Category: History

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Economics History The Opinionsphere

The Reagan Revolution (cont.)

I’m a bit annoyed at the fact that Krugman’s book – which I have not read – makes almost precisely the same point I’ve been making – but which I thought was mine independently, though inspired a bit by a phrase Stephen Metcalf tossed off in an essay on Tom Cruise:

The ’80s did for money what the ’60s did for sex.

Instead, from that phrase – likely inspired by Metcalf’s reading of Krugman – I reconstructed the view of history Krugman was advancing. I wrote:

This stability of the 1950s and 1960s came at the expense of tamping down certain social and economic forces. The social stability was torn apart by the Civil Rights movement, feminism, free love, and the later radicalisms of the late 1960s and early 1970s. This culture war has been dominating politics since then.

The economic stability of this period was destroyed by the forces of extreme capitalism, greed, deregulation, and other economic radicalisms of the 1970s and early 1980s – as labor unions were undermined, executive compensation grew exponentially, social mobility was impeded, and economic power concentrated in a handful of large corporations.

Lindsey quotes Krugman’s book in his essay:

For a generation after World War II, fear of outrage kept executive salaries in check. Now the outrage is gone. That is, the explosion in executive pay represents a social change…like the sexual revolution of the 1960’s—a relaxation of old strictures, a new permissiveness, but in this case the permissiveness is financial rather than sexual.

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Economics History

The Reagan Revolution (continued as Paul Krugman echoes me)

[digg-reddit-me]Well – not quite.

I actually cited a Krugman post in my initial post on how the Reagan Revolution caused the financial crisis (followed up with this and this.) So, it’s more like I was influenced by Krugman who then went on to echo a point I made (which I presume he arrived at independently.) As regular readers of this blog know, I tend to agree with Krugman on the broader trends at work in society (citing him here, here, and here for example) – and find him to be a generally insightful and thoughtful analyst of them – but often angrily disagree with his short-term takes on issues (see here, here, here, and here).

But here Krugman is in his most recent column:

For the more one looks into the origins of the current disaster, the clearer it becomes that the key wrong turn — the turn that made crisis inevitable — took place in the early 1980s, during the Reagan years.

As I wrote back in March, somewhat more eloquently:

Take away the regulations; encourage short-term profits; reduce taxes; trim the social safety net; “starve the beast” by spending without taxing; and then supercharge the economy with constant stimulus spending (which is what “starve the beast” is) and easy debt from China and Japan. What you get from this is not only a revolution that undermines the American way of life in the mid-term – as wealth is concentrated and middle class and manufacturing jobs dry up – but an unsustainable economy that is going to collapse, and collapse hard.

In other words, you get what we have now.

Today, we are reaping the effects of the generational bargain at the heart of the Reagan presidency.

I also think my analysis captures a subtlty Krugman’s piece lacks – and that Krugman himself often lacks. His conclusion is tougher in scapegoating specific individuals than mine:

There’s plenty of blame to go around these days. But the prime villains behind the mess we’re in were Reagan and his circle of advisers — men who forgot the lessons of America’s last great financial crisis, and condemned the rest of us to repeat it.

I’m not sure that that’s correct. It’s hard to call men villains if they are not aware of the wrong they do – and if the effects of their actions are essentially not predictable. Instead, what I believe is that Ronald Reagan created a generational bargain by accident – a bargain in which the successes of his presidency – of financial deregulation and rapid growth and huge deficits – would be paid for by my generation. I don’t think this was intentional – or predictable. But what should have been clear was that the financial dynamics the Reagan administration shaped were unsustainable.

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History Humor Iraq Morality National Security Reflections The Bush Legacy The Opinionsphere The War on Terrorism

Must-Reads This Weekend

Nuclear Porn. Ron Rosenbaum writes about how hard-core our nuclear fantasies have become in an essay for Slate:

I love airport best-sellers because I see them as our Nostradamuses, the literary canaries in the dark coal mines of our paranoia. They sniff out and serve up fictionalized but “realistic” prophecies of coming doom of one sort or another. Perhaps it’s that in their visions of total world immolation they diminish in the mind of said traveler the possibility of something so trivial as a 757 engine malfunction.

The Awakening. David Rose investigates the Sunni Awakening in an article for Vanity Fair. The big news: apparently the initial approach by the Sunni insurgents offering to work with America came in 2004 – but was rejected as a result of turf battles and ideology. 

Happiness. Joshua Wolf Shenk tells the story of the most significant longitudinal study in history (so far). He reveals that one of the participants in the study (all of whom were chosen while they were in college) was John F. Kennedy. The study itself is fascinating – and Shenk’s piece was reflective and probing:

“I’m usually callous with regard to death, from my father dying suddenly and unexpectedly.” He added, “I’m not a model of adult development.”

Vaillant’s confession reminded me of a poignant lesson from his work—that seeing a defense is easier than changing it. Only with patience and tenderness might a person surrender his barbed armor for a softer shield. Perhaps in this, I thought, lies the key to the good life—not rules to follow, nor problems to avoid, but an engaged humility, an earnest acceptance of life’s pains and promises…

Torture and Truth. Ali Soufan testified in Washington – but while he was constantly interrupted by an edgy Lindsey Graham, his written statement is a testament of a man who was there: 

The issue that I am here to discuss today – interrogation methods used to question terrorists – is not, and should not be, a partisan matter. We all share a commitment to using the best interrogation method possible that serves our national security interests and fits squarely within the framework of our nation’s principles. 

From my experience – and I speak as someone who has personally interrogated many terrorists and elicited important actionable intelligence– I strongly believe that it is a mistake to use what has become known as the “enhanced interrogation techniques,” a position shared by many professional operatives, including the CIA officers who were present at the initial phases of the Abu Zubaydah interrogation. 

These techniques, from an operational perspective, are ineffective, slow and unreliable, and as a result harmful to our efforts to defeat al Qaeda. (This is aside from the important additional considerations that they are un-American and harmful to our reputation and cause.) 

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History National Security The Bush Legacy The Opinionsphere The War on Terrorism

The Lessons of Torture in World War II

[digg-reddit-me]When I first started this blog, I told the story of two different interrogations at the beginning of Bush’s War on Terror – one using traditional methods which yielded actionable intelligence; and one using “enhanced” techniques which yielded false information. Now – in the past few weeks with Obama referencing Winston Churchill in defense of his administration’s anti-torture stance, a battle has broken out over torture in World War II. Keith Olbermann and Bill O’Reilly engaged in a skirmish earlier this week – but at the same time, two academics have written pieces about the broader historical context – both of which purport to demonstrate how torture helped the Allies win the war. 

N.B. Keep in mind while reading these stories that the justification for using torture that American proponents utilize is that it is an essential intelligence tool that is necessary to produce actionable intelligence quickly.

Julian Sanchez told the first story about how torture helped win “the Good War.” The Japanese tortured an American airman in the immediate aftermath of the bombings of Hiroshima and Nagasaki trying to get information about this bomb program. The airman “confessed” that America had hundreds of atom bombs ready to drop on Japanese cities. In turns out, the airman knew nothing of the program – and America has just used the only one left in it’s stock. It’s unclear what effect this information had – but this false information gleaned from torture had to have had an effect on Japan’s leadership as they debated whether or not to surrender. Sanchez doesn’t lay out the lesson – but based on his presentation, it is clear: Torture produces false information.

Andrew Roberts, who claims to be an historian, tells a different story in The Daily Beast. He starts out explaining what the lessons he wants to convey is –  the “crucial truth” about torture during World War II that he makes clear will support the right-wing defense of torture. Roberts writes:

When troops need information about enemy capabilities and intentions—and they usually need it fast—moral and ethical conventions…have repeatedly been ignored in the bid to save lives.

So far, a relatively uncontroversial reading of history. But the next sentence is a doozy:

In the conflict generally regarded today as the most ethical in history, World War II, enhanced interrogation techniques were regularly used by the Allies…[my emphases]

Google records 0 instances of anyone calling World War II the most ethical anything in history. For good reason – first, Roberts entirely mis-states what he means to say – that the Allies conduct in World War II was the most ethical in history; secondly, from the firebombings of Dresden and Tokyo to the atom bombs dropped on Hiroshima and Nagasaki to the interment of hundreds of thousands of Japanese-Americans there are quite a few barbaric acts associated with the Allies in the war. What Roberts should know – as an historian – is that World War II is widely regarded as a “good war” – one of the few – not because our conduct was exemplary – but because the war was against evil forces that left no choice but for the Allies to violently oppose them. Roberts only uses this as a throwaway phrase – more important is his second point – that “enhanced interrogation techniques were regularly used by the Allies.” 

Roberts spends the rest of his piece not backing up this assertion – except by innuendo. The story Roberts chooses to tell is of Operation Fortitude – Britain’s program that used German intelligence agents to feed misinformation to keep the bulk of the German army away from Normandy on D-Day. But in terms of “enhanced interrogation techniques” being used on these agents, he literally offers no proof. This is the closest he gets:

If anyone believes that SIS persuaded each of these 19 hard-bitten Nazi spies to fall in with Operation Fortitude by merely offering them tea, biscuits, and lectures in democracy, they’re being profoundly naïve.

Once again – a Google search for “Operation Fortitude” and torture yielded no results backing up Roberts’s history. Roberts himself cites not sources or records or accounts – and for what it’s worthy, torture is hardly the traditional method of turning a double agent. 

What you find instead are accounts that explicitly reject Roberts’s innuendo. Colonel Robin “Tin-Eye” Stephens who ran the interrogation center that turned these German spies into double agents for the same Operation Fortitude banned violence saying:

Never strike a man. It is unintelligent, for the spy will give an answer to please, an answer to escape punishment.

Stephens was manipulative – and held the threat of lawful execution over the German spies’ heads – but he understood that it was idiotic to torture them for information. Roberts gives no source for his rejection of the historical facts – but instead accuses those who accept them of being “profoundly naïve.”

Still – even if we are to grant Roberts his premise – that these agents were recruited as doubles by means of torture – his story still wouldn’t demonstrate that torture was “regularly used by the Allies” or capable of getting accurate “information about enemy capabilities and intentions.”

The story Roberts tells – if anything – undermines the idea of torture as an interrogation tool. Time and again – even in Roberts telling – history demonstrates that torture is an exceptionally effective tool to break an individual, to get them to confess to something regardless of it’s truth. Unfortunately, it is substantially documented that our intelligence agencies adopted a program of torture without knowing it’s history. What is almost inexplicable is how an historian such as Roberts can today still try to justify this program when the history of the methods used has been dragged out into the open.

Continue reading “The Lessons of Torture in World War II”
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Economics Financial Crisis History The Opinionsphere

Theories of the Financial Crisis: The Government Did It!

[digg-reddit-me]

The first person out of the box promoting the idea that the current financial crisis was actually caused by the government (specifically Democrats in the government – and even more specifically Barack Obama) was Rush Limbaugh. On the day Lehman fell (this crisis’s equivalent of September 11), Rush Limbaugh was already trying to exploit it for partisan gain – claiming “Capitalism Isn’t the Problem: Government Caused This Crisis.” On this date of crisis, Limbaugh had already unveiled in a near-complete form what was to become the Republican party’s position on the crisis. He embraced positions that had previously been associated with the Austrian School of Economics – but without much of the ideological baggage they had with them. He only embraced as much of them as was politically convenient – and he applied them only so far as they made Democrats look bad. He also began blaming Barney Frank for this crisis – something which many other right-wingers picked up on. Though I for one find it hard to see how this person who was a member of a Congressional minority had so much power to influence the entire economy and cause this severe crisis and the causal chain has never been made clear. At least to me.

Within a few days of the near-collapse of the financial system – with the crisis still causing panic – Limbaugh was already trying out names he could use to brand the crisis – from the “Democrat-Caused Financial Crisis” to the “Obama Recession.” None of them quite caught on as most people with common sense found it hard to blame Barack Obama for a crisis that occurred before he had won the presidency. But the right faithfully repeated this meme. (It has often seemed to me that Rush Limbaugh – with his vast influence via memes and love of pranks – is a forerunner of and competitor to 4chan.)

I need to say two things going into this: (1) for my analysis, I am merely standing on the shoulders of economists more knowledgeable than I – when it comes to economics especially, I am – clearly – just an interested amateur; and (2) I came to this issue biased against this theory of the financial crisis – although not with my mind closed to it. The best expression of why I started out biased against this idea is probably the analogy Tyler Cowen used while debunking it. Cowen invoked the legal principle of the “thin skull” – in which someone at fault is considered responsible for all the damage caused by their actions, even if a person without a thin skull would not have been seriously hurt by such damages. For example, if you were responsible for a car accident and the other party was injured seriously as they had a thin skull which was damaged much more than a normal skull when it banged into the side window, you would be responsible for even the extraordinary damages resulting from that individual’s medical condition. Cowen explains that those seeking to blame the government for the business cycle and/or the current economic crisis:

…are postulating a very thin skull for markets and then blaming government for the disaster which results from government’s glancing blow to that skull.

A surprising amount of the debate over what caused the current crisis centers around the causes of and solutions to the Great Depression. The reason for this is not because there is widespread disagreement about this among historians or economists – but because the Republican party has embraced recent revisionist histories to make their case against the current intervention. The traditional understanding – between Keynesian and members of the Chicago School is that the Great Depression was made worse by the application of variations of this “thin skull” theory – as Herbert Hoover heeded advice to do little or nothing to combat the financial crisis – preferring to allow the market to fix itself. As Paul Krugman describes (from a 1998 Slate column):

The hangover theory can do real harm. Liquidationist views played an important role in the spread of the Great Depression—with Austrian theorists such as Friedrich von Hayek and Joseph Schumpeter strenuously arguing, in the very depths of that depression, against any attempt to restore “sham” prosperity by expanding credit and the money supply.

But Amity Shlaes authored a recent history of the Great Depression to dispute this traditional understanding which had made her a hero of Republicans everywhere who have begun to cite her book more often than the Bible – almost. Shlaes passes herself off as an intellectual, but seems to be as partisan as Paul Krugman on his worst days. And her understanding of economics is quite shallow compared to the Nobel prize winner’s. Jonathan Chait in The New Republic took on Shlaes book – pointing out the holes in Shlaes revisions – how she attempted to blame liberalism for causing the crisis despite the fact that liberals had been out of power for the eight years before the depression started – and for the first three years after. She manages to pull this off by claiming that Herbert Hoover was a secret liberal interventionist – and blames Hoover’s meager attempts to stop starvation for undermining the recovery that her ideology maintains was imminent. Shlaes also fails to account for how we finally got out. As Chait explains:

[T]he classic right-wing critique fails to explain how the economy recovered at all. In one of his columns touting Shlaes, George Will observed that “the war, not the New Deal, defeated the Depression.” Why, though, did the war defeat the Depression? Because it entailed a massive expansion of government spending. The Republicans who have been endlessly making the anti-stimulus case seem not to realize that, if you believe that the war ended the Depression, then you are a Keynesian.

James Glassman’s influential arguments (in some circles) against any stimulus plan seem to have been inspired mainly by Shlaes’s flawed history.

Today’s crisis appeared at first glance (to most economists and us less enlightened citizens) to have been caused not by government interference but by private bankers controlling vast sums of money taking dumb risks with little government oversight. In time, other factors have come to the forefront, but this basic explanation seems right. Yet right-wingers and the Republican party continue to insist that government intervention was the cause – often out of what they see as a political necessity.

But on the other hand, there are some who seem to have less of a partisan interest in blaming the government for this crisis – and have embraced the Austrian School of Economics out of conviction rather than temporary partisan gain. Ron Paul, for example, blames both Democrats and Republicans for causing this mess. He seems to accept this “thin skull” logic and he has become an influential proponent of the Austrian school of economic thought. This school had its heyday in the 1920s as a result of Hayek, Mises, and others grappling with the issues of that time and perhaps most importantly discovering the business cycle. But this theory was largely abandoned as many saw it as responsible for worsening the Great Depression – as during the first years of the crisis, portions of the Austrian School’s prescriptions were tried. The theory was largely developed before the invention of central banks and while currency was still on the gold standard – but it had important insights in its time. Contemporary proponents such as Ron Paul tend to blame the changes to the financial system created to manage the boom-and-bust business cycle for causing the boom-and-bust business cycle. Yet this cycle has been part of capitalism since it’s inception – and has been managed since Great Depression by central banks and others using Keynesian theory and its successors relatively successfully. 

The appeal of this Austrian School of though though – aside from the partisan appeal for Republicans who are allowed to blame everything on liberals – is a moral one. It functions as a kind of religion-like palliative, telling a comforting story of sin and redemption. The Austrian business cycle tells of a recurring morality tale in which virtue is corrupted, until the sin of easy credit leads to the fall of the system. Then, the Market cleanses the world and virtue is restored to it’s proper place. The proper role of the economist in this is to act as a kind of priest – urging the people to stay true to this belief system in the face of adversity – to keep their faith that eventually the god of the Market will make everything better.

This fits well with the religious right of the Republican party – and perhaps this is why despite the theory’s rejection by most mainstream economists as outdated, it is gaining adherents among the Republican party, including the “rising star” Michelle Bachman.

[Image licensed under Creative Commons courtesy of elandru.]

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Barack Obama Domestic issues Economics Financial Crisis History Politics The Opinionsphere

The Value of a Safety Net

Jean Edward Smith points out the obvious yet neglected truth about Franklin Delano Roosevelt’s achievements:

The safety net provided by the New Deal allows time for government to move deliberately.

This is one of the extraordinary things about the legacy of FDR – that even as the nature of the state itself has changed significantly since he was president, the institutions he created still serve some – if not the same purpose – as they did back then.

Today, the safety net created by Roosevelt is an essential stabilizing factor in our society – on the order of regular elections, a civil society, a judiciary, a balance of powers. 

The initial intention of these social safety net programs was consisent with the nation-states of the day, as they competed to see who could provide a minimal standard of living for various at risks groups – such as the elderly and the poor. But today it is far more useful as a stabilizing factor allowing businesses and government officials and individuals adequate time to respond appropriately to financial crises.

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Foreign Policy History National Security Pakistan Politics Reflections The Bush Legacy The Opinionsphere The War on Terrorism The Web and Technology War on Drugs

Homo Blogicus, Pup, Pakistan, Torture, Marijuana, and the Revenge of Geography

[digg-reddit-me]I’m going to start creating a list of best reads for the week every Friday – picking between 5 and 10 articles or blog posts that are well worth reading in their entirety.

  1. Christopher Buckley writes a very personal essay for the New York Times, adapted from his soon to be published memoir, about growing up as the son of the famous Mr. and Mrs. William F. Buckley (“Pup” and “Mum”). Truly moving, surprising, honest and earnest. An excerpt:

    I’d brought with me a pocket copy of the book of Ecclesiastes. A line in “Moby-Dick” lodged in my mind long ago: “The truest of all men was the Man of Sorrows, and the truest of all books is Solomon’s, and Ecclesiastes is the fine hammered steel of woe.” I grabbed it off my bookshelf on the way here, figuring that a little fine-hammered steel would probably be a good thing to have on this trip. I’m no longer a believer, but I haven’t quite reached the point of reading aloud from Christopher Hitchens’s “God Is Not Great” at deathbeds of loved ones.

    Soon after, a doctor came in to remove the respirator. It was quiet and peaceful in the room, just pings and blips from the monitor. I stroked her hair and said, the words coming out of nowhere, surprising me, “I forgive you.”

    It sounded, even at the time, like a terribly presumptuous statement. But it needed to be said. She would never have asked for forgiveness herself, even in extremis. She was far too proud. Only once or twice, when she had been truly awful, did she apologize. Generally, she was defiant — almost magnificently so — when her demons slipped their leash. My wise wife, Lucy, has a rule: don’t go to bed angry. Now, watching Mum go to bed for the last time, I didn’t want any anger left between us, so out came the unrehearsed words.

  2. Stephen Walt, blogging for FP, asks Three Questions About Pakistan. He quotes David Kilcullen explaining:

    We have to face the fact that if Pakistan collapses it will dwarf anything we have seen so far in whatever we’re calling the war on terror now.

    He cites a Timur Kuran and Suisanne Lohmann for providing a construct for understanding why such collapses as Pakistan’s possible one are hard to predict:

    [R]evolutionary upheavals (and state collapse) are hard to predict because individual political preferences are a form of private information and the citizenry’s willingness to abandon the government and/or join the rebels depends a lot on their subjective estimate of the costs and risks of each choice. If enough people become convinced the rebels will win, they will stop supporting the government and may even switch sides, thereby create a self-reinforcing snowball of revolutionary momentum. Similar dynamics may determine whether the armed forces hang together or gradually disintegrate. As we saw in Iran in 1979 or in Eastern Europe in 1989, seemingly impregnable authoritarian governments sometimes come unglued quite quickly. At other times, however, apparently fragile regimes manage to stagger on for decades, because key institutions hold and the revolutionary bandwagon never gains sufficient momentum.

  3. Evgeny Morozov, also blogging for FP, suggests that “promoting democracy via the internet is often not a good idea.”

    I simply refuse to believe in the universality of this new human type of Homo Blogicus – the cosmopolitan and forward-looking blogger that regularly looks at us from the cover pages of the New York Times or the Guardian. The proliferation of online nationalism, the growing use of cyber-attacks to silence down opponents, the overall polarization of internet discussions predicted by Cass Sunstein et al, make me extremely suspicious of any talk about the emergence of some new archetype of an inherently democratic and cosmopolitan internet user.

    As much as I’d like to believe that internet decreases homophily and pushes us to discover and respect new and different viewpoints, I am yet to see any tangible evidence that this is actually happening – and particularly in the context of authoritarian states, where media and public spheres are set up in ways that are fundamentally different from those of democracies.

  4. Julian Sanchez blogs reflectively about “our special horror over torture” – especially as related to aerial bombing. He concludes:

    Civilian life affords us the luxury of a good deal of deontology—better to let ten guilty men go free, and so on. In wartime, there’s almost overwhelming pressure to shift to consequentialist thinking… and that’s if you’re lucky enough to have leaders who remember to factor the other side’s population into the calculus. And so we might think of the horror at torture as serving a kind of second-order function, quite apart from its intrinsic badness relative to other acts of war. It’s the marker we drop to say that even now, when the end is self-preservation, not all means are permitted. It’s the boundary we treat as uncrossable not because we’re certain it traces the faultline between right and wrong, but because it’s our own defining border; because if we survived by erasing it, whatever survived would be a stranger in the mirror. Which, in his own way, is what Shep Smith was getting at. Probably Khalid Sheik Mohammed deserves to be waterboarded and worse. We do not deserve to become the country that does it to him.

  5. Jim Manzi is equally reflective in his piece written “Against Waterboarding” for the American Scene and published at the National Review’s Corner as well:

    What should a U.S. citizen, military or civilian, do if faced with a situation in which he or she is confident that a disaster will occur that can only be avoided by waterboarding a captured combatant? Do it, and then surrender to the authorities and plead guilty to the offense. It is then the duty of the society to punish the offender in accordance with the law. We would rightly respect the perpetrator while we punish him. Does this seem like an inhuman standard? Maybe, but then again, I don’t want anybody unprepared for enormous personal sacrifice waterboarding people in my name.

    But consider, not a theoretical scenario of repeated nuclear strikes on the United States, or a tactical “ticking time bomb” scenario, but the real situation we face as a nation. We have suffered several thousand casualties from 9/11 through today. Suppose we had a 9/11-level attack with 3,000 casualties per year every year. Each person reading this would face a probability of death from this source of about 0.001% each year. A Republic demands courage — not foolhardy and unsustainable “principle at all costs,” but reasoned courage — from its citizens. The American response should be to find some other solution to this problem if the casualty rate is unacceptable. To demand that the government “keep us safe” by doing things out of our sight that we have refused to do in much more serious situations so that we can avoid such a risk is weak and pathetic. It is the demand of spoiled children, or the cosseted residents of the imperial city. In the actual situation we face, to demand that our government waterboard detainees in dark cells is cowardice.

  6. Robert Kaplan writes about the “Revenge of Geography” for Foreign Policy. The summary of the article:

    People and ideas influence events, but geography largely determines them, now more than ever. To understand the coming struggles, it’s time to dust off the Victorian thinkers who knew the physical world best. A journalist who has covered the ends of the Earth offers a guide to the relief map—and a primer on the next phase of conflict.

  7. Time magazine has a piece written by Maia Szalavitz on drug decriminalization in Portugal which is also worth checking out. Excerpt:

    “Judging by every metric, decriminalization in Portugal has been a resounding success,” says Glenn Greenwald, an attorney, author and fluent Portuguese speaker, who conducted the research. “It has enabled the Portuguese government to manage and control the drug problem far better than virtually every other Western country does.”

    Compared to the European Union and the U.S., Portugal’s drug use numbers are impressive. Following decriminalization, Portugal had the lowest rate of lifetime marijuana use in people over 15 in the E.U.: 10%. The most comparable figure in America is in people over 12: 39.8%. Proportionally, more Americans have used cocaine than Portuguese have used marijuana.

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History The Opinionsphere

The Banality of Both Evil and Good

 Fortunately they acted like normal people.

Günter Schabowski explaining why the border patrols in East Germany did not open fire on the crowds illegally crossing the border despite their instructions to do so.

The contrast between Hannah Arendt’s description of Adolf Eichmann and the other Nazis whose orderly actions reflected the “banality of evil” and Schabowski’s labeling of the decision by soldiers not to open fire as similarly banal is striking. 

I’m not sure what to make of it – and I’m curious as to what Schabowski would.

Categories
Economics Financial Crisis History Politics

The Reagan Revolution (cont.)

[digg-reddit-me]Some objections have been raised to my two posts on the Reagan Revolution earlier this week (here and here) that stem from a misunderstanding of what I was trying to say – a misunderstanding perhaps based on what I chose to emphasize when telling the story of the 1980s revolutions.

So let me re-tell the story briefly.

Ronald Reagan in 1980 was a man who met his moment. The nation was reacting to the excesses of the New Deal and Great Society liberalism and the 1960s revolutions – and they wanted a return to an older time. The country was in a reactionary mood, but still looking for optimism after the glum and depressing honesty of Jimmy Carter. Reagan blended the two in his own distinctive way. At the same time, the conservative movement that had been launched with Senator Barry Goldwater’s 1964 campaign was finally reaching maturity. The infrastructure of think tanks, foundations, magazines, and other organizations that the Scaife family and the Coors family and the Koch family and later the Walton family and others had started to build in 1964 was generating new and innovative right-leaning ideas. The neoliberal philosophy that Reagan was sympathetic to still only had a small number of adherents, but thanks to the conservative infrastructure it had reach and with marketing savvy was sold. At the same time, wealth was already becoming more heavily concentrated in the hands of fewer and fewer people, giving the rich benefactors of the conservative movement more power.

In this moment, Reagan became president – with liberalism tired and worn out, with a reaction against it’s excesses and the excesses of the revolutions of the 1960s reaching a boiling point, and a conservative movement heavily influenced at the top levels by neoliberalism finally maturing. Thus was launched the Reagan Revolution. 

This revolution wasn’t really about Reagan – but he was the figurehead at the top. A lot of the revolutionary changes had to do with society’s changing mores that allowed, “Greed is good” to became a positive mantra echoing the neoliberal Ayn Rand’s talk of the “virtue of selfishness.” Some of it had to do with the growing influence of the extremely wealthy. Some of it was a reaction against the silliness of the anti-materialism of the hippie generation. But like the 1960s revolutions, which were enabled though not created by the government, likewise for the 1980s revolutions. Reagan’s constant stimulus spending supercharged the economy; his trimming back the social safety net, his tax cuts for the wealthy, and his spending increases accelerated the concentration of wealth and power in the hands of fewer and fewer. His acquiescence to the informal Bretton Woods II arrangement created an economy that “favored finance over domestic manufacturing.” His trimming back of regulations also accelerated this trend. To some degree, these changes had positive effects – as the market was freer, as the economy grew, as corporations thrived, as the overall wealth of America grew. 

But they spelled trouble down the road. The stimulus spending and tax cutting, the informal Bretton Woods II agreement, and concentration of wealth created an unstable system. Internally, the society was imbalanced as extremes of wealth and power were accumulated by a small minority. This eventually undermined the very free market and democratic discourse that is essential to the American tradition. A course correction later might have saved the Reagan vision – and for a time it seemed as if Bill Clinton’s moderate presidency had, as middle class wages finally began to grow again – but Bush doubled down on Reaganism when he should have pared back, and we are left with this mess.

Is this collapse Reagan’s fault? I wouldn’t say so. But he set the initial course towards this iceberg, even if the iceberg was out of sight at the time he set the course. He – and the 1980s revolutions in finance, economics, and government that his administration supported and enabled – are the true authors of this economic collapse, even if they cannot be blamed for not forseeing it.

Categories
China Economics Financial Crisis History

The Reagan Revolution (cont.)

[digg-reddit-me]I’ve gotten a bit of feedback/blowback about having simplified what went on the in 1980s that led to the indisputable higher levels of income disparity, the concentration of wealth, the decimation of manufacturing, and the rise of finance. This wasn’t about Ronald Reagan and his neoliberal policies – it is claimed – but about basic economic forces. I tried to take that into account by pointing out that Reagan was only accelerating the trends that started in the 1970s – but let me go further now.

Another major factor that aided these trends was not entirely within Reagan’s control. As John Judis explained in The New Republic, in the 1980s:

…Japan was threatened by a cheaper dollar. To keep exports high, Japan intentionally held down the yen’s value by carefully controlling the disposition of the dollars it reaped from its trade surplus with the United States. Instead of using these to purchase goods or to invest in the Japanese economy or to exchange for yen, it began to recycle them back to the United States by purchasing companies, real estate, and, above all, Treasury debt…

With Japan’s purchases, the United States would not have to keep interest rates high in order to attract buyers to Treasury securities, and it wouldn’t have to raise taxes in order to reduce the deficit…[That] informal bargain…became the cornerstone of a new international economic arrangement…

Judis goes on to explain how this arrangement evolved through the 1990s:

Asian countries, led by China, adopted a version of Japan’s strategy for export-led growth… They maintained trade surpluses with the United States; and, instead of exchanging their dollars for their own currencies or investing them internally, they, like the Japanese, recycled them into T-bills and other dollar-denominated assets. This kept the value of their currencies low in relation to the dollar and perpetuated the trade surplus by which they acquired the dollars in the first place…

Until recently, there have been clear upsides to this bargain for the United States: the avoidance of tax increases, growing wealth at the top of the income ladder, and preservation of the dollar as the international currency…

[The current financial system] is sustained by specific national policies. The United States has acquiesced in large trade deficits – and their effect on the U.S. workforce – in exchange for foreign funding of our budget deficits. And Asia has accepted a lower standard of living in exchange for export-led growth and a lower risk of currency crises.

This financial arrangment was not created by Ronald Reagan – but he did acquiese to it – and spent America into a level of indebtedness it had not been in since World War II. This arrangment would not be consistent with a ideological neoliberalism that was discussed before – but this arrangment, most importantly, did benefit many of those who were vocal proponents of neoliberalism. 

The revolutions of the 1980s then, was not merely the result of a political movement within America – not anymore than the revolutions of the 1960s were. There were international factors that helped along both domestic movements. The combination of this special relationship with Japan – and later China and other Asian countries – with the neoliberal revolution of Ronald Reagan – led to a concentration of wealth and power within a small class of people rarely seen in a developed country. As Paul Krugman observed:

It’s important to know that no other advanced economy has seen a comparable surge in inequality – even the rising inequality of Thatcherite Britain was a faint echo of trends here.

Combined with the neoliberal principle, as described by Stanley Fish, that “Short-term transactions-for-profit [are better than] long-term planning designed to produce a more just and equitable society,” it becomes more clear how we ended up in this enormous financial mess. 

Take away the regulations; encourage short-term profits; reduce taxes; trim the social safety net; “starve the beast” by spending without taxing; and then supercharge the economy with constant stimulus spending (which is what “starve the beast” is) and easy debt from China and Japan. What you get from this is not only a revolution that undermines the American way of life in the mid-term – as wealth is concentrated and middle class and manufacturing jobs dry up – but an unsustainable economy that is going to collapse, and collapse hard. 

In other words, you get what we have now.

Today, we are reaping the effects of the generational bargain at the heart of the Reagan presidency.