The New New Deal

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By Thomas Fricke, Columnist & Head, WirtschaftsWunder-Website. Originally published as the lead article of the mid-May print version Der Spiegel; English translation published at the Institute for New Economic Thinking website

The spell worked its magic for three decades. For three decades humanity believed in the blessings that globalization would bring in its wake. It was assumed that in the end everyone involved will benefit when we remove regulations, when corporations become ubiquitous throughout the world, when the banks have lots of money, when tax havens exist, and of course when government stays out of our hair. What prevailed was the primacy of the economy, whether in Herne, New York or Shenyang. It was as simple as that.

But times have changed. Once considered to be the High Temple of market dogma, the mighty financial world was about to collapse ten years ago, before it had to be rescued by – surprise – the rest of us.

What also collapsed was the myth that markets can regulate themselves. Simmering unrest emerged, borne by diffuse fears, half-knowledge and justifiable rejection of what has gone wrong with globalization. It became an opportune time for con men and authoritarians.

We now see a void that cannot be remedied by trying to fix details. What the world needs instead is a new leitmotif, a new guiding concept. We indeed need it before populists of all stripes fill this void by inciting people against each other. Time is of the essence.

The tremendous power and impact inherent in such a myth was exemplified when Ronald Reagan relaxed banking regulations in 1982. All of a sudden, the Chicago Boys were considered hip. Supply and demand, so they believed, was the key to resolving anything and everything – whether it concerned a shortage of screws, demand for loans, or the desire to get married. Soon the apostles of the free market ruled everywhere, even in France. Mighty authorities such as the World Bank and the International Monetary Fund (IMF) preached the Washington Consensus; i.e. strict market orientation as a new world religion.

For more than a quarter of a century there was no doubt about what is right: The market trumps the state [no pun intended]. What to do with State-owned enterprises? Privatize them. Your pension? Self-provision through the free market. Unemployment benefits? Curtailments. Opening borders for Eastern Europeans? Certainly. And the next free trade round? Of course. And so forth. In the end, even Social Democrats contributed to lowering top tax rates and making hedge funds happy.

In these times a lot of prosperity was generated throughout the world. The Asians were able to sell off their cheap goods everywhere. And the West benefited from cheap clothing from Vietnam and toys from China. Germany enjoyed an export miracle because everyone needed machines made in Germany.

And yet something seems to have gone awry. There is this unease. There is this resentment. There are these downsides.

The reason why world inequality has fallen is due mainly to the fact that so many Chinese and Indians have experienced a rise in income, as was demonstrated by the former World Bank economist Branko Milanović.

The results elsewhere are less evident. Neither have Americans, Britons and Germans experienced faster growth in their economies compared to the decades prior to 1982. Nor were there fewer crises. On the contrary, the IMF has identified more than 120 banking crises and 200 currency crises since then – a dramatic increase.

True, companies make more profits today, but they invest a lower proportion in machinery and jobs than before. This is in part because in a financialized global economy it is more lucrative to speculate. In part because it is more chic to make a quick buck than to think long-term. To sum this up we see $200 trillion in debt generated in the old system.

More importantly, however, the greatest promise has remained unfulfilled: Half of the Americans today have seen stagnating or even significantly lower real incomes since 1989. In Germany, there are 40 percent who are less well-off in real terms, and half of Germans possess practically no wealth. And nearly one in four Germans works for little pay. Such enormous wealth gaps between the rich and the poor existed in the nineteenth century as well.

Depending on the calculation, progress has thus by-passed a third to half of the population. The Americans and Britons were the first to be jolted by this development through the election victories of Trump and Brexit. Ironically it is those very countries who most eagerly followed the mantra of the free markets that are now confronted with Industry 0.0 and social division. Meanwhile, IMF experts are having to concede that capital markets are probably not so efficient after all. And the once orthodox-liberal OECD is only defining growth these days as good growth if it benefits the poor.

The myth of the past has become passé. What is missing is the new, powerful concept.

Economists have begun to understand what went wrong in recent years. Kenneth Rogoff and Thomas Piketty evaluated enormous sets of data pertaining to financial crises and assets. Nobel laureate Angus Deaton reveals in a new study that in the US, the life expectancy of white men is on the decline in precisely those areas where local companies have been displaced. Robert Shiller and George Akerlof have found main reasons that explain why financial bubbles come about systematically in markets.

There is a growing suspicion that it was perilous to allow the economies to be determined by financial wizards who are incapable of foreseeing their own debacles, who follow every fad, who then in times of crises drive governments on before them.

Could this become the core of a new mantra – one that refrains from turning to financial magic for solutions? Possibly. Bonus calculations for managers should no longer be based on share prices, says Nobel laureate Joseph Stiglitz. Investors should be rewarded when they invest in the long term, says Andrew Haldane, chief economist of the Bank of England. And managers should have to pay back bonuses when it turns out that they made a mess of things. In other words, all incentives investing in human resources and machinery.

Many reasons point to the assumption that we would face fewer debts if, for instance, banks were required to provide more funds – especially when it comes to pure financial transactions as well as in times of distorted lending. The Bonn-based economic historian Moritz Schularick found that in the run-up to nearly all financial crises too many loans had been taken out on real estate. This problem could be solved if the loan portion for the purchase of a house was limited to around, let’s say, 50 percent.

And what about the pitfalls of free trade? According to Harvard professor Dani Rodrik, trade agreements in the future will have to be equipped with explicit clauses to enable import restrictions, if necessary. This would be the case, for example, when cost benefits are attributable solely to disregard for human rights in the countries of origin, however, not when the productivity is lower. When it is foreseeable that low-cost competition threatens to devastate entire industries. Thus, far more free trade could be rescued than through Trumpian protectionism, which comes with a high risk of escalation.

Moreover, it would be advisable to clarify what issues in a better world actually demand regulations on a global scale – climate protection would be an example. And in which cases, beyond the crude good vs. evil dichotomy, state government is actually useful. Experts today can determine with much more clarity which investments are worthwhile and which are not. And which expenditures on railroads, schools or research will ultimately bring the finance minister greater return on initial investment because they initiate growth and generate more tax revenues. Such projects could, under strict supervision, be exempted from rules limiting fiscal deficits. This would be a more farsighted approach than formally striving to balanced budgets every year. The innovation researcher, Mariana Mazzucato, has demonstrated how strongly government agencies have enhanced the development of technologies without which devices like the iPhone would not exist: A good reason to start making those dull authorities more attractive to top researchers.

Some of these ideas have already matured, others are still in their inception stage. What we need to find is a unifying formula to define the new paradigm: the leitmotif.

Finding it is a tremendous challenge. It cannot be as simple as the market-works-wonders formula. Yet it must be simple enough to make it plausible to everyone. The solution probably lies somewhere in the middle: in a better controlled, enlightened globalization that can do without the compulsion to standardize everything throughout the world. What is needed is a new balance of liberties with built-in safeguards against excesses. And an environment in which politicians can again shape and decide on policies instead of rescuing banks or states without having much choice in the matter.

This requires an economy that is more dynamic and innovative than in the imposter years – for the very reason that more money will flow into real projects and that higher incomes will increase sales. A good 80 years ago one myth already had to be replaced in the wake of a crash and a failed attempt at globalization. This brought populists to power, nourished nationalism and ended in a trade war and ultimately a world war.

At those times it was US President Franklin Roosevelt who coined a new slogan: the phenomenal New Deal, which embraced the losers of the economic crisis, placed bounds on the financial world, ensured investments in the future, and demonstrated political control: A model for the post-war world, during which almost everyone benefited for decades.

High time to draw our lessons from this.

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  1. Thuto

    Before 2008, the financial markets were a place where risk went to die. Credit default swaps and other derivatives/instruments meant that financial wizards could always pass the risk of their speculative “investments” onto the next, less sophisticated guy on the chain. I’m not sure about this argument that says the wizards couldn’t see the eventual collapse of their various schemes, they could, but the loot on offer was just too much for them to put the brakes on the runaway gravy train they were on. Afterall, they must have suspected, and this is how it eventually played out with bailouts and all, that the profits of their reckless shenanigans could be privatized while the fallout risks would be socialized. As regards lack of investment in true r&d and innovation, the timeline for returns from such investments is just too long for today’s “quarterly earnings” obsessed market. It’s much easier and far more attractive for managers to game the Earnings per share metric through share buybacks fuelled by easy credit, and to throw lower level employees under the bus by “downsizing to streamline operations and capture efficiencies”. Without a new model to measure company performance that instills more long term thinking in the minds of managers, it will be business as usual for many corporate executives…

    1. JTMcPhee

      What the “experts” could see: The Big Short, and the Mantra of Lower Manhattan, “Ill be gone, you’ll be gone.” Any “experts” take it in the shorts through the Great Global Financial Cash-Out? (Some say “collapse,” but if you follow the money, where did it go? Maybe “FIRE-induced Calamity for Ordinary People” is more accurate than the implication of some across-the-board suffering for the whole globe…)

      And as noted in the article, it’s up to the peasants and serfs and very minor lordlings, after the Emperors and Senators and Centurions and Visigoths have done their thing, to re-create another base of REAL wealth that the looting class can once again, you know, “loot.” A lot of minor structures in Roma were built with stone and rubble from the Coliseum…

      As to a new leitmotif, I’m not the only one who has been nagging, here and elsewhere, for some serious effort to define a “new organizing principle.” And asking, in full echolalia, “What outcomes do we (who do not have a current say) want from our political economy?”

      And how many who read here are ready to do what is necessary to identify and come to agreement and collectively act on (in big ways and small) what that new organizing principle might be? And how many are just inching their way to personal comfort, seeking the critical path to personal betterment between the demolished structures of the former form of the political economy? While adding pithy and trenchant observations of bits of What’s Wrong to the bit stream, cementing their status as critical observers? Moving along with life, toward what is hoped to be a mini-version of what the looters get, a very comfortable death after a very comfortable life, free of consequence or retribution?

      The water in the frog pot gets slowly, almost imperceptibly, less temperate… and “solitary waves” jostle the Damoclean ice masses at the polar regions…

      1. ChiGal in Carolina

        While adding pithy and trenchant observations of bits of What’s Wrong to the bit stream, cementing their status as critical observers? Moving along with life, toward what is hoped to be a mini-version of what the looters get, a very comfortable death after a very comfortable life, free of consequence or retribution?

        Very well put, sir!

        The piece was so lucid it seemed the redo could definitely if not easily be accomplished, if we could only begin.

        But how exactly, when events seem to be crashing ever more out of control. If we live in a handmaid’s tale world…

      2. Dead Dog

        thank you JT, very well said.

        You are right. How far are we prepared to go?

        I, for one, am waiting for the shove

      3. PhilM

        I knew a McPhee….

        Your writing reminds me of another J McPhee, John McPhee, who was an extraordinary man. Place de la Concorde Suisse is an incredible book of military history, completely disguised as something else. He raised observation to a high art, like Aristotle, but had clear and approachable, although perfect, prose, a lot like Waugh. It was work like his that made the New Yorker great, unlike the affected virtue-signaling rag that it has become.

        I for one am grateful for the obersations, on What’s Right or What’s Wrong, that you render to us in your engaging and perfectly crafted prose.

        That said, I take issue with the scorn in your view of the would-be looters. I think there is little more to be asked from life than to live reasonably comfortably and to die reasonably comfortably, especially if one has been kind in the meantime. So, if the many inch along with that ambition, I laud them, just as I despise the histrionic would-be Marat and the loathsome occult Sade.

      4. casino implosion


        There’s an old-fashioned word. Has a powerful old-testament flavor to it. Not a popular concept lately, but it’s bubbling under.

        “vengeance is mine saith the lord, I shall repay”

      5. RBHoughton

        Absolutely right – “in a financialized global economy its more lucrative to speculate.”

        Not only that but anyone with a rellie or old school friend in a bank can access the loans necessary to do so in the absolute certainty that market makers of whatever you speculate in will increase values.

        A new form of money (into which the old paper does not fully convert) is the road ahead.

  2. Sound of the Suburbs

    Trump is getting upset about Germany.

    This is what free market competition looks like, the US is losing and Germany is winning.

    What is the US doing wrong?

    It has put the interests of Wall Street first and this is damaging the real economy.

    Silly old America, it didn’t realise finance was a cost centre sucking money out of the real economy.

    The banker’s mortgage and loan repayments have to covered by businesses in wages, raising costs and reducing profits.

    Just look at the minimum wage that has to cover the cost of living, e.g. housing costs, healthcare insurance and student loans which are all payments to finance.

    The bankers try and convert the nation’s purchasing power to mortgage and loan repayments to maximise profits.

    Their success is the real economies failure.

    “Income inequality is not killing capitalism in the United States, but rent-seekers like the banking and the health-care sectors just might” Nobel-winning economist Angus Deaton

    Look at the successful Germany, it has a special banking sector to look after the long term interests of business and industry.

    HFT, micro-second markets and finance need a helping hand, their short term-ism is not suited to business and industry.

    Ditto China.

    5 year plans not 5 micro seconds

    1. Uahsenaa

      I wouldn’t necessarily disagree with the Americans can only think short term assessment, but let’s not go on about the virtues of our Teutonic brethren. Deutsche Bank, as Mark Blyth has shown, is leveraged up to its eyeballs with sovereign debt, and the Germans have manhandled Greece over the past seven years in large part because they can never let that debt be realized for what it is: worthless. Germany’s economic stability since the financial crisis has been on the backs of their southern European counterparts. To pretend anything else is folly.

      1. Sound of the Suburbs

        Finance is the same everywhere, short termist.

        Where it has more power, like the US and UK, the whole country develops a short term outlook.

    2. LT

      There was an article on NC about the board game “Monopoly.”
      The rules would have better reflected the the ways of the economy if at the beginning money was allocated on a dice roll, with each player starting with a different amount income – with the highest having 70 times more than the lowest.
      Then the two highest get to start the game by picking a couple of properties and utilities.
      Then the game begins.

  3. Sound of the Suburbs

    The profits of the few are not good for the US as a whole.

    As the country was corrupted by the few it went down the pan.

    Let’s offshore everything for higher profits.
    Let’s invest in Asia for higher returns.

    Adios America.

  4. Sound of the Suburbs

    Capitalism can be based on debt, as it was in the 1920s US.

    Debt based consumption and speculation gave the US the roaring twenties and then the Great Depression.

    Keynes recognised this model was not sustainable and used strong progressive taxation to provide subsidised housing, health, education and other services.

    We forgot why Keynes had made the changes he did and went back to the old unsustainable, 1920s, neoclassical economics.

    It was the same.

    You can only saturate an economy in debt once.

    Well the US has done it twice and it took them along time to forget the Great Depression before they did it again.

    1. Sound of the Suburbs

      From 1960 to 1980 we can see credit going into the UK economy but no rise in the GDP to debt ratio.

      This was productive investment into business and industry that showed direct returns in GDP.

      After that it’s all financial speculation and housing booms that don’t provide much of a return in GDP.

    2. Sound of the Suburbs

      Debt saturated economies are in a very bad position like the US after 1929 and Japan after 1989.

      Richard Koo has studied them and the post 2008 Western world:

      The only way out (apart from debt jubilees) is fiscal stimulus, which is why the New Deal worked first time and will be needed again.

      Richard Koo covers the monetary effects of the New Deal in the first 12 mins and the mistake the current mainstream made that made them think monetary stimulus would work.

  5. andy synonymous

    ” … in the run-up to nearly all financial crises too many loans had been taken out on real estate. This problem could be solved if the loan portion for the purchase of a house was limited to around, let’s say, 50 per cent.”

    Would this 50 percent down payment requirement also apply to commercial property? Presumably many of the excessive loans made (“taken out”? poor helpless banks) prior to crises were financing commercial property. So this policy proposal would tank the entire real estate sector, not just housing?

    1. JTMcPhee

      “Dont’ tank you, don’t tank me — tank that guy behind that tree.”

      What is the thing you call “housing?” You mean the bubble-blowers in all parts of the “self-regulating Real Estate (TM) “market?” I think of housing as, well, you know, having an affordable and preferably self-owned (not rented from the bank via a mortgage, where I bear all the risk and fund all the maintenance and repairs and any improvements) roof over my head, a foundation under my feet, links to water, sewer, gas and electric and let us not forget the new sine qua non, hyper-internet superbroadband.

      So sorry if flipping, and sh@tbox on-spec building out into remaining open space with all the externalities dumped on existing residents, or infilling via gentrification and making a market for dirty money, get hurt. And why do people go after Realtor! (TM) credentials, and then come round my neighborhood, banging on my doorbell, and when I don’t Respond (and they hear my dogs barking inside), leaving a hang tag on the door handle telling me that For Sure! It Is Time To Sell! And Your House Is Worth Big Dollars! See What I Just Sold Your Neighbor’s House For [and added and then skimmed off 6% of the total!]! And Don’t Ask Where Your Neighbor Is Going To Live Now! Because With The Proceeds From Selling Her House, She Has Cash That Another Realtor!(TM) Carve A Slice Off Of!

      Is “commercial property” a protected category, the ready turnover of which is a necessity for Life, Liberty and the Purfuit of Happineff?

      Woe to those who can’t (thanks to all the mechanisms so well detailed in bits here at NC) come up with a 50% down payment to sign on to a mortgage under which, in the end, they have NO rights and protections from the looters. What are they to do? Hey, there’s misfortune and horror all around, ask the people whose homes have been rubblized and children killed by the violence the Empire is such a big causative part of, which they are unfortunate enough to have been born into an dto lesser or greater extents, support and have to live with.

      Seems to me the current down-payment (what, 10-15%, less for many, on 30-year terms) is just like the margin terms and loans that helped bubble up the 1929 “stock market crash,” but maybe that is too simplistic?

      How do “we” get to a political and social order that minimizes pain and horror and keeps the tumors and parasites from always, always, always, gaining the upper hand by gaming the rest of us and the planet we have to live on? Maybe some smart kid with a CRSP-R set s/he got for Xmas will find the part of the genetic material that expresses as the Grift Gene, and looses a patch that will produce a Just Society…

      1. Whine Country

        “Seems to me the current down-payment (what, 10-15%, less for many, on 30-year terms) is just like the margin terms and loans that helped bubble up the 1929 “stock market crash,” but maybe that is too simplistic?”

        Too simplistic – Not really!

      2. animalogic

        “How do “we” get to a political and social order that minimizes pain and horror and keeps the tumors and parasites from always, always, always, gaining the upper hand….?
        This is a mere start: a government commitment to build an adequate stock of decent public housing & tax & other incentives to do the same. For me, that’s a productive fiscal (social) policy.

      3. casino implosion

        “How do “we” get to a political and social order that minimizes pain and horror and keeps the tumors and parasites from always, always, always, gaining the upper hand by gaming the rest of us and the planet we have to live on”

        Hang the bastards from the streetlights.

  6. Tyronius

    Since 1980 the rich have gotten richer at the expense of everyone else. It’s steadily gotten worse to the point where American minimum wages won’t support even a meagre standard of living; it’s easily possible to be working full time and still find oneself homeless!

    The only way to stave off another and even worse financial crash is to rebuild the foundation, that is the middle classes. The 1950s were extremely prosperous and are fondly looked back on even by conservatives- even though taxes were very high, especially on the rich!

    Raising taxes on the wealthy, increasing inheritance taxes and raising minimum wages to a decent living standard would take some adjustments in the economy, but they would level the playing field, increase demand and pay for government services.

    Surely Americans can find something better to do with much of the money now being dumped into ‘defense’ spending, which has long since ceased to be anything but highly offensive. Impoverishing our children to build a monstrous war machine we have to go create enemies to justify doesn’t seem sustainable, especially when there are so many better investments available.

    Clean energy, an electric transportation system from cars to trains, new forms of agriculture, space development- all these could be investments made with the savings, to say nothing of repairing our infrastructure and investing in Americans themselves through free college, better work opportunities and a social safety net worthy of the name.

    In short, our economy has been about serving the needs of the top and letting (hoping) prosperity trickles down for the last 40 years. If it was ever going to work, it would have by now. It hasn’t. Time to rebuild the economy, starting with outlawing campaign finance and instituting aggressive tax reform, with the aim of helping those at the bottom improve their situation first and foremost.

    After all, the rich aren’t starving to death in the dark on a park bench, they’ll be fine.

    Okay, time to wake up from my daydream. The only way any of this will happen is through another crash and likely a nasty war.

    1. Gerard Pierce

      I;ve been considering his as part of a study on “fake government”. The move I look at the current circumstances, the more convinced I am that it may already be too late

      Most of a high priced eduaction is useless in the marketplace except fpr STEM degrees, but M$ and others are currently working on systems that eliminate the need for these skills. I figure 10 to 15 years max before a STEM degree becomes worthless.

      My pessimistic view that if they allow is to have an economy again, we no longer have the intellectual skills for the current generation to participate.

    2. MoiAussie

      Since 1980 the rich have gotten richer at the expense of everyone else.

      So here’s an idea with plenty of appeal – retrospective adjustment of the tax code to make those who profited obscenely from financialisation since the days of “greed is good” pay what they should have paid. No need to go back more than 30 years, and tax rates only go up slightly on incomes >$100k, rather more on >$250k, lots more on >$1M. And a 40% penalty tax on carried interest. Everyone else gets a tax refund. Retrospective inheritance tax increases too, as needed.

      The IRS has all the relevant information, so just adjust the tax rates, do the calculations and send them all bills for the balance due. Hell, offer them ezy-payment plans: 50% down, then 10% a year for the next 5 years. If they can’t afford it, foreclose and sell up all their assets. If a few unfortunates go bust, they’ll be able to rely on UBI to keep them off the park benches.

      1. Gerard Pierce

        The general concept is attractive, but it’s neither fair nor possible. The ones most responsible for our economic and educational systems are immune. Some of them have been dead for 30′ years. You can’t change the tax code because the current powers that be own the government.. A lot of others that would be affected are struggling to get by (at a higher income level) in a system they did not create and most likely do not understand. Taking away from them is a formula for war.

        1. MoiAussie

          Sometimes I really despair at this “impossible” and “you can’t change that” mentality. It’s like all those who say single payer is impossible because you can’t change the way things are or because vested interests will fight against it. Let’s unpack things a bit.

          The ones most responsible for our economic and educational systems are immune. Some of them have been dead for 30 years.

          Did I suggest taxing “The ones most responsible …”? I specifically said “those who profited obscenely from financialisation”, a readily identifiable class. The “retrospective inheritance tax increases, as needed” is precisely to deal with the dead ones whose profits have been passed down. So the idea is quite practical.

          You can’t change the tax code because the current powers that be own the government

          Hence, it is not impossible at all, it merely requires that ownership of the government changes first. I would have thought that was obvious.

          A lot of others that would be affected are struggling to get by …

          No sympathy whatsoever for anyone earning >$250k pa and struggling to get by, sorry. Those below that have nothing to fear from the proposal, and plenty to welcome.

  7. Pelham

    I should think that a unifying leitmotif would have to embrace the notion that sovereign powers should be quite content to let private institutions — such as the entire global financial system in 2007-08 — go under and be swept aside if they fail. The sovereign powers should then be prepared to replace these functions with public institutions fully accountable to the public.

    Beyond that, perhaps the public everywhere should have direct and decisive say in which societal functions should be public and which ones private. For instance, gadget-making and laundry detergent: private. Healthcare and education: public.

    1. JTMcPhee

      Seems to me that there are no more sovereign powers. “Government” is wholly owned, the legitimizing face of the corporate looting complex. And most of us are stupid enough to believe that we ought to just go along or can’t resist, since we “voted for” the rulers, and the “laws” and “regulations” that loot us, were put in place through “due process” and “regular representative government.

      So do not even think that, short of a much larger kind of collapse, that will undo all those sovereign powers along with the death of billions of humans, there’s even a prayer that “failed private institutions” will ever be swept away. Us mopes can glimpse and gripe at the Bezzle and Grift that run everything that matters, but the small number of people that operate and facilitate both will never — never — release their chokehold on the rest of us, without some serious resistance and in the absence of a durable organizing principle and a reformation of political relations that somehow advances and keeps in place the kind of individuals who will not succumb to the pleasure principle and start yet another round of looting, among the ashes and rubble of the present…

      1. TheCatSaid

        Good point. I suspect that in the not-so-distant future we’ll get to create more meaningful “governance” (loosely described) on the most local community level. Best to start the process now, if nothing more than getting to know one’s neighbors before a crisis arrives.

          1. TheCatSaid

            I’ve no idea what’s right for you and where you are. One idea might be to share your personal abundances with those around you–which might be your knowledge, how-to, enthusiasm, listening skills, etc.

            I called in on the 5-6 houses nearest me for brief chats, encouraged them to grow a little extra food (in addition to lawns!), let them know if there were ever a crisis I’d have their back and I’d rather have the conversation in advance of a crisis!

            Through a few informal conversations I have a better idea of local resources and vulnerabilities. (For example, there’s a mentally/emotionally challenged person living in a semi-caretaking situation. He smokes–I know this from other neighbors. I will buy a few cartons of cigs so if there’s an emergency he won’t be having to go through nicotine withdrawal at the same time.) I know who has access to water/cooking/heating. I know who’s sick and likely to need assistance. I have sown a few “seeds” for what could be a healthier local network when needed. If it helps develop trust and knowing one another, that is a better starting point for any rough times.

            1. ChiGal in Carolina

              I am away from home now, living in an apartment complex filled mostly with students, but I do always try to get to know my neighbors and offer mutual support. It paid off when I had a knee replacement in March and the adorable young couple next door were very sweet and helpful.

              Thanks for ideas about how to make preparedness for larger events communal.

      2. PhilM

        The durable organizing principle is always the same. It is “no taxation without representation,” plus the bill of rights.

        Nothing we have now resembles either of those things any more. The Founders knew it would happen. People here like insult their memory; but they risked everything they had, and their lives, to fight for freedoms that people today do not even bother to dream of.

        A nation is easier to rule if it is divided. There is no such thing as America: there is a global ruling class, and a nation of oppressed; the global ruling class has more in common between China and America than the American rulers have with American proletarians.

        The nation-state died as an organizing principle over the last fifty years, and the internet carried it to the grave. That does not mean, however, that “no taxation without representation,” and the bill of rights, are any less useful as ideals towards which to strive. Without them, the higher goals, such as social democracy, become either impossible or simply feudal for all intents and purposes.

  8. roadrider

    Well unless there are more FDRs around instead of self-serving con men and grifters like Trump, Obama and the Clinton’s there ain’t gonna be any New New Deal.

    1. Whine Country

      Bill Clinton and his Rubinite acolytes were the parents of the “New Deal” for the Elites. The rest was just fine tuning. We don’t need a New New Deal, we just need to restore the New Deal we had, which was designed to benefit the masses principally and the Elites not so much.

      1. Whine Country

        I might add that the problem we now face is the very fact that the masses continually allow the policies in effect which divert most of our national income into the hands of a relatively small minority. Efforts to change the problem continue to fail because we fail to focus on this critical fact. It is unrealistic to believe that another FDR will just come along and all will be right. Either we focus on this one particular problem – allowing the political system to be dominated by that small minority – we will remain in the situation we are in. As is demonstrated on this site daily, the masses are too busy arguing on where the problem lies and what MIGHT cause a solution to magically appear. There first must be an absolute consensus that WE CANNOT ANY LONGER LET THE FEW DOMINATE OUR POLITICS FOR THE BENEFIT OF THIS SMALL MINORITY! The masses did not give us two terrible candidates to pick from and, in the case of the Presidency, cheat us out of a candidate who would likely start the work of fixing the system. The only option we have now is to argue with ourselves about which of the two candidates we get routinely is worse or more crooked. It is a complete waste of time and, I would argue that is by design. The only hope IMHO is to focus on this one issue and begin a process of fixing our political system so that the majority is no longer conned and manipulated into voting AGAINST OUR OWN INTERESTS! With all due respect, the rest is just noise.

        1. roadrider

          Well, you could have said the same thing in the late 1920s, to which we have apparently regressed. Things are going to have to get a lot worse before there’s any meaningful change and yes, even if there is some sort of bottom-up movement for change, there will need to be someone among the political elites who is willing to be a champion of it.

          We saw that last year with Trump and Sanders from opposite ends of the spectrum. Unfortunately, the Democrats stifled Sanders and he was co-opted into supporting Clinton which, despite his popularity is a real black mark against him. And Trump, despite one or two good things (H1-B restrictions, dumping TPP) has been a disaster area. But Trump, despite his bluster and bleating, has already been co-opted by the “system” just like Sanders was by the Dems. Enough people are doing well enough in the “system” so that there’s little to gain for most pols in looking to overturn it. Its easier to just blame the victims and promise them trickle-down pie-in-the-sky crap that will never materialize.

          1. Whine Country

            If you think that FDR was just an accident that occurred because “you could have said the same thing in the late 1920s” you do not know American history. The masses rioted and made known their displeasure with the status quo once the market crashed and the Great Depression was underway. Do you think that the union movement occurred because benevolent leaders just got in a room and worked it out? In addition, there was serious concern that the masses would opt for Communism which was becoming more popular day by day in the world at large. FDR was no fool and he realized that the country would be greatly harmed if the masses problems were not addressed. Today the masses are asleep and disorganized. With all due respect to all who frequent this board and especially Yves, there is not enough anger shown. Anger does not have to manifest itself in violence but it must manifest in some concrete action to address the problem. Instead we argue and change the subject, just as you have done. FDR was not born to lead the masses but rather was smart enough to see that our country would not survive as envisioned by the Founding Fathers unless the masses were brought on board, and the Elites were regulated. What we need was portrayed in the 1975 movie “Network”. We know the problem but instead of ignoring the elephant in the room we need to open up the window and shout loudly: “I’m mad as hell and I’m not going to take this anymore” What the Elites need now, just as in FDR’s time is to fear us, not respect us. The only issue is what level we have to go to to make them fear us. Re-read history and you’ll see that the masses used the technique successfully in the past instead of just chalking up our first New Deal to blind pig luck.

            1. ChiGal in Carolina

              Well said. And that I suppose is why the right to assembly is beginning to be criminalized, why we all carry tracking devices…somehow, it feels like a bit of a different world now, with the power imbalance on steroids

            2. Yves Smith Post author

              Hate to tell you but Roosevelt had the essential support of the multinationals, which were the up and coming business interests of his day. This wasn’t as pure a class struggle as many would like to depict.

              And let us not forget that it was the unions that opposed government-paid healthcare…..

              1. ger

                Yes, Unions opposed government-paid “sickness insurance” as it was called in a time when Unions did not have protection of law to exist. It was seen as a government paternalist program that would undermine their fragile existence. The cost of sickness, from a medical standpoint, was not as important as the loss wages relative to very low cost sickness care. Fast forward the cost of healthcare to a different time. In 1959, the year my oldest daughter was born, the total was $225.00. The doctor received $150.00 and the hospital got $75.00 for the three days in patient care. In 1968, as a member of the United Mine Workers Union, the joint Union Management health care program paid my doctor $3.00 per office visit. Make another leap forward to current times … the giant problem today is not lack of health care. It is the COST. Union’s now have to substitute wages for healthcare and employers (unionized or not) offer less wages to cover healthcare cost. One of the low blows of ACA was the “Cadillac” surcharge on the plans necessary to cover the high cost. The surcharge was used to partially fund the ACA. Go figure!!

                One last comment: There were other players involved in opposing sickness insurance. The most formidable was the death industry, other words, life and burial insurers. My mother called them the Debit Men as they came each month to collect a couple of hard found dollars.

        1. washunate

          Yep, that’s what is so bizarre about this article. The author acts like this is all a surprise, when in actuality replacing the New Deal era with concentration of wealth was precisely the point. Things haven’t gone wrong. They’ve gone right.

  9. a different chris

    I know nothing about the author, but this smells a bit of a reformed neo-lib trying to get out in front of (and control) the newest parade. It has the “Globalization is good just needs some fixes around the edges” theme the Clintons of the world are trying to pass on. Now I do not think Globalization is Bad, but the arguments presented here for it, again smell suspicious.

    For example:

    >when cost benefits are attributable solely to disregard for human rights in the countries of origin, however, not when the productivity is lower.

    Does “disregard for human rights” include not providing universal, free, quality healthcare? I would like to ask him this… if your population doesn’t have quality healthcare and mine does, I would simply not allow the import of your stuff until you got your sh*t together. .

    The underlying theme that this calls for “experts” vs. the awful “populists” is another suspicious mark. “Experts” are the people who sold us the type of globalization that he is telling us (like we need telling) has fallen well short of ideal.

    Can’t we actually have “populists”, aka the people, think about things in the long term? It actually seems they do, and do well, when given some current stability in their jobs. For instance, on the environment: Some people grumbled but they paid for lowered emissions in their new cars.

    I suspect, just for an example, an “end of coal” plan for the kids of coal miners, started 25 years ago, would be welcomed if it was driven by said coal miners. Instead it became a fight between some hazy “coastal elites” and people like Blankenship, who is a total pig but you knew who he was and he paid Dad and people like him paid Granddad so are you going to just let the world take it away from your kids? Hell no. Of course it did as the miner/ton of coal ratio crashed, but who knew and again the miners themselves had no input so they hung on to what they knew.

    Put a person in short-term difficulty and you will get short-term thinking.

    1. hemeantwell

      Yes. Reading it was like going through a series of economy-critical bullet points culled over the past few years from a bunch of sources >> a political space is set up and then >>> poof!, we’re left, once again, treading water. Why not get programmatic? Who is he worrying about offending, or who is he deferring to? The goal shouldn’t be to get everyone to agree. It should be to get enough people to agree that a New New Deal can be formulated and enacted.

  10. JEHR

    Such projects could, under strict supervision, be exempted from rules limiting fiscal deficits. This would be a more farsighted approach than formally striving to balanced budgets every year.

    When I come across sentences like the ones above, I am inclined to stop reading as the author does not seem to understand the necessity for deficits that put money into the general economy. He is using the coded words of the bankers and functionaries of neo-liberalism.

    And this statement:

    There is a growing suspicion that it was perilous to allow the economies to be determined by financial wizards who are incapable of foreseeing their own debacles, who follow every fad, who then in times of crises drive governments on before them.

    Why the use of the words “financial wizards” when what bankers are really doing is committing fraud and accumulating money to satisfy their own greed. We really need some straight forward usage of words to mean what they say rather than to obfuscate even more. I am so tired of these namby pamby ways of describing what has lead to real despair and poverty including the words “foreseeing,” “debacle,” and “fad” as though it was, indeed, a wizard at the helm. A pox on it!

    1. Susan the other

      Fricke did agree with you, I think. Because he recommended we put science and knowledge into government instead of government into science. That’s an interesting reversal. My concern would be that, like everything else, the financial world would manage to pervert those scientists as well. What’s missing here is a set of laws controlling the freedom of the financial industry. So that no other president can stand up in his STOU speech and say that what the banks did “was not illegal, it was only immoral,” and then to proceed to do absolutely nothing about it. I also think that Fricke is missing a certain skepticism about economic growth that we (at least here) have. Because even growth based on good science and what might be seen as a good solution to our problems can go bad if it is not maintained and controlled. Say, if it is allowed to “spin off” or be privatized for the sake of capitalism, etc.

    2. steelhead23

      While there were wizards in the Shire, a better example of a financial wizard was the Wizard of Oz, a charlatan. So Fricke’s use of the term fits. But you have a point about tip-toeing around supporting deficit spending – that is, government spending in excess of revenues. The issue here is that while “:…Reagan proved that deficits don’t matter,” (Dick Cheney), and there are ample reasons to support a more expansive fiscal policy, there is no real discussion of the concept in MSM, or in Congress. It is generally dismissed and anyone who dares to suggest such a policy, ridiculed. Hence, we have Congressional Committees and staffs working mightily to ensure any spending measure is balanced with either additional revenues or program cuts. With this mindset dominating Congress, change enjoys a snail’s pace. Would somebody please give a floor speech decrying this madness?

    3. Yves Smith Post author

      MMT has not gotten to Germany yet. The fact that he is even talking about deficit spending verges on heresy there. So he can be forgiven for that.

      1. cnchal

        Germany has their own version of MMT

        Germany enjoyed an export miracle because everyone needed machines made in Germany . . .

        (Material Meets Tool X sales) – expenses = profit or loss

        1. craazyboy

          Germany does MMT better than anyone. They just call it “shock absorbers”, except there is a long German name for it. “Ven_you_down_und_out_alzo_ going_around_ze_bend, ve_make_ride_back_to_verk_quick_und_bouncy_for_you!” Keeps things fun.

          However, they embraced neolib export mania to the detriment of their trading partners.

          Still, they did MMT fine. In Germany, they understand The Wizard of Oz was a giant metaphor for MMT. One of the many sub-metaphors is the Wicked Witch of San Francisco [SF Fed] and her band of Merry Flying Monkeys.* Dorothy finds Oz with her clueless friends by following The Greenback Road. There, they meet the Evil Money Wizard. This too is a sub metaphor. He isn’t real nor does he exist, and keeps all the money he makes in the Bank of Oz. Jamie “Diabolical” Diamond creates diamonds from coal for use as the Oz domestic currency. They are The Hegemon and everyone uses Oz Jamies. They buy Monkey fighter airplanes with it and the monkeys fly into battle, carrying the planes by rope and intimidate all enemies. [almost terrify, but in a less threatening way. They still need to get the vote out every two years. But memories are short, they think.]

          * Prophesy? Yes, Janet Yellen and the Fed Board of Governors? Dead Ringer. Right down to the glitter red slippers Janet wears in private, with friends [fetish], that cause her to melt whenever anyone even mentions deflation. The risk is she may deflate totally.

          *Thomas L. Freidman writes on this often, including the history of WW2 and also too Zimbabwe.

  11. J7915

    5 year plans not 5 micro seconds.

    Time to re-visit the national sales tax beloved by cons and libertarians.

    Lets start with a $ 0.01 sales tax on stocks and bonds.

  12. heresy101

    Rather than a new economic paradigm, we need a program that makes all American’s lives better. End the ceaseless moaning about a “growing GDP”; it doesn’t matter if all the growth goes to the 1%!

    One way to begin the process of moving away from “the market” is to “Put the Deplorables in Charge”!! Retirement funds are squandering millions with hedge fund shysters and grifters. The solution is not to “invest” retirement funds but to use Warren Buffet’s method of buying companies (eg 3 electric companies and a couple of railroads). There are enough retirement funds to buy all the real companies (AT&T, Cat, railroads, car companies, ADM, etc etc).. Once 51% of control is owned, fire the Board and Executives and put the Deplorables in charge. Put rules in place that there will be no bonuses for executives and their pay would be limited to 10 times the lowest paid worker. With the workers in charge, sending jobs and factories overseas will end unless they and the country benefit.

    To end real estate abuses from banks and other parasites, lend about $6T to Social Security to add to the $3T SS trust to invest in housing. Yes, everyone but Al Gore knows there is no lock box, but the $3T can be taken from the military budget. The loans would be at 5% for all new loans and it would be – Pay Yourself Twice for housing loans. You would pay to own your house and also add to your retirement rather than giving it to the 1%.

    Finally, the money as debt nonsense must end. Pete Petersen on the right and MMT on the left can’t see that debt only helps the 1% and is destroying the economy and the wealth of the deplorables. End the Fed and banks ability to issue money. Money would be created by the government in a ratio to how well the economy is doing. Tie it’s amount to the economy (maybe inversely) – crop production, unemployment, rail and trucking miles, housing starts, auto production, degrees awarded, manufacturing output, etc (ie indicators of the economy). Banks could still lend the money to business but they couldn’t create it, just borrow it from the government at a rate proportionate to the length of the loan (eg 5% for 30 years).

    1. LT

      What the economists have called “growth,” I refer to as recoveries from cyclical crashes of diminishing return after each crash for the majority of people.

    2. UserFriendly

      I love the idea of retirement funds attempting hostile takeovers, but here is what they should do. Take over a bank, a big bank, like citi. Once in control of the bank they now have the power to print money just like Barclays and Credit Suisse did to save themselves from the recession. They should make 0 interest loans forever to all the deplorables that have debt in the total amount of that debt plus $5k to everyone just to get the economy moving and instantly destroying every other bank which would die with no loan payments. This would not even negatively affect them. They should hike the interest on all the accounts they have with oligarchs.
      If only CalPers wasn’t so damn corrupt itself.

  13. LT

    The New Deal did not do as much as WWII did to create the post-WWII economy up to today.
    The USA then officially became a war economy, with the more home grown manufacturing (with jobs in the USA). Even the grand interstate highway project could be viewed as a military project. It didhelp the people of the country be more mobile, but, I’m sure the helping the military move about domestically helped to give the project urgency in the minds of the elite.
    Now I’ve seen reports that the USA’s military spending is greater than it was in the earlier half of the century and the benefits of that spending is not having the same effect now for citizens. Not even the force that gives so many people in this country meaning, war, can save the war culture.
    Something else is wrong when no matter what is done – tax cuts, raising taxes, raising the minimum wage, becoming a “right to work” state, etc – every economic downturn produces fewer and fewer people that feel the recovery. They are “recoveries of diminishing returns” for more and more people.

  14. witters

    “Neither have Americans, Britons and Germans experienced faster growth in their economies compared to the decades prior to 1982.”

    A New New Deal when this is the misleading and mealy mouthed way of referring to the LOWER growth rates of the neoliberal years?

    1. MoiAussie

      FFS people are picky today. It’s translated from the German, even the English still has a German flavour to it, and this particular expression is typical. You’re straining at gnats.

  15. California Bob

    Nobody has mentioned the 800-pound reality distortion field known as ‘religion.’ Does anyone really think the all Jews, Muslims, Catholics, Fundamentalists, etc. will sit down together and work out a system that benefits all the other ‘non-believers’ equally? And, yes, you can consider Capitalism a religion.

    1. Ptolemy Philopater

      Religion is a cover for family and tribe. The family is still the basic economic unit, as in the 400 richest families in America own 60 to 90 % of the wealth, fill in the blank. I my me my my me mine. It is about ethnic privilege, and ethnos means tribe, family. Until we can expand our social horizons this is where we shall remain. This is what the Donald Trumps and the Mick Mulvaneys of this world are all about

      There seems to be a tendency in all primate societies to split in two and compete with each other on that basis. It is no coincidence, that elections always tend to split the population 50/50, us against them. If we eliminate them, there is more for us! Easy peazy!

      Until this fundamental aberration in society is acknowledged all the vaunted social and economic schemes come to nought. It’s all about social Darwinism stupid. Hence the big push to get rid of the estate tax and establish Feudalism which perpetuates the “family” as in aristocratic families. Neo-liberalism was a means to an end, namely to establish neo-feudalism and establish in perpetuity the privileges of the wealthy families. Everyone else becomes chattel, to dispose of as they please. Hence the purchase by Homeland Security of 2 billion hollow point bullets. Who do you think they will be aimed at? Despite World War II and all its devastation, it’s still about the Herren Volk. We don’t need another Franklin Delano Roosevelt, we need another Joseph Stalin.

  16. nothing but the truth

    society was created because it raised the standard of living of the people.

    the people whose job it was to maintain order in the society (rather than the workers who actually produced something) – these people started dishing out deceptions and started watching out only for themselves. This is human nature. At some point the (emotional) energy extracted from the people by the elite cannot be replaced by reality shows, facebook gossip and super ball events. People start to smell the truth and they lose interest. This is manifesting as the opioid epidemic.

    This leads to the disintegration of capitalism based societies.

    The societies that seem to handle modern world and its problems in a robust manner are based on strong tribal religions (judaism and islam) which value internal loyalty over individual gain at the expense of fellow man.

    I just cannot see how western capitalism, anomie afflicted societies can survive in the long run.

  17. Temporarily Sane

    The truth that few in the media dare to speak. But even the Spiegel will go back to toeing the globalist line and business as usual will continue…for now.

    One problem with our idyllic view of the halcyon days of capitalism is that even then our lifestyle was dependent on cheap resources appropriated from the poor nations of the world. This little inconvenience was recognized in the 1930s when America as Exceptional Ruler Of The World was first floated publicly by the Brezinzki’s of the day. And it’s the reason why (some of us) still pretend this is a reasonable and achievable goal. And it is the reason the Europeans join our regime change wars willingly and some, like the French in West Africa, undertake their own imperial side projects.

    Well, along comes climate change and the realization that unleashing capitalism on the world with no checks and balances is suicidal. It’s like nature or [deity of your choice] has set up the ultimate test for humanity. In order to pass and save our sorry asses we need to slaughter some very sacred cows and find a way of putting the avaricious looting class back in its place. AND take responsibility for our contribution to the existential crisis we face.

    The current plan of doing nothing interspaced with guilt avoidance exercises and hoping that, going forward, neoliberalism will produce an innovative and creative self-identified genius of an indeterminate gender who will invent an app that saves us all at the 11th hour. By “us all” I mean of course the multi-billionaire class. The other “us” can fight over the limited stowaway spaces on Elon Musk’s Mars bound starship.

    (If it turns out Musk and co are fantasist glue huffers (very expensive bespoke glue of course) with delusions of grandeur…no problem, we can cobble together a makeshift gallows and take turns kicking the chair out from under them.)

    1. MoiAussie

      This ^. Except for one part which got jumbled, which I’ve fixed for you.

      In order to pass and save our sorry asses we need to slaughter the avaricious looting class and find a way of putting some very sacred cows out to pasture.

      Needed Leitmotif: For our children’s children’s children.

  18. Forklift Driver

    WWII was just the New Deal on steroids. We could have spent the same money on something else and gotten the same results, and had something to show for it.

  19. Irrational

    I agree that the state has a longer planning horizon than the financial sector. However, atop the state apparatus sit politicians, who have a planning horizon that stretches to the next election, typically 4 years.
    This is not significantly better than the next quarterly or annual report.
    Mind you, I am not advocating that we should not have elections, on the contrary.

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