evidence for the period 1919 to the present, and examine the extent to which societies become unstable after budget cuts. The results show a clear positive correlation between fiscal retrenchment and instability. We test if the relationship simply reflects economic downturns, and conclude that this is not the key factor. We also analyse interactions with various economic and political variables. While autocracies and democracies show a broadly similar responses to budget cuts, countries with more constraints on the executive are less likely to see unrest as a result of austerity measures.

As CNN notes:

Studying instances of austerity and unrest in Europe between 1919 to 2009, Ponticelli and Voth conclude that there is a “clear link between the magnitude of expenditure cutbacks and increases in social unrest. With every additional percentage point of GDP in spending cuts, the risk of unrest increases.”

“Expenditure cuts carry a significant risk of increasing the frequency of riots, anti-government demonstrations, general strikes, political assassinations, and attempts at revolutionary overthrow of the established order. While these are low probability events in normal years, they become much more common as austerity measures are implemented.”

Prominent Institutions, Economists and Politicians Have Warned For Years That Bad Economic Policy Would Lead To Unrest

Many prominent institutions, economists and politicians have been warning about this issue.

The relation between austerity and riots is so clear that former IMF chief economist and Noble prize winning economist Joseph Stiglitz coined a phrase to describe what happens after the International Monetary Fund demands austerity in return for loans to indebted countries: “The IMF Riot”.

Forbes reported in February:

Harvard economist Kenneth Rogoff, co-author of a best-selling book on financial crises, “This Time It’s Different,” told Forbes today in an exclusive interview, that the high unemployment rate and high levels of debt in the U.S. will sooner or later trigger serious “social unrest from the income disparities in the U.S.”

The Obama administration has “no clue,” he told me what do about this terrible disparity in the economy that is bound to erupt sooner or later, he feels.

“I don’t understand why people don’t wake up to the crisis they are creating,” he said to me just minutes after appearing at a Council on Foreign Relations round-table on “Currency Wars.”

As I warned in February 2009 and again in December of that year:

Numerous high-level officials and experts warn that the economic crisis could lead to unrest world-wide – even in developed countries:

  • Today, Moody’s warned that future tax rises and spending cuts could trigger social unrest in a range of countries from the developing to the developed world, that in the coming years, evidence of social unrest and public tension may become just as important signs of whether a country will be able to adapt as traditional economic metrics, that a fiscal crisis remains a possibility for a leading economy, and that 2010 would be a “tumultuous year for sovereign debt issuers”.
  • The U.S. Army War College warned in 2008 November warned in a monograph [click on Policypointers’ pdf link to see the report] titled “Known Unknowns: Unconventional ‘Strategic Shocks’ in Defense Strategy Development” of crash-induced unrest:
    The military must be prepared, the document warned, for a “violent, strategic dislocation inside the United States,” which could be provoked by “unforeseen economic collapse,” “purposeful domestic resistance,” “pervasive public health emergencies” or “loss of functioning political and legal order.” The “widespread civil violence,” the document said, “would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security.” “An American government and defense establishment lulled into complacency by a long-secure domestic order would be forced to rapidly divest some or most external security commitments in order to address rapidly expanding human insecurity at home,” it went on. “Under the most extreme circumstances, this might include use of military force against hostile groups inside the United States. Further, DoD [the Department of Defense] would be, by necessity, an essential enabling hub for the continuity of political authority in a multi-state or nationwide civil conflict or disturbance,” the document read.

  • Director of National Intelligence Dennis C. Blair said:
    “The global economic crisis … already looms as the most serious one in decades, if not in centuries … Economic crises increase the risk of regime-threatening instability if they are prolonged for a one- or two-year period,” said Blair. “And instability can loosen the fragile hold that many developing countries have on law and order, which can spill out in dangerous ways into the international community.”***

    “Statistical modeling shows that economic crises increase the risk of regime-threatening instability if they persist over a one-to-two-year period.”***

    “The crisis has been ongoing for over a year, and economists are divided over whether and when we could hit bottom. Some even fear that the recession could further deepen and reach the level of the Great Depression. Of course, all of us recall the dramatic political consequences wrought by the economic turmoil of the 1920s and 1930s in Europe, the instability, and high levels of violent extremism.”

    Blair made it clear that – while unrest was currently only happening in Europe – he was worried this could happen within the United States.

    [See also this].

  • Former national security director Zbigniew Brzezinski warned “there’s going to be growing conflict between the classes and if people are unemployed and really hurting, hell, there could be even riots.”
  • The chairman of the Joint Chiefs of Staff warned the the financial crisis is the highest national security concern for the U.S., and warned that the fallout from the crisis could lead to of “greater instability”.

Others warning of crash-induced unrest include:

CNN’s Jack Cafferty notes that a number of voices are saying that – if our economy continues to deteriorate (which it very well might) – we are likely headed for violence, and civil unrest is a growing certainty.

Watch the must-see CNN viewer comments on this issue:

People Are Furious Worldwide

Newsweek wrote in May:

Reality is beginning to break through. Gas and grocery prices are on the rise, home values are down, and vast majorities think the country is on the wrong track. The result is sadness and frustration, but also an inchoate rage more profound than the sign-waving political fury documented during the elections last fall.

***

In search of the earthly toll of this outrage, NEWSWEEK conducted a poll of 600 people, finding vastly more unquiet minds than not. Three out of four people believe the economy is stagnant or getting worse. One in three is uneasy about getting married, starting a family, or being able to buy a home. Most say their relationships have been damaged by economic woes or, perhaps more accurately, the dread and nervousness that accompany them.

Could these emotions escalate into revolt?

As the Newsweek article points out, people are furious that the Wall Street fatcats have gotten even richer, while Americans are suffering rampant unemployment:

Corporate earnings have soared to an all-time high. Wall Street is gaudy and confident again. But the heyday hasn’t come for millions of Americans. Unemployment hovers near 9 percent, and the only jobs that truly abound, according to Labor Department data, come with name tags, hairnets, and funny hats (rather than high wages, great benefits, and long-term security). The American Dream is about having the means to build a better life for the next generation. But as President Obama acknowledged at a town-hall meeting in May, “a lot of folks aren’t feeling that [possibility] anymore.”

Former American senator (and consummate insider) Chris Dodd said in 2008:

If it turns out that [the banks] are hoarding, you’ll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay.

Of course, the big banks are hoarding, and refusing to lend to Main Street. In fact, they admitted back in 2008 that they would. And the same is playing out globally.By way of background, America – like most nations around the world – decided to bail out their big banks instead of taking the necessary steps to stabilize their economies (see this, this and this). As such, they all transferred massive debts (from fraudulent and stupid gambling activities) from the balance sheets of the banks to the balance sheets of the country.

The nations have then run their printing presses nonstop in an effort to inflate their way out of their debt crises, even though that effort is doomed to failure from the get-go, and only helps the wealthy.

Quantitative easing by the Federal Reserve is causing food prices to skyrocket worldwide (and see this, this and this), without doing anything to help anyone but the wealthiest. And every country in the world that can print money – i.e. which is not locked into a multi-country currency agreement like the Euro – has been printing massive quantities of money. See these charts.

Unemployment is soaring globally – especially among youth.

And the sense of outrage at the injustice of the rich getting richer while the poor get poorer is also a growing global trend.

Countries worldwide told their people that bailout out the giant banks was necessary to save the economy. But they haven’t delivered, and the “Main Streets” of the world have suffered.

Matt Stoller – former Congressman Grayson’s chief legislative aide – writes:

To see what happens when a social contract falls apart, look at the massive rioting in London.

Middle-class incomes are down radically in the U.S. since 2007, as much as 15 percent according to new Internal Revenue Service data. Home equity is still falling. If cherished entitlement programs are also savaged by the politicians who destroyed our life savings, citizens might begin to question whether this whole constitutional democracy thing is worth it.

Strange and ominous political eddies are already emerging. Congressional disapproval is higher than 80 percent. This could turn ugly — as it has before in U.S. history. While we’ve airbrushed the legacy of political violence out of U.S. history, it’s there. Labor conducted gun battles with Pinkerton private military forces in the late 19th century. Strikes often turned deadly in the 1930s. If there are serious defense cuts, the prospect of hundreds of thousands of war-weary former soldiers thrown into a terrible economy is not, shall we say, a recipe for social stability.

British rioters, Israel protesters and people worldwide are lashing out at the runaway inequality and austerity measures.

Unfortunately, that means that the unrest will likely continue …

Indeed, these pictures from Israeli protests on Rothschild Boulevard last week show that people worldwide are getting sick and tired of the wealthiest acting like despotic kings:

A guillotine on Rotschild Boulevard in Tel Aviv, sending a message to Israel's tycoons, August 10, 2011.

Pictures courtesy of Ynet and Haaretz.
Print Friendly
Twitter48DiggReddit0StumbleUpon24Facebook72LinkedIn3Google+2bufferEmail

115 comments

  1. Middle Seaman

    The fact that austerity and income disparity cause instability and eventually violence is encouraging. If one looks at the US only, Republicans, Democrats and the president plan a serious austerity that every honest person knows will increase unemployment, increase the already huge gap between the rich and everyone else and will return the country socially to the social stone age of the beginning of the 20th century.

    Our only hope against the criminal austerity and the criminal elite is the power to cause upheaval, riots and chaos. If Obama is trying to rob me, I have the right to defend myself.

    1. rd

      Yep.

      1932 was a very good year.

      I don’t understand the thesis of the entire post. I would have thought that all of these unemployed people with government support cutoff would simply re-awaken their entrepreneurial animal spirits and they would create the next Google and Amazon bringing us back to prosperity that is our birthright.

      I can’t even conceive of Americans in these circumstances not simply buckling down and becoming productive instead of rioting and revolting. After all, we are not British, or German, or French, or Russian, or Greek, or African. All of those other countries rioting and revolting over the past couple of centuries against repression by the wealthy elite who believe that they are entitled to rule are not representative of the roots and ideals of America.

      1. akaison

        Austerity is not about productivity. The very fact you use the two words together calls into question whether you appreciate the circumstances. Relating Austerity to productivity is like relating cutting down on calories with gaining weight.

      2. Linus Huber

        What BS are you talking about. These are not students or past students with a proper perspective. They have actually been robbed of the change of living a decent life even if they are ready to work hard. But how can you work hard without a job. Young entrepreneurs are few and a special breed and have nothing to do with these young people. In addition, the support given to established entreprises that are able to influence legislation and when problems arise get government support stay in the way of getting a new wave of inovations rolling as they will crush competition early on.

          1. rd

            At least one person got it. I would have thought that the line “1932 was a very good year” should have been a pretty strong hint.

            The responses to my post were very interesting. The very thought that people were actually taking my post seriously indicates how much off-track the discourse in this country has become with a completely unrealistic view of the economic and social order.

            Although, I do understand that a lot of people watch Steven Colbert because they agree with his views in the same way a number of poeple watched Gordon Gekko in the 80s and wanted to be him.

          2. Ranjit

            Honestly, we need less sarcasm. It seems like the left has imbibed right-wing nostrums so well that even when rejecting them it comes naturally to do so in the pretense of being a conservative.

            If people are confused about who’s really a conservative and who’s being sarcastic, and they very often are in these cases, it may simply be that we should find better modes of communicating our positions. They’ll be plenty of time for satire after our side wins.

      3. Dan The Man

        Pal,you should always take 1 or 2 puffs and wait a half hour to see how strong the stuff is.

    1. pj

      Not entirely sure what your first link was all about, but was surprised by the second. No real measurable poverty in the U.S., is that what this report indicates?

      1. Soullite

        There’s a tendency with data like that to ignore relative prices and judge all countries by the standards of the least wealthy. It is thus entirely possible to have people starving to death in the streets but for that country to have low poverty because they make too much money a year relative to Indian street-rats.

    1. gs_runsthiscountry

      Priceless…that is all I can say. For some reason when i log on here on Sunday mornings i seem to be spitting up coffee.

      —-

      I will trade one back, my personal fav recently, Peter Schiff slipped one in at the tail end of this clip (last 30 sec.). He explains how capital is more important than labor. We must have more machines…Umm, because what, capacity utilization is at record lows and the pull forward via tax incentives the past 2 years is going to make companies invest in more capital equipment, again?

      Peter schiff is living in the 70′s if he thinks corporations pull highschool graduates off the street to run machines. And this is the guy feeding Ron Paul Economic information? – scary. I find it strange he is Ron Pauls economic advosior.

      http://www.cnbc.com/id/15840232/?video=3000028586&play=1

      Peter Schiff should read this, and repeat it 10 times.

      “Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration.” – Abraham Lincoln, 3 Dec, 1861

      1. anon

        At least Schiff lost his Senate bid!

        But you’re right, that quote in the video you linked is a classic.

    2. rps

      Societal failure Tim Solso states the US needs a “qualified workforce.” Biggest lies come from the tiniest dicks.
      The CEO’s gravy train runs on the sweat, labor, and dedication of the workforce. Their cognitive dissonance is breath taking. Rather than acknowledge and compensate labor they choose to dismantle the social contract that provides our continuity as a collective. The goal of stolen labor for pennies, no EPA, no regulations,no safety nets, no taxes, and a docile population of serfs with rioters shot on site.
      Next lie from his Mad Cow diseased brain, “To find a workforce with the math skills and technical skills to operate the machinery”….. Tell him to try to sell his crap in the slave wage countries with his ideal “skilled” labor. Austere wages restricts purchasing power. We have the education, skill, and experience, they just want are knowledge and labor for free.

      These vermin-infested rabid CEO’s bred in the putrid sewage with pustulent infected brains stirred in the caldrons of hell need to be expunged from society.

  2. K Ackermann

    Regardless if the interpretation of some points, this is an outstanding post.

    I really appreciate the work you put into it, George.

    Just think, though, Michelle Bachman spoke, and said she’d have us out of our problems in a jiffy… and look, she’s winning!

    Of course, neither her nor Perry will get any votes; I heard people are going to spray paint the polling booths with If you vote here, you could possibly burn in hell.

    P.S. Bay Area Fascist Transit is going down.

    1. K Ackermann

      huh, that’s so weird. What a coincidence that Greece is wracked by violence and demonstrations right now, and 10% of the population of Israel is in the streets protesting economics.

      Does anyone know of a good test for headaches? I think I have one, but I’m not sure.

    2. Yves Smith

      I sent this link to Mark Ames (it was 6 AM, so I hadn’t read the study, I needed to turn in) and said I thought this didn’t sound right, given the violence in Thailand and Indonesia in 1997, maybe there were few enough data points post 1980s that they could fudge the conclusions.

      His reply:

      This guy is ыщ full of shit. Not only did Indonesia and Thailand break out in chaos, riots and violence (and regime change), but so did much of Latin America. For example, did you know about the austerity mass-slaughter in Venezuela in 1989? Every Venezuelan knows about it–it’s called “The Caracazo” and it’s why Chavez is their leader today, but…Well, here, I wrote about Venezuela in an article I did on austerity and violence earlier this year:

      In February, 1989, Venezuela elected as president a candidate, Carlos Andres Perez, who campaigned as a populist-liberal who promised voters he would fight against the IMF and World Bank, who were trying to force an austerity program on the country. They believed Perez because the last time he was president, in the 1970s, he’d nationalized the oil industry as well as American iron ore interests.

      But Perez was a fraud, a fake-liberal who’d secretly sold himself to bankster oligarchs and conned the voters, sort of like a certain president today. Three weeks after winning the election, the same fake-populist, President Perez, rammed through an austerity program written by the IMF that sparked immediate mass protests. Perez did what all austerity-lovers did: he declared a state of emergency and suspended the Constitution, and called out the security forces, who massacred at least 1,000 Venezuelan protesters, perhaps as many as 3,000. (While everyone in the West knows about the comparatively smaller massacre in Tienamen Square that same year, few here have ever heard about this massacre, which Venezuelans call “The Caracazo.”) Naturally, this con-job and massacre was an example of “courage”—that’s how IMF’s Michel Camdessus described Perez’s decision to massacre protesters. Here’s an article from 1989:

      I.M.F. Position On Venezuela

      Special to the New York Times
      Published: March 09, 1989

      WASHINGTON, March 8 — The International Monetary Fund’s managing director, Michel Camdessus, asserts that economic stabilization measures in Venezuela ”are proving even more painful” because they were ”too long postponed.”

      He made the comment in a letter written on Monday, just days after unrest caused by tough economic measures led to up to 375 deaths in Venezuela.

      Mr. Camdessus praised the new Government of President Carlos Andres Perez for its ”courage” in embracing an economic shock program that was designed to increase economic efficiency, and said the I.M.F. would support it ”with all the influence at its disposal.” But he rejected charges from Mr. Perez that the I.M.F. was at least partly responsible for last week’s disturbances because it had recommended some of the revamping measures.

      [end of NYT extract, I can't replicate the formatting of Ames' e-mail here]

      Notice the same twisted rhetoric used then as we see today: The elites who impose austerity and slaughter civilians and declare states of emergency to protect IMF programs are labeled “courageous,” while the people who are killed don’t get so much as a column inch devoted to them, they don’t even get the dignity of proper death counts if they died making America’s free-marketeers look bad. Also, they can’t take responsibility for their fuck-ups: notice how President Perez blames Camdessus, and Camdessus blames an alternative history that could have been had only previous leaders been “courageous” too and enacted these insane price hikes and wage cuts earlier.

      Venezuela’s austerity programs created greater poverty, richer oligarchs, worse corruption, and the inevitable backlash in the form of Hugo Chavez, who staged a coup in 1992 that almost succeeded…and later won the presidency through the ballot box. Perez had to flee to Miami with his family to avoid being put on trial for the massacre; he died just last month in shame.

  3. Fed up

    When half the political spectrum is actually hoping for riots in order to prove their points (which they emphasize overe and over again to enflame things) then violence will surely come to us all.

    Justify something, and make it pay, and you’ll get plenty of it.

        1. rafael bolero

          Just this morning, on a post about David Cameron’s comments, I wrote : The phase of capitalism we are going through requires public sadism. I totally agree with your last point. It’s on the macro level with national governments obeying IMF austerity torture, and the micro/local level with hateful Tea Party Walker supporters caught in political Stockholm Syndrome applauding the destruction of their neighbors. The end result of the micro application of the austerity is starvation, exposure, and disease. The elite are ready to rumble and kill with their national armies. They’d gas us if they could. They’re psychopaths.

        2. Justicia

          The Patriot Act has given the elites all the powers they need to suppress dissent — domestic and foreign. The rioters in the UK would be declared “enemy combatants” under our new legal order.

      1. Fed up

        Please list the horrific things I did.

        There are no elites and no ruling class in most Western countries. Just a bunch of self-righteous people — left and right — who haven’t got a clue what they’re doing and who don’t really care about the consequences of what they’re trying to do so long as they get confirmation of the views they already hold. And no matter what happens, they will interpret it as confirmation of those views.

        And all the little people who preach violence from their living rooms fit in nicely behind one of the self-righteous groups.

        1. attempter

          Just a bunch of self-righteous people — left and right — who haven’t got a clue what they’re doing and who don’t really care about the consequences of what they’re trying to do so long as they get confirmation of the views they already hold.

          You mean like those who continue to propagate MSM-type lies about the “left-right spectrum”?

          I think everyone who supports the kleptocracy knows exactly what they’re trying to do.

          One way we can recognize them is by their conspicuous lack of outrage at elite crimes and their even more conspicuous sudden outrage wherever the peasants get uppity.

          And all the little people who preach violence from their living rooms fit in nicely behind one of the self-righteous groups.

          Yes, I’ve seen the snivelling little vermin everywhere, rabidly drooling to outdo one another in preaching the violence the police state should use against any peasant who dares to lash out, let alone hit back in a disciplined way.

          1. Fed up

            I can’t figure out whether it’s tin-foil hats all around, or what passes for cool radicalism in the college common room.
            When you’ve rolled out “kleptocracy”, “vermin”, “police state” and “peasant” in the same post, I’ll guess it’s coming from what passes for higher education these days.

          2. blunt

            “One way we can recognize them is by their conspicuous lack of outrage at elite crimes and their even more conspicuous sudden outrage wherever the peasants get uppity.”

            Yep. I know so many of them well, in fact work with a lot of them. Which may strike some as odd since I do inner city social work. But, some of the most reactionary tropes I hear I hear from co-workers who are certain that they got the right idea in graduate school when they learned that band-aid and unguent providers for the abused in order to patch them up well enough so they could return to the capitalist highway and the demolition derby was their job. Not of the Jane Addams model. The APA (Psychiatric) model instead.

            To scrounge and struggle, to grow up violently and be provided consistently with images of violence and the everlasting hero stories of the single good man against the sniveling, grubby hordes who he slaughters bloodily (God of War,) or the knight who vanquishes the brambles in order to find a sleeping princess in a bucolic sub or exurban castle awaiting true-love’s kiss is to be a product of the “American Dream.” I suspect the (add a Euro country) ?ian Dream as well.

            The chaff of whom you write will not realize until the final bars come down that there are no plans to keep them on the inside of the gated communities. They will serve, they hope, as the prison guards and the mercs. As some will.

          3. Anonymous Jones

            See, the thing about psychopaths is not that they have come up with some crazy way to put on pants or tie shoes; they put on their pants one leg at a time and tie their shoes with a bow. In 90% of their life, they do things just like sane, normal people do them, not with some, strange psychopathian procedure.

            It’s only at the margins that you understand their vermin-like psychopathology. It’s not like they can’t access the internet and string together words in sentences with complete thoughts and post them on a site like NC. And it’s not like every word is imbued with (and reveals) their disorder.

            Who do you think I’m talking about? Oh, the bell tolls for thee, mother effers! Only I, your ozymandian philosopher king, can dictate who snivels and who has access to violence and power! Only I, your benevolent psychopath, can rule the world, the World of Me!

            [But seriously who is the bigger psychopath? The psychopath or the psychopath who responds to the psychopath expecting a non-psychopath response? Hmmm…I'm going back to my study on vermin subcultures and vermin brain anatomy. PHD, here I come!]

            [No animals were harmed in the making of this comment. AHA-approved.]

        2. attempter

          The ironic, and poetically just, thing is that those same preachers of violence are next up on the chopping block to be liquidated themselves. And by siding with their own butchers, they’re doing all they can to bring it about.

          1. MichaelC

            And well they should be.

            It follows that they must be marginalized and coopted by cooler, wiser, more just heads, to steer the conversation toward solutions that avoid their empowerment.

            The immediate solution to the self imposed existential crisis to Americans is simply to tax the 1% ers , if only to continue to provide the oligarchs with a safe haven for their ill gotten gains (an increasingly small price for them to pay, given the global turmoil, and despite the Koch…,, other billionaires protests) to the contrary.)

            A deal can be stuck with the potential (and fictional, in my view) American revolutionaries, through a sop(that’s not fair, I mean a sincere commitment, (i.e SS is still sacrosanct, we owe it each other, full stop) to the middle class strivers.

            Americans have a deeper talent pool to dip into than the fractious Europeans. The Stiglitz, Bill Blacks, Liz Warren’s, Sheila Bairs,NY Ags, hell even the Buffet’s, Gate’s (and Enron plutocrats (pls see todays links) and the PIMCO bandits who know who best butters their bread) can be mobilized to make the US debt crisis disappear.

            Once the debt crisis disappears the US is poised for another generation of global dominance. China is a chaotic mess, not a threat to US hegemony. The next generation of dominace can be based on something other than military dominace, methinks, since no one really can afford war anymore, unless there is a total global collapse. I don’t envision a total collapse. I’d really like my daughter’s to benefit from 2 or 3 generations of struggle to live in a peaceful world.

            The nutters love Bachman, and they seem to be winning at the moment but come the Euro collapse, the only safe haven for global oligarchs will be the US. She’s a useful tool in a more stable world order, but she’s a Hitler- like wild card in the current order. That should give even the Boner Republicans pause in ’12.

            It’s past time for the US voters who matter to capitalize on their leverage. They don’t want violence. They only need a candidate who will tax the rich, a little bit and all will be fine for the US.

            A candidate who’s platform is “We’re all Icelander’s” can’t lose IMHO. Perhaps that tranlates to “NY AG Schneiderman(or Warren) for President”.

            I don’t know, but the current crop stikes me as a freakish cast that will end up in the dustbin of history in the next year. I expect the 2012 Pres election to be a paradigm shift.

            All this talk of violence and revolution rings hollow to my ears.(More hollow when it is so passionately argued by the elites who chat here, who presumably have a better grasp of the fundamentals than most.) My expectation is that the most informed have a duty to prevent violence.

            A modicum of normalcy and a restoration of a safe haven for Americans from a collapsing global economy and world order can win the day.

            (I’m often baffled trying to understand what you are “attempting”, but I’m grateful to you for the discomfort you provoke that forces me to argue against your callowness. Thank you. We should each learn from the other.)

          2. attempter

            Shorter Michael C:

            “Better elites! Better elites! Dictatorship of Buffet and Gates (and Monsanto via Gates)!

            As for the those of you who can’t or won’t embrace our next generation of US hegemony and global dominance, just die already. But don’t fight, and don’t speak!”

            Being attacked by the likes of you is a great honor. And of course you know perfectly well what I want. I’ve made it clear often enough. And it’s even more clear at my blog.

        3. R2P Pillar I

          The words that offend you are politically protected freedom of expression, and they lay the groundwork for the recourse to rebellion acknowledged in the Universal Declaration of Human Rights. As the state blows off its duties, it loses legitimacy and eventually sovereignty. After all, that is exactly the process that led to our blowing Libya up. Responsibility to Protect. As our state shirks it, it fails, meriting external intervention and withdrawal of consent of the governed. In a state as repressive as the US, you can’t blame people for the failures of an unresponsive state.

        4. nick

          There is no conspiracy theory, or ruling elite that makes predetermined moves for us. Is it so ludicrous to think that the citizens of this country actually make its decisions through voting for representatives? stop preaching for upheavel against your imaginary enemy and get out there to vote.

  4. Nick

    I agree, austerity isn’t the way to go. Time and time again, history has shown us that stimulus is the way to go when it comes to recessions. The problem is, we forgot the essential element of Keynesian economics; repayment. If we use stimulus and repay our debts while we have booms like we have had before, problems would get solved.

    1. nowhereman

      Yes, stimulus, but can you imagine what good the trillions of dollars of “stimulus” could have done had it not been wasted on the banks?

      1. rd

        The big myth there was “shovel ready” projects.

        It takes 2 years to complete an EIS process for small to mid-size projects if there are no significant objections or court fights.

        During that period, you would have a year or so of engineering and design. The public works procurement process would take 6 months to a year.

        As a result, the public works stimulus money could really only be spent on paving, painting, and simple repairs/replacements since it was supposed to be all spent withing 12-24 months.

        The big failure was for both Democrats and Republicans to think that unemployment was a temporary 1-2 year blip instead of a fundamental structural underlying issue.

        Serious public works projects to rebuild our infrastructure at the scale of the 1800s canals and railroads, 1930s CCC/WPA, 1960s transportation, and 1970s clean water would continue to provide benefits for another 50 to 100 years while providing solid employment for many for a decade.

        1. Cedric Regula

          ha ha. Before Mr. O did the last stim program, he did canvas state and local government for “shovel ready” projects and was shocked and surprised they had no plans to change the world (or America anyway) in the works. He did find some plans to build water parks, and there were the usual empty pothole filing budgets.

          So until we can find a way to do “central planning” on a more sustained basis (besides monkeying with banks, ZIRP and QE), or mayne find the people in our mostly privatized infrastructure whom may be doing it, we are doomed forever to have dumb stimulus spending.

          Course it is useful for maintaining the status quo, so this is why keynsian economists are much more popular than those creative-destructive Austrian guys.

          Then, in case it needs saying, the military budget cannot be subject to austerity, nor rich taxpayers or those job creator guys – multinational corporations.

          1. rd

            Local and state governments are not in the habit of spending a lot of money on EIS’s and engineering designs to put on the shelf in case there is a depression that will magically make stimulus money appear.

            However, there is lots of work on infratructure needed out there: http://www.infrastructurereportcard.org/

            This requires actual thinking and planning over a decade or more, which appears to be in short supply in today’s political environment which appears unable to move beyond the talking points for the next election campaign.

            One of the great international triumphs over the past century is the development of of good public infrastructure around the developed world. It is quite clear that the public investments made in the middle half of the last century paid off in spades in increased growth and productivity.

            The US no longer appears to believe that provision of this is a fundamental government function on the scale of defense spending and bank bailouts.

          2. Nick

            But our infrastructure isn’t insufficient as of now. It’s good enough to sustain another boom, I mean were not Mexico or Greece yet. We tried to stimulate a 15 trillion dollar economy with a half ass 800 billion dollar stimulus. Of course it didn’t do much. And I’m not talking about TARP unsupervised stimulus to already crooked banks. Calculated precise stimulus in our economy would do much good. And once were back on our feet, we can get our act together (Repaying debts). But I we cut back now, as tea party Americans are now advocating, it would spell disaster not only for the same tea partiers, but for everyone else as well.

          3. nick

            keynesian economics is popular because it revolutionized the then-rendered obsolete free market capitalism of the 1930′s. Austrian, American, British, German, etc.

        2. neo-realist

          Just think, if the Obama administration had undertaken the preparation for these 2 year turnaround shovel ready infrastructure projects, they would have been good to go just about now to save his ass politically.

  5. attempter

    The Obama administration has “no clue,” he told me what do about this terrible disparity in the economy

    Again this lie. By now it’s a Big Lie.

    As much as the Rogoffs want to obscure the fact, it’s clear that Obama very consciously and with full premeditation wants to make the disparity as terrible as possible. That’s his one and only thought.

      1. rd

        They are greedy with short-term thinking in many cases. They assume that the long-term will sort itself out and they will make out fine if they have lots of money.

        King Louis probably thought the same in the 1780s.

        I am always cautious about conspiracy thinking becasue it requires many people to plan intelligently and meticulously while working together in secret. This is very hard to pull off. I generally view bad results as arising from incompetence instead of conspiracy per Occam’s Razor.

        1. attempter

          Where do you get the idea that anyone needs to be intelligent, meticulous, or secretive? Everyone knows exactly what to do already. All they need is wealth and power.

        2. attempter

          Honestly, I’ve never understood the patently ridiculous notion that might makes right is a “conspiracy”. Why would it be – it’s, um, might.

          And you better go look up Occam’s Razor again. I do not think it means what you think it means. For example, how does “imcompetence” financially benefit every time, no matter what happens? Shouldn’t incompetence, you know, like, LOSE once in awhile?

          Crazy me, a poker player wins every hand, my Occam’s Razor doesn’t tell me he’s an incompetent player. It tells me he’s cheating.

          I think you’re trying to propagate something like Obama’s Razor. Which would also explain your smearing of obvious analysis as a “conspiracy theory”.

          But I bet that “incompetent” poker player would love to play with you.

  6. Philip Pilkington

    Regarding the video mid-post, I think it highlights the major confusion that the media, even at the best of times, shows on these problems.

    Two of the key gripes that the commentator points to are:

    (1) The country is bankrupt.
    (2) Unemployment has skyrocketed.

    The first statement isn’t true. A sovereign country cannot be ‘bankrupt’. It’s wealth must be measured by it’s capacity to produce consumable goods and services — the US has ample, indeed EXCESS capacity to do this.

    Money is simply the grease between the wheels and it can be created at will provided it facilitates production.

    However, when the media states this fallacy it becomes part of the problem. Watch that video. What are you supposed to take from it? A sense of hopelessness, I assume. You can take little else.

    The media know that a sense of hopelessness sells well these days. That’s why they play these clips. And those that consider themselves most immune from media manipulation swallow it hook, line and sinker.

    The abyss is rather deep and clips like that don’t just give us an opportunity to catch a glimpse, they actively work to push us in over the edge.

    1. Rex

      It always baffled me how the whole country of Germany could buy into the twisted evil story that became the Nazis and led into WWII. I’ve never been a historian, but after I thought about it a bit, it became clear to me that economic distress plowed the ground for the weeds of blame and hate to thrive.

      Now, I see signs we could be trending into similar realms where insanity has become a plausible story line for many.

      Yesterday, I was sent a link by a friend who I’m pretty sure isn’t stupid.

      Felonious Munk Presents “Stop It B! OBAMA PAY YOUR F*ckin BILL
      http://www.youtube.com/watch?v=-McpNtHet3w&

      As far as I can tell the performer is not political plant. Yet, I think, now is among the worst possible times for a catchy video propagating the latest popular lies to go viral. A google search seems to have the video well noticed.

      This particular video only troubles in that I think it is clever but wrong. But it is one more tile in a mosaic that builds a picture I don’t like. It hurts to watch the US seeming to slide into irrational patterns that could be argued to parallel Germany in the 1930′s.

      1. Philip Pilkington

        There are certainly parallels. But there are key differences.

        The Wiemar government actually launched a successful stimulus program backed by the post-hyperinflation currency, the Rentenmark which was in turn backed by loans from the US. (Yes, that’s right hyperinflationistas, the German government ran a DEFICIT after the hyperinflation and it was quite successful). This got unemployment down and, together with stable prices the future looked bright — the Nazis took a big hit in the polls.

        However, the loans dissolved after the ’29 stock market crash. And unemployment went back up — together with Hitler’s electoral capacity.

        Here’s the key difference though: Hitler rose to power on the promise of Big Government. When he got into office he ran the most successful Keynesian economic program ever undertaken (much better than FDR’s). This didn’t just go into rearmament either. The Nazi government built some fine infrastructure (the Autobahnen etc.).

        Today, the far-right forces in the US are on the other side. They want smaller government — and your rapper friend agrees with them.

        I’m sure you can see that this is an important difference. Hitler could actually offer the German people something tangible (as could Mussolini). The far-right in the US cannot.

        (Disclaimer: I am not saying that Tea-Partiers and the far-right in America are fascist.)

        1. The Royal Gatekeepers

          Conservative assholes claim, like Reagan did, that Gubbmint is the problem. They’ve achieved a Reichstag Fire of sorts on the public’s conscience – decades long with superior marketing. Politicians enter office and spend like hell on militarism, a massive expansion of the welfare state for all things war – this is what they are paid to do. Obama doesn’t want smaller Government, just a Government that does what his powerful constituents want. Consider that Boosh gave Homelund Security to Northrup in the profitable days post 9/11, another period of expansion for the Government.

      2. Sufferin' Succotash

        If your country fights a war for four years, loses a couple of million dead, loses the war, loses a ruling dynasty,loses territory, and gets stuck with a reparations tab by the winners, then there might be some bitter and angry people in your country. World War I, anyone?
        That’s where all the analogies between Weimar Germany and the contemporary US break down.

        1. Bad Enough

          Been to Detroit? Or parts of Baltimore for that matter? There’s a whole ‘nother world out there where people sleep in their cars if they can afford one. In gated fortress communities, the good folk can’t see what their millitary does in foreign countries and can’t acknowledge the suffering and trials of others anywhere.

          1. Anonymous Jones

            I agree! There is no such thing as degree. Look at a black and white movie, fer eff’s sake. It’s only black and white. Case effin’ closed, mother effer!

          2. attempter

            Speaking of degree, have you actually calculated the degree of the angles in the triangulation scam you’re always running here, or do you just wing it?

    2. mansoor h. khan

      Philip Pilkington,

      “Money is simply the grease between the wheels and it can be created at will provided it facilitates production.”

      That is what I think.

      But why would our elites want to commit “civilizational suicide” by insisting that we stay on our current economic path? Am I missing something?

      Mansoor

      1. frobn

        There is a strong belief among the populace that things can somehow get back to BAU, i.e. growth and consumption and a corresponding strong denial that we are at the beginning of constraint in fossil fuels and natural resources. The elites know this and are fortifying their whatever they can salvage.

        1. mansoor h. khan

          Frobn,

          “The elites know this and are fortifying their whatever they can salvage.”

          Alternatively, they can start the education process and re-structure the economy. Painful but probably doable.

          Why commit “suicide”? At least try something?

          Mansoor

      2. Mel

        I watched some of Charlie Rose’s brain science series a while ago, and since then I’ve been trying to figure out what could link larger balance sheet numbers with dopamine uptake. I can only imagine alpha-dominance factors: “Me bigger”, “I take away his”, “They my bitches”.

        It could indeed be that at the end of a long game of chasing local optima, the elites will live in frigid stone castles, eating gruel, and dying early of pneumonia, but they would still be barons, and have the satisfaction of seeing their serfs living in mud, eating even less gruel, and dying even younger. It might not be much, but it would be the best there was.

        1. mansoor h. khan

          Mel,

          “It could indeed be that at the end of a long game of chasing local optima, the elites will live in frigid stone castles, eating gruel, and dying early of pneumonia, but they would still be barons, and have the satisfaction of seeing their serfs living in mud, eating even less gruel, and dying even younger. It might not be much, but it would be the best there was.”

          Does this mean that evil exists? And they are guided by the evil one?

          Mansoor

          1. Mel

            I think of danger and benefit, not good and evil.

            To the extent that I’m right, what’s in play are the instinctive primate policies for picking a group leader. As chimps or baboons or humans generally do.

          2. mansoor h. khan

            Mel,

            “I think of danger and benefit, not good and evil.”

            Would it not be more beneficial and less dangerous for them (the elites) and their children and grand children we did not descend into another “dark age”?

            Mansoor

          3. blunt

            “Does this mean that evil exists? And they are guided by the evil one?”

            No, Mansoor Khan, it merely means that unbridled greed, baleful ignorance, unmitigated pride and inextinguishable envy exist within we humans. Those qualities exist in us right along with compassion, intelligence, love, and empathy.

            In our last 400 years of western culture we have more and more chosen to privilege the former four over the latter four on my list. Thus, among the elites, those who have gleaned most from the current set of systems and values the west operates under have been best trained to embody the former rather than the latter.

            They have found it useful to have the rest of us learn something about the latter, but the style in which they’ve ruled has precluded the circumstances that would lead to an abundance of the latter qualities among the impoverished, or simply, among all of those who struggle to make ends meet.

            The result has been the current state of almost total materialistic value-norms for the cultures of the west and increasingly of the east as well. Since they have established what they do as, perforce, the good; they cannot even imagine that a different way or ways exist and could be found useful for managing a recovery and an end to crisis with much less pain and suffering than their way will require.

            Is that evil? I don’t believe it’s the Satan-made-me-do-it evil as in evil as a enormously powerful metaphysical force. But, yes, in terms of this world and human life and the notion that cooperation and decreasing suffering rather than competition and increasing suffering is good, then their way is “evil.”

          4. blunt

            Mansoor Khan,

            You seem a decent man, a good man, and I admire your sense that they imagine they will suicide with everyone dying of the lack of oxygen, the dearth of water, the desert where crops once flourished.

            What you miss is the inability of the imagination in the dominants to readily see their evil as evil. My ancestor owned slaves and was a god-fearing man (so I finally heard.) Yet, what god did he fear and how did he avoid seeing the suffering and “evil” *smile* that he caused by the simple act of buying and selling?

            It’s the fashion in which we seem to be wired. We miss what we find beneath our notice. We confound profit with “virtu;” and that which maximizes profit as “good” (no matter how many die for that good.)

            Thus, there’s a place prepared for the KIngs of Hedge-Funding and the Magnificent CEOs and the scions of the past four century’s wealth hoarders that will allow them to survive the tragedy the rest of us will see. (Think: a Calvinistic sense that great wealth = great favor with the deity.) They will remain unscathed by ultraviolet radiation and inability to breathe the air. They think of themselves as The Chosen and, so, are beyond the rech of the catastrophe.

            At some point cupidity = stupidity and most of that lot (see Koch Bros.) have reached the equivalence point and surpassed it. I absolutely believe that they literally CANNOT do other than what they do.

          5. mansoor h. khan

            Blunt,

            ” (Think: a Calvinistic sense that great wealth = great favor with the deity.) ”

            God willing the deity you mentioned above can help them to change their ways before it is too late.

            Mansoor

          6. blunt

            “God willing the deity you mentioned above can help them to change their ways before it is too late.”

            What would be required for that to occur, I wonder? Perhaps Gabriel could speak in David Koch’s ear and he would change his heart. Hmmm. I rather doubt it, Mansoor.

            Instead, I think David would simply dismiss it as a momentary delusion, and speak of it to no one at all for fear of being labelled a lunatic. Or, perhaps Paul Ryan or Chris Christie might happen on a burning bush or stroll of a cool evening in a garden with the deity, talking. Again, I’d imagine they’d never speak of that either and continue in their ways & beliefs.

            It’s the way of things, ya know? We form a neural pattern and even cataclysm often doesn’t change it. Our wish to maintain the status quo overrules even the evidence of things we see and experience. We transform the remembrance of the experiences to what we wish them to be.

            But, perhaps, as you seem a good man and the pleading of a good man might avail much at times, sight will come before the deluge. I, for one, would hope that destruction will not be the final answer. Seems such a waste.

            Of course, the notion of corporate dominion seems to thrive on laying waste, latter-day Assyrians among the cities of the Chaldees.

            But, at your model, I will light a candle to hope and not cover my head in the darkness. *smile*

          7. wb

            Mansoor, Blunt, wonderful, sublime exchange, perennial questions, going back all through the ages, even unto Ur, and reminiscent of Charles Dickens, but, alas, he wrote long ago, and we seem to have learned very little since then…

      3. Philip Pilkington

        Well, what’s that Keynes quote?

        “The ideas of economists and political philosophers are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men are usually the slaves of some defunct economist. Madmen in authority are usually distilling their frenzy from some academic scribbler of a few years back.”

        I’d only add to that that many people seem to make the mistake of thinking that the government has to act like a household. Obama said this explicitly a while back. But also see the video linked to by Rex (above) where the guy says that the government cannot ‘balance its check-book’.

        Of course, the difference is that the government ISSUES currency, households only USE it (and so have to earn it).

        MMTers tirelessly point this out but rarely get anywhere:

        http://bit.ly/nRWQhV

        Most people think of the economy in terms that they understand and that they take from everyday life. Why do they do this? Well, in my experience people the stupider and less educated a person is, the more assured they are that their opinion is correct.

        So, I think its a mix of all the above I think. And a toxic mix at that.

        MMTers are also VERY insistent that people always think in terms of the REAL economy:

        http://bit.ly/paDNlr

        This is often eclipsed because we talk about money so much. But money is the ultimate policy tool. It is money that facilitates the movement of real goods and services in the economy — which, as I’ve said, should always be front and center.

    1. gs_runsthiscountry

      Riots at Wisconsin State Fair:

      http://www.jsonline.com/news/milwaukee/126828998.html

      To add to that above link: http://www.badgerherald.com/news/2010/10/25/study_shows_milwauke.php

      University of Wisconsin had a study that read, Unemployment in the African-American community is 53%, under 25, forget it. And, that study was done in 2010 I am guessing it is actually higher than that now, when you consider people dropping off unemployment.

      Should it be shocking unrest would spawn out of the demographic hardest hit, probably not.

  7. Dan Duncan

    Because GW is such a buffoon, a little more analysis is in order.

    Obviously, you’re not going to take my word for what follows…and why should you? You are, after all, a bright and inquisitive person capable of thinking for yourself.

    That’s why–out of respect for you, Naked Cap Reader—I’ve gone ahead and taken the extraordinary step of including a link to the actual f*cking study, as opposed to treating you like an unthinking imbecile who would be satisfied with a link to nothing but a one paragraph abstract….

    Because that’s all GW has done…is give you a link to a single f*cking paragraph abstract. And what’s worse is that the abstract is very misleading. Thus, for those of you who were content to comment without actually reading the study, because you thought said study confirmed your point of view—you’ve been played as a fool—courtesy of GW, Buffoon.

    So, here you go, a link to the actual paper composed by Hans-Joachim Voth and Jacopo Ponticelli:

    http://www.voxeu.org/sites/default/files/file/DP8513.pdf

    Yes, austerity is associated with social unrest, BUT:

    1. The correlation between budgetary cuts and social unrest has essentially disappeared since the late 1980s. In fact, according to the study, in modern industrial societies there is no longer a meaningful relationship between budget cuts and rioting.

    2. Yes, there is a meaningful relationship between austerity and social unrest…BUT you have to include a data set that goes back to the 1920s.

    The study states:

    “The fall of the Berlin wall saw the spread of Western-style democracy eastwards. The overall connection between austerity and social instability now changes sign, and becomes in insignificant.”

    Of course, GW doesn’t include this info. One might think he doesn’t include this information because he’s dishonestly skewing the facts. Such an interpretation is probably far too charitable, because it implies that GW actually had the mental capacity to comprehend what he was reading in order to skew it accordingly.

    Other items of note and some great headlines:

    3. Riots are more common in societies with high levels of public debt. “High Public Debt Leads to Violence and Instability.”

    4. Riots are associated with Urbanization, ethnic diversity. “Urbanization and Ethnic Diversity Both Lead to Violence and Instability”.

    5. Dictatorships are less likely to have riots. “Dictatorships Lead to Peace and Stability”.

    And last, but not least–the best headline of all:

    GW. Buffoon.

    1. Fat Danny

      Let’s take an axe to Defense spending, full bore austerity for Defense Contractors. Then we’ll have “professionally orchestrated” unrest.

    2. Philip Pilkington

      The analytic mind of Dan Duncan, as usual, knows no bounds.

      First of all, this:

      “High Public Debt Leads to Violence and Instability.”

      If Duncan knew anything about econometrics, macroeconomics or, you know, generally speaking about anything at all, he’d realise that we’d have to determine causality here. This is like the debate surrounding Rogoff’s work: does public debt ’cause’ rioting or are high public debt and rioting correlated. Unless Duncan has devised an extremely sophisticated means of determining causality in highly complex environments, we can only determine that the two are correlated.

      This leads us to the question: what causes high public debt? Rioting? Doubtful. But what about recession? Maybe. Or austerity programs themselves? There is evidence for this.

      Of course this is all dealt with in the paper. In order to “demonstrate that causality runs from cut-backs to unrest” they do two things:

      “First, we analyse a more detailed dataset that gives information about the causes of each incident. Second, we use recently-compiled data on changes in the government budget that follow directly from policy changes … For both types of additional evidence, we find clear indications that the link runs from budget cuts to unrest.”

      You see everyone. Duncan hasn’t understood the paper. He’s just scanned it with ‘hard eyes’ and pulled out points that he thinks undermine the person who wrote the above post.

      This is, among other reasons, why Duncan should never be taken seriously. Ever. We won’t say that he willfully misconstrues arguments by pulling out what he feels to be key points — while, of course, completely misconstruing them (public debt is CORRELATED with social unrest, Dan, to repeat again; it doesn’t ‘lead to’ [that is: cause] social unrest) — no, he just doesn’t engage with the arguments properly because:

      (A) He’s not smart enough to understand them which causes him frustration and leads to:

      (B) He angrily tries to attack them to try to abreact his frustration.

      Which leads us to conclusion:

      (C) Duncan’s post should be seen as his own personal psychodrama rather than actually taken seriously.

    3. Philip Pilkington

      Other fun points Dan failed to mention in his crusade against misrepresentation:

      “The correlation between budgetary cuts and social unrest has essentially disappeared since the late 1980s. In fact, according to the study, in modern industrial societies there is no longer a meaningful relationship between budget cuts and rioting.”

      No, the authors clearly state — in the introduction, of all places — that they are focusing on Europe. In the introduction they mention at least one counterexample to this in a ‘modern industrial society’: Argentina in 2001.

      They also mention Greece, where riots have certainly taken place in response to budget cuts in recent times. So, no according to this study there is a period (1990-2009) when there is no strict correlation between budget cuts and riots (dunno where Duncan gets the 1980s), but this may now be coming to an end.

      A reasonable interpretation of the data NOT torn from context as Duncan does, might suggest that this was during the New Economy boom (built in part on a stock bubble) and after that during the housing boom (also a bubble). But such an interpretation would involve contextualising which Duncan is unable to do — perhaps because he spend his time trolling to boost his ‘rebel’ ego-image of himself.

      “Yes, there is a meaningful relationship between austerity and social unrest…BUT you have to include a data set that goes back to the 1920s.”

      Question: if the authors hadn’t gone back to the 1920s would Duncan have claimed that the piece was being too particular? Hmmm… one can only speculate.

      Actually, if we were to judge this paper from the point-of-view of a professional econometrician rather than ‘Dan Duncan’s Troll Seal of Disapproval’ we’d find it adequate in its methodology. Here’s a trained econometrician, Bill Mitchell commenting on the article in question:

      “…it satisfies the needs of time-series econometrics – variance in the data. You cannot find anything interesting when the data is not variable.”

      Also note that Duncan — in all his rage and frustration — even misconstrues the author of the blog post’s argument.

      Duncan: “Of course, GW doesn’t include this info. One might think he doesn’t include this information because he’s dishonestly skewing the facts. Such an interpretation is probably far too charitable, because it implies that GW actually had the mental capacity to comprehend what he was reading in order to skew it accordingly.”

      George Washington: “A study this month by economists Hans-Joachim Voth and Jacopo Ponticelli shows that – from 1919 to the present – austerity has increased the risk of violence and instability.”

      So, chalk another strike up on Duncan. He’s engaging in some pretty powerful projection here.

    4. craazyman

      It’s hard to correct the ignorance of the masses, or even the ignorance of the intelligentsia, which is a harder virus to cure.

      I too am an apostle of truth.

      What helps me persevere through the inevitable criticisms of my altruism is my uniform. I have batman style leather head gear with face mask and goggles, a yellow body suit with a huge “C” embroidered on the chest and flared red leather boots. I also have a yellow cape and set a fan in front of me on High, so my cape blows like I’m flying when I’m on patrol, sitting in front of my computer.

      When I correct some ignorant fool with a precise and helpful comment, I usually wait for the screen to referesh after hitting the Submit Comment button, and then I nod with a grim square jaw at the spark of light I’ve tossed into the darkness. Sometimes I even flex a muscular bicep or latissimus. I’m 6 feet and 180 lbs and I could be a wide receiver in the NFL.

      I can’t do it alone. I’m glad there are others. I want to save humanity but there are so many who need to be saved.

    5. Dan

      Bla, bla, bla, things are different now because I’m. Scared. That’s what I got out of Mr. Duncan’s post.

  8. David

    When it comes to being asked to drink a cup of hemlock most people would give it back and say, “No, you drink it”.

    What we are discussing is the way the cup is returned!

    How would you return such a gift?

  9. gs_runsthiscountry

    When the discussion of civil unrest arises, I cannot help but draw loose parallels to the circumstances that surrounded Shays’ Rebellion.

    Maybe when its over instead of rethinking The Articles of Confederation we can instead address Citizens United vs Fed Election Commission?

    gs_

    1. Cedric Regula

      I think we are long over due in fixing the electoral college system. Thanks to the Supremes, I see our way clear to eliminate the middlemen – congressional representatives – and go straight to a S&P 500 weighting of the popular vote.

      Each state would get an allotment of votes based on the number of S&P 500 companies either headquartered or incorporated there (depends on if we just want Delaware to count or not)and this number would be adjusted by market capitalization at close of market day before election day.

      Then we should do the same for congressional races too, and stop all that silly redistricting stuff they do all the time.

      Then we would be sure our most successful job creator states are voting the same pols back into power over and over again and we could be assured of political stability in this country.

      1. gs_runsthiscountry

        “(depends on if we just want Delaware to count or not)”

        yes, that does present a problem, pesky small state with all those companies incorporated there, but you see, that is what EXEMPTIONS are for. *sarcasm off*

  10. dearieme

    “British rioters… at the runaway ..austerity measures”: bollocks. The auserity measures haven’t happened yet. When they do then on current plans they’ll just be reductions in the planned rate of growth of government spending.

  11. Holly

    Eric Hoffer in his 1952 book The True Believer: Thoughts on the Nature of Mass Movements discussed the economic & social issues that lead to destructive mass movements.

    This research just confirmed AGAIN the risks inherent when we have masses of disenfranchised youths. Maybe if the conversation states talking about the very real possibility of continued, increasing unrest, people will start to realize that it’s not just their financial livelihood that is at stake.

  12. razzz

    I’m reading it will be generational civil wars everywhere, revolting because elders pissed the youth’s futures away.

  13. Susan the other

    We have the Constitution which is sort of an inchoate social pact. Maybe it is time for a new one. What could all of us loonies agree on? That if some people must be obscenely powerful or get obscenely rich, they cannot do it on the backs of common people. Nor on the destruction of the environment. Nor wars of aggression. We need to make a list of things that are accepted as common decency and things that are not. Leaving human decency undefined causes riots.

    Inchoate rage.

    We need to define “Life, Liberty and the Pursuit of Happiness.” One of the modifiers of the phrase “pursuit of happiness” should be “cause no harm.”

    1. K Ackermann

      The one we have works fine. The only change it needs is the outlandish interpretation that corporations are people.

      It’s that interpretation which allows money to pick at the seams of the fabric of society. It’s starting to fray and unravel, and it needs to be stitched up quick.

      Public campaign finance would go a long way toward restricting the quid pro quo which infects everything, right up to the courts and justice system.

  14. Justicia

    Jeremy Grantham (GMO) has an excellent analysis in his latest newsletter that I hope Obummer will read.

    http://www.gmo.com/America/ (click link for Part 2)

    Danger: Children at Play

    [...]

    For 30 years to the year 2000, consumers compensated for their lack of progress in hourly wages partly by working harder and longer and in greater numbers (i.e., a higher participation rate) and partly by borrowing. But in the 10 years after 2000, the participation rate in the workforce has dropped dramatically (see Exhibit 2) and hours worked per person has fl attened so that the only way for individuals to grow their consumption more recently was by borrowing even more and, to some extent, by speculating in
    housing. Rising house prices provided the (apparently) real backing for more debt and, even where that backing
    did not exist, the ingenuity (and, we must admit, greed) of the financial system still supplied the debt. And all of
    that has gone. And since creating and destroying illusions seems a wretched way to proceed, we can hope (non-
    mortgage brokers anyway) that it does not return. Today the artificial sugar-coating of increasing debt has been
    removed and we must live with the reality that an average hour’s work has not received a material increase for
    40 years (see Exhibit 3). Without increased debt and without gains in hourly wages, how can there be sustained
    broad gains in consumption? Only Chanel suits, Hermes scarves, BMWs, and their ilk have very strong sales,
    and these top-end items are just too small a fraction to carry the day. If we want to dig out of our current morass, don’t we have to change this equation and isn’t the most direct way of doing this to divide the pie more evenly? That would mean lower income and sales taxes for the bottom 75% of earners and higher taxes for the top 10%! We have allowed the vagaries of globalization and the plentiful supply of cheap Chinese labor to determine our
    income distribution, which has become steadily steeper, to the point where we have become one of the least
    egalitarian developed societies. Wouldn’t it be better for us to decide deliberately and by ourselves that income
    distribution which creates the best balance of social justice and incentive to work? I am not suggesting that we
    become some goody two-shoes Scandinavian country. But how about going back to the levels of income equality
    that existed under the Presidency of that notable Pinko, Dwight Eisenhower (see Exhibit 4). And don’t think for a
    second that this more equal income distribution somehow interfered with economic growth: the 50s and 60s were
    the heyday of sustained U.S. economic gains.

    [...]

    Economic policy making has been stuck between half-hearted Keynesian stimulus, mostly chosen, apparently, to avoid projects with a high social return on investment, and ill-timed “Austrian” cut-backs. Clearly, this mishmash has not been effective at job creation. Conversely, we were great at job destruction: no other country laid off workers with such panic. Where Dutch and German companies, among others, tried to protect their workers’ social capital by limiting firing, we protected short-term profits.

  15. rps

    “The superstitious awe, the enslaving reverence, that formerly surrounded affluence, is passing away in all countries, and leaving the possessor of property to the convulsion of accidents. When wealth and splendor, instead of fascinating the multitude, excite emotions of disgust; when, instead of drawing forth admiration, it is beheld as an insult upon wretchedness; when the ostentatious appearance it makes serves to call the right of it in question, the case of property becomes critical, and it is only in a system of justice that the possessor can contemplate security.” T. Paine Agrarian Justice Essay 1796

    Onward to the next level up in societal development. It seems this is the way humanity moves forward breaking the chains of enslaved humanity in patriarchal systems

  16. tnjen

    The sad thing about this post, despite its absolutely stellar review and presentation of information, is that this information is not new. It has been known for ages, as generations (yes, generations) of sociology students and professors can tell you.

  17. Olaf Stobeck

    The paper by Ponticelli and Voth indeed is quite interesting. However, it’s not clear to me how valid the conclusions are for today’s world.

    It’s worth having a closer look at the paper: The link between austerity and riots only existed for the period from 1919 to 1989. Afterwards, it broke up, as the economists explain on page 15:

    ”The fall of the Berlin wall saw the spread of Western-style democracy eastwards. The overall connection between austerity and social instability now changes sign, and becomes in insignificant. This suggests to us that noneconomic causes became a dominant feature of the period.”

    So one should not get too excited about the results.

    More details in my blogpost “The Economics of Riots”:
    http://economicsintelligence.com/2011/08/11/the-economics-of-riots-and-austerity/

  18. solo

    The Pali canon attributes a similar thesis to the historical Buddha, who lived some 2500 years ago. Thus do the “latest studies” belabor the insultingly obvious: It takes a village to ruin a child. (For “village” read “oligopolistic capitalism, in decline”; for “child” read “those looters on the video, mimicking the egoism, greed and destructiveness of their betters.”)

      1. solo

        Not for greedy people. The Buddha had to give up his palace to seek release. But America, Left and Right, is nearly unanimous in clamoring for a restoration of that human nightmare called the American Dream (successful egoism for all). –Which is why, Mansoor, Buddhism–even in its contemporary expression, a far cry from the Pali canon–never has and never will catch on in the USA; which some of my Buddhist acquaintances call “the land of the hungry ghosts.”

        1. mansoor h. khan

          Solo,

          Have hope. civilizational collapse (what we will probably have in the next 2 to 5 to 10 years — don’t know the exact timeframe) often leads to (for those who are still left alive) a re-discovering of faith and god and value of cooperation and brotherhood.

          Because men realize they are not in control and they need each other. It was one thousand years ago when the western civilization was strongly christian that Thomas Aquinas wrote that there is no conflict between “faith and reason”.

          Of course he was trying to get Christians to be more interested in this (the material) world. Thus Christiondom was now set to delve in the world but then (eventually) forgot about faith.

          I believe (after the collapse) there will be re-balancing and the faith part will re-appear (god willing).

          Mansoor

          1. neo-realist

            My concern is that if we have collapse as well as violence and disorder to go along with it, those left alive will be rebuilding the country while looking down the barrel of a gun. We’ll have police state cooperation and in order to protect the plutocrats and military industrial complex in the next reset of the country, we may never be allowed by the powers to utilize any form of democratic consent for our own benefit.

            However, collapse may not necessarily lead to violence and disorder in our country–we have many safety valves–TV, video games, world of warcraft, farmville, and facebook. But if we lose our electricity, look out:).

  19. Greg

    Two cheers for Karl Marx, who predicted that increased capitalization would lead to increased unemployment and misery among the working and middle classes. There’s a lot he didn’t get right, but he was right about capitalism, from its own internal dynamics, undergoing these kinds of crises. See: http://anamecon.blogspot.com/

  20. pj

    You know, whenever I read about military plans for domestic insurgency, it always makes me want to laugh. I know these “plans” were formulated by the very people who are afraid they might one day have to “face the music” for their corrupt and self-serving actions. One more way the cowards in power avoid responsibility and accountability – they hide behind the bulletproof skirts of the men with guns.
    Chickens.

  21. MichaelC

    Reply to Attempter,

    (Sorry, I couldn’t let your ‘shorter MC…’..summary pass without comment).

    Since I began my screed with ‘we’re all Icelander’s now’,, the hegemony and dominance idea was based on the possibility that that principle (FU bankers) could prevail here in the US, into the next generation, dominated by a wiser, once bitten, twice shy humbled polity.

    Once its clear the debt non crisis can be adressed fairly easily (and reasonably unfairly) by taxing the plutocrats, it takes the wind out of the sails of the rhetorical tax trap the loopy Republicans and the complicit Democrats are blackmailing us all with. Then we could move on and focus on the real meat of the legislative process, protections from predators.

    Perhaps I didn’t argue clearly, or perhaps you misunderstood, but the ‘better elite’s, better elite’s conclusion diminishes both of our arguments. More yours, I think, given Buffet’s op ed the next day (which I responded to and which can’t be categorized as pro ‘better elites.”).

    I’m dismayed for you that you think my attack is a badge of honor. I’m just a fallible guy who disagrees with you. I come to this blog to help sort out that signal/noise problem. When you help with that I pay attention, when you don’t I move on. Lucky for both of us Yves is such a magnanimous host.

    In this case I thought you made a valid point worth responding to.

Comments are closed.