Everything was hellish before 1800

The biggest fact in the world that needs to be explained is how and why we have become so rich, compared to how the human race had lived for ever  before the last few centuries.

 

This graph portrays the economic progress in the last two hundred years as measured by life expectancy, GDP per capita, percentage not living in extreme poverty, energy consumption, war-making capacity, and percentage of people living in democracy.

These are the facts. Why, then, when things are getting better so fast, are we beset by concerns for global warming, climate catastrophes, income disparities, and every form of oppression, including completely imaginary ones? Why the atmosphere of general cultural pessimism?

The question that Deirdre McCloskey asked herself in her book Bourgeois Dignity was why the economics profession was unable to answer this question satisfactorily: why have things gotten better? her answer was that there occurred in western Europe and change in the deal: innovation came to be allowed, indeed encouraged, and you got to keep the economic value of your innovation. Hence the change int he human condition proceeded from a change in ideas. Not from trade, especially not from slavery, not from exploration, not from ripping off the ecology, but from allowing innovation.

You do not have to accept this explanation, but if you read McCloskey you will have difficulty in accepting another.

 

The sins of the economics profession

Deirdre McCloskey is the author of several important books, she is an economist of renown, and she is a proud defender of the bourgeois deal: you get to keep what you make and you are allowed, indeed encouraged, to innovate. She locates several inadequacies in the mindset of economists, in a little pamphlet available off the Intertubes. I recommend it, especially if you are economist. She describes her fellow practitioners in the following terms.

  • Economists, for example, are Institutionally Ignorant,which is to say that they don’t have much curiosity
    about the world they are trying to explain. For example—this will surprise you—academic economists, especially since Samuelsonianism took over, have come to think it is simply irrelevant, a waste of time, to do actual field work in the businesses they talk about.
  • Outsiders would likewise be amazed at the Historical Ignorance of the economist. They think that the scientific evidence about economies before the past few years would surely figure in an economist’s data. It doesn’t…. People call themselves economists who have never read a page of Adam Smith or Karl Marx or John Maynard Keynes. It would be like being an anthropologist who had never heard of Malinowski or an evolutionary biologist who had never heard of Darwin.

     

  • The more general Cultural Barbarism of economists is well illustrated by their Philosophical Naïveté. Few economists read outside economics. It is unnerving to gaze about the library of a distinguished professor of economics and find no books at all except on applied math and statistics: these are the worldly philosophers who run our nation? Uh-oh. So naturally the professors of economics have childish ideas about, say, epistemology….

    The economists know nothing of the main finding of linguistics, philosophy, and literary criticism in the twentieth century, namely, that we have ways of world making, language games, senses of an ending that cannot be reduced to formal grammars, even in principle (economists have themselves stumbled on analogous findings in their own highly non-humanistic work,such as the finding of “rational expectations” or “the cheap talk paradox”).
  • And economists are tempted to arrogance in social engineering….
  •  And I have to mention finally the very widespread opinion that economists are prone to the sin of pride: personal arrogance. Some names that come up in this connection are: Paul Krugman (gold medal in this category), Robert Lucas (Nobel 1995), and Deirdre McCloskey (bronze). Lots of intellectual professions are arrogant. Physicists, for example, are
    contemptuous of chemists, whom they regard as imperfect versions of themselves. In fact physicists are  contemptuous of most people. But when a physicist at North Carolina named Robert Palmer went in 1989 to a conference in which physicists and economists were to educate each other he remarked, “I used to think that physicists were the most arrogant people in the world. The economists were, if anything, more arrogant.” I’m afraid he’s right on this score. Though of course in general he’s a dope: a mere physicist.

McCloskey’s deepest argument with her profession is that it neither theorizes nor observes, though it believes it is doing both. The arguments are longer than are suitable for this space, and I commend you to read The Secret Sins of Economics in its brief entirety. In essence she says it is not enough to demonstrate whether some thing has some effect, you have to ask how much is the effect. How much? is the critical question, not whether? Most economists avoid interrogating the real world in all its messiness to find out. Her conclusions are:

 

  • Until economics stops believing, contrary to its own principles, that an intellectual free lunch is to be gotten from
    qualitative theorems [whether questions] and statistical significance it will be stuck on the ground waiting at the cargo-cult airport, at any rate in its high-end activities uninterested in (Really) How Much. High-end theoretical and econometric papers will be published. Careers will be made, thank you very much. Many outstanding fellows (and no women) will get chairs at Princeton and Chicago. But our understanding of the economic world will continue to be crippled by the spreading, ramifying, hideous sins.
    Woe, woe is me.
    Oy vey ist mir.
    Pity the poor economists. The sins of economics come from pride in formalization, the making of great machines and
    monsters.

 

A sample of McCloskey is found at Youtube:

 

Monopoly power is always the same

Some people are starting to notice the power of Google and other web giants to suppress points of view. The firing of their own engineer James Damore for pointing out the biological basis for women and men differing in their desires to be engineers was, it seems, only the beginning.

Now the repression appears to have widened. The Open Markets section of the New America Foundation concerns itself with  monopolies and abuses of dominant position: all very econometric geeky stuff. The head of Open Markets, Barry Lynn, issued a notice congratulating the European Commission for fining Google for economic crimes related to dominant market position. He was removed from the New America Foundation. It seems to have been the result of Google’s Eric Schmidt quietly expressing displeasure, as corporate titans are wont to do when underlings make trouble.

Matt Stoller, who belongs to the Open Markets group, wrote the following in the Huffington Post, US edition.

In response, Google had our group kicked out of our parent think tank, New America. Ken Vogel at the New York Times did the story on the specifics of how this happened. The combination, of the misbehavior in the search market and the attempt to suppress research into how Google operates, shows that the actual issue at hand is one of political power.

This moment matters. It matters because it shows that monopoly power, and Google itself, is a threat to the free flow of ideas upon which our democracy depends. It matters because it proves that if we do not stand up to monopolists, they will keep our public institutions quiet about their growing power. And it matters most of all because it shows that we can reclaim our democracy if we try.

At Open Markets, we obviously do not like the attempt at undermining our work, but on another level, we see this as a backhanded compliment by Google on how effective our work has actually been. After all, if we are worth silencing, then our words and research carries power.

Monopoly is a political problem. It is time to stand up for our rights. It is time to say, enough. And as we’ve seen, when we do tell the truth, the monopolists cannot abide.

Google’s tactics will not work. Our organization, Open Markets, is going independent. And we are launching a campaign called Citizens Against Monopoly, where we will ask Google’s CEO to stop this manipulation of our public commons. Join us.

I urge readers to stay on top of this story. Freedom is threatened as much by private economic power as by state action, frequently because private market power is exercized without recourse to standards of fairness that states are bound to. The portrait of Google  that emerged from the Damore story revealed a place dominated by leftist groupthink. The biological was an excluded category of truth; reference to it as an explanatory cause for why women did not participate in the ranks of elite engineers was the sin of “stereotyping” and a firing offence.

This kind of mental phase-locking would have no importance if Google made physical objects. It matters supremely when the company aspires to record, catalog and make findable all human knowledge. Because the same power to make findable can make things unfindable. The power to control the past is the power to control the future.

_________________________

Speaking of which, here is an example:

https://pjmedia.com/trending/2017/08/31/google-issues-ultimatum-to-conservative-website-remove-hateful-article-or-lose-ad-revenue/

With monopoly or market power, you can now be made to disappear.

Here s the stated policy which the site offended. How much would Barrelstrength offend, if it came to our Internet overlord’s attention?

“As stated in our program policies, Google ads may not be placed on pages that contain content that: Threatens or advocates harm on oneself or others; Harasses, intimidates or bullies an individual or group of individuals; Incites hatred against, promotes discrimination of, or disparages an individual or group on the basis of their race or ethnic origin, religion, disability, age, nationality, veteran status, sexual orientation, gender, gender identity, or other characteristic that is associated with systemic discrimination or marginalization,” the email stated.

You can drive an armoured division through that one.

 

Back in the real world … the truth about income inequality

In the current leftist parallel universe, the media elites try to figure out if a guy, whose favourite daughter is an Orthodox Jew,  is a closet Nazi, and Blacks, who were never slaves, are fighting Whites who were never Nazis, over Confederate statues erected by Democrats whilst blaming Trump. Meanwhile in the real world, this was the state of income equality in 2014, when Obama held the reins. It is doubtful much has changed since then.

With serious issues like income inequality on the front burner, it is strange to see that the Left is instead focused on trivialities like this, Man stabbed after haircut gets him mistaken for a neo-Nazi, but as CNN stated, before hastily deleting the headline, “Activists seek peace through violence

Luttwak again

From Edward Luttwak’s recent articleWhy the Trump Dynasty will last 16 years” on the root causes of Trump’s win, in case you missed it:

……..That gathering of lean and hungry Clint­onians is the world mercilessly exposed in Shattered: Inside Hillary Clinton’s doomed campaign by Jonathan Allen and Amie Parnes. Meticulously researched and strenuously un­biased, it is the most useful book published so far on the 2016 Presidential election as a whole, as well as the Clinton campaign specifically. It certainly convinced me that Clinton did not understand in what country she was running for election: not one populated by black women (they dominated her convention), environmental activists, patriotic Muslims, vegans, committed free-traders and social engineers, but chiefly a country of car owners and bitterly frustrated would-be new car owners, a far better categorization than Clinton’s own “deplorables”.

That is why the car affordability numbers revealed in June 2016 were so vastly significant in determining the outcome of the elections. Going by metropolitan areas, they extracted maximum affordable car prices from median incomes. The latter ranged from the stellar $87,210 of San Jose in the opulence of California’s Silicon Valley, all the way down to the $24,701 of deindustrialized Cleveland, Ohio, numbers that in turn yielded maximum affordable price limits of $32,855 in San Jose, and $7,558 in Cleveland – not actually the lowest number, which was Detroit’s $6,174, owing to high average insurance costs in that crime-afflicted city (at $1,131.40 per annum, as compared to Cleveland’s $659.47).

What made these seemingly obscure numbers nothing less than momentous was that the cheapest new car on sale in the United States in 2016 was the Nissan Versa sedan at $12,825, twice the level that average households could afford in Detroit or Cleveland, and more than average households could afford in cities ranging from Philadelphia, Orlando, Milwaukee, Memphis, Providence, New Orleans, Miami and Buffalo, as well as, a fortiori, in a very great number of smaller localities across the United States, even in high-income states such as California and Oregon, as well much more commonly in the lower-income Southern and rust-belt states.

The mass exclusion of Americans from new car ownership is the result of two converging phenomena, only one of which was recognized by Hillary Clinton, though scarcely emphasized in her identity-focused campaign: wage stag­nation. Sanders and Trump did not hesitate to blame that relative impoverishment on the exposure of the least agile of Americans to international competition, with the resulting de-industrialization that translated millions of Americans from $20-to-40-an-hour factory jobs to miserably paid service jobs. Beholden to the sanctity of free trade, the Clinton crowd even more than the candidate herself blamed the lethargy of the TV-watching, beer-drinking, gun-owning, church-going, and cigarette-smoking “deplorables”, who unaccountably failed to avail themselves of the wonderful opportunity to leave boring assembly-line jobs or downright dangerous coal-face or oil drilling jobs to become fashion designers, foreign-exchange traders, software engineers, or even political campaign operatives.

 

Wolfgang Streeck on Trump

 

The bloggers at Barrelstrength continue to try to understand what is going on. If that means some or all of us start sounding anti-capitalist, please be advised: any theory pushed to extremes becomes a tyranny, including even our own ideas. We are as firmly pro-market as we can be in the circumstances. The relevant question these days is: what is the nature of our circumstances?  We are each of us searching for answers to what has gone wrong: income stagnation for the masses, coupled with fantastic increases in wealth of the top one tenth of one percent. Whether it be Peter Thiel, Chrystia Freedland, Edward Luttwak, or today’s guest columnist, Wolfgang Streeck, every thinking person is actively considering how much internationalization [free trade + semi-open borders] is good for our own countries.

An excerpt:

Those aggrieved by the accelerated internationalization of their societies felt abandoned by their national state. Elites in charge of public affairs were judged guilty of having handed national sovereignty to international organizations. These charges were largely true. Global neoliberalism has enfeebled the nation state, and with it, national democracy. Citizens most affected by these events had only their votes to express their displeasure.

Trumpism took off, fueled as much in the United States as elsewhere by popular irritation at the vast public celebration of internationalization. Economic and cultural elites entered an international space rich in their rights, at ease both in and out of national states. If democracy is understood as the possibility of establishing social obligations toward those luckless in the marketplace, the global elites had entered into, or created, a world in which there was a great deal of lucklessness and not many obligations.

For those plotting to take advantage of growing discontent, nationalism appeared as an obvious formula both for social reconstruction and political success. The winners and the losers of globalism found themselves reflected in a conflict between cosmopolitanism and nationalism. The old left having withdrawn into stateless internationalism, the new right offered the nation-state to fill the ensuing political vacuum. Liberal disgust at Trumpian rhetoric served to justify the withdrawal of the left from its constituents, and to explain its failure to help them express their grievances in civilized public language. Discontent grew fast.

The Trump presidency is both the outcome and the end of the American version of neo-liberalism. Having commenced crumbling in the era of George W. Bush, the neo-liberal regime managed to regain an appearance of vitality under Barack Obama. With his departure, it was bound to collapse under the weight of its contradictions, and, indeed, absurdities.

Clinton’s daring attempt to present herself as advocate of those Americans “working hard and playing by the rules,” while collecting a fortune in speaker’s fees from Goldman Sachs, was destined to fail. So, too, was Clinton’s insistence that it was the historical duty of American voters to elect her as their first female president. Transgendered restrooms infuriated everyone except those seeking access to them, no matter the Obama administration’s attempt to depict bathroom access as a civil right.11 Deep down, no one cared.

Wolfgang Streeck

“If Trumpists feel bound by their electoral promises, they must put an end to neoliberal reform. This will not end the impasse between capitalism and society. In the absence of a stable class compromise between capital and labor, policy is doomed to become capricious. Perhaps Trumpism will make its departure from neoliberalism and free trade palatable to capital by increasing credit, debt, and inflation—another policy intended to buy time and little else. Nobody knows what Trumpists will do to shore up their political support if economic nationalism fails to produce the promised results.”

In Systems of Survival, the late Jane Jacobs spoke of two moral systems, or syndromes, the guardian and the market.. The relevance of the two systems never diminishes, though the strength of the institutions  influenced by each system can vary at different times in history. What we have witnessed in the past forty years has been the increasing dominance of the market system over the guardian system of morality. If people are feeling adrift and bereft, they turn to the only guardian institution they know, the state, to help them get through the crisis.

Jacobs’ thinking on these matters is of permanent importance. Despite Trump’s chaotic, incompetent governing style, the forces that brought Trump to power cannot be ignored, although the internationalists will do their best to whistle past the graveyard – pointing to Putin and Russia as to why Hillary lost. It looks as if they are setting themselves up to be beaten again at the polls.

Thiel, Buckley, and Piereson

In the video attached, there are three people who I think you should be paying attention to: Peter Thiel, discussed in my earlier post, Frank Buckley, the Canadian law professor who has become an American citizen, and who explains why Canada is doing so much better than the United States, and William Piereson, of the Manhattan Institute. He is the first American I have heard who is talking about regime wars, that is, purely political wars about the nature and character of the state itself. This kind of struggle is what I see happening in the United States, although it is still peaceful and has not yet degenerated into violence. Piereson is speaking of a division of the States into two nations, and he asks – though he cannot yet answer –  whether it will result in regime change. Thiel sees the basis of the difficulty in the lack of economic growth in things other than computers, which he calls “stuff”. Buckley says the spectre of class struggle has been hovering over American politics, for which Trump was in part an answer. Buckley asserts that social class has been the core of the electoral struggle in 2016. Piereson sees Trump as attempting to restore the United States to a traditional nation state, with defended borders. What is it that drives the opposition crazy when he tries to do this, he asks?

Kristol comes across as a snob. Thiel says the shocking thing is how bad the personnel of the US government are and how unaware they are of how bad they are. In response to Kristol’s disdain for Trump, Piereson says that every one of Obama, Hillary and Saunders were guilty of demagoguery; it is just an epithet for appealing to voters with arguments you do not like.

Both Buckley and Thiel insist that economic liberty must be restored in the United States from its current ranking of 17th in the world.

Finally, and I think this is the clincher, Thiel says that there is no less reason to be afraid of communism now than there was in the Soviet era. The threat of communism is greater, not less, now that the Soviet Union has collapsed. Just look at world politics.

Peter Thiel

I could try to be as clever but I think that anything I want to say about the state of the world has been said better by Peter Thiel in this interview in March of 2017.

And speaking of a world where stagnation is expected, end even desired, Thiel argues that Obama’s regime was fundamentally into transferring wealth into the very rich, while seeming to care about the poor. This guy is deeper and smarter than I am, and I am okay with that. Listen to his critique of Obama from the point of view of the original Marxists. He describes Obama’s philosophy as “pessimistic epicurianism”: that is a whole new level of insight and insult. He fears the return of the Malthusian calculus: because of stalling technological progress, population may grow to the limits of starvation, a starvation fed by corn syrup. He insults Obama by saying he does not even live up to the scientific optimism of Karl Marx.

Chrystia Freeland on the Plutocrats, Angus Deaton on the American white poor

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Our Minister of Foreign Affairs, Chrystia Freeland, was once a senior economics writer at Thomson Reuters and The Financial Times. She is the author of Plutocrats (2012).

I urge you to read it. Chrystia wrote this book without rancor or malice, which only makes the results more devastating. The 1%, and the one tenth of 1% , have become fantastically richer since the late 1970s. Though they have worked hard for their money, the majority of the super-rich have made their money out of finance not manufacturing.

Freeland concludes her book with a warning about cognitive capture: the process whereby the super rich come to believe their interests really are the most important in society, and the capture of legislatures composed largely of members of the 1% means that the interests of the truly very rich will be attended to by those who only have a few millions, and want to join.

Speaking of the Venetian Republic, that famous example of a highly successful commercial empire, she traces its decline from measures it took to close off access to its wealthiest classes by young entrepreneurs. The closure was a change of the rules on joint ventures, whereby the rich financed the young and adventurous. It was called la Serrata.

She fears for the same tendency in the world of the ultra rich today.

“This cultural Serrata matters because it increases the political myopia of the plutocrats. Add to that ordinary greed and a society that has turned its capitalists into popular heroes and you have an economic elite primed to repeat the mistake of the Venetian merchants – to drink its own Kool-Aid (or maybe prosecco is the better metaphor) to conflate its own self-interests with the interest of society as a whole. Low taxes, light-touch regulation, weak unions, and unlimited campaign contributions are certainly in the best interests of the plutocrats, but that doesn’t mean they are the right way to maintain the economic system that created today’s super elite.”

I shall make some inferences from having read this book, which may not be justified, but which I suspect are true.

  1. The author of this book is a very clever cookie, and it is a credit to Canada that somehow she has climbed this far.
  2. Her analysis of what it means to live in a society dominated by plutocrats is the same as Trump’s: the domestic working class is being neglected and the plutocrats do not give a damn for maintaining first world salaries or wage rates.

Points one and two can be demoinstrated by reading her book. My third inference is more conjectural.

3. The reason the Trudeau Liberals have refrained from criticism and restrained themselves from doing anything stupid in relation to Trump, the reason they have appointed a serious senior finance journalist to the international affairs ministry, is that their analysis of the large picture –  framed in the light of arguments made by Freeland – is not much that different from Trump’s intuitive take on the position we have arrived at. Too much plutocracy; too much influence of the plutocrats over politics and governments.

If you doubt Freeland’s take for partizan reasons (fool!), I would like to refer you to Angus Deaton, the Princeton economist (of Scottish origin) and Nobel winner whose work on inequality, and increasing mortality rates in the American working class, should inform everyone who is trying to make sense of politics these days.

For my part, I recommend Plutocrats for a sane and carefully researched appreciation of the large picture. It is an easy read, and that is a compliment.

A more scholarly and broader ranging interpretation is given in Deaton’s book, The Great Escape: Health, Wealth and the Origins of Inequality,  which I have just ordered. The key charts you should look at are found in Deaton’s discussion in the Wharton business school article “Is Despair Killing the White Working Class?”

The article contains one graph which shows why Trump won, which you have to click on to expand to its full size. The complete article and its charts are found here.