Stephanie Kelton: The Good Society: Lessons Not (Yet) Learned

By Stephanie Kelton, Associate Professor and Chair of the Department of Economics at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives

John Kenneth Galbriath’s book, The Good Society: The Humane Agenda, creates a blueprint for a more just, prosperous and stable world. I’m re-reading it for the nth time because I continue to believe we might just get there one day. Indeed, I’m convinced we must.

Here are some excerpts:

While the economy must accord everyone a chance both to participate and to advance according to ability and ambition, there are two further requirements. There must be a reasonable stability in economic performance; the economic system cannot recurrently deny employment and aspiration because of recession and depression. And it may not frustrate the efforts of those who plan diligently and intelligently for old age and retirement or for illness or unanticipated need. The threat in this case is, of course, inflation — the diminished purchasing power of money — and with it the loss of provision for the future.

The flow of aggregate demand for goods and services must keep the economy at or near [full employment]. The failure to do so — resulting in cyclical or enduring unemployment — is inconsistent with the goals of the good society…

The stabilization of the flow of aggregate demand is the vital factor…There are three substantive lines of corrective action that will accomplish this, will increase the flow of aggregate demand as required…..

1. taxes can be lowered
2. interest rates can be reduced
3. the government can contribute directly to the flow of demand by new expenditure in excess of tax receipts

Action on interest rates, commonly referred to as monetary policy, has the highest establishment approval as an effective measure against stagnation and unemployment…

The serious flaw in monetary policy is that it may have little or no effect on the flow of aggregate demand. As noted, the lowered interest rates are assumed to work against depressive conditions by encouraging consumer borrowing and expenditure and business investment. The latter responds to the lower cost of borrowing and therewith the improved possibility for profit. But when times are poor and unemployment is high, lower interest rates do not reliably inspire consumer expenditure; depressive attitudes, including those which are the product of unemployment or uncertain employment, are in control. And at such times, excess business capacity being evident, business firms, old and new, may not be encouraged by low interest rates to borrow and invest and so contribute to the income flow; the larger prospect is too uncertain. There is also the adverse effect of low rates on those whose income comes from interest — a reduction in their contribution to aggregate demand. None of this, however, discourages faith in monetary action as a decisive economic instrument. Quasi-religious conviction here triumphs over conflicting experience.

Tax reduction is also celebrated as a way to sustain aggregate demand during recession…Here again the hope is at odds with reality; there is no certainty that the funds released by tax reduction will be invested or spent.

As a way to stimulate demand in times of negative growth or stagnation, there remains only one direct and active intervention by the state to create employment… the only true substantive action is for the government to move to provide jobs for those for whom unemployment is otherwise inevitable…

The deficit… must not be seen as a barrier to effective public action….When the economy recovers and public revenues rise, there must then be the discipline that brings stimulative expenditure to an end. Taxes must be kept at previous levels or increased as a counter to speculative excess and, at the extreme, the inflationary pressure of demand on markets.

There is nothing easy about this broad course of action. An influential body of opinion now dismisses it as beyond the collective intelligence of the modern polity. Once again the unfortunate fact asserts itself: there is no effective alternative. What is dismissed as functionally difficult, ideologically passé, is the only way to prevent recurrent periods of stagnation and unemployment.

The “influential body of opinion” remains too enthralled with monetary policy, too wedded to supply-side “solutions” and too focused on deficit reduction to allow us to build The Good Society. The rich and powerful, working through our elected officials, insist that There is No Alternative: we must spread sacrifice instead of prosperity, make tough choices rather than wise investments, focus on budget outcomes instead of human achievements. Theirs is a bleak world – at least for the masses – arrived at through the cultivation of fear and mysticism. The Good Society is out there, and while it may seem unachievable in this Plutocratic world, Galbraith offers this:

To identify and urge the good and achievable society may well be a minority effort, but better that effort than none at all.

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About David Dayen

David is a contributing writer to Salon.com. He has been writing about politics since 2004. He spent three years writing for the FireDogLake News Desk; he’s also written for The New Republic, The American Prospect, The Guardian (UK), The Huffington Post, The Washington Monthly, Alternet, Democracy Journal and Pacific Standard, as well as multiple well-trafficked progressive blogs and websites. His has been a guest on MSNBC, CNN, Aljazeera, Russia Today, NPR, Pacifica Radio and Air America Radio. He has contributed to two anthology books, one about the Wisconsin labor uprising and another on the fight against the Stop Online Piracy Act in Congress. Prior to writing about politics he worked for two decades as a television producer and editor. You can follow him on Twitter at @ddayen.

73 comments

  1. Moneta

    It is really annoying when progressives attack realists and call them neocons or neolibs.

    Getting to the good society will require sacrifice. Reconfiguring structures always causes dislocations.

    It’s like those who keep on repeating that the US is a great country and will get through the crisis and be great again forgetting about the millions who died in wars, have lived in poverty so the US can be great.

    1. Banger

      Of course there are all kinds of great ideas out there about creating a sane and sustainable economy but they cannot be implemented because the economy is a sub category of politics. The ruling elite in this country runs the country by suppressing change that does not re-enforce their hold on power. If you want a more just economy you need a more just culture and political institutions.

      I say this too much, but I’ve looked into schemes from everything from transportation, energy use, urban planning, reducing poverty, prison reform, scientific inquiry, diplomacy and etc., etc., etc. There are no shortages of great ideas out there–there is only a shortage of people who want to listen to these ideas. We have the technology, the infrastructure to carry out reforms that would prosper everyone but the speculators and bandits who have become increasingly powerful over the years.

      Before anything can happen we need cultural reform to move us from a culture that thrives on a mixture of fears and fantasies. We must reject fear and the ideology that believes we are bad unless we are controlled by the state or the corporations. We need to stop the insult to our dignity that puts us under constant surveillance, in constant debt, and keeps us from using herbs and compounds to explore alternate forms of consciousness. Our culture encourages cowardice, narcissism, greed, and above all a general fear of everything. Once we deal with that stuff we’ll see how we are connected to each other and the natural world and begin to dramatically change the focus of our lives from acquisition/status games to more parties and celebrations.

      1. Jagger

        —–There are no shortages of great ideas out there–there is only a shortage of people who want to listen to these ideas.—–

        The foxes guarding the henhouse are not going to change the rules for the benefit of the chickens no matter how great the ideas sound to the chickens.

    2. F. Beard

      Action on interest rates, commonly referred to as monetary policy, has the highest establishment approval as an effective measure against stagnation and unemployment…

      Sure. Because somehow lending money into existence is not the same as counterfeiting. Actually, lending money into existence is worse than simple but modest counterfeiting since the money lent must be repaid and with interest too. There’s the cause of the boom-bust cycle right there, in plain view.

      Is there another way to do endogenous money? Sure, it’s called shares in Equity – common stock.

    3. Gerard Pierce

      Moneta:

      I like your saying: “Getting to the good society will require sacrifice. Reconfiguring structures always causes dislocations.”

      Most of the time I hear this kind of stuff from neo-cons and neo-libs and the one thing you can be sure of is that they do not personally expect to be the ones sacrificed.

      Just keep in mind that when TPTB get thru sacrificing what’s left of the middle class — you’re next.

      1. nonclassical

        Gerard,

        ..here is one definitive perspective on Moneta’s “reconfiguring structures always causes dislocations” (dislocations, which are intended=profit$):

        Naomi Klein’s, “The Shock Doctrine-Rise of Disaster Capitalism”;

        “If you wonder what happened to the middle class in the last 40 years, why poverty is on the rise , you’ll find lots of food for thought in Naomi Klein’s THE SHOCK DOCTRINE. Tracing the rise of the “Chicago Boys” laissez-faire economic beliefs, their impact on South America, China, Russia, Poland and South Africa and how it impacted their forms of government, Klein makes a compelling argument for the flaws in Milton Friedman’s economic theories.”

        http://www.thriftbooks.com/viewdetails.aspx?isbn=0676978002 ($3.97 delivered free)

      2. Moneta

        I have never gotten anything I really wanted without some form of sacrifice. So I don’t see how we could get a good society without some form of sacrifice from someone or some group.

        I know I will be next because the pain is coming no matter what:

        -I am not a 1%er and if we do not get the good society, they will probably squeeze the next 20%.

        -If we go for the good society, there will be a painful transition period where they take money/labor from those who have some to help those who don’t. I think you have to be in Gen-X or Gen-Y to see it this way. Most Boomers are on another wave length.

        If they want the good society, optimistic progressives should really look out a little more for realist progressives instead of labeling them Neocons/Neolibs.

        1. Calgacus

          I have never gotten anything I really wanted without some form of sacrifice. So I don’t see how we could get a good society without some form of sacrifice from someone or some group.

          MMTers have been trying to explain this for some time. What sacrifice is involved in stopping stabbing yourself? Stopping garrotting yourself? That is what the MMT proposals amount to, because economies are run that insanely now, economic beliefs are than bizzarre now, that human sacrifice and self-mutilation mystically create wealth. Manufacturers of bankruptcy forms might “sacrifice” in MMT world. Hard to see how anybody else would.

          It takes tremendously hard work and bullshitization of economies to create the kind of poverty midst plenty we see now. It ain’t rocket science. Run economies like we did in the 50s & 60s would be good enough. Run them, structure them as intelligently as the USA in 1941 say = MMT +/- 5%, we would have the most spectacular and universal prosperity ever seen.

          What “sacrifice” was involved in the first New Deal? Except for jailed crooks? The poor became a lot better off. The rich too, just not relatively. Best bull market of all time was when FDR was elected. Look at what people do, not what they say.

          I know I will be next because the pain is coming no matter what: The only “pain” necessary is the pain of logical, consistent thought.

          If we go for the good society, there will be a painful transition period where they take money/labor from those who have some to help those who don’t.
          Baloney.

          I think you have to be in Gen-X or Gen-Y to see it this way. Yes, they might have been brainwashed. But the even younger generation since the GFC can see what is in front of their noses.

          Most Boomers are on another wave length. They might remember a time where psychotic beliefs about economics were not universal.

          If they want the good society, optimistic progressives should really look out a little more for realist progressives instead of labeling them Neocons/Neolibs. “Realists” are often the most brainwashed of all. Hold the craziest, most illogical, most absurd, unreal and impossible beliefs. That’s the problem. “Realists” – aren’t.

          1. Moneta

            Maybe the ones in 90210 should switch with those in Bangladesh. Have you ever been in a committee and tried to sway a group? If you are not a naturally born leader, good luck!

            Redistribution will not happen without either an economic shock or a revolution… both imply pain and sacrifice.

            If the 99% think they can get the 1% to share without any pain, I call that magical thinking, not realism.

            1. reason

              No its been done before without a revolution. It was called an election. Yes, there is a problem in the US with the corrupt limited choice system called the two party system. But within the democratic party there is a progressive caucus and you could stop complaining and vote in pre-selections for progressive candidates.

              1. Moneta

                Actually I’m in Canada and we can’t vote in your elections. Meanwhile we are stuck with all the consequences of your bad policies.

          2. F. Beard

            What sacrifice is involved in stopping stabbing yourself? Stopping garrotting yourself? Calgacus

            Amen! It’s not a free lunch but preventing the destruction of lunches already paid for.

    4. nonclassical

      ..oh really, Moneta-

      please show us your “realists”…neocons and their blind believer-followers spout ideology which has never existed…your “Rand-Friedman-Greenspan free markets” operating “freely” for all have never existed in any historical context-time or place.

      This is downfall of Rand’s (and her blind believers) ideology-predicated upon equal access and information-ability to operate within “market economy”…which is demonstrably (we’re living the result) unTRUE…

      If I am inaccurate in this summation, please document Rand-Friedman-Greenspan ideological reality having been implemented??

    5. Cassiodorus

      It’s really annoying when we are told we can’t talk about neoliberals or the present-day neoliberal era when confronting its most serious problem, neoliberalism.

      1. Moneta

        The issue is not about discussing neoliberalism but labeling dissenters neoliberals when they aren’t.

        I believe banks should be right-sized
        I believe in socialized medicine
        I believe the US should shrink its military
        I believe the US should cut its materialism
        I believe the US should shrink its car dependency and increase public transit
        I believe pensions should be pay-as-you-go
        I believe resources and hard assets should be nationalized and benefit everyone equally
        I believe everyone should get free education

        Now, do I believe all these transformations can be done without pain? No.

        1. nonclassical

          ..of course, Moneta-the issue is not the issue-rather, it is how we talk about it..

          I expected dissembling, of course-which is reason I addressed your own words..

          and now find you dissembling even these…

          how “realistic”…

        2. Bapoy

          I could not pass this one up!

          I believe banks should be right-sized – Agree with you 100%

          I believe in socialized medicine – I also would love FREE medicine, but I think you mean you believe in either HIGHER taxes or HIGHER inflation. You see, somebody has to pay for school, research and development and production to provide the services. You know why unions have been so successful in getting their wishes? Political power, period. You think unions are powerful, do a quick search on the medical industry and their political connections and you will find out why prices are where they are. They would love your plan, that would give them an upper hand in the process (as if they don’t already).

          I believe the US should shrink its military – I tend to agree.

          I believe the US should cut its materialism – Not sure what this means, but sounds reasonable.

          I believe the US should shrink its car dependency and increase public transit – Major fail. Transportation only makes sense if you are in a city like NYC, otherwise public transportation makes no sense. Guess what, the majority of the US does not look anything close to NYC. Not feasible.

          I believe pensions should be pay-as-you-go – sounds good to me.

          I believe resources and hard assets should be nationalized and benefit everyone equally – this is a huge mistake. That means you are basically abolishing private industry, it’s communism. All this sounds good in theory, for an example of how this works in practice, see Russia and North Korea. This does not work because it takes resources from individuals that know how to manage the resources to individuals that don’t. You do this, you lose the US.

          I believe everyone should get free education – not sure what you mean by free, but some basic questions. How many people you know are willing to work for free. That should give you a sense of what “free” looks like.

          Now, do I believe all these transformations can be done without pain? No. – you bet you. Humans are both the smartest yet dumbest creatures on earth. Have you seen anyone ever working for free or handing out things for free?

          So where does the “free” crap comes from?

        3. Bapoy

          I also mis-read the first one. I thought it stated that government needed to be right sized. How wishful of me. Below is my real answer to that point.

          I believe banks should be right-sized – Agree with you 100% as long as you can define what right-sized means. Tell you what, why don’t you go out and ask a few people what right size means. I bet each will have a different idea of what right size is.

          We need to stop trying to control things. The attempt to control markets is what has caused all the issues we have today. We give people money for staying home twiddling their thumbs and than ask why the unemployment rate is high.

          We lower rates to 0%, force banks to lend, backstop bank failures and than ask why people bought homes they could not afford. We backstop the auto industry and than ask why their products stink.

          Moneta,
          What we need to do is let the markets work. Let the banks grow as big and as large as they want, just don’t ever come to the tax payer for funds because you ain’t getting any. Oh, and by the way, if you break our laws, your executives will go to jail.

          Is this that freaking hard to do?

  2. craazyman

    Can You Imagine Hundreds of Pages like This? see ya on youtube!

    “It must be that a people will want to live in a good society. Certainly they would not want to live in a bad society, is that not right, Plebion?”
    “Of course it is Plucrates, you state nothing but truisms.”
    “Certainly not, Plebion, for how is is that a people determine what a good society is, so that they can distinguish it from a bad society?”
    “Why Plucrates, I think you are a moron and not a philosopher. They decide among themselves what a good society is and then they govern themselves to achieve it.”
    “And how do they do this, Plebion?”
    ‘Why Plucrates, have you never been to junior high school? They elect representatives of the people, through a poular vote, to implement their will.”
    “And so you say, Plebion, that what ever the representatives chose to do, that choice creates the good society, and what they chose not to do, they chose not because that would create a bad society, were they to chose that instead?”
    “Of course, Plucrates. That’s how it works.”
    “And so since they always chose to do something, even if the choice is to do nothing, that which they chose, whether something or nothing, results in the good society?”
    “Yes, you are repeating yourself old man. Are you senile?”
    “I will ignore that insult, Plebion. But you must admit you now live in a good society, must you not, since the things done are done by the representatives of the people.”
    “Of course not Plucrates, there are many bad things done that we must change.”
    “But who did those things, Plebion, if not the representatives of the people who by their actions create the good society?”
    “You are doing nothing but creating confusion old man. Not all things they do are good, and we must persuade them to cease those things and do good things instead.”
    “And which things are good and which are bad, if all are done by the representatives of the peopled and they alone create the good society?”
    “You’re boring me old man. You think to much and overcomplicate things. It’s no wonder you are hated and reviled by the citizens of the state.”
    “It is good that you are bored, Plebion. I will decide what is good and bad and I will pay the representatives of the people to do that which is good, so that we all can live in a good society. How does that sound to you, oh learned one?”
    “If I can get a job with you, it sounds pretty good to me Plucrates.”
    “Call my secretary and set something up, Plebion, we’ll see what we can do.”
    “I’m sorry I called you a senile old man Plucrates, you are a learned philosopher indeed and I am humble student, at your service and ready to be instructed in the characteristics of a good society.”

  3. from Mexico

    Of all the members of the MMT school, Kelton is by far my favorite.

    She has a wonderful ability to communicate and to get her point across without coming across as being preachy or authoritarian.

        1. craazyman

          Oh man, I was thinking about beauty! Like Amadeo Modigliani himself.

          You gay men, you all have dirty minds! ;)

        2. Jess

          OTOH, all you gay men ever do is HAVE sex. We straight guys have to work so hard for it, so naturally it’s always on our minds.

          1. from Mexico

            I don’t know about that.

            It seems like all most gays want to do these days is get married and join the army, move to the suburbs and raise their 2.2 kids.

            It’s disgusting.

            What ever happened to drag queens, free love and living in the inner-city ghetto? It’s like some strange, heterosexual curse has overcome us.

            And what ever happened to our nurturing enemy? The “radical religious right” we used to call them.

            I remember one time the Christian Coalition had its annual convention in San Antonio. We’re all outside with our placards that read “Hate is Not a Family Value” and what not. Ralph Reed comes out and invites us inside for cake and ice cream. He and everybody else was real nice, and seemed very grateful we were there, kind of like if we weren’t they’d have to hire somebody to do what we were doing. It was all kinda surreal.

            One is irresistibly reminded of the question posed by Constantine Cavafy:

            What does this sudden uneasiness mean,

            and this confusion? (How grave their faces have become!)

            Why are the streets and squares rapidly emptying,

            and why is everyone going back home, so lost in thought!

            Because it is night and the barbarians have not come;

            and some men have arrived from the frontiers

            and they say that barbarians don’t exist any longer.

            And now what will become of us without barbarians?

            They were a kind of solution.

            1. AbyNormal

              THE RALPH REED??? Mexico you’ve scared my cat TOTAL FOOT STOMPIN…I’ll be Laffin ALL Night!

              “There is no telling how marriages and lives were saved and how many children were spared of the consequences of gambling because of the work I did, Now, if I had known then what I know now, I would not have done that work.”
              rreedd

              1. from Mexico

                Well he was very polished and adept at what he was doing. I knew I was completely out of my league.

                Looking back now, the most disturbing part is that I think we might have all been played. Could it all have been political theater to draw attention away from what Clinton was doing to the economy?

    1. Kelton

      Thanks from Mexico! Of all the commenters at NC you are by far my favorite. In all seriousness, some of your comments should have been blog posts at NEP. I would gladly invite your commentary if you’d ever like to contribute.

      Crazyman…. thanks to you too.

      1. from Mexico

        Well thank you Stephanie Kelton.

        Have you ever had one of those Ah-ha moments, kind of like when everything seems to come together and make sense? Well that’s what happened to me as I was watching this lecture:

        http://www.youtube.com/watch?v=khaypwRG5C0

        The concept of the hierarchy of money, with government money being on top, I found most useful in my understanding of things. And despite all the anti-government tirades one hears, and how the private sector is so superior to the government, the US government is still the best counter-party in town, and the one the lords of capital go running to when the chips are down.

  4. The Heretic

    I would add the idea, that the good society also balances its consumption of goods and services with wise shepherding and conservation of its environment and the natural resources which it draws upon.

    Monetary constraints are man-made and can be exceeded with caution; environmental constraints must be respected but are not fully understood.

  5. Mickey Marzick in Akron, Ohio

    The “good society” is still premised on economic growth [PRODUCTION] in which “excess capacity” already exists within the current institutional framework that posits with hard work and diligence one can be all that he or she wants to be as they climb the stairway to heaven. It says very little about DISTRIBUTION, allowing market forces to sort out the winners and the losers. The GOOD society is still a capitalist society!

    Frankly, it’s bullshit! More economic growth for what? Why create more “bullshit” jobs if they aren’t socially necessary? But it’s better than supply-side economics, right? Isn’t it just the other side of the perpetual economic growth machine – MORE quantity and less quality. Now who’s groveling at the table of the lesser of two evils? Why not shift the debate from more socially unnecessary jobs to “sharing the work” by reducing the number of hours worked per week without a reduction in pay, arguing that the productivity increases of the past 40 years have not been DISTRIBUTED fairly and the bill is now due? Or how about the concept of technological unemployment and ways to address it that take us beyond government as employer of last resort – ELR?

    How will we ever get beyond capitalism if we subscribe to economic policies still premised on scarcity and the efficient allocation of those scarce goods and services? Oh, but now I’m going too far – thinking outside the box of what is acceptable. Don’t wanna’ go there. Heaven forbid! From Phil Ochs “Love me, Love me – I’m a Liberal” to “Love me, Love me – I’m a Progressive!”
    Now that’s progress, groveling at the feet of post-Keynesian economic orthodoxy in an MMT suit.

    It wouldn’t be so infuriating, if “stimulus” had a remote chance of happening. But in the current political environment, it doesn’t seem likely regardless of who occupies the White House or who chairs the Federal Reserve.

    If the “good” society is merely a replay of the status quo before the Great Recession, what’s the point? It wasn’t the good society then and won’t be the good society down the road. If anything, this argument debases the very notion “good” by conditioning us to accept “full employment” – NAIRU or however one chooses to define it – as some kind of panacea, reinforcing “work” as the only object worthy of pursuit or meaning. How debased have we become if “work” is the only GOOD we value?

    1. JTFaraday

      Anytime I read anything influenced by Lord Keynes, I’m left with the distinct impression of “society as combustion engine,” with people as mere fuel for that engine.

      I fail to see how serving as fodder for a combustion engine manages to evade “TINA” in any way.

        1. JTFaraday

          Well, you probably have me there. Probably Keynesianism tried to turn the boom bust engine of economic liberalism into a better engine by eliminating the fits and starts.

          That still leaves us with a legacy system that demands our lives as fodder for a machine not of our making. Still well within the bounds of TINA.

          Even people who do relatively well can admit that they are slaves to the grind. But, then again, they’re not in the business of constructing a moral rationale for the engine.

          1. F. Beard

            That still leaves us with a legacy system that demands our lives as fodder for a machine not of our making. JTFaraday

            True dat. But it’s money lent into existence for usury that drives the rat race as well as being the cause of the boom-bust cycle.

            1. F. Beard

              Well, scratch the “True dat.” Our money system is the source of the boom-bust cycle and the rat race and environmental destruction and social disintegration and world wars and …

              But let’s keep it anyway since TINA. Oops! There is another way to create endogenous money! Hint: Equity is on the same side of the balance sheet as Liabilities.

              1. nonclassical

                FB,

                …”Equity” is no longer on “the same side of the balance sheet as liabilities”…

                Due entirely to “financialization” of U.S. economy now including “equity”…”equity” is transferred into “paper debt”, which can be written off by corporations, but not individuals, say, in the form of their homes…

                Corporate equity has become yet another financialized asset to be hidden through offshore secrecy jurisdictions (Shaxton’s, “Treasure Islands”) and “derivatives” (Satyajit Das’, “Extreme Money”).

                Revelatory reading, the both…

    2. Jeremy Grimm

      At Mickey Marzick in Akron, Ohio: Well said! Work is something that we do because we are compelled to do it. What is so wonderful about a forty-hour work week for all?

      “… the rich, for thousands of years, [to] preach the dignity of labor, while taking care themselves to remain undignified in this respect.” [“In Praise of Idleness”, by Bertrand Russell.]

      Being without paid work means a lack of income. Work is only a means; hardly an end in itself.

      [Note – Russell does observe that: “In America, men often work long hours even when they are already well off; … “. He also addresses one of the concerns raised in the discussion of a few days ago: “The wise use of leisure, it must be conceded, is a product of civilization and education.” I’m quite sure that the intended ‘education’ in this quote had little or nothing to do with training in order to be hirable on completion of that ‘education’.]

      At JTFaraday: I haven’t read them yet, but I understand that Keynes essays might change your mind about him.

    3. Danb

      I know from pervious comments by you, Mickey, that you understand that this complex economy -in the final analysis- runs on energy inputs. We cannot BS higher net energy inputs into existence, if the net flow of energy into an economy is declining a market can only throw people overboard to preserve the class structure. They call this “peak demand,” “efficient markets”, “demand destruction,” the “market always clears”, but it’s really about who suffers as we enter degrowth. Eventually even this so-called market allocation systems breaks down and then -unless we have made other arrangements- the state/military takes over resource allocation -and denial or restriction of resources.

    4. Jeremy Grimm

      Reply to Micky Marzick: Well said! Work is something we do because we are compelled to do it. What is so wonderful about a forty-hour work week for all?

      “… the rich, for thousands of years, [to] preach the dignity of labor, while taking care themselves to remain undignified in this respect.” [“In Praise of Idleness”, by Bertrand Russell.]

      Being without paid work means lack of income. Work is a means; hardly an end in itself.

      [Note: Russell does observe that:”In America, men often work long hours even when they are already well off; …”. He also addresses one of the concerns raised in the discussion of a few days ago: “The wise use of leisure, it must be conceded, is a product of civilization and education.” I’m quite sure that the intended ‘education’ in this quote has little or nothing to do with training in order to be hirable on completion of that ‘education’.

      At JTFaraday: I haven’t read them yet, but I understand that Keynes essayss might change your mind about him.

    5. jrs

      the only ways I see out of that – guaranteed national income or workers ownership (which might naturally lead to less work – if it was us working for us and not for them). But hey a lot of situations would be better than this throughly corrupt plutocracy, even with a 40 hour week, but better doesn’t mean they are the ideal to be aimed for.

      1. nonclassical

        ..interesting, well said, jrs,

        you have iterated Naomi Klein’s example of solution (South-Central America, circa 1970’s-80’s, from “The Shock Doctrine-Rise of Disaster Capitalism”…

        along with circumspection regarding perfection of the human experience…

    6. jonboinAR

      JTFaraday:
      “Why create more “bullshit” jobs if they aren’t socially necessary? But it’s better than supply-side economics, right? Isn’t it just the other side of the perpetual economic growth machine – MORE quantity and less quality. Now who’s groveling at the table of the lesser of two evils? Why not shift the debate from more socially unnecessary jobs to “sharing the work” by reducing the number of hours worked per week without a reduction in pay, arguing that the productivity increases of the past 40 years have not been DISTRIBUTED fairly and the bill is now due? Or how about the concept of technological unemployment and ways to address it that take us beyond government as employer of last resort – ELR?”
      ____________________

      You’re singing my song!

  6. TomDority

    Nothing wrong with work – work/labor is the only way to create wealth.
    Wealth is not money – not by a long shot
    Wealth is a creation of labor.
    Wealth is a paint brush, a painting, a work of art or architecture, a string of zeros and ones, a micro chip, an envelope and a shoelace – the list is endless.
    Our current economic system and, the debates around it have failed to distinguish wealth from money – it used to be well known what the distinction was – but that was taught out of the vocabulary of the economics departments from sea to shining sea.
    Tax the economic rent extraction functions and use those revenues for the public good – stuff like infrastructure, fighting global environmental chemical change, ‘green’ power initiatives, fighting hunger and deprivation, shoring up falling infra etc. etc. It is the unjust revenue system that has perverted our thinking and ability to function, has enriched the few at the expense of the many, Has created injustice where once stood justice etc. etc.

    Tax the crap out of economically destructive economic rent extractive activities and, use those revenues to advance our humane race for the benefit of all living things on this planet and our future generations.

    The evolutionary process by which monkeys made men of themselves was considerably slower than the reverse process.

    There is a bright side, after watching great minds combat the recession you should be rid of your inferiority complex.

    1. psychohistorian

      It is depressing to read the posting and all the comments and none speak directly to the current rules of inheritance.

      If we drastically change the rules of inheritance we will change the incentives throughout society and create a more equitable (good society) world. What is so hard to understand about that?

      1. F. Beard

        What is so hard to understand about that? psychohistorian

        Well, for one thing, Federal taxation destroys money. For another, some wealth is honestly acquired. For another, why not prevent unjust wealth accumulation in the first place by reforming the money system?

        A good man leaves an inheritance to his children’s children, and the wealth of the sinner is stored up for the righteous. Proverbs 13:22

        1. Bapoy

          How does it destroy money?

          The government receives 100 million in tax receipts which are directly deposited in the treasury’s account. The government spends the money from there. It’s as simple as that and so says the US government and the Federal Reserve.

          If you want to get fancy, they can burn the checks and digits (can you actually burn digits??) worth 100 million. The next day they spend 100 million out of they newly created digits. What’s the difference? 100 million is 100 million right?

          But… don’t get too fancy. The US government has a clearing mechanism that tracks and proofs all money movements (except the sprinkle that happens in actual cash). Fund movement from a person’s account is cleared via the Federal Reserve moneywire system and proofed by the same Fed. Retiring the funds would result in the system being out of proof. So no, there is no burning of the funds. Only the old bills are retired and re-issued.

          In terms of debt and credit, only the banks via the Fed can create it. The government does not create money, so it needs to either spend tax money or borrow, period.

          Let’s get the story straight here.

          1. F. Beard

            Let’s get the story straight here. Bapoy

            Speaking of which, the Federal Reserve creates fiat for the benefit of the banks to backstop their counterfeiting scheme.

            How about we eliminate that first? Or is eliminating welfare for the rich less important to you than eliminating welfare for their victims?

            1. Bapoy

              The Fed gives banks low rates and opens the Fed window when/if major Broker Dealers need it. From my understanding, the use of the window is very infrequent as it becomes public knowledge and does not look good on banks. Banks actually prefer to borrow from each other if they run into short fall even if they have to pay higher rates.

              Having said that, the banks got funds from the US government via the US treasury. The US government either borrowed or taxed those funds. So blame the government and by default the dumb people, not the Fed.

              Although I am not a fan of the Fed, the Fed just does what it does, which ain’t much. Lower the rates when the economy hits a rough patch and until the rates are 0, than it pushes debt/credit into the market via QE (purchasing assets). In the end, it’s a useless exercise as the prices are already inflated anyway, keeping them there a little while longer won’t help state of affairs. Fiat systems eventually collapse as debt/credit grows exponentially outpacing incomes. It’s defective.

              But yes, the banks are private institutions and should be treated as such. At the end of the day, only the population can put people in office and demand justice. We are too lazy and stupid to demand justice. We are scared of leaving our comfort zone, we are scared of feeling un-safe, we are scared to disturb the status quo and for that we let the government do what it wants.

            2. Bapoy

              In the grand scheme of things, welfare for the poor is but a grain of sand. It’s nothing actually.

              The issue with welfare is the same as for any other regulations, it is designed to help some portion of the economy, the politicians just conveniently forget to mention the other side that will be harmed. At the end of the day, poor people will eat either via welfare checks or a job.

              A job means they would contribute to society, “free” checks just means they consume. It’s society’s call, at the end of the day, we all consume.

              Anyway, none of this will get fixed until the purchasing power runs dry. At that point, you will see the most critical things, like welfare, medicare and social security gone in a heart beat. I hope this day doesn’t arrive anytime soon, as the population is just not ready. Nature has it’s own way of working.

              Of course, folks like Mitchel and Kelton will blame it on the free market when it happens. Something tells me they know what’s going on and what the solution is.

              1. F. Beard

                A job means they would contribute to society, “free” checks just means they consume. Bapoy

                Really? So the retired only consume and don’t contribute to society?

                Besides, justice is justice. If the population has been stolen from (and it has been), do you want to explain to your Judge why you opposed restitution?

                1. Bapoy

                  It’s not rocket science Beard. Work exists for the sole purpose of providing for yourself and others. A farmer is able to provide for his family while at the same time giving food to many others. That farmer is paid for his work with other items, period. Remove the money from the equation, all the farmer wants at the end of the day is food, clothing, housing and transportation. If the farmer works even harder and produces much more in excess, he would like to save his purchasing power to pass on to his children. And the people that receive the farmers food also want the same. If both stop working, we have nothing. The rest is irrelevant and this is where the leftists get lost. It’s not ok for banks to steal from people like the farmer, unless… unless it’s for social programs. For social programs, we can steal from the farmer by printing and causing inflation so that he “spends” his savings now to “create” jobs and a better economy. Blah… it’s theft.

                  In terms of restitution, what will you give the people? At the end of the day, doubling the money supply will not create rice, it will not create homes, or clothing, or cars. And I assume that these items is exactly what you want. You don’t eat dollars or wear them or drive them. What it will definitely do; however, is destroy confidence in the system and cause more poverty than currently.

          2. nonclassical

            yes, Bapoy,

            Let’s get the story straight here…it wasn’t government taxation that had anything to do with Wall $treet economic destruction of U.S. $6.5 trillion per year, world $16.5 trillion per year economies…

            Compare 100 million in taxbase to 2007, $600 trillion Wall $treet derivatives, 95% owned by 6 U.S. “investment banks”, 80% of which is parked in “City of London” Wall $treet British parallel…

            Realize that Wall $treet $600 trillion, 2007, was up from 2001, around $2 trillion=”derivatives”-here’s that documentation again:

            http://www.nextnewdeal.net/wp-content/uploads/2009/10/raj-revised-testimony1.pdf

            DERIVATIVES ARE A LARGE PRESENCE IN CAPITAL MARKETS

            “OTC derivatives markets are vitally important because of their size, and because of where positions are concentrated in relation to other vital functions of our economy/society. Derivative contracts have become an enormous proportion of the total notional credit exposure in U.S. and world financial markets. According to the International Swaps and Derivatives Association (ISDA) survey, the outstanding notional amount of derivatives is over 454 trillion dollars at mid year 2009. The Bank for International Settlements puts the number at nearly $800 trillion worldwide. Using ISDA data, that is over 30 times U.S. GDP. According to the flow of funds data from the Federal Reserve, total credit market debt outstanding is just under $53 trillion dollars. Derivatives are not a minor dimension of U.S. or international capital markets. They occupy a dominant position.”

            here’s explanation of:

            http://www.nextnewdeal.net/what-congress-did-not-want-you-read-robert-johnsons-testimony-otc-derivative-market

            http://harpers.org/blog/2009/10/an-object-lesson-in-governmental-failure-derivatives-reform/

            Let’s be clear-“straight truth”, Bapoy-though government did not do it’s job as overseer-reformer, it didn’t CAUSE the problem…much as you and other right-wingers proclaim that to be the case…

            1. Bapoy

              Don’t get confused on the “value” of those derivatives. These are notional values, it’s like saying homes in the US are valued at 5 million a pop. I can say all I want, would I be able to sell at that price is the question. Derivatives are nothing but bets to hedge against price movements. Futures, heavily used by farmers, are a form of derivatives.

              I see you are again looking at it from the wrong perspective. Up until 2000, derivatives were very rare, why was the market grown so quickly? I has because there is a backstop on irresponsibility. You risk your bank and run it to the ground, no worries, the government will figure out a way to bail you out. Either by giving you physical cash directly, or giving cash to one of your counter parties (AIG) which they will then pay you (GS).

              Where would all these big banks and broker dealers be without the backstop of your government? I thought so!

              1. skippy

                FYI the Market took over the Government (see SCOTUS), what little there was. Anywho the environment always dictates in the end (billions of years of evidence not opinion).

                skippy…. will the market fix the environment, it seems any time the government tried to intact remedy’s, it was the market that put the kibosh on that little necessity.

              2. nonclassical

                “notional value”, eh Bapoy? A bit like the “notional value” (paper debt) of mortgages turned into “securities” so they could be used to drive those “derivatives”??…the “notional value” placed upon those “securities” by ratings agencies now under indictment by DOJ??:

                (Reuters) – “The government is seeking $5 billion in its civil lawsuit against Standard & Poor’s, accusing the ratings service of defrauding investors, in one of the most ambitious cases yet from the Justice Department over conduct tied to the financial crisis.

                The United States said S&P inflated ratings and understated risks associated with mortgage securities, driven by a desire to gain more business from the investment banks that issued those securities. S&P committed fraud by falsely claiming its ratings were objective, the lawsuit said.

                “Put simply, this alleged conduct is egregious – and it goes to the very heart of the recent financial crisis,” said Attorney General Eric Holder at a news conference in Washington announcing the charges.

                The 119-page lawsuit, filed late Monday in federal court in Los Angeles, is the first from the government against a ratings agency, a sector that has generally shielded itself from liability by citing First Amendment protection of free speech.

                Sixteen states and the District of Columbia are also suing S&P, a unit of the McGraw-Hill Companies Inc. McGraw-Hill shares fell as much as 8.9 percent on Tuesday, after dropping 13.8 percent on Monday.”

                http://www.reuters.com/article/2013/02/05/us-mcgrawhill-sandp-civilcharges-idUSBRE9130U120130205
                ……………..

                You, Bapoy, appear to be having a problem specifically addressing documentation provided (innuendo doesn’t contrast), while being totally unable to provide documentation of your own ideology…?

                Please do so…(see documentation above, as relevant example)

              3. Bapoy

                Yup,

                Years of history ahhh… Like medical prices have been tamed with EMLATA. How about lower price of education, all those school loans have really fixed the problem. Oh, and what about housing, that sure was made better with all the regulation.

                1) Medicine would be alot cheaper if you had to pay with cash and the government was not involved.
                2) The cost of education was affordable to students working in pizza places, today, parents in professional jobs making 200k can’t afford it.
                3) Homes collapsed not too long ago.

                Skippy,
                Are you joking? Try again thoush…

              4. Bapoy

                You need documentation to show how the government bailed out banks? Here, search for yourself.

                1974 – Franklin National Bank – almost 2 billion
                1975 – NYC – 2.3 billion
                1980 – Chrysler – 1.1 billion
                1984 – Continental Illinois – 1 billion
                1989 – Savings & Loan – 220 billion
                1991 – Airline industry – 15 billion
                2008 – Bear, AIG, Auto Industry, TARP, Citi, BoA, Fannie & Freddie – 1.8 Trillion

                Do you want to bet that the names/industries above will soon go tap the government funds again? Has the government not set a precedent for the rewarding of risk taking/dinosaur industries? Is that enough documentation for you?

                1. skippy

                  Since at least Trustees of Dartmouth College v. Woodward – 17 U.S. 518 (1819), the U.S. Supreme Court has recognized corporations as having the same rights as natural persons to contract and to enforce contracts. In Santa Clara County v. Southern Pacific Railroad – 118 U.S. 394 (1886), the reporter noted in the headnote to the opinion that the Chief Justice began oral argument by stating, “The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.”[1] While the headnote is not part of the Court’s opinion and thus not precedent, two years later, in Pembina Consolidated Silver Mining Co. v. Pennsylvania – 125 U.S. 181 (1888), the Court clearly affirmed the doctrine, holding, “Under the designation of ‘person’ there is no doubt that a private corporation is included [in the Fourteenth Amendment]. Such corporations are merely associations of individuals united for a special purpose and permitted to do business under a particular name and have a succession of members without dissolution.” [2] This doctrine has been reaffirmed by the Court many times since.
                  Contents – snip

                  During the colonial era, British corporations were chartered by the crown to do business in North America. This practice continued in the early United States. They were often granted monopolies as part of the chartering process. For example, the controversial Bank Bill of 1791 chartered a 20 year corporate monopoly for the First Bank of the United States. Although the Federal government has from time to time chartered corporations, the general chartering of corporations has been left to the states. In the late 18th and early 19th centuries, corporations began to be chartered in greater numbers by the states, under general laws allowing for incorporation at the initiative of citizens, rather than through specific acts of the legislature. – snip

                  skippy… Whats your fooking point again… governments bad – free market good???? Dullard!~!~!

                  1. Bapoy

                    Perhaps that’s your point.

                    All I’m saying is that the market functions more efficiently without manipulations. Either you want a better environment for yourself and those around you, or you want monopolies extorting your blood.

                    Governments promote monopolies.

                    Skippy,
                    I’m sure you don’t!!!

                    1. skippy

                      Your reply is so vacuous I don’t know where to start…

                      @market functions

                      @efficiently without manipulations

                      @Either you want a better environment for yourself

                      @or you want monopolies extorting your blood

                      @Governments promote monopolies

                      skippy… I don’t know you from a bar of soap… yet… as this planet burns in a furnace of ignorance… your laying stake to a priori claim on personal indulgence – got any historical prospective[???]… you have no more claim to ***rights on this orb**** than any other cellular life form.

                      PS. FFSS… corporations are a form of government…. get a dictionary~~~

                    2. Bapoy

                      Oh I see, so if i want to start a government, just set up shop. Got it.

                      Let’s get serious now. Why is medicine so expensive? Perhaps you have a better answer than I do. And I’m sure your answer will be “more government regulations”. How about this?

                      Skippy,
                      Remove government protection of the medical industry monopoly. Do you think that’ll do it skippy?

  7. F. Beard

    Here’s a lesson not learned: “Thou shall not steal”, Exodus 20:15, since our money system is predicated on the notion that some, the so-called creditworthy, are entitled to “borrow” the stolen purchasing power of everyone else via heavy government privilege.

    Banks, if we need them at all, should be 100% private since they are essentially gambling institutions that bet they can lend long term what they borrow short term.

  8. washunate

    “The “influential body of opinion” remains too enthralled with monetary policy, too wedded to supply-side “solutions” and too focused on deficit reduction to allow us to build The Good Society.”

    Well said on the first two.

    On the third item, you’re not claiming that our current crop of political leaders care about the deficit, are you? Or that the trillions of dollars spent assaulting the Constitution over the past decade plus have made us better off?

    1. nonclassical

      Washunate,

      Let’s actually document how much and where those government $$$$ by “political leaders” actually went:

      “The first ever GAO (Government Accountability Office) audit of the Federal Reserve was carried due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill.

      Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill(HR1207), so that a complete audit would not be carried out.

      …Nevertheless, the results of the first audit in the Federal Reserve’s nearly 100 year history were posted on Senator Sander’s webpage earlier this morning.

      What was revealed in the audit was startling: $16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest.

      The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.

      Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious –the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.”

      The list of institutions that received the most money from the Federal Reserve can be found on page 131of the GAO Audit and are as follows..

      Citigroup: $2.5 trillion ($2,500,000,000,000)
      Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
      Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
      Bank of America: $1.344 trillion ($1,344,000,000,000)
      Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
      Bear Sterns: $853 billion ($853,000,000,000)
      Goldman Sachs: $814 billion ($814,000,000,000)
      Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
      JP Morgan Chase: $391 billion ($391,000,000,000)
      Deutsche Bank (Germany): $354 billion ($354,000,000,000)
      UBS (Switzerland): $287 billion ($287,000,000,000)
      Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
      Lehman Brothers: $183 billion ($183,000,000,000)
      Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
      BNP Paribas (France): $175 billion ($175,000,000,000)

      http://www.rawstory.com/rs/2011/07/21/audit-fed-gave-16-trillion-in-emergency-loans/

      http://www.sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3

  9. Cassiodorus

    The capitalist system has entered a stage in which the rich, failing to locate profits in an economy of declining actual economic growth, are taking more and more away from the rest of us. No return to populist Keynesianism will save us, because once we have beaten back the rich, we will discover the limits of the growth paradigm — ecosystem devastation. What we need is a postcapitalist vision with some imagination to it.

  10. Short Plank

    ” And [the economy] may not frustrate the efforts of those who plan diligently and intelligently for old age and retirement or for illness or unanticipated need”

    Is it not a better alternative for the economy to provide for old age and retirement, or for illness or unanticipated need, as some societies with a social contract still do?

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