Lessons from the Long Depression
coppolacomment.com
coppolacomment.com
I think the question boils down to, "How can the government encourage the creation of new job-creating watering holes, instead of pushing policies which increase the rent of existing watering holes?"
The real problem instead is unearned rent extraction. Lot of rent which is unethically taken away from workers and business is given to the extractors at the expense of those workers and businesses who provide it. Largely through taxes on labor, but also through increased prices.
There is no such thing as passive income without work. It's just that the profit is collected by someone else than who provided the labor.
Example 1. open source community building free stuff resulting in near trillion dollar valuations of cloud providers.
Example 2. taxes collected from labor (income and sales taxes) used for public works and new infrastructure resulting in increase of land and real estate value in vicinity of the new construction. Common with a new subway or highway systems.
Example 3. Communication, Pharma industry and other network systems. Any innovation funded by public money or other individuals can only benefit those who already operate the network infrastructure, because of the impossibility to compete with these established monopolies. Especially when regulations are set up to protect the incumbents from new entrants to their markets.
These cases illustrate not only redistribution of value from those who provide it to those who sit on it. It also shows that the goods these people helped to create then become even more expensive for them. The more of it they produce, the more expensive it gets - higher living rents, more expensive drugs, more expensive railroad services, etc.
This phenomenon is called the paradox of progress and poverty. You get it every time you set up the society in a way where the profits are extracted from the laborers and redistributed to the rentiers.
Blame the system I guess. Don't tax the workers, tax the rentiers collecting their results.
But I'm wondering, how do you think we distinguish between good and bad income streams? You seemed to be making a moral distinction.
I don't think we need to make the distinction between good and bad incomes. However we as a society should be concerned about giving somebody certain privileges without getting any compensation for it. That makes the society inherently unequal, because one group of people is forced to provide the privileges or services for another group of people.
Eg. people born in generation 2 are forced to accept and maintain private property privileges on land for those born in generation 1 even though they were never invited to discussions of land distribution in gen 1.
Simply stated, the infinite-length land rights are unethical to people in later generations. Continuous payment system would be ethical.
This alone could then help resolve other issues in other monopoly related problems as people would have more options to decide how to allocate their life, as you well know it is the case of basic income and when people are not stifled by excess taxes and excess rent payments.
But people want to add new things all the time. If you make it less difficult, more new things get added. If you decrease the rent-seeking of existing stuff, that makes it easier (less expensive) for people to create new things.
So you can encourage growth just by removing (or even reducing) rent seeking by existing entities.
(and if you think about it for a minute, if the government can't do that, it shouldn't exist at all. Politics is about defining what is pragmatic and what effective means.)
We organise ourselves in a system where: "a world in which goods and services are so cheap to produce that less and less capital is required for investment, and so easy to produce that less and less labour is required to produce them" is not a life-transforming utopia, but a catastrophe. The author constantly points this, points how growth in the "long stagnation" never materialised into better conditions and a better standard of living, and how that didn't change until war came.
Yet he never ceases to operate in the same system and to try to find the answers within the system. It never even crosses his thought that... perhaps the fundamental tenets of the system should be changed, or at the very least questionable. All he does is find convoluted ways of patching the a broken system from within the system.
But to answer your question, my opinion is that much of the power in our world is held undemocratically. Progress must be made to bring as much responsibility, power, property, etc, into democratic rule of the people whom that power affects. This is about as condensed a description as I can manage of my main convictions. After a certain point, that requires rethinking the fundamental structures and concepts of our society, or at list be willing to question them critically and honestly, rather than taking them as laws of nature.
Agree. And as a counterpoint to your other point, physical/material safety is a prerequisite to this. Nobody has time to vote, or agitate to get the vote, if they're starving and have no place to sleep. That's why the cheap goods and services are potentially important.
2) your criticism seems overly harsh. perhaps you should familiarize yourself with the author's other writings:
http://www.coppolacomment.com/2019/04/keynes-and-death-of-ca...
Apologies, I can't edit the post anymore.
>perhaps you should familiarize yourself with the author's other writings
But I don't want to. I'm discussing this article, I never came across this author before (that I can recall).
She never ceases. Frances is the feminine version of Francis. There is also a picture of her on the left.
She did end with a link to revolution spurred by austerity and the rise of populism, where change is coming but my reading is that this coming revolution would lead again to war (or at least, deeper inequality).
My blocker didn't load that, I think.
>She did end with a link to revolution spurred by austerity and the rise of populism
The quote is "revolutions don’t tend to end well", which is pretty telling and only confirms my assessment of her unwillingness to question the fundamentals or enact meaningful change (beyond supreficial "bandaids").
The American revolution was one of the very few that worked out the way people intended it to.
The American Revolution was a victory for the French, which the French promptly squandered by having their own Revolution. Life in the colonies under the Articles of Confederation was incredibly precarious, and it wasn't until after the War of 1812 that the U.S. was established as a stable nation state. They were helped in that regard by all of Europe going up in flames thanks to Napoleon.
No, it really wasn't. Many died during the revolution during the purges, and those that survived the wars and life under the dictatorship of the emperor. There's a reason there was another middle class revolution 40 years later (1830) and it wasn't because the merchant classes were doing really well, either under napoleon or the restored king after. The revolution lead to decades of tumult, and it's really difficult to see whether it was a net benefit or a net negative for the country or the middle classes. I suppose you could say the 1830 one was a victory for the middle classes in the long run.
They typically end in dictatorship, death and destruction.
https://www.financialsense.com/contributors/frances-coppola
Anyway seems like there's a lot of these warnings from mainstream sources lately... and there's a commensurate rise in seemingly leftish candidates, at least in the US.
I understand - and sympathize with - your reaction.
However I have a suspicion that the authors stance is correct and, indeed, there is something catastrophic involved. If not due to the circumstances, then to our response to the circumstances (which, as you say, would seem to be heavenly).
If, however, you place stock in the notion that (most) humans find happiness and meaning and fulfillment in completing meaningful and valuable work, I think it starts to make sense.
You and I might have the personal makeup - or find ourselves in a stage of generational or familial development - to find meaning and joy in a post-scarcity, post "work", nuanced and refined existence. I like to think I do.
But I can imagine not having that makeup and while I might not be able to point to "the absence of scarcity" or "not having meaningful work" as my affliction, I think without a doubt something would be afflicting me.
P.S. I have been in your shoes. I have literally said the exact same things as you. So I get where you’re coming from.
What represents wealth in an agrarian society? Land, livestock, horses, slaves, servants, leisure time, and social connections. Many of these goods increased in price during the Gilded Age, or became impossible to obtain. No more homesteading the West, no more slave plantations, independent ranchers & farmers were driven out of business by the meatpacking & agribusiness industries, the domestic servant class largely disappeared.
But what happened, eventually, is that these definitions of wealth became marginalized in favor of ownership of new luxury goods. What represented wealth in the 1950s? Having an expensive car. Owning a house in the suburbs with electricity & running water, and a washing machine, dishwasher, and vacuum cleaner. Flying on jets. None of these even existed during the Gilded Age.
It's possible we'll see a similar resolution to the current crisis, where the expensive and un-automatable pillars of a middle-class existence - health care, education, housing - simply get marginalized as a backward remnant of a previous era, and new status symbols - perhaps control of virtual currencies, prowess in computer games, neural net uplinks, bionic implants - take their place.
As such, I think your enumeration isn't quite accurate. Prior definitions of wealth only became impossible to obtain if you didn't have enough money. You cite land, certain notables in our own government owe much of their empire to land (real estate.) While there certainly is a transferrance of many technological goods via progress, key pillars such as social connections and leisure time continue to be significant carriers of value, and as you say, potentially become more difficult to obtain.
If health care, education, housing, become marginalized, I don't believe it's as an anachronism, but out of unavailability, and new social signifiers will inevitably emerge out of our very animal nature, but within our new price range, and not out of lack of want for "more traditional luxuries". (to cite anecdata, the number of peers who are at peace with their housing/commute/work life situations, increasing inversely corresponding to pay)
Basically people primarily buy stocks (maybe housing too?) not for the income they produce but for the price gains of the stock itself.
The goal of the central bank is to meet it's inflation target by injecting money into the economy via policies like QE. The stocks rise in price as intended and therefore the yield decreased. What was not expected is that the stock owners do not care about the low yield because the capital gains caused by QE outweigh the comparatively low dividend payments (in some cases none at all).
So why not tax capital gains more and dividend payments less?
Capital gains happen whenever anyone (central bank or other investors) buys stocks for more than you bought, the profits are not bounded by the success of the company.
Dividend payments however always have to be paid out by the company based on how much profit it made and therefore they are independent of the share price. A stock with low yields is unattractive and therefore gets sold to buy a stock with higher yields.
Not really. QE was a semi-emergency move. The hope was that managing interest rates alone would be sufficient, but it turned out not to be for deep slumps. QE creates a lot of nasty side-effects and draws criticism to the Central Bank they'd rather not have. I think the chairman once said the job of stimuluses outside of interest rates was or should be Congress's job, not them. But Congress bungles it with debt and reverse Keynesian timing due to political and tax squabbles.
Similarly if we take a global view over the last few decades, China added hundreds of millions of people to the labour force. It's been the period of the greatest reduction in poverty ever. That's got to count for something.
EDIT In fact enormous wealth has been created, and it's not all been concentrated in the top 1%. The bottom 30% or so globally has also benefited massively. It just hasn't really benefited mid range workers in the West, but let's not pretend the last few decades have been a disaster, or even particularly bad in the grand scheme of things.
In the 1870s there were a lot of newly free blacks who were saying "fuck sharecropping, fuck being scared of the klan, I'm gonna work in a factory up north" and they weren't moving north with jobs already lined up.
Prices can go down without production or labor costs falling. Equipment is frequently capitalized. The approach that CFOs take to applying both the payments (interest) and depreciation are valves they can turn to modulate the P&L. This is totally disconnected from supply, demand and pricing.
Moreover, the margins earned can be very high at the beginning of a product cycle and therefore, still robust enough to justify the investment and labor costs even when prices have dropped.
Finally, in many cases, the lower prices induce more demand. Average selling price drops, demand grows, offsetting the price decrease.
This is all modus operandi for the display, semiconductor and computing industries, among others.
Consider a case of demand deflation where farmers decide they don't need anything any more, stop growing crops in excess of what is needed to feed themselves and sit on productive land like stone toads. I think there would be near-absolute consensus that the situation was very bad.
The same situation but with coal and oil swapped for farmland would be different. I happen to think that would still be a bad outcome, but there is a pretty sizeable environmental lobby that wants exactly that and would call it good. Assuming it happened over a bit of time so that alternatives could be bought on line.
There is a key question here - who exactly should have the power to deny an economy access to primary resources (particularly those linked to land ownership)? Under what circumstances is that acceptable and unacceptable? That is the mechanical underlying issue for why bad employment numbers correlate to bad outcomes.
At the end of the day, reflecting on these issues makes me think we just need a land tax based on an assessed value of land + mineral wealth underneath the land. Something large enough that families have to repurchase their land once a generation. That is the only idea I have that is even a little consistent with property rights. The issue with dropping demand isn't that people are unemployed - I like being unemployed in the classic not-looking-for-work sense. The problem is that people are willing to work and don't have enough to live comfortably but are unable to get raw resources to do so.
The correct solution is to acknowledge that land is maybe the only resource that a human can't fabricate through hard work and then construct a gentle system of rewards and incentives to make sure that resources are deployed.
I see some of the same problems in housing. It seems every homeowner wants the value of their house to increase, and many times will lobby in such a manner that causes their home prices to increase significantly by limiting development. I've had people argue with me on Reddit that home values must continually increase or people will stop making homes?! The insanity required to believe that has become endemic in our society.
Right around 4:20 he actually argues that real estate investment is a bad thing.
What really blows my mind is that the production value of this video far surpasses that of the average Reddit comment, though the argument is essentially the same.
The opposite has happened. In spite of low taxes, entitlement spending keeps rising, such as dissablty, healthcare, education, and housing. Who is paying for it? Bondholders. Other countries are unable to sell so much debt so cheaply and thus have to resort to austerity.
The trend of the last 40 years or so has been relative cuts to entitlements to the poor specifically.
A lot of this essay is about "right now", which at the time was November 2013.
When you take into account labor participation it's not such a clear cut picture. [1]
[1] https://en.wikipedia.org/wiki/Labor_force_in_the_United_Stat...