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Why I keep underlining bad news

by Jerome a Paris Sun Jul 6th, 2008 at 08:14:51 AM EST

Many of you have noted that my diaries persistently focus on bad economic or financial news, and often announce more to come. A few complain that I'm gloating over other people's misfortunes; some point out that it's too easy to be systematically negative, as I'll eventually be right, if temporarily (in a "broken clock" kind of way), but that means little; and many more are seriously scared by all my doom'n'gloom.

I'd like to note, for the record, that bringing up such bad news (the real estate crash, the increasing energy prices, the financial crisis, etc...) has a very real political purpose and is at the heart of what this website is about.


A simple argument, that I have made on occasion, is that bringing up such negative news a couple of years ago was necessary, given the then prevailing bullish discourse. The prognosis was correct, both about the crisis we are in now, and its causes. This is not about shouting "recession" every year until it happens as part of a regular cycle: this was about identifying underlying failures of the economic regime we were in, and pointing them out despite the general cheerleading (or denial) in the media and the political world. It was about being reality-based.

But more importantly, this is about identifying causes and allocating responsibility for what's happening today. The crises I have been describing are a direct - and in many cases, desired - result of political choices that have been imposed on us, and it is fundamentally important that the underlying ideology be (i) identified and (ii) blamed for what happened, rather than amorphous and uncontrollable things like "globalization" or "economic cycles." There is a crime, there is a culprit, and there is a motive.

Even more vital is the need for an alternative discourse to take root against what still is an apparently overwhelming consensus amongst economists, analysts, pundits, politicians and other "serious" people about what should be done. Given that this dominant discourse still claims a lot of legitimacy by trashing out (an imaginary version of) the alternative model, there must be a coherent effort to underline that today's problems come specifically from the policy recommendations of that consensus, and that their calls for more "reform" today is quakery, not statesmanship.

We are at the end of a 30-year process which has brought a very simple principle to the fore: "Winning is Everything." Making extravagant amounts of money is a good thing (and a proof of success), stepping on others to get there is normal, and not doing either means that you are a loser and deserve your status (and thus should not be helped).

Taxes for the rich have been cut drastically; wages have been kept down (it, rather than fighting asset bubbles, is at the heart of the anti-inflationary policies we have "enjoyed"), and the arch-dominance of the New-York- and London-centered financial vision of the economy has spread to the body politic (something has value only if it can be expressed in monetary terms, and its future price discounted today, the rest is populism or conservatism). Meanwhile, culture wars have helpfully distracted the populace, with the more recent help of large doses of fearmongering.

Growth means 'more billionaires'. Progress means 'less taxes' and 'lower wages'. Freedom means anything that brings "growth" and "progress."

This is a purely political process. It can only be reversed by a similarly political process. And that will happen only if the current situation is correctly diagnosed for what it is, ie an overdose of neo-feudalism (or, as I have labelled it, the Anglo Disease), and if that leads to a full repudiation of the underlying politics, and a symetrical rehabilitation of concepts like "government policy", "long term planning", "infrastructure development", "equality", "fairness", "resiliency"

The current crisis has been caused by the greed of a few, and the policies they have foisted upon us all. It's time to blame them, and make them pay back. The facts are on our side, even if the conventional wisdom of the pundits hasn't caught up yet. It's our job to push these simple notions in the open, so that policies can change.

Display:
It's definitely the case that we need to pin the blame on those who got us to this point, otherwise they'll be free to carry on.
by Metatone (metatone [a|t] gmail (dot) com) on Sun Jul 6th, 2008 at 09:19:32 AM EST
It's definitely the case that we need to pin the blame on those who got us to this point

I agree. It is, however, a huge educational task.

In recent oral proceedings before the German Federal Constitutional Court, a prominent member of the Federal Diet was asked: «Why did you cast a positive ballot on this bill?» --- «Because we were told so.»

The classical parties had a sociological substrate that checked on them; the modern Volkspartei (catch all party) lives by comparison in a fantasy world. «The world as Will without Representation», as one quipped in the 1930s' Germany.

Historically, both the bureaucracies of the continent and the English Gentry had to appeal to the  public opinion in order to prevail. They had to demonstrate their impartiality, competence, respect for the Common Good.

Our problem is now how to replace (or adapt) the old mechanisms by new ones, more adapted to our times.

by Humbug (mailklammeraffeschultedivisstrackepunktde) on Sun Jul 6th, 2008 at 05:14:18 PM EST
[ Parent ]
I think putting the blame on the greed of the few lets everyone else off too easily. We are the ones who buy the SUV's, who buy bottled water, who demand McMansions and who expect 15% annual returns on investments.

Have these demands been manipulated by big businesses looking to increase their sales? Of course, but we are the ones who decide that Prada is cool this year and old hat next.

As for the behavior of large firms, I think that much of the blame goes back to average investors. Most people putting money in the stock market expect to see returns of 15-30%, in spite of the fact that long-term rates are more like 7-8%. What happens as a consequence is that firms which fail to deliver these sorts of unsustainable returns find themselves under pressure from mutual funds and corporate raiders. The managers either start pumping up the stock price or are forced out and replaced by less prudent ones.

There are people on this site, for example, who are relatively immune to consumerist pressures, which shows that giving in to excess is still an individual choice. By blaming the corporate leaders who are just responding to the demands of investors we are diverting attention from the real problem.

We all have to change our behavior and lifestyles and we have to demand that others do so as well, otherwise there will be some nominal changes directed at the management scapegoats and the reforms will be misdirected and inadequate.

To quote the sage Pogo, once again: "We have met the enemy, and he is us."

Let's hear some ideas which are feasible from technological, political and cultural points of view. All I see is a fearful populace (and I don't just mean in the US) saying "do something" instead of "what can we do?". This is the whole zeitgeist of the Obama campaign: a new leader who will lead us out of the wilderness. We don't have to wait to be led, we can do it ourselves, but so far we aren't motivated.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sun Jul 6th, 2008 at 09:58:20 AM EST
Sorry, but who is we? I do not buy a SUV nor do I have a 15% return for my investment, nor do I own a McMansion.
by Fran on Sun Jul 6th, 2008 at 10:04:10 AM EST
[ Parent ]
Fran:
I did say:
There are people on this site, for example, who are relatively immune to consumerist pressures, which shows that giving in to excess is still an individual choice.

However, we in the west still consume at rates unheard of in most of the world, so even the best of us are only relatively virtuous.

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Sun Jul 6th, 2008 at 10:51:08 AM EST
[ Parent ]
Sorry, seemed to have skimmed over that part. But if I look at the people I know, the same goes for most of them, no return on investment, or SUV's, etc. so there are a SUV's on the street, but they are in the minority.

And I do agree, though they are not huge consumers, they still consume to much and carelessly. So there is room for improvement and this level too, but it is much smaller than for the McMansion and SUV types.

by Fran on Sun Jul 6th, 2008 at 10:59:16 AM EST
[ Parent ]
I have been thinking a few times that we should have laws (taxes) against 'billionaires'. Who needs them. Okay I know some people say, being able to become rich is an incentive for some. I don't mind millionaires - but why not limit it to 50 millions, for example. Keep the money circulating.

How are the people supposed to keep the economy going if the do not have decent salary to lead a decent lifestyle with. Aren't the consumers the motor of the economy?

Yes, the next thought would be the environment - so having less billionaires, and millionaires and people with enough money to buy solid quality durable goods instead of junk, wouldn't that be better for the environment too?

Just my 2 cents on a Sunday. :-)

by Fran on Sun Jul 6th, 2008 at 10:01:33 AM EST
so having less billionaires, and millionaires and people with enough money to buy solid quality durable goods instead of junk

should say:

millionaires and more people with enough money to buy solid quality durable goods instead of junk
by Fran on Sun Jul 6th, 2008 at 11:23:55 AM EST
[ Parent ]
people should be able to keep their first million, then if they're such work junkies they don't want to move over, they can keep it up, but have to donate salaries to the needy.

heresy!

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Sun Jul 6th, 2008 at 12:32:56 PM EST
[ Parent ]
European Tribune - Why I keep underlining bad news
Freedom means anything that brings "growth" and "progress."

I'm sure there's a whole diary in what freedom is, I mean for much of the 70s and 80s freedom consisted of not having to queue in the shops  in Eastern Europe, and not having to have Identity cards or permission to travel widely.

However somehow, freedom to get a proper education, or proper medical care was never freedom for some reason I've never quite understood, however the freedom to charge people for medical care  was a freedom

Perhaps I just need to get a dictionary out to properly understand, as my knowledge just seems confused.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Sun Jul 6th, 2008 at 11:17:13 AM EST
You will find that if you substitute "oil" whenever you read "freedom" things will make more sense. It's not a perfect match by any means, but it goes quite a way for such a simple solution...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jul 7th, 2008 at 03:28:26 AM EST
[ Parent ]
Perfect.  Exactly.  An antisocial system based on a failed, but endlessly touted, economic system.  The dirty tail of the dog.

I don´t want to give up on naming names for legal responsibility of this global disaster, right down to the local level, but how do we start to turn the touting around, so that more people will demand ´justice´?  You are spreading reality as fast as you can, but how do we form our own ´navy´?

I´m drawing a frustrating blank.

Our knowledge has surpassed our wisdom. -Charu Saxena.

by metavision on Sun Jul 6th, 2008 at 12:28:52 PM EST
There are NO short term solutions: the two longest lasting forces of change in society are the quality of teachers and the quality of those who decide upon justice according to the 'law'- both of which (the law and education)  change themselves over generations, not quarters of years.

That does not necessarily mean that they should be the highest paid professions, but they should be the best supported organizations, in resources, independence and the facility of moral debate.

It's never going to happen. of course.

The fundamental paradox of society is that it contains individuals with a finite life, but is itself (seen from the individual point of view) infinite.  Two asynchronous cycles that rarely interesect in their rhythms.

Societies as cultures, are, of course, not infinite. Civilizations build up and collapse. We may be seeing the collapse of 'ours' now.

But those two factors - education and the law - are the two essentials to the continued evolution of any society. Even if, in the end, they become worthless. History is jam-packed with the imposition of alien cultures upon the losers of empire expansion. The invasion of Southern Europe by the Moors was no different, really, to the arrival of Martians.

But what the Moors (or any cultural invaders) bring/brought was a paradigm shift in what education and the law are about.

I'm all for it ;-)

You can't be me, I'm taken

by Sven Triloqvist on Sun Jul 6th, 2008 at 01:10:59 PM EST
[ Parent ]
It's never going to happen. of course.
...
History is jam-packed with the imposition of alien cultures upon the losers of empire expansion.
...
But what the Moors (or any cultural invaders) bring/brought was a paradigm shift in what education and the law are about.

As I read the first line (a spasm of apathy perhaps), I thought, "He doesn't believe this."

Then the twist of the 'imposition upon the losers' line reminded me of changes upon the victors as well, though this is not always so clear. I can't say that we have had any influence on the Bushites, though they have been somewhat beaten down.

But the enthusiastic remark after the final line concerning the paradigm shift...that's the heartening melody of hope that I expected from you.

That there are schools at all after the last 40 years is actually amazing. I think Jerome is wrong by saying this cycle is 30 years old. I mark it from the election of Reagan in California, which was devastating for public institutions and commons in general and education in particular and was a lab for the terror that the corporate socialists brought to the national scene later.

They came at the time that education was getting revamped toward more importance, and they were able to squelch that in America. But now that they are losing influence, I think education will be one of the first areas to re-seed and flower.

Never underestimate their intelligence, always underestimate their knowledge.

Frank Delaney ~ Ireland

by siegestate (siegestate or beyondwarispeace.com) on Sun Jul 6th, 2008 at 01:59:04 PM EST
[ Parent ]
There are good reasons imo to trace the 'changes to the victors' back to WWII.  The logistic-based transmutation of American business and its management, starting in the Fifties, can be traced directly back to WWII problem-solving.

The other side of that coin was the European experience: "war is terrible, look at all these dead civilians - our neighbours".

The slow bifurcation of two essentially similarly-based cultures, is the theme of the last 80 years - let alone 30.

And, as you say, it is the impositions of 'victory' upon the winners, as much as the losers, that drive social change. (or maybe I am going too far with that thought?)

Think about that capitalist notion of slavery. A cheap energy resource for WASP expansion in the 18th C onwards. An historical  business decision that still echoes loudly  in North American culture - and unlikely to quiesce any time soon.

This is what has occupied my thinking in recent months: the asynchronous time cycles of different world-views. The quartal view, the career view, the 'when will I die' view', the 'when will christianity die' view etc etc.

We've never really had to think cosmically before, apart from a few hard to read philosophers. Education has to be that broad imo.

You can't be me, I'm taken

by Sven Triloqvist on Sun Jul 6th, 2008 at 02:37:38 PM EST
[ Parent ]
Think about that capitalist notion of slavery. A cheap energy resource for WASP expansion in the 18th C onwards.

Not to mention Latino expansion from the sixteenth century onwards. The Brits actually were the first major imperialist power to abandon slavery. The growth of the European (ex) colonies was primarily driven by poor European settlers be that in English, Spanish, or Porgtugese speaking areas. It turned out that for modern capitalism, the legal and economic strictures of a market economy are far more efficient at generating wealth for the elites than chattel slavery. Those areas that had been particularly dependent on the early modern system of slave labour tended to fall behind (US South, Caribbean, northern Brazil). The same was largely true in Europe as well with a pretty good correlation between the persistence of serfdom and relative poverty and economic underdevelopment.

by MarekNYC on Sun Jul 6th, 2008 at 03:08:37 PM EST
[ Parent ]
Good insight

You can't be me, I'm taken
by Sven Triloqvist on Sun Jul 6th, 2008 at 03:28:55 PM EST
[ Parent ]
Oh, I see.  And, how do we form our 'navy', captain?

Our knowledge has surpassed our wisdom. -Charu Saxena.
by metavision on Sun Jul 6th, 2008 at 03:42:44 PM EST
[ Parent ]
I'm from the forecastle part of the ship. All I know is ropes. You'll have to ask the admirals ;-)

You can't be me, I'm taken
by Sven Triloqvist on Sun Jul 6th, 2008 at 05:09:55 PM EST
[ Parent ]

There is a crime, there is a culprit, and there is a motive.

And it is vital that enough people realize this in the US for something to be done. (I'll leave Europe to those who know more about it.)  Failure in that regard is my greatest fear concerning the outcome of this year's elections.  If Democrats capture the presidency, expand their majority in the House and get 60 in their caucus in the Senate and still fail to undermine and replace the pernicious prevailing paradigm in political economy, we may never get another chance, at least in the context of the Constitution, Bill of Rights and current form of government.

It is profoundly discouraging that such sentiments can be dismissed as Doom Mongering.  Everyone wants to feel good.  The easiest way to continue doing so is to deny the reality of everything that would bring you down.   Such denial usually only fails catastrophically. Such a  catastrophe appears to be upon us.  The facts of the ensuing chaos is perhaps, this time, more to our advantage than to that of the Shock Capitalism folks who have brought us the catastrophe.  Yet that is far from assuring success.  But it is the best chance for genuine change and improvement since Watergate.  

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

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Jul 6th, 2008 at 01:31:25 PM EST
I'd like to note, for the record, that bringing up such bad news [...] has a very real political purpose and is at the heart of what this website is about.

This is why it is so important to sort out the systemic part (the Anglo Disease) from the cyclical part (recession / expansion -- natural economic cycles), to point out -- no, to demonstrate -- that what is happening to us these days is not only the effects of a temporary down cycle.

Yes, recessions happen, happened before, will happen again. But underneath these "seasonal" variations, there's a pattern: the pattern of a political system that has been more or less imposed on the whole planet over the last decades (since Reagan/Thatcher? since WWII? doesn't matter) and this very system is now starting to fall apart: extreme concentration of wealth, financial engineering as the ultimate "industry", pillaging of the planet's natural resources and the Asian countries labor pool...

The real challenge for the progressives is to put a new narrative together. Pointing out the system's failures is just a starting point. Staying there will just get you branded as a doom monger (correction: you'll be branded a doom monger anyway, but not let that stop you, truth tends to be anything but popular).

by Bernard on Sun Jul 6th, 2008 at 02:57:09 PM EST
I've been following your posts for quite a long time now. I rarely comment, but I suppose I am one of the many who silently find your texts absolutely fundamental.

It is not only the underlying assumptions (which were not that difficult to discover if one passes behind the propaganda), but especially the quality of the argument, the near perfection of the synthesis.

The only problem that I have with your analysis is that it is loosing some of its novelty (countdown to $200 oil after countdown to $100 oil doesn't add that much per se).

More than analyzing the flaws of the current system, what we need, I think, is to meditate on the near and medium term future (post-peak, the end of permagrowth). How will this future be like? How should we move in order to make it better?

I must confess that, up to now, forecasting the short term future was not a very complicated exercise for myself. But we are living interesting times (as in the curse), and I confess that I am always expecting to have your insights on what the future might look, because what I see is too cloudy to get a clear picture of it.

I actually do think you don't underline the bad news, it is just the future that looks rather bleak...

by t-------------- on Sun Jul 6th, 2008 at 03:04:13 PM EST
If it is any reassurance to you, I also feel I am repeating myself at times, and would like to be able to work more actively on proposing solutions. But that's a bit more time consuming and beyond me right now. Some successor to Energize America, and the same for Europe would be worthy causes.

On the other hand, there is a need for the discourse in this diary to reach a wider audience, which has yet to hear it. I'm not sure how to do that either.

At least I'm privileged enough that my professional life is actually helping things go in the right direction.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Jul 6th, 2008 at 03:21:00 PM EST
[ Parent ]

On the other hand, there is a need for the discourse in this diary to reach a wider audience, which has yet to hear it. I'm not sure how to do that either.

I think it is too late for that: Reality is changing now, your analysis, albeit correct now will be dated in one year (I am using my foggy crystal ball which says that resource scarcity issues will accelerate in the next year dramatically).

The "anglo model" is getting to its knees, we are entering a scarcity world.

How to deal with scarcity, the end of permagrowth, "back to basics" will be the next narrative, just around the corner. We need to act on that...

by t-------------- on Sun Jul 6th, 2008 at 03:58:42 PM EST
[ Parent ]
On the "bright" side, "Countdown 200" promisses to be a lot shorter.
by Torres on Mon Jul 7th, 2008 at 06:55:48 AM EST
[ Parent ]
is there a guess when oil hits $200 sweepstake here?

My prediction is for October 23rd.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Mon Jul 7th, 2008 at 07:28:41 AM EST
[ Parent ]
I was only reflecting what i read around here. At 42% /year it puts the target before the end of 2008. Not learned enough to make a more precise educated guess, I'm  afraid.
by Torres on Mon Jul 7th, 2008 at 01:25:53 PM EST
[ Parent ]
... crisis that will hit the United States over the next decade ... it has been a political choice to engage in sprawl development. It is constantly framed by apologists of the status quo as "Americans prefer it" without ever explaining why, if Americans prefer it so strongly, does it have to be mandated with anything other than, for example, single use, single occupancy buildings requiring an exception in most suburban residential areas and, indeed, most allowed exception themselves being single-use buildings, whatever that use may be.

IOW, the latest Midnight Oil is now up, on EENR, including the Midnight Thought previewed here earlier this week. Anyone wanting to help a little bit with Paul Reveering are welcome to drop by to comment and rec.


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 Sun Jul 6th, 2008 at 08:38:34 PM EST


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