Truthout (October 03 2011)

Bill Clinton presided over a period of growth, but his legacy of eased
financial restrictions also opened the door for the fiscal crisis.

The New York Times reported last week that former President Bill Clinton
is working on a new book on economic policy to be released in time for
next year’s election. This is unfortunate, since Clinton stands
alongside Alan Greenspan as one of the last people who should be giving
the country and the world advice on economic policy.

Many people look back with fondness on Clinton years and there is good
cause. The economy grew at an annual rate of almost 4.5 percent during
his second term. The unemployment rate fell to a 4.0 percent as a
year-round average in 2000. And the country saw strong real wage growth
up and down the income ladder for the first time since the early 1970s.

This was all good news. However, it was unsustainable and Clinton’s
economic team should have known it at the time. The immediate cause of
the prosperity was the demand created by a $10 trillion stock bubble.
While this gave some boost to investment, its main impact was on
consumption. People spent based on their newly created stock wealth,
causing the saving rate to fall below two percent, which at the time was
the lowest level of the post-war era.

Bubbles, of course, burst, and when this one did, it gave the country a
severe downturn in 2001. While the official recession was short and
relatively mild, ending in just seven months, the economy didn’t start
to generate jobs again until September of 2003.

It is not easy to recover from a recession caused by a collapsed asset
bubble, as is becoming more evident every day. The country did not
regain the jobs lost in the 2001 downturn until 2005, and even then it
was only due to growth driven by the housing bubble.

One of the factors that made it harder to recover from the 2001 downturn
was the sharp increase in the country’s trade deficit. Demand was
diverted abroad from domestically produced goods and services. This was,
in turn, a direct result of the high-dollar policy that was put in place
by Robert Rubin when he became Treasury secretary.

Rubin put muscle behind his high-dollar policy when he oversaw the
International Monetary Fund bailout of East Asia from its financial
crisis in 1997. The harsh conditions led the countries of the region to
sharply devalue their currency against the dollar in order to accumulate
enormous reserves of foreign exchange. Other developing countries also
followed this path in order to avoid ever being put in the same spot as
the East Asian countries.

As a result of this policy, the US trade deficit soared, eventually
reaching six percent of gross domestic product in 2006. This was the
fundamental imbalance in the US economy. By definition, a trade deficit
of this size requires either large budget deficits or negative private
savings. We saw the latter in a big way as housing bubble wealth led to
another consumption boom that pushed the saving rate to near zero from
2004 to 2006.

Clinton also removed restrictions on the financial industry. This left
the door open for AIG and others to run wild with credit default swaps.
It also created an environment in which every new financial innovation
was seen as a step forward for society.

Clinton also deserves some grief from shoving the TRIPs provisions into
the Uruguay round of the World Trade Organization. The TRIPs provisions,
which are largely the invention of the US pharmaceutical industry, are
rules that require countries to have stronger patent and copyright
protections. They are likely to lead to sharply higher drug prices in
the developing world. One of the main goals of President Clinton’s
foundation is to try to make essential medicines affordable for people
in the developing world. The TRIPs provisions are one of the reasons
that these medicines became unaffordable.

Thankfully, Clinton probably will have the sense not to lecture us on
the virtues of TRIPs or his removal of restrictions on the financial
industry. More likely, he will be preaching the virtues of balanced
budgets. This is the part of the legacy that the country must have the
courage to reject.

Balanced budgets are 180 degrees the wrong answer in today’s economy. We
desperately need government deficits in order to make up the lost demand
from the private sector. For the near-term future, the private sector is
not going to spend enough to bring the economy back to full employment.

But balanced budgets were also the wrong answer in the Clinton years.
Clinton’s spending cuts and tax increases helped get the deficit down in
his first term, but the main reason that the deficit continued to shrink
and turn to a surplus was the growth driven by the stock bubble. The
Congressional Budget Office’s projections showed that even with the
Clinton administration’s tax increase and spending cuts, we still would
have been looking at a substantial deficit in 2000 had it not been for
the stock bubble {1}.

In short, President Clinton did not balance the budget; the stock bubble
balanced the budget. There is no doubt that excessive deficits can harm
the economy, but we are not looking at such a situation now or any time
in the near future. Over the longer term, we are projected to run large
deficits, but this is entirely because our health care system is broken.
If our health care system was as efficient as that of any other wealthy
country, we would be looking at surpluses, not deficits {2}.

Please President Clinton, save some trees. Don’t give a half-baked
lecture on the virtues of deficit reduction. It is not what the country
needs.
_____

Dean Baker is a macroeconomist and co-director of the Center for
Economic and Policy Research in Washington, DC. He previously worked as
a senior economist at the Economic Policy Institute and an assistant
professor at Bucknell University. He is a regular Truthout columnist and
a member of Truthout’s Board of Advisers.

This work by Truthout is licensed under a Creative Commons
Attribution-Noncommercial 3.0 United States License {3}.

Links:

{1}

http://www.cepr.net/index.php/blogs/cepr-blog/getting-rid-of-the-budget-deficit-the-clintongingrich-way

{2} http://www.cepr.net/calculators/hc/hc-calculator.html

{3} http://creativecommons.org/licenses/by-nc/3.0/us/

http://www.truth-out.org/bill-clinton-baaaaaaaaack/1317648177

European nations spend far less than the United States for universal healthcare rated by the World Health Organization as the best in the world, even as U.S. health care is ranked 37th. Europe leads in confronting global climate change with renewable energy technologies, creating hundreds of thousands of new jobs in the process. Europe is twice as energy efficient as the US and their ecological “footprint” (the amount of the earth’s capacity that a population consumes) is about half that of the United States for the same standard of living.

Unemployment in the US is widespread and becoming chronic, but when Americans have jobs, we work much longer hours than our peers in Europe. Before the recession, Americans were working 1,804 hours per year versus 1,436 hours for Germans — the equivalent of nine extra 40-hour weeks per year.

In his new book, Were You Born on the Wrong Continent?, Thomas Geoghegan makes a strong case that European social democracies — particularly Germany — have some lessons and models that might make life a lot more livable. Germans have six weeks of federally mandated vacation, free university tuition, and nursing care. But you’ve heard the arguments for years about how those wussy Europeans can’t compete in a global economy. You’ve heard that so many times, you might believe it. But like so many things, the media repeats endlessly, it’s just not true.

According to Geoghegan, “Since 2003, it’s not China but Germany, that colossus of European socialism, that has either led the world in export sales or at least been tied for first. Even as we in the United States fall more deeply into the clutches of our foreign creditors — China foremost among them — Germany has somehow managed to create a high-wage, unionized economy without shipping all its jobs abroad or creating a massive trade deficit, or any trade deficit at all. And even as the Germans outsell the United States, they manage to take six weeks of vacation every year. They’re beating us with one hand tied behind their back.”

Thomas Geoghegan, a graduate of Harvard and Harvard Law School, is a labor lawyer with Despres, Schwartz and Geoghegan in Chicago. He has been a staff writer and contributing writer to The New Republic, and his work has appeared in many other journals. Geoghagen ran unsuccessfully in the Democratic Congressional primary to succeed Rahm Emanuel, and is the author of six books including Whose Side Are You on, The Secret Lives of Citizens, and, most recently, Were You Born on the Wrong Continent?

Princeton
economics professor and New York Times columnist Paul Krugman and
Moody’s Analytics chief economist Mark Zandi represent the Keynesian
view that government deficit spending is needed to lift the economy out
of recession. Zandi declares that thanks to the fiscal stimulus, “The
economy has made enormous progress since early 2009,” an opinion shared
by the President’s Council of Economic Advisors and the Congressional
Budget Office.

The
opposite view, associated with Harvard economics professor Robert Barro
and with European economists, such as Francesco Giavazzi and Marco
Pagano and the European Central Bank, is that government budget
surpluses achieved by cutting government spending spur the economy by
reducing the ratio of debt to Gross Domestic Product. This is the “let
them eat cake school of economics.”

Barro
says that fiscal stimulus has no effect, because people anticipate the
future tax increases implied by government deficits and increase their
personal savings to offset the added government debt. Giavazzi and
Pagano reason that since fiscal stimulus does not expand the economy,
fiscal austerity consisting of higher taxes and reduced government
spending could be the cure for unemployment.

If
one overlooks the real world and the need of life for sustenance, one
can become engrossed in this debate. However, the minute one looks out
the window upon the world, one realizes that cutting Social Security,
Medicare, Medicaid, food stamps, and housing subsidies when 15 million
Americans have lost jobs, medical coverage, and homes is a certain path
to death by starvation, curable diseases, and exposure, and the loss of
the productive labor inputs from 15 million people. Although some
proponents of this anti-Keynesian policy deny that it results in social
upheaval, Gerald Celente’s observation is closer to the mark: “When
people have nothing left to lose, they lose it.”

The
Krugman Keynesian school is just as deluded. Neither side in “The
Great Stimulus Debate” has a clue that the problem for the U.S. is that a
large chunk of U.S. GDP and the jobs, incomes, and careers associated
with it, have been moved offshore and given to Chinese, Indians, and
others with low wage rates. Profits have soared on Wall Street, while
job prospects for the middle class have been eliminated.

The
offshoring of American jobs resulted from (1) Wall Street pressures for
“higher shareholder returns,” that is, for more profits, and from (2)
no-think economists, such as the ones engaged in the debate over fiscal
stimulus, who mistakenly associated globalism with free trade instead of
with its antithesis–the pursuit of lowest factor cost abroad or
absolute advantage, the opposite of comparative advantage, which is the
basis for free trade theory. Even Krugman, who has some credentials as a
trade theorist has fallen for the equation of globalism with free
trade.

As
economists assume, incorrectly according to the latest trade theory by
Ralph Gomory and William Baumol, that free trade is always mutually
beneficial, economists have failed to examine the devastatingly harmful
effects of offshoring. The more intelligent among them who point it out
are dismissed as “protectionists.”

The
reason fiscal stimulus cannot rescue the U.S. economy has nothing to do
with the difference between Barro and Krugman. It has to do with the
fact that a large percentage of high-productivity, high-value-added jobs
and the middle class incomes and careers associated with them have been
given to foreigners. What used to be U.S. GDP is now Chinese, Indian,
and other country GDP.

When
the jobs have been shipped overseas, fiscal stimulus does not call
workers back to work in order to meet the rising consumer demand. If
fiscal stimulus has any effect, it
stimulates employment in China and India.

The
“let them eat cake school” is equally off the mark. As investment,
research, development, etc., have been moved offshore, cutting
entitlements simply drives the domestic population deeper in the ground.
Americans cannot pay their mortgages, car payments, tuition, utility
bills, or for that matter, any bill, based on Chinese and Indian pay
scales. Therefore, Americans are priced out of the labor market and
become dependencies of the federal budget. “Fiscal consolidation” means
writing off large numbers of humans.

During
the Great Depression, many wage and salary earners were new members of
the labor force arriving from family farms, where many parents and
grandparents still supported themselves. When their city jobs
disappeared, many could return to the farm.

Today farming is in the hands of agri-business. There are no farms to which the unemployed can return.

The
“let them eat cake school” never mentions the one point in its favor.
The U.S., with all its huffed up power and importance, depends on the
U.S. dollar as reserve currency. It is this role of the dollar that
allows America to pay for its imports in its own currency.
For a country whose trade is as unbalanced as America’s, this privilege is what keeps the country afloat.

The
threats to the dollar’s role are the budget and trade deficits. Both
are so large and have accumulated for so long that the prospect of
making good on them has evaporated. As I have written for a number of
years, the U.S. is so dependent on the dollar as reserve currency that
it must have as its main policy goal to preserve that role.
Otherwise, the U.S., an import-dependent country, will be unable to pay for its excess of imports over its exports.

“Fiscal
consolidation,” the new term for austerity, could save the dollar.
However, unless starvation, homelessness and social upheaval are the
goals, the austerity must fall on the military budget. America cannot
afford its multi-trillion dollar wars that serve only to enrich those
invested in the armaments industries. The U.S. cannot afford the
neoconservative dream of world hegemony and a conquered Middle East open
to Israeli colonization.

Is
anyone surprised that not a single proponent of the “let them eat cake
school” mentions cutting military spending? Entitlements, despite the
fact that they are paid for by earmarked taxes and have been in surplus
since the Reagan administration, are always what economists put on the
chopping bloc.

Where
do the two schools stand on inflation vs. deflation? We don’t have to
worry. Martin Feldstein, one of America’s pre-eminent economist says:
“The good news is that investors should worry about neither.” His
explanation epitomizes the insouciance of American economists.

Feldstein
says that there cannot be inflation because of the high rate of
unemployment and the low rate of capacity utilization. Thus, “there is
little upward pressure on wages and prices in the United States.”
Moreover, “the recent rise in the value of the dollar relative to the
euro and British pound helps by reducing import costs.”

As
for deflation, no risk there either. The huge deficits prevent
deflation, “so the good news is that the possibility of significant
inflation or deflation during the next few years is low on the list of
economic risks faced by the U.S. economy and by financial investors.”

What
we have in front of us is an unaware economics profession. There may be
some initial period of deflation as stock and housing prices decline
with the economy, which is headed down and not up. The deflation will
be short lived, because as the government’s deficit rises with the
declining economy, the prospect of financing a $2 trillion annual
deficit evaporates once individual investors have completed their flight
from the stock market into “safe” government bonds, once the hyped
Greek, Spanish, and Irish crises have driven investors out of euros into
dollars, and once the banks’ excess reserves created by the bailout
have been used up in the purchase of Treasuries.

Then
what finances the deficit? Don’t look for an answer from either side of
The Great Stimulus Debate. They haven’t a clue despite the fact that
the answer is obvious.
The
Federal Reserve will monetize the federal government deficit. The
result will be high inflation, possibly hyper-inflation and high
unemployment simultaneously.

The
no-think economics establishment has no policy response for economic
armageddon, assuming they are even capable of recognizing it.

Economists
who have spent their professional lives rationalizing “globalism” as
good for America have no idea of the disaster that they have wrought.

Dr. Roberts
was educated at Georgia Tech, the University of Virginia, the
University of California, Berkeley, and Oxford University where he was a
member of Merton College. He is the author or coauthor of 9 books and
has published many articles in journals of scholarship. He served in the
Congressional staff and was Assistant Secretary of the U.S. Treasury.
He was awarded the Treasury’s Silver Medal for “outstanding
contributions to the formulation of U.S. economic policy.” In 1987 the
President of France recognized him as “the artisan of a renewal of
economic science and policy” and awarded him the Legion of Honor.

Roberts
was associate editor of the Wall Street Journal and columnist for
Business Week, Scripps Howard News Service, and Creators Syndicate. He
was Senior Research Fellow at the Hoover Institution, Stanford
University, and William E. Simon Chair of Political Economy, Center for
Strategic and International Studies, Georgetown University. He has been a
columnist for French, German, and Italian newspapers. Today he is
followed worldwide over the Internet.

Paul Craig Roberts is a frequent contributor to Global Research. Global Research Articles by Paul Craig Roberts

http://globalresearch.ca/index.php?context=va&aid=20854

Taibbi: The Lunatics Who Made a Religion Out of Greed and Wrecked the
Economy
By Matt Taibbi, The Guardian
Posted on April 26, 2010, Printed on April 26, 2010

So Goldman Sachs, the world’s greatest and smuggest investment bank, has
been sued for fraud by the American Securities and Exchange Commission.
Legally, the case hangs on a technicality.

Morally, however, the Goldman Sachs case may turn into a final
referendum on the greed-is-good ethos that conquered America sometime in
the 80s – and in the years since has aped other horrifying American
trends such as boybands and reality shows in spreading across the
western world like a venereal disease.

When Britain and other countries were engulfed in the flood of defaults
and derivative losses that emerged from the collapse of the American
housing bubble two years ago, few people understood that the crash had
its roots in the lunatic greed-centered objectivist religion, fostered
back in the 50s and 60s by ponderous emigre novelist Ayn Rand.

While, outside of America, Russian-born Rand is probably best known for
being the unfunniest person western civilisation has seen since maybe
Goebbels or Jack the Ripper (63 out of 100 colobus monkeys recently
forced to read Atlas Shrugged in a laboratory setting died of
boredom-induced aneurysms), in America Rand is upheld as an intellectual
giant of limitless wisdom. Here in the States, her ideas are roundly
worshipped even by people who’ve never read her books or even heard of
her. The rightwing “Tea Party” movement is just one example of an entire
demographic that has been inspired to mass protest by Rand without even
knowing it.

Last summer I wrote a brutally negative article about Goldman Sachs for
Rolling Stone magazine (I called the bank a “great vampire squid wrapped
around the face of humanity”) that unexpectedly sparked a heated
national debate. On one side of the debate were people like me, who
believed that Goldman is little better than a criminal enterprise that
earns its billions by bilking the market, the government, and even its
own clients in a bewildering variety of complex financial scams.

On the other side of the debate were the people who argued Goldman
wasn’t guilty of anything except being “too smart” and really, really
good at making money. This side of the argument was based almost
entirely on the Randian belief system, under which the leaders of
Goldman Sachs appear not as the cheap swindlers they look like to me,
but idealized heroes, the saviors of society.

In the Randian ethos, called objectivism, the only real morality is
self-interest, and society is divided into groups who are efficiently
self-interested (ie, the rich) and the “parasites” and “moochers” who
wish to take their earnings through taxes, which are an unjust use of
force in Randian politics. Rand believed government had virtually no
natural role in society. She conceded that police were necessary, but
was such a fervent believer in laissez-faire capitalism she refused to
accept any need for economic regulation – which is a fancy way of saying
we only need law enforcement for unsophisticated criminals.

Rand’s fingerprints are all over the recent Goldman story. The case in
question involves a hedge fund financier, John Paulson, who went to
Goldman with the idea of a synthetic derivative package pegged to risky
American mortgages, for use in betting against the mortgage market.
Paulson would short the package, called Abacus, and Goldman would then
sell the deal to suckers who would be told it was a good bet for a long
investment. The SEC’s contention is that Goldman committed a crime – a
“failure to disclose” – when they failed to tell the suckers about the
role played by the vulture betting against them on the other side of the
deal.

Now, the instruments in question in this deal – collateralized debt
obligations and credit default swaps – fall into the category of
derivatives, which are virtually unregulated in the US thanks in large
part to the effort of gremlinish former Federal Reserve chairman Alan
Greenspan, who as a young man was close to Rand and remained a staunch
Randian his whole life. In the late 90s, Greenspan lobbied hard for the
passage of a law that came to be called the Commodity Futures
Modernisation Act of 2000, a monster of a bill that among other things
deregulated the sort of interest-rate swaps Goldman used in its
now-infamous dealings with Greece.

Both the Paulson deal and the Greece deal were examples of Goldman
making millions by bending over their own business partners. In the
Paulson deal the suckers were European banks such as ABN-Amro and IKB,
which were never told that the stuff Goldman was cheerfully selling to
them was, in effect, designed to implode; in the Greece deal, Goldman
hilariously used exotic swaps to help the country mask its financial
problems, then turned right around and bet against the country by
shorting Greece’s debt.

Now here’s the really weird thing. Confronted with the evidence of
public outrage over these deals, the leaders of Goldman will often
appear to be genuinely confused, scratching their heads and staring
quizzically into the camera like they don’t know what you’re upset
about. It’s not an act. There have been a lot of greedy financiers and
banks in history, but what makes Goldman stand out is its truly bizarre
cultist/religious belief in the rightness of what it does.

The point was driven home in England last year, when Goldman’s
international adviser, sounding exactly like a character in Atlas
Shrugged, told an audience at St Paul’s Cathedral that “The injunction
of Jesus to love others as ourselves is an endorsement of
self-interest”. A few weeks later, Goldman CEO Lloyd Blankfein told the
Times that he was doing “God’s work”.

Even if he stands to make a buck at it, even your average used-car
salesman won’t sell some working father a car with wobbly brakes, then
buy life insurance policies on that customer and his kids. But this is
done almost as a matter of routine in the financial services industry,
where the attitude after the inevitable pileup would be that that family
was dumb for getting into the car in the first place. Caveat emptor, dude!

People have to understand this Randian mindset is now ingrained in the
American character. You have to live here to see it. There’s a hatred
toward “moochers” and “parasites” – the Tea Party movement, which is
mainly a bunch of pissed off suburban white people whining about
minorities consuming social services, describes the battle as being
between “water-carriers” and “water-drinkers”. And regulation of any
kind is deeply resisted, even after a disaster as sweeping as the 2008
crash.

This debate is going to be crystallised in the Goldman case. Much of
America is going to reflexively insist that Goldman’s only crime was
being smarter and better at making money than IKB and ABN-Amro, and that
the intrusive, meddling government (in the American narrative, always
the bad guy!) should get off Goldman’s Armani-clad back. Another side is
going to argue that Goldman winning this case would be a rebuke to the
whole idea of civilisation – which, after all, is really just a
collective decision by all of us not to screw each other over even when
we can. It’s an important moment in the history of modern global
capitalism: whether or not to move forward into a world of greed without
limits.

Matt Taibbi is a writer for Rolling Stone.

The Enterprise of Nations
by David S. Landes
Critics have tried to explain away the West’s centuries- long economic domination of the globe; they would do better to study its lessons.

Western entrepreneurship and technological progress go back centuries and have changed the world for the better. That, at least, is one assessment of the historical record— one with which not everyone would agree. There are some scholars who, disapproving of Western triumphalism or solicitous of Asian (mostly Chi nese) pride and prowess, would date the Industrial Revolution as a late phenomenon in the history of entrepreneurship and treat it as lucky accident (or unlucky, depend ing on one’s sense of values). It could have happened anywhere, they say; it just fell to Europe or Britain, in large part owing to political fortune, reinforced by overseas dominion. And globalization, in the sense of worldwide diffusion of trade, industry, and technology, came even later, after World War II.

Keynes: The Return of the Master by Robert Skidelsky
Allen Lane, 213 pp, £20.00, September 2009, ISBN 978 1 84614 258 1

It has become a commonplace to say, in the aftermath of the Great Recession, that ‘we are all Keynesians now.’ If this is so, then Keynes’s great biographer, Robert Skidelsky, should have much to say about the recession, its causes and the appropriate cures. And so indeed he does. I share with Skidelsky the view that, while most of the blame for the crisis should reside with those in the financial markets, who did such a poor job both in allocating capital and in managing risk (their key responsibilities), a considerable portion of it lies with the economics profession. The notion economists pushed – that markets are efficient and self-adjusting – gave comfort to regulators like Alan Greenspan, who didn’t believe in regulation in the first place. They provided support for the movement which stripped away the regulations that had provided the basis of financial stability in the decades after the Great Depression; and they gave justification to those, like Larry Summers and Robert Rubin, Treasury secretaries under Clinton, who opposed doing anything about derivatives, even after the dangers had been exposed in the Long-Term Capital Management crisis of 1998.

We should be clear about this: economic theory never provided much support for these free-market views. Theories of imperfect and asymmetric information in markets had undermined every one of the ‘efficient market’ doctrines, even before they became fashionable in the Reagan-Thatcher era. Bruce Greenwald and I had explained that Adam Smith’s hand was not in fact invisible: it wasn’t there. Sanford Grossman and I had explained that if markets were as efficient in transmitting information as the free marketeers claimed, no one would have any incentive to gather and process it. Free marketeers, and the special interests that benefited from their doctrines, paid little attention to these inconvenient truths.

While economists who criticised the ruling free-market paradigm often still employed, as a matter of convenience, simple models of ‘rational’ expectations (that is, they assumed that individuals ‘rationally’ used all the information that they had available), they departed from the ruling paradigm in assuming that different individuals had access to different information. Their aim was to show that the standard paradigm was no longer valid when there was even this seemingly small and obviously reasonable change in assumptions. They showed, for instance, that unfettered markets were not efficient, and could be characterised by persistent unemployment. But if the economy behaves so poorly when such small realistic changes are made to the paradigm, what could we expect if we added further elements of realism, such as bouts of irrational optimism and pessimism, the ‘panics and manias’ that break out repeatedly in markets all over the world?

Of course, one didn’t have to rely on theoretical niceties in order to criticise the faith in unfettered markets. Economic and financial crises have been a regular feature of capitalist economies; only the period of strong financial regulation after the Second World War was almost totally free of them. As financial market regulations were stripped away, crises became more common: we have had more than 100 in the last 30 years.

The present crisis should lay to rest any belief in ‘rational’ markets. The irrationalities evident in mortgage markets, in securitisation, in derivatives and in banking are mind-boggling; our supposed financial wizards have exhibited behaviour which, to use the vernacular, seemed ‘stupid’ even at the time. If we are to design policies to prevent crises or to deal with them when they occur, it is essential to understand the critical flaws in the standard paradigm. It is here that Skidelsky goes astray.

Is Anti-Capitalism Enough? The New Crisis & the Left
— Howard Brick

The New Spirit of Capitalism
by Luc Boltanski and Eve Chiapello
translated by Gregory Elliott
Verso Books 2006, paperback edition 2007, 656 pages, $39.95.

WHETHER OR NOT the current economic crisis and a historic
presidential election open up hidden potentials for renewed
popular protest and collective action, it is obvious that the
radical Left has lost a great deal of its size, visibility, élan
and influence since the 1970s.

When French sociologists Luc Boltanski and Eve Chiapello commenced
their work together in the mid-1990s, resulting in this monumental
and inventive book, they saw not only that the Right had surged
and the Left declined since heady days of revolt in the late 1960s.

They also believed that “social critique has not seemed so
helpless for a century.” That is, the practical and theoretical
opposition to the status quo was weaker than at any time since the
beginnings of the modern mass labor and socialist movement.(1)

Why was the opposition so deep in the hole? After all, the signs
of growing inequality were evident, and activism persisted through
the 1980s and ’90s in addressing acute problems and grievances,
concerning AIDS, homelessness, the plight of the undocumented, or
the lack of modern medical care in the poor world at large. But
almost no one talked much any longer of the systemic framework —
of capitalism — that demanded a correspondingly systemic
challenge, thought Boltanski and Chiapello (hereafter B&C).

In this respect, things may have been different in the United
States than in France. Here, plenty of people were talking about
capitalism — in an overwhelming din of celebration.

While the remarkable energy signaled by the burst of the
“anti-globalization,” or global justice movement, promised to
“revive critique,” as B&C put it, those campaigns suffered a sharp
setback in the wake of a renewed Right turn following 9-11. Even
the momentous antiwar protests of 2003 lost energy steadily as the
Iraq war continued.

Now, nearly ten years after B&C first ventured their judgment that
“capitalism has benefited from the enfeeblement of critique,” it
remains unclear if much is different.(2) Capitalism has suddenly
revealed its fragility for all to see, but it is quite another
matter whether the Left now has the standing or the poise to offer
the radical, democratic and transitional demands that would, one
would think, have a growing audience amidst the present crisis and
current calls for “change.”

It is the great ambition of The New Spirit of Capitalism to
diagnose the peculiar shape that capitalism has assumed since the
1970s, to explain how and why its new forms have eluded a
forceful, concentrated challenge, and to venture proposals for
reinvigorating, indeed reinventing an effective anticapitalist
critique.

It’s not as if everything is new: Capitalism, in B&C’s eyes,
remains a system for pursuing profits and limitless accumulation,
amidst the generalization of wage-labor; and anticapitalism —
critiques of the domination, alienation, inequality, and
antisocial egoism spawned by the system—has kept it company since
its very beginning. Yet there has been plenty of room for
shape-shifting along the way.

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More than two years after Wall Street’s closest brush with death since the Great Depression, taxpayers, investors and voters are still waiting for the kind of bare knuckles Congressional action like the Pecora Hearings in the 1930s that resulted in federal legislation creating basic firewalls within the banking industries.

http://www.guardian.co.uk/commentisfree/belief/2009/aug/15/einstein-darwin-mary-midgley

We all have myths through which we explain the world. The very word “myth”, however, is a little awkward, because it is sometimes used simply to mean “false”, but its other meaning can be very useful. I also talk about dreams and dramas and visions and so forth. Whichever way one talks about it, it’s about an imaginative background, a way of seeing a problem in the world which determines what questions you ask and how you select your questions.

The idea that all you need to do is simply and honestly find the answers to questions does not work. You’ve got to have the right questions. As the history of science has built up and developed, at every stage this has been a very important factor.

In the 17th century the imagery of clockwork was terribly strong, so when Newton was trying to understand the universe he was seeing it as a clock heading in a single direction. It’s not surprising that people were terribly impressed with clockwork because at the time it was magic, a miracle, a mystery. Once you have established a way like that of thinking about how things work, you stick with it, it is gratifying and satisfying – you find you can apply it to lots and lots of things, so you don’t feel a need to look for another one.

It remains, of course, with us. We still talk about a mechanism. And the idea that all the bits of our bodies are machines is a thought often used today. For one thing it makes our bodies less frightening – a machine is something that people make, something that people can control, can take out and alter. It provides a sense of control.

So people very much liked to look at things this way. After a time, however, physics began to find the machine image not very satisfactory; so from Michael Faraday’s time, instead of little particles you started having fields and waves and so on. Different imagery was required. Then from Albert Einstein on, the imagery questions became very difficult indeed – there is no comprehensive model or pattern which you can imaginatively see.

By the 19th century, the age of Charles Darwin, the market had already begun to be an image that fascinated people. The way in which Herbert Spencer developed Darwin’s ideas to create this terrible idea of “social Darwinism” was an attempt to make a direct equation between the processes of the market and the processes of nature. On the one hand you see the idea of the market deployed to understand nature, illustrating “the survival of the fittest” with reference to the stock exchange; on the other you see the idea flipped so that it can be said: “the stock exchange is actually just a jungle.” On both sides of the coin, things are simplified.

Why have the crude, brutalist images of social Darwinism have been so persistent? Because they have that enormous flexibility. They can be used both ways. If people are morally worried about what’s happening on the stock exchange, they can shift that worry by saying, “It’s just nature, isn’t it?” On the other hand, if they are worried about what’s going on in the jungle, they can say, “It’s all a great machine.” You are getting away from agency all the time.

These images, both of which have been very powerful in science, as well as everywhere else, have an appeal because they simplify things. But they simplify them in a way which gets rid of certain awkward frictions. And it is hard to debunk this pattern because it’s doing so much for people; soothing their anxieties – making them think it’s all quite simple.

Marxism was a big feature of the time when I was growing up, so it’s the political philosophy I’m most familiar with. It is another striking example of an imaginative system – a fable, a dream, a drama, a vision – within which a lot can go forward. Of course there was a good deal of fairly dodgy stuff on the fringe of science which was Marxist, but I don’t think it was any dodgier than the monetarist things that have been going on since then. The mythology of how markets work, of how money can do things on its own, is as remote from solid physical reality as these other things. And of course whatever the mythology of the time is, those inside it don’t recognise it as such; they think they are just noticing facts.

Mary Midgley is a moral philosopher and author of Beast And Man: The Roots of Human Nature. The article above is excerpted from a Theos pamphlet, Discussing Darwin theosthinktank.co.uk