Weekly Political Post

I've found myself growing less and less interested in US politics. I still think about ideological matters and the international system, but I think the fact that neither party seems to articulate what I feel to be an ethical foreign policy really makes me disinterested in the system.

But I always get a kick out of reading Ron Paul. The guy is absolutely nuts. And the left's brief infatuation with him last year only further convinced me that my compatriots don't know what the fuck they really believe.

The man is the embodiment of everything I loathe in American politics - unthinking, gut feeling political theory brought on by idiotic outrage and terrible pamphlets. He voted against the intervention in Kosovo. He voted against US recognition of the massacre at Srebrenica. He voted against intervention in Iraq. He wants a gold standard. He wants to deregulate virtually everything. The man is a throwback to the mid-90s survivalists. I mean, I'm a believer in the free-market, too, but only as a means to a greater society down the line (my Marxist roots just won't die, dammit). Capitalism is not a catechism, it is a system born of the interactions of billions of individuals and firms. It is a beautiful thing, but it is more like a Bonzai tree than an oak - it must be nurtured and shaped. Of course, I doubt that the market interventions the Keynsians prefer will amount to much - Friedman was probably right in that the market just can't be shaped that way. But this bailout is necessary, if the US doesn't want to suffer massive economic problems in the coming years.

So CNN gives him a soapbox, upon which he can screech about the impending credit bailout. And he does his typical "Watch out I'm fuckin crazy!" routine.

To be fair, he's largely correct. The federal government's subsidy program helped to make the housing bubble larger and costlier. But this was probably a failure of banking regulatory agencies and the market in general. If Wall Street had not backed a system of mortgage investments the equivalent of junk bonds, we wouldn't be in this mess. This is a market failure created by the interactions of firms, not one created by the government.

And getting rid of "big government" is the exact opposite of what is needed. More regulation is necessary, not less.

Oh, and the inestimable Christopher Hitchens has a great argument about why Obama is a fucking retard. My favorite part:

Obama does not, and perhaps even cannot, represent "change" for the very simple reason that the Democrats are a status quo party.

My thoughts exactly, Hitch.

This country is torn between, on the one hand, a bunch of conservatives who are scared of any real change (demographically, politically, internationally, economically) and, on the other, a group of self-proclaimed "liberals" (they are anything but) who are really just a voice of meaningless pap. The Democratic and Republican parties have once agin become little more than the voice of competing regions - the Democrats now giving voice to the economically declining but politically powerful regions of the West and East coasts, as well as the Rust Belt, while the Republicans representing the economically booming but culturally conservative Sun Belt.

I can tell you what I want: a party that espouses a true ideology of free markets and peoples. No more barriers to free trade across borders, and no more barriers to free movement across them, either. Greater worker representation in the workplace (workplace democracy is the ideal, here) and in the political sphere. A willingness to confront our enemies abroad - whether they be of the Russian imperialist or Iranian fascist varieties. A commitment to support our allies - the Iraqis, Kurds, Israelis, and oppressed peoples everywhere. An ethical treatment of domestic situations - ban executions and abortion, make marijuana legal, make Gay and Lesbian marriages a reality.

The problem, of course, is that no party could come up with this plan. Workers are generally against free-trade plans (it's short-sighted but it's the way things are). The left in America is usually against any sort of intervention abroad (Kosovo was a controversial exception, of course). And the abortion thing always pisses people off.

Meh. Whatcha gonna do?

Fear Mongering and Capital Flow

One of the many things that has turned me away from the Democratic party in recent years (can I really say that? I'm only 19. I've voted once; it seems somewhat odd to be radically changing viewpoints this early) has been the treatment of free trade proposals. I think, generally speaking, free trade agreements are a good thing. Allowing the global market to reach equilibrium free of constraining influences will, more often than not, create greater wealth for all. Any inequities can be solved for.

The United States, despite various idiotic tariffs and quotas, does allow free flow of capital. During the 1990s and early 2000s, this meant that capital largely flowed towards foreign markets. Now that the dollar is weaker, the market is correcting itself. Capital flows towards the United States, more capital is created, more wealth is created, and the dollar will eventually strengthen. It's a beautiful thing.

Stories like this are harmful to the public's knowledge of the economy. This one does an okay job of reporting the economic facts - foreign investment is a good thing - but it also ends with typical economic fear mongering. The end quote by Stiglitz leads people to believe that there is some hidden danger in normal economic activity. Here it is:

We used to measure the economy in terms of GNP, which is the amount of income produced by U.S. citizens. But now we measure it by GDP, the income that is actually produced in America. The distinction becomes important, says Stiglitz, when an increasing proportion of the country is owned abroad. "If you were to look at America Inc. as a company, it's like owning a company and you own a smaller and smaller fraction of it. So the fraction of America Inc. owned by Americans is diminishing," says Stiglitz.

That means that when the economy recovers, there will be less wealth left in the country to reinvest in it. But then returning to the original question--Why is the American yard sale not setting off alarms?--Stiglitz explains that the alternative is even worse. "There isn't an outcry," he says, "because the focus right now is the weakness of the American economy, and anything to keep our economy going is welcome." That's why no one really objected to Citibank's becoming a Middle Eastern--financed bank, because it's better than Citi's becoming a dead bank. "But clearly we're worse off as a country," he says.

There are a lot of problems with this. (And before I begin my critique, let me point out that I know quite a bit less than Dr. Stiglitz. I'm a second year economics undergraduate. He is a premier economist. But I think he's very wrong about this on a very basic level.)

This first is that he says, "...clearly we're worse off as a country." This is begging the question. We're not clearly worse off, as indicated by the necessity of his critique.

He gives his only reason for being "clearly worse off" earlier:

"If you were to look at America Inc. as a company, it's like owning a company and you own a smaller and smaller fraction of it. So the fraction of America Inc. owned by Americans is diminishing."

The problem I see with this is reference point. It's true that less of American capital is owned by Americans, but does that really matter much? As a left wing economist, one would think that he'd be primarily concerned with the welfare of laborers. And if one views it as an issue of worker quality of life, then this is a no-brainer. The prospect of having the Rust Belt resuscitated by European and Japanese money far outweighs the "problem" of having fewer wealthy Americans own shares in those factories.

Now, I think that workers should have a share in the capital they use. I think profit sharing plans, stock options, etc. are a step towards the cooperatives that I think would be a more just distribution of capital. But that type of society is a long way off. In the meantime, welfare of the people is a more worthy goal. Little is lost when a German owns a factory, rather than an American. To use Marxist lexicon, the Proletariat is international. Who cares which country our bourgeois oppressors are from?

I think Time should have brought in a more mainstream economist to actually counter Stiglitz' claims. It's poor journalism to just let the guy make such idiotic statements.