Introducing The Vile Maxim
My book on nuclear terrorism has, and continues, to occupy a lot of my time. This blog used to have much more detailed posts, but alas the nuke terror stuff has intruded a tad.
I sometimes would have liked to write about other issues. To be sure this is my blog and I can do what I want with it, but it wouldn't be right to put stuff, say on Paul Krugman or something, that is outside of the topic here. Stuff like that doesn't really belong here.
I have therefore set up another blog called The Vile Maxim.
The Nuke Strategy Wonk blog will have a much higher priority than The Vile Maxim.
Paul Krugman Exposes Adam Smith’s Vile Maxim “of the Masters of Mankind”
Paul Krugman runs a superb half column-half blog through the aegis of The New York Times, which he calls "the conscious of a liberal."
He has a pretty hot new post-column on what he calls "the bankruptcy boys." It is worth reading.
He argues, essentially, that deficit hawks in the US, mostly right wing members of the GOP, have used tax cuts in order to fashion a deliberate fiscal crisis. This was used, from Reagan onwards, to compel downsizing in US welfare programs. All sorts of quasi philosophical rationales were used as a shield by the defenders of the bankruptcy boys, such as Nozick's entitlement theory of justice, mutual obligation, reciprocity and so on.
What is at operation here is something very simple, no philosophy is required, namely the supreme operative axiom of neoliberalism; Adam Smith's "the vile maxim of the masters of mankind."
Krugman could have gone much further, though. Take say some pretty strong comments he makes in framing his thesis
...Voters may say that they oppose big government, but the programs that actually dominate federal spending — Medicare, Medicaid and Social Security — are very popular. So how can the public be persuaded to accept large spending cuts?
The conservative answer, which evolved in the late 1970s, would be dubbed “starving the beast” during the Reagan years. The idea — propounded by many members of the conservative intelligentsia, from Alan Greenspan to Irving Kristol — was basically that sympathetic politicians should engage in a game of bait and switch. Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government’s fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit...
He could have made two very important additional points. I'm sure he is aware of this, but his blog isn't run by the Wordpress server. There is only so much that The New York Times will let you get away with, even if you are Paul Krugman.
Those supply side tax cuts were heavily skewed towards the rich, especially during the era of Bush the Wrecker. So it is tax cuts for the rich that are behind Krugman's manufactured fiscal crisis, a crisis designed to hit social programs for the poor.
That's Adam Smith's "vile maxim of the masters of mankind", i.e. "all for ourselves and nothing for other people", precisely.
It should also be added that certain government programs were exempt from the budget cutters knife. We speak of course of such things as missile defence and military-industrial spending more broadly. These programs have always functioned as a type of "military-keynesianism", what the great US economist Hyman Minsky called a "permanent war economy." This type of spending has functioned as a public subsidy for high technology industry, remember market failure and the positive externality, and so constitutes a form of corporate welfare.
Newt Gingrich's old district illustrated this well. It was very much affluent based. It also received just about the most by way of government subsidy, in the military-keynesian sense, than any other district in the union. Because it was affluent it would not have received the type of spending on social programs typical of a democratic district based upon the urban working poor.
That's all the vile maxim. What is unique to the United States, and key to understanding a lot of what happens in America, is that the vile maxim operates in the world's most open democracy. It's not easy for the masters of mankind to pull off the vile maxim under this structural condition. That's why one observes what is sometimes called "intelligence failure."
The masters have managed to pull the vile maxim off, thus far.
For how much longer, I ask?
Chomsky, UC Berkeley and the University of Melbourne
We might have seen the uprising at the University of California, Berkeley. This immediately brings to mind the "Melbourne Model" at the University of Melbourne.
I cannot help but re-produce an email on these topics by Noam Chomsky, as published at his official website
...I had a startling experience a few weeks ago. I travelled to Mexico City for talks at the National University, an enormous and very impressive institution with high standards of achievement and scholarship. Entrance is selective, but the university is virtually free. I then visited an even more remarkable institution, the college in Mexico City established by former mayor Lopez Obrador. Again, the facilities and standards are quite impressive. It is not only free, but has open admissions, though sometimes that requires some delay and sometimes assistance for students lacking adequate preparation. Shortly after I went to San Francisco for talks, and learned more about the California institutions of higher education. They have been at the very peak of the international higher education system. By now tuitions are quite high, even for in-state students, and cutbacks are affecting teaching, research, and staff. It would be no great surprise if the two major state universities, UC Berkeley and UC Los Angeles, will soon be privatized while the remainder of the state system is reduced considerably in scale and level. Needless to say, Mexico is a poor country with a struggling economy, and California should be one of the richest places in the world, with incomparable advantages. I mention these recent experiences only to emphasize that the recent cut-backs in higher education seen in much of the world cannot simply be traced to economic problems. Rather, they reflect fundamental choices about the nature of the society in which we will live. If it is to be designed for the wealthy and privileged, mostly engaged in management and finance while production is transferred abroad and most of the population is left to fend somehow for themselves at the fringes of decent and creative life, then these are good choices. If we have different aspirations for the world of our children and grandchildren, the choices are shameful and ruinous...
That's how the university system is to function in a society governed by what Adam Smith called "the vile maxim"...all for ourselves and nothing for other people.
The VC of the University of Melbourne, Glyn Davis, is a mate of the Australian Prime Minister Kevin Rudd. This is the same Rudd that promises an "education revolution" and would have us believe that he opposes neoliberalism.
Are We Heading for Global Financial Crisis Version 3.0?
Are we hurtling towards another global financial bang? I have an essay on the topic at On Line Opinion
Global Market Failure and the Future of World Order: The Impact of Global Externalities on International Relations.
Global Market Failure and the Future of World Order: The Impact of Global Externalities on International Relations.
Marko Beljac.
Market failure has now become one of the world's hottest topics, much to chagrin of neoclassical economists.
One form of market failure is due to what economists call "externalities". These arise when the rational, profit driven, actions of economic agents have deleterious and uncompensated impacts on third parties. When externalities are present market outcomes are not socially optimal.
Two of the most important global crises today, the financial crisis and climate change, can be seen to a significant degree as being market failures where the presence of externalities are robust.
As we increasingly move towards a global economy, which includes the development of more globally integrated markets, we would expect externality effects to become increasingly global. Although much has been written about both crises, little attention has been directed towards this broader issue.
Milton Friedman, the noted free-market economist, had surmised that externalities are small and not that much of a problem. Boy was he wrong! Globalisation now means that externalities will become even huger as they correspondingly become global. That, in turn, poses a macroeconomic stability problem that challenges our international political architecture.
The global financial crisis, to a very significant extent, can be described as a global externality because crucial to its development was the under pricing of risk by financial institutions. That is to say, risk was under priced from the point of view of society. From our perspective consummately rational financial market entities took on far too much risk, enabled by both deregulation and lax regulation, in the pursuit of dazzling short term profits.
Recognising the presence of an externaility does not necessarily tell us much about its underlying cause. The best casual explanation that accounts for the global financial crisis is the Post Keynesian Financial Instability Hypothesis of Hyman Minsky.
It was the under pricing of risk that paved the way for the rise of systemic risk, the crucial impost on society. That the under pricing of risk in financial markets could lead to systemic instability, which then impacts the real economy through liquidity and solvency crises, was in fact an important, though ignored, staple of Post Keynesian economics.
What has made this crisis decidedly global is that the financial system created in the wake of the "Nixon shocks" of the early 1970s, the crucial acts that enabled financial liberalisation, has led to the development of a global financial market characterised by tight coupling between its constituent parts. Even relatively well regulated and sound domestic markets can be impacted by financial shocks originating from elsewhere through feedback loops.
Greater economic integration also means that the impact of financial instability upon the real economy that Post Keynesians warned us about will also become increasingly global. In the wake of the financial crash in 2008 the Baltic Dry Index, which provides an insight into global trade and production trends, went into a downward spiral much like the US real estate market. Perhaps Japan illustrates this point best. The Japanese financial system was relatively insulated from the worst excesses of Wall Street, but Japan’s dependence upon exports to the US to drive economic growth has seen Tokyo take an almighty hit.
When the world's two leading economies, at the very least, go down into deep simultaneous recessions a global recession becomes difficult to avoid. It would appear that we were indeed headed for a Great Depression like contraction, but for a coordinated global Keynesian stimulus of great force.
Globalisation now requires that Keynesian demand management needs to shift upwards and become internationalised.
Sir Nicholas Stern, upon handing down his era defining report on the economics of climate change, described it as the "greatest market failure the world has ever seen." This failure is also due to an externality. This is of the familiar type arising from pollution, in this case the emission of greenhouse gases. Here the externality is global, but not because of a global economy. The problem arises as a result of the emission by many individual firms and householders of greenhouse gases into a globally integrated climate system. This integration also results in global feedback loops and other knock-on effects; as such the externality becomes global.
Economists have identified three main ways of mitigating externalities. The strategy is to internalise the external effects of individual actions upon others either through taxes, market based schemes that try and develop price signals, and regulation. It is the purpose of our political institutions to craft and enforce these remedies.
However in international relations governance is weak. The international political order has been characterised by the "Westphalian" system that places state sovereignty at its core. This means that the amelioration of global externalities becomes decidedly problematical, as the international negotiations over both financial market regulation and a global emissions trading regime demonstrate.
In the case of financial markets we have the added problem that financial instability is endogenous to capitalism. An implication of the Financial Instability Hypothesis in the context of globalisation would be the need for a global financial authority to enforce systemic stability at the international level.
So, what are the prospects for reform?
Two developments in the evolution of world order are of first importance here. Firstly, the global economic order, from 1945 to the early 1970s, had moved from unipolarity to tripolarity. The development of tripolarity was a key motivating factor behind the Nixon shocks. Now we are slowly starting to see the emergence of a classically multipolar economic order, where the major poles are not allied states moreover, given the rise of the BRIC economies. Multipolar orders are the most difficult to manage if the major powers within that order are not allied. The US, Europe and Japan were and are allied powers.
Secondly, there exists an important fissure within this emergent multipolar economic order, namely between developed and developing economies which makes matters worse. Some label this cleavage as constituting an "international division of labour". This division means that the polar powers of the economic system have structurally divergent interests, one of the reasons for the lack of progress in the Doha round of world trade talks.
The G20 summit on the global financial crisis and the significant differences between the developed and the developing states pre-Copenhagen can be invoked as evidence supporting the case for pessimism.
Regulatory reforms to the financial system have not gone far enough (barely even started), another financial shock is still possible, whilst China and India have been digging their heels on climate change. The developed states, for their part, do not show much interest in helping either India or China adequately overcome the very large opportunity costs that retooling their energy systems poses.
The global political economy can be described as a type of state enabled corporate mercantilism, which poses another important barrier against international coordination in response to global market failure. Globalisation has been hitherto concerned with dismantling state based regulations over corporations. We now see, however, that global market failure will require extending global regulations over corporations. The economists John Eatwell and Lance Taylor have called for a world financial authority to regulate the global financial system and the head of the UK Financial Services Authority has made a case for the introduction of a global Tobin Tax.
It is doubtful that such measures will be enacted through elite coordination at the international level.
It is interesting to reflect that states and markets, both based on rational utility maximisation, so badly re-enforce each other. On the one hand rational self regarding actions within markets may not be socially optimal. On the other rational amoral states that tend to be geared toward relative gains are not terribly well disposed towards achieving socially optimal outcomes at the global level.
The reforms required to remedy this re-enforcing contradiction will not be easy to achieve. If we want to deal with global externalities properly the reform of the Westphalian system of international relations will be required. The same applies to the current corporate dominated form of globalisation. The role of social movements within and across states will be critical.
There appears to be a profound link between global justice and the major challenges facing mankind.
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Marko is also interested in philosophy, especially the theory of knowledge, and science, especially physics, and considers himself to work within the naturalist and enlightenment tradition. He is writing a book on nuclear terrorism.