Mark Ames: Why Finance Is Too Important to Leave to Larry Summers

Yves here. Even though Larry Summers is finally fading in influence, he still has enough sway to get his hat tossed into the ring as a possible Fed board member, and even worse, Fed chair candidate. So Mark Ames’ hardy perennial, which he wrote for our first fundraiser ten years ago, is still an important warning.

While this is our analogue to Christmas staples like The Grinch That Stole Christmas or It’s a Wonderful Life. Ames’ piece is the antithesis of sappy. His piece also explains one of the reasons the left is so bad at power: its adherents abandoned finance as grubby and thus not worth of study.

And in the spirit of Christmas come a couple months early, we hope you’ll leave something nice in our stocking, um, Tip Jar!

By Mark Ames, author of Going Postal: Rage, Murder and Rebellion from Reagan’s Workplaces to Clinton’s Columbine.

If you’ve been reading Naked Capitalism for any period of time without giving back in donations—and most of us have been hooked from the time we discovered Yves Smith’s powerful, sharp voice and brilliant mind—then you you’ve been getting away with murder. Naked Capitalism is that rare blog that makes you smarter. Smarter about a lot of things, but primarily about Yves’ area of expertise, finance.

By a quirk of historical bad luck, the American Left has gone two generations without understanding finance, or even caring to understand. It was the hippies who decided half a century ago that finance was beneath them, so they happily ceded the entire field—finance, business, economics, money—otherwise known as “political power”—to the other side. Walking away from the finance struggle was like that hitchhiker handing the gun back to the Manson Family. There’s a great line from Charles Portis’s anti-hippie novel, “Dog of the South” that captures the Boomers’ self-righteous disdain for “figures”:

He would always say—boast, the way those people do—that he had no head for figures and couldn’t do things with his hands, slyly suggesting the presence of finer qualities.

That part about the hands—that would refer to the hippies’ other great failure, turning their backs on Labor, because Labor didn’t groove with the Hippies’ Culture War. So the Left finds itself, fifty years later, dealing with the consequences of all those years of ruinous neglect of finance and labor—the consequences being powerlessness and political impotence.

That’s why Yves Smith is so important to anyone who cares about politics and the bad direction this country is taking. In 2008, the Left suddenly discovered that although it could bray with the best of ‘em about how bad foreign wars are, and how wrong racism and sexism an homophobia are, it was caught completely and shamefully by surprise by the financial collapse of 2008. The ignorance was paralyzing, politically and intellectually. Even the lexicon was alien. Unless of course you were one of the early followers of Yves Smith’s blog.

It wasn’t always this way.

Back in the 1930s, the Left was firmly grounded in economics, money and finance; back then, the Left and Labor were practically one. With a foundation in finance and economics, the Left understood labor and political power and ideology and organization much better than the Left today, which at best can parry back the idiotic malice-flak that the Right specializes in spraying us with. We’re only just learning how politically stunted and ignorant we are, how much time and knowledge we’ve lost, and how much catching up we have to do.

Which is why Yves Smith’s Naked Capitalism is one of the 99%’s most valuable asset in the long struggle ahead: She is both analyst and educator, with a rare literary talent (especially for finance). One thing that’s protected the financial oligarchy is the turgid horrible prose that they camouflage their toxic ideas and concepts in. Yves is one of the rare few who can make reading finance as emotionally charged as it needs to be.

Naked Capitalism is our online university in finance and politics and ideology. Whereas other online universities are set up to turn millions of gullible youths into debt-shackled Wall Street feeding cows, Naked Capitalism is the opposite: Completely free, consistently brilliant, vital, and necessary, making us smarter, teaching us how we might one day overthrow the financial oligarchy. One other difference between Naked Capitalism and online university swindles: (Stanley Kaplan cough-cough!) Your donations won’t end up paying Ezra Klein’s salary.

Which brings me back to my whole “Shame on you!” point I was trying to make earlier. When it comes to fundraising, nothing works like shaming. That’s how those late-night commercials work: You’re sitting there in your nice comfortable home, and then suddenly there’s this three-legged dog hobbling into its cage, with big wet eyes, and then some bearded pedophile comes on and says, “Poor Rusty has endured more abuse and pain than you can ever imagine, and tomorrow, he will be gassed to death in a slow, horrible poison death chamber. And you—look at you, sitting there with your Chunky Monkey and your central heating, what kind of sick bastard are you? Get your goddamn Visa Mastercard out and send money to Rusty, or else his death is on your head. I hope you sleep well at night.”

Now I know that this sort of appeal wouldn’t work on the Naked Capitalism crowd—too many economists here, and as everyone knows, you can’t appeal to economists’ hearts because, well, see under “Larry Summers World Bank Memo”… I can imagine Larry watching that late night commercial with the three-legged dog, powering a 2-liter bottle of Diet Coke and devouring a bag of Kettle Salt & Vinegar potato chips, calculating the productive worth of the three-legged dog, unmoved by the sentimental appeal. Larry grabs a dictaphone: “Item: How to end dog-gassings? Solution: Ship all three-legged stray dogs to sub-Saharan Africa. Africans won’t even notice. Dogs saved. Private capital freed up. Problem solved.”

So some of you have no hearts, and some of us have no shame. But we all do understand how vital Naked Capitalism has been in educating us. I’m sure that the other side knows how dangerous a site like this is, because as we become more educated and more political, we become more and more of a threat.

The oligarchy has spent decades on a project to “defund the Left,” and they’ve succeeded in ways we’re only just now grasping. “Defunding the Left” doesn’t mean denying funds to the rotten Democratic Party; it means defunding everything that threatens the 1%’s hold on wealth and power.

One of their greatest successes, whether by design or not, has been the gutting of journalism, shrinking it down to a manageable size where its integrity can be drowned in a bathtub. It’s nearly impossible to make a living as a journalist these days; and with the economics of the journalism business still in free-fall like the Soviet refrigerator industry in the 1990s, media outlets are even less inclined to challenge power, journalists are less inclined to rock the boat than ever, and everyone is more inclined to corruption (see: Washington Post, Atlantic Monthly). A ProPublica study in May put it in numbers: In 1980, the ratio of PR flaks to journalists was roughly 1:3. In 2008, there were 3 PR flaks for every 1 journalist. And that was before the 2008 shit hit the journalism fan.

This is what an oligarchy looks like. I saw the exact same dynamic in Russia under Yeltsin: When he took power in 1991, Russia had the most fearless and most ideologically diverse journalism culture of any I’ve ever seen, a lo-fi, hi-octane version of American journalism in the 1970s. But as soon as Yeltsin created a class of oligarchs to ensure his election victory in 1996, the oligarchs snapped up all the free media outlets, and forced out anyone who challenged power, one by one. By the time Putin came to power, all the great Russian journalists that I and Taibbi knew had abandoned the profession for PR or political whoring. It was the oligarchy that killed Russian journalism; Putin merely mopped up a few remaining pockets of resistance.

The only way to prevent that from happening to is to support the best of what we have left. Working for free sucks. It can’t hold, and it won’t.

There are multiple ways to give. The first is here on the blog, the Tip Jar, which takes you to PayPal. There you can use a debit card, a credit card or a PayPal account (the charge will be in the name of Aurora Advisors).

You can also send a check (or multiple post dated checks) in the name of Aurora Advisors Incorporated to

Aurora Advisors Incorporated
164 Peachtree Circle
Mountain Brook, AL

Please also send an e-mail to yves@nakedcapitalism.com with the headline “Check is in the mail” (and just the $ en route in the message) to have your contribution included in the total number of donations.

So donate now to Naked Capitalism. If you can’t afford much, give what you can. If you can afford more, give more. If you can give a lot, give a lot. Whether you can contribute $5 or $5,000, it will pay for itself, I guarantee you. This isn’t just giving, it’s a statement that you are want a different debate, a different society, and a different culture.

Who knows, maybe we’ll win; maybe we’ll even figure out a way to seal Larry Summers in a kind of space barge, and fire him off into deep space, to orbit Uranus for eternity. Yves? Could it be financed?

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18 comments

  1. PlutoniumKun

    Ames puts his finger on one of the most valuable aspects of NC here:-

    With a foundation in finance and economics, the Left understood labor and political power and ideology and organization much better than the Left today, which at best can parry back the idiotic malice-flak that the Right specializes in spraying us with. We’re only just learning how politically stunted and ignorant we are, how much time and knowledge we’ve lost, and how much catching up we have to do.

    I became very disenchanted with most leftist media and thought from the 1990’s onwards. Everyone was very good at explaining in excruciating detail how evil and horrible capitalism and colonialism and imperialism was…. but nobody seemed to have the slightest interest in diving deep into how exactly a progressive/left nation would work. What sort of monetary policy would it have? How would it address fiscal shortfalls? What type of industrial policy would it follow? How would it balance the need for food security while protecting farmers? What would its foreign policy look like? What would it do with failing industrial companies/sectors? How would it deal with a dysfunctional state body? What type of different policies would a large, developed country follow that a small, open economy couldn’t? What sort of military would it have? How do you reconcile growth with not destroying our planet? What will it do if it finds the electorate actually likes capitalism? I found very few people interested in these questions. Even some of the very best leftist thinkers just treated them with hand waves. ‘The people will decide!’ ‘We’ll tax the rich and that will pay for it!’ ‘We’ll do what the Swedes/Chinese/Russians/Cubans do, only better!’

    The main reason is because these subjects are hard – very hard. Much harder than just complaining about the horrors of capitalism. But NC never shies away from these tough questions, and never flinches from answers that may not be palatable.

    On this topic, I’ve just been ploughing this morning through a very dense read – a translation of some writings of Qin Hui, one of the best modern Chinese intellectuals – on the subject of Piketty. For anyone who thinks the question of opposing capitalism is a simple matter of just nationalising things, his writings, based on a deep knowledge of how Chinese (in particular) socialists struggled to develop their countries, is a long cold shower.

    Reply
    1. Tom Pfotzer

      Well said, PK.

      I agree that the Left does a poor job of positing, testing, adopting and promulgating actual solutions.

      The “Right” is just as bad, but in different ways.

      There is a major need to imagine and articulate – and then _test_ – new alternatives. Where do we do that job?

      I don’t think a blog is the right tool for this. To develop alternatives requires focus and constancy and iteration and dialogue and prototypes. That’s the stuff of innovation. Really tough to do that on a blog where contributions and brilliance rolls off into the bit-bucket just a few days after it’s been created and contributed.

      PK, I’d be interested to hear your version of what a facility – publicly accessible – would do to enable/foster/support … these outcomes you’re asking for. What is keeping us from doing this work (quoting from your remark above):

      What sort of monetary policy would it have? How would it address fiscal shortfalls?
      What type of industrial policy would it follow?
      What would its foreign policy look like?
      How would it deal with a dysfunctional state body?
      How do you reconcile growth with not destroying our planet?

      PK: I found very few people interested in these questions.

      Tom: I am very interested in developing policy and then physical, operational solutions to these questions. I don’t just want to posit a policy, I want to implement and then evolve physical solutions.

      I think people would get a lot more interested in this if it occurred to them that:

      a. They can make a difference. There are areas where individual action yields major results
      b. It’s OK to design your own political economy. Perfectly appropriate activity for the little guy

      Reply
      1. PlutoniumKun

        Tom, I think there are lots of people working on solutions, but they are fragmented and are often dug into specific ideological positions. It also doesn’t help that much of the best writing is done in languages other than English. The left doesn’t have that big spectrum of think tanks to churn out policy proposals that are genuinely all-encompassing and coherent. Obviously, MMT is important, but MMTers are often not very helpful when it comes to the question of how small open economies should operate.

        The one thing I am sure of is that there is no ‘one size fits all’ solution. A successful, progressive government in Bolivia will look very different from one in Malaysia, from one in France. The problems are different, the circumstances are different and the economics are different.

        Reply
        1. Tom Pfotzer

          PK: I agree, of course, that no one size fits all.

          Elsewhere (next thread) I advocate for a volcano of little solutions. Developed in whatever language, and in whatever locale it happens to occur. And I’m not so much after policy-level solutions as I am household-level solutions. Bottom-up.

          What I’m angling toward here is some sort of major increase in social collaboration performance.

          I keep imagining a forum-particle-collider-fast-evolution chamber that takes ideas that might become Useful Stuff and:

          a. subjects these ideas to 360-degree critique from a wide-spectrum of disciplines
          b. reduces the ideas to testable-prototype (via focused teamwork and some sort of resource-allocation method)
          c. produces a tested idea and a team that can promulgate and possibly commercialize the idea

          The basic principle is lots of evolutionary starts, efficient and fast failure and winnow-down mechanism, and resource alloc to promising teams-with-an-idea.

          And a big cloud of smart people buzzing around this thing, using it as a tool to vet their new epiphany, or build a team around a pet idea, or find a viable solution (household battery that’s cheap and safe), or find a home for slack resources (the old cube-van gathering dust in the barn).

          Right now we’ve got twitter feeds, a few (and not that many) blogs worth reading, and social media, where I show pix of my pet squirrel and tell about what I had for breakfast.

          I’m thinking that our tech isn’t serving us all that well. We need new tools.

          Reply
        2. lance ringquist

          GATT was not a one size fits all.

          “Compensatory tariffs might be added to products from countries that do not maintain international standards of environmental protection, wages, health and safety standards, and social safety nets, thus encouraging higher standards for all people everywhere.”

          “Is the answer to withdraw from global trade, as the free traders have caricatured our position? No, it is to go back to a system like the General Agreements on Tariffs and Trade (GATT), which promoted trade but was flexible enough to allow countries policy space to develop and to preserve their intricate social contracts by preventing commodity dumping, environmental dumping, and social dumping.

          Reply
      2. Susan the other

        I scanned most of Qui Hui. But his analysis of how capitalism develops and then tapers off was interesting. It explodes in a growth pattern of manufacturing and commodities trade. After a decade (Argentina) what was type A capitalism/socialism devolved into a less prosperous economy. But Qui Hui never draws the conclusion that is unavoidable, which is, that the “profits” that are the engine of capitalism and socialism do not fail because of Type A or Type B social policies – they fail because the environment, the low-hanging fruit of natural resources and willing labor, get used up and logically become much more expensive. Why don’t we all just sit down and look at this? One very important aspect in my mind is that these are not profits at all, they are the purest form of extraction. Impoverishing the environment of resources. Which, if it were maintained, if it were paid back, would continue to produce a way of life beneficial to all. So the whole idea of social-political failure, imo, is a lack of regard for the very things that make life better – which we casually take for granted.

        Reply
        1. rsm

          《they fail because the environment, the low-hanging fruit of natural resources and willing labor, get used up and logically become much more expensive. 》

          Yet are there many copper mines in Arizona abandoned because of falling prices, not used-up minerals?

          Reply
          1. Susan the other

            The cheapest price always wins. If commodities are not being exploited then the labor to produce them is. Copper is not a renewable so it’s just a question of time. Most copper mines are very big operations. Think Kennecott in Utah (new name now). Big because it gives them a monopoly edge, making it too expensive for small mines to stay in business. Making it too expensive even to recycle.

            Reply
    2. lance ringquist

      this was all very predictable. right now as the author says, the sweatshop economy is nationalizing as there own, what used to be americas life blood and wealth.
      when you look at the disastrous policies of nafta billy clinton and his type of ilk, what comes to mind is that they actually believe atlas shrugged is a real economically correct historical document.
      empty suit hollowman obama and war monger hillary figured out they had been had, and the sweatshop was buying them now, not the other way around, and that was what the pivot to asia is all about. and nafta joe biden is bound and determined to reinstate the order back under oligarch control.
      to late though, the capabilities are gone. G.E. proves that. hardly any state of the art anything, hardly any factories left, machines, engineers, the real producers of wealth, trained deplorable.
      the best thing china and russia can do, is to try to steer and giude nafta billys mess into a controlled implosion.
      other wise free trade will start another world war.

      Reply
    3. Dave in Austin

      Nice reference from Plutonium Kim. Qin Hui is definitely worth reading for a more general analysis of Socialism, Capitalism, Communism and how they relate to authoratarian vs democratic forms of governance.

      Reply
  2. Michael Hudson

    For me, the rot was there by 1970 when I was teaching at the New School and Bob Heilbroner was head of the graduate economics department.
    I decided to teach a course in “money and banking,” which Heilbroner thought was useless, and did not make it a core course. So I had almost entirely followers from my class in international trade theory.
    Heilbroner worried that I would discredit the school by saying that Latin American debts could not be paid, because that was too outrageous to be taken seriously. Mark Raskin at the Institute for Policy Studies told me the same thing.
    Matters were indeed better a century ago — viz. Lenin’s Imperialism, and the general 1930s’ discussion.

    Reply
  3. Gulag

    My best guess is that there are more and more people searching for a new political home.

    Is it conceivable that what is now going on in the US and China are simply two somewhat different sides of the same coin with their joint emerging model of brutal competition, massive surveillance and tight state control becoming more and more normative not just for emerging economies but also for the West?

    Has capital now become the state, requiring massive state intervention to keep the capitalist engine running?

    Is this emerging mega-machine, which we have collectively built, now attempting to run us?

    Does a new role for the Left involve attacking this emerging mega-apparatus/regime instead of mostly cheering on its Chinese form?

    Reply
  4. Anonymous

    I came to read a page 6 type regurgitation of why Larry Summers sucks, instead I was duped into donating money to support a website I read daily. Well done.

    Reply
  5. NotThePilot

    To riff on this, I think one of the things that keeps me coming back to NC is that, even if it’s not explicit, it has way more of a Veblenist streak than most other sites I can think of.

    There’s a very healthy respect for all the messy, technical details of reality, both in the posts & comments, and no punches pulled about the customary classes (Lambert’s “symbol manipulators”). At the same time, there’s a real respect that reality includes art, humanities, & society, which seems to get thrown out much of the time when you put a bunch of trained specialists together in the same space.

    As for Larry Summers, I hate having to admit his headline call about inflation this year looks right (though even then, for all the wrong reasons). At the risk of hijacking a thread some, I do have a funny story (I actually have several). I think people here would like it, since it ties into the ideology of mainstream economics & Larry Summer’s famous “herp derp, girlz bad at math; I know ‘cuz I R economist” gaffe.

    How NotThePilot went from skeptical Keynesian to red-pilled syndicalist*:
    After a lot of trouble finding my place in school, dropping out repeatedly, I had finally found a groove as a math major while minoring in econ. This was after ’08 so the recession had already happened, but I could still see it as just a failure of government policy then, not necessarily the system itself. Plus I already had a lot of econ credits & was good at it, so why not?

    To fill out the minor required intermediate micro, which while not super-advanced, was the gut-check course for my school’s econ program. My teacher was actually really cool (given the underlying ideology, it’s funny how genuinely likable my econ professors were), and technically, I don’t think most of what we learned was wrong. We were warned though that the mid-term exam would be brutal, and so almost everybody started cramming. Beyond an hour or two of review, I couldn’t see much value in it though so I took my chances.

    And somehow I crushed the test. I’m not humble-bragging; I’m straight-bragging. I was apparently only the 1st or 2nd person in the professor’s entire teaching career to get an A. This naturally got me wondering, what trick let me skate through while the rest of the class struggled? By the end of the semester, I had the answer: I was the only person to realize it was all an intellectual game.

    Everyone else was trying to keep a menagerie of rules straight in their head: supply goes down first in this problem but up in that one for weird rationalization A. But I just always started from the answer, that as an article of faith, there was an unregulated, equilibrium price where the market would clear. Once you realize that, getting from the problem statement to that answer was pretty much an exercise in BS-ing, just with a few formulas thrown in.

    Of course, assuming the answer & making up reasons along the way isn’t science, it’s propaganda. And especially as a math person, it comes across as more than just wrong, it’s an unholy abomination. So yes, the economists have stolen our pious rituals & use them for virgin sacrifices, opening hell-mouths, and sundry other things that are no bueno. Just keep that in mind next time Larry Summers presumes to say anything about math (may Maryam Mirzakhani’s spirit haunt him for all eternity).

    * I do still really like Keynes; AFAICT he was a universal genius & all-around mensch

    Reply
  6. lance ringquist

    i was told in the 1990’s by the democrat party, that they were done with people with greasy hands.
    if the democrats do not get rid of the nafta billy clintons that have a feverish grip on the throats of the democrat party, they may just become a small regional party.

    Reply
  7. nothing but the truth

    the “left” is now mostly interested in ego stroking ie race / gender identity and narcissistic matters.

    in terms of political economy it is probably worse than the repubs, because the dems are more dangerous (ie deep state operatives) compared to the repub clowns.

    the real problem is rentiers/monopolists . That requires bring Henry George back from a hundred and twenty years ago. Till we clearly understand who is getting the free lunch in modern capitalism, we can’t fix the problem.

    Reply

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