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So what really happened in the 70s?

by Metatone Thu Aug 23rd, 2012 at 04:04:39 AM EST

It's been apparent for quite a while that the core myths of neoliberalism sit on the foundation of a neoliberal/right-wing narrative of what happened in the 1970s.

For many of the people now in power, the period of oil crisis and stagflation was a formative experience regarding economics. For people of my generation - not yet in power, but now adults in our 30s, sort of the middle of the voting populace - the 70s are the times we heard about from our parents and the media, with much neoliberal spin about unions etc.

Two interesting bloggers have brought up the 70s recently and there's lots of food for thought. Both posts are too long to quote in full:

front-paged by afew


First, as posted by Migeru on ET, Bill Mitchell has been thinking about how assumptions about unemployment and policy have changed:

Public service employment programs - what really have we go to fear? | Bill Mitchell - billy blog

I was clearing out some old filing boxes today - I am moving offices soon - and came across a conference proceedings from 1976, which I had picked up somewhere in the 1980s when my own academic career really began. It was entitled: Directions for a national manpower policy : a collection of policy papers prepared for three regional conferences and published by in Washington by the US National Commission for Manpower Policy in 1976. There was a chapter in it that I recalled fondly by US economist Charles C. Killingsworth entitled Should full employment be a major national goal. He was a long-time advocate of public employment programs and understood how lacking my profession is when it comes to caring about people. In terms of public service employment programs - what really have we go to fear? Answer: not much, unless you don't enjoy the most disadvantaged having a better life!

At times you could be lulled into thinking the article was just written. He begins by saying:

Tomorrow morning in Washington there is going to be an announcement of momentous significance. About 14 hours from now the Department of Labor is going to tell the waiting world what the new unemployment rate is. Part of its importance, of course, lies in the fact that this will be the last unemployment figure announced prior to the election. I'm not going to tell you what the figure will be. I will make a prediction that I think is completely safe. Whatever the number is that they announce tomorrow morning, it will be the highest unemployment rate of the entire postwar period after 18 months of recovery. Now let me say that again. The number that will be announced tomorrow will be the highest unemployment rate this country has experienced since World War II in the 18th months of a recovery from recession. I say that in all seriousness because I think that the point is that the current economic recovery has done less to reduce the unemployment rate than any other recovery in our post-war experience.

Charles Killingsworth takes his audience back to the late 1940s to focus on the unemployment rate - "not simply because of historical interest but because I want to try to identify some lessons from it".

Read the full post, it's interesting, although the second half is more about job guarantees than historical analysis.

The key here for me is that this is circumstantial evidence that points to a change of policy which matches the sea change in unemployment rate.

The change in unemployment rate is an important part of this post by Noah over at Noahopinion:

Noahpinion: Something Big happened in the early 70s

Dissertation successfully defended (it won't be official until I complete the byzantine formatting requirements, but that will happen in a couple days), so back to blogging slash getting ready to teach finance to MBAs...

Reading Paul Krugman this week, I found that a question that has often nagged me is nagging me more than usual. Take a look at these two graphs that Krugman put up:



Yes, I know that trends in squiggly lines can be illusions. They might not represent anything structural. "The trend is your friend until the bend at the end," as they say. But WOW, doesn't it look like there was some sort of trend break in the early 1970s? Also, that Krugman graph shows labor productivity, but if we look at Total Factor Productivity, here is what we see:


Now, this is not exactly couched in the careful, formal language of macroeconometricians, but it seems like Something Big happened in the early 1970s.

What was it??

There are lots of graphs (missing from the block quote) and lots of interesting, inconclusive thinking, please read it on Noah's blog. I don't want to bring the stack of graphs over, that feels like over-quoting.

The most interesting point for me is that Noah discards the neoliberal consensus, looking at the data, but finds it difficult to identify what happened in the 70s. But as he says, something big did.

My view so far, reading all this:

  1. There were shocks to the system, notably Oil and Bretton Woods. These both implied greater volatility in trade costs and I think that caused problems in the workplace consensus between large firms and unions. That consensus had been built on the advantages of long-term planning, but the shocks to the system put some companies into immediate difficulty. Most importantly, it psychologically shocked the managerial class - planning was now less reliable - that both pushed them towards a shorter-term mindset and also made them want to dump risk onto workers. And much more than simply wage level, a lot of unions were established around mitigating risk for their members - this is the seeds of a big conflict.

  2. Japan and the Far East come online to the international trade system. This is a labour supply shock. As one commenter on Noah's blog notes, the canary in the mine was the garment industry - but it didn't stop there. These countries were pursuing a growth agenda as outlined here by Dani Rodrik:

No more growth miracles | New Europe

Moreover, rich countries are unlikely to be as permissive towards industrialization policies as they were in the past. Policymakers in the industrial core looked the other way as rapidly growing East Asian countries acquired Western technologies and industrial capabilities through unorthodox policies such as subsidies, local content requirements, reverse engineering, and currency undervaluation. Core countries also kept their domestic markets open, allowing East Asian countries to export freely the manufactured products that resulted.

The currency undervaluation in particular prevented the system from destabilising, all the new labour in the system did not generate as much demand as it should.

3) The policy response to these shocks was not to commit to employment, but to look for a race to the bottom. At the micro-level this is about firms hacking back wages, benefits and security. At the macro-level this is a change of monetary and fiscal policy away from trying to maintain employment levels.

So that's where I got to, with "What happened in the 70s?" What's your view? Any thoughts? Theories? etc...

What's your view?

Display:
Of course, with due deference to Crazy Horse, this says nothing about the rising use of psychedelics.
by Metatone (metatone [a|t] gmail (dot) com) on Tue Aug 21st, 2012 at 08:04:08 AM EST
The 70s in the UK saw 16 million prescriptions of tranquilizers a year dispensed. The figures for the US were even greater per capita. 25% of the US population were borderline catatonic.

Then Big Pharma discovered kids - start them early. Global ADHD prescriptions have been rising 12 % or more a year, but the US accounts for 80% of that. And (old figures) 500 or so brain lesion operation are carried out each year in the US - on kids!!!

You can't be me, I'm taken

by Sven Triloqvist on Thu Aug 23rd, 2012 at 03:56:33 PM EST
[ Parent ]
Stone 'em into the bombed age.
by rifek on Sun Sep 2nd, 2012 at 12:20:27 AM EST
[ Parent ]
My conviction is that the 70's growth was constrained by the oil production crisis.

I'd refer to the interesting work of JP Jancovici, who redacted a good website on the subject.


Result of the [normalization] processing described above for the price of oil (constant 2004 dollars from 1979), compared - in a normalized way - to the"weakness of OECD growth" [NdE: 0 for max growth, 100 for weakest growth of years considered, so inverted AND normalized scale] of the following year, and the unemployement rate 3 years later. The highest for unemployement - for the period - was reached in 1983, 3 years after the highest for oil in 1980, then a new high arrives in 1993, 3 years after a "moderate peak" for oil in 1990, and at last a new high happens in 2003, 3 years after a relative high for oil in 2000.
Mean value for 3 years figured.

With a caveat:

Of course, the above graph has no predictive value yet, because correlations are observed a posteriori, and as long as a "physicial" law is not established otherwise, no definite prediction can be made by simply extrapolating what has been observed. In particular, if oil was the sole possible cause for the evolution of the unemployement rate, there would be not only a good correspondance for the trends, but also for the magnitudes, which is clearly not the case for the above graph.

My understanding is that the link between Energy consummation and growth is strong but the relationship between both is non linear, due to a (small) gain in energy efficiency trough the years, and a financiarization of the growth (when banks grow, this does not require as much energy, whereas when industry grows, this requires real energy). so a shift in the economic structure of France would affect the link between energy quantity and economic growth in the OECD area (globalization).

The peak in unemployment in the early 90's corresponds to the speculation-induced monetary crisis (Soros attack on pound) in the european monetary system just before the euro creation.

1970's corresponds to a change in the growth rate of oil production. from then on, we are entering a rationning world, where poverty is used as a way to keep some people out of the oil benefits.

Acting against this trend, on a longer temporal frame, requires that we collectively shift from main energy source. Which is obviously not the case.

by Xavier in Paris on Tue Aug 21st, 2012 at 11:20:15 AM EST
In the US a major factor was a shift from a labor shortage to a labor glut as the Baby Boom generation flooded into the job market.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
by ATinNM on Tue Aug 21st, 2012 at 01:22:59 PM EST
Three related things happened in the 70s.

First, the European and Japanese reconstructions were largely completed. This reduced growth rates across the board in the American trading bloc (adding capacity means growth - maintaining it merely means not backsliding).

Second, the Americans involved themselves in unprofitable colonial wars in Indochina and elsewhere.

Third, Lower 48 peak oil happened.

This had a number of effects on the American economy, and therefore on the American trade bloc.

  • The social contract in the American trade bloc was predicated on a certain rate of growth. Lower real growth means that someone needs to take a smaller slice of pie. Roughly speaking, that can be idle wealth and the banks (through inflation), it can be workers (through unemployment and wage dumping) or it can be firms (through squeezed margins). For a variety of reasons, manufacturing firms ended up siding with idle money over workers.

  • The American oil companies no longer needed to care about employment. On the slide down the descending side of the lower 48 peak they could sell all the oil they could pump, regardless of the state of the macroeconomy. This incentivised their swing from the full employment coalition to the wage dumping coalition.

  • The US flipped from the current account surplus side of the American trade bloc to the CA deficit side. This turned the Bretton Woods system from an advantage for the US into a disadvantage, so they killed it. This in turn prompted the EU to re-create a mini-Bretton Woods with the currency snake.

    But for various reasons, the EU surplus countries lacked the expertise or political will to recycle their surpluses the way the Americans had done. This made the European fixed exchange rate experiments unstable, and placed the onus of compensating for that instability on labor, leading to a structural bias for wage dumping and unemployment.


  • The US, being the hegemon of its trade bloc, began imposing the folkviews of its new ruling coalition on its trade bloc, displacing the folkviews of the previous ruling coalition.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Aug 21st, 2012 at 01:49:00 PM EST
... Keen makes the point (I haven't checked the data) that the 1970s stagflation were a response to a debt bubble. Essentially, Keen postulates, stagflation is the result of a Keynesian response to an overleveraged private sector:

Stagnant growth, because the private sector does not invest and the public sector only barely puts people back to work (due to political opposition to robust government-driven growth); inflation because the public sector maintains employment but does not support real growth in the face of private sector forced debt amortization.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Aug 21st, 2012 at 05:43:56 PM EST
[ Parent ]
This might be simplistic CW, but my experience supports the idea that the oil-price shock was the source of both inflation and, as an effect, stagnant growth. Price inflation was directly a result of the higher energy costs associated with production and transportation of goods. This, of course, meant less money in the individual's budget, therefore lower domestic demand.

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Wed Aug 22nd, 2012 at 01:24:14 AM EST
[ Parent ]
There had been price inflation prior to the oil shock, however, showing up as early as 1966 in some places. The Vietnam War is often blamed for the late '60s inflation. By 1970-71 Nixon was imposing wage and price controls, abandoning the gold standard in the summer of '71. Bretton Woods had already fallen apart by that point.

Of course, peak oil in the lower 48 hit at exactly that same moment.

The 1973 oil shock was in many respects an aftershock of the main seismic event of 1970-71.

And the world will live as one

by Montereyan (robert at calitics dot com) on Wed Aug 22nd, 2012 at 11:13:31 PM EST
[ Parent ]
Yes, the power to set the price of oil passed outside of the US in 1970-1971, but the fact that price-making power has moved is not itself a direct effect until there is actually a dramatic change in the price setting policy.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Thu Aug 23rd, 2012 at 12:16:27 AM EST
[ Parent ]
A friend of mine and I worked in a furniture factory together near Austin in Summer, 1969. Every day after work, we would say: "Another day, another dollar", except that each day we would lower the amount by one cent.

Again, the CW said that Johnson's 'guns and butter' policy in the Viet Nam war created the inflation of the late '60s - which I believe. (And Nixon's price controls were tentative at best.) But the first time that I ever saw real inflation was post-oil-shock.

I had forgotten about the gold standard abandonment. I do wonder about its role, but I remember now that there was a fair amount of discussion about the idea that it was a recognition of reality, rather than any kind of strategic economic move. What do y'all think?

paul spencer

by paul spencer (spencerinthegorge AT yahoo DOT com) on Thu Aug 23rd, 2012 at 01:31:41 AM EST
[ Parent ]
With gold standard, the petrodollars would have fulfilled the same function? I think we have to mention them.
Financial speculation underlies in  the whole thing, since before and afterwards so far.

There are financial speculation, and motivations, and decision centers.

by PerCLupi on Thu Aug 23rd, 2012 at 02:56:09 AM EST
[ Parent ]
I had forgotten about the gold standard abandonment. I do wonder about its role, but I remember now that there was a fair amount of discussion about the idea that it was a recognition of reality, rather than any kind of strategic economic move. What do y'all think?

It's both. It's a recognition of the reality that maintaining the gold standard was no longer in the US' interest, and a strategic decision to act on that recognition.

If either the recognition or the political will to act on it had been absent, Bretton Woods would have broken up in a series of messy currency crises instead, Eurozone style.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Thu Aug 23rd, 2012 at 05:45:48 AM EST
[ Parent ]
There's more to this long Wikipedia quote than the breakup of Bretton Woods, but it's all interesting:

Nixon Shock - Wikipedia, the free encyclopedia

By the early 1970s, as the costs of the Vietnam War and increased domestic spending accelerated inflation,[1] the U.S. was running a balance-of-payments deficit and a trade deficit, the first in the 20th century. The year 1970 was the crucial turning point, because foreign arbitrage of the U.S. dollar caused governmental gold coverage of the paper dollar to decline from 55% to 22%. That, in the view of neoclassical economics and the Austrian School, represented the point where holders of the U.S. dollar lost faith in the U.S. government's ability to cut its budget and trade deficits.

By 1971, the money supply had increased by 10%.[1] In the first six months of 1971, $22 billion in assets left the U.S.[2] In May 1971, inflation-wary West Germany was the first member country to unilaterally leave the Bretton Woods system -- unwilling to devalue the Deutsche Mark in order to prop up the dollar.[1] In the following three months, West Germany's move strengthened its economy. Simultaneously, the dollar dropped 7.5% against the Deutsche Mark.[1]

Due to the excess printed dollars, and the negative U.S. trade balance, other nations began demanding fulfillment of America's "promise to pay" - that is, the redemption of their dollars for gold. Switzerland redeemed $50 million of paper for gold in July.[1] France, in particular, repeatedly made aggressive demands, and acquired $191 million in gold, further depleting the gold reserves of the U.S.[1] On August 5, 1971, Congress released a report recommending devaluation of the dollar, in an effort to protect the dollar against "foreign price-gougers."[1] Still, on August 9, 1971, as the dollar dropped in value against European currencies, Switzerland unilaterally withdrew the Swiss franc from the Bretton Woods system.[1] [edit] The Shock

To stabilize the economy and combat the 1970 inflation rate of 5.84%,[3] on August 15, 1971, President Nixon imposed a 90-day wage and price freeze, a 10 percent import surcharge, and, most importantly, "closed the gold window", ending convertibility between US dollars and gold. The President and fifteen advisers made that decision without consulting the members of the international monetary system, so the international community informally named it the Nixon shock. Given the importance of the announcement -- and its impact upon foreign currencies -- presidential advisers recalled that they spent more time deciding when to publicly announce the controversial plan than they spent creating the plan.[4]

Nixon was advised that the practical decision was to make an announcement before the stock markets opened on Monday (and just when Asian markets also were opening trading for the day). On August 15, 1971, that speech and the price-control plans proved very popular and raised the public's spirit. The President was credited with finally rescuing the American public from price-gougers, and from a foreign-caused exchange crisis.[4][5]

By December 1971, the import surcharge was dropped, as part of a general revaluation of the major currencies, which thereafter were allowed 2.25% devaluations from the agreed exchange rate. By March 1976, the world's major currencies were floating -- in other words, the currency exchange rates no longer were governments' principal means of administering monetary policy. [edit] Later ramifications

In 1996, Paul Krugman summarized the post-Nixon Shock era as follows:

The current world monetary system assigns no special role to gold; indeed, the Federal Reserve is not obliged to tie the dollar to anything. It can print as much or as little money as it deems appropriate. There are powerful advantages to such an unconstrained system. Above all, the Fed is free to respond to actual or threatened recessions by pumping in money. To take only one example, that flexibility is the reason the stock market crash of 1987--which started out every bit as frightening as that of 1929--did not cause a slump in the real economy. While a freely floating national money has advantages, however, it also has risks. For one thing, it can create uncertainties for international traders and investors. Over the past five years, the dollar has been worth as much as 120 yen and as little as 80. The costs of this volatility are hard to measure (partly because sophisticated financial markets allow businesses to hedge much of that risk), but they must be significant. Furthermore, a system that leaves monetary managers free to do good also leaves them free to be irresponsible--and, in some countries, they have been quick to take the opportunity.[6]

Note that monetarist W Germany was the first to unilaterally leave the Bretton Woods system.

The [1] footnotes in the above refer to an account by David Frum in "How We Got Here: The 70's", so bias alert -- but it includes some facts and is in Google Books.

by afew (afew(a in a circle)eurotrib_dot_com) on Thu Aug 23rd, 2012 at 09:21:53 AM EST
[ Parent ]
A more detailed account is in
The Collapse of the Bretton Woods Fixed Exchange Rate System
, Peter M Garber, NBER (pdf).
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Aug 23rd, 2012 at 09:40:43 AM EST
[ Parent ]
I have to admit that I didn't pay much attention to that aspect. I thought that money was simply an expression of goods in the market arena back then. Didn't even realize that there was a currency market, let alone monetary policy.

paul spencer
by paul spencer (spencerinthegorge AT yahoo DOT com) on Thu Aug 23rd, 2012 at 03:39:36 PM EST
[ Parent ]
Money as a thing: common sense conservatism.

Reality based progressive economics is counterintuitive.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Thu Aug 23rd, 2012 at 04:10:29 PM EST
[ Parent ]
Intuition = hardwired frames...
by afew (afew(a in a circle)eurotrib_dot_com) on Fri Aug 24th, 2012 at 03:18:37 AM EST
[ Parent ]
This is my impression too, and I would argue that the situation is similar to that of oil constrained Sweden and Switzerland during ww2.

European Tribune - What happens during real resource austerity?

Faced with real resource austerity Sweden (and probably Switzerland) increased labour in production, reducing unemployment while production shrinked. Inflation was high during the transition phase. This was of course a political choice, one made easier by the rise of the labour movement and a war going on just outside the border.

Lack of oil, inflation up, production down. But since the political will was there, unemployment decreased.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Thu Aug 23rd, 2012 at 04:58:55 PM EST
[ Parent ]
I've read this before from Keen - can you explain this bit in different words, because I've never understood it:

inflation because the public sector maintains employment but does not support real growth in the face of private sector forced debt amortisation
by Metatone (metatone [a|t] gmail (dot) com) on Wed Aug 22nd, 2012 at 09:49:59 AM EST
[ Parent ]
As far as I can tell, the basic reasoning is that the government supports employment, but is unwilling to support the economy aggressively enough to permit real growth. So you have full employment, low or no growth, and a massive debt overhang. And that combination is only possible - this explanation alleges - if you inflate away the debt overhang.

But I don't buy the implied causal story. If output and employment are only barely treading water, you won't get any significant inflation unless there's some inflationary pressure which Keen's story does not describe - such as an oil shock. Absent such an exogenous pressure, you'll get a Japan-style "lost decade," not stagflation.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Aug 22nd, 2012 at 11:57:09 AM EST
[ Parent ]
Its not necessarily a case of how aggressively ~ its also a case of whether it does it with tax cuts and transfer payments, or whether it does with with spending on goods and services.

There is nothing more direct in reducing unemployment than hiring people to do something useful. There is nothing more direct in increasing production than ordering things to be produced.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Aug 23rd, 2012 at 11:40:50 AM EST
[ Parent ]
Government kept employment up, but in doing so lowered the growth of productivity.
by oliver on Thu Aug 23rd, 2012 at 09:00:35 AM EST
[ Parent ]
Government kept employment up, but in doing so lowered the growth of productivity profit taking.

Fixed that for you.

What's missing from - say - Mitchell's analysis is the concept of economic enfranchisement. Wealth distribution isn't just about who gets the money, but about who gets to set policy, and with what aims.

Enfranchisement doesn't just mean the right to vote, it means the right to:

Get a good education
Get health care
Get legal support
Have economic security
Have a say over decisions in the workplace

Voting every few years is actually the least important thing in full enfranchisement.

Policy in the 60s and 70s was social democratic and approximately populist. The 'job free recovery' we've had since the late 70s has disenfranchised working populations through a combination of deliberate high unemployment, downward wage pressure, and restricted profit distribution.

Now - there may be some truth to the 70s mythology of restrictive union practices. But even if there is, it can hardly be more destructive than the damage rained on shared prosperity by the neoliberals and the far-right politicians who implement their policies.

I think it's important to understand that the aim of the neoliberals is not widespread prosperity. They are more than happy to create recessions and depressions as long as they can continue to concentrate wealth and power in their own hands.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Thu Aug 23rd, 2012 at 09:15:36 AM EST
[ Parent ]
Enfranchisement doesn't just mean the right to vote, it means the right to:

Get a good education
Get health care
Get legal support
Have economic security
Have a say over decisions in the workplace

Voting every few years is actually the least important thing in full enfranchisement.

And the Maastricht treaty is designed (deliberately or incompetently) to eliminate the state's ability to guarantee any of those. The austerity policies chosen by the Brussels/Frankfurt consensus are just the time and manner in which the ultimate outcome is realized.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Thu Aug 23rd, 2012 at 10:01:40 AM EST
[ Parent ]
That's right, you should never forget whom you really work for and who really owns "your" government.
by rifek on Sun Sep 2nd, 2012 at 01:16:25 AM EST
[ Parent ]
Government is not so much owned as pwn3d any more.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Sun Sep 2nd, 2012 at 04:46:49 AM EST
[ Parent ]
That implies it's actually trying to resist its owners.
by rifek on Sun Sep 2nd, 2012 at 10:40:20 AM EST
[ Parent ]
Nice fix.
by rifek on Sun Sep 2nd, 2012 at 01:22:02 AM EST
[ Parent ]
Oh, but they didn't.

The 1970's saw the end of full employment as a policy goal, and the start of a continued string of jobless recoveries.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Thu Aug 23rd, 2012 at 09:57:07 AM EST
[ Parent ]
The days of social democratic dominance. They didn't give up full employment. Governments tried to retain it by any means. They just failed. The question is why they failed.
by oliver on Thu Aug 23rd, 2012 at 03:13:00 PM EST
[ Parent ]
You might want to actually read the Bill Mitchell article linked in the diary.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Thu Aug 23rd, 2012 at 03:36:38 PM EST
[ Parent ]
So some economists gave up full employment as a goal. Nice to know, but doesn't explain why politicians listened. Unemployment and even more its increase is very good for the opposition. Governments will not simply accept unemployment. Look at the foolish things governments do to be reelected and how much money they are willing to spend on that.
by oliver on Fri Aug 24th, 2012 at 02:52:41 AM EST
[ Parent ]
It is trivially simple to ensure full employment.

Any government that tolerates any significant unemployment is doing it deliberately.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Aug 24th, 2012 at 06:43:55 AM EST
[ Parent ]
When it comes to Sweden (that gave up full employment in the early 90ies crisis) there appears to have been a belief at the top of the Soc-dems that temporary unemployment was necessary to lower wage pressure and avoid loosing industrial base (I've seen quotes from pm Carlsson somewhere). So in that case they accepted it as a necessary action for the competition in the world hierarchy of production. The Soc-dems having accepted made it risk-free for the right-wing to introduce it and since there are no other options ofr government it then stays.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se
by A swedish kind of death on Fri Aug 24th, 2012 at 02:44:46 PM EST
[ Parent ]
By any means? Certainly not in the US ~ not by direct employment of the unemployment, for one, and not by direct intervention increasing government spending on construction of useful infrastructure, for another.

Using the recession as the occasion for a permanent income tax cut, and relying on unemployment insurance for the balance of the counter-cyclical policy simply isn't "attempt by any means", its "try again what worked previously in different circumstances".

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Aug 23rd, 2012 at 06:54:05 PM EST
[ Parent ]
oliver:
The days of social democratic dominance

Certainly not true of France, where the Fifth Republic didn't see a socdem government until 1981. The dominant figure of the French '70s was economic liberal Giscard d'Estaing. Only at the end of the decade did PM Raymond Barre (former very liberal VP of the EC) introduce a work-training scheme to alleviate unemployment.

Britain was half-and-half, with Labour in power between 1974 and 1979, with Conservative governments on either side. (Margaret Thatcher became PM in 1979.) Part of the mythical British narrative of the '70s is that it was all down to Labour.

It's not true of the US either, unless you consider Richard Nixon and his VP Ford to have been social democrats...

by afew (afew(a in a circle)eurotrib_dot_com) on Fri Aug 24th, 2012 at 03:03:02 AM EST
[ Parent ]
The post-war US had a number of competitive advantages over any potential competitor:

  1. Financial hegemony, which it had taken over from the UK courtesy the First World War;
  2. Cheap domestic energy, largely due to domestic oil production (OPEC tried forcing prices up shortly after it formed, but the Texas Railway Commission spiked it domestically simply by turning on the spigots.);
  3. An educated, trained work force;
  4. Manufacturing plants and infrastructure that had not been turned into a crater.

All these advantages went away as the rest of the world either built or rebuilt and the costs of empire began to weigh on the US.  Everybody's industrial base and infrastructure was newer than ours, and our energy costs were increasing as domestic oil lost ground.  Add to this a genuine crisis in education/training (a complete lack of consensus on how to prepare the next generation for an economy no longer based on farms and Ford-type assembly lines) which left increasing chunks of the population unable to compete in a global labor market.  Mix all these together, and the financial situation destabilizes as well.

The entry of the Baby Boomers into the work force has been mentioned, but there was a bigger change in the work force that happened simultaneously.  The froth of post-war prosperity masked that it was really a white male prosperity.  Women and minorities were down by law, and if a white male needed in, any one of "them" could be moved out to make room, no problem.  As these practices became illegal, the legal work force started reflecting the real work force for the first time, and it was no longer possible to protect the workers who "mattered" at the expense of those who "didn't."  That mask was ripped off at exactly the moment when the formerly protected workers started feeling the pinch of the changing economy.

by rifek on Sun Sep 2nd, 2012 at 01:35:53 AM EST
[ Parent ]
Holy crap - I was thinking of writing a very similar diary on exactly this topic with the same title.

Yes, clearly we wouldn't have had neolib credibility (such as it is) without their interpretation of the 70s.

But - let's not forget that the oil crisis was a political reaction by the Arab world to US support for Israel, not a production shortage.

And it led to oddly expedient pro-corporate policies in the West which derailed social democracy and limited the introduction of renewables in a way which benefited - and continues to benefit - OPEC, the UK (North Sea oil - until it ran out) and especially the Saudis.

Considering the close links between the House of Saud and some of the US oil producers, it's tempting to wonder if perhaps the shock was exaggerated for deliberate political effect.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Tue Aug 21st, 2012 at 03:06:21 PM EST
But - let's not forget that the oil crisis was a political reaction by the Arab world to US support for Israel, not a production shortage.

Yes and no.

The oil embargo got its teeth from the fact that the US had turned from a major oil exporter to a major oil importer sometime in the sixties, seemingly without noticing that it had happened. Or at least not taking adequate steps to suborn the political systems of its new Arab suppliers (this oversight was soon rectified, which is why OPEC has been so toothless for the last three decades).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Aug 21st, 2012 at 04:56:35 PM EST
[ Parent ]
Note that the US at the federal level had never been responsible for the stable price of oil ~ it was the Texas Railway Commission that was directly responsible for adjusting the quotas on West Texas production that stabilized US crude oil prices.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Thu Aug 23rd, 2012 at 12:19:18 AM EST
[ Parent ]
it's tempting to wonder if perhaps the shock was exaggerated for deliberate political effect.

Or the shock was outright encouraged. The 70s were apparently so terrible, they beat the Great Depression judging from the effect on policy and ideology.

The 1970s were also the time of Pinochet and start of shock therapies. Wasn't the "terrible" stagflation just a mild shock therapy, a crisis "not to be wasted"?

by das monde on Tue Aug 21st, 2012 at 10:45:54 PM EST
[ Parent ]
Yes, my thoughts exactly. A crisis is an opportunity for the elites, as we are witnessing now, and in this case a way to get out of a very restrictive (for them) post-WWII social contract. The fact that the "opponent"  (USSR) was visibly stagnating itself and running into its own structural problems, certainly made this politically feasible...

The road of excess leads to the palace of wisdom - William Blake
by talos (mihalis at gmail dot com) on Wed Aug 22nd, 2012 at 06:49:20 AM EST
[ Parent ]
Officially, the collapse of the USSR was a surprise. With the West "suffering" stagflation, how could the Soviet stagnation visibly look much worse?

It should be useful to inspect the media perceptions and narratives of that time at it all happened, and observe how they were changing later.

by das monde on Fri Aug 24th, 2012 at 08:43:08 PM EST
[ Parent ]
I think not only discovering "what really happened" but turning it into a narrative that's easily digestible and has some power is essential to building an alternative to neo-lib policies...

And I realise as I type, not only a narrative of what actually happened, but what could have been done instead - but I guess that's for the next diary...

by Metatone (metatone [a|t] gmail (dot) com) on Wed Aug 22nd, 2012 at 09:55:07 AM EST
[ Parent ]
How much competition from Asia broke solidarity between different unions and inside unions. Asian competition effected different industries and firms differently. Some were disappearing while others were doing at least as well as previously. It is harder to reach unity when some are losing and others are winning than when all are losing.
by Jute on Wed Aug 22nd, 2012 at 08:27:33 AM EST
The background to the '70s was

  • the decline of the postwar reconstruction boom

  • the arrival of the postwar baby boom on the labour market

  • the end of postwar care of keeping buffer stocks (the US destocked grain through the '60s by giving it away)

  • the switch from US current account surplus to deficit

  • factors favourable to greater world trade aka globalisation : the rise of Asian industry; gradual speeding up of information processing and communications; an increase in the size and penetration of multinational companies, and the concomitant rise of a financial sector using the dollar as a vehicle currency

The shocks were

  • the end of Bretton Woods and resulting uncertainty

  • food crunch from 1972 (animal feed scarcity in US as a result of the failure of the Peruvian anchovy fisheries, disastrous harvest in USSR resulting in heavy buying on world markets), producing sharply rising food prices

  • the OPEC embargo causing higher energy prices

Growth was likely to tail off in the Western world; rising commodity prices were bound to push the costs of production higher while fuelling wage demands, hence inflation; a population bulge, in these circumstances, was likely to produce unemployment.

Is this an explanation for stagflation, and is it a good enough narrative? I don't know.

On the ideological front, neoliberalism had got up a head of steam and become influential (this can be documented) while a "classical" brand of Keynesianism was just waiting to get sucker-punched by the fact that inflation and unemployment rose together - and so "Keynesianism" was proved to be "wrong" and the neolibs took over. We know the rest.

by afew (afew(a in a circle)eurotrib_dot_com) on Wed Aug 22nd, 2012 at 12:25:52 PM EST
Take all of that and add on top a reactive Samuelsonian pump priming in reaction to weak labor markets, and you do indeed get a recipe for stagflation.

Also conveniently for the distorted memory of "the seventies", there were two successive oil price shocks in the 1970's, the 1973 oil price shock and the 1979 oil price shock, each involving a rough doubling in the price of crude oil, and the institutional reactions to the late 60's and early 70's waves of inflation had involved winning automatic cost of living adjustments in some key industrial wage bargains, which a monetarist Fed was determined to ring out of the system by squeezing the money supply until it squeaked.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Aug 23rd, 2012 at 12:39:02 AM EST
[ Parent ]
BruceMcF:
Samuelsonian pump priming

= the "brand of Keynesianism" that got sucker-punched. According to the CW, the Philips curve was proved wrong or inadequate.

Phillips curve - Wikipedia, the free encyclopedia

Since 1974 seven Nobel Prizes have been given for work critical of the Phillips curve. Some of this criticism is based on the United States' experience during the 1970s, which had periods of high unemployment and high inflation at the same time. The authors receiving those prizes include Thomas Sargent, Christopher Sims, Edmund Phelps, Edward Prescott, Robert A. Mundell, Robert E. Lucas, Milton Friedman, and F.A. Hayek.[2]
by afew (afew(a in a circle)eurotrib_dot_com) on Thu Aug 23rd, 2012 at 03:11:30 AM EST
[ Parent ]
Take all of that and add on top a reactive Samuelsonian pump priming in reaction to weak labor markets, and you do indeed get a recipe for stagflation.

So what could have been done differently?

by Metatone (metatone [a|t] gmail (dot) com) on Thu Aug 23rd, 2012 at 06:24:59 AM EST
[ Parent ]
An actual job guarantee rather than pump-priming.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Thu Aug 23rd, 2012 at 06:26:08 AM EST
[ Parent ]
That brings to mind quite a few questions, but maybe I should make a new diary for "what could have been done in the 70s"?
by Metatone (metatone [a|t] gmail (dot) com) on Thu Aug 23rd, 2012 at 06:30:26 AM EST
[ Parent ]
Yes, but not yet :)

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Thu Aug 23rd, 2012 at 06:45:22 AM EST
[ Parent ]
Ok - so one question for now - do you know (or know of a reference to) the forms that the pump-priming took?

It's clear that a job guarantee has particular benefits, but different kinds of pump-priming are substitutes that vary in their level of imperfection.

by Metatone (metatone [a|t] gmail (dot) com) on Thu Aug 23rd, 2012 at 07:37:52 AM EST
[ Parent ]
One thing I want to bring into this thread is Minsky's narrative of the 1970s, from Stabilizing an Unstable Economy.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Thu Aug 23rd, 2012 at 08:42:20 AM EST
[ Parent ]
What Migeru said. Federal non-defense spending on goods and services barely increased during the 1974-75 recession, while total federal spending on goods and services were in a secular decline from the cuts in defense spending. The fiscal response to the 74/75 recession was a tax cut ~ a $30 tax credit, increase in the standard deduction and enactment of the Earned Income Tax Credit ~ which pushed the deficit from 1% of GDP to over 4% of GDP ~ and increased spending on automatic stabilizers, with unemployment insurance hitting some of its highest rates of coverage.

In terms of GDP, the fiscal stimulus was a success, with the labor market improving following the 1974-75 recession at rates which at the time were perhaps a bit slow, but compared to the recessions since 1980 was strong.

While googling for that, I read a monetarist tract which "disproved" that there was any cost push inflationary impact from the 1973 oil price shock because before that time, oil was produced under a Seven Sisters cartel, and why was the OPEC cartel inflationary when the Seven Sisters cartel was not ... ignoring entirely the production quotas on Texas oil stabilizing oil prices in the 1950's and 1960's, so that the Seven Sisters did not have price control in their hands. Having "disproved" that, and ignoring that the price of crude oil actually did double in a short period of time, they laid all the inflation down to the abandonment of the Bretton Woods system and the subsequent dollar depreciation (which was of course primarily caused by US inflation).

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Aug 23rd, 2012 at 11:37:05 AM EST
[ Parent ]
So the pump-priming which actually took place could be described as being mainly "supply-side" - which makes sense, being further away from a job guarantee than "demand-side" pump-priming?
by Metatone (metatone [a|t] gmail (dot) com) on Thu Aug 23rd, 2012 at 11:46:33 AM EST
[ Parent ]
It was demand side pump priming, primarily focused on consumer spending, with the spending targeted by the households that received the funds.

The problem with tax cuts as pump priming is that each time they were deployed, from the Kennedy administration on, they resulted in a permanent change in the tax structure which removed the most effective tax cuts from being available for use the next time.

The problem with heavy reliance on automatic stabilizers is that they can only act as shock absorbers, so they rely on "something else" to take over the driving of the economy from the point that the people have fallen into the safety net. The economy is better positioned for recovery from that point than if the safety net was not there, because of the damage averted, but the automatic stabilizers themselves are not the growth driver.

And if the growth driver is consumer spending, (1) there has to be a strong consumer spending / middle class income loop in order for that to be a strong response and (2) there has to be a strong multiplier-accelerator for that to lead to investment in productive capacity.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Aug 23rd, 2012 at 12:07:01 PM EST
[ Parent ]
During that period, the Seven Sisters were at the twin mercies of Detroit and the Texas Railway Commission.  The Commission made sure they produced a lot, and Detroit made sure it all got burned.  I think that monetarist has been swilling the Kool-Aid of Chateau Austro-Chicago.
by rifek on Sun Sep 2nd, 2012 at 01:46:26 AM EST
[ Parent ]
afew:
the arrival of the postwar baby boom on the labour market

With more education and more demands of high social status (aka good jobs) then previous generations. Somewhat similar to the situation in oil-rich Arab countries.

afew:

factors favourable to greater world trade aka globalisation : the rise of Asian industry; gradual speeding up of information processing and communications; an increase in the size and penetration of multinational companies, and the concomitant rise of a financial sector using the dollar as a vehicle currency

I would perhaps put this in different terms, in particular I think the political independence of the former colonies as well as following a course for development economics in both Asia and South America should be seen as drivers and the finance/mulitnationals as the reaction from the west. What can no longer be controlled one way must be attempted to be controlled another way.

Also I wonder if trade really increased if measured in tons of moved goods. For me the globalisation narrative hides the colonial world and its trade patterns and appears to insert a pre-globalization world where every country had massive trade walls.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Thu Aug 23rd, 2012 at 04:52:02 PM EST
[ Parent ]
Comparing the 1960's and the turn of the century, trade certainly increased for the US in terms of tonnages of goods imported and exported ... the question at hand is to what extent that process was well underway by the mid-1970's. I don't have that data immediately at hand, but I would not be surprised if the impact of Asian neo-mercantalist exports in the mid-1970's were more in terms of competitive pressure in specific industries and not the actual dominance in terms of units shipped and total market share that become common in a number of industries in the 80's and 90's.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Thu Aug 23rd, 2012 at 06:58:49 PM EST
[ Parent ]
I apologize for not keeping me in the impersonal objective level that this site and my friends ETers deserve.

From my current state (psychologically, weak; physically, exhausted; emotionally empty; and ideologically, hopeless), I sing the palinode at this question:

On June 30, 1969 I finished my studies with 4.50 pesetas, and alone in this world. I rejected the power (which I could have obtained) and I despised the objective of money (which I could have obtained).

And, now, I sing the palinode, at this point in my life, hopeless about the future: The power and the money have won, and they will continue to win.

And I now should comment about the issue raised, but not at this time. I will read you with nostalgia.

by PerCLupi on Wed Aug 22nd, 2012 at 10:02:05 PM EST
The power and the money have won. An then...


by Katrin on Thu Aug 23rd, 2012 at 01:52:43 AM EST
[ Parent ]
"And", not "An"
by Katrin on Thu Aug 23rd, 2012 at 01:53:26 AM EST
[ Parent ]
Is this a "green shoot" (such as Zapatero's ones)?
by PerCLupi on Thu Aug 23rd, 2012 at 02:27:25 AM EST
[ Parent ]
  1. China saw an opportunity to win the Cold War without firing a bullet.

  2. Nixon "went to China" in order to gain access to their cheap slave labor pool.

  3. Nationalism/patriotism ... the middle class and wealthy working together along boundary lines ... gave way to worldwide oligarchs working together to control all resources.

  4. The wealthy were paying attention when the scientists said that human population growth was going to fuck the world ... including them with all their wealth. All computer models said the same thing ... come up with a plan to peacefully cull most of the earth's population or you are all screwed.

Welcome to today. Have a nice day.

My allegiance to the human species ends at the California border.
by THE Twank (yatta blah blah @ blah.com) on Thu Aug 23rd, 2012 at 06:33:33 AM EST
The wealthy were paying attention when the scientists said that human population growth was going to fuck the world ... including them with all their wealth. All computer models said the same thing ... come up with a plan to peacefully cull most of the earth's population or you are all screwed.

The Club of Rome report indeed came out in the 1970s - and somehow it got gradually dismissed, ridiculed, ignored. Was there an operative opposition at all to the growth-at-all-costs moves? It is not unthinkable that certain elites quickly reached a consensus that the best way to overcome over-consumption risks would be an over-leveraged opposite narrative for the peak times.

by das monde on Fri Aug 24th, 2012 at 05:11:54 AM EST
[ Parent ]
In Varoufakis' Global Minotaur the 70s are the time the US change their basic plan.
In the earlier version they based their hegemony on recycling their surpluses into their docile clients in Japan and Europe.
The new version was a giant vacuum cleaner that sucked capital into Wall Street by promising and delivering outlandish profits. After this change the oil price was no longer of vital importance to US global policy.

So in Varoufakis' story the oil shock is not a cause but a result.

by generic on Thu Aug 23rd, 2012 at 10:40:33 AM EST
The cause is the unsustainability of Bretton Woods
In order to maintain the Bretton Woods system, the U.S. had to do two things:

  • run a balance of payments current account deficit to provide liquidity for the conversion of gold into U.S. dollars. With more U.S. dollars in the system the citizens began to speculate, thinking that the U.S. dollar was overvalued. This meant that the U.S. had less gold as people started converting the U.S. dollars to gold and taking it offshore. With less gold in the country there was even more speculation that the U.S. Dollar was overvalued.

  • run a balance of payments current account surplus to maintain confidence in the U.S. dollar.

Obviously, the U.S. was faced with a dilemma because it is not possible to run a balance of payments current account deficit and surplus at the same time.


If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Thu Aug 23rd, 2012 at 11:00:33 AM EST
[ Parent ]
But it was the current account deficit that led to France, in particular, changing the default behavior of countries in treating gold settlement as a pro forma and taking dollars by preference.

The actual Bretton Woods system as it operated in the 1950's was not a gold settlement system, it was a large dollar settlement area, smaller pound stirling and franc settlement zones, and dollar settlement inter-zone.

The dollar surplus was automatic in the immediate post-WWII period and the challenge was in generating sufficient dollar outflows to prevent the global system from seizing up. But continuation of that policy as the US shifted from a strong surplus to a strong deficit position was unsustainable, as established when the France demanded the gold settlement that had previously been treated as a pro forma ~ France forced the US to choose between a fixed exchange rate system and the use of dollar outflows in support of US power, and the latter won.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Thu Aug 23rd, 2012 at 07:07:27 PM EST
[ Parent ]
The first graph in the second cited article says something:

This graph is very reminiscent to this often iterated:

The new graph shows that a clear gap started to open not with Reagan and Thatcher, but some 8 years earlier.

I bet that ideology was a leading rather than reacting narrative. As was stressed by Henry George, the classical economics accepted that workers' pay is not related to the value of their labor but to their bargaining choices. In other words, productivity gains are not supposed to be correlated to labor wages. Most of the workers (footballers and some other skills excluded) mostly get only what they would settle for. We see this interpretation getting the working status after the 1970s.

by das monde on Fri Aug 24th, 2012 at 05:33:21 AM EST
This is nicely put:
In modern history the shift of social wealth from labor to the ruling class began in earnest with Democrat Jimmy Carter in the White House in the late-1970s. A series of politically motivated oil embargoes quite predictably led the oil-dependent manufacturing economy to rising prices and lower output--stagflation. Through arcane theory still practiced by the American economic mainstream, the cause--the oil embargoes with attendant rising prices and reduced output, was converted to effect, as if from over-regulation and Keynesian management of the capitalist economy. The proposed solutions derived from these (implausible) economic theories were de-regulation, the destruction of labor's bargaining power and the return to (long discredited) `market' solutions to policy issues.
by das monde on Wed Aug 29th, 2012 at 06:35:12 AM EST
[ Parent ]
Another thing that happened in the 1970s is the beginning of the end of grandiose imagination. Recall David Graeber's
It's often said the Apollo moon landing was the greatest historical achievement of Soviet communism. Surely, the United States would never have contemplated such a feat had it not been for the cosmic ambitions of the Soviet Politburo. We are used to thinking of the Politburo as a group of unimaginative gray bureaucrats, but they were bureaucrats who dared to dream astounding dreams. The dream of world revolution was only the first. It's also true that most of them--changing the course of mighty rivers, this sort of thing--either turned out to be ecologically and socially disastrous, or, like Joseph Stalin's one-hundred-story Palace of the Soviets or a twenty-story statue of Vladimir Lenin, never got off the ground.

After the initial successes of the Soviet space program, few of these schemes were realized, but the leadership never ceased coming up with new ones. Even in the eighties, when the United States was attempting its own last, grandiose scheme, Star Wars, the Soviets were planning to transform the world through creative uses of technology. Few outside of Russia remember most of these projects, but great resources were devoted to them. It's also worth noting that unlike the Star Wars project, which was designed to sink the Soviet Union, most were not military in nature: as, for instance, the attempt to solve the world hunger problem by harvesting lakes and oceans with an edible bacteria called spirulina, or to solve the world energy problem by launching hundreds of gigantic solar-power platforms into orbit and beaming the electricity back to earth.

...

What has changed is the bureaucratic culture. The increasing interpenetration of government, university, and private firms has led everyone to adopt the language, sensibilities, and organizational forms that originated in the corporate world. Although this might have helped in creating marketable products, since that is what corporate bureaucracies are designed to do, in terms of fostering original research, the results have been catastrophic.

I have been reminded of this by this Guardian piece on the occasion of Neil Armstrong's death: Neil Armstrong's death should be a wake-up call for the world
Neil Armstrong's death means that the first man on the Moon will never meet the first man on Mars. It is a chilling reminder that we are unlikely to reach another planet in the lifetimes of any of the surviving Apollo astronauts. It may not happen in my parents' lifetimes. I'm beginning to lose faith that it will even happen in my lifetime. How have we allowed this to happen?

...

I'll be 31 years old next month, and pretty soon I'll have to come to terms with the fact that I am a grown-up. Born just after the first Shuttle mission, I find myself trapped in the world of First Great Western trains, flying on aircraft designed in the sixties, watching my generation struggle to bear the brunt of an economic crisis, trying to find sense in a culture where Big Brother losers are given more press coverage than Olympic athletes.

There was so much optimism in my old sci-fi books, but now all we seem to hear are people droning on about how shit things are, how much shitter they're going to get, and whose fault it is that they got shit in the first place: the tedious drumbeat of the cowardly and insidious 'Broken Britain' mentality. I'm probably as guilty of that as anyone: it's easier to shout at things than it is to stand up and do something about them.

I think that's key: optimism has been replaced by a conservative pessimism that tries to convince us that we just can't afford things that we could afford when we were collectively much poorer, in the 1930s and in the aftermath of the destruction brought by WWII. As rootless puts it in his comment on Graeber,
In the early 1970s, even right wing "free market" enthusiasts like Milton Friedman thought that increasing prosperity would allow the government to just give every person a guaranteed income instead of operating an expensive and humiliating welfare system. Technical innovation, automation, spread of education and commerce, all this was going to create a world without limits for all of us. In that time people talked about "post scarcity", worried about the problems of an "affluent society", assumed humans would soon be traveling around planets, perhaps even around stars, and expected technology to produce wonder after wonder. In a mere 40 years we jumped to a world where "we can't afford" is the justification for throwing sick people out of hospitals into the street, for homeless vets on streetcorners, for slashing wages, making education unaffordable. We can't afford Isaiah  17:
Learn to do good; seek justice, relieve the oppressed, judge the fatherless, plead for the widow.
When I think of the global can't-do mentality I usually gravitate to two examples: the successful push in the 1980s to ban CFCs in order to halt or reverse the hole in the ozone layer has been followed by a shameful failure to act on climate change despite a string on international summits over nearly two decades. After the recent failure at Copenhagen, it's an open question whether it makes sense to even have a new round of climate change talks at the global level. The second example of global cooperation on a project of grand ambition is the eradication of smallpox. That is, unfortunately, a 'socialist' project, and I say 'unfortunately' because it means that, since the fall of the Soviet bloc and the triumph of neoliberalism it is impossible to imagine coordinated global action on such a scale. Now we depend on the Bill and Melinda Gates Foundation to decide to fund malaria vaccine research, and even if a vaccine is found I doubt a successful eradication campaign can be mounted by our current crop of global leaders.

See also metatone's earlier diary learned helplessness.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa

by Migeru (migeru at eurotrib dot com) on Sat Aug 25th, 2012 at 07:16:32 PM EST
Missing link to Graeber's Of Flying Cars and the Declining Rate of Profit.

If you are not convinced, try it on someone who has not been entirely debauched by economics. — Piero Sraffa
by Migeru (migeru at eurotrib dot com) on Sat Aug 25th, 2012 at 07:20:07 PM EST
[ Parent ]
Imagination is all very well but space colonization requires engineers to build the systems and some entity to fund the work.  As it became clear there wasn't a huge pay-off in the immediate future sufficient to cover the expense governments lost interest.

Further, the engineering ran into problems when research scientists found basic bio-chemical reactions and functions depend on being in a 1 G environment.  Creating a safe artificial 1 G environment is harder than science fiction books and films make it out to be and has turned-out to be impossible given current materials.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Mon Aug 27th, 2012 at 11:57:04 AM EST
[ Parent ]
Well, but there's more to our lack of ambition than space.

Unemployment.
Global climate change.
Global poverty.

by Metatone (metatone [a|t] gmail (dot) com) on Tue Aug 28th, 2012 at 04:13:46 AM EST
[ Parent ]
This diary has made me remember to JJ Servan-Schreiber (Le Défi Américain -1968- and Défi Mondial -1980)
by PerCLupi on Wed Aug 29th, 2012 at 04:43:24 AM EST
[ Parent ]
It seems to me that we need a mindset shift in order to get through this.

In the past, lacking robots, and with low expectations about the importance of human life, we explored the planet with sailing ships--many lost--and overland expeditions--many lost--and settlement attempts--many lost. The guy credited with the first circumnavigation of Earth didn't even circumnavigate it, he died about half-way through his expedition.

Now, with robots replacing human physical presence in a lot of cases, and human brains in a few cases, the question is, if you ask me, not about the exploration of space, but about the humans directly involved exploration of space. What is fundamentally wrong with robot exploration of the inner planets (which might be possible, maybe, also by humans), the outer planets (probably never possible by humans), remote objects--Pluto, comets, etc., and the Sun (not possible by humans)? How is that approach not sufficiently grandiose in imagination?

I have never sailed around the world, but I take pleasure in reading about Magellan's adventures, using him as a proxy. Plenty of people similarly accept the robot proxies on Mars...

by asdf on Tue Aug 28th, 2012 at 10:48:50 AM EST
[ Parent ]
Yes. We need a mindset shift in order to get through this. This is the difficulty.
by PerCLupi on Wed Aug 29th, 2012 at 04:36:52 AM EST
[ Parent ]
THe civilization learned to get by less inspired.
by das monde on Wed Aug 29th, 2012 at 09:14:14 AM EST
[ Parent ]


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