Trumpism Has Dealt a Mortal Blow to Orthodox Economics and ‘Social Science’

By Sanjay Reddy, Associate Professor of Economics, The New School for Social Research. Originally published at the Institute for New Economic Thinking website

Grappling with the shock of Donald Trump’s election victory, most analysts focus on his appeal to those in the United States who feel left behind, wish to retrieve a lost social order, and sought to rebuke establishment politicians who do not serve their interests. In this respect, the recent American revolt echoes the shock of the Brexit vote in the United Kingdom, but it is of far greater significance because it promises to reshape the entire global order, and the complaisant forms of thought that accompanied it.

Ideas played an important role in creating the conditions that produced Brexit and Trump. The ‘social sciences’ — especially economics — legitimated a set of ideas about the economy that were aggressively peddled and became the conventional wisdom in the policies of mainstream political parties, to the extent that the central theme of the age came to be that there was no alternative. The victory of these ideas in politics  in turn strengthened the iron-handed enforcers of the same ideas in academic orthodoxy.

It is never clear whether ideas or interests are the prime mover in shaping historical events, but only ideas and interests together can sustain a ruling consensus for a lengthy interval, such as the historic period of financialization and globalization running over the last 35 years. The role of economics in furnishing the now-rebuked narratives that have reigned for decades in mainstream political parties can be seen in three areas.

First, there is globalization as we knew it. Mainstream economics championed corporate-friendly trade and investment agreements to increase prosperity, and provided the intellectual framework for multilateral trade agreements. Economics made the case for such agreements, generally rejecting concerns over labor and environmental standards and giving short shrift to the effects of globalization in weakening the bargaining power of workers or altogether displacing them; to the need for compensatory measures to aid those displaced; and more generally to measures to ensure that the benefits of growth were shared.  For the most part, economists casually waved aside such concerns, both in their theories and in their policy recommendations, treating these matters as either insignificant or as being in the jurisdiction of politicians.  Still less attention was paid to crafting an alternate form of globalization, or to identifying bases for national economic policies taking a less passive view of comparative advantage and instead aiming to create it.

Second, there is financialization, which led to increasing disconnection between stock market performance and the real economy, with large rewards going to firms that undertook asset stripping, outsourcing, and offshoring. The combination of globalization and financialization produced a new plutocratic class of owners, managers and those who serviced them in global cities, alongside gentrification of those cities, proleterianization and lumpenization of suburbs, and growing insecurity and casualization of employment for the bulk of the middle and working class.

Financialization also led to the near-abandonment of the ‘national’ industrial economy in favor of global sourcing and sales, and a handsome financial rentier economy built on top of it. Meanwhile, automation trends led to shedding of jobs everywhere, and threaten far more.

All of this was hardly noticed by the discipline charged with studying the economy. Indeed, it actively provided rationales for financialization, in the form of the efficient-markets hypothesis and related ideas; for concentration of capital through mergers and acquisitions in the form of contestable-markets theory; for the gentrification of the city through attacks on rent control and other urban policies; for remaking of labor markets through the idea that unemployment was primarily a reflection of voluntary leisure preferences, etc.  The mainstream political parties, including those historically representing the working and middle classes, in thrall to the ‘scientific’ sheen of market fetishism, gambled that they could redistribute a share of the promised gains and thus embraced policies the effect  of which was ultimately to abandon and to antagonize a large section of their electorate.

Third, there is the push for austerity, a recurrent trope of the ‘neoliberal’ era which, although not favored by all, has played an important role in creating conditions for the rise of popular movements demanding a more expansionary fiscal stance (though they can paradoxically simultaneously disdain taxation, as with Trumpism).  The often faulty intellectual case made by many mainstream economists for central bank independence, inflation targeting, debt sustainability thresholds, the distortive character of taxation and the superiority of private provision of services including for health, education and welfare, have helped to support antagonism to governmental activity. Within this perspective, there is limited room for fiscal or even monetary stimulus, or for any direct governmental role in service provision, even in the form of productivity-enhancing investments. It is only the failure fully to overcome the shipwreck of 2008 that has caused some cracks in the edifice.

The dominant economic ideas taken together created a framework in which deviation from declared orthodoxy would be punished by dynamics unleashed by globalization and financialization. The system depended not merely on actors having the specific interests attributed to them, but in believing in the theory that said that they did. [This is one of the reasons that Trumpism has generated confusion among economic actors, even as his victory produced an early bout of stock-market euphoria. It does not rebuke neoliberalism so much as replace it with its own heretical version, bastard neoliberalism, an orientation without a theory, whose tale has yet to be written.]

Finally, interpretations of politics were too restrictive, conceptualizing citizens’ political choices as based on instrumental and usually economic calculations, while indulging in a wishful account of their actual conditions — for instance, focusing on low measured unemployment, but ignoring measures of distress and insecurity, or the indignity of living in hollowed-out communities.

Mainstream accounts of politics recognized the role of identities in the form of wooden theories of group mobilization or of demands for representation. However, the psychological and charismatic elements, which can give rise to moments of ‘phase transition’ in politics, were altogether neglected, and the role of social media and other new methods in politics hardly registered. As new political movements (such as the Tea Party and Trumpism in the U.S.) emerged across the world, these were deemed ‘populist’—both an admission of the analysts’ lack of explanation, and a token of disdain. The essential feature of such movements — the obscurantism that allows them to offer many things to many people, inconsistently and unaccountably, while serving some interests more than others — was little explored. The failures can be piled one upon the other. No amount of quantitative data provided by polling, ‘big data’, or other techniques comprehended what might be captured through open-eyed experiential narratives. It is evident that there is a need for forms of understanding that can comprehend the currents within the human person, and go beyond shallow empiricism. Mainstream social science has offered few if any resources to understand, let alone challenge, illiberal majoritarianism, now a world-remaking phenomenon.

Trumpism is a crisis for the most prestigious methods of understanding economic and social life, ennobled and enthroned by the metropolitan academy of the last third of a century. It has caused mainstream ‘social science’ to fall like a house of cards. It can only save itself through comprehensive reinvention, from the ground up.

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108 comments

  1. KK

    I was surprised at how reasonable my plumber’s quote was and when l asked him about this, he said that he couldn’t increase his prices or the work would go to ‘Eastern Europeans’ who continued to undercut him. Wasn’t it plumbing and hairdressing that we got taught about in 1970’s economics classes as not being subject to international competition?

    1. rd

      Both plumbing and appliance repair are becoming disassemble and reassemble jobs. You don’t fix a faucet anymore. You just take the old one out and put and new one in because that is cheaper than repairing. Same with many appliances. Even the repairs are taking out an entire part or circuit board and no dropping a new one in.

      So the skill set now is diagnosis and occasionally brute strength to take apart the old joint.

    2. ambrit

      Yep, those were supposedly “immigrant proof” occupations. Hah! Were we ever wrong!
      It turns out that even “skilled labour,” into which, much to their dismay, technical occupations are now included, is subject to wage suppression by importation of cheaper workers. The fact that there is a H1B visa program at all should tell us something fundamental about the amoral character of management labour relations in America.

      1. fresno dan

        ambrit
        November 26, 2016 at 9:58 am

        http://www.marketwatch.com/story/shortage-of-mexican-workers-is-hurting-us-businesses-2016-11-25

        Many business owners who rely on low-skilled labor say the real trouble is too few Mexicans heading north, not too many. “Without Mexican labor our industry is at a standstill,” says Nelson Braddy Jr., the owner of King of Texas Roofing Co., which is helping build a sprawling new Toyota North American headquarters in a Dallas suburb. He says he would hire 60 roofers right away if he could find them. “It’s the worst I have seen in my career,” he adds.

        ========================================================
        The CEPR also talks about low wages
        http://cepr.net/blogs/beat-the-press/what-happened-to-job-killing-robots-businesses-complain-about-shortage-of-low-skilled-workers?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+beat_the_press+%28Beat+the+Press%29

        I think the comments are better than the article, in that the commenters simply state that the upper class and government are in cahoots to keep wages low.

        1. ambrit

          You are onto something here. I always wondered if the suppression of wages would lead to a decline in the population of people even willing to learn a task due to a perceived lack of incentive to make the effort. This would work alongside a seldom mentioned fact; the limits to the supply of appropriately skilled “foreigners” to perform a task. The resultant mix must be generating an industry of active recruiters in foreign lands for in demand, for less, skill sets. I would lay money on the bet that eventually, things will reach the point where criminal activities make more sense than the miserable jobs on offer.

          1. watermelonpunch

            “I always wondered if the suppression of wages would lead to a decline in the population of people even willing to learn a task due to a perceived lack of incentive to make the effort.”

            Just from what I’ve seen & heard… I’m pretty sure that’s already happened with CNC machinists, and it’s happening with CDLs, and starting to happen with CNAs.

            1. ambrit

              “I’m pretty sure that’s happened with CNC machinists…”
              One of my neighbours is a CNC machinist. He is presently working “free lance” because the company he was associated with was bought by a Taiwanese concern and all the skilled labour, previously in house, was out sourced. After a couple of years of near disasterous “production,” the company rreshored the more technical work, but as sub contract labour. Now Jack receives regularly spaced “jobs” from the company to do what was previously done in house. Naturally, now Jack and his fellow “free tradesmen” have to supply all the incidental work involved, such as quarterly taxes, insurance if any, self supplied “workers comp,” of a sort, and most importantly, the actual machinery to do the work. Even a used CNC machine is a pretty big investment for an individual. Jack’s CNC machine is almost as big as a Volkswagen Beetle. Jack was “lucky” insofar as he was already trained to do this work. Others needs rely on the support of small businesses in this “Engineering Trade,” or go into debt to learn the process at a technical college. Then, as Jack has remarked, there is no set schedule nor guaranteed contract. The ultimate “craps shoot.”
              Welcome to the “New World Economic Order;” which looks suspiciously like Dickensian Predatory Capitalism.

            2. RepubAnon

              Sounds like a classic supply/demand curve: the lower the price, the lower the supply and the greater the demand. As many have noted – perhaps higher wages would increase the number of job applicants.

              However, skilled workers aren’t widgets – they need to be trained. Companies don’t want to invest in training, and students don’t want to take out all those student loans without some assurance that there’ll be a job which pays enough to pay off the loans and still have enough left over to put food on the table and have a roof over their heads. Thus, it takes time to bring more skilled workers on-line, and by then, the demand may have evaporated.

              Public schools investing in training workers would help – but that would mean raising taxes to pay for them – and Grover would get angry.

          2. Procopius

            I think some states are seeing a shortage of teachers because of the way they’ve demonized the teaching profession and cut wages for the last fifteen years.

        2. John Wright

          I know someone who had a small roofing company in Los Angeles.

          Some time ago he commented that he had not been able to raise his labor rates in 20 years.

          He also had a wry comment about the glass ceiling in roofing, saying that there are no women in roofing, but there is no apparent societal pressure to break this version of the glass ceiling.

          Roofing is a hazardous job, requiring working outside in all types of weather, for low pay.

          But if the pay is high enough, even hazardous jobs, with weather exposure, are prized, as one can witness watching NFL football.

        3. bmeisen

          That was front page on the Wall St Journal Europe a couple days ago – a jaw-drop moment. The voice of business effectively calling for a larger pool of voiceless dirt-cheap laborers to dismantle the social contract. Clearly the management class has no fear of suffering consequences, like maybe even higher crime rates (their native victims not the illegals the perps), dystopic civics, encapsulation, culture = branding. are those undocumented roofers in code with that left over sealing? you bet! management has got them by the cajones.

      2. The Cleaner

        I don’t think these were considered “immigrant proof” as much as “outsourcing proof”… which makes sense if you think about it.

    3. Sandy

      Important to note there’s quite a lot of Europeans who stay illegally in the US by entering on the visa waiver program as tourists and simply overstaying. Irish and eastern Europeans especially. If you’re in the Northeast it’s common to see Irishmen working maintenance jobs at buildings here, or as bartenders or other cash jobs – 90% are going to be out of status. But this issue gets almost zero media attention.

      1. sunny129

        ‘But this issue gets almost zero media attention’

        If I mentioned ”colored skin’ stands out than those of Europeans, will I be labelled racist?

        Whenever there is immigration raid,on an establishment ‘brown & blacks'(illegals!) ran out but NOT the fair skinned Europeans, who were always confident that they won’t be affected or bothered! And they were 100% right!

        Seen it, been there and fed up with it!

      2. bmeisen

        Citizen registration (cr) would effectively end illegal immigration in the US. Once you get past the immigration control at the airport you are in. access to relevant services is possible without having to prove citizenship/legality. It is insane and/or perversely clever that illegals can get drivers licenses, ss#s, use dumps, open bank accounts, receive water and electrical services, even pay taxes without having to out themselves. The only barrier is at the border and Trump is gonna make it really big! hahaha.
        To receive any municipal service, including registering to vote, it should be necessary to be registered at city hall, anytime you change address you have to renew your registration, standard practice in eur social democracies.

          1. bmeisen

            haven’t read it – if you find cr intollerably intrusive then you must be on the warpath against facebook icloud and the nsa.

        1. Tim

          How would this accomplish anything other than making everything worse?

          The thing to do is try to push the actual numbers of people trying to immigrate here down, by ceasing to ruin their home countries. No one’s ever even tried that.

          1. bmeisen

            cr would make your life worse if you are the owner of a roofing firm that uses illegal aliens and wins juicy contracts with rock-bottom bids – you’ll have to give up a lot of your margin. breaks my heart.

            cr has the potential to destroy America’s shadow labor force which would cause a jump in opportunity, wages and benefits for deplorables. it would streamline the provision of municipal sercices, most dramatically with regard to voter registration: there wiuld no longer be uncertainty with regard to the voting rolls. this alone has the potential to effectively reform the 2-party system and maybe even address the issues that you refer to. The cost to individual americans would be, after a change of legal residence, a visit to the citizen registration center to provide our friends there with name, birthdate, nationality, old address, and new address – less than you give walmart as a member of sam’s club, less than you give facebook, and definitely less than I’m giving the nsa right now.

          2. Boris

            The thing to do is try to push the actual numbers of people trying to immigrate here down, by ceasing to ruin their home countries. No one’s ever even tried that.

            You are on the right path Tim.

            Any of you notice this shift in economic possibilities from Russia?

            Excerpt:

            The Stolypin Group

            The third group represented was the one most Western observers ridiculed and dismissed, with the US Pentagon-linked Stratfor referring to them as a “strange collective.” I have personally met and talked with them and they are hardly strange to anyone with a clear moral mind.

            This is the group which after two months has emerged with the mandate from Vladimir Putin to lay out their plans to boost growth again in Russia.

            The group is in essence followers of what the great almost-forgotten 19th Century German economist, Friedrich List, would call “national economy” strategies. List’s national economy historical-based approach was in direct counter-position to the then-dominant British Adam Smith free trade school.

            http://russia-insider.com/en/politics/putin-nyet-neo-liberals-da-nationa

            Friedrich List happens to be a contemporary of an economist I like, our homegrown American economist, Henry George. They share this website…

            http://www.truefreetrade.org/list.htm (LIST)

            http://www.truefreetrade.org/pftindex.htm (GEORGE)

            Overview http://www.truefreetrade.org/amap.htm

            And now this.

            http://russia-insider.com/en/putin-finally-purging-medvedev-government/r

            Can we find some common ground in this demographic driven trade problem?

            De`tante (Steady State) trade, lack of traditional “growth” yet more abundance and sanity? Can we defeat demographic trends with a better monetary system? There is plenty of need, is that not unfulfilled demand?

            We see massive malinvestment and over capacity right now, so some common sense like List and George sounds good to me.

            http://www.truefreetrade.org/

            Forward Comrades ;-)

        2. oh

          I thought it’s not possible to get a driver’s license without a green card or US citizenship since they changed the laws after 9/11. If this is true, one cannot get a SS No., open a bank a/c etc. Mexicans and others who cross the border w/o papers are unable to open a bank a/c and therefore pay big fees to Amex for money orders.

          Someone correct me if I’m wrong on this.

          1. bmeisen

            if you’re right then the transit authority in LA might be the envy of public transport systems the world over – or do they keep the prices down to enable employers?

          2. Bill H

            Not all states adopted the OpenID law which requires this, and the federal government cannot impose it since it imposes a financial cost on the states without compensating benefit. There are federal punishments for not adopting it, but states are fighting it.

          3. Watermelon

            In my state you need legal presence docs and proof of residence in the state, at least a student visa for example, to get a drivers license. And then the info is checked against the federal govt… Save request.

            I think the post office and drug stores sell money orders without id? Certainly without perm res status.

            I think bank accounts can be opened at least at some banks with a foreign passport and maybe an itin number.

        3. Procopius

          We have that kind of thing here in Thailand, and it doesn’t do much good. Every Thai citizen has an ID card. Used to be issued when you turned 15 but since they started government medical paid health care I think they issue them now when a child turns 7. Also every citizen is recorded on a “house register.” This is supposed to be a record of every person who resides in a house, with the owner of the house responsible for keeping track of everyone. Trouble is, it’s not convenient to change from one residence to another. You have to go to the old district office and get a form removing you from that register and then go to the new district office with the new register and get your name put on it. You need a copy of the house register for all kinds of things, including buying a mobile phone or voting. As a result you see millions of people travelling whenever there’s an election because they have to go from where they’re actually living to the place where they’re registered. Tourists are required to register at hotels, no problem, but they’re also required to notify the police if they stay at a private residence. Since the tourists don’t know that, they never do, so the system which is intended to track travellers is ineffective. As for illegal immigrants, there is a law that the person employing them is supposed to get a work permit for them, but that costs money, so most people just talke their chances. Workers from Burma or Cambodia work much cheaper than Thais at unpleasant, backbreaking jobs, but there doesn’t seem to be that much resentment — on the other hand I don’t know enough low-income Thai workers, so probably I just don’t know.

    4. Dignan

      I’m told by my father that in Berkely Springs, West Virginia, men can get haircuts for as little as $1.75. Perhaps these are eastern European barbers? More likely it is simply a product of the crushing desperation we see in our broken economy. But hey, unemployment is under 5% so everything’s fine, right? The dismal science indeed.

    5. jon raitmon

      Maybe the Plumber guy wasn’t working as hard “today” as he was when he was fairly new to the business. It probably is not good that a roofer repair owner guy gets rich off the back of the employees while not giving the employee a comparable piece of the pie.

  2. Ruben

    Neoliberalism -> c(Globalization, Financialization, Austerity)

    Just one caveat: Neoliberalism is not really market-fetishism, unless fetishism is understood as fake devotion. Neoliberalism is a State ideology of the economy, its central tenet being that the State must directly help the rich, the poor will be better off as a by-product.

    So if the push of the populace is strong enough, a new State ideology of the economy (aka mainstream economic dogma) would develop around the concepts of Self-suficiency (as opposed to Globalization), Industrialism (as opposed to Financialization), and Stimulus (as opposed to Austerity). Probably MMT has something to say about the latter, but what about Self-sufficiency and Industrialism?

    1. BecauseTradition

      its central tenet being that the State must directly help the rich, the poor will be better off as a by-product. Ruben

      Yes, government-subsidized* private credit creation being a (the?) prime example of this.

      *e.g. forcing the poorer to lend (a deposit is legally a loan) to banks to lower the borrowing costs of the more so-called creditworthy, the richer, or else be limited to dealing with unsafe, inconvenient physical fiat, cash.

  3. Disturbed Voter

    The Academy are direct and indirect employees of the State. The Ivy League are direct and indirect employees of plutocrats (thru the university endowment). The State officials are plutocrats or more commonly indirect employees of the plutocrats. What is not to like? How can the Academy be reformed, when it has been oligarchic since Plato (an oligarch) invented it … the first Rand Corporation

  4. cnchal

    Who knew that destroying little people’s lives would finally have consequences?

    Prrresidennntt Trrrummppp (just rolls off the tongue) can have a field day.

    When do the mass firings of inept economists begin? Starting with Larry “Pretty Air” Summers and all the rest of the Haaaarvaaard asshats.

    1. ambrit

      I want to know when those characters will be sent to the FEMA camps for “re-education?”
      Something with a faint affinity to the Cultural Revolution looms.

        1. ambrit

          Reactionaries will be purged. The Markets of Historical Determinism will demand it.
          Cut to view of parade down Main Street USA of politicians and business people with computer keyboards hung around their necks. Many wear signs around their necks proclaiming their crimes. “I facilitated consumers to buy insurance policies for the ACA,” says one. “I front ran the market for Uncle Sam,” says another. The lines of armed guards lining the parade route are there to protect the penitents, as various short action shots show. The crowd is in an ugly mood. Storm clouds lower in the distance.

          1. animalogic

            …”Storm clouds lower in the distance”. Camera pans, penitents trudge dejectedly up hill, to silhouette of Guillotine. Steady rain begins. End shot.

  5. cocomaan

    Remember, though, that neoliberal social sciences now insists that everything is “post fact”. “Post fact” society. “Anti intellectualism”. And so on.

    1. Synoia

      We can look forward to too post-neoliberslism . — which would be liberalism, as the post and neo cancel out.

  6. Damian

    Tell me where you want to go and I’ll provide the selective facts and the subjective interpretation of those facts to reach the desired conclusions = Economists

    —- or merely arbitrarily change the cell definitions in excel as Harvard economists Carmen Reinhart and Kenneth Rogoff.

    As early as 1967 Greenspan was well known as an academic whore and a Rockefeller Puppet which now is a vast army of dial up opinions.

  7. fresno dan

    From the article:
    “Ideas played an important role in creating the conditions that produced Brexit and Trump. The ‘social sciences’ — especially economics — legitimated a set of ideas about the economy that were aggressively peddled and became the conventional wisdom in the policies of mainstream political parties, to the extent that the central theme of the age came to be that there was no alternative. The victory of these ideas in politics in turn strengthened the iron-handed enforcers of the same ideas in academic orthodoxy.”

    Yesterday I posted a link from Krugman saying that manufacturing CANNOT be restored in the US.
    Not that laws, rules, trade agreements make it difficult, but that something akin to the “arrow of time” or entropy prevents it – “…that there was no alternative.” Which is why I so vehemently disagree with the man. 1st, economics is not a physical science. 2nd, the loss of manufacturing in this country is due to man made conventions. Men made the rules, men can unmake the rules.

    Just like prohibition was thought to be a good idea, but with the passage of time, it was revealed that whatever benefits arise of not drinking, it is more than offset by the setbacks.
    I used to believe in “free trade” – but a thing called reality whacked me upside the head and disabused me of the notion. Whether GDP is going up fast enough or not, there is overwhelming evidence that the vast majority of GDP is not distributed to the 90% of the members of society.

    Like a lot of things, we did the experiment – it doesn’t work, but a few who gain advantage by that state of affairs want it to continue. The emperor has been exposed as having no clothes, and once you see the nakedness, you can’t unsee it.

    1. vlade

      of course you could institute that all manufacturng used 1960s technology – or maybe even 1860s, that would generate even more jobs.
      short of doing that, todays higly automated factory will use about tenth of blue collar workforce than in 1960s with the same productivity but creating much more complex products.
      I’ve seen reshoring happen (into compartively high labour cost country) and it created a thousand jobs or so. the previus offshoring costed close to five or six thousands iirc.

        1. Optimader

          FD
          Because they are paid next to nothing by 1st world standards.
          Even so, Chinese policy makers realise they are in a state of “peak labor”. Flogging productivity with a policy of “many hands make project small” has hit it’s scaling potential. They understand that.

          https://roboticsandautomationnews.com/2016/09/23/chinese-whispers-the-most-populous-nation-on-earth-wants-to-replace-millions-of-human-workers-with-industrial-robots-it-plans-to-manufacture/7353/

        2. edr

          Because ‘selective facts’ and ‘neoliberal narrative’ and ‘corporate funding’ blinded him… maybe

        3. vlade

          I doubt that you’d wish for the US workers to have 10k or less annual salary – because that is what the Chinese get (10k is about the average salary for a worker at one of the plants making Apple gadgets, and that involves almost continuous overtime. IIRC, the hourly rate is something like $1.80. Oh, and there’s no health or social insurance).

          I suggest you investigate why the UK was the birthplace of industrial revolution and the Continent wasn’t (hint – the UK labour costs were order(s) of magnitude higher than say in France or Germany. It just didn’t make sense to invest in up-front expensive capital goods when you could get reams of very cheap labour instead).

          And, in fact, the QE and ZIRP made it even worse, because before that you’d to cost the capital at much more than labour, while now you can get money for literally nothing (assuming you want to use it for something, like capital goods). At the same time, the companies run locally optimal, but globally bad strategy of holding on the money, failing to recognise that for people to spend, they have to earn first. The supply economic mantra “if you make it cheap enough, someone will buy” fails to recognise that shopping basket of most people is very much skewed towards food, energy and housing, leaving limited buffer for other goods – so the “cheap enough” may have to be “free” or “near free” in the environment of falling real wages.

          But I’d be happy for you to provide examples of re-shored operations where the number of jobs created were the same (assuming the same quality of jobs) or comparable to the number of jobs lost by offshoring before.

          I don’t have US numbers, but I can give you UK ones. In 1970s, UK car manufacturing industry employed about 500k people. That number has been steadily dropping and today it’s about 140k total between all manufacturers (you may see some sources use number as high as 750k – but that generally includes anyone who has anything to do with cars, like car salesmen, garage staff etc. – not just car manufacturers. I don’t have a reliable comparable number for 1970, so use manufacturers only).

          In 1970, UK manufactured about 2m cars, in 2014 it was about 1.6m. The loss of 400k is almost entirely covered by the loss of commercial vehicles capacity – personal cars are at the same level.

          So, the UK car industry lost about 70% of its jobs, but only 20% of its output. And the cars it manufactures today are mostly driveable unlike say Austin Allegro.

          The situation is not that much different elsewhere. Yves run an article on Trump making US coal “great again” – and the conclusion was the same – it will never employ the same number of people at the same salaries.

    2. John Wright

      I work in the electronics industry and had a minor observation point for some of the outsourcing of electronics manufacturing from the USA to, primarily, Asia, starting in the late 1980’s.

      At first USA employees were told not to worry as only excess capacity would be built overseas.

      But, that was proven to be an optimistic(?) statement, as even the managers making these statements also disappeared.

      If one looks at the value of raw electronic “ingredients” produced in Asia, for example, Printed Circuit Boards (PCBs), one can see how much capacity has been built up overseas.

      Here are some numbers pulled from report I have access to:

      For 2015, 26.5 billion dollars of PCB’s were produced in China.

      Taiwan and South Korea produce 7.8Billion and 7.3billion respectively.

      Even high priced Japan produces 5.36 billion dollars of PCB’s

      The North American number is 2.846 billion.

      China + Japan + Taiwan + South Korea +Other Asia = .51.94 billion vs 2.8 billion in North America.

      So Asia produces 18.55 x as much dollar volume of PCBs than North America (Canada + USA)

      In my simple minded labor model, when a country allows very free migration of capital overseas, importation of foreign workers by migration or temporary visas and outsourcing of labor by computer networks to overseas workers, it seems implausible one would argue that USA wages would not tend lower in response.

      But we have Obama and numerous economists, pushing the Free Trade mantra, via TPP, as good for American workers.

      And a further factor is the US military and State Department strive to make it safer for American businesses to function anywhere in the world, lowering business risk while pitching increased national security to the USA population (who bears the military cost).

      It will be difficult to bring American manufacturing back, especially when the alleged high paying white collar college jobs are pushed as the solution to USA wage stagnation.

    3. susan the other

      Steve Keen said similarly in Forbes – that once you offshore an industry it is too expensive to reinstall, and that some old factory for making furnaces cannot be retooled to make textiles, etc. even tho’ you might have a comparative advantage for doing textiles – sounds like corporate raiding and big time looting more and more because once you devastate an industry you really cannot do anything economically with those facilities and those workers. Which explains why after clever men like Mitt Romney finish with your corporation’s takeover nobody dashes in to re-up something new. Like pulling a tree out by its roots and then expecting it to grow into some kinda shrub.

      1. a different chris

        Well I like Steve Keen but he and PK are finally on the same page, where neither knows not what the f he is talking about.

        A lot of “offshoring” of the steel industry happened as the US plants themselves were passing the “invest or wind down” point in their life. Since the US labor force was considered intractable and foreign governments had much newer facilities the TPTB in steel just punted on US manufacturing. I am going to try to find a link, but there was a lot of debate between the union and US Steel (? one of them? ) about building a continuous caster plant in the 70’s. Foreign companies had them, we didn’t. I think they didn’t, but the point is the, all other things being equal, any plants of any type of manufacturing go thru the same technological vs ageing cycle, and the US is as likely to gain “back” — quotes because like continuous casting, it’s steelmaking but not the same as before — an industry as it is to have lost it in the first place. Factories like to be located where they make sense.

        And what is all this about “well they don’t need anybody in manufacturing, it’s all gonna be machines now”. Yeah, right. Been on a manufacturing floor lately? People have yet to be born that are going to be working in something called “manufacturing”. And if the machines cut the work need by 10x, we may well need 10x as much stuff as long as it is the right stuff.

        Well, if we had universal heathcare and Germanic trade education, but that would require elections not between carrot-heads and Queen Wannabes.

      1. Octopii

        Because they have a skilled trade education track, and manufacturing is a respected occupation that one can raise a family doing. Because of the high-skill labor base, Germany can make high-margin products that the rest of the world wants to import.

        From very early, all German kids are encouraged to build things and take things apart, and they are given this opportunity even in urban areas at special “building playgrounds” that have hammers, nails, and wood. How is a poor American kid in a housing project going to do this? He’s not, and even if he does have a clue what to do with a tool someone hands him on the job, he won’t have the deep fundamental background to use it well without a long period of training and screwups — the kind of period he would have already gotten through while growing up.

        American small businesses that require skilled technicians are desperate for them. We literally cannot grow our businesses because of labor constraints.

        1. Procopius

          Since I am not an economist nor a historian probably I should restrain myself, but if you look at the history of labor relations in Germany you might notice that Bismark, not exactly a bleeding heart, believed that it was in the nation’s interest to have a healthy, well-fed, well-educated populace. They not only made better workers, they made better soldiers. Then from the 1890s onward Socialism was much better regarded in Germany than it ever has been in the U.S. I speculate that there is a desire for fairness that has deeper roots in German culture than in American culture — which is not particularly homogenous anyway.

        1. Anonymous

          Nobody wants to hear this, but manufacturing profit margins, according to Bruce Greenwald of Columbia Business School, are plummeting around the world. Globalization has hit its peak without our recognizing the fact and without our help. Fifty years from now, most of the things we buy will be made within fifty miles of our homes. In twenty years, we won’t be admiring the German system.

          http://blog.supplysideliberal.com/post/122394899914/bruce-greenwald-the-death-of-manufacturing-the

    4. likbez

      I used to respect Krugman during Bush II presidency. His columns at this time looked like on target for me. No more.

      Now I view him as yet another despicable neoliberal shill. I stopped reading his columns long ago and kind of always suspect his views as insincere and unscientific. In this particular case the key question is about maintaining the standard of living which can be done only if manufacturing even in robotic variant is onshored and profits from it re-distributed in New Deal fashion. Technology is just a tool. There can be exception for it but generally attempts to produce everything outside the US and then sell it in the USA lead to proliferation of McJobs and lower standard of living. Creating robotic factories in the USA might not completely reverse the damage, but might be a step in the right direction. The nations can’t exist by just flipping hamburgers for each other.

      Actually there is a term that explains well behavior of people like Krugman and it has certain predictive value as for the set of behaviors we observe from them. It is called Lysenkoism and it is about political control of science.

      See, for example:
      https://en.wikipedia.org/wiki/Lysenkoism
      http://www.softpanorama.org/Skeptics/lysenkoism.shtml

      Yves in her book also touched this theme of political control of science. It might be a good time to reread it. The key ideas of “ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism ” are still current.

      1. John Wright

        Another factor in maintaining manufacturing in the USA is what is referred to as furthering the “next bench syndrome”.

        This is where one is made aware of a manufacturing problem to solve due to proximity to the factory floor, and the solution leads to new profitiable products that can be used both inside/outside the original factory.

        This might be an improved process or an improvement in manufacturing tooling that had not been anticipated before.

        New products will be created with their profits/knowledge flowing to the country hosting the manufacturing plants.

        The USA seems to be on a path of “we can create dollars and buy anything we want from people anywhere in the world”.

        Manufacturing dollars and credit rather than real goods might prove very short sighted if dollars are no longer prized.

        Perhaps the TPP, with its ISDS provisions, indicates that powerful people understand this is coming and want additional wealth extraction methods from foreign countries.

  8. Actus Purus

    The author mentions globalization and financialization. But what seems to be always left out (and given a pass) in these discussions is the role of central banks and monetary policy.

    Central banking policy (always creating more money/credit) lies at the nexus of almost all that is wrong with modern capitalism and is the lubricant and fuel that enables financialization’s endless growth.

    Financialization leads to asset bubbles and deindustrialization. It hollows out industries. When money/credit are created in ever increasing quantity, the makeup of how we “work” shifts from goods producing to “finance”.

    Then through globalization, what we lack in goods, foreigners who accept our paper, seem to provide. At least for now. In a closed system, financialization has its natural limits. But enabled by cross-border trade, it metastasizes.

    In the short run, it appears to be a virtuous circle. We print paper. They make real stuff. They take our paper. We take their stuff. We feel very clever.

    But over time, wealth inequality grows. Industries are hollowed out. The banking sector dominates.

    And then we get a populist uprising because people realize “something is wrong”.

    But mistakenly, they think it’s globalization. Or free trade. Or capitalism. When all along, it’s just central banking. Central banks are the problem. Central bankers are the culprits.

    1. BecauseTradition

      Central banks are the problem. Actus Purus

      Yes, insofar as they create fiat for the private sector since that is obviously violation of equal protection under the law in favor of the banks and the rich.

      Otoh, all citizens, their businesses, etc. should be allowed to deal directly in their nation’s fiat in the form of account balances at the central bank or equivalent and not be limited to unsafe, inconvenient physical fiat, a.k.a. cash.

    2. IDG

      Central banks are part of the problem, but not because any of the things you say. Abandon monetarism, is just wrong, on everything.

      CB’s do not control the rates effectively during the upturns (they are just procyclical as they add to savings though higher rates).

      CB’s “creating money” would mean loanable funds theory is right, but as it has been demonstrated over and over it’s horribly wrong. Banks suffice themselves to expand credit on upturns, and CB’ers can do nothing about it. On downturns they cna try, and fail, because the appetite for credit is just not there. Credit expansion and contraction is endogenous and apart of of what CB’s do, not to speak about all the forms of shadow money which are the real outliers and trouble makers.

      What CB’s do, in practice, is to prevent capitalism from collapsing on crisis, making “bad money” good, by stabilising asset prices. All their tools are reactive, not pro-active, so they cannot create any condition, because they react to conditions. They neither set the rates in reality, nor “create money” that enters the real economy in any meaningful way.

      The religion of “central bankism” is part of the problem, but as it is the religion of “monetarism” (which are the same) on which many of those ideas are based.

      1. BecauseTradition

        Banks suffice themselves to expand credit on upturns, and CB’ers can do nothing about it IDG

        Yes, “loans create deposits” but only largely virtual liabilities wrt to the non-bank private sector. We should fix that by allowing the non-bank private sector to deal with reserves too then it would be much more dangerous for banks to create liabilities since bank runs would be as easy and convenient as writing a check to one’s cb account or equivalent. Of course, government provided deposit insurance could then be abolished too since accounts at the cb or equivalent are inherently risk-free.

        Our system is a dangerous mess because of privileges for depository institutions – completely unnecessary privileges given modern computers and communications.

      2. Actus Purus

        In other words, another “pass” for central banks. It’s not their fault. It’s just the economy. It’s how “markets” work.

  9. stefan

    Get ready for real kleptocracy.

    Breitbart obscurantism + Trump/Bannon misdirection = turkeys vote for thanksgiving.
    Sessions views on race at Justice = curtailed civil rights.
    Wilbur Ross pension stripping = privatize Social Security.
    DeVos at education = privatize the golden egg of public education.
    85% tax credit for private infrastructure spending = fire sale of the public square (only rich need apply).
    3~4 Military generals in the cabinet = enforcement threat for crypto-fascist state.
    McGahn at counsel + Pompeo at CIA = Koch Bros.
    Ryan at speaker = privatize Medicare

    Welcome to government of the billionaires, by the billionaires, for the billionaires.

    btw, if Giuliani is appointed to a cabinet post, he will have to explain his foreknowledge of the NY FBI→Kallstrom→Comey connection→to Congress under oath (if they aren’t too afraid to ask).

    1. a different chris

      I worry along with you, but again: When somebody Ms DeVos opens her mouth people just naturally recoil. Trump doesn’t seem to have grasped the only thing that mattered in his election – you want your enemies to suck. His appointees are people that suck. Hillary would have appointed smooth-talkers who could effortlessly move between “private and public” positions.

      PS: Paul Ryan is a good counterexample – people fall for his BS because he isn’t quite a stupid as, say Guiliani. Of course he was elected, not picked by Trump.

  10. Robert Dannin

    mr reddy solves the riddle of the Great Refusal but doesn’t far enough: certainly mainstream economists were wrong to act as cheerleaders for the kleptocracy, yet they were also complicit in a material sense by furnishing all the necessary algorithms to boost the derivatives industry into the realm of corporate cyber-theft. that genie isn’t going back into bottle. what’s in store for us then? economic apartheid. just read what the new team has been saying about walls, guns, police, military and terrorism. the bannon plan is for heavily policed gated communities monopolizing vital resources; high surveillance, rights abatement zones for the proletariat; and a free-fire wilderness of lumpen gangsters, gun-toting vigilantes, survivalist cults, etc. competing for subsistence. mad max, only run by people worse than mel gibson. close to what we already have but once legislated into existence impossible to reverse without a violent revolution. once again mr. reddy is correct: hobbes’ leviathan is the negation of social science.

  11. Waldenpond

    hmmmm….. Trump said quite a few contradictory things during his campaign and it would seem an error to believe anything a candidate says on either side of an issue. Have the Koch brothers (who are involved w/Trump) been particularly unhappy with the numerous billions they’ve accumulated under Obama? I expect this regime to be more along the ‘different globalization’ side (more a shuffling of the deck chairs on the Titanic). Manufacturing will be back in relation to the degree – penalties are eliminated on ‘repatriated’ funds, land is eminent domained on behalf of oligarchs, private profit is granted primacy over pollution, then build their factories with public money and abolish the minimum wage. Austerity will continue but the new con will be private/public partnerships. Don’t you want to buy you friend/family member/neighbor a job? Don’t you?

    The elite, including the Trump’s, are going to continue their actions until they’ve taken it all.

    1. Wendell Fitzgerald

      Since you mention land you might be interested in the idea of land value taxation a way to take the land back from the oligarchs an idea that has been around for a long time assiduously ignored by folks like Naked Capitalism.

      1. JEHR

        Mr. Fitzgerald, if you search in NC for “land value taxation” you will see many articles, especially from Mr. Hudson. NC has thoroughly covered a lot of territory regarding this topic.

        1. a different chris

          Yes you could probably catch us restlessly muttering “Henry George” in our sleep half the time.

          The problem is it’s a really, really hard sell. It just sounds funny. Pittsburgh actually had it until a few years ago when it was “discovered” and before there was even a discussion the Democratic mayor and City Council who should have known better had rescinded it before anybody got a chance to say anything.

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

          ” during 2001 after years of underassessment, and the system was abandoned in favor of the traditional single-rate property tax. The tax on land in Pittsburgh was about 5.77 times the tax on improvements.”

          To be good Russian plants, we do actually need to know things about Amerika…

          Anyway, here’s the problem: people just voted for a billionaire… how you gonna get this type of taxation approved given the Pittsburgh example?

          1. Allegorio

            It seems to be forgotten that this was a vote against Clinton and not a vote for Trump. If Trump goes back on his progressive platform, jobs jobs jobs there will be a backlash so fast that it will give everyone, especially the billionaires whiplash. Let them touch one hair on Social Security’s head or privatize Medicare, there will be another big surprise in the mid-term elections. When the good people of the rust belt find out about the plans to put rentier tolls on all that public infrastructure, trust me the pitchforks will come out from their corners quick as you blink The best laid plans of billionaires and their lackeys often go awry. The curtain has been lifted. If Trump thinks he can satisfy the working class by giving another huge tax break to the .01%, he better think again. They do not have enough rubber bullets nor pepper spray.

            1. Michael

              Nah, as long as Trump keeps blaming folks of color, he’s got a good six years. You overestimate the people of Flyover. Yes, they got hosed by Obama, but they’ve been electing Republicans to flog them for 30 years.

          2. Anonymous

            It’s a hard sell for good reason. Many Americans are land rich and cash poor. The idea that they’d have to sell property to pay such a tax offends even the simplest conception of sound land planning. If a lot more property came on the market at once, as it would have to under the land tax scheme, we’d be Japan all over again.

        2. BecauseTradition

          Taxes should be unavoidable to avoid violating equal protection under the law and land taxes are certainly unavoidable in that land can’t be hidden as income, for example, can be.

          Another unavoidable tax, except for the existence of physical fiat* (notes and coins), would be a tax on fiat, i.e. negative interest.

          *Yet these can be taxed when bought and sold to the central bank with/for “reserves”**
          **Just another name for fiat account balances at the central bank when the account owners are depository institutions.

          1. animalogic

            Here’s a few old fashioned & long derided ideas for taxes:
            An Estate Tax of 30% on estates larger than say, 5 million. Yes I know the US has one, but isn’t it suffering death by a thousand cuts ?
            A sales tax (say 30%) on Luxury goods ? If you can afford that Rolls Royce, you can afford the tax …
            Tax on financial transactions (ie: a Tobin tax).
            I’m sure we could add a couple dozen more tax ideas to the list. (The idea is not surpluses, but to reduce inequality…)

            1. BecauseTradition

              but to reduce inequality…) animalogic

              The goal should be to reduce injustice – preferably at its source. And the source of much injustice is surely government privileges for private credit creation and other welfare for the rich such as positive interest paying sovereign debt.

              Still, there’s previous injustice to deal with so asset redistribution should be on the table too and that could include taxing the rich to give to the poor – certainly not to run a surplus (or even a balanced budget) as you say.

  12. Altandmain

    Mainstream analysts don’t want to recognize the real problem. They failed the people have lost their legitimacy to govern.

    Not saying Trump is the solution (I’m hoping for a solution from the left and think that Trump could enable his cronies, but nothing else), but the Establishment is unworthy to govern.

    1. Wendell Fitzgerald

      A solution that most people would consider being from the left but which is the radical center (taking valid ideas from both left and right) is land value taxation the wedge issue to tax the various sources of unearned income (estimated at 40+% of GNP however you determine it) thus allowing for the elimination of taxation of earned income from wages and profit from the investment of real capital in the real economy. Taxing community created land value and making the distinction between earned and unearned income has been assiduously ignored and avoided by mainstream economists, most of our vaunted/sainted public intellectuals and sources like naked capitalism but since all of that has failed there is nothing to lose by considering what this author, Sanjay Reddy, says is necessary: “It [social science] can only save itself through comprehensive reinvention, from the ground up.” I suggest that the this has already been done literally from the ground up by the analysis that has been around for a very long time that takes land, how its value is created, who owns it and what happen when you tax its value into account. Happy day.

    2. Michael

      I still have no idea what the point of an economist who didn’t raise a flag before the 2007 crisis is.

      Why would any of them retain their jobs?

  13. Rosario

    We finally made it to the post-modern wasteland. It is pretty weird to see the post-modern methods used by social scientists for decades to dissect culture actually manifest in practiced culture.

  14. susan the other

    TINA was definitely an ideology – an idea backed by interest. They were making fun of Thatcherism last nite on France 24 because it had been so devastating and now one of the candidates in France is talking her old trash again. Humor is effective against ideology when all else fails but it takes a while. But as defined above, we actually do have an alternative – our current alternative is “illiberal majoritarianism”. Sounds a tad negative. We should just use the word “democracy”.

  15. Sound of the Suburbs

    The problem with free trade, a historical lesson:

    “The Anti-Corn Law League was a successful political movement in Great Britain aimed at the abolition of the unpopular Corn Laws, which protected landowners’ interests by levying taxes on imported wheat, thus raising the price of bread at a time when factory-owners were trying to cut wages to be internationally competitive.”

    The landowners wanted to increase their profit by charging a higher price for corn, but this posed a barrier to international free trade in making UK wage labour uncompetitive by raising the cost of living for workers.

    In a free trade world the cost of living needs to be the same in West and East as this sets the wage levels.

    The US has probably been the most successful in making its labour force internationally uncompetitive with soaring costs of housing, healthcare and student loan repayments.

    These costs all have to be covered by wages and US businesses are now squealing about the high minimum wage.

    US labour can never compete with Eastern labour and will have to be protected by tariffs.

    Free trade has requirements and you must meet them before you can engage in free trade.

    The cost of living needs to be the same in West and East.

    1. BecauseTradition

      Assume, for the sake of argument, that all assets in the West were equally owned by its citizens? Then wouldn’t free trade with the East be a universal blessing for the citizens of the West and not a curse for some (actually many) of them?

      So the problem is unjust asset distribution? But how could that occur if our economic system is just? Except it isn’t just since government subsidies for private credit creation are obviously unjust in that the poor are forced to lend (a deposit is legally a loan) to banks for the benefit of the rich.

    2. Oregoncharles

      A technical note, to avoid possible confusion: “corn” in British means wheat and other small grains – a “corn” is a kernel. Maize was not a big factor in Britain; too far north.

      Otherwise, good point.

  16. Sound of the Suburbs

    There are two certainties in life – death and taxes.

    There are two certainties about new versions of capitalism; they work well for a couple of decades before failing miserably.

    Capitalism mark 1 – Unfettered Capitalism

    Crashed and burned in 1929 with a global recession in the 1930s.
    The New Deal and Keynesian ideas promised a bright new world.

    Capitalism mark 2 – Keynesian Capitalism

    Ended with stagflation in the 1970s.
    Market led Capitalism ideas promised a bright new world.

    Capitalism mark 3 – Unfettered Capitalism – Part 2 (Market led Capitalism)

    Crashed and burned in 2008 with a global recession in the 2010s.

    We are missing the vital ingredient.

    When the first version of capitalism failed, Keynes was ready with a new version.

    When the second version of capitalism failed, Milton Freidman was waiting in the wings with his new version of capitalism.

    Elites will always flounder around trying to stick with what they know, it takes someone with creativity and imagination to show the new way when the old way has failed.

    Today we are missing that person with creativity and imagination to lead us out of the wilderness and
    stagnation we have been experiencing since 2008.

    1. Sound of the Suburbs

      What is missing from today’s economics?

      1) The work of the Classical Economists and the distinction between “earned” and “unearned” income, also “land” and “capital” need to be separated again (conflated in neoclassical economics)

      Reading Michael Hudson’s “Killing the Host” is a very good start

      2) How money and debt really work. Money’s creation and destruction on bank balance sheets.

      3) The work of Irving Fisher, Hyman Minsky and Steve Keen on debt inflated asset bubbles

      4) The work of Richard Koo on dealing with balance sheet recessions
      https://www.youtube.com/watch?v=8YTyJzmiHGk

      5) The realisation that markets have two modes of operation:

      a) Price discovery
      b) Bigger fool mode, where everyone rides the bubble for capital gains

      There may be more ……

      The Euro was designed with today’s defective economics.
      Oh dear, no wonder it’s going wrong.

      1. a different chris

        >The Euro was designed with today’s defective economics.

        Man I didn’t think of that. What comically lousy timing. I do like this post because it similar to…sigh, ok it asserts my belief but still don’t think I’m in an echo chamber here, I actually want people to know what I think so they can reinforce the good and whittle out the bad… anyway, asserts my belief that “economics” isn’t a science but when used in the best way is a toolkit, here we need an hammer (austerity), here we need a screwdriver (some tweaking). It isn’t one tool for all jobs for all time.

        1. Sound of the Suburbs

          American’s are brainwashed from birth about capitalism and Milton Freidman may have been as susceptible as the next man.

          He may not have realised he was building on a base that had already been corrupted, the core of neoclassical economics.

          The neoclassical economists of the late 19th century buried the difference between “earned” and “unearned” income.

          These economists also conflated “land” and “capital” to cause further problems that were clear to the Classical Economists looking out on a world of small state, raw capitalism.

          Thorstein Veblen wrote an essay in 1898 “Why is economics not an evolutionary science?”.

          Real sciences are evolutionary and old theory is replaced as new theory comes along and proves the old ideas wrong.

          Economics needs a scientific, evolutionary rebuild from the work of the classical economists.

          Most of the UK now dreams of giving up work and living off the “unearned” income from a BTL portfolio, extracting the “earned” income of generation rent.

          The UK dream is to be like the idle rich, rentier, living off “unearned” income and doing nothing productive.

          This is what happens when stuff goes missing from economics.

          Keynes realised wage income was just as important as profit.
          Wage income looks after the demand side of the equation and profit the supply side.
          I think we will find he was right, this knowledge has just gone missing at the moment.

          Keynes studied the Great Depression and noted monetary stimulus lead to a “liquidity trap”.
          Businesses and investors will not invest without the demand there to ensure their investment will be worthwhile.
          The money gets horded by investors and on company balance sheets as they won’t invest.
          Cutting wages to increase profit just makes the demand side of the equation worse and leads you into debt deflation.
          Central Banks today talk about the “savings glut” not realising this is probably Keynes’s “liquidity trap”.
          It’s more missing stuff.

          When Keynes was involved in Bretton Woods after the Second World War they put in mechanisms for recycling the surplus, to keep the whole thing running.

          The assumption today is that capitalism will just reach stable equilibriums by itself.

          The Euro is based on this idea, but Greece has just reached max. debt and collapsed, it never did reach that stable equilibrium.

          Recycling the surplus would probably have worked better.

          Science is evolutionary for a reason.

    2. UserFriendly

      I disagree that we don’t have a ready to go replacement. MMT. We just have TPTB throwing $$$ around to make sure no one hears about it, much less does anything.

  17. JEHR

    I believe that our way out of this morass is to start by buying locally. There are always people who make things and they need to be supported. We may not get the cheap products, but we can build our communities up gradually over time. Our standard of living will be different but we will have our dignity and the means for creating prosperous communities.

    1. Arizona Slim

      I have been a member of a localist group here in AZ. Said group does a great job of appealing to people from across the political spectrum. And that is a good example to follow.

    2. Ulysses

      “I believe that our way out of this morass is to start by buying locally.”

      I very much like the localist movement, and I try very hard to support it in upstate NY, among other places. The problem with this approach is that there are simply way too many people for us to painlessly revert back to an artisanal, agrarian 18th c. lifestyle.

      To put this in Empire State terms: we might just be able to accommodate hundreds of thousands of people who used to work for Kodak, I.B.M, or Xerox upstate– in new jobs making craft beer or high-quality string instruments, etc. Yet what do we do with the many millions of people, who live downstate, who currently work in jobs very dependent on a globalized economy?

  18. Greg

    We’ve seen a few economists posting lately to say that all social sciences got it wrong, and especially economics. What’s curious to me is that non of the examples given apply to any social science except economics.

    Is this the same discipline that refuses to acknowledge the value of other disciplines and cross-discipline research, ducking for cover behind the very disciplines it’s been snobbing?
    ‘All social sciences’ indeed.

  19. John k

    The election was less about trump gaining voters in the rust belt than Clinton losing hers. Romney lost with exactly as many votes as trump got because 6 million that voted for black Obama preferred to stay home rather than vote for white Clinton.
    All the dems need to do is to run a candidate willing to spend quality time in the swing states, somebody not totally corrupt and not verbally advocating confrontation with Russia would also be a big help, though this already rules out most dem elites.

    Of course if trump manages to get a lot of infra built, and gets a lot of decent jobs, his support in 2020 will grow, maybe to the point only a strong progressive could beat him.
    But today’s dem elites will fight tooth and nail to keep real progressives from controlling the party, as instructed by their corp overlords… remember, bankers might go to jail if the wrong person gets AG. First indication is Keith on dec 1… can/will big o keep him out?

  20. LifeIsLikeABeanstalk

    I liked this ‘take’ by Prof. Reddy a lot in terms of looking at what happened to bring us to a Trump Presidency (with an observation that Orange Duce hasn’t YET been sworn in).

    But if he thinks that a Tea Party shaped Republican House and Senate and soon to be skewed Supreme Court aren’t about to launch a season of Rent Taking and Austerity to levels previously only attained in Arthur Laffer’s wet dreams he needs his otherwise rational head examined.

  21. Schofield

    Don’t go so excited the “Trump Revolution” like the “Obama Revolution” will likely end up as “hopeless” for ordinary folk. So for starters Trump’s tax breaks will save the 1% fifteen percent and the rest of us 2 percent! Already the msm including my local paper are already grinding out the counter-propaganda against raising tariff barriers for China. The majority of the electorate are too ignorant to figure much of it out and come 2024 will be voting Ivanka Trump in as president!

    1. GregoryA

      If Trump raises MORE(notice that word son) tariffs against China, he will get a nice uppercut across the forehead when China cancels contracts one after another and jobs start being lost in the next NBER recession. His ego can’t take that.

      He was the Mercers introduction to the elite, nothing more or less. If anything, the Republicans are more Jewy than ever.

  22. Oregoncharles

    “The dominant economic ideas taken together created a framework in which deviation from declared orthodoxy would be punished by dynamics unleashed by globalization and financialization.”

    IOW, it isn’t science; it’s political ideology.

    The environmental economist Herman Daley traces that back to the very beginning of the field; he says the earliest economists essentially chose sides in the contest then raging between landowners (resource based) and merchants (trade based). That made them propagandists, not referees. And it’s the reason economics, from the beginning, suppressed the distinction between natural resources, like land, water, and minerals, and human-created capital. It recognized only two “production factors,” when in reality there are at least three. Marx picked up the same self-serving :”error.”

  23. Oregoncharles

    ” illiberal majoritarianism”
    That’s an unfortunate word choice, considering that Trump lost the election by nearly 2 million votes. It was an extraordinary demonstration of the defective Electoral College system. Maybe now we’ll get some action on the Popular Vote initiative.

    It’s important to remember that the rebellion is “illiberal” mainly because the “liberal” parties refuse to offer a “liberal” populism, aka the New Deal. You could call it an old, proven idea. Some of us see that as weak tea, but even that isn’t on offer outside the marginalized Left. (This is the essential point of Thomas Franks’ “What’s the Matter with Kansas.”)

    Of course, that’s just a further illustration of the author’s point.

  24. Paul Hirschman

    One of the most insightful chapters in Karl Polanyi’s THE GREAT TRANSFORMATION is about something Karl calls “the discovery of society.” It is the story of how those who wrestled with the fundamental falsehoods of the “self-regulating market” [our Libertarian friends’ dreamworld] had to begin thinking about how people in their everyday lives actually, really, incompletely, made a life for themselves in a world defined by trickle-down economics. It was never a pretty sight, but the lesson was that the “self-regulating market” was going to be regulated somehow by non-economic actors with non-economic considerations foremost in mind, like it or not, or face destruction by human beings whose lives were distorted beyond what would be tolerated by ordinary people. Most people put up with neoliberal BS for a generation because that’s what most people do, most of the time, even when they know they’re being sold a bunch of horsecr*p. But the limit of what people will tolerate in a society defined by the false gods of market capitalism is reached periodically. Trump’s victory tells us that one of these limits has been reached. The question now is, “What are we going to “discover” about ourselves and about the society we want to live in–and will we find a way to create it, assuming it’s something good?” (Or flee from, if it turns sour.)

    TINA folks will repeat, over and over, that “there is no alternative,” but that bugaboo has just been smashed. Clinton, Summers, Obama, Rubin, Schumer, and the many, many lesser lights of Neo-Liberalism have become “old hat” almost overnight. Let’s hope our discovery of society includes a stronger dose of Reason and Solidarity than would seem to exist in Trumpworld.

  25. Phil

    Here’s the deal:
    Automation is hallowing out work *at all levels*. Don’t believe me? Read this.
    http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf
    Summary:
    http://www.eng.ox.ac.uk/about/news/new-study-shows-nearly-half-of-us-jobs-at-risk-of-computerisation

    Add to the above:
    Projected population increases, worldwide -including some demographic vertical projections
    http://www.pewresearch.org/fact-tank/2014/02/03/10-projections-for-the-global-population-in-2050/

    ergo: Less work (at all levels) + increasing population (which includes some explosive variables, like a large increase of older persons who will require economic support from fewer younger workers) = a massive increase in tension re: the struggle for available necessities.

    Technology innovation will help with some of this, but the great, looming problem is: how are billions of idle people with nothing to do going to be motivated to remain non-disruptive? I can see a massive surveillance state controlling the “idles”; perhaps new technologies that permit people to jack their brains into the network for diversion (but how long before people become desensitized to that?). Will there be a “spiritual” revolution that is not attached to current dogmatic religions, that values having less, sharing more, cooperating with others, etc.? Hard to say.

    Anyway, it’s coming, yet very few policy makers are talking about it. I’ll bet the Pentagon is planning for this scenario, among others.

    In twenty years – maybe a few more – we should be able to begin to migrate away from earth. It will probably be a LONG time before extra-earth settlements are feasible and sustainable. That said, we here on earth are going to have our hands full.

    Can humanity somehow find ways to overcome its wired propensity for status reflected by material wealth, and somehow change that status-seeking to a sharing model that is not top-down?

    I’ve been pondering this for a while. People much smarter than I will hopefully lead the way. We have our work cut out for us.

    I don’t have any answers

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