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Coincidence? I think not.

You can't be me, I'm taken

by Sven Triloqvist on Sun May 8th, 2011 at 10:59:27 AM EST
[ Parent ]

Re: The End of the European Dream (4.00 / 5)

There never were coherent alternatives.

Historically the PES is based on the idea of increasing the material wealth of the working classes. Most of the working classes in Europe, nowadays, have enough material wealth to live decently. It can even be argued that we have too much: considering the ability of the planet to provide equal material wealth to all other citizens (Africa, Lat AM, Asia, ...).

What I am trying to convene is that, since some decades ago, there were actually no big difference from left and right: all proposals were variations of GREED. Asking for a salary increase of someone doing above 1.800 is greedy. The planet cannot sustain that lifestyle for 7 billion inhabitants.

A left program would be more along the lines of:

Full employment (at the expense of more salary!)
Some level of job security (even at the expense of "growth")
Trading money for time
Maintenance of community involvement: Some entitlement programs abstract away community - one pays taxes and problems appear "miraculously" solved. The welfare state should be maintained with direct population involvement (say, through a compulsory civil service)

The aspirations by the left are, in essence, the same as the ones from the right. Why go with a copy when you have the original?

by cagatacos on Sun May 8th, 2011 at 12:10:59 PM EST
[ Parent ]

Re: The End of the European Dream (4.00 / 6)

To meet those four goals we'll have to come-up with an alternative to compound interest. I suspect, cannot prove, we need an alternative to compound interest to get to "sustainable" - however defined - on any road.

Chris Cook has been very active on this line.

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

by ATinNM on Sun May 8th, 2011 at 05:52:44 PM EST
[ Parent ]

I do not understand, and (if you have the patience) would love to read an extended version (or pointers to info).

Then again, this is maybe because I do not buy Keynesian economics (especially in the context of dwindling natural resources): "if you want to invest, save first" is my motto. Of course, saving in debt based instruments (aka money) might pose a problem (because it means somebody else is accruing debt). Then again, it is just a question of saving in a different way (e.g. collecting natural resources). But this is above my pay grade (I am not an economist - though reading some, I am glad I am not).

I have to say (If Chris is reading), I have some difficulty in understanding what he proposes. I did indeed put quite some effort in reading his stuff, but I never really did grasp it.

by cagatacos on Sun May 8th, 2011 at 06:06:56 PM EST
[ Parent ]

Got some friends coming over & I have hustle to get the house ready.

I'll post later tonight or tomorrow.

(Depending on how much wine flows o'er the (non-existent) tonsils. :-)

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

by ATinNM on Sun May 8th, 2011 at 06:26:23 PM EST
[ Parent ]

Of course, saving in debt based instruments (aka money) might pose a problem (because it means somebody else is accruing debt).

Precisely.

The problem with "savings" is that the everyday understanding of the term is "to hoard money." Hoarding money does not create investment, or accumulate capital. It merely enables you to lay claim to a larger share of whatever plant and labour exists when you move to spend the money.

Hoarding physical resources solves that problem, because you can now spend those resources directly. But hoarding physical resources is not without problems either - because now you're hoarding (that is, making unavailable) physical resources that someone else might have a productive use for. In an era of scarce physical resources, this may not be wholly appropriate.

In the end, the problem is that there is a relationship between productivity (how many hours, raw materials, etc. we must spend in order to obtain the finished goods we want) and the extent of the capital plant. In turn, there is a relationship between the extent of the capital plant and the rate of investment. And the rate of investment is driven by the state of demand.

So the answer to the question "why don't we just cut production and work hours in half?" is that this would not work under a market economy, where investments are determined by what manufacturers believe that they can sell. Because manufacturers would then allow their plant to deteriorate. In the standard growth theory models, cutting output in half would only, in the long run, cut work hours by a little under 40 %.

This may not seem like such a problem - after all, working 60 % of the time for 50 % of the goods isn't an atrocious deal. But during the time (a decade and a half or so) that plant is deteriorating, you'd have to work longer hours to obtain the same production (on average you'd have to work something like 1 % longer every year - minus any advances in total factor productivity). Again, in real terms this may not seem like a big deal, but it becomes politically untenable very quickly (I'm betting that people will forget how much they used to work fast enough that they will complain about increased work hours before the capital plant has fully deteriorated).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 9th, 2011 at 07:15:54 AM EST
[ Parent ]

The problem with "savings" is that the everyday understanding of the term is "to hoard money." Hoarding money does not create investment, or accumulate capital. It merely enables you to lay claim to a larger share of whatever plant and labour exists when you move to spend the money.

I think the fallacy here is the idea that money always represents the same thing. It does not. Imagine: 1 million people are expropriated of their savings which they planned to use to buy a (imported) car and that capital accumulation is used to say, build a dam?

As a layman, it strikes me that you are being too theoretical. For me it depends on how capital accumulation is used. Politics can help there.

This may not seem like such a problem - after all, working 60 % of the time for 50 % of the goods isn't an atrocious deal. But during the time (a decade and a half or so) that plant is deteriorating, you'd have to work longer hours to obtain the same production (on average you'd have to work something like 1 % longer every year - minus any advances in total factor productivity)

My impression again is that you are over-theorizing (and over-simplifying). Interestingly I think the seeds of an answer are in your own words: "minus any advances in total factor productivity".

I would really like to continue this discussion, but this is above my paygrade and I do not have the time (the deadline to submit my PhD is looming)

by cagatacos on Mon May 9th, 2011 at 08:32:36 AM EST
[ Parent ]

I think the fallacy here is the idea that money always represents the same thing. It does not.

Exactly. Economics is politics. It has no independent existence.

Economics is a political tool used to manage the activities of populations.

Money is a whip. Occasionally it's a carrot. It isn't a commodity, it isn't limited, and it doesn't follow quasi-scientific laws.

It would be possible - with some effort - to imagine different accounting systems with different inherent priorities. But currently, as soon as you start thinking about concepts like profit/loss, interest, ROI, GDP and the rest, you're already trapped inside a world of conceptual newspeak where certain thoughts become impossible, and only certain types of relationships between actors are acceptable.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Mon May 9th, 2011 at 09:00:16 AM EST
[ Parent ]

Indeed (none / 1)

I quite like this way of putting it:

(via).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 9th, 2011 at 02:54:32 PM EST
[ Parent ]

Re: The End of the European Dream (4.00 / 5)

Imagine: 1 million people are expropriated of their savings which they planned to use to buy a (imported) car and that capital accumulation is used to say, build a dam?

Money is not capital.

If the government wanted to build a dam, the government could always build that dam, provided that it can mobilise the manpower, cement, turbines and rivers required. The reason that you take money from the people who wanted to buy cars is in order to free up man-hours otherwise spent selling the cars, and hard currency otherwise spent importing the cars, for use on your dam project. It is not because the money is necessary or sufficient in itself: The government can always print more money in any amount it wants (except if it's in the €-zone, since the BuBa is staffed by gold bugs).

Interestingly I think the seeds of an answer are in your own words: "minus any advances in total factor productivity".

Yes, if you can increase TFP faster than the capital plant deteriorates from lack of maintenance, then you're golden.

Unfortunately, increasing TFP is hard. Only roughly half our GDP growth in the industrial age has been from TFP increase (the other half from a combination of higher labour force participation, greater raw material use and greater capital intensity). And most of the industrial age's TFP increase is from economies of scale, which would presumably reverse if we went back to small-scale, local production.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon May 9th, 2011 at 01:33:50 PM EST
[ Parent ]

JangoSierra has pithily captured the history of western civilization in one phrase.

"the government could always build that dam, provided that it can mobilise the... rivers required."

Suweet.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Mon May 9th, 2011 at 03:15:57 PM EST
[ Parent ]

I'd like to second this request for a synoptic overview of Chris Cook's ideas.
Sometimes there is a great advantage in having an idea expressed by a third party.
I also find my understanding is ephemeral- more so as I grow older.

Capitalism searches out the darkest corners of human potential, and mainlines them.

by geezer in Paris (risico at wanadoo(flypoop)fr) on Mon May 9th, 2011 at 08:33:22 AM EST
[ Parent ]

I can't write a definitive synopsis of Chris' work. I don't understand it well enough.

My understanding - subject to correction - is:

He proposes investment would be returned by the goods/services the productive unit outputs. This would be in two ways:

1. Direct use of the output

Example: investers in a windmill power plant would receive (time limited?) compensation in the form of electricity which they would use to power their own productive unit to manufacture goods/services.

2. Indirect use of the output

The investor would sell the electricity to a third party, in some manner or form, in order to reap the benefit(s) of their investment.

One result of this system would be to limit the Return on Investment (ROI.) Investment funds "tied-up" in an electric power plant can only receive an ROI limited to the actual Real Economy value of the electricity. Thus disabling the ability of certain classes of investors (read: rentiers, for one) to churn their investment at a higher rate than the wealth (in my example electricity) produced by the Real Economy.

In concrete terms, an investor receiving 100 megawatts of electricity for their investment can only get an ROI of what 100 megawatts of electricity is worth. Unlike our current predatory financial capitalist system, the investor cannot reap the benefits of selling 500 megawatts; if an investor tries they run smack into what is commonly called "Fraud."

One rather nice 'externality' of Chris' proposal is: it ties the health of the FIRE sectors to the health of the Real Economy. IF an investor gets an ROI based on the ability of their investments to produce goods/services THEN they have a vital interest in the continuing ability of their firms, say, to continue to produce over the long term. This is complete contradiction to our current system in which the Financial Interests - particularly the (so-called) "Investment Banks" - to deploy their capital (equity and debt) as quickly as possible and as many times as possible to maximize short-term gain. Effectively Chris' proposed system reduces the baneful effects of Compound Interest run amok.

And I'm going to stop here so Chris and weigh in and tell me where I got it wrong.

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

by ATinNM on Mon May 9th, 2011 at 01:50:27 PM EST
[ Parent ]

Re: The End of the European Dream (4.00 / 8)

Not just compound interest.

Also profit/rent, the demand for which is the 'cause' - by definition and accounting identity - of inflation.

We need an enterprise model where there is the creation, exchange and sharing of surplus value, but no rentier profit. In other words, a partnership framework, within which there is no profit and there is no loss - and if credit is created within such a framework agreement, then there is no compound interest either.

This presentation last year on Economic Systems Thinking gave a holistic view.

More specifically re housing here's a preview of a presentation in London on Tuesday to a Community Land Trust conference in which I am proposing a new approach to financing and funding of CLTs, and outlining one of several ongoing specific prototypes.

Hard work, but getting there, I think.

Also as a Senior Research Fellow my work on Resilient (ie decentralised, dis-intermediated and networked) Markets is getting a more 'serious' hearing.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun May 8th, 2011 at 08:09:48 PM EST
[ Parent ]

Congrats on the position, Chris. Puts you in a position to do more good and looks very good on the CV.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun May 8th, 2011 at 09:26:53 PM EST
[ Parent ]

You at the Feasta conference in Croke Park tomorrow? See you there if you are.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun May 8th, 2011 at 09:36:24 PM EST
[ Parent ]

Avoiding compound interest is easy: Do not allow it to compound. There's really nothing terribly mysterious about this point. It's the reason "negative amortisation" loans tend to go tits-up sooner rather than later.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Sun May 8th, 2011 at 08:52:32 PM EST
[ Parent ]

And is Friedmanite monetarism and Randian libertarianism "coherent"?

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon May 9th, 2011 at 01:51:48 AM EST
[ Parent ]

God, no.

My point (though not clearly written) was not on coherence. Much less on the economical part.

It was philosophical. Centre-"left" (and hard-"left") proposals have been a variation of greed. That was my point.

Economics is nothing more than philosophy (and religion) through other means.

In a completely different front, I much doubt that the human species has the cognitive capacity to produce anything "coherent". "Enough to keep things going" is the best we can do. Note that saying this does not make me an Austrian ;)

PS - I always rate posts and, at the end, click the browser "close tab" button instead of the page "Rate all" button. Sorry, but it is a habit difficult to break.

by cagatacos on Mon May 9th, 2011 at 08:42:37 AM EST
[ Parent ]

Install tribex and the rating is instantaneously posted every time you rate.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 9th, 2011 at 04:26:52 PM EST
[ Parent ]

cagatacos:

It was philosophical. Centre-"left" (and hard-"left") proposals have been a variation of greed. That was my point.

It is the dream of Cornucopia. Some time ago I read a Bradbury novel (I think) were dystopia was achieved by to much Cornucopia - nothing for people to do.

When dystopian science fiction writers can raise no objection to infinite growth on a finite planet other then that it will be boring, then you have a general capture of the minds.

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

by A swedish kind of death on Mon May 9th, 2011 at 05:26:24 PM EST
[ Parent ]

cagatacos:

Trading money for time

Some time ago I heard a speech from a veteran of women's movement. She told the audience that the influential group she belonged to in the 70ies decided not to push for 30 hour week with 40 hour pay for parents with small children (government chipping in the cost) as it was believed that a general shortening of the work week to 30 hours was just around the corner anyway. So they pursued different changes.

My point is not that they would have got it, but that in the 70ies politically interested people believed that a general 30 hour work week was just around the corner.

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

by A swedish kind of death on Mon May 9th, 2011 at 05:09:43 PM EST
[ Parent ]

Ruari Quinn, Past Labour Leader, Minister for Finance, and now Minister for Education is famous for saying c. 1970, that "the 70's will be Socialist" and that Labour would remove the tyranny of work from people's backs by reducing work through automation, new technology, reduced working hours etc.

The irony is that people have had to work much harder ever since, now it takes two wage earners to support a family, and the hours, never mind the intensity has increased.

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Mon May 9th, 2011 at 05:46:24 PM EST
[ Parent ]

Re: The End of the European Dream (4.00 / 10)

Frank Schnittger:

We need a Marx, Keynes, or a Krugman to articulate an alternative paradigm for Europe

Ghostly contributions from the first two notwithstanding, that leaves a lot of work for Paul Krugman who isn't European, all the same.

An alternative paradigm for Europe, that's up to us. Here on ET. Srsly.

It's what we should now be aiming at.

by afew (afew(a in a circle)eurotrib_dot_com) on Sun May 8th, 2011 at 04:22:31 PM EST
[ Parent ]

We need a Marx, Keynes, or a Krugman

Hardly so. None of those above understand housing market. We need Adam Smith, Henry George and Hyman Minsky.

by kjr63 on Sun May 8th, 2011 at 05:03:30 PM EST
[ Parent ]

I Don't Know (4.00 / 2)

But perhaps P.T. Barnum could 'splain it all to the Banksters. Or Al Capone.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Sun May 8th, 2011 at 06:24:01 PM EST
[ Parent ]

Re: The End of the European Dream (4.00 / 6)

We need a Marx, Keynes, or a Krugman to articulate an alternative paradigm for Europe and a political movement to make it happen.

Both of those things are essential. Right now, however, it seems the latter is more desperately needed than the former. There's no shortage of good analysis, and there are new paradigms being articulated, including at this site. But it's like shouting into the wind, because there's not much organizing going on. UK Uncut seems to be about it so far. The ground appears to be fertile.

And the world will live as one

by Montereyan (robert at calitics dot com) on Sun May 8th, 2011 at 10:16:03 PM EST
[ Parent ]

We need a Marx, Keynes, or a Krugman to articulate an alternative paradigm for Europe and a political movement to make it happen.

That's a 30-year process right there.

We're living through the beginning of a crisis analogous to the Great Depression or the 1970's Stagflation. Both ended with a substantially different political economy than they started with. In the case of Stagflation, the new political economy was the Reagan/Thatcher revolution, and Friedmanite market-worshipping Neoliberalism. The thing is, Friedman had been active long enough (and notorious enough) for the elder Galbraith to heap ridicule on him in The New Industrial State for being a starry-eyed market romantic 150 years out of date. Which means the ideology of 1980-2010 was already there in the 1960's.

If there's going to be a transition to a progressive political economy at the end of the tunnel we're now just entering, the ideas must already be in place. But, of course, being ridiculed by the establishment we may not be aware of how important they will become. It is also entirely possible that the political economy of the post-crisis system will be an authoritarian dystopia because there actually isn's a strong enough progressive ideology waiting in the wings (not just that we're not able to see its importance).

Economics is politics by other means

by Carrie (migeru at eurotrib dot com) on Mon May 9th, 2011 at 01:50:25 AM EST
[ Parent ]

http://www.othercanon.org/

Krugman is an orthodox economist.

by rootless2 on Mon May 9th, 2011 at 07:15:48 AM EST
[ Parent ]

Well, there's a big difference between Europe and the EU; and an even bigger difference between a single currency and a common currency.

I think that the European (and global) institutions are past their sell-by dates, ad the challenge is to create new ones.

As the man said, you can't solve 21st century problems with 20th century solutions.

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Sun May 8th, 2011 at 04:39:05 AM EST
[ Parent ]

Especially when our leaders represent a return to 18th century feudalism.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Sun May 8th, 2011 at 05:28:57 AM EST
[ Parent ]

You exaggerate!

We may be going back to the pre WW1 "Great Powers" in a multipolar world order - with all the attendant militarism and jingoism, but feudalism with peasants owned by local warlords seems a further step back...

Index of Frank's Diaries

by Frank Schnittger (mail Frankschnittger at hot male dotty communists) on Sun May 8th, 2011 at 09:22:00 AM EST
[ Parent ]