Follow the money

“The Quiet Coup,” an article in The Atlantic by Simon Johnson, former chief economist at the International Monetary Fund and now a professor at MIT's Sloan School of Business, is a must-read for understanding where we are, how we got there, and roughly what we must do to get ourselves out of it. It's all about the power – who holds it, how they use it, and echoing Schumpeter's observation that there is always an elite that is more powerful than the rest of society, how much or little they are willing to share it. In a nutshell:

. . . . Naturally [for trying to solve the problems of a country applying for IMF help], the fund’s economists spend time figuring out the policies—budget, money supply, and the like—that make sense in this context. Yet the economic solution is seldom very hard to work out.

No, the real concern of the fund’s senior staff, and the biggest obstacle to recovery, is almost invariably the politics of countries in crisis.
Typically, these countries are in a desperate economic situation for one simple reason—the powerful elites within them overreached in good times and took too many risks. Emerging-market governments and their private-sector allies commonly form a tight-knit—and, most of the time, genteel—oligarchy, running the country rather like a profit-seeking company in which they are the controlling shareholders. When a country like Indonesia or South Korea or Russia grows, so do the ambitions of its captains of industry. As masters of their mini-universe, these people make some investments that clearly benefit the broader economy, but they also start making bigger and riskier bets. They reckon—correctly, in most cases—that their political connections will allow them to push onto the government any substantial problems that arise.

Economist Max Sawicky uses this article to make the point that it is not just the “irrationality of markets,” currently a popular formulation to rebut the notions of the dominant classical economists who failed so miserably to warn us what was coming, but the distribution of power. (Also courtesy of Kevin Drum:
http://www.motherjones.com/kevin-drum/2009/07/pitchforks-and-torches)

Arguably, however, both ways of putting it are trying to accomplish the same purpose. The distribution of political power is a form of irrationality not acknowledged in classical economics that likes to elevate itself to the status of a true science, and discard the word “social” as in the messy social sciences, by treating the economy as a closed system of rational actors that is quantifiable and put under mathematical algorithms without consideration of the political environment in which it operates. Unquestionably, however, although the "irrationality" formulators may be on the side of the good guys, it lets the bad actors off the hook -- as in the classic "mistakes were made" excuse -- while the power-distribution perspective is far more trenchant as an analytical formulation and for getting us thinking in the right direction of what needs to be done.

As we lose all manufacturing, rely more and more on services to define our economy, and fall behind other advanced industrialized countries in healthcare, public transportation, public infrastructure and per capita wealth -- all the while, wallowing in the pride that we can blow anybody up that we want to -- we should ask whether it is a mere coincidence that this began occurring in earnest during the Reagan administration that re-distributed money and power back to the monied classes (and for that matter, embraced wholeheartedly the Military-Industrial Complex that his former party leader warned us about).

A successful democracy depends on having an elite that understands the necessity for its own long-term good of not hoarding the maximum possible of either wealth or power. Everyone thriving and feeling confident of the future is what makes for a successful social contract and a healthy economy that benefits everyone, including, ironically, even the wealthy themselves. We had that roughly from the late 30s through the 1970s. Since then we have lost it, and it is right-wing conservative philosophy that is directly responsible for that loss. It would be good for Obama to begin articulating that vision as the basis for the policies he is pursuing, rather than, as seems to be too much the case now, assuming that everyone gets it even though it has been undermined by right-wing governance philosophy for the past 30-plus years. It's time to identify that philosophy and its failures clearly, root it and get rid of it. We will continue to lurch from crisis to crisis in ever descending stages until we do.

Republican Myths About the Stimulus Packae

July 10, 2009 by Faiz Shakir, Amanda Terkel, Matt Corley, Benjamin Armbruster, Ryan Powers, and Nate Carlile, Progress for America

The Obama administration has been making an aggressive push to explain the realities of the $787 billion stimulus package, in the face of aggressive Republican misinformation. Vice President Biden, for example, traveled to Ohio yesterday, forcefully backing the recovery bill and asking for patience from the American public. "Remember, we're only 140 days into this deal. It's supposed to take 18 months," he said. Only $60 billion of $175 billion allocated to federal agencies so far has been paid out. Earlier this week, President Obama took time out of his trip to Moscow to discuss the recovery. "There's nothing that we would have done differently," he told ABC News. "We needed a stimulus and we needed a substantial stimulus." Republicans, who overwhelmingly voted against the recovery act in Congress and have offered no new ideas, are now trying to sow public dissatisfaction. In fact, the "plans" that Republicans have been offering are largely the same ones that put the country into the current economic mess. To create confusion, the GOP has had to resort to sloppy attacks and inaccurate myths. A look at some of what the right wing is spinning:

MYTH #1 -- ELECTORAL CONSIDERATIONS ARE DRIVING THE DISBURSEMENT OF FUNDS: This myth popped up most prominently in a USA Today story yesterday, with the headline, "Billions in aid go to areas that backed Obama in '08." According to this USA Today analysis, "Counties that supported Obama last year have reaped twice as much money per person from the administration's $787 billion economic stimulus package as those that voted for his Republican rival, Sen. John McCain." Naturally, the right wing immediately picked up this report as evidence of malevolent political manipulation by the Obama administration. Fox News host Stuart Varney devoted an entire segment to it, and Sean Hannity blasted it out to his nearly 30,000 Twitter followers. If they had read the whole story, however, the likes of Varney and Hannity would have discovered that there was nothing there. In fact, in the second paragraph of the piece, reporter Brad Heath wrote, "Much of it [the stimulus funds] has followed a well-worn path to places that regularly collect a bigger share of federal grants and contracts, guided by formulas that have been in place for decades and leave little room for manipulation." These formulas are largely based on where the need is greatest. Adam Hughes of the non-profit OMB Watch said that "it would be almost inconceivable for [the spending imbalance] to be the result of political tinkering."

MYTH #2 -- NO NEW JOBS HAVE BEEN CREATED: "How can we sit here and claim success when people are hurting out there?" House Minority Whip Eric Cantor compassionately complained on MSNBC last month. "We already know, as of now, at the rate that we lost jobs last month, over eight people a minute in America are losing their jobs. That's eight families without a paycheck." Similarly, in a New York Daily News op-ed he wrote, "To put it generously, the $787 billion bill has not been the 'temporary, targeted and timely' job-creating machine the public was sold." House Minority Leader John Boehner (R-OH) has called the recovery package nothing short of "generational theft," and declared, "When it comes to slow-moving government spending programs, it's clear that it doesn't create the jobs." These claims are false. In fact, the recovery act is creating jobs right in their districts. And it's important to remember that the purpose of the legislation was also to save American jobs. Even Boehner has had to admit these facts. In a little-noticed press release, the Minority Leader highlighted the Obama administration's recent order that the Ohio Department of Transportation (ODOT) redirect $57 million to shovel-ready projects. He said that he was "pleased" that the funds would "create much-needed jobs." A few weeks later, when Boehner was back to lashing out at the stimulus, the ODOT actually came out and criticized him. ODOT's spokesman called Boehner's inaccurate statements "disappointing" and pointed out that the agency had just approved "six more stimulus road projects, which will cost about $43 million." Cantor's hypocrisy has also been highlighted by the media, who have noted that he is a backer of using stimulus funds to bring high-speed rail to Virginia because it would create...jobs.

MYTH #3 -- THE RECOVERY IS A TOTAL FAILURE: The Republican National Committee released a new web ad yesterday, declaring the stimulus a "failure." But leading economists agree that it's too early to make any such determinations. The non-partisan Congressional Budget Office estimated that "about a quarter of the money would be spent by year's end, and that about 75 percent would flow by the end of 2010." In other words, as Center for American Progress Senior Economist Heather Boushey has explained, "the largest job gains from [stimulus] spending were projected to occur in the late fall through 2010." So far, the spending appears to be on track. The health care and education sectors, both of which received stimulus money, have shown net job gains since the recession began. Furthermore, Obama noted that infrastructure projects were always going to take "six months to eight months to get that money actually into the ground because that's the nature of big infrastructure projects."

Mother Nature's Nuclear Holocost

John McConnico / AP Climate change poses a catastrophic threat for all G-8 nations, writes the former Democratic nominee for president in a security memo he likens to President Bush’s pre-9/11 warning.

On August 6, 2001, President George W. Bush famously received an intelligence briefing entitled, “Bin Laden Determined to Strike in U.S.” Thirty-six days later, al Qaeda terrorists did just that.

Today, as the leaders of the G-8 and the members U.S. Senate simultaneously debate climate-change policy shifts, scientists tell us we have a 10-year window—if even that—before catastrophic climate change becomes inevitable and irreversible. So I’ve put together the briefing that needs to be read by every American—before it’s the Day After.

Climate Change Poses Stark National Security Threat to U.S.

The scientific community agrees that climate change is real, human activity is contributing to it, and the window for doing something about it is closing rapidly.

Shifting weather patterns may turn the American “breadbasket” into a dustbowl.

Atmospheric carbon-dioxide levels have risen 38% in the industrial era, from 280 to 385 parts per million (ppm). Scientists have warned that anything above 450 ppm—a warming of 2 degrees Celsius—will result in an unacceptable risk of catastrophic climate change.

The truth is that the threat we face is not an abstract concern for the future. It is already upon us and its effects are being felt worldwide, right now. The Arctic will be ice-free in the summer of 2013, not 2030—and the loss of summer ice will accelerate warming because dark water absorbs more sunlight than snow and ice do.

Meanwhile, the ocean, which acts as a natural sink for carbon dioxide, is losing its ability to absorb emissions. This means that the impacts of climate change are being felt stronger than expected, faster than expected.

A recent study of the Siberian Shelf found that columns of methane bubbles—another greenhouse gas 20 times more damaging than CO2—are rising from the sea floor as a result of warmer ocean waters in the Arctic.

The science is unequivocal. The question is no longer whether or not climate change is happening, it’s whether we’ve passed the climate-tipping point.

The stakes could not be clearer. Look at the tiny coastal village of Newtok, Alaska. Citizens there recently voted to move their village nine miles inland because melting ice shelves made their old home too dangerous. Anyone who doubts the reality of climate change should go to Alaska and see the melting permafrost for themselves, or listen to the state’s two U.S. senators tell worrisome stories about climate change’s current—not future—impact on their state.

The challenges will only grow more severe, however, if we do nothing to address climate change. Dramatic sea-level rises could result from glaciers melting in Greenland and Antarctica, shifting weather patterns may turn the American “breadbasket” into a dustbowl, and increased periods of drought will lead to political instability and population migrations around the world, including in our own hemisphere.

Because of the magnitude of the consequences facing us, the national-security community has begun to take note. In 2007, 11 retired American admirals and generals issued a report from the Center for Naval Analyses warning that “Climate change can act as a threat multiplier for instability in some of the most volatile regions of the world, and it presents significant national-security challenges for the United States.” In 2008, the final national-defense strategy of the Bush administration recognized climate change among key trends that will shape U.S. defense policy in the coming years. And the National Intelligence Council—the U.S. intelligence community’s think-tank—has concluded “global climate change will have wide-ranging implications for U.S. national-security interests over the next 20 years.”

Nowhere is the connection between climate and security more direct than in South Asia—home to al Qaeda. Scientists now warn that the Himalayan glaciers which supply fresh water to a billion people in the region could disappear completely by 2035. Think about what this means: Water from the Himalayans flows through India and Pakistan. India’s rivers are not only vital to its agriculture but are also critical to its religious practice. Pakistan, for its part, is heavily dependent on irrigated farming to avoid famine. At a moment when the U.S. government is scrambling to ratchet down tensions and preparing to invest billions of dollars to strengthen Pakistan’s capacity to deliver for its people—climate change could work so powerfully in the opposite direction.

Worldwide, climate change risks making the most volatile places even more combustible.

The bottom line is that failure to tackle climate change risks much more than a ravaged environment: It risks a much more dangerous world, and a gravely threatened America.

* *

There’s much more to the climate-change challenge—threats to our military bases at home and abroad, threats to our allies, threats to stability in regions of the world the United States has invested billions of dollars and the lives of its sons and daughters.

Unfortunately, not everyone in Congress appreciates the stakes. It’s tragic that we live at a time when if one were to dismiss the threat of terrorism, you’d be run out of Washington in the next election. But there are no similar political consequences if you dismiss the science and the facts about the threat posed by climate change.

In less than six months, delegates from 192 nations will gather in Copenhagen to create a new global climate treaty. Between now and then, the United States Congress is expected to act on climate legislation. The decisions we make in these six months will determine whether we meet this challenge head-on and prevail or if we are to suffer the worst consequences of a warming planet.

This is our warning memo, America.